FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended: March 31, 1998
Commission File Number: 0-15754
CREATIVE TECHNOLOGIES CORP.
(Exact name of registrant as specified in its charter)
NEW YORK 11-2721083
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation of organization)
170 53rd Street, Brooklyn, New York 11232
(Address of principal executive offices) (Zip Code)
(718) 492-8400
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report)
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
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.
Common Stock, Par Value $.09 4,117,444
(Title of each class) (Outstanding at March 31, 1998)
CREATIVE TECHNOLOGIES CORP. AND SUBSIDIARIES
INDEX
PART I - FINANCIAL INFORMATION PAGE
Item 1. Condensed Consolidated Financial Statements
(Unaudited)
Balance Sheet as at March 31, 1998 3
Statement of Operations
for the Three Months ended
March 31, 1998 and March 31, 1997 4
Statement of Stockholders' Deficiency
for the Three Months ended March 31, 1998 5
Statement of Cash Flows
for the Three Months ended
March 31, 1998 and March 31, 1997 6
Notes to Condensed Consolidated Financial Statements 7-10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11-12
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
Exhibit 27
Financial Data Schedule 15
<TABLE>
CREATIVE TECHNOLOGIES CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1998
(Unaudited)
<CAPTION>
Assets
<S> <C>
Current assets:
Cash $ 1,000
Accounts receivable-net 3,204,000
Inventories 1,697,000
Prepaid expenses and other current assets 187,000
Total current assets 5,089,000
Fixed assets - less accumulated depreciation
and amortization of $267,000 245,000
Other assets 861,000
Total assets $6,195,000
Liabilities and Stockholders' Deficiency
Current liabilities:
Loans payable - financial institution $ 2,240,000
Note payable - bank 200,000
Notes payable - related parties 3,852,000
Accounts payable and accrued expenses 5,492,000
Total current liabilities 11,784,000
Subordinated note payable - affiliate 400,000
Total liabilities 12,184,000
Redeemable Preferred Stock - $.01 par value; authorized 5,000,000 shares;
4,000 shares of nonconvertible stock designated as 1997-A preferred stock -
$1,000 stated value; issued and outstanding 3,500 shares (redemption and
liquidation value $3,500,000) 281,000
Stockholders' Deficiency
Preferred stock - $.01 par value; authorized 5,000,000 shares:
10,000 shares of convertible stock designated as 1996 preferred stock -
$1,000 stated value; issued and outstanding 600 shares (liquidation
value $600,000) 600,000
10,000 shares of convertible stock designated as 1996-A preferred stock -
$1,000 stated value; issued and outstanding 1,170 shares (liquidation
value $1,170,000) 1,170,000
Common Stock - $.09 par value; authorized 20,000,000 shares, issued and
outstanding 4,117,000 shares 370,000
Additional paid-in capital 9,033,000
Accumulated deficit (17,443,000)
Stockholders' deficiency (6,270,000)
Total liabilities and stockholders' deficiency $6,195,000
See notes to condensed consolidated financial statements.
</TABLE>
<TABLE>
CREATIVE TECHNOLOGIES CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
1997 1998
<S> <C> <C>
Net Sales $2,792,000 $4,123,000
Cost of sales 1,921,000 2,675,000
Gross profit 871,000 1,448,000
Operating expenses:
Selling, general and
administrative expenses 688,000 917,000
Warehousing expense 267,000 288,000
Interest expense and financing costs 140,000 217,000
1,095,000 1,422,000
Net income (loss) before
provision for income taxes (224,000) 26,000
Provision for income taxes - -
Net income (loss) (224,000) 26,000
Less undeclared dividends
on preferred stock (53,000) (158,000)
Net loss applicable to common shares $(277,000) $(132,000)
Per common share - basic & diluted
Net loss $ (.11) $ (.03)
Weighted average number of shares 2,611,000 4,111,000
See notes to condensed consolidated financial statements.
</TABLE>
<TABLE>
CREATIVE TECHNOLOGIES CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIENCY
FOR THE THREE MONTHS ENDED MARCH 31,1998
(Unaudited)
<CAPTION>
1996 1996-A
Preferred stock Preferred Stock Common Stock
Number Number Number Additional
of of of Paid-in Accumulated
shares Amount Shares Amount Shares Amount Capital Deficit Total
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1,
1998 600 $600,000 1,170 $1,170,000 3,997,000 $359,000 $9,103,000 $(17,469,000) $(6,237,000)
Issuance of Common
Stock for services 120,000 11,000 43,000 54,000
Increase in carrying
value of 1997-A preferred
stock issued in connection
with acquisition (8,000) (8,000)
1997-A preferred
stock dividend accrued (105,000) (105,000)
Net income for the period 26,000 26,000
Balance at March 31,
1998 600 $600,000 1,170 $1,170,000 4,117,000 $370,000 $9,033,000 $(17,443,000) $(6,270,000)
See notes to condensed consolidated financial statements.
