UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended September 30, 1997
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 1-12571
INTELLICELL CORP.
DELAWARE 95-4467726
(State of incorporation or organization) (IRS Employer Identification No.)
6929 Hayvenhurst Ave., Van Nuys California 91406
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (818) 906-7777
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 and (2) has been subject to such filing requirements for
the past 90 days. Yes _X_ No___
As of October 31, 1997, there were 4,415,902 shares of the registrant's Common
Stock outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
Intellicell Corp.
Balance Sheets
December 31, September 30,
1996 1997
---------------------------------------
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Accounts receivable, net of allowance for
doubtful accounts of $428,000 and $1,020,000 $ 6,287,000 $ 9,257,000
Inventories, net of reserve of $442,000 and $300,000 6,437,000 5,972,000
Notes receivable, net of allowance for doubtful
note of $0 and $662,000 337,000 827,000
Other receivables 500,000 672,000
Deposits for purchases of inventory 1,443,000 1,220,000
Deferred tax asset 353,000 305,000
Prepaid expenses and other current assets 268,000 374,000
---------------------------------------
Total current assets 15,625,000 18,627,000
---------------------------------------
Property and equipment, net of accumulated
depreciation of $36,000 and $74,000 156,000 205,000
Goodwill, net of accumulated amortization of $13,000
and $21,000 87,000 79,000
Deferred financing costs, net of accumulated
amortization of $58,000 and $140,000 118,000 73,000
Deferred acquistion costs -- 151,000
Other asset 39,000 48,000
---------------------------------------
Total assets $ 16,025,000 $ 19,183,000
=======================================
Liabilities and Stockholders' Equity
Current liabilities:
Bank overdraft $ 1,012,000 $ 1,397,000
Revolving credit facility -- 3,275,000
Accounts payable 5,994,000 6,607,000
Accrued expenses 187,000 218,000
---------------------------------------
Total current liabilities 7,193,000 11,497,000
Deferred tax liability 23,000 --
---------------------------------------
Total liabilities 7,216,000 11,497,000
Commitments and contingencies
Stockholders' equity
Preferred stock -$.01 par value, 1,000,000 shares
authorized and none issued
Common stock - $.01 par value, 15,000,000 shares
authorized, 4,217,464 and 4,415,902 shares issued
and outstanding 42,000 44,000
Additional paid-in capital 8,925,000 9,809,000
Retained earnings (deficit) 296,000 (2,167,000)
Due from officer (454,000) --
---------------------------------------
Total stockholders' equity 8,809,000 7,686,000
---------------------------------------
Total liabilities and stockholders' equity $ 16,025,000 $ 19,183,000
=======================================
</TABLE>
See accompanying notes to financial statements.
2
<PAGE>
Intellicell Corp.
Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
For The 9 Months Ended
September 30,
--------------------------------------------
1996 1997
--------------------------------------------
<S> <C> <C>
Net Sales $ 65,989,000 $ 61,505,000
Cost of sales 62,852,000 58,411,000
--------------------------------------------
Gross profit 3,137,000 3,094,000
Selling, general and administrative expenses 2,025,000 4,243,000
Non-recurring legal and auditing fees -- 1,024,000
--------------------------------------------
Income (loss) from operations 1,112,000 (2,173,000)
Other income (expenses):
Interest (279,000) (284,000)
Other income -- 21,000
--------------------------------------------
Income (loss) before income taxes 833,000 (2,436,000)
Income tax expense -- (27,000)
--------------------------------------------
Net income (loss) $ 833,000 $ (2,463,000)
============================================
Pro forma amounts:
Income (loss) before income taxes $ 833,000 $ (2,436,000)
Income tax expense (336,000) (27,000)
--------------------------------------------
Net income (loss) $ 497,000 $ (2,463,000)
============================================
Earnings (loss) per share $ 0.23 $ (0.55)
============================================
Weighted average number of common shares outstanding 2,195,810 4,462,828
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
Intellicell Corp.
Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
For The 3 Months Ended
September 30,
-------------------------------------------
1996 1997
-------------------------------------------
<S> <C> <C>
Net Sales $ 23,519,000 $ 20,512,000
Cost of sales 22,257,000 19,890,000
-------------------------------------------
Gross profit 1,262,000 622,000
Selling, general and administrative expenses 854,000 2,250,000
-------------------------------------------
Income (loss) from operations 408,000 (1,628,000)
Other income (expenses):
Interest (189,000) (104,000)
Other income (3,000) 8,000
-------------------------------------------
Income (loss) before income tax 216,000 (1,724,000)
Income tax expense -- (309,000)
-------------------------------------------
Net income (loss) $ 216,000 $ (2,033,000)
===========================================
Pro forma amounts:
Income (loss) before income taxes $ 216,000 $ (1,724,000)
Income tax expense (87,000) (309,000)
-------------------------------------------
Net income (loss) $ 129,000 $ (2,033,000)
===========================================
Earnings (loss) per share $ 0.06 $ (0.46)
===========================================
Weighted average number of common shares outstanding 2,195,810 4,415,902
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
Intellicell Corp.
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Increase in Cash For the 9 Months Ended
September 30,
-----------------------------------------
1996 1997
-----------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net Income (loss) $ 833,000 $ (2,463,000)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation and amortization 52,000 129,000
Provision for doubtful account receivables 319,000 751,000
Provision for inventory reserves 54,000 205,000
Provision for doubtful note receivable -- 662,000
Change in net deferred tax asset -- 25,000
Changes in operating assets and liabilities:
(Increase) in accounts receivable (2,346,000) (5,378,000)
(Increase) decrease in inventory (1,523,000) 260,000
(Increase) decrease in deposits for purchases of inventory (1,461,000) 223,000
(Increase) in other receivables -- (172,000)
(Increase) in prepaid expenses and other current assets (173,000) (106,000)
(Increase) in other assets (4,000) (9,000)
Increase in accounts payable and accrued expenses 4,088,000 643,000
-----------------------------------------
Net cash used in operating activities (161,000) (5,230,000)
-----------------------------------------
Cash flows from investing activities:
Loans to employees and third parties 174,000 --
Repayments of note receivable 211,000 505,000
Acquisition of fixed assets -- (88,000)
Deferred acquisition costs -- (151,000)
-----------------------------------------
Net cash provided by investing activities 385,000 266,000
-----------------------------------------
Cash flows from financing activities:
Increase (decrease ) in Bank overdraft (96,000) 385,000
Deferred financing costs (176,000) (37,000)
Deferred registration costs (496,000) --
Advances under credit facility 3,582,000 58,769,000
Repayments under credit facility -- (55,494,000)
Proceeds from the sale of common stock -- 1,341,000
Distribution to shareholder (100,000) --
Payments on loan payable (1,301,000) --
-----------------------------------------
Net cash provided by financing activities 1,413,000 4,964,000
-----------------------------------------
Net increase in cash 1,637,000 --
Cash - beginning of period -- --
=========================================
Cash - end of period $ 1,637,000 $ --
=========================================
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
Intellicell Corp.
Statements of Cash Flows
(Unaudited)
(Continued)
<TABLE>
<CAPTION>
For the 9 Months Ended
September 30,
-----------------------------------
1996 1997
-----------------------------------
<S> <C> <C>
Supplemental Dislosures of Cash Flow Information
Cash paid during the period for:
Interest $ 252,000 $ 284,000
Income taxes $ -- $ 223,000
Non-cash financing activities:
Common stock reacquired from officer as settlement
of balance due from officer and retirement of such
shares $ -- $ 454,000
Conversion of trade receivable into note receivable $ 555,000 $1,657,000
</TABLE>
See accompanying notes to financial tatements.
6
<PAGE>
INTELLICELL CORP.
Notes to Financial Statements
(Unaudited)
Note 1. Company's Quarterly Report Under Form 10-Q
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
statements and with the instructions set forth in the Securities and Exchange
Commission's ("SEC") regulations. In the opinion of Management, the accompanying
financial statements include all adjustments consisting of normal recurring
accruals necessary to present fairly the financial statements of Intellicell
Corp. for the periods presented. The accompanying financial information should
be read in conjunction with the audited financial statements contained in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996.
Footnote disclosures that substantially duplicate those in the Company's Form
10-K including significant accounting policies, have been omitted. The results
of operations for the nine and three months ended September 30, 1997, are not
necessarily indicative of the results to be expected for the full fiscal year.
