<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
For the quarterly period ended March 31, 1997
---------------
OR
[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 (NO FEE REQUIRED)
Commission file number 0-25488
THE L.L. KNICKERBOCKER CO., INC.
(Name of Small Business Issuer in its Charter)
California 33-0230641
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
30055 Comercio 92688
Rancho Santa Margarita, CA (Zip Code)
(Address of Principal Executive Offices)
Issuer's Telephone Number, Including Area Code: (714) 858-3661
Securities registered under Section 12(b) of the Exchange Act:
Name of Each Exchange on
Title of Each Class Which Registered
-------------------- ------------------------
Common Stock, No Par Value NASDAQ
National Market System
Securities registered under Section 12(g) of the Exchange Act:
None
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
--- ---
The number of shares outstanding of the registrant's Common Stock, as of April
24, 1997 was 17,884,961.
Transitional Small Business Disclosure Format Yes No X
--- ---
DOCUMENTS INCORPORATED BY REFERENCE
NONE
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TABLE OF CONTENTS
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<TABLE>
<CAPTION>
ITEM PAGE
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<S> <C>
PART I
------
1. FINANCIAL INFORMATION............................................................................. 1
A. Condensed Consolidated Statements of operations (unaudited) for the three
month periods ended March 31, 1997 and March 31, 1996........................................ 1
B. Condensed Consolidated Balance Sheets at March 31, 1997
(unaudited) and December 31, 1996............................................................ 2
C. Condensed Consolidated Statements of Cash Flows (unaudited)
for the three month periods ended March 31, 1997 and March 31, 1996.......................... 4
D. Notes to Condensed Consolidated Financial Statements.......................................... 5
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS............. 9
A. General Business Description.................................................................. 9
B. Results of Operations......................................................................... 10
C. Liquidity and Capital Resources............................................................... 12
PART II
-------
SIGNATURES........................................................................................ 13
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
- ------------------------------
Item 1. Financial Statements
- ------------------------------
THE L.L. KNICKERBOCKER CO., INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
-----------------------------
1997 1996
----------- -----------
<S> <C> <C>
Sales, net of returns $13,441,000 $ 3,159,000
Cost of sales 6,644,000 1,404,000
----------- -----------
Gross profit 6,797,000 1,755,000
Advertising expense 1,577,000 108,000
Selling, general and administrative expenses 6,269,000 1,156,000
----------- -----------
Operating income (1,049,000) 491,000
Equity in loss of investee companies 305,000
Other income (expense), net (113,000) 44,000
Interest expense (See Note 3) 3,093,000
----------- -----------
Income before minority interest in loss
of subsidiary (4,560,000) 535,000
Minority interest in loss of subsidiary 118,000
Income tax (benefit) expense (603,000) 212,000
----------- -----------
Net income $(3,839,000) $ 323,000
=========== ===========
Primary net income (loss) per share $ (0.23) $ 0.02
=========== ===========
Primary weighted average common and common
equivalent shares outstanding 16,933,273 16,057,063
=========== ===========
</TABLE>
<PAGE>
THE L.L. KNICKERBOCKER CO., INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
March 31, 1997 December 31, 1996
-------------- -----------------
<S> <C> <C>
Cash and cash equivalents $ 1,751,000 $ 6,247,000
Restricted cash 500,000 500,000
Accounts receivable 10,802,000 13,730,000
Receivable from stockholder/officer 1,008,000 596,000
Inventories 9,716,000 8,474,000
Prepaid expenses and other current assets 7,144,000 4,983,000
Income tax receivable 1,378,000 733,000
