UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 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: 333-15127
---------
AZUREL LTD.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 13-3842844
-------- ----------
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
509 MADISON AVENUE, NEW YORK, NY 10022
- --------------------------------------------------------------------------------
(Address of principal executive office) (Zip Code)
(212) 317- 0712
- --------------------------------------------------------------------------------
(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
The number of shares of registrant's Common Stock, $.001 par value, outstanding
as of November 10, 1998 was 5,318,745 shares.
<PAGE>
AZUREL LTD. AND SUBSIDIARIES
----------------------------
INDEX
-----
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Balance Sheets 1
Consolidated Statements of Operations 2
Consolidated Statements of Cash Flows 3-4
Notes to Financial Statements 5-7
Item 2 - Management's Discussion and Analysis or
Plan of Operation 8-11
PART II - OTHER INFORMATION
Item 3 - Other Information 12
Item 5 - Exhibits and Reports on Form 8-K 12
SIGNATURE 13
<PAGE>
AZUREL LTD. AND SUBSIDIARIES
----------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
----------- -----------
(Unaudited)
ASSETS
------
CURRENT ASSETS:
<S> <C> <C>
Cash $ 296,833 $ 414,731
Restricted cash 0 290,521
Accounts receivable, net of allowance for
doubtful accounts of $60,000 3,045,722 1,985,232
Inventories 5,095,787 1,882,807
Prepaid expenses 511,500 262,886
Due from stockholders and related parties 122,825 232,921
---------- ----------
TOTAL CURRENT ASSETS 9,072,667 5,069,098
FURNITURE AND EQUIPMENT 1,617,180 1,462,580
GOODWILL 157,889 164,049
OTHER ASSETS
Formulae 1,972,264 2,086,493
Customer List 849,127 886,706
Due from related party 236,357 135,000
Deferred financing costs 35,700 35,700
TOTAL OTHER ASSETS 3,093,448 3,143,899
TOTAL ASSETS $ 13,941,184 $ 9,839,626
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Revolving line of credit $ 3,083,060 $ 1,133,393
Notes Payable 250,000 0
Accounts Payable 1,276,387 819,514
Accrued expenses and other liabilities 1,220,513 436,899
Customer advances 56,019 104,145
Current portion of long-term debt 744,122 634,294
Due to related parties ------------- -------------
TOTAL CURRENT LIABILITIES 6,750,966 3,398,161
------------- -------------
LONG-TERM DEBT 1,408,246 1,623,757
------------- -------------
EXCESS OF FAIR VALUE OF ACQUIRED ASSETS OVER PRICE PAID 687,891 0
STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par value, authorized 1,000,000, none
issued or outstanding 1,237,587 0
Common stock, $.001 par value, authorized 24,000,000 shares,
issued and outstanding 5,318,745 shares 5,319 5,294
Additional paid-in-capital 7,475,476 7,438,001
Accumulated deficit (3,624,301) (2,609,830)
Cumulative translation adjustment 0 (13,582)
Stock subscriptions receivable 0 (2,175)
------------- -------------
TOTAL STOCKHOLDERS' EQUITY 5,094,081 4,817,708
------------- -------------
$ 13,941,184 $ 9,839,626
============== ============
</TABLE>
See notes to financial statements
-1-
<PAGE>
AZUREL LTD. AND SUBSIDIARIES
----------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
(UNAUDITED)
-----------
<TABLE>
<CAPTION>
Three Months ended Sept. 30, Nine Months Ended Sept. 30,
-------------------------- --------------------------
1998 1997 1998 1997
----------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
NET SALES $ 5,321,433 $ 3,060,483 $ 11,612,784 $ 9,091,951
COST OF GOODS SOLD 3,941,181 2,204,093 8,265,080 7,301,895
----------- ----------- ------------ ------------
GROSS PROFIT 1,380,252 856,390 3,347,704 1,790,056
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 1,584,664 644,316 4,047,269 2,130,579
----------- ----------- ------------ ------------
INCOME (LOSS) FROM OPERATIONS (204,412) 212,074 (699,565) (340,523)
INTEREST INCOME 0 15,635 0 15,635
INTEREST EXPENSE 124,414 91,138 301,324 326,869
----------- ----------- ------------ ------------
NET INCOME (LOSS) $ (328,826) $ 136,571 $ (1,000,889) $ (651,757)
=========== =========== ============ ============
NET INCOME ( LOSS) PER COMMON SHARE - BASIC $ (0.06) $ 0.03 $ (0.19) $ (0.14)
=========== =========== ============ ============
WEIGHTED AVERAGE COMMON SHARES
USED 5,318,745 4,827,635 5,302,078 4,626,015
=========== =========== ============ ============
</TABLE>
See notes to financial statements.
