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, 1998
( ) 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, 1998 was 3,480,097.
Transitional small business disclosure format:
Yes_____ No__X__
<PAGE>
MERCURY WASTE SOLUTIONS, INC.
FORM 10-QSB
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of June 30, 1998 and
December 31, 1997 3
Consolidated Statements of Operations for the three and
six month periods ended June 30, 1998 and 1997 4
Consolidated Statements of Cash Flows for the six months
ended June 30, 1998 and 1997 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
PART II. OTHER INFORMATION
Item 2. Changes in 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 12
Signatures 13
2
<PAGE>
PART I-FINANCIAL INFORMATION
Item 1. Financial Statements
MERCURY WASTE SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER,31,
1998 1997
----------- -----------
ASSETS
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 97,654 $ 779,945
Accounts receivable, less allowance for doubtful accounts of $35,000
at June 30, 1998 and $40,000 at December 31, 1997 1,272,353 867,936
Other current assets 304,992 195,749
----------- -----------
Total current assets 1,674,999 1,843,630
----------- -----------
Property and Equipment, at cost
Leasehold improvements 313,012 198,462
Furniture, fixtures, and equipment 347,411 279,039
Plant equipment 1,645,146 958,683
Construction in progress 0 182,623
----------- -----------
2,305,569 1,618,807
Less accumulated depreciation 442,807 303,625
----------- -----------
1,862,762 1,315,182
----------- -----------
Other Assets
Cash restricted for closure 88,953 130,988
Acquired equipment and facility rights, net of accumulated amortization
of $131,249 at June 30, 1998 and $98,749 at December 31, 1997 518,751 551,251
Goodwill, net of accumulated amortization of $219,810 at June 30, 1998
and $175,848 at December 31, 1997 659,426 703,388
Other intangibles, primarily acquired customer lists, permits and non-compete agreements,
net of accumulated amortization of $86,110 at June 30, 1998 and $20,410
at December 31,1997 1,732,160 285,743
----------- -----------
2,999,290 1,671,370
----------- -----------
Total assets $ 6,537,051 $ 4,830,182
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt $ 477,172 $ 107,646
Accounts payable 325,592 470,543
Accrued expenses 256,853 269,718
Deferred revenue 100,272 60,309
----------- -----------
Total current liabilities 1,159,889 908,216
----------- -----------
Long-Term Liabilities
Long-term debt, net of current portion 1,303,744 250,290
Closure fund 30,300 10,300
----------- -----------
1,334,044 260,590
----------- -----------
Shareholders' Equity
Common stock, $0.01 par value; shares issued and outstanding of
3,480,097 at June 30, 1998 and 3,464,097 at December 31, 1997 34,801 34,641
Additional paid-in capital 4,788,894 4,722,304
Accumulated deficit (780,577) (1,095,569)
----------- -----------
4,043,118 3,661,376
----------- -----------
Total liabilities and shareholders' equity $ 6,537,051 $ 4,830,182
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
3
<PAGE>
MERCURY WASTE SOLUTIONS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
JUNE 30, 1998 JUNE 30, 1997 JUNE 30, 1998 JUNE 30, 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues $1,629,840 $ 821,040 $2,978,013 $1,320,472
Cost of Revenues 731,065 319,711 1,398,041 549,671
---------- --------- ---------- ----------
Gross Profit 898,775 501,329 1,579,972 770,801
---------- --------- ---------- ----------
Operating Expenses
Sales & Marketing 296,896 174,768 523,318 354,094
General & Administrative 439,744 288,633 825,511 489,400
---------- --------- ---------- ----------
736,640 463,401 1,348,829 843,494
---------- --------- ---------- ----------
Operating Income (Loss) 162,135 37,928 231,143 (72,693)
Insurance Recovery 0 0 121,034 0
Interest Income 1,477 25,416 6,614 35,070
Interest Expense (35,282) (12,177) (43,799) (52,761)
---------- --------- ---------- ----------
Net Income (Loss) before Income Taxes 128,330 51,167 314,992 (90,384)
Income tax expense (benefit) 0 0 0 (43,000)
---------- --------- ---------- ----------
Net Income (Loss) $ 128,330 $ 51,167 $ 314,992 $ (47,384)
========== ========= ========== ==========
Basic and diluted earnings (loss) per share $0.04 $0.01 $0.09 $(0.01)
Weighted average number of common and
common equivalent shares outstanding 3,543,080 3,567,672 3,585,054 3,532,928
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE>
MERCURY WASTE SOLUTIONS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30, 1998 JUNE 30, 1997
------------- -------------
<S> <C> <C>
Cash Flows From Operating Activities
Net Income(Loss) $314,992 $(47,384)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation 139,183 89,295
Amortization 142,162 70,211
