FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
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 No. 2-331855
Go-Video, Inc.
--------------
(Exact name of registrant as specified in its charter)
Delaware 86-0492122
-------- ----------
(State of Incorporation) (IRS E.I.N.)
7835 East McClain Drive, Scottsdale, Arizona 85260
- -------------------------------------------- -----
(Address of principal executive offices) (Zip code)
(602) 998-3400
--------------
(Registrant's telephone number, including area code)
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
----- -----
13,047,853 shares of Common Stock were outstanding as of August 12, 1998
<PAGE>
GO-VIDEO, INC.
INDEX
Page No.
--------
Part I. FINANCIAL INFORMATION
Consolidated Balance Sheets --
At June 30, 1998 and March 31, 1998 3
Consolidated Statements of Operations --
Three Months Ended June 30, 1998
and 1997 4
Consolidated Statements of Cash Flows --
Three Months Ended June 30, 1998 and 1997 5-6
Notes to the Interim Consolidated Financial Statements - 7-9
Management's Discussion and Analysis of Results
of Operations and Financial Condition 10-12
Quantitative and Qualitative Disclosures About 13
Market Risk
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
Signatures S-1
<PAGE>
GO-VIDEO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
<TABLE>
<CAPTION>
ASSETS June 30, 1998 March 31, 1998
------------- --------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents 314,151 445,925
Receivables - less allowance for doubtful accounts
of $110,000 9,699,050 9,460,081
Inventories 9,512,274 6,012,022
Prepaid expenses and other assets 305,123 47,146
Deferred income taxes 100,000 100,000
------------ ------------
Total Current Assets 19,930,598 16,065,174
------------ ------------
EQUIPMENT AND IMPROVEMENTS:
Furniture, fixtures & equipment 682,860 600,143
Leasehold improvements 212,830 212,830
Office equipment 1,073,205 844,056
Tooling 1,482,602 1,353,360
------------ ------------
Total 3,451,497 3,010,389
Less accumulated depreciation and amortization 2,196,263 2,109,376
------------ ------------
Equipment and improvements - net 1,255,234 901,013
------------ ------------
Dual-Deck VCR Patents, net of amortization of $56,271
and $54,410,respectively 119,746 121,607
Goodwill, net of amortization of 69,524
and 56,271,respectively 1,321,429 119,324
Market exclusivity fee 1,974,023 1,374,248
Deferred Income Taxes 430,000 430,000
Other Assets 30,781 33,243
------------ ------------
TOTAL $ 25,061,811 $ 19,044,609
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 2,922,161 $ 1,999,330
Accrued expenses 1,730,995 1,042,039
Other current liabilities 1,883,435 1,983,875
Warranty reserve - current 228,460 160,000
Income taxes payable 81,000 23,000
Line of credit 5,489,015 1,860,493
------------ ------------
Total Current Liabilities 12,335,066 7,068,737
------------ ------------
Long Term Liabilities 208,091 127,825
Mandatory Convertible Subordinated Debt 524,167 740,833
------------ ------------
Total Liabilities 13,067,324 7,937,395
------------ ------------
STOCKHOLDERS' EQUITY:
Common stock $.001 par value - authorized, 50,000,000 shares;
issued and outstanding, 13,005,153 and
12,643,297 shares, respectively 13,005 12,643
Additional capital 20,828,284 20,480,154
Accumulated deficit (8,846,802) (9,385,583)
------------ ------------
Total Stockholders' Equity 11,994,487 11,107,214
------------ ------------
TOTAL $ 25,061,811 $ 19,044,609
============ ============
</TABLE>
3
<PAGE>
GO-VIDEO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
-----------------------------------------------
(unaudited)
<TABLE>
<CAPTION>
For The Three
Months Ended June 30,
---------------------------
1998 1997
------ -----
<S> <C> <C>
Sales $ 11,729,088 $ 9,759,307
Cost of Sales 8,317,390 7,387,790
------------ -----------
Gross profit 3,411,698 2,371,517
------------ -----------
Other Operating Costs:
Sales and marketing 1,249,917 828,659
Research and development 357,856 359,503
General and administrative expenses 1,070,270 742,756
------------ -----------