Deferred income taxes 1,236,000 1,236,000
------------ ------------
Total current assets 33,535,000 36,499,000
Property and equipment, net 6,733,000 6,791,000
Investments 4,380,000 4,677,000
Other assets 1,120,000 1,480,000
Deferred income taxes 1,835,000 1,835,000
Goodwill, net of accumulated amortization
of $457,000 and $310,000 as of March 31,
1997 and December 31, 1996, respectively 6,143,000 6,290,000
------------ ------------
$ 53,746,000 $ 57,572,000
============ ============
</TABLE>
<PAGE>
THE L.L. KNICKERBOCKER CO., INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
March 31, 1997 December 31, 1996
-------------- -----------------
<S> <C> <C>
Current liabilities:
Accounts payable and accrued expenses $ 8,673,000 $ 11,311,000
Commissions and royalties payable 587,000 828,000
Notes payable 6,826,000 7,008,000
Interest payable 211,000 131,000
Income taxes payable 41,000 -
Acquisition payable 652,000 1,253,000
Current portion of long-term debt 278,000 266,000
Other current liabilities 384,000 -
------------ ------------
Total current liabilities 17,652,000 20,797,000
Long-term liabilities:
Long-term debt, less current portion 442,000 371,000
Convertible debentures, net of discount of
$2,344,000 as of December 31, 1996 10,681,000 11,826,000
Other long-term liabilities - 51,000
------------ ------------
Total long-term liabilities 11,123,000 12,248,000
Minority interest 146,000 264,000
Stockholders equity:
Common stock 19,489,000 13,082,000
Additional paid-in capital 5,947,000 8,018,000
Retained earnings (deficit) (692,000) 3,147,000
Foreign currency translation adjustment 81,000 16,000
------------ ------------
Total stockholder's equity 24,825,000 24,263,000
------------ ------------
$ 53,746,000 $ 57,572,000
============ ============
</TABLE>
<PAGE>
THE L.L. KNICKERBOCKER CO., INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<S> <C> <C>
Cash flows provided by operating activities:
Net income (loss) $ (3,839,000) $ 323,000
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization 503,000 40,000
Convertible debentures accretion of principal (Note 3) 1,899,000
Deferred income taxes
Amortization of deferred revenue (23,000)
Equity in loss of investee companies 305,000
Minority interest (118,000)
Amortization of debt discount 589,000
Changes in operating accounts:
Accounts receivable, net 2,928,000 1,294,000
Receivable from stockholder/officer (412,000) 84,000
Income tax receivable (645,000)
Inventories (1,242,000) (214,000)
Prepaid expenses and other current assets (2,161,000) (389,000)
Other assets (22,000)
Accounts payable and accrued expenses (2,103,000) (577,000)
Commissions and royalties payable (241,000) (128,000)
Income tax payable 41,000 (487,000)
Other long term liabilities (51,000) (10,000)
----------- -----------
(4,569,000) (87,000)
Cash flows from investing activities:
Acquisitions of property, plant and equipment (231,000) (12,000)
Investments (8,000) (116,000)
----------- -----------
Net cash used in investing activities (239,000) (128,000)
Cash flows from financing activities:
Net borrowings on line of credit (182,000)
Payments on long-term debt 83,000
Proceeds from exercise of common stock purchase warrants 346,000 565,000
Proceeds from exercise of stock options
Payment of royalty commitment (25,000)
----------- -----------
Deferred debt issue costs
Net cash provided by (used in) financing activities 247,000 540,000
Effect of Foreign currency translation 65,000
----------- -----------
Net (decrease) increase in cash and cash equivalents (4,496,000) 325,000
Cash and cash equivalents, beginning of period 6,247,000 2,469,000
----------- -----------
Cash and cash equivalents, end of period $ 1,751,000 $ 2,794,000
=========== ===========
Supplemental Disclosure of Cash Flow Information:
Cash Paid for Income Taxes $ $ 700,000
Cash Paid for Interest $ 387,000 $ -
</TABLE>
Supplemental Schedule of Noncash Investing and Financing Activity:
During the three months ended March 31, 1997, $5,388,000 of convertible
debentures and $71,000 of accrued interest was converted to common stock.
During the three months ended March 31, 1997, the Company issued 90,614 shares
of common stock in payment of $601,000 of acquisition payable.
