<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997 COMMISSION FILE NO. 0-23082
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______ TO ______
CARLYLE INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 13-1574754
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
ONE PALMER TERRACE
CARLSTADT, NJ 07072
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (201) 935-6220
FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST
REPORT: N/A
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.
[X] YES [ ] NO
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.
AS OF AUGUST 4, 1997, 7,388,282 SHARES OF COMMON STOCK WERE OUTSTANDING.
PAGE 1 OF 13
<PAGE> 2
CARLYLE INDUSTRIES, INC.
ONE PALMER TERRACE
CARLSTADT, NJ 07072
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
Part I -- Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets
as of June 30, 1997 and December 31, 1996....................................................3
Consolidated Statements of Operations
for the Three and Six Months Ended June 30, 1997 and 1996 ...................................4
Consolidated Statements of Cash Flows
for the Six Months Ended June 30, 1997 and 1996..............................................5
Notes to Unaudited Consolidated Financial Statements - June 30, 1997 ........................6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations ...............................................9
Part II -- Other Information
Item 1. Legal Proceedings ..............................................................Not Applicable
Item 2. Changes in Securities ..........................................................Not Applicable
Item 3. Defaults upon Senior Securities ............................................................11
Item 4. Submission of Matters to a Vote of Security Holders ........................................11
Item 5. Other Information ..............................................................Not Applicable
Item 6. Exhibits and Reports on Form 8-K ...........................................................12
Signatures..................................................................................13
</TABLE>
PAGE 2 OF 13
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CARLYLE INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS JUNE 30, 1997 DECEMBER 31, 1996
Current Assets: (UNAUDITED) (NOTE)
----------- --------
<S> <C> <C>
Cash and cash equivalents $ 10,756 $ 131
Accounts receivable trade, net 1,883 2,847
Inventories 3,967 2,838
Net assets of discontinued operations -- 52,504
Current deferred tax asset 4,886 2,688
Other current assets 51 330
----------- --------
Total current assets 21,543 61,338
----------- --------
Property, plant and equipment, at cost 2,482 3,344
Less: Accumulated depreciation and amortization (642) (694)
----------- --------
Net property, plant and equipment 1,840 2,650
----------- --------
Goodwill, net 2,199 2,246
Other assets 93 935
----------- --------
Total Assets $ 25,675 $ 67,169
=========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 846 $ 3,100
Current maturities of long-term debt 73 4,091
Federal and state income taxes payable 8,493 --
Other current liabilities 3,114 3,155
----------- --------
12,526 10,346
----------- --------
Long-Term debt 105 33,058
Other Liabilities 9,305 11,692
----------- --------
Total Liabilities 21,936 55,096
----------- --------
Redeemable Preferred Stock, par value $0.01 per share 21,305,055 shares
authorized; Shares issued and outstanding:
Series A - None
Series B - 20,805,060 20,805 20,805
Accumulated dividends on preferred stock 3,444 2,739
----------- --------
24,249 23,544
----------- --------
Common Stock, par value $0.01 per share
20,000,000 shares authorized;
Shares issued and outstanding:
June 30, 1997: 7,388,282 74
December 31, 1996: 7,388,282 74
Paid in Capital 19,858 19,858
Retained Earnings (40,442) (31,403)
----------- --------
Total Common Stockholders' Equity (20,510) (11,471)
----------- --------
Total Liabilities and Stockholders' Equity $ 25,675 $ 67,169
=========== ========
</TABLE>
See Notes to Unaudited Consolidated Financial Statements.
PAGE 3 OF 13
<PAGE> 4
CARLYLE INDUSTRIES, INC.
AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
1997 1996 1997 1996
-------------------- ----------------------
<S> <C> <C> <C> <C>
Net Sales $4,470 $ 4,623 $ 9,475 $ 9,494
Cost of Sales 1,939 2,313 4,291 4,765
------ -------- -------- -------
2,531 2,310 5,184 4,729
Selling, general & administrative expenses 1,162 1,675 2,449 3,417
Other income (expense) -- net -- 5 6 10
------ -------- -------- -------
Income from continuing operations before
interest and income taxes 1,369 640 2,741 1,322
Interest income (expense) 106 (5) 73 (5)
------ -------- -------- -------
Income from continuing operations before
provision for income taxes 1,475 635 2,814 1,317
Provision for income taxes 544 250 1,032 517
------ -------- -------- -------
Income from continuing operations 931 385 1,782 800
Less dividends on preferred stock 356 337 704 669
------ -------- -------- -------
Income applicable to common stock
from continuing operations 575 48 1,078 131
Results of discontinued operations net of
income tax provision:
Income (loss) from operations -- 555 (316) 983
Loss on disposition -- -- (9,801) --
------ -------- -------- -------
-- 555 (10,117) 983
------ -------- -------- -------
Net income $ 575 $ 603 $ (9,039) $ 1,114
====== ======== ======== =======
Earnings per common share:
Continuing operations $ .08 $ .01 $ .15 $ .02
Discontinued operations -- .07 (1.37) .13
------ -------- -------- -------
Total $ .08 $ .08 $ (1.22) $ .15
====== ======== ======== =======
Weighted average common shares
outstanding (in thousands) 7,388 7,397 7,388 $ 7,399
====== ======== ======== =======
</TABLE>
See Notes to Unaudited Consolidated Financial Statements.
PAGE 4 OF 13
<PAGE> 5
CARLYLE INDUSTRIES, INC.
AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income from continuing operations $ 1,782 $ 800
Reconciliation of net income from continuing
operations to net cash provided by operations:
Depreciation and amortization 188 339
Deferred tax provision 576 436
Changes in operating assets and liabilities:
Accounts receivable, trade 1,290 809
Merchandise inventories (1,129) (249)
Federal income taxes receivable -- 575
Other current assets 279 462
Accounts payable (674) (366)
Other current liabilities (535) (74)
Other liabilities (336) (866)
Other operating assets and liabilities -- (212)
Cash flow from discontinued operations (5,666) (749)
-------- -------
(4,225) 905
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of discontinued operation 51,924 --
Capital expenditures (103) (42)
-------- -------
51,821 (42)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving credit facility and capitalized
lease obligations 20,279 7,800
Repayment of long term debt and capital lease obligations (57,250) (8,724)
-------- -------
(36,971) (924)
-------- -------
Increase (decrease) in cash and cash equivalents 10,625 (61)
Cash and cash equivalents beginning of period 131 996
-------- -------
Cash and cash equivalents end of period $ 10,756 $ 935
======== =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 783 $ 2,403
======== =======
Income taxes $ 117 $ 93
======== =======
</TABLE>
See Notes to Unaudited Consolidated Financial Statements
PAGE 5 OF 13
<PAGE> 6
CARLYLE INDUSTRIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for fair presentation have
been included. Certain reclassifications have been made to prior year amounts in
order to present them on a basis consistent with the current year. Operating
results for the three-month and six-month periods ended June 30, 1997 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1997. For further information, refer to the consolidated financial
statements and footnotes included in the Company's annual report on Form 10-K
for the year ended December 31, 1996.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operation: The Company and its subsidiary distribute a line of home
sewing and craft products, principally buttons. During the first quarter, the
Company sold its Thread division. (See Note 5).
Consolidation: The accompanying consolidated financial statements include the
accounts of the Company and all subsidiaries after elimination of intercompany
items and transactions.
Depreciation and Amortization: Depreciation and amortization are computed
principally by the straight-line method for each class of depreciable and
amortizable asset based on their estimated useful lives. Buildings and
improvements, machinery and equipment, and furniture, fixtures and leasehold
improvements are generally depreciated over periods of 20-35, 5-25 and 5-10
years, respectively.
Revenue Recognition: Revenue is recognized upon shipment of merchandise.
Cash Equivalents: The Company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash equivalents.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires the Company to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
NOTE 3: EARNINGS PER SHARE
Earnings per common share for the Company have been computed on the basis of
weighted average common shares outstanding after providing for quarterly
preferred dividend requirements.
