U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
- --------------------------------------------------------------------------------
[ X ] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended September 30, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
SPORTAN UNITED INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Commission file number: 000-25513
Texas 76-0333165
----- ----------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
3170 Old Houston Road, Huntsville, Texas 77340
----------------------------------------- -----
(Address of Principal Executive Office) (Zip Code)
409-295-2726
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(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Securities registered pursuant to Section 12(g) of the Exchange Act: Common
Stock
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 [ ]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ X ]
Issuer's revenues for the 12 months ended September 30, 1999 were $2,901,829.
As of December 20, 1999 registrant had 7,000,000 shares of Common Stock
outstanding.
<PAGE>
TABLE OF CONTENTS
ITEMS PAGE
PART I
ITEM 1. DESCRIPTION OF BUSINESS. . . . . . . . . . . . . . . . . . . . .
ITEM 2. DESCRIPTION OF PROPERTIES. . . . . . . . . . . . . . . . . . . .
ITEM 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. . . . . . . .
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS. . . . . . . . . . . . . . . . . . . . . . . .
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. . . . . . . . . . . . . .
ITEM 7. FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . .
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE. . . . . . . . . . . . . .
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A)
OF THE EXCHANGE ACT OFFER. . . . . . . . . . . . . . . . . . .
ITEM 10. EXECUTIVE COMPENSATION. . . . . . . . . . . . . . . . . . . . . .
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT. . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . . . .
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K. . . . . . . . . . . . . . .
<PAGE>
PART I
All references to Sportan United Industries, Inc. ("Company" or "Sportan")
common stock reflect a 41.43455 for 1 forward stock split effected March 1998
(the "Common Stock").
FORWARD-LOOKING STATEMENTS
Some of the statements contained in this Form 10-KSB, discuss future
expectations, contain projections of results of operations or financial
condition or state other "forward-looking" information. These statements are
subject to known and unknown risks, uncertainties, and other factors that could
cause the actual results to differ materially from those contemplated by the
statements. The forward-looking information is based on various factors and is
derived using numerous assumptions. Important factors that may cause actual
results to differ from projections include, for example:
- the success or failure of management's efforts to implement their
business strategy;
- the ability of the Company to raise sufficient capital to meet
operating requirements;
- the ability of the Company to protect its intellectual property
rights;
- the ability of the Company to compete with major established
companies;
- the effect of changing economic conditions;
- the ability of the Company to attract and retain quality employees;
and
- other risks which may be described in future filings with the SEC.
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
The Company was founded in 1986. The Company is engaged in the
distribution and sales of sports novelties, memorabilia, apparel and
collectibles. The Company has been engaged in distributing sports related
products for 15 years. The products are sports novelties, memorabilia, apparel
and collectibles. The Company has recently modified its business strategy and
has now entered the e-commerce market with the launch of its web site,
"uglyfan.com."
The Company's primary marketing segments include:
- Wholesale - Distributing product to brick and mortar retail
storefronts.
- Fulfillment - Distributing product for other online (sports and
non-sports) companies.
- Retail - Sales from several different online storefronts owned by
Sportan.
- uglyfan.com - The sports portal and flagship store owned by Sportan.
- Auctions - Sales from products submitted to auction sites.
<PAGE>
BUSINESS STRATEGY
The Company's goal is to become a leading fulfillment center for online
sales of sports novelties and collectibles in America, and to promote its own
Internet site to become a successful sports portal on the web. To accomplish
this goal, management is committed to the highest standards in distributing
diversified products to the sports/hobby industry in an aggressive, reliable,
and ethical manner. The Company's strategy involves several key business
objectives. Management's strategy is to establish the Company as the
fulfillment firm of preference in the markets it serves, by acquiring new
product lines and expanding to meet the needs of all customers. Management
believes the key factor for success will be a strong and efficient marketing
program. Management's goal is to increase market share by being the best choice
for wholesale needs, fulfillment needs, and retail customer needs in the sports
products market.
PRODUCTS
The Company distributes all types of sports memorabilia and collectibles.
The sports collectibles industry includes:
- Sports novelties,
- periodicals,
- apparel,
- hats,
- racing items,
- autograph memorabilia,
- artwork,
- posters, and
- other licensed memorabilia and collectibles.
The Company does not have any agreements with manufacturers with respect to
ordering the products it distributes. The Company orders products on an as
needed basis based on its internal estimates. Although the Company does not
foresee its inability to order products from manufacturers in the future, the
Company can provide no assurance that it will be able to continue to order
products on favorable terms from any of its manufacturers. The loss of one of
the Company's manufacturers could limit the Company's ability to offer a wide
variety of products to customers, which could damage the Company's trade name
and have an adverse effect on its business.
