<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
[ ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended JANUARY 31, 1999
----------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT
OF 1934
For the transition period from to
---------------------- ------------------
Commission File Number 0-22964
-------
SEL-DRUM INTERNATIONAL, INC.
----------------------------
(Exact name of small business issuer as specified in its charter)
NEW YORK 84-1236134
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
501 AMHERST STREET, BUFFALO, NEW YORK 14207-2913
------------------------------------------------
(Address of principal executive offices)
905-335-2766
------------
(Issuer's telephone number)
----------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed
since last report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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[ ]
State the number of shares outstanding for each of the issuer's classes
of common equity, as of the latest practicable date:
COMMON STOCK, $.01 PAR VALUE
7,542,500 SHARES ISSUED AND OUTSTANDING AS OF MARCH 12, 1999
Transitional Small Business Disclosure Format (check one:)
Yes [ ] No [X]
<PAGE> 2
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
Unaudited Consolidated Balance Sheets as of January 31, 1999
and July 31, 1998
Unaudited Consolidated Statements of Income for the three
and six months ended January 31, 1999 and January 31, 1998
Unaudited Consolidated Statements of Cash Flow for the six
months ended January 31, 1999 and January 31, 1998
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
-2-
<PAGE> 3
SEL-DRUM INTERNATIONAL, INC. AND SUBSIDIARIES
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
UNAUDITED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS (U.S.$)
CURRENT ASSETS January 31, 1999 July 31, 1998*
-------------- ------------------------ ---------------------
<S> <C> <C>
Cash and cash equivalents $84,844 $285,750
Accounts receivable, net 2,054,585 1,826,182
Deferred income taxes 34,000 34,000
Inventories 3,512,963 3,457,466
Refundable income taxes 60,541 121,155
Other current assets 57,474 107,751
------------------------ ---------------------
TOTAL CURRENT ASSETS 5,804,407 5,832,304
PROPERTY
--------
Equipment 1,389,371 1,332,078
Vehicles 38,757 38,757
Furniture and fixtures 76,098 65,314
Leasehold improvements 406,164 406,696
------------------------ ---------------------
1,910,390 1,842,845
Less accumulated
depreciation and amortization (1,131,420) (1,024,905)
------------------------ ---------------------
778,970 817,940
OTHER ASSETS
------------
Organization costs, net 6,339 7,006
Purchased and developed technology, net 39,023 43,258
Non-competition agreement, net 130,711 130,711
Deposits 11,204 11,593
Loans received from related parties 149,857 160,084
------------------------ ---------------------
337,134 352,652
------------------------ ---------------------
$6,920,511 $7,002,896
======================== =====================
</TABLE>
* Derived from the July 31, 1998 Form 10-KSB
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<PAGE> 4
SEL-DRUM INTERNATIONAL, INC. AND SUBSIDIARIES
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
UNAUDITED CONSOLIDATED BALANCE SHEETS (CONT'D)
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY (U.S.$)
CURRENT LIABILITIES January 31, 1999 July 31, 1998*
------------------- --------------------------- -----------------------
<S> <C> <C>
Bank overdraft $346,936 $314,104
Notes payable to bank 529,120 311,121
Current portion of long-term debt 54,288 148,263
Accounts payable 214,579 688,451
Other current liabilities 213,860 136,300
--------------------------- -----------------------
TOTAL CURRENT LIABILITIES 1,358,783 1,598,239
OTHER LIABILITIES
-----------------
Long-term debt 230,384 257,724
Deferred income taxes 100,533 49,913
--------------------------- -----------------------
330,917 307,637
SHAREHOLDERS' EQUITY
--------------------
Common Stock 76,425 76,425
Additional paid-in capital 706,846 706,846
Preferred Stock 4,499,805 4,499,805
Cumulative foreign currency translation adjustment (289,850) (274,643)
Retained earnings 410,085 261,087
--------------------------- -----------------------
5,403,311 5,269,520
Less Common stock, subject to "put rights" (122,500) (172,500)
--------------------------- -----------------------
5,280,811 5,097,020
Less Common stock in treasury (50,000) -
--------------------------- -----------------------
5,230,811 5,097,020
--------------------------- -----------------------
$6,920,511 $7,002,896
=========================== =======================
</TABLE>
*Derived from the July 31, 1998 Form 10-KSB.
