- ------------------------------------------------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
Form 10-QSB
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the period ended June 30, 1996
[ ] 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 1-14076
ALLEGRO NEW MEDIA, INC.
(Exact name of small business issuer in its charter)
Delaware 22-3270045
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) identification Number)
16 Passaic Avenue, Unit 6, Fairfield, NJ 07004
(Address of principal executive offices) (Zip Code)
(201) 808-1992
(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act 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 [ ]
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 4,461,750 shares of common
stock as of August 13, 1996.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No /X/
---------------
<PAGE>
CROSS REFERENCE SHEET
Page
Number
Cover Page 1
Index 2
Part I. Financial Information
Item 1. Financial Statements (Unaudited):
Condensed balance sheets - June 30, 1996 and December 31, 1995 3
Condensed statements of income - For the Three and Six months
ended June 30, 1996 and 1995 4
Condensed statements of cash flows - For the Six months
ended June 30, 1996 and 1995 5
Notes to condensed financial statements - June 30, 1996 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 8
Part II. Other Information
Item 1. Legal Proceedings. 10
Item 2. Changes In Securities. 10
Item 3. Defaults upon Senior Securities. 10
Item 4. Submission of Matters to a Vote of Security Holders. 11
Item 5. Other Information. 11
Item 6. Exhibits and Reports on Form 8-K 11
Signature Page 12
Index to Exhibits 13
<PAGE>
Part I. Financial Information
ALLEGRO NEW MEDIA, INC.
CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
ASSETS (Unaudited) (Note)
Current assets:
<S> <C> <C>
Cash $ 1,722,050 $ 2,928,272
Accounts receivable, net 814,577 342,425
Inventories (Note 2) 241,828 225,013
Other current assets 246,847 103,380
----------- -----------
Total current assets 3,025,302 3,599,090
Equipment, furniture and leasehold improvements net
of accumulated depreciation and amortization of
$87,795 in 1996 and $73,260 in 1995 55,477 53,150
Royalty advances and other assets 242,474 206,366
----------- -----------
$ 3,323,253 $3,858,606
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 207,233 $ 410,818
Accrued liabilities 299,825 309,924
---------- -----------
Total current liabilities 507,058 720,742
Stockholders' equity:
Serial Preferred Stock, authorized 2,000,000 shares:
Class B Voting Preferred Stock, 60,520 shares
issued and outstanding 61 61
Common stock, par value $.001 per share, authorized
18,000,000 shares; issued and outstanding 3,461,750
shares in 1996 and 3,335,077 shares in 1995 3,462 3,335
Additional paid-in capital 7,343,147 6,158,753
Accumulated deficit (4,530,475) (3,024,285)
----------- -----------
Total liabilities and stockholders' equity $3,323,253 $3,858,606
----------- -----------
<FN>
Note: The balance sheet at December 31, 1995 has been derived from the
audited financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
See notes to condensed financial statements.
</FN>
</TABLE>
<PAGE>
ALLEGRO NEW MEDIA, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net sales $421,125 $317,113 $867,049 $614,699
Cost of goods sold 112,767 158,990 342,169 339,774
-------- -------- -------- --------
Gross profit 308,358 158,122 524,879 274,926
Selling, general and administrative
expenses 1,134,571 318,917 1,644,481 717,830
Product development 357,288 84,875 439,566 171,885
Interest (income) expense net (22,828) 1,451 (52,977) 35
---------- -------- ---------- -------
Net loss $(1,160,673) $(247,121)$(1,506,190) $(614,825)
Accretion of carrying value and
dividends attributable to Class
A Preferred Stock ________ 83,822 ________ 167,644
---------- --------- ----------- ---------
Net loss attributable to common
stockholders $(1,160,673) $(330,943)$(1,506,190) $(782,469)
----------- --------- ----------- ---------
Loss per common share:
Net loss per common share $ (.38) $ (.22) $ (.49) $ (.49)
------- ------- ------- -------
Weighted average number of common
shares outstanding 3,083,760 1,495,697 3,067,215 1,596,784
--------- --------- --------- ---------
<FN>
See notes to condensed financial statements.
