<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q/A
------------------------
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NO. 0-27506
------------------------
COHR INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<S> <C>
DELAWARE 95-4559155
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION)
21540 PLUMMER STREET 91311-4103
CHATSWORTH, CALIFORNIA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (818) 773-2647
------------------------
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 [ ]
As of March 17, 1998 there were outstanding 6,433,189 shares of the
Registrant's Common Stock, par value $0.01.
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COHR INC. AND SUBSIDIARIES
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1 Consolidated Financial Statements........................... 3
Consolidated Balance Sheets as of June 30, 1997 (unaudited) 3
and March 31, 1997..........................................
Consolidated Statements of Operations for the three months 4
ended June 30, 1997 and June 30, 1996 (unaudited)...........
Consolidated Statements of Cash Flows for the three months 5
ended June 30, 1997 and June 30, 1996 (unaudited)...........
Notes to Consolidated Financial Statements.................. 6
Item 2 Management's Discussion and Analysis of Financial Condition 8
and Results of Operations...................................
PART II OTHER INFORMATION
Item 6 Exhibits.................................................... 10
</TABLE>
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This Form 10-Q/A and other statements issued or made from time to time by
COHR Inc. or its representatives contain statements which may constitute
"forward-looking statements" within the meaning of the Securities Act of 1933
and the Securities Exchange Act of 1934, as amended by the Private Securities
Litigation Reform Act of 1995. 15 U.S.C.A. sections 772-2 and 78u-5 (SUPP.1996).
Those statements include statements regarding the intent, belief or current
expectation of COHR Inc. and members of its management team as well as the
assumptions on which such statements are based. Prospective investors are
cautioned that such forward-looking statements are not guarantees of future
performance and involve risks and uncertainties, and that actual results may
differ materially from those contemplated by such forward-looking statements.
Important factors currently known to management that could cause actual results
to differ materially from those in forward-looking statements are set forth in
the safe harbor compliance statement for forward-looking statements included
herein and in the Company's documents filed from time to time with the
Securities and Exchange Commission. The Company undertakes no obligation to
update or revise forward-looking statements to reflect changed assumptions, the
occurrence of unanticipated events or changes to future operating results over
time.
2
<PAGE> 3
In its press release attached as an exhibit to the Company's Form 10-Q
Quarterly Report for the period ended December 31, 1997 filed with the
Securities and Exchange Commission on February 17, 1998, the Company announced
its intention to restate previously reported financial statements for the first
two quarters of fiscal 1998 and for the fiscal year ended March 31, 1997. The
following items of the Company's Form 10-Q for the quarter ended June 30, 1997
are hereby amended.
PART I
COHR INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT NUMBER OF SHARES)
ITEM 1. FINANCIAL STATEMENTS
ASSETS
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
1997 1997
-------------- -------------
(UNAUDITED AND
RESTATED, (AS RESTATED,
SEE NOTE 3) SEE NOTE 3)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................. $21,125 $22,948
Investments............................................... 2,000 6,000
Accounts receivable -- Trade, net of allowance for
doubtful accounts of $1,565 (June 30, 1997) and $1,490
(March 31, 1997)....................................... 28,097 24,681
Other.................................................. 1,628 2,325
Inventory................................................. 10,043 9,126
Prepaid expenses and other................................ 785 1,263
Income tax refund receivable.............................. 1,948 1,348
Deferred income tax asset................................. 1,124 1,124
------- -------
Total current assets.............................. 66,750 68,815
EQUIPMENT AND IMPROVEMENTS, net............................. 6,998 6,636
INTANGIBLE ASSETS, net of accumulated amortization of $839
(June 30, 1997) and $665 (March 31, 1997)................. 9,703 9,237
OTHER ASSETS................................................ 873 391
------- -------
TOTAL............................................. $84,324 $85,079
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable............................................. $ 60 $ 1,342
Accounts payable -- trade................................. 6,409 5,668
Accrued expenses.......................................... 5,932 4,669
Deferred revenue.......................................... 5,766 6,394
Current portion of long-term debt......................... 966 853
------- -------
Total current liabilities......................... 19,133 18,926
LONG-TERM DEBT.............................................. 539 1,146
DEFERRED INCOME TAX LIABILITY............................... 499 499
SHAREHOLDERS' EQUITY
Preferred Stock, $.01 par value; 2,000,000 shares
authorized; no shares issued and outstanding
