HALIFAX CORPORATION
FORM 10-Q
JUNE 30, 1999
<PAGE>
FORM 10Q -- QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(As last amended in Rel. No. 312905 eff. 4/26/93.)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
( X) Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 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 0-12712 1-8964
Halifax Corporation
(Exact name of registrant as specified in its charter)
Virginia 54-0829246
(State or other jurisdiction of
incorporation of organization) (IRS Employer Identification No.)
5250 Cherokee Avenue, Alexandria, VA 22312
(Address of principal executive offices)
Registrant's telephone number, including area code (703) 750-2202
N/A
(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 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
APPLICABLE ONLY TO ISSUERS INVOLVED
IN BANKRUPTCY PROCEEDINGS DURING
THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. 2,013,406 as of September
9, 1999
HALIFAX CORPORATION
CONTENTS
PART I. FINANCIAL INFORMATION
page
Item 1.Financial Statements
Condensed Consolidated Balance Sheets - June 30, 1999
(Unaudited) and March 31, 1999 3
Condensed Consolidated Statements of Operations -
Three Months Ended June 30, 1999 and 1998 (Unaudited) 4
Condensed Consolidated Statements of Cash Flows -
Three Months Ended June 30, 1999 and 1998 (Unaudited) 5
Notes to Condensed Consolidated Financial Statements
(Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II OTHER INFORMATION
Item 6.
Exhibits and Reports on Form 8-K 13
Item 1. FINANCIAL STATEMENTS
<TABLE>
HALIFAX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 1999 AND MARCH 31, 1999
<CAPTION>
June 30, March 31,
1999 1999*
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 112,000 $ 0
Accounts receivable 23,207,000 26,648,000
Inventory 4,227,000 3,949,000
Prepaid expenses and other current
assets 1,343,000 1,377,000
TOTAL CURRENT ASSETS 28,889,000 31,974,000
PROPERTY AND EQUIPMENT, at cost less
accumulated 2,234,000 2,230,000
depreciation and amortization
OTHER ASSETS AND GOODWILL, net of
accumulated amortization
4,428,000 4,531,000
TOTAL ASSETS $ 35,551,000 $38,735,000
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued $ 21,206,000 $23,518,000
expenses
Current portion of long-term debt
5,820,000 7,720,000
TOTAL CURRENT LIABILITIES 27,026,000 31,238,000
LONG-TERM DEBT AND OTHER LIABILITIES
14,047,000 13,135,000
TOTAL LIABILITIES 41,073,000 44,373,000
STOCKHOLDERS' EQUITY
Common stock 545,000 545,000
Additional paid-in capital 4,413,000 4,413,000
Retained earnings
(10,268,000) (10,384,000)
(5,310,000) (5,426,000)
Less treasury stock at cost
212,000 212,000
TOTAL STOCKHOLDERS' EQUITY
(5,522,000) (5,638,000)
TOTAL LIABILITIES AND STOCKHOLDERS' $ 35,551,000 $ 38,735,000
EQUITY
*Condensed from March 31, 1999 Audited Financial Statements. See
Form 10-K filed September 8, 1999.
See notes to Condensed Consolidated Financial Statements.
</TABLE>
<TABLE>
HALIFAX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
<CAPTION>
Three Months Ended
June 30
Restated
1999 1998
<S> <C> <C>
Revenues $ 20,970,000 $ 16,163,000
Operating costs and expenses:
Cost of services 19,394,000 15,519,000
General and administrative
1,007,000 865,000
Total operating costs and
expenses 20,401,000 16,384,000
Operating income (loss) 569,000 (221,000)
Interest expense 453,000 355,000
Embezzlement Loss
- 1,798,000
Income (loss) before income taxes 116,000 (2,374,000)
Income tax (benefit)
46,000 (34,000)
Utilization of net loss
carryforward (46,000) -
Income tax (benefit)
- (34,000)
Net earnings (loss) $ 116,000 $(2,340,000)
Net earnings (loss) per common
share -basic $ .06 $ (1.16)
Net earnings (loss) per common
share - diluted $ .06 $ (1.16)
Weighted average number of common
shares
outstanding - basic 2,013,406 2,010,597
Weighted average number of common
shares
outstanding - diluted 2,013,406 2,010,597
See notes to Condensed Consolidated Financial Statements.