PAGE 6 OF 13
<PAGE> 7
NOTE 4: INVENTORIES:
The components of inventories, net of reserves, are as follows (dollars in
thousands):
<TABLE>
<CAPTION>
JUNE 30, 1997 DECEMBER 31, 1996
------------- -----------------
<S> <C> <C>
Raw materials $ 1,879 $ 1,932
Work in Progress 10 10
Finished goods 2,078 896
-------- --------
$ 3,967 $ 2,838
======== ========
</TABLE>
NOTE 5: DISCONTINUED OPERATIONS
On March 26, 1997, the Company sold the assets and specified liabilities of the
Company's Thread Division to Hicking Pentecost PLC. The aggregate cash
consideration was $54.9 million of which $3.0 million was placed in escrow
subject to certain post-closing adjustments.
In connection with this sale, the Company repaid all of its outstanding bank
debt using proceeds received in the transaction. No penalties were incurred by
the Company in connection with this prepayment. In addition, the Company will be
obligated to pay approximately $8.5 million of income taxes related to the tax
gain resulting from this transaction in March 1998. Nondeductible goodwill
associated with the Thread division amounting to approximately $18.0 million was
written-off as of the date of sale. Operating results of the Thread division for
1997 through the date of disposition and for all prior periods have been
presented as discontinued operations. In connection with this transaction, the
Company changed its name to Carlyle Industries, Inc.
In addition, the operating results related to the Company's former Home
Furnishings division which was sold on July 31, 1996, are also included in
discontinued operations through the date of its sale in 1996.
NOTE 6: DEFAULT ON PREFERRED STOCK
Under the terms of the Company's charter, dividends are payable upon the
Preferred Stock when, as and if declared by the Board of Directors out of
legally available funds. In addition, the Preferred Stock is required to be
redeemed by the Company, to the extent of legally available funds, in
installments on or prior to March 1999, subject among other things to the
approval of the Company's banks. Prior to March 27, 1997, the Company did not
make any payments on account of the Preferred Stock (either dividend or
redemption) as the Company's lenders declined to approve such payments, however,
as of that date, the Company discharged the last of its credit facilities.
Consequently, the Company is now in default of its obligations to redeem the
Preferred Stock to the extent of its legally available funds. As of June 30,
1997, the accrued but unpaid dividends were $3.4 million and redemption payments
in arrears aggregated $12.5 million. Accrued but unpaid dividends are added to
the redemption value of the Preferred Stock and the total continues to accrue
interest at a compound rate of 6% per annum. In addition, the Company has agreed
to notify the Pension Benefit Guaranty Corporation ("PBGC") thirty days prior to
taking certain actions, including any dividend or redemption payments with
respect to the Preferred Stock.
PAGE 7 OF 13
<PAGE> 8
The Company expects to enter into discussion with The Noel Group, Inc. ("Noel"),
with a view of satisfying its obligations to the Preferred Stockholders in
accordance with the terms of its charter to the extent consistent with the
Company's resources. The Company may also enter into negotiations to modify the
terms of the Preferred Stock, although the Company has not yet determined to do
so. If such negotiations are commenced, they may result in an acceleration of
the redemption of the Preferred Stock or other modifications to the terms of the
Preferred Stock, provided the Company determines that such modifications are in
its interest.
The Company intends to fulfill its obligation to the Preferred Stockholders as
required by the Company's charter to the extent that the Company has cash
resources in excess of those required to operate its business. As the Company
does not currently have such excess resources, its ability to make payments on
account of the Preferred Stock in the future will depend on the Company's future
cash flow, the timing of the settlement of the liabilities recorded in the
financial statements of the Company, the outcome of the contemplated
negotiations with Noel described above, and the ability of the Company to obtain
additional financing. In addition, as the Company has agreed to notify the PBGC
prior to making any redemption payments; the Company's decision to make any such
payments will depend on the successful resolution of any issues which may arise
with the PBGC relating to the Company's unfunded liability to its defined
benefit plan.
PAGE 8 OF 13
<PAGE> 9
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULT OF OPERATIONS
RESULTS OF OPERATIONS
SECOND QUARTER
Sales during the second quarter of 1997 totaled $4.5 million. Sales in the
second quarter of 1996 totaled $4.6 million for a decrease of $.1 million.
Gross margin during the second quarter of 1997 totaled $2.5 million as compared
with $2.3 million in the second quarter of 1996.
Selling, general and administrative expenses in the second quarter of 1997
totaled $1.2 million as compared to $1.7 million in the second quarter of 1996.
