<PAGE> 1
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 July 28, 1996
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: 0-17868
KRAUSE'S FURNITURE, INC.
(Exact name of registrant as specified in its charter)
Delaware 77-0310773
(State or other jurisdiction of incorporation) (I.R.S. Employer
Identification No.)
200 North Berry Street, Brea, California 92821
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code)
(714) 990-3100
(Former name, former address and former fiscal year, 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. /x/ Yes / / No
As of September 10, 1996 the Registrant had 19,033,011 shares of common stock
outstanding.
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
- Consolidated balance sheet 1
- Consolidated statement of operations 2
- Consolidated statement of cash flows 3
- Notes to consolidated financial statements 4 - 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 6 - 8
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security-Holders 9
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 10
</TABLE>
<PAGE> 3
KRAUSE'S FURNITURE, INC.
CONSOLIDATED BALANCE SHEET
(In thousands, except per share data)
ASSETS
July 28,
1996 January 28,
(Unaudited) 1996
----------- ----------
Current assets:
Cash and cash equivalents $2,373 $1,336
Accounts receivable, net of
allowance for doubtful accounts
of $319 ($291 at January 28, 1996) 822 786
Income tax refund receivable - 1,467
Inventories 12,506 14,627
Prepaid expenses 328 386
--------- ----------
Total current assets 16,029 18,602
Property, equipment, and leasehold
improvements, net 6,475 6,738
Goodwill, net 15,896 16,406
Leasehold interest, net 1,663 1,830
Other assets 3,470 3,290
--------- ----------
$43,533 $46,866
========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $18,877 $16,176
Accrued payroll and related expenses 2,144 1,696
Customer deposits 7,083 7,014
Notes payable 10 19
Income taxes payable 582 575
---------- ----------
Total current liabilities 28,696 25,480
Long-term liabilities:
Notes payable 8,957 5,584
Other liabilities 1,748 1,817
---------- ----------
Total long-term liabilities 10,705 7,401
Commitments and contingencies
Stockholders' equity:
Convertible preferred stock, $.001
par value; 666,667 shares authorized,
117,694 shares outstanding at stated
value (liquidation preference $67.50
per share) 7,523 7,523
Common stock, $.001 par value; 35,000,000
shares authorized (8,333,333 at
January 28, 1996), 4,120,810 shares
outstanding 4 4
Capital in excess of par value 27,419 27,419
Accumulated deficit (30,814) (20,961)
----------- ----------
Total stockholders' equity 4,132 13,985
----------- ----------
$43,533 $46,866
=========== ==========
See accompanying notes.
1
<PAGE> 4
KRAUSE'S FURNITURE, INC.
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Twenty-Six Weeks Ended
---------------------------------- ---------------------------------
July 28, July 30, July 28, July 30,
1996 1995 1996 1995
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net furniture sales $26,236 $28,928 $55,873 $61,179
Cost of sales 13,860 14,476 29,583 29,589
------- ------- ------- -------
Gross profit 12,376 14,452 26,290 31,590
------- ------- ------- -------
Operating expenses:
Selling 15,006 14,872 29,475 29,602
General and administrative 3,072 2,599 5,768 5,723
Amortization of goodwill 255 255 510 510
------- ------- ------- -------
18,333 17,726 35,753 35,835
------- ------- ------- -------
Loss from operations (5,957) (3,274) (9,463) (4,245)
Interest expense (304) (192) (486) (363)
Other income 45 38 96 189
------- ------- ------- -------
Loss before income taxes (6,216) (3,428) (9,853) (4,419)
Income tax benefit -- 1,327 -- 1,327
------- ------- ------- -------
Net loss $(6,216) $(2,101) $(9,853) $(3,092)
======= ======= ======= =======
Net loss per share $ (1.51) $ (0.53) $ (2.39) $ (0.81)
======= ======= ======= =======
Average number of common
shares outstanding 4,121 3,949 4,121 3,817
======= ======= ======= =======
</TABLE>
See accompanying notes.
2
<PAGE> 5
KRAUSE'S FURNITURE INC.
