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 May 31, 1998.
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 number 0-4465
Sirco International Corp.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
New York 13-2511270
- --------------------------------------------------------------------------------
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
24 Richmond Hill Avenue, Stamford Connecticut 06901
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
- --------------------------------------------------------------------------------
Registrant's Telephone Number, Including Area Code 203-359-4100
(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 .
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date: 5,485,400 shares of
Common Stock, par value $.10 per share, as of July 1, 1998.
<PAGE>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
Sirco International Corp. and Subsidiaries
Condensed Consolidated Balance Sheets
May 31, 1998 Nov. 30, 1997
(Unaudited) (See note)
------------ ------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 1,168,032 $ 114,190
Accounts receivable 2,117,497 3,166,804
Inventories 5,088,855 7,707,631
Prepaid expenses 235,838 253,225
Other current assets 106,195 44,231
Recoverable income taxes 88,032 125,517
------------ ------------
Total current assets 8,804,449 11,411,598
------------ ------------
Property and equipment at cost 1,779,045 1,762,533
Less accumulated depreciation 976,086 935,220
------------ ------------
Net property and equipment 802,959 827,313
------------ ------------
Other assets 169,544 207,940
Investment in and advances to subsidiary 495,261 514,797
Investment in Access One Communications, Inc. 1,957,428 1,080,000
Goodwill 646,042
------------ ------------
Total assets $ 12,875,683 $ 14,041,648
============ ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Sirco International Corp. and Subsidiaries
Condensed Consolidated Balance Sheets
(continued)
May 31, 1998 Nov. 30, 1997
(Unaudited) (See note)
------------ ------------
<S> <C> <C>
Liabilities and stockholders' equity Current liabilities:
Current maturities of long-term debt $ 3,734,423 $ 1,522,060
Due to related parties 793,215 974,046
Accounts payable 992,621 2,489,259
Accrued expenses and other current liabilities 1,803,684 1,318,863
------------ ------------
Total current liabilities 7,323,943 6,304,228
------------ ------------
Long-term debt, less current maturities 311,668 4,521,795
------------ ------------
Stockholders' equity:
Common stock, $.10 par value; 10,000,000 share authorized,
5,478,400 issued (1998), 4,300,400 issued (1997) 547,840 430,040
Preferred stock, $.10 par value; 1,000,000 authorized
none issued
Capital in excess of par value 11,044,828 7,753,368
Retained earnings (deficit) (5,386,476) (3,887,532)
Treasury stock at cost (27,500) (27,500)
Treasury stock held by equity investee (292,500) (420,000)
Accumulated foreign translation adjustment (646,120) (632,751)
------------ ------------
Total stockholders' equity 5,240,072 3,215,625
------------ ------------
Total liabilities and stockholders' equity $ 12,875,683 $ 14,041,648
============ ============
</TABLE>
See notes to the condensed consolidated financial statements.
Note: The balance sheet at November 30, 1997 has been derived from the audited
financial statements at that date but does not include all the information
and footnotes required by generally accepted accounting principles.
