<PAGE> 1
FORM 10-Q
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 QUARTER ENDED OCTOBER 31, 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 0-11434
ALFIN, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEW YORK 13-3032734
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
720 FIFTH AVENUE, NEW YORK, N.Y. 10019
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (212) 333-7700
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 THE LATEST PRACTICABLE
DATE: 11,721,259 SHARES OF COMMON STOCK, $.01 PAR VALUE PER SHARE, AT DECEMBER
14, 1995.
<PAGE> 2
ALFIN, INC. AND SUBSIDIARIES
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
October 31, 1996 and July 31, 1996 2-3
Condensed Consolidated Statements of 4
Operations for the three months ended
October 31, 1996 and 1995
Condensed Consolidated Statements of 5
Cash Flows for the three months ended
October 31, 1996 and 1995
Notes to Condensed Consolidated
Financial Statements 6-10
Item 2. Management's Discussion and Analysis
of Financial Condition and Results 11-12
of Operations
Exhibit 11 Schedule of Computation
of Earnings per share 13
Signatures 14
</TABLE>
1
<PAGE> 3
ALFIN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS October 31, July 31,
1996 1996
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash & cash equivalents $ 2,875,854 $ 2,210,972
Accounts receivable, net of allowances for
doubtful accounts and chargebacks of $975,901 and
$998,769 at October 31, and
July 31,1996, respectively and sales allowances of
$256,264 at October 31, and
July 31, 1996 698,685 680,370
Inventories 3,767,293 3,271,126
Prepaid expenses and other current assets 632,106 746,513
------------ ------------
Total current assets 7,973,938 6,908,981
------------ ------------
PROPERTY AND EQUIPMENT 5,173,880 4,998,954
Less-accumulated depreciation and
amortization (3,674,509) (3,537,025)
------------ ------------
Property and equipment, net 1,499,371 1,461,929
------------ ------------
OTHER ASSETS:
Goodwill, net of accumulated amortization
of $492,663 and $472,957 at October 31,
and July 31, 1996, respectively 2,660,375 2,680,081
Other 185,392 177,195
------------ ------------
Total other assets 2,845,767 2,857,276
------------ ------------
Total assets $ 12,319,076 $ 11,228,186
============ ============
</TABLE>
The accompanying notes are an integral part of
these condensed consolidated balance sheets.
2
<PAGE> 4
ALFIN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY October 31, July 31,
1996 1996
------------ ------------
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of mortgage, note
and other loans payable $ 1,633,499 $ 1,933,499
Due to related parties -- 4,826
Accounts payable 2,762,542 2,177,078
Accrued expenses-other 2,043,242 1,806,781
------------ ------------
Total current liabilities 6,439,283 5,922,184
NOTES PAYABLE 350,000 425,000
------------ ------------
Total liabilities 6,789,283 6,347,184
------------ ------------
REDEEMABLE PREFERRED STOCK 750,000 750,000
SHAREHOLDERS' EQUITY:
Common stock, $.01 par value,
17,000,000 shares authorized;
11,721,259 and $11,662,926 shares
issued and outstanding at
October 31, 1996 and July 31,1996,
respectively: 117,212 116,629
Additional paid-in capital 12,845,040 12,787,290
Accumulated deficit (8,182,459) (8,772,917)
------------ ------------
Total shareholders' equity 4,779,793 4,131,002
------------ ------------
Total liabilities and share-
holders' equity $ 12,319,076 $ 11,228,186
============ ============
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated balance sheets.
3
<PAGE> 5
ALFIN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
October 31, October 31.
1996 1995
------------ ------------
<S> <C> <C>
Net sales $ 9,634,712 $ 7,673,898
Cost of goods sold 3,095,294 2,171,052
------------ ------------
Gross profit on sales 6,539,418 5,502,846
Selling, general and
administrative expenses 5,620,939 4,928,482
------------ ------------
Operating profit 918,479 574,364
Other expense
Interest expense (63,021) (83,638)
Other -- (15,622)
------------ ------------
Total other expense (63,021) (99,260)
------------ ------------
Income before provision for
Income Taxes 855,458 475,104
Provision for income taxes 265,000 40,000
------------ ------------
NET INCOME $ 590,458 $ 435,104
============ ============
Weighted average number of common
and common equivalent shares 12,300,980 11,788,396
INCOME PER COMMON AND COMMON
EQUIVALENT SHARE $ 0.05 $ 0.04
============ ============
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated statements.
