<PAGE>
FORM 10Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1997
Commission File No. 0-18200
ARMANINO FOODS OF DISTINCTION, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
COLORADO 84-1041418
- --------------------------------- --------------------------------
(State or other jurisdiction (I.R.S. Employer Identification
of incorporation or organization) Number)
30588 San Antonio Street, Hayward, CA 94544
-------------------------------------------------
(Address of principal executive office)(Zip Code)
Registrant's telephone number, including area code: (510) 441-9300
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 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 ---
Number of registrant's common shares outstanding at September 30, 1997:
11,246,399.
<PAGE>
PART I - FINANCIAL INFORMATION
ARMANINO FOODS OF DISTINCTION, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
ASSETS
September 30, December 31,
1997 1996
Current Assets: ------------ -----------
Cash and cash equivalents $ 1,961,744 $ 742,856
Treasury bills, held to maturity 1,462,463 3,990,912
Accounts receivable 1,046,325 1,698,339
Inventory 1,375,189 1,066,904
Prepaid expenses 256,387 108,106
Current deferred tax asset 570,483 656,000
----------- -----------
Total Current Assets 6,672,591 8,263,117
Property and Equipment, Net 4,804,414 2,599,936
Other Assets:
Deposits 13,000 477,610
Goodwill, net 553,938 585,438
----------- -----------
Total Other Assets 566,938 1,063,048
----------- -----------
Total Assets $12,043,943 $11,926,101
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 1,060,930 $ 999,476
Income taxes payable 178,967 -
Notes payable - 32,073
Current portion of long-term debt 27,558 25,749
Line of credit payable - -
Net liabilities of discontinued operations - 75,145
----------- -----------
Total Current Liabilities 1,267,455 1,132,443
Deferred tax liability 126,000 126,000
Long-term debt 25,660 45,850
----------- -----------
Total Liabilities 1,419,115 1,304,293
Stockholders' Equity:
Common stock 11,136,042 11,529,739
Additional paid in capital 22,311 22,311
Accumulated deficit (533,525) (930,242)
----------- -----------
Total Stockholders' Equity 10,624,828 10,621,808
----------- -----------
Total Liabilities and
Stockholders' Equity $12,043,943 $11,926,101
----------- -----------
The accompanying notes are an integral part of these condensed financial
statements. The balances for December 31, 1996 were taken from the audited
financial statements at that date and condensed.
-2-
<PAGE>
PART I - FINANCIAL INFORMATION
ARMANINO FOODS OF DISTINCTION, INC.
Condensed Consolidated Statements of Operations
For the Quarter Ended September 30, 1997 and 1996
(Unaudited)
September 30, September 30,
1997 1996
------------ ------------
Net Sales $3,807,454 $3,642,270
Cost of Goods Sold 2,626,888 2,511,373
----------- -----------
Gross Profit 1,180,566 1,130,897
----------- -----------
Operating Expenses:
General and administrative 417,428 289,893
Salaries and wages 196,372 218,371
Commissions 67,451 91,093
Advertising, demonstrations, promotions,
and slotting allowances 239,297 184,153
----------- -----------
Total Operating Expenses 920,548 783,510
----------- -----------
Income (Loss) From Operations 260,018 347,387
Other Income 43,564 73,905
----------- -----------
Income From Continuing Operations Before
Income Taxes 303,582 421,292
Current Tax Expense 81,967 29,490
Deferred Tax Expense 39,466 139,027
----------- -----------
Income From Continuing Operations Before
Discontinued Operations 182,149 252,775
Net (Loss) From Discontinued Operations
Of AFDI, Inc. - (111,218)
----------- -----------
Net Income $ 182,149 $ 141,557
----------- -----------
Primary Earnings per Common share:
Continuing Operations $ .02 $ .02
Discontinued Operations .00 (.01)
----------- -----------
Net Earnings $ .02 $ .01
----------- -----------
Weighted Average Common Shares Outstanding 11,471,505 12,453,958
----------- -----------
Fully Diluted Earnings per Common share:
Continuing Operations $ .02 $ .02
Discontinued Operations .00 (.01)
----------- -----------
Net Earnings $ .02 $ .01
----------- -----------
Weighted Average Common Shares Outstanding 11,523,421 12,617,407
----------- -----------
The accompanying notes are an integral part of these condensed financial
statements.
