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 September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ___________________ to _____________________
Commission file number 1-2723
ATHEY PRODUCTS CORPORATION
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware 36-0753480
- --------------------------------------------------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
1839 South Main Street, Wake Forest, NC 27587-9289
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(Registrant's telephone number, including area code) 919-556-5171
- --------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year,
If Changed Since Last Report)
Indicate by check mark (a) a 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 that the registrant was
required to file such reports), and (2) has shorter period been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark (a) whether the registrant has filed all documents
and reports required to be filed by Sections 12,13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes [ ] No [ ]
Number of $2.00 par value Common Shares Outstanding as of September 30, 1998:
3,805,608
<PAGE>
ATHEY PRODUCTS CORPORATION
I N D E X
Page
Number
------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets as of September 30, 1998 (unaudited) and
December 31, 1997. 3 - 4
Statements of Operations for the nine
months ended September 30, 1998 (unaudited)
and September 30, 1997 (unaudited). 5
Statements of Operations for the three months ended
September 30, 1998 (unaudited) and September 30, 1997
(unaudited). 6
Statements of Cash Flows for the nine months ended
September 30, 1998 (unaudited) and
September 30, 1997 (unaudited). 7
Notes to Financial Statements. 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9 - 14
PART II. OTHER INFORMATION 15 - 16
2
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
ATHEY PRODUCTS CORPORATION
BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
September 30, 1998 December 31,1997
--------------------- --------------------
<S> <C> <C>
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 3,847,872 $ 6,880
Accounts receivable (less allowances for
doubtful accounts of $225,000 and $200,000 for 1998
and 1997, respectively) 2,724,272 2,865,872
Inventories 16,154,410 18,108,545
Prepaid expenses 143,832 357,828
Refundable income taxes - 749,045
Deferred income taxes - 227,072
---------------------------------------------
Total current assets 22,870,386 22,315,242
---------------------------------------------
OTHER ASSETS:
Marketable securities - 1,681,224
Other 26,586 26,586
---------------------------------------------
Total other assets 26,586 1,707,810
---------------------------------------------
PROPERTY, PLANT AND EQUIPMENT:
Land and land improvements 47,785 47,785
Buildings 3,796,170 3,777,922
Machinery and equipment 5,941,140 5,606,727
---------------------------------------------
9,785,095 9,432,434
Less accumulated depreciation (6,127,990) (5,790,493)
---------------------------------------------
Total property, plant and equipment net 3,657,105 3,641,941
---------------------------------------------
$ 26,554,077 $ 27,664,993
=============================================
</TABLE>
See notes to financial statements.
3
<PAGE>
ATHEY PRODUCTS CORPORATION
BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
September 30, 1998 December 31, 1997
--------------------- ---------------------
<S> <C> <C>
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Short-term borrowing $ 4,236,000 $ -
Excess of outstanding checks over bank balance 252,512 949,800
Current portion of obligations under capital lease - 14,507
Accounts payable 1,067,649 1,518,743
Employee compensation and amounts withheld 337,585 217,755
Other accrued expenses 36,241 129,917
Warranty reserve 1,823,242 1,276,000
--------------------- ---------------------
Total current liabilities 7,753,229 4,106,722
--------------------- ---------------------
NONCURRENT LIABILITIES:
Deferred income taxes - 476,904
--------------------- ---------------------
Total noncurrent liabilities - 476,904
--------------------- ---------------------
SHAREHOLDERS' EQUITY:
Common stock, par value $2 per share:
Authorized 10,000,000 shares;
Issued 4,020,459 shares 8,040,918 8,040,918
Additional paid-in capital 16,218,394 16,218,394
Retained earnings (deficit) (4,529,906) (734,798)
Unrealized gain on marketable securities
available-for-sale, net of related tax effect - 485,411
Less cost of 214,851 common shares
in treasury (928,558) (928,558)
--------------------- ---------------------
Total shareholders' equity 18,800,848 23,081,367
--------------------- ---------------------
$ 26,554,077 $ 27,664,993
===================== =====================
</TABLE>
See notes to financial statements.