-4
<PAGE> 5
SEL-DRUM INTERNATIONAL, INC. AND SUBSIDIARIES
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
(U.S.$)
QUARTER ENDED
---------------------------------------------
JANUARY 31
---------------------------------------------
1999 1998
--------------------- -----------------
<S> <C> <C>
Net sales $3,461,092 $3,428,788
Cost of goods sold 2,537,335 2,424,058
--------------------- -----------------
GROSS PROFIT 923,757 1,004,730
Selling, operating and general and administrative expenses 798,606 717,348
Provision for bad debts 14,611 18,470
--------------------- -----------------
INCOME FROM OPERATIONS 110,540 268,912
Other income (expense):
Interest Income 572 12,714
Interest Expense (12,668) (16,942)
Foreign currency transaction gain (loss) 11,315 (18,928)
--------------------- -----------------
(781) (23,156)
--------------------- -----------------
INCOME BEFORE INCOME TAXES 109,759 245,756
Income Taxes:
Current 46,581 92,590
Deferred - -
--------------------- -----------------
46,581 92,590
--------------------- -----------------
NET INCOME $ 63,178 $ 153,166
===================== =================
Number of common shares outstanding 7,542,500 7,642,500
Net income per common share $ .01 $ .02
===================== =================
</TABLE>
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<PAGE> 6
SEL-DRUM INTERNATIONAL, INC. AND SUBSIDIARIES
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
(U.S.$)
SIX MONTHS ENDED
----------------------------------------------
January 31
----------------------------------------------
1999 1998
-------------------- -------------------
<S> <C> <C>
Net sales $6,702,882 $7,117,077
Cost of goods sold 4,812,978 5,012,793
-------------------- -------------------
GROSS PROFIT 1,889,904 2,104,284
Selling, operating and general and administrative expenses 1,570,830 1,562,213
Provision for bad debts 32,469 37,065
-------------------- -------------------
INCOME FROM OPERATIONS 286,605 505,006
Other income (expense):
Interest Income 880 12,910
Interest Expense (27,993) (35,124)
Foreign currency transaction gain (loss) 8,674 (13,610)
-------------------- -------------------
(18,439) (35,824)
-------------------- -------------------
INCOME BEFORE INCOME TAXES 268,166 469,182
Income Taxes:
Current 119,168 206,765
Deferred - -
-------------------- -------------------
119,168 206,765
-------------------- -------------------
NET INCOME $148,998 $262,417
==================== ===================
Number of common shares outstanding 7,542,500 7,642,500
Net income per common share $ .02 $ .03
==================== ===================
</TABLE>
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<PAGE> 7
SEL-DRUM INTERNATIONAL, INC. AND SUBSIDIARIES
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
(U.S.$)
SIX MONTHS ENDED
------------------------------------
JANUARY 31
------------------------------------
CASH FLOWS - OPERATING ACTIVITIES 1999 1998
- --------------------------------- -------------- ---------------
<S> <C> <C>
Net Income $148,998 $262,417
Adjustments to reconcile net income to net cash provided from
(used for) operating activities:
Provision for bad debts 32,469 37,065
Depreciation and amortization 120,572 104,146
Deferred income taxes 50,620 42,625
Gain on Disposal of Property - -
Changes in certain assets and liabilities affecting operations:
Accounts receivable (282,891) 261,930
Inventories (55,497) 92,775
Other current assets 50,277 3,582
Deposits 389 3,094
Accounts payable (473,872) (441,334)
Income taxes payable 60,614 (2,974)
Other current liabilities 77,560 166,700
-------------- ---------------
NET CASH PROVIDED FROM OPERATING ACTIVITIES (270,761) 530,026
CASH FLOWS - INVESTING ACTIVITIES
- ---------------------------------
Purchases of property (78,106) (35,507)
-------------- ---------------
NET CASH (USED FOR) INVESTING ACTIVITIES (78,106) (35,507)
CASH FLOWS - FINANCING ACTIVITIES
- ---------------------------------
Redemption of preferred shares - (175,279)
Bank overdraft 32,832 -