-3-
<PAGE>
PART I - FINANCIAL INFORMATION
ARMANINO FOODS OF DISTINCTION, INC.
Condensed Consolidated Statements of Operations
For the Nine Months Ended September 30, 1997 and 1996
(Unaudited)
September 30, September 30,
1997 1996
------------ ------------
Net Sales $10,894,179 $10,540,175
Cost of Goods Sold 7,503,863 7,050,294
Gross Profit 3,390,316 3,489,881
Operating Expenses:
General and administrative 1,163,070 809,275
Salaries and wages 843,056 817,211
Commissions 246,923 290,444
Advertising, demonstrations, promotions,
and slotting allowances 629,497 520,762
Total Operating Expenses 2,882,546 2,437,692
Income From Operations 507,770 1,052,189
Other Income 153,431 194,256
Income From Continuing Operations Before
Income Taxes 661,201 1,246,445
Current Tax Expense 178,967 87,251
Deferred Tax Expense 85,517 411,327
Income From Continuing Operations Before
Discontinued Operations 396,717 747,867
Net (Loss) From Discontinued Operations
Of AFDI, Inc. - (170,587)
Net Income $ 396,717 $ 577,280
Primary Earnings per Common Share:
Continuing Operations $ .04 .06
Discontinued operations .00 .01
Net Earnings $ .04 .05
Weighted Average Common Shares Outstanding 11,466,637 12,125,090
The accompanying notes are an integral part of these condensed financial
statements.
-4-
<PAGE>
PART I - FINANCIAL INFORMATION
ARMANINO FOODS OF DISTINCTION, INC.
Condensed Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 1997 and 1996
(Unaudited)
September 30, September 30,
1997 1996
Cash Flows From Operating Activities: ------------ ------------
Net income $ 396,717 $ 577,280
----------- -----------
Adjustment to reconcile net income to net
cash (used for) provided by operations:
Depreciation and amortization 319,427 278,161
Changes in assets and liabilities:
Decrease in accounts receivable 652,014 241,186
(Increase)Decrease in inventories (308,285) 46,502
(Increase)Decrease in prepaid expenses (148,281) (143,592)
(Increase)in other assets - (150,715)
Decrease in deferred tax assets 85,517 384,854
Increase(Decrease)in accounts payable
and accrued expenses 61,454 (266,436)
Increase in income taxes payable 178,967 -
Increase (Decrease) in net liabilities
of discontinued operations (75,145) -
----------- -----------
Total Adjustments 765,668 389,960
----------- -----------
Net Cash Provided By Operating Activities 1,162,385 967,240
----------- -----------
Cash Flows To Investing Activities:
Organizational costs paid - (42,776)
Purchase of Goodwill - (609,938)
Decrease(Increase) in deposits for
equipment purchases 464,610 -
Capital expenditures (2,492,405) (706,695)
Reduction (Increase) in U.S. treasury
bills, net 2,528,449 (1,436,561)
----------- -----------
Net Cash (Used For) Investing Activities 500,654 (2,795,970)
----------- -----------
Cash Flows From Financing Activities:
Issuance of common stock 13,356 2,731,865
Purchase of treasury stock (407,053) -
Payments on capital lease obligations (18,381) (17,405)
Increase in borrowings - 47,520
Payments on notes payable (32,073) -
----------- -----------
Net Cash (Used For) Provided By
Financing Activities (444,151) 2,761,980
----------- -----------
Net Increase (Decrease) In Cash and
Cash Equivalents 1,218,888 933,250
Cash and Cash Equivalents Beginning of Period 742,856 746,250
----------- -----------
Cash and Cash Equivalents End of Period $ 1,961,744 $ 1,679,500
----------- -----------
The accompanying notes are an integral part of these condensed financial
statement.
-5-
<PAGE>
PART I - FINANCIAL INFORMATION
ARMANINO FOODS OF DISTINCTION, INC.
