<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 November 30, 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 December 31, 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 nine months ended November 30, 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 November 30, February 28,
------ 1999 1999
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 9,960 $ 825,437
Accounts receivable 7,579,916 8,021,764
Inventories 3,916,943 8,281,272
Other current assets 1,059,471 723,356
----------- -----------
Total current assets 12,566,290 17,851,829
Property and equipment, at cost 7,253,392 7,094,339
Less accumulated depreciation and amortization 3,926,436 3,514,601
----------- -----------
3,326,956 3,579,738
Other assets 51,498 691,059
----------- -----------
Total assets $15,944,744 $22,122,626
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
Current liabilities:
Short-term notes payable:
Affiliate $ 1,500,000 $ --
Other 2,371,785 11,811,627
Accounts payable and accrued liabilities 7,563,321 12,528,463
Current portion of long-term debt:
Affiliate 531,108 607,811
Other 1,589,714 3,045,046
----------- -----------
Total current liabilities 13,555,928 27,992,947
----------- -----------
Long-term debt due after one year:
Affiliate 1,775,232 275,232
Other 8,495,259 894,473
----------- -----------
10,270,491 1,169,705
----------- -----------
Total liabilities 23,826,419 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,
7,917,552 shares outstanding 79,176 37,176
Additional paid in capital 11,250,866 10,998,866
Accumulated deficit (20,387,037) (19,251,388)
----------- -----------
Total stockholders' deficit (7,881,675) (7,040,026)
----------- -----------
$15,944,744 $22,122,626
=========== ===========
</TABLE>
See accompanying notes.
3
<PAGE>
Meridian National Corporation
Condensed Consolidated Income Statements
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
November 30, November 30,
----------------------------- --------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $10,490,538 $11,456,921 $31,554,352 $38,329,172
Costs of sales 8,730,488 10,318,880 27,837,205 34,993,265
----------- ----------- ----------- -----------
Gross margin 1,760,050 1,138,041 3,717,147 3,335,907
Other costs and expenses (income):
Selling, general and administrative 1,212,046 1,283,253 3,752,866 4,156,430
Interest 338,799 416,790 1,037,088 1,350,261
(Gain) loss on disposal of assets 18,450 (944,809)
Miscellaneous - net (975) 690 (2,925) (229,586)
----------- ----------- ----------- -----------
Total other costs and expenses 1,549,870 1,719,183 4,787,029 4,332,296
----------- ----------- ----------- -----------
Net income (loss) $ 210,180 $ (581,142) $(1,069,882) $ (996,389)
=========== =========== =========== ===========
Income (loss) applicable to common stock $ 181,797 $ (615,340) $(1,155,031) $(1,098,983)
=========== =========== =========== ===========
Income (loss) per common share -
basic and diluted: $ 0.02 $ (0.17) $ (0.23) $ (0.3)
=========== =========== =========== ===========
Weighted average common shares
outstanding - basic and diluted 7,917,552 3,717,552 5,092,097 3,695,042
----------- ----------- ----------- -----------
</TABLE>
See accompanying notes.
4
<PAGE>
Meridian National Corporation
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
November 30,
-------------------------
1999 1998
-------------------------
<S> <C> <C>
Cash flows from operating activities
Net loss $(1,069,882) $ (996,389)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 457,098 746,648
Write-down of inventory 1,345,000 --
Gain on asset disposal -- (944,809)
Changes in operating assets and liabilities:
Accounts receivable 464,348 3,706,569
Inventories 3,019,329 2,240,776
Other current assets 21,238 (36,019)
Accounts payable and accrued liabilities (1,971,629) (2,805,326)
----------- ----------
Net cash provided by operating activities 2,232,734 1,911,450
Cash flows from investing activities
Additions to property and equipment (162,368) (365,598)
Changes in other assets (28,847) 21,038
Proceeds from disposals of property and equipment -- 1,464,226
----------- ----------
Net cash provided by (used in) investing activities (191,215) 1,119,666
Cash flows from financing activities
Payments on notes payable (5,447,097) (1,091,440)
Proceeds of borrowings from MNP 3,000,000 --
Payments on long-term debt (676,899) (1,123,036)
Proceeds from issuance of common stock 294,000 --
Cash dividends paid 27,000 (27,006)
----------- ----------
Net cash used in financing activities (2,856,996) (2,241,482)
----------- ----------
Increase (decrease) in cash and cash equivalents (815,477) 789,634
Cash and cash equivalents at beginning of period 825,437 21,260
----------- ----------
Cash and cash equivalents at end of period $ 9,960 $ 810,894
=========== ==========
</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 estimated net realizable value.
