<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED June 30, 1996.
-------------
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO .
----------- -------------
Commission file number 1-11900
Integrated Security Systems, Inc.
(Exact name of small business issuer as specified in its charter)
DELAWARE 75-2422983
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
8200 SPRINGWOOD, SUITE 230, IRVING, TEXAS 75063
(Address of principal executive offices) (Zip Code)
(214) 444-8280
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 July 22, 1996, 4,932,905 shares of Registrant's common stock were
outstanding.
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Index to Integrated Security Systems, Inc. Consolidated Financial
Statements:
<TABLE>
<S> <C> <C>
Page
----
Balance Sheets 3
Statement of Operations 4
Statement of Cash Flows 5
Notes to Financial Statements 6
</TABLE>
Page 2 of 12
<PAGE> 3
INTEGRATED SECURITY SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
-------------- --------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 130,305 $ 209,655
Accounts receivable, net of allowance for doubtful
accounts of $55,072 and $54,558, respectively 1,642,158 1,761,701
Restricted cash 129,245 157,851
Inventories 776,687 854,888
Other current assets 65,492 38,221
Net assets from discontinued operations 23,758 76,807
-------------- --------------
Total current assets 2,767,645 3,099,123
Property and equipment, net 1,034,374 1,068,123
Intangible assets, net 288,352 136,116
Capitalized software development costs, net 689,660 787,816
Deferred income taxes 205,384 205,384
Other assets 71,896 10,943
-------------- --------------
Total assets $ 5,057,311 $ 5,307,505
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 730,814 $ 1,484,152
Accrued liabilities 384,021 1,044,450
Notes payable 10,131 950,947
Notes payable to related parties 20,783 4,000
Current portion of long-term debt 56,540 96,451
Net liabilities of discontinued operations 56,552 332,866
-------------- --------------
Total current liabilities 1,266,921 3,912,866
-------------- --------------
Long-term debt 833,555 213,899
Stockholders' equity:
Preferred stock, $.01 par value, 750,000 shares
authorized, 94,334 and 34,165, respectively, shares
issued and outstanding 943 342
Common stock, $.01 par value, 18,000,000 shares
authorized, 4,932,905 and 3,730,738, respectively,
shares issued and 4,882,905 and 3,680,738,
respectively, shares outstanding 49,329 37,307
Additional paid-in-capital 9,390,552 7,191,575
Accumulated deficit (6,365,239) (5,929,734)
Treasury stock (118,750) (118,750)
-------------- --------------
Total stockholders' equity 2,956,835 1,180,740
-------------- --------------
Total liabilities and stockholders' equity $ 5,057,311 $ 5,307,505
============== ==============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
Page 3 of 12
<PAGE> 4
INTEGRATED SECURITY SYSTEMS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------- -----------------------------
1996 1995 1996 1995
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sales $2,416,360 $ 898,532 $ 4,225,419 $ 2,286,767
Cost of sales 1,461,552 487,137 2,617,433 1,288,904
---------- ----------- ----------- -----------
Gross margin 954,808 411,395 1,607,986 997,863
---------- ----------- ----------- -----------
Operating expenses:
Selling, general and administrative 1,076,676 1,477,653 1,809,271 2,229,834
Research and product development 56,422 29,869 108,611 35,697
---------- ----------- ----------- -----------
1,133,098 1,507,522 1,917,882 2,265,531
---------- ----------- ----------- -----------
Loss from operations (178,290) (1,096,127) (309,896) (1,267,668)
Other income (expense):
Interest income 3,488 1,148 5,805 13,192
Interest expense (65,751) (91,115) (174,215) (196,671)
Other (314) (440) 5,686 (472)
---------- ----------- ----------- -----------
Loss from continuing
operations before income tax (240,867) (1,186,534) (472,620) (1,451,619)
Benefit (provision) for income taxes (8,674) -- 14,326 --
---------- ----------- ----------- -----------
Loss from continuing operations (249,541) (1,186,534) (458,294) (1,451,619)
Discontinued operations:
Loss from discontinued operations -- (217,651) -- (470,043)
Gain (loss) on disposal of
discontinued operations -- (559,562) 22,789 (559,562)
