<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-QSB
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended February 28, 1999
------------------------------------------------
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission file number 0-15179
------------------------------
OFFICELAND INC.
---------------
(Name of small business issuer in its charter)
Ontario, Canada 10397 6668
- --------------- ----------
(State or other jurisdiction of (Canadian Federal Tax Account No.)
incorporation or organization)
312 Dolomite Drive, Downsview, Ontario, Canada M3J 2N2
(Address of principal executive
offices) (Zip Code)
Registrant's telephone number, including area code: (416) 736-4000
Check whether the issuer (1) filed all reports required to be filed by Section
13 of 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 ( )
On April 16, 1999, the registrant had 5,538,798 outstanding shares of common
stock.
<PAGE>
<TABLE>
<CAPTION>
Page No.
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Statements of Earnings and Deficit
for the three months February 28, 1999 and February 28, 1998 2
Consolidated Balance Sheets -
February 28, 1999 and November 30, 1998 3
Consolidated Statement of Cash Flows -
for the three months ended February 28, 1999 and February 28, 1998 4
Notes to Financial Statements 5-10
Item 2. Management's Discussion and Analysis of Financial Condition 11-12
and Results of Operations.
PART II- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES
</TABLE>
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
Officeland Inc.
Consolidated Statement of Earnings and Deficit
(Expressed in U. S. dollars)
(Unaudited) Feb. 28, Feb. 28,
Fiscal Quarter Ended 1999 1998
- -------------------------------------------------------------------------------
Sales $ 6,911,660 $ 3,791,612
Cost of sales $ 4,535,668 $ 3,206,124
----------- -----------
Gross profit 2,375,992 585,488
----------- -----------
Expenses
General and administrative 1,413,584 313,644
Selling 875,178 163,512
Depreciation and amortization 94,280 12,411
----------- -----------
2,383,042 489,567
----------- -----------
Earnings (loss) before the following (7,050) 95,921
----------- -----------
Foreign exchange remeasurement loss (gain) 32,187 12,078
Interest on debt 26,809 --
Interest income (11,909) (10,549)
----------- -----------
47,087 1,529
----------- -----------
Net earnings (loss) before income taxes (54,137) 94,392
Income taxes recovery (2,810) 46,856
----------- -----------
Net earnings (loss) $ (51,327) $ 47,536
----------- -----------
Net earnings (loss) per common share $ (0.01) $ 0.01
----------- -----------
Fully diluted net earnings (loss) per
common share $ (0.01) $ 0.01
----------- -----------
Deficit, beginning of year $(4,072,967) $(4,454,398)
Net earnings (loss) (51,327) 47,536
----------- -----------
Deficit, end of year $(4,124,294) $(4,406,862)
----------- -----------
See accompanying notes to the financial statements.
2
<PAGE>
Officeland Inc.
Consolidated Balance Sheet
(Expressed in U.S. dollars) Feb. 28, Nov. 30,
1999 1998
(unaudited)
- ----------------------------------------------------------------------------
Assets
Current
Cash $ 138,295 $ 72,649
Receivables 4,955,287 4,768,790
Income tax receivable 395,978 234,730
Inventory of goods for resale 3,727,531 3,413,157
Prepaid and other charges 380,406 218,077
Future income taxes 360,229 360,229
------------ -------------
9,957,726 9,067,632
Investments 118,521 118,521
Capital assets 474,955 256,592
Future income taxes 242,151 242,151
Other assets 569,570 504,284
Goodwill 9,479,333 6,639,851
------------ -------------
$ 20,842,256 $ 16,829,031
- ----------------------------------------------------------------------------
Liabilities
Current
Bank credit facilities $ 1,216,350 $ 1,346,349
Accounts payable and accrued liabilities 7,148,256 4,242,498
Income taxes payable 156,112 -
Current portion of long term debt 295,000 302,435
------------ -------------
8,815,718 5,891,282
Long term debt 249,868 216,751
------------ -------------
9,065,586 6,108,033
------------ -------------
Shareholders' Equity
Convertible debt 6,458,217 5,351,218
Capital stock 9,442,747 9,442,747
Deficit (4,124,294) (4,072,967)
---------- -------------
11,776,670 10,720,998
---------- -------------
$ 20,842,256 $ 16,829,031
- ---------------------------------------------------------------------------
See accompanying notes to the financial statements
3
<PAGE>
Officeland Inc.
