<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended July 4, 1999, or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from __________ to ___________.
Commission File No. 0-13401
PHOENIX MEDICAL TECHNOLOGY, INC.
- --------------------------------------------------------------------------------
(exact name of registrant as specified in its charter)
Delaware 31-092-9195
- --------------------------------------------------------------------------------
State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
U.S. Hwy. 521 West, Andrews, South Carolina 29510
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(843) 221-5100
- -----------------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
- --------------------------------------------------------------------------------
(Former name, former address, and former fiscal year, if changed since last
report)
Applicable only to issuers involved in bankruptcy proceedings during the
preceding five years.
Check whether the Registrant has filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act of 1934 after the
distribution of securities under a plan confirmed by a court.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, without par value 2,459,621
-------------------------------
(Outstanding at August 10, 1999)
<PAGE> 2
PHOENIX MEDICAL TECHNOLOGY, INC.
CONDENSED BALANCE SHEET
JULY 4, 1999 AND DECEMBER 31, 1998
<TABLE>
<CAPTION>
July 4 December 31
1999 1998
------------ ------------
(unaudited) *
<S> <C> <C>
ASSETS
Current Assets
Cash $ 834 $ 8,916
Receivables 2,105,274 2,009,866
Inventories (Note 2) 1,911,105 1,768,519
Prepaid expenses 64,323 176,995
------------ ------------
Total current assets 4,081,536 3,964,296
Operating property, plant and equipment - at cost 12,259,645 11,903,470
Less accumulated depreciation (8,657,747) (8,530,237)
------------ ------------
Net operating property, plant and equipment 3,601,898 3,373,233
------------ ------------
Nonoperating equipment, net 686,111 584,102
Other assets, net 309,178 326,727
------------ ------------
Total assets $ 8,678,723 $ 8,248,358
============ ============
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current liabilities
Accounts payable and accrued expenses $ 2,074,743 $ 1,656,428
Revolving line of credit 2,005,893 3,064,105
Deferred Option payment (Note 4) 0 508,054
Current portion of long-term debt 319,367 638,500
------------ ------------
Total current liabilities 4,400,003 5,867,087
Long-term debt 3,479,364 1,537,896
Other liabilities 602,088 651,409
------------ ------------
Total liabilities 8,481,455 8,056,392
Shareholders' investment
Shares issued and outstanding:
2,459,621 shares 7/4/99 and 12/31/98 245,962 245,962
Paid-in capital 8,425,582 8,425,582
Deficit (8,474,276) (8,479,578)
------------ ------------
Total shareholders' investment 197,268 191,966
------------ ------------
Total liabilities and shareholders' investment
$ 8,678,723 $ 8,248,358
============ ============
</TABLE>
*Condensed from audited financial statements.
See accompanying notes to Unaudited Condensed Financial Statements.
2
<PAGE> 3
PHOENIX MEDICAL TECHNOLOGY, INC.
CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
July 4, 1999 June 28, 1998 July 4, 1999 June 28, 1998
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 3,744,905 $ 3,937,529 $ 7,193,541 $ 7,463,857
Operating expenses:
Cost of goods sold (3,344,361) (3,400,589) (6,304,059) (6,508,083)
Selling and administrative expense (383,188) (455,433) (820,393) (843,169)
- -----------------------------------------------------------------------------------------------------------------------
Income from operations 17,356 81,507 69,089 112,605
Other expense and income:
Interest expense, net (147,425) (160,422) (285,703) (310,366)
Miscellaneous income, net 376 1,334 36,582 3,004
Option Agreement income (Note 4) 508,054 -0- 508,054 -0-
Option Agreement expense (Note 4) (100,654) -0- (100,654) (27,581)
Loan processing fee expense (Note 5) (222,066) -0- (222,066) -0-
- -----------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 55,641 $ (77,581) $ 5,302 $ (222,338)
=======================================================================================================================
Basic income (loss) per share $ 0.02 $ (0.03) $ -0- $ (0.10)
Diluted income (loss) per share $ 0.02 $ (0.03) $ -0- $ (0.10)
=======================================================================================================================
</TABLE>
See accompanying Notes to unaudited Condensed Financial Statements
3
<PAGE> 4
PHOENIX MEDICAL TECHNOLOGY, INC.
