<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
/ X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended February 28, 1999
---------------------------------------------
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
-------------------- ----------------------
Commission File Number 0-619
---------------------------------
WSI Industries, Inc.
- -----------------------------------------------------------------------------
(Exact name of registrant, as specified in its charter)
Minnesota 41-0691607
- -----------------------------------------------------------------------------
(State or other jurisdiction of (I. R. S. Employer
incorporation of organization) Identification No.)
Long Lake, Minnesota 55356
- -----------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(612) 473-1271
- -----------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- -----------------------------------------------------------------------------
(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 CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
2,453,425 Common Shares were outstanding as of March 31, 1999.
<PAGE>
WSI INDUSTRIES, INC.
AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page No.
------------
<S> <C>
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Balance Sheets February 28, 1999 (Unaudited)
and August 30, 1998 3
Consolidated Statements of Operations
Thirteen and Twenty-Six weeks ended February 28, 1999 and
Thirteen and Twenty-Six weeks ended March 1, 1998 (Unaudited) 4
Consolidated Statements of Cash Flows
Twenty-Six weeks ended February 28, 1999 and Twenty-Six weeks
ended March 1, 1998 (Unaudited) 5
Notes to Consolidated Financial Statements (Unaudited) 6, 7, 8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 9, 10, 11
PART II. OTHER INFORMATION:
Item 4. Submission of Matters to a Vote of the Security Holders 12
Item 5. Exhibits and Reports on Form 8-K 12
Signatures 12
</TABLE>
<PAGE>
Part I. Financial Information
ITEM I. FINANCIAL STATEMENTS
WSI INDUSTRIES, INC
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
February 28, August 30,
ASSETS 1999 1998
---- ----
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 0 $ 2,697,104
Accounts receivable 3,190,683 2,852,604
Inventories 3,862,143 919,418
Prepaid and other current assets 114,468 207,100
------------- --------------
Total Current Assets 7,167,294 6,676,226
Property, Plant and Equipment - Net 9,508,188 6,938,508
Intangible Assets 2,687,043 0
------------- --------------
$ 19,362,525 $ 13,614,734
------------- --------------
------------- --------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Trade accounts payable $ 1,746,552 $ 1,535,451
Accrued compensation and employee withholdings 502,219 434,582
Miscellaneous accrued expenses 828,804 758,687
Current portion of long-term debt 1,083,122 708,949
------------- --------------
Total Current Liabilities 4,160,697 3,437,669
Long term debt, less current portion 6,976,948 1,802,072
Long term pension liability 365,883 380,073
Stockholders' Equity:
Common stock issued, 2,453,425 and
2,448,800 shares respectively 245,343 244,880
Capital in excess of par value 1,600,301 1,592,515
Retained earnings 6,013,353 6,157,525
------------- --------------
Total Stockholders' Equity 7,858,997 7,994,920
------------- --------------
$ 19,362,525 $ 13,614,734
------------- --------------
------------- --------------
</TABLE>
See notes to consolidated financial statements
3
<PAGE>
WSI INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
13 weeks ended 26 weeks ended
------------------------------ ------------------------------
February 28, March 1, February 28, March 1,
1999 1998 1999 1998
-------------- ------------- --------------- -------------
<S> <C> <C> <C> <C>
Net sales $ 3,729,158 $ 5,677,479 $ 9,369,866 $ 10,991,179
Cost of products sold 3,563,151 4,551,569 8,378,828 9,060,193
------------- ------------- ------------- -------------
Gross margin 166,007 1,125,910 991,038 1,930,986
Selling and administrative expense 578,661 604,352 1,122,299 1,130,491
Interest and other income (65,595) (24,859) (132,666) (46,315)
Interest and other expense 67,385 40,646 127,077 85,246
------------- ------------- ------------- -------------
Earnings from operations
before income taxes (414,444) 505,771 (125,672) 761,564
Income tax expense 6,700 7,800 18,500 16,800
------------- ------------- ------------- -------------
Net earnings $ (421,144) $ 497,971 $ (144,172) $ 744,764
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Basic earnings per share $ (0.17) $ 0.20 $ (0.06) $ 0.31
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Diluted earnings per share $ (0.17) $ 0.20 $ (0.06) $ 0.29
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Weighted average number of
common and dilutive potential
common shares 2,451,696 2,432,483 2,450,248 2,430,732
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Weighted average number of
