UNITED STATES
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 Quarterly Period Ended March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-10475
PAGES, INC.
Incorporated - Delaware I.R.S. Identification No. 34-1297143
801 94th Avenue North, St. Petersburg, Florida 33702
Registrant's Telephone Number (813) 578-3300
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
----- ------
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of latest practicable date: 6,194,009 common shares
outstanding, each $0.01 par value, as of April 30, 1997.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PAGES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Three Months
Ended Ended
March 31, 1997 March 31, 1996
---------------- ----------------
Revenues $ 7,144,194 $ 9,457,068
------------ ------------
Costs and Expenses:
Cost of goods sold 4,136,552 5,699,713
Selling, general and administrative 2,786,870 4,225,485
Interest, net 189,330 361,992
Depreciation and amortization 271,068 233,720
Gain on sale of distribution channel - (3,255,337)
------------ ------------
7,383,820 7,265,573
------------ ------------
Income(loss) from continuing operations
before income taxes (239,626) 2,191,495
Provision for income taxes - -
------------ ------------
Income(loss) from continuing operations (239,626) 2,191,495
Discontinued operations:
Income from operations - 380,768
Cumulative effect of change in
accounting principle - 994,664
------------ ------------
NET INCOME(LOSS) $ (239,626) $ 3,566,927
============ ============
Income(loss) per common share:
Income(loss) from continuing operations $ (0.04) $ .38
Discontinued operations before
cumulative effect of change in
accounting principle - .07
Cumulative effect of change in
accounting principle - .17
------------ ------------
Income(loss) per common share $ (0.04) $ 0.62
============ ============
Weighted average common and common
equivalent shares 6,199,000 5,721,000
============ ============
See accompanying notes
<PAGE>
PAGES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, 1997 December 31, 1996
------------ ------------
ASSETS
Current Assets:
Cash $ 204,188 $ 317,911
Accounts receivable, net of allowance
for doubtful accounts of $285,000
and $316,000, respectively 3,592,658 6,896,366
Inventory 12,849,811 19,358,374
Prepaid expenses 905,400 1,541,964
Note receivable from CA Short Company 100,000 -
------------ ------------
Total current assets 17,652,057 28,114,615
------------ ------------
Property and equipment:
Buildings 1,070,201 4,264,259
Equipment 2,220,891 4,045,248
------------ ------------
3,291,092 8,309,507
Less accumulated depreciation (1,232,157) (2,448,860)
------------ ------------
2,058,935 5,860,647
Land 420,000 631,468
------------ ------------
Total property and equipment, net 2,478,935 6,492,115
------------ ------------
Other assets:
Note receivable from CA Short Company 4,900,000 -
Cost in excess of net assets acquired,
net of accumulated amortization of
$687,000 and $645,000, respectively 4,567,366 5,828,757
Other 261,123 884,752
------------ ------------
9,728,489 6,713,509
------------ ------------
TOTAL ASSETS $29,859,481 $41,320,239
============ ============
See accompanying notes
<PAGE>
PAGES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, 1997 December 31, 1996
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 4,418,118 $ 3,388,341
Short-term debt obligations 10,144,349 13,120,561
Accrued liabilities 885,430 2,060,637
Accrued tax liabilities 2,182,500 2,283,836
Deferred revenue 1,009,479 3,068,320
Current portion of long-term debt
obligations 144,901 158,160
Current portion of capital lease
obligations 81,445 100,123
------------ ------------
Total current liabilities 18,866,222 24,179,978
------------ ------------
Long-term debt and capital lease
obligations 1,296,623 1,328,986
Deferred revenue - 2,935,626
------------ ------------
Total liabilities 20,162,845 28,444,590
Commitments and contingencies
Stockholders' Equity:
Preferred stock: $.01 par value;
authorized 300,000 shares; none issued
and outstanding
Common stock: $.01 par value; authorized
20,000,000 shares; issued 6,492,722 and
6,497,268 shares, respectively 64,927 64,973
Capital in excess of par value 21,266,059 23,951,788
Notes receivable from stock sales (903,123) (903,123)
Accumulated deficit (10,490,104) (9,996,866)
