<PAGE> 1
================================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
-----------------
(MARK ONE)
[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: 000-23-661
-----------------
ROCKWELL MEDICAL TECHNOLOGIES, INC.
(Exact name of small business issuer as specified in its charter)
MICHIGAN 38-3317208
------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
28025 OAKLAND OAKS DRIVE
WIXOM, MICHIGAN 48393
----------------------------------------
(Address of principal executive offices)
(248) - 449-3353
-------------------------
Issuer's telephone number
(NONE)
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [ X ] No [ ]
State the number of shares outstanding of each of the issuer's classes of
common equity as of the latest practicable date: 4,830,450 Common Shares
outstanding and 3,625,000 Common Share Purchase Warrants outstanding as of
November 11, 1998.
Transitional Small Business Disclosure Format (Check one):
Yes [ ] No [ X ]
================================================================================
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
ROCKWELL MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
(WHOLE DOLLARS)
(Unaudited)
<TABLE>
<CAPTION>
SEPTEMBER 30,
ASSETS 1998
----
<S> <C>
Cash and Cash Item ............................................................ $ 2,063,804
Accounts Receivable, net of allowance for doubtful accounts of $35,745 ........ 684,068
Inventory ..................................................................... 189,151
Other Current Assets .......................................................... 57,172
-----------
TOTAL CURRENT ASSETS ...................................................... 2,994,195
Property and Equipment, net ................................................... 949,996
Other Noncurrent Assets ....................................................... 177,938
Excess of Purchase Price over Fair Value of Net Assets Acquired, net .......... 1,314,324
-----------
TOTAL ASSETS ............................................................. $ 5,436,453
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts Payable .............................................................. $ 409,875
Accrued Liabilities ........................................................... 160,499
-----------
TOTAL CURRENT LIABILITIES ................................................ 570,374
SHAREHOLDERS' EQUITY:
Common Shares, no par value, 4,830,450 shares issued and outstanding ......... 8,085,980
Common Share Purchase Warrants, 3,625,000 warrants issued and outstanding..... 251,150
Deficit ....................................................................... (3,471,051)
-----------
4,866,079
-----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ............................... $ 5,436,453
===========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
2
<PAGE> 3
ROCKWELL MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED INCOME STATEMENT
(WHOLE DOLLARS)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED ENDED
SEP. 30, 1998 SEP. 30, 1997 SEP. 30, 1998 SEP. 30, 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
SALES .......................................$ 1,547,273 $ 1,174,746 $ 3,700,562 $ 2,326,148
Cost of Sales ............................... 1,528,926 1,247,328 3,956,083 2,717,267
------------ ----------- ----------- -----------
GROSS MARGIN (DEFICIT) .................... 18,347 (72,582) (255,521) (391,119)
Selling, General and Administrative.......... 520,947 489,029 1,357,890 1,059,245
------------ ----------- ----------- -----------
OPERATING LOSS ............................ (502,600) (561,611) (1,613,411) (1,450,364)
Interest Income (Expense), net .............. 27,804 (20,142) 56,294 (74,570)
------------ ----------- ----------- ----------
NET LOSS ..................................$ (474,796) $ (581,753) $(1,557,117) $(1,524,934)
============ =========== =========== ===========
Average shares outstanding .................. 4,830,450 3,135,861 4,689,731 2,904,833
BASIC AND DILUTED LOSS PER SHARE ............ $(.10) $(.19) $(.33) $(.53)
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
3
<PAGE> 4
ROCKWELL MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30
(WHOLE DOLLARS)
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss....................................................................... $ (1,557,117) $ (1,524,934)
Adjustments to reconcile net loss to net cash used for
operating activities:
Depreciation and Amortization............................................... 264,486 176,785
------------- -------------
(1,292,631) (1,348,149)
Changes in Working Capital:
Increase in Accounts Receivable........................................... (296,804) (270,840)
Increase in Inventory..................................................... 104,568 (106,415)
