<PAGE> 1
U.S. 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 quarterly period ended January 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
PRO TECH COMMUNICATIONS, INC.
- -------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
FLORIDA 59-3281593
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
3311 INDUSTRIAL 25TH STREET, FORT PIERCE, FLORIDA 34946
- -------------------------------------------------------------------------------
(Address of principal executive offices)
(561)464-5100
- -------------------------------------------------------------------------------
(Issuer's telephone number)
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 of each of the issuer's classes of common
equity, as of the last predictable date:
Class Number of Shares Outstanding
on March 16, 2000
Common stock, Par Value $.001 Per Share 4,254,000
<PAGE> 2
PRO TECH COMMUNICATIONS, INC.
Index
Part I Financial Information Page
Item 1 Financial Statements
Balance Sheets at January 31, 2000
and 1999 (Unaudited) 3
Statements of Operations
for the Three months ended January 31,
2000 and 1999 (Unaudited) 4
Statements of Cash Flows
for the Three months ended January 31,
2000 and 1999 (Unaudited) 5
Notes to Financial Statements
(Unaudited) 6
Item 2 Management's Discussion and Analysis or
Plan of Operation 8
Part II
Item 5 Other Information 10
SIGNATURES 12
Exhibit 1 Financing Proposal for Pro Tech
Communications, Inc.
Exhibit 27 Financial Data Schedule
(for SEC use only)
<PAGE> 3
PRO TECH COMMUNICATIONS, INC.
Balance Sheets
January 31, 2000 and January 31, 1999
<TABLE>
<CAPTION>
(UNAUDITED) (UNAUDITED)
2000 1999
--------- -----------
<S> <C> <C>
Current Assets:
Cash and cash equivalents 59,334 292,564
Accounts receivable less allowance for doubtful
accounts of $18,661 and $14,868 in 2000 and 1999 159,481 227,745
Inventory (note 2) 353,247 308,751
Other current assets 82,876 46,408
----------- -----------
Total current assets 654,938 875,468
Net property and equipment 225,972 177,441
Due from officer 42,860 42,860
----------- -----------
Total Assets 923,770 1,095,769
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short-term borrowings (note 4) 37,134 --
Current portion of capital lease obligations 8,808 --
Accounts payable 107,798 20,427
Accrued expenses (note 3) 126,378 177,368
----------- -----------
Total current liabilities 280,118 197,795
Capital lease obligations 7,940 --
----------- ----------
Total liabilities 288,058 197,795
----------- ----------
Stockholder's Equity:
Common Stock, $.001 par value, authorized 10,000,000
shares, issued and outstanding 4,254,000 shares 4,254 4,254
Additional Paid in Capital 1,137,018 1,137,018
Retained Earnings (deficit) (505,560) (243,298)
----------- -----------
Total Stockholders' Equity 635,712 897,974
----------- -----------
923,770 1,095,769
=========== ===========
</TABLE>
See accompanying notes to financial statements
3
<PAGE> 4
PRO TECH COMMUNICATIONS, INC.
Statements of Operations
Three months ended January 31, 2000 and January 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
(UNAUDITED) (UNAUDITED)
2000 1999
---- ----
<S> <C> <C>
Net Sales $ 209,309 227,745
Cost of Goods Sold 67,675 84,249
----------- -----------
Gross Profit 141,634 143,496
Selling, general and administrative expenses 231,923 198,948
----------- -----------
(Loss) from operations (90,289) (55,452)
Other income (expense):
Interest income 1,512 4,373
Interest expense (3,499) --
----------- -----------
(Loss) before income taxes (92,276) (51,079)
Income taxes 0 0
----------- -----------
Net (Loss) $ (92,276) (51,079)
=========== ===========
Loss per common share:
Basic $ (0.02) (0.01)
Average common shares outstanding 4,254,000 4,254,000
=========== ===========
</TABLE>
4
<PAGE> 5
PRO TECH COMMUNICATIONS, INC.
