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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED SEPTEMBER 30, 1999 COMMISSION FILE NO. 1-9502
STAGE II APPAREL CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEW YORK 13-3016967
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1385 BROADWAY
NEW YORK, NEW YORK 10018
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code: (212) 840-0880
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
TITLE OF CLASS OUTSTANDING AT OCTOBER 31, 1999
Common Stock 4,109,267
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STAGE II APPAREL CORP.
INDEX
<TABLE>
<CAPTION>
Page
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<S> <C>
PART I. FINANCIAL INFORMATION
Condensed Consolidated Balance Sheets - September 30, 1999 (unaudited) and December 31, 1998 ............... 2
Condensed Consolidated Statements of Operations - Three Months and Nine Months Ended
September 30, 1999 and 1998 (unaudited) ................................................................. 3
Consolidated Statements of Comprehensive Income (Loss) -- Three Months and Nine Months Ended
September 30, 1999 and 1998 (unaudited) ................................................................. 4
Condensed Consolidated Statements of Cash Flows - Nine Months Ended
September 30, 1999 and 1998 (unaudited) ................................................................. 5
Notes to Condensed Consolidated Financial Statements ....................................................... 6
Management's Discussion and Analysis of Financial Condition and Results of Operations ...................... 7
PART II. OTHER INFORMATION ................................................................................ 11
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
STAGE II APPAREL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SEPT. 30, DEC. 31,
1999 1998
--------- ---------
<S> <C> <C>
ASSETS: (UNAUDITED)
Current assets:
Cash and cash equivalents........................................................ $ 840 $ 992
Accounts receivable.............................................................. 200 103
Finished goods inventory......................................................... 1,986 2,855
Prepaid expenses................................................................. 44 54
--------- ---------
Total current assets........................................................... 3,070 4,004
Property and equipment, at cost, less accumulated depreciation..................... 49 86
Marketable securities.............................................................. 576 388
Goodwill, less accumulated amortization and impairment of $7,946 at
September 30, 1999 and $7,821 at December 31, 1998, respectively................. 1,668 1,793
Other assets....................................................................... 796 529
--------- ---------
TOTAL ASSETS..................................................................... $ 6,159 $ 6,800
========= =========
LIABILITIES:
Current liabilities
Due to factor.................................................................... $ 1,662 $ 2,331
Accounts payable................................................................. 1,070 1,031
Due to affiliate................................................................. -- 26
Accrued royalties................................................................ 7 80
Other current liabilities........................................................ 67 301
--------- ---------
Total current liabilities...................................................... 2,806 3,769
--------- ---------
TOTAL LIABILITIES................................................................ 2,806 3,769
--------- ---------
SHAREHOLDERS' EQUITY:
Preferred stock, $.01 par value, 1,000 shares authorized;
none issued and outstanding...................................................... --- ---
Common stock, $.01 par value, 9,000 shares authorized; 4,999 shares issued;
4,109 shares outstanding at September 30, 1999 and 3,904 shares outstanding
at December 31, 1998............................................................. 50 50
Additional paid-in capital......................................................... 7,357 7,502
Accumulated deficit................................................................ (2,177) (2,221)
--------- ---------
5,230 5,331
Less treasury stock, at cost; 889 shares at September 30, 1999 and 1,089 shares
at December 31, 1998............................................................. (1,879) (2,302)
Accumulated other comprehensive income............................................. 2 2
--------- ---------
TOTAL SHAREHOLDERS' EQUITY....................................................... 3,353 3,031
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY......................................... $ 6,159 $ 6,800
========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
2
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STAGE II APPAREL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------ -------------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales................................................... $ 3,412 $ 4,130 7,273 $ 7,638
Cost of goods sold.......................................... 2,748 3,038 5,458 5,694
--------- --------- --------- ---------
Gross profit................................................ 664 1,092 1,815 1,944
Commission and other income................................. 4 96 38 202
--------- --------- --------- ---------
668 1,188 1,853 2,146
Selling, general and administrative expenses................ 554 765 1,492 2,717
Loss on lease cancellation.................................. -- 561 -- 561
--------- --------- --------- ---------
