SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 quarterly period ended September 30, 1998
/ / 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: 0-25918
ACTIVE APPAREL GROUP, INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE 13-3672716
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1350 BROADWAY
SUITE 2300
NEW YORK, NY 10018
(Address of Principal Executive Offices)
(212) 239-0990
(Issuer's telephone number)
Not Applicable
(Former name, former address and former
fiscal year if changed since last report)
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 common equity shares outstanding as of November 13, 1998
was 2,494,081 shares of Common Stock, $.002 par value, and 100,000 shares of
Class A Common Stock, $.01 par value.
Transitional Small Business Disclosure Format (check one):
Yes / / No /X/
Form 10-QSB
<PAGE>
INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Balance Sheets 3
Statements of Operations 4
Statements of Changes in Stockholders' Equity 5
Statements of Cash Flows 6
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 8-11
PART II. OTHER INFORMATION
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURE 13
- 2 -
<PAGE>
ACTIVE APPAREL GROUP, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1 9 9 8 1 9 9 7
---------------- ------------
(unaudited)
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 167,370 $ 59,441
Refundable income taxes 153,500
Accounts receivable 21,889 130,097
Due from factor 2,531,708 1,656,283
Inventory 2,962,640 3,847,556
Prepaid royalties 17,500 52,746
Prepaid expenses and other current assets 429,311 168,130
Deferred tax asset 70,612 88,053
----------- -------------
Total current assets 6,201,030 6,155,806
Note receivable, officer 120,000 120,000
Property and equipment, net 372,947 406,692
Security deposits and other assets 370,828 261,341
------------ ------------
Total Assets $7,064,805 $6,943,839
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $845,192 $ 768,960
Accrued expenses and other current liabilities 132,958 199,574
----------- ------------
Total current liabilities 978,150 968,534
----------- -----------
Stockholders' equity:
Common stock, par value $.002; 10,000,000 shares
authorized; 2,666,581 issued, 2,494,081 outstanding
(1998); 2,641,875 issued, 2,469,375 outstanding (1997) 5,332 5,283
Class A common stock, par value $.01; 100,000 shares
authorized; 100,000 shares issued and outstanding 1,000 1,000
Paid-in capital 6,136,342 6,124,891
Retained earnings 669,606 569,756
----------- -----------
6,812,280 6,700,930
Less treasury stock, at cost (172,500 common shares) (725,625) (725,625)
----------- -----------
Total Stockholders' Equity 6,086,655 5,975,305
----------- ----------
Total Liabilities and Stockholders' Equity $7,064,805 $6,943,839
========== ==========
</TABLE>
- 3 -
See accompanying notes to financial statements.
<PAGE>
ACTIVE APPAREL GROUP, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------------- -------------------------------
1 9 9 8 1 9 9 7 1 9 9 8 1 9 9 7
-------------- ------------- --------------- -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net sales $11,975,117 $12,598,293 $3,687,261 $4,595,594
Cost of goods sold 7,359,224 7,556,479 2,241,068 2,713,814
--------- --------- --------- ---------
Gross profit 4,615,893 5,041,814 1,446,193 1,881,780
--------- --------- --------- ---------
Operating expenses:
Selling and shipping 2,789,559 2,701,043 1,037,393 1,117,051
General and administrative 1,394,564 1,357,153 410,870 421,595
Financial expenses, including interest
expense of $91,717 and $102,776 for
the nine months ended September 30, 1998 and
1997 261,860 341,341 74,925 160,564
--------- ---------- ---------- ----------
4,445,983 4,399,537 1,523,188 1,699,210
--------- --------- --------- ---------
Income (loss) before provision for income taxes 169,910 642,277 (76,995) 182,570
Provision for income taxes (benefit) 70,060 281,208 (24,144) 85,340
---------- ---------- ----------- ---------
Net income $ 99,850 $ 361,069 ($52,851) $ 97,230
========== =========== =========== =========
Basic and diluted earnings per share $.04 $.14 ($.02) $.04
==== ==== ====== ====
</TABLE>
- 4 -
See accompanying notes to financial statements.
