<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the quarterly period ended June 30, 1996
[ ] Transition report under Section 13 or 15(d) of the Exchange Act For the
transition period from to
Commission file number 0-25992
NetVantage, Inc.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 95-4324525
(State or Other Jurisdiction of (IRS Employer Identification No.)
Incorporation)
201 Continental Boulevard, El Segundo, California 90245
(Address of Principal Executive Offices)
(310) 726-4130
(Issuer's Telephone Number, Including Area Code)
- --------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year, If Changed Since Last
Report)
Check whether the issuer: (1) filed all reports 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
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: July 31, 1996 - 3,029,418 Class A
Common Shares
Transitional Small Business Disclosure Format (check one):
Yes No X
--- ---
<PAGE> 2
ITEM 1. FINANCIAL STATEMENTS
NETVANTAGE, INC.
(A Development Stage Enterprise)
BALANCE SHEET
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
---- ----
ASSETS (unaudited)
<S> <C> <C>
Current assets:
Cash $ 105,866 $ 482,535
Accounts receivable, net of allowance of $3,117 and $12,010 4,363,183
Inventory 2,583,766 1,010,563
Prepaid expenses and other assets 84,811 24,426
----------- -----------
Total current assets 7,137,626 1,602,359
Property, plant and equipment 1,246,888 337,705
Other assets 408,904
----------- -----------
Total assets $ 8,793,418 $ 1,940,064
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 4,418,813 $ 510,780
Accrued expenses 156,527 108,791
Due to related parties 468,479 18,479
----------- -----------
Total current liabilities 5,043,819 638,050
----------- -----------
Commitments and contingencies
Stockholders' equity (deficit)
Preferred stock, par value $0.01 per share,
5,000,000 shares authorized, none issued
Class A Common Stock, par value $0.001 per share,
17,000,000 shares authorized, 2,798,328 and 1,890,000
issued and outstanding, respectively 2,798 1,890
Class B Common Stock, convertible into class A common
stock, par value $0.001 per share, 1,800,000 shares
authorized, 541,029 issued 541 541
Class E Common Stock, convertible into Class B common
stock, par value $0.001 per share, 1,200,000 shares
authorized, 1,082,057 issued; all shares are held in escrow 1,082 1,082
Additional paid-in-capital - Other 17,046,836 11,647,739
Additional paid-in capital - Issuance of warrants 1,152,185 1,152,185
Deficit accumulated during the development stage (14,453,843) (11,501,423)
----------- -----------
Total stockholders' equity 3,749,599 1,302,014
----------- -----------
Total liabilities and stockholders' equity $ 8,793,418 $ 1,940,064
=========== ===========
</TABLE>
See accompanying notes to the financial statements
1
<PAGE> 3
NETVANTAGE, INC.
(A Development Stage Enterprise)
STATEMENT OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Period from
March 12, 1991
(inception) to
Three Months Ended June 30, June 30,
1995 1996 1996
---- ---- ----
<S> <C> <C> <C>
Revenues:
Sales of product $ 566,309 $ 4,784,527 $ 7,305,671
Services 85,293
----------- ----------- ------------
566,309 4,784,527 7,390,964
Costs and expenses:
Cost of revenue 383,223 4,490,329 7,123,890
Research and development 342,826 778,443 6,080,708
Marketing and selling 375,662 444,335 2,612,859
General and administrative 458,201 663,469 4,805,830
Licensee fee to CircuitPath Networks
Systems Corporation 580,000 580,000
----------- ----------- ------------
2,139,912 6,376,576 21,203,287
----------- ----------- ------------
Loss from operations (1,573,603) (1,592,049) (13,812,323)
Interest income 24,485 30,362 181,131
Interest expense (99,216) (348,420)
----------- ----------- ------------
Loss before extraordinary item (1,648,334) (1,561,686) (13,979,612)
Extraordinary item: Extinguishment
of debt (474,231) (474,231)
=========== =========== ============
Net Loss $(2,122,565) $(1,561,686) $(14,453,843)
=========== =========== ============
Net Loss Per Share:
Loss before extraordinary item $ (1.06) $ (0.46)
=========== ===========
Extraordinary item: Extinguishment of debt $ (0.30)
===========
Net Loss $ (1.36) $ (0.46)
=========== ===========
Weighted average number of shares outstanding 1,558,886 3,407,619
=========== ===========
</TABLE>
See accompanying notes to the financial statements
2
<PAGE> 4
NETVANTAGE, INC.