---------- ----------- ----------- -----------
Gain (loss) from discontinued operations -- (777,213) 22,789 (1,029,605)
---------- ----------- ----------- -----------
Net loss $ (249,541) $(1,963,747) $ (435,505) $(2,481,224)
========== =========== =========== ===========
Weighted average common and
common equivalent shares
outstanding 8,949,376 3,920,057 7,615,087 3,923,293
========== =========== =========== ===========
Net loss per share:
Continuing operations $ (0.03) $ (0.30) $ (0.06) $ (0.37)
Discontinued operations $ (0.00) $ (0.20) $ (0.00) $ (0.26)
---------- ----------- ----------- -----------
Total $ (0.03) $ (0.50) $ (0.06) $ (0.63)
========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
Page 4 of 12
<PAGE> 5
INTEGRATED SECURITY SYSTEMS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30,
------------------------------------
1996 1995
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net loss from operations $ (435,505) $ (2,481,224)
Adjustments to reconcile net loss to net cash provided
(used) by operating activities:
Depreciation 92,938 78,292
Amortization 201,160 215,737
Bad debt expense 514 12,000
Non-cash income (110,015) (15,874)
Provision for inventory reserve 14,566 143,000
Restricted cash 28,606 298,605
Net change in assets and liabilities from
discontinued operations (159,897) 855,272
Changes in operating assets and liabilities:
Accounts receivable 70,902 1,371,341
Inventories 79,420 (219,550)
Other assets 38,020 (290,068)
Accounts payable (413,304) 514,896
Accrued liabilities (935,731) 522,148
------------- -------------
Net cash provided (used) by operating activities (1,528,326) 1,004,575
------------- -------------
Cash flows from investing activities:
Purchase of property and equipment (60,449) (25,865)
Intangible assets (76,530) --
Capitalized software costs -- (141,191)
------------- -------------
Net cash used by investing activities (136,979) (167,056)
------------- -------------
Cash flows from financing activities:
Issuance of preferred stock, net 683,906 --
Issuance of common stock, net 895,468 88,000
Payments on line of credit -- (847,317)
Payments on notes payable and long-term debt (1,228,464) (34,898)
Proceeds from notes payable and long-term debt 1,235,045 87,400
Other -- (1,946)
------------- -------------
Net cash provided (used) by financing activities 1,585,955 (708,761)
------------- -------------
Increase (decrease) in cash (79,350) 128,758
Cash at beginning of period 209,655 10,523
------------- -------------
Cash at end of period $ 130,305 $ 139,281
============= =============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
Page 5 of 12
<PAGE> 6
INTEGRATED SECURITY SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
QUARTERS ENDED JUNE 30, 1996 AND 1995
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the six months
ended June 30, 1996 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1996. The accompanying financial
statements include the accounts of Integrated Security Systems, Inc. ("ISSI")
and all of its subsidiaries (collectively, the "Company"), with all significant
intercompany accounts and transactions eliminated. For further information,
refer to the consolidated financial statements and footnotes thereto included
in the Company's 1995 Annual Report on Form 10-KSB filed March 14, 1996.
NOTE 2 - RECLASSIFICATION
Certain reclassification of prior year amounts have been made to
conform to the current period presentation.
NOTE 3 - FINANCING
The business and financial conditions that lead to the going concern
emphasis paragraph in the independent accountants' report for the December 31,
1995 Form 10-KSB still exist as of the date of this report on Form 10-QSB.
Although the Company raised $2,700,000 through equity placements and new or
refinanced debt during the first six months of 1996, there is still a going
concern as to the Company's ability to fund cash needs. The Company will
likely be required to raise additional cash through debt and/or equity
placements, or other arrangements, in order to fund operations as presently
structured and/or to acquire other businesses during the next year. The exact
amount, type and timing of such funding activities, and their impact on current
shareholder interests, cannot be determined at this time.