Note 2. Non-recurring Legal and Auditing Fees
During 1997 and in connection with the audit of the Company's financial
statements for the year ended December 31, 1996 (see, Form 10-K, Item 9), the
Company incurred non-recurring expenses of $1,024,000 consisting primarily of
professional fees, including the fees of its prior and current independent
auditors, fees of special counsel and a special auditor retained by the
Company's Audit Committee.
Note 3. Contingent Liabilities
In October 1996, an action was filed against the Company seeking a judgment
to cancel the Company's trademark registration for the name "Intellicell". The
action is in a preliminary stage and the Company is unable to determine the
outcome of the action. Although the Company intends to vigorously defend this
action, there can be no assurance that such action will be resolved in a manner
favorable to the Company. The probability of an unfavorable outcome and range of
possible loss, if any, cannot be determined.
Note 4. Common Stock
In December 1996, the Company consummated an initial public offering of
2,000,000 shares of Common Stock and received proceeds of $8,047,000, net of
underwriting discounts and commissions and expenses of the offering. In January
1997, the managing underwriter exercised an over-allotment option (the
"Over-allotment Option") to purchase an additional 300,000 shares, resulting in
net proceeds of $1,341,000.
In December 1996, $1,000,000 principal amount of a note payable was
converted into 223,464 shares of Common Stock. In addition, the Company
repurchased 36,000 shares of Common Stock from the Company's President in
cancellation of $180,000 due from such officer. In May 1997, the President
repaid excess S corporation distributions in the amount of $454,000 by
delivering 101,562 shares of Common Stock to the Company for cancellation (the
"Stock Cancellation"). The Company reflected the $454,000 as a "Due from
officer" at December 31, 1996.
7
<PAGE>
Note 5. Pro forma Income Taxes (Benefit)-Unaudited
As a result of the Company's S corporation status which terminated in
December 1996, the financial statements do not include a provision for federal
and state income taxes for the period ended September 30, 1996. As a result of
the initial public offering, the S corporation election was terminated and the
Company became subject to federal and state income taxes. Accordingly, pro forma
net income in the accompanying statements of operations includes pro forma
adjustments for income taxes which would have been provided had the S
corporation election not been in effect.
Note 6. Credit Facility
In June 1996, the Company entered into a revolving line of credit agreement
with a finance company, which expires in June 1998, and provides for borrowings
of up to a maximum of $7,500,000 based on a maximum of 82% of eligible accounts
receivable and 50% of eligible inventory as defined in the agreement. Borrowings
under the agreement bear interest at prime rate plus one and three-quarters
percent (1.75%) per annum. At December 31, 1996 and September 30, 1997, interest
on advances accrued at a rate of 10% and 10.25%, respectively. The credit
facility is collateralized by substantially all of the assets of the Company.
The agreement prohibits the Company from paying dividends or incurring
additional indebtedness, except for trade indebtedness, and requires the Company
to maintain a tangible net worth of $4,500,000 and working capital of
$1,500,000. The Company is in compliance with all restrictive covenants at
September 30, 1997.
Note 7. Acquisition
On August 19, 1997, the Company entered into a non-binding letter of intent
to acquire all of the outstanding stock of Pacific Unplugged Communications,
Inc. and Unplugged de Mexico (together referred to as Unplugged). The letter of
intent expired on October 31, 1997, however the parties remain in negotiations
with the ultimate outcome uncertain. Unplugged is engaged in substantially the
same business as the Company. The acquisition would be accounted for using the
purchase method. The Company has capitalized as deferred acquisition cost
$151,000 of professional and legal fees incurred associated with the proposed
acquisition at September 30, 1997. In the event the acquisition is not
consummated, such deferred acquisition costs would be expensed. For the nine
months ended September 30, 1997, the Company made product purchases from and
sales to Unplugged totaling $6,762,000 and $2,513,000, respectively. At
September 30, 1997, the Company had accounts payable to Unplugged of $537,000,
or 8.1% of total accounts payable, and accounts receivable from Unplugged in the
amount of $155,000, or 1.5% of total accounts receivable.
Note 8. Lease of Facilities
The Company entered into a five year lease agreement for a 12,800 square
foot warehouse and office space facility in Miami, Florida. The facility will
handle sales into the southeastern region of the United States and to Latin
America. It is anticipated that the facilities will be available for occupancy
in November 1997. The lease agreement has an initial annual rental of $74,408.