Increase in Other Current Assets.......................................... (737) (46,788)
Decrease in Accounts Payable.............................................. (627,958) 227,525
Increase (Decrease) in Other Liabilities.................................. (322,351) 321,081
-------------- -------------
Net change in Working Capital.......................................... (1,143,282) 124,563
-------------- -------------
NET CASH USED IN OPERATIONS........................................... (2,435,913) (1,223,586)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Business, net of cash acquired..................................... -- (508,887)
Purchase of Equipment.......................................................... (391,722) (62,378)
Redemption (Purchase) of Certificate of Deposit................................ 25,000 (25,000)
------------- -------------
CASH USED IN INVESTING ACTIVITIES...................................... (366,722) (596,265)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of Common Shares...................................................... 6,012,221 2,430,928
Issuance of Common Share Purchase Warrants..................................... 251,150 --
Purchase of Common Shares...................................................... (164,359) --
Proceeds from notes payable - shareholders -- 225,000
Payment on promissory note -- (500,000)
Repayment of notes payable..................................................... (200,000) (125,000)
Redemption of Series A Preferred Stock........................................ (1,095,915) --
Deposits paid on leases........................................................ -- (138,397)
------------- -------------
CASH PROVIDED BY FINANCING ACTIVITIES................................... 4,803,097 1,892,531
INCREASE IN CASH................................................................. 2,000,462 72,680
CASH AT BEGINNING OF PERIOD...................................................... 63,342 --
-------------- -------------
CASH AT END OF PERIOD............................................................ $ 2,063,804 $ 72,680
============= =============
Interest paid upon the redemption of the Series A Preferred Stock was $62,272.
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
4
<PAGE> 5
ROCKWELL MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND CAPITALIZATION
Rockwell Medical Technologies, Inc. ("the Company") was incorporated on
October 25, 1996 for the purpose of purchasing and operating the business of
Rockwell Medical Supplies, L.L.C. and its sister company, Rockwell
Transportation, L.L.C. The Company is in the business of manufacturing and
distributing hemodialysis concentrates and dialysis kits to hemodialysis
clinics. The Company also packages, sells and distributes ancillary products
related to the hemodialysis process.
The Company is regulated by the Federal Food and Drug Administration under
the Federal Drug and Cosmetics Act, as well as by other federal, state and local
agencies. The Company currently has 510(k) approval from the FDA to market
hemodialysis solutions and powders.
On February 19, 1997, the Company purchased the assets and assumed certain
liabilities of Rockwell Medical Supplies, L.L.C. and Rockwell Transportation,
L.L.C. for an initial purchase price of approximately $2.4 million, excluding
liabilities assumed. The transaction was accounted for using the purchase method
of accounting. The initial purchase price was allocated to assets acquired and
liabilities assumed based on the estimated fair market value at the date of
acquisition.
On January 26, 1998 the Company issued 1,800,000 Common Shares and 3,105,000
Common Share Purchase Warrants pursuant to a Registration Statement filed with
the Securities and Exchange Commission. The offering price was $4.00 per share
for the Common Shares and $.10 per warrant for the Common Share Purchase
Warrants. Net proceeds from this offering were approximately $5.9 million.
Proceeds were used to redeem the Series A Preferred Shares, repay the Notes
Payable and reduce Accounts Payable and accrued expenses. The balance of the
funds was invested in short-term cash investments.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements of the Company include the accounts of
Rockwell Medical Technologies, Inc. and its wholly owned subsidiary, Rockwell
Transportation, Inc. All intercompany balances and transactions have been
eliminated. The results of operations and cash flows are presented from October
25, 1996 (the date of inception) through September 30, 1997 and January 1, 1998
through September 30, 1998. During the period October 25, 1996 through December
31, 1996 the Company incurred and accrued expenses of $49 thousand, primarily
consulting fees, in conjunction with the initial organization of the Company.