CONDENSED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
----------------
July 4, 1999 June 28, 1998
------------ -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 5,302 $(222,338)
Adjustments to reconcile net income to
net cash (used in) provided by
operating activities:
Depreciation 127,510 121,291
Changes in assets and liabilities:
Increase in accounts receivable, net (95,408) (216,002)
Increase in inventories (142,586) (511,065)
Decrease in prepayments 12,018 15,406
(Increase) decrease in other assets (204,517) 20,313
Decrease in deferred financing costs 222,066 -0-
Decrease (increase) in deferred expenses 100,654 (97,678)
Increase in accounts payable and accrued
liabilities 368,994 515,717
(Decrease) increase in deferred option
payment (508,054) 508,054
----------- ---------
Net cash (used in) provided by operating
activities (114,021) 133,698
----------- ---------
Cash flows from investing activities:
Additions to property, plant and equipment, net (23,774) (53,210)
LIG funded property, plant and equipment (Note 4) (434,410) -0-
----------- ---------
Net cash used in investing activities: (458,184) (53,210)
Cash flows from financing activities:
Exercise of warrants -0- 15,501
(Decrease) increase in line of credit (1,058,212) 11,741
Increase (decrease) in long term debt 1,168,173 (145,145)
Increase in LIG equipment debt (Note 4) 454,162 -0-
----------- ---------
Net cash provided by (used in) financing activities 564,123 (117,903)
----------- ---------
Net decrease in cash (8,082) (37,415)
Cash at beginning of period 8,916 38,236
----------- ---------
Cash at end of period $ 834 $ 821
=========== =========
Cash paid during the period for interest $ 304,674 $ 285,229
=========== =========
Cash paid during the period for deferred
financing costs $ 229,750 $ -0-
(Cash paid during the period for Option Agreement $ -0- $ 166,743
=========== =========
</TABLE>
See accompanying Notes to Unaudited Condensed Financial Statements.
4
<PAGE> 5
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
1. General
The condensed financial statements included herein have been prepared
by the Registrant, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations. These unaudited condensed financial statements should be
read in conjunction with the annual financial statements and related notes
contained in the Registrant's Form 10-KSB for the year ended December 31, 1998.
In the opinion of management, the accompanying unaudited condensed
financial statements include all adjustments (consisting solely of normal
recurring adjustments) necessary for a fair presentation of the information
therein. Results of operations for interim periods should not be regarded as
necessarily indicative of the results to be expected for the full year.
2. Inventories
Inventories at July 4, 1999 and December 31, 1998 have been stated at
the lower of cost or market. Cost is determined for substantially all
inventories using the first-in, first-out (FIFO) method. The Registrant changed
to the FIFO from the LIFO (Last-in, first-out) method of inventory accounting in
the fourth quarter of 1996. This change has been applied by retroactively
restating the accompanying financial statements for that year. The accounting
change is further discussed in the Form 10-KSB for the year ending December 31,
1998.
<TABLE>
<CAPTION>
Jul 4, 1999 Dec 31, 1998
----------- ------------
<S> <C> <C>
Raw materials $ 419,357 $ 403,504
Finished goods 1,491,748 1,365,015
----------- -----------
$ 1,911,105 $ 1,768,519
=========== ===========
</TABLE>
3. Earnings
As of December 31, 1997, the Registrant adopted SFAS No. 128, "Earnings
per Share," effective December 15, 1997. As a result, the Registrant's reported
earnings per share for 1996 and 1995 were restated.
4. Other Relevant Events
On September 15, 1997, the Registrant announced that it had entered
into a letter of intent with London International Group, Ltd. ("LIG") with
respect to LIG's intent to purchase an option to acquire substantially all of
the assets of the Registrant and other related transactions. In the Letter of
Intent, LIG agreed
5
<PAGE> 6
to pay $500,000 as consideration for an option to purchase substantially all of
the Registrant's assets and assume certain stated liabilities, for a $6,821,708
cash purchase price, for a period of one year from the date of the definitive
Option Agreement. On December 22, 1997, the Registrant entered into the
Definitive Option Agreement with LIG, which, in addition to the transactions
stated above, included a Loan and Security Agreement, a Research and Development
Agreement and a Supply Agreement. This Agreement was subject to approval of
Phoenix Stockholders. On April 28, 1998, the Registrant's stockholders approved
the Option Agreement with LIG. In conjunction with the approval, on April 29,
1998, the Registrant received the $500,000 Option Payment which was deferred
until the Option expired on April 28, 1999. Second and third quarter 1998
expenses related to the Option Agreement were capitalized on the Balance Sheet
as a current asset.