Deferred income tax 0 (43,000)
Non cash compensation 3,500 2,333
Changes in assets and liabilities:
Accounts receivable (404,417) (371,559)
Other current assets (88,780) (164,666)
Accounts payable (144,951) (46,657)
Accrued expenses (12,865) (6,077)
Deferred revenue 39,963 0
----------- -----------
Net cash used in operating activities (11,213) (517,504)
----------- -----------
Cash Flows from Investing Activities
Purchase of furniture, fixtures, and equipment (466,763) (340,428)
Settlement of contingent consideration 0 (75,000)
(Increase) decrease in restricted cash 42,035 (38,856)
Acquisition of business (1,377,899) 0
----------- -----------
Net cash used in investing activities (1,802,627) (454,284)
----------- -----------
Cash Flows From Financing Activities
Proceeds from long-term debt 1,200,000 0
Payments on long-term debt (76,451) (1,686,697)
Net proceeds (payments) from related party demand note 0 22,000
Net proceeds from issuance of common stock and exercise of stock options 8,000 4,528,845
----------- -----------
Net cash provided by financing activities 1,131,549 2,864,148
----------- -----------
Increase (decrease) in cash and cash equivalents (682,291) 1,892,360
Cash and cash equivalents
Beginning 779,945 0
----------- -----------
Ending $97,654 $1,892,360
=========== ===========
Supplemental Disclosures of Cash Flow Information
Cash payments for interest $20,035 $63,126
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
5
<PAGE>
MERCURY WASTE SOLUTIONS, INC.
Notes to Consolidated Financial Statements
June 30, 1998
Note 1. - Basis of Presentation
The accompanying unaudited consolidated 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, 1998 are not necessarily indicative
of the results that may be expected for the year ended December 31, 1998, or any
other period. For further information, refer to the audited financial statements
and footnotes thereto for the year ended December 31, 1997 contained in the
Company's Annual Report on Form 10-KSB.
Note 2. Business Acquisition
Pursuant to an Asset Purchase Agreement dated March 11, 1998, by and
among MWS New York, Inc., a wholly-owned subsidiary of Mercury Waste Solutions,
Inc. (collectively, the "Company") and Mercury Refining Company, Inc.,
26 Railroad Ave., Inc. and their shareholders (collectively, "MERECO"), on
May 11,1998, the Company completed the purchase of certain assets relating to
the mercury remediation, recycling and refining business of MERECO.
The acquired assets include an 888 drum permitted storage facility, certain
aqueous waste processing technology and equipment, mercury refining capability
and MERECO's existing customer list. The Company did not acquire and will not
operate MERECO's mercury processing facility. Any processing equipment acquired
from MERECO will be utilized at the Company's Union Grove Retorting Facility
located in Union Grove, Wisconsin. The Company will operate the permitted 888
drum storage facility under a lease, with an initial term of three years, with
MERECO.
The acquisition will be accounted for as a purchase. The purchase price
and estimated allocation of such cost for the acquisition is as follows:
Purchase Price components:
Cash purchase price $1,250,000
Non-compete payment 65,000
Warrant issuance 55,250
Excess rent applied to purchase price 148,000
Transaction costs 150,000
----------
$1,668,250
==========
Estimated allocation:
Plant equipment $ 190,000
Furniture fixtures and equipment 10,000
Intangibles 1,468,250
----------
$1,668,250
==========
6
<PAGE>
MERCURY WASTE SOLUTIONS, INC.
Notes to Consolidated Financial Statements
June 30, 1998
Pro forma unaudited consolidated statements of operations for the six
months ended June 30, 1998 and 1997, assuming the acquisition occurred on
January 1, 1997, are as follows:
1998 1997
Revenues $3,597,844 $2,251,900
Net income (loss) $ 376,942 $ (12,682)
Basic and diluted earnings per share $ 0.10 $ (0.00)
Weighted average number of common
and common equivalent shares 3,600,839 3,532,928
7
<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 consolidated financial statements and related notes thereto included
within this document.
OVERVIEW
The Company provides services to mercury waste generators to reduce the
risk of liability associated with mercury waste disposal. The Company currently
operates a mercury waste retorting facility in Union Grove, Wisconsin, ("Union
Grove Retorting Facility") a facility for recycling and storing fluorescent and
other mercury-containing lamps in Roseville, Minnesota and mercury waste storage
and collection facilities in Indianapolis, Indiana, Atlanta, Georgia and Albany,
New York. In March, 1998, the Company added lamp recycling, storage and
additional retorting capability at its Union Grove Retorting Facility.