common and dilutive potential
common shares 2,547,947 2,527,257 2,550,000 2,535,742
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
WSI INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
26 weeks ended
-------------------------------
February 28, March 1,
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ (144,172) $ 744,764
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Gain on sale of property, plant & equipment (40,230) -
Depreciation and amortization 626,336 559,000
(Decrease) in pension liability (14,190) (43,500)
Changes in assets and liabilities:
(Increase) decrease in accounts receivable 405,735 (277,067)
(Increase) decrease in inventories (1,143,384) 59,349
Decrease in prepaid expenses 98,439 10,345
Increase (decrease) in accounts payable and
accrued expenses (247,194) 855,156
-------------- -----------
Net cash provided by (used in) operations (458,660) 1,908,047
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of equipment 40,230 -
Purchase of property, plant and equipment (185,126) (510,287)
Purchase of subsidiary (net of cash acquired) (6,667,124) -
----------- -----------
Net cash provided by (used in) investing activities (6,812,020) (510,287)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of long-term debt (384,674) (586,537)
Proceeds from issuance of long term debt 4,950,000 -
Issuance of common stock 8,250 14,250
------------- -----------
Net cash provided by (used in) financing activities 4,573,576 (572,287)
------------- ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (2,697,104) 825,473
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 2,697,104 2,847,598
------------- -----------
CASH AND CASH EQUIVALENTS AT END OF REPORTING PERIOD $ 0 $ 3,673,071
------------- -----------
------------- -----------
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 127,598 $ 86,145
Income taxes $ 22,500 $ 28,500
Noncash investing and financing activities:
Acquisition of machinery through capital lease $ 980,250 $ 432,492
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
WSI INDUSTRIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. CONSOLIDATED FINANCIAL STATEMENTS:
The consolidated balance sheet as of February 28, 1999, the
consolidated statements of operations for the thirteen weeks and
twenty-six weeks ended February 28, 1999 and March 1, 1998 and the
consolidated statements of cash flows for the twenty-six weeks then
ended, respectively, have been prepared by the Company without audit.
In the opinion of management, all adjustments (which include normal
recurring adjustments) necessary to present fairly the financial
position, results of operations and cash flows for all periods
presented have been made.
The balance sheet at August 30, 1998 is derived from the
audited balance sheet as of that date. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted. Therefore, these condensed consolidated financial
statements should be read in conjunction with the financial statements
and notes thereto included in the Company's 1998 annual report to
shareholders. The results of operations for interim periods are not
necessarily indicative of the operating results for the full year.
Effective February 15, 1999, the Company acquired Taurus
Numeric Tool, Inc. ("Taurus") in a stock purchase transaction using
cash on hand, borrowings from a bank and subordinated debt from the
previous owner. Accordingly, the balance sheet as of February 28, 1999
and statements of operations and cash flows of Taurus have been
consolidated for the two weeks ended February 28, 1999 into WSI
Industries, Inc.
2 BUSINESS ACQUISITION
On February 15, 1999, the Company acquired Taurus Numeric
Tool, Inc. for the purchase price of $ 5 million cash plus $1,175,807
paid in the form of a Subordinated Promissory Note subject to
adjustment based on the February 15, 1999 closing balance sheet. An
additional undetermined amount not to exceed $1 million in the form of
a contingent Subordinated Promissory Note will be payable based upon
the operating income of Taurus during the twelve-month period
subsequent to the acquisition. For financial statement purposes, the
acquisition has been accounted for under the purchase method of
accounting with the excess of the purchase price over the fair value of
the net tangible assets acquired recorded as intangible assets which
are being amortized over 20 years. The following unaudited pro forma
information presents a summary of consolidated results of operations of
the Company and Taurus as if the acquisition had occurred at the
beginning of fiscal 1998, with pro forma adjustments to give effect to
amortization of goodwill and other intangible assets, depreciation
expense on the fair value of property, plant and equipment and interest
expense on acquisition debt, together with the related income tax
effects assuming that Taurus would be able to utilize the available WSI
Net Operating Loss.