4
<PAGE> 6
ALFIN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
October 31,
1996 1995
---- ----
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 590,458 $ 435,104
----------- ---------
Adjustments to Reconcile Net Income to Net Cash
Provided by (Used in) Operating Activities:
Depreciation & Amortization 157,190 218,886
(Increase) Accounts Receivable (18,315) (207,131)
(Increase) Decrease Inventory (496,167) 59,906
Decrease Prepaid Expenses & Other Assets 106,210 29,288
Increase (Decrease) Accounts Payable
& Accrued Expenses 821,925 (291,107)
----------- ---------
Total Adjustments 570,843 (190,158)
----------- ---------
Net Cash Provided by
Operating Activities 1,161,301 244,946
----------- ---------
Cash Flows from Investing Activities
Capital Expenditures (174,926) (101,789)
----------- ---------
Cash Flows from Financing Activities
(Payment) Proceeds of Lines of Credit, net (300,000) 188,979
Principal Payments of Mortgage Note (75,000) (75,000)
Payment of Term Promissory Note -- (150,000)
Payments to Related Parties (4,826) --
Proceeds from Sales of Stock 58,333 --
----------- ---------
Net Cash Used in Financing Activities (321,493) (36,021)
Net Increase in Cash and cash equivalents 664,882 107,136
Cash and cash equivalents at Beginning of Period 2,210,972 515,636
----------- ---------
Cash and cash equivalents at End of Period $ 2,875,854 $ 622,772
=========== =========
Cash Paid during the quarter ended
Interest $ 54,123 $ 92,934
Income Taxes 45,563 13,147
</TABLE>
The accompanying notes are an integral part of
these condensed consolidated statements
5
<PAGE> 7
ALFIN, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1996
(UNAUDITED)
(1) Summary of significant accounting policies:
In the opinion of management, the accompanying condensed consolidated financial
statements contain all of the adjustments necessary to present fairly the
Company's financial position at October 31,1996 and July 31, 1996, the results
of its operations for the three months ended October 31, 1996 and 1995 and the
cash flows for the three months ended October 31, 1996 and 1995. All adjustments
are of a normal recurring nature. The condensed consolidated balance sheet at
July 31, 1996 was taken from audited consolidated financial statements
previously filed with the Securities and Exchange Commission on the Company's
Form 10K.
All significant intercompany transactions and accounts have been eliminated in
consolidation. Interim period results are not necessarily indicative of the
results of operations for a full year.
These quarterly financial statements should be read in conjunction with the
Company's audited financial statements contained in the Annual Report on Form
10-K for the fiscal year ended July 31, 1996, filed with the Securities and
Exchange Commission.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of
credit risk consist principally of trade receivables. The Company's major
customers are department stores and a major television shopping network.
Concentration of credit risk with respect to trade receivables is significant
due to the dependence of certain customers in the Company's customer base. At
October 31, 1996, a television shopping network accounted for 59% of net sales
and 27% of accounts receivable.
Recently Issued Accounting Standards
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long Lived Assets to be Disposed Of". This
statement establishes financial accounting and reporting standards for the
impairment of long lived assets, certain identifiable intangibles, and goodwill
related to those assets to be held and used, and for long-lived assets and
certain identifiable intangibles, to be disposed of. The adoption of this
statement will not have a material impact on the Company's financial position or
results of operation.
6
<PAGE> 8
ALFIN, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1996
(UNAUDITED)
In November 1995, the Financial Accounting Standards Board ("FASB")
issued FASB Statement No. 123, "Accounting for Stock-Based Compensation".
This statement establishes a fair value based method of accounting for an
employee stock option or similar equity instrument but allows companies
to continue to measure compensation cost for those plans using the
intrinsic value based method of accounting prescribed by APB Opinion No.
25. "Accounting for Stock Issued to Employees." The Company has elected
to remain with the accounting under APB Opinion No. 25, and make pro
forma disclosures of net income and earnings per share as if the fair
valued based method of accounting defined in SFAS No. 123 has been
applied.