2. 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 represented 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"). As of
November 30, 1999, MNP has loaned a total of $3 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. As of November 30, 1999 the Company was not aware of any
covenant defaults or other events of default under the Loan Agreement. 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. Prior to the revised
financing arrangements, the revolving line of credit and term loan payable to
the Bank were classified as current liabilities in the Company's 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 are shown as long-
term debt at November 30, 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 November 30, 1999 and 1998 approximated $64,000.
Lease charges from these affiliates during each of the six month periods ended
November 30, 1999 and 1998 approximated $192,000. 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
Third Quarter Ended November 30, 1999
Compared to
Third Quarter Ended November 30, 1998
Steel Distribution and Processing Segment. The steel distribution and
processing operations reported net sales of $9.6 million for the third quarter,
a decrease of $743,000 or 7% compared to the third 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
operated only as a sales office in the current fiscal year. Sales generated by
the Gary, Indiana operations decreased by $1,181,000 in the third quarter
compared to the same period in the prior year. As further discussed in the
Liquidity and Capital Resources section, sales volumes have been affected as a
result of reduced availability of steel products from suppliers due to credit
constraints earlier in the fiscal year. In the third 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 income for this segment amounted to $745,000 for the third quarter
compared to operating income of $69,000 for the third quarter of the prior
fiscal year. Gross margin (net sales less cost of sales) as a percentage of net
sales was 16.7% in the third quarter of fiscal 2000 compared to 8.8% in the
third quarter of the prior fiscal year. The increase in gross margin percentage
is a result of stronger sales of value-added product to the automotive market,
which generally has a greater gross margin than as-is sales. The market for
steel products remained somewhat soft during the third quarter, however the
excess supply of steel product in the market appears to be declining. The
Company anticipates increasing sales levels as its ability to purchase steel has
been enhanced with the investment in the Company by the Buyers, the loan
arrangement with MNP Corporation and the renegotiated financing arrangements
with its senior lender, as discussed in the Liquidity and Capital Resources
section which follows.
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
8
<PAGE>
System. As a result, operating and administrative costs of the paint waste
recycling operation have been significantly reduced. Revenues are affected to a
lesser extent since revenues are primarily generated by its continuing DryPure
recycling process. Net sales for this segment decreased to $896,000 in the
third quarter of fiscal 2000 from $1,119,000 in the third quarter of the prior
year.
The paint waste recycling business recorded an operating loss of $28,000 for the
third quarter, an improvement of $27,000 over the operating loss of $55,000 for
the third quarter of the prior year. The DryPure process for the last several
years has operated at or near its capacity. Results in the current quarter have
been affected by a larger mix of processing of paint waste received in bulk
loads, which generate a lower average revenue per cubic yard processed.
Selling, General and Administrative Expenses. The $71,000 decrease in
selling, general and administrative expenses in the third 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 $78,000 (or 19%) in the third
quarter compared to the prior year. Average outstanding borrowings fell due to
a decrease in steel purchases, lower inventory levels and reduced working
capital requirements.
Nine Months Ended November 30, 1999
Compared to
Nine Months Ended November 30, 1998
Steel Distribution and Processing Segment. Net sales for the steel
distribution and processing operations amounted to $28.9 million for the first
nine months of fiscal 2000, a decrease of $6.3 million or 18% compared to the
first nine months of the prior year. Processing activity at the Gary, Indiana
facility was discontinued, leading to a $4.9 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 income for this segment amounted to $517,000 for the first nine months
of fiscal 2000 compared to operating income of $1,000 for the first nine months
of the prior year. The results for the first nine months of fiscal 2000
includes a $1,345,000 non-recurring charge to cost of sales for adjustments to
reflect the estimated net realizable value of aged inventory items as of August
31, 1999. Gross margin as a percentage of net sales was 10.7% in the
9
<PAGE>
first nine months of fiscal 2000, including the inventory adjustment, compared
to 7.9% in same period of the prior year.
Waste Management Segment. Net sales for this segment decreased to $2,632,000 in
the first nine months of fiscal 2000 from $3,079,000 in the same period of the
prior year. The decrease results primarily from reduced volumes of material
processed through the Polymeric Recovery System.
This segment reported a $7,000 operating profit for the first nine months of
fiscal 2000, compared to an operating loss of $296,000 the first nine months of
the prior year. This operation has undergone significant reductions in personnel
costs, and has experienced a reduction of $189,000 in depreciation expense as a
result of the equipment writedown that was recorded at February 28, 1999.