SALES AND MARKETING
The Company distributes its products to retailers that sell to the end
user, customers of online companies, customers of the Company's Internet retail
store, and to customers from auction sites. Management believes
the increased demand for sports collectibles and the emergence of e-commerce,
means that:
- retailers cannot afford to stock their inventory with all the products
produced by a manufacturer,
- online stores have no time, facilities, and experience in distributing
sports products, and
- the development of the online sports portal created by the Company
will provide the Company with access to this market.
Currently, the Company has one retail agreement and is currently
negotiating more, although there is no assurance that it will be able to execute
any other retail agreements. The retail agreement already established is with
Gridiron.com, which the Company has exclusive rights for fulfillment of all
products sold on site. The agreement with Gridiron.com expires in August 2000,
but may be extended on a year-to-year basis by the mutual agreement of the
parties. In addition, either party may terminate the agreement on 180 days
notice.
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The Company's business is service-oriented, and its primary marketing
focus is on responding rapidly to customer requirements. The Company conducts
limited advertising in the trade magazine Card Trade for the traditional
wholesale segment of the business. The Company is developing a market strategy
for advertising the online sports portal. For the fulfillment portion of the
business, most arrangements are made through personal contact.
Sales of sports memorabilia and collectibles in general are influenced by
the popularity of the sports to which the products or memorabilia relate.
During 1994, Major League Baseball experienced a strike and the National Hockey
League experienced a work stoppage. In 1998, the National Basketball
Association also experienced a work stoppage. These labor disputes resulted in
a loss of interest in these sports by many fans, which in turn triggered a
significant and immediate reduction in memorabilia sales. There can be no
assurance that similar labor disputes will not occur again or that the
popularity of the sports for which the Company distributes sports memorabilia
will not decline for other reasons. Further labor disputes or any such decline
in popularity could have a material adverse effect on the Company's business.
COMPETITION
The Company competes with a few companies on distribution of some products.
The Company believes the number of different product lines it offers makes it
unique in the industry. The Company's main competition is from the
manufacturers that produce the products it offers. The Company believes
manufacturers have a significant competitive advantage in the traditional retail
store front distribution. The retail store can buy direct but are often forced,
at this time, to buy in large quantities. There is no assurance that
manufacturers will not allow retailers to purchase smaller quantities of product
in the future, which would reduce or eliminate the Company's advantage over such
manufacturers.
For the fulfillment and online segments, there is a threat of new entrants
into the market because of the growth potential the Company believes this market
has experienced and will continue to experience. The Company expects to compete
with corporation with significantly greater financial and personnel resource
than the Company. There is no assurance that the Company will be able to
successfully compete in this market.
The Company competes based on a number of factors, such as:
- customer service and support,
- product diversification,
- timely and reliable delivery, and
- price.
Of these factors, the Company believes that product diversification is the
most important factor in attracting new customers, while service is the most
important factor in retaining customers. The Company believes that its ability
to compete effectively in the industry requires sales and support organizations
that are well versed in the various products distributed by the Company.
Management's business strategy is to acquire a multitude of product lines,
forming a one-stop distributor of novelty products, while expanding its reach to
a national level through the Internet. The Company's ability to adequately
execute its business strategy will be directly related to its level of capital.
There is no assurance that the Company will be able to raise sufficient capital
to fully execute its strategy.
INSURANCE
The Company has insurance covering risks incurred in the ordinary course of
business, covering fire, theft and other destruction, in amounts management
believes adequate for its needs. The Company does not maintain key-man life
insurance on the life of Jason G. Otteson, president and chief executive officer
of the Company. The Company believes its insurance coverage is adequate, but
the loss of Mr. Otteson, for any reason, could have a material adverse effect on
the prospects of the Company.
FACILITIES
The Company's headquarters facility, which includes its principal
administrative offices, is located at 3170 Old Houston Road, Huntsville, Texas
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<PAGE>
77340. These premises are leased from Jason G. Otteson and consist of
approximately 12,000 square feet. The lease expires on September 30, 2000 and
the monthly rental is $2000.
EMPLOYEES
As of January 3, 2000, the Company employed sixteen persons, six of whom
are full-time employees, and ten part-time employees. No employees are covered
by a collective bargaining agreement. Management considers relations with its
employees to be very satisfactory. To date the Company does not have any
employment agreements with its officers, directors, or employees.