<PAGE>
<TABLE>
<CAPTION>
Sirco International Corp. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
For The Six Months Ended For The Three Months Ended
May 31, 1998 May 31, 1997 May 31, 1998 May 31, 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Sales $ 9,029,994 $ 6,175,826 $ 5,197,823 $ 3,109,682
Cost of goods sold 7,159,234 4,942,664 4,178,524 2,570,275
----------- ----------- ----------- -----------
Gross profit 1,870,760 1,233,162 1,019,299 539,407
Selling, warehouse, general and
administrative expenses 2,891,282 2,230,369 1,572,026 1,130,164
----------- ----------- ----------- -----------
Loss from operations (1,020,522) (997,207) (552,727) (590,757)
Other (income) expense:
Interest expense 297,252 237,476 148,471 112,997
Interest income (31,276) (31,746) (29,153) (22,560)
Miscellaneous income, net (57,626) (174,319) (17,491) (79,658)
Equity in loss of investee 270,072 170,737
----------- ----------- ----------- -----------
478,422 31,411 272,564 10,779
Net loss $(1,498,944) $(1,028,618) $ (825,291) $ (601,536)
=========== =========== =========== ===========
Basic loss per share $ (0.32) $ (0.36) $ (0.17) $ (0.19)
=========== =========== =========== ===========
Diluted loss per share $ (0.32) $ (0.36) $ (0.17) $ (0.19)
=========== =========== =========== ===========
Shares used in computing loss per share
Basic and diluted 4,633,208 2,832,603 4,946,824 3,099,687
=========== =========== =========== ===========
</TABLE>
See notes to the condensed consolidated financial statements
<PAGE>
<TABLE>
<CAPTION>
Sirco International Corp. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
For the Six Months Ended
May 31, 1998 May 31, 1997
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss ($1,498,944) ($1,028,618)
Adjustments to reconcile net loss
to net cash provided by (used in) operating activities:
Depreciation and amortization 49,969 49,616
Provision for losses in accounts receivable 5,590 50,146
Loss in sale of property and equipment 7,104
Loss in equity of investee 270,072
Changes in operating assets and liabilities:
Accounts receivable 1,045,298 171,777
Inventories 2,627,868 (1,671,500)
Prepaid expenses 57,896 (240,579)
Other current assets (61,964) 47,117
Other assets 38,396 (106,975)
Accounts payable and accrued expenses (722,540) (719,431)
----------- -----------
Net cash provided by (used in) operating activities: 1,811,641 (3,441,343)
----------- -----------
Cash flows from investing activities:
Purchase of property and equipment (32,176) (27,881)
Proceeds from sale of property and equipment 3,655
Cash inflow from agreement to sell subsidiary 19,536 23,050
----------- -----------
Net cash used in investing activities (12,640) (1,176)
----------- -----------
Cash flows from financing activities:
(Decrease) increase in loans payable to
financial institutions and short-term
loans payable-other (1,342,722) 2,567,608
Proceeds from exercise of stock options 6,000 190,567
Proceeds from exercise of warrants 488,250
Proceeds from private placement of common stock 75,000 609,000
----------- -----------
Net cash (used in) provided by financing activities (773,472) 3,367,175
----------- -----------
Effect of exchange rate changes on cash 28,313 (39,250)
----------- -----------
Increase (decrease) in cash and cash equivalents 1,053,842 (114,594)
Cash and cash equivalents at beginning of period 114,190 390,043
----------- -----------
Cash and cash equivalents at the end of period $ 1,168,032 $ 275,449
=========== ===========
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest $ 284,754 $ 232,583
Income taxes $ $ 300,015
</TABLE>
See notes to the condensed consolidated financial statements.
<PAGE>
SIRCO INTERNATIONAL CORP.
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 six month period ended May 31, 1998 are
not necessarily indicative of the results that may be expected for the year
ended November 30, 1998. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's Annual
Report on Form 10-K, as amended, for the year ended November 30, 1997.
Note 2-Financing Arrangements
On December 17, 1996, the Company's factoring agreement with Rosenthal &
Rosenthal Inc. was terminated and replaced with a financing agreement with Coast
Business Credit, a division of Southern Pacific Thrift and Loan Association
("Coast"), that provides for revolving loans and letter of credit financing in
the amount of the lesser of $7,000,000 or the sum of (a) 80% of eligible
accounts receivable (as defined) and (b) 50% of eligible inventory (as defined)
up to a maximum inventory loan of $3,000,000 less 50% of letter of credit
financing outstanding. The amount of the facility available for letter of credit
financing is limited to $2,500,000. The loan bears interest at 2% above the
prime rate, matures on December 31, 1998, and is guaranteed by the Company's
Chairman and Chief Executive Officer. The Company has granted Coast a security
interest in substantially all of the Company's assets. The agreement with Coast
contains various restrictive covenants, including among others, a restriction on
the payment or declaration of any cash dividends, a restriction on the
acquisition of any assets other than in the ordinary course of business in
excess of $100,000, restrictions related to mergers, borrowing and debt
guarantees, and a $100,000 annual limitation on the acquisition or retirement of
the Company's common and preferred stock, which acquisitions or retirements are
limited to transactions with employees, directors and consultants pursuant to
the terms of employment, consulting or other stock restriction agreements with
such persons. The agreement also requires the Company to maintain a minimum
tangible net worth of $1,400,000. As of May 31, 1998, the Company owed Coast
approximately $3,727,000 and had no outstanding letters of credit. At May 31,
1998, the prime rate was 8.50%.