(A Development Stage Enterprise)
STATEMENT OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
1995 1996
---- ----
<S> <C> <C>
Revenues:
Sales of product $ 1,079,293 $ 5,790,429
Services 30,000
----------- -----------
1,109,293 5,790,429
Costs and expenses:
Cost of revenue 733,079 5,388,678
Research and development 530,810 1,629,598
Marketing and selling 492,926 688,590
General and administrative 823,252 1,098,577
Licensee fee to CircuitPath Networks
Systems Corporation 580,000
----------- -----------
3,160,067 8,805,443
----------- -----------
Loss from operations (2,050,774) (3,015,014)
Interest income 25,131 62,594
Interest expense (253,611)
----------- -----------
Loss before extraordinary item (2,279,254) (2,952,420)
Extraordinary item: Extinguishment
of debt (474,231)
----------- -----------
Net Loss $(2,753,485) $(2,952,420)
=========== ===========
Net Loss Per Share:
Loss before extraordinary item $ (2.17) $ (0.98)
=========== ===========
Extraordinary item: Extinguishment of debt $ (0.45)
===========
Net Loss $ (2.62) $ (0.98)
=========== ===========
Weighted average number of shares outstanding 1,052,769 3,018,430
=========== ===========
</TABLE>
See accompanying notes to the financial statements
3
<PAGE> 5
NETVANTAGE, INC.
(A Development Stage Enterprise)
STATEMENT OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Period from
Six Months Ended March 12, 1991
June 30, (Inception) to
-------- June 30,
1995 1996 1996
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net Loss $(2,753,485) $(2,952,420) $(14,453,843)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 35,681 120,603 334,538
Amortization and write off of deferred rent 40,993 273,900
Amortization of debt discount and deferred
debt issue costs including write off
upon extingishment 691,639 718,034
Accrued interest, long term 66,346
Allowance for returns and doubtful accounts 62,926 20,904
Compensation recorded upon issuance of options 27,000
Common stock and warrants issued for goods
and services 155,513
Changes in current assets and liabilities:
Accounts receivable (381,002) (4,278,348) (4,384,087)
Inventory (449,778) (1,573,203) (2,583,766)
Prepaid expenses and other assets 22,738 (60,385) (84,811)
Accounts payable (193,567) 3,908,033 4,418,813
Accrued expenses 21,965 47,736 156,527
Due to related parties (218,894) 450,000 940,593
----------- ----------- ------------
Net cash used in operating activities (3,120,784) (4,337,985) (14,394,340)
----------- ----------- ------------
Investing activities:
Purchase of property, plant and equipment (139,811) (1,029,785) (1,581,425)
Cash expended in acquisition of MultiMedia, LANs (8,904) (8,904)
----------- ----------- ------------
(139,811) (1,038,684) (1,590,324)
----------- ----------- ------------
Financing activities:
Proceeds from issuance of bridge notes payable
and related warrants, net of debt issue costs 340,500 862,500
Proceeds from issuance of convertible notes payable 1,523,000
Proceeds from issuance of common stock 7,503,900 5,000,000 14,705,030
Payment of bridge notes (1,000,000) (1,000,000)
Deferred offering costs (390,168) --
----------- ----------- ------------
Net cash provided by financing activities 6,454,232 5,000,000 16,090,530
----------- ----------- ------------
Increase (decrease) in cash 3,193,637 (376,669) 105,866
Cash at beginning of period 199,630 482,535
----------- ----------- ------------
Cash at end of period $ 3,393,267 $ 105,866 $ 105,866
=========== =========== ============
</TABLE>
See accompanying notes to the financial statements
4
<PAGE> 6
NETVANTAGE, INC.