Common Stock, $.01 par value; 20,000,000 shares
authorized; 6,433,000 (June 30, 1997 and March 31,
1997) shares issued and outstanding.................... 887 887
Additional paid in capital................................ 55,153 55,153
Retained earnings......................................... 8,113 8,468
------- -------
Total shareholders' equity........................ 64,153 64,508
------- -------
TOTAL....................................................... $84,324 $85,079
======= =======
</TABLE>
3
<PAGE> 4
COHR INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
-------------------------
1997 1996
------------- --------
(AS RESTATED,
SEE NOTE 3)
<S> <C> <C>
Revenues.................................................... $24,811 $20,465
Direct operating expenses................................... 20,028 14,720
------- --------
Gross margin................................................ 4,783 5,745
Selling, general and administrative expenses................ 5,638 4,417
------- --------
Operating income (loss)..................................... (855) 1,328
Interest income............................................. 310 232
Interest expense............................................ (14) (9)
------- --------
Income (loss) before income taxes (benefit)................. (559) 1,551
Provision (benefit) for income taxes........................ (204) 620
------- --------
Net income (loss)........................................... ($ 355) $931
======= ========
Net income (loss) per share................................. ($ 0.06) $0.20
======= ========
Number of shares used to compute net income (loss) per
share..................................................... 6,419 4,735
======= ========
</TABLE>
4
<PAGE> 5
COHR INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
------------------------
1997 1996
------------- -------
(AS RESTATED,
SEE NOTE 3)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)......................................... $ (355) $ 931
------- -------
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization........................... 505 251
Provision for losses on accounts receivable............. 75 62
Changes in assets and liabilities:
(Increase) decrease in:
Receivables........................................ (2,794) (1,055)
Inventory.......................................... (508) (448)
Other current assets............................... 478 (751)
Other assets....................................... (460) (154)
Increase (decrease) in:
Accounts payable -- trade.......................... 741 (548)
Accrued expenses................................... 1,263 (1,095)
Income taxes receivable............................ (600)
Deferred revenue................................... (628) (831)
------- -------
Total adjustments.................................. (1,928) (4,569)
------- -------
Net cash used in operating activities.............. (2,283) (3,638)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures...................................... (557) (245)
Payment for acquisition of certain assets................. (1,147) (2,889)
Sale of investments....................................... 4,000
------- -------
Net cash provided by (used in) investing
activities....................................... 2,296 (3,134)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of long-term debt................................ 1,050
Payments and maturities on long-term debt................. (1,836) (411)
Exercise of stock options.................................
------- -------
Net cash (used in) provided by financing
activities....................................... (1,836) 639
------- -------
NET DECREASE IN CASH AND CASH EQUIVALENTS................... (1,823) (6,133)
CASH AND CASH EQUIVALENTS, beginning of period.............. 22,948 19,314
------- -------
CASH AND CASH EQUIVALENTS, end of period.................... $21,125 $13,181
======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION --
Cash paid during the period for:
Income taxes............................................ $ 407 $ 0
======= =======
Interest................................................ $ 70 $ 9
======= =======
DETAILS OF BUSINESSES OR ASSETS ACQUIRED AT FAIR VALUE ARE
AS FOLLOWS:
Current assets............................................ $ 409 $ 853
Equipment................................................. 138 1,520
Goodwill and other intangibles............................ 660 2,465
------- -------
1,207 4,838
------- -------
Note issued............................................... 60
Liabilities assumed....................................... 1,949
------- -------
Net cash paid for acquisitions..................... $ 1,147 $ 2,889
======= =======
</TABLE>
5
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COHR INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
1. BASIS OF PRESENTATION
In the opinion of management, the accompanying consolidated financial
statements include all adjustments necessary for a fair presentation of the
financial position of COHR Inc. ("COHR") and subsidiaries (collectively, the
"Company"), and the results of its operations and its cash flows for the interim
periods presented. Although COHR believes that the disclosures in these
consolidated financial statements are adequate to make the information presented
not misleading, certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission. Results of operations for
the interim periods are not necessarily indicative of results to be expected for
any other interim period or for the full year.
