<PAGE>
FORM 10-Q
Securities and Exchange Commission
Washington D.C. 20549
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal quarter ended: August 31, 1996
Commission file number: 0-21161
Q.E.P. CO., INC.
(Exact name of registrant as specified in its charter)
Delaware 13-2983807
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1081 Holland Drive
Boca Raton, Florida 33487
(Address of principal executive offices)
(Zip Code)
(561) 994-5550
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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 No X
------- -------
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of October 28, 1996: 2,504,894 shares of common
stock, par value $.001 per share.
<PAGE>
PART I - FINANCIAL INFORMATION
Q.E.P. CO., INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL INFORMATION
PERIODS ENDED AUGUST 31, 1996 AND 1995
<TABLE>
<CAPTION>
Item Page
- ---- ----
Item 1 - Financial Statements:
<S> <C>
Consolidated Balance Sheets -
August 31, 1996 and February 29, 1996................................................................ 3
Consolidated Statements of Income -
For the Six and Three Months Ended August 31, 1996 and 1995.......................................... 4
Consolidated Statements of Cash Flows -
For the Six Months Ended August 31, 1996 and 1995.................................................... 5
Notes to Consolidated Financial Statements............................................................. 6
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations........... 8
</TABLE>
- 2 -
<PAGE>
Q.E.P. CO., INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AUGUST 31, 1996 AND FEBRUARY 29, 1996
<TABLE>
<CAPTION>
August 31, 1996 February 29, 1996
--------------- -----------------
(Unaudited)
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents................................ $ 196,340 $ 179,138
Accounts receivable, less allowance for doubtful
accounts of $54,500 at August 31, 1996 and
February 29, 1996.................................... 3,849,472 3,580,554
Inventories.............................................. 3,833,317 3,138,681
Other current assets..................................... 496,168 350,443
------------ ------------
Total current assets................................. 8,375,297 7,248,816
PROPERTY AND EQUIPMENT - net.................................. 229,001 266,610
DEFERRED INCOME TAXES......................................... 88,500 84,000
OTHER ASSETS.................................................. 535,917 280,538
------------ ----------
$9,228,715 $7,879,964
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities................. $2,171,337 $1,820,555
Loans payable............................................ 2,530,857 2,447,887
Other current liabilities................................ 69,034 49,109
------------- -------------
Total current liabilities............................ 4,771,228 4,317,551
OTHER LIABILITIES............................................. 155,545 137,088
COMMITMENTS...................................................
STOCKHOLDERS' EQUITY:
Preferred stock, 2,500,0000 shares authorized, $1.00 par
value; 503,047 shares issued and outstanding......... 503,047 503,047
Common Stock, 10,000,000 shares authorized, $.001
par value; 1,500,000 shares issued and outstanding... 1,500 1,500
Additional paid-in capital............................... 30,762 30,762
Retained earnings........................................ 3,824,533 2,947,916
Cost of stock held in treasury........................... (57,900) (57,900)
------------- -------------
$9,228,715 $7,879,964
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements
- 3 -
<PAGE>
Q.E.P. CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
FOR THE SIX AND THREE MONTHS ENDED AUGUST 31, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
---------------------------------------- ----------------------------------------
August 31, 1996 August 31, 1995 August 31, 1996 August 31, 1995
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net sales........................... $15,943,639 $12,036,463 $8,241,494 $6,355,529
Costs of goods sold................. 10,107,669 7,873,229 5,305,900 4,200,185
----------- ----------- ---------- ----------
Gross profit............... 5,835,970 4,163,234 2,935,594 2,155,344
Costs and expenses
Shipping....................... 1,115,324 667,639 539,921 432,878
General and administrative..... 1,602,186 1,442,375 845,841 707,998
Selling and marketing.......... 1,615,465 1,185,798 797,626 628,044
Foreign exchange losses, net... 2,222 - 2,222 -
----------- ----------- ---------- ----------
4,335,197 3,295,812 2,185,610 1,768,920
----------- ----------- ---------- ----------
Operating income........... 1,500,773 867,422 749,984 386,424
Interest expense.................... 77,508 98,315 33,636 49,087
----------- ----------- ---------- ----------
Income before provision
for income taxes...... 1,423,265 769,107 716,348 337,337
Provision for income taxes.......... 539,200 328,400 271,700 154,600