-2-
<PAGE>
AZUREL LTD. AND SUBSIDIARIES
----------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(UNAUDITED)
-----------
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (1,000,889) $ (651,757)
--------------- ---------
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation 188,257 147,046
Amortization 134,248 152,025
Amortization of deferred costs 0 0
Stock subscriptions writeoff 2,175 0
Changes in assets and liabilities,
net of effect of acquisition:
(Increase) decrease in accounts receivable (676,347) (484,182)
(Increase) decrease in inventories (109,050) 150,296
(Increase) decrease in prepaid expenses (248,614) (444,652)
(Increase) decrease in other current assets 0 71,394
(Increase) decrease in other assets 151,808 10,000
Increase (decrease) in accounts payable 456,873 (268,968)
Increase (decrease) in accrued expenses (16,386) (684,392)
Increase (decrease) in payroll taxes and penalties 0 (448,654)
Increase (decrease) in advances (48,126) 0
--------------- ---------
TOTAL ADJUSTMENTS (165,162) 1,800,087)
--------------- ---------
NET CASH USED IN OPERATING ACTIVITIES (1,166,051) (2,451,844)
--------------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of furniture and equipment (342,857) (118,160)
Increase (Decrease) from Ben Rickerts
acquisition (2,000,182) 0
--------------- ---------
NET CASH USED IN INVESTING ACTIVITIES (2,343,039) (118,160)
CASH FLOW FROM FINANCING ACTIVITIES:
Increase (decrease) in revolving line of credit 1,449,667 (10,635)
Increase (decrease) in notes payable 250,000 0
(Increase) decrease in restricted cash 290,521 (15,635)
(Increase) decrease in due from stockholders 110,096 170,565
Increase (decrease) in due to related parties (250,408) 0
(Increase) decrease in deferred financing costs 0 32,797
(Increase) decrease in deferred registration costs 0 175,514
Increase (decrease) in intangibles (128,088) 0
Payment of capital lease obligations 0 (33,994)
Payment of long-term debt (105,683) (1,157,021)
Issuance of preferred stock 1,237,587 (1,434,890)
Issuance of common stock 37,500 5,538,000
--------------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 3,391,192 3,264,701
NET INCREASE IN CASH (117,898) 694,697
CASH, beginning of period 414,731 0
--------------- ---------
CASH, end of period $ 296,833 $ 694,697
=============== ==========
</TABLE>
See notes to financial statements
-3-
<PAGE>
AZUREL LTD. AND SUBSIDIARIES
----------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(UNAUDITED)
-----------
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
1998 1997
---- ----
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
<S> <C> <C>
Cash paid during the year for:
Interest $ 301,324 $326,869
========== ========
Taxes $ 1,649 $ 5,644
========== ========
Non cash activities:
Issuance of common stock in connection with acquisitions $ 0 $892,496
======== ========
Purchase of equipment through capital lease obligations $ 250,000 $ 0
======== ========
Assumption of debt in connection with acquisition of Ben Rickert $ 1,350,000 $ 0
======== ========
Excess of fair value of Ben Rickerts'acquired assets over price paid $(1,143,073) $ 0
======== ========
======== ========
Stock issued for services $ 37,500 $112,500
======== ========
</TABLE>
See notes to financial statements
-4-
<PAGE>
AZUREL LTD. AND SUBSIDIARIES
----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
NINE MONTHS ENDED SEPTEMBER 30, 1998
------------------------------------
(UNAUDITED)
-----------
1. BASIS OF PRESENTATION
---------------------
The accompanying consolidated financial statements as of September 30,
1998 and for the nine and three months ended September 30, 1998 and
1997 have not been audited by independent auditors, but in the opinion
of management, such unaudited statements include all adjustments
consisting of normal recurring accruals necessary for a fair
presentation of the financial position, the results of operations and
cash flows for the nine months ended September 30, 1998.