Notes to Condensed Consolidated Financial Statements
September 30, 1997
(Unaudited)
Note 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments, consisting of normal recurring accruals, considered necessary
for a fair presentation have been included. It is suggested that these
condensed consolidated financial statements be read in conjunction with the
financial statements and notes thereto included in the December 31, 1996
audited financial statements for Armanino Foods of Distinction, Inc. The
results of operations for the periods ended September 30, 1997 and 1996 are
not necessarily indicative of the operating results for the full year.
During the first quarter of 1997, the Company discontinued the
operations of AFDI, Inc. The financial statements for the prior period have
been restated to reflect the operating results of AFDI, Inc. as discontinued
operations.
The condensed consolidated financial statements include the accounts of
Armanino Foods of Distinction, Inc. ("Parent") and it's wholly-owned
subsidiary Alborough, Inc. (dba "Emilia Romagna").
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments (Treasury Bills) purchased with a maturity of
three months or less to be cash equivalents.
The calculation of primary earnings per share is based on the weighted
average number of outstanding common shares during the period plus, when their
effect is dilutive, additional shares assuming the exercise of certain vested
and non-vested stock options and warrants reduced by the number of shares
which could be repurchased with the proceeds. Fully dilutive earnings per
share are not presented as their effect for the nine months ended September
30, 1997 and September 30, 1996 was anti-dilutive.
The Company acquired a subsidiary (Alborough, Inc.) during May, 1996.
The Company recorded goodwill in the amount of $609,938 as part of the
purchase. The Company is amortizing the goodwill over 15 years, on a straight
line basis.
-6-
<PAGE>
PART I - FINANCIAL INFORMATION
ARMANINO FOODS OF DISTINCTION, INC.
Notes to Condensed Consolidated Financial Statements
September 30, 1997
(Unaudited)
Note 2 - INVENTORY
Inventory is carried at the lower of cost or market with cost being
determined on the first-in, first-out method and consisted of the following at
September 30, 1997 and December 31, 1996:
September 30, December 31,
1997 1996
------------ -----------
Raw materials & supplies 609,484 $ 275,472
Finished goods 765,705 791,432
$ 1,375,189 $ 1,066,904
Note 3 - RELATED PARTY TRANSACTIONS
The Company incurred $23,788 and $20,027 respectively, for the nine
months ended September 30, 1997 and 1996, in accounting and consulting fees to
Polly, Scatena, Gekakis & Co., an accounting firm, the managing partner of
which is also a stockholder and director of the Company. Services provided by
the accounting firm are an extension of the internal accounting functions of
the Company, as well as management, business and systems consulting.
Note 4 - INCENTIVE COMPENSATION
The Company has accrued $50,000 and $130,000 for the nine months ended
September 30, 1997 and September 30, 1996 respectively, for its management and
employee incentive compensation plans. These amounts are based on achieving a
predetermined level of sales, net income and personal goals and objectives.
For the current year this amount is eligible for distribution only when the
(1) predetermined level of sales and net income and/or (2) personal goals and
objectives are achieved.
Note 5 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
September 30, December 31,
1997 1996
------------ -----------
Furniture & Office Equipment $ 259,594 $ 224,968
Plant Machinery & Equipment 4,170,721 2,096,048
Leasehold Improvements 1,760,758 1,389,223
---------- ----------
6,191,073 3,710,239
Accumulated Depreciation 1,386,659 1,110,303
---------- ----------
$4,804,414 $2,599,936
---------- ----------
-7-
<PAGE>
PART I - FINANCIAL INFORMATION
ARMANINO FOODS OF DISTINCTION, INC.
Notes to Condensed Consolidated Financial Statements
September 30, 1997
(Unaudited)
Note 5 - PROPERTY AND EQUIPMENT (Continued)
As of September 30, 1997 the Company placed in service equipment and
leasehold improvements totaling $2,492,405 which had been acquired since 1996.
At December 31, 1996, $464,610 of these purchases were included in deposits.
Note 6 - LINE OF CREDIT
As of September 30, 1997 the Company had a $500,000 line of credit.