</FN>
</TABLE>
<PAGE>
ALLEGRO NEW MEDIA, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended June 30,
1996 1995
Operating activities
<S> <C> <C>
Cash (used in) from Operations $(1,533,617) $ (337,209)
Investment activities
Purchase of equipment, furniture and
fixtures ( 6,862) ( 13,982)
Cash paid in acquisition ( 120,650)
------------
( 137,512)
Financing activities
Proceeds from sale of common stock 464,907
Issuance of Bridge Notes 209,000
Net (decrease) in cash (1,206,222) (142,191)
Cash at beginning of period 2,928,272 212,749
------------ -----------
Cash at end of period $1,722,050 $ 70,558
------------ -----------
<FN>
See notes to condensed financial statements.
</FN>
</TABLE>
<PAGE>
ALLEGRO NEW MEDIA, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Article 310
of Regulation S-B. 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. Operating results for the three month and six month periods ended
June 30, 1996 are not necessarily indicative of the results that may be expected
for the year ended December 31, 1996. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-KSB and Form 10-KSB/A for the year ended
December 31, 1995.
2. Loss Per Share.
Net loss per share is computed based upon the weighted average number of
shares of common stock and common share equivalents outstanding during the
periods presented. In accordance with the Securities and Exchange Commission
Staff Accounting Bulletin No. 83, shares issuable upon exercise of options
granted during the twelve months immediately preceding the initial public
offering have been included in the calculation of shares used in computing net
loss per share as if they were outstanding for all periods presented using the
treasury stock method. For the period subsequent to the initial public offering,
common share equivalents resulting from outstanding options to purchase common
stock are excluded as the impact is anti-dilutive.
3. Inventories
Inventories consist of the following:
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
<S> <C> <C>
Raw materials $ 81,678 $ 65,586
Finished goods 160,150 125,777
-------- --------
$241,828 $225,013
</TABLE>
4. Shareholder's Equity
During 1994 the Company issued an aggregate of 1,190,250 shares of its
Class A Cumulative, Convertible, Redeemable 10% Preferred Stock ("Redeemable
Preferred Stock") in a private placement transaction. In accordance with its
terms, all of the shares of Redeemable Preferred Stock were converted into an
aggregate of 491,821 shares of the Company's common stock upon completion of the
Company's initial public offering in December 1995. No dividends were declared
or paid on the Redeemable Preferred Stock.
In connection with certain financing transactions during 1993, certain of
the then existing employee/stockholders of the Company agreed to place an
aggregate of 1,000,000 newly issued shares of the Company's common stock into
escrow. Under the terms of the escrow agreement such shares are to be released
to the stockholders based upon the Company achieving certain financial results,
as defined. When such escrowed shares are released, Securities and Exchange
Commission rules require recognition by the Company of compensation expense
based on the fair value of the shares at the date of release. The escrow
agreement expires the earlier of the release of all of the escrow shares or June
30, 1999. Any shares not released are to be returned to the Company. During
1994, with the approval of such stockholders, 677,500 of these escrowed shares
were canceled.
<PAGE>
ALLEGRO NEW MEDIA, INC.
NOTES CONDENSED TO FINANCIAL STATEMENTS
(Unaudited)
Shareholder's Equity (continued)
On April 26, 1996, upon the execution of and delivery by the Company of a
letter of intent to acquire all of the issued and outstanding capital stock of
Serif Inc. and Serif (Europe) Limited, 217,000 shares of Common Stock held in
escrow pursuant to the above described arrangements were released from escrow
and delivered to the two stockholder employees. In connection with this release
of escrow shares, the Company recorded compensation expense of $637,980.