In the opinion of management, all necessary adjustments (consisting of
normal recurring adjustments) considered necessary for a fair presentation have
been included. The operating results for the three or the nine month periods
ended September 30, 1998 are not necessarily indicative of the results to be
expected for the year ending December 31, 1998.
5
<PAGE> 6
2. BASIS OF PRESENTATION (CONT'D)
COMPREHENSIVE INCOME
A Statement of Comprehensive Income for the periods ended September 30, 1998
and 1997 is not presented in accordance with Statement of Financial Accounting
Standard No. 130 as the Company has no Comprehensive Income.
3. INVENTORY
Components of inventory are as follows:
<TABLE>
<S> <C>
Raw Materials..........................$ 126,735
Finished Goods......................... 62,416
---------
Total.............................$ 189,151
=========
</TABLE>
4. RELATED PARTY TRANSACTIONS
In July 1997, the Company obtained a demand loan from Karen Bagley in the
amount of $100,000 and in November 1997 the Company obtained a loan from Michael
J. Xirinachs in the amount of $100,000 due February 11, 1998. The loans bear
interest at an annual rate of 24%. These loans were repaid in January and
February 1998 with the proceeds of the Initial Public Offering. Karen Bagley is
the wife of Patrick Bagley, whose firm serves as legal counsel to the Company on
certain matters and also to Mr. Robert L. Chioini in a personal capacity.
Michael J. Xirinachs is a founder and a Director of the Company.
During each of the nine month periods ended September 30, 1997 and 1998, the
Company paid fees to the consulting firm of Wall Street Partners, Inc. for
financial and management services of $225,000. The principals of the consulting
firm are shareholders, and members of the Board of Directors of the Company.
ITEM 6. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OR PLAN OF OPERATION.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
Sales in the third quarter of 1998 were $1.5 million which is 32% higher
than the $1.1 million in the same quarter of 1997. The Company differentiates
its sales in the three primary product lines of acid concentrate, bicarbonate
and ancillary products. Product line sales of acid concentrate increased 23% in
the third quarter of 1998 as compared to the third quarter of 1997. In 1997
however, acid concentrate sales included a sale to one export customer of a
product formula not sold in the United States. Without considering this export
sale, acid concentrate sales increased 85% in 1998. The bicarbonate product
line's sales increased by approximately 92% in the third quarter of 1998
compared to the prior year. Sales of ancillary products were comparable in both
periods.
Gross margin was $18.3 thousand, or 1% of sales, in the third quarter of
1998. This compares to a gross deficit of $(72.6) thousand in the third quarter
of 1997. The improvement in Gross Margin was due to increased prices to our
customers and lower fixed costs as a percent of sales in the 1998 period. These
savings were partially offset by the lack of the profitable export sales
recorded in the third quarter of 1997 as noted above. Distribution expense was
$366.7 thousand or 24% of sales in quarter ended September 30, 1998. Although
the expense is comparable to the prior period, sales last year were
considerabley lower which caused distribution expense to be 31% of sales in the
third quarter of 1997.
6
<PAGE> 7
More efficient routing of company-owned trucks and use of common carriers
when available caused this decrease in distribution expense as a percent of
sales. The Company also reduced sales into distant geographic markets, in
accordance with our target market strategy, which also helped reduce
distribution costs.
Selling, General and Administrative costs were $31.0 thousand higher in the
third quarter of 1998 as compared to the same period of 1997. Increased
compensation expense and investor relations costs in 1998 were partially offset
by higher professional fees last year. Selling, General and Administrative
expense was about 8% lower as a percent of sales for the quarter ended September
30, 1998 as compared to the same period in 1997 given the higher sales level in
1998.
Interest income of $27.8 thousand was earned in the third quarter of 1998
compared to interest expense of $(20.2) thousand in the same period of the prior
year. This is directly related to the investment of the proceeds received from
the Company's initial public offering of Common Shares in January of 1998. Short
term investments in 1998 averaged $2.3 million during the third quarter while
interest bearing promissory notes and obligations on Redeemable Preferred Stock
existed in the comparable period of the prior year.
