SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[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
[ ] 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 1-8191
PORTA SYSTEMS CORP.
(Exact name of registrant as specified in its charter)
Delaware 11-2203988
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
575 Underhill Boulevard, Syosset, New York
(Address of principal executive offices)
11791
(Zip Code)
516-364-9300
(Company'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 of 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 $0.01) 9,298,713 shares as of August 3, 1998
Page 1 of 14 pages
<PAGE>
PART I.- FINANCIAL INFORMATION
Item 1- Financial Statements
PORTA SYSTEMS CORP. AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in thousands)
June 30, December 31,
1998 1997
---------- ------------
(Unaudited)
Assets
Current assets:
ash and cash equivalents $ 4,877 $ 5,091
ccounts receivable, net 15,831 14,891
nventories 8,103 8,159
repaid expenses 1,703 1,266
-------- --------
Total current assets 30,514 29,407
-------- --------
Property, plant and equipment, net 4,420 4,667
Deferred computer software, net 313 543
Goodwill, net 11,828 12,059
Other assets 4,089 4,324
-------- --------
Total assets $ 51,164 $ 51,000
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Convertible subordinated debentures $ 360 $ 1,758
Current portion of senior debt 1,518 1,900
Accounts payable 4,825 5,796
Accrued expenses 7,085 8,656
Accrued interest payable 574 398
Accrued commissions 2,010 2,444
Income taxes payable 995 853
Accrued deferred compensation 1,152 1,228
Short-term loans 63 120
-------- --------
Total current liabilities 18,582 23,153
-------- --------
Senior debt 9,483 12,978
12% subordinated debentures 5,475 --
Zero coupon senior subordinated
convertible notes -- 2,796
Notes payable net of current maturities 3,084 3,084
Income taxes payable 640 649
Other long-term liabilities 513 487
Minority interest 1,115 1,040
-------- --------
Total long-term liabilities 20,310 21,034
-------- --------
Total Liabilities 38,892 44,187
-------- --------
Stockholders' equity:
Preferred stock, no par value; authorized
1,000,000 shares, none issued -- --
Common stock, par value $.01; authorized
20,000,000 shares, issued 9,298,713
and 8,644,304 shares at June 30, 1998
and December 31,1997, respectively 93 86
Additional paid-in capital 74,970 70,926
Accumulated other comprehensive loss:
Foreign currency translation adjustment (3,900) (4,027)
Accumulated deficit (56,518) (57,799)
-------- --------
14,645 9,186
Treasury stock, at cost (2,066) (2,066)
Receivable for employee stock purchases (307) (307)
-------- --------
Total stockholders' equity 12,272 6,813
-------- --------
Total liabilities and stockholders' equity 51,164 $ 51,000
======== ========
See accompanying notes to consolidated financial statements.
Page 2 of 14 pages
<PAGE>
PORTA SYSTEMS CORP. AND SUBSIDIARIES
Unaudited Consolidated Statements of Operations
(In thousands, except per share data)
Six Months Ended
June 30, June 30,
1998 1997
-------- ---------
Sales $ 30,943 $ 28,874
Cost of sales 17,622 18,095
-------- --------
Gross profit 13,321 10,779
Selling, general and administrative expenses 6,967 5,892
Research and development expenses 3,013 2,488
-------- --------
Total expenses 9,980 8,380
-------- --------
Operating income 3,341 2,399
Interest expense (1,782) (1,840)
Interest income 157 92
Other income 712 202
Debt conversion expense (945) --
-------- --------
Income before income taxes, minority interest
and extraordinary item 1,483 853
Income tax expense (200) (23)
Minority interest (76) 15
-------- --------
Income before extraordinary item 1,207 845
Extraordinary item 76 11
-------- --------
Net income $ 1,283 $ 856
======== ========
Per share data:
Basic per share amounts:
Income before extraordinary item $ 0.13 $ 0.36
-------- --------
Extraordinary item 0.01 0.00
-------- --------
Net income per share of common stock $ 0.14 $ 0.36
======== ========
Weighted average shares outstanding 9,220 2,348
======== ========
Diluted per share amounts:
Income before extraordinary item $ 0.12 $ 0.13
Extraordinary item 0.01 0.00
-------- --------
Net income per share of common stock $ 0.13 $ 0.13
======== ========
Weighted average shares outstanding 10,075 6,398
======== ========
See accompanying notes to unaudited consolidated financial statements.