----------- ----------- ---------- ----------
NET INCOME................. $ 884,065 $ 440,707 $ 444,648 $ 182,737
=========== =========== ========== ==========
Primary and fully diluted net
income per common share........ $0.58 $0.29 $0.30 $0.12
===== ===== ===== =====
Weighted average number of
shares outstanding............. 1,500,000 1,511,000 1,500,000 1,507,000
========= ========= ========= =========
Pro forma net income per common
share.......................... $0.52 $0.26
===== =====
</TABLE>
The accompanying notes are an integral part of these statements
- 4 -
<PAGE>
Q.E.P. CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED AUGUST 31, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
-------------------------------------------
August 31, 1996 August 31, 1995
--------------- ---------------
Cash flows from operating activities
<S> <C> <C>
Net income............................................... $ 884,065 $440,707
Adjustments to reconcile net income to net cash provided
by (used in) operating activities
Depreciation and amortization........................ 59,718 52,439
Amortization of fair market value in excess of cost
of business acquired............................ (15,000)
Accounts receivable.................................. (268,918) (753,443)
Inventories.......................................... (694,636) 287,214
Other current assets................................. 120,092 (221,533)
Other assets......................................... (255,379) 24,550
Accounts payable and accrued liabilities............. 166,657 (295,649)
--------- --------
Net cash (used in) operating activities.............. (3,401) (465,715)
Cash flows from investing activities
Capital expenditures.......................................... (22,109) (7,845)
--------- --------
Net cash (used in) investing activities.............. (22,109) (7,845)
Cash flows from financing activities
Redemption of preferred stock............................ (48,000)
Net borrowings under line of credit...................... 82,970 311,764
Net borrowings of debt................................... 18,457 2,079
Cash overdraft........................................... 219,050 382,479
Dividends................................................ (7,448) (6,206)
Purchase of treasury stock............................... (27,900)
Payment of deferred offering costs....................... (270,317)
--------- --------
Net cash provided by financing activities............ 42,712 614,216
--------- --------
NET INCREASE IN CASH................................. $ 17,202 $140,656
Cash and cash equivalents at beginning of period.............. 179,138 114,767
--------- --------
Cash and cash equivalents at end of period.................... $196,340 $255,423
========= ========
</TABLE>
The accompanying notes are an integral part of these statements
- 5 -
<PAGE>
Q.E.P. CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PERIODS ENDED AUGUST 31, 1996 AND 1995
Note 1. Basis of Presentation.
The accompanying financial statements for the interim periods
are unaudited and reflect all adjustments (consisting only of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
presentation of the financial position and operating results for the periods
presented. These financial statements should be read in conjunction with the
financial statements and notes thereto, together with Management's Discussion
and Analysis of Financial Condition and Results of Operations, contained in
Amendment 3 to the Registration Statement on Form S-1 of Q.E.P. Co., Inc. (the
"Company") (Registration No.: 333-7477), filed with the Securities and Exchange
Commission on September 16, 1996. The results of operations for the three and
six months ended August 31, 1996 are not necessarily indicative of the results
for the full fiscal year ending February 28, 1997.
Note 2. Initial Public Offering.
On September 17, 1996, the Company successfully completed an
initial public offering of 1,000,000 shares of Common Stock of the Company at an
initial offering price of $8.50 per share and 120,000 warrants to purchase
Common Stock at an exercise price of $10.20 per share with an offering price of
$.001 per warrant (the "Offering"). The net proceeds from the Offering are
estimated to be approximately $7,109,000. The Company used $2,287,000 of the
proceeds from the Offering to retire existing bank debt. The Company intends to
use the remaining net proceeds to finance inventory purchases and accounts
receivable, for capital improvements for the expansion and upgrading of existing
facilities, to purchase or lease additional manufacturing equipment, as well as
for general corporate purposes and the possible investment in, strategic
acquisition of, or joint venture with, other businesses, as well as possible
acquisition of other product lines. There can be no assurance that any
acquisition will become available on terms acceptable to the Company. The
Company does not have any agreements for such investments, acquisitions, joint
ventures or product line acquisitions in place at this time.
