<PAGE>
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 quarterly period ended December 31, 1996
--- 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 0-14669
-------
THE ARISTOTLE CORPORATION AND SUBSIDIARY
----------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 06-1165854
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
78 Olive Street, New Haven, Connecticut 06511
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 867-4090
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
----- -----
As of January 31, 1997, 1,097,902 shares of Common Stock were outstanding.
<PAGE>
THE ARISTOTLE CORPORATION AND SUBSIDIARY
INDEX OF INFORMATION CONTAINED IN FORM 10-Q FOR THE
QUARTER ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Page
Part I - Financial Information ----
<S> <C> <C>
Item 1 - Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets at December 31, 1996
and June 30, 1996 3
Condensed Consolidated Statements of Operations for the
Three and Six Months Ended December 31, 1996 and 1995 4
Condensed Consolidated Statements of Cash Flows for the Six
Months Ended December 31, 1996 and 1995 5
Notes to Condensed Consolidated Financial Statements 6
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
Part II - Other Information
Item 4 - Submission of Matters to a Vote of Security Holders 13
Item 6 - Exhibits and Reports on Form 8-K 13
Signatures 14
Exhibit Index 15
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
THE ARISTOTLE CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except for share data)
December 31, June 30,
1996 1996
---- ----
(Unaudited)
ASSETS
------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 637 $ 99
Marketable securities held in escrow, at market value -- 6,253
Accounts receivable, net of reserves of $202 and $242 2,887 2,834
Inventories 9,707 9,478
Other current assets 434 359
--------- ---------
Total current assets 13,665 19,023
--------- ---------
Property and equipment, net 1,586 1,684
--------- ---------
Other assets:
Marketable securities held in escrow, at market value 1,200 --
Employee notes receivable 354 354
Goodwill, net of amortization of $126 and $101 1,808 1,845
Deferred tax asset 630 630
Other noncurrent assets 256 259
--------- ---------
4,248 3,088
--------- ---------
$19,499 $23,795
--------- ---------
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
<S> <C> <C>
Current liabilities:
Notes payable and current maturities of long-term debt $ 6,758 $ 6,055
FDIC tax refund claim payable -- 3,760
Accounts payable 1,275 1,372
Accrued expenses 568 919
Deferred tax liability 630 630
-------- --------
Total current liabilities 9,231 12,736
-------- --------
Long-term debt, less current maturities 1,805 2,097
-------- --------
Total liabilities 11,036 14,833
-------- --------
Minority interest in subsidiary's preferred stock 1,975 2,247
-------- --------
Minority interest in subsidiary's common stock 184 182
-------- --------
Commitments and contingencies
Redeemable preferred stock, $.01 par value; 3,000,000 shares authorized; 76,014 and
101,976 Series A at December 31, 1996 and June 30, 1996, respectively, 60,756 and
61,345 Series B at December 31, 1996 and June 30, 1996, respectively, 60,756 and
61,345 Series C at December 31, 1996 and June 30, 1996, respectively and 24,998
shares Series D at December 31, 1996 and June 30, 1996 issued and outstanding
3 3
-------- --------
Stockholders equity:
Common stock, $.01 par value; 3,000,000 shares authorized;
1,105,801 shares at December 31, 1996 and June 30,1996 issued and outstanding 11 11
Additional paid-in capital 159,762 159,762
Retained earnings (deficit) ( 153,440) (153,245)
Treasury stock at cost - 7,287 and 1,287 shares at December 31, 1996 and June 30, 1996,
respectively ( 30) ( 8)
Net unrealized investment gains (losses) ( 2) 10
--------- --------
Total stockholders equity 6,301 6,530
--------- --------
$ 19,499 $ 23,795
--------- --------
The accompanying notes are an integral part of
these condensed consolidated financial statements.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
THE ARISTOTLE CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(dollars in thousands, except for share data)
Three Months Six Months
Ended December 31, Ended December 31,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 4,941 $ 6,787 $ 10,248 $ 12,756
Cost of goods sold 3,573 5,026 7,393 9,426
------------ ------------ ----------- -----------
Gross profit 1,368 1,761 2,855 3,330
Operating expenses:
Selling 729 783 1,427 1,457
General and administrative 528 439 976 979
Product development 151 110 277 228
------------- ------------ ------------ ------------
Operating income (loss) ( 40) 429 175 666
------------- ------------ ------------ ------------
Other income (expense)
Investment and interest income 36 77 98 157
Interest expense ( 166) ( 235) ( 350) ( 454)
------------- ------------- ------------- -------------
Income (loss) before income
taxes and minority interest ( 170) 271 ( 77) 369
Income tax expense 8 6 22 6
------------- ------------- ------------- -------------
Income (loss) before minority
interest ( 178) 265 ( 99) 363
Minority interest 42 62 96 119
------------ ------------- ------------- -------------
NET INCOME (LOSS) ($ 220) $ 203 ($ 195) $ 244
------------ ------------- ------------- -------------
Net income (loss) per share ($ 0.19) $ 0.18 ($ 0.17) $ 0.22
------------ ------------- ------------- -------------
Weighted average shares outstanding 1,134,614 1,124,184 1,136,268 1,123,310
------------ ------------- ------------- -------------
The accompanying notes are an integral part of
these condensed consolidated financial statements.
</TABLE>
4
<PAGE>
THE ARISTOTLE CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
Six Months
Ended December 31,
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) ($ 195) $ 244
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities: 260 262
Depreciation and amortization
Changes in assets and liabilities: ( 53) 1,270
Accounts receivable ( 229) 1,215
Inventories ( 89) 15
Other assets ( 97) ( 1,147)
Accounts payable ( 351) ( 287)
Accrued expenses - 61
Issuance of treasury stock ------------ ------------
Net cash provided by (used in) operating
activities ( 754) 1,633
------------ ------------
Cash flows from investing activities:
Purchase of property and equipment ( 132) ( 364)
Purchase of marketable securities ( 707) -
Minority interest 2 9
Repurchase of ASI preferred stock ( 260) -
Sale of marketable securities 5,760 -
Settlement of FDIC claim ( 3,760) -
------------ ------------
Net cash provided by (used in) investing
activities 903 ( 355)
------------ ------------
Cash flows from financing activities:
Net borrowings (payments) under line-of-credit 980 ( 1,240)
Principal payments under note payable ( 569) ( 125)
Purchase of treasury stock ( 22) -
Proceeds from issuance of long-term debt - 75
------------ ------------
Net cash provided by (used in) financing
activities 389 ( 1,290)
------------ ------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 538 ( 12)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 99 188
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 637 $ 176
------------ ------------
</TABLE>
The accompanying notes are an integral part of
these condensed consolidated financial statements.
