SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(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.
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 for the transition period from __________ to _________.
1-7921
(Commission file number)
SECURITY CAPITAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 13-3003070
(State or other (I.R.S. Employee
jurisdiction of Identification No.)
incorporation or
organization)
1111 NORTH LOOP WEST, SUITE 400, HOUSTON, TEXAS 77008
(Address of principal executive offices, including zip code)
(713) 880-7100
(Registrant's telephone number, including area code)
N.A.
(Former address, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ].
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 14,
1997, there were 4,059,766 outstanding shares of Class A Common Stock, par value
$ .01, and 392 outstanding shares of Common Stock, par value $ .01, of the
registrant.
Page 1 of 11
<PAGE>
Security Capital Corporation and Subsidiaries
Consolidated Statements of Income
For the Three For the Six
Months Months
Ended Ended
June 30, June 30,
--------------- ----------------
1997 1996 1997 1996
---- ---- ---- ----
(Dollars in thousands, except per
share amounts)
Product sales ...................... $ 3,490 $ 1,453 $ 6,032 $ 1,453
Cost of goods sold ................. 1,565 668 2,617 668
------- ------- ------- -------
Gross profit ....................... $ 1,925 $ 785 $ 3,415 $ 785
------- ------- ------- -------
Selling, general and
administrative ................... 1,642 1,307 3,394 1,517
------- ------- ------- -------
Operating income (loss) ............ $ 283 $ (522) $ 21 $ (732)
------- ------- ------- -------
OTHER INCOME
Income from joint .................. $ 62 $ 114 $ 274 $ 443
enterprise
Interest income .................... 93 104 182 230
Interest expense ................... (401) -- (744) --
Other income ....................... (22) -- (50) 4
------- ------- ------- -------
Total other income(expense) ........ $ (268) $ 218 $ (338) $ 677
------- ------- ------- -------
Minority interest share of
net income(loss) ................... (14) 32 86 32
------- ------- ------- -------
Income(loss) before provision for
Federal income tax................ $ 1 $ (272) $ (231) $ (23)
Provision for Federal
income taxes ..................... -- -- 8 --
------- ------- ------- -------
Net income(loss) ................... $ 1 $ (272) $ (239) $ (23)
Less preferred stock dividends ..... (112) (113) (225) (225)
------- ------- ------- -------
Net loss applicable to
common stockholders .............. $ (111) $ (385) $ (464) $ (248)
------- ------- ------- -------
Net loss per common share: $ (.03) $ (.09) $ (.11) $ (.06)
------- ------- ------- -------
Weighted average shares
outstanding ...................... 4,060 4,060 4,060 4,060
------- ------- ------- -------
The accompanying Notes to Consolidated Financial Statements are an integral part
of these financial statements.
Page 2 of 11
<PAGE>
Security Capital Corporation and Subsidiaries
Consolidated Balance Sheets
June 30, December 31,
1997 1996
---- ----
(Unaudited) (Unaudited)
(Dollars in thousands,
except par value)
ASSETS
Current assets:
Cash and cash equivalents ............................. $ 6,341 $ 8,010
Account receivable (net of
allowance for
doubtful accounts
of $125 and $70) .................................... 5,308 3,063
Inventory ............................................. 7,292 3,612
Other current assets .................................. 1,018 628
-------- --------
Total current assets .................................. 19,959 15,313
Property and equipment (net
of accumulated depreciation
of $240 and $211) ................................... 1,436 1,095
Intangible assets (net of
accumulated amortization of
$629 and $353) ........................................ 13,827 8,984
Licenses and other assets ............................. 424 405
-------- --------
Total Assets .......................................... $ 35,646 $ 25,797
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable .......................................... $ 5,453 $ 1,000
Current portion of long-term debt ..................... 1,600 950
Accounts payable ...................................... 1,996 1,047
Accrued expenses and other
liabilities ......................................... 351 407
-------- --------
Total current liabilities ............................. 9,400 3,404
Long-term debt, less current portion .................. 13,059 10,047
Other long-term liabilities ........................... 467 --
Minority interest ..................................... 1,526 913