(A Development Stage Enterprise)
NOTES TO INTERIM FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - THE COMPANY
NetVantage, Inc. ("NetVantage" or the "Company") is engaged in the
development, manufacture and sale of Ethernet switching devices designed to
increase the information handling capacity of Local Area Networks.
Interim Financial Data
The interim financial information is unaudited; however in the opinion
of the Company, the interim data includes all material adjustments, consisting
only of normal recurring adjustments, necessary for a fair statement of the
results of the interim periods. The interim financial information should be read
in conjunction with the financial statements and notes thereto for the year
ended December 31, 1995, included in the Company's Annual Report on Form 10-KSB
and the quarterly report on Form 10-QSB for the three months ended March 31,
1996.
Revenue Recognition and Sales to Major Customers
Revenue from shipments to OEMs is recognized upon shipment to OEMs.
Revenue from shipments to distribution channels is recognized when the Company
is able to determine that successful sellthrough to end users will occur.
Sales to two major customers amounted to 69% and 18%, respectively, of
net sales for the three month period ended June 30, 1996.
NOTE 2 - NET LOSS PER SHARE
The Company's net loss per share was computed based on the weighted
average number of shares of common stock outstanding during the six months ended
June 30, 1996, and excludes all shares of Class E Common Stock outstanding, or
subject to option, because all such shares of stock are subject to escrow and
the conditions for the release from escrow have not been satisfied.
Pursuant to Securities and Exchange Commission Staff Accounting
Bulletin No. 83, all options and warrants granted and common shares issued since
September 30, 1993 through the date of the public offering, and not included
in the escrow arrangement have been included as outstanding for all periods
prior to the public offering using the treasury stock method and the public
offering price per share.
NOTE 3 - PUBLIC OFFERING
On May 3, 1995, the Company completed an initial public offering of
1,500,000 units and on June 5, 1995, the Company completed an offering of the
underwriter's overallotment of 225,000 units. The offering price was $5.00 per
unit for total gross proceeds of $8,825,000 or $7,503,750
5
<PAGE> 7
after Underwriters commission. Each unit comprises one share of the Company's
Class A Common Stock, one Class A warrant and one Class B warrant (the "Units").
Upon exercise, the Class A warrants entitle the holder to purchase one share
(adjusted to 1.05 shares as of January 10, 1996) of Class A Common Stock for
$6.50 (adjusted to $6.21 as of January 10, 1996) and receive one Class B
warrant. Class B warrants entitle the holder to purchase one share (adjusted to
1.05 shares as of January 10, 1996) of Class A Common Stock for $7.75 (adjusted
to $7.41 as of January 10, 1996).
In addition, the Underwriter purchased for nominal consideration a Unit
Purchase Option to purchase up to 150,000 units at an exercise price of $6.75
per Option Unit.
In anticipation of the public offering the Company completed, in
January 1995, a private placement of $1,000,000 in promissory notes. These notes
were repaid from the proceeds of the public offering in May 1995. As a part of
the issuance of the promissory notes the Company issued 500,000 Class A warrants
to the note holders which are identical in all respects to the warrants issued
in the public offering.
As a condition of the initial public offering, all shares of the
Company's Class B and E Common Stock and all shares of Class B and E Common
Stock issuable upon exercise of outstanding options are subject to an escrow
agreement. With respect to the Class B Common Stock and related options, the
shares were released from escrow on June 3, 1996. With respect to the Class E
Common Stock and related options, the shares are released from escrow upon the
attainment of certain earnings levels or market price targets (Note 6).
NOTE 4 - PRIVATE PLACEMENTS AND OTHER EQUITY TRANSACTIONS
On July 25, 1995, the Company completed a private sale of 165,000
shares of its Class A Common Stock to UB Networks for $5.25 per share, the fair
market price, for total proceeds of $866,250. At the same time UB Networks and
the Company signed an OEM agreement for certain products under development by
the Company.
On January 10, 1996, the Company completed a private sale of 854,993
previously unissued shares of its Class A Common Stock to two individuals for
$5.848 per share, the fair market price based on the average closing bid and ask
prices preceding the transaction date, for net proceeds of $5,000,000.