On April 10, 1996, the Company repaid a loan of $85,000 from a
principal stockholder. Related party accounts receivables of $48,127 were
offset as part of the transaction, resulting in a net cash payment of $36,873.
On April 25, 1996, the Company closed on a $900,000 term loan facility
with a lending institution. The loan is due in 23 monthly payments of $12,000
beginning June 1, 1996, and one payment sufficient to pay the balance.
Interest on the loan is floating at the lending institution's Base Lending Rate
plus 1%, which is currently 10% APR. The loan is secured by all real estate
and equipment at B&B Electromatic, Inc. and guaranteed by ISSI's Chief
Executive Officer, with certain of his personal assets pledged as collateral.
Approximately $450,000 of the proceeds of this loan were used to repay existing
mortgages and notes payable at B&B Electromatic, Inc., a wholly-owned
subsidiary, and the remaining proceeds were used to repay a portion of ISSI
notes payable that were due April 29, 1996.
During the quarter ended December 31, 1995, the Company secured an
extension of the due dates of certain outstanding loans. These loans were in
the principal amount of $789,000 and were secured by certain of the Company's
accounts receivable, equipment and inventory. These loans were extended until
April 29, 1996 in exchange for warrants to purchase the Company's common stock
and an increase in the interest rate from 14% to 16% per annum. On April 29,
1996, $680,000 of the aforementioned loans were paid along with accrued
interest. The remaining $113,364 in principal and interest was converted by
the holder into 5,668 Units consisting of one share of $20 Series A convertible
preferred stock and warrants to purchase eight shares of the Company's common
stock at a price of $1 per share through March 31, 2001.
During the second quarter of 1996, the Company converted short-term
advances totaling $250,000 into $20 Series C Convertible Preferred Stock
convertible to 30 common shares and a warrant to purchase 15 shares of the
Company's common stock at a price of $.67 per share. The warrants expire on
March 31, 2001.
Page 6 of 12
<PAGE> 7
During the second quarter of 1996, the Company continued the sale of
$20 Series A Convertible Preferred Stock and warrants to purchase eight shares
of the Company's common stock at a price of $1 per share. Proceeds from the
sale of these securities amounted to $493,906, net of related expenses, during
the second quarter of 1996. The warrants related to the securities expire five
years from the date of issue.
NOTE 4 - REGISTRATION STATEMENT
On or about August 15, 1996, the Company intends to file a
registration statement with the Securities and Exchange Commission relating to
1,678,390 common shares issuable under outstanding warrants, 2,348,279 common
shares issuable upon conversion of outstanding Series A, B and C $20
Convertible Preferred Shares, 975,000 common shares, of which 885,000 are
currently outstanding, and 71,000 options to purchase common stock. Of the
total 5,702,670 shares in the filing, approximately 2,931,668 are controlled by
institutional investors, insiders and placement agents.
NOTE 5 - RECENT DEVELOPMENTS
The Company is negotiating an arrangement with an unaffiliated third
party whereby the third party would undertake to fund most of the sales,
engineering and order fulfillment expenses of the Company's IST subsidiary,
which provides the Intelli-Site(R) product. In exchange, the third party would
receive, as compensation from IST, most of the revenue arising from any
Intelli-Site sales that take place after the agreement commences. The Company
retains full ownership of the product during the agreement period and retains
responsibility for managing IST's business activities including customer
relationships. As of August 12, 1996, no funds have been received by the
Company.
The Company has entered into a Letter of Intent to acquire a company
which develops, manufactures and markets products to the banking and hospital
industries. The consummation of such acquisition is contingent upon completion
of due diligence, funding, and the negotiation of a definitive contract, none
of which are assured. If the acquisition occurs, it will require the issuance
of additional debt and securities totaling approximately $6.5 million, the
terms of which may cause dilution of existing shareholders. The Company is
unable to determine at this time whether, or to what extent, dilution may
occur.