-------- --------
Total Liabilities ..................................... $ 24,452 $ 14,364
-------- --------
Commitments and Contingencies ......................... $ -- $ --
-------- --------
Class A preferred stock
(redeemable), $.01
par value, 50,000 shares
authorized, 30,000
shares issued (including
dividends in arrears
of $1,762 and $1,537) ............................... $ 4,762 $ 4,537
-------- --------
STOCKHOLDERS' EQUITY
Common stock, $.01 par
value, 7,500 shares ................................. $ -- $ --
authorized; 551 shares
issued
Class A common stock,
$.01 par value,
10,000,000 shares
authorized; 4,378,183
shares issued ....................................... 44 44
Preferred stock, $.01 par
value, 2,500,000
shares authorized,
none issued ......................................... -- --
Additional paid-in capital ............................ 62,544 62,544
Accumulated deficit ................................... (50,941) (50,477)
Less: Treasury stock, at
cost, 318,576 shares ................................ (5,215) (5,215)
-------- --------
Total Stockholders' Equity ............................ $ 6,432 $ 6,896
-------- --------
Total Liabilities and
Stockholders' Equity ................................ $ 35,646 $ 25,797
-------- --------
The accompanying notes to consolidated financial statements are an integral part
of these statements.
Page 3 of 11
<PAGE>
Security Capital Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
For the
Six Months
Ended
June 30,
---------------
1997 1996
---- ----
(Dollars in thousands)
Cash flows from operating activities:
Net loss ................................................. $ (239) $ (23)
Adjustments to reconcile income (loss) to net
cash used by operating activities:
Depreciation and amortization of
property and equipment, and
amortization of deferred items ................. 304 99
Net change in operating assets and
liabilities(excluding purchased operating
assets and assumed liabilities of Pumpkin)
Increase in accounts receivable .............. (2,071) (860)
Increase in inventories ...................... (1,334) (1,181)
Increase in other assets ..................... (394) (234)
Increase in accounts payable ................. 126 --
Increase(decrease) in accrued interest and
other liabilities ........................... (210) (3)
Minority interest in net
earnings of subsidiary ....................... (86) (32)
------- -------
Net cash used for operating activities ................... (3,904) (2,234)
------- -------
Cash flows used for investing activities
Additions to property and equipment ...................... (84) (3)
------- -------
Cash flow used for investing activities .................. (84) (3)
------- -------
Net cash provided by financing activities
Net increase in borrowings
under line of credit ................................... 4,325 2,173
Repayment of term loans .................................. (639) --
Purchase of assets of Pumpkin
Masters, Inc. (net of cash ............................. (1,366) --
acquired of $134)
Purchase assets of Possible
Dreams, Ltd. and Columbia
National Corporation (net of
cash acquired of $764) ................................. -- (1,936)
------- -------
Cash flow provided by financing activities ............... 2,320 237
------- -------
Net decrease in cash and cash equivalents ................ (1,668) (2,000)
Cash and cash equivalents, beginning of period ........... 8,010 9,827
------- -------
Cash and cash equivalents, end of period ................. $ 6,341 $ 7,827
------- -------
The accompanying notes to consolidated financial statements are an integral part
of these statements.
Page 4 of 11
<PAGE>
Security Capital Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
(1) ACCOUNTING AND FINANCIAL REPORTING POLICIES
The accompanying consolidated financial statements include the accounts of
Security Capital Corporation and all of its subsidiaries engaged in continuing
operations ("Security Capital" or the "Company"). The Company's subsidiaries
include Possible Dreams, Ltd., a Delaware corporation, which engages in the
business of designing, importing, warehousing and distributing Christmas
figurines and ornaments and, to a lesser extent, religious statutes. On June 27,
1997, the Company's subsidiary, Pumpkin Masters Holdings, Inc. ("Holdings"),
through its subsidiary, Pumpkin Ltd. ("Pumpkin"), both Delaware corporations,
acquired substantially all of the assets and assumed certain liabilities of
Pumpkin Ltd. d/b/a Pumpkin Masters, Inc., a Colorado corporation (the "Seller").