In January 1997, the Company's Canadian subsidiary, Sirco International (Canada)
Ltd. ("Sirco Canada"), was advised by its bank, National Bank of Canada, that it
would no longer provide Sirco Canada a revolving line of credit but would
continue to provide the real property mortgage loan on Sirco Canada's office and
warehouse facility. The mortgage loan is payable in monthly installments of
approximately $3,300, including interest at 10.25%, with a balloon payment of
approximately $308,000 in the year 2000. At May 31, 1998, the principal amount
of the mortgage loan was approximately $319,000.
<PAGE>
Note 3-Investment in Subsidiary
On February 27, 1998, the Company acquired all the outstanding shares of common
stock of Essex Communications, Inc. ("Essex") in exchange for 250,000 shares of
the Company's common stock and warrants to purchase up to 225,000 shares of the
Company's common stock at $2.75 per share, of which warrants to purchase 75,000
shares had vested at May 31, 1998 and warrants to purchase 150,000 shares will
vest if certain performance conditions are met. The purchase agreement also
provides for the issuance of up to 600,000 additional shares of the Company's
common stock if certain performance conditions are met. As of July 1, 1998,
50,000 of such shares had been issued. Essex is a start-up telecommunications
provider that is certified to resell local telephone services in the states of
New Jersey and New York. Essex is currently seeking certification to resell
local telephone services in the states of Connecticut, Massachusetts and
Virginia. The acquisition has been accounted for as a purchase.
<PAGE>
Item 2. Management's Analysis and Discussion of Financial Condition and Results
of Operations
The following discussion and analysis contains forward-looking statements that
involve risk and uncertainties. The Company's actual results may differ
materially from results discussed in forward-looking statements. Factors that
might cause such a difference include, among others, general economic
conditions; industry trends; the loss of major customers; dependence on foreign
sources of supply; the loss of licenses; availability of management;
availability, terms and deployment of capital; the seasonal nature of the
Company's business; and changes in state and federal regulations of the
telecommunications industry.
Three and Six Months Ended May 31, 1998 vs. May 31, 1997
- ---------------------------------------------------------
Net sales for the three and six months ended May 31, 1998 increased by
approximately $2,088,000 and $2,854,000, respectively, to approximately
$5,198,000 for the three months ended May 31, 1998 and approximately $9,030,000
for the six months ended May 31, 1998, as compared to approximately $3,110,000
and $6,176,000, respectively, reported for the comparable periods in 1997. Net
sales for the Company's United States operations increased by approximately
$1,960,000 and $3,117,000, respectively, for the three and six months ended May
31, 1998 over comparable periods in 1997 primarily due to 1) increases in sales
of licensed product, especially Dunlop and Perry Ellis, 2) sales of certain
discontinued and slow-moving products and 3) sales by the Company's
recently-formed subsidiary, Airline Ventures, Inc. ("AVI"), which was not in
operation in the prior fiscal periods. This increase in net sales was partially
offset by a decrease in sales of the Company's unlicensed product. Net sales for
the Company's Canadian operations increased by approximately $128,000 and
decreased by approximately $263,000, respectively, for the three and six months
ended May 31, 1998 over comparable periods in 1997. The increase in net sales
for the three months ended May 31, 1998 reflects a steady penetration of the
Company's Hedgren and Perry Ellis product lines in the Canadian market, while
the decrease in net sales for the six months ended May 31, 1998 reflects the
loss, by Sirco Canada in fiscal 1996, of the license from Airway Industries Inc.
("Airway") to sell Atlantic luggage (see below). The sale of Airway product
accounted for approximately $472,000 in net sales for the first three months of
fiscal 1997 prior to the December 31, 1996 termination date.
