U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30,1997
( ) TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE TRANSITION PERIOD FROM ___________TO__________
Commission File Number 0-22533
MERCURY WASTE SOLUTIONS, INC.
(Exact name of small business issuer as specified in its charter)
MINNESOTA 41-1827776
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
302 North Riverfront Drive, Suite 100A
MANKATO, MINNESOTA 56001
(Address of principal executive offices)
(507) 345-0522
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 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 ____
The number of shares outstanding of each of the Issuer's Common Stock, $.01 Par
Value, as of June 30, 1997 was 3,464,097.
Transitional small business disclosure format:
Yes_____ No __X__
<PAGE>
MERCURY WASTE SOLUTIONS, INC.
FORM 10-QSB
INDEX
PAGE
----
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets as of December 31, 1996 and June 30, 1997 3
Statements of Operations for the three month and six month periods
ended June 30, 1996 and June 30, 1997 4
Statement of Changes in Shareholders' Equity for the six months
ended June 30, 1997 5
Statements of Cash Flows for the six months ended June 30, 1996
and June 30, 1997 6
Notes to Financial Statements 7
Item 2 Managements Discussion and Analysis of Financial Condition and
Results of Operations 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
<PAGE>
PART 1-FINANCIAL INFORMATION
Item 1. Financial Statements
MERCURY WASTE SOLUTIONS, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
1997 1996
---------- -----------
ASSETS
<S> <C> <C>
Current Assets
Cash and cash equivalents $1,892,360 $ 0
Accounts receivable, less allowance for doubtful accounts of $15,000 752,623 381,064
at June 30, 1997 and $10,000 at December 31, 1996
Prepaid expenses 198,785 34,119
---------- -----------
TOTAL CURRENT ASSETS 2,843,768 415,183
---------- -----------
Property and Equipment, at cost
Leasehold improvements 106,233 95,860
Furniture, fixtures, and equipment 216,586 150,430
Plant equipment 881,462 663,792
Construction in progress 46,229 0
---------- -----------
TOTAL PROPERTY AND EQUIPMENT 1,250,510 910,082
Less accumulated depreciation 192,327 103,032
---------- -----------
NET PROPERTY AND EQUIPMENT 1,058,183 807,050
---------- -----------
Other Assets
Deferred offering costs 0 118,908
Cash restricted for closure 112,988 74,132
Deferred Tax Assets 43,000 0
Acquired equipment and facility rights, net of accumulated amortization
of $60,000 at June 30, 1997 and $40,000 at December 31, 1996 340,000 360,000
Goodwill, net of accumulated amortization of $138,135 at June 30, 1997
and $87,924 at December 31, 1996 991,101 791,312
---------- -----------
TOTAL OTHER ASSETS 1,487,089 1,344,352
---------- -----------
TOTAL ASSETS $5,389,040 $ 2,566,585
========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Related party demand note $ 67,000 $ 45,000
Current portion of long-term debt 102,418 0
Accounts payable 67,265 113,922
Accrued expenses 53,025 59,102
---------- -----------
TOTAL CURRENT LIABILITIES 289,708 218,024
---------- -----------
Long-Term Liabilities
Long-term debt, net of current portion 305,451 1,919,567
Closure fund 10,300 10,300
Subordinated Debt 0 135,000
---------- -----------
TOTAL LONG-TERM LIABILITIES 315,751 2,064,867
---------- -----------
TOTAL LIABILITIES 605,459 2,282,891
---------- -----------
Shareholders' Equity
Common stock, $0.01 par value; shares issued and outstanding of
3,464,097 at June 30, 1997 and 2,249,097 at December 31, 1996 34,641 22,491
Additional paid-in capital 4,718,804 1,246,649
Retained Earnings(Accumulated deficit) 30,136 (985,446)
---------- -----------
TOTAL SHAREHOLDERS' EQUITY 4,783,581 283,694
---------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $5,389,040 $ 2,566,585
========== ===========
</TABLE>
See Notes to Financial Statements
<PAGE>
MERCURY WASTE SOLUTIONS, INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
JUNE 30,1997 JUNE 30,1996 JUNE 30,1997 JUNE 30,1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Total Revenues $ 821,040 $ 230,635 $ 1,320,472 $ 496,967