5
<PAGE>
THE ARISTOTLE CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
---------------------
The Aristotle Corporation ("Aristotle") is a holding company for its
subsidiary, Aristotle Sub, Inc. ("ASI"). ASI is a holding company for The
Strouse, Adler Company ("Strouse"). Strouse designs, manufactures and markets
women's intimate apparel. Unless the context indicates otherwise, all references
herein to the "Company" include Aristotle, ASI and Strouse.
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with the instructions to Form 10-Q
and do not include all of the information and notes 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 December 31, 1996 are not necessarily
indicative of results that may be expected for the year ending June 30, 1997.
For further information, refer to the consolidated financial statements and
notes included in the Company's Annual Report on Form 10-K for the year ended
June 30, 1996.
2. Earnings per Common Share
-------------------------
Weighted average shares outstanding are primary; treasury stock has
not been included. At December 31, 1996, the weighted average shares include
33,424 shares of common stock equivalents.
3. Debt Agreement
--------------
On October 3, 1996, Strouse and Bank of Boston, Connecticut (the
"Bank") entered into a credit agreement that provides for a line-of-credit
facility and a term loan facility (the "Credit Facilities"). Borrowing under the
line-of-credit is determined by a borrowing base which is equal to the sum of
80% of eligible accounts receivable, as defined, plus 50% of eligible raw
material inventory, as defined, plus 60% of eligible finished goods inventory,
as defined, with a maximum borrowing of $8,000,000 at any one time. In addition,
the line-of-credit facility permits advances to exceed the borrowing base amount
by up to $750,000 through September 1997, and $500,000 thereafter through
September 1999 (so long as the total line-of-credit is not more than the
$8,000,000 and the overadvance is reduced to zero for 30 consecutive days per
annum). The principal amount of the term loan is $2,000,000. The credit
agreement matures in September 1999. Strouse uses the Credit Facilities for
working capital and other general corporate purposes.
The interest on the line-of-credit will vary from prime to prime plus
1.0% or Eurodollar plus 1.75% to Eurodollar plus 3.0% per annum based on the
financial performance of Strouse. The term loan bears interest at the option of
the Company at a rate per annum equal to prime plus .75%, Eurodollar plus 2.5%
or at a fixed rate of the Bank's cost of funds plus 2.25%. The term loan has a
three year term and requires principal payments to reduce the amount outstanding
based on a ten year amortization.
6
<PAGE>
The Credit Facilities are secured by a lien on all assets of Strouse.
Aristotle and ASI have unconditionally guaranteed the Credit Facilities.
Recourse under each guaranty is limited to $2,000,000. To secure Aristotle's
guarantee of the Credit Facilities, Aristotle has pledged $500,000 (the "Account
Pledged to the Bank") which is included in marketable securities held in escrow
in the accompanying balance sheet. The credit agreement further provides that
Strouse may not pay dividends to ASI or Aristotle without the Bank's prior
written consent. Strouse must maintain certain financial ratios and satisfy
various other covenants in connection with the Credit Facilities.
As of January 31, 1997, the balance outstanding on the line-of-credit
was $6,133,000 and the balance outstanding on the term loan was $1,950,000. As
of January 31, 1997, the additional borrowing available on the overadvance was
$415,000.
7
<PAGE>
THE ARISTOTLE CORPORATION AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of Operations
Three Months Ended December 31, 1996 and 1995
---------------------------------------------
The Company's net sales for the three months ended December 31, 1996
decreased 27% to $4,941,000, compared to net sales of $6,787,000 for the three
months ended December 31, 1995. The decrease was primarily generated by a
$560,000 volume decrease in shapewear products, and a $1,480,000 volume decrease
in specialty brassiere products, offset by a $194,000 impact from increased
prices.
The Company's gross profit for the three months ended December 31, 1996
decreased 22% to $1,368,000, compared to gross profit of $1,761,000 for the
three months ended December 31, 1995. Gross margin percentage increased to 27.7%
from 25.9%. The decrease in gross profit was primarily a result of the reduction
in sales. The increase in gross margin percentage was principally a result of
reduced overhead expenses and a consolidation of production to locations with
lower costs.
Selling, general and administrative expenses for the three months ended
December 31, 1996 were $1,257,000, compared to $1,222,000 for the corresponding
three months ended December 31, 1995. The $35,000, or 3%, increase was
principally a result of increases in advertising and professional fees,
partially offset by a reduction in commissions and shareholder expenses.
Product development costs for the Company for the three months ended
December 31, 1996 were $151,000, compared to $110,000 for the three months ended
December 31, 1995. Product development costs primarily included compensation of
Company personnel and were incurred by Strouse. All products are designed
internally in Strouse's New Haven and New York design centers. The $41,000, or
37%, increase in costs reflects Strouse's continued investment in the product
development process through increases in staffing in Strouse's design centers.
Investment and interest income was $36,000 and $77,000 for the three months
ended December 31, 1996 and 1995, respectively. Investment and interest income
for the three months ended December 31, 1996 was principally generated by an
investment account (the "Strouse Escrow Account") established in connection with
the acquisition of Strouse by Aristotle (the "Acquisition") and subject to an
escrow and pledge agreement with the former Strouse stockholders (the "Former
Strouse Stockholders"). Investment and interest income for the three months
ended December 31, 1995 was principally generated by the Strouse Escrow Account
and two special escrow accounts (the "FDIC Escrow Accounts"). The FDIC Escrow
Accounts contained approximately $5,760,000 in tax refunds received by the
Company that the Federal Deposit Insurance Corporation ("FDIC") claimed. The
$41,000 reduction in investment and interest income for the three months ended
December 31, 1996 was primarily a result of the payment to the FDIC of
approximately $3,760,000 from the FDIC Escrow Accounts in the first quarter of
1996 in connection with a settlement between the Company and the FDIC related to
certain disputes between the FDIC, the Company and others (the "FDIC
Settlement").
