<PAGE>
SECURITIES AND EXCHANGE COMMISSIONNN
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT
OF 1934 For the three month period ended June 30, 1997.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-11685-NY
RADYNE CORP.
(Exact name of registrant as specified in its charter)
NEW YORK
(State or other jurisdiction of incorporation or organization)
11-2569467
(IRS EMPLOYER IDENTIFICATION NO.)
5225 South 37th Street, Phoenix, AZ 85040
(Address of principal executive offices)
602-437-9620
(Registrant's Telephone number)
Indicate by check mark whether the registrant (1) 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 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 by check mark whether the registrant filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court.
YES X NO
----- -----
The registrant had 5,931,346 shares of its common stock, par value
$.002, outstanding as of June 30, 1997.
<PAGE>
PART I - FINANCIAL INFORMATION
RADYNE CORP.
BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
Item 1 - ASSETS 1997 1996
(Unaudited) (Audited)
--------------- -------------
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 1,166,797 $ 186,488
Accounts receivable, less allowance
for doubtful accounts of $27,000 and $13,000 respectively 2,339,282 2,733,902
Inventories 3,622,055 1,991,360
Prepaid and other current assets 117,804 94,298
Total Current Assets 7,245,938 5,006,048
PROPERTY AND EQUIPMENT - NET 1,102,287 849,564
OTHER ASSETS:
Designs and drawings - net of accumulated
amortization of $596,863 and $475,696 respectively 583,137 701,643
Deposits 15,662 15,662
--------------------------------------
Total $ 8,947,024 $ 6,572,917
======================================
LIABILITIES AND STOCKHOLDERS' CAPITAL DEFICIENCY
CURRENT LIABILITIES:
Notes payable under lines of credit $ 7,500,000 $ 1,993,820
Notes payable to affiliates 0 6,600,000
Obligations under capital leases 45,400 53,042
Accounts payable - trade 817,489 805,279
Accounts payable - affiliate 0 436,362
Accrued liabilities 769,469 926,956
Taxes payable 50,000 42,116
---------------------------------------
Total Current Liabilities 9,182,358 10,857,575
OBLIGATIONS UNDER CAPITAL LEASES 78,500 81,016
TAXES PAYABLE 52,963 80,952
---------------------------------------
Total Liabilities 9,313,821 11,019,543
---------------------------------------
STOCKHOLDERS' CAPITAL DEFICIENCY
Common stock, $.002 par value, 20,000,000
shares authorized, shares issued and outstanding, 5,931,346 and
3,759,721 at June 30, 1997 and December 31, 1996 respectively 11,863 7,519
Additional paid-In capital 5,756,240 605,782
Accumulated deficit (6,038,400) (5,059,927)
Notes receivable - employees (96,500) 0
---------------------------------------
Total Stockholders' ` (366,797) (4,446,626)
Capital Deficiency
Total $ 8,947,024 $ 6,572,917
=======================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
RADYNE CORP.
STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1997 1996 1997 1996
--------------------------------------------------------
<S> <C> <C> <C> <C>
NET SALES $ 2,811,596 $ 545,525 $ 5,552,264 $ 1,432,288
COST OF SALES 1,654,095 595,634 3,333,906 1,084,066
--------------------------------------------------------
Gross Profit 1,157,501 (50,109) 2,218,358 348,222
--------------------------------------------------------
OPERATING EXPENSES:
Selling, general and administrative 926,780 494,811 1,738,061 997,463
Research and development 572,079 664,882 1,123,721 1,206,372
--------------------------------------------------------
Total Operating Expenses 1,498,859 1,159,693 2,861,782 2,203,835
LOSS FROM OPERATIONS BEFORE INTEREST EXPENSE (341,358) (1,209,802) (643,424) (1,855,613)
INTEREST EXPENSE - NET 162,961 92,897 335,048 185,597
NET LOSS BEFORE PROVISION FOR INCOME TAXES (504,319) (1,302,699) (978,472) (2,041,210)
PROVISION FOR INCOME TAXES -0- -0- -0- -0-
--------------------------------------------------------
NET LOSS $ (504,319) $ (1,302,699) $ (978,472) $ (2,041,210)
========================================================
NET LOSS PER COMMON SHARE $ (0.11) $ (0.35) $ (0.24) $ (0.55)
========================================================
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 4,443,110 3,749,721 4,122,303 3,739,870
========================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
RADYNE CORP.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
-----------------------------------
JUNE 30, 1997 JUNE 30, 1996
------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net Loss $ (978,473) $(2,041,210)
Adjustments to reconcile net loss to cash flows used
in operating activities:
Depreciation and Amortization 222,065 122,905
Changes in operating assets and liabilities:
Accounts Receivable 394,620 448,410
Inventories (1,630,695) (85,448)
Prepaid and Other Current Assets (23,506) 137,256
Deposits 0 12,122
Accounts Payable - Trade 12,210 219,320
Accounts Payable - Affiliates (436,362) 0
Accrued Liabilities (157,487) (110,145)
Taxes Payable (20,105) (10,623)
-------------------------------------------
Net Cash used in Operating Activities (2,617,733) (1,307,413)
-------------------------------------------
Cash flows from investing activities:
Capital Expenditures (356,282) (314,097)
-------------------------------------------
Cash flows from financing activities:
Borrowing from Notes Payable under Line Of
Credit Agreements 5,506,180 0
Proceeds from Notes Payable to Affiliates 0 1,576,351
Payments on Notes Payable to Affiliates (6,600,000) 0
Net Proceeds from sale of common stock 5,154,802 0
Notes Receivable - employees (96,500) 0
Principal payments on capital lease obligations (10,158) 0
-------------------------------------------
Net Cash provided by financing activities 3,954,324 1,576,351
-------------------------------------------
Net increase (decease) in Cash 980,309 (45,159)
Cash, Beginning of year 186,488 46,130
-------------------------------------------
Cash, End of Period $ 1,166,797 $ 971
===========================================
Supplemental Disclosure of cash flow information:
Interest paid $ 367,509 $ 189,889
===========================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
RADYNE CORP.
Notes to Financial Statements
(Information for JUNE 30, 1997 and JUNE 30, 1996 is Unaudited)
1. Business
Radyne Corp. (the "Company") was incorporated on November 25, 1980 and
commenced operations on May 22, 1981. The Company designs, manufactures and
sells products, systems and software used for the transmission and reception of
data over satellite and cable communications networks.
2. Summary of Significant Accounting Policies
(a) Basis of presentation
The interim financial statements furnished reflect all adjustments which
are, in the opinion of management, necessary for a fair statement of financial
position as of June 30, 1997 and the results of operations for the three months
ended June 30, 1997 and June 30, 1996 and the results of operations and cash
flows for the six months ended June 30, 1997 and June 30, 1996. Such adjustments
are of a normal recurring nature. This information should be read in conjunction
with the financial statements included in the Company's Form 10-K for the six
month period ended December 31, 1996.
The results of operations for the interim period are not necessarily
indicative of the results to be expected for the full year.
(b) Revenue Recognition
The Company recognizes revenue upon shipment of products.
(c) Inventories
Inventories, consisting of satellite modems, converters and related
products, are valued at the lower of cost (first-in, first-out) or market value
including material, direct labor and overhead costs.
(d) Property and Equipment
Property and equipment is stated at cost. Expenditures for repairs and
maintenance are charged to operations as incurred, and improvements which extend
the useful lives of assets are capitalized. Depreciation and amortization of
machinery and equipment are computed using the straight-line method based on the
following useful lives:
Machinery and Equipment 7 years
Furniture and fixtures 7 years
Leasehold improvements 5 years
<PAGE>
RADYNE CORP.
