<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-14203
MERIDIAN NATIONAL CORPORATION
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 34-1470518
(State of Incorporation) (I.R.S. Employer
Identification Number)
805 CHICAGO STREET, TOLEDO, OH 43611
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number: (419) 729-3918
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 X No
--- ---
As of September 30, 1999, 7,917,552 shares of Meridian National Corporation
common stock were outstanding.
<PAGE>
MERIDIAN NATIONAL CORPORATION
PART I
FINANCIAL INFORMATION
ITEM 1. Financial Statements
The accompanying condensed consolidated financial statements of Meridian
National Corporation are unaudited but, in the opinion of management, reflect
all adjustments (including only normal recurring accruals) necessary to present
fairly such information for the periods and at the dates indicated. The results
of operations for the three months and six months ended August 31, 1999 may not
be indicative of the results of operations for the year ending February 28,
2000. Since the accompanying condensed consolidated financial statements have
been prepared in accordance with Article 10 of Regulation S-X, they do not
contain all information and footnotes normally contained in annual consolidated
financial statements; accordingly, they should be read in conjunction with the
consolidated financial statements and notes thereto appearing in the Company's
Annual Report on Form 10-K for fiscal year ended February 28, 1999.
2
<PAGE>
Meridian National Corporation
Condensed Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
ASSETS August 31, February 28,
1999 1999
----------- -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 24,893 $ 825,437
Accounts receivable 7,432,579 8,021,764
Inventories 4,503,379 8,281,272
Other current assets 756,076 723,356
---------- ----------
Total current assets 12,716,927 17,851,829
Property and equipment, at cost 7,201,191 7,094,339
Less accumulated depreciation and amortization 3,787,926 3,514,601
---------- ----------
3,413,265 3,579,738
Other assets 464,574 691,059
---------- ----------
Total assets $16,594,766 $22,122,626
========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Short-term notes payable $ 2,811,086 $11,811,627
Accounts payable and accrued liabilities 9,125,181 12,528,463
Current portion of long-term debt:
Affiliate 560,053 607,811
Other 1,464,652 3,045,046
---------- ----------
Total current liabilities 13,960,972 27,992,947
Long-term debt due after one year:
Affiliate 275,232 275,232
Other 10,657,885 894,473
---------- ----------
10,933,117 1,169,705
---------- ----------
Total liabilities 24,894,089 29,162,652
Stockholders' deficit:
Preferred stock, $.001 par value, authorized 5,000,000 shares:
$100 Series A, 5,000 shares authorized,
4,000 shares issued and outstanding 400,000 400,000
$3.75 Series B, 1,375,000 shares authorized,
206,752 shares issued and outstanding 775,320 775,320
Common stock, $.01 par value, authorized 20,000,000 shares,
3,717,552 shares outstanding 37,176 37,176
Additional paid in capital 10,998,866 10,998,866
Accumulated Deficit (20,510,685) (19,251,388)
---------- ----------
Total stockholders' deficit (8,299,323) (7,040,026)
---------- ----------
$16,594,766 $22,122,626
========== ==========
</TABLE>
See accompanying notes.
3
<PAGE>
Meridian National Corporation
Condensed Consolidated Income Statements
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
August 31, August 31,
--------------------------------------- ------------------------------------------
1999 1998 1999 1998
---------------- ---------------- ---------------- ------------------
<S> <C> <C> <C> <C>
Net sales $ 10,200,183 $ 11,042,273 $ 21,063,814 $ 26,872,251
Costs of sales 9,920,265 10,335,181 19,106,717 24,674,385
--------------- ------------- ------------- -------------
Gross margin 279,918 707,092 1,957,097 2,197,866
Other costs and expenses (income):
Selling, general and administrative 1,246,303 1,398,898 2,540,820 2,873,177
Interest 327,927 452,895 698,289 933,471
Gain on disposal of assets -- (963,259) -- (963,259)
Miscellaneous - net (975) (162,059) (1,950) (230,275)
--------------- ------------- ------------- -------------
Total other costs and expenses 1,573,255 726,475 3,237,159 2,613,114
--------------- ------------- ------------- -------------
Net loss $ (1,293,337) $ (19,383) $ (1,280,062) $ (415,248)
=============== ============= ============= =============
Loss applicable to common stock $ (1,321,720) $ (53,581) $ (1,336,828) $ (483,644)
=============== ============= ============= =============
Loss per common share -
basic and fully diluted: $ (0.36) $ (0.01) $ (0.36) $ (0.13)
=============== ============= ============= =============
Weighted average common
shares outstanding 3,717,552 3,653,309 3,717,552 3,639,256
--------------- ------------- ------------- -------------
</TABLE>
See accompanying notes.
