<PAGE>
FLOTEK INDUSTRIES INC. AND SUBSIDIARIES
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 - QSB
(x) Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarter ended August 31, 1999
( ) Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (no fee required)
Commission file number 1-13270
FLOTEK INDUSTRIES INC.
(Exact name of registrant as specified in its charter)
ALBERTA 77-0709256
(State or other jurisdiction of incorporation
(I.R.S. Employer Identification No.)
or organization)
7030 EMPIRE CENTRAL DRIVE, HOUSTON, TEXAS 77040
(Address of principal executive offices) (zip code)
REGISTRANTS TELEPHONE NUMBER, INCLUDING AREA CODE
(713) 849-9911
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 and 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 ( )
As of August 31, 1999 the number of shares of common stock outstanding was
48,493,295
Transitional Small Business Disclosure Format (check one):
Yes ( ) No (x)
1
<PAGE>
FLOTEK INDUSTRIES INC. AND SUBSIDIARIES
Part 1 - Financial Information
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
Assets August 31, August 31,
1999 1998
---- ----
<S> <C> <C>
CURRENT ASSETS
Cash $ (6,483) $ 69,210
Accounts receivable, less allowance for doubtful
accounts of $25,569 and $5,311 453,609 469,450
Inventory 858,810 829,390
------------ -------------
Total Current assets 1,305,936 1,368,050
FURNITURE AND EQUIPMENT 354,290 149,992
OTHER ASSETS 372,375 141,205
------------ -------------
2,032,601 1,659,247
-------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Note payable 171,307 30,000
Current portion of long-term debt 1,379,446 766,535
Due to related party - -
Accounts payable and accrued liabilities 543,869 562,771
Accrued repurchase option - 264,085
------------ -------------
Total current liabilities 2,094,622 1,623,391
LONG-TERM DEBT 138,004 12,802
COMMITMENTS - -
SHAREHOLDERS' EQUITY
Common stock-no par value; 1000,000,000 shares
authorized; 48,493,295, issued and outstanding 18,384,295 17,870,210
Additional paid in capital 163,813 150,313
Equity adjustment from foreign currency translation (234,574) (284,622)
Accumulated deficit (18,229,248) (17,712,847)
------------ -------------
Total Equity (200,025) 23,054
------------ -------------
2,032,601 1,659,247
-------------------------------
</TABLE>
The accompanying notes are an integral part of these statements and should be
read in conjunction herewith.
2
<PAGE>
FLOTEK INDUSTRIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Six Months
Ended August 31, Ended August 31,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales 451,119 486,897 755,772 1,216,583
Cost and expenses:
Cost of goods sold 194,918 400,979 380,800 748,798
Selling 222,749 301,264 461,134 620,813
General and administrative 77,381 283,385 188,371 504,481
Depreciation and amortization 13,127 15,670 24,303 30,853
Research and development - - - -
----------- ---------- ---------- ----------
508,175 1,001,298 1,054,609 1,904,945
Loss from operations (57,056) (514,401) (298,837) (688,362)
Other income (expense), net
Interest (39,494) (42,301) (72,898) (84,737)
Other 68 12,468 87,424 54,675
(39,426) (29,833) 14,526 (30,062)
----------- ---------- ---------- ----------
Net loss (96,482) (544,234) (284,310) (718,424)
Basic and diluted loss per share .002 .013 .006 .021
Weighted average number of shares outstanding 45,680,795 43,180,795 48,493,295 43,180,795
</TABLE>
The accompanying notes are an integral part of these financial statements and
should be read in conjunction herewith
3
<PAGE>
FLOTEK INDUSTRIES INC. AND SUBSIDIARIES
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months
Ended August 31,
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period (284,310) (718,424)
Adjustments to reconcile net losses to net cash
used in operating activities
Depreciation and amortization 24,303 30,853
Accretion of discount 4,639 44,261
Severence provision - 80,635
CHANGE IN ASSETS AND LIABILITIES
(Increase) Decrease in accounts receivable (315,252) (41,984)
Decrease (Increase) in inventory (73,171) 253,544
(Decrease) Increase in accounts payable and accrued
liabilities 111,596 (257,520)