Pumpkin is engaged in the business of manufacturing and distributing pumpkin and
watermelon carving kits and related accessories. The allocation of the purchase
price of the tangible and intangible assets was based upon a preliminary
evaluation of their fair value. The final allocation of the purchase price may
differ from that presented.(See Note 4 for additional details)
All significant intercompany balances and transactions have been eliminated in
consolidation. The condensed consolidated financial statements included herein
have been prepared by Security Capital, in accordance with the rules and
regulations of the Securities and Exchange Commission, without audit. Security
Capital's accounting and financial reporting policies conform with generally
accepted accounting principles and include adjustments in interim periods,
consisting only of normal recurring items, considered necessary for a fair
presentation of the financial statements. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although Security Capital believes that
the accompanying disclosures are adequate to make the information presented not
misleading. It is suggested that these condensed consolidated financial
statements be read in conjunction with the consolidated financial statements and
the notes thereto included in the latest Annual Report of Security Capital on
Form 10-K. Prior period financial statements are presented for comparative
purposes.
(2) FEDERAL INCOME TAXES
The Company adopted Statement of Financial Accounting Standards ("SFAS") No.
109, "Accounting for Income Taxes" during fiscal year 1994. SFAS No. 109
requires the Company to compute deferred income taxes based on the difference
between the financial statement basis and tax basis of assets and liabilities
using enacted tax rates in effect in the years in which the differences are
expected to reverse. The adoption had no effect on the financial position or
results of operations because of a 100% valuation allowance applied against the
deferred tax assets.
The tax effects of the items comprising the Company's net deferred tax asset at
September 30, 1996 in the Company's statement of financial position are as
follows:
September 30,1996
-----------------
Deferred tax assets: (In thousands)
Allowance for doubtful accounts ................ $ 39
Operating loss carryforwards ................... 12,122
Partnership income ............................. (17)
--------
12,144
100% Valuation allowance ....................... (12,144)
Net deferred tax asset ........................ $ -0-
========
Page 5 of 11
<PAGE>
The Company continued to provide a 100% valuation allowance on all net deferred
tax assets at September 30, 1996. In addition, the net deferred tax asset at
June 30, 1997 has not changed materially since September 30, 1996.
Security Capital files a consolidated Federal income tax return with its
subsidiaries. At September 30, 1996, the Company had net operating loss
carryforwards for Federal income tax purposes of approximately $17.0 million,
the expiration dates of which are as follows:
September 30, Amount
------------- ------
(In thousands)
1998 $ 200
1999 2,500
2000 1,300
2001 3,600
2002 1,800
2003 4,000
2004 2,400
2006 400
2007 200
2008 600
-------
$17,000
-------
In addition, in connection with the disposition of a former subsidiary of the
Company, the Company incurred a tax loss amounting to approximately $26 million.
The Company believes that a substantial portion of this loss is an ordinary loss
for Federal income tax purposes which may be carried forward to 2004, although
there can be no assurance that this position would prevail, if challenged. The
Company's Federal income tax returns have been examined by the Internal Revenue
Service (the "IRS") through fiscal year 1986 and the above loss carryforwards,
including the loss on disposition of the aforementioned subsidiary, remain
subject to review by the IRS.
(3) EARNINGS PER SHARE FISCAL YEAR 1997 AND FISCAL YEAR 1996
Earnings per common and common equivalent share amounts are based on the
weighted average number of shares of Common Stock and Class A Common Stock
outstanding and the dilutive effect, if any, of outstanding stock options. The
sum of Common Stock and Class A Common Stock is used because the two classes are
identical except for certain transfer restrictions imposed on the Class A Common
Stock. The assumed conversion of these options was anti-dilutive for all periods
presented, and are thus excluded from the primary and fully diluted earnings per
share calculation
The weighted average number of shares outstanding used in the computation of
primary and fully diluted earnings per share is as follows (in thousands):
Fiscal Year 1997 Fiscal Year 1996
--------------------- --------------------
6 Months 3 months 6 months 3 months
-------- -------- -------- --------
Primary .................... 4,060 4,060 4,060 4,060
Fully diluted .............. 4,060 4,060 4,060 4,060
Page 6 of 11
<PAGE>
(4) ASSET PURCHASE OF PUMPKIN LTD.