Consolidated Statement of Cash Flows
(Expressed in U.S. dollars) Feb. 28, Feb. 28,
Fiscal Quarter Ended 1999 1998
(unaudited)
- -------------------------------------------------------------------------------
Cash derived from (applied to)
Operating
Net earnings (loss) $ (51,327) $ 47,536
Depreciation and amortization 94,280 12,411
------ ------
42,953 59,947
Changes in
Receivables 181,599 (451,227)
Inventory of goods for resale 377,067 (689,453)
Prepaid and other charges (108,526) (233,261)
Other assets (65,283) -
Accounts payable and accruals 1,768,992 962,157
Income taxes payable (receivable) (5,136) (70,449)
Future income taxes - 45,571
------------- -----------
2,148,713 (376,715)
------------- -----------
Financing
Decrease in bank credit facilities (130,000) -
Repayment of long term debt 25,682 -
------------- -----------
(104,318) -
-------------- -----------
Investing
Acquisition of Eastern Equipment
Brokers Inc. (Note 2) (1,451,535) -
Acquisition of Digital Document
Solutions Inc. (Note 2) (469,092) -
Purchase of capital assets - (50,150)
Disposal of capital assets 15,329 -
------------- ---------
1,905,298 (50,150)
Effect of foreign exchange remeasurement (116,404) 78
-------------- -----------
Net increase (decrease) in cash 65,646 (426,787)
Cash and short term investments
Beginning of year 72,649 1,041,203
------------- -----------
End of year $ 138,295 $ 614,416
------------- -----------
See accompanying notes to the financial statements.
4
<PAGE>
Officeland Inc.
Notes to Consolidated Financial Statements
(Expressed in U.S. dollars)
(unaudited)
- -------------------------------------------------------------------------------
Nature of operations
Officeland Inc. (the Company) is a Canadian corporation. The Company, and
certain of its subsidiaries are engaged in the business of the purchasing,
refurbishing and selling of used photocopiers and fax machines. Those
subsidiaries are located in the United States. The primary activity of the
Company and those subsidiaries is within the United States. The Company also
has another subsidiary located in Canada which provides agency and collection
services in the Province of Ontario.
- -------------------------------------------------------------------------------
1. Summary of significant accounting policies
Basis of Presentation
The accompanying interim consolidated financial statements of the Company have
been prepared in accordance with accounting principles generally accepted in
Canada for interim financial information. These acounting principles are also
generally accepted in the United States ("U.S. GAAP") in all material respects.
Principles of consolidation
The consolidated financial statements include the accounts of all companies in
which the Company has a controlling interest, after elimination of
inter-company transactions and balances.
Use of estimates
In preparing the Company's financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements, and the reported revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Inventories
Inventories, consisting of equipment for resale, are valued at the lower of
cost and net realizable value. Cost is determined on a specific item basis for
certain equipment and on the first-in, first-out method for other categories of
inventory.
5
<PAGE>
Officeland Inc.
Notes to Consolidated Financial Statements
(Expressed in U.S. dollars)
(unaudited)
- -------------------------------------------------------------------------------
1. Accounting policies (continued)
Depreciation
Rates of depreciation are applied to write off the cost of capital assets less
estimated salvage value over their estimated useful lives. Furniture and
equipment are depreciated on the diminishing balance basis at 20% per year.
Automotive equipment is depreciated on the diminishing balance basis at 20% per
year. Computer equipment is depreciated on the diminishing balance basis at 30%
per year.
Amortization of intangibles
Goodwill is amortized on a straight line basis over its estimated life of 40
years. On an ongoing basis, the Company reviews the measurement of goodwill for
possible impairment based primarily on the ability to recover the balance of
goodwill from expected future operating cash flows on an undiscounted basis.
Fair value of financial instruments
The Company's estimate of the fair value of cash and short term investments,
receivables, payables and accruals and long term debt approximates the carrying
value.
