<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 1996 Commission File Number 0-27642
TRANSDERM LABORATORIES CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-3518345
(State of Incorporation) (I.R.S. Employer Identification No.)
1212 Avenue of the Americas, 24th Floor, New York, NY 10036
(Address of principal executive offices)
Registrant's Telephone Number: 212-398-0700
The registrant has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 and has been subject to such
filing requirements since September 18, 1995.
As of July 31, 1996, 40,000,000 shares of Common Stock, $.001 Par Value, were
outstanding.
Page 1<PAGE>
<PAGE>
<TABLE>
TRANSDERM LABORATORIES CORPORATION Part I
CONSOLIDATED BALANCE SHEETS Item 1
(In thousands) Page 2
<CAPTION>
June 30, December 31,
1996 1995
ASSETS (Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash $ 16 $ 8
Accounts receivable 792 650
Inventories (Note 3) 861 934
Deferred income taxes - current 116 72
Other current assets 47 0
Total Current Assets 1,832 1,664
PROPERTY, PLANT & EQUIPMENT
Land and building 2,854 2,854
Other property, plant & equipment 7,650 7,530
Total Property, Plant & Equipment 10,504 10,384
Less accumulated depreciation & amortization 5,203 4,855
Net Property, Plant & Equipment 5,301 5,529
NON-CURRENT ASSETS
Deferred income taxes 741 989
Payable to Health-Chem as net operating loss and
tax credit carryforwards are used (Note 1) <502> <803>
Long-term receivable - Health-Chem 1,541 1,939
Other non-current assets 0 1
Total Non-Current Assets 1,780 2,126
TOTAL ASSETS $ 8,913 $ 9,319
LIABILITIES AND STOCKHOLDERS' EQUITY <DEFICIENCY>
CURRENT LIABILITIES
Accounts payable $ 536 $ 250
Accrued expenses and other current liabilities 367 552
Current portion of redeemable preferred
stock (Note 1) 1,000 500
Preferred dividends payable 166 233
Income taxes payable 47 91
Total Current Liabilities 2,116 1,626
LONG-TERM LIABILITIES
Subordinated promissory note (Note 1) 7,000 7,000
Other long-term debt 0 200
Deferred income taxes 595 537
REDEEMABLE PREFERRED STOCK (Note 1) 8,500 9,500
STOCKHOLDERS' EQUITY <DEFICIENCY>
Common stock 40 40
Retained deficit <9,338> <9,584>
Total Stockholders' Equity <Deficiency> <9,298> <9,544>
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
<DEFICIENCY> $ 8,913 $ 9,319
<FN>
See Notes to Consolidated Financial Statements.<PAGE>
<PAGE>
</TABLE>
<TABLE>
TRANSDERM LABORATORIES CORPORATION Part I
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Item 1
(In thousands, except share data) Page 3
<CAPTION>
For The Six Months
Ended June 30,
1996 1995
<S> <C> <C>
REVENUE:
Net sales $ 7,032 $ 5,768
Cost of goods sold 2,873 2,384
Gross profit 4,159 3,384
OPERATING EXPENSES:
Selling, general and administrative expense 1,142 804
Legal expense 761 107
Research and development expense 1,144 1,162
Net interest expense 261 274
Total operating expenses 3,308 2,347
INCOME FROM OPERATIONS 851 1,037
Other income 42 100
INCOME FROM OPERATIONS BEFORE TAXES 893 1,137
Income tax provision (Note 2) 306 427
NET INCOME 587 710
PREFERRED DIVIDENDS 341 0
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS $ 246 $ 710
Earnings per Common Share (primary & fully
diluted) (Note 4):
NET INCOME PER COMMON SHARE $ 0.01
Average number of common shares outstanding (Note 4)
Primary 47,453,755
Fully Diluted 47,621,166
<FN>
See Notes to Consolidated Financial Statements.