Increase in due to related parties (21,000) -
Net cash (used) provided in operating activities (553,195) (608,635)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of furniture and equipment (236,427) -
Purchase of other assets (235,189) -
Net cash used by investing activities (471,616) -
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt and notes payable 718,684 -
Repayment of long-term debt and notes payable - (65,981)
Stock issued for purchase 250,000
Net cash (used) provided by financing activities 968,684 (65,981)
Effect of exchange rates on cash (848) 1,014
Net (decrease) increase in cash (56,127) (673,602)
Cash at beginning of year 50,492 634,511
Cash at end of period (6,483) 69,210
SUPPLEMENTARY INFROMATION
Interest paid 72,898 40,693
Income taxes paid - -
</TABLE>
The accompanying notes are an integral part of these financial statements and
should be read in conjunction herewith
4
<PAGE>
FLOTEK INDUSTRIES INC. AND SUBSIDIARIES
Note 1 - General
The unaudited consolidated condensed financial statements included
herein have been prepared by Flotek Industries Inc. (the "company") pursuant
to the rules and regulations of the Securities and Exchange Commission. These
financial statements reflect all adjustments which the company considers
necessary for the fair presentation of such financial statements for the
interim periods presented. Although the Company believes that the disclosures
in these financial statements are adequate to make the interim information
presented not misleading, certain information relating to the Company's
organization and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles has been condensed or omitted in this Form 10 QSB pursuant to such
rules and regulations. These financial statements should be read in
conjunction with the audited consolidated financial statements and notes
thereto included in the Company's Annual Report on Form 10-KSB for the year
ended February 28, 1999. The results of operations for the six-month period
ended August 31, 1999 are not necessarily indicative of the results expected
for the full year.
Note 2 - Comprehensive Income
Effective March 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, Reporting Comprehensive Income, which requires
an entity to report and display comprehensive income and its components.
Comprehensive income includes net earnings plus other comprehensive income.
The Company's other comprehensive income consists of foreign currency
translation adjustments.
<TABLE>
<CAPTION>
Six Months Ended August 31,
Comprehensive income: 1999 1998
---------- ----------
<S> <C> <C>
Net Loss $ (284,310) $ (718,424)
Cumulative translation adjustment (46,233) 1,014
---------- ----------
Total comprehensive income $ (238,077) $ (717,410)
---------- ----------
</TABLE>
5
<PAGE>
FLOTEK INDUSTRIES INC. AND SUBSIDIARIES
Note 3 - Segment Information
The Company is an energy service and manufacturing company that
provides a variety of services and equipment to the exploration and
production of oil and gas. The Company defines its business segments into two
separate groups: drilling products and production equipment. Financial
information by industry segment for each of the six months ended August 31,
1999 and 1998 is summarized below:
<TABLE>
<CAPTION>
1999 Drilling Production
Products Equipment Corporate Total
-------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Revenue 493,509 262,264 - 755,773
Total expenses 663,952 292,260 86,755 1,042,968
Income (loss) from operations (170,444) (29,996) (86,755) (298,837)
Net income (loss) (166,248) (29,563) (76,858) (284,311)
1998 Drilling Production
Products Equipment Corporate Total
-------- ---------- --------- ---------
Revenue 937,623 278,959 - 1,216,582
Total expenses 1,108,388 369,608 426,948 1,904,944
Income (loss) from operations (170,764) (90,650) (426,948) (688,362)
Net income (loss) (150,347) (63,210) (504,867) (718,424)
</TABLE>
Note 4 - Reclassifications and Restatements
Certain reclassifications of prior year balances have been made to
conform such amounts to corresponding 1999 classifications. These
reclassifications had no impact on net income or shareholders' equity.