4
<PAGE>
MERIDIAN NATIONAL CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
August 31,
-----------------------------------------------
1999 1998
-------------------- -----------------
<S> <C> <C>
Cash flows from operating activities
Net loss $ (1,280,062) $ (415,248)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 309,641 499,558
Write-down of inventory 1,345,000 --
Gain on asset disposal -- (963,259)
Changes in operating assets and liabilities:
Accounts receivable 619,185 4,605,981
Inventories 2,432,893 1,500,691
Other current assets (32,720) (12,718)
Accounts payable and accrued liabilities (1,412,234) (3,350,177)
-------------------- -----------------
Net cash provided by operating activities 1,981,703 1,864,828
Cash flows from investing activities
Additions to property and equipment (110,167) (335,982)
Changes in other assets (22,766) (18,880)
Proceeds from disposals of property and equipment -- 1,482,676
-------------------- -----------------
Net cash provided by (used in) investing activities (132,933) 1,127,814
Cash flows from financing activities
Payments on notes payable (4,747,086) (1,325,487)
Proceeds of borrowings from MNP Corporation 2,600,000 --
Payments on long-term debt (484,225) (869,177)
Cash dividends paid (18,003) (18,009)
-------------------- -----------------
Net cash used in financing activities (2,649,314) (887,186)
-------------------- -----------------
Increase (decrease) in cash and cash equivalents (800,544) 2,105,456
Cash at beginning of period 825,437 21,260
-------------------- -----------------
Cash at end of period $ 24,893 $ 2,126,716
==================== =================
</TABLE>
See accompanying notes.
5
<PAGE>
MERIDIAN NATIONAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited)
1. Inventory Valuation
At August 31, 1999, the Company recorded a $1,345,000 charge to cost of
sales to write down inventory to the estimated net realizable value.
2. Subsequent Event - Sale of Common Stock
On September 1, 1999, a private investor group (the "Buyers") purchased 4.2
million previously unissued shares of the Company's common stock pursuant to a
Stock Purchase Agreement dated June 25, 1999 (the "Agreement") for $294,000.
The purchase of the common stock represents approximately 53% of the issued and
outstanding shares of the Company's common stock. The Buyers are affiliated with
MNP Corporation ("MNP"), a privately held company which currently holds
approximately 280,000 shares of the Company's common stock and whose majority
owner is a director of the Company. The percentage ownership of the Buyers,
together with the present holdings of MNP, constitutes 57% of the Company's
outstanding and issued common stock.
3. Notes Payable and Long-Term Debt
In conjunction with the execution of the Stock Purchase Agreement with the
Buyers, MNP made a loan in the amount of $1.5 million to the Company, the
proceeds of which were used to repay a portion of the indebtedness owing to the
Company's senior lender, the National Bank of Canada (the "Bank"). MNP, in its
sole discretion, has agreed to make additional loans up to $1.5 million to the
Company. To date and as of August 31, 1999, MNP has loaned a total of $2.6
million to the Company. The loans bear interest at prime plus 1% and are
secured by substantially all assets of the Company, however, all such security
interests and liens are junior and subordinate to the secured positions of the
Bank and other secured lenders. The loans are due on demand, however, MNP, as
part of a subordination agreement with the Company and the Bank, has agreed that
while the Company has any outstanding obligations to the Bank, MNP will not
cause the amount of loans to the Company to be less than $1.5 million.
