<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: May 31, 1998
|_| TRANSITION REPORT PURSUANT TO SECTION 13(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to________
COMMISSION FILE NUMBER: 0-29346
FRM NEXUS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3754422
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
271 NORTH AVENUE, NEW ROCHELLE, NY 10801
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (914) 636-3432
N/A
(Former name, former address and former fiscal
year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes (x) No( )
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by checkmark whether the registrant has filed all documents and reports
required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court. Yes ( ) No ( )
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding
of each of the issuer's classes of common stock, at July 10, 1998: 1,817,453.
<PAGE> 2
FRM Nexus, Inc. and Subsidiaries
Index to Consolidated Financial Statements
PART I
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets -- May 31, 1998 and February 28, 1998..............2
Consolidated Statements of Operations -- Three months ended
May 31, 1998 and 1997........................................................4
Consolidated Statements of Stockholders' Equity --
Three months ended May 31, 1998 .............................................5
Consolidated Statements of Cash Flows --
Three months ended May 31, 1998 and 1997.....................................6
Notes to Consolidated Financial Statements.....................................7
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<PAGE> 3
FRM Nexus, Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
MAY 31, FEBRUARY 28,
1998 1998
----------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash & cash equivalents $ 1,106,503 $ 1,434,893
Mortgage and notes receivable 22,735 22,232
Finance receivables, net 1,816,776 1,782,687
Vendor rebate receivable -- 244,477
Inventories 114,060 96,922
Other current assets 181,546 250,663
----------- -----------
Total current assets 3,241,620 3,831,874
----------- -----------
Property and equipment:
Property and equipment, at cost 5,934,244 5,850,404
Less accumulated depreciation and amortization 2,411,934 2,310,626
----------- -----------
3,522,310 3,539,778
----------- -----------
Other assets:
Real estate held for development and sale 1,378,588 1,375,445
Mortgage and notes receivable 3,197,722 3,203,598
Loans receivable 84,126 88,995
Leasehold costs, net of accumulated amortization
of $341,483 at May 31, 1998 and $333,143
at February 28, 1998 498,805 507,145
Technical assistance fees, net of accumulated
amortization of $153,072 at May 31, 1998 and
$147,672 at February 28, 1998 221,928 227,238
Other 267,852 240,007
----------- -----------
Total other assets 5,649,021 5,642,428
----------- -----------
Total assets $12,412,951 $13,014,080
=========== ===========
</TABLE>
See notes to interim consolidated financial statements.
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<PAGE> 4
FRM Nexus, Inc. and Subsidiaries
Consolidated Balance Sheets (continued)
<TABLE>
<CAPTION>
MAY 31, FEBRUARY 28,
1998 1998
------------ ------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 974,941 $ 960,172
Current portion of notes payable 188,068 228,578
Due to finance customers 834,326 975,545
Income taxes payable 348 64,202
Other current liabilities 16,782 19,489
------------ ------------
Total current liabilities 2,014,465 2,247,986
------------ ------------
Other liabilities:
Notes payable 2,149,480 2,391,867
Deferred income taxes
20,638 20,729
Deferred Income 2,760,624 2,760,624
------------ ------------
Total other liabilities 4,930,742 5,173,220
------------ ------------
Commitments and contingencies
Stockholders' equity:
Common stock - $.10 par value;
Authorized - 2,000,000 shares;
Issues and outstanding - 1,817,453 shares 181,745 181,745
Capital in excess of par value 5,827,125 5,827,125
Unrealized loss on mortgage and notes receivable (162,202) (162,202)
Retained earnings (accumulated deficit) (378,924) (253,794)
------------ ------------
Total stockholders' equity 5,467,744 5,592,874
------------ ------------
Total liabilities and stockholders' equity $ 12,412,951 $ 13,014,080
============ ============
</TABLE>
See notes to interim consolidated financial statements.