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Twenty-Six Weeks Ended
----------------------
July 28, July 30,
1996 1995
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(9,853) $(3,092)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation and amortization 1,215 1,216
Income tax benefit -- (1,327)
Change in assets and liabilities:
Accounts receivable (36) 28
Income tax refund receivable 1,467 --
Inventories 2,121 1,278
Prepaid expenses and other assets (122) 470
Accounts payable and accrued liabilities 3,080 (1,703)
Customer deposits 69 (167)
Deferred gain -- 345
Income taxes payable 7 (200)
------- -------
Net cash used by operating activities (2,052) (3,152)
------- -------
Cash flows from investing activities:
Capital expenditures (275) (756)
------- -------
Net cash used by investing activities (275) (756)
------- -------
Cash flows from financing activities:
Net borrowings under revolving credit 426 3,702
Proceeds from issuance of notes 2,950 --
Principal payments on other debt (12) (13)
------- -------
Net cash provided by financing activities 3,364 3,689
------- -------
Net increase (decrease) in cash and cash equivalents 1,037 (219)
Cash and cash equivalents at beginning of period 1,336 1,952
------- -------
Cash and cash equivalents at end of period $ 2,373 $ 1,733
======= =======
Supplemental disclosures of cash flow information-
Cash paid during the period for:
Interest $ 342 $ 248
Income taxes -- 200
Noncash investing and financing activities-
Conversion of preferred stock -- 2,674
</TABLE>
See accompanying notes.
3
<PAGE> 6
KRAUSE'S FURNITURE, INC
--------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The accompanying consolidated financial statements of Krause's Furniture,
Inc. (the "Company") and its wholly owned subsidiaries, including the Company's
principal subsidiary, Krause's Sofa Factory ("Krause's"), have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission
and reflect all adjustments which are, in the opinion of management, necessary
for a fair presentation for the periods reported. Certain information and note
disclosures normally included in annual financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to those rules or regulations, although management believes
that the disclosures made are adequate to make the information presented not
misleading.
On August 1, 1995 the Company effected a one-for-three reverse split of
its common stock and preferred stock. Share and per share data for the thirteen
and twenty-six weeks ended July 30, 1995 have been restated to reflect the
reverse split.
These financial statements should be read in conjunction with the
consolidated financial statements and the notes thereto included in the
Company's Annual Report on Form 10-K for the year ended January 28, 1996. The
results of operations for the thirteen and twenty-six weeks ended July 28, 1996
are not necessarily indicative of results to be expected in future periods.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management 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 revenue and expenses during the reported
periods. Actual results could differ from those estimates.
2. On August 26, 1996 and September 10, 1996 the Company completed transactions
with investors in which the Company received cash proceeds of $15,669,000 from
financings through issuances of $10,669,000 of common stock, at $1 per share,
and a $5 million subordinated note with a warrant to purchase 1,400,000 shares
of common stock at $.001 per share. The subordinated note bears interest at 10%
per annum, payable in additional subordinated notes for the first two years.
Semi-annual mandatory redemptions of $1,015,336 are required beginning February
28, 1999 through final maturity on August 31, 2001. In addition $2,950,000 of
existing notes plus accrued interest were exchanged for 3,066,251 shares of
common stock and substantially all of the Company's Series A preferred stock was
converted into approximately 1.2 million shares of common stock. After the
equity capital and debt transactions noted above the Company had approximately
19 million shares of common stock outstanding. Also Krause's revolving credit
agreement was amended to extend the expiration date of the agreement to January
2000, provide for an increase in borrowing availability, lower the interest rate
to prime plus 1% and revise certain covenants and conditions.
4
<PAGE> 7
The proceeds from these transactions allows the Company to accelerate
its strategic objectives and initiatives including downsizing showroom square
footage to reduce occupancy expenses, upgrading and remodeling showrooms to
provide a more appealing setting for customers, remerchandising, refocusing
advertising expenditures, improving manufacturing processes, and reducing
corporate expenses. These objectives and initiatives are expected to contribute
significantly to reducing losses and ultimately returning the Company to
profitability. The Company's long-term success is dependent upon its ability to
successfully execute management's strategic plan and, ultimately, to achieve
sustained profitable operations.
3. Inventories are carried at the lower of cost or market using the first-in,
first-out method and are comprised of the following:
<TABLE>
<CAPTION>
July 28, 1996 January 28, 1996
------------- ----------------
<S> <C> <C>
Finished goods $10,303,000 $12,345,000
Work-in-process 393,000 297,000
Raw materials 1,810,000 1,985,000
----------- -----------
$12,506,000 $14,627,000
----------- -----------
</TABLE>
4. Long-term notes payable consists of the following:
<TABLE>
<CAPTION>
July 28, 1996 January 28, 1996
------------- ----------------
<S> <C> <C>
Secured revolving credit notes $5,941,000 $5,515,000
Demand and convertible notes 2,950,000 --
Other notes 76,000 88,000
---------- ----------
8,967,000 5,603,000
Less current portion 10,000 19,000
---------- ----------
$8,957,000 $5,584,000
========== ==========
</TABLE>
The secured revolving credit notes were issued under a revolving credit
facility with a financial institution that now expires in January 2000.
