<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 1O-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 2, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File Number : 0-26226
MICROFIELD GRAPHICS, INC.
(Exact name of small business issuer as specified in its charter)
OREGON 93-0935149
(State or other jurisdiction (I. R. S. Employer
of incorporation or organization) Identification No.)
7216 SW DURHAM RD.
PORTLAND, OREGON 97224
(Address of principal executive offices and zip code)
(503) 620-4000
(Issuer's telephone number including area code)
Check whether the issuer (1) filed all reports required to be filed by Section 3
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 outstanding of the Registrant's Common Stock as of
October 31, 1999 was 4,132,185 shares.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
<PAGE>
MICROFIELD GRAPHICS, INC.
FORM 10-QSB
INDEX
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION Page
- ------------------------------- ----
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheet - October 2, 1999
and January 2, 1999 3
Consolidated Statement of Operations -Three and
Nine Months Ended October 2, 1999 and October 3, 1998 4
Consolidated Statement of Cash Flows -Nine Months
Ended October 2, 1999 and October 3, 1998 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
PART II OTHER INFORMATION
- ----------------------------
Item 3. Defaults upon Senior Securities 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
</TABLE>
2
<PAGE>
MICROFIELD GRAPHICS, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
(unaudited)
October 2, January 2,
1999 1999
------------ ------------
<S> <C> <C>
Current assets:
Cash $ 454,370 $ 739,628
Accounts receivable, net of allowances
Of $41,841 and $44,553 381,450 797,543
Inventories (Note 2) 647,457 946,103
Prepaid expenses and other 113,082 156,627
------------ ------------
Total current assets 1,596,359 2,639,901
Property and equipment, net (Note 4) 279,601 379,457
Other assets 172,876 226,140
------------ ------------
$ 2,048,836 $ 3,245,498
------------ ------------
------------ ------------
Current liabilities:
Current portion of debt $ 551,778 $ 738,333
Accounts payable 398,729 532,308
Accrued payroll and payroll taxes 59,279 255,698
Unearned income 85,290 56,101
Accrued liabilities 191,982 186,403
------------ ------------
Total current liabilities 1,287,058 1,768,843
Long-term debt, net of current portion 38,610 84,165
------------ ------------
1,325,668 1,853,008
Shareholders' equity:
Common stock, no par value, 25,000,000 shares
Authorized, 4,132,185 and 3,686,775 shares
Issued and outstanding 15,352,662 14,362,698
Accumulated deficit (14,629,494) (12,970,208)
------------ ------------
Total shareholders' equity 723,168 1,392,490
------------ ------------
$ 2,048,836 $ 3,245,498
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
3
<PAGE>
MICROFIELD GRAPHICS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
(unaudited) (unaudited)
Three months ended Nine months ended
October 2, October 3, October 2, October 3,
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Sales $ 919,561 1,245,020 $ 2,780,309 5,642,067
Cost of goods sold 569,749 719,199 1,742,473 3,274,290
--------- --------- --------- ---------
Gross profit 349,812 525,821 1,037,836 2,367,777
Operating expenses
Research and development 56,776 254,862 582,435 710,360
Marketing and sales 304,759 619,413 1,364,475 2,050,668
General and administrative 168,438 236,382 657,438 705,039
--------- --------- --------- ---------
529,973 1,110,657 2,604,348 3,466,067
--------- --------- --------- ---------
Loss from operations (180,161) (584,836) (1,566,512) (1,098,290)
Other income (expense)
Interest income (expense), net (16,066) (7,626) (43,350) (39,384)
Other income, net 95 98 (49,424) 228
--------- --------- --------- ---------
Loss before provision for income taxes (196,132) (592,364) (1,659,286) (1,137,446)
Provision for income taxes 800 1,505
--------- --------- --------- ---------
Net loss $ (196,132) (593,164) $(1,659,286) (1,138,951)