On June 27,1997, Pumpkin acquired substantially all of the assets and assumed
certain liabilities of the Seller. The consideration paid to the Seller and the
transaction fees and expenses incurred as of the closing date aggregated
$7,871,136. This amount consists of the following:
Cash paid to the Seller ........................ $6,079,172
Transaction Fees and expenses .................. 651,125
Assumption of accounts payable
and accrued liabilities ...................... 1,140,839
----------
Total .......................................... $7,871,136
The assets purchased consisted of the assets used by the Seller in the conduct
of its business, including cash, accounts receivable, inventories, prepaid
expenses, furniture, fixtures, computers, and intellectual property rights and
other intangibles. Of the cash paid to the Seller, $1,500,000 was provided by
the Company and the balance was borrowed pursuant to a credit agreement. The
credit agreement provides various credit facilities to Pumpkin to partially
finance the acquisition, provide for seasonal working capital and letter of
credit requirements and to pay transaction expenses. The facilities consist of a
revolving credit facility of up to $3,500,000 and amortizing term debt of
$5,000,000 maturing from four to six years from the closing date. The facilities
are secured by all of the acquired assets as well as by a pledge to the lenders
under such credit agreement of the capital stock of Pumpkin owned by Holdings.
In connection with this financing, the lenders were issued a warrant exercisable
for 10% of the Class B Common Stock, on a fully diluted basis, of Pumpkin. The
Class B Common Stock is non-voting and convertible at any time into voting,
Class A Common Stock of Pumpkin. An executive of Pumpkin was granted an option
to acquire 4% of the Class A Common Stock of Pumpkin at an exercise price per
share of $1,754.39. This option is subject to certain restrictions on transfers
of these shares of Pumpkin owned by the executive, together with certain
preemptive rights, puts and calls and "tag along/drag along" rights with respect
to these shares.
The Seller received stock of Holdings constituting 20% of the outstanding Common
Stock of Holdings. The Seller is also entitled to receive a payment of up to
$2,000,000 (the "Earnout Amount") if Pumpkin's average earnings before income
taxes, depreciation and amortization ("EBITDA"), as defined in the asset
purchase agreement, is in excess of $1,500,000 during the four fiscal years
following the closing. If earned, the amount is first payable in June 2002, with
the possibility of being deferred until June 2004. In addition the Seller will
receive a payment of at least $120,000 and up to $160,000 each fiscal year,
payable quarterly, until the Earnout Amount is either not to be earned or, if
determined to be earned, paid. The Earnout Amount is fully subordinate to debt
under such credit agreement and any loans by the Company to Pumpkin.
In connection with the acquisition, the Company entered into a Second Amendment
to the Advisory Services Agreement with Capital Partners, Inc.("CP, Inc."),
pursuant to which CP, Inc. agreed to assist Security Capital in providing
management advisory services to Pumpkin in the areas of corporate development,
strategic planning, investment and financial matters and general business
policies. The Company agreed to increase CP, Inc.'s fees in an amount equal to
the greater of $100,000 or 5% of Pumpkin's annual EBITDA, as defined in the
Asset Purchase Agreement.
SUBSEQUENT EVENT
On July 17, 1997, the Company's subsidiary, Foster Insurance Managers, Inc.
("FIM"), entered into a Purchase Agreement with Bowen, Miclette, Descant & Britt
Inc.(the "Buyer") and certain employees of the Buyer to purchase FIM's
beneficial interest in Foster Insurance Services, Inc.("FIS"), an independent
insurance agency located in Houston, Texas. The Company received proceeds of
$1,525,845 in cash at closing. The Company no longer has any interest in the
insurance brokerage business as a result of the completion of this transaction.
The gain on the sale of FIM's beneficial interest in FIS of approximately
$1,500,000 will be reported in income in the quarter ended September 30, 1997.