Notes to Financial Statements
(Information for JUNE 30, 1997 and JUNE 30, 1996 is Unaudited)
(e) Designs and Drawings
The valuation of designs and drawings is the result of adjustments made
by the Company to adopt Fresh Start reporting in accordance with AICPA Statement
of Position 90-7, `Financial Reporting By Entities in Reorganization Under the
Bankruptcy Code,' and represents the excess reorganization value that has been
applied to the acquired technology supporting the Company's products (Note 3).
Amortization of designs and drawings is computed using the straight-line method
over an estimated useful life of four to seven years.
(f) Research and Development
The cost of research and development is charged to expense as incurred.
(g) Taxes on Income
The Company follows the liability method of accounting for income taxes,
as prescribed by Statement No. 109 of the Financial Accounting Standards Board.
(h) Per Share Data
Earnings (loss) per share of common stock were computed by dividing Net
Loss by the weighted average number of shares of common stock outstanding during
each of the periods presented.
(i) Rights Offering
In November 1996 the Board of Directors approved the distribution to
stockholders, other than the Company's principal stockholder, Stetsys US, Inc.
("ST"), of subscription rights for the purchase of up to 215,833 shares of the
Company's common stock at a price of $2.50 per share. The Board of Directors
further approved the distribution of subscription rights to an affiliate of ST
to purchase up to 2,040,000 shares of the Company's common stock at a price of
$2.50 per share. This Rights Offering became effective on May 12, 1997 and was
concluded in June. ST's affiliate exercised 1,976,000 of its rights and another
34,000 were exercised by individuals associated with such affiliate. 51,525
rights issued to stockholders other than ST were also exercised. In a related
offering under the Company's Incentive Stock Option Plan, 110,100 shares of the
Company's common stock were purchased by employees at $2.50 per share. Total
proceeds received from the Rights Offering were partially offset by $275,000 of
associated costs. The proceeds from the exercise of these rights were used, in
part, to satisfy notes payable to affiliates shown on the accompanying balance
sheet at December 31, 1996.
(j) Reverse Split
<PAGE>
All per share information in these financial statements has been
adjusted to give effect to the 1-for-5 reverse split of common shares which was
effective January 9, 1997.
3. Reorganization
On April 28, 1994, Radyne Corp. (the Predecessor Company) filed a
petition for relief under Chapter 11 of the federal bankruptcy laws in the
United States Bankruptcy Court for the Eastern District of New York. The
Predecessor Company received approval from the Bankruptcy Court to pay certain
of its pre-petition obligations, employee wages and benefits. Tax claims were
rescheduled for payment in equal quarterly installments of $8,720, with interest
at 7%, over six years.
On December 16, 1994, the Bankruptcy Court confirmed the Predecessor
Company's Plan of Reorganization effective at the close of business on December
16, 1994.
<PAGE>
RADYNE CORP.
Notes to Financial Statements
(Information for JUNE 30, 1997 and JUNE 30, 1996 is Unaudited)
4. Inventories
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
Inventories consist of the following: 1997 1996
-----------------------------------
<S> <C> <C>
Raw Materials and components $ 1,161,543 $ 1,108,019
Work in process 1,766,299 792,119
Finished Goods 934,213 577,222
-----------------------------------
Sub Total 3,862,055 2,477,360
Less Valuation Allowance (240,000) (486,000)
-----------------------------------
Total $ 3,622,055 $ 1,991,360
===================================
</TABLE>
5. Property and Equipment
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
Property and Equipment consist of the following: 1997 1996
-----------------------------------
<S> <C> <C>
Machinery and Equipment $ 990,821 $ 731,778
Furniture and Fixtures 340,798 243,559
-----------------------------------
Sub Total 1,331,619 975,337
Less: accumulated depreciation
and amortization (229,332) (125,773)
-----------------------------------
Total $ 1,102,287 $ 849,564
===================================
</TABLE>
6. Accrued Liabilities
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
Accrued liabilities consist of the following: 1997 1996
-----------------------------------
<S> <C> <C>
Wages and related payroll taxes $ 110,296 $ 356,624
Interest Expense 167,877 194,492
Warranty Reserve 99,053 139,775
Professional fees 46,612 171,000
Other 345,631 65,065
-----------------------------------
Total $ 769,469 $ 926,956
===================================
</TABLE>
<PAGE>
7. Related Party Transactions
In July 1995, the Company's manufacturing operations were moved to an affiliate,
Engineering and Technical Services, Inc ("ETS"), pending the Company's
relocation to Phoenix. In September 1996, in recognition of the completion of
the move to Phoenix and increase in staffing, the Board of Directors determined
that the Company should resume direct manufacturing. During the period that ETS
served as the Company's manufacturer, the Company handled purchases of
manufactured goods as inter-company purchases. Purchases from ETS for the three
month periods ended June 30, 1997 and June 30, 1996 were $ 0 and $ 300,090,
respectively. During the six month periods ended June 30, 1997 and June 30,
1996, the Company purchased $ 0 and $ 659,256, respectively, under this
arrangement.