Page 7 of 12
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
GENERAL
Integrated Security Systems, Inc. ("ISSI") designs, develops,
manufactures, sells and services commercial and industrial security and traffic
control products including warning gates, crash barriers, lane changers,
navigational and airport lighting, and electronically-controlled security
gates. The Company also develops and markets "intelligent" or programmable
security systems that integrate multiple security devices and subsystems for
governmental, commercial and industrial facilities. Applications for these
systems include perimeter security for airports, access control for commercial
office buildings, and video surveillance for warehouses.
The Company was incorporated on December 19, 1991. Effective as of
January 1, 1992, the Company acquired B&B Electromatic, Inc. ("B&B") in a
transaction which was accounted for similar to a pooling of interests. B&B
designs, manufactures and distributes commercial and industrial security
products, and traffic control barriers and lighting for the road and bridge
industry. B&B has been in operation since 1925.
On March 16, 1993, the Company organized Innovative Security
Technologies, Inc. ("IST"), which is a retail seller of security products and
microprocessor-based systems to large customers. IST sells and markets the
PC-based security network, Intelli-Site, that integrates multiple security
functions into a centralized management system for single and/or multiple site
locations.
On September 18, 1995, the Company purchased substantially all of the
assets and liabilities of Tri-Coastal Systems, Inc. ("TCSI"). TCSI sells and
installs security and safety systems to end users.
During the second quarter of 1995, the Company discontinued the
operations of Automatic Access Controls, Inc. ("AAC"), a distributor of
commercial and industrial security products, and merged certain functions of
AAC with two other existing subsidiaries (B&B and IST). This merger was
implemented during the second and third quarters of 1995. The results of
operations for AAC are reflected on the consolidated financial statements as
discontinued operations for all periods reported.
RESULTS OF OPERATIONS
Quarter Ended June 30, 1996 Compared to Quarter Ended June 30, 1995
Sales. The Company's sales increased by 168.9% from $898,532 in the
second quarter of 1995 to $2,416,360 in the second quarter of 1996. A majority
of this increase is attributable to increased sales at B&B and the inclusion of
TCSI revenue in the quarter ended June 30, 1996, with no equivalent revenue
last year.
Cost of Sales and Gross Profit. Gross profit as a percent of sales
decreased to 39.5% from 45.8% for the second quarters of 1996 and 1995,
respectively. This decrease was primarily due to inclusion of TCSI results in
the quarter ended June 30, 1996, which generally has lower gross margins than
B&B, the other material operating subsidiary. Historically, gross margins have
averaged 47% and 25% for B&B and TCSI, respectively. Also, the Company
continued to amortize software development costs related to the Intelli-Site
software during the second quarter of 1996. The amount amortized was $31,845.
Page 8 of 12
<PAGE> 9
Selling, General and Administrative. Selling, general and
administrative expenses decreased during the second quarter of 1996 compared to
the same period in 1995 by approximately $401,000. During the second quarter
of 1995, the Company incurred one-time expenses of approximately $525,000 for
severance obligations to a former officer. Offsetting this decrease was
increased personnel costs and the addition of expenses of a subsidiary
purchased in September 1995.
Research and Development. Research and development expenses increased
from $29,869 for the second quarter of 1995 to $56,422 for the comparable 1996
period. This increase is primarily attributable to the inclusion of
approximately $50,000 in expenses at IST related to the development of
Intelli-Site, offset by a decrease in expenses at B&B of approximately $23,000.
Prior to 1996, the Company capitalized software development costs related to
Intelli- Site.
Interest Expense. The decrease of $25,364 in interest expense during
the second quarter of 1996, compared to the same period in 1995, is
attributable to the payment of certain short-term notes.
Income Taxes. The Company recorded income tax expense of $8,674
during the second quarter of 1996 for state income taxes.