Page 7 of 11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS-
Security Capital reported net income of $1,000 and a net loss of $239,000 for
the three and six month periods ended June 30, 1997. This compares to net losses
of $272,000 and $23,000 for the same three and six month periods of the prior
calendar year. The Company reported a net loss per common share (after accrual
for Class A Preferred Stock dividends) of $.03 and $.11 for the three and six
month periods ended June 30, 1997 as compared to a net loss per share (after
accrual for Class A Preferred Stock dividends) of $.09 and $.06 for the same
three and six month periods of the prior calendar year.
On June 27, 1997, Pumpkin acquired substantially all of the assets and assumed
certain liabilities of the Seller, a Colorado corporation. The Seller was
engaged in the business of manufacturing and distributing pumpkin and watermelon
carving kits (comprised primarily of tools and patterns) and related accessories
There is no impact on the results of operations of the Company for this quarter
due to the timing of the acquisition of Pumpkin.
Product sales and gross profit of the Company increased to $3,490,000 and
$1,925,000, respectively, for the second calendar quarter. This compares to
product sales of $1,453,000 and gross profit of $785,000 for the same quarter of
the prior calendar year. The acquisition of Possible Dreams occurred during May
1996. Therefore, the prior years second quarter did not reflect Possible Dreams'
total product sales or gross profit for a typical quarter. Selling, general and
administrative expense, which increased by $335,000 for the quarter to
$1,642,000, was also impacted by this event. Interest expense increased to
$401,000 for the quarter due to increased short-term bank borrowings.
The Company's percentage of Bowen, Miclette, Descant & Britt ("BMD&B") net
revenues and expenses is included under the caption "Income from Joint
Enterprise". The income amounted to $62,000 and $274,000 for the three and six
month periods ended June 30, 1997. This compares to income of $114,000 and
$443,000 for the same periods of the prior fiscal year. On July 17, 1997, the
Company's subsidiary FIM entered into a Purchase Agreement with the Buyer and
certain employees of the Buyer to purchase FIM's beneficial interest in FIS, an
independent insurance agency located in Houston, Texas. FIS is a 50% partner of
Bowen, Miclette, Descant & Britt. The Company received proceeds of $1,525,845 in
cash at closing. The Company no longer has any interest in the insurance
brokerage business as a result of the completion of this transaction and will
receive no additional income after June 30, 1997 from the insurance brokerage
business. For accounting purposes, this acquisition is effective July 1, 1997.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents decreased by $1,669,000 to $6,341,000 at June 30, 1997
as compared to $8,010,000 at December 31, 1996 The decrease in cash and cash
equivalents was primarily attributable to the $1,500,000 payment made by the
Company to the Sellers as part of the acquisition of Pumpkin. The Company's
consolidated working capital at June 30, 1997, decreased by $1,493,000 to
$10,559,000 from $11,990,000 at December 31, 1996. The decrease in working
capital was attributed to the impact of the new credit agreement with the
lenders, as part of the acquisition of Pumpkin.
Page 8 of 11
<PAGE>
The consideration paid to the Seller of Pumpkin and the transaction fees and
expenses incurred as of the closing date aggregated $7,871,136. This amount
consists of the following:
Cash paid to the Seller ........................ $6,079,172
Transaction Fees and expenses .................. 651,125
Assumption of accounts payable
and accrued liabilities ...................... 1,140,839
----------
Total .......................................... $7,871,136
The assets purchased consisted of the assets used by the Seller in the conduct
of its business, including cash, accounts receivable, inventories, prepaid
expenses, furniture, fixtures, computers and intellectual property rights and
other intangibles. Of the cash paid to the Seller, $1,500,000 was provided by
the Company and the balance was borrowed pursuant to a credit agreement. The
credit agreement provides various credit facilities to Pumpkin to partially
finance the acquisition, provide for seasonal working capital and letter of
credit requirements and to pay transaction expenses. The facilities consist of a
revolving credit facility of up to $3,500,000 and amortizing term debt of
$5,000,000 maturing from four to six years from the closing date. The facilities
are secured by all of the acquired assets as well as by a pledge to the lenders
under such credit agreement of the capital stock of Pumpkin owned by Holdings.