On April 30, 1996, the Company acquired all of the outstanding capital
stock of MultiMedia LANs, Inc., a North Carolina corporation, in exchange for
53,334 shares of the Company's previously authorized but unissued Class A Common
Stock. The closing price of the Company's Class A Common Stock at April 30, 1996
was $7.50 per share, for accounting purposes the acquisition has been treated as
a purchase. At the date of the closing MultiMedia LANs merged into the Company.
On June 3, 1996, the Company's Class B Common Stock was released from
Escrow (See Note 3). At the option of the holder Class B Common shares can be
exchanged for Class A Common shares on a one share for one share basis. As of
July 31, 1996 approximately 83,542 shares of Class B Common had been exchanged
for Class A Common.
NOTE 5 - INVENTORY
6
<PAGE> 8
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
---- ----
<S> <C> <C>
Finished goods $ 22,100 $ 178,800
Work in process 1,597,021
Parts and materials 964,645 831,763
---------- ----------
$2,583,766 $1,010,563
========== ==========
</TABLE>
NOTE 6 - CLASS E COMMON STOCK ESCROW ARRANGEMENT
In connection with the initial public offering of Units of the Company
securities, all outstanding shares of Class E Common Stock were placed into
escrow by existing stockholders. All shares of Class E Common Stock placed in
escrow, including those shares which may be issued upon exercise of options
("Escrowed Contingent Shares") are not transferable (but may be voted) and will
be released from escrow in the event net income before provision for income
taxes, and exclusive of any extraordinary earnings or charges and the
compensation charges discussed in the next paragraph, reaches certain targets
during the next three years (the first 600,000 shares will be released if pretax
income exceeds $4.3 million, $5.8 million, or $7.2 million in fiscal years 1996,
1997 or 1998, respectively and the remaining 600,000 will be released if pretax
income exceeds $5.3 million, $7.1 million, or $8.9 million in fiscal year 1996,
1997 or 1998, respectively); or the market price of the common stock reaches
specified levels over the next three years (the first 600,000 shares will be
released if commencing at the effective date and ending 18 months thereafter,
the bid price of the Company's common stock averages in excess of $13.33 per
share for 30 consecutive business days, or commencing 18 months after the
effective date and ending 36 months after the effective date, the bid price
averages $16.67 per share for 30 consecutive business days and the remaining
600,000 shares will be released if commencing at the effective date and ending
18 months thereafter, the bid price of the Company's common stock averages in
excess of $18.50 per share for 30 consecutive business days or commencing 18
months after the effective date and ending 36 months after the effective date,
the bid price averages in excess of $23.50 for 30 consecutive business days).
Any options to purchase common stock shall be deemed converted into similar
options to acquire Class B and E Common Stock in the same proportion that
outstanding Class E common is converted upon attaining the specified earnings or
market price levels.
The release of the Escrowed Contingent Shares held by employees,
officers, directors, consultants and their relatives will be deemed compensatory
and, accordingly, will result in charges to earnings equal to the fair market
value of the Escrowed Contingent Shares recorded ratably over the period
beginning on the date when management determines that any of the specified
events are likely to occur and ending on the date on which the securities are
released. At the time a goal is attained, compensation expense will be recorded
in a one-time charge to reflect the then fair market value of the shares
released from escrow. Such shares could substantially reduce the Company's net
income or increase the Company's loss for financial reporting purposes in the
periods such charges are recorded.
All Escrowed Contingent Shares that have not been released from escrow
by March 31, 1999 will be redeemed by the Company at a redemption price of $.01
per share. Any dividends or other distributions made with respect to Escrowed
Contingent Shares not released from escrow will be forfeited and contributed to
the capital of the Company.
7
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
NETVANTAGE, INC.