</TABLE>
<TABLE>
CREATIVE TECHNOLOGIES CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
1997 1998
Cash flows from operating activities:
<S>
<C> <C>
Net income (loss) $(224,000) $26,000
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating activities:
Depreciation and amortization 59,000 22,000
Amortization of goodwill - 6,000
Noncash professional fees - 54,000
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable (220,000) 68,000
Decrease in inventories 60,000 412,000
Decrease in prepaid expenses
and other current assets 90,000 4,000
Decrease in accounts payable
and accrued expenses (3,000) (477,000)
Net cash provided by (used in) operating activities (238,000) 115,000
Cash flows from investing activities:
Acquisition of fixed assets (2,000) (3,000)
Cash flows from financing activities:
Net (repayments of) proceeds
from loans payable - financial institution 20,000 (108,000)
Proceeds from notes payable 195,000 -
Repayment of notes payable (68,000) (19,000)
Net cash (used in) provided by
financing activities 147,000 (127,000)
Net decrease in cash (93,000) (15,000)
Cash at beginning end of period 100,000 16,000
Cash at end of period $ 7,000 $ 1,000
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest $133,000 $ 133,000
Taxes 0 0
Supplemental schedule of noncash financing activities:
Issuance of common stock for services 0 $54,000
See notes to condensed consolidated financial statements.
</TABLE>
CREATIVE TECHNOLOGIES CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note - A Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and the rules and regulations of the Securities
and Exchange Commission. 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 three month period ended March 31, 1998 are not necessarily indicative of
the results that may be expected for the year ending December 31, 1998. For
further information, refer to the financial statements and footnotes thereto
included in the Company's annual report on Form 10-KSB for the year ended
December 31, 1997.
Creative Technologies Corp. ("CTC") and Subsidiaries (collectively the
"Company") are engaged in importing and marketing small household products
(principally to department and discount stores, catalogues and other
retailers) and medical, janitorial and dietary products to hospitals and
other healthcare facilities.
The consolidated financial statements include the accounts of CTC and its
wholly owned subsidiaries, IHW, Inc. and Ace Surgical Supply Co., Inc.
("Ace") which was acquired on October 27, 1997 (see Note B). All material
intercompany balances and transactions have been eliminated in consolidation.
The Company computes earnings per share in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 128 Earnings per Share, and has
retroactively revised the presentation of net loss per share in historical
financial statements to present both basic and diluted net loss per share as
required by SFAS No. 128. Basic net loss per common share is based on the
weighted-average number of shares outstanding during the period while diluted
net loss per common share considers the dilutive effect of stock options and
warrants reflected under the treasury stock method. The Company's net loss
per share presented in the accompanying consolidated financial statements,
calculated under SFAS No. 128, is the same as net loss per share calculated
under the provisions of Accounting Principles Board ("APB") Opinion No. 15.
Both basic net loss per share and diluted net loss per share are the same
since the Company's outstanding stock options and warrants have not been
included in the calculation because their effect would have been
antidilutive.
Note - B Acquisition of Ace Surgical Supply Co., Inc.:
On October 27, 1997, CTC executed a merger agreement among a subsidiary of
the Company, Ace, David Guttmann and Barry Septimus, the stockholders (the
"Stockholders") of Ace and the principal stockholders of the Company for an
estimated purchase price of approximately $484,000. At the closing, Ace
merged into a subsidiary of the Company in a merger treated as a purchase for
accounting purposes, with the purchase price allocated based on the fair
value of the assets acquired and liabilities assumed. The excess of the fair
value of the net assets acquired over the estimated purchase price,
aggregating approximately $869,000 has been calculated as follows:
Purchase price $484,000
Assets acquired 3,821,000
Liabilities assumed 4,206,000
Net liabilities acquired (385,000)
Excess of cost over fair value
of net assets acquired (goodwill) $869,000
On the effective date of the merger, the outstanding shares of common stock
of Ace were transferred to a subsidiary of the Company. The stockholders of
Ace received an aggregate of 1,000,000 shares of the Company's common stock
valued at approximately $219,000 and an aggregate of 3,500 shares of the
Company's 1997 Series A 12% cumulative preferred stock, valued at
approximately $265,000 (see Note D). Subsequent to the merger, the
subsidiary Ace merged into changed its name to Ace Surgical Supply Co., Inc.
