U.S. Securities and Exchange Commission
Washington, DC 20549
Form 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
[ ] 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 0-7693
INTERNATIONAL MERCANTILE CORPORATION
------------------------------------
(Exact name of small business issuer as
specified in its charter)
Missouri 43-0970243
- ---------------------------------------------------------------------
(State of other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1625 Knecht Avenue, Baltimore, Maryland 21227
- ---------------------------------------------------------------------
(Address of principal executive offices)
(410) 242-5000
- ---------------------------------------------------------------------
(Issuer's telephone number)
- ---------------------------------------------------------------------
(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 ___
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:
As of April 17, 2000, there were outstanding 17,032,987 shares
of Class A Common Stock, $0.01 par value, and 2,000,000 shares
of Class B Common Stock, $0.01 par value.
Transitional Small Business Disclosure Format (check one);
Yes __ No _X__
<PAGE> 1
INTERNATIONAL MERCANTILE CORPORATION
Form 10-QSB Index
March 31, 2000
Page
Part I: Financial Information .......................... 3
Item 1. Financial Statements ..................... 3
Balance Sheets as of December 31, 1999
and March 31, 2000 (unaudited).................... 6-7
Statement of Operations for the period
September 2, 1999 (Date of Inception)
through December 31, 1999 and the Quarter
Ended March 31, 2000............... .............. 8
Statement of Changes in Stockholder's Equity
for the period September 2, 1999
(Date of Inception) through December 31, 1999
and the Quarter Ended March 31, 2000 ............ 9
Statement of Cash Flows for the period
September 2, 1999 (Date of Inception)
through December 31, 1999 and the Quarter
Ended March 31, 2000 ............................ 10
Notes to Financial Statements...................... 11-20
Item 2. Management's Discussion and Analysis
or Plan of Operation ...................... 21
Part II: Other Information ........................... 24
Item 1. Legal Proceedings ...................... 24
Item 2. Changes in Securities .................. 24
Item 3. Defaults Upon Senior Securities ........ 25
Item 4. Submission of Matters to a Vote of
Security Holders ....................... 25
Item 5. Other Information ...................... 25
Item 6. Exhibits and Reports on Form 8-K ....... 25
Signatures ............................................. 27
<PAGE> 2
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
<PAGE> 3
INTERNATIONAL MERCANTILE CORPORATION
Balance Sheets as of December 31, 1999 and March 31, 2000 (Unaudited)
Statements of Operations, Changes in Stockholders' Equity
and Cash Flows for the Period September 2, 1999 (Date of
Inception) Through December 31, 1999 and the Quarter Ended
March 31, 2000 (Unaudited)
<PAGE> 4
INTERNATIONAL MERCANTILE CORPORATION
TABLE OF CONTENTS
DECEMBER 31, 1999 AND MARCH 31, 2000 (Unaudited)
Page
Balance Sheets F-1
Statements of Operations F-2
Statements of Changes in Stockholders' Equity F-4
Statements of Cash Flows F-5
Notes to the Financial Statements F-7 - F-16
<PAGE> 5
INTERNATIONAL MERCANTILE CORPORATION
BALANCE SHEETS
AS OF DECEMBER 31, 1999 and MARCH 31, 2000
<TABLE>
<CAPTION>
December 31, March 31,
1999 2000
Unaudited
------------ ------------
<S> <C> <C>
ASSETS
Current Assets
- --------------
Cash and Cash Equivalents $ 37,699 $ 28,562
Marketable Securities 715,075 0
Accounts Receivable Net of Allowance
for Doubtful Accounts 849,471 1,302,921
Inventory 475,626 835,920
Prepaids and Other Assets 14,298 131,468
------------ -----------
Total Current Assets 2,092,169 2,298,871
Investments
- -----------
Investment in VLDC Technologies, Inc. Stock 2,725,642 2,725,642
Fixed Assets
- ------------
Fixed Assets, net of Accumulated Depreciation 200,008 218,247
Other Assets
- ------------
Organization Costs, Net of Amortization 196,832 202,587
Deposits 18,330 36,042
------------ -----------
Total Other Assets 215,162 238,629
------------ -----------
Total Assets $ 5,232,981 $ 5,481,389
============ ===========
</TABLE>
See Notes to Financial Statements
F-1
<PAGE> 6
INTERNATIONAL MERCANTILE CORPORATION
BALANCE SHEETS
AS OF DECEMBER 31, 1999 and MARCH 31, 2000
<TABLE>
<CAPTION>
December 31, March 31,
1999 2000
Unaudited
------------ ------------
<S> <C> <C>
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities
- -------------------
Accounts Payable and Accrued Expenses $ 745,218 $ 1,004,493
Accrued Interest Payable 9,052 22,278
Due to Related Party 261,322 128,464
Warranty Reserve - Current Portion 2,442 2,442
Note Payable - Related Parties,
Current Portion 596,609 596,609
Line of Credit 0 600,000
Loans Payable 750,124 57,500
Capitalized Lease Payable - Current Portion 10,221 10,221
----------- -----------
Total Current Liabilities 2,374,988 2,422,007
Long Term Liabilities
- ---------------------
Committments and Contingencies
Warranty Reserve Net of Current Portion 4,884 8,884
Capitalized Lease Payable Net
of Current Portion 23,787 20,887
Note Payable - Related Party
Net of Current Portion 100,000 75,000
----------- -----------
Total Long Term Liabilities 128,671 104,771
----------- -----------
Total Liabilities 2,503,659 2,526,778
Stockholders' Equity
- --------------------
Common stock-Class A - $.01 Par,
31,000,000 shares authorized,
5,102,441 shares outstanding @ 12/31/99
and 16,534,847 shares outstanding
@ 3/31/00 51,024 165,348
Common stock-Class B - $.01 Par,
2,000,000 shares authorized, 1,000,000
shares outstanding @ 12/31/99 & 3/31/00 10,000 10,000
Preferred stock - Series 1 - $.10 Par,
10,000,000 shares authorized,
-0- shares outstanding
Preferred stock - Series 2 - $.10 Par,
2,000,000 shares authorized,
-0- shares outstanding
Preferred stock - Series 3 - $.10 Par,
5,000,000 sharesauthorized,
-0- shares outstanding