The consolidated financial statements for the three months ended June 30,
1997 are unaudited and should be read in conjunction with the consolidated
financial statements and notes thereto included in COHR's Annual Report on Form
10-K for the year ended March 31, 1997 as amended by Form 10-K/A filed on March
18,1998.
Consolidation of Subsidiaries -- The Company's financial statements include
the activity of all of its wholly-owned subsidiaries over which the Company has
direct or indirect unilateral and perpetual control. All intercompany
transactions have been eliminated in consolidation.
Net Income (Loss) Per Common Share -- Net income (loss) per common share is
computed based on the weighted average number of shares outstanding, giving
retroactive effect to all stock splits.
2. SUBSEQUENT EVENTS
Subsequent to June 30, 1997, the Company acquired the business of a company
similar to that of COHR Inc. The acquisition included the purchase of certain
assets including inventory, equipment, and other assets, for a purchase price of
$243,000, of which $180,000 was paid in cash, with a short term note issued for
the remainder.
3. RESTATEMENT
Subsequent to the issuance of the Company's fiscal 1997 consolidated
financial statements, the Company's management determined that certain equipment
and software sales were prematurely recorded and that certain liabilities were
understated. As a result, the accompanying consolidated balance sheet as of
March 31, 1997 and the statements of operations and cash flows for the three
months ended June 30, 1997 have been restated from the amounts previously
reported to reverse these sales and to record the appropriate liabilities.
6
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COHR INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THREE MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
A summary of the significant effects of the restatement is as follows:
<TABLE>
<CAPTION>
AS PREVIOUSLY AS
REPORTED RESTATED
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<S> <C> <C>
AT MARCH 31, 1997:
Accounts receivable................................. $25,439 $24,681
Accounts payable -- trade........................... 4,040 5,668
Accrued expenses.................................... 2,618 4,669
Retained earnings................................... 10,961 8,468
AT JUNE 30, 1997
Accounts receivable................................. $29,925 $28,097
Accounts payable - trade............................ 3,309 6,409
Accrued expenses.................................... 2,972 5,932
Retained earnings................................... 12,545 8,113
FOR THE THREE MONTHS ENDED JUNE 30, 1997:
Revenues............................................ $26,411 $24,811
Direct operating expenses........................... 19,162 20,028
Selling, general and administrative expenses........ 4,872 5,638
Income (loss) before taxes (benefit)................ 2,673 (559)
Net income (loss)................................... 1,584 (355)
Net income (loss) per share......................... .24 (.06)
</TABLE>
7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
The Company is a national outsourcing service organization providing
equipment servicing, group purchasing and other services to hospitals,
integrated health systems and alternate site providers.
RESTATEMENT OF PRIOR PERIOD FINANCIAL STATEMENTS
The Company has concluded that a restatement of previously reported
financial statements for the first two quarters of fiscal year 1998 and for
fiscal year 1997 is appropriate based upon management's determination that
certain equipment and software sales were prematurely recorded and that certain
liabilities were understated. Please see Note 3 to the Consolidated Financial
Statements for the Three Months Ended June 30, 1997.
RESULTS OF OPERATIONS
Three Months Ended June 30, 1997, as restated, versus Three Months Ended June
30, 1996
Revenues. The Company's revenues for the three months ended June 30, 1997
totaled $24.8 million, an increase of $4.3 million or 21.2% over revenues of
$20.5 million for the three months ended June 30, 1996. Of the $4.3 million
increase in revenues, $3.9 million resulted from growth in COHR MasterPlan. The
$3.9 million was primarily from increases in revenues from sites acquired or
opened in previous periods. The Company acquired one new service and sales site
in the three months ended June 30, 1997.