Note 3. Inventories.
The major classes of inventories are as follows:
August 31, 1996 February 29, 1996
--------------- -----------------
(Unaudited)
Raw materials and work-in-process........ $ 774,639 $ 376,433
Finished goods........................... 3,058,678 2,762,248
----------- -----------
$3,833,317 $3,138,681
========== ==========
Note 4. Net Income per Common Share.
Primary and fully diluted net income per common share is
computed using the weighted average number of common shares outstanding. The
computation reduces the net income available per common share by the amount of
preferred stock dividends.
- 6 -
<PAGE>
Note 5. Supplemental Cash Flows.
Supplemental cash flow information for the periods are as follows:
Six months ended August 31,
---------------------------
(Unaudited)
1996 1995
---- ----
Interest paid..................................... $ 84,147 $ 95,191
Income taxes paid................................. 315,096 422,619
Note 6. Subsequent Events.
Reincorporation. The Company was originally incorporated in
New York in 1979. In connection with the Offering, the Company reincorporated in
September 1996 as a Delaware corporation with the same name and the New York
corporation was merged into it, continuing the business of the Company.
Stock Option Plan. The Company has adopted a stock option plan
(the "Plan") for employees, consultants, and directors of the Company. Stock
options granted pursuant to the Plan shall be authorized by the Board of
Directors. The aggregate number of shares which may be issued under the Plan
shall not exceed 250,000 shares of Common Stock. As of August 31, 1996, the
Company had not granted any stock options or stock appreciation rights to any
person.
Pro forma net income per common share. Pro forma net income
per common share reflects the issuance of 269,045 shares of Common Stock
necessary to repay $2,287,000 of debt, including the elimination of $43,000 and
$19,000 of interest expense net of income taxes, for the six months and three
months ended August 31, 1996, respectively.
Conversion of Preferred Stock. Upon completion of the
Offering, the Company converted 166,385 shares of outstanding Preferred Stock
into 4,894 shares of Common Stock. The incremental Common Stock outstanding
would not result in a change in net income per share of Common Stock included in
the accompanying financial statements.
- 7 -
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The Company manufactures, markets and distributes a broad line
of specialty tools and related products for the home improvement market. The
Company markets over 4,000 products used primarily for surface preparation and
installation of ceramic tile, carpet, marble, masonry, drywall and paint. The
Company's products are sold through home improvement retailers, specialty
distributors, original equipment manufacturers and chain or independent
hardware, tile, carpet and painting retailers for use by the do-it-yourself
consumer as well as the construction or remodeling professional.
Results of Operations
Six months ended August 31, 1996 compared to six months ended August
31, 1995.
Net sales for the six months ended August 31, 1996 (the
"fiscal 1997 period") were approximately $15,944,000, compared to $12,036,000
for the six months ended August 31, 1995 (the "fiscal 1996 period"), an increase
$3,908,000 or 32.5%. The increase is primarily the result of increased sales to
home centers, specialty retailers and to independent distributors. The increases
were, in turn, the result of new product introductions, increased market
penetration and new store openings by major home center chain customers.
Gross profit for the fiscal 1997 period was approximately
$5,836,000, compared to $4,163,000 in the fiscal 1996 period, an increase of
$1,673,000 or 40.2%. As a percentage of net sales, gross profit increased to
36.6% in the fiscal 1997 period from 34.6% in the fiscal 1996 period. The
increase in gross profit margin was due primarily to the Company's ability to
secure lower cost foreign suppliers and achieve volume discounts from existing
suppliers as a result of increased purchasing levels. In addition, the improved
gross profit margin was attributable to the Company's ability, beginning in
March 1996, to manufacture certain products at a lower cost than what the
Company historically expended to purchase those products from outside suppliers.
Shipping expenses for the fiscal 1997 period were
approximately $1,115,000, compared to $668,000 for the fiscal 1996 period, an
increase of $447,000 or 66.9%. As a percentage of net sales, these costs
increased to 6.9% in the fiscal 1997 period from 5.5% in the fiscal 1996 period.