Use of Estimates
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 revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Concentration of Revenues
For the quarter ended October 31, 1996, approximately 77% of department
store sales are derived from merchandise, 5% from services and 18% from
seasonal, promotional items.
(2) Inventory:
Inventory at October 31, 1996 and July 31, 1996 was comprised of finished
goods amounting to $1,549,235 and $1,303,538 respectively and components
of $2,218,058 and $1,967,588, respectively.
(3) Other Assets:
Goodwill related to the acquisition of ARPEL is being amortized using the
straight line method over 40 years.
During March 1996, the Company sold its exclusive worldwide
manufacturing, distribution and licensing rights for FRACAS and BANDIT
and other fragrances by Robert Piquet to Fashion Fragrances and Cosmetics
Ltd.("FF&C") for $1.2 million. Under the agreement, the Company has
received $500,000 with the remaining payments of $250,000 and $350,000
due to be paid in December 1996 and July 1997 respectively.
On November 11, 1996, pursuant to an outstanding agreement, dated
November 1, 1983, between Adrienne Newman and Seligman & Latz, Inc., Ms.
Newman elected to purchase a diamond ring of 13.2 karats, for the
amount of $96,195. Such amount was equal to the amount reflected as an
asset on the Company's balance sheet.
7
<PAGE> 9
ALFIN, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1996
(UNAUDITED)
(4) Debt:
Term Promissory Note:
At October 31, 1996, the Company had a Term promissory note due to PNC
Bank (formerly Midlantic National Bank) in the amount of $650,000. The
term promissory note is collateralized by a distribution and
administration facility and bears interest at a rate of 2% above PNC's
prime lending rate. The balance under this term promissory note was
$725,000 and $1,025,000 at July 31, 1996 and October 31, 1995
respectively. Principal payments under this note are $25,000 per month.
Lines of Credit:
In addition to the above, ARPEL entered into a financing agreement with
Credit Lyonnais for a revolving secured line of credit of up to
$2,100,000, expiring on October 15, 1995, subject to renewals on a yearly
basis under certain conditions. During January 1996, the Company amended
its agreement with Credit Lyonnais to extend the expiration date of its
line of credit to November 29,1996. The loan is secured by domestic
accounts receivable of ARPEL. Borrowings under this line of credit were
$1,300,000 and $2,100,000 at October 31, 1996 and 1995 respectively. This
line of credit bears interest at the higher of (a) the rate per annum
established by Credit Lyonnais, New York as the reference rate for short
term commercial loans (b) the overnight cost of funds of Credit Lyonnais,
New York plus 1/4 of 1%. On November 29, 1996 the Company paid the balance
of this revolving secured line of credit.
Related Party Loans:
At October 31, 1996 and July 31, 1996, the Company had advances from
Fine Fragrance Distribution Inc.("FFD) in the amount of $0 and $4,826,
respectively. These advances were due on demand and bear interest at a
rate of 1.5% above the prime lending rate of Midlantic.
8
<PAGE> 10
ALFIN, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1996
(UNAUDITED)
(5) Computation of net income (loss) per common and common equivalent
share:
Net income per common and common equivalent share was computed by
dividing net income by the weighted average number of shares of common
stock and common stock equivalents outstanding during the periods.
Common stock equivalents include the number of shares issuable on
exercise of the outstanding options and warrants less the number of
shares that could have been purchased with the proceeds from the
exercise of the options and warrants based on the average price of
common stock during the period.
(6) Income Taxes
The Company maintains approximately $4.3 million of Federal operating
loss carry forwards with expiration dates from 2005 to 2009; however,
the use of pre-acquisition loss carry forwards is limited by the
Internal Revenue Code. As such, the Company has reflected a tax
provision of $265,000 in its condensed consolidated statement of
operations for the quarter ended October 31, 1996 which primarily
relates to the Federal and State income taxes.
(7) Commitments
See Footnote 8 - "Other".