--------- --------- --------- ---------
--------- --------- --------- ---------
Net loss per share
Basic $ (.05) (.16) $ (.42) (.32)
--------- --------- --------- ---------
--------- --------- --------- ---------
Diluted $ (.05) (.16) $ (.42) (.32)
--------- --------- --------- ---------
--------- --------- --------- ---------
Shares used in per share calculations
Basic 4,132,185 3,627,984 3,995,230 3,512,594
--------- --------- --------- ---------
--------- --------- --------- ---------
Diluted 4,132,185 3,627,984 3,995,230 3,512,594
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
4
<PAGE>
MICROFIELD GRAPHICS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
(unaudited)
Nine months ended
---------------------------------
October 2, October 3,
1999 1998
----------- -----------
<S> <C> <C>
Cash Flows From Operating Activities:
Net loss $(1,659,286) $(1,138,951)
Adjustments to reconcile net loss to net cash
Used in operating activities:
Depreciation and amortization 146,471 143,361
Changes in assets and liabilities:
Accounts receivable 416,093 184,753
Inventories 298,646 (192,789)
Prepaid expenses and other 80,521 64,967
Accounts payable (133,579) (193,786)
Accrued payroll and payroll taxes (196,419) (85,014)
Unearned income 29,189 (5,900)
Accrued liabilities (33,031) 58,653
----------- -----------
Net cash used in operating activities (1,051,395) (1,164,706)
Cash flows from investing activities:
Acquisition of property and equipment (30,327) (161,994)
----------- -----------
Net cash used in investing activities (30,327) (161,994)
Cash flows from financing activities:
Payments on equipment line of credit (62,500) (62,500)
Proceeds from (payments on) operating line of credit (131,000) (225,000)
Proceeds from exercise of common stock options 1,210
and warrants 93,677
Proceeds from issuance of common stock 988,754 1,990,208
----------- -----------
Net cash provided by financing activities 796,464 1,796,385
Net increase (decrease) in cash and cash equivalents (285,258) 469,685
Cash and cash equivalents, beginning of period 739,628 909,184
----------- -----------
Cash and cash equivalents, end of period $ 454,370 $ 1,378,869
----------- -----------
----------- -----------
Supplemental disclosure of cash flow information:
Cash paid for:
Interest $ 52,709 $ 76,517
----------- -----------
----------- -----------
Income taxes $ 0 $ 705
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
5
<PAGE>
MICROFIELD GRAPHICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of
Microfield Graphics, Inc. (the "Company") for the quarters and the nine months
ended October 2, 1999 and October 3, 1998 have been prepared in accordance with
the rules and regulations of the Securities and Exchange Commission. The
financial information as of January 2, 1999 is derived from the Company's Annual
Report on Form 10-KSB. The accompanying consolidated financial statements do not
include all of the information and footnotes required by generally accepted
accounting principles and should be read in conjunction with the Company's
audited consolidated financial statements and notes thereto for the year ended
January 2, 1999. In the opinion of Company management, the unaudited
consolidated financial statements for the interim periods presented include all
adjustments, consisting of normal recurring adjustments, necessary for a fair
presentation of the results for such interim periods. Operating results for the
quarters and the nine months ended October 2, 1999 are not necessarily
indicative of the results that may be expected for the full year or any portion
thereof.
The Company's fiscal year is the 52- or 53-week period ending on the
Saturday closest to the last day of December. The Company's current fiscal year
is the 52-week period ending January 1, 2000. The Company's last fiscal year was
the 53-week period ended January 2, 1999. The Company's third fiscal quarters in
fiscal 1999 and 1998 were the 13-week periods ended October 2, 1999 and October
3, 1998, respectively.