Total Cost of Revenues 287,443 132,059 493,027 256,928
----------- ----------- ----------- -----------
Gross Profit 533,597 98,576 827,445 240,039
----------- ----------- ----------- -----------
Operating Expenses
Research & Development 32,268 23,034 56,644 293,089
Sales & Marketing 174,768 84,678 354,094 156,552
General & Administrative 288,633 200,277 489,400 410,674
----------- ----------- ----------- -----------
495,669 307,989 900,138 860,315
----------- ----------- ----------- -----------
Operating Income(Loss) 37,928 (209,413) (72,693) (620,276)
Interest Income 25,416 0 35,070 0
Interest Expense (12,177) (44,590) (52,761) (80,611)
----------- ----------- ----------- -----------
Net Income(Loss) before Income Taxes 51,167 (254,003) 90,384 (700,887)
Income tax expense(benefit) 0 0 (43,000) 0
----------- ----------- ----------- -----------
Net Income (Loss) $ 51,167 ($ 254,003) ($ 47,384) ($ 700,887)
=========== =========== =========== ===========
Income(Loss) per share $ 0.01 ($ 0.23) ($ 0.01) ($ 0.64)
Weighted average number of common and 3,567,672 1,088,949 3,532,928 1,088,949
common equivalent shares outstanding
</TABLE>
See Notes to Financial Statements
<PAGE>
MERCURY WASTE SOLUTIONS, INC.
STATEMENT OF SHAREHOLDERS' EQUITY
Period from December 31, 1996 to June 30, 1997
<TABLE>
<CAPTION>
Retained
Common Common Additional Earnings Total
Stock Stock Paid-In (Accumulated Shareholders'
Shares Amount Capital Deficit) Equity
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1996 2,249,097 $ 22,491 $ 1,246,649 ($ 985,446) $ 283,694
Initial Public Offering of common stock, net of
commissions and offering costs of $1,065,062 1,095,000 10,950 4,398,988 4,409,938
Exercise of warrant 120,000 1,200 133,800 135,000
Reclassification of "S" corporation accumulated
deficit to additional paid-in capital pursuant to
termination of "S" corporation status (1,062,966) 1,062,966 0
Compensation expense on stock option grants 2,333 2,333
Net loss (47,384) (47,384)
----------- ----------- ----------- ----------- -----------
Balance, June 30, 1997 3,464,097 $ 34,641 $ 4,718,804 $ 30,136 $ 4,783,581
=========== =========== =========== =========== ===========
See Notes to Financial Statements
</TABLE>
<PAGE>
MERCURY WASTE SOLUTIONS, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30, 1997 JUNE 30,1996
------------- ------------
<S> <C> <C>
Cash Flows From Operating Acitivities
Net Income(Loss) ($ 47,384) ($ 700,887)
Adjustments to reconcile net income(loss) to net cash (used in) operating activities:
Depreciation 89,295 46,364
Amortization 70,211 63,962
Deferred income tax (43,000) 0
Non cash compensation 2,333 0
Purchased research and development 0 200,000
Provision for doubtful accounts 5,000 10,000
Changes in assets and liabilities, net of effects of business acquisition
(Increase)decrease in:
Accounts receivable (376,559) (119,958)
Prepaid expenses (164,666) 0
Increase(decrease) in:
Accounts payable (46,657) 38,742
Accrued expenses (6,077) 53,088
----------- -----------
NET CASH (USED IN) OPERATING ACTIVITIES (517,504) (408,689)
----------- -----------
Cash Flows from Investing Activities
Purchase of furniture, fixtures, and equipment (340,428) (325,039)
Settlement of contingent consideration (75,000) 0
Increase in restricted cash (38,856) (28,190)
Acquisition of business 0 (977,125)
----------- -----------
NET CASH (USED IN) INVESTING ACTIVITIES (454,284) (1,330,354)
----------- -----------
Cash Flows From Financing Activities
Proceeds from related party long-term debt 0 1,457,793
Payments on long-term debt (1,686,697) 0
Net proceeds from related party demand note 22,000 0
Net proceeds from issuance of common stock 4,528,845 281,250
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,864,148 1,739,043
----------- -----------
INCREASE IN CASH & CASH EQUIVALENTS 1,892,360 0
Cash and cash equivalents
Beginning 0 0
----------- -----------
Ending $ 1,892,360 $ 0
=========== ===========
Supplemental Disclosures of Cash Flow Information
Cash payments for interest $ 63,126 $ 76,751
=========== ===========
</TABLE>
See Notes to Financial Statements
<PAGE>
MERCURY WASTE SOLUTIONS, INC.