</TABLE>
<TABLE>
HALIFAX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED)
<CAPTION>
Three Months Ended
June 30
Restated
1999 1998
<S> <C> <C>
Cash flows from operating
activities:
Net income (loss) $ 116,000 $(2,340,000)
Adjustments to reconcile net income
to net
cash provided (used) by operating
activities:
Depreciation and amortization 241,000 296,000
Decrease in accounts receivable 3,441,000 538,000
(Increase) in inventory (278,000) (274,000)
Decrease (increase) in other 73,000 (397,000)
assets
(Decrease) increase in accounts
payable and
accrued expenses
(270,000) 252,000
Total adjustments
3,207,000 415,000
Net cash provided (used) by
operating activities 3,323,000 (1,925,000)
Cash flows from investing
activities:
Acquisition of property and
equipment, net of
purchased operations (181,000) (169,000)
Net cash used in investing
activities (181,000) (169,000)
Cash flows from financing
activities:
Proceeds from borrowing of long- 13,680,000 24,331,000
term debt
Retirement of long-term debt (16,710,000) (22,140,000)
Cash dividends paid - (101,000)
Proceeds from sale of stock upon
exercise of stock options - 4,000
Net cash provided (used) by
financing activities (3,030,000) 2,094,000
Net increase in cash 112,000 0
Cash at beginning of period
0 0
Cash at end of period $ 112,000 $ 0
See notes to Condensed Consolidated
Financial Statements.
</TABLE>
Halifax Corporation
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1 - Basis of Presentation
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally
accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted
accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the three month
period ended June 30, 1999 are not necessarily indicative of the
results that may be expected for the year ending March 31, 2000.
For further information refer to the consolidated financial
statements and footnotes thereto included in the Halifax
Corporation Annual Report on Form 10-K for the year ended March
31, 1999.
Note 2 - Embezzlement Matter and Restatement of Consolidated
Financial Statements
On March 18, 1999, the Company announced that an internal
investigation had revealed an apparent material embezzlement by
the former controller of one of the Company's subsidiaries. The
embezzlement occurred at, and was confined to, the Company's
Richmond, VA based Halifax Technology Services Company ("HTSC").
At the time of the embezzlement, HTSC was a wholly owned
subsidiary of Halifax Corporation, which resulted from a merger
of CMSA (acquired by Halifax on April 1, 1996), and CCI (acquired
by Halifax on November 25, 1996). On April 1, 1999, HTSC was
merged into Halifax Corporation and is now a division of the
Company.
The Company believes that a single individual, the former
controller of HTSC, perpetrated the embezzlement. She was
immediately terminated, has since been indicted, has pleaded
guilty, and currently awaits sentencing. Under the terms of an
agreement entered into with the Company, she is cooperating with
the Company's recovery efforts.
The embezzlement occurred over a period of nearly four years and
aggregated approximately $15.4 million, of which $15 million was
embezzled from the Company and $400,000 from CMSA before it was
acquired by Halifax. To conceal the embezzlement in the
accounting records, the former controller made fraudulent
adjustments totaling more than $21 million. Of the $21 million,
the $15.0 million embezzled was recorded in the Company's
statements of operations and balance sheets after the
acquisition, approximately $2.2 million related to amounts
reflected in the acquisition date balance sheet, and
approximately $3.8 million related to other overstatements of
operating results during the three year period subsequent to the
CMSA acquisition.
Under the terms of an agreement with the Company, the embezzler
has transferred certain assets back to the Company. Some of the
recovered assets have been converted into approximately $1.4
million in cash as of August 31, 1999. With an estimated $1.1
million of assets awaiting conversion to cash, the Company
estimates approximately $2.5 million will ultimately be recovered
from the embezzler. In addition, the full policy amount of $1
million from each of two separate theft insurance polices, or an
aggregate of $2 million, has been received to date.