Loans receivable - related parties 10,227 (110,717)
Short-term borrowings net 217,999 (648,797)
Repayments on long-term debt (121,315) (51,719)
Repurchase of Common Stock (50,000) -
-------------- ---------------
NET CASH (USED FOR) PROVIDED FROM FINANCING ACTIVITIES 89,743 (986,512)
Effect of exchange rate changes on cash 58,218 (39,245)
-------------- ---------------
NET (DECREASE) INCREASE IN CASH (200,906) (531,238)
Cash and Cash Equivalents at beginning of period 285,750 1,084,954
-------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $84,844 $553,716
============== ===============
-7-
</TABLE>
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
GENERAL
- -------
Sel-Drum International, Inc., a New York corporation ("Sel-Drum" or the
"Company" is a leading independent distributor of high mortality copier and
printer replacement parts and supplies. As one of the largest independent high
mortality copier parts distribution companies in North America, Sel-Drum
provides a link between parts manufacturers, sellers and buyers. Sel-Drum is
also developing strong relationships with suppliers who seek advanced inventory
management and order processing.
Sel-Drum is the successor corporation to Dakota Equities, Ltd., a
publicly-held "blind pool." On February 1, 1995, the Company acquired all of the
outstanding common shares of Sel-Drum Imaging Corporation, the parent
corporation of Sel-Drum Corporation, a privately held Canadian corporation which
was founded in 1978. Through its Sel-Drum Imaging Corporation subsidiary, the
Company has two wholly-owned subsidiaries, Sel-Drum Corporation (U.S.A.), Inc.
and Sel-Drum Corporation. On November 1, 1996, Micron Imaging Corporation and
Sel-Drum Corporation combined their operations into one entity, which continued
to do business as Sel-Drum Corporation (now the Kelowna Facility). Unless
otherwise indicated, all references to "Sel-Drum" or the "Company" include the
Company, Sel-Drum Imaging Corporation, Sel-Drum Corporation (U.S.A.), Inc. and
Sel-Drum Corporation.
It should be noted that approximately 90% of the Kelowna Facility's
remanufactured product is sold directly to the other operating divisions.
Sel-Drum Corporation (U.S.A.), Inc. and Sel-Drum Corporation employ a number of
sales agents and telemarketers who directly contact the copier machine dealers
throughout North America. There are approximately 5,000 such dealers marketing
various brands of copier products. the Company estimates that the potential
marketplace for high mortality replacement parts, drums and toner, not
controlled by the Original Equipment Manufacturers ("O.E.M's") to be
approximately $750 million in North America.
The Company's primary business is the distribution of high mortality
copier and printer replacement parts, toners, and photoreceptors ("Drums")
including, to a limited extent, the manufacturing of Drums. On August 1, 1995,
the Company added remanufactured facsimile and printer cartridges to its product
offering. The Company markets in the United States and Canada through a direct
network of sales agents and telemarketers. Outside of North America, the Company
is represented by several distributors with their sales accounting for less than
5% of the total revenues.
On March 7, 1997, the Company and certain principal shareholders
terminated discussions with JRCS Corp. regarding the sale of substantially all
of the outstanding capital stock of the Company.
In late 1997, the Company initiated a strategic plan which was
designated to focus on the longer term growth prospects of the Company. This new
strategy calls for concentrating on the Company's core business and the existing
opportunities within the high mortality copier replacement part and printer part
marketplace.
-8-
<PAGE> 9
Additional strategic items include seeking acquisition candidates and a
listing on the Chicago Stock Exchange, The Nasdaq SmallCap Market or a national
or other regional exchange, and establishing integrated data systems, all of
which served to increase the Company's budgeted 1998 expenses.