On March 31, 1995, certain existing stockholder employees surrendered to
the Company a total of 280,000 shares of the Company's common stock and agreed
to place an additional 220,000 shares under the terms of an additional escrow
agreement. These shares are to be released to the stockholders upon the Company
attaining certain financial results, as defined. Release of these shares will
also result in recognition of compensation expense based on the fair value of
the shares at the date of release.
In December 1995, the Company completed an initial public offering of
1,033,000 shares of its common stock and received net proceeds of $4,156,411.
Upon the completion of the offering the Company repaid all of its 10% notes
payable and in addition issued 243,902 shares of its common stock to the former
note holders pursuant to the terms of their subscription.
On January 23, 1996 the Company issued 109,400 shares of common stock to
its underwriter, upon the underwriter's exercise of its over-allotment option,
and received net proceeds of $464,907.
In April 1996, the Company signed a Letter of Intent to acquire Serif Inc.
and Serif (Europe) Ltd. for 1,000,000 shares of common stock subject to
completion of due diligence.
In May 1996, the Company issued 17,273 shares of common stock, which had an
aggregate value of $95,000, as part compensation for the acquisition of
software.
Subsequent Events.
As of July 31, 1996, the Company completed the closing of the acquisition
of Serif Inc. and Serif (Europe) Ltd. for 1,000,000 shares of common stock. The
acquisition will be accounted for under the purchase method of accounting. The
aggregate cost of the acquisition is approximately $4.0 million.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
General
The Company designs, develops and markets a line of computer software
products for the SOHO and small corporate business markets. The Company
currently derives substantially all of its net sales from products sold by its
internal sales force and independent sales representatives to retailers and
distributors.
The development of the Company's computer software publishing business has
involved the development of proprietary computer software, the licensing of
CD-ROM and, in certain instances, other electronic publishing rights to content,
and the creation and conversion of original and supplemental text, video, audio,
graphics and animation. The Company's continued growth is expected to require
continued increases in the number of the Company's employees, expenditures for
new product development, the acquisition of licensing or product rights, sales
and marketing expenses, and general and administrative expenses relating to the
development of a management infrastructure and facilities necessary to support
the Company's growth.
Costs of goods sold consists primarily of product costs, freight charges,
royalties and an inventory allowance for damaged and obsolete products. Product
costs consist of the costs to purchase the underlying materials and print both
boxes and manuals, media costs (CD-ROM's and other media) and assembly and
shipping. The product development costs associated with the Company's products
are expensed as incurred.
<PAGE>
Results of Operations
Three Month Period Ended June 30, 1996 Compared to the Three Month Period
Ended June 30, 1995
Net Sales. Net sales increased approximately 33% from $317,113 in the three
month period ended June 30, 1995 to $421,125 in the three month period ended
June 30, 1996. This increase in net sales was largely attributable to the
greater number of products offered by the Company and the continued introduction
of the Company's two new products; Entrepreneur Small Business Encyclopedia and
Betty Crocker Cooking with Kids. In addition to the increased number of products
offered by the Company, the Company expanded its retail distribution channel
through contracting with two additional software distributors; Merisel Americas,
Inc. and Tech Data Corporation. The Company provided in the three month period
ended June 30, 1996 for returns at approximately 22% of gross sales versus
approximately 21% in the three month period ended June 30, 1995.
Cost of Goods Sold. Cost of goods sold decreased approximately 29% from
$158,990 in the three month period ended June 30, 1995 to $112,767 in the three
month period ended June 30, 1996, as a result of lower production costs
associated with higher volume production. In addition, material costs in the
three month period ended June 30, 1996 were favorably impacted by a larger sales
volume of lower cost products. As a percentage of net sales, cost of goods sold
decreased from approximately 50% of net sales in the three month period ended
June 30, 1995 to approximately 27% of net sales in the three month period ended
June 30, 1996.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $815,654 or approximately 256% from
$318,917 in the three month period ended June 30, 1995 to $1,134,571 in the
three month period ended June 30, 1996. $637,980 or approximately 78% of the
increase resulted from a charge to compensation expense resulting from the
release in April 1996 of 217,000 escrow shares to two management stockholders.