Note 9. Subsequent Event
On November 18, 1997, the Board of Directors of the Company declared a
dividend to its shareholders in the form of a warrant to purchase Common Stock
of the Company. Record owners of Common Stock as of December 10, 1997 shall be
entitled to receive one warrant for every two shares of Common Stock held. No
fractional warrants shall be issuable in connection with the payment of the
dividend.
Each warrant will entitle the holder to purchase one share of Common Stock
at a price of $4.00 per share for a three year period, subject to adjustment in
certain circumstances. The warrants shall be redeemable by the Company, upon
notice of not less than 30 days, at a price of $.10 per warrant in the event the
closing bid quotation of the Common Stock on all 20 of the trading days ending
on the third day prior to the day on which Company gives notice has been at
least $7.00 per share; provided however that no such right of redemption shall
exist prior to the time that such shares of Common Stock underlying the warrants
have been registered under the Securities Act of 1933, as amended. The Company
intends to make an application for the warrants to be listed and traded on the
Nasdaq SmallCap Market.
Ben Neman, Chairman, Chief Executive Officer and President has agreed to
waive his rights to receive dividends on the shares of Common Stock held by him.
Item 2. Management's Discussion and Analysis of Financial Conditions and Results
of Operations.
Safe Harbor statement under the Private Securities Litigation Reform Act of
1995: The statements contained in this report which are not historical facts are
forward looking statements that involve risks and uncertainties, including but
not limited to, possible delays in the Company's expansion efforts,
8
<PAGE>
changes in wireless communications markets and technologies, the nature of
possible supplier or customer arrangements which may become available to the
Company in the future, possible product obsolescence, uncollectable accounts
receivable, slow moving inventory, lack of adequate financing, increased
competition and unfavorable general economic conditions. The Company's actual
results may differ materially from the results discussed in any forward looking
statement.
Changes in Financial Condition
Total assets at September 30, 1997 increased by $3,158,000 from December
31, 1996, primarily as a result of a $2,970,000 or 47.2% increase in accounts
receivable and a $490,000 increase in notes receivable. These increases were
offset by a $688,000 decrease in inventories and deposits for purchase of
inventories. The increase in accounts receivable was the result of increased
sales activity occurring in late September and an increase in the extension of
credit terms to customers. The increase in notes receivable is the result
converting aged accounts receivable into interest bearing promissory notes with
a fixed maturity. As of September 30, 1997, accounts 90 days past due were
approximately 10.8% of aggregate trade accounts receivable. The Company's
allowance for doubtful accounts receivable was $1,020,000 and its allowance for
doubtful notes receivable was $662,000 at September 30, 1997. The Company
believes these allowances are currently adequate for the size and nature of its
accounts and notes receivable. However, delays in the collection or the
uncollectibility of accounts and notes receivable have had and could continue to
have a material adverse effect on the Company's liquidity and working capital
position and could require the Company to continually increase its allowance for
doubtful accounts. Bad debt expense as a percentage of sales for the nine months
ended September 30, 1997 was 2.3%.
Net assets (assets less liabilities) of the Company decreased by $1,123,000
or 12.7% from December 31, 1996, reflecting the issuance of additional shares of
the common stock pursuant to the exercise of the Over-allotment Option, offset
by the Stock Cancellation and the net loss of $2,463,000 for the nine months
ended September 30, 1997.
Inventory and deposits for purchases of inventory decreased by $688,000 or
8.7% from December 31, 1996 to September 30, 1997. This decrease is primarily
the result of returning inventories of Sony products on hand in June 1997 as a
result of Sony terminating its distribution arrangement with the Company.
The Company's inventory reserve was $300,000 at September 30, 1997, which
the Company believes is currently adequate for obsolescence and net realizable
value, given the size and nature of its inventories. The amounts the Company
will ultimately realize could, however, differ materially from the amounts
estimated in arriving at inventory reserves.
On December 31, 1996, the Company had recorded a deferred income tax asset
of $353,000 with no valuation allowance and a deferred tax liability of $23,000.
The Company has a deferred tax asset of $1,327,000 representing the future
benefit of net operating losses and timing differences and has established a
valuation allowance of $1,022,000 at September 30, 1997 reflecting current
assessment of its realizability.