Revenue recognition
Agency and collection fees revenue is recognized when a client receivable is
collected from the debtor and remitted to the client. Legal expenses are
expensed at the same time as revenue is recognized. Prior to collection, legal
expenses are identified on a debtor by debtor basis and are deferred. The
deferred amounts, net of estimated allowance for non-recovery, are included in
prepaid expenses until expensed. Amounts which are considered non-recoverable
are expensed and included in cost of sales.
Equipment revenue is recognized at the time of sale of the equipment.
Commissions on the sale of consignment office equipment are recorded at the
time of sale. Commissions for auction services are recorded when the services
are rendered.
6
<PAGE>
Officeland Inc.
Notes to Consolidated Financial Statements
(Expressed in U.S. dollars)
(unaudited)
- -------------------------------------------------------------------------------
1. Accounting policies (continued)
Income taxes
The Company has recorded tax benefits of the net operating losses that are
available to offset future income taxes because it is the Company's belief,
beyond a reasonable doubt, that these benefits will be realized in future
periods.
The Company has provided for the tax benefits of temporary timing differences
related primarily to differing bases of certain assets and liabilities for
financial statement and income tax reporting purposes.
Barter transactions
The Company engages in barter sales and purchases, whereby it exchanges for
goods and services the right to acquire other goods and services. For income
tax purposes, the transactions are recorded in the accounts at the notional
amounts reflected in the respective transaction documents. Under generally
accepted accounting principles, these amounts are discounted to fair values.
- -------------------------------------------------------------------------------
2. Business acquisitions
a) Acquisition of Eastern Equipment Brokers Inc.
On January 1, 1999, the Company acquired a 100% equity interest in Eastern
Equipment Brokers Inc., a wholesaler and re-manufacturer of used photocopiers
located in Bridgeport, Connecticut, for consideration of $1,400,000 cash and
675,000 common shares of Officeland Inc. (market value at the date of
acquisition $1,107,000) for total consideration of $2,600,845 including costs
to efect the acquisition, plus additional earn out consideration. The 675,000
common shares are placed in escrow and will be issued on January 1, 2001.
The vendor may be paid up to a maximum of 350,000 common shares of Officeland
Inc. for the three year period commencing December 1, 1998. The additional
consideration is based on annual profits of Eastern Equipment Brokers, Inc. The
additional consideration cannot be reasonably determined at this time.
The acquisition was accounted for by the purchase method of accounting. The
purchase price included professional fees and othe direct costs of the
acquisition. Goodwill is being amortized on a straight line basis over it's
estimated useful life of 40 years.
7
<PAGE>
Officeland Inc.
Notes to Consolidated Financial Statements
(Expressed in U.S. dollars)
(unaudited)
- -------------------------------------------------------------------------------
2. Business acquisitions (continued)
b) Acquisition of Digital Document Solutions, Inc.
On January 1, 1999 the Company acquired all of the assets of Digital Document
Solutions, Inc. a closely held Connecticut corporation. Digital Document
Solutions, Inc. is in the business of selling, leasing and servicing
re-manufactured photocopiers. The assets of Digital Document Solutions, Inc.
were purchased for consideration of $665,000 in cash and for total
consideration of $690,306 including costs to effect the acquisition.
The acquisition was accounted for by the purchase method of accounting. The
purchase price included professional fees and other direct costs of the
acquisition. Goodwill is being amortized on a straight line basis over it's
estimated useful life of 40 years.
c) The allocation of the Company's investments is as follows:
<TABLE>
<CAPTION>
Eastern Digital
Equipment Document
Brokers Inc. Solutions, Inc.
----------- ---------------
<S> <C> <C>
Non-cash current assets $ 691,435 $ 421,905
Capital assets 53,165 113,328
Goodwill arising from acquisition 2,830,644 53,913
------------- ------------
Total assets 3,575,244 589,146
------------- ------------
Bank indebtedness (net of cash) assumed 307,690 (221,214)
Accounts payable and other liabilities 666,709 120,054
------------- ------------
974,399 (101,160)
------------- ------------
Total purchase price $ 2,600,845 $ 690,306
------------- ------------
Consideration
Cash paid, including costs to effect acquisition $ 1,493,845 $ 690,306
Shares to be issued 1,107,000 -
------------- ------------
Total consideration $ 2,600,845 $ 690,306
------------- ------------
Net cash paid
Cash, per above $ 1,493,845 $ 690,306
Less: Cash acquired (42,310) (221,214)
------------- ------------
Net cash paid $ 1,451,535 $ 469,092
------------- ------------
</TABLE>
8
<PAGE>
Officeland Inc.
