SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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, 1998 or
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from _______________ to ____________________
Commission File Number: 0-29182
FIDELITY HOLDINGS, INC.
-----------------------
(Exact name of small business issuer as specified in its charter)
Nevada 11-3292094
---------------------------- -------------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
80-02 Kew Gardens Road, Suite 5000
Kew Gardens, New York 11415
---------------------------
(Address of principal executive offices)
(718) 520-6500
--------------
Issuer's telephone number
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 |_|
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required
<PAGE>
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by court. Yes |_| 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: The number of shares of the
registrant's common stock outstanding as of August 7, 1998 was 7,278,600.
<PAGE>
Part 1. FINANCIAL INFORMATION
Item 1. Financial Statements
FIDELITY HOLDINGS, INC AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998
UNAUDITED
<PAGE>
FIDELITY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
SIX MONTHS THREE MONTHS
ENDED JUNE 30, 1998
-------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 462,312 $ 530,884
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Amortization of intangible assets 246,375 161,637
Depreciation 245,298 144,987
Deferred income taxes 190,000 211,000
(Increase) decrease in assets:
Net investment in direct financing leases (222,222) (188,842)
Notes receivable (2,100) --
Accounts receivable (3,323,760) (3,167,642)
Inventories 5,154,798 5,108,915
Other assets (128,990) (101,450)
Increase (decrease) in liabilities:
Notes, accounts payable and accrued expenses (3,677,388) (3,666,316)
Customer deposit (19,641) (19,641)
Deferred revenue (29,024) (4,567)
Due to affiliates (143,926) (99,342)
----------- -----------
Net Cash provided (used) by operating activities (1,248,268) (1,090,377)
----------- -----------
Cash flows from investing activities:
Decrease in property and equipment 414,699 432,953
Acquisition of Major Auto Group net of cash
acquired (6,838,901) (6,838,901)
----------- -----------
Net cash used in investing activities (6,424,202) (6,405,948)
----------- -----------
Cash flows from financing activities:
Proceeds from long-term debt-net 8,844,372 8,732,003
----------- -----------
Net cash provided by financing activities 8,844,372 8,732,003
----------- -----------
Net increase (decrease) in cash and cash equivalents 1,171,902 1,235,678
Cash and cash equivalents, beginning of period 217,191 153,415
----------- -----------
Cash and cash equivalents, end of period $ 1,389,093 $ 1,389,093
=========== ===========
</TABLE>
<PAGE>
FIDELITY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
SIX MONTHS THREE MONTHS
ENDED JUNE 30, 1997
-------------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 508,738 $ 339,069
Adjustments to reconcile net income (loss) to net cash
(used in) provided by operating activities:
Amortization of intangible assets 156,234 78,117
Depreciation 264,758 162,897
Deferred income taxes (114,000) (178,000)
(Increase) decrease in assets:
Net investment in direct financing leases 134,071 106,080
Notes receivable 2,659 3,206
Accounts receivable (626,363) (207,497)
Inventories 941,571 1,062,921
Other assets (44,266) 94,803
Increase (decrease) in liabilities:
Accounts payable 160,361 227,283
Accrued expenses (461,639) (82,069)
Accrued income taxes 338,622 309,000
Deferred revenue (908) (74,751)
Due to affiliates (1,258,906) (1,148,774)
----------- -----------
Net Cash provided (used) by operating activities 932 692,285
----------- -----------
Cash flows from investing activities:
Additions to property and equipment 413,663 1,170,338
----------- -----------
Net cash used in investing activities 413,663 1,170,338
----------- -----------
Cash flows from financing activities:
Payments on long-term debt-net (184,777) 270,089
Proceeds from issuance of common
stock and deposits for exercise of warrants 695,750 695,375
----------- -----------
Net cash provided by financing activities 510,973 965,464
----------- -----------
Net increase (decrease) in cash and cash equivalents 98,242 487,411
Cash and cash equivalents, beginning of period 574,486 185,317
----------- -----------
Cash and cash equivalents, end of period $ 672,728 $ 672,728
=========== ===========
</TABLE>
<PAGE>
FIDELITY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Unaudited
<TABLE>
<CAPTION>
1997 MAJOR 1996 MAJOR
Preferred Stock Preferred Stock Common Stock Additional