Page 3 of 14 pages
<PAGE>
PORTA SYSTEMS CORP. AND SUBSIDIARIES
Unaudited Consolidated Statements of Operations
(In thousands, except per share data)
Three Months Ended
June 30, June 30,
1998 1997
-------- ---------
Sales $ 14,651 $ 16,394
Cost of sales 8,017 9,629
-------- --------
Gross profit 6,634 6,765
Selling, general and administrative
expenses 3,500 3,305
Research and development expenses 1,683 1,337
-------- --------
Total expenses 5,183 4,642
-------- --------
Operating income 1,451 2,123
Interest expense (925) (924)
Interest income 79 50
Other income 203 67
-------- --------
Income before income taxes, minority
interest and extraordinary item 808 1,316
Income tax expense (184) (9)
Minority interest (121) (60)
-------- --------
Income before extraordinary item 503 1,247
Extraordinary item -- 3
-------- --------
Net income $ 503 $ 1,250
======== ========
Per share data:
Basic per share amounts:
Income before extraordinary item $ 0.05 $ 0.56
Extraordinary item 0.00 0.00
-------- --------
Net income per share of common stock $ 0.05 $ 0.56
======== ========
Weighted average shares outstanding 9,299 2.214
======== ========
Diluted per share amounts:
Income before extraordinary item $ 0.05 $ 0.20
Extraordinary item 0.00 0.00
-------- --------
Net income per share of common stock $ 0.05 $ 0.20
======== ========
Weighted average shares outstanding 10,345 6,288
======== ========
See accompanying notes to unaudited consolidated financial statements.
Page 4 of 14 pages
<PAGE>
PORTA SYSTEMS CORP. AND SUBSIDIARIES
Unaudited Consolidated Statements of Comprehensive Income
Six Months Ended
June 30, June 30,
1998 1997
-------- --------
Net income $1,283 $ 856
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments 127 (202)
------ ------
Comprehensive income $1,410 $ 654
====== ======
Three Months Ended
June 30, June 30,
1998 1997
-------- --------
Net income $ 503 $1,250
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments (15) 140
------ ------
Comprehensive income $ 488 $1,390
====== ======
See accompanying notes to unaudited consolidated financial statements.
Page 5 of 14 pages
<PAGE>
PORTA SYSTEMS CORP. AND SUBSIDIARIES
Unaudited Consolidated Statements of Cash Flows
(In thousands)
Six Months Ended
June 30, June 30,
1998 1997
-------- --------
Cash flows from operating activities:
Net income $ 1,283 $ 856
Adjustments to reconcile net income
to net cash provided by
operating activities:
Extraordinary gain (76) (11)
Non-cash debt conversion expense 945 --
Non-cash financing expenses 228 184
Non-cash operating expenses -- 13
Write off of interest expense 304 --
Depreciation and amortization 1,080 1,582
Amortization of debt discounts 108 20
Minority interest 76 14
Changes in assets and liabilities:
Accounts receivable (940) 182
Inventories 56 (1,137)
Prepaid expenses (437) 119
Other receivables -- 31
Deferred computer software -- (13)
Other assets (68) 865
Accounts payable, accrued expenses
and other liabilities (1,873) (285)
------- -------
Net cash provided by
operating activities 686 2,420
------- -------
Cash flows from investing activities:
Proceeds from disposal of assets
held for sale, net -- 500
Capital expenditures (297) (216)
------- -------
Net cash provided by (used in)
investing activities (297) 284
------- -------
Cash flows from financing activities:
Proceeds from senior debt 6 299
Repayments of senior debt (3,883) (1,122)
Proceeds from 12% subordinated
debentures and warrants 6,000 --
Repayment of Zero coupon senior
subordinated convertible notes (2,796) --
(Repayments of) proceeds from short
term loans (57) 39
------- -------
Net cash used in financing activities (730) (784)
------- -------
Effect of exchange rate changes on cash 127 (227)
------- -------
Increase (decrease) in cash and
cash equivalents (214) 1,693
Cash and equivalents - beginning
of the year 5,091 2,584
------- -------
Cash and equivalents - end of
the period $ 4,877 $ 4,277
======= =======
Supplemental cash flow disclosures:
Cash paid for interest expense $ 1,219 $ 1,399
======= =======
Cash paid for income taxes $ 82 $ 45
======= =======
See accompanying notes to unaudited consolidated financial statements.
