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 SEPTEMBER 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 September 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 1. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of September 30, 1998 and
December 31, 1997 3
Consolidated Statements of Operations for the three and
nine month periods ended September 30, 1998 and 1997 4
Consolidated Statements of Cash Flows for the nine months
ended September 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 7
PART II. OTHER INFORMATION
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
2
<PAGE>
PART I-FINANCIAL INFORMATION
Item 1. Financial Statements
MERCURY WASTE SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
---- ----
ASSETS
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 0 $ 779,945
Accounts receivable, less allowance for doubtful accounts of $50,000
at September 30, 1998 and $40,000 at December 31, 1997 1,683,919 867,936
Insurance claim receivable 497,168 0
Other current assets 295,729 195,749
----------- -----------
Total current assets 2,476,816 1,843,630
----------- -----------
Property and Equipment, at cost
Leasehold improvements 374,843 198,462
Furniture, fixtures, and equipment 369,762 279,039
Plant equipment 1,723,905 958,683
Construction in progress 61,791 182,623
----------- -----------
2,530,301 1,618,807
Less accumulated depreciation 532,567 303,625
----------- -----------
1,997,734 1,315,182
----------- -----------
Other Assets
Cash restricted for closure 90,002 130,988
Acquired equipment and facility rights, net of accumulated amortization
of $147,499 at September 30, 1998 and $98,749 at December 31, 1997 502,501 551,251
Goodwill, net of accumulated amortization of $241,791 at September 30, 1998
and $175,848 at December 31, 1997 637,445 703,388
Other intangibles, primarily acquired customer lists, permits and non-compete agreements,
net of accumulated amortization of $176,471 at September 30, 1998 and $20,410
at December 31,1997 1,700,823 285,743
----------- -----------
2,930,771 1,671,370
----------- -----------
Total assets $ 7,405,321 $ 4,830,182
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Line of credit $ 510,000 $ 0
Current portion of long-term debt 482,000 $ 107,646
Accounts payable 347,461 470,543
Accrued expenses 330,955 269,718
Deferred revenue 96,625 60,309
----------- -----------
Total current liabilities 1,767,041 908,216
----------- -----------
Long-Term Liabilities
Long-term debt, net of current portion 1,176,228 250,290
Closure fund 30,300 10,300
----------- -----------
1,206,528 260,590
----------- -----------
Shareholders' Equity
Common stock, $0.01 par value; shares issued and outstanding of
3,480,097 at September 30, 1998 and 3,464,097 at December 31, 1997 34,801 34,641
Additional paid-in capital 4,790,644 4,722,304
Accumulated deficit (393,693) (1,095,569)
----------- -----------
4,431,752 3,661,376
----------- -----------
Total liabilities and shareholders' equity $ 7,405,321 $ 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 NINE MONTHS ENDED
SEPT. 30, 1998 SEPT. 30, 1997 SEPT. 30, 1998 SEPT. 30, 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenues $ 1,821,444 $ 511,355 $ 4,799,457 $ 1,831,827
Cost of Revenues 852,495 458,474 2,250,584 1,008,145
----------- ----------- ----------- -----------
Gross Profit 968,949 52,881 2,548,873 823,682
----------- ----------- ----------- -----------
Operating Expenses
Sales & Marketing 340,288 254,414 863,606 608,508
General & Administrative 524,742 351,883 1,350,255 841,283
----------- ----------- ----------- -----------
865,030 606,297 2,213,861 1,449,791
----------- ----------- ----------- -----------
Operating Income (Loss) 103,919 (553,416) 335,012 (626,109)
Insurance Recovery, net of direct expenses 348,794 0 469,878 0
Interest Income 932 21,198 7,546 56,268
Interest Expense (66,761) (10,080) (110,560) (62,841)
----------- ----------- ----------- -----------
Net Income (Loss) before Income Taxes 386,884 (542,298) 701,876 (632,682)
Income tax expense (benefit) 0 0 0 (43,000)
----------- ----------- ----------- -----------
Net Income (Loss) $ 386,884 ($ 542,298) $ 701,876 ($ 589,682)
=========== =========== =========== ===========
Basic and diluted earnings (loss) per share $0.11 $(0.16) $0.20 $(0.17)
Weighted average number of common and
common equivalent shares outstanding 3,585,226 3,464,097 3,585,111 3,509,984
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE>