Statements of Cash Flows
For the Three months ended January 31, 2000 and January 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
(UNAUDITED) (UNAUDITED)
2000 1999
--------- ---------
<S> <C> <C>
Cash Flows from operating activities:
Cash received from the sale of merchandise $ 270,932 213,366
Cash paid to vendors and employees (371,163) (378,517)
Interest received 1,512 4,373
--------- ---------
Net cash used by operating activities (98,719) (160,778)
--------- ---------
Cash flows from investing activities
Purchase of property and equipment (39,360) --
--------- ---------
Net cash used in investing activities (39,360) --
--------- ---------
Cash flows from financing activities:
Proceeds from short-term borrowings 37,134 --
Payments of capital lease obligations (149) --
Net cash provided by financing activities 36,985 0
--------- ---------
Net (decrease) in cash and cash equivalents (101,094) (160,778)
Cash and cash equivalents at the beginning of period 160,428 453,342
--------- ---------
Cash and cash equivalents at the end of period 59,334 292,564
========= =========
Reconciliation of net income(loss) to net cash used by operating activities:
Net income (loss) $ (92,276) (51,079)
--------- ---------
Adjustments to reconcile net income(loss) to net cash used by operating
activities:
Depreciation and amortization 10,135 8,950
Decrease(increase) in accounts receivable 46,442 (12,919)
Decrease of employee accounts receivable 15,181 --
Increase in inventory (67,364) (63,141)
Increase in accounts payable 7,694 (15,953)
Increase in accrued expenses 25,990 3,903
Decrease in other assets (44,521) (30,539)
--------- ---------
Total adjustments (6,443) (109,699)
--------- ---------
Net cash used by operating activities $ (98,719) (160,778)
========= =========
</TABLE>
See accompanying notes to financial statements
5
<PAGE> 6
PRO TECH COMMUNICATIONS, INC.
Notes to Financial Statements
January 31, 2000 and 1999
(UNAUDITED)
(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) BUSINESS
Pro Tech Communications, Inc. (the Company) was organized and
incorporated under the laws of the State of Florida for the
purpose of designing, developing, producing and marketing
lightweight telephone headsets. The Company presently
manufactures and markets its headsets primarily for fast food
companies and other large quantity users of headset systems. The
Company is in the process of completing the development of
several designs for the telephone user market, which includes
telephone operating companies, government agencies and business
offices. The Company's business strategy is to offer lightweight
headsets with design emphasis on performance and durability at a
cost below that of its competitors.
(B) ACCOUNTING POLICIES
In the opinion of management, the unaudited financial statements
contain all adjustments (consisting of normal recurring
adjustments) necessary to present fairly the Company's financial
position as of January 31, 2000 and the results of operations
and cash-flows for the three months ended January 31, 2000. The
accompanying interim financial statements should be read in
conjunction with the Company's Form 10-KSB filing for the year
ended October 31, 1999.
(C) RECEIVABLES
Certain customer receivable accounts are factored with recourse
under a short-term financing arrangement, which has been
accounted for as a secured borrowing under the provisions of
SFAS No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities."
(D) LOSS PER SHARE
Earnings per share is accounted for by using the basic and
diluted earnings per share method perscribed by SFAS No. 128,
which became effective for years ending after December 15,1997.
Basic loss per share is based on the weighted average number of
shares of common stock outstanding during the year. Diluted loss
per share is based on shares of common stock and dilutive
potential common stock (stock Options and Stock Warrants)
outstanding during the year. Diluted loss per share was
antidilutive due to the net loss generated by the Company during
the 2000 and 1999 and is therefore not reported.
(E) COMPREHENSIVE INCOME
In June 1997, the FASB issued Statement No. 130, reporting
comprehensive income (Statement 130), which establishes
standards for reporting and display of comprehensive income and
its components in a financial statement having the same
prominence as other financial statements. Statement 130 is
effective for years beginning after December 15, 1997 (Fiscal
Year 1999 the Company). During the three months ended January
2000 and 1999, the Company had no components considered to be
other comprehensive income.