Page 6 of 14 pages
<PAGE>
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 1: Management's Responsibility For Interim Financial Statements Including
All Adjustments Necessary For Fair Presentation
Management acknowledges its responsibility for the preparation of the
accompanying interim consolidated financial statements which reflect all
adjustments, consisting of normal recurring adjustments, considered necessary in
its opinion for a fair statement of its consolidated financial position and the
results of its operations for the interim periods presented. These consolidated
financial statements should be read in conjunction with the summary of
significant accounting policies and notes to consolidated financial statements
included in the Company's annual report to stockholders for the year ended
December 31, 1997. Results for the first six months of 1998 are not necessarily
indicative of results for the year.
Note 2: Inventories
Inventories are valued at lower of cost or market. Inventory costs at June
30, 1998 have been computed using a standard cost system. The composition of
inventories at the end of the respective periods is as follows:
June 30, 1998 December 31,1997
------------- ----------------
(in thousands)
Parts and components $ 4,762 $ 5,349
Work-in-process 1,413 1,079
Finished goods 1,928 1,731
------- -------
$ 8,103 $ 8,159
======= =======
Note 3: 6% Convertible Subordinated Debentures and
Zero Coupon Senior Subordinated Convertible Notes
As of June 30, 1998, the Company had outstanding $360,000 of its 6%
Convertible Subordinated Debentures due July 1, 2002 ("the Debentures"), net of
original issue discount amortized to principal over the term of the debt using
the effective interest rate method, of $25,000. The face amount of the
outstanding Debentures was $385,000 at June 30, 1998.
Interest on the Debentures is payable on July 1 of each year. The interest
accrued as of June 30, 1998 amounted to $92,400. As of June 30, 1998, the
Company was in default under the provisions of the Debentures. Subsequent to
June 30, 1998, the Company remedied the default by paying the interest due
through July 1, 1998 to the paying agent.
Page 7 of 14 pages
<PAGE>
Note 4: Senior Debt
On June 30, 1998, the Company's debt to its senior lender was $14,085,000.
During the six and three months ended June 30, 1998, the Company repaid
principal of $3,877,000 and $934,000, respectively. Based on anticipated
principal payments, $1,518,000 has been classified as a current liability at
June 30, 1998.
Financial debt covenants include an interest coverage ratio measured
quarterly, limitations on the incurrence of indebtedness, limitations on capital
expenditures, and prohibitions on declarations of any cash or stock dividends or
the repurchase of the Company's stock. As of June 30,1998, the Company was in
compliance with the above covenants.
Note 5: 12% Subordinated Notes
In January 1998, the Company raised $6,000,000 from the private placement
of 60 units at $100,000 per unit. Each unit consisted of (a) the Company's 12 %
Subordinated Note due January 3, 2000 (a "12% Note"), in the principal amount of
$100,000, and (b) a Series B Common Stock Purchase Warrant (a "Series B
Warrant") to purchase 10,000 shares of Common Stock at $3.00 per share through
December 31, 2002. In the event that any 12% Note is outstanding one year from
the date on which such 12% Note is issued (the "Anniversary Date of the Note"),
the Company shall issue to the holder of such 12% Note on the Anniversary Date
of the Note a Series C Warrant to purchase 25 shares of Common Stock for each
$1,000 principal amount of 12% Notes outstanding on the Anniversary Date of the
Note. The Series C Warrant will have an exercise price equal to the average
closing prices of the Common Stock on each of the five trading days preceding
the Anniversary Date of the Note with respect to which the Series C Warrant is
being issued and will expire on December 31, 2003. The proceeds from the sale of
the Units was used principally to pay the remaining principal amount of Zero
Coupon Notes which had not been converted of $2,796,000 (note 3) and to reduce
the Company's senior debt by approximately $2,950,000 (note 4). The balance of
such proceeds was added to working capital. The Series B and Series C Warrants
were valued at $630,000 and were recorded as part of additional paid in capital.