Additional paid in capital 2,967,742 3,453,081
Accumulated Deficit (299,444) (673,818)
----------- -----------
Total Stockholders' Equity 2,729,322 2,954,611
----------- -----------
Total Liabilities & Stockholders' Equity $ 5,232,981 $ 5,481,389
=========== ===========
</TABLE>
See Notes to Financial Statements
F-2
<PAGE> 7
INTERNATIONAL MERCANTILE CORPORATION
STATEMENTS OF OPERATIONS
FOR THE PERIOD SEPTEMBER 2, 1999 (Date of Inception)
THROUGH DECEMBER 31, 1999 AND THE QUARTER ENDED MARCH 31, 2000
<TABLE>
<CAPTION>
December 31, March 31,
1999 2000
Unaudited
------------ ------------
<S> <C> <C>
Revenues
Sales $ 1,465,294 $ 2,210,246
Cost of Merchandise Sold 1,262,396 1,969,148
----------- -----------
Gross Profit 202,898 241,098
Operating Expenses
Amortization 12,390 9,212
Auto and Truck Expense 0 4,364
Bad Debts 17,336 4,625
Bank Charges & Credit Card Fees 4,718 7,276
Donations 0 1,817
Depreciation 10,480 11,050
Interest Expense 11,436 17,894
Marketing & Advertising Expense 55,074 0
Office Supplies & Expense 32,021 40,893
Professional Fees 18,476 34,236
Rent 42,823 44,009
Repairs & Maintenance 5,168 4,553
Sales Expense 61,848 118,418
Salaries & Related Costs & Benefits 188,706 249,744
Subcontract Labor & Temporary Help 9,725 7,474
Telephone 16,559 21,103
Travel & Promotion 3,267 24,093
Utilities 4,989 10,711
Warranty Reserve 7,326 4,000
----------- -----------
Total Operating Expenses 502,342 615,472
----------- -----------
Net (Loss) ($299,444) ($374,374)
=========== ===========
Earnings (Loss) per share of Common
Stock - Basic (Note 1) ($0.0513) ($0.0374)
=========== ===========
Weighted Average Shares - Basic 5,835,166 10,021,083
=========== ===========
Earnings (Loss) per share of Common
Stock - Diluted (Note 1) ($0.0308) ($0.0340)
=========== ===========
Weighted Average Shares - Diluted 9,726,833 11,021,083
=========== ===========
</TABLE>
See Notes to Financial Statements
F-4
<PAGE> 8
INTERNATIONAL MERCANTILE CORPORATION
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD SEPTEMBER 2, 1999 (Date of Inception)
THROUGH DECEMBER 31, 1999 AND THE QUARTER ENDED MARCH 31, 2000
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
PAID IN
SHARES AMOUNT CAPITAL DEFICIT
---------------------------------------------------
<S> <C> <C> <C> <C>
Balance, September 2, 1999
(Date of Inception) 1,000 $ 10 $ 490 $ 0
Reverse acquisition, September 6, 1999
Exchange of Micromatix.com, Inc., a
Delaware corp
Common Stock (1,000) (10) (490) 0
Authorization of Common Stock of
International Mercantile Corporation,
a Missouri corp, to owners of
Micromatix.com, Inc., a Delaware corporation -
Class B Common Stock, issued and outstanding 0 0 0 0
Outstanding Common Stock of International
Mercantile Corporation, a Missouri corp.,
9/2/99 to 12/31/99
Class A Common Stock 5,102,441 51,024 2,967,742 0
Class B Common Stock 1,000,000 10,000 0 0
Net (Loss) Accumulated During the
Development Stage 0 0 0 (299,444)
--------------------------------------------------------
Balance, December 31, 1999 6,102,441 61,024 2,967,742 (299,444)
Issuance of Common Stock of International
Mercantile Corporation, a Missouri corp,
to owners of Micromatix.com, Inc., a
Delaware corporation
Class A Common Stock 1,500,000 15,000 0 0
Issuance of Common Stock of International
Mercantile Corporation, a Missouri corp.,
1/1/00 to 3/31/00
Class A Common Stock 9,932,406 99,324 485,339 0
Class B Common Stock 0 0 0 0
Net (Loss) 0 0 0 (374,374)
--------------------------------------------------------
Balance, March 31, 2000 (Unaudited) 17,534,847 $175,348 $3,453,081 ($673,818)
========================================================
</TABLE>
See Notes to Financial Statements
F-5
<PAGE> 9
INTERNATIONAL MERCANTILE CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE PERIOD SEPTEMBER 2, 1999 (Date of Inception)
THROUGH DECEMBER 31, 1999 AND THE QUARTER ENDED MARCH 31, 2000
<TABLE>
<CAPTION>
December 31, March 31,
1999 2000
Unaudited
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
- ------------------------------------
Net Loss ($299,444) ($374,374)
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities
Bad Debts 17,336 0
Depreciation & Amortization 22,870 20,262
(Increase) Decrease In
Marketable Securities (715,075) 715,075
Accounts Receivable (866,807) (453,450)
Investment in VLDC Technologies, Inc. (2,725,642) 0
Inventory (475,626) (360,294)
Prepaids & Other Assets (14,298) (117,170)
Deposits (18,330) (17,712)
Organization Costs (209,222) (14,967)
Increase (Decrease)
Accounts Payable & Accrued Expenses 745,218 259,275
Due to Related Party 261,322 (132,858)
Accrued Interest 9,052 13,226
Warranty Reserve 7,326 4,000
----------- ----------
NET CASH (USED) IN OPERATING ACTIVITIES (4,261,320) (458,987)
CASH FLOWS FROM INVESTING ACTIVITIES
- ------------------------------------
Acquisition of Fixed Assets (210,488) (29,289)
----------- ----------
NET CASH (USED) IN INVESTING ACTIVITIES (210,488) (29,289)
CASH FLOWS FROM FINANCING ACTIVITIES
- ------------------------------------
Proceeds from Capitalized Leases 34,008 0
Proceeds from Loans and Line of Credit 775,124 650,000
Payments on Loans (25,000) (767,624)
Payments on Capital Lease 0 (2,900)
Capital Contributions 2,967,742 485,339
Issuance of Capital Stock 61,024 114,324
Proceeds from Note Payable - related parties 696,609 0
----------- ----------
NET CASH PROVIDED BY IN FINANCING ACTIVITIES 4,509,507 479,139
----------- ----------
NET INCREASE (DECREASE) IN CASH 37,699 (9,137)
CASH - BEGINNING 0 37,699
----------- ----------
CASH - ENDING $37,699 $28,562
=========== ==========
</TABLE>
See Notes to Financial Statements
F-6
<PAGE> 10
INTERNATIONAL MERCANTILE CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. Organization and Summary of Significant Accounting Policies
ORGANIZATION
International Mercantile Corporation (The Company) is a profit
corporation organized under the laws of the State of Missouri on
March 10, 1971 as International Mercantile Corporation (IMTL).