<PAGE>
THE L.L. KNICKERBOCKER CO., INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 1: Basis of Presentation:
As contemplated by the Securities and Exchange Commission under Item 310(b) of
Regulation S-B, the accompanying financial statements and footnotes have been
condensed and therefore do not contain all disclosures required by generally
accepted accounting principles. The information set forth in these consolidated
financial statements is unaudited except for the December 31, 1996 balance
sheet. These statements have been prepared in accordance with generally
accepted accounting principles for interim financial information, the
instructions to Form 10-Q and Rule 10-01 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 accompanying consolidated financial statements consolidate the accounts of
Krasner Group, Inc. ("Krasner") which was acquired on June 18, 1996, Harlyn
International, Ltd. which was acquired effective July 1, 1996, L.L.
Knickerbocker (Thai) Company, Ltd, which includes the operations of Grant King
International,Ltd and S.L.S Trading Co., Ltd, which were acquired effective July
1, 1996, and Georgetown Collection, Inc. which was acquired effective October
18, 1996. All intercompany transactions have been eliminated.
In the opinion of management, all adjustments, consisting only of normal
recurring accruals, necessary for a fair presentation have been included. The
results of operations for the three months ended March 31, 1997 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1997. For further information, refer to the financial statements
and notes thereto included in the Company's annual report for the year ended
December 31, 1996.
Certain prior period balances have been reclassified to conform with current
presentation.
NOTE 2: Net income per share:
<PAGE>
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings Per Share (SFAS 128) which is
effective for financial statements issued for periods ending after December 15,
1997. SFAS 128 requires the disclosure of basic and diluted earnings per share.
For the three months ended March 31, 1997, the amount reported as net loss per
share is not materially different from that which would have been reported for
basic and diluted loss per share in accordance with SFAS 128.
NOTE 3: Convertible debentures:
In September 1996, the Company issued Convertible Debentures (the Debentures)
with a face value of $15,500,000 in a private placement to institutional
investors. This private placement yielded net proceeds to the Company totaling
$14,730,000 after deducting costs associated with issuing the debentures. The
Debentures accrue interest at the rate of 7% per annum, payable quarterly in
arrears on any unpaid or unconverted debt. The Debentures were convertible at
the option of the holder into shares of the Company's common stock at a price
equal to 85% of the closing price of the Company's common stock at the date of
conversion, subject to a minimum and maximum conversion price of $5.25 and
$12.00 per share, at any time through the second anniversary of the original
date of issuance. Through March 31, 1997, the Company issued a total of
1,405,514 shares of its common stock in connection with the conversion of
$6,718,000 of the original principal amount of the Debentures, plus interest
accrued through the conversion dates.
The conversion of the notes at 85% of the closing price of the Company's common
stock resulted in the Debentures being issued at a discount (the conversion
discount). The conversion discount is being recognized by the Company as non-
cash interest expense over the term of the Debentures with a corresponding
increase to the original principal amount of the Debentures. Upon conversion of
the Debentures any portion of the conversion discount not previously recognized
is recorded as interest expense on the conversion date. During the quarter
ended March 31, 1997, a total of $ 2,600,000 of non-cash interest expense was
recorded relating to the Debentures, including $ 591,000 relating to the
additional conversion discount recorded upon conversion.
In January 1997, the Company reached agreement with the Debenture holders to
tender all outstanding Debentures to the Company in exchange for new convertible
Debentures (the New Debentures). Under the terms of the agreement, New
Debentures were issued with a face value of 117.5% of the face value of the
tendered Debentures. The New Debentures bear interest at 7% per year, payable
quarterly. The New Debentures are convertible at the option of the holder into
shares of the Company's common stock at $8.00 per share. The New Debentures
must be converted by January 1999. As a result of the 17.5% premium given as an
inducement to the Debenture holders to tender the original debentures into New
Debentures, the Company recorded a non-cash charge of $1,899,000 in the first
quarter of 1997.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the financial
statements and the notes thereto appearing elsewhere in this Form 10-QSB.