--------------- --------------- ------------ Paid in
Shares Amount Shares Amount Shares Amount Capital
------ ------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance
December 31, 1996 -- $ -- 250,000 $ 2,500 6,279,200 $ 62,792 $ 4,509,108
Issuance of Common
Stock pursuant to exercise
of warrants -- -- -- -- 523,000 5,230 648,520
Effect of stock compensation
charge -- -- -- -- 93,500 935 256,665
Net income -- -- -- -- -- -- --
Translation adjustment -- -- -- -- -- -- --
Balance ------------------------------------------- ----------- --------- ----------- -----------
December 31, 1997 -- -- 250,000 2,500 6,895,700 68,957 5,414,293
Net income -- -- -- -- -- -- --
Translation adjustment -- -- -- -- -- -- --
Issuance of 1997 Preferred
stock for the acquisition of
Major Automotive Group 900,000 9,000 -- -- -- -- 5,991,000
Issuance of Common Stock
for compensation and security
deposit -- -- -- -- 365,900 3,659 1,214,788
Balance -----------------------------------------------------------------------------------------------------
June 30, 1998 900,000 $ 9,000 250,000 $ 2,500 7,261,600 $ 72,616 $12,620,081
=====================================================================================================
</TABLE>
Retained Currency Total
Earnings Translation Stockholders'
(Deficit) Adjustment Equity
--------- ---------- ------
Balance
December 31, 1996 $ 669,549 $ 264 $ 5,244,213
Issuance of Common
Stock pursuant to exercise
of warrants -- -- 653,750
Effect of stock compensation
charge -- -- 257,600
Net income 369,139 -- 369,139
Translation adjustment -- 33 33
Balance ----------- ----------- -----------
December 31, 1997 1,038,688 297 6,524,735
Net income 462,312 -- 462,312
Translation adjustment -- 85 85
Issuance of 1997 Preferred
stock for the acquisition of
Major Automotive Group -- -- 6,000,000
Issuance of Common Stock
for compensation and security
deposit -- -- 1,218,447
Balance ---------------------------------------------
June 30, 1998 $ 1,501,000 $ 382 $14,205,579
=============================================
<PAGE>
FIDELITY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
UNAUDITED AUDITED
--------- -------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 1,389,093 $ 217,191
Net Investment in direct financing leases, current 1,617,955 1,644,575
Notes receivable - officer shareholder 150,500 148,400
Accounts receivable 10,526,787 1,650,919
Inventories 13,264,455 164,661
Due from related parties 897,151 --
Other current assets 1,483,842 375,172
----------- -----------
Total current assets 29,329,783 4,200,918
Net investment in direct financing leases,
net of current portion 935,948 687,106
Property and equipment, net 5,100,602 1,236,513
Goodwill 5,111,710 2,738,911
Other intangible assets - patents, customer lists,
favorable lease and franchise value 6,535,714 428,571
Other assets 551,552 109,324
----------- -----------
Total assets $47,565,309 $ 9,401,343
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable $18,021,518 $ 150,000
Accounts payable and accrued expenses 3,817,318 839,307
Current maturities of long-term debt 582,075 575,185
Customer deposits 700,643 --
Deferred revenue 43,546 72,570
Due to affiliates -- 143,926
----------- -----------
Total current liabilities 23,165,100 1,780,988
Long-term debt, less current maturities 9,264,869 427,387
Income taxes deferred 773,000 583,000
Other 156,761 85,233
----------- -----------
Total liabilities 33,359,730 2,876,608
Commitments
Stockholders' equity
Preferred stock, .01 par value;
2,000,000 shares authorized,
250,000 shares issued and outstanding
in 1998 and 1997 2,500 2,500
Preferred stock, .01 par value;
1997 Major, 900,000 shares issued and
outstanding in 1998 none in 1997 9,000 --
Common stock, .01 par value
50,000,000 shares authorized,
7,261,600 shares issued and
outstanding in 1998 and
6,895,700 in 1997 72,616 68,957
Additional paid in capital 12,620,081 5,414,293
Cumulative translation adjustment 382 297
Retained earnings 1,501,000 1,038,688
----------- -----------
Total stockholders' equity 14,205,579 6,524,735
----------- -----------
Total liabilities and stockholders' equity $47,565,309 $ 9,401,343
=========== ===========
</TABLE>
<PAGE>
FIDELITY HOLDINGS INC, AND SUBSIDIARIES
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
Unaudited
June 30, 1998
1. Basis of Presentation
In the opinion of the Company, the accompanying consolidated financial
statements contain all adjustments (consisting only of normal recurring
adjustments) necessary to fairly present the Company's financial position and
its results of operations and cash flows as of the dates and for the periods
indicated.