The consolidated financial statements should be read in conjunction
with the financial statements and related notes concerning the
Company's accounting policies and other matters contained in the
Company's annual report on Form 10-KSB. The results for the nine months
ended September 30, 1998 are not necessarily indicative of the results
expected for the full year ending December 31, 1998. Certain prior year
amounts have been reclassified to conform with the current year's
presentation.
2. REVOLVING CREDIT FACILITY
-------------------------
On February 6, 1998, the Company refinanced their borrowing arrangement
with Finova Capital Corporation. The line of credit was increased to
$3,500,000 and bears interest at 2.5% per annum above the existing
prime rate. In September 1998, the Company financed an additional $4
million line of credit with Finova Capital Corporation for Ben Rickert
Corp subsidiary at a 2.5% per annum interest rate above prime.
Borrowings are secured by trade receivables, inventories and a second
lien on machinery and equipment; except for Ben Rickert borrowing which
have a first lien on machinery and equipment.
3. EQUIPMENT FINANCING
--------------------
In December 1997, the Company secured a four year term loan of $800,000
at 11.3% with GE Capital. This loan is secured by the Private Label
Group's machinery and equipment.
On March 17, 1998, the Company entered into an agreement with The CIT
Group for financing of machinery and equipment purchases. The total
financing is $272,112 at approximately 10.5% over a 60 month period.
-5-
<PAGE>
4. PREFERRED STOCK
---------------
On August 12, 1998 the Company obtained $1,237,587 additional equity
through the issuance of preferred stock
5. NOTES PAYABLE
-------------
On September 9, 1998, the Company negotiated an unsecured short term
note with Tadeo Holding Corp for $250,000 at 20.8%
6. BEN RICKERT, INC. ACQUISITION
-----------------------------
On July 31, 1998, the Company acquired from Summit Bank the assets of
Ben Rickert, Inc., a manufacturer and distributor of cosmetics,
fragrances and gift items, for $1.5 million. The acquisition was
financed by $150,000 in cash and a $1,350,000 note.
The following table gives an aggregate summary of the acquisition in
financial terms:
<TABLE>
<S> <C>
Purchase Price $ 1,500,000
Acquisition Costs 200,000
Fair Value of Assets Acquired (3,488,073)
Fair Value of Liabilities Assumed 645,000
------------
Excess of Fair Value of Acquired Assets
Over Price Paid $(1,143,073)
The detailed components consist of the following:
PURCHASE PRICE
--------------
Cash to Sellers $ 150,000
Notes to Sellers 1,350,000
-----------
Total Purchase Price $ 1,500,000
FAIR MARKET VALUE OF ASSETS ACQUIRED
Accounts Receivable $ 384,143
Inventory (Net of $750,000 Reserve) 3,103,930
-----------
Total Fair Value of Assets $ 3,488,073
LIABILITIES ASSUMED
Accrued Expenses $ 600,000
Due To Related Party 45,000
===========
Total Fair Value of Liabilities $ 645,000
===========
</TABLE>
-6-
<PAGE>
The following tables summarizes pro forma consolidated results of
operations (unaudited) of the Company and the 1998 and the 1997 Ben
Rickert asset acquisition as though the acquisition had been
consummated at January 1, 1997. The pro forma amounts give effect to
the appropriate adjustments for the fair value of assets acquired and
the amortization of goodwill, depreciation and the debt incurred and
resulting interest expense.