<PAGE>
<PAGE>
</TABLE>
<TABLE>
TRANSDERM LABORATORIES CORPORATION Part I
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Item 1
(In thousands, except share data) Page 4
<CAPTION>
For The Three Months
Ended June 30,
1996 1995
<S> <C> <C>
REVENUE:
Net sales $ 3,230 $ 2,578
Cost of goods sold 1,373 1,140
Gross profit 1,857 1,438
OPERATING EXPENSES:
Selling, general and administrative expense 537 437
Legal expense 546 50
Research and development expense 584 586
Net interest expense 135 129
Total operating expenses 1,802 1,202
INCOME FROM OPERATIONS 55 236
Other income 42 100
INCOME FROM OPERATIONS BEFORE TAXES 97 336
Income tax provision (Note 2) 45 122
NET INCOME 52 214
PREFERRED DIVIDENDS 166 0
NET <LOSS> INCOME AVAILABLE TO COMMON STOCKHOLDERS $ <114> $ 214
Earnings per Common Share (primary & fully
diluted) (Note 4):
NET LOSS PER COMMON SHARE $ 0.00
Average number of common shares outstanding (Note 4)
Primary 46,093,750
Fully Diluted 46,428,571
<FN>
See Notes to Consolidated Financial Statements.
<PAGE>
<PAGE>
</TABLE>
<TABLE>
TRANSDERM LABORATORIES CORPORATION Part I
CONSOLIDATED CASH FLOW STATEMENTS Item 1
(Unaudited) Page 5
(In thousands)
<CAPTION>
For The Six Months
Ended June 30,
1996 1995
<S> <C> <C>
Cash was Provided by <Used for>:
OPERATIONS:
Net income $ 587 $ 710
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation and amortization 348 354
Deferred income taxes 262 367
Changes in:
Accounts receivable <142> 101
Inventories 73 <230>
Other current assets <47> 0
Other non-current assets 1 0
Accounts payable 286 393
Accrued expenses and other current liabilities <185> <205>
Income taxes payable <44> <53>
Net cash provided by operations 1,139 1,437
INVESTING:
Additions to property, plant and equipment <120> <317>
Net cash used for investing <120> <317>
FINANCING:
Borrowings from <payments to> affiliates, net 97 <1,066>
Other long-term debt payments <200> 0
Redemption of preferred stock <500> 0
Preferred dividends paid <408> 0
Decrease in Health-Chem equity in land and building 0 <54>
Net cash used for financing <1,011> <1,120>
Net Increase in Cash 8 0
Cash at beginning of period 8 3
Cash at end of period $ 16 $ 3
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $ 324 $ 274
Income taxes 89 134
<FN>
See Notes to Consolidated Financial Statements.
<PAGE>
<PAGE>
TRANSDERM LABORATORIES CORPORATION Part I
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Item 1
(Unaudited) Page 6
1. Basis of Presentation and Nature of Operations
Transderm Laboratories Corporation (the "Company") is an indirect 90%
owned subsidiary of Health-Chem Corporation ("Health-Chem").
In April 1995, Health-Chem's Board of Directors approved a plan to
realign certain of its business operations in order to separate its
transdermal pharmaceutical business from its hospital and industrial
laminated fabrics and environmental chemical business. As part of
such realignment, Hercon Laboratories Corporation ("Hercon")
effectively transferred its environmental chemical business to a
subsidiary of Health-Chem, Hercon Environmental Corporation.
Following the completion of the transfer of the environmental
business, the Company, Herculite Products, Inc. ("Herculite"), which
is a wholly-owned subsidiary of Health-Chem, and Health-Chem entered
into a Plan of Reorganization and Asset Exchange Agreement effective
August 31, 1995.
The Plan of Reorganization and Asset Exchange Agreement required:
. The transfer from Herculite to the Company of the
manufacturing facility in which Hercon's operations
are conducted and the 985 shares of Hercon common
stock owned by Herculite in exchange for 1,000,000
shares of the Company's Redeemable Preferred Stock,
$10.00 par value.
. Hercon's issuance to Health-Chem of a $7,000,000, 9%
Subordinated Promissory Note evidencing the
approximate amount of intercompany advances owed by
Hercon to Health-Chem.
. The Company's issuance of 40,000,000 shares of its
authorized 60,000,000 shares of Common Stock, $.001
par value, in exchange for the previously issued 50
shares of its $.01 par value common stock.
