UNITED STATES 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, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE
ACT
For the transition period from ________ to _________
Commission File Number 0-24242
PRODUCTIVITY TECHNOLOGIES CORP.
(Exact name of small business issuer as specified in its charter)
Delaware 13-3764753
- ------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
520 Madison Avenue, New York, New York 10022
-----------------------------------------------------------
(Address of principal executive offices)
(212) 843-1480
--------------
(Issuer's telephone number)
Not Applicable
----------------------------------------------
(Former name, former address and former fiscal
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
12, 13 or 15 (d) of the Exchange Act during the past 12 months (or 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 [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court. Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of November 15, 1996: 2,125,000 shares $ .001 par value common stock.
<PAGE>
CONTENTS
Part I: Financial Information Page
Item 1. Interim Financial Statements 3
Consolidated Balance Sheets of The Company 4-5
Consolidated Statement of Operations of The
Company and Statement of Operations of the Predecessor 6
Consolidated Statement of Stockholders' Equity of The Company 7
Consolidated Statement of Cash Flows of The Company and
Statement of Cash Flows of the Predecessor 8-9
Notes to Financial Statements 10-15
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. 16-17
Part II: Other Information
Item 6. Exhibits and Reports on Form 8-K 18
Signatures 19
2
<PAGE>
PRODUCTIVITY TECHNOLOGIES CORP. AND SUBSIDIARY
PART I: FINANCIAL INFORMATION
ITEM 1. INTERIM FINANCIAL STATEMENTS
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and
in accordance with instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
The information furnished in the accompanying balance sheets, statements of
operations, stockholders' equity and cash flows reflect all adjustments which
are, in the opinion of management, necessary for a fair presentation of the
aforementioned financial statements for the interim periods. Operating results
for the three months ended September 30, 1996, are not necessarily indicative of
the results that may be expected for the year ending June 30, 1997.
The aforementioned consolidated financial statements should be read in
conjunction with the notes to the consolidated financial statements,
Management's Discussion and Analysis of Financial Condition and Results of
Operations and Productivity Technologies Corp. and Subsidiary's Form 10-K for
the year ended June 30, 1996.
3
<PAGE>
Consolidated Balance Sheets of The Company
<TABLE>
<CAPTION>
September 30, 1996 June 30, 1996
- ----------------------------------------------------------------------------------------------------------
(Unaudited) (Audited)
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 671,233 $ 512,179
Short-term investments, including accrued interest 730,122 965,255
Contract receivables 6,283,631 7,958,159
Notes receivable - 240,606
Costs and estimated earnings in excess of
billings on uncompleted contracts 8,196,573 7,593,003
Inventories 742,216 720,947
Prepaid expenses and other 44,071 220,494
Deferred income taxes 480,000 480,000
- -------------------------------------------------------------------------------------------------------------------
Total Current Assets 17,147,846 18,690,643
- -------------------------------------------------------------------------------------------------------------------
Property and Equipment
Land 231,000 216,000
Buildings and improvements 2,178,028 2,132,388
Machinery and equipment 1,955,560 1,888,479
Transportation equipment 31,500 31,500
- -------------------------------------------------------------------------------------------------------------------
4,396,088 4,268,367
Less accumulated depreciation 124,840 27,928
- -------------------------------------------------------------------------------------------------------------------
Net Property and Equipment 4,271,248 4,240,439