On July 31, 1999, the Company liquidated its' majority interest
holdings in its' subsidiary, University Mortgage, Inc., which
represented the Company's operations, through a new issuance of
University Mortgage, Inc. stock to a related third party
investor in consideration of their capital investment in
University Mortgage, Inc. The result of this action left an OTC
Bulletin Board publicly traded company with no substantial
assets or liabilities. On September 6, 1999, the Company merged
with Micromatix.com, Inc. (the predecessor company), a newly
formed Delaware corporation which maintained an Internet based
personal computer manufacturing business that sells build-to-
order unbranded or "white box" PC systems and PC related
hardware throughout the United States to value added retailers
and other marketers of micro computer systems. Shareholders of
the Predecessor Company received 2,500 shares of the Company's
stock for each share of the Predecessor Company; a total of
2,500,000 shares issued, in exchange for 100% of the outstanding
stock of the Predecessor Company. The merger is being accounted
for as a capital transaction with no recognition of goodwill or
other intangible assets. The Company, however, has not
completed the requisite articles of merger and related
documents, which are required to be filed with the applicable
state authorities. Subsequent to the transaction, the owners of
the predecessor company assumed the management of the Company
doing business as Micromatix.net and owned approximately 26.92%
of the outstanding stock of the Company representing 48.32% of
the voting rights. Since this transaction is, in substance, a
recapitalization of Micromatix.com, Inc. (the Predecessor
Company) and not a business combination, pro forma information
is not presented. Accordingly, the historical data contained in
the financial statements is that of the Predecessor Company.
REVENUE RECOGNITION
Revenues are derived primarily from sales of build-to-order
personal computers and related PC hardware via the Company's
business to business e:commerce. Revenues related to these
sales are recognized when a computer product is shipped and
invoiced.
INVENTORY
Inventory consists of component parts and work in process at
period-end as all finished products were shipped prior to March
31, 2000. The Company maintains a perpetual inventory system
and determines quantities by the average cost method. Inventory
is valued at the lower of actual cost or market, net of
inventory allowance.
F-7
<PAGE> 11
INTERNATIONAL MERCANTILE CORPORATION
NOTES TO FINANCIAL STATEMENTS
ADVERTISING EXPENSE
The Company recognizes advertising expenses in accordance with
Statement of Position ("SOP") 93-7 "Reporting on Advertising
Costs." As such, the Company expenses the costs of producing
advertisements at the time production occurs, and expenses the
cost of communicating advertising in the period in which the
advertising space or airtime is used.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation is
computed using the straight-line method based on the estimated
useful lives of the assets, which range from three to five
years. Costs for routine repairs and maintenance are expensed
as incurred and gains and losses on the disposal of assets are
recognized in the period such disposals occur.
SOFTWARE DEVELOPMENT COSTS
Internal and external costs incurred to develop internal-use
software are capitalized during the application development
stage and are being amortized over three years.
INTANGIBLE ASSETS
Costs incurred to organize the Company are capitalized and
reported on the balance sheet as other assets. The costs are
being amortized over a period of 5 years using the straight-line
method.
MARKETABLE SECURITIES
The Company's marketable securities are comprised of equity and
debt securities and are classified as trading securities.
Trading securities are recorded at fair value, with the change
in fair value during the period included in net earnings. In
the first quarter of the year 2000 the Company liquidated its
entire marketable trading securities portfolio.
WARRANTY RESERVE
The Company maintains a depot warranty on components sold and
manufactured systems for three years; the equivalent period of
time that substantially all components from supplier
manufacturers are warranted. As the Company has not established
a history of warranty service, a warranty reserve of 1/2 of 1% of
sales has been recorded at March 31, 2000.
F-8
<PAGE> 12
INTERNATIONAL MERCANTILE CORPORATION
NOTES TO FINANCIAL STATEMENTS
INCOME TAXES
The Company files its tax return with the Internal Revenue
Service as a C Corporation. Applying statutory tax rates to
future year's differences between the tax bases and financial
reporting amounts of assets and liabilities recognizes deferred
income taxes. No deferred tax asset/valuation allowance has
been recognized for the losses incurred to date, as it is not
determinable that the Company will realize any tax benefit from
such losses. Loss carryforwards, if any, expire fifteen years
following the tax year-end in which they occur. The Company
has filed for an automatic extension through September 15, 2000
for the filing of its Federal and State corporate income tax
returns.
USE OF ESTIMATES AND ASSUMPTIONS
The preparation of financial statements in conformity with
generally accepted accounting principles requires that
management make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the respective reporting period. Actual results could
vary from these estimates and assumptions.
CONCENTRATIONS OF RISK
Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of cash, cash
equivalents and marketable securities. The Company maintains
its cash and cash equivalents in bank deposit accounts, the
balances of which, at times, may exceed federally insured
limits. Additionally, the Company assumes that computer chip
and memory availability will remain constant. This assumption
subjects the Company to concentrations of risk should the
availability of these items become
uncertain in the future.
RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities
effective for all fiscal quarters of fiscal years beginning
after June 15, 1999. The Company does not anticipate the impact
of this pronouncement will be material. Further, the Company
does not believe that any recently issued, but not yet effective
accounting standards will have a material effect on the
Company's financial position, results of operations or cash
flows.