<PAGE>
ACTIVE APPAREL GROUP, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
CLASS A
COMMON STOCK COMMON STOCK
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
Balance, December 31, 1996 2,447,737 $5,240 100,000 $1,000
Stock options exerised 21,638 43 - -
Net income - nine months
ended September 30, 1997 - - -
--------- ------ ------- ------
Balance, September 30, 1997 2,469,375 $5,283 100,000 $1,000
========= ====== ======= ======
Balance, December 31, 1997 2,469,375 $5,283 100,000 $1,000
Stock options exercised 24,706 49 - -
Net income - nine months
ended September 30, 1998 - - - -
--------- ------ ------- ------
Balance, September 30, 1998 2,494,081 $5,332 100,000 $1,000
========= ====== ======= ======
<TABLE>
<CAPTION>
TREASURY STOCK
PAID IN CAPITAL RETAINED EARNINGS SHARES AMOUNT TOTAL
--------------- ----------------- ------ ------ -----
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1996 $6,054,035 $358,271 172,500 $(725,625) $5,692,921
Stock options exerised 70,856 - - - 70,899
Net income - nine months
ended September 30, 1997 - 361,069 - - 361,069
---------- -------- ------- -------- ----------
Balance, September 30, 1997 $6,124,891 $719,340 172,500 $(725,625) $6,124,889
========== ======== ======= ========== ==========
Balance, December 31, 1997 $6,124,891 $569,756 172,500 $(725,625) $5,975,305
Stock options exercised 11,451 - - - 11,500
Net income - nine months
ended September 30, 1998 - 99,850 - - 99,850
---------- -------- ------- --------- ----------
Balance, September 30, 1998 $6,136,342 $669,606 172,500 $(725,625) $6,139,506
========== ======== ======= ========== ==========
</TABLE>
-5-
See accompanying notes to financial statements.financial statements.
<PAGE>
ACTIVE APPAREL GROUP, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------------
1 9 9 8 1 9 9 7
------------- -----------
(Unaudited) (Unaudited)
Cash flows from operating activities:
<S> <C> <C>
Net income $99,850 $ 361,069
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 93,386 80,524
Amortization 5,889 -
Changes in assets (increase) decrease:
Refundable income taxes 153,500 -
Accounts receivable 108,208 -
Due from factor (875,425) 1,343,645
Inventory 884,916 (2,229,871)
Prepaid expenses and other current assets (261,181) (337,806)
Prepaid royalties 35,246 (1,251)
Deferred tax asset 17,441 -
Security deposits and other assets (115,376) (208,392)
Changes in liabilities increase (decrease):
Accrued expenses and other current liabilities (66,616) (199,080)
Accounts payable 76,232 1,193,271
-------- ------------
Net cash provided by operating activities 156,070 2,109
------- ------------
Cash flows used by investing activities:
Acquisition of property and equipment (59,641) (173,752)
--------- ----------
Cash flows from financing activities:
Proceeds from stock options exercised 11,500 70,899
---------- ------------
Net increase (decrease) in cash and cash equivalents 107,929 (100,744)
Cash and cash equivalents, beginning of period 59,441 163,241
-------- ----------
Cash and cash equivalents, end of period $167,370 $ 62,497
======== ==========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 91,717 $ 102,776
Income taxes 83,288 635,432
</TABLE>
- 6 -
See accompanying notes to financial statements.
<PAGE>
ACTIVE APPAREL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 AND 1997
1. The Company and basis of presentation:
The financial statements presented herein as of September 30, 1998 and
for the nine months and the three months ended September 30, 1998 and
1997 are unaudited and, in the opinion of management, include all
adjustments (consisting only of normal and recurring adjustments)
necessary for a fair presentation of financial position and results of
operations. Such financial statements do not include all of the
information and footnote disclosures normally included in audited
financial statements prepared in accordance with generally accepted
accounting principles. The accompanying unaudited financial statements
have been prepared in accordance with the instructions to Form 10-QSB.