Total other operating costs 2,678,043 1,930,918
------------ -----------
Operating income 733,655 440,599
------------ -----------
Other Revenues (Expenses):
Interest income 3,372 1,925
Interest expense (140,492) (109,287)
Other 75 (9,292)
------------ -----------
Total other expenses-net (137,045) (116,654)
------------ -----------
Income Before Provision for income taxes 596,610 323,945
Provision for Income Taxes 58,000 5,000
------------ -----------
Net Income $ 538,610 $ 318,945
============ ===========
Basic Net Income per Common Share $ 0.04 $ 0.03
============ ===========
Diluted Net Income per Common Share and
Share Equivalent $ 0.04 $ 0.03
============ ===========
</TABLE>
4
<PAGE>
GO-VIDEO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(unaudited)
<TABLE>
<CAPTION>
For the Three
Months Ended June 30,
-----------------------------
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 538,610 $ 318,945
Adjustments to reconcile net income
to net cash provided by operating activities-
Depreciation and amortization 107,266 190,333
Provision for losses on accounts receivable (10,493)
Loss on sale of equipment 9,845
Change in operating assets and liabilities-net of acquisition:
Receivables 61,681 1,520,815
Inventories (2,643,912) (1,846,624)
Prepaid expenses and other assets (257,977) (122,953)
Other assets 2,462 0
Accounts payable 568,163 64,362
Accrued expenses 683,597 (123,088)
Other current liabilities (136,783) (459,498)
Warranty reserve 460 (7,000)
Other long-term liabilities 1,853 619
Income taxes payable 58,000 (10,000)
----------- -----------
Net cash used in operating activities (1,027,073) (464,244)
----------- -----------
INVESTING ACTIVITIES:
Market exclusivity fee (599,775) 0
Cash paid for acquisition net of cash acquired (1,947,034) 0
Equipment and improvement expenditures (296,554) (92,780)
----------- -----------
Net cash used in investing activities (2,843,363) (92,780)
----------- -----------
FINANCING ACTIVITIES:
Proceeds from issuance of common stock 131,826 76,250
Payment on capital lease obligations (21,686) (21,711)
Net borrowings (payments) under line of credit 3,628,522 569,275
----------- -----------
Net cash provided by financing activities 3,738,662 623,814
----------- -----------
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS (131,774) 66,347
CASH AND CASH EQUIVALENTS, beginning of period 445,925 302,788
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 314,151 $ 369,578
=========== ===========
</TABLE>
5
<PAGE>
GO-VIDEO, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(unaudited)
For the Three
Months Ended June 30
----------------------
1998 1997
--------- --------
SUPPLEMENTAL INFORMATION TO CASH FLOW
STATEMENT:
Interest paid $ 123,009 $109,287
========== ========
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Conversion of subordinated debt and accrued interest
to common stock $ 216,666
==========
In connection with the acquisition, liabilities were
assumed as follows:
Liabilities assumed $2,545,301 $ 0
--------
Fair value of assets acquired, including $33,799
in cash $1,324,811 $ 0
---------- --------
Excess of cost over fair value of assets acquired $1,220,491 $ 0
========== ========
6
<PAGE>
GO-VIDEO, INC. AND SUBSIDIARIES
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------
GENERAL
- -------
In the opinion of the Company, the accompanying unaudited consolidated financial
statements contain all adjustments (consisting of normal reccurring accruals)
necessary to present fairly the financial position of the Company and the
results of its operations and changes in its financial position for the periods
reported. The results of operations for interim periods are not necessarily
indicative of the results to be expected for the entire year. The consolidated
financial statements include Go-Video Inc. and its wholly owned subsidiary
California Audio Labs LLC ("California Audio"). All significant intercompany
balances and transactions have been eliminated. Certain reclassifications have
been made to the prior financial statements to conform to the current
classifications.