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<PAGE> 5
FRM Nexus, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MAY 31,
1998 1997
----------- -----------
<S> <C> <C>
REVENUES
Restaurant food sales $ 3,940,918 $ 4,268,935
Sale of real estate 40,678 --
Rental income 23,911 --
Interest from mortgages 59,151 38,642
Income from the purchase of medical receivables 286,971 161,538
----------- -----------
Total income 4,351,629 4,469,115
----------- -----------
COSTS AND EXPENSES
Restaurants 3,807,491 3,982,765
Real estate 125,067 146,775
Medical receivables 251,562 171,973
Corporate expenses 115,614 55,519
Depreciation and amortization 119,159 124,993
----------- -----------
Total costs and expenses 4,418,893 4,482,025
----------- -----------
Income (loss) from operations (67,264) (12,910)
----------- -----------
Other income (expense):
Interest income 53,859 15,523
Interest expense (104,622) (119,293)
----------- -----------
(50,763) (103,770)
----------- -----------
Income (loss) before provision for income taxes (118,027) (116,680)
Provision for income taxes 7,103 430
----------- -----------
Net income (loss) $ (125,130) $ (117,110)
=========== ===========
Basic and diluted earnings (loss) per common share $ (0.07) $ (0.06)
=========== ===========
Number of shares used in computation of basic and
diluted earnings per share 1,817,453 1,817,453
=========== ===========
</TABLE>
See notes to interim consolidated financial statements.
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<PAGE> 6
FRM Nexus, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
February 28, 1998 through May 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
RETAINED
ADDITIONAL UNREALIZED EARNINGS TOTAL
COMMON PAID-IN GAINS (ACCUMULATED STOCKHOLDERS'
STOCK CAPITAL (LOSSES) DEFICIT) EQUITY
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance, February 28, 1998 $ 181,745 $ 5,827,125 $ (162,202) $ (253,794) $ 5,592,874
Net loss -- -- -- (125,130) (125,130)
----------- ----------- ----------- ----------- -----------
Balance, May 31, 1998 $ 181,745 $ 5,827,125 $ (162,202) $ (378,924) $ 5,467,744
=========== =========== =========== =========== ===========
</TABLE>
See notes to interim consolidated financial statements.
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<PAGE> 7
FRM Nexus, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MAY 31,
1998 1997
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (125,130) $ (117,110)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 119,159 124,993
Deferred interest expense -- 16,531
Deferred income taxes (91) (3,083)
Changes in operating assets and liabilities:
Vendor rebate receivable 244,477 --
Inventories (17,138) (13,273)
Additions to real estate held for
development and sale (3,143) (370)
Prepaid expenses, miscellaneous receivables
and other assets 37,071 30,267
Accounts payable, accrued expenses and taxes (49,085) 60,736
Other current liabilities (2,707) (4,187)
----------- -----------
Net cash provided by operating activities 203,413 94,504
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures & intangible assets (83,840) (195,854)
Repayment of loans to officers 4,869 4,000
Increase in finance receivables (34,089) (329,209)
Due to finance customers (141,219) 198,885
Principal payments on notes receivable 5,373 6,202
----------- -----------
Net cash used in investing activities (248,906) (315,976)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on notes payable (282,897) (46,173)
Proceeds of finance obligation -- 52,250
----------- -----------
Net cash provided by (used in) financing activities (282,897) 6,077
----------- -----------
Net decrease in cash and cash equivalents (328,390) (215,395)
Cash and cash equivalents, beginning of period 1,434,893 1,861,219
----------- -----------
Cash and cash equivalents, end of period $ 1,106,503 $ 1,645,824
=========== ===========
ADDITIONAL CASH FLOW INFORMATION
Interest paid $ 64,976 $ 105,694
=========== ===========
Income taxes paid $ 39,074 $ 25,026
=========== ===========
</TABLE>
See notes to interim consolidated financial statements.
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<PAGE> 8
FRM NEXUS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information in response to the requirements of Article 10 of
Regulation S-X. 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, the accompanying unaudited
consolidated financial statements contain all adjustments (consisting only of
normal recurring items) necessary to present fairly the financial position as of
May 31, 1998; results of operations for the three months ended May 31, 1998 and
1997; cash flows for the three months ended May 31, 1998 and 1997; and changes
in stockholders' equity for the three months ended May 31, 1998. For further
information, refer to the Company's financial statements and notes thereto
included in the Company's Form 10-K for the year ended February 28, 1998. The
consolidated balance sheet at February 28, 1998 was derived from the audited
financial statements as of that date. Results of operations for interim periods
are not necessarily indicative of annual results of operations.
Certain prior year amounts were reclassified to conform with the current year
presentation.
2. FINANCE RECEIVABLES, NET
Net finance receivables consist of the following:
<TABLE>
<CAPTION>
MAY 31, FEBRUARY 28,
1998 1998
----------- -----------
<S> <C> <C>
Gross finance receivables $ 2,132,342 $ 2,083,043
Allowance for credit losses (72,866) (72,866)
Deferred finance income (242,700) (227,490)
----------- -----------
Finance receivables, net $ 1,816,776 $ 1,782,687
=========== ===========
</TABLE>
3. COMMITMENTS AND CONTINGENCIES
FRANCHISE AGREEMENT COMMITMENTS
The food service subsidiaries are the franchisees for the 16 Wendy's Restaurants
it owns and operates. The franchise agreements obligate the subsidiaries to pay
to Wendy's International a monthly royalty equal to 4% of the gross sales of
each restaurant during the month, or $250, whichever is greater.