Interest expense for the three months ended December 31, 1996 decreased to
$166,000 from $235,000 in the corresponding three months ended December 31,
1995. The decrease in interest expense primarily resulted from reduced borrowing
levels under the Credit Facilities due to a reduction in inventory.
The income tax provision reflects minimum state taxes, as any federal tax
obligation is sheltered by the utilization of net operating loss carryforwards.
8
<PAGE>
Minority interest expense of $42,000 and $62,000 for the three months ended
December 31, 1996 and 1995, respectively, was principally due to preferred
dividends paid or accrued during the corresponding period on outstanding
preferred stock of ASI (the "ASI Preferred Stock") issued to the Former Strouse
Stockholders in connection with the Acquisition. The preferred dividends
decreased as a result of the exercise of the Put Right, as defined in the
Liquidity and Capital Resources section, by three Former Strouse Stockholders,
including one executive officer and one former executive officer, in November
and December, 1996, which resulted in fewer shares of ASI Preferred Stock being
outstanding.
9
<PAGE>
Six Months Ended December 31, 1996 and 1995
-------------------------------------------
The Company's net sales for the six months ended December 31, 1996
decreased 20% to $10,248,000, compared to net sales of $12,756,000 for the six
months ended December 31, 1995. The decrease was primarily generated by a
$620,000 volume decrease in shapewear products, and a $2,382,000 volume decrease
in specialty brassiere products, offset by a $494,000 impact from increased
prices.
The Company's gross profit for the six months ended December 31, 1996
decreased 14% to $2,855,000, compared to gross profit of $3,330,000 for the six
months ended December 31, 1995. Gross margin percentage increased to 27.9% from
26.1%. The decrease in gross profit was primarily a result of the reduction in
sales. The increase in gross margin percentage was principally a result of
reduced overhead expenses, lower production costs resulting from a reduction in
production rates charged by the Company's Dominican subcontractor and a
consolidation of Strouse's production to locations with lower costs.
Selling, general and administrative expenses for the six months ended
December 31, 1996 were $2,403,000, compared to $2,436,000 for the corresponding
six months ended December 31, 1995. The $33,000, or 1%, decrease was principally
a result of a reduction in administrative personnel, commissions and shareholder
expenses, partially offset by an increase in advertising and professional fees.
Product development costs for the Company for the six months ended December
31, 1996 were $277,000, compared to $228,000 for the six months ended December
31, 1995. Product development costs primarily included compensation of Company
personnel and were incurred by Strouse. All products are designed internally in
Strouse's New Haven and New York design centers. The $49,000, or 21%, increase
in costs reflects Strouse's continued investment in the product development
process through increases in staffing in Strouse's design centers.
Investment and interest income was $98,000 and $157,000 for the six months
ended December 31, 1996 and 1995, respectively. This income was principally
generated by the FDIC Escrow Accounts and the Strouse Escrow Account. The
$59,000 reduction in investment and interest income for the six months ended
December 31, 1996 was primarily a result of the payment to the FDIC of
approximately $3,760,000 from the FDIC Escrow Accounts in the first quarter of
1996 in connection with the FDIC Settlement.
Interest expense for the six months ended December 31, 1996 decreased to
$350,000 from $454,000 in the corresponding six months ended December 31, 1995.
The decrease in interest expense primarily resulted from reduced borrowing
levels under the Credit Facilities due to a reduction in inventory.
The income tax provision reflects minimum state taxes, as any federal tax
obligation is sheltered by the utilization of net operating loss carryforwards.
Minority interest expense of $96,000 and $119,000 for the six months ended
December 31, 1996 and 1995, respectively, was principally due to preferred
dividends paid or accrued during the corresponding period on outstanding ASI
Preferred Stock. The preferred dividends decreased for the six months ended
December 31, 1996 as a result of the exercise of the Put Right by three Former
Strouse Stockholders in November and December, 1996, which resulted in fewer
shares of ASI Preferred Stock being outstanding.
10
<PAGE>
Liquidity and Capital Resources
The Company used $754,000 to fund operations during the six months ended
December 31, 1996. The Company generated $1,633,000 from operations for the six
months ended December 31, 1995. During these periods, the principal operating
cash requirements were attributable to increased inventory levels and a
reduction of other liabilities.
The Company generated $903,000 from investing activities for the six months
ended December 31, 1996 and utilized $355,000 for investing activities for the
six months ended December 31, 1995. In the six months ended December 31,1996,
the primary generation of cash from investing activities was the $5,760,000 sale
of marketable securities that were withdrawn from the FDIC Escrow Accounts in
connection with the FDIC Settlement, offset by the payment of $3,760,000 from
the FDIC Escrow Accounts in connection with the FDIC Settlement. The Company
also used $260,000 to fund the payment of the Put Right, as defined below,
exercised by three of the Former Strouse Stockholders, including one executive
officer and one former executive officer of the Company. In exchange for the
funding of the Put Right, the Company received 25,962 shares of ASI Series A
Preferred Stock and 25,962 shares of Aristotle Preferred Stock. During such
period, the Company also utilized $707,000 of its cash from investing activities
to purchase marketable securities to fund the Account Pledged to the Bank, which
secures Aristotle's guarantee of the Credit Facilities, and to restore the
Strouse Escrow Account. During both periods, the Company used cash from
investing activities to purchase property and equipment.