Accordingly, $1.5 million of the loans from MNP have been classified as long-
term debt in the accompanying balance sheet.
6
<PAGE>
MERIDIAN NATIONAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited)
On September 3, 1999, the Company entered into an Amended and Restated Loan
Agreement with the Bank (the "Loan Agreement"). The Loan Agreement provides for
a $10 million revolving line of credit with interest at 3/4% above prime and a
term loan of $1,650,000 with interest at 1% above prime. Provided there are no
covenant defaults or other events of default under the Loan Agreement, the
interest rate on the revolving loan and the term loan will be reduced by 1/4% as
of August 31, 2000. The revolving loan expires in March 2002. The term loan
provides for payments of interest only through March 2000 and, thereafter,
monthly principal payments of $35,000 plus interest until fully paid in March
2004. Previously, the revolving line of credit and notes payable to the Bank
were classified as current liabilities in the accompanying balance sheet.
As a result of the revised terms of its obligations under the Loan Agreement,
the obligations owing to the Bank have been reclassified as long-term debt at
August 31, 1999.
4. Related Party Transactions
The Company leases property and equipment from affiliates of an officer and
director of the Company. Lease charges from these affiliates during each of the
three month periods ended August 31, 1999 and 1998 approximated $64,000. Lease
charges from these affiliates during each of the six month periods ended August
31, 1999 and 1998 approximated $128,000. Management believes the terms of the
leases are at least as favorable as those that could have been obtained from
unrelated parties.
7
<PAGE>
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
Second Quarter Ended August 31, 1999
Compared to
Second Quarter Ended August 31, 1998
Steel Distribution and Processing Segment The steel distribution and
processing operations reported net sales of $9.4 million for the second quarter,
a decrease of $696,000 or 7% compared to the second quarter of the prior year.
The steel processing operations at the Company's Gary, Indiana facility were
significantly curtailed in the fourth quarter of the prior fiscal year and are
now operated only as a sales office. Sales generated by the Gary, Indiana
operations decreased by $1,222,000 in the second quarter compared to the same
period in the prior year. As further discussed in Liquidity and Capital
Resources, sales volumes have been affected as a result of reduced availability
of steel products from suppliers due to credit constraints. In the second
quarter of the prior year, sales were depressed due to the pervasive effects on
the steel industry, and many of the Company's customers, of a major automotive
strike.
Operating losses for this segment amounted to $826,000 for the second quarter
compared to operating losses of $380,000 for the second quarter of the prior
fiscal year. Gross margin (net sales less cost of sales) as a percentage of net
sales was 0.3% in the second quarter of fiscal 2000 compared to 5.4% in the
second quarter of the prior fiscal year. The results for the quarter ended
August 31, 1999 include a $1,345,000 non-recurring charge to cost of sales for
adjustments to reflect the estimated net realizable value of aged inventory
items. The inventory adjustment caused a reduction of 14.4% in the gross margin
percentage for the second quarter. The market for steel products remained
somewhat soft during the second quarter as demand has not overcome the supply of
low-priced foreign steel entering the U.S. market.
Waste Management Segment This segment reflects the results of operations of
the Company's paint waste recycling business. In July 1999, the Company
discontinued processing of paint waste using its developmental Polymeric
Recovery System. In fiscal year ended February 28, 1999 a $2.7 million
restructuring charge was recorded to write down certain assets, mainly impaired
equipment, and accrue certain liabilities related to the Polymeric Recovery
System. As a result, operating and administrative costs of the paint waste
recycling operation have been significantly reduced while revenues are not
significantly affected since revenues have been primarily generated by its
continuing DryPure recycling process. Net sales for this segment decreased to
8
<PAGE>
$849,000 in the second quarter of fiscal 2000 from $995,000 in the second
quarter of the prior year.
The paint waste recycling business recorded a $64,000 operating profit for the
second quarter, an improvement of $179,000 over the operating loss of $115,000
for the second quarter of the prior year.