Notes to Financial Statements
June 30, 1997
Note 1. - Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and the instructions to Form 10-QSB. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three and six month periods ended June 30, 1997 are not necessarily indicative
of the results that may be expected for the year ended December 31, 1997, or any
other period. For further information, refer to the audited financial statements
and footnotes thereto for the year ended December 31, 1996 contained in the
Company's Registration Statement on Form SB-2 (File No. 333-17399.)
Note 2. - Initial Public Offering
On March 5, 1997, the Company sold 1,000,000 shares at $5.00 per share in an
initial public offering, realizing net proceeds of $4,012,017. In April 1997,
the Company closed on the over-allotment for the offering by selling an
additional 95,000 shares at $5.00, realizing net proceeds of approximately
$397,921. In conjunction with the offering, the underwriter was issued a warrant
to purchase 100,000 shares of common stock at $6.00 per share.
Upon closing of the offering, the Company's S corporation election was
terminated. As a result, the accumulated deficit balance at March 5, 1997,
totaling $1,062,966, representing losses on which income tax deductions have
been taken at the shareholder level, was reclassified to paid-in-capital.
Note 3. - Income(Loss) Per Share
Net income(loss) per common and common equivalent share is based upon the
weighted average number of common and common equivalent shares outstanding
during each period. Pursuant to SEC Staff Accounting Bulletin No. 83, common
stock issued and stock options and warrants granted with exercise prices below
the initial public offering price for the period from January 2, 1996 (date of
inception) through the effective date of the offering (through March 31, 1997)
have been included in the calculations as if they were outstanding for all
periods presented. In periods subsequent to March 31, 1997, common equivalent
shares are included in the calculation if their effect is dilutive using the
treasury stock method.
Note 4. - Pro Forma Information
Pro forma income tax and loss per share data for the periods when the Company
was an S corporation is not presented as it does not differ from the information
in the accompanying statement of operations.
Note 5. - Settlement with U.S. Environmental, Incorporated
As part of the acquisition of U.S. Environmental, Incorporated (USE) on January
2, 1996, the Company was obligated to make payments to USE for each Model 2000
(or 2000B) sold by the Company, with total payments not to exceed $460,000. In
March 1997, the Company settled this obligation for $250,000 by paying $75,000
in cash and the balance of $175,000 in a note. This amount, together with the
amounts already owing the related party ($259,567), are payable pursuant to
notes bearing interest at 10% and payable in installments totaling $11,550 a
month through December 1, 2000. This settlement was an adjustment of the
original purchase price of USE and has been allocated to goodwill.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in connection with the Company's
financial statements and related notes thereto included within this document.
OVERVIEW
The Company provides mercury waste recycling solutions to mercury waste
generators of all sizes. The Company operates a mercury waste retorting facility
in Union Grove, Wisconsin (the "Union Grove Retorting Facility')and a facility
to recycle fluorescent and other mercury-containing lamps in Roseville,
Minnesota (the "Roseville Recycling Facility"). In addition, the Company plans
to market and lease lamp recycling equipment.
In 1996, the Company's revenues consisted of recycling revenues generated from
its Roseville and Union Grove facilities. The Company's activities also
included: (i) the continued improvement of the Model 2000 lamp recycler, (ii)
completion of the development of the mercury retorting equipment at the Union
Grove Retorting Facility, (iii) development of new lamp processing equipment,
(iv) commencement of marketing strategies and (v) activities related to the
organizational development of the Company, including various capital raising
activities.