General
The Company markets a wide variety of branded consumer products, including
collectibles, costume and fine jewelry, fashion accessories, patented products
and consumables. The Company markets these brands through a variety of channels,
including television shopping channels, infomercials, print media, direct mail,
retail stores and internet marketing campaigns. The Company's core collectible
business is developing diverse lines of consumer products, contracting for the
manufacture of those products to the Company's specifications, and marketing
those products to customers. The Company's strength and history has been its
strategy in marketing to the home shopping industry by identifying the
industry's key
<PAGE>
product segments (i.e. collectibles, environmental systems, jewelry, health and
beauty) and building Brand recognition within those product segments. The
Company partners with a celebrity or spokesperson to enhance the appeal of the
product. Using this strategy, the Company was the first to bring celebrities to
the home shopping industry. The Company's celebrity programs include products
endorsed by Marie Osmond, Annette Funicello, Bob Mackie, Nolan Miller, Kenneth
Jay Lane, and Barbara Mandrell. The Company plans to expand celebrity programs
introducing new key product segments.
The Company has expanded from marketing its products through television shopping
channels to include direct response marketing channels such as print media
advertising, infomercials, direct mail campaigns, and the internet. The
Company has also developed product distribution through retail stores and retail
catalog accounts.
During 1996, the Company expanded its stable of brand names and increased its
distribution of products by making several strategic acquisitions, as follows:
Effective June 18, 1996, the Company acquired all of the outstanding capital
stock of Krasner Group, Inc., a marketer and manufacturer of celebrity-driven
costume jewelry located in New York; effective July 1, 1996, the Company
acquired certain assets and assumed certain liabilities of S.L.S Trading Co.,
Ltd, a jewelry stone sourcing and cutting operation that holds proprietary stone
cutting techniques, located in Bangkok, Thailand; effective, July 1, 1996, the
Company acquired the remaining 51% interest in Grant King International Co.,
Ltd, that the Company did not previously own. Grant King International Co.,
Ltd. is a jewelry design operation, located in Bangkok, Thailand; effective
July 1, 1996, the Company acquired all of the common stock of Harlyn
International, Ltd., a fine jewelry manufacturing operation, located in Bangkok,
Thailand; and, effective October 18, 1996, the Company acquired approximately
82% of the capital stock of Georgetown Collection, Inc., a marketer of
collectible dolls, located in Portland, Maine.
As a result of the acquisitions, the Company has substantially changed the size,
scope, and nature of its business. Prior to the acquisitions, the Company
marketed primarily collectible dolls and bears over television shopping
channels. At that time, the Company was characterized by a relatively small
revenue base, one major customer, and one primary means of distribution. As a
result of the acquisitions, the Company now has a wide distribution base,
diverse product lines, and has increased its revenue base five-fold. Management
believes that the Company's significantly more diversified product and revenue
base increases the overall health of the Company and has reduced its exposure to
demand fluctuations in any one product area or distribution channel.
The Company also has a strategy that includes searching for investment
opportunities that appear to offer attractive returns on invested capital. The
Company made two such investments in 1996. The Company owns a 38.3% interest in
the Pure Energy Corporation. Pure Energy Corporation is in the process of
developing a proprietary alternative fuel that would produce the lowest possible
emissions at the lowest cost to the public. The Company, on September 18, 1996,
acquired 25%, on a fully diluted basis, of the common stock of both Ontro, Inc.
(formerly Self-Heating Container Corporation ) and Insta-Heat, Inc. a related
corporation. In connection with the Ontro, Inc. and Insta-Heat, Inc.
investments, the Company will receive distribution rights for a product that
self-heats canned liquids and meals on demand by pressing a button.
The Company also has a joint venture with Paxson Communications Corporation and
is currently developing infomercials for several new products and services. The
Company believes that the joint venture will provide synergistic opportunities
for strategic growth. To date, the joint venture has generated only minimal
sales and profit.
As a result of the Company's growth in its television shopping business, and the
acquisitions, the Company has phased out its marketing consulting services to
outside companies.