Operating income (loss)..................................... 114 (138) 361 (1,132)
Other income (expenses):
Interest income.......................................... 16 26 46 100
Interest and factoring expenses.......................... (124) (309) (363) (712)
--------- --------- --------- ---------
Income (loss) before income tax benefit..................... 6 (523) 44 (1,846)
Income tax benefit.......................................... -- 51 -- 51
--------- --------- --------- ---------
Net income (loss)........................................... $ 6 $ (472) $ 44 $ (1,795)
========= ========= ========= =========
Earnings (loss) per common share:
Basic.................................................... $ .00 $ (.12) $ (.01) $ (.46)
======== ========= ========= =========
Diluted.................................................. $ .00 $ (.12) $ (.01) $ (.46)
======== ========= ========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
3
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STAGE II APPAREL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------ -------------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net income (loss)........................................... $ 6 $ (472) $ 44 $ (1,795)
Other comprehensive income (loss):
Unrealized gains on marketable securities,
net of taxes........................................... -- -- 3 8
--------- --------- --------- ---------
Comprehensive income (loss)................................. $ 6 $ (472) $ 47 $ (1,787)
========= ========= ========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
4
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STAGE II APPAREL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------
1999 1998
--------- ---------
<S> <C> <C>
Net cash provided by (used in) operating activities........................ $ 705 $ (2,111)
INVESTING ACTIVITIES:
Purchase of marketable securities....................................... (188) ---
Sale or redemption of available for sale marketable securities.......... --- 260
--------- ---------
Net cash provided by (used in) investing activities........................ (188) 260
--------- ---------
FINANCING ACTIVITIES:
Factor financing, net................................................... (669) 2,564
--------- ---------
Net cash provided by financing activities.................................. -- 2,564
--------- ---------
Net increase (decrease) in cash and cash equivalents....................... (152) 713
Cash and cash equivalents at beginning of year............................. 992 641
--------- ---------
Cash and cash equivalents at end of period................................. $ 840 $ 1,354
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Cash paid for income taxes.............................................. $ --- $ 51
========= =========
Cash paid for interest, excluding factoring fees........................ $ 244 $ 502
========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
5
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STAGE II APPAREL CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
of Stage II Apparel Corp. (the "Company") have been prepared in accordance with
generally accepted accounting principles and, in the opinion of management,
reflect all adjustments (consisting of normal recurring adjustments) necessary
to fairly present the Company's financial position at September 30, 1999 and its
results of operations, comprehensive income (loss) and cash flows for the
interim periods presented. The accounting policies followed by the Company are
set forth in Note 1 to the Consolidated Financial Statements included in its
Annual Report on Form 10-K for the year ended December 31, 1998 and are
incorporated herein by reference.
NOTE 2. FINISHED GOODS INVENTORY
Finished goods inventories for the interim periods presented were
computed using the gross profit method.
NOTE 3. COMPREHENSIVE INCOME
Effective January 1, 1998, the Company adopted Financial Accounting
Standards Board Statement No. 130, REPORTING COMPREHENSIVE INCOME ("FAS 130").
FAS 130 establishes standards for reporting and display of comprehensive income
and its components in financial statements. Appropriate items in the
accompanying consolidated financial statements for the quarter and nine months
ended September 30, 1998 have been reclassified to conform to the provisions of
FAS 130.
NOTE 4. EARNINGS (LOSS) PER SHARE
The Company has adopted Statement of Financial Accounting Standards No.
128, EARNINGS PER SHARE ("FAS 128"). Under FAS 128, companies that are publicly
held or have complex capital structures are required to present basic and
diluted earnings per share ("EPS") on the face of the income statement. FAS 128
replaces the presentation of primary EPS with a presentation of basic EPS and,
if applicable, diluted EPS. Basic EPS excludes dilution and is computed by
dividing income available to common shareholders by the weighted average number
of common shares outstanding for the period. Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised or converted and the resulting additional shares are dilutive
because their inclusion decreases the amount of EPS.
6
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
GENERAL. Stage II Apparel Corp. (the "Company" or "Stage II") designs
and distributes an extensive range of casual apparel, activewear and collection
sportswear for men and boys. The Company markets its apparel to sporting goods,
specialty and department stores, mass merchandisers and wholesale membership
clubs under nationally recognized brand names as well as proprietary and private
labels. The Company's products are produced to its specifications by various
independent manufacturers in Asia, Africa and Europe. Stage II also acts as
purchasing agent for various major retailing customers.