6
<PAGE> 7
(2) INVENTORY
Inventory at January 31, 2000 and 1999 consists of the following:
2000 1999
---- ----
Raw materials $ 118,901 147,017
Work in process 36,890 66,249
Finished goods 197,456 95,485
--------- ---------
$ 353,247 $ 308,751
========= =========
(3) ACCRUED EXPENSES
Accrued expenses consisted of the following at January 31, 2000 and
1999:
2000 1999
---- ----
Accrued warranty expense $ 78,038 156,406
Other accrued expenses 43,825 20,962
-------- --------
$121,863 $177,368
======== ========
(4) SHORT-TERM BORROWINGS
On December 22, 1999 the Company entered into a short-term factoring
arrangement providing for advances of up to $300,000 based on 80% of
selected accounts receivable factored under the agreement on a recourse
basis. The Company is charged a factoring fee of 1% on each advance,
plus 2% per month on advances outstanding. In addition, the minimum fee
charged per month is 1% of the factoring plan, or $3,000, during the
life of the agreement, which is for six months and automatically
renewable for additional six month terms, unless terminated by the
Company with a 30 day notice. The Company's obligations are
collateralized by all of the Company's accounts receivable, inventory,
and equipment.
The amount outstanding under this financing arrangement amounted to
$37,134 as of January 31, 2000, which approximates its fair value.
Through March 14, 2000, the Company obtained additional advances
subsequent to January 31, 2000 of $126,356.
(5) SUBSEQUENT EVENTS
On March 8, 2000, the Company signed a financing Term Sheet with
the NCT Group, Inc. and NCT Hearing Products which is a wholly owned
subsidiary of NCT and three investors (the "Investors").
Under the term sheet the Company will issue certain securities to the
NCT Group, Inc. for an aggregate purchase price of $3,000,000 (See Part
II, Item 5 for a detailed discussion of this potential transaction)
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
- ------------------------------------------------------------------------
QUARTER ENDED JANUARY 31, 2000 AS COMPARED TO THE YEAR ENDED JANUARY 31, 1999:
For the quarter ended January 31, 2000, the Company realized a net loss of
$(92,276) compared to a net loss of $(51,079) for the quarter ended January
31,1999. The current reporting year loss was attributed to two factors: (1) The
Company's revenues were negatively impacted in the current quarter as a result
of a competitors attempt to take away the Company's distributor selling channel
in the fast-food market; and (2) A delay in the market introduction of the
company's telephone headsets as a result of changes made to the final design
resulting in little revenue growth in telephone market.
The Company continued the sale of its fast food products through distributors
augmenting these sales with direct sales from the Company's own outbound
telemarketing operation. In addition the Company has begun the sale of its new
telephone headset, the Trinity, to several customers. Several of these customers
responded positively to this headset and each is in the evaluation phase of this
product. The Company expects to receive the results of these evaluations in the
second quarter of this fiscal year. The Company also expects sales to improve
upon the market introduction planned in the 2nd quarter of the current fiscal
year. However, although this is the Company's intention there are no formal
sales agreements in place and no assurances can be given that sales of this
product will occur in the future. The Company has successfully maintained its
relationship with The McDonald's Corporation and once again has been selected to
be a part of McDonald's International Owner Operator's trade show planned for
April 2000. In addition the Company attended KFC's International trade show in
the current quarter and is currently processing all sales leads.
Gross margin percent increased 4.67% to 67.67% versus 63.00% in the comparable
1999 period as result of the cost savings from the transition of all production
offshore to the Far East. This action showed a 48% gain in cost of goods
produced through the Company's now established Far East manufacturing partners.
The Company plans to keep this same supply-chain in place for all existing and
new products planned for market introduction in the 2nd quarter of the current
fiscal year. Selling, general and administrative expenses (SG&A) for the fiscal
year were $231,923 or 111% of revenues versus $198,948 or 87% in revenues in the
comparable 1999 period. This increase was the result of several factors. First,
in fiscal year 1999, an unaffiliated investment banking firm was retained in
order to proceed with the structuring of a potential investment of capital into
the Company. The capital would be used for new product development along with
the associated expansion of sales personnel developing the telephone market. For
the current fiscal year 2000, the Company's expenses to this firm were $20,000.