- -------------------------------------------------------------------------------------------------------------------
Other Assets
Goodwill, net of accumulated amortization of $25,740
and $10,923 2,568,062 2,593,803
Noncompetition agreement, net of accumulated
amortization 223,833 228,083
Other assets 532,416 270,803
- -------------------------------------------------------------------------------------------------------------------
Total Other Assets 3,324,311 3,092,689
- -------------------------------------------------------------------------------------------------------------------
$24,743,405 $ 26,023,771
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
Consolidated Balance Sheets of The Company
<TABLE>
<CAPTION>
September 30, 1996 June 30, 1996
- ----------------------------------------------------------------------------------------------------------
(Unaudited) (Audited)
<S> <C> <C>
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $ 2,161,356 $ 2,444,411
Line-of-credit 6,283,258 7,188,558
Accrued expenses
Executive bonus agreement 618,805 753,778
Commissions payable 479,267 544,248
Payroll and related withholdings 283,135 438,274
Federal and state income taxes - 221,790
Other 545,422 1,052,237
Billings in excess of costs and estimated
earnings on uncompleted contracts 1,628,208 534,963
Current maturities of long-term debt 464,393 464,393
- -------------------------------------------------------------------------------------------------------------------
Total Current Liabilities 12,463,844 13,642,652
Deferred Income Taxes 779,000 779,000
Long-Term Debt, less current maturities 2,112,895 2,228,786
- -------------------------------------------------------------------------------------------------------------------
Total Liabilities 15,355,739 16,650,438
- -------------------------------------------------------------------------------------------------------------------
Stockholders' Equity
Preferred stock, $.001 par value, 1,000,000 authorized
and none outstanding - -
Common stock, $.001 par value, 20,000,000 shares
authorized and 2,125,000 outstanding 2,125 2,125
Additional paid-in capital 9,177,488 9,177,488
Retained earnings 208,053 193,720
- -------------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity 9,387,666 9,373,333
- -------------------------------------------------------------------------------------------------------------------
$ 24,743,405 $26,023,771
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
Consolidated Statement of Operations of The Company
and Statement of Operations of the Predecessor (Unaudited)
The Company Predecessor
Three Months Ended Three Months Ended
September 30, 1996 September 30, 1995
- -------------------------------------------------------------------------------
Net Sales $ 8,426,298 $ 8,898,617
- -------------------------------------------------------------------------------
Cost of Sales 6,325,350 6,109,930
- -------------------------------------------------------------------------------
Gross Profit 2,100,948 2,788,687
Selling, General and Administrative
Expenses 1,842,258 1,775,256
Officers' Bonuses 70,360 654,665
- -------------------------------------------------------------------------------
Income From Operations 188,330 358,766
- -------------------------------------------------------------------------------
Other Income (Expense)
Interest income 19,157 11,772
Interest expense (187,853) (152,356)
Miscellaneous 19,199 3,806
- -------------------------------------------------------------------------------
Total Other Expenses (149,497) (136,778)
- -------------------------------------------------------------------------------
Income Before Income Taxes 38,833 221,988
Income Taxes (24,500) (96,486)
- -------------------------------------------------------------------------------
Net Income 14,333 125,502
- -------------------------------------------------------------------------------
Net Income Per Share of
Common Stock $ .01
- -------------------------------------------------------------------------------
Weighted Average Number of
Common Shares Outstanding 2,125,000
- -------------------------------------------------------------------------------
See accompanying notes to financial statements.