4
<PAGE>
ATHEY PRODUCTS CORPORATION
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
September 30, 1998 September 30, 1997
---------------------- ---------------------
<S> <C> <C>
(Unaudited) (Unaudited)
NET SALES $ 21,156,151 $ 22,661,881
Cost of goods sold 21,666,561 17,473,509
---------------------- ---------------------
Gross profit (loss) (510,410) 5,188,372
Selling, administrative and engineering expenses 5,338,885 5,177,010
---------------------- ---------------------
Earnings (loss) from operations (5,849,295) 11,362
Other income 2,191,835 24,379
Other expenses (137,420) (92,482)
---------------------- ---------------------
Loss before income tax expense (3,794,880) (56,741)
Income tax expense 228 249,958
---------------------- ---------------------
NET LOSS $ (3,795,108) $ (306,699)
====================== =====================
NET LOSS PER SHARE $ (1.00) $ (0.08)
====================== =====================
WEIGHTED AVERAGE SHARES
OUTSTANDING 3,805,608 3,809,535
====================== =====================
</TABLE>
See notes to financial statements.
5
<PAGE>
ATHEY PRODUCTS CORPORATION
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
September 30, 1998 September 30, 1997
------------------------ -----------------------
<S> <C> <C>
(Unaudited) (Unaudited)
NET SALES $ 6,063,090 $ 8,692,123
Cost of goods sold 8,778,402 6,966,117
---------- ---------
Gross profit (loss) (2,715,312) 1,726,006
Selling, administrative and engineering expenses 1,959,591 1,505,128
---------- ---------
Earnings (loss) from operations (4,674,903) 220,878
Other income 82,805 9,262
Other expenses (84,847) (56,963)
-------- --------
Earnings (loss) before income tax expense (benefit) (4,676,945) 173,177
Income tax expense (benefit) 39,377 (29,368)
------- --------
NET EARNINGS (LOSS) $ (4,716,322) $ 202,545
==================== =======================
NET EARNINGS (LOSS) PER SHARE $ (1.24) $ 0.05
==================== =======================
WEIGHTED AVERAGE SHARES
OUTSTANDING 3,805,608 3,805,608
==================== =======================
</TABLE>
See notes to financial statements.
6
<PAGE>
ATHEY PRODUCTS CORPORATION
STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
September 30,1998 September 30,1997
---------------------- ------------------------
<S> <C> <C>
(Unaudited) (Unaudited)
OPERATING ACTIVITIES:
Net earnings (loss) $ (3,795,108) $ (306,699)
Adjustments to reconcile net earnings
(loss) to net cash used in operating activities:
Depreciation and amortization 337,497 349,006
Provision for doubtful acounts 25,000 -
Provision for deferred income tax 230 (86,172)
Gain on sale of marketable securities (2,095,965) -
Changes in operating assets and liabilities:
Accounts receivable 116,600 (247,549)
Insurance settlement receivable - 564,380
Inventories 1,954,135 (1,895,785)
Prepaid expenses 213,996 440,895
Refundable income taxes 749,045 453,762
Other assets - 5,423
Accounts payable (451,094) (2,149,363)
Employee compensation and amounts withheld 119,830 (88,874)
Other accrued expenses (93,676) (205,170)
Warranty reserve 547,242 605,120
------------------ ------------------------
Net cash used in operating activities (2,372,268) (2,561,026)
------------------ ------------------------
INVESTING ACTIVITIES:
Purchase of plant equipment (352,661) (370,348)
Proceeds from sale of marketable securities 3,041,716 -
------------------ ------------------------
Net cash provided by (used in) investing
activities 2,689,055 (370,348)
------------------ ------------------------
FINANCING ACTIVITIES:
Proceeds from line of credit 12,472,000 12,551,000
Repayment of line of credit (8,236,000) (9,819,000)
Excess of outstanding checks over bank balance (697,288) 469,112
Principal paid on obligations under capital lease (14,507) (32,099)
Purchase of common stock for treasury - (237,743)
------------------ ------------------------
Net cash provided by financing activities 3,524,205 2,931,270
------------------ ------------------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 3,840,992 (104)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 6,880 6,984
------------------ ------------------------
CASH AND CASH EQUIVALENTS
END OF PERIOD $ 3,847,872 $ 6,880
================== ========================
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid $ 115,658 $ 78,680
================== ========================
</TABLE>
See notes to financial statements.
7
<PAGE>
ATHEY PRODUCTS CORPORATION
NOTES TO FINANCIAL STATEMENTS
I. The condensed financial statements included herein have been prepared by
Athey Products Corporation (the "Company"), without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations; however, the Company believes that the disclosures are
adequate to make the information presented not misleading. The Management
Discussion and Analysis of Financial Condition and Results of Operations
which follows contains additional information concerning the results of
operations and the financial position of the Company. These notes should
be read in conjunction with that discussion. In addition, it is suggested
that these financial statements be read in conjunction with the financial
statements and the notes thereto included in the Company's latest annual
report on Form 10-K for the year ended December 31, 1997.
II. The financial information reflects all adjustments, which are, in the
opinion of Management, necessary to a fair presentation of the results for
the interim period presented.