The Company has historically developed its product lines primarily
through the acquisition of license rights to nationally recognized brand names
for sales of its apparel in the United States. During the last three years, the
Company streamlined its operations to focus on its most popular labels,
relinquishing its license rights for six brand name lines, liquidating its
interests in its Canadian and Hong Kong subsidiaries and discontinuing its
arrangements with a licensee of NBA and NFL brand sportswear. The relinquished
lines have been replaced with a new exclusive license for the ADOLFO brand in
1998 and the STANLEY BLACKER brand in August 1999. In addition, the Company has
increased emphasis on its own proprietary labels, primarily TIMBER RUN, MAIN
EVENT, PRO TOUR and, commencing in 1999, the CROSS COLOURS trademark. See
"Recent Developments" below.
In general, the Company's licensed brand name apparel sells at a higher
price and with greater gross profit margins than comparable non-branded apparel.
These advantages are partially offset by royalty and advertising expenses
incurred in accordance with the Company's license agreements. These costs are
included in selling, general and administrative ("SG&A") expenses. The new
management team that joined the Company as part of a change of control
transaction in May 1998 (the "Change of Control Transaction") has added new
apparel lines and plans to add more lines that retain the advantages of brand
name recognition without the high costs associated with Stage II's prior
licenses.
TURNAROUND STRATEGY
Stage II incurred net losses in each year from 1994 through 1998. To
reverse this trend, the Company's new management adopted a turnaround strategy
that includes the following components:
o INCREASED SALES -- added nationally recognized licenses and restructured
the sales force by division or brand name to promote a more highly motivated
sales staff with a deeper knowledge of each product line and targeted customer
base
o INCREASED PROFIT MARGINS -- reduced manufacturing inefficiencies, with
greater control of inventories, to lower the Company's cost of sales while
creating faster inventory turn, thereby avoiding unnecessary markdowns
o LOWER FACTORING CHARGES -- added more stringent financial controls with a
view to reducing factoring charges and debt levels
o PROMOTED ADMINISTRATIVE EFFICIENCIES -- pursued cost cutting initiatives
on an aggressive basis where appropriate, with a minimum objective of bringing
overhead costs in line with sales
o OPTIMIZED FINANCIAL EFFICIENCIES -- prioritized the collection of
accounts receivable and the management of returns and allowances
o INCREASED PRODUCTIVITY -- reduced the Company's cost of management below
prior ratios as a percentage of sales while increasing organizational
efficiencies, with a greater use of stock options to offset substantial
reductions in salary levels.
The success of the turnaround strategy implemented by the Company's new
management contributed to a
7
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return to profitable operations in the last two quarters of 1998 before giving
effect to lease cancellation and relocation expenses of $561,000, writeoffs of
accounts receivable and other noncash or nonrecurring items that added $209,000
to SG&A expenses in the third quarter and $560,000 in the fourth quarter of
1998. For the first three quarters of 1999, Stage II realized net income
aggregating $44,000 on net sales of $7.3 million, marking the Company's first
profitable nine-month period since 1993.
RECENT DEVELOPMENTS
INTERNET SALES. In March 1999, Stage II launched an e-commerce
business-to-business website on the Internet for sales of its branded and
proprietary apparel lines to retailers in the United States. Over time, the
facility is expected to enhance the Company's visibility to the trade and
provide a convenient sourcing tool to its customers. If successful, it could
also reduce the Company's dependence on commissioned salesmen, resulting in
higher gross profit margins. While sales on the website have been modest to
date, the Company has achieved its initial goal of attracting additional
retailers, who use the facility as a virtual showroom and then follow up with
orders via phone or fax, avoiding the time and expense of traveling to the
Company's showroom in New York City.
PRODUCT INNOVATION. In May 1999, Stage II completed the acquisition of
the CROSS COLOURS trademark, a pioneer brand in the early development of young
men's urban fashion. The brand was originally launched in 1989 and achieved
rapid success in the early 1990s by creating a fresh new urban look in the youth
fashion forward sector. The Company has developed its own lines of CROSS COLOURS
products internally, with a strategy of offering affordable prices to expand the
availability of lifestyle urban streetwear to a wider audience within the young
men's youth market. In addition to its own CROSS COLOURS apparel lines, Stage II
also plans to license a wide variety of retail items under this brand, focusing
initially on footwear, accessories, kids' and juniors' activewear and home
products.
NEW LICENSE AGREEMENT. In August 1999, the Company obtained an
exclusive license to use the STANLEY BLACKER brand for men's activewear,
swimwear, jeans, sleepwear and loungewear, as well as various categories of
accessories. With this established prestige brand, Stage II expects to increase
its presence in the higher end markets with a wider distribution channel for the
covered categories, upgrading its product mix to further improve overall
margins.