Therefore, from these sources, the Company expects a total
recovery of $4.5 million (excluding recovery costs) . The
Company estimates that, net of recovery costs, approximately $3.5
million will be recovered. At March 31, 1999, the Company had received
approximately $670,000 from its recovery efforts and recorded a
$2.83 million recovery receivable to recognize its expectation
of receiving the estimated $3.5 million of total net recoveries.
Due to the corresponding overstatement of taxable income,
reported by the Company during the period of the embezzlement,
the Company will file for a tax refund of approximately $808,000.
The receivable is recorded in "Income Taxes Receivable" in the
consolidated financial statements.
The embezzlement had a material effect on the Company's financial
statements for fiscal years 1999, 1998 and 1997. In addition to
the correction for overstated assets and understated liabilities,
the Company recorded an embezzlement loss of approximately
$2,593,000, $6,044,000 and $2,892,000 for the fiscal years ended
March 31, 1999, 1998 and 1997, respectively. The embezzlement
loss recorded in fiscal 1999 is net of the actual and projected
net recoveries aggregating $3,500,000.
In addition to the notification and involvement of the
appropriate authorities, and the intensive and ongoing
investigative efforts, the Company has taken other important
steps as a result of the embezzlement. The Board of Directors
appointed a special committee of the Board to focus on the
recovery of assets taken from the Company and minimization of the
damages sustained as a result of the embezzlement.
The employment contract of the HTSC president was not renewed,
and he is no longer employed by the Company. Furthermore, new
executives have been hired to manage the technology services
division and to consolidate the Company's financial and
administrative activities. The Company has also transferred key
accounting and cash management functions of HTSC to Company
headquarters.
The Company's financial statements for the three months ended
June 30, 1998 have been restated to reflect corrections due to
the embezzlement. The effect of the restatement on results of
operations for the three months ended June 30, 1998 is as
follows:
<TABLE>
<CAPTION>
Three Months Ended
June 30, 1998
Previously
Statement of Operations: Reported Restated
<S> <C> <C>
Revenues $ 17,264,000 $ 16,163,000
Cost of services 15,323,000 15,519,000
G&A expenses
1,306,000 865,000
Operating income 635,000 (221,000)
Interest expense 355,000 355,000
Embezzlement loss
- (1,798,000)
Income (loss) before taxes 280,000 (2,374,000)
Income taxes
129,000 (34,000)
Net income (loss) $ 151,000 $ (2,340,000)
Net income (loss) per share- $ .08 $ (1.16)
basic
Net income (loss) per share- $ .07 $ (1.16)
diluted
</TABLE>
Note 3 - Subsequent Event
The Company signed a new banking agreement on September 1, 1999
which refinances the Company's bank debt as presented at March
31, 1999. The new debt continues to consist of a revolving line
of credit ($12,000,000 revised facility) and two term loans
($1,000,000 and $2,500,000 revised facilities), however the
principal reduction and interest rate provisions of the term
loans have been revised. Standard closing and unused balance
fees are included. The revised facilities make $15,500,000 of
credit available to the Company. This agreement expires on
September 8, 2000. All assets of the Company remain as
collateral in accordance with the prior agreement. Financial
covenants have been revised to require only prospective
operational performance objectives including minimum quarterly
net income of $100,000 beginning September 30, 1999 and
quarterly increases in tangible net worth of $150,000.
The new agreement prohibits the payment of dividends or
distributions as well as the payment of principal or interest on
Subordinated Debt. Interest expense on Subordinated Debt is
accrued on a current basis.
In connection with the new banking agreement, the revolving
credit agreement was reduced from a maximum credit line of
$14,500,000 to $12,000,000. Amounts available are determined by
applying stated percentages to the Company's eligible billed and
unbilled accounts receivable. Interest now accrues at LIBOR plus
4.25%.
