<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 19, 1998
REGISTRATION NO. 333-8061
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------
FORM 10-QSB/A
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1997
------------------------------------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT 1934
For the transition period from to
-------------------------- ---------------------
Commission file number 0-29028
-------
Aviation Distributors, Inc.
----------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware 33-0715685
----------------------------------------------------------------------
(State or Other Jurisdiction of (I.R.S. employer
Incorporation or Organization) Identification No.)
One Capital Drive Lake Forest, California 92630
----------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (949) 586-7558
--------------
Indicate by check (X) whether the issuer (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 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 ( ) NO (X)
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: 3,165,000 SHARES OF COMMON
STOCK, $.01 PAR VALUE PER SHARE, WERE OUTSTANDING AS OF JUNE 19, 1998.
<PAGE>
AVIATION DISTRIBUTORS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
RESTATED RESTATED
1996 1997
------------- -----------
ASSETS (UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . . . . . . . . $ 16,985 $ 289,448
Restricted cash . . . . . . . . . . . . . . . . . . 63,458 1,275,539
Accounts receivable, net of allowance for
doubtful accounts of $410,500 at December 31,
1996 and $346,316 at June 30, 1997,
respectively . . . . . . . . . . . . . . . . . . . . 4,390,479 7,769,984
Other receivables . . . . . . . . . . . . . . . . . . 66,272 77,945
Inventories, net of reserve . . . . . . . . . . . . . 2,866,756 5,476,990
Prepaid expenses . . . . . . . . . . . . . . . . . . 69,724 413,592
Current portion of notes receivable . . . . . . . . . 1,615,528 1,654,201
Notes receivable from founder . . . . . . . . . . . . 408,718 408,718
Deferred tax asset . . . . . . . . . . . . . . . . . 386,000 410,919
----------- -----------
Total current assets . . . . . . . . . . . . . . 9,883,920 17,777,336
----------- -----------
PROPERTY AND EQUIPMENT . . . . . . . . . . . . . . . . . . 1,784,853 1,920,291
Less - accumulated depreciation . . . . . . . . . . . 278,686 351,752
----------- -----------
1,506,167 1,568,539
----------- -----------
Notes receivable, net of current portion . . . . . . . . . 3,056,855 2,230,057
Other assets . . . . . . . . . . . . . . . . . . . . . . . 167,797 -
----------- -----------
3,224,652 2,230,057
----------- -----------
$14,614,739 $21,575,932
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Checks issued not yet presented for payment . . . . . $ 530,440 $ 438,630
Accounts payable . . . . . . . . . . . . . . . . . . 2,844,798 3,769,274
Accrued liabilities . . . . . . . . . . . . . . . . . 377,044 419,327
Lines of credit . . . . . . . . . . . . . . . . . . . 5,583,475 6,231,645
Income taxes payable . . . . . . . . . . . . . . . . - 103,000
Current portion of long-term debt . . . . . . . . . . 3,066,540 3,165,262
Current portion of capital lease obligations . . . . 18,867 16,654
----------- -----------
Total current liabilities . . . . . . . . . . . 12,421,164 14,143,792
----------- -----------
Long-term debt, net of current portion . . . . . . . . . . 3,985,205 3,149,241
----------- -----------
Capital lease obligations, net of current portion. . . . . 34,372 26,394
----------- -----------
Deferred tax liability . . . . . . . . . . . . . . . . . . 86,000 86,000
----------- -----------
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, par value of $.01, 3,000,000
shares authorized; none issued and outstanding . . . - -
Common stock, par value of $.01, 10,000,000
shares authorized; 3,165,000 shares issued
and outstanding at December 31, 1996 and
June 30, 1997, respectively . . . . . . . . . . . . 17,850 31,650
Additional paid in capital . . . . . . . . . . . . . 389,150 5,643,179
Accumulated deficit . . . . . . . . . . . . . . . . . (2,319,002) (1,504,324)
----------- -----------
Total stockholders' equity (deficit). . . . . . (1,912,002) 4,170,505
----------- -----------
$14,614,739 $21,575,932
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
<PAGE>
AVIATION DISTRIBUTORS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------- ---------------------------
RESTATED RESTATED RESTATED RESTATED
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
1996 1997 1996 1997
---------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
NET DISTRIBUTED SERVICES AND INVENTORY SALES . $6,530,621 $ 9,377,901 $ 10,650,222 $ 18,566,271
NET SALES ON CONSIGNMENT AND
MARKETING AGREEMENTS. . . . . . . . . . . . . 481,397 387,200 973,055 662,052
---------- ----------- ------------ ------------
TOTAL NET SALES. . . . . . . . . . . . . . . . 7,012,018 9,765,101 11,623,277 19,228,323
COST OF SALES. . . . . . . . . . . . . . . . . 4,878,116 7,122,084 8,763,832 14,809,006
---------- ----------- ------------ ------------
Gross profit . . . . . . . . . . . . . . . . 2,133,902 2,643,017 2,859,445 4,419,317
SELLING AND ADMINISTRATIVE EXPENSES. . . . . . 1,436,487 1,880,799 2,531,694 3,064,855
---------- ----------- ------------ ------------
Income from operations . . . . . . . . . . . 697,415 762,218 327,751 1,354,462
OTHER (EXPENSES) INCOME:
Interest expense . . . . . . . . . . . . . . (319,396) (233,222) (623,822) (508,872)
Interest income. . . . . . . . . . . . . . . 147,571 109,192 299,342 221,637
Other income . . . . . . . . . . . . . . . . 91 - 11,730 451
---------- ----------- ------------ ------------
Income before provision for
income taxes . . . . . . . . . . . . . . . 525,681 638,188 15,001 1,067,678
PROVISION FOR INCOME TAXES . . . . . . . . . . 78,000 150,000 - 253,000
---------- ----------- ------------ ------------
NET INCOME . . . . . . . . . . . . . . . . . $ 447,681 $ 488,188 $ 5,001 $ 814,678
---------- ----------- ------------ ------------
---------- ----------- ------------ ------------
Primary and fully diluted net
income per share . . . . . . . . . . . . . . $ 0.25 $ 0.16 $ 0.01 $ 0.31