. The Company's payment to Health-Chem as it uses its
net operating loss and tax credit carryforwards to
offset future taxable income as a result of entering
into a Tax Sharing Agreement.
. The Company's participation in a Corporate Services
Agreement with Health-Chem.
In September 1995, subscription rights to purchase up to 4,000,000
shares of the Company's Common Stock for $.10 per share were issued to
holders of Health-Chem common stock. The Rights Offering expired
November 10, 1995, with shareholders subscribing to the 4,000,000
shares of the Company's Common Stock by exercising their Basic
Subscription Rights and Oversubscription Privileges.
<PAGE>
TRANSDERM LABORATORIES CORPORATION Part I
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Item 1
(Unaudited) Page 7
The accompanying financial statements of the Company, which are
consolidated as of and for the interim periods ended June 30, 1996 and
as of December 31, 1995 and combined for the interim periods ended
June 30, 1995 (collectively referred to as "consolidated") include the
operations of the following:
. Transderm Laboratories Corporation, a previously
inactive company which was originally incorporated in
1989.
. Hercon, excluding its former environmental division
which was transferred to another subsidiary of Health-
Chem effective April 28, 1995.
. The land and building, previously owned by Herculite,
in which Hercon's operations are conducted.
The Consolidated Balance Sheet as of June 30, 1996, the Consolidated
Statements of Operations and the Consolidated Cash Flow Statements for the
interim periods ended June 30, 1996 and 1995 have been prepared by the
Company, without audit. In the opinion of the Company, all necessary
adjustments, consisting of normal recurring items, have been made to
present fairly the financial position, results of operations and cash
flows at June 30, 1996 and for all periods presented. Certain amounts
included in the consolidated financial statements relating to prior
periods have been reclassified to conform to the current presentation.
Certain information and note disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these
consolidated financial statements be read in conjunction with the
consolidated financial statements and notes thereto included in the
Company's December 31, 1995 Annual Report on Form 10-K. The results of
operations for the periods ended June 30, 1996 and 1995 are not
necessarily indicative of the operating results for the full years.
2. Taxes on Income (In thousands) For the Six Months
Ended June 30,
1996 1995
Taxes on income include provision for:
Federal income taxes $ 289 $ 366
State and local income taxes 17 61
Total $ 306 $ 427
Taxes on income are comprised of:
Current $ 44 $ 60
Deferred 262 367
Total $ 306 $ 427
<PAGE>
TRANSDERM LABORATORIES CORPORATION Part I
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Item 1
(Unaudited) Page 8
A reconciliation of taxes on income to the federal statutory rate is as
follows:
For the Six Months
Ended June 30,
1996 1995
Tax provision at statutory rate $ 304 $ 386
Increase <decrease> resulting from:
State and local taxes, net of federal tax benefit 27 41
Reversal of valuation allowance <25> 0
Tax provision $ 306 $ 427
3. Inventories (In thousands)
June 30, 1996 December 31, 1995
Raw materials $ 758 $ 749
Finished goods and work in process 103 185
Total inventories $ 861 $ 934
4. Earnings Per Share
Primary and fully diluted earnings per share are computed based upon
the weighted average number of common shares outstanding after
adjustment for any dilutive effect of the Company's stock options.
<PAGE>
<PAGE> TRANSDERM LABORATORIES CORPORATION Part I
MANAGEMENT'S DISCUSSION AND ANALYSIS OF Item 2
FINANCIAL CONDITION AND RESULTS OF OPERATIONS Page 9
Results of Operations
Net sales increased $1,264,000 for the six months ended June 30, 1996 as
compared to the same period in 1995. The increase is due primarily to greater
demand from distributors for transdermal nitroglycerin patches ($1,073,000)
and to higher selling prices ($191,000).
Net sales increased $652,000 for the quarter ended June 30, 1996 as compared
to the same period in 1995. The fluctuation in sales is attributable to the
factors noted above -- greater demand ($503,000) and higher selling prices
($149,000).