Total liabilities increased by $4,281,000 or 59.3% from December 31, 1996
to September 30, 1997. Bank overdraft increased by $385,000, borrowings under
the revolving credit facility increased by $3,275,000 and accounts payable
increased by $613,000 from December 31, 1996 to September 30, 1997.
9
<PAGE>
Comparison of Operations
Net sales for the nine months and three months ended September 30, 1997,
decreased $4,484,000, or 6.8%, and $3,007,000 or 12.8%, respectively, from the
prior comparable periods. Such decreases were the result of both volume and
price decreases.
Gross profit decreased by $43,000 or 1.3%, and decreased by $640,000 or
50.7% for the nine and three months ended September 30, 1997, from the prior
comparable periods. The decrease for the three months ended September 30, 1997
was due to decreased volume discounts earned from manufacturers and lower margin
sales and an increase in the provision for inventory obsolescence.
Selling, general and administrative expenses increased by $2,218,000, or
109.5%, from the nine months ended September 30, 1996 to the nine months ended
September 30, 1997. As a percentage of sales, such expenses were 3.1% and 6.9%
for the nine months ended September 30, 1996 and 1997, respectively. For the
three months ended September 30, 1997, such expenses increased by $1,396,000 or
163.5% over the comparable period of the prior year. The above mentioned
increase in expenses is associated with a $1,162,000 provision for doubtful
accounts and notes receivable. The provisions for doubtful accounts of $500,000
and for doubtful notes receivable of $662,000 related to two customers. The
remainder of the increase relates to increased costs associated with sales
staff, promotional and advertising efforts, and general and administrative
expenses, primarily salaries and legal and auditing fees incurred for general
company purposes.
During the first and second quarters of 1997, the Company incurred
non-recurring legal and auditing fees relating to the Company's change in
auditors of $1,024,000, including the fees of its current and prior independent
auditor, fees of special counsel and a special auditor retained by the Company's
Audit Committee of the Board of Directors.
The Company incurred a loss from operations of $2,173,000 for the nine
months ended September 30, 1997, as compared to income from operations of
$1,112,000 for the nine months ended September 30, 1996. For the quarter ended
September 30, 1997 the Company incurred a loss from operations of $1,628,000 as
compared to income from operations of $408,000 for the quarter ended September
30, 1996. The Company incurred a net loss of $2,463,000 for the nine months
ended September 30, 1997 as compared to pro forma net income of $497,000 for the
nine months ended September 30, 1996. For the quarters ended September 30, 1997
and 1996 the Company had a net loss of $2,033,000 and pro-forma net income of
$129,000, respectively.
The loss from operations and the net loss for the nine months ended
September 30, 1997 are primarily attributable to non-recurring legal and
auditing fees, increased allowances for doubtful accounts and notes receivable,
increased selling, general and administrative expenses, and the establishment of
a valuation reserve for deferred tax assets. The loss from operations and the
net loss for the three months ended September 30, 1997 are attributable to a
lower gross profit, increased allowances for doubtful accounts and notes
receivable, increased selling, general and administrative expenses and the
establishment of a valuation reserve for deferred tax assets.
10
<PAGE>
Liquidity and Capital Resources
Historically, the Company's primary cash requirements have been to fund
increased levels of inventories and accounts receivable. The Company has
satisfied its working capital requirements principally through cash flow from
operations, the issuance of equity securities and borrowings. Working capital at
September 30, 1997 was $7,130,000 compared to working capital of $8,432,000 at
December 31, 1996. This decrease in working capital primarily reflects increased
allowances for doubtful accounts and note receivable.
Net cash used in operating activities was $5,230,000 and $161,000 for the
nine months ended September 30, 1997 and 1996, respectively. The increase in
cash used was primarily attributable to the net loss for the period and
increased levels of accounts receivable offset by increases in provisions for
doubtful accounts and notes receivable, decreases in inventories and increases
in accounts payable and accrued expenses. Net cash provided by investing
activities for the nine months ended September 30, 1997 was $266,000 as compared
to $385,000 for the nine months ended September 30, 1996. Net cash provided by
investing activities for the nine months ended September 30, 1997 was primarily
the result of payments on notes receivable. Net cash provided by financing
activities was $4,964,000 and $1,413,000 for the nine months ended September 30,
1997 and 1996, respectively. This increase was primarily attributable to the net
increase in borrowings under the Company's credit facility, the net proceeds
from the exercise of the Over-allotment Option of $1,341,000 and a $385,000
increase in the bank overdraft. The Company had no cash or cash equivalents at
September 30, 1997.