6
<PAGE>
2. INVENTORIES
Inventories are stated at the lower of standard cost (which
approximates the first-in, first-out method), or market value. Inventory costs
include raw materials, direct labor and allocated overhead and consist of the
following:
<TABLE>
<CAPTION>
October 2, January 2,
1999 1999
---------- ----------
<S> <C> <C>
Raw materials $ 540,355 $ 607,140
Finished goods 107,102 338,963
---------- ----------
$ 647,457 $ 946,103
---------- ----------
---------- ----------
</TABLE>
3. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
October 2, January 2,
1999 1999
---------- ----------
<S> <C> <C>
Machinery and equipment $1,253,340 $1,223,014
Less accumulated depreciation and
amortization 973,739 843,557
---------- ----------
$ 279,601 $ 379,457
---------- ----------
---------- ----------
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
Microfield Graphics, Inc. (the "Company") develops, manufactures and
markets computer conferencing and telecommunications products to facilitate
group communications. The principal purpose of these products is to make
meetings more productive and cost effective by capturing ideas from all meeting
members (whether they are located locally or linked remotely through a computer
and an audio hookup) and making the information available to all of the linked
systems, where everyone involved can see and interact with the information
produced and presented. The Company's product lines incorporate a series of
digital whiteboards, digital whiteboard rear projection systems and interactive
plasma display systems under the brand name SoftBoard, along with a variety of
application software packages, supplies and accessories. Information written or
drawn on the SoftBoard surface is recorded and displayed on a personal computer
simultaneously and in color using the Company's proprietary technology. The
information is recorded in a computer file that can be replayed, printed, faxed,
e-mailed or saved for future applications. Optional proprietary software allows
the information to be communicated in real time to remote computers over
standard telephone lines, networks and the Internet.
The Company was incorporated in Oregon in 1986. The Company's executive
offices are located at 7216 SW Durham Road, Portland, OR 97224.
In July 1997 the Company entered into a General Purchase and
Development Agreement with Minnesota Mining and Manufacturing Company (3M),
under which 3M globally marketed advanced versions of the Company's SoftBoard
family of products. Under the terms of the two year agreement, the
7
<PAGE>
Company developed specialized versions of the SoftBoard product line exclusively
for 3M. Shipments from the Company to 3M began in the fourth quarter of 1997 and
continued through the second quarter of 1998. For the nine months ended October
2, 1999 and October 3, 1998, approximately 0% and 45%, respectively, of the
Company's sales were attributable to 3M.
In April 1999, the Company was informed by 3M of its decision to exit
the Advanced Meeting Solutions (AMS) Project under which the SoftBoard family of
products was marketed. The Company reached an agreement with 3M under which the
Company assumed responsibility for 3M's global distribution network of
whiteboard products. In this role, the Company will support digital whiteboard
product sales, service and warranty obligations for all of 3M's installed base
and dealer network affected by their withdrawal from the AMS Project. The
reduced level of sales to 3M and their announced exit from the AMS program has
had a material adverse effect on the Company's business. The Company believes
that 3M's liquidation of its inventory of Ideaboard products negatively impacted
sales of its SoftBoard digital whiteboard products during the first half of
1999. Unit sales in this product line have been strengthening, reflecting
completion of the 3M liquidation program, the recent expansion of the Company's
dealer base as previously announced, and new product pricing strategies which
the Company recently introduced.
In March 1998 the Company signed a Common Stock Purchase Agreement with
Steelcase Inc. (Steelcase), pursuant to which Steelcase purchased 350,000 shares
of the Company's common stock and a warrant for a total of $2,012,500 in cash.
The warrant gives Steelcase the right to purchase an additional 260,000 shares
of the Company's common stock at $6.75 per share. The warrant is exerciseable
starting on March 16, 1999 and expires on March 16, 2001. In March 1999,
Steelcase purchased an additional 444,445 shares for a total of $1,000,001 in
cash. As of October 2, 1999 Steelcase owned 23% of the outstanding common stock
of the Company.
At the end of the second quarter of 1999, the Company introduced a
major restructuring to realign operating expenses with sales levels while
retaining critical functions in key operational areas. Total overhead expense
was reduced by approximately 50% through a combination of staff reductions,
workweek reductions, temporary executive salary reductions, and reductions in
general expense spending levels. As a result, the Company has delayed the
previously reported Joint Development Agreement with Steelcase Inc. entered into
in the first quarter of 1999. In the near term, the Company is focusing efforts
on expanding product offerings based on its current technology. It is the
Company's intention to resume the joint product development program with
Steelcase when the Company achieves profitability on a sustainable basis. There
is no assurance that the development program will be resumed or that the
restructuring will return the Company to profitability. Also at the end of the
second quarter of 1999, the Company introduced a product price reduction in its
200 Series digital whiteboard product line. Prices were adjusted to achieve
closer parity with competing products in the marketplace.