Selling, General and Administrative Expenses The $153,000 decrease in
selling, general and administrative expenses in the second quarter is primarily
attributable to lower personnel and administration costs for the paint waste
recycling operation and the Gary, Indiana steel operation when compared to the
same quarter of fiscal 1999.
Interest Expense Interest expense decreased $125,000 (or 28%) in the second
quarter compared to the prior year. Average outstanding borrowings fell due to
a decrease in steel purchases and lower working capital requirements. Also
interest rates were lower during the second quarter of the current fiscal year.
Six Months Ended August 31, 1999
Compared to
Six Months Ended August 31, 1998
Steel Distribution and Processing Segment Net sales for the steel distribution
and processing operations amounted to $19.3 million for the first half of fiscal
2000, a decrease of $5.6 million or 22% compared to the first half of the prior
year. Processing activity at the Gary, Indiana facility was discontinued,
leading to a $3.7 million sales decline, while the distribution business also
experienced a sales decline due to reduced availability of steel products as a
result of working capital constraints.
Operating losses for this segment amounted to $229,000 for the first half of
fiscal 2000 compared to operating losses of $68,000 for the first six months of
the prior year. The results for the first half of fiscal 2000 includes the
$1,345,000 inventory writedown discussed earlier. Gross margin as a percentage
of net sales was 7.8% in the first half of fiscal 2000, including the inventory
adjustment, compared to 7.5% in same period of the prior year.
Waste Management Segment Net sales for this segment decreased to $1,737,000 in
the first half of fiscal 2000 from $1,960,000 in the same period of the prior
year. The decrease results primarily from reduced volumes of material processed
through the Polymeric Recovery System.
9
<PAGE>
This segment reported a $36,000 operating profit for the first half of fiscal
2000, compared to an operating loss of $241,000 the first half of the prior
year. This operation has undergone significant reductions in personnel costs,
and has experienced a reduction of $126,000 in depreciation expense as a result
of the equipment writedown that was recorded at February 28, 1999.
Selling, General and Administrative Expenses Expenses decreased $332,000 in
the first half of fiscal 2000 due primarily to lower personnel and
administration costs for the paint waste recycling operation and the Gary,
Indiana steel operation when compared to the same period of fiscal 1999.
Interest Expense Interest expense decreased $235,000 (or 25%) in the first
half of fiscal 2000. The Company's average outstanding borrowings fell due to a
decrease in steel purchases and lower working capital requirements. Interest
rates were also lower during the current six-month period compared to the same
period last year.
Liquidity and Capital Resources
The Company's primary source of liquidity is a revolving credit line with
the National Bank of Canada (the "Bank"). Borrowing availability under the
revolving credit line is determined using a formula based upon eligible accounts
receivable and inventories. The Bank had permitted the Company to exceed the
eligible borrowing amount based on the lending formula by $1,500,000 (the
"overadvance").
In addition to the revolving credit line facility, the Bank has
previously provided financing which primarily funded the purchase and
installation of certain equipment for the Company's paint waste recycling
business. This financing was intended to be interim financing until the Company
was able to provide permanent funding anticipated to be raised through an
initial public offering of the Company's paint waste business. The Company was
unable to complete the public offering and therefore was unable to make the
final scheduled payment due to the Bank in March 1998 of $2,035,000. The Bank
allowed the Company to continue to make monthly principal payments on the debt
of $21,000 plus interest.
As a result of the Company's inability to make payment of sums due the
Bank and maintain the terms and covenants of the original loan agreements, the
Company, in May 1999, entered into a forbearance agreement with the Bank.
During the forbearance period the Bank agreed not to exercise its right to
demand immediate payment of obligations due, and the right to foreclose, take
possession of, and liquidate all collateral. The Bank also did not enforce the
10
<PAGE>
default interest rate during the forbearance period, which extended through
September 1, 1999.