(A Development Stage Enterprise)
General
In mid 1994, the Company introduced its 8 port NV7500 Ethernet Switch
and began commercial shipments of this product in late 1994. In 1995, the
Company attempted to market this product through both distribution channels and
to Original Equipment Manufacturers ("OEMs"). Late in the third quarter of 1995,
the Company changed its strategic marketing emphasis to OEM customers and
discontinued its efforts to market through distribution channels. In the first
quarter of 1996 the Company completed its second product, a 16 port Ethernet
switch with uplink capability. Substantially all of the revenue in the six
months ended June 30, 1996, is from the 16 port Ethernet products including 100
Base T and 100 VG uplinks. Also during this period the production and sale of
the 8 port NV7500 product was discontinued. Same quarter comparisons with 1995
are not generally meaningful due to the strategic shift in the Company's sales
and marketing activities and the introduction in 1996 of the 16 port Ethernet
switch products. Therefore the analysis provided below will generally compare
the second quarter ended June 30, 1996 with the first quarter ended March 31,
1996 unless a prior year comparison is considered helpful to the reader.
This Management Discussion and Analysis of Financial Condition and Results
of Operations contains certain forward-looking statements. Actual results
could differ materially.
Results of Operations
Sales of the Company's 16 port Ethernet switch products for the three
months ended June 30, 1996, were $4,784,527 compared to sales for the three
months ended March 13, 1996 of $1,005,902 an increase of 376%. Sales to a major
customer represented 49% and 69%, respectively, in the first and second quarter
of 1996. Sales in the three months ended June 30, 1995, were $566,309 all of
which were sales of the Company's 8 port NV7500 Ethernet Switch. The increase of
$4,218,218 or 745%, reflects a greater demand for the Company's 16 port Ethernet
switch compared to the 8 port switch. The Company began the third quarter of
1996 with confirmed backlog of $8.9 million.
Cost of revenue in the three months ended June 30, 1996, was $4,490,329
or 94% of revenue. Cost of revenue in the three months ended March 31, 1996 was
$898,348 or 90% of revenue. Cost of revenue in the three months ended June 30,
1995 was $383,223 or 68% of revenue. The increase in the cost of revenue as a
percentage of revenue in the three months ended June 30, 1996, was due to a
large concentration of sales to one customer of a particular product which had
low profit margin. In the third quarter the manufacturing cost of this product
is expected to be lower and the concentration in sales of this product is
expected to decline dramatically as sales of higher margin products to a greater
number of customers increase. Manufacturing costs in the quarter were also
impacted, but to a lesser extent, by increased staffing and costs associated
therewith, such as recruitment costs and moving allowances, as the Company
increased its support staff to manage the increasing manufacturing demands on
the Company's contract manufacturers.
Research and development in the three months ended June 30, 1996, was
$778,443 compared to $851,156 in the three months ended March 31, 1996 and
$342,826 in the three months ended June 30, 1995. The decrease over the first
quarter of $72,713 or 9% is the result of
8
<PAGE> 10
a decline in consulting costs as products reached the production stage and the
need for concentrated help from consultants diminished. The increase in research
and development expense over the second quarter of 1995 of $435,617 or 128% was
the due to increased staffing to support the Company's OEM strategy. At June 30,
1995 the engineering department consisted of 13 persons and at June 30, 1996 the
staffing had increased to 19 of which a larger portion of the staff was more
experienced and therefore higher paid.
Marketing and selling expense was $444,335 for the three months ended
June 30, 1996, compared with $ 244,255 for the three months ended March 31, 1996
and $375,262 for the three months ended June 30, 1995. The increase of $200,080
or 82% over the first quarter of 1996 was due to commissions on higher sales and
increased staff to support the Company's OEM marketing activities.
General and administrative expense for the three months ended June 30,
1996 was $663,469 compared with $435,108 for the three months ended March 31,
1996 and $458,201 for the three months ended June 30, 1995. The increase of
$228,361 or 53% in the second quarter compared to the first quarter of 1996 was
due to Delaware tax on capital, increase insurance costs due to higher limits,
moving expenses on relocation to new quarters, non recurring security costs
during construction of leasehold improvements while the Company occupied the new
premises, and costs of investors relations including annual report preparation,
Company newsletter, travel and expense of investor meetings.
Liquidity and Capital Resources
The Company has incurred losses for the period from March 12, 1991
(inception) through June 30, 1996 of $14,451,973. The Company may to continue to
incur losses until such time as sufficient sales volume at adequate gross
margins is achieved to cover indirect operating costs.