The Company's gross profit for the three and six months ended May 31, 1998
increased by approximately $480,000 and $638,000, respectively, to approximately
$1,019,000 and $1,871,000, respectively, from approximately $539,000 and
$1,233,000, respectively, reported in the prior fiscal periods. The gross profit
percentage for the three and six months ended May 31, 1998 increased to
approximately 19.6% and 20.7%, respectively, from approximately 17.3% and 20.0%,
respectively, reported in the prior fiscal periods. While the margins showed
slight improvement for the three and six months ended May 31, 1998, the sales of
certain discontinued and slow-moving products at prices below the Company's
normal margins for similar items had a negative impact on the gross profit
percentage.
<PAGE>
During fiscal 1996, Airway notified the Company that it would not renew its
license agreement with the Company, pursuant to which Sirco Canada was granted
an exclusive license to sell in Canada, luggage and luggage related products
under the trade names "Atlantic" and "Oleg Cassini" through December 31, 1996.
In November 1996, the Company entered into an Asset Purchase Agreement with
Airway, whereby Airway agreed, among other things, to purchase any remaining
Atlantic inventory owned by Sirco Canada on December 31, 1996, to purchase
certain fixed assets and to enter into a two year lease for a substantial
portion of the premises owned by Sirco Canada at fair market value. Sirco Canada
sold approximately $472,000 of Airway product in the first quarter of fiscal
1997 prior to the December 31, 1996 termination date. The loss of the Airway
license had an adverse effect on the Company's results of operations for the
three and six months ended May 31, 1998 and will have an adverse effect on Sirco
Canada's results of operations for the remainder of the fiscal year ended
November 30, 1998.
On February 27, 1998, the Company acquired Essex Communications, Inc.,
("Essex"), a start-up telecommunications provider that is certified to resell
local telephone services and value-added products in the states of New Jersey
and New York. For the three months ended May 31, 1998, Essex had no sales of
services or products although it has started billing in June 1998. At July 10,
1998, Essex had customers utilizing approximately 400 telephone lines. Essex is
currently seeking certification to resell local telephone service in the states
of Connecticut, Massachusetts and Virginia and expects to be certified in each
of these states by the end of the Company's current fiscal year.
Selling, warehouse and general and administrative expenses increased for the
three and six months ended May 31, 1998 by approximately $442,000 and $661,000,
respectively, to approximately $1,572,000 and $2,891,000, respectively, from
approximately $1,130,000 and $2,230,000, respectively, reported in the prior
fiscal periods. A major portion of the increase is a direct result of expenses
incurred by the Company's wholly-owned subsidiaries AVI and Essex, which were
not in operation in the prior fiscal periods.
Interest expense for the three and six months ended May 31, 1998 increased by
approximately $35,000 and $60,000, respectively, from the amounts reported in
the same periods in fiscal 1997 due to higher average borrowings.
Miscellaneous income for the three and six months ended May 31, 1998 decreased
by approximately $62,000 and $117,000, respectively, from amounts reported in
the same periods in fiscal 1997. The decline of approximately $71,000 and
$137,000, respectively, in the Company's commission income generated from sales
arranged by the Company between overseas suppliers and certain customers was
offset by an increase of approximately $9,000 and $20,000, respectively, in
rental income reported by Sirco Canada.
At May 31, 1998, the Company was the largest shareholder of Access One
Communications Inc. (formerly CLEC Holding Corp.) ("Access One"), owning
approximately 30% of Access One's capital stock. As the Company's investment in
Access One is accounted for under the equity method of accounting, the Company
is required to include its portion of Access One's net loss in the Company's
results of operations. For the three and six months ended May 31, 1998, the
Company has recorded a loss of approximately $171,000 and $270,000,
respectively, relating to its investment in Access One.
<PAGE>
Liquidity and Capital Resources
At May 31, 1998, the Company had cash and cash equivalents of approximately
$1,168,000 and working capital of approximately $1,481,000.
Net cash provided by (used in) operating activities aggregated approximately
$1,812,000 and ($3,441,000) fiscal periods ended May 31, 1998 and May 31, 1997,
respectively.