ITEM 2. DESCRIPTION OF PROPERTY
The Company's headquarters facility, which includes its principal
administrative offices, is located at 3170 Old Houston Road, Huntsville, Texas
77340. These premises are leased from Jason G. Otteson and consist of
approximately 12,000 square feet. The lease expires on September 30, 2000 and
the monthly rental is $2000.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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<PAGE>
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
Currently, there is no public trading market for the company's securities
and there can be no assurance that any market will develop. If a market
develops for the company's securities, it will likely be limited, sporadic and
highly volatile. The Company has submitted its application to be listed on the
OTC Electronic Bulletin Board.
It is the present policy of the Company not to pay cash dividends and to
retain future earnings to support the Company's growth. Any payment of cash
dividends in the future will be dependent upon the amount of funds legally
available therefor, the Company's earnings, financial condition, capital
requirements and other factors that the Board of Directors may deem relevant.
The Company has not paid any dividends during the last two fiscal years and does
not anticipate paying any cash dividends in the foreseeable future.
The following information sets forth certain information for all securities
the Company sold within the past three years, without registration under the
Act.
Between April 1998 and August 1998, the Company issued 1,000,000 shares of
Common Stock at a purchase price of $0.05 per share. The issuance was made
pursuant to Rule 504 promulgated under the Act. In connection with the
offering, the Company paid a cash sales commission of $5,000, a non-accountable
expense allowance of $1,500, and issued warrants to purchase 100,000 shares of
Common Stock at an exercise price of $0.06 per share to the underwriters, Di
Paulo Securities, Ltd. The Company believes the transaction was exempt from
registration pursuant to Section 4(2) of the Act.
In August 1998, the Company issued warrants to purchase 71,000 shares of
Common Stock at an exercise price of $0.01 per share to Brewer & Pritchard, P.C.
The Company believes the transaction was exempt from registration pursuant to
Section 4(2) of the Act.
In April 1998, the Company issued 15,000 shares of Common Stock to current
and former officers and directors, Messrs. Rodriguez, Strader, and Westbrook,
for services rendered. The Company believes the transaction was exempt from
registration pursuant to Section 4(2) of the Act.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
GENERAL
The Company was incorporated in March 1991, but has experienced significant
changes in its management and operations since the death of its founder, James
R. Otteson, in October 1995. The Company's operating results have been
declining since 1995. The Company's fiscal year was changed from December 31 to
September 30 in 1997.
The Company recognizes revenues from sales of sports memorabilia at the
time of shipment. General and administrative costs are charged to expense as
incurred. Property, plant and equipment are recorded at cost and depreciated
using an appropriate accounting method over the estimated useful lives of the
assets. Expenditures for repairs and maintenance are charged to expense as
incurred. The costs of major renewals and betterments are capitalized and
depreciated over the estimated useful lives. The cost and related accumulated
depreciation of the assets are removed from the accounts upon disposition.
Historically, the Company has concentrated on the distribution of sports
cards. In June 1999, the Company sold the sports cards and supplies portion for
net cash of $344,279, plus assumption by the buyer of $216,703 in related
accounts payable. The sales price included transfer of $320,040 in inventory,
$31,741 in accounts receivable, $2,300 in equipment, their St. Louis warehouse
lease, and a 3-year non-compete agreement with the Company and 3 key officers
valued at $206,901. The net gain recognized in 1999 was 206,903. The proceeds
were used to retire $85,000 in bank debt and $55,000 in related party debt, with
the balance used to fund current operating losses. Management estimates that
trading cards accounted for 80% of its past revenues.
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<PAGE>
RESULTS OF OPERATIONS
Year Ended September 30, 1999 Compared to the Year Ended September 30, 1998
Revenues. For the year ended September 30, 1999, revenues decreased to
$2,901,829 from $3,057,734 during the year ended September 30, 1998. The
decrease of $155,905 or 5% was attributable to the sale of its trading card
business which represented approximately 80% of its revenues. For the year
ended September 30, 1999, gross margins decreased to $363,104 from $453,331
during the year ended September 30, 1998.
Cost of Sales. For the year ended September 30, 1999, cost of sales
decreased to $2,538,725 from $2,604,403 during the year ended September 30,
1998. The decrease of $65,678 or 3% was primarily attributable to the sale of
merchandise and inventory of the trading card business.
General and Administrative Expenses. For the year ended September 30,
1999, general administrative expenses increased to $685,812 from $569,931 during
the year ended September 30, 1998. The increase of $115,881 or 20% was
partially attributable to the increase in offering expenses, increased legal and
accounting fees incurred in connection with and in preparation for the Company's
initial public filing with the Securities and Exchange Commission, and contract
labor used in determining the Company's year 2000 readiness.