Sales to ETS for the three month periods ended June 30, 1997 and June 30, 1996
were $15,650 and $11,070, respectively. Sales to ETS for the six month periods
ended June 30, 1997 and June 30, 1996 were $29,150 and $ $61,178, respectively.
Notes payable to ST and affiliates outstanding at December 31, 1996 were paid
with proceeds from the Rights Offering.
Interest expense on notes payable to affiliates was $57,610 and $97,189 for the
three month period ended June 30, 1997 and the three month period ended June 30,
1996, respectively. For the six month periods which ended June 30, 1997 and June
30, 1996, interest expense on notes payable to affiliates was $105,929 and
$189,889 respectively. All interest expenses to affiliates have been paid in
full.
8. Notes Payable
The Company has a note payable under a line of credit agreement with
Bank of America, that permits outstanding borrowings of $5,000,000 with interest
payable at IBOR plus 1.265% per annum (rates varied from 6.622%--7.41% on
balances owed at June 30, 1997). The outstanding balance under this agreement as
of June 30, 1997 was $3,700,000. The line of credit agreement expires in March
1998 and is renewable annually at the option of the Bank.
The Company has a $5,500,000 credit agreement with Citibank, N.A. that
includes $5,000,000 available under an uncommitted line of credit facility and
facilities for bank guarantees and/or standby letters of credit up to $500,000.
An affiliate of ST has issued a nonbinding letter of awareness in connection
with this credit agreement. Borrowings under the line of credit bear interest at
a fluctuating rate equal to IBOR plus 1% per annum or alternative Citibank's
Quoted Rate plus 1% per annum (rates varied from 6.625%-6.9% on balances owed at
June 30, 1997). The credit agreement requires the Company to maintain certain
financial leverage ratios. The availability of additional borrowings under the
credit agreement expires December 31, 1997 and is renewable
<PAGE>
annually at the option of the Bank. The Company owed $3,800,000 under the
agreement as of June 30, 1997 and has paid down $400,000 subsequent to June 30,
1997.
<PAGE>
RADYNE CORP
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of Operations
The Company's assets have increased from $6,572,917 at December 31, 1996
to $8,947,024 at June 30, 1997, while the Company's liabilities have decreased
from $11,019,543 at December 31, 1996 to $9,313,821 at June 30, 1997. The
increase in net assets (assets minus liabilities) of $4,079,829 relates to the
Company's net loss for the three month period ending June 30, 1997 offset by the
net decrease in Stockholder Capital Deficiency due to the conclusion of the
Rights Offering and the related satisfaction of notes payable to affiliates.
Results of operations for the three month period ended June 30, 1997
compared to the fiscal period ended June 30, 1996, were as follows:
The Company's net sales increased 415% to $2,811,596 during the period
ended June 30, 1997 from $545,525 during the period ended June 30, 1996 as a
result of the Company's introduction of new products and aggressive marketing
efforts. A substantial portion of the sales increase came from the new digital
video product line that has enjoyed tremendous market acceptance. Likewise, new
RF products like the C-Band Up and Down Converters have been accepted nicely.
Other products which contributed to the increase were the RCS-10 and RCS-20
subsystems with their associated modems and the new DMD-2401 modem line.
