<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Quarter Ended November 30, 1997
--------------------------------------------------------------
Commission File Number 2-91218-B
---------------------------------------------------------
International Electronics, Inc.
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Massachusetts 04-2654231
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
427 Turnpike Street, Canton, Massachusetts 02021
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(781) 821-5566
- --------------------------------------------------------------------------------
(Issuer's telephone number, including area code)
Not applicable
- --------------------------------------------------------------------------------
(former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Exchange Act 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
----- -----
1,493,301 common shares were outstanding at January 5, 1998.
<PAGE>
INTERNATIONAL ELECTRONICS, INC.
---------------------------------
Index
-----
Part I. Financial Information: Page No.
--------
Item 1: Financial Statements (unaudited)
--------------------------------
Condensed Consolidated Balance Sheets, November 30, 1997
and August 31, 1997 2
Condensed Consolidated Statements of Operations, three months
ended November 30, 1997 and 1996 3
Condensed Consolidated Statement of Shareholders' Equity,
three months ended November 30, 1997 4
Condensed Consolidated Statements of Cash Flows, three
months ended November 30, 1997 and 1996 5
Notes to Condensed Consolidated Financial Statements 6-8
Item 2: Management's Discussion and Analysis of
---------------------------------------
Financial Condition and Results of Operations 9-13
---------------------------------------------
Part II. Other Information:
Item 6: Exhibits and Reports on Form 8-K 14
--------------------------------
Signature 14
---------
- 1 -
<PAGE>
INTERNATIONAL ELECTRONICS, INC.
-------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(unaudited)
<TABLE>
<CAPTION>
Nov. 30, 1997 August 31, 1997
------------- ---------------
ASSETS
- ------
<S> <C> <C>
Current assets:
Cash and equivalents $ 223,617 $ 160,075
Accounts receivable, net 1,017,768 1,035,596
Inventories 1,130,925 1,078,561
Other current assets 130,244 133,274
---------- ----------
Total current assets 2,502,554 2,407,506
Equipment, furniture and
improvements, net 441,727 357,289
Other assets:
Goodwill and other intangibles, net 213,293 235,029
Other 18,998 26,349
---------- ----------
232,291 261,378
---------- ----------
$3,176,572 $3,026,173
========== ==========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
- --------------------------------------
<S> <C> <C>
Current liabilities:
Accounts payable $ 513,190 $ 684,431
Accrued expenses 1,044,231 847,210
Income taxes 44,000 39,000
Current portion of long-term
obligations 40,947 36,212
---------- ----------
Total current liabilities 1,642,368 1,606,853
Long-term obligations 73,718 68,369
Commitments
Shareholders' equity:
Common stock, $.01 par value:
Authorized 5,984,375 shares
Issued 1,528,301 shares 15,283 15,283
Capital in excess of par value 4,784,738 4,784,267
Accumulated deficit (3,300,891) (3,409,955)
Less treasury stock, at cost:
35,000 shares (38,644) (38,644)
----------- -----------
Total shareholders' equity 1,460,486 1,350,951
----------- -----------
$ 3,176,572 $ 3,026,173
=========== ===========
</TABLE>
See notes to unaudited condensed consolidated financial statements.
- 2 -
<PAGE>
INTERNATIONAL ELECTRONICS, INC.
-------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
-----------------------------------------------
(unaudited)
<TABLE>
<CAPTION>
Three months ended
-----------------------------
Nov. 30, 1997 Nov. 30, 1996
------------- -------------
<S> <C> <C>
Net sales $2,360,932 $2,298,156
Cost of sales 1,297,351 1,367,829
--------- -----------
Gross profit 1,063,581 930,327
Research and development costs 102,723 114,118
Selling, general and
administrative expenses 805,701 763,488
--------- ------------
Income from operations 155,157 52,721
Interest expense (3,136) (12,046)
Other income 1,043 3,453
--------- ------------
Income before taxes 153,064 44,128
Provision for taxes 44,000 16,000
--------- -------------
Net income $109,064 $28,128
========= ============
Net income per share $.07 $.02
========= ============
Weighted average number
of common and equivalent
shares outstanding 1,587,053 1,720,894
========= ============
</TABLE>
See notes to unaudited condensed consolidated financial statements.
- 3 -
<PAGE>
INTERNATIONAL ELECTRONICS, INC.