Net Loss. For the year ended September 30, 1999, the Company's net loss
increased to $178,248 from $129,304 during the year ended September 30, 1998.
The increase of $48,944 or 38% was attributable to the decrease in revenues and
the increase in general and administrative expenses discussed above.
Historical Cash Flows
Cash Flow from Operating Activities. The Company's net cash flow from
operating activities resulted in cash provided by operations of $149,177 for the
year ended September 30, 1999, and cash used in operations of $66,363 for the
year ended September 30, 1998. The increase was primarily attributable to net
operating losses for both years, offset in fiscal 1999 by the sale of inventory
in connection with the sale of the Company's trading card business.
Cash Flow from Investing Activities. The Company's net cash used in
investing activities for the year ended September 30, 1999 decreased to $2,368
from $8,270 for the year ended September 30, 1998. The decrease was due to the
Company's sale of property and equipment in connection with the sale of the
Company's trading card business in fiscal 1999.
Cash Flow from Financing Activities. The Company's net cash flows used in
financing activities for the year ended September 30, 1999 was $134,982,
compared to net cash flows provided in financing activities of $45,214 for the
year ended September 30, 1998. In fiscal 1999, cash used in financing
activities consisted primarily of repayments on the Company's line of credit,
repayments of principal on notes to stockholders, and repayment of stockholder
advances to the Company. In fiscal 1998, cash provided in financing activities
consisted primarily of proceeds from the Company's line of credit, proceeds from
the sale of common stock, stockholder advances to the Company, and proceeds from
notes to stockholders, which was partially offset by the repayment of principal
on notes to stockholders.
LIQUIDITY AND CAPITAL RESOURCES
Management believes that working capital as of September 30, 1999 of
$35,534 should enable the Company to continue its current operations for
approximately the next six months. However, unforeseen costs could shorten the
period during which the current working capital may be expected to satisfy the
Company's capital requirements. Management estimates its current monthly
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<PAGE>
operating costs are approximately $50,000. Management expects to finance year
2000 operating deficits with through additional vendor credits. In December
1999, the Company updated its computer systems, financing approximately $30,000
in computer hardware. The Company does not have any other material commitments
for capital expenditures. Management estimates that its current product sales
will not raise sufficient profits to meet its operating costs, and the Company
believes it will need to add additional product lines to increase revenues. The
Company may raise additional capital through equity sales to fund its business
strategy. The Company can provide no assurance that it will be able to make
such equity sales on terms favorable to the Company, if at all. If the Company
is able to raise funding through the sale of equity, it will result in
additional dilution to the Company's stockholders.
The Company has established a line of credit in the amount of $100,000 with
First National Bank of Huntsville. At September 30, 1999, the Company had a
balance of approximately $10,000 on the line of credit. At October 31, 1998,
the Company had borrowed $90,000 in the form of a note payable due on demand, at
an annual interest rate of 9.5% with principal plus accrued interest payments
beginning March 1999. The note payable is collateralized by all accounts
receivable and inventory of the Company. There can be no assurance that the
Company will be able to obtain additional funding from other external sources on
suitable terms, if at all.
The Company still owes stockholders $53,500 in the form of a note payable
due on demand, at an annual interest rate of 5% with principal plus accrued
interest to be paid on repayment. There can be no assurance that additional
stockholder funds will be available in the future.
The Company may in the future experience significant fluctuations in its
results of operations. Such fluctuations may result in volatility in the price
and/or value of the Company's common stock if any market develops. Results of
operations may fluctuate as a result of a variety of factors, including demand
for the Company's products, introduction of new products by the Company or its
competitors, the variety of products distributed by the Company, the number and
timing of the hiring of additional personnel, the timing of acquisitions,
general competitive conditions in the industry, and general economic conditions.
Shortfalls in revenues may adversely and disproportionately affect the Company's
results of operations because a high percentage of the Company's operating
expenses are relatively fixed. Accordingly, the Company believes that period to
period comparisons of results of operations are not necessarily meaningful and
should not be relied upon as an indication of future results of operations. Due
to the foregoing factors, it is likely that in one or more future periods the
Company's operating results will be below expectations.
SEASONALITY
Sales of sports-related memorabilia products tend to be more constant, with
sales peaks during holiday seasons and the then current sport season.
YEAR 2000 COMPLIANCE
Even though the date is now past January 1, 2000, and the Company has not
experienced any immediate adverse impact from the transition to the year 2000,
it cannot provide any assurance that its suppliers and customers have not been
affected in a manner that is not yet apparent. In addition, certain computer
programs which were date sensitive to the year 2000 may not have been programmed
to process the year 2000 as a leap year, and any negative consequential effects
remain unknown. As a result, the Company will continue to monitor its year 2000
compliance and the year 2000 compliance of its suppliers and customers.