F-9
<PAGE> 13
INTERNATIONAL MERCANTILE CORPORATION
NOTES TO FINANCIAL STATEMENTS
EARNINGS PER SHARE
As per Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 128 (SFAS 128), Earnings Per
Share, standards for computing and presenting earnings per share
(EPS) applies to publicly held common stock or potential common
stock. It requires dual presentation of basic and diluted EPS
on the face of the income statement for all entities with
complex capital structures. Basic EPS excludes dilution and is
computed by dividing income available to common stockholders by
the weighted average number of common shares outstanding for the
period. Diluted EPS reflects the potential dilution that could
occur if securities or other contracts to issue common stock
were exercised or converted into common stock or resulted in the
issuance of common stock that then shared in the earnings of the
entity. In computing EPS as a result of the reverse
acquisition, the number of shares outstanding for the period
from September 2, 1999 until the date of the reverse
acquisition, September 6, 1999, is the number of shares issued
by the Company to the shareholders of the predecessor company.
For the period September 6, 1999 to December 31, 1999 the number
of shares considered to be outstanding is computed as actual
number of shares of the Company outstanding during that period.
The average number of shares outstanding for the period
September 2, 1999 to December 31, 1999 has been computed by
averaging these two amounts. Other appropriate adjustments have
been made to deal with changes in numbers of shares issued
during the period. Diluted EPS were computed as a result of the
Company's complex capital structure: 6,000,000 shares of Class A
Common stock and 1,000,000 shares of Class B Common stock were
authorized and unissued as of December 31, 1999; 1,000,000
shares of Class B Common stock were authorized and unissued as
of March 31, 2000. These shares were subsequently issued by
April 12, 2000. The average number of shares outstanding for
the quarter ended March 31, 2000 has been computed using actual
numbers of shares of the Company outstanding during that period.
2. Allowance for Doubtful Accounts
In accordance with Generally Accepted Accounting Principles the
Company records anticipated uncollectible amounts by creating an
allowance account. Bad Debt Expense is recognized using the
Percentage of Sales method. The Company recognized a Bad Debt
Expense of $17,336 for the period ended December 31, 1999 and an
additional $4,625 for the quarter ended March 31, 2000. In 1999
and during the quarter ended March 31, 2000 no actual
receivables were directly written off. As a result, the
allowance account included on the balance sheet as net of
accounts receivables is $17,336 and $21,961 respectively at
December 31, 1999 and March 31, 2000.
F-10
<PAGE> 14
INTERNATIONAL MERCANTILE CORPORATION
NOTES TO FINANCIAL STATEMENTS
3. Related Party Transactions
The Company's financing during its development stage and during
the quarter ended March 31, 2000 had been provided by interest
bearing loans, non-interest bearing loans and capital
contributions to the Company by its shareholders. At December
31, 1999 and March 31, 2000 the Company had liabilities to a
major shareholder of $125,000 and $100,000 respectively in the
form of an unsecured note payable bearing interest at 8% per
annum. The note calls for six annual principal installments of
$25,000 plus accrued interest. In December, 1999 and January,
2000 the Company paid the first two annual principal
installments of $25,000. The note was issued for the purchase
of machinery, office equipment and furniture from the
shareholder. Accrued interest on this note through December 31,
1999 and March 31, 2000 was $3,775 and $2,894 respectively.
A B securities, a shareholder of IMTL, acquired authorized,
but unissued, shares of University Mortgage, Inc. (UMI) diluting
the voting and equity interest of IMTL in UMI to less than 5%.
The shares of UMI remaining after the dilution were then
exchanged in a stock for stock transaction for registered shares
of VLDC Technologies, Inc., a publicly traded company, trading
under the symbol PCLO. The investment is recorded at cost. On
December 31, 1999 IMTL acquired 3,000,000 authorized but
unissued shares of VLDC Technologies, Inc.'s restricted common
stock in exchange for 3,000,000 shares of IMTL restricted Class
A common stock. The investment is recorded at the fair market
value of VLDC Technologies, Inc. stock as of the date of the
exchange.
At December 31, 1999 and March 31, 2000 the Company had
outstanding a $571,609 note payable to a major stockholder due
in one lump sum payment of principal and interest on or before
November 23, 2000. The note bears interest at a rate of 8% per
annum, and is unsecured.
In addition, shareholders' contribution amounts totaling
$3,028,766 and $3,628,429 as of December 31, 1999 and March 31,
2000 respectively are recorded as par value class A and class B
common stock and as additional paid in capital.
The Company owed $261,322 to an officer/director for monies
advanced as of December 31, 1999. As of March 31, 2000 the
liability has been reduced to $128,464. The advance includes
interest at 14% per annum and is due on demand.
4. Commitments
The Company leases its corporate offices and manufacturing
facilities in Baltimore, Maryland under a six-year lease
agreement, which began on October 1, 1999. The lease
encompasses commercial facilities of approximately 40,000 square
feet. Rent for the first year is $14,274 per month plus
applicable sales tax, utilities, maintenance and property tax
reimbursement and will increase approximately 5% in each of the
succeeding five years. An additional security deposit of
$14,274 was paid to the landlord on February 21, 2000. The
Company leases sales offices in New York, NY under a one-year
lease agreement, beginning March 1, 2000. The lease encompasses
office facilities of 1,000 square feet. Rent is $1,774 per
month.