On October 29, 1997, the Company announced that it had hired Raymond C.
Sparks as its new Chief Executive Officer and President, replacing Brian F.
Turnbull who has agreed to remain with the Company as Chairman of the Board.
In December 1997, the Company reorganized its sales staff and began
implementing this reorganization during the month of January 1998.
On January 15, 1998, the Company repurchased 172 shares of Class C and
241 shares of Class D Preferred Stock in the Company's Sel-Drum Imaging
Corporation subsidiary held by two of the Company's principal shareholders. The
total purchase price was $300,000, of which approximately $175,000 was delivered
during the quarter ended January 31, 1998, and approximately $125,000 was
delivered during the quarter ended April 30, 1998.
At the Annual Meeting of Shareholders of the Company held on December 1,
1998, three nominees were proposed for election as directors. Prior to the vote
on the election of directors, Robert E. Asseltine withdrew his name as a
nominee. Brian F. Turnbull and Robert M. Orr were elected directors of the
Company to serve until the next Annual Meeting of Shareholders and until their
successors are elected or appointed and qualify. As of the date of this report,
the vacancy created by Mr. Asseltine's withdrawal has not been filled by the
Board of Directors.
-9-
<PAGE> 10
RESULTS OF OPERATIONS
- ---------------------
The Company's results of operations are affected by numerous factors
such as general economic conditions, competition and inventory costs. The
largest component of the Company's cost of sales is inventory cost, which may
vary slightly from period to period based upon timing of purchases and exchange
rate fluctuations which indirectly affect the Company's inventory costs.
The Company has restated its cost of goods sold to include additional
costs associated, directly or indirectly, with product costs. These newly
incorporated costs include direct and indirect costs associated with the
acquisition of inventory.
The following table sets forth for each of the periods presented,
certain income statement data for the Company expressed as a percentage of net
sales.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
January 31, January 31, January 31, January 31,
----------- ----------- ----------- -----------
Statement of Operations Data 1999 1998 1999 1998
- ---------------------------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales 100.0% 100.0% 100.0% 100.0%
As a Percentage of Net Sales:
Cost of Goods Sold 73.3 70.7 71.8 70.4
Gross Profit 26.7 29.3 28.2 29.6
Selling, General and Administrative Expenses 23.1 20.9 23.4 22.0
Provision for Bad Debt 0.4 0.5 0.5 0.5
Income from Operations 3.2 7.9 4.3 7.1
Other Income (Expense) - (0.7) (0.3) (0.5)
Income Before Taxes 3.2 7.2 4.0 6.6
Net Income 1.8 4.5 2.2 3.7
</TABLE>
Net sales for the three months ended January 31, 1999 were $3,461,092 as
compared with $3,428,788 for the three months ended January 31, 1998, an
approximate increase of 1%. For the six months ended January 31, 1999, net sales
were $6,702,882, as compared with $7,117,077 for the six months ended January
31, 1998, a decrease of approximately 6%. The decrease in net sales for the six
months ended January 31, 1999 is principally the result of the slow first
quarter of Fiscal 1999.
Gross profit margin for the three months ending January 31, 1999 was
26.7%, as compared to 29.3% for the same period last year. For the six months
ended January 31, 1999, gross profit margin was 28.2% as compared to 29.6% for
the six months ended January 31, 1998. In absolute dollars, gross profit
decreased from $1,004,730 for the three months ended January 31, 1998 to
$923,757 for the three months ended January 31, 1999. For the six months ended
January 31, 1999, absolute gross profit dollars decreased to $1,889,904 from
$2,104,284 for the six months ended January 31, 1998. The decrease in
-10-
<PAGE> 11
absolute gross profit dollars of $80,973 and $214,380 for the three and six
month periods, respectively, resulted primarily from exchange rate fluctuations.