---------------------------------
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
-------------------------------------------------------------
(unaudited)
<TABLE>
<CAPTION>
Common Stock Capital in Treasury Stock
------------ excess of Accumulated --------------
Shares Amount par value Deficit Shares Cost Total
------ ------ --------- ------- ------ ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balances,
September 1, 1997 1,528,301 $15,283 $4,784,267 ($3,409,955) 35,000 ($38,644) $1,350,951
Issuance of
stock warrants - - 471 - - - 471
Net income - - - 109,064 - - 109,064
--------- ------- ---------- ------------ ------ -------- ----------
Balances,
November 30, 1997 1,528,301 $15,283 $4,784,738 ($3,300,891) 35,000 ($38,644) $1,460,486
========= ======= ========== ============ ====== ======== ==========
</TABLE>
See notes to unaudited condensed consolidated financial statements.
- 4 -
<PAGE>
INTERNATIONAL ELECTRONICS, INC.
---------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
----------------------------------------------------
(unaudited)
<TABLE>
<CAPTION>
Three months ended
-----------------------------
Nov. 30, 1997 Nov. 30, 1996
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 109,064 $ 28,128
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 51,579 61,241
Stock warrants issued for professional
services 471 -
Changes in operating assets and liabilities:
Accounts receivable 17,828 (104,229)
Inventories (52,364) 34,725
Other current assets 3,030 3,469
Income taxes 5,000 (24,000)
Accounts payable and accrued
expenses 25,780 108,528
--------- ---------
Net cash provided by
operating activities 160,388 107,862
CASH FLOWS FROM INVESTING ACTIVITIES
AND OTHER:
Net purchase of equipment,
furniture and improvements (114,281) (25,645)
Other assets 7,351 (11,142)
--------- ---------
Net cash used in investing
activities and other (106,930) (36,787)
CASH FLOWS FROM FINANCING ACTIVITIES:
Additions to debt obligations 22,250 -
Reduction of notes payable and debt
obligations (12,166) (26,878)
Issuance of common stock and
warrants - 2,580
--------- ---------
Net cash provided by (used in)
financing activities 10,084 (24,298)
CASH AND EQUIVALENTS:
Net increase during period 63,542 46,777
Balances, beginning of period 160,075 556,745
--------- ---------
Balances, end of period $ 223,617 $ 603,522
========= =========
</TABLE>
SUPPLEMENTAL SCHEDULE OF NONCASH
TRANSACTIONS:
Equipment acquired under capitalized leases $- $29,726
See notes to unaudited condensed consolidated financial statements.
- 5 -
<PAGE>
INTERNATIONAL ELECTRONICS, INC.
-------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(unaudited)
A. Financial Statements:
---------------------
In the opinion of the Company, the unaudited condensed consolidated financial
statements contain all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the financial position as of
November 30, 1997 and the results of operations for the three months then
ended.
Certain disclosures normally included have been condensed or omitted pursuant
to the rules and regulations of the Securities and Exchange Commission,
although the Company believes the disclosures are adequate to make the
information presented not misleading. It is suggested that these financial
statements be read in conjunction with the financial statements and notes
thereto included in the Company's annual report on Form 10-KSB for the year
ended August 31, 1997.
B. Net Income per Share:
---------------------
Net income per share is based on the weighted average common and dilutive
common equivalent shares outstanding during the period. Common equivalent
shares consist of stock options and warrants. Primary income per share is
computed by dividing net income by the weighted average number of common and
common equivalent shares outstanding based on the average market price of the
Company's common stock (under the treasury stock method). Income per share,
on a fully diluted basis, is computed as described above utilizing the higher
of the ending or average market price of the Company's common stock. Primary
and fully diluted income per share are the same for the periods presented.
C. Principles of Consolidation:
----------------------------
The accompanying condensed consolidated financial statements include the
accounts of the Company, its majority owned subsidiary, Ecco Industries, Inc.
and its wholly owned subsidiary, International Electronics Europe Limited.
All material intercompany transactions, balances and profits have been
eliminated.
D. Income Taxes:
-------------
The Company provides for income taxes at the end of each interim period based
on the estimated effective tax rate for the full fiscal year. Cumulative
adjustments to the tax provision are recorded in the interim period in which
a change in the estimated annual effective rate is determined.