Gross profit increased $775,000, or 23%, for the six months ended June 30,
1996 as compared to the same period in 1995. Gross profit as a percentage of
net sales was 59% in both 1996 and 1995. Gross profit increased primarily due
to increased domestic sales volumes of transdermal nitroglycerin patches.
Gross profit increased $419,000, or 29%, for the quarter ended June 30, 1996
as compared to the same period in 1995. Gross profit as a percentage of net
sales increased from 56% for 1995 to 57% for 1996. These increases in gross
profit are attributable to the factors noted above.
Selling, general and administrative expenses, excluding legal expenses,
increased $338,000 for the six months ended June 30, 1996 as compared to the
same period in 1995. This increase is due primarily to a higher allocation of
expenses from affiliates of $196,000 and from higher payroll-related, data
processing and consulting costs. Selling, general and administrative expenses
incurred by Health-Chem which cannot be directly attributed to a specific
subsidiary are allocated to the Company based upon its net sales as a
percentage of Health-Chem's net sales. The Company's allocation of Health-
Chem's total expenses was 27% for the six months ended June 30, 1996 as
compared to 25% for the same period in 1995. For the quarter ended June 30,
1996, selling, general and administrative expenses, excluding legal expenses,
increased $100,000 due primarily to the same reasons described above.
Legal expenses for the six months and quarter ended June 30, 1996 increased
$654,000 and $496,000, respectively, as compared to the same periods in 1995.
In August 1995, Key Pharmaceuticals, Inc. commenced an action against the
Company's Hercon subsidiary relating to some of Hercon's improved transdermal
nitroglycerin products. The increased legal expenses are primarily due to the
costs of intensive discovery related to the defense of this action. Discovery
is currently scheduled to be completed by mid August 1996. The trial in this
action is scheduled to begin during the last week in September 1996.
Research and development expenses for the six months and quarter ended June
30, 1996 decreased $18,000 and $2,000, respectively, as compared to the same
periods in 1995. These decreases are due primarily to lower clinical
materials expense and to the timing of various phases of clinical studies and
other scheduled research activities. The Company expects total research and
development expenses related to pharmaceutical products in 1996 to approximate
1995 levels.
Net interest expense decreased $13,000 for the six months ended June 30, 1996
as compared to the same period in 1995 due primarily to a reduction in the
outstanding balance of the note payable to Circa Pharmaceuticals, Inc. Net
interest expense increased $6,000 for the quarter ended June 30, 1996 as
compared to the same period in 1995 due primarily to higher average interest
rates on net borrowings from affiliates.
<PAGE>
TRANSDERM LABORATORIES CORPORATION Part I
MANAGEMENT'S DISCUSSION AND ANALYSIS OF Item 2
FINANCIAL CONDITION & RESULTS OF OPERATIONS Page 10
Other income for the six months and quarter ended June 30, 1996 each decreased
$58,000 as compared to the same periods in 1995. These decreases are due to
nonrecurring proceeds of $100,000 received from entering into a distribution
agreement in the second quarter of 1995, partially offset by $42,000 of second
quarter 1996 development work income.
Income from operations before taxes decreased $244,000 and $239,000 for the
six months and quarter ended June 30, 1996, respectively, as compared to the
same periods in 1995 due primarily to the factors discussed above. Income tax
provision varies with the amount and nature of the components of income from
operations before taxes. The decrease in the effective tax rate from 38% for
the six months ended June 30, 1995 to 34% for the six months ended June 30,
1996 is due primarily to a reversal of a portion of the valuation allowance
amounting to $25,000, with such reversal directly reducing the income tax
provision (See Note 2).
Preferred dividends of $341,000 and $166,000 for the six months and quarter
ended June 30, 1996, respectively, reflect dividends associated with the
Company's Redeemable Preferred Stock, $10.00 par value, issued on August 31,
1995 (See Note 1). On March 31, 1996, the Company, as required, redeemed
50,000 shares of the 1,000,000 shares of preferred stock that were issued.
Annual dividend payments required are $.70 per share.
The results of operations for the periods ended June 30, 1996 and 1995 are not
necessarily indicative of the operating results for the full years.