MERCURY WASTE SOLUTIONS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPT. 30, 1998 SEPT. 30, 1997
-------------- --------------
<S> <C> <C>
Cash Flows From Operating Activities
Net Income(Loss) $ 701,876 ($ 589,682)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation 228,942 144,024
Amortization 270,756 108,442
Deferred income tax 0 (43,000)
Non cash compensation 5,250 4,083
Changes in assets and liabilities, net of business acquisitions:
Accounts and insurance claim receivable (1,313,151) (156,723)
Other current assets (79,517) (136,354)
Accounts payable (123,082) (29,772)
Accrued expenses 61,237 88,939
Deferred revenue 36,316 0
----------- -----------
Net cash used in operating activities (211,373) (610,043)
----------- -----------
Cash Flows from Investing Activities
Purchase of furniture, fixtures, and equipment (691,494) (446,687)
Settlement of contingent consideration 0 (75,000)
(Increase) decrease in restricted cash 40,986 (38,856)
Acquisition of businesses (1,436,925) (251,139)
----------- -----------
Net cash used in investing activities (2,087,433) (811,682)
----------- -----------
Cash Flows From Financing Activities
Increase (decrease) in line of credit borrowings 510,000 0
Proceeds from long-term debt 1,200,000 0
Payments on long-term debt (199,139) (1,711,354)
Net proceeds (payments) from related party demand note 0 (45,000)
Net proceeds from issuance of common stock and exercise of stock options 8,000 4,528,845
----------- -----------
Net cash provided by financing activities 1,518,861 2,772,491
----------- -----------
Increase (decrease) in cash and cash equivalents (779,945) 1,350,766
Cash and cash equivalents
Beginning 779,945 0
----------- -----------
Ending $ 0 $ 1,350,766
=========== ===========
Supplemental Disclosures of Cash Flow Information
Cash payments for interest $ 92,450 $ 71,984
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
5
<PAGE>
MERCURY WASTE SOLUTIONS, INC.
Notes to Consolidated Financial Statements
September 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 nine month periods ended September 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.
Pro forma unaudited consolidated statements of operations for the
nine months ended September 30, 1998 and 1997, assuming the acquisition occurred
on January 1, 1997, are as follows:
1998 1997
Revenues $ 5,419,288 $ 3,267,927
Net income (loss) $ 763,806 $ (402,989)
Basic and diluted earnings per share $ 0.21 $ (0.11)
Weighted average number of common
and common equivalent shares 3,594,733 3,509,984
Note 3. Insurance Recovery
In September, 1998, the Company settled its 1997 business
interruption insurance claim. The settlement totaled $662,000, of which
approximately $497,000 was paid in October, 1998 and the balance in prior
quarters. For the three and nine months ended September 30, 1998, the Company
recorded an insurance recovery of $348,794 and 469,878, respectively, which
consists of the gross proceeds received from the insurance company, net of
direct expenses consisting primarily of equipment repair costs and professional
fees.
6
<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.
RESULTS OF OPERATIONS
Total revenues were $1,821,444 and $4,799,457 for the three and nine
months ended September 30, 1998 compared to $511,355 and $1,831,827 for the
three and nine months ended September 30, 1997, an increase of 256% and 162% ,
respectively.
Mercury retorting revenues were $1,048,905 and $2,607,101 for the
three and nine months ended September 30,1998 compared to $252,221 and
$1,009,786 for the three and nine months ended September 30, 1997, an increase
of 316% and 158%, 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. This added capability has allowed the
Company to pursue larger projects. During the third quarter of 1998, the Company
secured such a project that accounted for approximately 50% of third quarter
mercury retorting revenues, but only encumbered approximately one third of the
current quarterly processing capacity.
Lamp recycling revenues were $772,539 and $2,192,356 for the three
and nine months ended September 30, 1998 compared to $259,134 and $822,041 for
the three and nine months ended September 30, 1997, an increase of 198% and
167%, 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 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 53% and 53% for the three and nine months ended
September 30, 1998 compared to 10% and 45% for the three and nine months ended
September 30, 1997.