Accordingly, the Company recorded the net 12% Note at a value of $5,370,000. In
connection with the private placement of these units, the Company issued to its
investment banking firm 120,000 shares of common stock.
Note 6: Receivable for Employee Stock Purchases
During the quarter ended June 30, 1998, the Board of Directors approved
the exchange of certain notes receivable issued by current and former employees
of the Company for the common stock of the Company which is held as collateral
for these notes. The notes were issued as payment for the shares pursuant to the
1984 compensation plan. It is anticipated that this transaction will close
during the quarter ended September 30, 1998. The exchange of the shares of the
Company's common stock as full payment of the employee notes will have only an
effect on the Company's balance sheet as a reclassification of equity.
Page 8 of 14 pages
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The Company's consolidated statements of operations for the periods
indicated below, shown as a percentage of sales, are as follows:
Six Months Ended Three Months Ended
June 30, June 30,
1998 1997 1998 1997
------ ------ ------ ------
Sales 100% 100% 100% 100%
Cost of Sales 57% 63% 55% 59%
Gross Profit 43% 37% 45% 41%
Selling, general and administrative
expenses 22% 20% 24% 20%
Research and development expenses 10% 9% 11% 8%
Operating income 11% 8% 10% 13%
Interest expense - net (5%) (6%) (6%) (5%)
Other income 2% 1% 1% 0%
Debt conversion expense (3%) 0% 0% 0%
Minority interest 0% 0% (1%) 0%
Income taxes (1%) 0% (1%) 0%
Extraordinary item 0% 0% 0% 0%
Net income 4% 3% 3% 8%
The Company's sales by product line for the periods ended June 30, 1998
and 1997 are as follows:
Six Months Ended
June 30,
1998 1997
---- ----
(Dollars in thousands)
Line connection/protection
equipment ("Line connection") $10,600 34% $13,347 46%
Operations Support Systems ("OSS") 15,743 51% 11,302 39%
Signal Processing 4,520 15% 3,942 14%
Other 80 0% 283 1%
----------- -----------
$30,943 100% $28,874 100%
=========== ===========
Three Months Ended
June 30,
1998 1997
---- ----
(Dollars in thousands)
Line connection $ 5,830 40% $ 6,552 40%
OSS 6,570 45% 7,310 45%
Signal Processing 2,195 15% 2,339 14%
Other 53 0% 193 1%
----------- -----------
$14,651 100% $16,394 100%
=========== ===========
Page 9 of 14 pages
<PAGE>
Results of Operations
The Company's sales for the six months ended June 30, 1998 compared to the
six months ended June 30, 1997 increased $2,069,000 (7%) from $28,874,000 in
1997 to $30,943,000 in 1998. Sales for the quarter ended June 30, 1998 of
$14,651,000 decreased by $1,743,000 (11%) compared to $16,394,000 for the
quarter ended June 30, 1997. The increased sales for the six month period is due
to higher revenue from the OSS and Signal Processing divisions for that period.
The decrease for the three month period is due to a decline sales from all
divisions for that period.
The line connection equipment sales for the six months ended June 30
decreased from $13,347,000 to $10,600,000, or $2,747,000 (21%) from 1997 to
1998. Sales for the three months ended June 30 decreased by $722,000 (11%) from
$6,552,000 in 1997 to $5,830,000 in 1998. The decrease for both the six and
three months ended June 30, 1998 reflects changes in the product mix and reduced
unit purchases from the Company's largest customer, British Telecommunications
plc ("BT"). During 1997, the Company amended an agreement to supply certain line
connection/protection equipment to BT, which included certain new products. The
amended agreement resulted in a lower selling price for existing products and
prices that resulted in a reduced gross margin for new products. Sales to BT
during the six and three months of 1997 were made pursuant to the old agreement,
while the amended agreement applied to sales in the 1998 periods. In addition,
the number of units purchased by BT declined in the three and six months ended
June 30, 1998 from the comparable periods of 1997. Orders for line
connection/protection equipment from BT remain at the reduced rate. The decline
in sales to BT was somewhat offset by increased sales of Line connection
equipment in the United States and Mexico.