Notes to Consolidated Financial Statements
(Expressed in U.S. dollars)
(unaudited)
- -------------------------------------------------------------------------------
3. Earnings (loss) per share
Under Canadian GAAP earnings (loss) per share are based on the weighted average
common shares outstanding. Weighted average common shares used in the
computation of earnings (loss) per share are 5,538,798 and 5,320,064 for
February 28, 1999 and February 28, 1998 respectively. The weighted average
common shares plus dilutive shares used in the computation of fully diluted
earnings (loss) per share are 7,069,398 and 6,930,207 for February 28, 1999 and
February 28, 1998 respectively.
- --------------------------------------------------------------------------------
4. Uncertainty due to the Year 2000 Issue
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in errors when information
using year 2000 dates is processed. In addition, similar problems may arise in
some systems which use certain dates in 1999 to represent something other than
a date. The effects of the Year 2000 Issue may be experienced before, on, or
after January 1, 2000, and, if not addressed, the impact on operations and
financial reporting may range from minor errors to significant systems failure,
which could affect an entity's ability to conduct normal business operations.
It is not possible to be certain that all aspects of the Year 2000 Issue
affecting the company, including those related to the efforts of customers,
suppliers, or other third parties will be fully resolved.
9
<PAGE>
- -------------------------------------------------------------------------------
Officeland Inc.
Notes to Consolidated Financial Statements
(Expressed in U.S. dollars)
(unaudited)
- -------------------------------------------------------------------------------
5. Reconciliation to accounting principles generally accepted in the United
States of America
In certain respects, Canadian generally accepted accounting principles
("Canadian GAAP") differ from United States generally accepted accounting
principles ("US GAAP").
(a) Statement of earnings
<TABLE>
<CAPTION>
February 28, February 28,
Fiscal quarter ended 1999 1998
---- ----
<S> <C> <C>
Net earnings (loss) according to Canadian GAAP ($51,327) $47,536
Goodwill adjustments (i) 750 773
Legal expenses (ii) 2,500 4,797
----- -----
3,250 5,570
----- -----
Net earnings (loss) earnings according to US GAAP (54,577) 41,966
Deficit, beginning of year $(6,184,918) $(5,724,612)
----------- -----------
Deficit, end of year $(6,239,495) $(5,671,505)
----------- -----------
Basic earnings (loss) per share $(0.01) $0.01
------- -----
Diluted earnings (loss) per share $(0.01) $0.01
------- -----
</TABLE>
(i) Goodwill has been adjusted at each balance sheet date for the effect of
goodwill valuation adjustment at the date of acquisition, less the
adjustment to the goodwill amortization thereon.
(ii) As discussed in Note 1 under Revenue Recognition, the Company defers
certain legal expenditures. Under US GAAP, these expenditures must be
expensed as incurred.
10
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Certain statements contained herein are not based on historical facts, but are
forward-looking statements that are based upon numerous assumptions about
future conditions that could prove not to be accurate. Actual events,
transactions and results may materially differ from the anticipated events,
transactions or results described in such statements. The Company's ability to
consummate such transactions and achieve such events or results is subject to
certain risks and uncertainties. Such risks and uncertainties include, but are
not limited to, the existence of demand for and acceptance of the Company's
products and services, regulatory approvals and developments, economic
conditions, the impact of competition and pricing results of financing efforts
and other factors affecting the Company's business that are beyond the
Company's control. The Company undertakes no obligation and does not intend to
update, revise or otherwise publicly release the result of any revisions to
these forward-looking statements that may be made to reflect future events or
circumstances.
The information contained herein is presented in United States dollars in
accordance with Canadian GAAP except where specifically noted.