On May 11, 1998 the Company completed the acquisition of certain assets
and liabilities relating to the mercury remediation, recycling and refining
business of Mercury Refining Company, Inc., ("MERECO"). The acquired assets
include an 888 drum permitted storage facility, certain aqueous waste processing
technology and equipment, mercury refining capability and MERECO's existing
customer list. The Company did not acquire and will not operate MERECO's mercury
processing facility. Any processing equipment acquired from MERECO will be
utilized at the Company's Union Grove Retorting Facility. The Company will
operate the permitted 888 drum storage facility under a lease, with an initial
term of three years, with MERECO. The cash purchase price for the acquisition
was approximately $1,250,000, exclusive of the annual rent commitment under the
storage facility lease of $75,000 and acquisition costs. In addition, pursuant
to a non compete agreement with a shareholder of MERECO, the Company will pay
$65,000, in total, and grant a warrant for the purchase of 20,000 shares of
common stock at $0.001.
RESULTS OF OPERATIONS
Total revenues were $1,629,840 and $2,978,013 for the three and six
months ended June 30, 1998 compared to $821,040 and $1,320,472 for the three and
six months ended June 30, 1997, an increase of 99% and 126%, respectively.
Mercury retorting revenues were $872,404 and $1,557,311 for the three
and six months ended June 30,1998 compared to $492,141 and $762,361 for the
three and six months ended June 30, 1997, an increase of 77% and 104%,
respectively. The Company has continued to experience revenue growth resulting
from what the Company believes is the increasing impact of its national sales
force implemented in 1997, coupled with increased processing and storage
capability and revenues generated from customers acquired in the MERECO
acquisition. The Company has expanded its Union Grove Retorting Facility which
significantly increased retorting capacity, added lamp processing capacity and
added hazardous waste storage capability. In March, 1998, the Company received a
variance from the Wisconsin Department of Natural Resources (DNR) that
allows the Company to store up to 181 drums of hazardous waste at the Union
Grove Retorting Facility. The variance will remain in effect until the DNR
issues the final hazardous waste storage permit, which is anticipated to occur
later this year. The Company believes that this storage capability, along with
the 888 drum storage facility acquired in the MERECO acquisition, will position
the Company for continued growth.
Lamp recycling revenues were $757,436 and $1,420,702 for the three and
six months ended June 30, 1998 compared to $328,899 and $558,111 for the three
and six months ended June 30, 1997, an increase of 130% and 155%, respectively.
This increase is due primarily to the acquisition of certain assets of Ballast &
Lamp Recycling, Inc. in September, 1997 which expanded the Company's lamp
recycling market in the Midwest and Southeast.
Cost of recycling revenues consists primarily of direct labor costs to
process the waste, transportation costs and direct facility overhead costs.
Gross profit as a percent of revenue was 55% and 53% for the three and six
8
<PAGE>
months ended June 30, 1998 compared to 61% and 58% for the three and six months
ended June 30, 1997. The decrease in gross profit percentage in the 1998 is due
to (i) increases in fixed costs incurred related to the expansion at the Union
Grove Retorting Facility, (ii) higher mix of lamp recycling revenues, including
ballast collection, that yield lower margins, and (iii) competitive pressures
causing downward pricing in the lamp recycling operations.
Sales and marketing expense was $296,896 and $523,318 for the three and
six months ended June 30, 1998 compared to $174,768 and $354,094 for the three
and six months ended June 30, 1997, an increase of 70% and 48%, respectively. As
a percent of revenues, sales and marketing expense was 18% and 18% for the three
and six months ended June 30, 1998 as compared to 21% and 27% for the 1997
comparable periods. The increase in expense is due primarily to the sales staff
acquired through business acquisitions and increased sales commissions.
General and administrative expense was $439,744 and $825,511 for the
three and six months ended June 30, 1998 compared to $288,633 and $489,400 for
the three and six months ended June 30, 1997, an increase 52% and 69%,
respectively. As a percent of revenues, general and administrative expense was
27% and 28% for the three and six months ended June 30, 1998 as compared to 35%
and 37% for the 1997 comparable periods. The increase in administrative expense
in 1998 was principally due to personnel investments made in 1997 after the
initial public offering to support the Company's growth and professional fees
and other costs associated with being a public company.