Mercury retorting gross profit percentages were 55% and 58% for the
three and nine months ended September 30, 1998 compared to 13% and 54% for the
three and nine months ended September 30, 1997. The improved margins are due
primarily to increased revenues in the 1998 periods which more efficiently
utilized the largely fixed cost structure and related processing capacity at the
Union Grove Retorting Facility. However, this cost structure has continued to
increase in 1998 due to the expansion efforts employed to support future revenue
growth.
Lamp recycling gross profit percentages were 51% and 47% for the
three and nine months ended September 30, 1998 compared to 8% and 34% for the
three and nine months ended September 30, 1997. The improved margins in the 1998
periods are due to i) increased sales, resulting in more efficient utilization
of lamp processing capacity and ii) a 1998 focus on higher margin products and
services.
Sales and marketing expense was $340,288 and $863,606 for the three
and nine months ended September 30, 1998 compared to $254,414 and $608,508 for
the three and nine months ended September 30, 1997, an increase of 34% and 42%,
respectively. As a percent of revenues, sales and marketing expense was 19% and
18% for the three and nine months ended September 30, 1998 as compared to 50%
and 33% for the 1997 comparable periods.
7
<PAGE>
The increase in expense is due primarily to the sales staff acquired through
business acquisitions and increased sales commissions.
General and administrative expense was $524,742 and $1,350,255 for
the three and nine months ended September 30, 1998 compared to $351,883 and
$841,283 for the three and nine months ended September 30, 1997, an increase 49%
and 60%, respectively. As a percent of revenues, general and administrative
expense was 29% and 28% for the three and nine months ended September 30, 1998
as compared to 69% and 46% for the 1997 comparable periods. The increase in
administrative expense in 1998 was principally due to increased amortization
resulting from business acquisitions, personnel investments made to support the
Company's growth, and professional fees and other costs associated with being a
public company.
In September, 1998, the Company settled its 1997 business
interruption insurance claim. The settlement totaled $662,000, of which
approximately $497,000 was paid in October, 1998 and the balance in prior
quarters. For the three and nine months ended September 30, 1998, the Company
recorded an insurance recovery of $348,794 and 469,878, respectively, which
consists of the gross proceeds received from the insurance company, net of
direct expenses incurred in 1998 consisting primarily of equipment repair costs
and professional fees.
Interest expense was $66,761 and $110,560 for the three and nine
months ended September 30, 1998 compared to $10,080 and $62,841 for the three
and nine months ended September 30, 1997. The 1998 increases are due to the debt
incurred in connection with the MERECO acquisition and increased line of credit
borrowings.
The Company had no income tax expense for the three and nine months
ended September 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 September 30, 1998, the Company has recorded a valuation allowance of
approximately $200,000 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
September 30, 1998, the Company had net operating loss carryforwards, generated
since the Company became a C corporation, of approximately $300,000 that expire
in 2012.
Resulting from the factors discussed above, net income was $386,884
and $701,876 for the three and nine months ended September 30, 1998 compared to
net losses of $542,298 and $589,682 for the three and nine months ended
September 30, 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company had working capital of $709,775 at September 30, 1998.
Net cash used in operating activities was $211,373 for the nine months ended
September, 1998, primarily resulting from an increase in receivables of
$1,313,151 due to an increase in sales, particularly in September, and the
insurance claim, offset by net income of $701,876 and depreciation and
amortization of $499,698. The increases in the Company's current assets and
liabilities are due to an increase in sales.
Cash flows used in investing activities were $2,087,433 for the nine
months ended September 30, 1998, consisting primary of payments for capital
expenditures of $691,494 and the cash portion of the purchase price of MERECO of
$1,436,925. The capital expenditures for the period relate primarily to the
expansion of 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, borrowings of
$510,000 under the Company's line of credit and proceeds received on exercise of
stock options of $8,000, offset by payments on long-term debt of $199,139.
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
8
<PAGE>
$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. Line of credit borrowings, which totaled $510,000
at September 30, 1998, have been significantly reduced due to the receipt of the
insurance settlement.
On October 14, 1998, processing at the Union Grove Retorting
Facility was interrupted after the Company received and mistakenly processed
three drums of labeled mercury batteries that contained a small quantity of
lithium batteries. The lithium batteries reacted in one of the Company's ovens,
forcing open the oven. While no one was injured and there was no fire or
structural damage, the incident necessitated an extensive clean up within the
building. The Company, working closely with State regulators and local
officials, has revised operating procedures to include expanded battery sorting
protocols and additional notification to customers regarding acceptance and
packaging of materials. Processing resumed on November 9, 1998 after completion
of the clean up. While insured for equipment damage and business interruption,
the Company believes that this processing interruption may have a negative
impact on fourth quarter revenue growth and profitability.