The results of operations for the nine and three month periods ended
September 30, 1998 are not necessarily indicative of the results that
may be expected for any other interim period or the full year ending
December 31, 1998.
2. Earnings per share:
Basic earnings per share amounts are computed based on the weighted
average number of shares actually outstanding during the period.
Diluted earnings per share amounts are based on an increased number of
shares that would be outstanding assuming conversion of convertible
preferred stock and the exercise of dilutive stock options. For
purposes of the diluted computation, the number of shares that would be
issued from the exercise of stock options has been reduced by the
number of shares which could be purchased from the proceeds from the
exercise of stock options at the average market price of the Company's
stock on September 30, 1998 and 1997.
The number of shares used in the computation of basic earnings per
share was 2,591,638 and 2,562,293 at September 30, 1998 and 1997
respectively. The number of shares used in the computation of diluted
earnings per share was 2,620,722 and 2,664,896 at September 30, 1998
and 1997 respectively.
-7-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THIS REPORT ON FORM 10-QSB CONTAINS FORWARD-LOOKING STATEMENTS THAT
INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS. FACTORS
THAT MAY CAUSE SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THE COMPANY'S
EXPANSION INTO NEW MARKETS, COMPETITION, TECHNOLOGICAL ADVANCES AND AVAILABILITY
OF MANAGERIAL PERSONNEL.
GENERAL
The Company is a designer, marketer and supplier of women's
activewear, sportswear, swimwear and unisex activewear and accessories. The
Company sells its principal product collections under the EVERLAST, CONVERSE and
MTV brand names through exclusive licensing arrangements. The Company's products
are manufactured by third party independent manufacturing contractors and are
sold to approximately 500 separate accounts, representing approximately 20,000
retail locations throughout the United States and Canada, including a variety of
department stores, specialty stores, sporting goods stores, catalog operations
and better mass merchandisers. On October 23, 1998, the Company acquired the
exclusive license for EVERLAST menswear products, including activewear, casual
wear and outerwear. Under the terms of two separate contracts, the Company will
market EVERLAST menswear in the U.S. and Canada. The Company anticipates it will
start shipping EVERLAST menswear in the three month period ending March 31,
1999.
The financial statements of the Company and the notes thereto contain
detailed information that should be referred to in conjunction with this
discussion.
RESULTS OF OPERATIONS
QUARTER ENDED SEPTEMBER 30, 1998 COMPARED TO QUARTER ENDED SEPTEMBER 30, 1997
Net sales decreased to $3,687,261 for the three months ended September
30, 1998 from $4,595,574 for the three months ended September 30, 1997, a
decrease of $908,313, or 19.8%. This decrease in net sales was principally
attributable a decline in sales volume of the Company's Converse and MTV product
lines.
Gross profit decreased to $1,446,193 for the three months ended
September 30, 1998 from $1,881,780 for the three months ended September 30,
1997, a decrease of $435,587, or 23.1%. Gross profit decreased as a percentage
of net sales to 39.2% from 40.9%. The decrease as a percentage of net sales was
primarily attributable to lower prices received for the Company's products.
Selling and shipping expenses decreased to $1,037,393 for the three
months ended September 30, 1998 from $1,117,051 for the three months ended
September 30, 1997, a decrease of $79,658 or 7.1%. Selling and shipping expenses
as a percentage of net sales increased to 28.1% from 24.3%. The increase as a
percentage of net sales was primarily attributable to the decrease in net sales,
which offset lower expenditures for royalties, advertising, travel and freight.