The Company's cost of sales as a percentage of net sales decreased to
59% during the period ended June 30, 1997 from 109% during the fiscal period
ended June 30, 1996. Start-up costs associated with the delivery of new products
to the marketplace accounted for the high prior period costs while on-going
efforts to reduce costs paid off during the current period.
Selling, general and administrative costs increased to $926,780 (33% of
sales) during the current period from $494,811 (91% of sales) during the fiscal
period ended June 30, 1996. The increased level of expenses for the period (and
the related reduction in costs in terms of percentage of sales) was as a result
of the increase in the Company's base business level during the period.
Marketing expenses have substantially increased as the Company has attempted to
position itself to compete head-to-head with larger competitors without giving
up margin advantages.
Research and development expenditures decreased to $572,079 (20% of
sales) during the period ended June 30, 1997 from $664,882 (122% of sales)
during the period ended June 30, 1996. The decreased level of expenses for the
period (and the related reduction in costs in terms of percentage of sales) was
as a result of the increase in the Company's base business level during the
period and the redirection of efforts to marketing our newer lines of products.
Net interest expense increased from $92,897 in the period ended June 30,
1996 to $162,961 in the current period due mainly to an increase in the
Company's debt level.
<PAGE>
Based on the increases in margins and lower costs in terms of percent of
sales as outlined above, the Company experienced a net loss of ($504,319) during
the period ended June 30, 1997 as compared with a net loss of ($1,302,699)
during the period ended June 30, 1996.
The Company's new-orders-booked (Bookings) increased 225% to $5,341,368
for the period ended June 30, 1997 from $1,641,100 for the period ended June 30,
1996. This increase was primarily due to the successful introduction of certain
new product lines to the market during and after the period ended June 30, 1996.
The Company's level of unfilled-orders-to-ship (Backlog) increased 197%
to $4,269,002 at June 30, 1997 from $1,439,038 at June 30, 1996 primarily due to
the increased Bookings referred to above and like increases in the previous
quarter.
<PAGE>
RADYNE CORP
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of operations for the six month period ended June 30, 1997
compared to the six month period ended June 30, 1996, were as follows:
The Company's net sales increased 288% to $5,552,264 during the period
ended June 30, 1997 from $1,432,288 during the six months ended June 30, 1996 as
a result of the Company's introduction of new products during and after the
prior period. A substantial portion of the sales increase came from the new
digital video product line that has enjoyed tremendous market acceptance. Other
products which contributed to the increase were the RCS-10 and RCS-20 subsystems
with their associated modems, the new DMD-2401 modem and the RF product lines.
The Company's cost of sales as a percentage of net sales decreased to
60% during the period ended June 30, 1997 from 76% during the fiscal period
ended June 30, 1996. A reduction in start-up costs associated with the delivery
of new products to the marketplace during the current period accounted for the
major portion of the decrease in costs. Cost reduction efforts begun during the
prior period have assisted in the reduction of direct costs also.
Selling, general and administrative costs increased to $1,738,061 (31%
of sales) during the current period from $997,463 (70% of sales) during the six
month period ended June 30, 1996. The increased level of expenses for the period
(and the related reduction in costs in terms of percentage of sales) was
partially as a result of the increase in the Company's base business level
during the period. The Company's marketing expenses have increased substantially
as the Company has attempted to position itself in the marketplace to compete
head-to-head with larger competitors without giving up margin advantages.
Research and development expenditures decreased to $1,123,721 (20% of
sales) during the period ended June 30, 1997 from $1,206,372 (84% of sales)
during the six months ended June 30, 1996. The decreased level of expenses for
the period (and the related reduction in costs in terms of percentage of sales)
was as a result of the increase in the Company's base business level during the
period and the redirection of efforts from research to improving of our older
product lines for manufacturability and lower costs.
Net interest expense increased from $185,597 in the period ended June
30, 1996 to $335,048 in the current period due to an increase in the Company's
debt level.