------------ ------------
9,937,759 13,116,772
Less 298,713 shares of common stock in
treasury, at cost (241,123) (241,123)
------------ ------------
Total stockholders' equity 9,696,636 12,875,649
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $29,859,481 $41,320,239
============ ============
See accompanying notes
<PAGE>
PAGES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Three Months
Ended Ended
March 31, 1997 March 31, 1996
------------ ------------
Cash Flow Used In Operations:
Income(loss) from continuing operations $ (239,626) $ 2,191,495
Reconciliation to net cash flow used
in continuing operations:
Depreciation and amortization 271,068 233,720
Gain on sale of distribution channel - (3,255,337)
Changes in working capital items of
continuing operations:
Accounts receivable (1,340,319) (1,033,008)
Inventory (654,590) 2,147,549
Prepaid expenses and other assets (145,826) (341,654)
Accounts payable and accrued liabilities 1,667,409 (2,279,902)
Deferred revenue (106,524) (313,677)
------------ ------------
Net cash used in continuing operations (548,408) (2,650,814)
------------ ------------
Net cash from (used in) discontinued
operations (152,787) 15,512
------------ ------------
Net cash used in operations (701,195) (2,635,302)
------------ ------------
Cash Flow From (Used In) Investing Activities:
Proceeds from sale of property
and equipment - 8,031
Payments for purchases of property
and equipment (41,764) (32,675)
Proceeds from disposition of
distribution channel - 11,287,500
------------ ------------
Net cash flow from (used in)
investing activities (41,764) 11,262,856
------------ ------------
Cash Flow From (Used In) Financing Activities:
Proceeds from issuance of stock - 123,749
Proceeds from debt obligations 5,574,406 10,833,222
Payments on debt and lease obligations (4,945,170) (19,927,032)
------------ ------------
Net cash flow from (used in)
financing activities 629,236 (8,970,061)
------------ ------------
Effect of changes in exchange rates
on cash - (13,699)
------------ ------------
Decrease in cash (113,723) (356,206)
Cash, beginning of period 317,911 532,855
------------ ------------
Cash, end of period $ 204,188 $ 176,649
============ ============
See accompanying notes
<PAGE>
PAGES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Basis of Presentation
The accompanying consolidated financial statements have not been audited,
but reflect all adjustments which, in the opinion of management, are necessary
for a fair presentation of financial position, results of operations and cash
flows. All adjustments are of a normal and recurring nature.
The children's literature business is highly seasonal and correlated
closely to the school year. The results of operations for the interim periods
are not necessarily indicative of the results to be expected for the full year.
Certain reclassifications were made to the prior year financial statements
to conform to current period presentations. The interim consolidated financial
statements and notes thereto are presented as permitted by the Securities and
Exchange Commission and do not contain certain information included in the
Company's annual financial statements and notes thereto. These financial
statements should be read in conjunction with the Company's audited financial
statements and notes thereto for the fiscal year ended December 31, 1996.
Note 2. Discontinued Operations
Effective on the close of business on December 31, 1996, the Company
completed a tax-free spin-off of the common stock of the Company's wholly-owned
subsidiary, CA Short Company ("CAS") through a distribution to the stockholders
of Pages, Inc. of one and one-half shares of CAS common stock for every ten
shares of Pages common stock outstanding on the record date. Effective January
1, 1997, CAS issued a subordinated debenture to Pages in the principal amount
of $5.0 million bearing interest at 7% per annum payable quarterly, with
principal payments of $100,000 each due at the end of the first four years, and
a final payment of $4.6 million due at the end of the fifth year. The Company
had an investment and advances due from CAS prior to the spin-off that totaled
approximately $7.7 million. Capital in excess of par value of the Company was
reduced by approximately $2.7 million effective January 1, 1997, to record the
spin-off transaction.