Second, the Company increased its total marketing and advertising expenses to
$64,530 from $40,542 in the comparable 1999 period to support several telephone
trade shows attended by the Company's marketing staff. These trade shows allowed
the Company the opportunity to successfully present the new products planned for
market introduction in the 2nd quarter of the current fiscal year along with the
opportunity to perform needed market research necessary to have successful
product introductions in the future. The Company also hired 2 additional
marketers assigned to sell to this market. The Company has continued its
investment in Research and Development and new product development accounting
for investments in mold designs and component testing. The Company is also
reviewing several possible alliances with companies that have complimentary
products which could provide access into several key accounts in the telephone
market. Although this is the Company's intention there are no formal agreements
in place and no assurances that the Company will enter in such alliances will
occur in the future. Net depreciation expenses increased to $10,135 or 4.8% of
revenues in the current fiscal year versus $8,950 or 3.7% of revenues in the
comparable 1999 period. This increase was as a result of an increased investment
in production molding associated with new product development.
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION (CONTINUED)
==============================================================================
LIQUIDITY AND CAPITAL RESOURCES
The Company's current ratio (current assets to current liabilities) was 2.34 to
1.00 at January 31, 2000 as compared to 4.43 to 1.00 at January 31, 1999. At
January 31, 2000, the Company's current assets exceeded its current liabilities
by approximately $374,820.
During the current fiscal year, the Company had not being able to fund its
working capital requirements with cash flow from operations and management did
not believe that the Company had sufficient funds to meet the Company's
anticipated working capital requirements for the next 12 months. Therefore on
December 22, 1999, the Company entered into a short-term factoring arrangement
providing for advances of up $300,000, based on 80% of selected accounts
receivable factored under the agreement on a recourse basis. The Company is
charged a factoring fee of 1% of each advance, plus 2% per month on advances
outstanding. In addition, the minimum fee charged per month is 1% of the total
factoring plan, or $3,000, during the life of the agreement, which is for six
months and automatically renewable for an additional six month terms, unless
terminated by the Company with 30 days notice. The Company's obligations are
collateralized by all of the Company's account receivable, inventory, and
equipment. Total advances outstanding as of January 31, 2000 amounted to
$37,134. On March 14, 2000, the Company obtained a net advance of $126,356 under
the agreement. As a result of this arrangement the Company has been able to fund
its working capital requirements.
In addition, in order for the Company to maximize the potential of the telephone
user market and to enable the Company to expand into additional markets,
including government agencies and personal computers, the Company will require
additional capital. It is anticipated that the Company will seek to raise such
additional financing through a private or public offering of equity and/or
through its potential relationship with the NCT Group, Inc.
As noted above in Subsequent Events, on March 8, 2000 the Company signed a term
sheet with the NCT Group, Inc. and NCT Hearing Products subject to a definitive
agreement. Under the term sheet, the Company will issue certain securities to
the NCT Group, Inc. for an aggregate purchase price of $3,000,000. The
completion of the transaction is subject to the negotiation and signing of
definitive agreements and approval by the shareholders of the Company. (See Part
II, Item 5 for a detailed discussion of this potential transaction).
PART II - OTHER INFORMATION
(a) Exhibits
1 Financing Proposal for Pro Tech Communications, Inc.
27 Financial Data Schedule (for SEC use only)
9
<PAGE> 10
Item 5. Other Information
On March 8, 2000, the Company signed a term sheet with NCT Group, Inc.
("NCT") and NCT Hearing Products, Inc., a wholly-owned subsidiary of NCT and the
investors. NCT develops and commercializes technology in the sound and media,
consumer headset and consumer product industries. The term sheet is subject to
the execution of definitive agreements, the completion of the exchange between
Pro Tech and NCT Hearing of a 60% interest in Pro Tech for a license to use
certain NCT and NCT Hearing Technology and approval by the Company's
shareholders.
Under the term sheet, the Company has agreed to issue the investors
warrants to purchase 4.5 million shares of the Company's common stock for $1.5
million in cash. The exercise price of such warrants will be $.50 per share. The
Company has agreed to register all of the shares of its common stock underlying
the warrants in a registration statement to be filed with the Securities and
Exchange Commission ("SEC").