---------- ----------- ------------ ------------
---------- ----------- ------------ ------------
Weighted average shares outstanding. . . . . . 1,785,000 3,123,000 1,785,000 2,650,000
---------- ----------- ------------ ------------
---------- ----------- ------------ ------------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE>
AVIATION DISTRIBUTORS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
--------------------------------
RESTATED RESTATED
1996 1997
------------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income. . . . . . . . . . . . . . . . . . . . . . . $ 15,001 $ 814,678
Adjustments to reconcile net income to net cash
used in operating activities:
Principal payments on note receivable . . . . . . . . 721,484 788,125
Borrowings on notes payable related
to inventory purchases . . . . . . . . . . . . . . 1,088,906 1,610,183
Principal payments on notes payable
related to inventory purchases . . . . . . . . . . (200,000) (1,449,318)
Reduction in amount due on notes payable
related to inventory purchases . . . . . . . . . . (210,950) -
Principal payments on note payable
related to legal settlement. . . . . . . . . . . . - (820,000)
Legal Settlement. . . . . . . . . . . . . . . . . . . - (80,000)
Depreciation and amortization . . . . . . . . . . . . 107,780 84,653
Changes in assets and liabilities:
Accounts receivable, net . . . . . . . . . . . . (1,178,920) (3,379,505)
Other receivables. . . . . . . . . . . . . . . . (76,132) (11,673)
Inventories. . . . . . . . . . . . . . . . . . . (444,163) (2,610,234)
Prepaid expenses . . . . . . . . . . . . . . . . (33,166) (343,868)
Income tax receivable. . . . . . . . . . . . . . - -
Deferred tax asset . . . . . . . . . . . . . . . (17,174) (24,919)
Other assets . . . . . . . . . . . . . . . . . . (147,455) 167,797
Checks issued not yet presented for payment. . . 76,968 (91,810)
Accounts payable . . . . . . . . . . . . . . . . (384,162) 909,556
Accrued liabilities. . . . . . . . . . . . . . . (96,070) 42,283
Income taxes payable . . . . . . . . . . . . . . 25,366 103,000
Deferred tax liability . . . . . . . . . . . . . (28,192) -
----------- -----------
Net cash provided by (used in) operating
activities . . . . . . . . . . . . . . . . (780,879) (4,291,052)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment . . . . . . . . . (115,997) (135,438)
Decrease in restricted cash . . . . . . . . . . . . . 184,292 (1,212,081)
----------- -----------
Net cash used in investing activities. . . . 68,295 (1,347,519)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on lines of credit . . . . . . . . . . . . 12,304,964 20,065,229
Principal payments on lines of credit . . . . . . . . (11,684,217) (19,417,059)
Borrowings on long-term debt. . . . . . . . . . . . . - 500,000
Principal payments of long-term debt. . . . . . . . . (761,296) (509,694)
Principal payments of capital lease obligations . . . (11,551) (10,191)
Net proceeds from initial public offering . . . . . . - 5,282,749
----------- -----------
Net cash provided by (used in) financing
activities . . . . . . . . . . . . . . . . (152,100) 5,911,034
----------- -----------
Net increase (decrease) in cash and cash equivalents. . . (864,684) 272,463
Cash and cash equivalents at beginning of period. . . . . 867,721 16,985
----------- -----------
Cash and cash equivalents at end of period. . . . . . . . $ 3,037 $ 289,448
----------- -----------
----------- -----------
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest.. . . . . . . . . . . . . . . . . . . . . . $ 1,156,696 $ 332,482
----------- -----------
----------- -----------
Income taxes . . . . . . . . . . . . . . . . . . . . $ 20,000 $ 375,000
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE>
AVIATION DISTRIBUTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
NATURE OF BUSINESS AND OPERATIONS
Aviation Distributors, Inc. and its subsidiaries (collectively, the "Company")
established operations in 1988, incorporated in the state of California in 1992
and reincorporated in the state of Delaware in 1996. The Company is a supplier,
distributor and broker of commercial aircraft parts and supplies worldwide.
On March 3, 1997 the Company's Registration Statement on Form SB-2 relating to
the Company's initial public offering of 1,200,000 shares of its common stock
was declared effective. On March 7, 1997 the Company closed its public offering
of 1,200,000 shares of its common stock at $5 per share. In connection with the
initial public offering, the Company granted the underwriters a 45-day option to
purchase up to 180,000 additional shares of its common stock to cover
over-allotments. The underwriters exercised such over-allotment option and on
April 22, 1997, the Company sold an additional 180,000 shares of its common
stock at $5 per share.
The net proceeds from the offering after all expenses were approximately $4.5
million, of such proceeds, $3,800,000 was used to repay a portion of the amount
outstanding under two revolving lines of credit, $400,000 was used to repay
loans made to the Company by certain of its employees, and the remaining
proceeds were used to fund a portion of a legal settlement entered into by the
Company. (See Note 3)
On April 22, 1997 the Company received net proceeds of approximately $792,000
from the exercise of the underwriter's over-allotment option. The proceeds were
used for working capital and to reduce vendor payables.
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
In the opinion of management, the accompanying unaudited consolidated financial
statements of the Company contain all adjustments (consisting of only normal
recurring adjustments) necessary to present fairly the financial position of the
Company as of June 30, 1997 and the results of its operations for the three and
six month periods ended June 30, 1997 and 1996 and cash flows for the six month
periods ended June 30, 1997 and 1996. The results of operations and cash flows
for the six month period ended June 30, 1997 are not necessarily indicative of
the results of operations or cash flows which may be reported for the remainder
of 1997.