CREATIVE TECHNOLOGIES CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note - C Notes Payable and Related Party Transactions:
At March 31, 1998 the Company had outstanding related party notes payable
totaling $3,852,000. Of this amount, $3,102,000 bears interest at rates
ranging from 12% to 15% and $750,000 bears interest at 18%. These notes are
all due on demand and include $1,000,000 due to an entity whose principal is
a director of the Company. The remaining $2,852,000 is payable to various
individuals who are stockholders, entities whose principals are stockholders
of the Company, and the Company's retirement plan. Notes payable aggregating
$2,683,000 are personally guaranteed by certain stockholders of the Company.
During the year ended December 31, 1997, the Company issued 386,000 shares of
common stock (valued at $193,000) to induce certain of the related party
noteholders to agree to lower the interest rates attributable to such notes
from 18% to 12% per annum.
At March 31, 1998, the Company owed $2,240,000 pursuant to a loan and
security agreement entered into with a financial institution whereby the
Company is required to maintain an outstanding combined loan balance of not
less than $1,500,000, but no more than $3,000,000, which expires December
1999, as defined. The loan is collateralized by substantially all of the
assets of the Company and is partially guaranteed by an officer of the
Company. Under the agreement, the Company receives revolving credit advances
based on accounts receivable and inventory available, as defined, and is
required to pay interest at a rate equal to the greater of 9% or the prime
rate (8.5% at March 31, 1998) plus 2.5% plus other fees and all of the
lenders' out-of-pocket costs and expenses. The agreement, among other
matters, restricts the Company with respect to (i) incurring any lien or
encumbrance on its property or assets, (ii) entering into new indebtedness,
(iii) incurring capital expenditures in any fiscal year in an amount in
excess of $100,000, declaring or paying dividends on common or preferred
stock and requires an officer of the Company to maintain certain ownership
percentages.
At March 31, 1998, the Company had a $200,000 noninterest-bearing note
payable to a bank due on March 11, 1998. The note has not been repaid to
date.
At March 31, 1998, the Company had an outstanding note payable (aggregating
$400,000) to an affiliate subordinated to the obligations due the financial
institution discussed above. Interest is payable on the note at the rate of
12% per annum.
Pursuant to the merger agreement between the Company and Ace, the Company
agreed to continue an obligation to pay $10,000 per month each in consulting
fees to Rochelle Guttmann (the wife of David Guttmann) and Bonnie Septimus, a
stockholder of the Company. During the three months ended March 31, 1998,
$30,000 was paid to each of these individuals.
CREATIVE TECHNOLOGIES CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note - D Preferred Stock
During October 1997, in connection with the acquisition of Ace, the board of
directors designated 4,000 shares of preferred stock as "1997-A Preferred
Stock" having a stated valued of $1,000 per share. The holders of 1997-A
Preferred Stock are entitled to:
(i) receive cumulative dividends at the rate of $120 per annum, when, as
and if declared by the board of directors of the Company;
(ii) redemption of their preferred stock on the later of 20 years from
date of issuance or October 1, 2017 at a redemption price of $1,000
per share plus accrued but unpaid dividends; and
(iii) liquidation preference of $1,000 per share plus accrued but unpaid
dividends.
The holders of 1997-A Preferred Stock are not entitled to:
(i) convert the 1997-A Preferred Stock into common stock; or
(ii) vote at any meeting of the stockholders of the Company unless
the dividends are in arrears longer than one year at which time the
holders of the 1997-A Preferred Stock shall be entitled to 1,000
votes per share and shall vote along with the holders of common
stock as one Class.
The estimated fair value of the 1997-A Preferred Stock amounted to
approximately $265,000 pursuant to a valuation by an independent financial
advisory firm.
Cumulative unpaid 1997-A Preferred Stock dividends aggregated $181,000 at
March 31, 1998.
In June 1996, the board of directors designated 10,000 shares of preferred
stock as "1996 Preferred Stock" valued at $1,000 per share. The holders of
1996 Preferred Stock are entitled to:
(i) receive cumulative dividends at the rate of $120 per annum payable
quarterly in cash or common stock at the option of the Company;
(ii) convert each share of preferred stock into approximately 333
shares of common stock subject to adjustment, as defined;
(iii) redemption of their preferred shares on June 1, 1998 at $1,000
per share payable in cash or shares of common stock at the option of
the Company;
(iv) liquidation preferences of $1,000 per preferred share; and
(v) no voting rights.