(8) Other
On October 28, 1996 the Company received notice form Adrienne Newman
terminating her Employment Agreement based on an alleged breach of the
Employment Agreement by the Company. Mrs. Newman served as the
President of ARPEL and has been the Company's selling host, under the
name of Adrien Arpel in its sales program on the Home Shopping Network,
Inc. ("HSN"). The employment agreement provided for salary, fringe
benefits and commission payments based upon 33% of the net profits
attributable to television shopping sales. Ms. Newman has vested rights
in 625,000 warrants which expire in November 1998.
9
<PAGE> 11
ALFIN, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1996
(UNAUDITED)
The Company believes that it has fully complied with all terms of the
Employment Agreement with Ms. Newman and that the termination, by Ms.
Newman, of the Employment Agreement is itself a breach of the Employment
Agreement. The Company intends to fully enforce all of its rights under the
Employment Agreement.
On November 8,1996, the Company and Adrienne Newman reached an agreement
whereby Ms. Newman will appear as the selling host for ARPEL, on HSN shows
scheduled for November 14 through 18, 1996, December 12 through 16, 1996,
and January 23 through 27, 1997 ("the HSN Selling Period"). During the HSN
Selling Period, Ms. Newman will be acting as an independent contractor and
not as an employee of the Company. The Company and Ms. Newman also agreed
to refrain from initiating legal action, if any, against the other in
connection with their dispute over Ms. Newman's termination as an employee
of the Company until after the HSN Selling Period. There can be no
assurance that the Company and Ms. Newman will reach an agreement regarding
her future relationship with the Company. Failure to reach such an
agreement whereby Ms. Newman remains affiliated with and provides services
to the Company would have a material adverse effect on the Company.
The Company has not yet determined the potential impact of the effect, if
any, of this termination on its sales revenues and operating results.
On October 23, 1996 the Company's Chairman and Chief Executive Officer
resigned from the Company. Mrs. Elisabeth Fayer, a director and major
shareholder, was elected President of the Company prior to this
resignation. Since the resignation, Mrs. Fayer has served as Chief
Executive Officer.
10
<PAGE> 12
ALFIN, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OCTOBER 31, 1996
Results of Operations:
The Company recorded net income of $590,458 for the three months ended October
31, 1996 as compared to $435,104 for the three months ended October 31, 1995.
Net income per common and common equivalent share for the three months ended
October 31, 1996 was $0.05 as compared to $0.04 for the three months ended
October 31, 1995.
Net sales for the three months ended October 31, 1996 increased to $9,634,712
from $7,673,898 recorded in the prior fiscal year, an increase of $1,960,814 or
25.6%. Sales of cosmetic products increased to $9,634,712 from $7,435,330 as
compared to the prior fiscal year, an increase of $2,199,382, a 29.6% increase.
There were no sales of fragrance products recorded during the three months ended
October 31, 1996 due to the Company's suspension of this business. Sales of
fragrance products amounting to $238,568 were recorded during the three months
ended October 31, 1995 and were primarily sales of the Company's remaining
fragrance inventory.
The Cosmetic sales increase of $2,199,382 is primarily attributable to an
increase of sales to HSN in the amount of $2,282,008, or 66.2% during the three
months ended October 31, 1996 as compared to the three months ended October 31,
1995. The increased sales to HSN is primarily attributable to the scheduling of
appearances which dictated that the Company ship the August 1996 appearance
during the three months ended October 31, 1996 whereas the Company shipped the
August 1995 appearance during the fiscal year ended July 31, 1995. Contributing
to the increase of sales to HSN were shipments to HSN of Canada in the amount of
$304,459 during the three months ended October 31, 1996. The Company did not
start appearing on HSN of Canada until the second quarter ended January 31,
1996.
Cost of goods sold as a percentage of net sales was 32.1% for the three months
ended October 31, 1996, as compared to 28.3% for the three months ended October
31, 1995. The increase is primarily related to product mix since products sold
to HSN have a higher cost of goods rate and consisted of 59% of total cosmetic
sales for the three months ended October 31, 1996 as compared to 46% of total
cosmetic sales for the three months ended October 31, 1995.
Selling, general and administrative expenses increased to $5,620,939 for the
three months ended October 31, 1996 from $4,928,482 for the three months ended
October 31, 1995, a 14.0% increase. The increase is primarily related to
increased advertising expenses related to the Company's decision to invest in
updated point of sale materials, at its retail locations. The Company has
committed to improving its retail department store business by investing in
point of sale product brochures, display units and video marketing in order to
maximize customer awareness.
