SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended March 31, 1997 Commission File Number
0-12575
Arizona Instrument Corporation
(Exact name of registrant as specified in its charter)
Delaware 86-0410138
(State of incorporation) (I.R.S. Employer identification number)
4114 East Wood Street, Phoenix, Arizona 85040-1941
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (602) 470-1414
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 and 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
--- ---
As of April 20, 1997, 6,498,780 shares of Common Stock ($0.01 par value) were
outstanding.
<PAGE>
ARIZONA INSTRUMENT CORPORATION
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1 Financial Statements
Consolidated Balance Sheets
March 31, 1997 and December 31, 1996 I-3
Consolidated Statements of Income
Three months ended March 31, 1997 and
March 31, 1996 I-4
Consolidated Statements of Cash Flows
Three months ended March 31, 1997
and March 31, 1996 I-5
Notes to Consolidated Financial
Statements I-6
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of
Operations I-7
II. OTHER INFORMATION
Item 1 Legal Proceedings I-9
Item 6 Exhibits and Reports on Form 8-K I-10
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
I-3
ARIZONA INSTRUMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS March 31, 1997 December 31, 1996
---------------------------------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $174,285 $597,931
Receivables, net 3,646,807 2,917,476
Inventories 2,045,755 2,049,982
Current portion of notes receivable related party 9,398 45,501
Prepaid expenses and other current assets 296,702 550,840
---------------------------------------
Total current assets 6,172,947 6,161,730
PROPERTY, PLANT AND EQUIPMENT, NET 879,848 846,458
GOODWILL, NET 2,148,062 2,209,650
COVENANT NOT TO COMPETE, NET 87,500 102,084
DEFERRED INCOME TAXES 641,437 641,437
OTHER ASSETS 1,008,068 1,062,805
---------------------------------------
TOTAL ASSETS $10,937,862 $11,024,164
=======================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Lines of credit $150,000 $0
Accounts payable 809,071 771,679
Current portion of long-term debt and
capital lease obligations 416,454 794,268
Other accrued expenses 725,145 648,501
---------------------------------------
Total current liabilities 2,100,670 2,214,448
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS 276,339 378,010
SHAREHOLDERS' EQUITY Common stock, .01 par value per share:
Authorized, 10,000,000 shares;
Issued, 6,614,687 and 6,352,563 shares 67,109 66,777
Preferred stock, $.01 par value per share:
Authorized, 1,000,000 shares
Additional paid-in capital 9,754,302 9,706,163
Deficit (1,038,107) (1,118,783)
---------------------------------------
8,783,304 8,654,157
Less treasury stock, 86,165 shares at cost (222,451) (222,451)
---------------------------------------
Total shareholders' equity 8,560,853 8,431,706
---------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $10,937,862 $11,024,164
=======================================
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
I-4
ARIZONA INSTRUMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------------------------
March 31, 1997 March 31, 1996
-------------------------------------------------
<S> <C> <C>
NET SALES $3,578,194 $3,284,431
COST OF GOODS SOLD 1,629,543 1,475,898
-------------------------------------------------
Gross Margin 1,948,651 1,808,533
-------------------------------------------------
EXPENSES
Marketing 869,256 773,825
General & administrative 575,630 561,918
Research and development 172,396 178,329
Amortization and depreciation 171,951 166,064
-------------------------------------------------
Total Expenses 1,789,233 1,680,136
-------------------------------------------------
OPERATING INCOME 159,418 128,397
-------------------------------------------------
OTHER REVENUE (EXPENSE)
Interest Income (4,139) 3,175
Interest expense (27,946) (70,678)
Other income 2,343 19,706
-------------------------------------------------
Total other revenue (expense) (29,742) (47,797)
-------------------------------------------------
INCOME BEFORE INCOME TAXES 129,676 80,600
INCOME TAXES 49,000 2,000
-------------------------------------------------
NET INCOME $80,676 $78,600
=================================================
NET INCOME PER SHARE $0.01 $0.01
=================================================
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES AND COMMON STOCK EQUIVALENTS 7,055,151 6,862,548
=================================================
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
I-5
ARIZONA INSTRUMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------------------
March 31, 1997 March 31, 1996
-----------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
NET INCOME $80,676 $78,600
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES
Depreciation and amortization 198,929 200,845
(Increase) decrease in accounts receivable (729,331) 210,428
Decrease (increase) in inventory 4,227 (113,236)
Decrease (increase) in prepaid expenses and other
current assets 290,241 (24,957)
Decrease (increase) in other assets 29,898 (16,031)
Increase (Decrease) in accounts payable and other
accrued expenses 114,035 (378,162)