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<PAGE> 9
FRM Nexus, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
3. COMMITMENTS AND CONTINGENCIES (CONTINUED)
MINIMUM OPERATING LEASE COMMITMENTS
The food service subsidiaries entered into various leases for its restaurants
containing clauses relating to real estate taxes, common charges, renewal and
percentage rent with certain minimum payments.
In June 1996, the division exercised its option to purchase the land and
buildings of the four restaurants it was leasing from Wendy's International for
$1,680,000. The purchase option agreement required Wendy's International to be
given the right of first refusal, for a period of 20 years, in the event the
properties are resold.
In December 1997, Nexus signed a lease extension for its executive offices under
a three year lease expiring on February 28, 2001.
Subject to annual real estate adjustments, and additional rent in excess of base
sales, the following is a schedule of future minimum rental payments required
under the above operating leases as of February 28:
<TABLE>
<CAPTION>
Year Ending February:
<S> <C>
1999 $ 806,730
2000 810,351
2001 809,054
2002 750,078
2003 719,578
Thereafter 5,404,829
----------
Total $9,300,620
==========
</TABLE>
There are various commitments and contingencies relating to the sale of real
estate.
-8-
<PAGE> 10
FRM Nexus, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
3. COMMITMENTS AND CONTINGENCIES (CONTINUED)
LITIGATION
The Yolo Capital subsidiary ("Yolo") filed an action against the former
management for breach of management agreements and for conversion of monies
resulting from cutting wood on its property in Hunter, New York. The defendants
have counterclaimed against Yolo for breach of contract, interference with
contract, conversion and conspiring to interfere with their contracts. The
defendants are seeking damages amounting to over $2,000,000, and have asserted a
claim to the right of ownership of the property. Yolo's legal counsel believes
that the counterclaims will be dismissed. The property at Hunter is under lien
until this matter is settled. A trial date has been set for 1998.
PSI LITIGATION
In 1993, shareholders of Programming and Systems, Inc. ("PSI") brought a class
action against PSI and certain of its officers in the United States District
Court for the Southern District of New York, which was settled by a Stipulation
of Settlement dated as of November 15, 1993 (the "Stipulation"), pursuant to
which PSI Settlement Corp. ("Nexus") was formed. On January 21, 1994, Judge
Robert Sweet signed the Order confirming the Stipulation. Pursuant to that
Stipulation (i) the eligible shareholders of PSI received a pro-rata
distribution of $1,400,000, after deduction of the fees and expenses of the
class action, which amounted to $.50 per share, and (ii) all the shares of Nexus
were delivered to Escrow Agents to hold for the benefit of all shareholders of
PSI. Pursuant to the Orders of Judge Sweet, PSI transferred certain assets to
Nexus as specified in the Stipulation and the Court's Orders. These payments,
including the shares of Nexus, fully settled all of the claims by PSI
shareholders that could have been asserted against PSI and the other defendants
in the class action.
On June 12, 1995, Judge Sweet signed an Order approving an amendment of the
Stipulation which permitted Nexus to operate as an ongoing entity rather than
liquidating its assets, provided the escrowed shares of Nexus were delivered out
to PSI shareholders by June 12, 1997 (such shares were delivered on August 12,
1996) and listed for trading on NASDAQ.
In addition to settling the class action and making payment to shareholders, PSI
has now settled the action by the Securities and Exchange Commission against it
and resolved the material claims and lawsuits which arose out of its
discontinued vocational school operations.
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<PAGE> 11
FRM Nexus, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
3. COMMITMENTS AND CONTINGENCIES (CONTINUED)
At the present time, PSI is indebted to (i) the United States Department of
Education for $1,000,000 by reason of the fraudulent conduct of a former chief
executive officer, (ii) to the Internal Revenue Service for $416,000
representing excess refunds of income taxes made by IRS to PSI plus interest
thereon and (iii) to a former landlord of a PSI school for $98,621. As a result
of the Stipulation described above, the Company believes it is not responsible
for the obligations of PSI.