The Company generated $389,000 from financing activities for the six months
ended December 31, 1996. The Company utilized $1,290,000 for financing
activities during the six months ended December 31, 1995. Funds generated during
the six months ended December 31, 1996 were primarily a result of the Company
drawing $980,000 from its line-of-credit, offset by the $569,000 payment of its
notes payable. In addition, the Company repurchased 6,000 shares of its Common
Stock in the open market for approximately $22,000. The Company intends to pay
its directors' annual retainer with these treasury shares.
In connection with the Acquisition, ASI issued to the Former Strouse
Stockholders 245,381 shares of ASI Preferred Stock and Aristotle issued to the
Former Strouse Stockholders 270,379 shares of voting preferred stock of
Aristotle (the "Aristotle Preferred Stock"). The Former Strouse Stockholders may
require that ASI repurchase each share of ASI Preferred Stock at various dates
beginning in April 1996 for $10.00 per share, plus any accrued but unpaid
dividends (the "Put Right"). Prior to the vesting of the Put Right, the ASI
Preferred Stock is entitled to quarterly dividends of 8.9% per annum. Once the
Put Right is exercisable, the dividends cease. In order to exercise the Put
Right, a Former Strouse Stockholder must sell an equal number of shares of
Aristotle Preferred Stock to Aristotle for $.001 per share. The Put Right is
secured by the Strouse Escrow Account.
If the Former Strouse Stockholders exercise their Put Right with respect to
the ASI Preferred Stock, then Aristotle would have to pay up to $1,975,000
during the next four fiscal years to such Stockholders. It is not anticipated
that current amounts of capital will be sufficient to satisfy potential
commitments related to the Acquisition. However, there is $700,000 held in the
Strouse Escrow Account, $354,000 in employee notes receivable, $560,000 from
Strouse intercompany loans and $500,000 held in the Account Pledged to the Bank
to satisfy the requirements of the Put Rights, if exercised. Any default in the
payments due to the Former Strouse Stockholders could create a partial unwinding
of the Acquisition in which the Former Strouse Stockholders would be entitled to
receive 59% of the capital stock of Strouse, in exchange for certain
consideration previously paid to them by Aristotle in connection with the
Acquisition.
11
<PAGE>
In order to conserve funds, in November 1996, the Company requested that
the holders of the ASI Preferred Stock postpone the Put Right with respect to
101,976 shares of ASI Series A Preferred Stock and 61,345 shares of ASI Series B
Preferred Stock from dates in April 1996 and April 1997 to October 1997. In
exchange, ASI offered to continue to pay the 8.9% dividend until October 1997 to
the holders of the ASI Preferred Stock who postpone the Put Right. In addition,
the Company offered to delay the repayment of certain loans made by Aristotle to
certain Former Strouse Stockholders (the "Acquisition Loans") in connection with
the Acquisition from April 1997 until October 1997 if such Stockholders postpone
their Put Rights.
In October 1996, pursuant to terms of an employment agreement between a
former executive officer of Strouse and the Company, upon the voluntary
termination of such officer's employment, the former executive officer was
obligated to sell to the Company for nominal consideration 589 shares of ASI
Series B Preferred Stock and 589 shares of ASI Series C Preferred Stock. As
mentioned above, in November and December of 1996, three Former Strouse
Stockholders exercised their Put Right with respect to 25,962 shares of ASI
Series A Preferred Stock and 25,962 shares of Aristotle Preferred Stock for a
cash payment of $260,000.
After repurchases of ASI Preferred Stock pursuant to the foregoing
employment agreement and exercise of Put Rights, the offer resulted in the
holders of 73,604 shares of ASI Series A Preferred Stock and 13,862 shares of
ASI Series B Preferred Stock postponing their Put Right until October 1997 with
the remaining 2,410 shares of ASI Series A Preferred Stock continuing to be
exercisable. In addition, there are 46,894 shares of ASI Series B Preferred
Stock that will be exercisable beginning April 1997. The offer also resulted in
the delay of the repayment of $131,000 principal amount of Acquisition Loans to
October 1997, with $46,000 principal amount of Acquisition Loans remaining
payable in April 1997.
In order to meet its projected capital requirements and potential
commitments to the Former Strouse Stockholders, the Company believes that it
must either raise new equity capital or obtain additional financing or both.
There can, however, be no assurance that the Company will be able to raise new
equity capital or obtain additional financing.
Certain Factors That May Affect Future Results of Operations
The Company believes that this report may contain forward-looking
statements within the meaning of the "safe-harbor" provisions of the Private
Securities Litigation Reform Act of 1995. These forward-looking statements are
based on management's current expectations and are subject to a number of
factors and uncertainties that could cause actual results to differ materially
from those described in the forward-looking statements. The Company cautions
investors that there can be no assurance that actual results or business
conditions will not differ materially from those projected or suggested in such
forward-looking statements as a result of various factors, including, but not
limited to, the following: the availability of financing and additional capital
to fund the Company's business strategy on acceptable terms, if at all, market
responses to pricing actions, continued competitive factors and pricing
pressures, changes in product mix, the timely acceptance of new products,
inventory risks due to shifts in market demand, the dependence by the Company on
key customers, and general economic conditions. As a result, the Company's
future development efforts involve a high degree of risk. For further
information, refer to the more specific risks and uncertainties discussed
throughout this report.
12
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
On November 21, 1996, Aristotle held its annual meeting of its
stockholders. The following matters were voted on at the annual meeting:
1. The election of Barry R. Banducci and Daniel J. Miglio to
Aristotle's Board of Directors for three-year terms; and
2. The approval of the Company's plan to continue to pay the annual
retainer that it pays to its non-employee Directors in Common Stock
of the Company; and
3. The ratification of the appointment of Arthur Andersen LLP,
Independent Certified Public Accountants, as Aristotle's independent
auditors for the fiscal year ending June 30, 1997.
The following chart shows the number of votes cast for or against, as
well as the number of abstentions and broker nonvotes, as to each matter voted
on at the annual meeting:
<TABLE>
<CAPTION>
The The The The
election election approval of appointment
of of Company's Plan of Arthur
Mr. Banducci Mr. Miglio to Pay Directors Andersen LLP
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
For 925,617 925,347 790,983 917,863
Against 6,925 7,195 26,320 9,034
Abstain 0 0 5,545 5,645
Broker Nonvotes 0 0 109,694 N/A
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
See Exhibit Index.