Cash at June 30, 1996, was $105,866, representing an decrease of
$376,669, compared to December 31, 1995. Working capital at June 30, 1996,
increased $1,129,499 or 118%, compared to December 31, 1995 due to increased
investment in receivables and inventory which was financed by increased payables
and the private sale of 854,993 shares of the Company's Class A Common Stock for
net proceeds of $5,000,000 in January 1996. In July 1996, the Company received
initial funding against a $2,000,000 working capital line of credit. As of
August 9, 1996, the Company had received $1,520,650 representing the proceeds
from the issuance of 244,871 shares of Class A Common Stock upon the voluntary
exercise of Class A Warrants.
Accounts receivable at June 30, 1996, were $4,363,183, an increase of
$4,278,348 compared to December 31, 1995. The increase is due to increased
sales.
Inventory increased by $1,573,203 to $2,583,766 at June 30, 1996,
compared with December 31, 1995. The inventory increase was in support of orders
received for third quarter shipments.
The Company believes that its existing cash and the existing bank line
of credit are sufficient to meet the liquidity requirements of the Company
through the end of the third quarter. However, because of the rapid growth in
the Company's revenues and the associated increase in inventory the Company did
not meet one of the measurement ratios required by the Company's bank at June
30, 1996 and at July 31, 1996 the Company also failed to meet the required
ratio.
9
<PAGE> 11
The Company believes the bank is well collateralized on its loan and has
requested an amendment to the required ratio and an increase in the line of
credit to $5 million. After a preliminary conversation the bank has informally
indicated a willingness to adjust the ratio and to increase the line of credit
to $5 million. There can be no assurance that the bank will formally grant the
Company's requests or that the Company can generate sufficient revenues from
product sales to satisfy its working capital needs in the future. Therefore the
Company may need to seek additional credit, alternative financing and/or further
equity investment. The sources of such credit or equity investment may include
increased lines of credit, factoring of receivables, extended credit terms by
vendors and/or additional exercise of outstanding warrants; however, there can
be no assurances that these sources will be available. The Company may also seek
additional public offerings and/or private placements of its securities. There
can be no assurance, however, that additional funds will be available from any
of the foregoing or other sources on favorable terms, if at all. The Company's
working capital requirements will depend upon numerous factors, including the
progress of the Company's cost reductions efforts for its existing products and
its research and development program for the development of new products and
applications, the level of resources devoted by the Company to the development
of manufacturing and marketing capabilities, technological advances, the status
of competitors and the success or lack thereof of the Company's marketing
activities.
10
<PAGE> 12
NETVANTAGE, INC.
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
For the quarter ended June 30, 1996 the Registrant filed two reports
on Form 8-K. The first was dated, May 7, 1996, and described the acquisition of
Multimedia LANs, Inc. for 53,334 shares of the Registrant's previously
authorized but unissued Class A Common Stock. The second was dated June 27, 1996
and concerned a notification of all warrantholders of the Registrant's Class A
and Class B Warrants of an adjustment to the conversion price and the number of
Class A Common shares to be issued for each warrant.
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.
NetVantage, Inc.
Date: August 12, 1996 /s/ Stephen R. Rizzone
--------------------------------------
Stephen R. Rizzone, President & CEO
Date: August 12, 1996 /s/ Thomas V. Baker
--------------------------------------
Thomas V. Baker, Vice President & CFO
11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 105,866
<SECURITIES> 0
<RECEIVABLES> 4,366,300
<ALLOWANCES> 3,117
<INVENTORY> 2,583,766
<CURRENT-ASSETS> 7,137,626
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 8,793,418
<CURRENT-LIABILITIES> 5,043,819
<BONDS> 0
0
0
<COMMON> 4,421
<OTHER-SE> 3,745,178
<TOTAL-LIABILITY-AND-EQUITY> 8,793,418
<SALES> 5,790,429
<TOTAL-REVENUES> 5,790,429
<CGS> 5,388,678
<TOTAL-COSTS> 5,388,678
<OTHER-EXPENSES> 3,416,765
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,952,420)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,952,420)
<EPS-PRIMARY> (0.98)
<EPS-DILUTED> 0
</TABLE>