Basic and fully diluted loss per share improved to ($.10) for the three
month period ended September 30, 1998 from a loss per share of ($.19) for the
comparable period in 1997. The net loss of the Company decreased to $(474.8)
thousand in the third quarter of 1998 as compared to $(581.8) thousand in the
prior year. About $(.02) per share of the improved loss per share was a result
of the decreased net loss and about $(.07) per share was due to the increased
average shares outstanding. The increased average shares outstanding was
directly attributable to the additional Common Shares issued in conjunction with
the Initial Public Offering.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
Financial results for the nine months ended September 30, 1997 reflect
operations for seven and one-half months as compared to the full nine months in
the period ended September 30, 1998. This is due to the Company purchasing
Rockwell Medical Supplies, L.L.C. and Rockwell Transportation, L.L.C. on
February 19, 1997. The purchase of these two companies formed the entire
operation of Rockwell Medical Technologies, Inc. When comparing year to date
1998 results to 1997 care must be taken to adjust for the shorter length of
operations in 1997.
Sales in the first nine months of 1998 were $3.7 million compared to $2.3
million in the short period in 1997. Comparable sales in the nine months of
1997, after combining the sales of the Company and the sales of the Predecessor
Company, were $2.7 million. This represents an increase of 44% in 1998 over 1997
as adjusted. The product line sales fluctuations as described in the Results of
Operations for the quarter ended September 30, 1998 and 1997 are also
representative of the nine-month periods.
The Gross Deficit in 1998 was $(255.5) thousand as compared to $(391.1)
thousand in the 1997 period. After adjusting 1997 to reflect the operating
results for the full nine months, as noted above, the Gross Deficit was $(556.3)
thousand. Efficiencies achieved in the manufacturing process, lower material
costs, and higher selling prices all contributed to the lower deficit in 1998
compared to 1997.
Selling, General & Adnistrative Expense, after adjusting for the shorter
1997 period, were higher by $121.8 thousand compared in 1998. The SG&A cost
increases are due to those reasons noted in the quarterly results of operations.
Interest income of $56.3 thousand was earned in the nine months ended
September 30, 1998 compared to interest expense of $(74.6) thousand in the prior
year. This is directly related to the proceeds received from the Company's
initial public offering of Common Shares in January of 1998. Short-term
investments in 1998 averaged $2.3 million while interest bearing promissory
notes and obligations on Redeemable Preferred Stock existed in the prior year.
The Company's Net Loss in the nine months ended September 30, 1998 was
$(1,557.1) thousand as compared to $(1,524.9) thousand in the shorter period of
1997. After considering the adjustment for the short period in 1997 the nine
month net loss for 1997 was $(2,170.6) thousand.
7
<PAGE> 8
Basic and fully diluted loss per share improved to ($.33) for the nine
months period ended September 30, 1998 from a loss per share of ($.53) for the
reported period in 1997. The gross amount of the net loss of the Company in 1998
was approximately the same as in the prior year without adjusting for the short
period of 1997. The improved loss per share was a result of the increased
average shares outstanding. The increased average shares outstanding was
directly attributable to the additional Common Shares issued in conjunction with
the Initial Public Offering.
LIQUIDITY AND CAPITAL RESOURCES
The Company issued 1,800,000 Common Shares and 3,105,000 Common Share
Purchase in an Initial Public Offering on January 26,1998. The net offering
proceeds of $5.9 million were used for: (a) payments for redemption of the
Series A Preferred Shares ($1.1 million), (b) payments of accounts payable and
certain liabilities ($700 thousand), and (c) repayment of promissory notes ($217
thousand). The balance of the cash remaining, approximately $3.9 million will be
used to fund operating cash needs and capital equipment and expansion programs.