Liquidity and Capital Resources
The following measures of liquidity are drawn from the Company's consolidated
financial statements.
June 30, December 31,
1996 1995
Working capital (in thousands) $ <284> $ 38
(Current assets less current liabilities)
Current ratio 0.9 1.0
(Current assets/current liabilities)
Quick ratio 0.4 0.4
(Cash and receivables/current liabilities)
Working capital decreased $322,000 from December 31, 1995 to June 30, 1996 due
to a $490,000 increase in current liabilities, partially offset by a $168,000
increase in current assets. Cash, accounts receivable, deferred taxes and
other current assets increased $8,000, $142,000, $44,000 and $47,000,
respectively, while inventory decreased $73,000. The increase in accounts
receivable and decrease in inventory resulted from an increase in sales in the
second quarter of 1996 as compared to the fourth quarter of 1995. The
increase in current liabilities is due to increases in the current portion of
redeemable preferred stock and accounts payable of $500,000 and $286,000,
respectively, partially offset by decreases in accrued expenses, preferred
dividends payable and state taxes payable of $185,000, $67,000 and $44,000,
respectively.
<PAGE>
TRANSDERM LABORATORIES CORPORATION Part I
MANAGEMENT'S DISCUSSION AND ANALYSIS OF Item 2
FINANCIAL CONDITION & RESULTS OF OPERATIONS Page 11
Cash provided by operations for the six months ended June 30, 1996 was
$1,139,000.
The Company has not paid cash dividends on its Common Stock and does not
anticipate doing so in the foreseeable future.
The Company has financed its capital requirements primarily from cash flow
generated from operations and borrowings from its affiliates.
Capital expenditures in 1996 for property, plant and equipment are expected to
be approximately $300,000. These capital expenditures will primarily consist
of equipment needed to assemble and package the Company's second generation
nitroglycerin products.
Health-Chem is a borrower along with its affiliates, including the Company,
under the terms of a $6,000,000 line of credit with The First National Bank of
Maryland. Pacific Combining Corporation ("Pacific"), a subsidiary of Health-
Chem, is a borrower under the terms of a $1,750,000 term loan with The First
National Bank of Maryland. Borrowings under the line of credit and term loan
are collateralized by a pledge of substantially all of the assets of Health-
Chem, Pacific, the Company, and Health-Chem's other operating subsidiaries
with the exception of real estate. The line of credit and term loan, which
expire on October 15, 1997 and November 15, 2000, respectively, are subject to
various financial covenants. At June 30, 1996, Health-Chem and its affiliates
were in compliance with the covenants as amended.
As part of the Plan of Reorganization and Asset Exchange Agreement by and
among Health-Chem, Herculite, and the Company effective August 31, 1995, the
Company and Hercon have incurred financial obligations to Health-Chem and its
other affiliates, including the following:
. On August 31, 1995, Hercon issued to Health-Chem a $7,000,000, 9%
Subordinated Promissory Note in exchange for the then outstanding
borrowings from affiliates. Interest payments associated with this
note are due semi-annually and, as required, commenced March 31, 1996,
with the principal amount of $7,000,000 payable on March 31, 1999.
Prior to August 31, 1995, interest associated with borrowings from
affiliates was at a rate equal to the prime rate charged by The First
National Bank of Maryland.
. The Company is required to make semi-annual preferred dividend
payments to Herculite at the annual rate of $.70 per share on the
then-outstanding shares of the redeemable preferred stock, $10.00 par
value, issued to Herculite in 1995. In March 1996, the Company, as
required, commenced the semi-annual dividend payments and redeemed,
for $500,000, 50,000 shares of the 1,000,000 shares of preferred stock
issued to Herculite. Additional required redemption payments are
$1,000,000 annually in 1997 through 2004 and $1,500,000 in 2005.