III. Earnings (loss) per share amounts are computed on the basis of the
weighted average number of shares outstanding during the nine months
period, which were 3,805,608 and 3,809,535 in 1998 and 1997, respectively.
Certain 1997 financial statement amounts have been reclassified to conform
with the 1998 presentation with no effect on net income.
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
condition and Results of Operations.
RESULTS OF OPERATIONS
Significant Events Affecting Comparability
The comparability of statement of operations data has been affected by the
following significant items.
o In June 1997, the Company recognized pretax net periodic pension income
under FASB No. 88 of $1,308,200 on the reversion of assets due to the
termination of the pension plan. Approximately $565,227 of this amount
resulted in a reduction in cost of goods sold and approximately
$742,973 of this amount resulted in a reduction in selling,
administrative and engineering expenses. However, this favorable impact
on selling, administrative and engineering expenses was partially
offset by a $369,044 increase in excise tax expense associated with the
termination of the pension plan. The effect was a decrease in net loss
after tax of $619,843 or $ .16 per share, for the first nine months of
1997.
o In May 1998, the Company sold its marketable securities for $3,041,716.
This sale resulted in a pre-tax gain of $2,095,965. The effect was an
increase in net earnings after tax of $1,383,337 or $.36 per share, for
the first nine months of 1998.
9
<PAGE>
Nine Months Ended September 30, 1998
as compared to
Nine Months Ended September 30, 1997
The Company's net sales for the nine months ended September 30, 1998 were
$21,156,151, a 6.6% or $1,505,730 decrease from the $22,661,881 recorded for the
same period in 1997. The sales decline reflects a 12.8% decrease in the number
of sweepers shipped during the period as compared to the same period for 1997.
This volume decline in sweeper shipments was partially offset by an 8.8%
increase in replacement parts sales. The decline in sweeper shipments was
primarily attributable to production inefficiencies resulting from delays in
receiving manufactured parts.
Cost of goods sold as a percentage of net sales was 102.4% for the nine months
ended September 30, 1998 as compared to 77.1% during the same period for 1997.
Cost of goods sold in the third quarter of 1998 was significantly impacted by
approximately $2,347,000 in various inventory-related adjustments. Such
adjustments consisted of the following: (i) approximately $759,000 charged as a
result of the Company's annual physical inventory taken at the end of September;
(ii) approximately $755,000 relating to production inefficiencies noted above;
(iii) approximately $421,000 relating to an increase in the reserve for obsolete
inventories based on the Company's ongoing review of future production
requirements; and (iv) approximately $412,000 relating to the annual adjustment
to net realizable value of the Company's used finished goods and demonstration
fleet comprised of approximately 30 units. In 1997 these physical inventory
adjustments, which amounted to $1,525,000, were recorded in the Fourth Quarter
1997. The cost of goods sold in the 1997 period was favorably impacted by the
$565,227 pre-tax net periodic pension income relating to the termination of the
pension plan. Excluding this item, cost of goods sold in 1997 would have been
$18,038,736 or 79.6%.
The Company has already implemented several major upgrades to its information
systems, particularly with regard to its inventory controls, and is currently in
the process of implementing a Materials Requirements Planning ("MRP") system
which will improve the Company's ability to monitor inventory movement and
reduce production order lead times. The full implementation of this MRP system
will be completed in the second quarter of 1999.
10
<PAGE>
The Company's selling, administrative and engineering expenses increased
$161,875 for the first nine months in the current year as compared with the
prior year period, from $5,177,010 or 22.8% of net sales, to $5,338,885 or 25.2%
of net sales. Selling, administrative and engineering expenses in the 1997
period had been favorably impacted by the $742,973 pre-tax net periodic pension
income relating to the termination of the pension plan. However, this favorable
impact in 1997 was partially offset by a $369,044 increase in excise tax expense
associated with the termination of the pension plan. Excluding these items,
selling, administrative and engineering expenses would have been $5,550,939 or
24.5% of net sales for the 1997 period. Excluding the impact of the plan
termination and related excise tax, the decline in selling, administrative, and
engineering expenses was primarily attributable to lower warranty expenses in
1998 as a result of increases in warranty reserves during 1997.
Other income for the 1998 period was $2,191,835 as compared to $24,379 recorded
in the same period for 1997. Included in other income for 1998 was a gain of
$2,095,965 on the sale of marketable securities. The remaining increase is
primarily due to additional interest income earned on the proceeds from the sale
of the marketable securities.