On April 1, 1998, the Company acquired of California Audio. The purchase price
was $775,000 in cash plus assumption of liabilities of $1.2 million. The
acquisition was accounted for using the purchase method of accounting for
business combinations. The excess of assets acquired over liabilities assumed of
approximately $1,200,000 has been allocated to goodwill and is being amortized
over twenty years. The Company also has recorded goodwill of $170,000 from the
April 1995 acquisition of the predecessor to the Company's Security Products
Division which is being amortized over ten years.
Inventories at June 30, 1998 consisted of $456,358 of raw materials and service
parts and $9,055,916 of finished goods.
The Market Exclusivity Fee of approximately $1,974,023 represents ten
installments of a fee to be paid by the Company to Loewe Opta GmbH for the
exclusive right to market and distribute Loewe Opta direct view televisions in
North America. The total fee will be amortized on a straight line basis over the
initial term of the agreement which ends on January 1, 2003. Amortization will
begin with deliveries of product to the Company, anticipated for the third
quarter of fiscal 1999.
The Company is engaged in the design, development, and marketing of consumer
electronic audio, video, and television products and video security products.
Sales of the Company's Dual-Deck videocassette recorder have constituted
substantially all of its revenue of the last five fiscal years. For the three
months ended June 30, 1998 one customer represented 41% of the Company's
revenue. Accounts receivable from this customer was $4,110,420 at June 30, 1998.
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income", which is effective for fiscal years beginning
after December 15, 1997 and establishes standards for reporting and display of
comprehensive income and its components (revenues, expenses, gains and losses)
in a full set of general-purpose financial statements. The adoption of this
statement on April 1, 1998 had no impact on the Company's financial statement
presentation or related disclosures. In June 1997, the Financial Accounting
Standards Board issued SFAS No 131, "Disclosure about Segments of an Enterprise
and Related Information" which is effective for fiscal years beginning after
December 15, 1997. This standard requires that public companies report certain
information about operating segments in their financial statements. It also
establishes related
7
<PAGE>
disclosures about products and services, geographic areas, and major customers.
The Company does not believe this standard will require additional disclosures
when adopted.
Deferred income taxes reflect the net tax effects of (a) temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes, and (b) operating loss
and tax credit carryforwards. The tax effects of significant items comprising
the Company's net deferred tax asset as of June 30, 1998 are as follows:
Deferred Tax Assets:
Current-reserves not currently
deductible $ 456,000
Noncurrent:
Differences between book & tax
basis of property $ 458,000
Operating loss carryforwards 6,687,000
Tax credit carryforwards 189,000
Other intangibles 77,000
----------
Net Deferred Tax Asset 7,867,000
Valuation Allowance (7,137,000)
----------
Net Deferred Asset $ 530,000
==========
8
<PAGE>
SFAS No.128, "Earnings Per Share", requires a reconciliation of the numerator
and denominators of basic and diluted earnings per share as follows:
For the Three Months Ended June 30,
-----------------------------------
1998 1997
---- ----
Net Income $ 538,610 $ 318,945
----------- -----------
Average Outstanding Common
Shares 12,842,237 11,860,220
----------- -----------
Basic Net Income Per Share $ .04 $ .03
----------- -----------
Diluted Net Income per
Common Share-
Income available to common $ 538,610 $ 318,945
Stockholders, from a bove
Add interest on presumed
conversion of convertible debt 19,667 21,250
----------- -----------
Net income available for diluted
earnings per share $ 558,277 $ 340,195
=========== ===========
Average Outstanding Common
Shares, from above 12,842,237 11,860,220
Additional dilutive shares related to
stock options and warrants 1,135,220 390,124
Additional dilutive shares related to
subordinated notes 610,000 1,109,139
----------- -----------
Average outstanding and potentially
Dilutive common shares 14,587,457 13,359,483
=========== ===========
Dilutive net income per share $ .04 $ .03
----------- -----------
Options and warrants to purchase 206,630 shares of common stock at various
prices were outstanding during the three months ended June 30, 1998 but were not
included in the computation of diluted earnings per share because the exercise
prices of the options and warrants were greater than the average price of the
common shares.