-----------------------------------------------
NET CASH USED IN OPERATING ACTIVITIES (11,325) (42,513)
-----------------------------------------------
INVESTING ACTIVITIES
Proceeds from the sale of assets 0 19,750
Gain on the sale of assets 0 (19,960)
Purchases of capital equipment (131,306) (39,487)
-----------------------------------------------
NET CASH USED IN INVESTING
ACTIVITIES (131,306) (39,427)
-----------------------------------------------
FINANCING ACTIVITIES
Net borrowing (payments) under lines of credit 150,000 (100,000)
Issuance of common stock pursuant to earnout agreement 0 202585
Issuance of common stock pursuant to stock
purchase plan 36,512 28,273
Stock issued pursuant to option exercises 11,960 0
Payments of long-term debt and capital leases (479,485) (150,344)
-----------------------------------------------
NET CASH USED IN FINANCING ACTIVITIES (281,014) (19,486)
-----------------------------------------------
NET DECREASE IN CASH & CASH
EQUIVALENTS (423,646) (101,426)
CASH & CASH EQUIVALENTS AT BEGINNING OF PERIOD 597,931 486,382
-----------------------------------------------
CASH & CASH EQUIVALENTS AT END OF PERIOD $174,285 $384,956
===============================================
Supplemental cash flow information:
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
I-6
ARIZONA INSTRUMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. CONSOLIDATED FINANCIAL STATEMENTS
The consolidated balance sheet as of March 31, 1997, and the consolidated
statements of income and cash flows for the three-month periods ended March 31,
1997 and 1996 have been prepared by the Company without audit. In the opinion of
management, all adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position at March 31, 1997 and the
results of operations and cash flows for the three-month periods ended March 31,
1997 and March 31, 1996 have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. These consolidated financial statements should
be read in conjunction with the financial statements and notes thereto included
in the Company's 1996 Report on Form 10-KSB, as amended. The results of
operations for the interim periods are not necessarily indicative of the results
to be obtained for the entire year.
2. INVENTORIES
Inventories consist of the following:
March 31, December 31,
1997 1996
Finished goods $ 799,567 $ 680,976
Components 1,246,188 1,369,006
-------------------- ---------------------
$ 2,045,755 $ 2,049,982
-------------------- ---------------------
<PAGE>
I-7
The following discussion should be read in conjunction with, and is qualified in
its entirety by, the Company's Consolidated Financial Statements and Notes
thereto appearing elsewhere herein. Historical results are not necessarily
indicative of trends in operating results for any future period.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The statements contained herein regarding management's anticipation of the
Company's future market position, development of additional products, product
introduction and delivery dates, reliability of products, adequate sources of
supplies, acquisition of related product lines or companies, and positive
responses to new developments, constitute "forward-looking" statements within
the meaning of the Private Securities Litigation Reform Act of 1995.
Management's anticipation is based upon assumption regarding levels of
competition, research and development results, product introduction and delivery
schedules, raw material markets, the markets in which the Company operates, and
stability of the regulatory environment. Any of these assumptions could prove
inaccurate, and therefore there can be no assurance that the forward-looking
information will prove to be accurate.
Results of Operations:
Three months ended March 31, 1997 and March 31, 1996
Net sales for the three months ended March 31, 1997 increased 9% or $293,763 to
$3,578,194 from $3,284,431 generated for the first three months of 1996. This
increase was due to increased sales of the Company's instruments which more than
offset declines in tank testing revenues and installation revenues related to
the Company's ENCOMPASS systems.
Cost of goods sold for the three months ended March 31, 1997 was $1,629,543, an
increase of 10% from the $1,475,898 incurred for the first three months of 1996.
The increase in cost of goods sold was primarily due to the costs of goods
associated with increased sales.
Operating expenses for the first quarter of 1997 were $1,789,233, an increase of
$109,097 or 6% as compared to operating expenses of $1,680,136 for the first
quarter of 1996. Marketing expenses for the first quarter of 1997 were $869,256,
an increase of 12% or $95,431 over the same period in 1996. Increased marketing
expenses were due to a higher level of selling activity required to support the
Company's domestic and international operations. General and administrative
expenses for the first quarter of 1997 were $575,630, an increase of 2% or
$13,712 as compared to the first quarter of 1996, due primarily to increased
personnel related expenses. Research and development expenses for the first
quarter of 1997 were $172,396, a decrease of 3% or $5,933 compared to the
$178,329 of research and development expenses incurred in the first quarter of
1996.