The accompanying unaudited interim financial statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission
for reporting on Form 10-QSB. Pursuant to such rules and regulations, certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted. The accompanying unaudited interim consolidated financial
statements should be read in connection with the Company's December 31, 1996
restated financial statements and the notes thereto included in the Company's
Form
<PAGE>
10-KSB Registration Statement for the fiscal year ended December 31, 1997.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In March 1997, the Financial Accounting Standards Board (FASB) issued SFAS #
128 Earnings Per Share. The statement requires, at a minimum, new
calculations of earnings per share and disclosures. The Company has reviewed
the provisions of SFAS No. 128 and has determined that adoption of this
pronouncement will have no material effect on the Company's reporting of its
results of operations.
In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS # 130
Reporting Comprehensive Income. The statement requires a separate reporting
of all changes in equity of an enterprise that result from transactions and
other economic events of the period other than transactions with owners.
Comprehensive income is the total of net income and all other nonowner changes
in equity. The statement is effective for fiscal years beginning after December
15, 1997. Management does not expect the adoption of this statement to have a
material effect on the Company's reporting of its results of operations.
In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS # 131
Disclosures About Segments of an Enterprise and Related Information. The
statement requires a disclosures for each segment that are similar to those
required under current standards with the addition of quarterly disclosure
requirements and a finer partitioning of geographic disclosures. It also
requires geographic data by country, as opposed to broader geographic regions
permitted under current standards. The statement is effective for fiscal years
beginning after December 15, 1997. Management does not expect the adoption of
this statement to have a material effect on the Company's reporting of its
results of operations.
NOTE 2 - RESTATEMENT OF JUNE 30, 1996 AND 1997 FINANCIAL STATEMENTS:
The Company has restated its previously issued consolidated financial statements
for the quarterly periods ended June 30, 1996 and 1997, for matters related to:
previously reported sales and accounts receivables, inventory costs and
valuation reserves, revisions to the previous policy regarding the
capitalization of costs associated with the bulk purchase of inventory,
correction of prior accounting for capitalization of bulk purchase and certain
other costs, unrecorded liabilities, additional bad debt expenses and the
related income tax effects. Retained earnings at January 1, 1996 and 1997, was
reduced by $499,265 and $2,380,245, respectively, as a result of adjustments to
1995 and 1996 financial statements.
The effect on the Company's previously issued financial statements for the
quarterly periods ended June 30, 1996 and 1997 are summarized as follows:
<PAGE>
Changes to the Statement of Operations for the three months ended June 30, 1996:
<TABLE>
<CAPTION>
PREVIOUSLY INCREASE
REPORTED (DECREASE) (RESTATED)
---------- ---------- ----------
(OOO'S OMITTED)
<S> <C> <C> <C>
Total Net Sales. . . . . . . . . . $ 7,085 $ (73) $ 7,012
Cost of Sales. . . . . . . . . . . 4,858 20 4,878
Gross Profit. . . . . . . . . . . 2,227 (93) 2,134
Selling and Administration Expenses. . . . 1,107 330 1,437
Income from Operations . . . . . . . 1,120 (423) 697
Interest Expense . . . . . . . . . 466 (147) 319
Interest Income. . . . . . . . . . 284 (136) 148
Income Before Taxes . . . . . . . . 938 (412) 526
Provision for Taxes . . . . . . . . 170 (92) 78
Net Income . . . . . . . . . . . 768 (320) 448
Net Income Per Share . . . . . . . . $ 0.43 $ (0.18) $ 0.25
</TABLE>
Changes to the Statement of Operations for the six months ended June 30, 1996:
<TABLE>
<CAPTION>
PREVIOUSLY INCREASE
REPORTED (DECREASE) (RESTATED)
-------- ---------- ----------
(OOO'S OMITTED)
<S> <C> <C> <C>
Total Net Sales. . . . . . . . . . $ 11,721 $ (98) $ 11,623
Cost of Sales . . . . . . . . . . 8,625 139 8,764
Gross Profit. . . . . . . . . . . 3,096 (237) 2,859
Selling and Administration Expenses . . . 2,217 314 2,531
Income from Operations . . . . . . . 879 (551) 328
Interest Expense . . . . . . . . . 609 15 624
Interest Income. . . . . . . . . . 284 15 299
Income Before Taxes . . . . . . . . 566 (551) 15
Provision for Taxes . . . . . . . . 169 (169) -
Net Income . . . . . . . . . . . 397 (382) 15
Net Income Per Share. . . . . . . . $ 0.22 $ (0.21) $ 0.01
</TABLE>
<PAGE>
Changes to the Balance Sheet as of June 30, 1997:
<TABLE>
<CAPTION>
PREVIOUSLY INCREASE
REPORTED (DECREASE) (RESTATED)
-------- ---------- ----------
(OOO'S OMITTED)
<S> <C> <C> <C>
Current Assets . . . . . . . . . . $20,185 $(2,408) $17,777
Total Assets. . . . . . . . . . . 23,984 (2,408) 21,576
Total Current Liabilities . . . . . . 14,204 (60) 14,144
Deferred Tax Liability . . . . . . . 51 35 86
Total Liabilities . . . . . . . . . 17,432 (27) 17,405
Additional paid in capital . . . . . . 5,544 99 5,643
RETAINED EARNINGS (ACCUMULATED DEFICIT):
December 30, 1996 . . . . . . . . . 61 (2,380) (2,319)
Net Income . . . . . . . . . . . 915 (100) 815
------- ------- -------
June 30, 1997 . . . . . . . . . . 976 (2,480) (1,504)
------- ------- -------
------- ------- -------
Total Liabilities and Stockholders'
Equity . . . . . . . . . .. . $23,984 $(2,408) $21,576
</TABLE>
Changes to the Statement of Operations for the three months ended June 30, 1997:
<TABLE>
<CAPTION>
PREVIOUSLY INCREASE
REPORTED (DECREASE) (RESTATED)
---------- ----------- ----------
OOO'S OMITTED)
<S> <C> <C> <C>
Total Net Sales. . . . . . . . . . $ 10,085 $ (320) $ 9,765
Cost of Sales . . . . . . . . . . 7,171 (49) 7,122
Gross Profit. . . . . . . . . . . 2,914 (271) 2,643
Selling and Administration Expenses. . . 1,794 87 1,881
Income from Operations . . . . . . . 1,120 (358) 762
Income Before Taxes . . . . . . . . 996 (358) 638
Provision for Taxes . . . . . . . . 388 (238) 150
Net Income . . . . . . . . . . . 608 (120) 488
Net Income Per Share. . . . . . . . . . . $ 0.20 $ (0.04) $ 0.16
</TABLE>
<PAGE>
Changes to the Statement of Operations for the six months ended June 30, 1997:
<TABLE>
<CAPTION>
PREVIOUSLY INCREASE
REPORTED (DECREASE) (RESTATED)
--------- ------------ ---------
(OOO'S OMITTED)
<S> <C> <C> <C>