General and Administrative Expenses remained relatively constant, increasing
less than 1% from $128,447 in the three month period ended June 30, 1995 to
$128,916 in the three month period ended June 30, 1996. Total selling expenses
increased approximately 69% from $88,776 in the three month period ended June
30, 1995 to $149,973 in the three month period ended June 30, 1996, primarily as
a result of an increase in trade and co-operative advertising with the Company's
retail vendors associated with the introduction of the Company's two new
products and an increase of approximately $25,000 or 17% of the total selling
costs in the three month period ended June 30, 1996 for public relations and
sales convention expenses. In addition to the above mentioned compensation
charge, total salaries and wages increased $116,007, or approximately 114%, from
$101,695 in the three month period ended June 30, 1995 to $217,702 in the three
month period ended June 30, 1996. Of the increase, approximately 51% is
represented by wage increases to key personnel in accordance with their
employment agreements while the remaining cost increases are associated with
additional staffing required to support the expansion plans of the Company.
Product Development. Product development expenses increased approximately
321% from $84,875 in three month period ended June 30, 1995 to $357,288 in the
three month period ended June 30, 1996 as the Company expensed $243,750 relating
to the acquisition of a developmental stage software program the Company intends
to market. In addition to the acquisition of this software, the Company
experienced an increase in product development costs associated with the
acquired software and additional new products. These product development costs
increased approximately 34% from $84,875 in the three month period ended June
30, 1995 to $113,538 in the three month period ended June 30, 1996. The Company
believes that development expenses will increase in dollar amount in the future
as the Company expands its development activities, although the Company's
long-term goal is to continue to reduce product development costs as a
percentage of sales. All development costs have been expensed in the period
incurred.
Interest (Income). Interest income increased from a net expense of $1,451
in the three month period ended June 30, 1995 to net interest income of $22,828
in the three month period ended June 30, 1996 primarily as a result of higher
cash balances. The Company had no interest bearing liabilities in the three
month period ended June 30, 1996 and incurred an interest expense of $1,874 in
the three month period ended June 30, 1995.
<PAGE>
Six Month Period Ended June 30, 1996 Compared to the Six Month Period Ended
June 30, 1995
Net Sales. Net sales increased approximately 41% from $614,699 in the six
month period ended June 30, 1995 to $867,049 in the six month period ended June
30, 1996. As a result of increased product offerings related to the Company's
newest titles and sales to certain larger customers, the Company provided in the
six month period ended June 30, 1996 for returns at approximately 21% of gross
sales versus approximately 24% in the six month period ended June 30, 1995.
Cost of Goods Sold. Cost of goods sold decreased as a percentage of net
sales from approximately 55% in the six month period ended June 30, 1995 to 39%
in the six month period ended June 30, 1996, as a result of increased sales
volume and lower per unit production costs. On a year over year basis cost of
goods sold remained constant at $338,774 for the six month period ended June 30,
1995 versus $342,169 in the six month period ended June 30, 1996.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $926,651 or approximately 129% from
$717,830 in the six month period ended June 30, 1995 to $1,644,481 in the six
month period ended June 30, 1996. Expenses in the six month period ended June
30, 1996 were negatively impacted by the charge to compensation expense of
$637,980 due to the release of 217,000 shares of common stock from escrow to two
management stockholders. General and Administrative Expenses remained relatively
constant, decreasing approximately 1% from $317,418 in the six month period
ended June 30, 1995 to $320,442 in the six month period ended June 30, 1996.