Six Months Ended June 30, 1996 Compared to Six Months Ended June 30, 1995.
Sales. The Company's sales increased by 84.8% from $2,286,767 in the
second quarter of 1995 to $4,225,419 in the second quarter of 1996. A majority
of this increase is attributable to increased sales at B&B and the inclusion of
TCSI revenue during the first six months of 1996, with no equivalent revenue
last year.
Cost of Sales and Gross Profit. Gross profit as a percent of sales
decreased to 38.1% from 43.6% for the first two quarters of 1996 and 1995,
respectively. This decrease was primarily attributable to inclusion of TCSI
results in the first six months of 1996 which generally has lower gross margins
than B&B, the other material operating subsidiary. Historically, gross margins
have averaged 47% and 25% for B&B and TCSI, respectively. Also during 1996,
the Company began amortizing software development costs related to the
Intelli-Site software. During the first six months of 1996, the Company
amortized $63,690 of these costs.
Selling, General and Administrative. Selling, general and
administrative costs decreased during the first six months of 1996 compared to
the same period in 1995 by approximately $421,000. The majority of this
decrease was attributable to one-time expenses incurred during the second
quarter of 1995 of approximately $575,000 for severance obligations to a former
officer and employees, offset by the inclusion of TCSI expenses.
Research and Development. Research and development expenses increased
from $35,697 for the second quarter of 1995 to $108,911 for the comparable 1996
period. This increase is primarily attributable to the inclusion of expenses
at IST related to the development of Intelli-Site, offset by a decrease in
expenses at B&B of approximately $27,000. Prior to 1996, the Company
capitalized software development costs related to Intelli-Site.
Interest Income. Interest income for the first six months of 1996
decreased to $5,805 from $13,192 in the comparable 1995 period. During the
first quarter of 1995, the Company earned interest on a $350,000 certificate of
deposit placed with a bank as collateral to secure a line of credit. The
certificate of deposit and accumulated interest were released on April 11,
1995.
Page 9 of 12
<PAGE> 10
Interest Expense. The decrease of $22,456 in interest expense during
the first six months of 1996, compared to the same period in 1995, is primarily
due to the payment of certain short-term notes.
Income Taxes. The Company recorded a net income tax benefit of
$14,326 during the first six months of 1996, due primarily to the adjustment of
state income tax liabilities.
Discontinued Operations. The discontinued operations reflect the
operations of Automatic Access Controls, Inc. ("AAC"). AAC's operations were
discontinued in the second quarter of 1995. During the first six months of
1996, the Company has recorded a gain on disposal of discontinued operations in
the amount of $22,789 related to the settlement of certain liabilities.
LIQUIDITY AND CAPITAL RESOURCES
The business and financial conditions that lead to the going concern
emphasis paragraph in the independent accountants' report for the December 31,
1995 Form 10-KSB still exist as of the date of this report on Form 10-QSB.
Although the Company raised $2,700,000 through equity placements and new or
refinanced debt during the first six months of 1996, there is still a going
concern as to the Company's ability to fund cash needs. The Company will
likely be required to raise additional cash through debt and/or equity
placements, or other arrangements, in order to fund operations as presently
structured and/or to acquire other businesses during the next year. The exact
amount, type and timing of such funding activities, and their impact on current
shareholder interests, cannot be determined at this time.
The Company is negotiating an arrangement with an unaffiliated third
party whereby the third party would undertake to fund most of the sales,
engineering and order fulfillment expenses of the Company's IST subsidiary,
which provides the Intelli-Site product. In exchange, the third party would
receive, as compensation from IST, most of the revenue arising from any
Intelli-Site sales that take place after the agreement commences. The Company
retains full ownership of the product during the agreement period and retains
responsibility for managing IST's business activities including customer
relationships. As of August 12, 1996, no funds have been received by the
Company.