On April 26, 1999, the Registrant signed a nonbinding letter of intent
to extend for an additional nine months the option held by LIG to purchase
substantially all of the assets and assume certain liabilities of the
Registrant. The Registrant will receive $150,000 as payment for the extension of
the option for an additional nine months from the date a definitive revised
Option Agreement is signed by the parties. The option extension will permit the
parties to continue the joint research and development efforts which began on
April 28, 1998, the commencement date of LIG's initial one-year option.
Under the terms of the revised option, the purchase price to be paid by
LIG for the assets of the Registrant will be reduced from $6,821,708 to
$6,071,708 (subject to certain adjustments), in addition to the assumption by
LIG of certain liabilities of the Registrant. This reduction reflects
adjustments which would have been required to be made to the purchase price
under the terms of the original one-year option. LIG will continue to provide
the Registrant with a $750,000 credit facility to finance capital expenditures
and capital improvements related to the research and development. In addition,
LIG will continue to purchase nitrile gloves from the Registrant under a revised
supply agreement.
The Second Option Agreement is subject to approval by the Registrant's
stockholders. A special meeting of stockholders will be held on August 17, 1999
for the purpose of voting on the Second Option Agreement and related proposals.
In addition, on March 30, 1998, NationsBank (now Bank of America)
exercised its warrant to purchase 496,058 shares of the Registrant's Common
Stock exercisable at a price of $0.03125 per share. This was recorded as a
reduction of the Registrant's note payable with NationsBank.
6
<PAGE> 7
5. Debt
On June 21, 1999, the Registrant and LaSalle Business Credit, Inc.
("LBCI") closed on a $6,000,000 credit facility which includes a $1,700,000 term
loan on equipment, a $3,800,000 revolving loan on eligible inventories and
eligible accounts receivable and a $500,000 capital expenditure loan. The LBCI
credit facility has an interest rate of prime plus 1.75% for the term loan and
capital expenditure loan and prime plus 1.5% for the revolving loan. The
Registrant paid $230,000 in deferred loan costs during the second quarter of
1999 and was required to write off $222,000 of deferred loan costs from the
prior CIT credit facility which were being amortized over the term of the loan.
At July 4, 1999, the Registrant's borrowing against its $6,000,000 LBCI
credit facility was $3,706,000, including $2,006,000 of borrowing against the
LBCI $3,800,000 revolving loan.
7
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OPERATIONS
On May 31, 1999, the Registrant and London International Group, Inc.
("LIG") executed a Second Option Agreement (the "Second Option Agreement")
pursuant to which LIG will purchase from the Registrant, at an option purchase
price of $150,000, an option, exercisable for a period of nine months, to
purchase substantially all of the assets of the Registrant. The Second Option
Agreement extends the option previously held by LIG which expired on April 28,
1999. On June 11, 1999, the Second Option Agreement was amended to allow the
Registrant until September 15, 1999 to satisfy certain conditions to LIG's
obligations under the Second Option Agreement, including obtaining stockholder
approval.
Under the terms of the revised option, the purchase price to be paid by
LIG for the assets of the Registrant will be reduced from $6,821,708 to
$6,071,708 (subject to certain adjustments), in addition to the assumption by
LIG of certain liabilities of the Registrant. This reduction reflects
adjustments which would have been required to be made to the purchase price
under the terms of the original one-year option. LIG will continue to provide
the Registrant with a $750,000 credit facility to finance capital expenditures
and capital improvements related to the research and development. In addition,
LIG will continue to purchase nitrile gloves from the Registrant under a revised
supply agreement and the parties will continue their joint research and
development efforts under a revised research and development agreement.