RESULTS OF OPERATIONS
SEASONALITY. Stage II experiences some seasonal business fluctuations
due primarily to seasonal buying patterns for its product mix of casual apparel
and activewear. While sales of the Company's products are made throughout the
year, the largest sales volume has historically occurred in the third quarter.
The following table reflects these quarterly fluctuations, which should not be
construed as indicative of future net sales.
QUARTERLY NET SALES
(IN THOUSANDS)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
-------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
1999............................. $ 1,591 $ 2,270 $ 3,412 $ --- $ ---
1998............................. 1,855 1,653 4,130 2,229 9,867
1997............................. 4,067 2,348 5,718 4,414 16,547
</TABLE>
QUARTERS ENDED SEPTEMBER 30, 1999 AND 1998. Net sales of $3.4 million
for the third quarter of 1999
8
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decreased by 17.4% from $4.1 million in the corresponding quarter of 1998. The
decrease primarily reflects tighter inventory controls. The Company expects its
comparable quarterly volumes to return to a growth trend in subsequent periods.
Cost of goods sold as a percentage of sales increased to 80.5% in the
third quarter of 1999 compared to 73.6% in the same quarter last year. The
increase primarily reflects a sell-off of old inventory on hand prior to the
Change of Control Transaction.
Commission and other income decreased by 95.8% during the third quarter
of 1999 compared to the third quarter of 1998, reflecting a decrease in emphasis
on the Company's lower margin sales agency business.
SG&A expenses of $554,000 for the third quarter of 1999 decreased by
28.9% compared to $765,000 for the corresponding quarter of 1998, primarily
attributable to a cost cutting plan adopted as part of the Company's turnaround
strategy. See "Turnaround Strategy" above. As a percentage of sales, SG&A
expenses were 16.2% in the third quarter of 1999 compared to 18.5% in the same
quarter last year. Stage II anticipates a continuation in this trend as a result
of an estimated $330,000 in annual savings from its office relocation in July
1998 and other cost cutting measures adopted by new management following the
Change of Control Transaction.
Interest and factoring expenses, net of interest income, aggregated
$108,000 or 3.2% of sales in the third quarter of 1999 compared to $283,000 or
6.9% of sales in the corresponding quarter last year. The decrease reflects a
reduction in borrowing levels primarily attributable to tighter inventory
controls.
The Company realized net income of $6,000 or $.00 per share in the
third quarter of 1999 compared to a net loss of $472,000 or $.12 per share in
the corresponding quarter of 1998, reflecting the foregoing trends.
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998. Net sales of $7.3
million for the first nine months of 1999 decreased by 4.8% from $7.6 million in
the corresponding period in 1998. The decrease primarily reflects stronger
inventory controls.
Cost of goods sold as a percentage of sales increased to 80.5% in the
first nine months of 1999 compared to 74.5% in the same period last year. The
decrease primarily reflects tighter inventory controls.
Commission and other income decreased by 81.2% during the first nine
months 1999 compared to the corresponding prior period, reflecting a decrease in
emphasis on the Company's sales agency business.
SG&A expenses of $1.5 million for the first nine months of 1999
decreased by 45.1% compared to $2.7 million for the first nine months of 1998,
primarily attributable to a cost cutting plan adopted as part of the Company's
turnaround strategy. See "Turnaround Strategy" above. As a percentage of sales,
SG&A expenses were 20.5% in the first three quarters of 1999 compared to 35.6%
in the same period last year.
Interest and factoring expenses, net of interest income, aggregated
$317,000 or 4.4% of sales in the first three quarters of 1999 compared to
$612,000 or 8.0% of sales in the corresponding period last year. The decrease
reflects a reduction in borrowing levels primarily attributable to tighter
inventory controls.
The Company realized net income of $44,000 or $.01 per share in the
first nine months of 1999 compared to a net loss of $1.8 million or $.46 per
share in the corresponding period in 1998, reflecting the foregoing trends and,
for the.1998 period, a lease cancellation expense of $561,000.
The results of operations for the quarter and nine months ended
September 30, 1999 are not necessarily indicative of operating results to be
expected for the full year.