6
<PAGE>
Consolidated Statement of Stockholders' Equity of The Company (Unaudited)
<TABLE>
<CAPTION>
Additional Total
Common Stock Paid-In Retained Stockholders'
Shares Amount Capital Earnings Equity
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, July 1, 1996 2,125,000 $ 2,125 $ 9,177,488 $193,720 $9,373,333
Net income - - - 14,333 14,333
- -------------------------------------------------------------------------------------------------------------------
Balance, September 30, 1996 2,125,000 $ 2,125 $ 9,177,488$ 208,053 $9,387,666
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
Consolidated Statement of Cash Flows of The Company
and Statement of Cash Flows of the Predecessor (Unaudited)
<TABLE>
<CAPTION>
The Company Predecessor
Three Months Ended Three Months Ended
September 30, 1996 September 30, 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows From Operating Activities
Net income $ 14,333 $ 125,502
Adjustments to reconcile net income to net cash
provided by (used in) operating activities
Depreciation 96,912 76,862
Amortization 29,991 4,250
Deferred income taxes - 92
Changes in operating assets and liabilities
Contract receivables 1,674,528 (505,430)
Inventories, prepaid expenses and other (106,459) (3,703)
Costs and estimated earnings in excess of
billings on uncompleted contracts - net effect 489,675 (1,933,736)
Accounts payable, accrued expenses and other (1,366,753) 514,836
- -------------------------------------------------------------------------------------------------------------------
Net Cash Provided By (Used In) Operating Activities 832,227 (1,721,327)
- -------------------------------------------------------------------------------------------------------------------
Cash Flows From Investing Activities
Collection of notes receivable 240,606 -
Maturity of U.S. Government securities deposited
in trust fund 235,133 -
Expenditures for property and equipment (127,721) (79,902)
Increase of notes receivable - (30,625)
- -------------------------------------------------------------------------------------------------------------------
Net Cash Provided By (Used In) Investing Activities 348,018 (110,527)
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
Consolidated Statement of Cash Flows of The Company
and Statement of Cash Flows of the Predecessor (Unaudited)
<TABLE>
<CAPTION>
The Company Predecessor
Three Months Ended Three Months Ended
September 30, 1996 September 30, 1995
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows From Financing Activities
Net borrowings (payments) - line-of-credit (905,300) 1,973,620
Payments on long-term debt, capital
leases and notes payable (115,891) (148,679)
- -------------------------------------------------------------------------------------------------------------------
Net Cash Provided By (Used In) Financing Activities (1,021,191) 1,824,941
- -------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) In Cash and Cash Equivalents 159,054 (6,913)
Cash and Cash Equivalents, at beginning of period 512,179 17,253
- -------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents, at end of period $ 671,233 $ 10,340
- -------------------------------------------------------------------------------------------------------------------
Supplemental Cash Flow Information
Cash Paid During the Period For
Interest $ 187,853 $ 152,356
Income taxes 24,500 96,486
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements
9
<PAGE>
Notes to Financial Statements (Unaudited)
1. Basis of Presentation
The accompanying unaudited financial statements as of September 30, 1996 and for
the three months then ended and for the three months ended September 30, 1995
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10- Q and
Article 10 of Regulation S-X. 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. The consolidated balance sheet at June 30, 1996
has been derived from the audited consolidated financial statements at that
date. Operating results for the three month period ended September 30, 1996 are
not necessarily indicative of the results that may be expected for the year
ending June 30, 1997 or any other interim period. For further information, refer
to the consolidated financial statements and footnotes thereto included in the
Company's Annual Report for the period ended June 30, 1996.
2. Summary of Significant Accounting Policies
Formation of the Company and Basis of Presentation
Production Systems Acquisition Corporation ("PSAC") was incorporated in June
1993 with the objective of acquiring an operating business engaged in the
production systems industry. PSAC originally selected March 31 as its fiscal
year-end. PSAC completed an initial public offering ("Offering") of common stock
in July 1994 and raised net proceeds of approximately $9.0 million.
The accompanying financial statements presented for the three months ended
September 30, 1996 include the accounts of PTC and its wholly-owned subsidiary,
Atlas (collectively, the "Company"). All significant intercompany accounts and
transactions have been eliminated upon consolidation.
The accompanying financial statements presented for the three months ended
September 30, 1995 represent the financial statements of Atlas (the
"Predecessor").
10
<PAGE>
Nature of Business
The Company is a manufacturer of automated industrial systems, machinery,
equipment, components and engineering services. It operates with two
manufacturing plants and three sales and engineering offices. The main plant is
located in Fenton, Michigan with an additional plant operating in nearby Linden,
Michigan.
Sales of products have principally been to automobile and automotive parts
manufacturers and appliance manufacturers. Other customers include manufacturers
of garden and lawn equipment, office furniture, heating, ventilation and air
conditioning equipment and aircraft. Sales to automotive- related customers have
accounted for the majority of total annual sales.