Certain information and footnote disclosures normally contained in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted. These condensed consolidated financial statements should be
read in conjunction with the audited December 31, 1997 financial statements and
related notes included in the Company's 10KSB. The results of operations for the
six months are not necessarily indicative of the operating results for the full
year.
2. Major Auto Group
On May 14, 1998, the Company acquired the Major Automotive Group, comprised of
five franchise automobile dealers. The acquisition which was accounted for as a
purchase pursuant to Accounting Principles Board Opinion Number 16, was
accomplished by payment of $7,000,000 in cash, the incurrence of $500,000 in
merger- related expenses and the issuance of 900,000 shares of the Company's
Convertible Preferred Stock ("1997-MAJOR Preferred"). Such shares are
convertible, by their terms, into 1,800,000 shares of the Company's Common
Stock. Such common shares were valued at $3.33 per share at the time the
transaction was agreed to. The valuation was based on fair market value of the
Company's freely trading shares and considered such factors as restrictions and
blockage. The number of shares was determined, in accordance with the
acquisition agreement, as the greater of (I) 1,800,000 shares and (ii) that
number of shares of Common Stock that had a market value of $6,000,000.
Together, the cash payment plus the 1997-Major Preferred stock and the merger
related expenses, represent a purchase price of approximately $14 million. The
assets and liabilities of Major were recorded at their historical book value.
The real property, acquired from the principals of Major as part of the
transaction, was recorded at its actual cash cost of $3.4 million.
<PAGE>
Item 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The discussion below contains, in addition to historical information,
forward- looking statements that involve risks and uncertainty. The Company's
actual results could differ significantly from the results discussed in the
forward-looking statements.
The Company
On May 14, 1998, the Company, a holding company whose primary purpose is
the acquisition and development of synergistic technological and
telecommunications businesses as well as the consolidation of the retail
automotive industry, acquired, from a related party, the Major Automotive Group
of dealerships ("Major Auto") and related real estate for approximately $14
million in cash and stock.
As a result of the acquisition of Major Auto, which now comprises the Company's
Automotive division, the Company is now one of the largest volume retailers in
New York City of new and used vehicles. The Automotive division consists of the
following Major Auto dealerships, all of which are located in Queens, New York:
(i) Chevrolet; (ii) Chrysler and Plymouth; (iii) Dodge; (iv) Jeep; and (v)
Subaru. The acquisition was accounted for as a purchase. Accordingly, the
consolidated results of operations of the Company include the results from Major
Auto only since the date of acquisition on May 14, 1998.