Selling, general, and administrative expenses for the three months ended
January 31, 1999 increased 11.3% from the prior comparable period. As a
percentage of net sales, selling, general and administrative expenses increased
primarily as a result of staff hiring and depreciation charges related to the
purchase of a new computer system. For the six months ended January 31, 1999,
selling, general and administrative expenses in absolute dollars increased by
$8,617 or 0.6%. The increases for the six-month period resulted primarily from
timing of sales commissions and bonuses and increased professional expenses due
to the Company's previously stated strategic plan.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company's principal capital requirements are to fund its working
capital needs and material inventory requirements and to fund the improvement of
facilities, machinery and equipment. Historically, the Company has used income
generated by operations as well as bank financing to fund these capital needs.
Net cash provided by operating activities primarily represents net
income plus changes in working capital positions. Net cash provided by operating
activities for the six months ended January 31, 1999 was ($270,761).
Net cash used for investing activities represents purchases of property
in connection with the start up of a facsimile and printer cartridge production
operation at the Company's Kelowna, British Columbia facility.
The Company currently has a revolving demand loan arrangement with the
National Bank of Canada in the amount of $3,700,000 (CDN). These borrowings
generally assist the Company with funding of accounts receivable and inventory
purchases. As of January 31, 1999 outstanding borrowings of $529,120 (U.S.)
existed under this arrangement.
Cash flow from operations coupled with cash flow generated by bank
financing has provided the Company with the cash necessary to meet its cash
requirements. Except for certain planned capital expenditures in connection with
computer system upgrades, for the foreseeable future, the Company does not
anticipate any significant cash outlays other than those consistent with past
practices.
YEAR 2000 ISSUE
- ---------------
The Year 2000 issue stems from date coding practices in both software
and hardware. Specifically, hardware and software developers have often used
two-digit numbers rather than four-digit numbers to represent years. This was
done in a conscious effort to provide cost-effective and efficient business
solutions, given resource constraints and requirements in the past.
Consequently, when the year turns to 2000, the software may calculate the date
as 1900 because the century has not been defined.
-11-
<PAGE> 12
Management has initiated an enterprise-wide program to prepare the
Company's computer systems and applications for the year 2000. The Company
expects to incur internal staff costs as well as consulting and other expenses
related to infrastructure and facilities enhancements necessary to prepare the
systems for the year 2000. The Company is expending significant resources to
assure that its computer systems are reprogrammed in time to effectively deal
with transactions in the year 2000 and beyond. The Company expects to spend as
much as $250,000 in order to get the systems ready for processing in the year
2000. Much of this outlay will be for new computer equipment and a new core data
processing system, which will be capitalized and amortized over five and three
years respectively. The core system being considered is a state-of-the-art
in-house, client/server based system. In addition to being Year 2000 ready, the
new processing system will result in immediate cost savings compared with the
existing system. The Company does not expect the amount required to be expensed
over the next three to five years to have a material effect on its financial
position or results of operations. Cost savings from the new system are expected
to completely offset the entire expenditure within three years. The amount
expensed to date is immaterial.
The Year 2000 problem creates risk for the Company from both unforeseen
problems in its own computer systems and from problems in the computer systems
of third parties with whom the Company transacts business. Failures of the
Company's and/or third parties' computer systems could have a material adverse
impact on the Company's ability to conduct business.
The Company expects its Year 2000 date conversion project to be
completed on a timely basis. However, there can be no assurance that the systems
of other companies on which the Company's systems rely also will be timely
converted or that any such failure to convert by another company would not have
an adverse effect on the Company's systems.
-12-
<PAGE> 13
PART II
OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On December 1, 1998, the Shareholders of the Company approved
the following proposals at the Annual Meeting:
PROPOSAL 1: TO ELECT DIRECTORS TO SERVE UNTIL THE 1999 ANNUAL MEETING:
- ----------
Authority
For Withheld
--- --------
Brian F. Turnbull 6,318,680 2,500
Robert M. Orr 6,318,680 2,500
PROPOSAL 2: TO APPROVE AND ADOPT A CERTIFICATE OF AMENDMENT OF THE COMPANY'S
CERTIFICATE OF INCORPORATION TO EFFECT A REVERSE STOCK SPLIT OF UP TO
0.25-FOR-ONE:
For Against Abstain
--- ------- -------
6,318,680 2,500 0
PROPOSAL 3: TO APPROVE AND RATIFY AN AMENDMENT TO THE SEL-DRUM INTERNATIONAL,
INC. 1995 EMPLOYEE AND NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN TO INCREASE THE
NUMBER OF SHARES AVAILABLE FOR OPTION GRANTS UNDER THE PLAN FROM 500,000 TO
700,000.