<PAGE>
Other expenses for the first quarter of 1997 were $29,742, a decrease of 38% or
$18,055 from the $47,797 in other expenses incurred for the first quarter of
1996. This decrease was due primarily to a reduction in interest expense due to
lower levels of borrowing by the Company for the first quarter of 1997, as
compared to the first quarter of 1996.
As a result of these changes, income before taxes for the first quarter of 1997
was $129,676, an increase of 61% or $49,076 from the $80,600 recorded for the
first quarter of 1996. Provision for income taxes increased to $49,000 for the
first quarter of 1997 as compared to just $2,000 for the first quarter of 1996.
The Company expects its provision for income taxes to approximate the amount
computed at the statutory rate for 1997. As a result, net income for the first
quarter was $80,676, a small improvement of 3% or $2,076 over the net income of
$78,600 achieved for the first quarter of 1996.
The Company has historically experienced and expects to continue to experience
quarterly fluctuations, potentially in a material amount, in its operating
results. A variety of factors influence the Company's operating results in a
particular period, including economic conditions in the industries served by the
Company, regulatory developments, the timing of significant orders, shipment
delays, specific features requested by the customers, the introduction of new
products by the Company and its competitors, market acceptance of new products
and enhancements of existing products, changes in the cost of materials,
disruptions in the sources of supply, seasonal variations of spending by
customers, the timing of the Company's expenditures in anticipation of future
orders and other factors, many of which are beyond the Company's control. In
addition, the Company sells a significant portion of its ENCOMPASS products to a
limited number of customers. While management believes that its relationships
with these customers are strong, future orders under purchase agreements with
these customers are subject to change based on changing business conditions of
the customers.
Liquidity and Capital Resources:
Working capital at March 31, 1997 was $4,072,277, an increase of $124,995, or
3%, from the working capital of $3,947,282 as of December 31, 1996. Working
capital increased due to an increase in receivables which more than offset a
reduction in cash, as well as due to a reduction in the current portion of long
term debt which more than offset increases in other current liabilities. As a
result, the Company's current ratio as of March 31, 1997 increased to 2.9 from a
current ratio of 2.8 as of December 31, 1996.
The Company currently has two lines of credit available through a bank,
collateralized by accounts receivable, inventory, and property, plant and
equipment which provide for an aggregate maximum commitment of $2,500,00 through
March 15, 1998. Advances can be made against the lines based on qualified levels
of receivables and inventory. At March 31, 1997, $150,000 had been borrowed
under these lines of credit.
The Company believes that cash generated from ongoing operations and the
borrowing arrangements described above will satisfy the anticipated cash
requirements of the Company's current operations over the next 12 months, though
there can be no assurance that this will be the
<PAGE>
case. The Company's ability to continue funding its planned operations beyond
the next 12 months is dependent upon its ability to generate sufficient cash
flow to meet its obligations on a timely basis, or to obtain additional funds
though equity or debt financing, or from other sources of financing, as may be
required.
<PAGE>
PART II. OTHER INFORMATION
Item 1 Legal Proceedings
Information is incorporated by reference from the Company's Report on Form
10-KSB, as amended, for the year ended December 31, 1996.
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Composite Certificate of Incorporation of Registrant as amended through
July 5, 1994. Incorporated by reference from the Form 8-A filed on June
26, 1996.
3.2 Bylaws of Registrant. Incorporated by reference from the Form 8-A filed
on June 26, 1996.
10. Employment Agreement between George G. Hays and Registrant dated April
1, 1997 (Management contract or compensatory plan or arrangement.)
27 Financial Data Schedule
(b) There were no reports on Form 8-K for the
quarter ended March 31, 1997
<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.
ARIZONA INSTRUMENT CORPORATION
May 13, 1997 /s/ John P. Hudnall
- ------------------------- -------------------------------------------
Date John P. Hudnall, President and CEO
(Authorized officer)
May 13, 1997 /s/ George G. Hays
- ------------------------- -------------------------------------------
Date George G. Hays, Vice President and CFO
(Principal financial officer)
EMPLOYMENT AGREEMENT
ARIZONA INSTRUMENT CORPORATION
AND
George G. Hays
THIS EMPLOYMENT AGREEMENT ("Agreement") dated as of April 1, 1997 is
between Arizona Instrument Corporation ("AZI" or the "Company" or "Employer")
and George G. Hays ("Employee").
1. Employment Duties. Employer hereby employs Employee and Employee
hereby accepts employment on the terms and conditions set forth herein. Employee
shall serve in the position of Vice President and Chief Financial Officer, with
responsibility for overseeing the financial operations of the Company, and will
have such other powers and duties consistent with such position as may from time
to time be prescribed by the Board of Directors.