Other expenses for the first nine months of 1998 were $137,420 as compared to
$92,482 recorded for the first nine months of 1997. This increase in other
expenses for the first nine months of 1998 is related to increased interest
expense associated with larger borrowings under the Company's line of credit.
Income tax expense (benefit) for the comparable periods of 1998 and 1997 varies
from the customary relationship of 34% primarily due to changes in the Company's
valuation reserve allowance against recorded deferred tax assets.
The net loss after tax for the nine months ended September 30, 1998, was
$3,795,108 or $1.00 per share, as compared to a net loss after tax of $306,699
or $.08 per share recorded in 1997, principally as a result of the factors noted
above.
11
<PAGE>
Three Months Ended September 30, 1998 ("Third Quarter 1998")
as compared to
Three Months Ended September 30, 1997 ("Third Quarter 1997")
The Company's net sales for the Third Quarter 1998 were $6,063,090, representing
a $2,629,033 or 30.3% decrease from net sales of $8,692,123 in the Third Quarter
1997. This sales decrease is attributable to a 36.8% decline in number of units
shipped as well as a 6.6% decline in replacement parts sales. The Third Quarter
1998 decline in sweeper shipments was attributable to the continued production
inefficiencies resulting from delays in receiving manufactured parts noted
above. While replacement parts sales have increased slightly for the nine-month
period, such sales declined in the Third Quarter 1998 compared to the Third
Quarter 1997 due to the timing of customer orders.
Cost of goods sold as a percentage of net sales was 144.8% in the Third Quarter
1998 as compared to 80.1% in the Second Quarter 1997. In addition to the Third
Quarter 1998 inventory adjustments discussed above, cost of goods sold in the
Third Quarter 1998 was negatively impacted compared to the Third Quarter 1997
due to a decrease in the number of units shipped.
The Company's selling, administrative, and engineering expenses increased in the
Third Quarter 1998 by $454,463 from $1,505,128 or 17.3% of net sales for the
Third Quarter 1997, to $1,959,591 or 32.3% of net sales. This increase is
attributable to higher warranty expenses in the Third Quarter 1998 compared to
the Third Quarter 1997.
Other income for the Third Quarter 1998 was $82,805 as compared to $9,262
recorded in the Third Quarter 1997. This increase is attributable to higher
interest income earned on the proceeds from the sale of the marketable
securities.
Other expenses for the Third Quarter 1998 were $84,847 as compared to $56,963
recorded in the Third Quarter 1997. This increase in other expenses for the
Third Quarter 1998 is related to increased interest expense associated with the
borrowings under the Company's line of credit.
The income tax benefit for the Third Quarter 1998 and Third Quarter 1997 varies
from the customary relationship of 34% primarily due to changes in the Company's
valuation reserve allowance against recorded deferred tax assets.
The net loss after tax for the three months ended September 30, 1998 was
$4,716,322 or $1.24 per share, as compared to a net gain of $202,545 or $.05 per
share for the three months ended September 30, 1997, due to the factors noted
above.
12
<PAGE>
Effects of Inflation
The Company attempts to minimize the impact of inflation on production and
operating costs through cost control programs and productivity improvements.
Over the past three years, the rate of inflation has not had a significant
impact on the Company's operations. Prices paid for raw materials and other
manufacturing inputs have remained fairly stable throughout this period. On a
longer-term basis, the Company has demonstrated an ability to adjust the selling
prices of its products in reaction to changing costs.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1998 the Company had working capital of $15,117,157; the ratio
of current assets to current liabilities was 2.9 to 1; and the debt to equity
ratio was .41 to 1. A $3,840,992 increase in the Company's cash position was due
to the sale of marketable securities, the receipt of 1997 tax refunds and
$4,236,000 of borrowings under the Company's line of credit.
This compares to working capital of $18,208,520; a ratio of current assets to
current liabilities of 5.4 to 1; and a debt to equity ratio of .20 to 1 at
December 31, 1997.
As part of its authorized stock repurchase program, the Company used $237,743
for financing activities in 1997 to repurchase its common stock. There were no
stock repurchases in 1998.
The Company generally relies upon internally generated funds to satisfy working
capital requirements and to fund capital expenditures. The Company had available
an unsecured line of credit of $5,000,000 of which $4,236,000 had been utilized
at September 30, 1998. The Company is currently in discussions with its lenders
regarding potential alternative financing arrangements to provide additional
support to the Company's cash flow needs for operations and capital
expenditures. No assurances can be given, however as to whether such alternative
arrangements will be available on commercially acceptable terms.
13
<PAGE>
Year 2000 Compliance
The Company completed an assessment of its Year 2000 issues in the first quarter
of 1998 and determined that most of the Company's internal computer systems were
not Year 2000 ready. The Company determined that maintenance of older systems
had become expensive enough to justify replacement.