In assessing the effect of the year 2000 problem, management determined
that there existed two general areas that needed to be evaluated:
- Internal infrastructure and
- Supplier/third-party relationships.
A discussion of the various activities related to assessment and actions
resulting from those evaluations is set forth below.
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INTERNAL INFRASTRUCTURE.
The Company verified that all of its personal computers and software are
Year 2000 compliant. The Company replaced or upgraded all items that were not
to Year 2000 compliant. The costs related to these efforts were not material.
SUPPLIERS/THIRD-PARTY RELATIONSHIPS.
The Company relies on its outside vendors for water, electrical, and
telecommunications services as well as climate control, building access, and
other infrastructure services. Although the Company has not experienced any
delays or interruptions in its service, it has received any assurance of
compliance from the providers of these services. Any failure of these
third-parties to resolve year 2000 problems with their systems could have a
material adverse effect on the Company's operations.
CONTINGENCY PLANS.
Based on the above actions, the Company has not developed a formal
contingency plan to be implemented as part of its efforts to identify and
correct year 2000 problems affecting our internal systems. However, if it deems
necessary, the Company may take the following actions:
- Accelerated replacement of affected equipment or software;
- Short to medium-term use of backup equipment and software;
- Increased work hours for Company personnel;
- Other similar approaches.
If the Company is required to implement any of these contingency plans,
such plans could have a material adverse effect on its business.
Based on the actions taken to date, and the lack of any problems to date,
the Company is reasonably certain that it has identified and resolved all year
2000 problems that could hurt its business.
ITEM 7. FINANCIAL STATEMENTS
Our financial statements, commencing on page F-1 have been audited by
Malone & Bailey, PLLC, independent certified public accountants, to the extent
and for the periods set forth in their reports appearing elsewhere herein and
are included in reliance upon such reports given upon the authority of said firm
as experts in auditing and accounting.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
This information was "previously reported," as defined in Rule 12b-2 of the
Securities Exchange Act of 1934, in its Form 8-K dated November 29, 1999, as
amended on December 14, 1999.
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PART III
ITEMS 9 TO 12 INCLUSIVE.
These items have been omitted in accordance with the general instructions
to Form 10-KSB. Prior to January 28, 2000, the Company will file a definitive
proxy statement or information statement that will involve the election of
directors. The information required by these items will be included in such
proxy statement or information statement and are incorporated by reference in
this annual report.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are to be filed as part of this Form 10-KSB:
EXHIBIT NO. IDENTIFICATION OF EXHIBIT
---------------------------
Exhibit 3.1(1) Amended and Restated Articles of Incorporation of
Sportan United Industries, Inc.
Exhibit 3.2(1) Bylaws of Sportan United Industries, Inc.
Exhibit 4.1(1) Common Stock Certificate, Sportan United Industries, Inc.
Exhibit 10.1(1) Sportan United Industries, Inc. 1999 Stock Option Plan
Exhibit 10.2(3) Lease Agreement
Exhibit 16.1(2) Letter on change in certifying accountant
Exhibit 23.1(3) Consent of Malone & Bailey, PLLC
Exhibit 27.1(3) Financial Data Schedule
____________________
(1) Filed previously on registration statement Form 10-SB SEC File No.
000-25513.
(2) Filed previously on current report Form 8-K/A SEC File No. 000-25513.
(3) Filed herewith.
(b) The Company filed no reports on Form 8-K during the last quarter of the
fiscal year ended September 30, 1999.
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SIGNATURES
----------
In accordance with the Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Sportan United Industries, Inc.
By: /s/ Jason G. Otteson
--------------------------
Jason G. Otteson, Chairman of the Board,
President, Chief Executive Officer, and Treasurer
---------------------------
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Jason G. Otteson Chairman of the Board, President, January 12, 2000
- ---------------------- Chief Executive Officer, and Treasurer
Jason G. Otteson
/s/ Brian E. Rodriguez Director January 12, 2000
- ----------------------
Brian E. Rodriguez
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INDEPENDENT AUDITORS' REPORT
Board of Directors
Sportan United Industries, Inc.
Huntsville, Texas
We have audited the accompanying balance sheet of Sportan United Industries,
Inc. as of September 30, 1999, and the related statements of operations, changes
in stockholders' equity, and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Sportan United Industries, Inc.
as of September 30, 1999, and the results of its operations and its cash flows
for the years then ended, in conformity with generally accepted accounting
principles.