Borrowings under the revolving credit facility are based on the value of
eligible inventory, as defined, and as of July 28, 1996 were limited to
approximately $6.6 million. Interest on the loans as of July 28, 1996 was
payable monthly at the rate of 1.5% in excess of the prime rate (8.25%).
Substantially all of Krause's assets are pledged as collateral for the notes.
See Note 2 for revisions to this revolving credit facility.
Demand notes of $2,000,000 and convertible notes of $950,000 were
issued in May through July 1996 to related parties. These notes plus accrued
interest of $116,251 were exchanged for 3,066,251 shares of common stock on
August 26, 1996 (Note 2). Since the demand notes were refinanced as equity they
are classified as long-term notes in the accompanying consolidated balance
sheet.
5. Net loss per share amounts were computed based on the weighted average number
of common shares outstanding during the periods reported. Common equivalent
shares are not included in the computation since such share equivalents are
antidilutive.
5
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULT OF OPERATIONS
RESULTS OF OPERATIONS
Thirteen Weeks Ended July 28, 1996 Compared to Thirteen Weeks Ended July 30,
1995
Net furniture sales for the second fiscal quarter 1996 were $26,236,000
which was a decrease of approximately 9.3% from net sales in the comparable
quarter of 1995. The sales decrease was primarily attributable to a 8.2%
decrease in same-store sales in the second quarter 1996 compared to the second
quarter 1995 and the fact that Krause's operated five fewer stores in the 1996
quarter. The same-store sales decrease was the result, among other things, of an
industry-wide softness in retail sales and the shortage of raw materials due to
insufficient cash available for purchases of such raw materials required for
production and shipments. Raw material shortages have continued into the third
quarter, however, this condition is expected to improve beginning in September
1996.
Gross margin was 47.2% of net sales in the second quarter 1996 compared
to 50.0% in the second quarter 1995. The lower gross margins resulted primarily
from higher product promotions (price discounts). Changes in product mix also
contributed to margin differences.
Selling expenses as a percentage of sales were 57.2% in the second
quarter 1996 compared to 51.4% in the same period last year. Selling expenses
were $15,006,000 in the second quarter 1996 and $14,872,000 in the second
quarter 1995. The increase in total selling expenses was principally because of
higher delivery expenses, advertising expenses, and sales payroll incentives,
offset by certain expenses which were lower due to fewer stores operating in
1996.
General and administrative expenses were $473,000 higher in the second
quarter 1996 compared to the same quarter in 1995 due to higher professional
fees offset somewhat by lower payroll and travel expenses.
As a result of the above factors, net loss was $6,216,000 in the second
quarter ended July 28, 1996 compared to a loss of $2,101,000 in the second
quarter ended July 30, 1995. Net loss per share in the 1996 quarter was $1.51
based on 4,121,000 average shares outstanding. In the comparable 1995 quarter
the net loss per share was $.53 based on 3,949,000 average shares outstanding.
6
<PAGE> 9
Twenty-Six Weeks Ended July 28, 1996 Compared to Twenty-Six Weeks Ended July 30,
1995
Net furniture sales for the first twenty-six weeks of 1996 were
$55,873,000 compared to $61,179,000 for the same period in fiscal 1995. The
sales decrease was due principally to a same-store sales decrease of 8.0% and to
the reasons explained above in the second quarter comparisons .
Gross margin was 47.1% of net sales in the 1996 period compared to
51.6% in the 1995 period. Lower gross margins in 1996 resulted from extensive
promotional pricing and changes in product mix.
Selling expenses were $29,475,000 a decrease of $127,000 from the same
period last year. Selling expenses were 52.8.% of net furniture sales in 1996
compared to 48.4% in the 1995 period. Selling expenses increased as a percentage
of sales primarily because of higher sales commission rates, occupancy costs and
delivery expenses.
General and administrative expenses increased by $45,000 due
principally to employee termination expenses and professional fees, offset by
general cost reductions.
Income tax benefits of $1,327,000 in the first six months of 1995
represents refundable income taxes available from the carryback of 1995 losses.
There were no carryback benefits recorded in 1996 and none are available in
future periods.
LIQUIDITY AND CAPITAL RESOURCES
As of July 28, 1996, the Company had $2,373,000 in cash and cash
equivalents compared to $1,336,000 as of January 28, 1996.
Cash Flow - Twenty-Six Weeks Ended July 28, 1996
Cash and cash equivalents increased by $1,037,000 during the period.