For the three and six month periods ended June 30, 1997, the Company's revenues
consisted primarily of recycling revenues generated from its Roseville and Union
Grove facilities. The Company's activities also included: (i) the raising of
$5,475,000 in capital through an Initial Public Offering of the Company's common
stock, (ii) research and development of lamp processing equipment, (iii)
research and development of a hazardous waste storage facility in the Southeast
U.S., (iv) commencement of expansion of the Union Grove Retorting Facility, and
(v) expansion of processing capacity at the Union Grove Retorting Facility.
RESULTS OF OPERATIONS
Total revenues were $821,040 and $1,320,472 for the three and six month periods
ended June 30, 1997 respectively compared to $230,635 and $496,967 for the
comparable periods in 1996. Total revenues for the second quarter of 1997
increased $321,608 or 64% over the first quarter of 1997. Mercury retorting
revenues were $492,141 and $762,361 for the three and six month periods ended
June 30, 1997 compared to $85,937 and $185,150 for the comparable periods in
1996. These increases are primarily due to volume increases as a result of the
Union Grove Retorting Facility becoming fully operational in September 1996.
Since that time, the Company has continued to add customers by targeting
national waste management companies and Fortune 500 companies. Lamp recycling
revenues were $328,899 and $558,111 for the three and six month periods ended
June 30, 1997 compared to $144,698 and $311,817 for the comparable periods in
1996. These increases are due primarily to the continued growth of ballast
collection as a service to lamp recycling customers and the growth of lamp
recycling sales in markets outside Minnesota.
The Company is developing a proprietary lamp processor that it plans to lease to
large users of flourescent and other mercury-containing lamps such as office
towers and retail chain stores. Lamp processor marketing activity is expected to
begin in the second half of 1997.
Cost of recycling revenues consists primarily of direct labor costs to process
the waste and direct facility overhead costs. Gross profit as a percent of
revenue was 65% and 63% for the three and six month periods ended June 30, 1997
respectively compared to 43% and 48% for the comparable periods in 1996. The
improvement in gross profit in 1997 is primarily due to increases in capacity
utilization at the Union Grove Retorting Facility, which spreads more volume
over fixed costs at this facility.
Research and development expense was $32,268 and $56,644 for the three and six
month periods ended June 30, 1997 respectively compared to $23,034 and $293,089
for the comparable periods in 1996. The Company's development activities in 1997
consisted of research into new lamp processing equipment. Research and
<PAGE>
development expense for the six months ended June 30, 1996 included $200,000
allocated to purchased research and development related to a continuous flow
oven at the Union Grove Retorting Facility that had no alternative use for the
Company. The balance of research and development expense in the six months ended
June 30, 1996 was related to mercury retorting equipment development.
Selling expense was $174,768 or 21% of revenues and $354,094 or 27% of revenues
for the three and six month periods ended June 30, 1997 respectively compared to
$84,678 or 37% of revenues and $156,552 or 32% of revenues for the comparable
periods in 1996. This increase in expense in 1997 was related to the Company's
development of its sales staff and related costs of deploying its marketing
plan, including increased travel and telephone expense. The reduction in
percentage in 1997 is primarly due to increased revenues.
General and administrative expense was $288,633 or 35% of revenues and $489,400
or 37% of revenues for the three and six month periods ended June 30, 1997
compared to $200,277 or 87% of revenues and $410,674 or 83% of revenues for the
comparable periods in 1996. The increase in expense in 1997 was principally due
to personnel costs related to investment in organizational infrastructure. The
reduction in percentage in 1997 is primarily due to increased revenues.
Interest income was $25,416 and $35,070 for the three and six month periods
ended June 30, 1997 respectively compared to no interest income for the
comparable periods in 1996. The increase was largely due to investment of
proceeds from the Company's Initial Public Offering. Interest expense was
$12,177 and $52,761 for the three and six month periods ended June 30, 1997
compared to $44,590 and $80,611 for the comparable periods in 1996. The Company
anticipates lower interest expense in the future as the $1,660,000 credit line
was paid from proceeds of the Initial Public Offering and was terminated.
Income tax provision (benefit) for the three and six month periods ended June
30, 1997 was $0 and ($43,000) compared to $0 for the comparable periods in 1996.