Based on the increases in costs and expenses as offset by the increase
in revenues and gross margins as outlined above, the Company experienced a net
loss of ($978,472) during the period ended June 30, 1997 as compared with a net
loss of ($2,041,210) during the six months ended June 30, 1996.
The Company's new-orders-booked (Bookings) increased 176% to $7,348,001
for the period ended June 30, 1997 from $2,658,311 for the period ended June 30,
1996.
<PAGE>
This increase was primarily due to the successful introduction of certain
new product lines to the market during and after the period ended June 30, 1996.
The Company's level of unfilled-orders-to-ship (Backlog) increased 197%
to $4,269,002 at June 30, 1997 from $1,439,038 at June 30, 1996 primarily due to
the increased Bookings referred to above and like increases in the previous six
months.
<PAGE>
Liquidity and Capital Resources
The Company's working capital deficit was ($1,936,000) at June 30, 1997,
an improvement of $3,916,000 from ($5,852,000) at December 31, 1996. The
decrease in the deficit was due primarily to a $1,094,000 decrease in net
borrowings and net proceeds from the Rights Offering.
Net cash used in operating activities was $2,618,000 for the period
ended June 30, 1997, as compared to $1,307,000 used in the six months ended June
30, 1996. Management considers these differences to be consistent with the
introduction of new products which resulted in increased inventory levels
coupled with an increase in the overall business activities of the Company.
Cash used in investing activities, consisting of additions to equipment,
amounting to $356,000 for the period ended June 30, 1997 was comparable to the
prior period amount of $314,000.
The Company derived net cash from financing activities of $3,954,000 and
$1,576,000 during the periods ended June 30, 1997 and June 30, 1996,
respectively, with the difference resulting from net proceeds received from the
Rights Offering.
As a result of the foregoing, the Company increased its cash balances by
$1,167,000 and $1,000 for the six months ended June 30, 1997 and the period
ended June 30, 1996, respectively,.
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K.
(a) Exhibit Description
3.1* Restated Certificate of Incorporation
3.2* Bylaws, as amended and restated
10.1** 1996 Incentive Stock Option Plan
10.2***Employment Agreement with Robert C. Fitting (Radyne Termsheet)
10.3***Agreement with Merit Microwave, Inc. and Peter Weisskopf
27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter covered by this
report.
* Incorporated by reference from Registrant's report on Form 10-Q, filed
March 11, 1997.
** Incorporated by reference from Registrant's Registration Statement on
Form S-8, dated and declared effective on March 12, 1997.
*** Incorporated by reference from Registrant's amended Registration
Statement on Form S-1, dated May 9, 1997 and declared effective on
May 12, 1997.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Dated: August 13, 1997 RADYNE CORP.
By: /s/ Robert C. Fitting
--------------------------
Robert C. Fitting
President
By: /s/ Garry D. Kline
--------------------------
Garry D. Kline
Chief Financial Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS CONTAINED IN THE FORM 10-Q FOR THE QUARTER ENDED 6-30-97
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,166,797
<SECURITIES> 0
<RECEIVABLES> 2,366,282
<ALLOWANCES> (27,000)
<INVENTORY> 3,622,055
<CURRENT-ASSETS> 7,245,938
<PP&E> 1,324,352
<DEPRECIATION> 222,065
<TOTAL-ASSETS> 8,947,024
<CURRENT-LIABILITIES> 9,182,358
<BONDS> 0
0
0
<COMMON> 11,863
<OTHER-SE> 5,756,240
<TOTAL-LIABILITY-AND-EQUITY> 8,947,024
<SALES> 2,811,596
<TOTAL-REVENUES> 2,811,596
<CGS> 1,654,095
<TOTAL-COSTS> 1,654,095
<OTHER-EXPENSES> 1,498,859
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 162,961
<INCOME-PRETAX> (504,319)
<INCOME-TAX> 0
<INCOME-CONTINUING> (504,319)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (504,319)
<EPS-PRIMARY> (0.11)
<EPS-DILUTED> (0.11)
</TABLE>