Total Net Sales. . . . . . . . . . $19,539 $ (311) $19,228
Cost of Sales . . . . . . . . . . 14,742 67 14,809
Gross Profit. . . . . . . . . . . 4,797 (378) 4,419
Selling and Administration Expenses . . . 3,019 45 3,064
Income from Operations . . . . . . . 1,778 (423) 1,355
Income Before Taxes . . . . . . . . 1,491 (423) 1,068
Provision for Taxes . . . . . . . . 576 (323) 253
Net Income . . . . . . . . . . . 915 (100) 815
Net Income Per Share . . . . . . . $ 0.35 $(0.04) $ 0.31
</TABLE>
NOTE 3 - LEGAL SETTLEMENT:
In February 1996, an action was brought against the Company arising out of a
dispute relating to an agreement between the Company and a customer. The
plaintiff claimed, among other things, damages of $3,518,000, interest, attorney
fees and punitive damages. In August 1996, the Company made a partial payment
to such customer of $166,000. Although the Company believed it had meritorious
defenses to this dispute, in August 1996, counsel advised the Company that final
judicial resolution of such matter could take several years. Consequently, in
order to prevent future strain on the Company's financial and human resources
necessary to defend the dispute, to avoid the uncertainties associated with
litigation generally and to pursue an initial public offering in a timely
manner, the Company made a strategic business decision to resolve this dispute,
and on November 1, 1996, entered into a settlement agreement with such customer.
Pursuant to such settlement agreement, the Company was to pay such customer $1.2
million, of which $300,000 was paid upon execution of the settlement agreement.
On March 14, 1997 the Company modified the settlement agreement by paying the
customer $850,000 in exchange for full satisfaction of all remaining monetary
obligations owed to the customer under the settlement agreement.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This discussion and analysis should be read in conjunction with the
information set forth under: Management's Discussion and Analysis of
Financial Condition and Results of Operations on pages 10 through 15 of the
Company's Annual Report on Form 10KSB for the year ended December 31, 1997.
This discussion contains "forward looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Although the Company believes
that the expectations reflected in such forward looking statements are
reasonable, it can give no assurance that such expectations will prove to
have been correct. Such forward looking statements involve risks and
uncertainties and actual results could differ from those described herein and
future results may be subject to numerous factors, many of which are beyond
the control of the Company.
OVERVIEW
The Company's business as a supplier, distributor and seller of commercial
aircraft parts and supplies was established in October 1988. The Company was
incorporated in California in February 1992 and reincorporated in Delaware in
July 1996.
GENERAL
Net sales consist primarily of gross sales, net of allowance for returns and
other adjustments. Cost of sales consists primarily of product costs, freight
charges and an inventory provision for damaged and obsolete products. Product
costs consist of the acquisition costs of the products and costs associated with
repairs, maintenance and certification.
Net sales and gross profit depend in large measure on the volume and timing of
sales orders received during the period and the mix of aircraft parts contained
in the Company's inventory. Sales and gross profit can be impacted by the timing
of bulk inventory purchases. In general, bulk inventory purchases allow the
Company to obtain large inventories of aircraft parts at a lower cost than can
ordinarily be obtained by purchasing such parts on an individual basis. Thus,
these bulk purchases allow the Company to receive larger gross margins on its
sale of aircraft parts since the cost of purchase is reduced.
Sales can be impacted by marketing and consignment agreements because such
agreements give the Company increased access to aircraft parts. Net profits are
impacted by marketing agreements because the Company does not incur costs
associated with carrying owned inventory due to the fact that a party who has
entered into a marketing agreement with the Company is responsible for storing
and maintaining the inventory to which the Company has access pursuant to such
marketing agreement. Generally, sales from consignment and marketing agreements
are not as profitable as sales from bulk inventory purchases.
<PAGE>
The following table sets forth certain information relating to the Company's
operations for the three months ended June 30, 1996 and 1997 (dollars in
thousands):
<TABLE>
<CAPTION>
1996 1997
RESTATED RESTATED
------------------ -------------------
<S> <C> <C> <C> <C>
Net distributed services and
inventory sales $6,531 93.1% $9,378 96.0%
Net sales on consignment and
marketing agreements 481 6.9 387 4.0
------ ------ ------ -------
Net sales 7,012 100.0 9,765 100.0
Cost of sales 4,878 69.6 7,122 72.9
------ ------ ------ -------
Gross profit 2,134 30.4 2,643 27.1
Selling and administrative
expenses 1,437 20.5 1,881 19.3
------ ------ ------ -------
Income from operations 697 9.9 762 7.8
Interest expense, net 171 2.4 124 1.3
Provision for income taxes 78 1.1 150 1.5
------ ------ ------ -------
Net income $ 448 6.4% $ 488 5.0%
------ ------ ------ -------
------ ------ ------ -------
</TABLE>
NET DISTRIBUTED SERVICES AND INVENTORY SALES. Net distributed services
represents sales of aircraft parts purchased at the point of sale through
outside parties. Inventory sales represent sales of the Company's owned
inventory. Net distributed services and inventory sales increased from $6.5
million for the three months ended June 30, 1996 to $9.4 million for the three
months ended June 30, 1997, an increase of $2.9 million or 44.6%. This
increase was primarily the result of the additional capital availability in
March 1997 from the initial public offering of 1,380,000 shares. This new
capital allowed the Company to react more quickly to order requests and the
ability to locate and purchase the parts needed to fulfill these orders. In
addition, the Company's availability of aircraft parts as a result of the bulk
inventory purchases received during 1996 and during the first two quarters of
1997, the general growth in the industry, the emphasis on broadening
relationships with existing domestic customers, and the development of both new
domestic and international customers. The Company also had two large
transactions during the second quarter of 1997 that contributed approximately
$1.2 million of inventory sales.