The financial statements of Sportan United Industries, Inc. as of September 30,
1998, were audited by other auditors whose report dated December 30, 1998
expressed an unqualified opinion on those statements.
MALONE & BAILEY, PLLC
Houston, Texas
December 16, 1999
<PAGE>
<TABLE>
<CAPTION>
SPORTAN UNITED INDUSTRIES, INC.
BALANCE SHEET
September 30, 1999
ASSETS
<S> <C>
Current Assets
Cash $ 18,490
Accounts receivable, net of allowance
for doubtful accounts of $64,450 63,463
Accounts receivable-stockholder and employees 10,235
Inventory, net of valuation allowance of $0 265,256
----------
Total Current Assets 357,444
----------
Property and Equipment, net of $90,699
accumulated depreciation 26,840
----------
TOTAL ASSETS $ 384,284
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 219,110
Accounts payable to stockholder 1,482
Accrued expenses 37,818
Notes payable to stockholders 53,500
Note payable to bank 10,000
----------
Total Current Liabilities 321,910
----------
STOCKHOLDERS' EQUITY
Preferred stock, no par value, 10,000,000 shares
authorized, no shares issued or outstanding
Common stock, $.001 par value, 50,000,000 shares
authorized, 7,000,000 issued and outstanding 7,000
Paid in capital 246,263
Retained earnings (deficit) (190,889)
----------
Total Stockholders' Equity 62,374
----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 384,284
==========
</TABLE>
See summary of accounting policies and notes to financial statements.
F - 2
<PAGE>
<TABLE>
<CAPTION>
SPORTAN UNITED INDUSTRIES, INC.
STATEMENTS OF OPERATIONS
For the Years Ended September 30, 1999 and 1998
1999 1998
----------- -----------
<S> <C> <C>
Revenues $2,901,829 $3,057,734
Cost of Sales 2,538,725 2,604,403
----------- -----------
Gross Margin 363,104 453,331
Operating Expenses
General and administrative 685,812 569,931
Bad debts 44,661
----------- -----------
Total Operating Expenses 730,473 569,931
----------- -----------
Operating Loss ( 367,369) ( 116,600)
Other Income and (Expense)
Gain on sale of facility 206,901
Interest expense ( 13,950) ( 5,141)
Miscellaneous expense ( 3,830) ( 7,563)
----------- -----------
Total Other Income (Expense) 189,121 ( 12,704)
----------- -----------
NET (LOSS) $( 178,248) $( 129,304)
=========== ===========
Net (loss) per common share $( .02) $( .02)
Weighted average common shares
Outstanding 7,000,000 6,159,167
=========== ===========
</TABLE>
See summary of accounting policies and notes to financial statements.
F - 3
<PAGE>
<TABLE>
<CAPTION>
SPORTAN UNITED INDUSTRIES, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Years Ended September 30, 1999 and 1998
Retained
Earnings
Shares Amount Capital (Deficit) Totals
---------- ---------- -------- ---------- --------
<S> <C> <C> <C> <C> <C>
Balances at
September 30, 5,985,000 $ 5,985 $196,528 $ 116,663 $319,176
1997
Issuance of stock
to employees 15,000 15 735 750
Proceeds from sale
of stock 1,000,000 1,000 49,000 50,000
Net loss (129,304) (129,304)
---------- ---------- -------- ---------- --------
Balances at
September 30,1998 7,000,000 7,000 246,263 ( 12,641) 240,622
Net loss (178,248) (178,248)
---------- ---------- -------- ---------- --------
Balances at
September 30, 1999 7,000,000 $ 7,000 $246,263 $(190,889) $ 62,374
========== ========== ======== ========== ========
</TABLE>
See summary of accounting policies and notes to financial statements.
F - 4
<PAGE>
<TABLE>
<CAPTION>
SPORTAN UNITED INDUSTRIES, INC.