Operating cash requirements, including working capital needs were $1.7
million for the nine months ended September 30, 1998. The Company anticipates
that these cash needs will continue in the future as our growth strategy is
implemented and as operating losses continue.
Capital equipment purchases were $391.7 thousand for the nine-month period
ended September 30, 1998. This capital was primarily related to technological
improvements in existing manufacturing processes and other expenditures to
enable the company to manufacture the new product, Sterilyte(TM) Liquid
Bicarbonate.
The Company also used cash to repurchase 108,300 Common Shares for
approximately $164.4 thousand during the first nine months of 1998.
YEAR 2000 ISSUES AND CONSEQUENCES
The Company is in the process of reviewing its systems, both information
technology based and non-information technology based. In our preliminary
assessment of these systems the Company has determined that certain software
associated with accounting and order processing functions is not Year 2000
compliant. New software has been evaluated, purchased and the conversion has
been initiated. This conversion will be completed by December 31, 1998. The cost
of the software was expensed in a prior period and the conversion will not
require additional out-of-pocket expenditures. The risk of this conversion is
not significant to the Company.
Other critical IT based systems and non-IT based systems do not appear to
have Year 2000 issues, however our review is currently in process. The Company
does not believe that the Year 2000 issues will have a material impact on the
business.
8
<PAGE> 9
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
(a) Exhibits
Exhibit No Description
---------- -----------
<S> <C>
10.1 Amendment dated June 25, 1998 to Consulting and
Advisory Services Agreement dated February 19,
1997 between the Company and Wall Street Partners
27.1 Financial Data Schedule
27.2 Financial Data Schedule
27.3 Financial Data Schedule
27.4 Financial Data Schedule
(b)Reports on Form 8-K
(None)
</TABLE>
9
<PAGE> 10
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ROCKWELL MEDICAL TECHNOLOGIES, INC.
(Registrant)
Date: November 16, 1998 /s/ ROBERT L. CHIOINI
--------------------------------
Robert L. Chioini
President, Chief Executive
Officer and Director (Principal
Executive Officer)
Date: November 16, 1998 /s/ JAMES J. CONNOR
-------------------------------
James J. Connor
Vice President of Finance, Chief
Financial Officer, Treasurer and
Secretary (Principal Financial
Officer and Principal Accounting
Officer)
10
<PAGE> 11
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
(a) Exhibits
Exhibit No Description
---------- -----------
<S> <C>
10.1 Amendment dated June 25, 1998 to Consulting and
Advisory Services Agreement dated February 19,
1997 between the Company and Wall Street Partners
27.1 Financial Data Schedule
27.2 Financial Data Schedule
27.3 Financial Data Schedule
27.4 Financial Data Schedule
</TABLE>
9
<PAGE> 1
AMENDMENT TO CONSULTING AND FINANCIAL
ADVISORY SERVICES AGREEMENT
This Amendment to Consulting and Financial Advisory Services Agreement
(this Amendment) is made as of June 25, 1998 between Rockwell Medical
Technologies, Inc., a Michigan corporation (Rockwell), and Wall Street
Partners, Inc., a Michigan corporation (Wall Street).
RECITALS
A. Rockwell and Wall Street are parties to a Consulting and
Financial Advisory Services Agreement dated as of February 19, 1997 (the
Consulting Agreement) pursuant to which, among other things, Wall Street
provides consulting and financial advisory services to Rockwell in exchange
for a consulting fee.
B. On or about November 25, 1997, the term of the Consulting
Agreement was extended to June 30, 1998.
C. On or about April 3, 1998, Rockwell agreed to indemnify Wall
Street from liabilities arising out of Wall Streets providing consulting
services to Rockwell, other than liabilities arising out of Wall Streets gross
negligence in performing such consulting services.
D. Rockwell desires to extend the term of the Consulting Agreement
to December 31, 1998 and to adjust the consulting fee to be paid to Wall Street
under the Consulting Agreement.