The reduction in selling, general and administrative expense in 1997 as compared
to 1996 was primarily the result of the lower corporate administrative headcount
and expense.
Interest expense incurred in connection with the credit facilities outstanding
during 1996 and through March 27, 1997 has been included in results of
discontinued operations as the respective credit facilities were required to be
repaid in full in connection with the sale of the Thread division. Interest
expense in 1997 included in results of continuing operations represents an
interest accrual related to a pension obligation.
The provision for income taxes during the second quarter of 1997 totaled $.5
million as compared to $.3 million during the same period last year. The
combined effective income tax rate in 1997 totaled 36.9% as compared to 39.4% in
1996. The combined effective income tax rates are higher than combined statutory
rates because of nondeductible goodwill.
Preferred dividends during the second quarter of 1997 totaled $.4 million as
compared to $.3 million during the same period in 1996. Preferred dividends are
accrued and compound at a rate of 6% per annum. No dividend payments have been
made by the Company. See Note 6 to the unaudited consolidated financial
statements.
YEAR-TO-DATE
Sales during the six months ended June 30, 1997 and 1996 totaled $9.5 million.
Gross margin during the six months ended June 30, 1997 totaled $5.2 million as
compared to $4.7 million during the comparable period in 1996. The increase in
gross margin during the first half of 1997 was the result of favorable product
mix.
Selling, general and administrative expense during the six months ended June 30,
1997 totaled $2.4 million as compared to $3.4 million during the first six
months of 1996. The reduction in selling, general and administrative expense in
1997 as compared to 1996 was primarily the result of the lower corporate
administrative headcount and expense.
Interest expense related to outstanding debt under former credit facilities is
classified as discontinued operations during the first six months of 1997 and
1996.
PAGE 9 OF 13
<PAGE> 10
The provision for income taxes during the first six months of 1997 totaled $1.0
million as compared to $.5 million during the comparable period in 1996. The
effective income tax rate during the first half of 1997 was 36.7% as compared to
39.3% during the comparable period last year.
Preferred dividends accrued during the first six months of 1997 totaled $704
thousand as compared to $669 thousand during the first six months of 1996.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1997, the Company's principal sources of liquidity included cash and
cash equivalents of $10.8 million and trade accounts receivable of $1.9 million.
In connection with the sale of the Thread division, the Company estimates that
it will be obligated to pay approximately $8.5 million of income taxes in March
1998.
In connection with the sale of the Thread division, all outstanding bank
indebtedness was repaid and the existing bank credit facility was terminated
without penalty.
Under the terms of the Company's charter, dividends are payable upon the
Preferred Stock when, as and if declared by the Board of Directors out of
legally available funds. In addition, the Preferred Stock is required to be
redeemed by the Company, to the extent of legally available funds, in
installments on or prior to March 1999, subject among other things to the
approval of the Company's banks. Prior to March 27, 1997, the Company did not
make any payments on account of the Preferred Stock (either dividend or
redemption) as the Company's lenders declined to approve such payments, however,
as of that date, the Company discharged the last of its credit facilities.
Consequently, the Company is now in default of its obligations to redeem the
Preferred Stock to the extent of its legally available funds. As of June 30,
1997, the accrued but unpaid dividends were $3.4 million and redemption payments
in arrears aggregated $12.5 million. Accrued but unpaid dividends are added to
the redemption value of the Preferred Stock and the total continues to accrue
interest at a compound rate of 6% per annum. In addition, the Company has agreed
to notify the Pension Benefit Guaranty Corporation ("PBGC") thirty days prior to
taking certain actions, including any dividend or redemption payments with
respect to the Preferred Stock.
The Company expects to enter into discussion with The Noel Group, Inc. ("Noel"),
with a view of satisfying its obligations to the Preferred Stockholders in
accordance with the terms of its charter to the extent consistent with the
Company's resources. The Company may also enter into negotiations to modify the
terms of the Preferred Stock, although the Company has not yet determined to do
so. If such negotiations are commenced, they may result in an acceleration of
the redemption of the Preferred Stock or other modifications to the terms of the
Preferred Stock, provided the Company determines that such modifications are in
its interest.