STATEMENTS OF CASH FLOWS
for the Years Ended September 30, 1999 and 1998
1999 1998
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) $(178,248) $(129,304)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation 19,127 18,330
Securities issued for services 750
(Gain) on disposal of property and equipment ( 2,699) ( 226)
Net (increase) decrease in:
Accounts receivable 59,969 5,276
Inventory 259,990 ( 81,308)
Other current assets 3,489 31,039
Net increase (decrease) in:
Accounts payable ( 32,453) 75,232
Accrued expenses 20,002 13,848
---------- ----------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 149,177 ( 66,363)
---------- ----------
CASH FLOWS (USED) BY INVESTING ACTIVITIES
Proceeds from sale of property and equipment 5,000 500
Cash paid for property and equipment ( 7,368) ( 8,770)
---------- ----------
NET CASH (USED) BY INVESTING ACTIVITIES ( 2,368) ( 8,270)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from sale of stock 50,000
Net proceeds (repayments)from line of credit ( 85,000) 95,000
Principal payments on notes to stockholders ( 10,000) (189,532)
Net proceeds from notes to stockholders 23,500
Net increase (decrease) in stockholder advances
to the company ( 39,982) 41,464
Increase in drafts outstanding 24,782
---------- ----------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES (134,982) 45,214
---------- ----------
NET INCREASE IN CASH 11,827 ( 29,419)
CASH BALANCES
-Beginning of period 6,663 36,082
---------- ----------
-End of period $ 18,490 $ 6,663
========== ==========
SUPPLEMENTAL DISCLOSURES
Interest paid in cash $ 5,589 $ 5,140
Income taxes paid in cash $ 0 $ 0
</TABLE>
See summary of accounting policies and notes to financial statements.
F - 5
<PAGE>
SPORTAN UNITED INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of operations and organization: Sportan United Industries, Inc.
(formerly Players Texas Sports, Inc.) (the Company) was incorporated on March
15, 1991, as Players Texas Sports, Inc., a subchapter S corporation. On March
30, 1998, the Board of Directors of Players Texas Sports, Inc. voted to change
the name of the company to Sportan United Industries, Inc. and change the
federal income tax filing status to a C corporation. The Company is a
distributor of sports novelties and memorabilia. The Company markets its
distribution services primarily to retail outlets in the United States.
Cash and cash equivalents: For purposes of the statements of cash flows, cash
equivalents include all highly liquid investments with original maturities of
three months or less.
Allowance for Doubtful Accounts: Earnings are charged with a provision for
doubtful accounts based on a current review of the collectibility of accounts.
Accounts deemed uncollectible are applied against the allowance for doubtful
accounts.
Inventory: Inventory is stated at the lower of cost (determined by the specific
identification method) or market.
Property and Equipment: Property and equipment are stated at cost. The Company
depreciates property and equipment by the straight-line method over the
estimated useful lives of the related assets as follows:
Computer equipment 5 years $ 73,864
Furniture and fixtures 5-10 years 35,854
Transportation equipment 5-7 years 7,821
---------
117,539
Less accumulated depreciation ( 90,699)
---------
$ 26,840
=========
Revenue Recognition: Revenues are recognized as goods are shipped from the
Company's warehouse. Shipments directly to customers from a third party vendor
are recognized at time of shipment from vendor.
Federal Income Taxes: Since March 30, 1998, the Company reports federal income
taxes as a C corporation and uses the liability method in accounting for income
taxes, whereby tax rates are applied to cumulative temporary differences based
on when and how they are expected to affect future tax returns. Deferred tax
assets and liabilities are adjusted for tax rate changes in the year changes are
enacted. The realizability of deferred tax assets are evaluated annually and a
valuation allowance is provided if it is more likely than not that the deferred
tax assets will not give rise to future benefits in the Company's tax returns.
F - 6
<PAGE>
SPORTAN UNITED INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Prior to conversion to a "C" corporation, the income or loss of the Company
flowed through to its stockholders. Accordingly, no provision has been made for
federal income taxes for periods prior to March 30, 1998.
Use of Estimates: The preparation of these financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amount of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Certain reclassifications were made to prior year amounts to conform to the
current year presentation.
NOTE B - BANK CREDIT LINE ARRANGEMENT
The Company presently has a credit line of up to $100,000 at First National Bank
of Huntsville secured by substantially all assets, accounts receivable and
inventory with interest at the bank's prime commercial rate, and maturing March
2000. The Company's outstanding balance on this line as of September 30, 1999,
was $10,000.
NOTE C - INCOME TAXES
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at September 30, 1999,
are as follows:
Deferred tax assets:
Net operating loss carryforward $ 81,600
Allowance for doubtful accounts 21,900
Less: valuation allowance (103,500)
---------
Net current deferred tax assets (liability) 0
=========
The Company has net operating loss carryforwards of approximately $240,000 as of
September 30, 1999, which expire through year 2019.
NOTE D - OPERATING LEASES
The Company rents its principal facility from a stockholder of the Company (see
Note E). During the year, the Company also paid rent on an ancillary facility.
F - 7
<PAGE>
SPORTAN UNITED INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE D - OPERATING LEASES (Continued)
Total rent expense under all lease agreements amounted to approximately $36,350
and $43,000 for the years ended September 30, 1999 and 1998, respectively.