Selling, General and Administrative Expenses. Expenses decreased $404,000 in
the first nine months 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 $313,000 (or 23%) in the first
nine months of fiscal 2000. The Company's average outstanding borrowings fell
due to a decrease in steel purchases, lower inventory levels and reduced working
capital requirements. Interest rates were also lower during the current nine-
month period compared to the same period last year.
Liquidity and Capital Resources
The Company's primary source of liquidity is a $10 million 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 also 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 while
the Company attempted to obtain permanent funding for the project through an
initial public offering of securities in the Company's paint waste business.
The public offering never made it to market, and the Company 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 loan agreements, the Company,
in May 1999, entered into a forbearance agreement with the Bank.
10
<PAGE>
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
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 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 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 an allowed overadvance owing the Bank. As
of November 30, 1999, MNP has loaned a total of $3 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. As of November 30, 1999 the Company was
not aware of any covenant defaults or other events of default under the Loan
Agreement. 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.
Prior to the revised financing arrangements, the revolving line of credit and
notes payable to the Bank were classified as current liabilities in the
Company's balance sheet. As a result of the revised terms of its obligations
11
<PAGE>
under the Loan Agreement, the long-term portion of the obligations owing to the
Bank are shown as long-term debt at November 30, 1999.
Until recently, the Company had not been able to make timely payments to
many of its trade and other creditors during the past year. 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 and
increase its sales volume.
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
operating results have significantly improved.
. 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 November 30, 1999 amounted to $990,000.
The improvement from the working capital deficiency at February 28, 1999 of
$10,141,000 is due primarily to the reclassification of previous short-term
obligations to long-term , as discussed above. Certain components of working
capital, including accounts receivable, inventories and accounts payable, may
fluctuate significantly based upon trends in sales volumes, market conditions
and steel purchasing strategies for the Company's steel operations. Inventory
levels have been significantly reduced from prior years due to limitations on
the ability to purchase steel earlier in the year, as well as, more effective
management of the steel purchasing function and an emphasis on increasing
inventory turns.
The Company does not have any material capital expenditure commitments at
this time. Capital expenditures are limited under the Loan Agreement with the
Bank. 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.
12
<PAGE>
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,
which funds were used for working capital purposes. These shares were not
registered under the Securities Act of 1933 (the "Act") in reliance upon 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 3. Defaults Upon Senior Securities
The Company is in arrears in the payment of dividends on its $3.75 Series
B Preferred Stock, $.001 par value. The arrearage consists of semiannual
dividends payable on February 1, 1999 and August 1, 1999, aggregating $77,532 if
paid in cash and has been accrued in the accompanying balance sheet.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27. Financial Data Schedule
(b) Reports on Form 8-K
One report on Form 8-K was filed during the quarter ended November
30, 1999. A report dated September 15, 1999 was filed to disclose a
change in control of the Company, as of September 1, 1999, and
revised financing arrangements with the Company's senior lender
effective on September 3, 1999.
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: January 14, 1999 By /s/ William D. Feniger
---------------------------
William D. Feniger
Chairman of the Board of Directors,
President and Chief Executive Officer
Date: January 14, 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
November 30, 1999 and the related consolidated statement of operations for the
nine months ended November 30, 1999
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-29-2000
<PERIOD-START> MAR-01-1999
<PERIOD-END> NOV-30-1999
<CASH> 9,960
<SECURITIES> 0
<RECEIVABLES> 7,579,916
<ALLOWANCES> 0
<INVENTORY> 3,916,943
<CURRENT-ASSETS> 12,566,290
<PP&E> 7,253,392
<DEPRECIATION> 3,926,436
<TOTAL-ASSETS> 15,944,744
<CURRENT-LIABILITIES> 13,555,928
<BONDS> 10,270,491
0
1,175,320
<COMMON> 79,176
<OTHER-SE> (9,136,171)
<TOTAL-LIABILITY-AND-EQUITY> 15,944,744
<SALES> 31,554,352
<TOTAL-REVENUES> 31,554,352
<CGS> 27,837,205
<TOTAL-COSTS> 27,837,205
<OTHER-EXPENSES> (2,925)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,037,088
<INCOME-PRETAX> (1,069,882)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,069,882)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,069,882)
<EPS-BASIC> (0.23)
<EPS-DILUTED> (0.23)
</TABLE>