<TABLE>
<CAPTION>
Azurel Without Ben Rickert
Nine Months Ended September 30
1998 1997
-------------- ------------
<S> <C> <C>
Total Revenue $ 10,895,010 $ 9,091,951
Net Loss $ (506,362) $ ( 651,757)
Net Loss Per Share $ (0.096) $ (0.141)
Weighted Average Number of Shares 5,302,078 shares 4,626,015 shares
Ben Rickert Corp Only
Nine Months Ended September 30
1998 1997
----- -----
Total Revenue $ 3,120,354 $ 11,348,766
Net Loss $ (4,510,095) $( 2,057,521)
Net Loss Per Share $ (0.851) $ (0.445)
Weighted Average Number of Shares 5,302,078 shares 4,626,015 shares
Consolidated
Nine Months Ended September 30
1998 1997
----- -----
Total Revenue $ 14,015,364 $ 20,440,717
Net Loss $ (5,016,457) $ ( 2,709,278)
Net Loss Per Share $ (0.946) $ (0.586)
Weighted Average Number of Shares 5,302,078 shares 4,626,015 shares
</TABLE>
The consolidated results of operations indicate a significant reduction
of revenues and an increase in losses in the nine months ended
September 30, 1998 as compared to the same period in 1997 due primarily
to the later shipment of Christmas gifts sets into the retail trade in
1998 as compared to the same period for Ben Rickert Corp.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
FORWARD LOOKING STATEMENTS AND ASSOCIATED RISKS
This Quarterly Report on Form 10-QSB contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. The Company's actual results could differ
materially from those set forth in the forward-looking statements.
The following discussion should be read in conjunction with the attached
consolidated financial statements and notes thereto and with the Company's
audited financial statements and notes thereto for the fiscal year ended
December 31, 1997.
FOR THE NINE MONTHS AND THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
- -----------------------------------------------------------------------
Azurel, Ltd., hereinafter "Azurel" or the "Company", through its wholly owned
subsidiaries, manufactures, markets, and sells private label cosmetics,
fragrances, skincare and related gift products.
In August 1996, Azurel acquired the stock of Private Label Group (PLC), and in
October 1996, Azurel acquired all of the outstanding capital stock of Scent
Overnight (currently Scent 1-2-3).
In October 1997, Azurel acquired the stock of Cambridge Business Services
Corporation.
On July 31, 1998, Ben Rickert Corp ("Ben Rickert") a wholly owned subsidiary of
Azurel acquired the assets of Ben Rickert, Inc. ("BRI"), a 23-year old cosmetic
company, for $1.5 million. The Ben Rickert acquisition, with 1998 fiscal sales
of $10.9 million, is expected to help Azurel more than double its core business.
Azurel expects to enjoy numerous advantages, such as transferring much of BRI's
out source manufacturing to PLC, as well as reducing overhead by combining
several departments. Additionally, the acquisition allows Azurel to enter the
soap manufacturing business and affords the Company more clout with `key
accounts' retailers for other Azurel product lines.
RESULTS OF OPERATIONS.
- ----------------------
Total revenues for the nine and three months ended September 30, 1998 were
$11,612,784 and $5,321,433, respectively, compared to $9,091,951 and $3,060,483
for the nine and three months ended September 30, 1997. This increase is
principally attributable to an increase in sales at the Company's PLC subsidiary
and the Ben Rickert acquisition.