2. Term. Employee's employment shall continue for a period of three
years, beginning with the effective date of this Agreement and ending three
years thereafter. At the conclusion of the three-year period, this Agreement
shall be automatically renewed for a one-year period unless the Company has
given Employee written notice of nonrenewal at least six months prior to the
conclusion of the three-year term.
3. Full-time Employment. Employee shall devote substantially all his
employment energies, intrest, abilities and time to the performance of his
obligations hereunder.
4. Compensation. Employer shall pay to employee the sum of $140,000.00
per year during the term hereof, to be paid in accordance with the Employer's
normal payroll practice, but in no event shall such salary be paid less
frequently than twice a month. Employee shall participate in an annual incentive
bonus plan equal to at least 30% of annual salary. The Company will consider
merit increases on a periodic basis commensurate with the executive compensation
practices of the Company. Additionally, the base pay will be annually adjusted
based on the cost of living index for the Greater Phoenix area. Employer may
deduct from the compensation to Employee social security taxes and all federal,
state and municipal taxes and charges as may now be in effect or which may
hereafter be enacted or required. Employer shall pay or reimburse Employee for
reasonable travel and other expenses incurred by Employee in furtherance of or
in connection with the performance of his duties hereunder, consistent with
Employer policies regarding such expenses.
5. Participation in Employee Benefits. Employee shall be entitled to
and shall receive all other benefits and conditions of employment available
generally to executives of AZI pursuant to Employer plans and programs,
including group health insurance, benefits, life insurance benefits and the
opportunity to participate in any stock option, profit sharing or retirement
income plan; provided, however, that Employee may request leave of absence
without pay during the term hereof, and Employer agrees to grant such leave if
it determines that the leave would not be materially injurious to the operations
of Employer; and provided, further, that Employee shall be
<PAGE>
entitled to a vacation of four weeks in each twelve-month period during the term
of this Agreement, during which time his compensation shall be paid in full. The
manner of implementation of such benefits with respect to such items as
procedures and amounts is discretionary with the Company.
6. Termination.
A) For Cause. The Company may terminate this Agreement for
cause upon written notice to the Employee stating the facts constituting such
cause, provided that Employee shall have 10 days following such notice to cure
any conduct or act, if curable, alleged to provide grounds for termination for
cause hereunder. In the event of termination for cause, the Company shall be
obligated to pay the Employee only the base salary due him through the date of
termination. Cause shall include material neglect of duties, wilful failure to
abide by ethical and good faith instructions or policies from or set by the
Chairman or the Board, commission of a felony or serious misdemeanor offense or
pleading guilty or nolo contendere to same, the commission by Employee of an act
of dishonesty or moral turpitude involving the Company, Employee's material
breach of this Agreement, the filing of bankruptcy proceedings by or against
Employee, or breach by Employee of any other material obligation to the Company.
B) Without Cause. The Company may terminate this Agreement at
any time immediately, without cause, by giving written notice to Employee. Upon
termination under this Section 6(b), the Company shall be obligated to pay
Employee the base salary payable hereunder for the balance of the employment
term set forth in Section 2. At the Company's election, such payment can be made
in a lump sum or pursuant to the Company's normal payroll practices over the
balance of the term. The Company shall also maintain Employee's participation in
the employee benefit programs referred to in Section 5 hereof for the remainder
of the employment term set forth in Section 2 and to the extent contemplated in
Section 5 hereof, except that the Company shall have no obligation to Employee
under any profit sharing or retirement plan other than amounts due through the
date of termination of employment. If continued coverage or participation in any
such benefit program is prohibited by the terms thereof, the Company will
provide a substantially similar benefit during such period. The obligations
provided in this Section 6(b) shall be the Company's sole obligations upon
termination under this Section 6(b).
C) Disability. If during the term of this Agreement, Employee
fails to perform his duties hereunder because of illness or other incapacity for
a period of two consecutive months, or for 90 days during any 150-day period,
the Company shall have the right to terminate this Agreement without further
obligation hereunder except for any amounts payable pursuant to disability plans
generally applicable to executive employees.
D) Death. If Employee dies during the term of this Agreement,
this Agreement shall terminate immediately, and Employee's legal representatives
shall be entitled to receive the base salary due Employee through the last day
of the calendar month in which his death shall have occurred and any other death
benefits generally applicable to executive employees.
<PAGE>
E) Employee Termination. Employee may terminate this Agreement
at any time upon written notice to the Company.