Direct Operating Expenses. The Company's direct expenses for the three
months ended June 30, 1997 totaled $20.0 million which represented an increase
of $5.3 million or 36.1% over the three months ended June 30, 1996 total of
$14.7 million. Direct operating expenses as a percentage of revenues for the
three months ended June 30, 1997 increased to 80.7% from 71.9% for the three
months ended June 30, 1996. Factors contributing to the increase include growth
in the number of sales and service employees and related employee costs,
start-up costs associated with new accounts, the outsourcing of a greater number
of services provided to customers, and an increase in customer rebate accruals.
Gross Margin. The Company's gross margin for the three months ended June
30, 1997 totaled $4.8 million, a decrease of $0.9 million or 16.7% from the
three months ended June 30, 1996 total of $5.7 million. Gross margin as a
percentage of revenues decreased to 19.3% for the three months ended June 30,
1997 from 28.1% for the three months ended June 30, 1996. Factors contributing
to the decrease in gross margin include the increased expenses identified in the
discussion of direct operating expenses above.
Selling, General and Administrative Expenses. The Company's selling,
general and administrative expenses for the three months ended June 30, 1997
totaled $5.6 million, an increase of $1.2 million or 27.3% over the three months
ended June 30, 1996 total of $4.4 million. As a percentage of revenues, selling,
general and administrative expenses increased during the three months ended June
30, 1997 to 22.7% from 21.6% during the three months ended June 30, 1996. The
absolute increase in expenses reflected the increase in costs necessary to
support the Company's expanded operations. Other factors contributing to the
increase include increases in the number of support personnel, facility expenses
and other expenses incurred to generate new business and integrate recent
acquisitions.
Operating Income (Loss). The Company's operating loss for the three months
ended June 30, 1997 totaled $0.9 million, a decrease of $2.2 million from
operating income for the three months ended June 30, 1996 of $1.3 million.
Operating loss as a percentage of revenues for three months ended June 30, 1997
was a 3.4% charge as compared to a 6.5% return for the three months ended June
30, 1996. The operating loss can be primarily attributed to the factors
identified in the discussion of direct operating expenses and selling, general
and administrative expenses above.
Provision for Income Taxes (Benefit). The Company's income tax benefit for
the three months ended June 30, 1997 totaled $0.2 million, a decrease in tax of
$.8 million from the income tax provision for the three months ended June 30,
1996 total of $.6 million. The Company's effective tax (benefit) rate was
(36.5%) for
8
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the three months ended June 30, 1997 and 40% for the three months ended June 30,
1996. The effective tax benefit rate for the three months ended June 30, 1997
was lower than it would have otherwise been due to the fact that the Company is
unable to carryback net operating losses for state income tax purposes.
Net Income (Loss). The Company's net loss for the three months ended June
30, 1997 totaled $0.4 million, a decrease of $1.3 million from net income for
the three months ended June 30, 1996 of $.9 million. As a percentage of
revenues, the net loss resulted in a 1.4% charge for the three months ended June
30, 1997 as compared to a 4.5% return for the three months ended June 30, 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company had working capital of $47.6 million and $49.9 million as of
June 30, 1997 and March 31, 1997, respectively. The Company had cash, cash
equivalents and short term investments of $23.1 million and $28.9 million for
the same respective periods. The decrease in the amount of cash, cash
equivalents and short term investments during the three months of fiscal year
1998 was primarily attributable to a net operating loss (offset in part by
noncash charges for depreciation, amortization and provision for losses on
accounts receivable), capital expenditures and payment for acquired assets of
businesses and a repayment of long-term debt.
The Company allowed its revolving credit line to expire and has not sought
a renewal thereof. The Company has not paid dividends since its initial public
offering in February of 1996.
Net cash used in operating activities was $2.3 million and $3.6 million for
the three months ended June 30, 1997 and 1996, respectively. The fluctuations in
cash used in operations is due primarily to changes in accounts receivable,
inventories, accounts payable, accrued expenses and current income tax
liabilities.