Cost of sales was $8,265,080 and $3,941,181 for the nine and three months ended
September 30, 1998 and $7,301,895 and $2,204,093 for the respective periods
ended September 30, 1997. Of the $1,737,088 increase in cost of sales for the
-8-
<PAGE>
three months ended September 30, 1998 vs. the three months ended September 30,
1998 , $745,887 was attributed to Ben Rickert. Gross profit as a percentage of
revenue was 28.8% and 25.9% for the nine and three months ended September 30,
1998 and 19.6% and 27.9% for the corresponding periods ended September 30, 1997.
The improvement in gross profit percentage in the nine months ending September
30, 1998 was due to higher sales volumes, a more profitable product mix,
operating efficiencies and improved cost controls. The decline in gross profit
percentage from the three month ended September 30, 1998 compared to the three
month ended in September 30, 1997 is primarily attributed to the disproportional
amount of close out and low margin sales immediately following the acquisition
of assets from BRI.
Selling, general and administrative expenses for the nine months and three
months ended September 30, 1998 were $4,047,269 and $1,584,664 as compared to
$2,130,579 and $644,316 for the nine months and three months ended September 30,
1997. The increase in selling, general and administrative expenses was primarily
attributable to expenses associated with the Azurel division, including
salaries, product development and marketing costs as well as $406,689 in
expenses associated with Ben Rickert.
For the nine months and three months ended September 30, 1998, the Company's net
income included non-cash expenses of $324,680 and $105,766 respectively. For the
same periods in 1997, the Company's net income included non-cash expenses of
$299,071 and $75,066. The increase of this expense was incurred principally as a
result of depreciation and amortization of assets obtained during this period by
PLC.
Interest expense was $301,324 for the nine months ended September 30, 1998 and
$124,414 for the three months ended September 30, 1998, compared to $326,869 for
the nine months and $91,138 for the three months ended September 30, 1997. The
increase in interest expense for the third quarter is reflective of financing
the newly acquired Ben Rickert operation, while the nine month period decrease
is the result of debt reduction at the time of the initial public offering in
August of 1997.
Excluding Ben Rickert's losses , the net loss for the Company for the nine
months ended September 30, 1998 was $506,362 compared to a loss of $651,757
during the same period in 1997 and showed a profit of $165,701 in the three
months ended September 30, 1998 compared to $136,571 during the same period in
1997.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company's primary source of liquidity is accounts receivable of
$3,045,722 and inventory of $5,095,787.
The Company has funded its operations to date primarily through a combination of
debt and equity financing. In August 1997, Azurel completed its initial public
offering of 1,200,000 shares of common stock and 1,200,000 common stock purchase
warrants that resulted in net proceeds of approximately $4,800,000 to the
Company. In December 1997,
-9-
<PAGE>
the company secured a four-year term loan of $800,000 at 11.3% with GE Capital.
This loan is secured by the Company's machinery and equipment.
In February 1998, the Company secured a revolving line of credit in the amount
of $3,500,000 with Finova Capital Corporation until February 2000. This line of
credit bears an interest rate of 2.5% above the prime rate and is secured by the
Company's receivables, inventory and a second lien on machinery and equipment.
An additional line of credit of $4,000,000 was secured for the subsidiary Ben
Rickert Corp in September 1998 with Finova. The terms and expiration date are
the same as the $3,500,000 line of credit except that the $4 million line is
secured by Ben Rickets' receivables, inventory and a first lien on Ben Rickets'
machinery and equipment.
In March 1998, the Company obtained a 5-year term loan of $272,112, secured by
new equipment and machinery, at a rate of approximately 10.5%, with The CIT
Group.
On August 12,1998 the Company obtained $1,237,587 additional equity through the
issuance of preferred shares.
On September 9, 1998 the Company obtained a $250,000 unsecured short term loan
at 20.8% from the Tadeo Holding Corp.
Cash used in operations for the first nine months of 1998 was $1,166,051 as
compared to $2,451,844 for the first nine months of 1997. Cash was used in 1998
to fund losses before non-cash expenses of $676,209 and a significant increase
in inventory component purchases.