Revenue and Cost Recognition
Contract revenues from fixed price contracts, and the related contract costs,
are recognized using the percentage-of-completion method, measured by the
percentage of contract costs incurred to date to total estimated costs for each
contract. The Company estimates the status of individual contracts when progress
reaches a point where experience is sufficient to estimate final results with
reasonable accuracy.
Contract costs include all direct material and labor costs and those indirect
costs related to contract performance, such as indirect labor, supplies, repairs
and depreciation costs. Provisions for estimated losses on uncompleted contracts
are made in the period in which such losses are determined. Changes in job
performance, job conditions, estimated profitability, and final contract
settlement may result in revisions to costs and income, and are recognized in
the period the revisions are determined.
Revenues from time-and-material contracts are recognized currently as the work
is performed.
11
<PAGE>
Net Income Per Common Share
Net income per common share for the three months ended September 30, 1996
has been computed based on the weighted average number of common and
diluted common equivalent shares outstanding.
3. Commitments
(1) In connection with the Merger Agreement, the Company has entered into
employment agreements which changed the compensation of two executive
officers of Atlas. These employment agreements are identical except that
one agreement expires on December 31, 1998, and the other expires on
December 31, 2001. Each agreement requires the executive to devote
substantially all of his business time and attention to the affairs of the
Company. Annual compensation under each agreement is $190,000,
subject to cost of living increases after December 31, 1996.
The employment agreements also provide for two bonus calculations based on
the earnings of the Company before interest and taxes (as defined). Under
one of the bonus arrangements, each of the two executives mentioned in the
above paragraph will be paid $208,333 for each of the six years beginning
January 1, 1996 in which the Company's "Adjusted Earnings" (as defined in
the related agreements) exceed $2,000,000. If the Adjusted Earnings
average at least $2,000,000 during such six-year period, the two
executives will each be paid, at the end of the six year period, the sum
of $1,250,000 less the aggregate of the amounts paid to them under such
bonus arrangement for the prior five years.
Under the second bonus arrangement, if during the five years beginning
January 1, 1996, the "Average Adjusted Earnings" (as defined in the
related agreements) are at least $2,626,000, each executive will be paid
an amount equal to the amount by which such average earnings exceed
$2,626,000. Both bonus arrangements are also subject to various conditions
described in the related agreements. The bonus arrangements do not
terminate in the event of death of the executive, but payments will be
reduced by the amount of insurance benefits paid to the executive's estate
pursuant to life insurance in effect.
12
<PAGE>
(2) As of September 30, 1996, the Company had outstanding commitments for the
purchase of real estate and the construction of a new facility totaling
approximately $3,500,000.
4. Contingencies
(1) The Company has received a "Demand For Arbitration" dated October 1, 1996
by a former customer who alleges, among other issues, a $15,400,000 claim
for damages resulting from a breach of contract and breach of warranties
related to the design and manufacture of certain industrial equipment. The
Company believes the lawsuit is without merit and will vigorously defend
its position. Further, with respect to the alleged damages, the total
purchase amount on this contract was $1,360,000. The former customer has
acknowledged receiving the Company's standard terms and conditions. These
terms and conditions provide in pertinent part that the Company will not,
in any event, be liable for any incidental or consequential damages,
including loss of profits. Further, the Company warranty policy states that
the buyer's sole remedy is limited to either repair or replacement of the
equipment or defective parts, or, after negotiated settlement, return of
the goods to seller. While the final outcome of the litigation cannot be
determined at this early date in the proceedings, management believes that
the final outcome will not have a material adverse effect on the Company's
results of operations or its financial position. The Company is not
involved as a defendant in any other substantial litigation.
5. Pro Forma Condensed Consolidated Statement of Operations
The following unaudited pro forma condensed statement of operations for the
three months ended September 30, 1995 is presented as if the Company had
completed the merger of Atlas on July 1, 1995.