The Company, at its option, has the right to redeem all or any portion of the
1996 Preferred Stock at $1,100 per share plus accrued and unpaid dividends
prior to June 1, 1998.
Management intends to satisfy the cumulative unpaid 1996 Preferred Stock
dividends which aggregated $128,000 at March 31, 1998 through the issuance of
securities and, therefore, such amounts have not been accrued.
On September 30, 1996, the board of directors designated 10,000 shares of
preferred stock as "1996-A Preferred Stock" valued at $1,000 per share. The
holders of 1996-A Preferred Stock are entitled to:
CREATIVE TECHNOLOGIES CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(i) receive cumulative dividends at the rate of $120 per annum payable
quarterly in cash or common stock at the option of the Company;
(ii) convert each share of preferred stock into approximately 1,600
shares of common stock subject to adjustment, as defined;
(iii) redemption of their preferred shares on October 1, 1998 at
$1,000 per share payable in cash or shares of common stock at the
option of the Company;
(iv) liquidation preferences of $1,000 per preferred share; and
(v) no voting rights.
The Company, at its option, has the right to redeem all or any portion of the
1996-A Preferred Stock at $1,100 per share plus accrued and unpaid dividends
prior to October 1, 1998.
Management intends to satisfy the cumulative unpaid 1996-A Preferred Stock
dividends which aggregated $210,000 at March 31, 1998 through the issuance of
securities and, therefore, such amounts have not been accrued.
Note - E Product Liability and Litigation:
The Company has received notice that several consumers claim to have suffered
finger injuries while using one of the Company's appliance products. The
claims are covered by the Company's product liability insurance carrier. The
Company redesigned the appliance in August 1992, and believes that the
modification made should minimize the possibility of such injury. The
Consumer Product Safety Commission (the "CPSC") made a preliminary
determination that the Company's appliance product represents a "substantial
product hazard" as that term is defined in the Consumer Product Safety Act.
The Company proposed and the CPSC accepted a voluntary corrective action plan
which began implementation during 1997, whereby the Company would replace
certain parts of the appliances manufactured prior to August 1992. At March
31, 1998 the Company has a $50,000 reserve which it believes is adequate to
cover any additional costs to be incurred in completing the plan.
The Company believes that the ultimate resolution of these matters will not
have a material effect on its financial condition.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
Creative Technologies Corp. (the "Company") through its wholly owned
subsidiary, IHW Inc. ("IHW") which was incorporated in 1997, is the exclusive
distributor of Brabantia International ("Brabantia"), Soehnle-Waagen GmbH &
Co. ("Soehnle"), and Ergo Trade Co. ("Ergo") products in the US and Canada.
Brabantia, headquartered in the Netherlands, is a leading manufacturer of top
of the line non-electric metal houseware products in Europe. Soehnle
headquartered in Murrhardt, Germany, manufactures a full line of bathroom
scales. Ergo, located in Slovenia, manufactures a line of high quality
wooden carts and pantry products that are distributed under the registered
Euroform trademark. IHW is looking for other products that it believes would
compliment the products that they are currently selling.
In October 1997, the Company acquired Ace Surgical Supply Co., Inc., ("ACE"),
a company which distributes medical, janitorial and dietary products in the
tri-state area, generally to hospitals, nursing homes and medical care
facilities. Ace has been in business since 1974. Their product line can
generally be categorized as disposables and include branded and non-branded
lines of wound dressing, incontinence products, dietary supplies, house
keeping supplies and cleaning chemicals. These products are purchased by
Ace from a variety of domestic suppliers.
For the three month period ended March 31, 1998, cash provided by operating
activities was $115,000, $3,000, was used in investing activities and cash of
$127,000 was used in financing activities. As a result, at March 31, 1998
cash decreased by $15,000 to $1,000 compared to $16,000 at December 31, 1997.
The Company had a negative working capital of $6,695,000 at March 31, 1998.
Accounts payable and other liabilities decreased to $5,492,000 at March 31,
1998 from $5,863,000 at December 31, 1997 primarily due to the Company's
return to profitability and a reduction of inventory.
During the three month period ending March 31, 1998 the Company was also able
to reduce debt to financial institution by $108,000 to $2,240,000 and repay
notes to related parties by $19,000 to $3,852,000.
At March 31, 1998 the Company had outstanding notes payable to related
parties totaling $3,852,000. Of this amount, $3,102,000 bears interest at
12% to 15% and $750,000 bears interest at 18%. These notes are all due on
demand and include $1,000,000 due to an entity whose principal is a director
of the Company. The remaining $2,852,000 is payable to various individuals
who are stockholders or entities whose principals are stockholders of the
Company. Notes payable aggregating $2,683,000 are personally guaranteed by
certain stockholders of the Company.