The Second Option Agreement is subject to approval by the Registrant's
Stockholders. A special meeting of stockholders will be held on August 17, 1999
for the purpose of voting on the Second Option Agreement and other related
proposals.
Second quarter 1999 net sales were $3,745,000, down $193,000, or 4.9%
as compared with the second quarter of 1998. However, net sales were up
$296,000, or 8.6% as compared with the first quarter of 1999. Latex glove sales,
which represent 20% of the Registrant's total glove sales, were down $348,000,
32%, as compared with the prior year second quarter. The decrease in latex glove
sales was broad in nature but reflects substantially reduced sales to the US
Government and related agencies. The Government is sourcing more non-natural
rubber latex gloves, such as nitrile examination gloves and less natural rubber
gloves. The Registrant expects to have FDA approval to market its nitrile
examination glove to the medical market by early fourth quarter 1999. US
Government agencies and their prime contractors purchased slightly more than
one-third of the Registrant's natural rubber latex gloves in 1998, or $1.25
million. July 1999 orders
8
<PAGE> 9
\
showed further erosion in natural rubber latex gloves, but July is historically
a slow order month for all gloves. Vinyl glove sales, 60% of total glove sales
during the second quarter of 1999, were approximately $2,245,000, down 8.6% from
the prior year's similar quarter. The majority (74%) of the decline in vinyl
glove sales can be attributed to decline on the low end commodity glove sector,
where the Asian currency devaluation has the greatest effect on the Registrant's
ability to compete price-wise. Vinyl glove sales for cleanroom use were off less
than 4%, a decline mostly attributable to price erosion.
Second quarter 1999 sales of nitrile gloves, 20% of total glove sales,
were $749,000, almost double prior year similar quarter sales. Nitrile gloves
manufactured for LIG represented 75% or $562,000 of total nitrile glove sales
during the quarter. The Registrant first began the manufacture of nitrile gloves
for LIG during the third quarter of 1998.
Through the first six months of 1999, net sales were approximately
$7,194,000, 3.6% less than for the similar six-month period of 1998. Latex glove
sales in the current year six-month period were down 14.3%, vinyl glove sales
were down 8.9% and nitrile glove sales were up 64.6% as compared with the first
six months of 1998.
While the manufacturing sector of the US economy has grown during the
six months, from February through July 1999, purchasing agents continue to be
under substantial pressure to reduce unit purchase costs. Until the Registrant
is able to implement significant cost reduction through automation, it will not
be able to grow market share based on superior quality and service, as it has in
the past. Buyers demand price reductions and with Asian low price imports
available in many product lines, US manufacturers are expected to offer price
reductions. With its limited capital availability, the Registrant must move
slowly with its capital-intensive automation projects. Some relief is expected
by year end 1999 as the first units of automation equipment become operational.
Selling and Administrative ("S&A") expenses continue to be carefully
controlled and were $383,000 during the second quarter of 1999 and $820,000
during the first six months of 1999, 10.2% and 11.4% of sales respectively. S&A
expenses were down $72,000 in the quarter and $23,000 for the 1999 half-year as
compared with the similar prior year periods. Selling expense continues to be
below prior year's expenditures and is just 2.9% of sales vs. 4.3% in the 1998
similar quarter. The savings results from direct selling versus the use of
manufacturer's representative sales agencies.
9
<PAGE> 10
The Registrant had $17,000 of income from operations in the second
quarter of 1999 versus $82,000 of income from operations in the prior year
quarter. Income from operations was $69,000 for the six months of 1999 as
compared with $113,000 for the prior year first six months. The decrease is
attributable to a decline in the net sales and an increase in cost of goods
sold. Cost of goods sold, as a percentage of net sales, was 89% in the second
quarter of 1999 as compared with 86% in the second quarter of 1998. The
Registrant has experienced raw material price increases during the second
quarter of 1999 on the raw materials used in the manufacture of vinyl gloves.
The strong US automotive business sector, strong home construction and the early
stages of recovery in the Asian economy have shifted the supply/demand balance
for vinyl materials. The increase in prices recently experienced was the first
in more than eighteen months. The Registrant cannot pass the cost increases to
its customers. Natural gas costs during May and June 1999 were the highest of
the year and relief is not in sight. The increase in cost was 14% over the prior
quarter's gas costs.