The increase in these expenses was due primarily to higher staff levels and
higher freight costs to support increased sales and a higher number of shipments
per sales dollar and an increase in the number of retail locations to which
shipments were made.
General and administrative expenses for the fiscal 1997 period
were approximately $1,602,000, compared to $1,442,000 for the fiscal 1996
period, an increase of $160,000 or 11.1%. As a percentage of net sales, these
expenses decreased to 10.0% in the fiscal 1997 period from 11.9% in the fiscal
1996 period, due primarily to the Company's ability to become more efficient
with increased staffing levels to support the Company's growth.
Selling and marketing expenses for the fiscal 1997 period were
approximately $1,615,000, compared to $1,186,000 for the fiscal 1996 period, an
increase of $429,000 or 36.2%. As a percentage of net sales, these expenses
increased to 10.1% for the fiscal 1997 period from 9.9% for the fiscal 1996
period. The increase was primarily attributable to an increase in the number of
retail customers participating in the Company's co-op advertising program, as
well as an increase in the co-op advertising costs borne by the Company with
respect to certain retail customers. An increase in sales and marketing
personnel to support the Company's growth, particularly in the western United
States, also contributed to the increase in these expenses, along with increased
commission expenses driven by the increased sales.
Interest expense for the fiscal 1997 period was approximately
$78,000, compared to $98,000 for the fiscal 1996 period, a decrease of $20,000
or 20.4%. As a percentage of net sales, this expense decreased to .5% for the
fiscal 1997 period from .8% for the fiscal 1996 period as a result of lower
interest rates.
Provision for income taxes was $539,000 for the fiscal 1997
period, compared to $328,000 for the fiscal 1996 period, an increase of $211,000
or 64.3%. The effective tax rate was approximately 38.5% in the fiscal 1997
period,
- 8 -
<PAGE>
compared to 42.6% in the fiscal 1996 period. The change in the effective tax
rate reflects a reduction in provision for income taxes in the fiscal 1997
period based upon the most recent effective tax rates.
As a result of the above, net income for the fiscal 1997
period was approximately $884,000, compared to $441,000 for the fiscal 1996
period, an increase of $443,000 or 100.5%. This represents an increase in net
income as a percentage of net sales to 5.5% in the fiscal 1997 period from 3.7%
in the fiscal 1996 period.
Three months ended August 31, 1996 compared to three months ended
August 31, 1995.
Net sales for the three months ended August 31, 1996 (the
"fiscal 1997 period") were approximately $8,241,000, compared to $6,356,000 for
the three months ended August 31, 1995 (the "fiscal 1996 period"), an increase
$1,885,000 or 29.7%. The increase is primarily the result of increased sales to
home centers, specialty retailers and to independent distributors. The increases
were the result of new product introductions, increased market penetration and
new store openings by major home center chain customers.
Gross profit for the fiscal 1997 period was approximately
$2,936,000, compared to $2,155,000 in the fiscal 1996 period, an increase of
$781,000 or 36.2%. As a percentage of net sales, gross profit increased to 35.6%
in the fiscal 1997 period from 33.9% in the fiscal 1996 period. The increase in
gross profit margin was due primarily to the Company's ability to secure lower
cost foreign suppliers and achieve volume discounts from existing suppliers as a
result of increased purchasing levels. In addition, the improved gross profit
margin was attributable to the Company's ability, beginning in March 1996, to
manufacture certain products at a lower cost than what the Company historically
expended to purchase those products from outside suppliers.
Shipping expenses for the fiscal 1997 period were
approximately $540,000, compared to $433,000 for the fiscal 1996 period, an
increase of $107,000 or 24.7%. The primary causes for this increase are
increased staff levels and freight costs driven by increased sales. As a
percentage of net sales, these costs decreased to 6.6% in the fiscal 1997 period
from 6.8% in the fiscal 1996 period. The decrease in these expenses as a
percentage of net sales was due to certain economies realized from increases in
relative dollar values of customer orders.