Net cash used in investing activities aggregated approximately $13,000 and
$1,000 in fiscal periods ended May 31, 1998 and May 31, 1997, respectively. The
principal uses of cash from investing activities in fiscal 1998 and 1997 was for
the purchase of equipment. The principal source of cash provided from investing
activities in 1998 and 1997 was the proceeds of a note receivable from a 1992
sale of a subsidiary.
Net cash (used in) provided by financing activities aggregated approximately
($773,000) and $3,367,000 in the fiscal periods ended May 31, 1998 and May 31,
1997, respectively. In the fiscal period ended May 31, 1998, net cash used in
financing activities resulted from an increase in short-term debt of
approximately $1,343,000, partially offset by approximately $6,000 from the
proceeds of stock options, by approximately $488,000 from the proceeds of
warrants and by approximately $75,000 from the proceeds of a private placement
of common stock. In the fiscal period ended May 31, 1997, approximately
$2,568,000 of net cash was provided by short-term debt, approximately $191,000
was provided from the proceeds of stock options and approximately $609,000 was
provided from the proceeds of a private placement of common stock..
On December 17, 1996, the Company entered into a financing agreement with Coast
Business Credit, a division of Southern Pacific Thrift & Loan Association
("Coast"). See Note 2 to Notes to Condensed Consolidated Financial Statements
(Unaudited). As of May 31, 1998, the Company was indebted to Coast in the
principal amount of approximately $3,727,000 and had no outstanding letters of
credit. This loan matures on December 31, 1998 and therefore the entire
indebtedness is classified as a current liability, whereas a significant portion
of the indebtedness was considered a long-term liability at the Company's most
recent fiscal year-end November 30, 1997. The reclassification in debt from
long-tern to current has a significant impact on the Company's working capital
position. However, management believes it can successfully refinance this
working capital line in a manner that will not be disruptive to operations.
In January 1997, Sirco Canada was advised by its bank, National Bank of Canada,
that it would no longer provide Sirco Canada a revolving line of credit but
would continue to provide the real property mortgage loan on Sirco Canada's
office and warehouse facility. See Note 2 to Notes to Condensed Consolidated
Financial Statements (Unaudited). At May 31, 1998, the principal amount of the
mortgage loan was approximately $319,000. The Company is currently using the
Coast line of credit to provide letter of credit financing that was formerly
provided by National Bank of Canada.
For the six month period ended May 31, 1998, the Company had approximately
$32,000 in capital expenditures. The Company expects to make additional capital
expenditures over the next twelve months to purchase equipment for its
telecommunications division, but does not anticipate that these expenditures
will be significant.
<PAGE>
As of May 31, 1998, the Company owned approximately 30% of Access One, a
Florida-based competitive local exchange carrier. Although Access One has
approximately 750 shareholders, it is not publicly traded, there is no readily
ascertainable market for the stock, and the shares held by the Company bear a
restrictive legend stating that the shares have not been registered under the
Securities Act of 1933. The investment in Access One is recorded on the
Company's books by the equity method of accounting.
Management believes that the Company's present sources of financing, combined
with its present working capital and cash flow from operations will be
sufficient to meet the cash and capital requirements of the Company's travel
division for the next twelve months. However, if the depressed level in sales do
not increase or the Company is unable to improve its cash position by raising
capital, the Company may experience temporary cash shortages. Such cash
shortages may negatively impact the Company's ability to purchase inventory in a
timely manner, which could impact the Company's results of operations.
The Company anticipates that it will need to raise up to $1 million to meet the
cash requirements for its telecommunications division contemplated by the
business plan for that division for the next twelve months. There can be no
assurances that the Company will be able to obtain such funding when needed, or
that such funding, if available, will be obtainable on terms acceptable to the
Company. The failure by the Company to raise the necessary funds to finance its
telecommunications operations will have an adverse effect on the ability of the
Company to carry out its business plan for its telecommunications division.
<PAGE>
Item 4.- Submission of Matters To a Vote of Security Holders
(a) The 1998 Annual meeting of Shareholders of the Company (the "1998
Annual Meeting") was duly held on June 11, 1998.