(b) Reports on Form 8-K:
There were no reports on Form 8-K for the three months ended
December 31, 1996.
13
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
THE ARISTOTLE CORPORATION
/s/ John J. Crawford
--------------------
John J. Crawford
Its President, Chief Executive Officer
and Chairman of the Board
Date: February 14, 1997
/s/ Paul McDonald
-----------------
Paul McDonald
Its Chief Financial Officer
and Secretary
(principal financial and chief
accounting officer)
Date: February 14, 1997
14
<PAGE>
EXHIBIT INDEX
Exhibit Description
- ------- -----------
4.1 Amended and Restated Certificate of Incorporation of
Aristotle Sub, Inc., filed December 4, 1996 is filed
herewith as Exhibit 4.1.
27.1 Financial Data Schedule
15
<PAGE>
Exhibit 4.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
ARISTOTLE SUB, INC.
under Sections 242 and 245
of the
Delaware General Corporation Law
Aristotle Sub, Inc., a corporation organized and existing under the
laws of the State of Delaware, hereby certifies as follows:
FIRST: The name of the Corporation is Aristotle Sub, Inc.
SECOND: The Certificate of Incorporation of the Corporation was filed with the
Secretary of the State of Delaware on the 12th day of November, 1993.
THIRD: This Amended and Restated Certificate of Incorporation restates and
integrates and further amends the Certificate of Incorporation of the
Corporation by:
1. deleting in its entirety the definition of the "Dividend
Termination Date" as set forth in Article 4, Section 2 and adding
a new definition in Article 4, Section 2 as set forth herein; and
2. deleting in its entirety the first paragraph of Article 4,
Section 4 and adding a new first paragraph of Article 4, Section
4 as set forth herein.
FOURTH: The text of the Amended and Restated Certificate of Incorporation, as
amended or supplemented heretofore, is further amended hereby to read
as herein set forth in full.
FIFTH: This Amended and Restated Certificate of Incorporation was duly
adopted by the Stockholders of the Corporation in accordance with
Sections 242 and 245 of the General Corporation Law of the State of
Delaware.
<PAGE>
IN WITNESS WHEREOF, Aristotle Sub, Inc. has caused this Certificate to be
signed by John Crawford, its President, this 4th day of December, 1996.
ARISTOTLE SUB, INC.
By /s/ John Crawford
--------------------------------
John Crawford
Its President
<PAGE>
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
ARISTOTLE SUB, INC.
Article 1. Corporate Title. The name of the corporation is
---------------
Aristotle Sub, Inc. (the "Corporation").
Article 2. Duration. The duration of the Corporation is perpetual.
--------
Article 3. Purpose. The purpose or purposes for which the
-------
Corporation is organized are to engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of Delaware (the
"DGCL").
Article 4. Capital Stock. The total number of shares of all classes
-------------
of capital stock which the Corporation has authority to issue is six million
(6,000,000) shares, of which three million (3,000,000) shares shall be common
stock, par value $.01 per share (the "Common Stock"), amounting in the aggregate
to thirty thousand dollars ($30,000)), and three million (3,000,000) shares
shall be serial preferred stock, par value $.01 per share (the "Preferred
Stock"), amounting in the aggregate to thirty thousand dollars ($30,000). The
shares of Common Stock and Preferred Stock may be issued by the Corporation from
time to time as approved by its board of directors (the "Board of Directors")
without the approval of its stockholders. The consideration for the issuance of
the shares of Common Stock or Preferred Stock shall be paid in full before their
issuance and shall not be less than the par value per share thereof. Neither
promissory notes nor future services shall constitute payment or part payment
for the issuance of the shares of Common Stock or Preferred Stock. The
consideration for the shares of Common Stock or Preferred Stock shall be cash,
services actually performed for the Corporation, personal property, real
property, leases of real property or any combination of the foregoing. In the
absence of actual fraud in the transaction, the value of such property, labor or
services, as determined by the Board of Directors, shall be conclusive. Upon
payment of such consideration, such shares of Common Stock or Preferred Stock
shall be deemed to be fully paid and nonassessable.
The Preferred Stock authorized by this Certificate of Incorporation
(the "Certificate of Incorporation") shall be issued in series. The first,
second and third such series shall be designated Series A Preferred Stock
("Series A Preferred Stock"), which shall consist of one hundred twenty-two
thousand six hundred ninety-one (122,691) shares, Series B Preferred Stock
("Series B Preferred Stock") and Series C Preferred Stock ("Series C Preferred
<PAGE>
Stock"), which shall each consist of sixty-one thousand three hundred forty-five
(61,345) shares.
Except for the 245,380 shares of Series A, B and C Preferred Stock,
the Preferred Stock may be issued in one or more series by the Corporation from
time to time as approved by its Board of Directors. The Board of Directors is
authorized by resolution or resolutions from time to time adopted and by filing
a certificate pursuant to Section 151(g) of the DGCL to provide for the issuance
of one or more series of Preferred Stock and to fix and state the voting powers,
full or limited, or no voting powers, and such designations, preferences and
relative, participating, optional or other special rights of the shares of each
such series of Preferred Stock and the qualifications, limitations and
restrictions thereof other than the Series A, B and C Preferred Stock. Each
share of each series of Preferred Stock shall have the same relative rights as
and be identical in all respects with all the other shares of the same series of
Preferred Stock.
The relative rights, preferences, privileges, restrictions and other
matters relating to the respective classes of the shares of capital stock of the
Corporation are as follows:
Section 1. Junior Stock. For purposes of this Article, other than as
------------
set forth in Section 3 hereof, "Junior Shares" shall mean all Common Stock and
any other shares of capital stock of the Corporation other than the Series A, B
and C Preferred Stock.
Section 2. Dividends Rights of Series A, B and C Preferred Stock.