At March 31, 1998, the Company owed $2,240,000 pursuant to a loan and
security agreement entered into with a financial institution whereby the
Company is required to maintain an outstanding combined loan balance of not
less than $1,500,000, but no more than $3,000,000, which expires December
1999, as defined. The loan is collateralized by substantially all of the
assets of the Company and is guaranteed by an officer of the Company. Under
the agreement, the Company receives revolving credit advances based on
accounts receivable and inventory available, as defined, and is required to
pay interest at a rate equal to the greater of 9% or the prime rate (8.5% at
March 31, 1998) plus 2.5% plus other fees and all of the lenders' out-of-
pocket costs and expenses. The agreement, among other matters, restricts the
Company with respect to (i) incurring any lien or encumbrance on its property
or assets, (ii) entering into new indebtedness, (iii) incurring capital
expenditures in any fiscal year in an amount in excess of $100,000, declaring
or paying dividends on common or preferred stock and requires an officer of
the Company to maintain certain ownership percentages at March 31, 1998.
Results of Operations
The condensed consolidated financial statements contained in this Form 10QSB
reflect the acquisition of Ace which took place in October, 1997. The
Company had net sales of $4,123,000 and $2,792,000, respectively, for the
three month periods ended March 31, 1998 and March 31, 1997. The increase in
sales is primarily attributable to the inclusion of Ace sales in the first
quarter of 1998 but not in the comparable period of 1997 and increased sales
of Brabantia and Soehnle. These factors offset the elimination of sales of
small electric products which occurred during the three month period ended
March 31, 1997.
Gross profit margins for the first quarter ended March 31, 1998 and March 31,
1997 were 35.1% and 31.2%, respectively. The increase in gross profit
margin is attributable to lower returns as a percentage of sales, IHW
receiving better pricing on certain key Brabantia items in exchange for
buying container loads, placing purchase orders well in advance of shipments
and a stronger dollar.
Selling, general and administrative expenses were $917,000 and $688,000 or
22.2% and 24.6% of net sales, respectively, in the three month periods ended
March 31, 1998 and March 31, 1997, and reflects selling, general and
administrative expenses applicable to Ace offset by management's continuing
cost cutting programs and better efficiencies from consolidating Ace and IHW.
Interest expense increased to $217,000 for the three month period ended March
31, 1998 as compared to $140,000 for the three month period ended March 31,
1997. The increase of $77,000 was primarily due to debt owed by Ace.
Inventory was $1,697,000 at March 31, 1998 compared to $1,549,000 on March
31, 1997. The increase in inventory associated with the Ace acquisition was
offset by management's ability to forecast IHW sales better based on historic
experience and its relying more on just in time deliveries from Brabantia.
All inventory associated with small electrics has been written off. Accounts
receivable were $3,204,000 at March 31, 1998 and reflects receivables from
Ace, higher sales and the fact that Ace extends more liberal terms to their
customers as an inducement to do business.
Due to the foregoing, the Company reported a net profit of $26,000 compared
to a net loss of $224,000 respectively, for the three month periods ended
March 31, 1998 and March 31, 1997.
PART II OTHER INFORMATION
Item 6. a. Exhibits
Exhibit 27. Financial Data Schedule
b. Reports on Form 8-K
The Registrant did not file reports on Form
8-K during the three months ended March 31, 1998.
CREATIVE TECHNOLOGIES CORP.
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.
CREATIVE TECHNOLOGIES CORP.
Registrant
Dated : May 20, 1998 By: S/Richard Helfman
Richard Helfman, President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-01-1998
<PERIOD-END> Mar-31-1998
<CASH> $1,000
<SECURITIES> 0
<RECEIVABLES> 3,435,000
<ALLOWANCES> 231,000
<INVENTORY> 1,697,000
<CURRENT-ASSETS> 5,089,000
<PP&E> 512,000
<DEPRECIATION> 267,000
<TOTAL-ASSETS> 6,195,000
<CURRENT-LIABILITIES> 11,784,000
<BONDS> 0
<COMMON> 370,000
281,000
1,770,000
<OTHER-SE> (8,410,000)
<TOTAL-LIABILITY-AND-EQUITY> 6,195,000
<SALES> 4,123,000
<TOTAL-REVENUES> 4,123,000
<CGS> 2,675,000
<TOTAL-COSTS> 2,675,000
<OTHER-EXPENSES> 1,205,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 217,000
<INCOME-PRETAX> 26,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 26,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,000
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