- 6 -
<PAGE>
INTERNATIONAL ELECTRONICS, INC.
-------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(continued)
(unaudited)
E. Long-term Obligations:
----------------------
Long-term obligations are summarized as follows:
<TABLE>
<CAPTION>
Nov. 30, 1997 Aug. 31, 1997
------------- -------------
<S> <C> <C>
7-18% capitalized lease obligations,
due through April, 2001 (Note G) $51,954 $60,627
Other 14,000 14,000
Equipment line of credit, 8.5% (Note F) 22,323 24,352
8-13% equipment loans, collateralized
by equipment, final payment due
Nov., 2001 26,388 5,602
------ -----
114,665 104,581
Less current portion (40,947) (36,212)
------- -------
$73,718 $68,369
======= =======
</TABLE>
The aggregate principal payments on long-term obligations, excluding capital
leases are $22,177 (1998), $22,439 (1999), $11,854 (2000), and $6,241 (2001).
F. Bank Arrangements:
-----------------
In February 1997, the Company established a bank working capital demand line
of credit with borrowings up to $1,000,000 and a $250,000 equipment line of
credit. Available borrowings under the working capital line are based on a
percentage of eligible accounts receivable and inventory. Both lines of
credit are at the bank's prime rate of interest and all of the Company's
assets are collateralized under these arrangements. The credit agreements
contain certain restrictive covenants including covenants limiting the
payment of dividends, and a required minimum current ratio and debt to
tangible net worth ratio. As of November 30, 1997, no borrowings have been
made under the working capital line of credit and the Company has $22,323 in
borrowings under the equipment line of credit at an interest rate of 8.5%
which is payable in monthly installments through August 2000.
- 7 -
<PAGE>
INTERNATIONAL ELECTRONICS, INC.
-------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(continued)
(unaudited)
G. Capital Lease Commitments:
--------------------------
The Company leases certain equipment under capital leases and, accordingly,
the present value of the net minimum payments has been reflected in
equipment, furniture and improvements and capitalized lease obligations.
Future minimum capital lease payments under non-cancelable lease terms in
excess of one year at November 30, 1997 are as follows:
<TABLE>
<CAPTION>
<S> <C>
1998 $ 24,486
1999 22,355
2000 10,584
2001 4,230
--------
Total minimum lease payments 61,655
Less interest (9,701)
--------
Net minimum lease payments 51,954
Less current portion (18,770)
--------
Long-term portion $ 33,184
========
</TABLE>
- 8 -
<PAGE>
Management's Discussion and Analysis of
----------------------------------------
Financial Condition and Results of Operations
---------------------------------------------
Liquidity and Capital Resources
- -------------------------------
As of November 30, 1997, the Company had working capital of $860,186 compared to
$800,653 at August 31, 1997. The ratio of current assets to current liabilities
was 1.5 at both November 30, 1997 and August 31, 1997. The debt to equity ratio
was 1.2 at both November 30, 1997 and August 31, 1997. The increase in working
capital is primarily the result of the Company's operating cash flow, offset in
part by the purchase of fixed assets for the first quarter of fiscal 1998.
Net capital expenditures were $114,281 and $55,371 for the three months ended
November 30, 1997 and 1996, respectively. The Company has no current commitments
for any material capital expenditures, but the Company anticipates up to
$400,000 in capital expenditures for the purchase of office and manufacturing
equipment, regulatory testing and tooling costs over the next twelve months.
Management believes that its current cash position, together with internally
generated funds at present sales levels and its available bank financing, will
provide adequate cash reserves to satisfy its cash requirements for the next
twelve months. Depending upon whether or not sufficient revenue and working
capital is generated from profitable operations, the Company may require
additional external funding. There is no assurance that profits will be
generated, or that additional external funding will be obtainable, if such a
need should arise.
Results of Operations
- ---------------------
Net sales for the first quarter of fiscal 1998 increased 3% as compared to the
first quarter of fiscal 1997. The increase in sales for the first quarter of
fiscal 1998 primarily reflects increases in access control and keypad sales,
offset in part by a reduction in glassbreak detector sales.
The ratios of gross profit to sales for the three months ended November 30, 1997
and 1996 were 45% and 40%, respectively. The increase is primarily the result of
product mix, lower product costs and the settlement for $75,000 of an agreement
with a customer who failed to purchase certain minimum quantities of the
Company's products.