F-11
<PAGE> 15
INTERNATIONAL MERCANTILE CORPORATION
NOTES TO FINANCIAL STATEMENTS
Commitments cont'd
Future minimum requirements as of December 31, 1999 are:
Baltimore New York Total
---------- -------- ----------
FYE 12/31/00 $ 174,205 $ 17,744 $ 191,949
FYE 12/31/01 182,371 3,549 185,920
FYE 12/31/02 187,040 -0- 187,040
FYE 12/31/03 189,957 -0- 189,957
FYE 12/31/04 195,790 -0- 195,790
Thereafter 130,257 -0- 130,257
---------- -------- ----------
$1,059,890 $ 21,293 $1,081,183
========== ======== ==========
Future minimum requirements as of March 31, 2000 (Unaudited)
are:
Baltimore New York Total
---------- -------- ----------
FYE 12/31/00 $ 131,383 $ 15,970 $ 147,353
FYE 12/31/01 182,371 3,549 185,920
FYE 12/31/02 187,040 -0- 187,040
FYE 12/31/03 189,957 -0- 189,957
FYE 12/31/04 195,790 -0- 195,790
Thereafter 130,257 -0- 130,257
---------- -------- ----------
$1,017,068 $ 19,519 $1,036,587
========== ======== ==========
5. Capital Lease Obligations
The Company leases its operational and accounting software under
a capital lease, which expires in December, 2002. The lease
requires monthly payments of principal and interest of $1,235
plus applicable sales tax. Interest is imputed at 13.25% per
annum. The lease agreement concludes with a $1 buy option at
the end of the lease term. Approximate future lease payments
under the capital lease are as follows:
Unaudited
12/31/99 3/31/00
-------- --------
FYE 12/31/00 $ 14,821 $ 11,116
FYE 12/31/01 14,821 14,821
FYE 12/31/02 13,586 13,586
-------- --------
43,228 39,523
Less Amount representing
interest 9,220 8,415
-------- --------
34,008 31,108
Less current maturities 10,221 10,221
-------- --------
Long-term debt, less current
maturities $ 23,787 $ 20,887
======== ========
F-12
<PAGE> 16
INTERNATIONAL MERCANTILE CORPORATION
NOTES TO FINANCIAL STATEMENTS
6. Officers' Compensation
Prior to the reverse acquisition, the Company's day to day
activities were managed by certain officer/shareholders, who
contributed their time on the Company's behalf without
compensation in either cash or stock. No value for these
services has been determined or recorded on the accompanying
financial statements. The officers and all other employees are
currently employed by the Company at their administrative and
operating facilities in Baltimore, Maryland, and sales office in
New York, New York.
7. Fixed Assets
Fixed assets for the Company consisted of the following at
December 31, 1999:
<TABLE>
<CAPTION>
Accumulated
Fixed Asset Depreciation Balance
----------- ------------ ---------
<S> <C> <C> <C>
Website Development $ 3,017 $ 176 $ 2,841
Furniture & Fixtures 32,000 1,333 30,667
Manufacturing/Warehouse Equip 33,000 1,375 31,625
Computer Hardware 61,163 3,231 57,932
Transportation Equip 7,000 408 6,592
Office Equipment 30,959 1,806 29,153
Software Systems 39,349 2,151 37,198
Leasehold Improvements 4,000 - 4,000
--------- --------- ---------
$ 210,488 $ 10,480 $ 200,008
========= ========= =========
</TABLE>
Fixed assets for the Company consisted of the following at March
31, 2000 (Unaudited):
<TABLE>
<CAPTION>
Accumulated
Fixed Asset Depreciation Balance
----------- ------------ ---------
<S> <C> <C> <C>
Website Development $ 5,637 $ 414 $ 5,223
Furniture & Fixtures 33,717 2,516 31,201
Manufacturing/Warehouse Equip 37,499 2,643 34,856
Computer Hardware 71,214 6,549 64,665
Transportation Equip 7,000 758 6,242
Office Equipment 36,577 3,385 33,192
Software Systems 44,133 4,265 39,868
Leasehold Improvements 4,000 1,000 3,000
--------- --------- ---------
$239,777 $ 21,530 $ 218,247
========= ========= =========
</TABLE>
F-13
<PAGE> 17
INTERNATIONAL MERCANTILE CORPORATION
NOTES TO FINANCIAL STATEMENTS
8. Employee Stock Option Plan
The Company's Board of Directors has authorized officers of the
Company to offer certain employees benefits under an unqualified
Employee Stock Option Plan which, as of the date of these
financial statements, has not been consummated. The terms of
such options are contracted between each eligible employee and
the Company on a case by case basis. As of the date of these
financial statements, 7 such plans are either active, pending
the start of employment or under negotiation; none are vested.
9. Notes Payable
<TABLE>
<CAPTION>
Notes Payable Related Party
consists of the following: Unaudited
December 31, March 31,
1999 2000
------------ ----------
<S> <C> <C>
Note Payable - related party
dated September 1999 $ 125,000 $ 100,000
Note Payable - related party
dated November 1999 571,609 571,609
---------- ----------
696,609 671,609
Less Current Portion 596,609 596,609
---------- ----------
Long Term Portion $ 100,000 $ 75,000
========== ==========
Loans Payable consist of the
following:
Loan Payable - Dated November, 1999 $ 7,500 $ 7,500
Loan Payable - Dated March, 2000 - 50,000
---------- ----------
7,500 57,500
Less Current Portion (7,500) (57,500)
---------- ----------
Long Term Portion $ - $ -
========== ==========
</TABLE>
Based on the borrowing rates currently available to the Company
for loans with similar terms and average maturities, the fair
value of the Company's long term debt approximates the carrying
amount. Interest expense on the above notes for the
periods ended December 31, 1999 and the quarter ended March 31,
2000 amounted to $9,052 and $14,294 respectively.
10. Line of Credit
On March 22, 2000 the Company entered into a factoring
arrangement with an unrelated third party to fund the purchase
of inventory to fulfill purchase orders under an agreement
to manufacture approximately 2,000 white-box computer units per
month for a national satellite distributed program network
marketing group. The factoring arrangement is in the form of a
one-year revolving line of credit, which allows for the drawing
of funds by the Company in an amount equal to 60% of the
purchase orders received from the marketing group. The line of
credit is capped at $600,000 representing up to $1,000,000
F-14
<PAGE> 18
INTERNATIONAL MERCANTILE CORPORATION
NOTES TO FINANCIAL STATEMENTS
Line of Credit cont'd
of purchase orders. The financing calls for the payment of 3
points per month on open invoices and is secured by an
assignment of the underlying receivable, acquired inventory
related to the contract, and 1,500,000 shares of the Company's
Class A common stock. The Company issued 650,000 shares to the
lender as a fee for securing the financing. For the period
ended March 31, 2000 the Company has accrued $3,600 in financing
costs related to the line of credit.
11. Contingencies
The Company's management has confirmed that as of the date of
the financial statements the Company is not involved in any
lawsuits nor is there any pending litigation.