On September 1, 1999, a private investor group (the "Buyers") purchased
4.2 million previously unissued shares of the Company's common stock pursuant to
a Stock Purchase Agreement dated June 25, 1999 (the "Agreement") for
$294,000.00. The purchase of the common stock represents approximately 53% of
the issued and outstanding shares of the Company's common stock. The Buyers are
affiliated with MNP Corporation ("MNP"), a privately held company which
currently holds approximately 280,000 shares of the Company's common stock and
whose majority owner is a director of the Company. The percentage ownership of
the Buyers, together with the present holdings of MNP, constitutes 57% of the
Company's outstanding and issued common stock.
In conjunction with the execution of the Stock Purchase Agreement with
the Buyers, MNP made a loan in the amount of $1.5 million to the Company, the
proceeds of which were used to repay the allowed overadvance owing the Bank.
MNP, in its sole discretion, has agreed to make additional loans up to $1.5
million to the Company. To date and as of August 31, 1999, MNP has loaned a
total of $2.6 million to the Company. The loans bear interest at prime plus 1%
and are secured by substantially all assets of the Company, however, all such
security interests and liens are junior and subordinate to the secured positions
of the Bank and other secured lenders. The loans are due on demand, however,
MNP, as part of a subordination agreement with the Company and the Bank, has
agreed that while the Company has any outstanding obligations to the Bank, MNP
will not cause the amount of loans to the Company to be less than $1.5 million.
Accordingly, $1.5 million of the loans from MNP have been classified as long-
term debt in the accompanying balance sheet.
On September 3, 1999, the Company entered into an Amended and Restated
Loan Agreement with the Bank (the "Loan Agreement"). The Loan Agreement
provides for a $10 million revolving line of credit with interest at 3/4% above
prime and a term loan of $1,650,000 with interest at 1% above prime. Provided
there are no covenant defaults or other events of default under the Loan
Agreement, the interest rate on the revolving loan and the term loan will be
reduced by 1/4% as of August 31, 2000. The revolving loan expires in March
2002. At August 31, 1999, the outstanding balance of the revolving credit line
amounted to $7,306,000 and unused availability amounted to $593,000. The term
loan provides for payments of interest only through March 2000 and, thereafter,
monthly principal payments of $35,000 plus interest until fully paid in March
2004. Previously, the revolving line of credit and notes payable to the Bank
were classified as current liabilities in the accompanying balance sheet.
As a result of the revised terms of its obligations under the Loan Agreement,
the long-term portion of the obligations owing to the Bank have been
reclassified as long-term debt at August 31, 1999.
11
<PAGE>
During the past year, the Company has not been able to make timely
payments to many of its trade and other creditors. As a result of the sale of
the stock to the Buyers and the financing arrangements made with the Bank and
MNP, the Company has recently negotiated deferred payment terms and expanded
credit lines with most of its major suppliers. Management believes the
arrangements established with its major suppliers will provide adequate supplies
of steel product at competitive prices to meet its customers' requirements.
The Company has also taken the following actions to improve operating
results and cashflow.
. At February 28, 1999 a $2.7 million restructuring charge was recorded to
write down certain assets, mainly impaired equipment, and accrue certain
liabilities related to the Polymeric Recovery System of the paint waste
recycling business. In July 1999, the Company discontinued processing of
paint waste using this system. Operating and administrative costs at the
paint waste recycling operation have been significantly reduced and has
significantly reduced the losses experienced by this business.
. The Company is continuing to focus on its core steel processing and
distribution business and is placing additional emphasis on purchasing
and inventory management to enhance cash generated from operations.
The working capital deficiency at August 31, 1999 amounted to $1,244,000.
This is an improvement from the working capital deficiency at February 28, 1999
of $10,141,000, due primarily to the reclassification of previous short-term
obligations to long-term , as discussed above. Management believes its existing
resources, including cash provided by operating activities and its credit
facilities will be sufficient to satisfy its working capital and other capital
requirements through the end of fiscal 2000.