Sales from distributed services represented approximately 92.8% and 79.1% of
total distributed services and inventory sales for the three months ended June
30, 1996 and 1997, respectively. Sales of Company-owned inventory represented
approximately 7.2% and 20.9% of total distributed services and inventory sales
for the three months ended June 30, 1996 and 1997, respectively. The increase
in the
<PAGE>
percentage of the sales of Company-owned inventory was primarily due to the bulk
inventory purchases received during 1996 and during the first two quarters of
1997 and due to the sale of a single engine being sold for $900,000 and another
part that was sold for $250,00 from Company-owned inventory during the second
quarter of 1997.
NET SALES ON CONSIGNMENT AND MARKETING AGREEMENTS. Net sales on consignment and
marketing agreements represent total revenue, including commissions, related to
sales of inventory held on consignment and sales of inventory obtained through
marketing agreements. Net sales on consignment and marketing agreements
decreased from $481,000 for the three months ended June 30, 1996 to $387,000 for
the three months ended June 30, 1997, a decrease of $94,000 or 19.5%. This
decrease was primarily due to a decrease in the number of consignment and
marketing agreements the Company had entered into during the second quarter of
1997.
NET SALES. Net sales increased from $7.0 million for the three months ended
June 30, 1996 to $9.8 million for the three months ended June 30, 1997, an
increase of $2.8 million or 40.0%. This increase has been discussed above in
the net distributed services and inventory sales, offset by the decrease in net
sales on consignment and marketing agreements. See "Net distributed services and
inventory sales" and "Net sales on consignment and marketing agreements."
COST OF SALES. Cost of sales increased from $4.9 million for the three months
ended June 30, 1996 to $7.1 million for the three months ended June 30, 1997, an
increase of $2.2 million or 44.9%. This increase was primarily attributable to
the increase in net sales.
GROSS PROFIT. Gross profit increased from $2.1 million for the three months
ended June 30, 1996 to $2.6 million for the three months ended June 30, 1997, an
increase of $500,000 or 23.8%. This increase was a result of the increase in
net sales. Gross profit margin slightly decreased from 30.4% for the three
months ended June 30, 1996 to 27.1% for the three months ended June 30, 1997.
The decrease in gross profit margin was primarily attributable to some high
margin sales received in the 1996 period.
SELLING AND ADMINISTRATIVE EXPENSES. Selling and administrative expenses
consisted primarily of management compensation, commission expense, professional
fees, consulting expense and travel expense. The Company's selling and
administrative expenses increased from $1.4 million for the three months ended
June 30, 1996 to $1.9 million for the three months ended June 30, 1997, an
increase of $500,000 or 35.7%. This increase was principally due to higher
personnel costs necessary to respond to the Company's growth, including
salaries, taxes, insurance and commission expenses. As a percentage of net
sales, selling and adminstrative expenses decreased from 20.5% for the 1996
period to 19.3% for the 1997 period.
INCOME FROM OPERATIONS. Income from operations increased from $697,000 for the
three months ended June 30, 1996 to $762,000 for the three months ended June 30,
1997. The increase was due to the increase in net sales and gross profit,
offset by the increase in the selling and administrative expenses. See "Net
sales," "Gross profit" and "Selling and administrative expenses."
INTEREST EXPENSE, NET. Net interest expense decreased from $171,000 for the
three months ended June 30, 1996 to $124,000 for the three months ended June 30,
1997. The decrease in interest expense was due to a decrease in borrowings
under the
<PAGE>
Company's lines of credit during the second quarter of 1997. The Company was
able to decrease its borrowings under its lines of credit in 1997 as a result of
the proceeds received from the initial public offering completed in March 1997.
NET INCOME. Net income increased from $448,000 for the three months ended June
30, 1996 to $488,000 for the three months ended June 30, 1997, an increase of
$40,000 or 8.9%. This increase was attributable to the increase in net sales
and gross profit, offset by the increase in the selling and administrative
expenses. See "Net sales," "Gross profit" and "Selling and administrative
expenses."
<PAGE>
The following table sets forth certain information relating to the Company's
operations for the six months ended June 30, 1996 and 1997 (dollars in
thousands):
<TABLE>
<CAPTION>
1996 1997
RESTATED RESTATED
----------------- -------------------
<S> <C> <C> <C> <C>
Distributed services and
inventory sales $10,650 91.6% $18,566 96.6%
Net sales on consignment and
marketing agreements 973 8.4 662 3.4
------- ------- ------- -------
Net sales 11,623 100.0 19,228 100.0
Cost of sales 8,764 75.4 14,809 77.0
------- ------- ------- -------
Gross profit 2,859 24.6 4,419 23.0
Selling and administrative
expenses 2,531 21.8 3,065 16.0
------- ------- ------- -------
Income from operations 328 2.8 1,354 7.0
Interest expense, net 325 2.8 286 1.5
Other income 12 0.1 - -
Provision for income taxes - - 253 1.3
------- ------- ------- -------
Net income $ 15 0.1% $ 815 4.2%
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
NET DISTRIBUTED SERVICES AND INVENTORY SALES. Net distributed services
represents sales of aircraft parts purchased at the point of sale through
outside parties. Inventory sales represent sales of the Company's owned
inventory. Net distributed services and inventory sales increased from $10.7
million for the six months ended June 30, 1996 to $18.6 million for the six
months ended June 30, 1997, an increase of $7.9 million or 73.8%. This increase
was primarily the result of the additional capital availability in March 1997
from the initial public offering of 1,380,000 shares. This new capital allowed
the Company to react more quickly to order requests and the ability to locate
and purchase the parts needed to fulfill these orders. In addition, the
Company's availability of aircraft parts as a result of the bulk inventory
purchases received during 1996 and during the first two quarters of 1997, the
general growth in the industry, the emphasis on broadening relationships with
existing domestic customers, and the development of both new domestic and
international customers. The Company also had several large transactions during
the first two quarters of 1997 that contributed approximately $2.8 million of
distributed services and inventory sales.