For Against Abstain
--- ------- -------
6,318,680 2,500 0
PROPOSAL 4: TO APPROVE AND RATIFY THE SELECTION OF MENGEL, METZGER, BARR & CO.
LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING JULY 31,
1999:
For Against Abstain
--- ------- -------
6,321,180 0 0
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) See Index to Exhibits.
(b) Reports on Form 8-K.
There were no reports on Form 8-K filed during the quarter for which
this report is filed.
-13-
<PAGE> 14
SIGNATURES
In accordance with the requirements of the Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SEL-DRUM INTERNATIONAL, INC.
Date March 17, 1999 /s/ Raymond C. Sparks
----------------------------- ------------------------------------
Raymond C. Sparks, President and CEO
Date March 17, 1999 /s/ John C. Hall
----------------------------- ------------------------------------
John C. Hall, Vice President-Finance
-14-
<PAGE> 15
INDEX TO EXHIBITS
(2) PLAN OF ACQUISITION, REORGANIZATION, ARRANGEMENT, LIQUIDATION OR
SUCCESSION
Not applicable.
(3) (a) ARTICLES OF INCORPORATION
Restated Certificate of Incorporation is incorporated by
reference to Exhibit 3 (a) to the Registrant's Form 10-QSB
for the quarterly period ended January 31, 1998.
(b) BY-LAWS
Amended and Restated By-laws are incorporated by reference
to Exhibit 3 (b) to the Registrant's Form 10-QSB for the
quarterly period ended January 31, 1998.
(4) INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING
INDENTURES
The documents listed under Item (3) of this Index are incorporated
herein by reference.
(10) MATERIAL CONTRACTS
Not applicable.
(11) STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
Computation can be clearly determined the Financial Statements included
herein under Item 1.
(15) LETTER ON UNAUDITED INTERIM FINANCIAL INFORMATION
Not applicable.
(18) LETTER ON CHANGE IN ACCOUNTING PRINCIPLES
Not applicable.
(22) PUBLISHED REPORT REGARDING MATTERS SUBMITTED TO VOTE
Not applicable.
(23) CONSENT OF EXPERTS AND COUNSEL
Not applicable.
-15-
<PAGE> 16
(24) POWER OF ATTORNEY
Not applicable.
*(27) FINANCIAL DATA SCHEDULE
The Financial Data Schedule is included herein as Exhibit 27.
(99) ADDITIONAL EXHIBITS
Not applicable.
- ------------------------
* Exhibit filed with this Report
-16-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE COMPANY'S JANUARY 31, 1999 FORM
10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-1999
<PERIOD-END> JAN-31-1999
<CASH> 84,844
<SECURITIES> 0
<RECEIVABLES> 2,109,073
<ALLOWANCES> 54,488
<INVENTORY> 3,512,963
<CURRENT-ASSETS> 5,804,407
<PP&E> 1,910,390
<DEPRECIATION> 1,131,420
<TOTAL-ASSETS> 6,920,511
<CURRENT-LIABILITIES> 1,358,783
<BONDS> 0
0
4,499,805
<COMMON> 76,425
<OTHER-SE> 654,581
<TOTAL-LIABILITY-AND-EQUITY> 6,920,511
<SALES> 6,702,882
<TOTAL-REVENUES> 6,702,882
<CGS> 4,812,978
<TOTAL-COSTS> 4,812,978
<OTHER-EXPENSES> 1,570,830
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 27,993
<INCOME-PRETAX> 268,166
<INCOME-TAX> 119,168
<INCOME-CONTINUING> 148,998
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 148,998
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