As a result of the restructuring and increased unit sales in the third
quarter of 1999, the Company reported a net loss of $196,000, an improvement of
77% from the second quarter of 1999 and an improvement of 67% from the third
quarter of 1998.
The Company's future results of operations will depend on continued and
increased market acceptance of its SoftBoard products and the Company's ability
to modify them to meet the needs of its customers. Any reduction in demand for,
or increasing competition with respect to, these products could have a material
adverse effect on the Company's financial condition and results of operations.
8
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth, as a percentage of sales, certain
consolidated statement of operations data relating to the SoftBoard Business for
the periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
---------------------- ----------------------
OCT. 2, OCT 3, OCT. 2, OCT 3,
1999 1998 1999 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
Sales 100% 100% 100% 100%
Cost of goods sold 62 58 63 58
------ ------ ------ ------
Gross profit 38 42 37 42
Research and development expenses (6) (20) (21) (13)
Marketing and sales expenses (33) (50) (49) (36)
General and administrative expenses (18) (19) (24) (12)
------ ------ ------ ------
Loss from operations (19) (47) (57) (19)
Other income (expense) (2) (1) (3) (1)
------ ------ ------ ------
Loss before provision for income taxes (21) (48) (60) (20)
Provision for income taxes -- -- -- --
------ ------ ------ ------
Net loss (21)% (48)% (60)% (20)%
------ ------ ------ ------
------ ------ ------ ------
</TABLE>
THIRD QUARTER AND NINE MONTHS ENDED OCTOBER 2, 1999 COMPARED WITH THIRD QUARTER
AND NINE MONTHS ENDED OCTOBER 3, 1998
SALES. Sales decreased $325,000 (26%) to $920,000 in the third quarter
of 1999 from $1,245,000 in the third quarter of 1998. Sales decreased $2,862,000
(51%) to $2,780,000 in the first nine months of 1999 from $5,642,000 in the
first nine months of 1998. The decrease in sales for the three month period
resulted primarily from an increased percentage of sales through the Company's
reseller distribution channel at discounted prices combined with the effect of a
price reduction on the Series 200 product line introduced at the end of the
second quarter. The decrease for the first nine months of this year resulted
primarily from the absence of revenue from 3M as compared to the comparable
prior year period. SEE OVERVIEW. Unit sales for the third quarter of 1999
increased by 49% over the second quarter which the Company believes is a result
of completion of the 3M liquidation program, a more effective product pricing
strategy, and expansion of the Company's dealer base.
GROSS PROFIT. Cost of goods sold includes the cost of raw materials
needed to assemble the products, assembly and preparation by vendors and direct
and indirect costs associated with the procurement, testing, scheduling and
quality assurance functions performed by the Company. The Company's gross margin
decreased to 38% in the third quarter of 1999 from 42% in the third quarter of
1998. The Company's gross margin also decreased to 37% in the first nine months
of 1999 from 42% in the first nine months of 1998. The decline in gross margin
during the third quarter of 1999 versus the comparable year period was primarily
due to the effect of the 200 Series product line price reduction introduced at
the end of the second quarter of 1999 combined with decreased overhead
absorption. Gross margins for the nine months decreased between years as a
result of lower sales volumes resulting in decreased manufacturing overhead
absorption. Gross margin remained constant at 38% between the second and third
quarters of 1999.
9
<PAGE>
RESEARCH AND DEVELOPMENT EXPENSES. Research and development costs are
expensed as incurred. These expenses decreased $198,000 (78%) to $57,000 in the
third quarter of 1999 from $255,000 in the third quarter of 1998. These expenses
decreased $128,000 (18%) to $582,000 in the first nine months of 1999 from
$710,000 in the first nine months of 1998. The decreases for both periods were
due primarily to the Company restructuring implemented at the end of the second
quarter. Research and development expenses increased as a percentage of sales to
21% in the first nine months of 1999 from 13% in the first nine months of 1998.
The increase was due primarily to the lower level of Company revenue in the
first nine months of 1999 compared to the same period in 1998. Research and
development expenses decreased as a percentage of sales to 6% in the first three
months of 1999 from 20% in the first three months of 1998. The decrease is due
primarily to the restructuring implemented at the end of the second quarter.