When the SEC declares the registration statement to be effective, the
warrants will be callable by the Company in three 1.5 million share blocks,
after the Company's common stock trades a minimum of 150,000 shares per day.
Thereafter, the first block of 1.5 shares may be called by the Company when the
Company's common stock price reaches and maintains for a minimum 15 consecutive
trading days a price 36% above the exercise price per share of the warrants. The
second block of 1.5 shares may be called by the Company when the Company's
common stock reaches and maintains for a minimum of 15 consecutive trading days
a price 88% above the exercise price per share of the warrants. The last block
of 1.5 shares may be called by the Company when the Company's common stock
reaches and maintains for a minimum of 15 consecutive trading days a price 127%
above the exercise price per share of the warrants. The Company will be required
to provide 30 days, trading between the call of each Block of Warrants.
If the Company does not register the shares of its common stock
underlying the warrants within one year after the closing of the transaction,
investors will have the right to have a cashless exercise of the warrants, the
terms of which have not yet been negotiated among the parties.
As part of the term sheet, the Company has also agreed to issue 1,500
shares of convertible preferred stock of the Company to investors for $1.5
million in cash. The convertible preferred stock will not have any voting
rights, except as may be required by applicable law, and provides for 4%
accretion payable by the Company, at its option, in the Company's common stock
or cash at the time of the conversion of such stock.
10
<PAGE> 11
All shares of preferred stock will be required to be converted 36
months after the closing date of the transaction. The investors will have the
right to convert its shares of preferred stock into shares of the Company's
common stock. The amount of shares of the Company's common stock to be issued
for each share of convertible preferred stock will be determined by dividing
the $1,000 stated value of each share of convertible preferred stock by the
conversion price. The conversion price will be equal to the lesser of (a) $.50
or (b) a 20% discount from the lowest average closing bid price of the
Company's common stock for any consecutive five-day period out of the 15-day
period preceding the conversion.
The investors will have the option, at its discretion, to convert the
preferred stock into NCT common stock at a 20% discount below the lowest average
closing bid price of NCT's common stock for any consecutive 5-day period out of
the 15-day period preceding conversion. Six months from the closing of the
transaction, up to one-half of the shares of preferred stock is subject to this
option, and the balance of the preferred stock is subject to this option 12
months after the closing. NCT's common stock presently is traded on the OTCBB
under the trading symbol NCTI.
The Company has preliminarily agreed to file a registration statement
with the SEC covering all of the shares of the Company's common stock
underlying the convertible preferred stock within 60 days after the closing of
the transaction. The Company has agreed to maintain the effectiveness of this
registration for three years.
11
<PAGE> 12
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, on March 16, 2000.
PRO TECH COMMUNICATIONS, INC.
(registrant)
BY: /s/ RICHARD HENNESSEY
----------------------------------
Richard Hennessey, President
In accordance with the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ KEITH LARKIN Treasurer March 16, 2000
- ----------------------- and Chairman of the Board
Keith Larkin (Principal Executive, Financial
and Accounting Officer)
/s/ RICHARD HENNESSEY Director, Secretary March 16, 2000
- ---------------------- and President
Richard Hennessey
</TABLE>
12
<PAGE> 1
Exhibit 1
Term Sheet
Financing Proposal for Pro Tech Communications, Inc.
----------------------------------------------------
Page 1 of 3
Amount: $1.5 million in cash to be paid at closing and the
issuance by Pro Tech Communications, Inc. ("Pro Tech"
or the "Company") of a warrant for 4.5 million common
shares of Pro Tech at $0.50 callable upon effectiveness
of an underlying registration statement by the Company
in three (3) 1.5 million share blocks, each block
callable when the Company's common stock trades a
minimum of one hundred fifty thousand (150,000) shares
per day and the common stock price reaches and
maintains for a minimum of fifteen (15) consecutive
days a price 36% above the issuance price per share, 88%
above the issuance price per share and 127% above the
issuance price per share, respectively, provided that
the time period between the call of each block shall
not be less than thirty (30) trading days.