-----------------------------------------------------
The holders of the Series A, B and C Preferred Stock shall be entitled
to receive in any fiscal year, when and as declared by the Board of Directors,
out of any assets at the time legally available therefor, dividends in cash at
the rate per annum, prior to their respective Dividend Termination Dates (as
defined herein), of $.89 per share, payable in preference and priority to any
payment of any dividend on Junior Shares. The right to such dividends on the
Series A, B and C Preferred Stock shall be cumulative and shall accrue at the
rate of $.2225 per share on the first day of each January, April, July and
October until the applicable Dividend Termination Date. On and after the
applicable Dividend Termination Date, no dividends shall accrue upon the Series
A, B or C Preferred Stock. As used in this Certificate of Incorporation, the
"Dividend Termination Date" for any share of Preferred Stock means the later of
(a) the Put Right Commencement (as hereinafter defined) Date with respect to
such share or (b) the first date upon which The Aristotle Corporation
("Aristotle") has sufficient audited financial statements in order to satisfy
the requirements for filing a registration statement under the federal
-2-
<PAGE>
securities laws pursuant to which shares of Common Stock of Aristotle can be
registered for sale. Each share of Series A, B and C Preferred Stock shall rank
on a parity with each other share of Series A, B and C Preferred Stock,
irrespective of series, with respect to dividends, and no dividends shall be
declared or paid or set apart for payment on any of the Series A, B or C
Preferred Stock unless at the same time a dividend, bearing the same proportion
to the dividend rate shall also be declared or paid or set apart for payment, as
the case may be, on any of the Series A, B and C Preferred Stock as to which the
Dividend Termination Date has not occurred. No dividends shall be paid on any
Junior Shares unless all accrued dividends have been paid with respect to all
outstanding shares of Series A, B and C Preferred Stock.
Section 3. Liquidation Preference.
----------------------
A. In the event of any liquidation, dissolution or winding up of
the Corporation, either voluntary or involuntary, the holders of the Series A, B
and C Preferred Stock shall be entitled to receive, prior and in preference to
any distribution of any of the assets or surplus funds of the Corporation to the
holders of the Junior Shares by reason of their ownership thereof, the sum of
(i) $10 for each share of Series A, B or C Preferred Stock then held by them,
and (ii) an amount equal to all accrued but unpaid dividends on such Series A, B
and C Preferred Stock. If, upon the occurrence of such event the assets and
funds thus distributed among the holders of the Series A, B or C Preferred Stock
shall be insufficient to permit the payment to such holders of the full
preferential amount aforesaid, then the entire assets and funds of the
Corporation legally available for distribution shall be distributed ratably
among the holders of the Series A, B and C Preferred Stock in accordance with
the percentage of Preferred Stock then owned by them. After payment has been
made to the holders of the Series A, B and C Preferred Stock of the full amounts
to which they shall be entitled as aforesaid, all remaining assets and funds of
the Corporation shall be distributed among the holders of the Junior Shares.
B. For purposes of this Article 4, Section 3, a liquidation,
dissolution or winding up of the Corporation shall be deemed to be occasioned
by, or to include, a sale by any of the Corporation, Aristotle or The Strouse,
Adler Company ("Strouse") of all or substantially all of its assets or the
acquisition of this Corporation, Aristotle or Strouse by a Nonpermitted Party
(as hereinafter defined) by means of merger or consolidation resulting in the
exchange of the outstanding shares of capital stock of this Corporation,
Aristotle or Strouse for securities or consideration issued, or caused to be
issued, by the acquiring entity or its subsidiary or its parent.
-3-
<PAGE>
C. In the event the Corporation shall propose to take any action
of the types described in Paragraphs (A) and (B) of this Article 4, Section 3,
then the Corporation shall, within ten (10) days after the date that the Board
of Directors approves such action, or twenty (20) days prior to any
stockholders' meeting called to approve such action, whichever is earlier, give
each holder of shares of Series A, B and C Preferred Stock initial written
notice of the proposed action. Such initial written notice shall describe the
material terms and conditions of such proposed action, including a description
of the stock, cash and property to be received by the holders of shares of
Series A, B and C Preferred Stock upon consummation of the proposed action and
the date of delivery thereof. If any material change in the facts set forth in
the initial notice shall occur, the Corporation shall promptly give written
notice to each holder of shares of Series A, B and C Preferred Stock of such
material change.
D. The Corporation shall not consummate any proposed action of the
types described in Paragraphs (A) and (B) of this Article 4, Section 3 before
the expiration of thirty (30) days after the mailing of the initial notice or
twenty (20) days after the mailing of any subsequent written notice, whichever
is later; provided that any such 30-day or 20-day period may be shortened upon
the written consent of the holders of a majority of the outstanding shares of
Series A, B and C Preferred Stock.
E. In the event the Corporation shall propose to take any action
of the types described in Paragraphs (A) and (B) of this Article 4, Section 3
which will involve the distribution of assets other than cash, the Board of
Directors shall make a good faith appraisal of the value of the assets to be
distributed to the holders of shares of Series A, B and C Preferred Stock. The
Corporation shall give prompt written notice to each holder of shares of Series
A, B and C Preferred Stock of such valuation. All notices pursuant to this
Article 4, Section 3 hereof shall be deemed given upon personal delivery, or
upon delivery to a recognized overnight delivery service, or upon deposit in a
United States Post Office by registered or certified mail.
Section 4. Right of Holders of Series A, B and C Preferred Stock to
--------------------------------------------------------
Sell their Shares and Right of Corporation to Redeem Series A, B and C Preferred
- --------------------------------------------------------------------------------
Stock. On the earlier of an "Acceleration Event" (as hereinafter defined) or at
- -----
any time after April 12, 1996 with respect to Series A Preferred Stock, April
12, 1997 with respect to Series B Preferred Stock, and April 12, 1998 with
respect to Series C Preferred Stock (each such date being a "Put Right
Commencement Date"), and before the date three (3) years after the respective
Put Right Commencement Dates for each of Series A, B and C Preferred Stock (the
"Put Right Termination Date"), each holder of Series A, B or C Preferred Stock
shall have
-4-
<PAGE>
the right to sell, and the Corporation shall have the obligation to purchase,
any or all of such Series A, B or C Preferred Stock to the Corporation for $10
per share plus any accrued and unpaid dividends thereon (each such right being a
"Put Right"); provided, however, in order for the holder to exercise such Put
Right, the holder shall sell a number of each of the Series A, B and C Preferred
Stock of The Aristotle Corporation, issued to the holder on April 11, 1994,
which is equal to the number of Series A, B and C Preferred Stock with respect
to which the holder is exercising the Put Right, to The Aristotle Corporation
for a purchase price of $.001 per share. The Put Right may be exercised after
the Put Right Commencement Date until the Put Right Termination Date.