General and administrative expenses decreased to $410,870 for the three
months ended September 30, 1998 from $421,595 for the three months ended
September 30, 1997, a decrease of $10,725, or 2.5%. General and administrative
expenses as a percentage of net sales increased to 11.1% from 9.2%. The increase
as a percentage of net sales was primarily attributable to the decrease in net
sales.
Financial expenses decreased to $74,925 for the three months ended
September 30, 1998 from $160,564 for the three months ended September 30, 1997,
a decrease of $85,639, or 53.3%. The decrease was primarily attributable to a
decrease in interest expense and factor commissions charged to the Company. The
decrease in interest expense was due to the reduction in the Company's net
borrowings from the factor for the three months
-8-
<PAGE>
ended September 30, 1998 versus the comparable period in 1997. The decrease in
factor commissions was due to the decrease in net sales.
The Company recorded an operating loss of $76,995 for the three months
ended September 30, 1998 compared to operating income of $182,570 for the three
months ended September 30, 1997, a decrease of $259,565, or 142.2%, for the
reasons stated in the preceding paragraphs. Operating income as a percentage of
net sales was (2.1)% for the three months ended September 30, 1998 as compared
to 4.0% for the three months ended September 30, 1997.
The Company's income tax benefit for the three months ended September
30, 1998 was $24,144 as compared to an income tax expense of $85,340 for the
three months ended September 30, 1997, a decrease of $109,484.
The Company had a net loss of $52,851 for the three months ended
September 30, 1998 as compared to a net profit of $97,230 for the three months
ended September 30, 1997, a decrease of $150,080, or 154.4%, for the reasons
stated in the preceding paragraphs.
NINE MONTHS SEPTEMBER 30, 1998 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 1997
Net sales decreased to $11,975,117 for the nine months ended September
30, 1998 from $12,598,293 for the nine months ended September 30, 1997, a
decrease of $623,176, or 4.9%. This decrease in net sales was principally
attributable a decline in sales volume of the Company's Converse and MTV product
lines.
Gross profit decreased to $4,615,893 for the nine months ended
September 30, 1998 from $5,014,814 for the nine months ended September 30, 1997,
a decrease of $398,921, or 8.0%. Gross profit decreased as a percentage of net
sales to 38.5% from 40.0%. The decrease as a percentage of net sales was
primarily attributable to lower prices received for the Company's products.
Selling and shipping expenses increased to $2,789,559 for the nine
months ended September 30, 1998 from $2,701,043 for the nine months ended
September 30, 1997, an increase of $88,516, or 3.3%. Selling and shipping
expenses as a percentage of net sales increased to 23.3% from 21.4%. The
increase as a percentage of net sales was primarily attributable to an increase
in sales, shipping, and design salaries.
General and administrative expenses increased to $1,394,564 for the
nine months ended September 30, 1998 from $1,357,153 for the nine months ended
September 30, 1997, an increase of $37,411, or 2.8%. General and administrative
expenses as a percentage of net sales increased to 11.6% from 10.8%. The
increase was primarily attributable to an increase in outside consulting
expense.
Financial expenses decreased to $261,860 for the nine months ended
September 30, 1998 from $341,341 for the nine months ended September 30, 1997, a
decrease of $79,481, or 23.3%. The decrease was attributable to a decrease in
the Company's net borrowings and lower factor commissions for the nine months
ended September 30, 1998 versus the comparable period in 1997.
Operating income decreased to $169,910 for the nine months ended
September 30, 1998 from $642,277 for the nine months ended September 30, 1997, a
decrease of $472,367, or 73.5%, for the reasons stated in the preceding
paragraphs. Operating income as a percentage of net sales was 1.4% for the nine
months ended September 30, 1998 as compared to 5.1% for the nine months ended
September 30, 1997.
The Company incurred a tax provision of $70,060 for the nine months
ended September 30, 1998 as compared to $281,208 for the nine months ended
September 30, 1997, a decrease of $211,148, or 75.1%.