Total selling expenses increased approximately 61% from $196,785 in the six
month period ended June 30, 1995 to $316,443 in the six month period ended June
30, 1996, primarily as a result of an approximate 98% increase in trade and
co-operative advertising. In addition to the escrow stock charge to
compensation, total salaries and wages increased $165,989, or approximately 82%,
from $203,626 in the six month period ended June 30, 1995 to $369,615 in the six
month period ended June 30, 1996. Approximately 51% of the increase is
represented by wage increases to key personnel in accordance with their
employment agreements while the remaining cost increases are associated with
additional staffing required to support the expansion plans of the Company.
Product Development. Product development expenses increased approximately
156% from $171,885 in the six month period ended June 30, 1995 to $439,566 in
the six month period ended June 30, 1996 as the Company expensed $243,750
relating to the acquisition of a developmental software program which the
Company intends to market. Without this expense, product development costs
increased approximately 13% from $171,885 in the six month period ended June 30,
1995 to $193,817 in the six month period ended June 30, 1996 primarily as a
result of the Company's continued development of Internet products and costs
associated with readying the acquired software product for market. The Company
believes that development expenses will increase in dollar amount in the future
as the Company expands its development activities, although the Company's
long-term goal is to continue to reduce product development costs as a
percentage of sales. All development costs have been expensed in the period
incurred.
Interest (Income). In the six month period ended June 30, 1996 the Company
received net interest income of $52,977 versus a net expense of $35 in the six
month period ended June 30, 1995, primarily as a result of higher cash balances.
The Company had no interest bearing liabilities in the six month period ended
June 30, 1996.
Liquidity and Capital Resources
The Company historically has been unable to generate sufficient cash flow
to fund operations. Working capital deficiencies had been funded principally
through private placements of securities until the Company's initial public
offering ("IPO"), completed in December 1995, and the exercise by the
underwriter of its over-allotment option on January 23, 1996. The Company
through its IPO raised net funds of $4,156,411 ($2,906,411 after retiring debt)
and $464,907 from the exercise of the over-allotment option. Management believes
that the Company has working capital sufficient for the Company's current
operations for at least the next twelve months. As of June 30, 1996 the Company
had working capital of $2,653,014 including cash and cash equivalents of
$1,722,050 and a note receivable of $200,000. The Company has no bank or other
credit facility and there can be no assurance that the Company will be able to
obtain such financing on favorable terms, if at all, or that such financing will
be on terms acceptable to the Company.
<PAGE>
The Company's operating activities for the first six months of 1996 used
cash of $1,533,617 primarily related to costs associated with and bridge loans
made to Serif as part of a the Company's acquisition of Serif, the increase in
accounts receivable and inventories associated with higher net revenues and a
reduction of trade accounts payable. The Company intends to continue to utilize
its working capital in 1996 for product development, marketing and advertising,
to finance the higher level of inventory and accounts receivable necessary to
support the anticipated increase in sales, for capital expenditures, including
the purchase of computer equipment, for software development and content rights
and for its acquisition program. However, the Company's working capital
requirements may change depending upon numerous factors, including, without
limitation, the need to finance acquisitions and the costs associated with such,
as well as increased inventory and accounts receivable arising from the sale and
shipment of new products.
Except for historical information contained herein, the matters set forth
herein are forward looking statements that involve certain risks and
uncertainties that could cause actual results to differ materially from those in
the forward looking statements. Potential risks and uncertainties include such
factors as the level of business and consumer spending for computer software,
the amount of sales of the Company's products, the competitive environment
within the computer software industry, the ability of the Company to integrate
the Serif operations, the level and costs incurred in connection with the
Company's product development efforts and the financial strength of the retail
industry.
PART II. Other Information
Item 1. Legal Proceedings.
The Company is not involved in any material pending legal proceedings. In
August 1995, the Company commenced an arbitration proceeding against Media
Depot, Inc., a distributor of products to the OEM market, seeking to collect
approximately $78,000 in past due accounts receivable. A hearing relating to
this arbitration proceeding was held in April 1996 and the Company was awarded
$78,262.34 in respect of its claim. No assurance can be given as to the
collectability of the award the Company has received in connection therewith.