6
<PAGE>
FLOTEK INDUSTRIES INC. AND SUBSIDIARIES
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
This Form 10-QSB includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended and Section
21E of the Securities Exchange Act of 1934, as amended. The words
"anticipate," "believe," "expect," "plan," "intend," "project," "forecasts,"
"could" and similar expressions are intended to identify forward-looking
statements. All statements other than statements of historical facts included
in this Form 10-QSB regarding the Company's financial position, business
strategy, budgets and plans and objectives of management for future
operations are forward-looking statements. Although the Company believes that
the expectations reflected in such forward-looking statements are reasonable,
no assurance can be given that actual results may not differ materially from
those in the forward-looking statements herein for reasons including the
effect of competition, the level of petroleum industry exploration and
production expenditures, world economic conditions, prices of, and the demand
for crude oil and natural gas, drilling activity, weather, the legislative
environment in the United States and other countries, and the condition of
the capital and equity markets.
Management's Discussion and Analysis of Financial Condition and
Results of Operations should be read in conjunction with the Company's
Consolidated Financial Statements and the related notes thereto.
Business
Flotek Industries Inc. (hereafter the "Company" or "Flotek") was
originally incorporated under the laws of the Province of British Columbia on
May 17, 1985. Effective September 7, 1995, the Company transferred its
corporate status by continuing under the laws of the Province of Alberta.
Flotek is headquartered in Houston, Texas and its common shares have been
listed on the Vancouver Stock Exchange and the OTC Bulletin Board market. On
April 7, 1999, the Company received notice from the Vancouver Stock Exchange
regarding the acceptance of the Company's request to voluntarily delist and
that the last day of trading of the common shares of the Company on the
Vancouver Stock Exchange was April 21, 1999. The Company's common stock
continues to be traded in the United States on the OTC Bulletin Board market.
The Company's products are used both for the drilling and production
phases of oil and natural gas wells. The Company's product lines are divided
into two separate segments in the industry: drilling products and production
equipment. The production equipment segment develops, manufactures and
markets the Petrovalve + Plus-R- Pump Valve and the Petrovalve Gas Breaker
Valve, which are valves for down-hole sucker-rod pumps used in oil wells. The
drilling products segment manufactures and distributes centralizers, which
are spiraled vane cementing sleeves and stand off tools that improve mud and
cementing displacement in drilled oil wells.
7
<PAGE>
FLOTEK INDUSTRIES INC. AND SUBSIDIARIES
Production Equipment
The Company has focused on the development of its proprietary and
patented technologies; the Petrovalve +Plus-R- Pump Valve and the Petrovalve
Gas Breaker Valve. Both patented products are valves used in down-hole
sucker-rod pumps. The Petrovalve Gas Breaker Valve provides a solution to gas
lock problems. Both valves offer producers operating advantages by performing
more efficiently and lasting longer than the traditional ball and seat
valves. Flotek's original technology was developed in concert with several
university research departments, including the University of Alberta and is
the subject of various patents and patent applications.
Drilling Products
Flotek's drilling products division manufactures, sells and services
several products that enhance oil and gas well cementing programs. Its
primary product is the Cementing Turbulator, which the Company began
distributing in March of 1994, when it acquired Turbeco Inc., an oilfield
service company. The Turbulator is a steel sleeve, which is placed over pipe
before the cementation process of pipe or casing. This pipe or casing is
commonly cemented in the open hole section of a recently drilled oil well.
The main purpose of this tool is to provide maximum standoff and improve mud
displacement to obtain the best cement bond. The Company was one of the first
companies to distribute spiral vaned cementing turbulators. The Turbulator
has gained widespread acceptance through is proven ability to improve oil and
gas well cementing programs and is effective in deep, directional and
horizontal well applications. In June 1999, the Company acquired exclusive
rights to the King `D-Mudder' design and patented technology. This
enhancement has been proven to improve the cementing of casing by removing
drilling mud film from the casing external surface.
Business Environment
The business environment for oilfield operations and its
corresponding operating results are affected significantly by petroleum
industry exploration and production expenditures. These expenditures are
influenced strongly by oil company expectations as to energy prices and the
supply and demand for crude oil and natural gas. Petroleum supply and demand,
and pricing, in turn are influenced by numerous factors including, but not
limited to, the effect of competition, the level of petroleum industry
exploration and production expenditures, world economic conditions, prices
of, and the demand for crude oil and natural gas, drilling activity, weather,
the legislative environment in the United States and other countries, and the
condition of the capital and equity markets. The worldwide price of oil had
declined significantly since late 1997, with prices having dropped as much as
40% to under $13 per barrel for spot deliveries. This decline has been
attributed to, among other things, an excess supply of oil in the world
markets, reduced domestic demand associated with an unseasonably warm winter,
and high inventory levels of oil and gas.