This line of credit provides for interest at prime plus .75% with a maturity
date of September 10, 1998. At September 30, 1997, there was no balance
outstanding on this line of credit. This line of credit is secured by the
Company's inventory, accounts receivable and equipment.
Note 7 - INCOME TAXES
The Company accounts for income taxes in accordance with FASB Statement
109, "Accounting for Income Taxes."
As of September 30, 1997 and December 31, 1996 the net deferred tax
assets and liabilities consisted of the following:
September 30, December 31,
1997 1996
------------ -----------
Current deferred tax asset $ 570,483 $ 656,000
Deferred Tax Liability (126,000) (126,000)
Management estimates that the Company will generate adequate net profits
to offset net operating loss carryforwards prior to the expiration of the net
operating loss carryforwards. Consequently, a deferred tax asset valuation
allowance has not been accrued.
Note 8 - COMMON STOCK
The Company received $9,250, for the nine months ended September 30,
1997, from the issuance of 10,000 shares at $.925 in connection with options
exercised, under the 1993 Stock Option Plan. Additionally, the Company issued
5,000 shares of restricted stock valued at $4,106 to a consultant. This
issuance was recorded as compensation expense.
During the nine months ended September 30, 1997, the Company purchased
352,700 shares of common stock for $407,503 on the open market to be retired
by the Company.
-8-
<PAGE>
PART I - FINANCIAL INFORMATION
ARMANINO FOODS OF DISTINCTION, INC.
Notes to Condensed Consolidated Financial Statements
September 30, 1997
(Unaudited)
Note 9 - ACQUISITION OF SUBSIDIARY
On May 20, 1996, the Company acquired all of the outstanding common
stock of Alborough, Inc., (dba Emilia Romagna), in a business combination
accounted for as a purchase. Alborough, Inc. is primarily engaged in the
manufacturing of gourmet Italian foods. The results of operations of
Alborough, Inc. is included in the accompanying financial statements since the
date of acquisition. The total cost of the acquisition was $738,779, which
exceeded the fair market value of the net assets of Alborough, Inc. by
$609,938. The excess is recorded as goodwill and is being amortized over 15
years. The purchase price could increase significantly depending upon
Alborough, Inc. meeting certain earnings performance criteria over the 3 year
period subsequent to the consummation of the purchase agreement. The
agreement between the parties provides that additional payments may be earned
by Alborough, Inc's previous shareholders based on a percentage of gross
margin attributable to sales made to specified customers. The sales must be
made during a specified period of time and subject to certain minimum sales
levels being achieved. As of September 30, 1997, no additional payments have
been made to Alborough Inc.'s former shareholders as minimum sales to the
specified customers had not been achieved.
Note 10 - DISCONTINUED OPERATIONS
During the first quarter of 1997 the Company closed its quick service
Italian restaurant locations and discontinued the operations of AFDI, Inc.
The Company completed the disposition of the business during the second
quarter of 1997. AFDI, Inc. is reported as a discontinued operation for the
year ended December 31, 1996.
Note 11 - CONTINGENCIES
On June 11, 1997, Mass Marketing Services filed a lawsuit in Superior
Court of San Diego County, California against Armanino Foods of Distinction
seeking damages for breach of contract, open book account and reasonable value
of services rendered. The lawsuit arose after the Company terminated its
sales representation agreement with Mass Marketing. Mass Marketing asserts
that it is entitled to an additional ten months of commissions (approximately
$100,000) and attorney s fees under the agreement. The parties agreed to
arbitrate the dispute in San Mateo County, California. No date has been set
for the arbitration. Management cannot reasonably predict the ultimate
outcome, but believes that it will not have a material effect on the Company's
financial position. The Company intends to vigorously defend their position.