9
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LIQUIDITY AND CAPITAL RESOURCES
LIQUIDITY. Net cash provided by Stage II's operating activities during
the first nine months of 1999 aggregated $705,000. The Company's cash position
decreased from $992,000 at December 31, 1998 to $840,000 at September 30, 1999,
due primarily to reduced factor debt.
CAPITAL RESOURCES. In 1998, the Company sold marketable securities
netting $3.0 million, all of which was used to reduce short term debt. At
September 30, 1999, the Company retained marketable securities with a carrying
value of $576,000.
In connection with the Change of Control Transaction, Stage II obtained
a new factoring and credit facility with The CIT Group/Commercial Services, Inc.
(the "Credit Facility") to replace its prior credit facility. The agreements
covering the Credit Facility provide for the factor to purchase the Company's
accounts receivable that it has preapproved, without recourse except in cases of
merchandise returns or billing or merchandise disputes in the normal course of
business. In addition, the factor is responsible for the accounting and
collection of all accounts receivable sold to it by Stage II. The factor
receives a commission under the Credit Facility in an amount less than 1% of the
net receivables it purchases. The agreements covering the Credit Facility also
provide for the issuance of letters of credit to fund the Company's foreign
manufacturing orders and for short term borrowings at a floating interest rate
equal to 1/2% above the prime rate. The Company's obligations under the Credit
Facility are payable on demand and secured by its inventory, accounts receivable
and marketable securities. The aggregate amount of letters of credit and
borrowings available under the Credit Facility are determined from time to time
by the factor based upon the Company's financing requirements and financial
performance. The agreements covering the Credit Facility may be terminated
without penalty by the Company on May 31, 2000 or the end of any subsequent
contract year upon 60 days notice.
As of September 30, 1999, the Company's net direct borrowings under the
Credit Facility aggregated $1.7 million. This reflects a reduction of $5.6
million from debt levels at September 30, 1998. The reduction was primarily
attributable to debt repayments of $3 million from the sale of marketable
securities and a substantial reduction of inventory since the Change of Control
Transaction.
The Company believes that its internally generated funds and borrowings
available under its Credit Facility will be sufficient to meet its foreseeable
working capital requirements. Stage II may reborrow amounts repaid under its
Credit Agreement or seek other external means to finance its operations in the
future. As of September 30, 1999, the Company had no material capital
expenditure requirements.
FORWARD LOOKING STATEMENTS
This Report includes forward looking statements within the meaning of
Section 21E of the Securities Exchange Act relating to matters such as
anticipated operating and financial performance, business prospects,
developments and results of the Company. Actual performance, prospects,
developments and results may differ materially from anticipated results due to
economic conditions and other risks, uncertainties and circumstances partly or
totally outside the control of the Company, including risks of inflation,
fluctuations in market demand for the Company's products and changes in the
level of future expenses for the manufacturing and distribution of those
products. Words such as "anticipated," "expect," "intend" and similar
expressions are intended to identify forward looking statements, all of which
are subject to these risks and uncertainties.
10
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8 - K.
(a) EXHIBITS:
EXHIBIT
NUMBER: EXHIBIT
------- -------
27.1 Financial Data Schedule
(b) REPORTS ON FORM 8-K.
None
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.
STAGE II APPAREL CORP.
Date: November 9, 1999 By: /s/ RICHARD SISKIND
---------------------------------
Richard Siskind
Chief Executive Officer
(Duly Authorized Officer)
(Principal Executive Officer)
11
<TABLE> <S> <C>
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS OF STAGE II APPAREL CORP. FOR THE QUARTER ENDED SEPTEMBER 30, 1999
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 840
<SECURITIES> 576
<RECEIVABLES> 200
<ALLOWANCES> 0
<INVENTORY> 1,986
<CURRENT-ASSETS> 3,070
<PP&E> 49
<DEPRECIATION> 7,946
<TOTAL-ASSETS> 6,159
<CURRENT-LIABILITIES> 2,806
<BONDS> 0
0
0
<COMMON> 7,407
<OTHER-SE> (2,177)
<TOTAL-LIABILITY-AND-EQUITY> 6,159
<SALES> 3,412
<TOTAL-REVENUES> 3,416
<CGS> 2,748
<TOTAL-COSTS> 554
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 124
<INCOME-PRETAX> 6
<INCOME-TAX> 0
<INCOME-CONTINUING> 6
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6
<EPS-BASIC> .00
<EPS-DILUTED> .00
</TABLE>