Operating activities used net cash of $2,052,000, principally from a $8,638,000
cash loss from operations offset by an increase in accounts payable and other
liabilities of $3,156,000, a decrease in inventories of $2,121,000 and
collections of income tax refund receivables of $1,467,000. Investing activities
during the period included capital expenditures of $275,000, principally for
additions to leasehold improvements at retail showrooms. Financing activities
during the period were comprised principally of net borrowings of $426,000 under
the Company's revolving credit facility and proceeds from issuances of
$2,950,000 of convertible and demand notes.
7
<PAGE> 10
Cash Flow - Twenty-Six Weeks Ended July 30, 1995
Cash and cash equivalents decreased by $219,000 during the period.
Operating activities used net cash of $3,152,000 principally from a $3,203,000
cash loss from operations and a decrease in accounts payable and other
liabilities of $1,725,000, offset by decreases in inventories of $1,278,000 and
other assets of $498,000. Investing activities were capital expenditures of
$756,000 principally for costs of construction of a showroom in Dallas and for
additions to leasehold improvements of other new showrooms. The Dallas showroom
was sold for approximately $1 million cash in May 1995 and leased back. This
sale and leaseback resulted in a $386,000 deferred profit to be amortized over
the term of the lease. Financing activities included $3,702,000 of net
borrowings under a revolving credit agreement.
Outlook
On August 26, 1996 and September 10, 1996 the Company completed transactions
with investors in which the Company received cash proceeds of $15,669,000
from financings as described in Note 2.
The proceeds from these transactions allows the Company to accelerate
its strategic objectives and initiatives including downsizing showroom square
footage to reduce occupancy expenses, upgrading and remodeling showrooms to
provide a more appealing setting for customers, remerchandising, refocusing
advertising expenditures, improving manufacturing processes, and reducing
corporate expenses. These objectives and initiatives are expected to contribute
significantly to reducing losses and ultimately returning the Company to
profitability. The Company's long-term success is dependent upon its ability to
successfully execute management's strategic plan and, ultimately, to achieve
sustained profitable operations. Operating losses are expected to continue at
least through the third quarter 1996. Other than as attendant to the strategic
objectives described above, the Company has no significant long-term capital
expenditure requirements.
8
<PAGE> 11
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security-Holders
The Company held its Annual Meeting of Stockholders on June 18, 1996.
At the meeting the stockholders;
(i) reelected all six incumbent directors to serve until the next
annual meeting.
(ii) approved an amendment of the Company's 1990 Employees Stock Option
Plan to increase the number of shares of common stock available for
grant under the plan from 83,333 shares to 500,000. There were 2,383,445
affirmative votes and 88,623 negative votes with respect to this matter.
(iii) approved an amendment of the Company's 1994 Directors Stock
Option Plan to increase the number of shares of common stock available
for grant under the plan from 66,667 shares to 200,000. There were
2,447,468 affirmative votes and 110,359 negative votes with respect to
this matter.
(iv) ratified the selection of Ernst & Young as independent auditors
for the fiscal year ending February 2, 1997.
By written consent the Company's stockholders;
(i) approved, as of May 10, 1996, an amendment to the Company's
Certificate of Incorporation to increase the authorized common stock
from 8,333,333 shares to 20,000,000 shares.
(ii) approved, as of July 29, 1996, an amendment to the Company's
Certificate of Incorporation to increase the authorized common stock
from 20,000,000 shares to 35,000,000 shares.
Item 6. Exhibits and Reports on Form 8-K filed during the quarter
ended July 30, 1996
(a) Exhibits
3 (i) (l) Certificate of Amendment of Certificate of
Incorporation dated as of June 7, 1996.
(2) Certificate of Amendment of Certificate of
Incorporation dated as of August 1, 1996
(b) Reports on Form 8-K
On September 10, 1996, the Registrant filed a current
report dated August 26, 1996 on Form 8-K. This report
described under Item 1 Changes in Control of
Registrant certain financing transactions resulting
in a change in control.
9
<PAGE> 12
SIGNATURES
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.
KRAUSE'S FURNITURE, INC.
(Registrant)
Date: September 11, 1996 /s/ Stephen P. Anderson
------------------ ------------------------
Stephen P. Anderson
President
Date: September 11, 1996 /s/ Robert G. Sharpe
------------------ ---------------------
Robert G. Sharpe
Executive Vice President
and Treasurer
10
<PAGE> 13
Exhibit 3(i)(1)
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
KRAUSE'S FURNITURE, INC.
(Pursuant to Section 242 of the General
Corporation Law of the State of Delaware)
KRAUSE'S FURNITURE, INC., a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware (the
"Company"), certifies as follows:
1. The amendment of the Company's Certificate of Incorporation set
forth in the following resolution approved by unanimous written consent of the
Company's Board of Directors was duly adopted in accordance with the provisions
of Section 242 of the General Corporation Law of the State of Delaware.