An unwind provision exists as part of the merger agreement,
whereby the merger agreement could be rendered void.
Management, however, believes that the provision will not be
exercised as all other provisions of the merger agreement have
been fulfilled.
12. Segment Information
The Company operates primarily in two industry segments: (1)
whitebox system sales and (2) computer component sales. The
accounting policies of the segments and the products and
services provided by the operating segments are described in
Note 1. The table below presents information about reported
segments at December 31, 1999:
<TABLE>
<CAPTION>
System Component
Sales Sales Other Total Sales
<S> <C> <C> <C> <C>
$547,955 $917,339 $ - $ 1,465,294
Gross Profit 74,464 128,434 - 202,898
Operating Income (Loss) 18,160 47,272 (364,876) (299,444)
Assets 510,410 844,207 3,878,364 5,232,981
Capital Expenditures 14,956 25,044 170,788 210,488
Depreciation Expense 667 1,116 8,697 10,480
</TABLE>
F-15
<PAGE> 19
INTERNATIONAL MERCANTILE CORPORATION
NOTES TO FINANCIAL STATEMENTS
Segment Information cont'd
The table below presents information about reported segments at
March 31, 2000 (Unaudited):
<TABLE>
<CAPTION>
System Component
Sales Sales Other Total Sales
<S> <C> <C> <C> <C>
Sales $1,427,999 $768,115 $ 14,132 $2,210,246
Gross Profit 170,429 56,537 14,132 241,098
Operating Income (Loss) 80,167 26,450 (480,991) (374,374)
Assets 1,633,742 544,581 3,303,066 5,481,389
Capital Expenditures 3,374 1,125 24,790 29,289
Depreciation Expense 723 1,208 9,119 11,050
</TABLE>
13. Subsequent Events
Subsequent to March 31, 2000, the Company exchanged and/or sold
to private investors 1,283,725 shares of Class A Common stock
for a total of $113,500 cash plus future services valued at
approximately $ 250,000. In addition the Company issued
2,200,000 shares of Class A Common Stock which the Company holds
in escrow in anticipation of the consummation of future capital
contributions by certain prospective investors.
In February 2000, the Company entered into an agreement to
manufacture approximately 2,000 white-box computer units per
month beginning March, 2000 with a national satellite
distributed program network marketing group. The agreement is
open-ended and has no minimum purchase requirements. To fund
the acquisition of inventory to fulfill the purchase orders
under the agreement, the Company entered into a factoring
arrangement in March 2000 with an unrelated third party. As of
March 31, 2000 the Company drew $600,000 against the factoring
line of credit and on April 20, 2000 borrowed an additional
$150,000 under similar terms. The financing calls for the
payment of 3 points per month on open invoices, and an initial
payment of 650,000 restricted shares of the Company's Class A
common stock. The financing is secured by the underlying
receivables, acquired inventory related to the contract, and
1,500,000 shares of the Company's Class A common stock.
On March 31, 2000 the Company completed its ISO9002
certification audit and was certified on April 26, 2000 allowing
the Company to perform under future federal and state government
contracts.
On April 10, 2000 the Company issued 1,000,000 shares of Class B
Common Stock as previously authorized by the September 6, 1999
reverse merger agreement to the owners of Micromatix.com, Inc.,
the Predecessor Company.
F-16
<PAGE> 20
Item 2. Management's Discussion and Analysis or Plan of Operation.
This Quarterly Report on Form 10-QSB contains forward-looking
statements. For this purpose, any statements contained in it that
are not statements of historical fact should be regarded as
forward-looking statements. For example, the words "believes,"
"anticipates," "plans," and "expects" are intended to identify
forward-looking statements. There are a number of important
factors that could cause the Company's actual results to differ
materially from those indicated by such forward-looking statements.
These factors include those shown at the end of this section under
the caption "Certain Factors That May Affect Future Results."
The following discussion for the Company's results of
operations and financial condition should be read in conjunction
with the Company's Financial Statements listed in Part I, Item 1
and the Notes thereto appearing elsewhere in this Form 10-QSB, and
the Company's Audited Financial Statements and the Notes thereto
appearing in the Company's 1999 Annual Report on Form 10-KSB.
(a.) Results of Operations
For the period of operations since inception on 9/2/99 and
ending 12/31/99, our Company posted total sales of $1,465,294.
Total sales for the quarter ended 3/31/00 were $2,210,246, which
represents an increase of $744,952 or 50.8%. We were able to
realize this degree of growth due to the groundwork we established
during the first quarter of our operations. Our management
recruited top sales personnel, with significant customer bases,
which reflect our goals in both our target markets and reseller
qualifications. As a result of hiring these salespersons, we
obtained an immediate clientele with existing purchasing power, and
increased sales began to materialize. Since our manufacturing,
warehouse facility, administration, technical support and
purchasing departments are fully staffed with quality personnel, we
were able to respond and fulfill the needs of our customers. As a
result of our proactive outlook, our SG&A for the quarter ended
12/31/99 is higher than would occur under normal business
conditions given the level of sales generated. The SG&A of
$502,065, as a percentage of sales for the period since inception
on 9/2/99 and ending 12/31/99 was 35%. This is a reflection of the
quality of the personnel and our Company's positioning to allow it
to handle the higher sales volume once it is realized. For the
quarter ended March 31, 2000, SG&A is $596,472 or 27% of sales
which indicates that SG&A will approach realistic conditions as
sales continue to increase in accordance with our goals and
projections.
(b) Plan of Operation
Our primary emphasis through December 31, 1999 was placed upon
our capitalization, the establishment of our website, our internal
infrastructure, our production lines and the development of our
marketing team. During the quarter ended March 31, 2000, this
emphasis shifted to sales and production, which we expect to
continue to be our emphasis throughout the remainder of the year
2000 so that we can increase sales by capturing a larger percentage
of the growth in the white box market. Based upon our current SG&A
rate, we believe that sales revenue of $2.0 million per month, at
a gross margin of 10%, is our Company's break even level.