The Registrant had net income of approximately $56,000 in the second
quarter of 1999 as compared with a net loss of $78,000 in the prior year
quarter. The 1999 second quarter results include $407,000 of income ($508,000
deferred income less $101,000 deferred expenses) resulting from the expiration,
on April 28, 1999, of the LIG Option Agreement, $222,000 of expense related to
replacing the CIT Group/Credit Finance ("CIT") credit facility with a credit
facility from LaSalle Business Credit, Inc. ("LBCI") and $147,000 of interest
expense. The prior year quarter included $160,000 of interest expense and $1,000
of miscellaneous income. The Registrant had $5,000 of net income in the first
half of the current year as compared with a net loss of $222,000 in the prior
year similar period. Current year first six months results include $407,000 of
income resulting from the expiration of the LIG Option Agreement, $222,000 of
expense related to refinancing, $37,000 of miscellaneous income and interest
expense of $286,000. The prior year first six months results included $3,000 of
miscellaneous income, $28,000 of expense related to the LIG Option Agreement
which was not deferred, and $310,000 of interest expense. In addition to the
$129,000 of expenses related to the LIG Option Agreement as discussed above,
$93,000 was expensed in 1997, for a total of $222,000 of expenses related to the
LIG Option. Income from the LIG Option Agreement was the $500,000 payment plus
$8,000 of interest earned thereon while the option payment was in escrow and
unavailable to the Registrant.
Liquidity and Capital Resources
During the second quarter of 1999, the Registrant's operations used
$550,000 of cash compared with $239,000 of cash used in the prior year second
quarter. Capital expenditures were
10
<PAGE> 11
$71,000, of which $47,000 was funded by LIG under the Loan and Security
Agreement between LIG and the Registrant. Accounts payable and accrued expenses
increased $270,000 in the 1999 quarter as compared with a $197,000 decrease in
the second quarter of 1998. The sum of inventories, accounts receivable and
prepayments increased $544,000 as compared with a $439,000 increase in the
similar quarter a year ago. The significant increase in accounts receivable
during the current year quarter was the result of an eight million glove nitrile
glove run produced for and shipped to LIG near the end of the quarter.
Through two quarters of 1999, the Registrant's operations have used
$114,000 of cash as compared with $134,000 of cash provided by operations
through the similar two quarters of 1998.
At July 4, 1999, the Registrant's borrowing against its $6,000,000 LBCI
credit facility was $3,706,000, including $2,006,000 of borrowing against the
LBCI $3,800,000 revolving loan. Total bank debt at July 4, 1999 was $5,178,000
versus $5,069,000 at December 31, 1998.
At July 4, 1999, the Registrant was not in compliance with several
financial covenants in its credit agreements with Carolina First Bank but the
violations have been waived by the bank. Due to financial accounting rules
changes relating to the classification of long-term debt where the debt contains
a subjective acceleration clause and a lock box arrangement, the Registrant was
not in compliance with the Carolina First Bank financial covenants related to
working capital and the current ratio. The Registrant's revolving loan is
classified as current debt. In addition, the Registrant was not in compliance
with the financial covenants related to net worth and the leverage ratio.
On June 21, 1999, the Registrant and LBCI closed on a $6,000,000 credit
facility which includes a $1,700,000 term loan on equipment, a $3,800,000
revolving loan on eligible inventories and eligible accounts receivable and a
$500,000 capital expenditure loan. The LBCI credit facility is at lower interest
rates than the prior CIT facility. The Registrant paid $230,000 in deferred loan
costs during the second quarter of 1999 and was required to write off $222,000
of deferred loan costs from the prior CIT credit facility which were being
amortized over the term of the loan.
Management believes the LBCI credit facility and the anticipated
$150,000 Second Option Payment will provide adequate working capital to support
continuing operations. Management is hopeful that order receipt will improve
during the final four months of 1999 and that its planned introduction of
nitrile examination gloves for the medical market is successful.