Results of operations
<PAGE>
The following table sets forth, for the periods indicated, the percentage of
revenues represented by items included in the Company's Statements of
Operations.
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1997 1996
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<S> <C> <C>
Revenue 100.0% 100.0%
Cost of revenue 49.4% 44.4%
--------- ----------
Gross profit 50.6% 55.6%
Operating expenses 58.4% 40.0%
--------- ----------
Operating income -7.8% 15.6%
Interest expense 23.0% 0.0%
--------- ----------
Net income -28.6% 10.2%
</TABLE>
The following comparisons are for the quarters ended March 31, 1997 and March
31, 1996.
Revenues
First quarter revenues increased 326% from $3,159,000 in 1996 to $13,441,000 in
1997. The increase in revenues was due primarily to an increase in jewelry sales
as a result of the acquisitions completed in the second half of 1996 which
expanded the consumer product lines and distribution channels of the Company.
Revenues in the first quarter of 1997 include revenues from costume jewelry,
fine jewelry, fashion accessories and additional doll lines that were not part
of the Company's product lines in the first quarter of 1996. Revenues from
costume jewelry and fashion accessories were $2,835,000 in 1997 versus zero in
1996. Revenues from fine jewelry were $2,430,000 in 1997 versus $385,000 in
1996. Additional doll lines acquired through acquisitions contributed
$5,892,000 to revenues in 1997. Revenues from the Marie Osmond collectible doll
line decreased to $579,000 in 1997 from $1,599,000 in 1996. Revenues from the
Annette Funicello collectible bear line increased to $1,065,000 in 1997 from
$564,000 in 1996.
Gross profit
Gross profit increased 287% from $1,755,000 in 1996 to $6,797,000 in 1997 due
primarily to the increase in revenues from the acquisitions completed in 1996.
In the Company's core celebrity driven collectibles business, the decrease in
gross profit generated from the Marie Osmond collectible doll line was more than
offset by the increase in gross profit generated from the growth in the Annette
Funicello collectible bear line. As a percentage of revenues, gross profit
decreased to 50.6% in the first quarter of 1997 from 55.6% in the first quarter
of 1996. Gross profit, as a percentage, is impacted by the amount of revenues
generated from the Company's direct response doll business, which consists of
retail sales to consumers, thereby generating higher gross margins.
Alternatively, gross profit will be lower if the percentage of the Company's
wholesale jewelry and collectible doll business surpasses the direct response
business.
Advertising expense
Advertising expense increased from $108,000 in 1996 to $1,577,000 in 1997 due
primarily to the Company's expansion of its direct response business and through
its acquisition of Georgetown Collection, Inc., which markets its products
primarily through direct response channels. Included in advertising expense are
advertisement printing costs, catalog printing costs, media space in magazines,
infomercial costs, and advertisement development costs.
<PAGE>
Selling, general and administrative expenses
Total selling, general and administrative expenses increased from $1,156,000 in
1996 to $6,269,000 in 1997. The percentage of revenues represented by these
expenses increased from 36.6% in 1996 to 46.6% in 1997. The primary reason for
the increase is due to the jewelry manufacturing operations purchased in 1996
which, due to the nature of manufacturing, typically carry higher overhead than
the Company's core collectible doll business. Additionally, the Company has
added professionals in the areas of management, development, and marketing which
increase the overall overhead of the Company. Additionally, the Company's
overall selling, general, and administrative expenses have increased due to the
Company's focus on expanding its infrastructure to accommodate anticipated
future growth by adding office space and systems support. Remaining expenses in
this category were in proportion to the corresponding revenues between 1997 and
1996.
Other income (expense)
Other income (expense) decreased $157,000 to $(113,000) in 1997 from $44,000 in
1996 primarily as a result of the acquisitions completed in 1996.
Interest income (expense)
Interest expense increased in 1997 primarily as a result of charges associated
with the convertible debenture financing which occurred in September of 1996.