Based on current plans and assumptions relating to its operations, the Company
believes that available cash resources and projected cash flow from operations
will be sufficient to satisfy the Company's contemplated short-term cash
requirements. The Company currently does not have significant borrowing
availability under its credit facility. Under the Company's line of credit, the
Company is prohibited from incurring additional indebtedness, except for trade
indebtedness. There can be no assurance that additional financing will be
available to the Company on commercially reasonable terms, or at all.
.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
In October 1996, an action was filed against the Company seeking a judgment
to cancel the Company's trademark registration for the name "Intellicell". The
action is in a preliminary stage and the Company is unable to determine the
outcome of the action. Although the Company intends to vigorously defend this
action, there can be no assurance that such action will be resolved in a manner
favorable to the Company.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit 11 Computations of Earnings Per Share
Exhibit 27 Financial Data Schedule
(b) No Reports on Form 8-K were filed during the three months ended
September 30, 1997.
11
<PAGE>
Pursuant to the requirements of Section 13 of 15(d) of the Securities Exchange
Act of 1934, Intellicell Corp. has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
Intellicell Corp.
By: /s/John C. Snyder II Dated: November 19, 1997
- ------------------------------------
John C. Snyder II
Chief Financial Officer
12
Intellicell Corp.
EXHIBIT 11
Computation of Earnings (Loss) Per Share
(Unaudited)
<TABLE>
<CAPTION>
For The 9 Months Ended For The 3 Months Ended
September 30, September 30,
--------------------------------- --------------------------------
1996 1997 1996 1997
--------------------------------- --------------------------------
<S> <C> <C> <C> <C>
Earnings (loss) per share:
Pro forma net income (loss) for primary earnings
(loss) per share $ 497,000 $ (2,463,000) $ 129,000 $ (2,033,000)
================================= ================================
Weighted average common shares outstanding 2,030,000 4,462,828 2,030,000 4,415,902
Weighted average shares sold to fund stockholder
distribution paid out of proceeds of initial public offering 142,346 -- 142,346 --
Weighted average shares resulting from conversion of
convertible notes payable at a discount from market 23,464 -- 23,464 --
--------------------------------- --------------------------------
Weighted average common shares and equivalents 2,195,810 4,462,828 2,195,810 4,415,902
================================= ================================
Primary pro forma earnings (loss) per share $ 0.23 $ (0.55) $ 0.06 $ (0.46)
================================= ================================
</TABLE>
For the periods ending September 30, 1996 and 1997, no additional common stock
equivalents (upon exercise of common share equivalents under the modified
treasury stock method) were included in the calculation of earnings (loss) per
share. For the periods ended September 30, 1996, no such common share
equivalents existed and for the periods ended September 30, 1997, the results
would be anti-dilutive. For the periods ended September 30, 1996 and 1997,
earnings (loss) per share was identical under the primary and fully diluted
basis.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S
FINANCIAL STATEMENT INCLUDED IN THIS QUARTERLY REPORT ON FORM 10-Q, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 10,277,000
<ALLOWANCES> 1,020,000
<INVENTORY> 5,972,000
<CURRENT-ASSETS> 18,627,000
<PP&E> 279,000
<DEPRECIATION> 74,000
<TOTAL-ASSETS> 19,183,000
<CURRENT-LIABILITIES> 11,497,000
<BONDS> 0
0
0
<COMMON> 44,000
<OTHER-SE> 7,642,000
<TOTAL-LIABILITY-AND-EQUITY> 19,183,000
<SALES> 61,505,000
<TOTAL-REVENUES> 61,505,000
<CGS> 58,411,000
<TOTAL-COSTS> 58,411,000
<OTHER-EXPENSES> 1,024,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 284,000
<INCOME-PRETAX> (2,436,000)
<INCOME-TAX> (27,000)
<INCOME-CONTINUING> (2,463,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,463,000)
<EPS-PRIMARY> (0.55)
<EPS-DILUTED> (0.55)
</TABLE>