This unaudited pro forma financial statement is not necessarily indicative
of what the actual results of operations of the Company would have been. In
management's opinion, all adjustments necessary to reflect the formation of
the Company and the effects of the offering have been made. These
adjustments include the following:
13
<PAGE>
(1) The unaudited pro forma consolidated statement of operation is presented
assuming that no PSAC stockholders will request conversion of their shares.
No such requests were made.
(2) The excess of the purchase price over the book value of Atlas' stockholders
equity is allocated to property and equipment (based on a recent appraisal)
and to goodwill. Additional depreciation on property, plant and equipment
based on a 20-year life, and amortization of goodwill based on a 25-year
life has been charged to operations.
(3) Pro forma amounts payable to Atlas senior management under new employment
agreements after the merger (based on Atlas operating income, as adjusted).
(4) The elimination of interest income on the portion of PSAC's investment in a
U.S. government security deposited in the Trust Fund.
(5) Consolidated income tax provision at an effective rate of 40% on taxable
income after adding back non-deductible amortization of goodwill.
14
<PAGE>
Pro Forma
Three Months Ended
September 30, 1995
- -------------------------------------------------------------------------------
Net Sales $8,898,617
- ------------------------------------------------------------------------------
Cost of Sales 6,109,930
- -------------------------------------------------------------------------------
Gross Profit 2,788,687
Selling, General and Administrative Expenses 1,653,244
Officers' Bonuses 380,142
- -------------------------------------------------------------------------------
Income From Operations 755,301
- ------------------------------------------------------------------------------
Other Income (Expense)
Interest income 33,831
Interest expense (152,356)
Miscellaneous 3,806
- -------------------------------------------------------------------------------
Total Other Expenses (114,719)
- -------------------------------------------------------------------------------
Income Before Income Taxes 640,582
Income Taxes (264,000)
- -------------------------------------------------------------------------------
Net Income 376,582
- -------------------------------------------------------------------------------
Net Income Per Share of Common Stock $ .18
- -------------------------------------------------------------------------------
Weighted Average Number of Common Shares
Outstanding 2,125,000
- -------------------------------------------------------------------------------
15
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
Effective May 23, 1996, the Company entered into a Merger Agreement with Atlas
Technologies, Inc. whereby Atlas became a wholly-owned subsidiary of the
Company. Financial statements after that date are those of the new reporting
entity and are not fully comparable to pre-merger periods.
Unaudited sales revenues for the quarter ending September 30, 1996 were
$8,426,298, down 5% from sales of $8,898,617 for the quarter ending September
30, 1995. Lower sales in the first quarter of fiscal 1997 were primarily due to
lower levels of job completion recognized under Atlas's percentage-of-completion
accounting method. See "Revenue and Cost Recognition" explained in footnote 2
above. Atlas's lower percentage of completion levels in the first quarter of
1996 are attributable primarily to a change in product mix and the introduction
of a new line of destackers. Order bookings and backlog continued to increase
during the first quarter ending September 30, 1996, compared to the year ago
period ending September 30, 1995. Net new orders for the quarter ending
September 30, 1996 were approximately $10.8 million, a 40% increase from 1995
first quarter order bookings of $7.7 million. Backlog at September 30, 1996 was
approximately $20.6 million up 17% from the $17.6 million backlog at September
30, 1995.
Costs of products sold for the first quarter 1996 was $6,325,350, compared to
$6,109,930 for the first quarter 1995. The 4% increase on lower sales was
primarily due to a change in the mix of products as well as the high
standardization and product development costs related to the introduction and
shipment of the first of a series of new destacker units. Excluding the new
destacker units, which accounted for approximately 30% of first quarter sales,
the cost of sales levels associated with the remainder of revenues were at
levels consistent with prior periods.
Higher cost of sales resulted in gross profit for the quarter ending 1996 of
$2,100,948, down 25% relative to gross profit of $2,788,687 for the quarter one
year ago.