6
<PAGE>
<TABLE>
<CAPTION>
Thirteen weeks ended November Twenty-six weeks ended February
------------------------------- --------------------------------
1998 1997 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue $ 7,722,000 $ 7,234,000 $ 12,871,000 $ 14,636,000
-------------- ------------- -------------- -------------
-------------- ------------- -------------- -------------
Net Income $ 774,000 $ 384,000 $ 601,000 $ 878,000
-------------- ------------- -------------- -------------
-------------- ------------- -------------- -------------
Earnings per share $ .30 $ .15 $ .24 $ .35
-------------- ------------- -------------- -------------
-------------- ------------- -------------- -------------
</TABLE>
The unaudited pro forma condensed combined financial
information above is not necessarily indicative of what actual results
would have been had the acquisition occurred at the date indicated or
indicative of the results that may be expected for the full year ended
August 29, 1999.
3. DEBT AND LINE OF CREDIT:
Pursuant to the Taurus transaction, the Company amended its
credit and security agreement with its bank. The amended agreement
calls for a term loan in the principal amount of $3,200,000 and a
revolving credit facility in the maximum of $3,000,000. Interest is
accrued at prime plus .50% for the term loan and prime plus .25% for
the revolving credit facility. Each facility has a LIBOR rate option.
The term loan shall mature and is payable in equal monthly installments
of $38,096 of principal commencing August 31, 1999. At February 28,
1999, the outstanding balance on the term loan was $3,200,000 while
there was no outstanding balance on the revolving facility. The fair
value of the term debt is estimated to be its carrying value since the
debt has a variable interest rate.
The Company also entered into a Subordinated Promissory Note
with the former owner of Taurus of $1,175,807 (subject to final
adjustment based on the February 15, 1999 closing balance sheet). The
note bears interest at 7.75% with interest payable quarterly. Principal
payments are due in three equal installments commencing annually on
February 15, 2002.
4. EARNINGS PER SHARE
In 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 128 EARNINGS PER
SHARE. Statement 128 replaced the previously reported primary and fully
diluted earnings per share with basic and diluted earning per share.
Unlike primary earnings per share, basic earnings per share excludes
any dilutive effects of options, warrants and convertible securities.
Diluted earnings per share is very similar to the previously reported
fully diluted earnings per share. All earnings per share amounts for
all periods have been presented, and where necessary, restated to
conform to the Statement 128 requirements.
7
<PAGE>
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
13 weeks ended 26 weeks ended
--------------------------- ----------------------------
February 28, March 1, February 28, March 1,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Numerator for basic and diluted
earnings per share:
Net Earnings $(421,144) $497,971 $(144,172) $744,764
--------- --------- --------- ---------
--------- --------- --------- ---------
Denominator:
Denominator for basic earnings
per share - weighed average shares 2,451,696 2,432,483 2,450,248 2,430,732
Effect of dilutive securities:
Employee/Director stock options 96,251 94,744 99,752 105,010
--------- --------- --------- ---------
Dilutive potential common shares
Denominator for diluted earnings
per share-adjusted weighted shares
and assumed conversions 2,547,947 2,527,257 2,550,000 2,535,742
--------- --------- --------- ---------
--------- --------- --------- ---------
Basic earnings per share $ (.17) $ 0.20 $ (.06) $ 0.31
--------- --------- --------- ---------
--------- --------- --------- ---------
Diluted earnings per share $ (.17) $ 0.20 $ (.06) $ 0.29
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS:
Net sales of $3,729,000 for the quarter ending February 28,
1999 decreased $1,948,000 or 34% from the second quarter of the prior
year in large measure attributable to recessionary forces in the
agribusiness market. Net sales for the twenty six weeks ended February
28, 1999 decreased $1,621,000 or 15% from the first half of fiscal 1998
again in large part due to the agribusiness market.
Gross margin declined to 4.5% of sales in the second quarter
of fiscal 1999 compared to 19.8% in the prior year's second quarter.
The first half of fiscal 1999 gross margin declined to 10.6% compared
to the prior year's first half gross margin of 17.6%. The lower gross
margins resulted primarily from volume inefficiencies created by the
lower quarterly and year to date sales and the mix of products sold.
Selling and administrative expense of $579,000 was $25,000
lower than the second quarter of the prior year and the first half's
$1,122,000 was $8,000 lower due to lower compensation and fringe
benefit costs.
Interest and other income was $42,000 higher than the
comparable quarter of the prior year. The second quarter of fiscal 1999
included $35,000 of net gain from the sale of miscellaneous equipment.