(b) Inapplicable, as (i) proxies for the meeting were solicited
pursuant to Regulation 14 under the Act; (ii) there was no
solicitation in opposition to the management's nominees as listed
in the proxy statement relating to the 1998 Annual Meeting (the
"Proxy Statement"); and (iii) all of such nominees were duly
elected.
(c) Set forth below is a brief description of each other matter voted
upon at the 1998 Annual Meeting and the number of affirmative
votes and the number of negative votes cast:
(i) The approval and adoption of an amendment to the Company's
Certificate of Incorporation to increase the authorized
shares of Common Stock from 10,000,000 shares to
20,000,000 shares. The information contained in the Proxy
Statement at pages 9 through 10 under the heading
"Proposal to Increase Authorized Shares of Common Stock"
is incorporated by reference herein.
Votes For....................... 4,144,951
Votes Against .................. 70,900
Votes Abstaining................ 29,150
Non-Vote........................ 964,899
(d) Not applicable.
<PAGE>
SIRCO INTERNATIONAL CORP.
PART II-OTHER INFORMATION
Item 2. Changes in Securities
On April 23, 1998, the Company sold to Access One Communications, Inc.
("Access One"), 350,000 shares of Common Stock of the Company in
consideration of the issuance to the Company by Access One of 300,000
shares of common stock, par value $.001 per share, of Access One, and
$150,000 in cash. Such transaction was effected pursuant to Section
4(2) of the Securities Act of 1933, as amended.
On May 8 and 11, 1998, the Company sold an aggregate of 260,000 shares
of Common Stock of the Company to five vendors from which the Company
buys luggage, sports bags and other travel related products, in
consideration of the cancellation of an aggregate of $1,170,000 in
vendor invoices. Such transactions were effected pursuant to Section
4(2) of the Securities Act of 1933, as amended.
On February 27, 1998 and April 16, 1998, the Company issued to the then
shareholders of Essex Communications, Inc. ("Essex"), an aggregate of
300,000 shares of Common Stock of the Company in conjunction with the
purchase of all the outstanding shares of common stock of Essex. Such
transaction was effected pursuant to Section 4(2) of the Securities Act
of 1933, as amended.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
None
27 Financial Data Schedule.
(b) Reports on Form 8-K
During the third quarter of fiscal 1998, the Company
filed a Current Report on Form 8-K dated June 18, 1998, reporting the
issuance of preferred stock.
<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 hereunto duly authorized.
Sirco International Corp.
July 15, 1998 By: /s/ Joel Dupre
------------- ---------------
Date Joel Dupre
Chairman of the Board and
Chief Executive Officer
July 15, 1998 By: /s/ Paul Riss
------------- -------------
Date Paul Riss
Chief Financial Officer
(Principal Financial and
Accounting Officer)
<PAGE>
EXHIBIT INDEX
No. Description
- --- -----------
27 Financial Data Schedule.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
"This schedule contains summary financial information extracted from the Balance
Sheet and Income Statement and is qualified in its entirety by reference to such
financial statements."
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-END> MAY-31-1998
<CASH> 1,168,032
<SECURITIES> 0
<RECEIVABLES> 2,507,710
<ALLOWANCES> 390,213
<INVENTORY> 5,088,855
<CURRENT-ASSETS> 8,804,449
<PP&E> 1,779,045
<DEPRECIATION> 976,086
<TOTAL-ASSETS> 12,875,683
<CURRENT-LIABILITIES> 7,323,943
<BONDS> 311,668
0
0
<COMMON> 547,840
<OTHER-SE> 4,692,232
<TOTAL-LIABILITY-AND-EQUITY> 12,875,683
<SALES> 9,029,994
<TOTAL-REVENUES> 9,087,620
<CGS> 7,159,234
<TOTAL-COSTS> 2,891,282
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 297,252
<INCOME-PRETAX> (1,498,944)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,498,944)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,498,944)
<EPS-PRIMARY> (.32)
<EPS-DILUTED> (.32)
</TABLE>