The information presented within the financial statements should be read in
conjunction with the Company's audited Financial Statements for the fiscal year
ended March 31, 1998, and March 31, 1997 and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" from the 1998 Annual
Report on Form 10-K.
9
<PAGE>
ITEM II
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
Three months ended June 30, 1998 compared with the three months ended June 30,
- --------------------------------------------------------------------------------
1997:
- -----
Net sales increased 20.2% to $11.7 million during the three months ended June
30, 1998 from $9.8 million during the three months ended June 30, 1997. The
increase in net sales was primarily due to a 17% increase in net units of
Dual-Deck VCRs (DDVCR) sold by the Company's Consumer Electronics Division for
the three months ended June 30, 1998 compared to the three months ended June 30,
1997 and a 3% increase in the average selling price per unit over the two
periods. The increase in net units sold was primarily due to increased demand
for the Company's current model line of DDVCR's, particularly the Company's
Hi-Fi models as a result of lower retail prices and continued expansion of sales
into warehouse clubs. Sales to the warehouse clubs were 48.1% for the three
months ended June 30, 1998. The Company does not anticipate the percentage of
sales sold to warehouse clubs during the three months ended June 30, 1998 to be
representative of future results as the Company's mainstream consumer
electronics retailer accounts reduced their purchases of certain older models
during the quarter in anticipation of second quarter deliveries of the new lower
priced line. Sales of the Company's Security Products Division were
approximately 8% of total net sales for the three months ended June 30, 1998 up
from 4% for the comparable period of the prior year. The Company's Home Theater
Division, which consists of its recently acquired wholly owned subsidiary
California Audio, represented 5% of total sales for the three months ended June
30, 1998.
Gross profit was $3.4 million and $2.4 million for the three months ended June
30, 1998 and 1997, respectively, representing a 43.9% increase in gross profit
dollars. The increase in gross profit dollars was primarily due to higher unit
sales of the current DDVCR model lines and increased gross profit dollars
contributed by the Company's Security and Home Theater Divisions. Gross profit
as a percentage of sales increased from 24.3% for the three months ended June
30, 1997 to 29.1% for the three month period ended June 30, 1998. The increase
in gross profit percentage is primarily result of the Company's sales mix which
included an increased percentage of Hi-Fi DDVCR models (typically carrying a
higher gross margin).
Sales and marketing expense increased 50.8% to $1.2 million for the three months
ended June 30, 1998 from $0.8 million for the three months ended June 30, 1997.
As a percentage of sales, sales and marketing expenses increased from 8.5% in
the three months ended June 30, 1997, to 10.7% in the three months ended June
30, 1998. The increase in sales and marketing expense was primarily due to
increased market development funds used for sales rebate programs, and sales and
marketing expenses incurred by California Audio which was acquired on April 1,
1998.
Research and development expenses were $0.4 million for the three months ended
June 30, 1998 and 1997. As a percentage of sales, research and development
expense decreased slightly from 3.7% for the three months ended June 30, 1997 to
3.1% for the three months ended June 30, 1998 due to the increase in sales.
General and administrative expenses increased 44.1% to $1.1 million for the
three months ended June 30, 1998 from $0.7 million for the three months ended
June 30, 1997. As a percentage of sales, general and administrative expense
increased from 7.6% for the three months ended June 30, 1997 to 9.1% for the
three months ended June 30, 1998. The increase in general and administrative
expense was primarily due to additional administrative costs incurred due to the
acquisition and integration of California Audio and increased personnel and
travel expense during the three months ended June 30, 1998.