8
<PAGE>
FLOTEK INDUSTRIES INC. AND SUBSIDIARIES
The depressed economic conditions in Southeast Asia also have had a
negative effect on the economies in other regions around the world and the
associated demand for oil in those regions. These conditions have resulted in
substantially lower rig utilization rates in the United States and Canadian
land markets as well as less dramatic declines in the United States offshore
markets as the Company's customers have begun to reevaluate their exploration
and development plans for 1999 in light of current lower oil prices. The
above factors have particularly affected the demand for many of the Company's
centralizer products. Although oil and natural gas prices have recently shown
some improvement, a renewed decline in future oil and natural gas prices
would likely result in reduced exploration and development of oil and gas and
a decline in the demand for the Company's drilling products and could have an
adverse financial effect on the Company.
Within the United States and Canada, the Company's artificial lift
segment had experienced declines in revenue as demand and pricing had fallen
with the lower rig count and oil production activity, but is showing
improvement in the recent market. The artificial lift segment was
particularly affected by large declines in demand for its equipment used for
the production of heavy oil and other wells that are highly dependent on oil
prices. Although demand has shown some improvement, there is no assurance of
stability in this phase of the market.
In response to current industry conditions, the Company has
implemented various actions directed at reducing costs to be in line with the
reduced operating activities. These actions include reductions in employment,
the reduction of certain operating expenses, and disposal of certain lower
margin product lines.
9
<PAGE>
FLOTEK INDUSTRIES INC. AND SUBSIDIARIES
Results of Operations
Quarter ended August 31, 1999 compared to the quarter ended August 31, 1998.
The following charts contain selected financial data comparing our results
for 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Revenues 755,772 1,216,583
Gross profit 356,834 467,785
Gross margin % 47.21% 38.45%
Costs and expenses 1,040,717 1,904,944
Loss from operations 284,944 748,798
Net loss 270,418 718,424
Loss per share .006 .017
</TABLE>
Consolidated revenues were down $460,811, or 38% for the quarter ended
August 31, 1999, as compared to the same period in 1998, primarily due to the
effect of lower oil prices resulting in certain customers' decision to limit
investments in exploration, drilling and production activities. Revenues from
the drilling products segment decreased by 47% in the quarter as compared to
the same period of 1998. Despite higher oil prices, drilling activity has not
shown a concomitant increase.
Costs and Expenses
The Company's consolidated gross margins increased from 38% in the
quarter ended August 31, 1998 to 47% in the quarter ended August 31, 1999.
The Company's drilling products segments gross margins increased from 29% in
the quarter ended August 31, 1998 to 38% in the quarter ended August 31,
1999. The increase in gross margins is attributed to Company's acquisition of
its manufacturer of most of its product lines, Trinity Tool Inc. in July
1999. The Company's production equipment segments gross margins declined from
68% in the quarter ended August 31, 1998 to 64% in the quarter ended August
31, 1999. This was attributed to the Company's redesign of the guides and
cost to manufacture the new `open' cage body.
10
<PAGE>
FLOTEK INDUSTRIES INC. AND SUBSIDIARIES
Selling expenses, which consist primarily of the salaries, wages, and
benefits of the Company's salesmen, rent, insurance, and other direct selling
costs, were down $159,679 or 26% in the quarter as compared to the same
period in 1998. In response to the current industry conditions, the Company
has implemented various actions directed at reducing costs to be in line with
the reduced operating activities. These actions include reductions in the
Company's sales-force.
General corporate expenses decreased in the quarter by $316,109 or 63% as
compared to the same period in 1998. In response to the current industry
conditions, the Company has implemented various actions directed at reducing
costs to be in line with the reduced operating activities. These actions
include reductions in the Company's corporate overhead.
Capital Resources and Liquidity
The Company has financed its operations to date from stock offerings,
subordinated borrowings and internally generated funds. The principal use of
its cash has been to fund the working capital needs of the Company.