Year 2000
The Company uses computer hardware and financial and manufacturing software that
it purchased from third party suppliers. Such suppliers have confirmed to the
Company that such products are Year 2000 compliant or will be in the near
future. Consequently the Company does not expect to incur any significant costs
to become Year 2000 compliant. The Company has no information concerning the
Year 2000 compliance status of its suppliers or customers. If any of the
Company's significant suppliers or customers does not successfully and timely
become Year 2000 compliant, the Company's business or operations could be
adversely affected. The Company has not generated any disaster contingency
plans related to the Year 2000 compliance issue, because operations are not
heavily dependent on computer software, and management
12
<PAGE>
believes that alternative means of operating can be utilized in the event a Year
2000 problem occurs.
Forward-Looking Statements
This Form 10-Q, other SEC filings, and other pronouncements made from
time to time by the Company may include a number of forward-looking statements,
including, but not limited to, statements with respect to the Company's future
financial performance, operating results, plans and objectives. Such statements
are made pursuant to the Safe Harbor provisions of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements are based upon
the Company's expectations and are subject to a number of risks and
uncertainties, many of which are beyond the Company's control. Actual results
may differ materially from those anticipated by such statements, as a result of
a variety of factors, including among others, competitive pressures,
availability of products at competitive prices and regulatory or economic
influences. In light of these risks and uncertainties, there can be no
assurance that any forward-looking information contained herein will in fact
transpire or prove to be accurate. The Company undertakes no responsibility to
update any forward-looking statement that may be made to reflect events or
circumstances occurring after the dates the statements were made or to reflect
the occurrence of unanticipated events.
13
<PAGE>
MERIDIAN NATIONAL CORPORATION
PART II
OTHER INFORMATION
ITEM 2. Changes in Securities and Use of Proceeds
On September 1, 1999 the Company sold 4.2 million shares of Common
Stock, $.01 par value, in a private placement to a private investor group for
$294,000. These shares were not registered under the Securities Act of 1933
(the "Act") under an exemption from registration under Section 4.2 of the Act
and Rule 506 of the regulations pursuant to the Act. This sale of stock is
further described in Form 8-K filed with the Securities and Exchange
Commission on September 15, 1999.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27. Financial Data Schedule
(b) Reports on Form 8-K
Two reports on Form 8-K was filed during the quarter ended August 31,
1999. A report dated June 16, 1999 was filed to disclose under Item 4,
Changes in Registrant's Independent Accountant, the appointment of Rehmann
Robson, P.C. as the Company's independent accountants. A second report
dated June 28, 1999 was filed to disclose under Item 5, Other Events, the
signing of an agreement for the sale of 4.2 million shares of common
stock.
14
<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.
MERIDIAN NATIONAL CORPORATION
(Registrant)
Date: October 20, 1999 By /s/ William D. Feniger
---------------------------
William D. Feniger
Chairman of the Board of Directors,
President and Chief Executive Officer
Date: October 20, 1999 By /s/ James L. Rosino
---------------------------
James L. Rosino
Vice President - Finance and
Chief Financial Officer
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED BALANCE SHEET OF MERIDIAN NATIONAL CORPORATION AS OF
AUGUST 31, 1999 AND THE RELATED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX
MONTHS ENDED AUGUST 31, 199
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-29-2000
<PERIOD-START> MAR-01-1999
<PERIOD-END> AUG-31-1999
<CASH> 24,893
<SECURITIES> 0
<RECEIVABLES> 7,432,579
<ALLOWANCES> 0
<INVENTORY> 4,503,379
<CURRENT-ASSETS> 12,716,927
<PP&E> 7,201,191
<DEPRECIATION> 3,787,926
<TOTAL-ASSETS> 16,594,766
<CURRENT-LIABILITIES> 13,960,972
<BONDS> 10,933,117
0
1,175,320
<COMMON> 37,176
<OTHER-SE> (9,511,819)
<TOTAL-LIABILITY-AND-EQUITY> 16,594,766
<SALES> 21,063,814
<TOTAL-REVENUES> 21,063,814
<CGS> 19,106,717
<TOTAL-COSTS> 19,106,717
<OTHER-EXPENSES> (1,950)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 698,289
<INCOME-PRETAX> (1,280,062)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,280,062)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,280,062)
<EPS-BASIC> (0.36)
<EPS-DILUTED> (0.36)
</TABLE>