Results of Operations - Six-Month Period Ended June 30, 1998 and 1997
Revenues. Revenues for the six-month period ended June 30, 1998 increased
approximately $24.6 million or 1,000% over the comparable prior period to
$27,060,472. Revenue for the comparable period in 1997 was $2,477,656. The
primary source of the increase in revenues was the approximate $26.1 million
generated by Major Auto since May 14, 1998. This increase was offset, in part,
primarily by the decrease in revenues from the Computer Telephony and
Telecommunications division. The revenues of this division decreased
$(1,414,795) or (71.2%). This is a result of the Company's modified business
plan, which is to discontinue sales to Master Agents and acquire the territorial
rights and equipment of its existing Master Agents. Accordingly, the Company
stopped selling to Master Agents during the third quarter of 1997 and has
reached general agreement with its existing Master Agents and is concluding
definitive contractual arrangements to acquire their territorial rights and
equipment.
Cost of Sales. The net cost of sales increase for the six months ended
June 30, 1998 of approximately $23.3 million or 5,000% is primarily attributable
to the automotive division which had a cost of sales of $23,026,967 since its
acquisition on May 14, 1998. This was partially offset by a decrease in cost of
sales in the Computer Telephony and Telecommunications division. The cost of
sales in that division in the 1998 period was $304,180 compared with $426,779 in
the comparable 1997 period. This decrease of $(122,599), or (28.7%), is
consistent with the decrease in revenues related to the higher margin products
sold by this division.
Gross profit. Gross profit showed a net increase of $1,789,044, or 114.6%,
to $3,350,293 in the six months ended June 30, 1998 from $1,561,249 in the
corresponding prior year's period. In the 1997 period, all of the gross profit
was generated by the Computer Telephony and Telecommunications division. The
gross profit from the Automotive division accounted for $3,081,240 of the 1998
net increase. This Automotive division increase was partially offset by a
decrease in the gross profit for the Computer Telephony and Telecommunications
division in the 1998 six-month period of $(1,292,196), or (82.8%) to $269,053.
Gross profit as a percentage of sales in the Automotive division was 11.8% since
the acquisition of Major Auto on May 14, 1998. Gross profit as a percentage of
sales in the Computer Telephony and Telecommunications division decreased to
46.9% in the 1998 first half-year, compared with gross profit of 78.5% in the
comparable prior period. This, again, is the result of the curtailment of higher
gross profit sales to Master Agents that was begun in the third quarter of 1997.
<PAGE>
Selling, general and administrative expense. Selling, general and
administrative expenses ("SG&A") increased a total of $1,362,778, or 120.4%, to
$2,494,486 in the six months ended June 30, 1998 from $1,137,108 from the
comparable period in 1997. Of this net increase, $1,808,710 relates to the
Company's Automotive division acquired on May 14, 1998, a decrease of $(468,085)
relates to the Computer Telephony and Telecommunications division and an
increase of $22,153 is from the Leasing division. SG&A for the Computer
Telephony and Telecommunications division decreased from $767,132 for the first
half of 1997 to $299,047 for the six months ended June 30, 1998, a decrease of
(61.0%). This decrease is reflective of the reduced level of activity associated
with the Company's Master Agents in the first half of 1998. The increase of only
$22,153, or 6.1% in SG&A to $386,729 for the Leasing division in the first half
of 1998 from $364,576 in the comparable prior period is reflective of both
operating efficiencies and a reduced level of activities.
Interest expense. Interest expense increased by $2,65,828 to $339,552 in
the first six months of 1998, from interest expense of $73,724 incurred in the
comparable period in 1997. This is primarily related to the floor plan interest
in the Company's Automotive division of $185,989 and interest incurred in
financing the acquisition of Major Auto amounting to $101,800, partially offset
by a decrease in the Leasing division's interest cost as a result of decreased
activity in that division.
Income on joint venture. The joint venture with Nissko Telecom showed no
gain or loss during the 1998 period, compared with income of $52,055 in the
comparable prior period.
Results of Operations - Three-Month Period Ended June 30, 1998 and 1997
Revenues. Revenues for the three-month period ended June 30, 1998
increased approximately $25.3 million or more than 2,000% to $26,564,192.