10
<PAGE>
As a result of the above, the Company recorded operating profit of $0.7 million
for the three months ended June 30, 1998 compared with operating profit of $0.4
million for the three months ended June 30, 1997. The Company recorded net other
expense of $0.1 million for the three months ended June 30, 1998 and 1997. Net
income for the three months ended June 30, 1998 was $0.5 million compared with
net income of $0.3 million for the three months ended June 30, 1997. The Company
recorded a provision for income taxes of $58,000 representing its state and
estimated alternative minimum tax liabilities for the three months ended June
30, 1998. For the three months ended June 30, 1997, the Company recorded a
provision for income tax of $5,000 representing its alternative minimum tax
liability.
Seasonality
- -----------
The Company's primary product lines compete within the consumer electronics
industry, which generally experience seasonality in sales. Accordingly, the
Company generally expects to experience peaks in its sales from September
through January, which covers the holiday selling season.
Year 2000 Compliance
- --------------------
The Company is conducting its evaluation of its management information systems
and the possible effect of Year 2000 hardware and software issues. In addition
the Company is in communication with its significant suppliers, financial
institutions, and other parties that provide critical services or supplies to
the Company to assess their respective compliance with Year 2000 issues. There
can be no assurance that the Company's significant suppliers will properly
address and resolve such Year 2000 issues. Expenditures to make the Company Year
2000 compliant will be expensed as incurred and are not expected to be material
to the Company's financial position or results of operations.
Future Results
- --------------
The Company's expectations for results of operations and other forward-looking
statements contained in this report on Form 10-Q, particularly statements
relating to the sustainability of profitable growth, the expected amendment of
the Company's credit agreement, the impact of year 2000 issues, and expected
results and the timing of product shipments for the security products and home
theater markets, involve a number of risks and uncertainties. Among the factors
that could affect future operating results are the following: business
conditions and general economic conditions; changes in legislation that may
affect the ability of the Company to sell its products; competitive factors,
such as the pricing and marketing efforts of rival companies; timing of product
introductions; success of competing or future technologies; ability to negotiate
reduced product manufacturing costs; and the pace and success of product
research and development, particularly with overseas distributors of the DDVCR,
and the direct view digital television development with Loewe Opta GmbH; and the
successful integration of California Audio which was acquired by the Company
effective April 1, 1998.
Capital Resources and Liquidity
- -------------------------------
Net cash used in operating activities net of the effect of the California Audio
acquisition was $1.0 million for the three months ended June 30, 1998 and $0.5
million for the three months ended June 30, 1997. The increase in net cash used
was primarily a result of a $2.6 million increase in inventory offset in part by
$0.5 million of net income. The increase in the inventory balance from March 31,
1998 to June 30, 1998 was primarily due to the increased number of DDVCR
inventory models carried by the Company, increased numbers of video security
products resulting from the Company's March 1998 agreement with Samsung
Electronics to market and distribute Samsung branded security product inventory.
The 3.6 million increase in the Company's line of credit is primarily due to the
purchase of California Audio and increased purchases of inventory.
11
<PAGE>
The Company had net working capital of $7.6 million and $8.9 million at June 30,
1998 and March 31, 1998, respectively. At June 30, 1998, the Company's current
ratio (the ratio of current assets to current liabilities) was 1.6 to 1.
The Company's sales seasonality requires incremental working capital for
investment primarily in inventories and receivables, which the Company currently
funds through a line of credit with Congress Financial. The financing agreement
was entered into in October 1992 and was last amended in November 1996. The
maximum line of credit, as amended, is $14.0 million, limited by a borrowing
base determined by specific inventory and receivable balances and provides for
cash loans, letters of credit and acceptances. The agreement, as amended,
expires in November 1999 with a prepayment (if applicable) fee of 1.0%. Loans
are priced at the lender's prime lending rate plus 1.0%. The lender is
collateralized by all assets of the Company. The unused and available line of
credit at June 30, 1998 was approximately $3.5 million. The Company expects to
amend its current line of credit with Congress Financial in August 1998. The
Company expects the amendment will among other things increase its maximum line
to $20 million to support its increasing operational requirements over the next
twelve months, which include increased inventory purchases, and expenditures
related to growth. The Company believes that its current capital resources
together with its internally generated funds will be sufficient to fund its
operational growth.