RESOLVED, that Article FOURTH of the Certificate of Incorporation of
the Company is hereby amended and restated to read as follows:
"The total number of shares of stock which the corporation shall have
authority to issue is Twenty Million Six Hundred Sixty-Six Thousand Six
Hundred Sixty-Seven (20,666,667), of which Twenty Million (20,000,000)
shares, of the par value of One Tenth of One Cent ($0.001) each, amounting
in the aggregate to Twenty Thousand ($20,000) Dollars, shall be common
stock, and of which Six Hundred Sixty-Six Thousand Six Hundred Sixty-Seven
(666,667) shares, of the par value of One Tenth of One Cent ($0.001) each,
amounting in the aggregate to Six Hundred Sixty-Six and 67/100ths ($666.67)
Dollars, shall be preferred stock.
"Preferred shares may be issued in one or more series and the number
of shares, designations, preferences, rights and restrictions of each such
series shall be fixed by resolution or resolutions by the Board of
Directors."
2. Thereafter, the foregoing amendment to the Certificate of
Incorporation of the Company was approved by the stockholders of the Company by
written consent.
<PAGE> 14
IN WITNESS WHEREOF, this Certificate of Amendment is hereby executed on
behalf of the Company and attested to by its officers thereunto duly authorized
as of June 7, 1996.
KRAUSE'S FURNITURE, INC.
By /s/ Robert G. Sharpe
------------------------------------------
Robert G. Sharpe, Executive Vice President
ATTEST:
/s/ Gary S. Vandeweghe
- -----------------------------
Gary S. Vandeweghe, Secretary
<PAGE> 15
Exhibit 3(i)(2)
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
KRAUSE'S FURNITURE, INC.
(Pursuant to Section 242 of the General
Corporation Law of the State of Delaware)
KRAUSE'S FURNITURE, INC., a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware (the
"Company"), certifies as follows:
1. The amendment of the Company's Certificate of Incorporation set
forth in the following resolution approved by unanimous written consent of
the Company's Board of Directors was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware:
RESOLVED, that Article FOURTH of the Certificate of Incorporation of
the Company is hereby amended and restated to read as follows:
"The total number of shares of stock which the corporation
shall have authority to issue is Thirty-Five Million Six Hundred
Sixty-Six Thousand Six Hundred Sixty-Seven (35,666,667), of which
Thirty-Five Million (35,000,000) shares, of the par value of One Tenth
of One Cent ($0.001) each, amounting in the aggregate to Thirty-Five
Thousand ($35,000) Dollars, shall be common stock, and of which Six
Hundred Sixty-Six Thousand Six Hundred Sixty-Seven (666,667) shares,
of the par value of One Tenth of One Cent ($0.001) each, amounting
in the aggregate to Six Hundred Sixty-Six and 67/100ths ($666.67)
Dollars, shall be preferred stock.
"Preferred shares may be issued in one or more series and the
number of shares, designations, preferences, rights and restrictions
of each such series shall be fixed by resolution or resolutions by
the Board of Directors."
2. Thereafter, the foregoing amendment to the Certificate of
Incorporation of the Company was approved by the stockholders of the Company by
written consent.
<PAGE> 16
IN WITNESS WHEREOF, this Certificate of Amendment is hereby executed on
behalf of the Company by its officer thereunto duly authorized as of August 1,
1996.
KRAUSE'S FURNITURE, INC.
By /s/ ROBERT G. SHARPE
--------------------------------
ROBERT G. SHARPE, Executive Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-02-1997
<PERIOD-START> APR-29-1996
<PERIOD-END> JUL-28-1996
<CASH> 2,373
<SECURITIES> 0
<RECEIVABLES> 1,141
<ALLOWANCES> 319
<INVENTORY> 12,506
<CURRENT-ASSETS> 16,029
<PP&E> 13,252
<DEPRECIATION> 6,777
<TOTAL-ASSETS> 43,533
<CURRENT-LIABILITIES> 28,696
<BONDS> 0
0
7,523
<COMMON> 4
<OTHER-SE> (3,395)
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 26,236
<TOTAL-REVENUES> 26,236
<CGS> 13,860
<TOTAL-COSTS> 13,860
<OTHER-EXPENSES> 18,333
<LOSS-PROVISION> 65
<INTEREST-EXPENSE> 304
<INCOME-PRETAX> (6,216)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,216)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,216)
<EPS-PRIMARY> (1.51)
<EPS-DILUTED> (1.51)
</TABLE>