Cash flows (used in) provided by financing activities were principally for
acquiring new debt and payments on existing debt.
INFLATION
The Company believes that its operations have not been materially adversely
affected by inflation. The Company expects that salary and wage increases for
its skilled staff will continue to be higher than average wage increases, as is
common in the Company's industry.
9
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PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS
(a) Exhibits included or incorporated herein:
See Index to Exhibits
10
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COHR INC.
(Registrant)
Date: March 19, 1998 /s/ STEPHEN W. GAMBLE
--------------------------------------
Stephen W. Gamble
President and Chief Executive Officer
(Principal Executive Officer)
Date: March 19, 1998 /s/ DANIEL F. CLARK
--------------------------------------
Daniel F. Clark
Executive Vice President and Chief
Financial Officer
(Principal Financial Officer)
11
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COHR INC. AND SUBSIDIARIES
INDEX TO EXHIBITS
ITEM (A) 3
(a) Exhibits
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ------------
<S> <C> <C>
3.1* Certificate of Incorporation of Registrant..................
3.2* By-laws of Registrant.......................................
4.1* Form of Warrant to be issued to the Representatives of the
Underwriters................................................
4.2* Form of Registration Rights Agreement between Registrant,
Healthcare Association of Southern California ("HASC") and
Hospital Council Coordinated Programs, Inc. ................
4.3* Specimen Stock Certificate..................................
10.1* Form of Indemnity Agreement entered into between Registrant
and each of its executive officers and directors............
10.2* Employment Agreement between Registrant and Paul Chopra,
effective January 1, 1996...................................
10.4* Form of 1995 Stock Option Plan of Registrant and Form of
Nonstatutory Option Grant Under the Plan....................
10.8** Office Lease between TCEP II properties and Registrant dated
May 8, 1996.................................................
10.9*** 1996 Stock Option Plan of Registrant, as amended and
restated on June 17, 1997...................................
11 Computation of Net Income (Loss) Per Share..................
</TABLE>
- ---------------
* Incorporated by reference from Registrant's Statement on Form S-1,
Registration No. 33-80635.
** Incorporated by reference from Registrant's Annual Report for the fiscal
year ended March 31, 1996 on Form 10-K.
*** Incorporated by reference from Registrant's Quarterly Report for the fiscal
quarter ended June 30, 1997 on Form 10-Q.
12
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EXHIBIT 11
COHR INC.
COMPUTATION OF NET INCOME (LOSS) PER SHARE
(UNAUDITED)
(IN THOUSANDS, EXCEPT INCOME (LOSS) PER SHARE)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
-------------------------
1997 1996
------------- ------
(AS RESTATED,
SEE NOTE 3)
<S> <C> <C>
Net income (loss) attributable to common stock.............. ($ 355) $ 931
====== ======
Weighted average number of common shares outstanding........ 6,419 4,562
Dilutive effect of stock options and warrants after
application of treasury stock method...................... 173
------ ------
Number of shares used to compute income (loss) per share.... 6,419 4,735
====== ======
Net income (loss) per share................................. ($0.06) $ 0.20
====== ======
</TABLE>
13
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 21,125
<SECURITIES> 2,000
<RECEIVABLES> 29,662
<ALLOWANCES> 1,565
<INVENTORY> 10,043
<CURRENT-ASSETS> 66,750
<PP&E> 11,433
<DEPRECIATION> 4,435
<TOTAL-ASSETS> 84,324
<CURRENT-LIABILITIES> 19,133
<BONDS> 0
0
0
<COMMON> 887
<OTHER-SE> 63,266
<TOTAL-LIABILITY-AND-EQUITY> 84,324
<SALES> 24,811
<TOTAL-REVENUES> 24,811
<CGS> 20,028
<TOTAL-COSTS> 20,028
<OTHER-EXPENSES> 5,563
<LOSS-PROVISION> 75
<INTEREST-EXPENSE> 14
<INCOME-PRETAX> (559)
<INCOME-TAX> (204)
<INCOME-CONTINUING> (355)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (355)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> (.06)
</TABLE>