The first half of fiscal 1999 was $87,000 higher than the first half of
fiscal 1998 due to the miscellaneous equipment sales and higher overall
levels of cash balances generating higher interest income.
Interest and other expense increased $27,000 in the second
quarter of fiscal 1999 and $42,000 in the first half of fiscal 1999
versus the comparable periods of the prior year due to higher term debt
and capitalized lease debt balances.
In the first half of fiscal 1999, the Company recorded $19,000
of mandatory state income taxes. The Company has not recorded the
benefit of net operating losses and other net deductible temporary
differences in the consolidated statement of operations due to the fact
that the Company has not been able to establish that it is more likely
than not that the tax benefits will be realized.
LIQUIDITY AND CAPITAL RESOURCES:
On February 28, 1999 working capital was $3,007,000 compared
to $3,238,000 at August 30, 1998, a decrease of $231,000, due primarily
to the addition of Taurus' working capital offset by reduction in cash
and increase in current portion of long term debt due to the Taurus
acquisition. The ratio of current assets to current liabilities at
February 28, 1999 and March 1, 1998 was 1.72 to 1.0 and 1.77 to 1.0,
respectively.
As described previously in the Notes to Consolidated
Statements, the Company amended its credit and security agreement with
its bank. Currently, the Company owes $3,200,000 on its term loan
facility but does not have a balance due on its revolving facility.
9
<PAGE>
As also described in the Notes, the Company entered into a
subordinated promissory note with the former owner of Taurus for
approximately $1,175,807 (subject to adjustment). Interest is accrued
at a rate of 7.75% paid quarterly. Principal payments are due in three
equal annual installments commencing on February 15, 2002.
Long-term capitalized lease debt of $2,294,000 on February 28,
1999 was $492,000 higher than on August 30, 1998. The Company entered
into new capital lease arrangements amounting to $980,000 in the first
half of 1999.
It is management's belief that its internally generated funds
combined with the line of credit will be sufficient to enable the
Company to meet its financial requirements during fiscal 1999.
YEAR 2000 COMPLIANCE:
The Year 2000 issue is the result of computer systems that use
two digits rather than four to define the applicable year, which may
prevent such systems from accurately processing dates ending in the
year 2000 and beyond. This could result in computer system failures or
disruption of operations, including, but not limited to, an inability
to process transactions, to send and receive electronic data, or to
engage in routine business and production activities.
The Company has completed its initial assessment of all
currently used computer and network systems as well as its precision
machining production equipment and has developed a plan to correct
those areas that will be affected by the year 2000 issue. The Company's
plan includes replacement or upgrades of certain computer hardware and
software. The Company will utilize outside vendors to assist in the
upgrade of certain computer systems. For its precision machining
equipment, the Company has received written assurance from the
equipment manufacturers as to year 2000 compliance of their machines.
The Company has also tested its manufacturing equipment by rolling the
date forward to the year 2000 and has experienced no difficulties. The
Company estimates that it is 80% complete with respect to its major
computer systems and 95% complete with respect to its precision
machining equipment in its compliance programs. The Company's goal is
to be substantially Year 2000 compliant by the end of fiscal 1999.
In addition to reviewing its internal systems, the Company has
begun formal communications with its significant vendors concerning
Year 2000 compliance and has received an 85% response rate. There can
be no assurance that the systems of other companies that interact with
the Company will be sufficiently Year 2000 compliant so as to avoid an
adverse impact on the Company's operations, financial condition and
results of operations. The Company does not believe that its products
involve any material Year 2000 risks.
The Company presently anticipates that the costs associated
with addressing the year 2000 issues compliance will not have a
material adverse impact on the Company's financial condition, results
of operations or liquidity. Present estimated costs for the Company's
compliance programs are less than $25,000.
The Company anticipates that it will complete its Year 2000
assessment and compliance programs by the end of fiscal 1999. However,
there can be no assurance the Company will be successful in
implementing its programs according to the anticipated schedule. In
addition, the Company may be adversely affected by the inability of
other companies whose systems interact with
10
<PAGE>
the Company to become Year 2000 compliant and by potential
interruptions of utility, communication or transportation
systems as a result of Year 2000 issues.