-9-
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM II: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Quarter and Nine Months Ended September 30, 1997 v. Quarter and Nine Months
Ended September 30, 1996
Net sales for the quarter ended September 30, 1997 were $3,807,454 as
compared to $3,642,270 for the quarter ended September 30, 1996. For the nine
months ended September 30, 1997, net sales were $10,894,179 as compared to
$10,540,175 for the nine months ended September 30, 1996. The small increase
is primarily attributed to a 13% increase in the foodservice pesto sales and
the inclusion of sales of Emilia Romagna, the Company s subsidiary, for a full
nine months in 1997 vs. four months in 1996. These additional sales were
offset by lower pasta sales to a club store customer. In August 1996 this
club store customer decided to buy its pasta products from a different
manufacturer. In September 1997, this club store customer agreed to place one
of the Company s pastas back into a limited number of stores on a trial basis.
The Company is optimistic that this trial will lead to placements of the
Company s pasta products in additional locations of this club store customer.
Meatball sales for the first nine months increased 2% from the same period
last year. The club store customer has made a decision to start its own
manufacturing operations for the meatball products. The Company anticipates
total meatball sales will be approximately 28% lower due to reduced sales to
this club store customer for the fourth quarter of 1997 compared to prior year
same quarter. The Company expects no sales from this club store customer in
1998. The Company is experiencing positive pressures from the market place
for new items which will be produced on the new pasta/entree line which the
Company placed in service during September of 1997. The Company is presently
in the start-up phase of the new entree line and expects to phase up to full
operations by the beginning of the second quarter of 1998.
Cost of goods sold as a percentage of net sales remained at 69% for the
quarter ended September 30, 1997 compared to the quarter ended September 30,
1996. Cost of goods sold as a percentage of net sales increased from 67% for
the nine months ended September 30, 1996 to 69% for the nine months ended
September 30, 1997. This increase was primarily due to a change in the product
mix. The change in the product mix was the result of purchasing a new
subsidiary (Alborough, Inc.). The new products of the subsidiary currently
have lower margins than some of the Company's other products. Additionally,
higher freight charges to one of the customers of the subsidiary increased
this percentage.
Operating expenses as a percentage of net sales were approximately 24.2%
for the quarter ended September 30, 1997 as compared to 21.5% for the quarter
ended September 30, 1996. Operating expenses for the first nine months of
1997 were approximately 26.5% as compared to 23.1% for first nine months of
1996. The increase is primarily due to increases in general and
administrative expenses and salaries expense. General and administrative
expenses increased due to the acquisition of Alborough, Inc., increase in
outside professional fees and the hiring of a public relations firm.
Additionally, the revision the packaging design and merchandising materials
for the Company's product lines added to this expense. Salaries increased due
to additional personnel at the Company.
Net income from continuing operations was $182,149 for the quarter ended
September 30, 1997 compared to $252,775 for the quarter ended September 30,
1996. Net income from continuing operations was $396,717 for the nine months
ended September 30, 1997, as compared to $747,867 for the nine months ended
September 30, 1996. The decrease in net income from continuing operations for
the quarter and nine months is attributed to lower gross margins due to the
change in the product mix and an increase in operating expenses.
-10-
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM II: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1997 V. QUARTER AND NINE MONTHS
ENDED SEPTEMBER 30, 1996
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1997, the Company had working capital of $5,405,136, a
decrease of $1,725,538 from December 31, 1996. The decrease was primarily due
to purchases of pasta equipment and leasehold improvements. Current assets as
of September 30, 1997 included $4,470,532 in cash and cash equivalents, U.S.
treasury bills, and accounts receivable. Management believes that this level
of working capital is adequate to meet anticipated needs for liquidity.
During the nine months ended September 30, 1997, cash provided by
operating activities of the Company amounted to $1,162,385. This was
primarily a result of the decrease in accounts receivable.
In September 1994, the Company obtained a line of credit in the amount
of $500,000. The line provides for interest at prime plus .75% with a
maturity date of September 10, 1998. At September 30, 1997, there was no
balance outstanding on this line of credit. The purpose for obtaining the
line of credit is to afford the Company greater cash liquidity.
During the first nine months of 1997, the Company purchased 352,700
shares of common stock for $407,403 on the open market to be retired by the
Company. The Company will consider purchasing additional shares on the open
market from time to time, based on market conditions.