The Company has entered into a Letter of Intent to acquire a company
which develops, manufactures and markets products to the banking and hospital
industries. The consummation of such acquisition is contingent upon completion
of due diligence, funding, and the negotiation of a definitive contract, none
of which are assured. If the acquisition occurs, it will require the issuance
of additional debt and securities totaling approximately $6.5 million, the
terms of which may cause dilution of existing shareholders. The Company is
unable to determine at this time whether, or to what extent, dilution may
occur.
The Company's cash position decreased by $79,350 during the first six
months of 1996. The Company used $1,528,326 for operations during this period
as compared with $1,004,575 generated from operations during the same period
last year. This was primarily attributable to the payment of certain 1995
accounts payable and accrued liabilities, for which extended payment terms were
negotiated. These uses of cash were partially offset by increased collections
of accounts receivable, either directly or through a factoring agreement.
Discontinued operations used $159,897 of cash during the first six months of
1996 by paying off liabilities compared to providing $855,272 in the same 1995
period. During the first six months of 1996, the Company generated $1,585,955
from financing activities. Payments of $1,228,464 were made on notes payable
and long-term debt. The Company borrowed $985,045 from a principal stockholder
and a lending institution and received short term advances totaling $250,000
from affiliated and unaffiliated investors. The Company also received
$1,579,374 through the sale of common and preferred stock, warrants and
convertible debt, net of related expenses.
Page 10 of 12
<PAGE> 11
On April 25, 1996, the Company closed on a $900,000 term loan facility
with a lending institution. The loan is due in 23 monthly payments of $12,000
beginning June 1, 1996, and one payment sufficient to pay the balance.
Interest on the loan is floating at the lending institution's Base Lending Rate
plus 1%, which is currently 10% APR. The loan is secured by all real estate
and equipment at B&B Electromatic, Inc. and guaranteed by ISSI's Chief
Executive Officer, with certain of his personal assets pledged as collateral.
Approximately $450,000 of the proceeds of this loan were used to repay existing
mortgages and notes payable at B&B Electromatic, Inc., a wholly-owned
subsidiary, and the remaining proceeds were used to repay a portion of ISSI
notes payable that were due April 29, 1996.
SEASONALITY
Because the Company sells products which are used primarily in outdoor
construction, which is affected by weather, the Company's sales have
historically been greater during the third and fourth quarters of the year than
during the first two quarters. Consequently, the Company's sales during the
two quarters ending in March and June of each year are generally not expected
to reach the levels of the two quarters ending in September and December of
each year. The Company has historically performed 61% of its total sales
during the second half of the fiscal year, and expects that this seasonal
fluctuation will continue.
Page 11 of 12
<PAGE> 12
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Integrated Security Systems, Inc.
-----------------------------------------
(Registrant)
Date: August 13, 1996 /s/ JAMES W. CASEY
-----------------------------------------
James W. Casey
Director, Vice President, Chief Financial
Officer, Secretary and Treasurer
Page 12 of 12
<PAGE> 13
EXHIBIT INDEX
EXHIBIT
- -------
Ex-27 -- Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 130,305
<SECURITIES> 0
<RECEIVABLES> 1,642,158
<ALLOWANCES> 0
<INVENTORY> 776,687
<CURRENT-ASSETS> 2,767,645
<PP&E> 1,034,374
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,057,311
<CURRENT-LIABILITIES> 1,266,921
<BONDS> 0
<COMMON> 49,329
0
943
<OTHER-SE> 2,906,563
<TOTAL-LIABILITY-AND-EQUITY> 5,057,311
<SALES> 4,225,419
<TOTAL-REVENUES> 4,225,419
<CGS> 2,617,433
<TOTAL-COSTS> 2,617,433
<OTHER-EXPENSES> 1,917,882
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 174,215
<INCOME-PRETAX> (472,620)
<INCOME-TAX> 14,326
<INCOME-CONTINUING> (458,294)
<DISCONTINUED> 22,789
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (435,505)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> (.06)
</TABLE>