MARKETING AND SALES EXPENSES. Marketing and sales expenses decreased
$315,000 (51%) to $305,000 in the third quarter of 1999 from $619,000 in the
third quarter of 1998. These expenses decreased $686,000 (33%) to $1,364,000 in
the first nine months of 1999 from $2,051,000 in the first nine months of 1998.
The decrease between quarters was due primarily to the restructuring implemented
at the end of the second quarter and continued lower costs associated with the
current advertising program and decreased participation in trade shows.
Marketing and sales expenses increased as a percentage of sales to 49% in the
first nine months of 1999 from 36% in the first nine months of 1998 primarily
due to the lower sales volume in 1999.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses decreased $68,000 (29%) to $168,000 in the third quarter of 1999 from
$236,000 in the third quarter of 1998. These expenses decreased $48,000 (7%) to
$657,000 in the first nine months of 1999 from $705,000 in the first nine months
of 1998. The decreases for both periods were due primarily to the Company
restructuring implemented at the end of the second quarter. General and
administrative expenses increased as a percentage of sales to 24% in the first
nine months of 1999 from 12% in the first nine months of 1998 primarily due to
lower sales volume in 1999. General and administrative expenses as a percentage
of sales decreased slightly to 18% for the three months ended 1999 from 19% for
the prior year comparable period.
OTHER INCOME (EXPENSE). Other income (expense) includes interest
income, interest expense, and miscellaneous income. Other expense, net was
($16,000) in the third quarter of 1999 compared to other expense, net of
($8,000) in the third quarter of 1998. Other expense, net was ($93,000) in the
first nine months of 1999 compared to ($39,000) of other expense, net in the
first nine months of 1998. The majority of the increase over the comparable
nine-month period in the prior year is due to a legal settlement and related
expenses of approximately $23,000 and a one time non-recurring charge of $26,000
related to the restructuring. (See Overview) Other expense, net also increased
as a result of increased levels of borrowing under the Company's operating line
of credit and a decrease in interest income due to lower average cash balances
in the first nine months of 1999 compared to the first nine months of 1998.
INCOME TAXES. The Company recorded losses from operations in the third
quarters of 1999 and 1998. Accordingly no provision for income taxes was
provided for in either of these periods.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company has financed its operations and capital
expenditures through the private and public sale of equity securities, cash from
operations, and borrowings under operating lines of credit. At October 2, 1999,
the Company had working capital of approximately $309,000 and its principal
source of liquidity consisted of approximately $454,000 in cash and cash
equivalents. Accounts receivable decreased to $381,000 from $797,000 at the end
of 1998, and inventory decreased to $647,000 from $946,000 at the end of 1998.
10
<PAGE>
The Company has a line of credit with its bank using its accounts
receivable and certain of its inventory as collateral. The Loan Agreement for
the line of credit expired on September 8, 1999, at which time $524,000 was
outstanding under the line of credit. The Company and the bank continued to
operate under the terms of the Loan Agreement until new terms were formalized on
October 25, 1999. At September 8, 1999 and at October 2, 1999, the Company was
not in compliance with the minimum tangible net worth financial covenant of its
Loan Agreement with the bank. On October 15, 1999, the bank delivered a notice
of default and the Company subsequently entered into a Forbearance Agreement
which provides for a reduction in the line of credit to $650,000, the
elimination of inventory from the collateral base over a 14 month period, an
interest rate increase, and certain financial covenants with which the Company
must comply. The Forbearance Agreement period is through April 30, 2000. The
operating line bears interest monthly at prime ( 8.5 % at October 2, 1999) and
will increase to prime plus 2.5% under terms of the the Forbearance Agreement.
In the event that the Forbearance Agreement is not extended or the Loan
Agreement is not renewed, the Company's business and financial condition could
be materially and adversely affected.