Operating Activities
Substantially all of the Company's customers are engaged in the energy
industry. This concentration of customers may impact the Company's overall
exposure to credit risk, either positively or negatively, in that customers
may be similarly affected by changes in economic and industry conditions. The
Company performs ongoing credit evaluations of its customers and does not
generally require collateral in support of its trade receivables. The Company
maintains reserves for potential credit losses, and actual losses have
historically been within the Company's expectations.
At August 31, 1999, the Company had no cash on hand as compared to cash
of $13,323 at the end of the first quarter. The overall decrease in the
Company's working capital during the current fiscal year is attributed to an
overall decrease in cash and an increase in short-term debt. The Company has
sustained substantial operating losses in recent years.
In addition, the Company has used substantial amounts of working capital in
its operations. Further, the company has a debt payment of $750,000 due in
July 1999. An extension has been granted by the creditor. In view of these
matters, realization of a major portion of the assets in the accompanying
balance sheet is dependent upon continued operations of the Company, which in
turn is dependent upon the Company's ability to meet its financing
requirements, and the success of its future operations. Management believes
that actions presently being taken to revise the Company's operating and
financial requirements provide the opportunity for the Company to continue as
a going concern. Management is taking the following steps to provide the
Company with adequate working capital:
11
<PAGE>
FLOTEK INDUSTRIES INC. AND SUBSIDIARIES
On July 1, 1999, the company acquired all the issued and outstanding common
stock of Trinity Tool, Inc., the principal manufacturer of much of the
Company's product lines. The acquisition was in consideration of $50,000.
cash and 2,500,000 shares of Company stock.
Management continues to reduce general and administrative expenses and
judiciously monitor needed selling expense.
Management intends to secure new long-term equity financing for working
capital purposes.
Management is negotiating with the lenders a conversion of the existing
$1,250,000 debt obligation to equity.
Risk Factors
The following risk factors, among others, may cause the Company's operating
results and/or financial position to be adversely affected:
The Company's ability to raise additional working capital could be limited
due to future operating losses and the existing level of short-term debt.
Without the ability to raise operating capital or to convert debt to equity
and to return to profitability, there would be substantial doubt about the
Company's ability to continue as a going concern.
Competitive factors including, but not limited to, the Company's limitations
with respect to financial resources and its ability to compete against
companies with substantially greater resources.
The Company's ability to control the amount of operating expenses.
The Company's drilling products segment generates a significant portion of
the Company's consolidated revenues. A further reduction in drilling activity
could adversely affect future operating results..
In managing inventory requirements, the Company must forecast customer demand
for our products. Should the Company underestimate the supplies needed to
meet demand, it could be unable to meet customer demand. Should the Company
overestimate the supplies needed to meet customer demand, its working capital
could be adversely affected. If the Company is unable to manage purchases and
utilization of its inventory to maintain low inventory levels immediately
prior to major price declines, the Company could be unable to take immediate
advantage of such declines to lower product costs, which could adversely
affect its sales and gross margins.
12
<PAGE>
FLOTEK INDUSTRIES INC. AND SUBSIDIARIES
Year 2000 Issue
The Year 2000 issue is the risk that information systems, computers,
equipment and products using date-sensitive software or containing computer
chips with two-digit date fields will be unable to correctly process the Year
2000 date change. If not identified and corrected prior to the Year 2000,
failures could occur in the software, hardware, equipment and products of the
Company and its suppliers, vendors and customers that could result in
interruptions of the Company's business. Any of such failures could have a
material impact on the Company.
The Company has completed the evaluation of its current hardware and
software systems. The external evaluations and recommendations are in process
and the estimated cost associated with achieving Y2K compliance are not
expected to have a material impact on the Company's financial condition or
results of operations. The Company has asked for and received confirmation
from its vendors that they are also in compliance. Though the Company can not
guarantee that there will not be some problems, The Company has taken
precautions with back up procedures to insure that there will be no delays in
the delivery of products and subsequent financial information.