Research and development expenses were $102,723 and $114,118 for the three
months ended November 30, 1997 and 1996, respectively. The decrease in costs is
primarily due to lower personnel and related costs.
As a percentage of net sales, selling, general and administrative expenses were
34% and 33% for the three months ended November 30, 1997 and 1996, respectively.
The provision for income taxes for the first quarter of fiscal 1998 represents
foreign, federal alternative minimum taxes and state income tax expense. The
Company's effective income tax rate for the three months ended November 30, 1997
of 29% was less than the combined federal and state statutory income tax rates,
primarily as a result of the utilization of available net operating loss
carryforwards.
- 9 -
<PAGE>
Management's Discussion and Analysis of
---------------------------------------
Financial Condition and Results of Operations
---------------------------------------------
(continued)
New Accounting Pronouncements
Statement of Financial Accounting Standards ("SFAS") SFAS No. 128, "Earnings per
Share" will be effective commencing with the Company's second quarter in fiscal
1998. The Company believes there will be no material impact upon adoption of
SFAS No. 128 on its reported net income per share.
SFAS No. 129, "Disclosure of Information about Capital Structure" will be
effective commencing with the Company's second quarter in fiscal 1998. SFAS No.
130, "Reporting Comprehensive Income" will be effective for fiscal years
beginning after December 15, 1997. SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information" is effective for periods beginning after
December 15, 1997. The Company has not determined the effects, if any, that SFAS
Nos. 129, 130 and 131 will have on its consolidated financial statements and
disclosures.
Factors that May Affect Future Results
Information provided by the Company in writing and orally, from time to time may
contain certain "forward-looking" information as this term is defined by: (1)
the Private Securities Litigation Reform Act of 1995 (the "Act") and (2) in
releases made by the Securities and Exchange Commission. These Cautionary
Statements are being made pursuant to the provisions of the Act and with the
intention of obtaining the benefits of the "safe harbor" provisions of the Act.
The Company cautions investors that any forward-looking statements made by the
Company involve risks and uncertainties, which could cause actual results to
differ materially from those projected.
The Company has identified certain risks and uncertainties as factors which may
impact on its operating results that are detailed below. All of these factors
are difficult for the Company to forecast, and these or other factors can
materially adversely affect the Company's business and operating results for one
quarter or a series of quarters.
Limited Financial Resources and Losses from Operations. The Company has limited
financial resources. It is therefore subject to all the risks generally
associated with a small business having limited financial resources. The Company
experienced a loss of approximately ($231,000) for the year ended August 31,
1995. For the years ended August 31, 1996, 1997 and three months ended November
30, 1997, the Company had net income of approximately $162,000, $70,000 and
$109,000, respectively. There can be no assurance that the Company will continue
profitable operations. Continued operations after the expenditure of the
Company's existing cash reserves may require additional working capital to be
generated by profitable operations or use of the bank lines of credit and/or
additional financing. There can be no assurance that profits will continue or
that additional external funding will be obtainable, if such a need should
arise.
- 10 -
<PAGE>
Management's Discussion and Analysis of
----------------------------------------
Financial Condition and Results of Operations
---------------------------------------------
(continued)
Dependence on Key Employees. The business of the Company is dependent upon the
efforts of John Waldstein and certain other key management and technical
employees. The loss or prolonged disability of such personnel could have a
significant adverse effect on the business of the Company. The Company
presently maintains a key man life insurance policy of $1,000,000 on John
Waldstein, President and Treasurer.
Limited Design Engineering Staff. The Company is engaged in an industry which,
as a result of extensive research and development, introduces new products on a
regular basis. Current competitors or new market entrants may develop new
products with features that could adversely affect the competitive position of
the Company's products. There can be no assurance that the Company will be
successful in selecting, developing, manufacturing and marketing new products or
enhancing its existing products or that the Company will be able to respond
effectively to technological changes or product announcements by competitors.
Any failure or delay in these goals could have a material adverse effect on the
Company.