The noncash 15% conversion discount on conversions into common stock is charged
as interest expense. The total conversion discount in the first quarter of 1997
totaled $591,000. Additionally, the Company has taken a charge of $1,899,000
representing the accretion of the principal balance which resulted from the
restructuring in February of 1997 of the convertible debentures. Also, cash
interest expense increased to due to the acquisitions completed in 1996 which
employ bank lines of credit.
Net Income
As a result of the foregoing factors, net income decreased from $323,000 in 1996
to a net loss of $3,839,000 in 1997.
Liquidity and Capital Resources
As of March 31, 1997 the Company had working capital of $15,883,000. Working
capital has increased substantially by both the issuance of convertible
debentures of $15,500,000, which resulted in $14,880,000 in net proceeds to the
Company and the acquisitions completed in 1996.
Through the first quarter of 1997, the Company has continued to invest most of
the funds generated from operations and raised in the convertible debenture
financing by capitalizing subsidiaries and paying down high interest bearing
debt.
In February 1997, the Company restructured its convertible debentures which had
an unconverted balance of $10,850,000 prior to restructuring. The Company
reached an agreement with the Debenture holders to tender all of the outstanding
Debentures to the Company in exchange for new convertible Debentures (the "New
Debentures"). Under the terms of the agreement, the New Debentures were issued
with a face value of 117.5% of the unconverted balance of the tendered
debentures. The New Debentures are convertible into common stock at the option
of the holder at a fixed price of $8.00 per share. The New Debentures must be
converted by January 1999. As a result of the 17.5% premium given as an
inducement to the
<PAGE>
Debenture holders to tender the original debentures into New Debentures, the
Company recorded a noncash charge of $1,899,000 in the first quarter of 1997.
The Company is currently negotiating a line of credit to replace a $4.1 million
line of credit acquired through its acquisition of Georgetown Collection, Inc.
and is technically in default under the terms of the line of credit with the
financial institution. Management believes it will be successful in its
negotiations on the replacement line.
Cash flow used in operations was $4,569,000 due to the increase in inventory and
other current assets associated with the acquisitions of Krasner Group, Inc,
Harlyn International, Ltd., and L.L. Knickerbocker (Thai) Company, Ltd. The
Company's cash flow also decreased due to the payments made to decrease accounts
payable. The combination of the above factors resulted in an overall increase in
working capital from $15,702,000 at December 31, 1996 to $15,833,000 at March
31, 1997. The current ratio for the Company increased from 1.74 at December 31,
1996 to 1.89 at March 31, 1997.
In the first quarter of 1997, the Company received $220,000 as the final
proceeds from warrants that were issued in connection with the Company's 1995
initial public offering which, under their terms, were to expire in January of
1997.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Reports on Form 8-K
On January 16, 1997, the Company filed a Form 8-K in connection with the
restructuring of its convertible debentures, whereby the Company temporarily
suspended conversions of the debentures into common stock.
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.
THE L.L. KNICKERBOCKER CO., INC.
Date: May 5, 1997 By: /s/ ANTHONY P. SHUTTS
Anthony P. Shutts
Chief Financial Officer
Signing on behalf of the registrant and as
principal financial and accounting officer.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 2,251,000
<SECURITIES> 0
<RECEIVABLES> 10,802,000
<ALLOWANCES> 0
<INVENTORY> 9,716,000
<CURRENT-ASSETS> 7,144,000
<PP&E> 6,733,000
<DEPRECIATION> 457,000
<TOTAL-ASSETS> 53,746,000
<CURRENT-LIABILITIES> 17,652,000
<BONDS> 10,681,000
0
0
<COMMON> 19,489,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 53,746,000
<SALES> 13,441,000
<TOTAL-REVENUES> 13,441,000
<CGS> 6,644,000
<TOTAL-COSTS> 6,269,000
<OTHER-EXPENSES> 1,577,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,093,000
<INCOME-PRETAX> (4,560,000)
<INCOME-TAX> (603,000)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,839,000)
<EPS-PRIMARY> (.23)
<EPS-DILUTED> 0
</TABLE>