Although it expects its internal computer and manufacturing
systems to be Year 2000 compliant as described above, the Company is
preparing a contingency plan that will specify what it plans to do if
it or important external companies are not Year 2000 compliant in a
timely manner. The Company expects to prepare its contingency plan
during calendar year 1999.
CAUTIONARY STATEMENT:
Statements included in this Management's Discussion and
Analysis of Financial Condition and Results of Operations, in future
filings by the Company with the Securities and Exchange Commission, in
the Company's press releases and in oral statements made with the
approval of an authorized executive officer which are not historical or
current facts are "forward-looking statements." These statements are
made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995 and are subject to certain risks and
uncertainties that could cause actual results to differ materially from
historical earnings and those presently anticipated or projected. The
Company wishes to caution readers not to place undue reliance on any
such forward-looking statements, which speak only as of the date made.
The following important factors, among others, in some cases have
affected and in the future could affect the Company's actual results
and could cause the Company's actual financial performance to differ
materially from that expressed in any forward-looking statement: (i)
the Company's ability to obtain additional manufacturing programs and
retain current programs; (ii) the loss of significant business from any
one of its current customers could have a material adverse effect on
the Company; (iii) a significant downturn in the industries in which
the Company participates, principally the agricultural industry, could
have an adverse effect on the demand for Company services; (iv) Year
2000 issues which may result in computer system failures or disruption
of operations including engaging in routine business activities. The
foregoing list should not be construed as exhaustive and the Company
disclaims any obligation subsequently to revise any forward-looking
statements to reflect events or circumstances after the date of such
statements or to reflect the occurrence of anticipated or unanticipated
events.
11
<PAGE>
PART II. OTHER INFORMATION:
<TABLE>
<C> <S>
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
A. The Annual Meeting of the Company Stockholders was held on January 7, 1999.
B. Change of Corporate Name to WSI Industries, Inc:
For 2,200,812 Against 10,709 Abstain 9,623
Authorization of Preferred Stock:
For 699,175 Against 247,687 Abstain 22,019 Broker non-vote 1,252,325
This measure did not pass as it did not receive a majority vote of all outstanding shares.
Amendments to the 1994 Stock Plan:
For 703,945 Against 240,034 Abstain 24,942 Broker non-vote 1,252,285
Directors elected at that meeting were:
Paul Baszucki For 2,217,132 Against 4,074
Melvin L. Katten For 2,217,132 Against 4,074
Gerald E. Magnuson For 2,215,632 Against 5,574
George J. Martin For 2,217,132 Against 4,074
Eugene J. Mora For 2,166,632 Against 4,574
Michael J. Pudil For 2,211,522 Against 9,684
Item 5. EXHIBITS AND REPORTS ON FORM 8-K:
A. Exhibit 27. Financial Data Schedule, Q2, Fiscal 1999
B. There was one Form 8-K filed effective February 15, 1999
describing the Company's purchase of Taurus Numeric Tool
and corresponding other events.
</TABLE>
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.
WSI INDUSTRIES, INC.
Date: April 12, 1999 /s/ Michael J. Pudil
-------------- ----------------------------------
Michael J. Pudil, President & CEO
Date: April 12, 1999 /s/ Paul D. Sheely
-------------- ----------------------------------
Paul D. Sheely, Vice President,
Finance & CFO
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-29-1999
<PERIOD-END> FEB-28-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 3,215,683
<ALLOWANCES> 25,000
<INVENTORY> 3,862,143
<CURRENT-ASSETS> 7,167,294
<PP&E> 25,046,674
<DEPRECIATION> 15,538,486
<TOTAL-ASSETS> 19,362,525
<CURRENT-LIABILITIES> 4,198,792
<BONDS> 6,938,853
0
0
<COMMON> 245,343
<OTHER-SE> 7,613,654
<TOTAL-LIABILITY-AND-EQUITY> 19,362,525
<SALES> 3,729,158
<TOTAL-REVENUES> 3,729,158
<CGS> 3,563,151
<TOTAL-COSTS> 3,563,151
<OTHER-EXPENSES> 513,066
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 67,385
<INCOME-PRETAX> (414,444)
<INCOME-TAX> 6,700
<INCOME-CONTINUING> (421,144)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (421,144)
<EPS-PRIMARY> (0.17)
<EPS-DILUTED> (0.17)
</TABLE>