Fluctuations in Sales and Operating Results. The quarterly growth rates recently
experienced by the Company are not necessarily indicative of future quarterly
growth rates. Operating results may also fluctuate due to factors such as the
timing of new product announcements and introductions by the Company, its major
customers and its competitors, market acceptance of new or enhanced versions of
the Company's products, changes in the product mix of sales, changes in the
relative proportions of sales among distribution channels or among customers
within each distribution channel, changes in manufacturing costs, competitive
pricing pressures, the gain or loss of significant customers, increased research
and development expenses associated with new product introductions and general
economic conditions. A limited number of customers have accounted for a
significant portion of sales in any particular quarter. In addition, the Company
typically operates with a relatively small backlog. As a result, quarterly sales
and operating results generally depend on the volume, timing of, and ability to
fulfill orders received within the quarter which are difficult to forecast. In
this regard, the Company may recognize a substantial portion of its sales in a
given quarter from sales booked and shipped in the last weeks of that quarter. A
delay in customer orders, resulting in a shift of product shipment from one
quarter to another, could have a significant effect on the Company's operating
results. In addition, competitive pressure on pricing in a given quarter could
adversely affect the Company's operating results, or such price pressure over an
extended period could adversely affect the Company's long-term profitability.
The Company establishes its expenditure levels for sales and marketing and other
expenses based, in large part, on its expected future results. As a result, if
sales fall below expectations, there would likely be a material adverse effect
on operating results because only a small portion of the Company's expenses vary
with its sales in the short-term.
- 11 -
<PAGE>
Management's Discussion and Analysis of
----------------------------------------
Financial Condition and Results of Operations
---------------------------------------------
(continued)
Concentration of Customers. Although the Company has a substantial number of
customers, a significant portion of the Company's sales are to a small number of
large customers. This concentration of customers may cause net sales and
operating results to fluctuate from quarter to quarter based on major customers'
requirements and the timing of their orders and shipments. Sales to the
Company's largest customer accounted for approximately 36% of the Company's
total net sales for the fiscal year ended August 31, 1997. The Company's
agreements with its customers generally do not include minimum purchase
requirements. There can be no assurance that the Company's major customers will
place additional orders, or that the Company will obtain orders of similar
magnitude from other customers. The Company's operating results could be
materially and adversely affected if any present or future major customer were
to choose to reduce its level of orders, were to experience financial,
operational or other difficulties that resulted in such a reduction in orders to
the Company or were to delay paying or fail to pay the Company's receivables
from such customer. In fiscal 1995, the Company lost a major domestic
distributor who filed for bankruptcy with accounts receivable due the Company of
approximately $80,000.
Competition. Other companies in the industry offer products in competition with
those of the Company. Many of the companies with which the Company competes are
substantially larger, have greater resources and market a larger line of
products. The Company expects competition to increase significantly in the
future from existing competitors and new companies that may enter the Company's
existing or future markets. Increased competition could adversely affect the
Company's sales and profitability. There can be no assurance that the Company
will be able to continue to compete successfully with its existing competitors
or with new competitors.
Lack of Patent Protection. Although the Company has obtained some patent and
copyright protection for certain of its products and software, management
believes that competitors may be able to market certain products similar to
those sold by the Company.
Production in Asia. The Company presently maintains certain manufacturing molds
in Asia and has a significant amount of components for some products
manufactured in Asia. There can be no assurance that the Asian political or
economic environment will remain sufficiently stable to allow reliable and
consistent delivery of product.
Dependence on Single Source of Supply. The Company is dependent upon sole source
suppliers for a number of key components and parts used in the Company's
products. There can be no assurance that these suppliers will be able to meet
the Company's future requirements for such components or that the components
will be available to the Company at favorable prices. Any extended interruption
in the supply or significant increase in price of any such components could have
a material adverse effect on the Company's operating results in any given
period.
Foreign Sales. During the year ended August 31, 1997, the Company's foreign
sales represented approximately 16% of net sales. There may be a reduction in
the Company's foreign sales in the event of significant changes in foreign
exchange rates or political and economic instability in foreign countries.
- 12 -
<PAGE>
Management's Discussion and Analysis of
----------------------------------------
Financial Condition and Results of Operations
---------------------------------------------
(continued)
Limited Market for Common Stock. There is a limited market for the Company's
common stock and there can be no assurance that even this limited market will be
sustained. Holders of the Company's common stock may have difficulty selling
their shares or may have difficulty selling them at a favorable price.