Revenue for the comparable period in 1997 was $1,260,634. The primary source of
the increase in revenues was the $26,108,207 generated by Major Auto since May
14, 1998. This was offset, in part, by the decrease in revenues from the
Computer Telephony and Telecommunications division. The revenues of this
division decreased $(788,059), or (76.5%). This resulted from the Company's
planned curtailment of sales to Master Agents. Revenues for the Leasing division
decreased by $(16,590), or (7.2%), to $213,880 in the current quarter from
$230,470 in the prior year's comparable quarter.
Cost of Sales. The net cost of sales increase for the three months ended
June 30, 1998 of almost $23.2 million, or more than 10,000% is primarily
attributable to the Automotive division which had a cost of goods sold of
$23,026,967 since May 14, 1998. This increase was partially offset by a decrease
in cost of sales in the Computer Telephony and Telecommunications division. The
cost of sales in that division in the three-month 1998 period was $187,482,
compared with $221,402 in the comparable 1997 period. This decrease of
$(33,920), or (15.3%), is consistent with the decrease in revenues related to
the higher margin products sold by this division.
Gross profit. Gross profit showed a net increase of $2,327,101, or 287.7%,
to $3,135,863 in the three months ended June 30, 1998 from $808,762 in the
corresponding prior year's period. In the 1997 period, all of the gross profit
was generated by the Computer Telephony and Telecommunications division. The
gross profit from the Automotive division accounted for $3,081,240 of the 1998
net increase. This Automotive division increase was partially offset by a
decrease in the gross profit for the Computer Telephony and Telecommunications
division in the 1998 second quarter period of $(754,139), or (93.2%) to $54,623.
Gross profit as a percentage of sales in the Automotive division was 11.8% since
the acquisition of Major Auto on May 14, 1998. Gross profit as a percentage of
sales in the Computer Telephony and Telecommunications division decreased to
22.6% in the 1998 second quarter, compared with gross profit of 78.5% in the
comparable prior period. This, again, is the result of the curtailment of higher
gross profit sales to Master Agents that began in the third quarter of 1997.
Selling, general and administrative expense. SG&A expenses increased a net
total of $1,665,779, or 355.6%, to $2,134,193 in the three months ended June 30,
1998 from $468,414 for the comparable
<PAGE>
period in 1997. Of this net increase, $1,808,710 relates to the Company's
Automotive division acquired on May 14, 1998, a decrease of $(220,279) relates
to the Computer Telephony and Telecommunications division and an increase of
$77,348 is from the Leasing division. SG&A for the Computer Telephony and
Telecommunications division decreased from $318,140 for the second quarter of
1997 to $79,244 for the three months ended June 30, 1998, a decrease of (75.1%).
This decrease is reflective of the reduced level of activity associated with the
Company's Master Agents in the second quarter of 1998. The increase in the
Leasing division's SG&A expense of $77,348 is an increase of 45.8% to $246,239
in the second quarter of 1998 from $168,891 in the comparable prior period.
Interest expense. Interest expense increased by $282,833 to $313,329 in
the second quarter of 1998, compared with interest expense of $30,496 incurred
in the comparable period in 1997. This is primarily related to the floor plan
interest of the Major Auto Group and the interest incurred on the financing of
that acquisition, aggregating $287,789, which was partially offset by a decrease
in the Leasing division's interest cost as a result of decreased activity in
that division.
Income on joint venture. The joint venture with Nissko Telecom showed no
gain or loss during the 1998 period, compared with income of $30,968 in the
comparable prior period.
Assets, Liquidity and Capital Resources - June 30, 1998
Primarily as a result of the acquisition of Major Auto, the Company's
total assets increased to approximately $47.5 million at June 30, 1998 from
approximately $9.4 million at December 31, 1997. For the same reason,
stockholders' equity increased to approximately $14.2 million from $6.5 million
at December 31, 1997.