<PAGE> 21
Management believes that this sales revenue is achievable. Our
growth is projected to result from an increase in sales equal to or
greater than 50% each quarter, which would annualize to
approximately $18 million in sales. Potentially, should all of the
contracts that we are currently negotiating materialize, annual
sales could exceed $40 million for the calendar year 2000.
Coinciding with this anticipated growth is the anticipated need for
additional financing. We are currently finalizing an arrangement
for a $1,000,000 capital infusion from an unrelated third party
investor. This investor presently has extended a $750,000 line of
credit to the Company in the form of a factoring arrangement,
secured by (i) an assignment of the underlying receivable, (ii)
acquired inventory related to the receivable, and (iii) 1,500,000
shares of the Company's Class "A" common stock.
In addition, future growth strategies may include strategic
acquisitions should opportunities arise which would not jeopardize
current operations. This anticipated growth, along with the growth
already experienced, has and will strain our financial and
operational resources. Additional funding is necessary to achieve
the results projected. Multiple funding avenues are currently
being explored to provide the resources needed to fund the growth
while allowing our Company to maintain debt at a manageable level
for our cash flow.
Marketing
We currently have a sales force consisting of six account
executives, with varying degrees of experience, but all with
knowledge of computers essential to assisting customers in
configuring their orders optimally. In addition, we have two
account executives specializing in government sales and marketing,
along with the management of our strategic corporate accounts
(Fortune 500). Our website allows our customers and potential
customers to view our specials and to apply for active account
status. In the year 2000, we have plans to upgrade our website to
allow our customers to custom configure their orders online, with
real-time interaction with our inventory software to allow them to
ascertain availability of product, and an order tracking function
which will allow the customer to monitor their orders progress
through production. We anticipate that this upgrade will cost
approximately $125,000. Our sales department is currently faxing
to all current customers and potential customers in our extensive
database our specials on a weekly basis. Additionally, we have
tele-marketers calling and updating our database of prospective
customers on a daily basis. We expect that we will need to hire a
minimum of 5 additional sales persons in order for us to attain our
projected sales goals.
Production
Our production department is designed for flexibility and
staffed with skilled assemblers and system integration technicians.
Small to medium quantity orders can be easily produced on our
existing custom configuration line. In addition, we have the
capability, at very short notice, of activating an assembly line of
skilled workers for large production builds. As these contracts
increase in consistency and quantity, these additional workers will
be utilized on a permanent basis. Our production facility has the
capacity to add additional assembly lines on an as needed basis.
We have completed the required independent audit for ISO 9002
certification and we were certified on April 26, 2000. The ISO
9002 certification is an internationally accredited standard, which
guarantees that our product is processed to the highest quality
<PAGE> 22
standards. In addition, it allows our Company to participate in
and be awarded state and federal government contracts.
Inventory
We manage the quantity and quality of our component inventory
through our experienced purchasing personnel and warehousing policy
and procedures. We strive to maximize our responsiveness to
customer requirements while optimizing inventory turns. Inventory
management is critical to the success of our business. Our
strategy is to focus on products with high turnover ratios to
reduce exposure to product obsolescence, changing consumer demands
and declines in market prices, while still fulfilling the needs of
our customers. Our software program facilitates the control of
purchasing, inventory, and accounts payable. Each sales
representative has available real-time data with respect to our
inventory levels. We believe that we are able to take advantage of
synergies and efficiencies arising out of the combination of system
assembly and inventory warehousing in a single facility.
Vendor Relations
Our Company has accounts with numerous suppliers that provide
us with the components required to custom configure systems for our
customers. Pricing and availability primarily govern our
purchasing decisions. We currently do not have any guarantees to
purchase from specified vendors for any parts. Conversely, we also
do not have any contracts that require any vendor to segregate and
maintain inventory for our consumption. As a result, we are at the
mercy of market conditions to obtain products at reasonable prices
that allow us to operate profitably. Should market conditions
experience any shortages or price hikes, we would be subject to
such conditions and would be unable to compete with other companies
with supplier contracts.
Certain Factors That May Affect Future Results
The white box PC industry is highly competitive. Competition
is largely based on price, quality, range of service offered,
shipping capabilities, customer service, and product availability.
Many of our competitors are larger, more established, and have
greater name recognition and financial and marketing resources than
our Company. As a result, we could potentially experience
downward pricing pressure and increased competition, which would
drive down our revenues by either forcing a cut in our sales or in
our prices. There is always the risk of general market down turn,
which could adversely impact our revenues and our growth.
We are considered a start-up company and have no significant
operating history as Micromatix.net. We have not generated
significant revenue to date to support operations on an ongoing
basis. We cannot assure that we will achieve sufficient revenues
to offset our anticipated operating costs. Our viability,
profitability and growth depend upon our meeting our sales goals
and our attaining sufficient financing to purchase inventory at
competitive prices. We cannot assure that we will be able to
generate revenues or ever achieve profitable operations.
We have no significant capital. We have required significant
capital to develop our business and to date all of our costs have
been funded via sales of common stock and loans. We will continue
<PAGE> 23
to require significant funds as we grow. We are currently
generating limited revenue from our operations. Other than as
discussed elsewhere herein, we have no current arrangements in
place with respect to sources of additional financing. If we have
to arrange for financing to further the development of our
business, we cannot assure that such financing will be available on
acceptable terms or at all. Our inability to obtain additional
financing, when needed, would have a material adverse effect on us,
including possibly requiring us to curtail or cease our operations.
Demand and market acceptance for white box PC systems are
subject to a high level of uncertainty. We cannot assure that
widespread acceptance of white box PC systems, or our products in
particular, will occur. We will rely on VAR's who utilize white
box PC systems to purchase our products. In order for us to be
successful, these VAR's must perceive us as their partner, not
their competitor. Further, issues concerning the reliability, cost
and quality of white box PC systems may affect our market. We
cannot assure that VAR's will view us as "partners" and utilize our
products. If our products do not achieve market acceptance, our
business, results of operations and financial condition could be
materially adversely affected.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
Not Applicable
Item 2. Change in Securities
During January 2000, we sold 188,735 shares of our common
stock at various prices ranging from $0.30 to $0.50 per share
(depending upon OTCBB price quotations for our common stock at the
time of sale), $84,649 in the aggregate, pursuant to a private
placement transaction. The exemptions we relied upon were Sections
4(2), 4(6) and Regulation D of the Securities Act of 1933, as
amended. The stock was sold to 22 individuals and/or entities, all
of whom were "accredited" investors as that term is defined in
Regulation D. The net proceeds to our Company for the sale of the
188,735 shares were approximately $76,199 after offering expenses
and commissions of approximately $8,450. No underwriting discounts
were paid by our Company in connection with the abovementioned
transactions.