The benefit recorded in 1997 represents deferred tax assets recorded on the
conversion from S to C corporation tax status. The realization of these deferred
tax assets is dependent upon generating sufficient taxable income during the
period that deductible temporary differences are expected to be available to
reduce taxable income.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash and cash equivalents of $1,892,360 and working capital of
$2,555,060 at June 30, 1997. Net cash used in operating activities was $517,504
for the six months ended June 30, 1997, primarily resulting from the net loss of
$47,384, an increase in prepaid expenses of $164,666, and an increase in
accounts receivable of $376,559, offset by depreciation of $89,295 and
amortization of $70,211. The increase in prepaid expenses was primarily due to
prepaid insurance. The significant increase in accounts receivable is the result
of the increase in sales.
Cash flows used in investing activities were $454,284 for the six months ended
June 30, 1997, consisting of payments for the purchase of furniture, fixtures
and equipment of $340,428, an increase in cash reserved for closure related to
the Union Grove Retorting Facility of $38,856, and $75,000 for a settlement of a
contingent liability related to the acquisition of USE (see below.) The capital
expenditures for the period relate primarily to the expansion of the Union Grove
Retorting Facility. The Company is in the process of expanding the Union Grove
Retorting Facility to increase the retorting capacity, to add lamp recycling
capability and to add a temporary waste storage facility. The Company believes
this expansion will be completed in 1997. After the expansion, the Company will
continue to lease this facility and has negotiated a long-term lease with the
landlord.
Cash provided by financing activities consisted primarily of net proceeds from
the Initial Public Offering, offset by the payoff and termination of the
Company's revolving credit line with Norwest Bank, N.A. of $1,660,000.
On March 5, 1997, the Company sold 1,000,000 shares at $5.00 per share in an
Initial Public Offering, realizing
<PAGE>
net proceeds of $4,012,017. In April 1997, the Company closed on the
over-allotment for the offering by selling an additional 95,000 shares at $5.00,
realizing net proceeds of $397,921. In conjunction with the offering, the
underwriter was issued a warrant to purchase 100,000 shares of common stock at
$6.00 per share.
As part of a private placement completed in September 1996, the Company received
proceeds of $135,000 of subordinated debt. The holder of the debt cancelled the
indebtedness concurrently with the effectiveness of the Initial Public Offering
as payment of the exercise price of a warrant to purchase 120,000 shares of
Common Stock.
The Company has a $600,000 revolving credit promissory note with Brad J.
Buscher, its Chairman of the Board, Chief Executive Officer, and Chief Financial
Officer of which $67,000 was outstanding on June 30, 1997. The note is secured
by all assets of the Company and bears interest at prime plus 2%.
As part of the acquisition of USE on January 2, 1996, the Company was obligated
to make payments to USE for each Model 2000 (or 2000B) sold by the Company, with
total payments not to exceed $460,000. In March 1997, the Company settled this
obligation for $250,000 by paying $75,000 in cash and the balance of $175,000 in
a note. This amount together with the amounts already owing the related party
($259,567), are payable pursuant to notes bearing interest at 10% and payable in
installments totaling $11,550 a month through December 1, 2000. This settlement
was an adjustment of the original purchase price of USE and has been allocated
to goodwill.
The Company's capital requirements will be significant for 1997 to fund
operations and planned capital expenditures related to expansion of the Union
Grove Retorting Facility, to manufacture and lease lamp processing equipment,
and to develop consolidation and temporary hazardous waste storage facilities.
The Company anticipates that the net proceeds from the Initial Public Offering
will be sufficient to fund its operations and planned expansion for at least 12
months. If the Company's business grows more rapidly than anticipated or if
anticipated revenue increases do not materialize, the Company may require
additional capital more quickly. There can be no assurance that additional
financing will be available at all or that, if available, such financing would
be obtainable on terms favorable to the Company.
ISSUED BUT NOT YET ADOPTED STANDARD
In February 1997, the FASB issued Statement No. 128, "Earnings Per Share."
Statement No. 128 establishes standards for computing and presenting earnings
per share (EPS). This Statement simplifies the standards for computing EPS
previously found in APB Opinion No. 15. It replaces the presentation of primary
EPS with a presentation of basic EPS, which excludes dilution and is computed by
dividing income available to common shareholders by the weighted-average number
of common shares outstanding for the period. It also requires dual presentation
of basic and diluted EPS on the face of the income statement for all entities
with complex capital structures.