As used herein an Acceleration Event shall mean any one or more of the
following (it being understood that the Corporation shall use reasonable efforts
to provide the holders of the Series A, Series B and Series C Preferred Stock
with at least twenty (20) days prior written notice of the occurrence of the
Acceleration Events set forth in (a), (b) and (d)):
(a) In the event that all or substantially all of the capital stock
or assets of Strouse, the Corporation or Aristotle shall have
been transferred to a party not controlling, controlled by or
in the same control group as Aristotle (a "Nonpermitted
Party");
(b) In the event of merger, consolidation, business combination or
the reorganization involving Strouse, the Corporation or
Aristotle in which Strouse, the Corporation, Aristotle or a
corporation other than a Nonpermitted Party is not the
surviving corporation;
(c) In the event that Aristotle, the Corporation or Strouse makes
an assignment for the benefit of creditors, or shall apply for
or consent to the appointment of or taking possession by a
committee of creditors, a trustee, receiver or liquidator or if
Aristotle, the Strouse or the Corporation shall commence a case
or have an order for relief entered against it under federal
bankruptcy laws or applicable state insolvency or other similar
laws; or
(d) In the event of the dissolution or liquidation of Strouse, the
Corporation or Aristotle other than in connection with a
transaction that would be an Acceleration Event described in
clause (a) or (b) but for the fact that the transferee or
surviving
-5-
<PAGE>
corporation is Strouse, the Corporation, Aristotle or a
corporation other than a Nonpermitted Party.
The Corporation shall have the right, as and when determined by the Board
of Directors out of funds legally available therefor, to redeem the Series A, B
and C Preferred Stock in whole or in part, for $10 per share, plus any accrued
and unpaid dividends thereon, at any time after the applicable Put Right
Termination Date for any such series.
The shares to be included in any partial redemption shall be chosen by lot,
to be conducted in such manner as the Board of Directors shall deem to be
appropriate.
Any redemption or purchase of Series A, B and C Preferred Stock by the
Corporation shall be carried out in accordance with the following provisions:
(A) In the event the Corporation shall redeem shares of Series A, B
and C Preferred Stock, notice of such redemption and a statement from the Chief
Financial Officer of the Corporation setting forth the amount of surplus of the
Corporation as of the end of the month immediately preceding the date of such
notice (which amount shall be not less than the amount of the redemption price)
shall be given by certified mail, return receipt requested, or by recognized
overnight delivery service, sent not less than thirty (30) nor more than sixty
(60) days prior to the redemption date, to each holder of record of the shares
to be redeemed, at such holder's address as the same appears on the stock record
books of the Corporation. Each such notice shall state: (i) the redemption date;
(ii) the number of shares to be redeemed and, if fewer than all the shares held
by such holder are to be redeemed, the number of such shares to be redeemed from
such holder; and (iii) the place or places where certificates for such shares
are to be surrendered for payment of the redemption price.
(B) In the event that a holder of Series A, B or C Preferred Stock
shall be entitled to and shall exercise his Put Right, notice of such holder's
exercise of such Put Right shall be given by certified mail, return receipt
requested, or by recognized overnight delivery service, sent not less than
thirty (30) nor more than sixty (60) days prior to the purchase date designated
by such holder. Each such notice shall state: (i) the purchase date designated
by such holder (which shall be after the Put Right Commencement Date and before
the Put Right Termination Date with respect to the series to be purchased); and
(ii) the number of shares of such series to be purchased.
(C) Notice having been mailed as aforesaid, then from and after the
redemption or purchase date (unless default shall be
-6-
<PAGE>
made by the Corporation in providing money for the payment of the redemption or
purchase price of the shares called for redemption or purchase or, in the case
of the exercise of a Put Right, the Corporation has surplus in an amount less
than the purchase price), said shares shall: (i) be transferred or deemed
transferred to the Corporation free and clear of all liens and encumbrances;
(ii) no longer be deemed to be outstanding; and (iii) all rights of the holders
thereof as shareholders of the Corporation (except the right to receive from the
Corporation the redemption or purchase price) shall cease and terminate. Upon
surrender in accordance with said notice of the certificates for any shares so
redeemed or purchased (properly endorsed or assigned for transfer, if the Board
of Directors shall so require), such shares shall be redeemed or purchased by
the Corporation at the price aforesaid, without interest. In case fewer than all
the shares represented by any such certificate are redeemed or purchased, a new
certificate shall be issued representing the unredeemed or unpurchased shares
without cost to the holder thereof. If the certificates evidencing ownership of
redeemed shares are not surrendered to the Corporation (or affidavits of lost
certificates accompanied by indemnities reasonable satisfactory to the Company
are not provided to the Company in place of such certificates) within six (6)
years after the giving of such notice of redemption, then the Corporation shall
have the right to retain the redemption price and to deem the shareholder to
have waived his right to receive the redemption price or any further right or
benefit from such certificate or shares. If the Corporation does not have
sufficient surplus to purchase the shares as to which the Put Right was being
exercised, the Corporation shall notify the holders of such shares as to the
amount of surplus that the Corporation does have.
(D) Any shares of Series A, B and C Preferred Stock which shall at any
time have been redeemed or purchased by the Corporation shall, after such
redemption or purchase, be cancelled, retired and eliminated from being
authorized to be issued in the manner provided by applicable law.