During February 2000, we sold 396,440 shares of our common
stock at various prices ranging from $0.50 to $1.00 per share
(depending upon OTCBB price quotations for our common stock at the
<PAGE> 24
time of sale), $230,500 in the aggregate, pursuant to a private
placement transaction. The exemptions we relied upon were Sections
4(2), 4(6) and Regulation D of the Securities Act of 1933, as
amended. The stock was sold to13 individuals and/or entities, all
of whom were "accredited" investors as that term is defined in
Regulation D. The net proceeds to our Company for the sale of the
396,440 shares were approximately $210,850 after offering expenses
paid in our common stock of approximately $7,500 and commissions
paid in cash of approximately $12,150. No underwriting discounts
were paid by our Company in connection with the abovementioned
transactions.
During March 2000, we sold 421,268 shares of our common stock
at various prices ranging from $0.29 to $0.80 per share (depending
upon OTCBB price quotations for our common stock at the time of
sale), $262,150 in the aggregate, pursuant to a private placement
transaction. The exemptions we relied upon were Sections 4(2), 4(6)
and Regulation D of the Securities Act of 1933, as amended. The
stock was sold to 12 individuals and/or entities, all of whom were
"accredited" investors as that term is defined in Regulation D.
The net proceeds to our Company for the sale of the 421,268 shares
were approximately $228,550 after offering expenses paid in our
common stock of approximately $13,600 and commissions paid in cash
of approximately $20,000. No underwriting discounts were paid by
our Company in connection with the abovementioned transactions.
Additionally, in March 2000 we issued 650,000 shares of our
common stock as a fee to a lender which entered into a factoring
arrangement with our Company which provides our Company with a one
year revolving line of credit. The line of credit is capped at
$600,000 and enables the Company to draw funds in an amount up to
60% of the purchase orders we receive. Additionally, we issued
250,000 shares of our common stock as a fee to the "finder" who
introduced our Company to the aforementioned lender. The
exemptions we relied upon were Sections 4(2), 4(6) of the
Securities Act of 1933, as amended. The stock was issued to two
individuals and/or entities, all of whom were "accredited"
investors as that term is defined in Regulation D.
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
(3)(i)(a) Articles of Incorporation (incorporated by
reference to our Report on Form 10-K for the year
ended December 31, 1981).
(b) Articles of Amendment (incorporated by reference to
our Report on Form 10-K for the year ended December
31, 1981).
(c) Articles of Amendment (incorporated by reference to
our Report on Form 10-K for the year ended December
31, 1998).
(d) Articles of Amendment (incorporated by reference to
our Report on Form 10-K for the year ended December
31, 1998).
(3)(ii) Bylaws (incorporated by reference to the Company's
Report on Form 10-K for the year ended December 31,
1987).
(4) Instruments defining the rights of holders
(incorporated by reference to Exhibit (3) herein).
<PAGE> 25
(10)
(1) Our Acquisition Agreement with Red River Trading
Company, Inc. and Micromatix.com, Inc. and Addendum
thereto (incorporated by reference to our Report on
Form 10-K for the year ended December 31, 1999).
(2) Our compensation plan agreement with Frederic
Richardson (incorporated by reference to our Report
on Form 10-K for the year ended December 31, 1999).
(3) Our Lease Agreement (incorporated by reference to
our Report on Form 10-K for the year ended December
31, 1999).
(4) Our Note Payable to Sarah Saul Simon Trust
(incorporated by reference to our Report on Form
10-K for the year ended December 31, 1999).
(5) Our Note Payable to Red River Trading (incorporated
by reference to our Report on Form 10-K for the
year ended December 31, 1999).
(11) Earnings per share (See Financial Statements).
(27) Financial Data Schedule.
(b) The following report on Form 8-K was filed during the
quarter ended March 31, 2000.
(1) Form 8-K filed on February 24, 2000. The item
reported on was Item 4. Changes in Registrant's
Certifying Accountant, and Item 7. Financial
Statements and Exhibits.
Exhibits. The following document was filed as an
exhibit to the Form 8-K.
c) Exhibit 16. Letter from Thomas P. Monahan,
C.P.A. re: change in certifying accountant.
<PAGE> 26
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
INTERNATIONAL MERCANTILE CORPORATION
By:/s/C. Timothy Jewell
C. Timothy Jewell,
Chief Exec. Officer
President, Director
Date: May 15, 2000
By:/s/C. Timothy Jewell
C. Timothy Jewell,
Chief Exec. Officer
President, Director
By:/s/ Frederic S. Richardson
Frederic S. Richardson,
Director
By:/s/ Max W. Apple
Max W. Apple,
Director
Date: May 15, 2000
<PAGE> 27
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Balance
Sheet, Statement of Operations, Statement of Cash Flows and Notes thereto
incorporated in this Form 10-QSB and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 28,562
<SECURITIES> 0
<RECEIVABLES> 1,338,268
<ALLOWANCES> (30,772)
<INVENTORY> 835,920
<CURRENT-ASSETS> 2,298,871
<PP&E> 239,777
<DEPRECIATION> (21,530)
<TOTAL-ASSETS> 5,481,389
<CURRENT-LIABILITIES> 2,422,007
<BONDS> 0
0
0
<COMMON> 125,348
<OTHER-SE> 3,453,081
<TOTAL-LIABILITY-AND-EQUITY> 5,481,389
<SALES> 2,210,246
<TOTAL-REVENUES> 2,210,246
<CGS> 1,969,148
<TOTAL-COSTS> 615,472
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,894
<INCOME-PRETAX> (374,374)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (374,374)
<EPS-BASIC> (0.037)
<EPS-DILUTED> (0.034)
</TABLE>