The Company will be required to adopt Statement No. 128 in the fourth quarter of
1997. This statement requires restatement of all prior-period EPS data
presented. The adoption of Statement No. 128 would have no effect on reported
EPS.
FORWARD LOOKING STATEMENTS
Statements contained in this report regarding the Company's future operations,
performance and results, and anticipated liquidity are forward-looking and
therefore are subject to certain risks and uncertainties, including
those discussed herein. In addition, any forward-looking information regarding
the operations of the Company will be affected by the ability of the Company to
implement its marketing strategies and secure new customers, secure storage
facilities at the Union Grove Retorting Facility and other parts of the country,
and manage anticipated growth and other Risk Factors included in the
Registration Statement on Form SB-2, as amended, filed with the Securities and
Exchange Commission (Form 333-17399.)
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceedings - none
Item 2. Changes in Securities - not applicable
Item 3. Defaults upon Senior Securities - not applicable
Item 4. Submission of Matters to a Vote of Security Holders - not applicable
Item 5. Other Information - none
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibits
11 - Statement re: computation of per share earnings
27 - Financial Data Schedule
(B) Reports on Form 8-K - no reports on Form 8-K were filed during the
fiscal quarter ended June 30, 1997
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized
Mercury Waste Solutions, Inc.
(registrant)
Dated: July 29, 1997. ___________________________________
Brad J. Buscher
Chairman of the Board, Chief Executive
Officer, & Chief Financial Officer
Dated: July 29, 1997. ___________________________________
Mark G. Edlund
President
EXHIBIT 11
MERCURY WASTE SOLUTIONS, INC.
COMPUTATION OF LOSS PER COMMON
AND COMMON EQUIVALENT SHARE
Three Three
Months Months
Ended Ended
June 30, June 30,
1997 1996
---- ----
Computation of weighted average number of common
shares outstanding and common stock equivalent
shares:
Common shares outstanding at the beginning of
the period 3,369,097 1,000,000
Weighted average number of shares issued during
the period 79,341 --
Common equivalent shares attributed to stock
options and warrant granted (A) 119,234 88,949
Common stock issued (B) -- --
Weighted average number of common and common
equivalent shares 3,567,672 1,088,949
========== ==========
Net Income (loss) $ 51,167 $ (254,003)
========== ==========
Income (loss) per common and equivalent shares $ .01 $ (0.23)
========== ==========
(A) All stock options and warrants are anti-dilutive, however, pursuant to
the Securities and Exchange Commission Staff Accounting Bulletin No. 83
(SAB 83), stock options and warrants granted with the exercise price
below the assumed initial offering price during the twelve-month
period preceding the date of the initial filing of the Registration
Statement have been included in the calculation of common stock
equivalent shares as if they were outstanding for all periods
presented, using the treasury stock method.
(B) Pursuant to the Securities and Exchange Commission SAB 83, all stock
issued at a price below the assumed initial offering price issued
during the twelve-month period preceding the date of the initial filing
of the Registration Statement has been included in the calculation of
common stock as if it was outstanding for all periods presented.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,892,360
<SECURITIES> 0
<RECEIVABLES> 767,623
<ALLOWANCES> 15,000
<INVENTORY> 0
<CURRENT-ASSETS> 2,843,768
<PP&E> 1,250,510
<DEPRECIATION> 192,327
<TOTAL-ASSETS> 5,389,040
<CURRENT-LIABILITIES> 289,708
<BONDS> 0
0
0
<COMMON> 34,641
<OTHER-SE> 4,688,668
<TOTAL-LIABILITY-AND-EQUITY> 5,389,040
<SALES> 821,040
<TOTAL-REVENUES> 821,040
<CGS> 0
<TOTAL-COSTS> 287,443
<OTHER-EXPENSES> 490,669
<LOSS-PROVISION> 5,000
<INTEREST-EXPENSE> 12,177
<INCOME-PRETAX> 51,167
<INCOME-TAX> 0
<INCOME-CONTINUING> 51,167
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 51,167
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
</TABLE>