Since the fourth quarter of 1996, the Company has purchased
manufacturing equipment and leasehold improvements for the new pasta entree
line. During the nine months ended September 30, 1997 the Company placed in
service this manufacturing equipment and leasehold improvements totaling
$2,420,798 at the Hayward, California facility.
On May 20, 1996, the Company purchased all of the outstanding stock of
Alborough, Inc. (dba Emilia Romagna). The total cost of the acquisition was
$738,779 including professional fees paid in relation to the acquisition.
Additionally, the terms of the agreement include an "earn-out" formula which
provides for payments to Alborough shareholders over a three year period based
on certain performance criteria established. The purchase price could
increase significantly depending upon Alborough, Inc. meeting certain earnings
performance criteria over the 3 year period subsequent to the consummation of
the purchase agreement. The agreement between the parties provides that
additional payments may be earned by Alborough, Inc. shareholders based on a
percentage of gross margin attributable to sales made to specified customers.
The sales must be made during a specified period of time and subject to
certain minimum sales levels being achieved. As of September 30, 1997, the
Company has not incurred any additional cost due to this provision.
-11-
<PAGE>
PART II
OTHER INFORMATION
II. OTHER INFORMATION
Item 1. Legal Proceedings
On June 11, 1997, Mass Marketing Services filed a lawsuit in Superior Court of
San Diego County, California against Armanino Foods of Distinction seeking
damages for breach of contract, open book account and reasonable value of
services rendered. The lawsuit arose after the Company terminated its sales
representation agreement with Mass Marketing. Mass Marketing asserts that it
is entitled to an additional ten months of commissions (approximately
$100,000) and attorney's fees under the agreement. The parties agreed to
arbitrate the dispute in San Mateo County, California. No date has been set
for the arbitration. Management cannot reasonably predict the ultimate
outcome, but believes that it will not have a material effect on the Company's
financial position. The Company intends to vigorously defend their position.
Item 2. Changes In Securities
During the quarter ended September 30, 1997, the Company sold 5,000 shares of
its Common Stock which were not registered under the Security Act of 1933, as
amended, to Jim Drewitz, a consultant to the Company, in exchange for services
valued at $4,106. In connection with this issuance, the Company relied on
Section 4(2) of the Securities Act of 1933, as amended. The shares were
offered for investment only to a sophisticated investor and not for the
purpose of resale or distribution, and the transfer thereof was appropriately
restricted by the Company.
Item 3. Defaults Upon Senior Securities. None
Item 4. Submission Of Matters To A Vote Of Security Holders. None
Item 5. Other Information. None
Item 6. Exhibits And Reports On Form 8-K
A. Exhibit
27 - Financial Data Schedule Filed herewith
electronically
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 behalf of the
undersigned thereunto duly authorized.
ARMANINO FOODS OF DISTINCTION, INC.
By /s/ William J. Armanino
Dated: November 6, 1997 William J. Armanino
President
Chief Executive Officer
Chief Financial Officer
Treasurer
-13-
<PAGE>
EXHIBIT INDEX
EXHIBIT METHOD OF FILING
27. Financial Data Schedule Filed herewith electronically
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
balance sheets and statements of operations found on page 2 and 4 of the
Company's Form 10-Q for the year to date, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1997
<CASH> 1,961,744
<SECURITIES> 1,462,463
<RECEIVABLES> 1,046,325
<ALLOWANCES> 0
<INVENTORY> 1,375,189
<CURRENT-ASSETS> 6,672,591
<PP&E> 4,804,414
<DEPRECIATION> 0
<TOTAL-ASSETS> 12,043,943
<CURRENT-LIABILITIES> 1,267,455
<BONDS> 0
<COMMON> 11,136,042
0
0
<OTHER-SE> (511,214)
<TOTAL-LIABILITY-AND-EQUITY> 12,043,943
<SALES> 10,894,179
<TOTAL-REVENUES> 10,894,179
<CGS> 7,503,863
<TOTAL-COSTS> 7,503,863
<OTHER-EXPENSES> 2,882,546
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 661,201
<INCOME-TAX> 264,484
<INCOME-CONTINUING> 396,717
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 396,717
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