The Company's capital requirements will be significant for the
remainder of 1998 and into 1999 to fund operations, planned capital expenditures
and 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.
YEAR 2000 COMPLIANCE
The Company has completed several tasks related to year 2000
compliance and is on schedule to complete the remaining tasks in the next six
months. In June, 1998, the Company purchased, from a worldwide supplier and
developer of information systems, an enterprise-wide information system with
written assurance from the developer that the system will correctly function
across the year 2000. The Company is also in the process of upgrading its plant
production software to become year 2000 compliant. With respect to non-IT
applications, the Company is investigating issues related to the operation of
each of its facilities, such as phone and security systems. Each facility is
being evaluated individually and upgrades to hardware and software are being
addressed as they are encountered. The Company considers risks in this area to
be minimal.
Through September 30, 1998, the Company has spent approximately
$50,000 in upgrading its hardware and software systems and plans to spend
another $50,000 in the next six months.
The Company is in the process of evaluating the extent to which the
Company is vulnerable to the failure of third parties to solve their own year
2000 compliance issues. Because of the diversity of sources available for the
supplies and services the Company needs to conduct its operations, the Company
believes that the year 2000 issue will not have a material adverse effect on the
Company's ability to provide its recycling services. Although the Company is not
economically dependent on any one customer, failure of a number of larger
customers to become year 2000 compliant could have an adverse effect on the
Company's financial position.
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,
successfully operate its Union Grove Retorting Facility without interruption,
secure storage facilities at the Union Grove Retorting Facility and other parts
of the country, manage anticipated growth, successfully integrate business
acquisitions, the ability of the Company to complete its year 2000 compliance
initiatives 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.)
9
<PAGE>
PART II OTHER INFORMATION
Item 5. Other information
Discretionary Proxy Voting Authority/Shareholder Proposals
On May 21, 1998 the Securities and Exchange Commission adopted an
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.
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 July 23, 1998 the Company filed an
amendment to Form 8-K regarding the acquisition of Mercury Refining Company,
Inc. on May 11, 1998 and on August 3, 1998, the Company filed an 8-K regarding
an equipment malfunction at its Union Grove Retorting Facility.
10
<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: November 16, 1998 \s\ BRAD J. BUSCHER
-------------------
Brad J. Buscher
Chairman of the Board and Chief Executive
Officer
Dated: November 16, 1998 \s\ TODD J. ANDERSON
--------------------
Todd J. Anderson
Chief Financial Officer
11
EXHIBIT 11
MERCURY WASTE SOLUTIONS, INC.
COMPUTATION OF LOSS PER COMMON
AND COMMON EQUIVALENT SHARE
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
September 30, 1998 September 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 15,942 906,213
Common equivalent shares attributed to stock
options and warrant granted 105,072 45,887(A)
Common stock issued -- 308,787(B)
---------- ----------
Weighted average number of common and common
equivalent shares 3,585,111 3,509,984
========== ==========
Net Income (loss) $ 701,876 $ (589,682)
========== ==========
Basic and duluted earnings (loss) per share $ 0.20 $ (0.17)
========== ==========
</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.
12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 1,733,919
<ALLOWANCES> 50,000
<INVENTORY> 0
<CURRENT-ASSETS> 2,476,816
<PP&E> 2,530,301
<DEPRECIATION> 532,567
<TOTAL-ASSETS> 7,405,321
<CURRENT-LIABILITIES> 1,767,041
<BONDS> 1,176,228
0
0
<COMMON> 34,801
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 4,396,951
<SALES> 4,799,457
<TOTAL-REVENUES> 4,799,457
<CGS> 0
<TOTAL-COSTS> 2,250,584
<OTHER-EXPENSES> 2,193,344
<LOSS-PROVISION> 20,517
<INTEREST-EXPENSE> 110,560
<INCOME-PRETAX> 701,876
<INCOME-TAX> 0
<INCOME-CONTINUING> 701,876
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 701,876
<EPS-PRIMARY> .20
<EPS-DILUTED> .20
</TABLE>