The Company intends to fulfill its obligation to the Preferred Stockholders as
required by the Company's charter to the extent that the Company has cash
resources in excess of those required to operate its business. As the Company
does not currently have such excess resources, its ability to make payments on
account of the Preferred Stock in the future will depend on the Company's future
cash flow, the timing of the settlement of the liabilities recorded in the
financial statements of the Company, the outcome of the negotiations with Noel
described above, and the ability of the Company to obtain additional financing.
In addition, as the Company has agreed to notify the PBGC prior to making any
redemption payments; the Company's decision to make any such payments will
depend on the successful resolution of any issues which may arise with the PBGC
relating to the Company's unfunded liability to its defined benefit plan.
PAGE 10 OF 13
<PAGE> 11
IMPACT OF INFLATION
The Company's results are affected by the impact of inflation on operating
costs. Historically, the Company has used selling price adjustments, cost
containment programs and improved operating efficiencies to offset the otherwise
negative impact of inflation on its operations.
PART II - OTHER INFORMATION
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
a) None
b) REDEEMABLE SERIES B PREFERRED STOCK
Scheduled dividend payments totaling $1,316,018 in 1995,
$1,361,230 in 1996 and an additional $707,793 in 1997 remain
unpaid and continue to accrue at a compounded rate of 6% per
annum. Additionally, the Company has not given effect to
certain previously scheduled redemption payments. See Note 6
to the unaudited consolidated financial statements for a
detailed discussion of the Preferred Stock.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of Carlyle Industries, Inc. was
held on April 22, 1997 for the following purposes:
1) To elect four directors to serve until the next Annual Meeting
of Stockholders and until their successors are elected.
2) To ratify the selection of Arthur Andersen LLP as the
independent auditors of the Company for the fiscal year ending
December 31, 1997.
3) To vote on the approval of certain amendments to the Company's
1994 Incentive Program.
The holders of the Company's Common Stock and Series B Preferred
Stock voted as a single class. The number of votes cast for,
against or withheld, as well as the number of abstentions is set
forth below:
Shares eligible to Vote: 28,193,342
<TABLE>
<CAPTION>
Proposal No 1 Proposal No 2 Proposal 3
- ---------------------------------------- --------------------------------------- -------------------------------------
For Against Abstain For Against Abstain For Against Abstain
--- ------- ------- --- ------- ------- --- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
26,151,564 5,861 297,644 26,447,550 4,631 2,887 24,585,242 487,054 34,436
92.8% 0.0% 1.1% 93.8% 0.0% 0.0% 87.2% 1.7% 0.1%
</TABLE>
PAGE 11 OF 13
<PAGE> 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER EXHIBIT NUMBERED PAGE
------ ------- -------------
<S> <C> <C>
</TABLE>
(B) REPORTS ON FORM 8-K.
On April 9, 1997, the Company filed a Current Report on
Form 8-K to reflect the sale of its Thread division to
Hicking Pentecost, PLC.
PAGE 12 OF 13
<PAGE> 13
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.
CARLYLE INDUSTRIES, INC.
(Registrant)
/S/ Karen Brenner
- --------------------------------------------------------------------------------
Karen Brenner, Chairman, President and Chief Executive Officer
/S/ Edward F. Cooke
- --------------------------------------------------------------------------------
Edward F. Cooke, Vice President and Chief Financial Officer
Date:
PAGE 13 OF 13
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 10,756
<SECURITIES> 0
<RECEIVABLES> 1,883
<ALLOWANCES> 0
<INVENTORY> 3,967
<CURRENT-ASSETS> 21,543
<PP&E> 2,482
<DEPRECIATION> 642
<TOTAL-ASSETS> 25,675
<CURRENT-LIABILITIES> 12,526
<BONDS> 0
0
24,249
<COMMON> (20,510)
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 25,675
<SALES> 9,475
<TOTAL-REVENUES> 9,475
<CGS> 4,291
<TOTAL-COSTS> 4,291
<OTHER-EXPENSES> 2,443
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 73
<INCOME-PRETAX> 2,814
<INCOME-TAX> (1,032)
<INCOME-CONTINUING> 1,782
<DISCONTINUED> (10,117)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,039)
<EPS-PRIMARY> (1.22)
<EPS-DILUTED> (1.22)
</TABLE>