The Company's primary source of liquidity for the six months ended June
30, 1998 was $1,143,985 from its net income of $462,312, as adjusted by non-cash
charges which aggregated $681,673. This net increase in cash was more than
offset by the net effect of (a) a decrease in liabilities of $3,869,979
(primarily related to Major Auto's floor plan notes), less (b) the net decrease
of assets of $1,477,726 (primarily from the decrease in the Automotive
division's inventory of $5,154,798 following the acquisition of Major Auto which
was substantially offset by an increase in accounts receivable of $3,323,760).
The combination of record new and used cars sales for Major Auto during this
period, coupled with a strike at General Motors, which restricted the Company's
ability to obtain replacement cars for inventory, was the primary reason for the
significant inventory and floor planning decreases and the related increase in
accounts receivable. The net result of all of the foregoing was a use of cash in
operating activities of $1,248,268.
The Company's investing activities had a net use of cash of $6,424,202.
The most significant component of this use was the acquisition of Major Auto,
which used net cash of $6,838,901. This use was partially offset by a decrease
in property, plant and equipment aggregating $414,619. All of this was more than
offset by net cash provided by financing activities, which aggregated
$8,844,372, from the net proceeds of long-term debt. The primary sources of such
debt were (1) the loan of $7,500,000 from a third-party which was used to
acquire Major Auto and its related real estate and (2) the proceeds of $600,000
from the sale of convertible, subordinated debentures to a limited number of
accredited investors.
The foregoing activities, i.e. operating, investing and financing,
resulted in a net cash increase of $1,171,902 for the six months ended June 30,
1998.
The Company believes that the cash generated from existing operations and
its new Automotive division, together with existing cash, available credit from
its current lenders, including banks and floor planning, and the completion of
its debenture offering, as well as future securities offerings will be
sufficient to finance its current operations, planned expansion and internal
growth for at least the next twenty-four months.
<PAGE>
PART II - OTHER INFMATION
Item 1. Legal Proceedings
The Company is not engaged in any litigation other than as previously
reported.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
The Company filed a report on Form 8-K on May 29, 1998 in connection with
the acquisition of Major Auto. The Company filed amendments to its report on
Form 8-K on June 9, 1998 and June 18, 1998 containing the financial information
required by Item 7(a) of Form 8-K. The Form 8-K and the amendments thereto are
incorporated herein by reference.
Exhibit 27. Financial Data Schedule
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
FIDELITY HOLDINGS, INC.
Date: August 14, 1998 /s/ Bruce Bendel
-----------------------------------
Bruce Bendell, President/CEO
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheets and consolidated statements of operations and
related footnotes of Fidelity Holdings, Inc. and subsidiaries as of and for the
six months and three months ended June 30, 1998 and is qualified in its entirety
by reference to such financial statements and footnotes.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998
<PERIOD-END> JUN-30-1998 JUN-30-1998
<CASH> 1,389,093 1,389,093
<SECURITIES> 0 0
<RECEIVABLES> 11,423,938 11,423,938
<ALLOWANCES> 0 0
<INVENTORY> 13,264,455 13,264,455
<CURRENT-ASSETS> 29,329,783 29,329,783
<PP&E> 5,813,118 5,813,118
<DEPRECIATION> (712,516) (712,516)
<TOTAL-ASSETS> 47,565,309 47,565,309
<CURRENT-LIABILITIES> 23,165,100 23,165,100
<BONDS> 9,846,944 9,846,944
0 0
11,500 11,500
<COMMON> 72,616 72,616
<OTHER-SE> 14,121,463 14,121,463
<TOTAL-LIABILITY-AND-EQUITY> 47,565,309 47,565,309
<SALES> 26,681,440 26,350,312
<TOTAL-REVENUES> 27,060,472 26,564,192
<CGS> 23,331,147 23,214,449
<TOTAL-COSTS> 26,072,008 25,510,279
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 339,552 313,329
<INCOME-PRETAX> 652,312 741,884
<INCOME-TAX> 190,000 211,000
<INCOME-CONTINUING> 462,312 530,884
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 462,312 530,884
<EPS-PRIMARY> .07 .07
<EPS-DILUTED> .05 .06
</TABLE>