4. INCOME TAXES
The provision (benefit) for income taxes consist of the following:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MAY 31,
1998 1997
------- -------
<S> <C> <C>
Current:
Federal $ -- $ --
State 7,194 3,513
------- -------
Total current 7,194 3,513
------- -------
Deferred:
Federal -- --
State (91) (3,083)
------- -------
Total deferred (91) (3,083)
------- -------
Total $ 7,103 $ 430
======= =======
</TABLE>
Nexus filed consolidated federal tax returns with PSI through August 12, 1996,
which has no federal tax liability due to current and prior year net operating
losses. After August 12, 1996, Nexus and its subsidiaries are not filing
consolidated tax returns with PSI. Nexus and its subsidiaries are filing
individual federal tax returns for the period beginning August 13, 1996 and
ending February 28, 1997. Subsequent to February 28, 1997, Nexus and its
subsidiaries are filing consolidated federal tax returns.
5. STOCK SPLIT
On May 14, 1998, the Company declared a common stock dividend of one common
share for every two common shares owned of record on June 14, 1998. The
accompanying financial statements give retroactive effect to this stock
dividend.
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<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF INTERIM OPERATIONS
AND FINANCIAL CONDITION
All statements contained herein that are not historical facts,
including but not limited to, statements regarding future operations, financial
condition and liquidity, expenditures to develop real estate owned by the
Company, future borrowing, capital requirements and the Company's future
development plans are based on current expectations. These statements are
forward looking in nature and involve a number of risks and uncertainties.
Actual results may differ materially. Among the factors that could cause actual
results to differ materially are the following: changes in the business of the
Company's medical provider clients, changes in the real estate, fast food and
financial markets, and other risk factors described in the Company's reports
filed and to be filed from time to time with the Commission. The discussion and
analysis below is based on the Company's unaudited consolidated financial
statements for the three months ended May 31, 1998 and 1997. The following
should be read in conjunction with the Management's Discussion and Analysis of
results of operations and financial condition included in the 1998 10-K.
OVERVIEW
Nexus generates revenues from three business segments: food services, real
estate and medical financing. Revenues in the real estate division vary
substantially from period to period depending on when a particular transaction
closes and depending on whether the closed transaction is recognized for
accounting purposes as a sale or reflected as a financing or is deferred to a
future period.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MAY 31, 1998 COMPARED TO THE THREE MONTHS ENDED MAY 31, 1997
The Company's revenues decreased by $117,000, or 3%, for the three
months ended May 31, 1998 to $4,352,000 from $4,469,000 for the three months
ended May 31, 1997. The reduction was a result of decreased revenues in the food
service division offset by increased revenues in the real estate and medical
financing divisions. The decrease of $328,000 in the food service division was
attributable primarily to the higher revenue in the 1997 period resulting from
special national advertising which was used to implement new menu and
promotional items. In addition, the opening of a competing restaurant at one of
the locations had an impact on the reduced revenues. The additional revenue of
$85,000 in the real estate division was attributable to the sale of real estate
in the 1998 period and increases in interest and rental income. Growth in
revenues in the medical financing division of $125,000 was due to the increase
in the medical insurance claims receivables that were purchased in the current
period from existing and new customers.
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<PAGE> 13
Costs and expenses decreased $63,000, or 1%, for the three months ended
May 31, 1998, to $4,419,000 from $4,482,000 for the three months ended May 31,
1997. This net decrease was due to decreases in the food service division of
$175,000, $22,000 in the real estate division and $6,000 in depreciation and
amortization, which were offset by increases of $80,000 in the medical financing
division and $60,000 in corporate expenses.
The decrease in the costs and expenses of the food service division is
attributable to the decrease in food costs due to the reduced revenues for the
three months ended May 31, 1998 compared with the three months ended May 31,
1997. This was offset by higher labor costs, which are due in part to an
increase in the minimum wage. The decrease in the real estate division is
attributable to a reduction in operating costs. The increase in corporate
expenses is primarily due to the additional costs related to the registration of
the Company's common stock pursuant to the Securities and Exchange Act of 1934
which were required during the first quarter of 1998 and not required during the
prior year because the Company's stock was not registered at that time. The
increase of the costs and expenses of the medical financing division was
attributable to additional expenditures on staff and systems as a result of the
increase in volume.