The Tier III Term Note principal balance was reduced by $125,000
at closing which reduced the outstanding principal balance on
that date to $1,000,000. Interest is payable monthly on the
principal at LIBOR plus 5.55%.
The Tier II Term Note facility remains $2,500,000. The principal
balance is to be reduced by $125,000 on December 15, 1999 and by
$500,000 quarterly beginning March 15, 2000. Any unpaid balance
is due September 15, 2000. Interest is payable monthly on the
principal at LIBOR plus 4.65%.
The Company is required to make certain additional term note
balance reductions from the future proceeds of various
embezzlement recoveries, tax refunds and potential asset sales if
any. In addition the Company is required to pay quarterly fees
on outstanding term note credit facilities. Such fees will range
from .35% to .45%.
In addition, on September 2, 1999, the Company entered into an
agreement with a major supplier of digital communications switch
hardware for the Company's United States Army contract where
approximately $5,500,000 of outstanding accounts payable arising
since March 31, 1999 and currently due to the supplier will be
paid over 18 months with interest at 8.5%. $506,945 was paid on
September 2, 1999 and will be paid on October 1, 1999, $299,965
will be paid on the first day of the next ensuing 15 months and a
final payment of $299,974 is due on February 1, 2001. At June
30, 1999, $2,042,000 of amounts then outstanding are classified
as noncurrent obligations.
Note 4 - Tax Matters
The Company has a $12.5 million net operating loss carryover
virtually all of which expires in fiscal 2019. At June 30, 1999,
the balance sheet includes an $808,000 income tax receivable
which consists of net operating loss carryback refunds of
$682,000 and $126,000 of estimated tax payments made in fiscal
1999.
Note 5 - Earnings per Share
The following table sets forth the computation of basic and
diluted earnings per share.
<TABLE>
<CAPTION>
Three Months Ended
June 30,
1999 1998
<S> <C> <C>
Numerator:
Net earnings $ 116,000 $(2,340,000)
Numerator for basic earnings per
share -
income available to common $ 116,000 $(2,340,000)
stockholders
Numerator for diluted earnings
per share -
income available to common
stockholders
after assumed conversions $ 116,000 $ 2,340,000)
Denominator:
Denominator for basic earnings
per share -
weighted-average shares 2,013,406 2,010,597
Effect of dilutive securities:
Employee stock options - -
Contingent stock-acquisition - -
7% Convertible Subordinated
Debenture - -
Dilutive potential common shares
Denominator for diluted earnings
per
share - adjusted weighted-
average
shares and assumed
conversions 2,013,406 2,010,597
Basic earnings per share $ .06 $ (1.16)
Diluted earnings per share $ $
.06 (1.16)
</TABLE>
Note 6 - Selected Financial Date by Business Seqment
The Company operates in two principal business segments:
technology services and facilities management.
<TABLE>
<CAPTION>
3 Months Ended June
30,
Restated
Selected Financial Data by 1999 1998
Business Segment
<S> <C> <C>
Net Sales
Technology Services $ 15,514 $ 12,470
Facilities Management 5,456 3,693
$ 20,970 $ 16,163
Operating Income (Loss)
Technology Services $ 510 $ (366)
Facilities Management 59 145
$ 569 $ (221)
</TABLE>
Technology Services sales for the quarter ended June 30,
1999 increased over 1998 as a result of increased levels of
business generally. Facilities Management sales increased
due to the HUD contract being fully ramped up in 1999.
Technology Services operating income increased because of
the increased level of sales and improved product mix.