<PAGE>
TRANSDERM LABORATORIES CORPORATION Part I
MANAGEMENT'S DISCUSSION AND ANALYSIS OF Item 2
FINANCIAL CONDITION & RESULTS OF OPERATIONS Page 12
. Pursuant to a Corporate Services Agreement between the Company and
Health-Chem, Health-Chem provides or otherwise makes available to the
Company certain general corporate services provided by Health-Chem's
corporate staff, including, but not limited to, accounting, tax,
corporate communications, legal, data processing, purchasing, human
resources, financial and other administrative staff functions, and
arranges for administration of insurance and employee benefit
programs. The Company reimburses Health-Chem for the actual out-of-
pocket cost to Health-Chem or, for those services not directly
attributable to the Company, reimburses them based upon a method
(allocation based upon the Company's net sales as a percentage of
Health-Chem's consolidated net sales) which is considered by the
Company to be reasonable. The Company reimbursed Health-Chem
approximately $570,000 and $374,000 for the six months ended June 30,
1996 and 1995, respectively. The Agreement has an initial term
expiring on December 31, 1997 and will automatically renew for
successive one-year terms. The Company will be required to provide 30
days' notice prior to cancellation of the Agreement.
. Pursuant to a tax sharing agreement between the Company and Health-
Chem, the Company is required to pay Health-Chem as it uses its net
operating loss and tax credit carryforwards to offset future taxable
income. At June 30, 1996, the maximum amount of future such payments
was $502,000.
The semi-annual interest payment on the subordinated promissory note is
$315,000 and the semi-annual dividend on the preferred stock currently
outstanding is $332,500. In addition to the cumulative dividends and interest
payments, the Company is obligated to redeem the preferred stock and repay the
promissory note as described above. The Company anticipates that internally
generated funds may not be sufficient to provide the Company with cash to meet
all of these retirement and redemption obligations and thus the Company may
need to raise additional capital from third parties.
<PAGE>
<PAGE>
Part II
Item 1
Page 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
There were no material developments in any pending legal proceedings in the
quarter ended June 30, 1996.
Item 4. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Stockholders was held on April 30, 1996. The
following members were elected to the Company's Board of Directors to hold
office for the ensuing year:
Nominee In Favor Withheld
Thomas J. Atkins 39,572,976 83,920
Joyce F. Brown 39,572,835 84,061
Michael J. Campbell 39,572,976 83,920
Ester R. Fuchs 39,571,576 85,320
Donald E. Kauffman, Jr. 39,572,835 84,061
Murray Lieber 39,573,076 83,820
Marvin M. Speiser 39,488,209 168,687
Robert D. Speiser 39,487,715 169,181
The results of the voting on the adoption of the 1996 Performance Equity Plan
were as follows:
For Against Abstained Broker Non-Vote
39,407,125 165,659 16,514 67,598
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Master Modification Agreement dated as of June 30,
1996 by and between The First National Bank of
Maryland, Marvin M. Speiser, Health-Chem Corporation,
Pacific Combining Corporation, Hercon Laboratories
Corporation, Herculite Products, Inc., Hercon
Environmental Corporation and the Company, filed as
Exhibit 10.1 to Health-Chem's Report on Form 10-Q for
the quarter ended June 30, 1996 and incorporated
herein by reference.
(b) During the three months ended June 30, 1996, the Company did not file any
reports on Form 8-K.
<PAGE>
Page 14
SIGNATURES
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.
TRANSDERM LABORATORIES CORPORATION
August 5, 1996 /s/ Robert D. Speiser
By: Robert D. Speiser
President (Principal
Executive Officer)
/s/ Ronald J. Burghauser
By: Ronald J. Burghauser
Controller
(Principal Financial Officer)
(Principal Accounting Officer)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 16
<SECURITIES> 0
<RECEIVABLES> 792
<ALLOWANCES> 0
<INVENTORY> 861
<CURRENT-ASSETS> 1832
<PP&E> 10504
<DEPRECIATION> 5203
<TOTAL-ASSETS> 8913
<CURRENT-LIABILITIES> 2116
<BONDS> 7000
<COMMON> 40
8500
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 8913
<SALES> 7032
<TOTAL-REVENUES> 7032
<CGS> 2873
<TOTAL-COSTS> 2873
<OTHER-EXPENSES> 3308
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 261
<INCOME-PRETAX> 893
<INCOME-TAX> 306
<INCOME-CONTINUING> 587
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 246
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