For the reasons noted above the loss from operations increased $54,000
from a loss of $13,000 for the three months ended May 31, 1997 to a loss of
$67,000 for the three months ended May 31,1998. Net interest costs decreased
$53,000 and the provision for tax increased $7,000 producing an increase in net
loss of $8,000, from a loss of $117,000 for the three months ended May 31, 1997
to a loss of $125,000 for the three months ended May 31, 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operating activities in the three month periods ended May
31, 1998 and 1997 including investments in the purchase of medical claims
receivable resulted in the use of cash by operations. The Company expects this
trend to continue with the growth of its medical financing division. The funds
for those needs are expected to be provided from financing activities such as
asset-based borrowing on the Company's mortgages and accounts receivable. Cash
flow provided from the food service division decreased by $13,000 to $181,000
for the three months ended May 31, 1998 as compared with $194,000 for the same
period in 1997. The Company's anticipated reduction in the amount of capital
expenditures should result in cash continuing to be provided from the food
service division for the balance of the current fiscal year. Management believes
the effects of competition at one of its locations will diminish and the
addition of new menu items will have a positive effect on cash flow during
fiscal 1999. The real estate division is not expected to be a significant user
of cash flow from operations by reason of the disposition as of January 1, 1998
of the formerly vacant space in the Granby, CT property. The Company's real
estate assets in Hunter, NY and Brookfield, CT. are owned free and clear of
mortgages. Further development of those properties, at any significant
-12-
<PAGE> 14
cost, is expected to be funded by asset-based financing. The Company believes
that its present cash resources and the cash available from financing activities
will be sufficient on a short-term basis and over the next 12 months to fund
continued expansion of its medical financing business, its company-wide working
capital needs and expected investments in property and equipment. The Company
intends to pace its growth in the medical financing division to its capacity to
provide the funds from its financing activities. The Company has no present
intention of increasing its capital from the sale of common stock, but that may
be an option it will explore in the future should management decide that it will
assist its goal of increasing the per-share value of the Company's outstanding
shares.
Cash provided by operations during the three months ended May 31, 1998
was $203,000 compared to $95,000 provided during the same period in the prior
year. The increase in 1998 was due to fluctuations in operating assets and
liabilities primarily caused by timing differences in the payment of accounts
payable and the collection of a rebate due from a soft drink vendor in the food
service division. Cash used in investing activities was $249,000 for three
months ended May 31, 1998 as compared with $316,000 used in the prior year. The
decrease in 1998 was due to a decrease in capital expenditures offset by
increases in payments to finance customers as receivables from the purchase of
medical insurance claims are collected. Net cash used by financing activities
was $283,000 during the three months ended May 31, 1998 as compared with $6,000
provided in the prior year. The increase in the use of cash in 1998 was due to a
partial repayment of a line of credit because the Company had an excess balance
of cash.
EFFECTS OF NEW ACCOUNTING PRONOUNCEMENTS
DISCLOSURE ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION
In June 1997 the FASB issued SFAS No. 131 "Disclosure About Segments of an
Enterprise and Related Information". SFAS No. 131 requires the reporting of
profit and loss, specific revenue and expense items, and assets for reportable
segments. It also requires the reconciliation of total segment revenues, total
segment profit and loss, total segment assets and other amounts disclosed for
segments to the corresponding amounts in the general purpose financial
statements. This statement is effective for financial statements issued for
periods beginning after December 15, 1997. The Company will adopt this statement
in the fiscal year ending February 28, 1999. SFAS No. 131 is not required to be
applied to interim financial statements in the initial year of its application.
-13-
<PAGE> 15
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a) EXHIBITS.
27. Financial Data Schedule
b) REPORTS ON FORM 8K.
None.
-14-
<PAGE> 16
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.
FRM NEXUS, INC.
By: /S/ VICTOR BRODSKY
----------------------------------------
Victor Brodsky
Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer)
Date: July 10, 1998
-15-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1999
<PERIOD-START> MAR-01-1998
<PERIOD-END> MAY-31-1998
<CASH> 1,106,503
<SECURITIES> 0
<RECEIVABLES> 1,912,377
<ALLOWANCES> 72,866
<INVENTORY> 114,060
<CURRENT-ASSETS> 3,241,620
<PP&E> 5,934,244
<DEPRECIATION> 2,411,934
<TOTAL-ASSETS> 12,412,951
<CURRENT-LIABILITIES> 2,014,465
<BONDS> 2,149,480
0
0
<COMMON> 181,745
<OTHER-SE> 5,285,999
<TOTAL-LIABILITY-AND-EQUITY> 12,412,951
<SALES> 3,940,918
<TOTAL-REVENUES> 4,351,629
<CGS> 3,807,491
<TOTAL-COSTS> 4,418,893
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 50,763
<INCOME-PRETAX> (118,027)
<INCOME-TAX> 7,103
<INCOME-CONTINUING> (125,130)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (125,130)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> (.07)
</TABLE>