The spin-off of this discontinued operation represents the entire
incentive/awards segment of the Company's business. The statement of
operations for the three months ended March 31, 1996 has been restated to
reflect the results of CAS as a discontinued operation. Revenues for CAS were
$5.8 million for the three months ended March 31, 1996. Net income was $1.3
million. Included in the net income is a $1.0 million cumulative effect of an
accounting change adopted by CAS as of January 1, 1996. CAS changed its method
of accounting for the recognition of revenues relating to advance deposits.
The components of net assets of the CAS discontinued operations included
in the balance sheet at December 31, 1996, follow:
Cash $ 130,972
Accounts receivable, net 4,644,027
Inventory 7,163,153
Prepaid expenses 803,321
Property and equipment, net 3,931,800
Costs in excess of net asset acquired, net 1,133,023
Other assets 622,257
Accounts payable (1,572,022)
Accrued liabilities (342,156)
Short-term debt obligations (3,669,746)
Deferred revenue (4,887,943)
Note 3. Disposition of United Kingdom and Discontinuance of Canadian
Distribution Channels
The Company sold its United Kingdom subsidiary in March, 1996. Revenues
in US dollars for the United Kingdom subsidiary for the three months ended
March 31, 1996, approximated $1.4 million, with loss before income taxes of
approximately $117,000.
The Company discontinued its Canadian distribution channel in March, 1996.
Revenues in U.S. dollars for the Canadian distribution channel for the three
months ended March 31, 1996, approximated $335,000, with loss before income
taxes of approximately $175,000.
Note 4. Supplemental Cash Flow Information
Cash payments during the three months ended March 31, 1997 and 1996
included interest of $192,000 and $431,000, respectively, and income taxes of
$150,000 and $0, respectively.
During the three months ended March 31, 1997, the Company acquired a
$5,000,000 note receivable from CA Short Company in connection with the spin-
off of this wholly-owned subsidiary effective on the close of business on
December 31, 1996.
Note 5. Stock Appreciation Rights
Included in the results of operations for the three months ended March 31,
1997, is a reduction in administrative compensation expense of $431,287
associated with the Company's Stock Appreciation Rights issued under the
executive incentive compensation plan in October, 1996.
Note 6. Income Taxes
There was no income tax provision for the three months ended March 31,
1997, due to the Company's net operating loss position and the full valuation
of any resulting deferred tax benefit. Estimated income tax rates based on
annualized income were taken into consideration.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
First Quarter 1997 Compared with First Quarter 1996
Revenues for the three months ended March 31, 1997, approximated $7.1
million compared to approximately $9.5 million for the three months ended March
31, 1996, a decrease of 25% or approximately $2.4 million. The decrease in
revenues is principally attributable to the following: the sale of the United
Kingdom operations in March 1996 (15% or $1.4 million); the discontinuance of
the Canadian distribution channel in early March 1996 (3% or $300,000); and an
approximate 23% reduction in the number of domestic book fair events held in
the current quarter compared to the same period in 1996, partially offset by a
12% increase in average revenue per fair (5% or $500,000).
Cost of goods sold was approximately $4.1 million for the three months
ended March 31, 1997, compared to approximately $5.7 million for the three
months ended March 31, 1996, a decrease of 28% or approximately $1.6 million.
The decrease in cost of goods sold is due to the reduction in revenues
discussed above. As a percentage of revenues, cost of goods sold decreased by
2.4% to 57.9% during the first quarter of 1997 compared to 60.3% for the same
period in 1996. The decrease is due to changes in product mix sold, the sale of
the United Kingdom operations and the discontinuance of the Canadian
distribution channel in March 1996, and improvements in the cost of book fair
products.
Selling, general, and administrative expense was approximately $2.8
million for the three months ended March 31, 1997, compared to approximately
$4.2 million for the three months ended March 31, 1996, a decrease of 33% or
approximately $1.4 million. The decrease in selling, general and administrative
expense is attributable to the sale of the United Kingdom operations and the
discontinuance of the Canadian distribution channel in March 1996, and the
reduction in expenses of approximately $431,000 in March 1997, to record the
current value of Stock Appreciation Rights issued in 1996.