The Company has provided for the potential loss of the receivable and is in the
process of attempting to collect this award through the California courts.
Item 2. Changes in Securities.
None.
Item 3. Defaults upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
<PAGE>
Item 5. Other Information.
On July 23, 1996, Richard Bergman resigned as a director and as Vice
President of product development of the Registrant. On August 15, 1996, Gwyn
Jones, the former controlling stockholder of Serif Inc. and Serif (Europe)
Limited was elected as the Company's Executive Vice President of product
development and as a director of the Company in Class II. On July 24, 1996,
Joseph Cirillo, President of H. Betti Industries, Inc. and Mark E. Leininger,
the Company's Vice President - Finance were elected as directors of the Company
in Classes II and III, respectively.
As of July 31, 1996, the Company completed the closing of the acquisition
of Serif Inc. and Serif (Europe) Ltd. for 1,000,000 shares of common stock.
Item 6. Exhibits and Reports on Form 8-K
(a) The Exhibits listed on the accompanying index immediately following the
signature page are filed as part of this report.
(b) Reports filed on Form 8-K during the quarter ended June 30, 1996:
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
ALLEGRO NEW MEDIA, INC.
Date: August 16, 1996 By: /s/ Barry A. Cinnamon
Barry A. Cinnamon
Chairman of the Board and President
Date: August 16, 1996 By: /s/ Mark E. Leininger
Mark E. Leininger
Vice President - Finance, Treasurer and
Chief Financial Officer
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Exhibit
4.3 -- Agreement and Plan of Reorganization dated as of July 31, 1996
among the Registrant, Serif Inc., Gwyn Jones and all other
stockholders of Serif Inc. (incorporated by reference to Exhibit
4.3 to the Registrant's current report on Form 8-K dated July
31,1996).
4.4 -- Agreement and Plan of Reorganization dated as of July 31, 1996
among the Registrant, Serif (Europe) Limited., Gwyn Jones and all
other stockholders of Serif (Europe) Limited (incorporated by
reference to Exhibit 4.4 to the Registrant's current report on
Form 8-K dated July 31,1996).
10.30 -- Form of Lock-Up Agreements dated as of July 31, 1996 relating to
limitations on stock sales between the Registrant and each of the
stockholders of Serif Inc. and Serif (Europe) Limited.
(incorporated by reference to Exhibit 10.30 to the Registrant's
current report on Form 8-K dated July 31,1996).
10.31 -- Registration Rights Agreement between the Registrant and the
Stockholders of Serif Inc. and Serif (Europe) Limited
(incorporated by reference to Exhibit 10.31 to the Registrant's
current report on Form 8-K dated July 31,1996).
10.32 -- Settlement and General Release Agreement dated as of July 23,
1996 among the Registrant, Richard Bergman and Barry Cinnamon
(incorporated by reference to Exhibit 10.32 to the Registrant's
current report on Form 8-K dated July 31,1996)
27 Financial Data Schedule
----------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
condensed financial statements for the quarter ended June 30, 1996 and is
qualified in its entirety by reference to such statements.
In thousands except per share amounts.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-END> Jun-30-1996
<CASH> 618
<SECURITIES> 1,104
<RECEIVABLES> 1,503
<ALLOWANCES> 475
<INVENTORY> 242
<CURRENT-ASSETS> 3,160
<PP&E> 143
<DEPRECIATION> 88
<TOTAL-ASSETS> 3,337
<CURRENT-LIABILITIES> 507
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 2,827
<TOTAL-LIABILITY-AND-EQUITY> 3,337
<SALES> 421
<TOTAL-REVENUES> 421
<CGS> 229
<TOTAL-COSTS> 229
<OTHER-EXPENSES> 571
<LOSS-PROVISION> 21
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (346)
<INCOME-TAX> 0
<INCOME-CONTINUING> (346)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (346)
<EPS-PRIMARY> (.11)
<EPS-DILUTED> (.11)
</TABLE>