OSS revenue for the six months ended June 30, 1998 was $15,743,000
compared to the six months ended June 30, 1997 of $11,302,000 an increase of
$4,441,000 (39%). OSS revenue for the three months ended June 30, 1998 was
$6,570,000 compared to the three months ended June 30, 1997 of $7,310,000, a
decrease of $740,000 (10%) due to a delay in securing an anticipated OSS
contract. The increased sales during the six months ended June 30, 1998 resulted
from the attainment of certain milestones on OSS contracts which are accounted
for using a percentage of completion method. Furthermore, OSS sales during the
first quarter of 1997 were at a reduced level since certain contract milestones
were attained later in the year, resulting in recognition of revenue at such
later time.
Signal Processing sales for the six months ended June 30, 1998 were
$4,520,000 compared to the six months ended June 30, 1997 of $3,942,000, an
increase of $578,000 (15%). Sales for the three months ended June 30, 1998 were
$2,195,000 compared to the three months ended June 30, 1997 of $2,339,000, a
decrease of $144,000 (6%). The increased revenue for the six month period
reflects shipments on multiple year sales orders to certain military customers
which were secured during the latter part of 1997. The decrease in sales for the
three month period reflects delays by customers in placing sales orders.
Cost of sales for the six months and the quarter ended June 30, 1998, as a
percentage of sales compared to the same periods of 1997, decreased from 63% to
57% and from 59% to 55%, respectively. The improvement in gross margin is
attributed to the Company's continuing effort to increase manufacturing
productivity, the sales product mix and the associated higher gross margin, and
the absorption of certain fixed expenses associated with the OSS contracts.
Page 10 of 14 pages
<PAGE>
Results of Operations (continued)
Selling, general and administration expenses increased by $1,075,000 (18%)
from $5,892,000 to $6,967,000 for the six months ended June 30, 1998 compared to
1997. The increase from 1997 to 1998 for the six months reflects higher sales
commissions, primarily on OSS contracts, based upon the increased revenues for
the first six months of 1998. For the quarter ended June 30, 1998 and 1997
selling, general and administration expenses increased by $195,000 (6%). This
increase relates primarily to the Company's efforts to increase its sales and
marketing effectiveness in order to secure future business.
Research and development expenses increased by $525,000 (21%) and by
$346,000 (26%) for the six and three months ended June 30, 1998 from the
comparable periods in 1997, respectively. The increased expenses results from
the Company's efforts to develop new products, primarily related to the OSS
business.
As a result of the above, for the six months ended June 30, 1998 compared
to 1997, the Company had operating income of $3,341,000 in 1998 versus
$2,399,000 in 1997. The Company had an operating income of $1,451,000 for the
quarter ended June 30, 1998 as compared to $2,123,000 for the quarter ended June
30, 1997.
Other income for the six months ended June 30, 1998 includes $400,000 from
the settlement of litigation and $167,000 of additional funds received from the
settlement of the sale of the Israeli business.
During the six months ended June 30 ,1998, the Company recorded debt
conversion expense of $945,000 as a result of the conversion of Zero Coupon
Notes and 6% Convertible Subordinated Debentures to common stock.
Income tax expense increased for the six months ended June 30, 1998
compared to 1997 by $177,000 from $23,000 to $200,000 and for the three months
ended June 30, 1998 compared to 1997 by $175,000 from $9,000 to $184,000 due to
the limitation of the Company's NOL carryforwards.
As the result of the foregoing the Company generated net income after
extraordinary items of $1,283,000, $0.13 per share (basic) and $0.12 per share
(diluted) for the six months ended June 30, 1998 compared with net income after
extraordinary items of $856,000, $0.36 per share (basic) and $0.13 per share
(diluted), for the six months ended June 30, 1997. Net income for the three
months ended June 30, 1998 was $503,000, $0.05 per share (basic and diluted),
compared with net income for the three months ended June 30, 1997 of $1,250,000,
$0.56 per share (basic) and $0.20 per share (diluted).