Part II - Other Information
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
<TABLE>
<S> <C>
3.1 Articles of Incorporation (incorporated by reference to the Company's
Form 10-Q for the quarter ended November 30, 1997)
3.2 By-laws (incorporated by reference to the Company's Form 10-Q for the
quarter ended November 30, 1997)
3.3 Amendment to Registrant's Bylaws (incorporated by reference to the
Company's Form 10-KSB for the year ended February 28, 1998)
4.1 Shareholders Protection Rights Plan (incorporated by reference to the
Company's Form 10-Q for the quarter ended November 30, 1997)
10.1 Distribution Agreement - Downhole Products (UK), LTD (incorporated by
reference to the Company's Form 10-Q for the quarter ended November 30, 1997)
10.2 Wallace Robertson Inc. Consulting Agreement (incorporated by
reference to the Company's Form 10-Q for the quarter ended November 30, 1997)
10.3 Bill Jayroe Employment Agreement (incorporated by reference to the
Company's Form 10-Q for the quarter ended November 30, 1997)
10.4 Convertible Loan Agreement between the Company and TOSI, L.P dated
October 16,1997 (incorporated by reference to the Company's Form 10-Q for
the quarter ended November 30, 1997)
10.5 Form of Warrant Agreement dated October 16, 1997 - Marlin Investors,
L.L.C. (incorporated by reference to the Company's Form 10-Q for the quarter
ended November 30, 1997)
13
<PAGE>
FLOTEK INDUSTRIES INC. AND SUBSIDIARIES
10.6 Form of Warrant Agreement dated October 16, 1997 - Charles A. Dickinson
incorporated by reference to the Company's Form 10-Q quarter ended November 30,
1997)
10.7 License Agreement - Harlan King (incorporated by reference to the
Company's Form 10-Q for the quarter ended November 30, 1997)
10.8 Form of Subscription Agreement by and between the Company and certain
shareholders, dated September 16, 1997 - Marlin Investors, L.L.C.(incorporated
by reference to the Company's Form 10-Q for the quarter ended November 30, 1997)
10.9 Form of Subscription Agreement by and between the Company and certain
shareholders, dated September 16, 1997 - Charles A. Dickinson (incorporated by
reference to the Company's Form 10-Q for the quarter ended November 30, 1997)
10.10 Promissory Note between Chisholm Energy Partners, LLC and the Company
dated February 24, 1999. (incorporated by reference to the Company's Form 10-KSB
for the year ended February 28, 1999)
21.1 List of Operating Subsidiaries (incorporated by reference to the
Company's Form 10-Q for the quarter ended November 30, 1997)
*27.1 Financial Data Schedule
</TABLE>
* Filed herewith
b) Reports on Form 8-K
During the fiscal quarter ended August 31, 1999, the Company filed no reports
on Form 8-K.
SIGNATURES
In accordance with 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.
FLOTEK INDUSTRIES INC.
(Registrant)
Date: October 20, 1999 By:
---------------------------------------------
Jerry Dumas
President and Chief Executive Officer
(Principal Executive Officer, Principal Financial
Officer, Principal Accounting Officer)
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-2000
<PERIOD-START> JUN-01-1999
<PERIOD-END> AUG-31-1999
<CASH> (6,483)
<SECURITIES> 0
<RECEIVABLES> 453,609
<ALLOWANCES> 30,880
<INVENTORY> 858,810
<CURRENT-ASSETS> 1,305,936
<PP&E> 726,665
<DEPRECIATION> 13,127
<TOTAL-ASSETS> 2,032,601
<CURRENT-LIABILITIES> 2,094,622
<BONDS> 0
0
0
<COMMON> 18,384,295
<OTHER-SE> (18,229,248)
<TOTAL-LIABILITY-AND-EQUITY> 2,032,601
<SALES> 451,119
<TOTAL-REVENUES> 451,119
<CGS> 194,918
<TOTAL-COSTS> 508,175
<OTHER-EXPENSES> 68
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 39,494
<INCOME-PRETAX> (96,482)
<INCOME-TAX> 0
<INCOME-CONTINUING> (96,482)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (96,482)
<EPS-BASIC> .002
<EPS-DILUTED> .002
</TABLE>