For the nine months ended September 30, 1998, the Company used cash provided by
the CIT loan to purchase machinery and equipment in the amount of $272,112.
Cash provided through financing activities for the first nine months of 1998 was
$3,391,192 as compared to $3,264,701 for the first nine months of 1997. The
increase in the first nine months of 1998 was primarily attributable to the new
Ben Rickert revolving line of credit with Finova, the issuance of preferred
stock and the excess of fair value of acquired assets of Ben Rickert Inc. over
the price paid. In the first nine months of 1997, the increase was primarily
attributed to the issuance of common stock which was partially offset by the
payments against long term debt.
Cash availability as of September 30, 1998, against the Finova revolving line of
credit was approximately $425,960. Management believes that the current lines of
credit with Finova Capital Corporation, GE Capital and The CIT Group are
sufficient to support the working capital needs of the company.
The July 31, 1998 acquisition of the assets of Ben Rickert, Inc. was consummated
through Summit Bank for a combination of $1.5 million, comprised of $150,000 in
cash and $1,350,000 in short term notes.
-10-
<PAGE>
SEASONALITY
- -----------
The Company's revenue are substantially dependent on it's customers' seasonal
retail sales. Historically, the Company has experienced higher sales volume in
the fourth quarter of each year.
YEAR 2000 ISSUE
- ---------------
Computer programs used by businesses worldwide were written using two digits
rather than four digits to define the applicable year. Accordingly, these
programs recognize the dates "00" and "01" as the years 1900 and 1901 rather
than the years 2000 and 2001. The Company recognizes the need to ensure its
operations will not be adversely impacted by year 2000 computer program failures
arising from program processes and calculation misinterpreting the year 2000
date.
The Company is currently evaluating its financial and operational systems to
determine the impact the year 2000 issue will have on its operations, The
Company also plans to communicate with its significant suppliers, dealers,
financial institutions, and others with which it conducts business to determine
the extent the Company may be impacted by third parties' failure to address the
year 2000 issue. The Company plans to be year 2000 compliant prior to December
31, 1999 and expects no material impact to the Company's operation.
-11-
<PAGE>
PART II - OTHER INFORMATION
Item 3. OTHER INFORMATION
In August of 1998, Joseph Truitt Bell resigned from the Company and the Board of
Directors. No replacement has been nominated.
Item 4. EXHIBITS AND REPORTS ON FORM 8-K
(a.) EXHIBIT DESCRIPTION
22 List Of Subsidiaries
27 Financial Data Schedule
(b.) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
September 30, 1998.
-12-
<PAGE>
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.
AZUREL LTD. AND SUBSIDIARIES
/S/ GERARD SEMHON
-----------------
Gerard Semhon
Chief Executive Officer
/S/ FRANK DESIMONE
------------------
Frank Desimone
Chief Financial Officer
Dated : November 12, 1998
-13-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 296,833
<SECURITIES> 0
<RECEIVABLES> 3,105,722
<ALLOWANCES> 60,000
<INVENTORY> 5,095,787
<CURRENT-ASSETS> 3,742,380
<PP&E> 4,276,244
<DEPRECIATION> 2,659,064
<TOTAL-ASSETS> 13,941,184
<CURRENT-LIABILITIES> 6,750,966
<BONDS> 0
0
1,237,587
<COMMON> 5,319
<OTHER-SE> 3,851,175
<TOTAL-LIABILITY-AND-EQUITY> 13,941,184
<SALES> 11,612,784
<TOTAL-REVENUES> 11,612,784
<CGS> 8,265,080
<TOTAL-COSTS> 8,265,080
<OTHER-EXPENSES> 4,047,269
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 301,324
<INCOME-PRETAX> (1,000,889)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,000,889)
<EPS-PRIMARY> (0.19)
<EPS-DILUTED> (0.19)
</TABLE>