Page 11 of 14 pages
<PAGE>
Liquidity and Capital Resources
At June 30, 1998 the Company had cash and cash equivalents of $4,877,000
compared with $5,091,000 at December 31, 1997. The Company's working capital at
June 30, 1998 was $11,932,000, compared to working capital of $6,254,000 at
December 31, 1997. The improved working capital reflects (i) increased accounts
receivable (ii) reduced balance of the 6% Debentures and (iii) lower balances of
accounts payable, accrued expenses and accrued commissions.
As of June 30, 1998, the Company's loan and security agreement with its
senior secured lender, which expires August 1999, provided the Company, under
its revolving line of credit and its letter of credit facility, with combined
availability totaling $9,000,000. In addition, the Company has $11,001,000
outstanding as of June 30, 1998 under a term loan agreement. Prior to the
expiration of its agreement with its senior lender, the Company will require
either an extension of such agreement or secure a comparable agreement with
another lender. No assurance can be give as to the ability of the Company to
obtain such an extension or alternative financing.
Year 2000 Issue
Many existing computer programs use only two digits to identify a year in
a date field. These programs were designed and developed without considering the
impact of the upcoming change in the century. If not corrected, many computer
applications could fail or create erroneous results by or at the year 2000. This
is referred to the as the "Year 2000 Issue." Management has initiated a Company
wide program to prepare the Company's computer systems and applications for year
2000 compliance including potential obligations to update its customer's systems
to the extent required under their contracts. The Company expects to incur
internal staff costs as well as other expenses necessary to prepare its systems
for the year 2000. The Company expects to both replace some systems and upgrade
others. Maintenance or modification costs will be expensed as incurred. The
total cost of this effort is still being evaluated, but is not expected to be
material to the Company.
Forward Looking Statements
Statements contained in this Form 10-Q include forward-looking statements
that are subject to risks and uncertainties. Actual results could differ
materially from those currently anticipated due to a number of factors,
including those identified in this Form 10-Q, the Company's Annual Report on
From 10-K for the year ended December 31, 1997 and in other documents filed by
the Company with the Securities and Exchange Commission.
Page 12 of 14 pages
<PAGE>
PART II- OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
The Company's 1998 Annual Meeting of Stockholders was held on June 23,
1998. At the annual meeting, the stockholders (i) reelected its present board,
consisting of Messrs. William V. Carney, Seymour Joffe, Michael A. Tancredi,
Howard D. Brous, Warren H. Esanu, Herbert H. Feldman, Stanley Kreitman, Lloyd I.
Miller, III and Robert Schreiber and (ii) ratified the appointment of BDO
Seidman, LLP as independent auditors for the year ended December 31, 1998.
Each director received at least 7,648,532 votes for his election. Set
forth below is the vote on the other matters approved at the meeting.
Matter Votes for Votes Against Abstentions
Appointment of
Auditors 7,645,145 19,591 7,321
Page 13 of 14 pages
<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.
PORTA SYSTEMS CORP.
Dated August 11, 1998 By /s/ William V. Carney
------------------------------
William V. Carney
Chairman of the Board
Dated August 11, 1998 By /s/ Edward B. Kornfeld
------------------------------
Edward B. Kornfeld
Senior Vice President
and Chief Financial Officer
Page 14 of 14 pages
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 4,877
<SECURITIES> 0
<RECEIVABLES> 15,831
<ALLOWANCES> 0
<INVENTORY> 8,103
<CURRENT-ASSETS> 30,514
<PP&E> 4,420
<DEPRECIATION> 0
<TOTAL-ASSETS> 51,164
<CURRENT-LIABILITIES> 18,582
<BONDS> 0
0
0
<COMMON> 93
<OTHER-SE> 12,179
<TOTAL-LIABILITY-AND-EQUITY> 51,164
<SALES> 30,943
<TOTAL-REVENUES> 30,943
<CGS> 17,622
<TOTAL-COSTS> 9,980
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,782
<INCOME-PRETAX> 1,483
<INCOME-TAX> 200
<INCOME-CONTINUING> 1,207
<DISCONTINUED> 0
<EXTRAORDINARY> 76
<CHANGES> 0
<NET-INCOME> 1,283
<EPS-PRIMARY> 0.14
<EPS-DILUTED> 0.13
</TABLE>