-9-
<PAGE>
The Company had net income of $99,850 for the nine months ended
September 30, 1998 as compared to $361,069 for the nine months ended September
30, 1997, a decrease of $261,219, or 72.3%, for the reasons stated in the
preceding paragraphs.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities for the nine months ended
September 30, 1998 was $156,070 compared to $2,109 for the nine months ended
September 30, 1997. This increase was primarily attributable to a decrease in
inventory partially offset by higher accounts payable . Net cash used for
investing activities for the nine months ended September 30, 1998 was $59,641
compared to $173,752 for the nine months ended September 30, 1997. The decrease
was attributable to the significant investment in the technological
infrastructure of the Company in 1997. Net cash provided by financing activities
was $11,500 for the nine months ended September 30, 1998 compared to $70,899 for
the nine months ended September 30, 1997. The decrease was primarily
attributable to a decrease in the proceeds from the exercise of stock options.
During the nine months ended September 30, 1998, the Company's primary
need for funds was to finance working capital for operations. The Company has
relied primarily upon cash flow from operations and advances drawn against
factored receivables to finance its operations and expansion. At September 30,
1998, working capital was $5,222,888 compared to $5,070,524 at September 30,
1997, an increase of $152,364.
Due from factor represents the amount owed to the Company for factored
receivables less the amount of outstanding advances made by Century Business
Credit Corporation to the Company under a credit agreement (the "Century
Agreement"). At September 30, 1998, due from factor was $2,531,708 as compared
to $1,552,628 at September 30, 1997. This increase is primarily a result of less
factor borrowings being required due to a lowering of inventory. The Company's
inventory decreased to $2,962,640 at September 30, 1998 as compared to
$4,987,571 at September 30, 1997 due to the application of better management
controls and automated systems.
Management anticipates it will retain a net receivable position under
the Century Agreement, although no assurance to that effect can be given.
Positive cash flow, if it occurs, will provide for a further reduction in
advances, and excess working capital will be sufficient to fund the Company's
operations through 1998.
On April 15, 1998 the Company and Converse Inc. amended its exclusive
license agreement to produce and market certain apparel in the United States.
The amendment extended the license and option period from September 30, 1998 to
March 31, 1999. Management does not anticipate that the Company will achieve
sufficient net sales to automatically renew the license agreement. If the
license agreement is canceled at the end of the extended license period, the
Company believes it will not have a material adverse effect on the Company's
business. A copy of the amendment was filed as Exhibit 10.1 to the Company's
Form 10-QSB for the period ended June 30, 1998.
On May 26, 1998 the Company and MTV Networks, A division of Viacom
International, Inc. amended its exclusive license agreement to produce and
market certain apparel in the United States. The amendment extended the license
and option period from January 31, 1999 to June 30, 1999. Management does not
anticipate that the Company will achieve sufficient net sales to automatically
renew the license agreement. If the license agreement is canceled at the end of
the extended license period, the Company believes it will not have a material
adverse effect on the Company's business. A copy of the amendment is annexed
hereto and incorporated by reference as Exhibit 10.1.
-10-
<PAGE>
YEAR 2000
The Company began a year 2000 compliance project in June 1995 and is
currently year 2000 compliant. The project encompassed upgrading the server and
all proprietary and non-proprietary software. The project was completed
September 1997.
The Company is in the process of assessing year 2000 issues not related
to its internal systems, including issues with third-party suppliers and
customers and warehouse communications. Due to the general uncertainty of the
year 2000 readiness of third-party suppliers and customers, the Company is
unable to determine at this time whether the consequences of year 2000 failures
will have a material impact on the Company's results of operations, liquidity or
financial condition. The Company believes that interruptions of normal
operations will not be affected.
The total expenditures for the Year 2000 project were approximately
$200,000 in fiscal year 1997. There are no anticipated year 2000 related costs
in the current fiscal year.