In connection with this financing, the lenders were issued a warrant exercisable
for 10% of the Class B Common Stock, on a fully diluted basis, of Pumpkin. The
Class B Common Stock is non-voting and convertible at any time into voting,
Class A Common Stock of Pumpkin. An executive of Pumpkin was granted an option
to acquire 4% of the Class A Common Stock of Pumpkin at an exercise price per
share of $1,754.39. This option is subject to certain restrictions on transfers
of these shares of Pumpkin owned by the executive, together with certain
preemptive rights, puts and calls and "tag along/drag along" rights with respect
to these shares.
The Seller received stock of Holdings constituting 20% of the outstanding Common
Stock of Holdings. The Seller is also entitled to receive a payment of up to
$2,000,000 (the "Earnout Amount") if Pumpkin's average earnings before income
taxes, depreciation and amortization ("EBITDA"), as defined in the asset
purchase agreement, is in excess of $1,500,000 during the four fiscal years
following the closing. If earned, the amount is first payable in June 2002, with
the possibility of being deferred until June 2004. In addition, the Seller will
receive a payment of at least $120,000 and up to $160,000 each fiscal year,
payable quarterly, until the Earnout Amount is either not to be earned or, if
determined to be earned, paid. The Earnout Amount is fully subordinate to debt
under such credit agreement and any loans by the Company to Pumpkin.
The Company had no major capital expenditures during the quarter. During the
middle of July, the Company completed the sale of its beneficial interest in its
insurance brokerage business. The Company received proceeds of $1,525,845 in
cash at closing. The Company believes that with the proceeds from the sale of
its insurance brokerage business and existing cash on hand, the Company can
continue to compete for acquisition opportunities, as well as to meet its
working capital and operating expenditure requirements for at least the next
twelve months.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Pursuant to the General Instructions to Rule 305 of Regulation S-K, the
quantitative and qualitative disclosures called for by this Item 3 and by Rule
305 of Regulation S-K are inapplicable to the Company at this time.
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None
Page 9 of 11
<PAGE>
ITEM 3. DEFAULT UPON SENIOR SECURITIES
(a) None
(b) The Company's Class A Preferred Stock bears a dividend of 15% per
annum payable. Upon redemption or the liquidation of the Company,
dividends on Preferred Stock are payable only out of cumulative net
income since January 1990. (At a redemption date or upon the liquidation
of the Company, accumulated but unpaid dividends are payable in full
regardless of earnings since January 1, 1990.) Therefore, since there
has been a cumulative net loss since January 1, 1990 of $634,000,
preferred stock dividends of $1,762,500 accrued from July 30, 1993 to
June 30, 1997 were in arrears at June 30, 1997.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS: None
(b)
DATE OF FILING DATE OF EVENT REPORTED ITEMS
-------------- ---------------------- -----
4-1-97 3-21-97 Item 5
Other Events
Page 10 of 11
<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.
SECURITY CAPITAL CORPORATION
Date: August 14 , 1997 By: /s/ A. George Gebauer
A. George Gebauer, President
Date: August 14 , 1997 By: /s/ Larry M. Karren
Larry M. Karren, Treasurer
(Principal Financial and
Accounting Officer)
Page 11 of 11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 6,341
<SECURITIES> 0
<RECEIVABLES> 5,308
<ALLOWANCES> (125)
<INVENTORY> 7,292
<CURRENT-ASSETS> 19,959
<PP&E> 1,436
<DEPRECIATION> (240)
<TOTAL-ASSETS> 35,646
<CURRENT-LIABILITIES> 9,400
<BONDS> 0
4,762
0
<COMMON> 44
<OTHER-SE> 6,388
<TOTAL-LIABILITY-AND-EQUITY> 35,646
<SALES> 6,032
<TOTAL-REVENUES> 6,032
<CGS> 2,617
<TOTAL-COSTS> 3,394
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 744
<INCOME-PRETAX> (231)
<INCOME-TAX> 8
<INCOME-CONTINUING> (239)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (239)
<EPS-PRIMARY> (.11)
<EPS-DILUTED> (.11)
</TABLE>