Item 2
Management's Discussion and Analysis
of Financial Conditions and
Results of Operations
Forward-Looking Statements
Certain statements in this Annual 10-Q Report constitute "forward-
looking statements" within the meaning of the United States
Private Securities Litigation Reform Act of 1995. Such forward-
looking statements involve known and unknown risks, uncertainties
and other factors which may cause the actual results, performance
or achievements of the Company, or industry results, to be
materially different from any future results, performance, or
achievements expressed or implied by such forward-looking
statements. Such factors include, among others, the following:
general economic and business conditions in the Company's market
area, inflation, continuation of favorable banking arrangements,
the availability of capital to finance planned growth,
ramifications of the embezzlement referenced herein, changes in
government regulations, availability of skilled personnel and
competition, which may, among other things impact on the ability
of the Company to implement its business strategy.
Forward-looking statements are intended to apply only at the time
they are made. Moreover, whether or not stated in connection
with a forward-looking statement, the Company undertakes no
obligation to correct or update a forward-looking statement
should the Company later become aware that it is not likely to be
achieved. If the Company were to update or correct a forward-
looking statement, investors and others should not conclude that
the Company will make additional updates or corrections
thereafter.
The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto. (Tabular
information: dollars in thousands, except per share amounts).
<TABLE>
<CAPTION>
Three Months Ended June 30,
Restated
Results of Operations 1999 Change 1998
<S> <C> <C> <C>
Revenues $ 20,970 30% $ 16,163
Cost of services 19,394 25% 15,519
Percent of revenues 92% 96%
General & Administrative 1,007 16% 865
Percent of revenues 5% 5%
Operating cost and expenses: 20,401 24% 16,384
Percent of revenues 97% 101%
Three Months Ended June 30,
Restated
Results of Operations - 1999 Change 1998
Cont'd
Operating (loss) income 569 N/A (221)
Percent of revenues 3% (1%)
Interest expense 453 28% 355
Embezzlement (loss) - N/A 1,798
Income tax (benefit) expense - N/A (34)
Net income (loss) $ 116 N/A $ (2,340)
Net income (loss) per share - $ .06 $ (1.16)
basic
Net income (loss) per share - $ .06 $ (1.16)
diluted
</TABLE>
Revenues
Revenues for the three months ended June 30, 1999 increased
by 30% over the quarter ended June 30, 1998 principally as a
result of increased levels of information technology
services business.
Operating Costs and Expenses
Operating costs and expenses for the quarter ended June 30,
1999 increased by 24% over the comparable period in 1998
primarily as a result of the increase in revenues.
Operating Income (Loss)
The increased level of revenue and improved product mix
resulted in operating income of $569,000 for the three
months ended June 30, 1999 as compared to an operating loss
of $221,000 for the same period in 1998.
Interest Expense
Interest expense increased 28% for the quarter ended June
30, 1999 as compared to the quarter ended June 30, 1998
principally due to increases in effective interest rates
paid by the Company.
Embezzlement Loss
Embezzlement losses reflect the cash amounts embezzled from
the Company. Embezzlement losses for the quarter ended June
30, 1998 were $1,798,000. There were no embezzlement losses
for the quarter ended June 30, 1999. For additional
discussion see Note 2 of the consolidated financial
statements.
Income Taxes
The Company did not incur a net income tax expense for the
three months ended June 30, 1999 because of application of
the net operating loss carryforwards. For the quarter ended
June 30, 1998, the Company recorded an income tax benefit of
$34,000.
Financial Condition, Liquidity and Capital Resources
At June 30, 1999, The Company's working capital balance was
$1,863,000 and its current ratio 1.07:1. The Company
believes that funds generated from operations, bank
borrowings, embezzlement recoveries, tax refunds and
investing activities should be sufficient to meet its
current operating requirements although there can be no
assurances that all the aforementioned sources of cash can
be realized.
Year 2000 Compliance
State of Readiness: During fiscal 1999 the Company undertook a
formal Year 2000 readiness project assessment of all information
technology assets to ensure the compliance of all applications,
operating systems and hardware on its PC desktop suites and LAN
and WAN server and communications platforms; the compliance of
voice and data network software and hardware; to address issues
related to non-IT systems in buildings, facilities and equipment
which may contain date logic in embedded chips; and to address
the compliance of key vendors and other third parties.