General and administrative expenses for the fiscal 1997 period
were approximately $846,000, compared to $708,000 for the fiscal 1996 period, an
increase of $138,000 or 19.5%. As a percentage of net sales, these expenses
decreased to 10.3% in the fiscal 1997 period from 11.1% in the fiscal 1996
period, due primarily to the Company's ability to become more efficient with
increased staffing levels to support the Company's growth.
Selling and marketing expenses for the fiscal 1997 period were
approximately $798,000, compared to $628,000 for the fiscal 1996 period, an
increase of $170,000 or 27.1%. The primary cause of the increases are higher
commissions and advertising costs. As a percentage of net sales, these expenses
decreased to 9.7% for the fiscal 1997 period from 9.9% for the fiscal 1996
period. The decrease was primarily attributable to sales volume per order
increasing faster than the normal selling costs generally associated with a
customer order.
Interest expense for the fiscal 1997 period was approximately
$34,000, compared to $49,000 for the fiscal 1996 period, a decrease of $15,000
or 30.6%. As a percentage of net sales, this expense decreased to .4% for the
fiscal 1997 period from .8% for the fiscal 1996 period as a result of lower
interest rates.
Provision for income taxes was $272,000 for the fiscal 1997
period, compared to $155,000 for the fiscal 1996 period, an increase of $117,000
or 75.5%. The effective tax rate was approximately 38.5% in the fiscal 1997
period, compared to 45.8% in the fiscal 1996 period. The change in the effective
tax rate reflects a reduction in provision for income taxes in the fiscal 1997
period based upon the most recent effective tax rates.
As a result of the above, net income for the fiscal 1997
period was approximately $447,000, compared to $183,000 for the fiscal 1996
period, an increase of $264,000 or 144.3%. This represents an increase in net
income as a percentage of net sales to 5.4% in the fiscal 1997 period from 2.9%
in the fiscal 1996 period.
- 9 -
<PAGE>
Liquidity and Capital Resources
The Company's operations are primarily financed by cash flow
from operations and an asset based lending agreement. Working capital for the
six month period ended August 31, 1996 increased by approximately $673,000 to
$3,604,000 at August 31, 1996 from $2,931,000 at February 29, 1996. This
represents an increase of 23.0%.
The Company has a bank line of credit facility which permits
borrowings of up to $3,250,000 as revolving credit against a fixed percentage of
eligible accounts receivable and inventory, as defined in the facility. Interest
is charged at the bank's base lending rate plus 1/2% or the LIBOR plus 225 basis
points. The credit facility terminates June 30, 1998. Subsequent to August 31,
1996, the Company completed an initial public offering pursuant to which the
Company sold 1,000,000 shares of Common Stock at an initial public offering
price of $8.50 per share and utilized $2,287,000 of the net proceeds to retire,
in full, the outstanding balance on the bank line of credit facility. The
Company intends to use the remaining net proceeds to finance inventory purchases
and accounts receivable, for capital improvements for the expansion and
upgrading of existing facilities, to purchase or lease additional manufacturing
equipment, as well as for general corporate purposes and the possible investment
in, strategic acquisition of, or joint venture with, other businesses, as well
as possible acquisition of other product lines. There can be no assurance,
however, that any acquisition will become available on terms acceptable to the
Company. The Company does not have any agreements for such investments,
acquisitions, joint ventures or product line acquisitions in place at this time.
- 10 -
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Reference is hereby made to the section titled "Legal
Proceedings" on page 35 of the Prospectus forming a part of Amendment 3 to the
Registration Statement on Form S-1 of the Company (Registration No.: 333-7477),
filed with the Securities and Exchange Commission on September 16, 1996, for
information with respect to legal proceedings to which the Company or any of its
subsidiaries may, in the future, become parties. To the knowledge of the
Company, no proceedings of a material nature have been commenced or are
contemplated by governmental authorities.
Item 2. Changes in Securities.
In connection with the Offering, the Company reincorporated in
September 1996 as a Delaware corporation with the same name and the New York
corporation was merged into it, continuing the business of the Company. As a
result of such reincorporation, the rights of the holders of the Company's
securities are now governed by Delaware law.
Item 3. Defaults Upon Senior Securities.