The Company sold $1.5 million of convertible subordinated notes in a private
placement with institutional holders in August 1996. Notes outstanding after
August 1999 must be converted to common stock at the option of the Company. As
of June 30, 1998, $875,000 of the notes had been converted into common stock.
The Company entered into an agreement with Loewe Opta GmbH of Kronach, Bavaria,
Germany, to develop and market a line of digital television products designed
specifically for the North American Market. The initial agreement is effective
through January 1, 2003 with built in five year extensions. The Company will
incur fees totaling $1.7 million and Deutsche Marks 1,050,000 (approximately
$0.6 million as of August 12, 1998) for the exclusive right to market and
distribute Loewe Opta direct view televisions in North America. The fee, as
structured, is due in installments through August 1998. The Company expects to
receive the first shipments of product from Loewe during the third quarter of
its fiscal year 1999.
On April 1, 1998 the Company acquired California Audio. California Audio
designs, develops, manufactures and distributes digital audio and video products
marketed to the high-performance home theater market under the California Audio
Labs and Cinevision brand names. The Company expects to incur increased expenses
related to the integration and development of the California Audio Labs business
and therefore does not anticipate a meaningful contribution to operating income
by Cal Audio during the fiscal year ending March 31, 1999.
The Company leases a 33,000 square foot executive office and warehouse facility
in north Scottsdale, Arizona, which is fully utilized and in good condition. The
lease began in January 1996 and has a term of seven years, with one three year
extension at the option of the Company. The Company is currently considering its
space requirements in relation to its business plan, which anticipates increased
needs for personnel, office, and warehousing space. As such, the Company may be
required to seek additional space, which would increase the Company's overall
rental costs.
12
<PAGE>
Inflation
- ---------
Inflation has had no material effect on the Company's operations or financial
condition.
13
<PAGE>
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
The Company does not utilize market risk sensitive instruments.
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
27 Financial Data Schedule
NONE
14
<PAGE>
Pursuant to 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.
GO-VIDEO, INC. (Registrant)
Date: August 12, 1998 By /S/ ROGER B. HACKETT
----------------------
Roger B. Hackett
Chairman of the Board,
Chief Executive Officer,
President and Chief Operating Officer
Date: August 12, 1998 By /S/ DOUGLAS P. KLEIN
----------------------
Douglas P. Klein
Chief Financial Officer, Vice President,
Secretary and Treasurer
(principal financial and
accounting officer)
S-1
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1995
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 314,151
<SECURITIES> 0
<RECEIVABLES> 9,799,050
<ALLOWANCES> 100,000
<INVENTORY> 9,512,274
<CURRENT-ASSETS> 19,930,598
<PP&E> 1,255,234
<DEPRECIATION> 2,196,263
<TOTAL-ASSETS> 25,061,811
<CURRENT-LIABILITIES> 12,335,066
<BONDS> 0
13,005
0
<COMMON> 0
<OTHER-SE> 11,981,482
<TOTAL-LIABILITY-AND-EQUITY> 25,061,811
<SALES> 48,897,883
<TOTAL-REVENUES> 11,729,088
<CGS> 8,317,390
<TOTAL-COSTS> 8,317,390
<OTHER-EXPENSES> 2,678,043
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 140,492
<INCOME-PRETAX> 596,610
<INCOME-TAX> (58,000)
<INCOME-CONTINUING> 538,610
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 538,610
<EPS-PRIMARY> 0.04
<EPS-DILUTED> 0.03
</TABLE>