Sales from distributed services represented approximately 94.8% and 86.8% of
total distributed services and inventory sales for the six months ended June 30,
1996 and 1997, respectively. Sales of Company-owned inventory represented
approximately 5.2% and 13.2% of total distributed services and inventory sales
for the six months ended June 30, 1996 and 1997, respectively. The increase in
the percentage of the sales of Company-owned inventory was primarily due to the
bulk inventory purchases received during 1996 and during the first two quarters
of 1997 and due to the sale of a single engine being sold for $900,000 and
another part
<PAGE>
that was sold for $250,000 from Company-owned inventory during the second
quarter of 1997.
NET SALES ON CONSIGNMENT AND MARKETING AGREEMENTS. Net sales on consignment and
marketing agreements represent total revenue, including commissions, related to
sales of inventory held on consignment and sales of inventory obtained through
marketing agreements. Net sales on consignment and marketing agreements
decreased from $973,000 million for the six months ended June 30, 1996 to
$662,000 for the six months ended June 30, 1997, a decrease of $311,000 or
32.0%. This decrease was primarily due to a decrease in the number of
consignment and marketing agreements the Company had entered into during the
first two quarters of 1997.
NET SALES. Net sales increased from $11.6 million for the six months ended June
30, 1996 to $19.2 million for the six months ended June 30, 1997, an increase of
$7.6 million or 65.5%. This increase has been discussed above in the net
distributed services and inventory sales, offset by the decrease in net sales on
consignment and marketing agreements. See "Net distributed services and
inventory sales" and "Net sales on consignment and marketing agreements."
COST OF SALES. Cost of sales increased from $8.8 million for the six months
ended June 30, 1996 to $14.8 million for the six months ended June 30, 1997, an
increase of $6.0 million or 68.2%. This increase was primarily attributable to
the increase in net sales.
GROSS PROFIT. Gross profit increased from $2.9 million for the six months
ended June 30, 1996 to $4.4 million for the six months ended June 30, 1997, an
increase of $1.5 million or 51.7%. This increase was a result of the increase
in net sales. Gross profit margin slightly decreased from 24.6% for the six
months ended June 30, 1996 to 23.0% for the six months ended June 30, 1997. The
decrease in gross profit margin was primarily attributable to some high margin
sales received in the 1996 period.
SELLING AND ADMINISTRATIVE EXPENSES. Selling and administrative expenses
consisted primarily of management compensation, commission expense, professional
fees, consulting expense and travel expense. The Company's selling and
administrative expenses increased from $2.5 million for the six months ended
June 30, 1996 to $3.1 million for the six months ended June 30, 1997, an
increase of $600,000 or 24.0%. This increase was principally due to higher
personnel costs necessary to respond to the Company's growth, including
salaries, taxes, insurance and commission expenses. As a percentage of net
sales, selling and administrative expenses decreased from 21.8% for the six
months ended June 30, 1996 to 16.0% for the six months ended June 30, 1997. The
decrease as a percentage of net sales was primarily due to management
effectively controlling administrative expenses.
INCOME FROM OPERATIONS. As a result of the above factors, income from
operations for the six months ended June 30, 1997 increased $1.0 million
compared to the six months ended June 30, 1996. The increase primarily reflects
higher net sales and gross profit realized during the first two quarters of
1997. See "Net Sales" and "Gross profit."
INTEREST EXPENSES, NET. Net interest expense decreased from $325,000 for the
six months ended June 30, 1996 to $286,000 for the six months ended June 30,
1997. The decrease in interest expense was due to a decrease in borrowings
under the Company's lines of credit during the first two quarters of 1997. The
Company was able to decrease its borrowings under its lines of credit in 1997 as
a result of
<PAGE>
the proceeds received from the initial public offering completed in March 1997.
NET INCOME. Net income increased from $15,000 for the six months ended June 30,
1996 to $815,000 for the six months ended June 30, 1997, an increase of
$800,000. This increase was attributable to the increase in net sales and gross
profit, somewhat offset by higher selling and administrative expenses. See "Net
sales," "Gross profit," and "Selling and administrative expenses."
LIQUIDITY AND CAPITAL RESOURCES
On March 3, 1997 the Company's Registration Statement on Form SB-2 relating to
the Company's initial public offering of 1,200,000 shares of its common stock
was declared effective. On March 7, 1997 the Company closed its initial public
offering of 1,200,000 shares of its common stock at $5 per share. In connection
with the initial public offering, the Company granted the underwriters a 45-day
option to purchase up to 180,000 additional shares of its common stock to cover
over-allotments. The underwriters exercised such over-allotment option and on
April 22, 1997, the Company sold an additional 180,000 shares of its common
stock at $5 per share.
The net proceeds from the offering after all expenses were approximately $4.5
million; of such proceeds, $3,800,000 was used to repay a portion of the amount
outstanding under two revolving lines of credit, $400,000 was used to repay
loans made to the Company by certain of its employees, and the remaining
proceeds were used to fund a portion of a legal settlement entered into by the
Company.
On April 22, 1997 the Company received net proceeds of approximately $760,000
from the exercise of the underwriter's over-allotment option. The proceeds were
used for working capital and to reduce vendor payables.