Officeland Inc. acquired The Wholesale Group on May 12, 1998, Telecom
Corporation of Chicago on October 9, 1998, Eastern Equipment Brokers Inc., and
Digital Document Solutions, Inc. on January 1, 1999. These businesses have been
accounted for under the purchase method of accounting. As a result, the
operations of the acquired businesses have been included in the unaudited
interim consolidated financial statements from the date of acquisition.
Consolidated Results
Sales were $6,911,660 for the first quarter of fiscal 1999 compared to
$3,791,612 for the first quarter of fiscal 1998. The increase in sales is
primarily due to the contribution of the newly acquired businesses. Contribution
by each company is as follows; core operations, $1,769,433, The Wholesale Group,
Inc., $1,273,385, Telecom Corporation of Chicago, $2,834,906 Eastern Equipment
Brokers, Inc. and Digital Document Solutions, Inc., $1,033,936.
Cost of sales were $4,535,668 or 67% for the first quarter of 1999 compared to
$3,206,124 or 85% for the first quarter of 1998. Contribution by each company
to cost of sales is as follows; core operations, $1,460,979, The Wholesale
Group, Inc., $806,551, Telecom Corporation of Chicago, $1,590,512 and Eastern
Equipment Brokers, Inc. and Digital Document Solutions, Inc., $677,626.
Gross profit for the first quarter of 1999 was $2,375,992 or 34% compared to
$585,488 or 15% for the first quarter of 1998 reflecting an increase of
$1,790,504. The Company's gross profit as a percentage of sales has more than
doubled from the first three months of 1999 compared to the first three months
of 1998 principally due to higher margins being realized on increased end user
sales. The Company expects to continue to realize increased gross profit
percentages in fiscal 1999 compared to fiscal 1998 due to new channels of
distribution and increased end user sales. Contribution by each company to
gross profit is as follows; core operations, $308,464, The Wholesale Group,
Inc., $466,814, Telecom Corporation of Chicago, $1,244,394, and Eastern
Equipment Brokers, Inc. and Digital Document Solutions, Inc., $356,320.
The Company is no longer reporting segmented financial information for it's
subsidiary Metropolitan Collection Service Inc. since it contributes less than
1% of total revenues.
General and Administrative Expenses incurred during the first quarter of 1999
were $1,413,584 compared to $313,644 for the first quarter of fiscal 1998
reflecting an increase of $1,099,940. This increase is a result of salary
increases as well as the addition of management and technical support personnel
to support the newly acquired businesses.
Selling expenses for the first quarter 1999 were $875,178 compared to $163,512
for the first quarter 1998 representing an increase of $711,666. The increase
was primarily due to an increase in expenses incurred as a result of the
acquisitions, and addition of a marketing department.
The depreciation and amortization expenses, including amortization of goodwill
from the acquisitions, were $94,280 for the first quarter 1999 compared to
$12,411 for the first quarter 1998.
11
<PAGE>
The Company recorded a loss before income taxes, interest charges and foreign
exchange remeasurement loss for the first quarter 1999 of $7,050 compared to
earnings of $95,921 for the first quarter 1998. The decrease was due to the
increase in support costs incurred to provide a management and staffing
structure that can sustain the growth expected from acquisitions.
The Company recorded a foreign exchange remeasurement loss for the first
quarter 1999 in the amount of $32,187, compared to a remeasurement gain of
$12,078 for the first quarter 1998.
The Company recorded a net loss of $51,327 or ($0.01) per common share
(($0.01) fully diluted) compared to a net earnings of $47,536 or $0.01 per
common share ($0.01 fully diluted).