Section 5. Covenants. In addition to any other rights provided by law, so
---------
long as shares of a Series A, B and C Preferred Stock shall be outstanding, the
Corporation shall not, without first obtaining the affirmative vote or written
consent of the holders of a majority of such outstanding shares of such Series
A, B and C Preferred Stock:
(A) Increase or decrease the number of shares of Series A, B and C
Preferred Stock authorized hereby;
(B) Authorize or issue shares of any class or series of stock having a
liquidation preference superior to or equal to the Series A, B and C Preferred
Stock, or authorize or issue shares of
-7-
<PAGE>
stock of any class or any bonds, debentures, notes or other obligations
convertible into or exchangeable for, or having option rights to purchase, any
shares of stock of the Corporation having a liquidation preference superior to
the Series A, B and C Preferred Stock;
(C) Reclassify any outstanding shares into shares having a liquidation
preference superior to the Series A, B and C Preferred Stock; or
(D) Amend this Article 4 and Article 11 hereof.
The covenants set forth in Sections 5(B) and (C) shall terminate on
the Put Right Termination Date.
Section 6. Voting Rights. The Common Stock will have the right to one
-------------
vote per share with respect to any matter as to which a vote or consent of the
stockholders of the Corporation is sought.
Article 5. Preemptive Rights. Holders of the capital stock of the
-----------------
Corporation shall not be entitled to preemptive rights with respect to any
shares or other securities of the Corporation which may be issued.
Article 6. Directors. The Corporation shall be under the direction of the
---------
Board of Directors. The Board of Directors shall consist of not less than seven
directors nor more than fifteen (15) directors. The number of directors within
this range shall be as stated in the Bylaws, as may be amended from time to
time, and shall initially consist of thirteen (13) directors. The Board of
Directors shall divide the directors into three (3) classes and, when the number
of directors is changed, shall determine the class or classes to which the
increased or decreased number of directors shall be apportioned; provided, that
the directors in each class shall be as nearly equal in number as possible;
provided, further, that no decrease in the number of directors shall affect the
term of any director then in office.
The classification shall be such that the term of one class shall expire
each succeeding year. The Board of Directors shall initially be divided into
three classes named Class I, Class II and Class III, with Class I initially
consisting of five directors and Class II and III each initially consisting of
four directors. The terms, classifications, qualifications and election of the
Board of Directors and the filling of vacancies thereon shall be as provided
herein and in the Bylaws.
Subject to the foregoing, at each annual meeting of stockholders the
successors to the class of directors whose term shall then expire shall be
elected to hold office for a term
-8-
<PAGE>
expiring at the third succeeding annual meeting and until their successors shall
be elected and qualified.
Any vacancy occurring in the Board of Directors, including any vacancy
created by reason of an increase in the number of directors, shall be filled for
the unexpired term by the concurring vote of a majority of the directors then in
office, whether or not a quorum, and any director so chosen shall hold office
for the remainder of the full term of the class of directors in which the new
directorship was created or the vacancy occurred and until such director's
successor shall have been elected and qualified.
No director may be removed except for cause and then only by an affirmative
vote of at least two-thirds of the total votes eligible to be voted by
stockholders at a duly constituted meeting of stockholders called for such
purpose. At least thirty (30) days prior to such meeting of stockholders,
written notice shall be sent to the director or directors whose removal will be
considered at such meeting.
Article 7. Bylaws. The Board of Directors or the stockholders may from
------
time to time amend the Bylaws.
Article 8. Special Meetings. Special meetings of stockholders may be
----------------
called at any time but only by the chairman of the Board of Directors or the
president of the Corporation or by the Board of Directors.
Article 9. Registered Office. The street address of the Corporation's
-----------------
initial registered office in the State of Delaware is 1209 Orange Street, City
of Wilmington, County of New Castle, and the name of its initial registered
agent at such address is The Corporation Trust Company.
Article 10. Stockholder Meetings. Meetings of stockholders may be held
--------------------
within or without the State of Delaware, as the Bylaws may provide. The books of
the Corporation may be kept (subject to any provision contained in the statutes)
outside of the State of Delaware at such place or places as may be designated
from time to time by the Board of Directors or in the Bylaws of the Corporation.
Elections of Directors need not be by written ballot unless the Bylaws of the
Corporation shall so provide.
Article 11. Amendment of Certificate of Incorporation. The Corporation
-----------------------------------------
reserves the right to amend, alter, change or repeal any provision contained in
this Certificate of Incorporation in the manner now or hereafter prescribed by
law, and all rights and powers conferred herein on stockholders and directors
are subject to this reserved power.
-9-
<PAGE>
Article 12. Limitation on Director Liability. No director of the
--------------------------------
Corporation shall be personally liable to the Corporation or its stockholders
for monetary damages for any breach of fiduciary duty by such director as a
director, except for liability (1) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (2) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (3) under Section 174 of the DGCL for approval of an unlawful dividend or
an unlawful stock purchase or redemption, or (iv) for any transaction from which
the director derived an improper personal benefit. Any repeal or modification of
this Article 13 by the stockholders of the Corporation shall be prospective
only, and shall not adversely affect any limitation on the personal liability of
a director of the Corporation for acts or omissions occurring prior to the
effective date of such repeal or modification.
-10-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEETS AND CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 637
<SECURITIES> 1,200
<RECEIVABLES> 3,089
<ALLOWANCES> (101)
<INVENTORY> 9,707
<CURRENT-ASSETS> 13,665
<PP&E> 2,518
<DEPRECIATION> (932)
<TOTAL-ASSETS> 19,499
<CURRENT-LIABILITIES> 9,231
<BONDS> 0
1,975
0
<COMMON> 11
<OTHER-SE> 6,290
<TOTAL-LIABILITY-AND-EQUITY> 19,499
<SALES> 10,248
<TOTAL-REVENUES> 10,346
<CGS> 7,393
<TOTAL-COSTS> 2,680
<OTHER-EXPENSES> 96
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 350
<INCOME-PRETAX> (77)
<INCOME-TAX> 22
<INCOME-CONTINUING> (195)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (195)
<EPS-PRIMARY> (.17)
<EPS-DILUTED> 0
</TABLE>