The Company's line of credit provides working capital of up to $15.0 million
with interest at the greater of prime plus 1.0 percent or the weighted average
of the rates on overnight Federal funds plus 1.5 percent subject to an
availability calculation based on the eligible borrowing base. The eligible
borrowing base includes certain receivables and inventories of the Company. The
$15.0 million line of credit matures on June 24, 2000. Events of default under
the line of credit include various events of default customary for such type of
agreement, such as failure to pay scheduled payments when due, failure to pay
taxes when due (unless contested in good faith), cross defaults on other
indebtedness or material contracts, the breach of any representation or warranty
by the Company, any change in the Company's condition that the Lender believes
impairs the collateral for the Credit Facility or the ability of the Company to
perform its obligations, certain events of bankruptcy, insolvency or
reorganization, engaging in certain sales of assets and if the lender deems
itself in good faith insecure or unsafe or fears diminution in value, removal or
waste of the collateral for the line of credit. In addition, the line of credit
includes events of default for the Company including any merger, consolidation
or sale of substantially all of the property or assets of the Company and any
change in the management of the Company whereby Mr. Osamah Bakhit is no longer
the Chief Executive Officer of the Company.
The line of credit requires certain financial covenants to be met; including,
but not limited to, a tangible net worth of at least $4.5 million at the outset
and increasing by $500,000 each calendar quarter thereafter, a minimum working
capital of $4.0 million at all times and not to make capital expenditures in any
fiscal year in an amount in excess of $750,000. In addition, the line of credit
requires
<PAGE>
mandatory repayments in the event the availability calculation based on the
eligible borrowing base has been reduced. Substantially all of the Company's
assets are pledged as collateral for amounts borrowed. At June 30, 1997 the
Company was in compliance with all of its requirements under the line of credit.
<PAGE>
The Company's long-term debt consists of the following: (i) note payable of
$3.9 million at June 30, 1997 to a financial institution, due in monthly
installments of $166,250 (principal and interest) to August 1999 with an
interest rate of 9.5 percent; (ii) note payable of $929,000 at June 30, 1997 to
a financial institution, secured by a building, due in adjustable monthly
installments of $8,382 (principal and interest) to May 1999, with a balloon
payment due May 1999 and interest at Moody's A Bond Index (8.0% at December 30,
1996) plus .125 percent; (iii) note payable of $1.5 million at June 30, 1997 to
a corporation, secured by specific inventory, due in monthly installments of
$128,194 (principal and interest) to May 2000, with an imputed interest rate of
9.5 percent; (iv) other long-term debt of approximately $9,700.
In February 1996, an action was brought against the Company arising out of a
contract dispute between the Company and one of its customers. In August 1996,
the Company made a partial settlement payment to such customer in the amount of
$166,000, which was financed through additional borrowings under the Company's
lines of credit. Although the Company believed it had meritorious defenses to
this dispute, counsel advised the Company that final judicial resolution of such
matter could take several years. Consequently, in order to prevent future
strain on the Company's financial and human resources necessary to defend the
dispute, to avoid the uncertainties associated with litigation generally and to
pursue an initial public offering in a timely manner, the Company made a
strategic business decision to resolve this dispute, and on November 1, 1996,
entered into a settlement agreement with such customer. Pursuant to such
settlement agreement, the Company was to pay such customer $1.2 million, of
which $300,000 was paid upon execution of the settlement agreement, which was
financed through additional borrowings under the Company's lines of credit. On
March 14, 1997 the Company modified the settlement agreement by paying the
customer $850,000 in exchange for full satisfaction of all remaining monetary
obligations owed to the customer under the settlement agreement. This amount
was financed through the proceeds from the offering and through additional
borrowings under the Company's lines of credit.
On April 16, 1997, the Company entered into an agreement to lease approximately
33,000 square feet of office and warehouse space located in Lake Forest,
California. Additionally, the Company has entered into an agreement to sell the
building presently owned. The sale closed in December 1997. Net proceeds
resulting from the sale were used to offset the costs associated with relocation
and improvements to the new leased facility.
The Company expects its cash requirements to increase significantly in future
periods. The Company will require substantial funds to purchase inventory on a
bulk basis.
The Company believes that the net proceeds from its initial public offering will
be sufficient to meet its cash requirements for at least the next twelve months.
There can be no assurance that the Company will not require additional financing
during such period or that financing will be available on a timely basis and at
acceptable terms, if at all.
As part of its growth strategy, the Company intends to pursue acquisitions of
bulk inventories of aircraft parts. Financing for such acquisitions will be
provided from operations and from borrowings under the Company's lines of
credit. The Company may also issue additional debt and/or equity securities in
connection with one or more of these acquisitions.
<PAGE>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
None
Item 2. CHANGES IN SECURITIES
Not Applicable
Item 3. DEFAULTS UPON SENIOR SECURITIES
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
None
Item 5. OTHER INFORMATION
In February 1996, an action was brought against the Company arising out of a
dispute relating to an agreement between the Company and a customer. The
plaintiff claimed, among other things, damages of $3,518,000, interest, attorney
fees and punitive damages. In August 1996, the Company made a partial payment
to such customer of $166,000. Although the Company believed it had meritorious
defenses to this dispute, in August 1996, counsel advised the Company that final
judicial resolution of such matter could take several years. Consequently, in
order to prevent future strain on the Company's financial and human resources
necessary to defend the dispute, to avoid the uncertainties associated with
litigation generally and to pursue an initial public offering in a timely
manner, the Company made a strategic business decision to resolve this dispute,
and on November 1, 1996, entered into a settlement agreement with such customer.
Pursuant to such settlement agreement, the Company was to pay such customer $1.2
million, of which $300,000 was paid upon execution of the settlement agreement.
On March 14, 1997 the Company modified the settlement agreement by paying the
customer $850,000 in exchange for full satisfaction of all remaining monetary
obligations owed to the customer under the settlement agreement.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
<PAGE>
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
**3.1 Amended and Restated Certificate of Incorporation of the Registrant
**3.2 Bylaws, as amended, of the Registrant
**3.3 Amendment to Amended and Restated Certificate of Incorporation of
the Reistrant
**4.1 Specimen Common Stock Certificate
**4.2 Form of Warrant Agreement
**10.2 1996 Stock Option and Incentive Plan
**10.3 Aircraft Purchase Agreement, dated August 8, 1995, by and between
Alia The Royal Jordanian Airlines and Aviation Distributors
Incorporated
**10.4 Aircraft Purchase Agreement, dated January 4, 1995, by and between
Air China Group Import & Export Trading Co. and Aviation
Distributors Incorporated
**10.5 Revolving Credit Facility, dated August 22, 1996, by and between
Aviation Distributors Incorporated and Far East National Bank.