NONE
Item 4. Submission of Matters to a Vote of Security Holders.
NONE
Item 5. Other Information.
On October 24, 1996, in accordance with the Company's By-Laws,
the Board of Directors was expanded to nine members and two of the four
vacancies were filed with the election of Michael Actis-Grande and Norman
Snesil.
Michael Actis-Grande is a Certified Public Accountant and has
practiced with the accounting firm of Actis-Grande, Ronan & Company, LLC since
February 1984. Mr. Actis-Grande's accounting firm has provided various
accounting services to the Company during the fiscal years 1988 through 1993.
Norman Snesil has been the President and Chief Executive
Officer of Medical Economics, a division of Thomson Corporation, a health care
company, since 1990.
- 11 -
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
The following list sets forth the applicable exhibits
(numbered in accordance with Item 601 of Regulation S-K) required to be filed
with this Quarterly Report on Form 10-Q:
Exhibit
Number Description
- ------ -----------
3.1 Form of Certificate of Incorporation.*
3.2 Form of By-Laws.*
4.1 Specimen Common Stock Certificate, $.001 par value.*
10.1 1996 Incentive Stock Option Plan.*
27.1 Financial Data Schedule.
- ----------
* Incorporated by reference. See Exhibit Index.
(b) Reports on Form 8-K.
There were no Current Reports on Form 8-K filed by the Company
during its fiscal quarter ended August 31, 1996.
- 12 -
<PAGE>
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.
Q.E.P. CO., INC.
Dated: October 30, 1996 By: /s/ Lewis Gould
---------------------------------
Lewis Gould, President
(Duly Authorized Officer)
Dated: October 30, 1996 By: /s/ Patrick L. Daggett
---------------------------------
Patrick L. Daggett
(Chief Financial Officer)
- 13 -
<PAGE>
Q.E.P. CO., INC.
FORM 10-Q
PERIOD ENDED AUGUST 31, 1996
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description Location
- ------ ----------- --------
<S> <C>
3.1 Certificate of Incorporation...................................................... *1 Exh. 3.1.1
3.2 By-Laws........................................................................... *1 Exh. 3.2.1
4.1 Form of Common Stock Certificate, $.001 par value*................................ *2 Exh. 4.1
10.1 1996 Incentive Stock Option Plan.................................................. *2 Exh. 10.1.1
27.1 Financial Data Schedule........................................................... *3
- ----------
</TABLE>
*1 All Exhibits so indicated are incorporated herein by reference to the
exhibit listed above in the Company's Registration Statement on Form
S-1 (File No. 333-7477), filed on July 2, 1996.
*2 All Exhibits so indicated are incorporated herein by reference to the
exhibit listed above in Amendment No. 2 to the Company's Registration
Statement on Form S-1 (File No. 333-7477), filed on August 5, 1996.
*3 Filed electronically pursuant to Item 401 of Regulation S-T.
- 14 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM QUARTERLY
REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS CONTAINED THEREIN.
</LEGEND>
<CURRENCY> U.S. DOLLAR
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-START> MAR-01-1996
<PERIOD-END> AUG-31-1996
<EXCHANGE-RATE> 1
<CASH> 196,340
<SECURITIES> 0
<RECEIVABLES> 3,903,972
<ALLOWANCES> 54,500
<INVENTORY> 3,833,317
<CURRENT-ASSETS> 8,375,297
<PP&E> 229,001
<DEPRECIATION> 0
<TOTAL-ASSETS> 9,228,715
<CURRENT-LIABILITIES> 4,771,228
<BONDS> 0
0
503,047
<COMMON> 1,500
<OTHER-SE> 3,797,395
<TOTAL-LIABILITY-AND-EQUITY> 9,228,715
<SALES> 15,943,639
<TOTAL-REVENUES> 15,943,639
<CGS> 10,107,669
<TOTAL-COSTS> 2,222
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 77,508
<INCOME-PRETAX> 1,423,265
<INCOME-TAX> 539,200
<INCOME-CONTINUING> 884,065
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 884,065
<EPS-PRIMARY> 0.58
<EPS-DILUTED> 0.58
</TABLE>