Interest expense was approximately $189,000 for the three months ended
March 31, 1997, compared to $362,000 for the three months ended March 31, 1996,
a decrease of 48% or $173,000. The average outstanding debt for the three
months ended March 31, 1997 approximated $11.7 million compared to $16.5
million for the three months ended March 31, 1996. Additionally, the average
interest rate for the three months ended March 31, 1997 approximated 9.25%
compared to approximately 8.85% for the three months ended March 31, 1996.
Netted in interest expense for the three months ended March 31, 1997 is
approximately $90,000 of interest income earned on the $5.0 million note
receivable from the former subsidiary, CA Short Company.
Depreciation and amortization expense was approximately $271,000 for the
three months ended March 31, 1997, compared to $234,000 for the three months
ended March 31, 1996, an increase of 16% or approximately $37,000.
There was no income tax provision for the three months ended March 31,
1997, due to the Company's net operating loss position and the full valuation
of any resulting deferred tax benefit. Estimated income tax rates based on
annualized income were taken into consideration.
The first quarter ended March 31, 1997 resulted in an operating loss of
$240,000 compared to operating income of $2.2 million in the first quarter
ended March 31, 1996. The operating results for the quarter ended March 31,
1996 included a $3.3 million gain recorded on the sale of the United Kingdom
distribution channel. Without the gain, operating results improved in the
first quarter ended March 31, 1997 over the same quarter for 1996.
The first quarter ended March 31, 1997 resulted in a net loss of $240,000
versus net income of $3.6 million in the first quarter ended March 31, 1996.
Included in net income for the first quarter ended March 31, 1996 was $1.3
million of income from the discontinued operations of the Company's subsidiary,
CA Short Company (which was spun-off to shareholders at December 31, 1996).
Without the income from discontinued operations and the gain mentioned above,
net results improved in the first quarter ended March 31, 1997 over the same
quarter for 1996. Primary and fully diluted earnings per share decreased
from $.62 in the comparable quarter last year to a net loss per share of
$.04.
Liquidity and Capital Resources
The Company had a net decrease in cash for the three months ended March
31, 1997 of $114,000, compared to a net decrease for the comparable period in
the prior year of $356,000. Cash provided by financing activities funded the
net cash used in operating and investing activities during the three months
ended March 31, 1997.
For the three months ended March 31, 1997 continuing operations used
$548,000 in cash as compared to $2.6 million during the first quarter of 1996.
Included in operating cash outlays in the first quarter of 1997 was $375,000
and $150,000, relating to the settlements of the previously disclosed
litigation with Gruner + Jahr and the Internal Revenue Service, respectively.
The decrease in cash used in operations for the first quarter of 1997 resulted
primarily from improved income from operations (approximately $400,000) and an
increase in the days outstanding of trade accounts payable. Due to the
seasonality of the Company's book fairs, cash flow from the Spring season fairs
does not become significant until mid-March. This has required the Company to
extend payments to some of its vendors beyond normal terms. The Company
anticipates vendor payments will be back to normal terms by June 1997.
For the three months ended March 31, 1997 net cash provided by financing
activities was $629,000. This compares to net cash used in financing
activities of $9.0 million for the three months ended March 31, 1996.
Financing activities consisted primarily of borrowings and paydowns on the
revolving line of credit in 1997. In the comparable period in 1996, proceeds
from the sale of the United Kingdom distribution channel were used to repay
debt obligations. The Company's primary source of liquidity has been amounts
available under its existing credit facility. The Company has an $11.5 million
revolving credit facility ($1,355,651 unused at March 31, 1997) bearing
interest at the lender's prime rate plus 1%, due June 30, 1997.
Cash used in investing activities was $42,000 for the three months ended
March 31, 1997, representing payments for capital expenditures. The three
months ended March 31, 1996 had cash from investing activities of $11.3
million, primarily representing the proceeds from the sale of the United
Kingdom distribution channel.
The Company anticipates that operating cash flows during the next twelve
months, coupled with the revolving credit facility, will cover operating
expenditures and meet the current maturities on long-term obligations. The
Company does not anticipate any material expenditures for property and
equipment during the next twelve months.