Interest expenses decreased to $63,021 for the three months ended October 31,
1996, from $83,638 recorded during the prior fiscal year, a 27.0% decrease. This
decrease is primarily attributable to lower debt levels.
11
<PAGE> 13
ALFIN, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OCTOBER 31, 1996
Liquidity and Capital Resources
The Company had positive working capital of $1,534,655 at October 31, 1996, an
increase of $547,858 from working capital of $986,797 at July 31, 1996.
Total bank borrowings were reduced by $375,000 from $2,325,000 at July 31, 1996
to $1,950,000 at October 31, 1996. On November 29, 1996 the Company paid the
remaining amount of $1.3 million due under its revolving line of credit with
Credit Lyonnais, New York. At July 31, 1996 borrowings under this line of credit
were $1.6 million.
The Company has a Term Promissory Note due to PNC Bank (formerly Midlantic
National Bank) in the amount of $650,000. The Term Promissory Note with PNC Bank
bears interest at a rate of 2% above PNC Bank's prime lending rate and is
collateralized by the Company's distribution facility. Principal installments
under the term Promissory Note are due on the first day of each month at $25,000
per month.
At October 31, 1996, shareholder advances to the Company from Fine Fragrances
Distribution ("FFD")were $0 versus $4,826 at July 31, 1996.
At October 31, 1996, the Company had $2,371,897 invested in marketable
securities. The Company has been investing excess cash in marketable securities
since April 1996. The Company plans to use these investments to meet current and
intermediate working capital needs. See footnote 8 for a discussion of the
relationship between the Company and Adrienne Newman. If sales to HSN do not
continue after January 1997, this would have a material adverse effect on the
Company's liquidity. The Company believes that notwithstanding such possible
termination that its liquidity will be sufficient and it can secure additional
financing, if such financing should become necessary.
12
<PAGE> 14
EXHIBIT 11
ALFIN, INC. AND SUBSIDIARIES
SCHEDULE OF COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended
October 31
1996 1995
----------- -----------
<S> <C> <C>
Net Income $ 590,458 $ 435,104
----------- -----------
Weighted average number
of shares outstanding 11,721,259 11,519,311
Add:
Common Stock
Equivalents under 1983 option plan 2,608 1,479
Common Stock
Equivalents under 1993 option plan 225,438 147,887
Common Stock
Equivalents represented by Warrants 351,675 119,719
----------- -----------
Weighted average number of Shares used
in earnings per share 12,300,980 11,788,396
Earnings per share $ 0.05 $ 0.04
</TABLE>
13
<PAGE> 15
ALFIN, INC AND SUBSIDIARIES
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.
ALFIN, INC.
------------------------
(Registrant)
/s/ Elisabeth Fayer
------------------------
Elisabeth Fayer
Chief Executive Officer
Dated: December xx,1996 /s/ Michael D. Ficke
------------------------
Michael D. Ficke
Principal Financial &
Accounting Officer
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ALFIN INC.
AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF OPERATIONS FOR
THE 3 MONTHS ENDED OCTOBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FORM 10Q.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-START> AUG-01-1996
<PERIOD-END> OCT-31-1996
<EXCHANGE-RATE> 1
<CASH> 2,875,854
<SECURITIES> 0
<RECEIVABLES> 698,685
<ALLOWANCES> 1,232,165
<INVENTORY> 3,767,293
<CURRENT-ASSETS> 7,973,938
<PP&E> 5,173,880
<DEPRECIATION> 3,674,509
<TOTAL-ASSETS> 12,319,076
<CURRENT-LIABILITIES> 6,439,283
<BONDS> 0
750,000
0
<COMMON> 117,212
<OTHER-SE> 4,779,793
<TOTAL-LIABILITY-AND-EQUITY> 12,319,076
<SALES> 9,634,712
<TOTAL-REVENUES> 9,634,712
<CGS> 3,095,294
<TOTAL-COSTS> 5,620,939
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 63,021
<INCOME-PRETAX> 855,458
<INCOME-TAX> 265,000
<INCOME-CONTINUING> 590,458
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 590,458
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