The insurance recovery of $121,034 recognized during the six months
ended June 30, 1998 represents a partial recovery received from its 1997
business interruption insurance claim. The recovery consists primarily of
reimbursement of expenses incurred in 1997 during the business interruption
period. The major portion of the claim, which addresses the recovery of lost
revenue during the interruption, has not yet been settled with the insurance
company.
Interest expense was $35,282 and $43,799 for the three and six months
ended June 30, 1998 compared to $12,177 and $52,761 for the three and six months
ended June 30, 1997. The 1998 increase in the three month period is due to the
debt incurred in connection with the MERECO acquisition. The 1998 decrease in
the six month period is due to a lower average outstanding debt balance than in
1997.
The Company had no income tax expense for the three and six months
ended June 30, 1998 due to availability of net operating loss carryforwards. The
income tax benefit of $43,000 recorded in 1997 represented deferred tax assets
recorded on the conversion from S to C corporation tax status. At June 30, 1998,
the Company has recorded a valuation allowance of approximately $450,000 on its
net deferred tax assets due to the uncertainty of their realization. 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. At June 30, 1998, the Company
had net operating loss carryforwards, generated since the Company became a C
corporation, of approximately $900,000 that expire in 2012.
Resulting from the factors discussed above, net income was $128,330 and
$314,992 for the three and six months ended June 30, 1998 compared to net income
of $51,167 for the three months ended June 30, 1997 and a net loss of $47,384
for the six months ended June 30, 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash and cash equivalents of $97,654 and working
capital of $515,110 at June 30, 1998. Net cash used in operating activities was
$11,213 for the six months ended June, 1998, primarily resulting from an
increase in accounts receivable of $404,417 due to an increase in sales, offset
by net income of $314,992 and depreciation and amortization of $281,345. The
increases in the Company's current assets and liabilities are due to an increase
in sales.
9
<PAGE>
Cash flows used in investing activities were $1,802,627 for the six
months ended June 30, 1998, consisting primary of payments for capital
expenditures of $466,763 and the cash portion of the purchase price of MERECO of
$1,377,899. The capital expenditures for the period relate primarily to the
expansion of the Union Grove Retorting Facility. Capital expenditures for the
balance of 1998, approximating $200,000, will be used primarily to further
expand processing capabilities at the Union Grove Retorting Facility.
Cash provided by financing activities consisted of proceeds of
$1,200,000 from a term loan used to fund the MERECO acquisition and proceeds
received on exercise of stock options of $8,000, offset by payments on long-term
debt of $76,451.
In conjunction with the acquisition of MERECO, the Company replaced its
$600,000 revolving credit promissory note with Brad J. Buscher, its Chairman of
the Board and Chief Executive Officer, with a $2,000,000 loan borrowed from
Bankers American Capital Corporation ("BACC"), a corporation wholly owned by
Brad J. Buscher. The $2,000,000 loan consists of a $1,200,000 term loan used to
fund the MERECO acquisition and an $800,000 revolving credit loan to be used for
working capital purposes. The term loan has a two year term requiring quarterly
payments, commencing on September 1, 1998, of $60,000 plus interest and the
revolving credit loan has a one year term. Borrowings under the loans bear
interest at 6% over the prime rate and are secured by all Company assets. In
addition, BACC was granted a ten year warrant to purchase 100,000 shares of
common stock at $3.75, the market price of the stock on the date of closing.
The Company's capital requirements will be significant for the
remainder of 1998 to fund operations and planned capital expenditures, to
develop consolidation and temporary hazardous waste storage facilities and to
fund potential acquisitions. The Company anticipates that its availability under
its revolving credit loan will be sufficient to fund its operations and capital
expenditures for at least 12 months, excluding any additional business
acquisitions. In addition to capital needed for potential acquisitions, if the
Company's business grows more rapidly than anticipated or if anticipated revenue
increases do not materialize, the Company may require additional capital. 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.
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 actual amount of
the insurance claim settlement received by the Company and 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, manage anticipated growth, successfully integrate business
acquisitions, and other Risk Factors included in the Registration Statement on
Form SB-2, as amended, filed with the Securities and Exchange Commission (File
No. 333-17399.)
10
<PAGE>
PART II OTHER INFORMATION
Item 2. Changes in Securities:
Pursuant to Item 701 of Regulation S-B, the following is a report of
use of proceeds resulting from the Form SB-2 of Mercury Waste Solutions, Inc.,
effective date February 28, 1997, file no. 333-17399. Information is for the
period from April 1, 1998 through June 30, 1998.