The foregoing operations have impacted the Balance Sheet as at February 28,
1999 from November 30, 1998 as follows:
Cash at February 28, 1999 was $138,295 compared to $72,649 at November 30,
1998. At February 28, 1999 the Company's trade receivables were $4,955,287
compared to $4,768,790 at November 30, 1998 an increase of $186,497. Inventory
was $3,727,531 at February 28, 1999 compared to $3,413,157 at November 30, 1998
increasing $31,437. Capital assets have increased $218,363 mainly as a result
of the acquisition of Eastern Equipment Brokers, Inc. and Digital Document
Solutions, Inc. The Company has a future income tax benefit in the amount of
$602,380 as at February 1999. The company has other assets representing
$569,570 of costs incurred related to the issuance of the Convertible Note
offerings, which will be recorded to retained earnings when the Notes are
converted. The Company has achieved the necessary audited results for fiscal
1998 such that the Convertible Notes will automatically convert into units in
the second quarter of fiscal 1999. The Company has recorded goodwill as a result
of the acquisition of Eastern Equipment Brokers, Inc and Digital Document
Solutions, Inc. in the amount of $2,884,557 that has increased the balance at
November 30, 1998 of $6,639,851 net of amortization. The Company's total assets
have increased to $20,842,256 at February 28, 1999 from $16,829,031 at November
30, 1998, due to an increase in receivables, inventory and goodwill recorded
from the 1999 acquisitions.
The Company had a bank credit facility utilized at February 28, 1999 in the
amount of $1,216,350 compared to $1,346,349 at November 30, 1998. The Company's
accounts payable and accrued liabilities are $7,148,256 at February 28 1999
compared to $4,242,498 at November 30, 1998. The Company had Long Term Debt of
$544,868 compared to $519,502 at November 30, 1998.
The Company's equity has increased $1,107,000 from November 30, 1998 due to the
common shares issued pursuant to the acquisition of Eastern Equipment Brokers,
Inc.
Liquidity and Capital Resources
The Company presently has sufficient cash on hand to sustain its operations at
current levels and will be able to sustain its operations for the next twelve
months through internally generated funds and the lines of credit available
from various lending institutions in the consolidated amount of $4,430,000.
During the first quarter of fiscal 1999, the Company began negotiating with
American National Bank and Trust Company of Chicago, a refinancing of the
existing lines of credit and the addition of other acquisition and working
capital credit facilities. When completed the Company will receive working
capital lines of credit ("WLC's") totaling $5.6 million, and an additional line
of credit of $2 million ("ALC") to be used by the Company for future
acquisitions. The WLC's and ALC have a one year term, and are renewable from
year to year thereafter provided certain covenants of the Company are
maintained. The WLC's bear interest at the Prime Rate of the Bank and the ALC
bears interest at Prime plus 1/2% in year one and Prime in year two.
The Company will receive in the second quarter of fiscal 1999 an additional
$1.2 million through the sale of Class B shares.
At February 28, 1999 the Company had working capital of approximately $1.1
million.
The Company does not believe inflation has materially affected its past
operations nor does it anticipate inflation to materially affect future
operations.
12
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
Exhibit 27 Financial Data Schedule
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.
OFFICELAND INC.
(Registrant)
Date: April 19, 1999 By: /s/ Marvyn A. Budd
------------------
Marvyn A. Budd,
Chief Executive Officer, President
Date: April 19, 1999 By: /s/ Christopher Walker
----------------------
Christopher Walker,
Vice President Finance
EXHIBIT INDEX
27 Financial Data Schedule 14
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information from the consolidated
statement of earnings and deficit, consolidated balance sheet and consolidated
statement of cash flows included in the Company's Form 10-QSB for the fiscal
quarter ended February 28, 1999, and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-1999
<PERIOD-START> DEC-01-1998
<PERIOD-END> FEB-28-1999
<CASH> 138
<SECURITIES> 0
<RECEIVABLES> 4,955
<ALLOWANCES> 0
<INVENTORY> 3,728
<CURRENT-ASSETS> 9,958
<PP&E> 474
<DEPRECIATION> 94
<TOTAL-ASSETS> 20,842
<CURRENT-LIABILITIES> 8,816
<BONDS> 0
0
0
<COMMON> 9,443
<OTHER-SE> 6,458
<TOTAL-LIABILITY-AND-EQUITY> 20,842
<SALES> 6,912
<TOTAL-REVENUES> 6,912
<CGS> 4,536
<TOTAL-COSTS> 2,383
<OTHER-EXPENSES> 32
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 27
<INCOME-PRETAX> (54)
<INCOME-TAX> 0
<INCOME-CONTINUING> (51)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (51)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