**10.6 Employment Agreement, dated as of July 16, 1996, by and between
Osamah S. Bakhit and Aviation Distributors Incorporated
**10.7 Employment Agreement, dated as of July 16, 1996, by and between
Mark W. Ashton and Aviation Distributors Incorporated
**10.8 Employment Agreement, dated as of July 16, 1996, by and between
Jeffrey G. Ward and Aviation Distributors Incorporated
**10.9 Commercial Lease, dated June 11, 1996, by and between Francis De
Leone and Aviation Distributors, Inc
**10.10 Lease Agreement, dated January 1, 1996, by and between Ian and
Robert Burton Limited and Aviation Distributors (Europe) Limited
**10.11 Revolving Credit Facility, dated August 30, 1996, by and between
Aviation Distributors Incorporated and Far East National Bank
**10.12 Non-Revolving Credit Facility, dated August 22, 1996, by and
between Aviation Distributors, Incorporated and Far East National
Bank
**10.13 Amended and Restated Employment Agreement, dated as of July 16,
1996, by and between Osamah S. Bakhit and Aviation Distributors
Incorporated
**10.14 Amended and Restated Promissory Note from Osmah S. Bakhit to
Aviation Distributors, Inc., dated as of December 30, 1995
<PAGE>
**10.15 Settlement Agreement dated as of November 1, 1996
**10.16 Form of Indemnity Agreement
**10.17 Promissory Note between Aviation Distributors, Inc. and Mark W.
Ashton, dated January 28, 1997
**10.18 Promissory Note between Aviation Distributors, Inc. and Osamah S.
Bakhit, dated January 28, 1997
**10.19 Promissory Note between Aviation Distributors, Inc. and Jim
Goulet, dated January 28, 1997
**10.20 Promissory Note between Aviation Distributors, Inc. and Steve
Hayer, dated January 28, 1997
**10.21 Promissory Note betwen Aviation Distributors, Inc. and Elizabeth
Morgan, dated January 28, 1997
**10.22 Promissory Note between Aviation Distributors, Inc., and Magda
Reichenberg, dated January 28, 1997
**10.23 Promissory Note between Aviation Distributors, Inc. and Leza Ann
Waner, dated January 28, 1997
**10.24 Promissory Note between Aviation Distributors, Inc. and Jeffrey G.
Ward, dated January 28, 1997
**10.25 Amendment to Promissory Note between Aviation Distributors, Inc.
and Mark W. Ashton, dated February 3, 1997
**10.26 Amendment to Promissory Note between Aviation Distributors, Inc.
and Osamah S. Bakhit, dated February 3, 1997
**10.27 Amendment to Promissory Note between Aviation Distributors, Inc.
and Jim Goulet, dated February 3, 1997
**10.28 Amendment to Promissory Note between Aviation Distributors, Inc.
and Steve Hayer, dated February 3, 1997
**10.29 Amendment to Promissory Note between Aviation Distributors, Inc.
and Elizabeth Morgan, dated February 3, 1997
**10.30 Amendment to Promissory Note between Aviation Distributors, Inc.
and Magda Reichenberg, dated February 3, 1997
**10.30 Amendment to Promissory Note between Aviation Distributors, Inc.
and Leza Ann Waner, dated February 3, 1997
**10.32 Amendment to Promissory Note between Aviation Distributors, Inc.
and Jeffrey G. Ward, dated February 3, 1997.
<PAGE>
**10.33 Promissory Note between Aviation Distributors, Inc. and Osamah S.
Bakhit, dated December 30, 1996.
***10.34 Acknowledgement of Receipts of Settlement Funds by and among
Compania Mexicana de Aviacion, S.A. de C.V., ADI Consignment
Sales, Inc., Aviation Distributors, Inc. and Osamah S. Bakhit
* Filed herewith
** Incorporated by reference to the exhibits with the
corresponding exhibit numbers in the Registration Statements
on Form SB-2 previously filed by the Registrant (File No.
333-8061).
*** Incorporated by reference to the exhibits with the
corresponding exhibit numbers in the Registration Statement
on Form 10-QSB previously filed by the Registrant on May 6,
1997 (File No. 333-8061)
(b) Reports on Form 8-K
None.
<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.
Date June 19, 1998 AVIATION DISTRIBUTORS, INC.
------------------------------
By: /SS/ Kenneth A. Lipinski
----------------------------
Ken Lipinski
Chief Operating Officer
By: /SS/ Gary L. Joslin
----------------------------
Gary Joslin
Chief Financial Officer and
Vice President of Finance
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,564,987
<SECURITIES> 0
<RECEIVABLES> 12,078,503
<ALLOWANCES> 346,316
<INVENTORY> 5,476,990
<CURRENT-ASSETS> 17,777,336
<PP&E> 1,920,291
<DEPRECIATION> 351,752
<TOTAL-ASSETS> 21,575,932
<CURRENT-LIABILITIES> 14,143,792
<BONDS> 0
0
0
<COMMON> 31,650
<OTHER-SE> 4,153,775
<TOTAL-LIABILITY-AND-EQUITY> 21,575,932
<SALES> 19,228,323
<TOTAL-REVENUES> 19,228,323
<CGS> 14,809,006
<TOTAL-COSTS> 14,809,006
<OTHER-EXPENSES> 2,855,841
<LOSS-PROVISION> 209,014
<INTEREST-EXPENSE> 508,872
<INCOME-PRETAX> 1,067,678
<INCOME-TAX> 253,000
<INCOME-CONTINUING> 814,678
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 814,678
<EPS-PRIMARY> 0.31
<EPS-DILUTED> 0.31
</TABLE>