Construction of plant, building and facilities
(primarily the Union Retorting Grove Facility) $ 41,484
Purchase and installation of machinery and equipment
(primarily the Union Grove Retorting Facility) 89,493
--------
Total use of proceeds for the period $130,977
========
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders of Mercury Waste Solutions, Inc. was
held on May 27, 1998. There were 3,480,097 shares of Common Stock entitled to
vote at the meeting and a total of 3,307,970 shares were represented at the
meeting. The following matters were voted upon:
1. Election of directors
The following directors were elected, each with 3,302,970 votes for, 0
votes against and 5,000 votes withheld:
Brad J. Buscher
Mark G. Edlund
Alan R. Geiwitz
Joel H. Gottesman
Robert L. Etter
Frank F. Farrar
2. Proposal to increase the number of shares reserved for issuance
under the 1996 Stock Option Plan from 185,500 to 371,000 was passed with
2,630,946 votes for, 49,900 votes against, 9,000 votes abstained and 618,124
broker non-votes.
Item 5. Other information
Discretionary Proxy Voting Authority/Shareholder Proposals
On May 21, 1998 the Securities and Exchange Commission adopted and
amendment to Rule 14a-4, as promulgated under the Securities and Exchange Act of
1934. The amendment to Rule 14a-4(c)(1) governs the Company's use of its
discretionary proxy voting authority with respect to a shareholder proposal
which the shareholder has not sought to include in the Company's proxy
statement. The new amendment provides that if a proponent of a proposal fails to
notify the company at least 45 days prior to the month and day of mailing of the
prior year's proxy statement, then the management proxies will be allowed to use
their discretionary voting authority when the proposal is raised at the meeting,
without any discussion of the matter in the proxy statement.
With respect to the Company's 1999 Annual Meeting of Shareholders, if
the Company is not provided notice of a shareholder proposal, which the
shareholder has not previously sought to include in the Company's proxy
statement, by March 6, 1999, the management proxies will be allowed to use their
discretionary authority as outlined above.
11
<PAGE>
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 - On May 22, 1998 the Company filed an
8-K regarding the acquisition of Mercury Refining Company, Inc. on May 11, 1998.
12
<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: August 13, 1998 /s/ BRAD J. BUSCHER
----------------------------------
Brad J. Buscher
Chairman of the Board and
Chief Executive Officer
Dated: August 13, 1998 /s/ TODD J. ANDERSON
----------------------------------
Todd J. Anderson
Chief Financial Officer
13
EXHIBIT 11
MERCURY WASTE SOLUTIONS, INC.
COMPUTATION OF LOSS PER COMMON
AND COMMON EQUIVALENT SHARE
<TABLE>
<CAPTION>
Six Months Ended Six Months Ended
June 30, 1998 June 30, 1997
---------------- ----------------
<S> <C> <C>
Computation of weighted average number of common
shares outstanding and common stock equivalent shares:
Common shares outstanding at the beginning
of the period 3,464,097 2,249,097
Weighted average number of shares issued during
the period 15,911 763,893
Common equivalent shares attributed to stock
options and warrant granted 105,046 68,831(A)
Common stock issued -- 451,107(B)
---------- ----------
Weighted average number of common and common
equivalent shares 3,585,054 3,532,928
========== ==========
Net Income (loss) $ 314,992 $ (47,384)
========== ==========
Income (loss) per common and equivalent shares $ 0.09 $ (0.01)
========== ==========
</TABLE>
(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 oustanding 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-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 97,654
<SECURITIES> 0
<RECEIVABLES> 1,307,353
<ALLOWANCES> 35,000
<INVENTORY> 0
<CURRENT-ASSETS> 1,674,999
<PP&E> 2,305,569
<DEPRECIATION> 442,807
<TOTAL-ASSETS> 6,537,051
<CURRENT-LIABILITIES> 1,159,889
<BONDS> 1,334,044
0
0
<COMMON> 34,801
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 4,008,317
<SALES> 2,978,013
<TOTAL-REVENUES> 2,978,013
<CGS> 0
<TOTAL-COSTS> 1,398,041
<OTHER-EXPENSES> 1,339,954
<LOSS-PROVISION> 8,875
<INTEREST-EXPENSE> 43,799
<INCOME-PRETAX> 314,992
<INCOME-TAX> 0
<INCOME-CONTINUING> 314,992
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 314,992
<EPS-PRIMARY> .09
<EPS-DILUTED> .09
</TABLE>