At the end of the second quarter, the Company concluded that it may not
have sufficient funds to operate for at least the next twelve months due to
reduced resources (cash and cash equivalents, cash available under its operating
line of credit) coupled with the reduction in sales that occurred during the
first six months of 1999. In response to this, the Company significantly reduced
corporate expenses through a restructuring and introduced additional interim
cost savings measures. (SEE OVERVIEW) During the third quarter, these measures
significantly reduced operating losses and improved cash flow. The Company
believes its resources are sufficient to fund its operations until April 2000 if
the Forbearance Agreement is not terminated prior to that time. If the Company's
lender (a) terminates the Forbearance Agreement prior to April 2000 and does not
renew the Loan Agreement at that time or (b) does not extend the Forbearance
Agreement upon its expiration in April 2000 and does not renew the Loan
Agreement at that time, the Company believes that it will not have resources
sufficient to fund its operations for the next twelve months unless it is able
to obtain alternative financing on terms acceptable to the Company. The Company
is also exploring alternative means of financing the business. There is no
assurance that the Company can obtain such financing, or that such financing
will be on terms acceptable to the Company.
The Company has no commitments for capital expenditures in material
amounts.
IMPACT OF THE YEAR 2000 ISSUE
The Company has made an assessment of the Year 2000 issue on its internal
systems and equipment, its hardware and software products, and on the systems of
its vendor base. Based on this assessment, the Company believes that its
internal systems have been updated to address the Year 2000 issue, its hardware
and software products will properly recognize calendar dates beginning in the
Year 2000, and its vendor base is appropriately addressing the Year 2000 issues.
Accordingly, the Company believes it is Year 2000 ready and does not currently
expect to incur any material costs in connection with the Year 2000 issue.
11
<PAGE>
PART II. OTHER INFORMATION
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The Company failed to comply with the minimum tangible net worth
financial covenant of its Loan Agreement with its bank. The bank has delivered a
notice of default and the Company has entered into a Forbearance Agreement that
extends through April 30, 2000. At that time, in the event the Forbearance
Agreement is not extended or the Loan Agreement is not renewed, the Company's
business and financial condition could be materially and adversely affected. SEE
LIQUIDITY AND CAPITAL RESOURCES.
ITEM 5. OTHER INFORMATION
Subsequent to the end of the third quarter, the Company was notified by
the Nasdaq Stock Market that its securities would be delisted from the Nasdaq
SmallCap Market effective with the close of business October 29, 1999 for
failure to maintain certain requirements for continued listing. The Company's
securities are presently traded on the OTC Bulletin Board.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The exhibit filed as part of this report is listed below:
Exhibit No.
-----------
27 Financial data schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
October 2, 1999.
12
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities and Exchange Act
of 1934, the issuer caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: November 16, 1999
MICROFIELD GRAPHICS, INC.
By:_________________________________
John B. Conroy
President and Chief Executive Officer
(Principal Executive Officer)
By:_________________________________
Sandra K. Pleasants
Chief Financial Officer and Secretary
(Principal Financial and Accounting Officer)
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the issuer caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: November 16, 1999
MICROFIELD GRAPHICS, INC.
By:/s/JOHN B. CONROY
-----------------
John B. Conroy
President and Chief Executive Officer
(Principal Executive Officer)
By:/s/ SANDRA K. PLEASANTS
-----------------------
Sandra K. Pleasants
Chief Financial Officer and Secretary
(Principal Financial and Accounting Officer)
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS FOUND IN THE COMPANY'S FORM 10-QSB FOR THE
THREE AND NINE MONTH PERIODS ENDED OCTOBER 2, 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-01-2000
<PERIOD-START> JAN-03-1999
<PERIOD-END> OCT-02-1999
<CASH> 454
<SECURITIES> 0
<RECEIVABLES> 423
<ALLOWANCES> 42
<INVENTORY> 647
<CURRENT-ASSETS> 1,596
<PP&E> 280
<DEPRECIATION> 146
<TOTAL-ASSETS> 2,049
<CURRENT-LIABILITIES> 1,287
<BONDS> 0
0
0
<COMMON> 15,353
<OTHER-SE> (14,629)
<TOTAL-LIABILITY-AND-EQUITY> 2,049
<SALES> 2,781
<TOTAL-REVENUES> 2,781
<CGS> 1,743
<TOTAL-COSTS> 1,743
<OTHER-EXPENSES> 2,605
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 53
<INCOME-PRETAX> (1,659)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,659)
<EPS-BASIC> (.42)
<EPS-DILUTED> (.42)
</TABLE>