-11-
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 10.1 - Amendment to MTV License agreement dated
March 28, 1996 between MTV Networks and the
Company.
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
None
-12-
<PAGE>
Pursuant to the requirements 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.
ACTIVE APPAREL GROUP, INC.
Date: NOVEMBER 13, 1998 By: /S/ GEORGE Q HOROWITZ
------------------- ----------------------
George Q Horowitz
Chief Executive Officer, President,
Treasurer, and Director
Signing on behalf of the
registrant and as Chief
Financial Officer
-13-
[Letterhead of MTV Music Television]
May 26, 1998
Active Apparel Group, Inc.
1350 Broadway, Suite 2300
New York, NY 10018
Attn: Edward R. Epstein, Esq.
Reference is made to the agreement dated March 28, 1996, and as amended as of
October 21, 1997, with respect to "MTV's THE GRIND" (the "LICENSED PROPERTY")
between MTV Networks, a division of Viacom International Inc., ("MTVN") and
Active Apparel Group, Inc. ("LICENSE") (the "AGREEMENT"). Capitalized terms used
without definition herein shall have the respective definitions set forth in the
Agreement.
Effective as of the date hereof, MTVN and Licensee hereby agree that the Basic
Provisions of the Agreement shall be amended as follows:
1) With respect to the LICENSE TERM of the Agreement, the Agreement shall be
extended until June 30, 1999. The LICENSE TERM shall be deleted and replaced by
the following:
April 30, 1996 through June 30, 1999
3) With respect to GUARANTEED MINIMUM ROYALTY, the installment due on January 1,
1999, shall be deleted and the GUARANTEED MINIMUM ROYALTY shall be reduced to
the sum of US$183,750.00. The GUARANTEED MINIMUM ROYALTY payment schedule shall
be deleted and replaced by the following:
The Guaranteed Minimum Royalty for the License Term
is US$183,750.00 and shall be payable as follows:
$37,500.00 upon Licensee's execution hereof
("Advance"),
$16,250.00 on or before October 1, 1996,
$16,250.00 on or before January 1, 1997,
$16,250.00 on or before April 1, 1997,
$16,250.00 on or before July 1, 1997,
$16,250.00 on or before October 1, 1997,
$48,750.00 on or before October 1, 1998, and
$16,250.00 on or before December 15, 1998.
<PAGE>
Except as otherwise herein amended, the Agreement is hereby ratified and
confirmed in all respects.
Please indicate your acceptance of the foregoing by signing in the space
provided below.
Very truly yours,
MTV NETWORKS, A DIVISION OF
VIACOM INTERNATIONAL INC.
By: /s/ Illegible
----------------------------------------
Title: Vice President
ACCEPTED AND AGREED TO
ACTIVE APPAREL GROUP, INC.
By: /s/ George O. Horwitz
--------------------------
Title:President/CEO
----------------------
-2-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's Form 10-QSB for the quarter ended September 30, 1998 and is qualified
in its entirety by reference to such Financial Statements and Notes, thereto.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 167,370
<SECURITIES> 0
<RECEIVABLES> 2,553,597
<ALLOWANCES> 0
<INVENTORY> 2,962,640
<CURRENT-ASSETS> 6,201,030
<PP&E> 688,143
<DEPRECIATION> 315,196
<TOTAL-ASSETS> 7,064,805
<CURRENT-LIABILITIES> 978,150
<BONDS> 0
0
0
<COMMON> 5,332
<OTHER-SE> 1,000
<TOTAL-LIABILITY-AND-EQUITY> 7,064,805
<SALES> 11,975,117
<TOTAL-REVENUES> 11,975,117
<CGS> 7,359,224
<TOTAL-COSTS> 7,359,224
<OTHER-EXPENSES> 4,445,983
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 91,717
<INCOME-PRETAX> 169,910
<INCOME-TAX> 70,060
<INCOME-CONTINUING> 99,850
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 99,850
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