11
<PAGE> 12
YEAR 2000
The Registrant has assessed the impact of the Year 2000 on its
reporting systems and operations. The Registrant presently believes that, with
limited modifications to existing software, the Year 2000 will not pose
significant operational or financial reporting problems for the Registrant's
computer systems as so modified. These modifications are expected to be
completed before September 30, 1999. In addition, the Registrant's systems do
not interface with outside entities except for EDI, which the Registrant has
been assured is Year 2000 compatible. Therefore the Registrant believes the Year
2000 issue is not material with respect to its reporting systems and operations.
CAUTIONARY STATEMENT AS TO FORWARD-LOOKING INFORMATION
Statements contained in this report as to the Registrant's outlook for
sales, operations, capital expenditures and other amounts, budgeted amounts and
other projections of future financial or economic performance of the Registrant,
and statements of the Registrant's plans and objectives for the future are
"forward-looking" statements, and are being provided in reliance upon the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995.
Important factors that could cause actual results or events to differ materially
from those projected, estimated, assumed or anticipated in any such
forward-looking statements include without limitation: general economic
conditions in the Registrant's markets, including inflation, recession, interest
rates and other economic factors, especially in the United States and other
areas of the world where the Registrant markets its products; any loss of the
services of the Registrant's key management personnel; increased competition in
the United States and abroad, both from existing competitors and from any new
interests in the business; changes in the cost and availability of raw
materials; changes in governmental regulations applicable to the Registrant's
business; the failure to obtain any required governmental approvals; casualty to
or disruption of the Registrant's production facilities and equipment; delays or
disruptions in the shipment of the Registrant's products and raw materials;
disruption of operations due to strikes or other unrests; and other factors that
generally affect the business of manufacturing companies with international
operations.
12
<PAGE> 13
PART II - OTHER INFORMATION
PHOENIX MEDICAL TECHNOLOGY, INC
ITEMS 1, 2, 3, AND 4 ARE INAPPLICABLE AND ARE OMITTED.
ITEM 5. OTHER INFORMATION.
On June 11, 1999, the Registrant and LIG signed an amendment to the
Second Option Agreement which extended the deadline for the fulfillment of
certain conditions to the obligations of LIG, including the Registrant obtaining
stockholder approval for the transaction. The Special Meeting of Stockholders
will be held on August 17, 1999 and the Registrant expects to receive the
$150,000 Second Option Payment out of escrow shortly after such meeting.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a. Exhibit 27, Financial Data Schedule filed in electronic format only.
b. Exhibits and Reports on Form 8-K. The Registrant filed one report on
Form 8-K during the quarterly period ended July 4, 1999. This report was dated
May 31, 1999 and was filed to report the execution of the Second Option
Agreement on that date.
13
<PAGE> 14
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.
PHOENIX MEDICAL TECHNOLOGY, INC.
BY: /s/ EDWARD W. GALLAHER, SR.
---------------------------
EDWARD W. GALLAHER, SR.
PRESIDENT AND TREASURER
BY: /s/ DELORES P. WILLIAMS
---------------------------
DELORES P. WILLIAMS
CONTROLLER
DATE: AUGUST 13, 1999
---------------
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONDENSED
BALANCE SHEETS AND STATEMENTS OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH STATEMENTS FOR THE PERIOD ENDED JULY 4, 1999.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUL-04-1999
<EXCHANGE-RATE> 1
<CASH> 834
<SECURITIES> 0
<RECEIVABLES> 2,169,597<F1>
<ALLOWANCES> 0
<INVENTORY> 1,911,105
<CURRENT-ASSETS> 4,081,536
<PP&E> 4,597,187<F1>
<DEPRECIATION> 0
<TOTAL-ASSETS> 8,678,723
<CURRENT-LIABILITIES> 4,400,003
<BONDS> 4,081,452
0
0
<COMMON> 245,962
<OTHER-SE> (48,694)
<TOTAL-LIABILITY-AND-EQUITY> 8,678,723
<SALES> 7,193,541
<TOTAL-REVENUES> 544,636
<CGS> 6,304,059
<TOTAL-COSTS> 6,304,059
<OTHER-EXPENSES> 1,143,103
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 285,703
<INCOME-PRETAX> 5,302
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,302
<EPS-BASIC> 0.00
<EPS-DILUTED> 0.00
<FN>
<F1>Represents net amount
</FN>
</TABLE>