E. Rockwell and Wall Street are entering into this Amendment to
set forth in writing the agreements of the parties hereto with respect to the
matters referenced in Recitals B, C and D above.
Therefore, the parties agree as follows:
1. Extension of Term. The term of the Consulting Agreement is
hereby extended until December 31, 1998.
2. Consideration. During the period from July 1, 1998 through
December 31, 1998, Rockwell will pay Wall Street the fees set forth below
(which amounts will be prorated for any partial periods worked based on a
five-day business week):
<TABLE>
<S> <C>
July, August, September and October $25,000 per month
November, December $20,000 per month
</TABLE>
3. Indemnification of Wall Street. Rockwell shall indemnify,
defend and hold Wall Street and its officers, directors, employees and other
affiliates, harmless from, against and with respect to any claim, liability,
obligation, loss, damage, judgment, settlement, cost and expense,
<PAGE> 2
including, without limitation, reasonably attorneys fees and court costs
(collectively, Claims), arising out of or in any manner incident, relating or
attributable to the providing of Services by Wall Street to Rockwell under the
Consulting Agreement; provided, however, that Rockwell shall have no obligation
hereunder with respect to any Claims resulting from Wall Streets gross
negligence in performing such Services.
4. Miscellaneous.
(a) Except as otherwise expressly set forth herein, all of
the terms and provisions of the Consulting Agreement shall remain in full force
and effect.
(b) This Amendment shall be governed by and construed in
accordance with the laws of the jurisdiction specified in paragraph 9 of the
Consulting Agreement.
(c) Capitalized terms used in this Amendment but not
otherwise defined shall have the meanings set forth in the Consulting
Agreement.
(d) This Amendment may be executed in one or more
counterparts by the parties. All counterparts shall be construed together and
shall constitute one agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this
Amendment on the date set forth in the introductory paragraph of this Amendment.
ROCKWELL MEDICAL TECHNOLOGIES, INC., a
Michigan corporation
By: /s/ Robert L. Chioini
-------------------------------------
Robert L. Chioini
Its: President
WALL STREET PARTNERS, INC., a Michigan
corporation
By: /s/ Gary D. Lewis
-------------------------------------
Gary D. Lewis
Its: President
-2-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 1,547,273
<TOTAL-REVENUES> 1,547,273
<CGS> 1,528,926
<TOTAL-COSTS> 1,528,926
<OTHER-EXPENSES> 520,947
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (474,796)
<INCOME-TAX> 0
<INCOME-CONTINUING> (747,796)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (474,796)
<EPS-PRIMARY> (.10)
<EPS-DILUTED> (.10)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 1,174,746
<TOTAL-REVENUES> 1,174,746
<CGS> 1,247,328
<TOTAL-COSTS> 1,247,328
<OTHER-EXPENSES> 489,029
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20,142
<INCOME-PRETAX> (581,753)
<INCOME-TAX> 0
<INCOME-CONTINUING> (581,753)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (581,753)
<EPS-PRIMARY> (.19)
<EPS-DILUTED> (.19)
</TABLE>
<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> 2,063,804
<SECURITIES> 0
<RECEIVABLES> 684,068
<ALLOWANCES> 35,745
<INVENTORY> 189,151
<CURRENT-ASSETS> 2,994,195
<PP&E> 1,218,811
<DEPRECIATION> 268,851
<TOTAL-ASSETS> 5,436,453
<CURRENT-LIABILITIES> 570,374
0
0
<COMMON> 0
<BONDS> 8,085,980
<OTHER-SE> 251,150
<TOTAL-LIABILITY-AND-EQUITY> 5,436,453
<SALES> 3,700,562
<TOTAL-REVENUES> 3,700,562
<CGS> 3,956,083
<TOTAL-COSTS> 3,956,083
<OTHER-EXPENSES> 1,357,890
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,557,117)
<INCOME-TAX> 0
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