The phases of the Project are : (i) inventorying Year 2000 items
and assigning priorities, (ii) assessing the Year 2000 compliance
of items, (iii) remediating or replacing items that are
determined not to be Year 2000 compliant; (iv) testing items for
year 2000 compliance, and (v) designing and implementing Year
2000 contingency and business continuity plans. To determine
that all IT systems (whether internally developed or purchased)
are Year 2000 compliant, each system is tested using a standard
testing methodology which includes unit testing, baseline
testing, and future date testing. Future date testing includes
critical dates near the end of 1999 and into the year 2000,
including leap year testing.
The inventory and assessment phases of the Project were completed
in mid fiscal 1999. At March 31, 1999, all of the Company's
application systems had been remediated and current date tested.
Essentially all critical hardware and software was compliant and
tested by March 31, 1999. The remaining items will be resolved,
tested and remediated by October 1999.
The Company is addressing non-information technology systems
readiness through direct contact with our critical supplier chain
to validate Year 2000 readiness. As part of the Project,
significant service and information providers, external vendors,
suppliers, and other third parties (including telecommunication,
electrical, security, and HVAC systems), that are believed to be
critical to business operations after January 1, 2000, have been
identified and contacted. Procedures are being undertaken in an
attempt to reasonably ascertain their state of Year 2000
readiness through questionnaires, compliance letters, interviews,
on-site visits, and other available means. The Company paid
particular attention to suppliers and shippers of the product
comprising its hardware inventory.
Cost: The estimated total cost of the Year 2000 Project is
approximately $90,000, including $30,000 of internal labor costs
devoted to the project. Costs incurred to date are approximately
$72,000, with the remainder of the estimated total to be incurred
during the second quarter of FY 2000.
Risk: The Company believes that its Year 2000 readiness program
will prepare the Company for Year 2000 compliance in a timely
manner. There can be no assurance, however, that the Company's
internal systems or equipment or those external parties on which
the Company relies will be Year 2000 compliant in a timely manner
or that the Company's or external parties contingency plans will
mitigate the effects of any noncompliance. Given the current
status of the Company's year 2000 Project, management believes
that the most probable worst case scenario could result in short
term business interruptions. However, failure by the Company
and/or external parties to complete year 2000 readiness work in a
timely manner could have a materially adverse effect on the
Company's financial position and its results of operations.
Contingency Plans: The Company is developing a Year 2000
Contingency Plan designed to address problems arising from Year
2000 failures of critical third parties and will be directed
towards providing alternate sources of supply to the Company.
The Company expects to complete its contingency planning phase
for Year 2000 by November 1, 1999.
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - Not applicable
(b) Reports on Form 8-K - None
<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.
HALIFAX CORPORATION
(Registrant)
Date: September 9, 1999 By: s/John J. Reis
John J. Reis
President & CEO
Date: September 9, 1999 By: s/John D. D'Amore
John D. D'Amore
Principal Financial &
Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> 10Q-JUNE-1999
<MULTIPLIER> 1
<CURRENCY> 0
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-1-1999
<PERIOD-END> JUN-30-1999
<PERIOD-TYPE> 3-MOS
<EXCHANGE-RATE> 1
<CASH> 112,000
<SECURITIES> 0
<RECEIVABLES> 23,207,000
<ALLOWANCES> 0
<INVENTORY> 4,227,000
<CURRENT-ASSETS> 28,889,000
<PP&E> 2,234,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 35,551,000
<CURRENT-LIABILITIES> 27,026,000
<BONDS> 0
0
0
<COMMON> 545,000
<OTHER-SE> (6,067,000)
<TOTAL-LIABILITY-AND-EQUITY> 35,551,000
<SALES> 20,970,000
<TOTAL-REVENUES> 20,970,000
<CGS> 19,394,000
<TOTAL-COSTS> 20,461,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 453,000
<INCOME-PRETAX> 116,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 116,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 116,000
<EPS-BASIC> .06
<EPS-DILUTED> .06
</TABLE>