Security: Convertible preferred stock of the Company (the
"Preferred Stock")
Voting Rights: None, except as may be required by applicable law
Issue Date: To Be Determined
Maturity Date: Thirty Six (36) months from Issue Date
Purchase Price: $1,000 per share (the "Stated Value")
Accretion: Four percent (4.0%) payable by the Company in common
stock or cash (at the Company's election) upon
conversion
Cashless Exercise: In the event the shares underlying the warrant have not
been registered within one (1) year of closing, the
Holder shall have the right to have a cashless exercise
of the warrant.
<PAGE> 2
Financing Proposal for Pro Tech Communications, Inc.
----------------------------------------------------
Page 2 of 3
Conversion
Rights: Each Preferred Share is convertible into the following
number of shares:
Stated Value
------------
Conversion Price
The conversion price is equal to the lesser of (a) 0.50
or (b) 20% discount off the lowest average closing bid
price of the common stock for any consecutive five (5)
day period out of the fifteen (15) day period preceding
conversion.
Mandatory
Conversion: At maturity, all unconverted Preferred Shares will
convert at the then prevailing Conversion Price
Supplemental
Conversion
Rights: The Investor has the option to convert into NCT Group,
Inc. common stock at a 20% discount off the lowest
average closing bid price of the common stock for any
consecutive five (5) day period out of the fifteen (15)
day period preceding conversion at their discretion. Up
to one half of the position is subject to this option
at six months after closing and the other one half 12
months after closing.
Registration
Rights: The Company will agree to file a registration statement
under the Securities Act of 1933 including the shares
of Common Stock underlying the Convertible Preferred
within 60 days of the Closing and will use its best
efforts to cause the registration to become effective
on the date (the "SEC Effective Date") which is the
earlier of 150 days after the Closing or within five
days of SEC clearance to request acceleration of
effectiveness. The Company will maintain the
effectiveness of such registration for three years.
<PAGE> 3
Financing Proposal for Pro Tech Communications, Inc.
---------------------------------------------------
Page 3 of 3
Effective
Date: For purposes of this transaction, all calculations of
values shall be as of the date hereof; which shall be
considered the closing date.
Supplemental
Registration
Rights: Should the Investor elect the Supplemental Conversion
Rights as noted above, NCT Group, Inc. shall file a
registration statement covering such shares on a post
issuance basis.
Selinus Limited NCT Group, Inc.
- --------------------- --------------------- ------------------------
Investor Investor
/s/ S. Sallman /s/ Michael J. Parrella
- --------------------- --------------------- -----------------------
Signature Signature Signature
S. Sallman Michael J. Parella
- --------------------- --------------------- -----------------------
Print Name Print Name Print Name
3/7/2000 3/7/2000
- --------------------- --------------------- -----------------------
Date Date Date
Pro Tech Communications, Inc. NCT Hearing Products, Inc.
/s/ Richard Hennessey /s/ Michael J. Parella
- ---------------------------------- ----------------------------------
Signature Signature
Richard Hennessey Michael J. Parella
- ---------------------------------- ----------------------------------
Print Name Print Name
3/8/2000 3/7/200
- ---------------------------------- ----------------------------------
Date Date
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-2000
<PERIOD-START> NOV-01-1999
<PERIOD-END> JAN-31-2000
<CASH> 59,334
<SECURITIES> 0
<RECEIVABLES> 159,481
<ALLOWANCES> 18,661
<INVENTORY> 353,247
<CURRENT-ASSETS> 654,938
<PP&E> 225,972
<DEPRECIATION> 10,135
<TOTAL-ASSETS> 923,770
<CURRENT-LIABILITIES> 280,118
<BONDS> 0
0
0
<COMMON> 4,254
<OTHER-SE> 631,458
<TOTAL-LIABILITY-AND-EQUITY> 923,770
<SALES> 209,309
<TOTAL-REVENUES> 210,821
<CGS> 67,675
<TOTAL-COSTS> 231,923
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,499
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (92,276)
<EPS-BASIC> (.02)
<EPS-DILUTED> 0
</TABLE>