7. Cooperation with Employer After Termination of Employment. Following
any termination of employment hereunder, Employee shall fully cooperate with
Employer in all matters relating to the winding up of his pending work on behalf
of Employer and the orderly transfer of any such pending work to other employees
of Employer as may be designated by Employer. Employer shall be entitled to such
full time or part time services of Employee as Employer may reasonably require
during all or any part of the 30-day period following any termination hereunder,
and shall compensate Employee for such services on a basis consistent with
Employee's compensation pursuant to Section 4 hereof.
8. Non-Competition. The parties acknowledge that the Employee will
acquire much knowledge and information concerning the business of the Company
and its affiliates as the result of his employment. The parties further
acknowledge that the scope of business in which the Company is engaged as of the
date of execution of this Agreement is world-wide and very competitive and one
in which few companies can successfully compete. Competition by Employee in that
business after this Agreement is terminated would severely injure the Company.
Accordingly, for a period of one year after this Agreement is terminated for any
reason (except termination by the Company without cause), Employee agrees not to
become an employee, consultant, advisor, principal, partner or substantial
shareholder of any firm or business that in any way competes with the Company or
its affiliates in any of their presently existing or then existing products and
markets.
9. Specific Performance. The parties agree that the provisions in
Sections 3 and 8 are of a special, unique and extraordinary character, which
gives them a peculiar value, the loss of which could not be reasonably or
adequately compensated in damages in any action at law, and that a breach by
Employee will cause Employer great and irreparable injury and damage. Employee
hereby expressly agrees that Employer shall be entitled to the remedies of
injunction, specific performance and other equitable relief to prevent a breach
by Employee. This provision shall not, however, be construed as a waiver of any
of the rights which Employer may have for damages.
10. Miscellaneous Provisions.
10.1 Decisions by Employer. For all purposes herein, Employee
may not make any decisions or take any action with respect to this Agreement as
an agent of Employer. Actions of Employer hereunder shall be taken by its
President..
10.2 Governing Law. This Agreement is governed by Arizona law.
10.3 Entire Agreement. This Agreement supersedes all prior
agreements between the parties concerning the subject matter hereof and this
Agreement constitutes the entire agreement between the parties with respect
hereto. This Agreement may be modified only with a
<PAGE>
written instrument duly executed by each of the parties. No person has any
authority to make any representation or promise not set forth herein on behalf
of any of the parties and this Agreement has not been executed in reliance upon
any representation or promise except those contained herein.
10.4 Notices. Any notice, request, demand or other
communication hereunder shall be in writing and shall be deemed given when
personally delivered to AZI or to Employee, as the case may be, or when
delivered by certified mail, return receipt requested.
To the Company: 4114 East Wood Street
Phoenix, AZ 85040
To the Employee: 4114 East Wood Street
Phoenix, AZ 85040
10.5 Waiver of Breach. The failure of either party to require
the performance of any term or condition of the Agreement, or the waiver by
either party of any breach of this Agreement shall not prevent a subsequent
enforcement of any such term or any other term nor be deemed to be a waiver of
any subsequent breach.
10.6 Severability. The provisions of this Agreement shall be
deemed severable. If any part of this Agreement shall be held unenforceable, the
remainder shall remain in full force and effect, and such unenforceable
provisions shall be reformed so as to give maximum legal effect to the intent of
the parties as expressed herein.
11. Any controversy or claim arising out of or relating to this
Agreement or the breach thereof shall be settled by binding arbitration
conducted in Phoenix, Arizona in accordance with the laws of the State of
Arizona conducted in accordance with the rules of the American Arbitration
Association. Judgement upon the award rendered by the arbitration may be entered
in any court having jurisdiction thereof.
/s/ John P. Hudnall 4-1-97 /s/ George G. Hays 4-1-97
- --------------------------------- -------------------------------------
Employer Date Employee Date
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM THE CONSOLIDATED
FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS
</LEGEND>
<CIK> 0000724904
<NAME> ARIZONA INSTRUMENT CORPORATION
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> Jan-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 174,285
<SECURITIES> 0
<RECEIVABLES> 3,799,648
<ALLOWANCES> 152,841
<INVENTORY> 2,045,755
<CURRENT-ASSETS> 6,172,947
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 10,937,862
<CURRENT-LIABILITIES> 2,100,670
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 10,937,862
<SALES> 3,578,194
<TOTAL-REVENUES> 3,578,194
<CGS> 1,629,543
<TOTAL-COSTS> 1,789,233
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 27,946
<INCOME-PRETAX> 129,676
<INCOME-TAX> 49,000
<INCOME-CONTINUING> 80,676
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 80,676
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