Consolidated selling, general and administrative expenses including officers'
bonuses during the first quarter were $1,912,618 during the first quarter,
compared to $2,429,921 for Atlas alone during the first quarter of 1995, a
decrease approximating 22%. Primary factors for the decrease were lower
executive compensation expenses and bonus accruals, as well as smaller legal and
accounting expenses in the first quarter of 1996 as compared to higher
professional fees incurred by both PTC and Atlas in the first quarter of fiscal
1995 for the acquisition of Atlas by PTC during the last fiscal year.
Consolidated earnings before interest and taxes decreased approximately 14%,
from $38,833 during the first quarter 1996 compared to $221,988 during the
quarter one year ago, due primarily to lower gross margins on the first shipment
of this new destacker units.
Atlas' net income for the quarter ending September 30, 1996 was approximately
$160,400, an increase of 28% compared to first quarter 1995 adjusted earnings
approximating $14,300, or $0.01 per share.
16
<PAGE>
Liquidity and Capital Resources
The Company believes that its principal long-term capital requirement has been
and is expected to continue to be the funding of capital expenditures to improve
and expand Atlas' facility and marketing efforts and the financing of day-to-day
Atlas operations.
At September 30, 1996, the Company had borrowings outstanding of $2,527,288
under various term loans, of which the current portion was $464,393. This
compares with Atlas' borrowings at September 30, 1995 of $3,160,060, of which
the current portion was $577,050. In addition to the term loans, during the
first quarter of fiscal 1997, the Company entered into a new revolving credit
agreement with its primary lender, which increased the available revolving bank
line of credit from $8.0 million to $14 million and a two year revolving line of
credit including long-term debt and lowered the interest rate from the level
charge previously. At September 30, 1996, borrowings under this facility were
$8,787,186. Borrowings under this credit facility bear interest at the
adjustable rate of 1.2% over the bank's prime rate and are due on May 31, 1997.
The Company believes that, as a result of its revolving facility, its short-term
credit facilities are adequate to support its business operation at current and
near-term anticipated sales levels.
The Company believes Atlas is reaching capacity at its present manufacturing
facilities. Construction on Atlas' third manufacturing plant, located across the
street from its main manufacturing facility in Fenton, Michigan, presently is
underway. Construction is expected to be completed early in the fourth quarter
of the current fiscal year. The expansion will increase plant capacity by
approximately 80% and gives Atlas the capability to handle its growing backlog.
The expansion is expected to cost $3.5 million, and the funding is in place.
Atlas' primary lender assisted with a $3.5 million revenue bond financing for
the new plant.
17
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
27 Financial Data Schedule (filed electronically only).
B. Reports on Form 8-K -- None
18
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
PRODUCTIVITY TECHNOLOGIES CORP.
Date: November 21, 1996 By: /s/ Samuel N. Seidman
------------------------------
Samuel N. Seidman, President
Date: November 21, 1996 By: /s/ Jesse Levine
------------------------------
Jesse Levine, Chief Financial Officer
19
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 671,233
<SECURITIES> 730,122
<RECEIVABLES> 6,445,731
<ALLOWANCES> (162,100)
<INVENTORY> 742,216
<CURRENT-ASSETS> 17,147,846
<PP&E> 4,396,088
<DEPRECIATION> (124,840)
<TOTAL-ASSETS> 24,743,405
<CURRENT-LIABILITIES> 12,463,844
<BONDS> 0
<COMMON> 2,125
0
0
<OTHER-SE> 9,387,666
<TOTAL-LIABILITY-AND-EQUITY> 24,743,405
<SALES> 8,426,298
<TOTAL-REVENUES> 8,426,298
<CGS> 6,325,350
<TOTAL-COSTS> 6,325,350
<OTHER-EXPENSES> 1,912,618
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 149,947
<INCOME-PRETAX> 38,833
<INCOME-TAX> 24,500
<INCOME-CONTINUING> 14,333
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,333
<EPS-PRIMARY> .010
<EPS-DILUTED> .010
</TABLE>