Maintain Listing on NASDAQ. In March 1992, the NASD changed its standards for a
company's stock to maintain its listing on NASDAQ. The revised standards
included maintaining a minimum bid price of $1.00 per share for ten consecutive
trading days and shareholders' equity with a minimum balance of $1,000,000.
Although the Company has maintained its NASDAQ listing, the Company has, at
times, been unable to maintain the $1.00 minimum bid price criteria.
In February, 1997, the NASD adopted new more stringent standards for a company
to maintain its stock listing on NASDAQ. The new standards may result in the
Company's common stock losing its listing on NASDAQ. The final standards will be
effective on February 23, 1998.
One of the newly adopted standards includes maintaining minimum net tangible
shareholders' equity of $2,000,000. As of November 30, 1997, the Company had net
tangible shareholders' equity of approximately $1,247,000. The Company does not
presently meet the standard and, unless the Company increases its net tangible
shareholders' equity to $2,000,000, the Company's common stock will no longer be
listed on NASDAQ. If the Company is unable to maintain its listing on NASDAQ,
holders of the Company's common stock may have additional difficulty selling
their shares at a favorable price.
Volatility of Stock Price. The Company's stock price is subject to significant
volatility. If revenues or earnings in any quarter fail to meet the investment
community's expectations, announcements of new products by the Company or its
competitors and other events or factors could have an immediate impact on the
Company's stock price. The stock price may also be affected by broader market
trends unrelated to the Company's performance.
- 13 -
<PAGE>
Part II. Other Information
- ---------------------------
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
(11.1) Calculation of Net Income Per Share
(27) Financial Data Schedule
(b) There were no reports on Form 8-K filed for the
three months ended November 30, 1997.
SIGNATURE
---------
Pursuant to the requirements of the Exchange Act, the Registrant has duly caused
this report to be signed on its behalf by the undersigned, who is duly
authorized to sign and is Chief Financial and Accounting Officer.
International Electronics, Inc.
Date: 1/13/98 /s/ John Waldstein
-------- ------------------------------------------
John Waldstein, President,
Treasurer & Chief Financial and Accounting
Officer and duly authorized to sign.
- 14 -
<PAGE>
Exhibit 11.1
International Electronics, Inc.
Calculation of Net Income Per Share
(unaudited)
<TABLE>
<CAPTION>
PRIMARY NET INCOME PER SHARE
- ----------------------------
Weighted average common and Three months ended
------------------
equivalent shares: Nov. 30, 1997 Nov. 30, 1996
------------- -------------
<S> <C> <C>
Common stock 1,493,301 1,492,469
Common equivalent shares
resulting from dilutive stock
options and warrants (treasury
stock method using the average
market price) 93,752 228,425
--------- ---------
Total 1,587,053 1,720,894
========= =========
Net income $109,064 $28,128
========= =========
Net income per share $.07 $.02
========= =========
<CAPTION>
FULLY DILUTED NET INCOME PER SHARE
- ----------------------------------
<S> <C> <C>
Weighted average common and
equivalent shares:
Common stock 1,493,301 1,492,469
Common equivalent shares
resulting from dilutive stock
options and warrants (treasury
stock method using the higher
of the ending or average
market price) 99,128 247,901
--------- ---------
Total 1,592,429 1,740,370
========= =========
Net income $109,064 $28,128
========= =========
Net income per share $.07 $.02
========= =========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENT OF FINANCIAL CONDITION AT NOVEMBER
30, 1997 (UNAUDITED) AND THE RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED
NOVEMBER 30,1997 (UNAUDITED) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> SEP-01-1997
<PERIOD-END> NOV-30-1997
<CASH> 223,617
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 1,130,925
<CURRENT-ASSETS> 2,502,554
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,176,572
<CURRENT-LIABILITIES> 1,642,368
<BONDS> 73,718
0
0
<COMMON> 15,283
<OTHER-SE> 1,445,203
<TOTAL-LIABILITY-AND-EQUITY> 3,176,572
<SALES> 2,360,932
<TOTAL-REVENUES> 2,361,975
<CGS> 1,297,351
<TOTAL-COSTS> 1,297,351
<OTHER-EXPENSES> 102,723
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,136
<INCOME-PRETAX> 153,064
<INCOME-TAX> 44,000
<INCOME-CONTINUING> 109,064
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 109,064
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