Much of the Company's computer equipment had originally been leased through July
1998. New equipment leases with IBM, Sprint, and Dell were entered into in
July-August of 1998 and new equipment installed. The new equipment is
represented by the manufacturers to be Year 2000 compliant, and improve the
functionality and performance of the Company's computer network.
In the second quarter of 1998, a new network infrastructure consisting of a
fiber optic backbone, cabling, hubs, switches and routers, was installed at the
Company's corporate office. The cost of the infrastructure upgrade was
approximately $16,000, excluding leased equipment. The new components of the
network infrastructure are Year 2000 ready.
The Company completed an upgrade to Year 2000 ready systems in August 1998.
System software, including the Company's core business systems for financial,
sales, manufacturing, purchasing, and engineering, are Year 2000 ready. The
Company upgraded its computer-aided drafting software (AutoCAD) to the latest
version, which is Year 2000 ready. All standard office software is Year 2000
ready. Network and client operating systems are Year 2000 ready. The Company has
obtained documentation from software manufacturers for all such software in use
by the Company to verify such compliance.
The Industrial Engineering Department has reviewed the manufacturing and tooling
equipment in use by the Company for Year 2000 compliance. Management believes
that all systems requiring an upgrade or patch have been addressed and that
there are no outstanding issues for such equipment. The Engineering Department
has reviewed all parts and components of the Company's manufactured trucks and
concluded that, in its view, that no Year 2000 issues exist that will effect the
Company.
The Company has reviewed all information technology equipment and related
systems. As of the release of this document, Management believes that only one
system remains that is not Year 2000 ready, the telephone system's Call
Accounting system. The Company has a contract with the service provider, Sprint.
Sprint advised that a patch or upgrade will be available by the first quarter of
1999 for this system, and that there is no additional cost for this upgrade
since the Company maintains a service contract on this system.
14
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. None.
Item 2. Changes in Securities. None.
Item 3. Defaults upon Senior Securities. None.
Item 4. Submission of Matters to a Vote of Security Holders.
The substitute annual meeting of shareholders for the Company was held
on July 30, 1998, at which meeting the following matters were voted on
by the shareholders:
(i) Set the number of directors at six ( 3,255,840 for, 0 against, and
26,900 abstaining) and Election of Directors
Name Votes For Votes Abstaining
---- --------- ----------------
John F. McCullough 3,255,920 26,820
Martin W. McCullough 3,255,840 26,900
Richard A. Rosenthal 3,263,564 19,176
John P. Kelly 3,263,148 19,592
Wes O. Brant 3,263,238 19,502
Thomas N. Nelson 3,263,238 19,502
(ii) Ratification of the Appointment of Auditors
Votes For Votes Against Votes Abstaining
--------- ------------- and Broker Non-Votes
--------------------
3,276,323 3,288 3,129
Item 5. Other Information. None.
Item 6. Exhibits and Reports on Form 8-K.
(a) No exhibits have been filed as part of this Report.
(b) No reports on Form 8-K have been filed during the Third Quarter
1998.
15
<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.
ATHEY PRODUCTS CORPORATION
ATHEY PRODUCTS CORPORATION
Date: November 16, 1998 /s/ Wes O. Brant
- ------------------------ -------------------------------
Wes O. Brant
Vice-President and Chief Operating Officer
Date: November 16, 1998 /s/ Eugene R. Gardner
- ------------------------ -------------------------------
Eugene R. Gardner
Controller
16
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 3,847,872
<SECURITIES> 0
<RECEIVABLES> 2,949,272
<ALLOWANCES> 225,000
<INVENTORY> 16,154,410
<CURRENT-ASSETS> 22,870,386
<PP&E> 9,785,095
<DEPRECIATION> 6,127,990
<TOTAL-ASSETS> 26,554,077
<CURRENT-LIABILITIES> 7,753,229
<BONDS> 0
0
0
<COMMON> 8,040,918
<OTHER-SE> 10,759,930
<TOTAL-LIABILITY-AND-EQUITY> 26,554,077
<SALES> 21,156,151
<TOTAL-REVENUES> 0
<CGS> 21,666,561
<TOTAL-COSTS> 5,338,885
<OTHER-EXPENSES> 137,420
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 115,658
<INCOME-PRETAX> (3,794,880)
<INCOME-TAX> 228
<INCOME-CONTINUING> (3,795,108)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,795,108)
<EPS-PRIMARY> (1.00)
<EPS-DILUTED> 0
</TABLE>