During the second half of 1997 and early 1998, the Company plans to
expand several of its product lines and to introduce a new book fair concept.
The Company anticipates an increase in revenues from the plans and to do so
will require an increased inventory investment. The Company anticipates
raising additional capital during the second and third quarters of 1997 to
fund this growth. The exact form of this has not been decided; however,
the Company anticipates that it will conduct a public rights offering to its
shareholders of units consisting of subordinated debentures and warrants,
with a continued public offering of any units not purchased pursuant to the
rights offering. If additional funds are not raised, the Company will delay
the product line expansion and new book fair introduction and will control its
growth and expenses at a level funded by internal cash flows and the
revolving credit facility. The Company's credit facility is due and
payable in full on June 30, 1997. Although the lender has not issued a
commitment to do so, the Company believes that its relationship with its
lender is favorable and that the credit facility will be renewed when due.
Seasonality
The children's literature business is highly seasonal and correlated
closely to the school year. As a result, most of the income is generated
between the months of September and May. Due to the seasonality, the Company
experiences negative cash flow during the summer months. Further, in order to
build its inventory for its Fall sales, the Company's borrowings increase over
the summer and generally peak during late Fall. Inventory and receivables
reach peak levels during the months of October through December.
Special Note Regarding Forward-Looking Statements
Certain statements contained in this Form 10-Q under "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
regarding matters that are not historical facts are "forward looking
statements" (as such term is defined in the Private Securities Litigation
Reform Act of 1995) and because such statements involve risks and
uncertainties, actual results may differ materially from those expressed or
implied by such forward-looking statements. Those statements include remarks
regarding the intent, belief, or current expectations of the Company, its
directors, or its officers with respect to, among other things: (i) future
operating cash flows; (ii) ability of the Company to absorb additional volume;
(iii) the Company's financing plans; and (iv) the Company's growth strategy,
including the introduction of new book fair concepts. Prospective investors
are cautioned that any such forward-looking statements are not guarantees of
future performance and involve risks and uncertainties, and that actual results
may differ materially from those projected in the forward-looking statements as
a result of various factors. The accompanying information contained in this
Form 10-Q, including without limitation the information set forth under the
heading "Management's Discussion and Analysis of Financial Condition and
Results of Operations", identifies important factors that could cause such
differences.
PART II - OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
- -------
(a) On December 27, 1996, the Company filed an action in U.S.
District Court for the Northern District of Ohio against Arthur
Andersen & Co. LLP seeking in excess of $16,000,000 in damages. The
complaint is a result of the final outcome of the Internal Revenue
Service assessment settled in October, 1996, and representations made
by Arthur Andersen & Co. during Pages, Inc's purchase of School Book
Fairs, Inc. at May 19, 1992.
(b) In March 1997, the Company reached a settlement with Gruner +
Jahr Printing and Publishing Company (G+J) on the previously
disclosed litigation. As a result of the settlement, the Company
made a payment to G+J of $300,000 in March 1997. No other legal
proceedings were terminated during the three months ended March
31, 1997, other than routine litigation incidental to the Company's
business.
ITEM 2: CHANGES IN SECURITIES
- ------- None.
ITEM 3: DEFAULT UPON SENIOR SECURITIES
- ------- None.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------- None.
NOTE 5: OTHER INFORMATION
- ------- None.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
- -------
(a) Exhibits:
Exhibit
Number Description of Document
------- --------------------------------------------
3(a)1 Certificate of Incorporation dated October 5, 1994
3(b)1 By-laws of the Company
11 Computation of Per Share Earnings
(b) Reports on 8-K:
A report on Form 8-K dated and filed January 7, 1997, under
Item 5 disclosing the finalization of the spin-off of
CA Short Company.
A report on Form 8-K dated and filed February 6, 1997, under
Item 5 announcing the appointment of Steven L. Canan to
Chief Financial Officer and Treasurer.
Footnotes:
(1) Incorporated by reference to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1994, File Number 0-10475, filed in
Washington, D.C.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Pages, Inc.
--------------------------------
(Registrant)
Dated: May 8, 1997 By: /s/ Steven L. Canan
---------------------- -------------------------------
Steven L. Canan
Vice President, Treasurer and
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
<PAGE>
EXHIBIT 11
PAGES, INC. AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
Three Months Ended Three Months Ended
March 31, 1997 March 31, 1996
------------ ------------
Primary
Weighted average number of
common shares outstanding 6,199,000 5,180,000
Adjustment for stock options
which have a dilutive effect
based upon the average market
price for common stock:
Add dilutive stock options -- 1,424,000
Deduct shares that could be
repurchased from the proceeds
of dilutive options -- (883,000)
------------ ------------
Weighed average common and
common equivalent shares 6,199,000 5,721,000
============ ============
Income(loss) from continuing operations $ (239,626) $ 2,191,495
Discontinued operations before cumulative
effect of change in accounting principle -- 380,768
Cumulative effect of change in accounting
principle - 994,664
------------ ------------
Net income(loss) (239,626) 3,566,927
Earnings adjustment (20% rule) - -
------------ ------------
Net income(loss) for computation purposes $ (239,626) $ 3,566,927
============ ============
Income(loss) per common share:
Income(loss) from continuing operations $ (0.04) $ .38
Discontinued operations before cumulative
effect of change in accounting principle - .07
Cumulative effect of change in accounting
principle - .17
------------ ------------
Earnings(loss) per common and common
equivalent share $ (0.04) $ .62
============ ============
<PAGE>
Three Months Ended Three Months Ended
March 31, 1997 March 31, 1996
------------ ------------
Fully diluted
Weighted average number of
common shares outstanding 6,199,000 5,180,000
Adjustment for stock options
which have a dilutive effect
based upon the market price for
common stock at end of period:
Add dilutive stock options 81,000 1,424,000
Deduct shares that could be
repurchased from the proceeds
of dilutive options (66,000) (883,000)
------------ ------------
Fully diluted shares 6,214,000 5,721,000
============ ============
Income(loss) from continuing operations $ (239,626) $ 2,191,495
Discontinued operations before cumulative
effect of change in accounting principle - 380,768
Cumulative effect of change in accounting
principle - 994,664
------------ ------------
Net income(loss) (239,626) 3,566,927
Earnings adjustment (20% rule) - -
------------ ------------
Net income(loss) for computation purposes $ (239,626) $ 3,566,927
============ ============
Income(loss) per common share:
Income(loss) from continuing operations $ (0.04) $ .38
Discontinued operations before cumulative
effect of change in accounting principle - .07
Cumulative effect of change in accounting
principle - .17
------------ ------------
Earnings(loss) per common and common
equivalent share assuming full dilution $ (0.04) $ .62
============ =============
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 204,188
<SECURITIES> 0
<RECEIVABLES> 3,877,658
<ALLOWANCES> 285,000
<INVENTORY> 12,849,811
<CURRENT-ASSETS> 17,652,057
<PP&E> 3,711,092
<DEPRECIATION> 1,232,157
<TOTAL-ASSETS> 29,859,481
<CURRENT-LIABILITIES> 18,866,222
<BONDS> 1,296,623
0
0
<COMMON> 64,927
<OTHER-SE> 9,631,709
<TOTAL-LIABILITY-AND-EQUITY> 29,859,481
<SALES> 7,144,194
<TOTAL-REVENUES> 7,144,194
<CGS> 4,136,552
<TOTAL-COSTS> 4,136,552
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 189,330
<INCOME-PRETAX> (239,626)
<INCOME-TAX> 0
<INCOME-CONTINUING> (239,626)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (239,626)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 176,649
<SECURITIES> 0
<RECEIVABLES> 7,549,330
<ALLOWANCES> 426,000
<INVENTORY> 18,607,814
<CURRENT-ASSETS> 27,795,324
<PP&E> 8,381,280
<DEPRECIATION> 2,086,932
<TOTAL-ASSETS> 41,047,567
<CURRENT-LIABILITIES> 17,003,857
<BONDS> 10,351,745
0
0
<COMMON> 56,152
<OTHER-SE> 13,635,813
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