NOTE E - RELATED PARTY TRANSACTIONS
The Company is involved in various transactions with stockholders or officers of
the Company. The transactions and amounts incurred with these individuals are
detailed as follows:
Year Ended Year Ended
September September
1999 1998
---------- ----------
Transaction:
Rent-principal facility $22,140 $22,140
Purchase of inventory $36,537 $43,391
Interest $ 8,362 $ 5,141
Notes payable to stockholders consist of the following:
Notes payable to two stockholders bearing interest
at 5% annually, balance is due on demand.
Interest is being accrued. $53,500
NOTE F - STOCK SPLIT CHANGING PAR VALUE OF STOCK
On March 30, 1998, the Board of Directors authorized a 41.43455-for-1 stock
split and a reduction of par value from $.10 to $.001, thereby increasing the
number of issued and outstanding shares to 5,985,000, and decreasing the par
value of each share to $.001. The effect of the change is reflected in the
Statements of Shareholder Equity retroactively to September 30, 1997.
Note G - PREFERRED STOCK, OUTSTANDING STOCK WARRANTS, AND OPTIONS
Preferred Stock: The Company is authorized to issue up to 10,000,000 shares of
preferred stock, no par value per share. The preferred stock may be issued in
one or more series, the terms of which may be determined at the time of issuance
by the Board of Directors, without further action by stockholders, and may
include voting rights (including the right to vote as a series on particular
matters), preferences as to dividends and liquidation, conversion, redemption
rights and sinking fund provisions. The issuance of any such preferred stock
could adversely affect the rights of the holders of Common Stock and, therefore,
reduce the value of the Common Stock.
Outstanding Stock Warrants: At September 30, 1999, the Company had outstanding
warrants to purchase 171,000 shares of the Company's common stock at prices
ranging from $.01 to $.06 per share. The warrants became exercisable in 1998
and expire at various dates through 2003. At September 30, 1999, 171,000 shares
of common stock were reserved for that purpose.
F - 8
<PAGE>
SPORTAN UNITED INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
Note G - PREFERRED STOCK, OUTSTANDING STOCK WARRANTS, AND OPTIONS(Continued)
Stock Option Plan: Effective March 1, 1999, the Company adopted a stock option
plan. Under the plan, the Company may award options for up to 1,000,000 shares
of common stock to eligible key employees and certain non employee consultants
and directors. As of September 30, 1999, no options had been issued pursuant to
this plan.
NOTE H - MAJOR CUSTOMERS AND VENDORS
During the year ended September 30, 1999, the Company purchased $355,381, or 31%
of total expenditures from Riddell. No other vendor or customer accounted for
greater than 10% of total expenditures or revenues.
NOTE I - SALE OF ST. LOUIS WAREHOUSE
In June 1999, the Company sold its St. Louis, Missouri warehouse and
accompanying trading card inventories located in both St. Louis and the
Company's Huntsville, Texas corporate headquarters for $344,279 plus assumption
of $216,703 in related accounts payable. Included with this sale was the
agreement by the Company and its officers not to compete with the buyer in the
sale of trading cards for a 3 year period in an 18 state geographic area roughly
comprising the South and Midwest. In connection with this sale, a $206,901 gain
was recognized in the current year.
F - 9
<PAGE>
COMMERCIAL LEASE
This lease is made between Jason Glenn Ottesor, herein called Lessor, and
Sportan United Industries, Inc., herein called Lessee.
Lessee hereby offers to lease from Lessor the premises situated in the City
of Huntsville, County of Walker, State of Texas, described as 1,100 square feet
of office space and warehouse at 3__0 Old Houston Road, upon the following TERMS
and CONDITIONS:
1. Term and Rent. Lessor demises the above premises for a term of 1
year, commencing October 1, 1999 and terminating on September 30, 2000 or sooner
as provided herein at the annual rental of ($) 21,000.00 payable in equal
installments in advance on the 15th day of each month for that month's rental,
during the term of this lease. All rental payments shall be made to Lessor, at
the address specified above.
2. Use. Lessee shall use and occupy the premises for storage and sale
of sport novelty items. The premises shall be used for no other purpose.
Lessor represents that the premises may lawfully be used for such purpose.
3. Care and Maintenance of Premises. Lessee acknowledges that the
premises are in good order and repair, unless otherwise indicated herein.
Lessee shall, at his own expense and at all times, maintain the premises in good
and safe condition, including plate glass, electrical wiring, plumbing and
heating installations and any other system or equipment upon the premises, and
shall surrender the same at termination hereof, in as good condition as
received, normal wear and tear excepted. Lessee shall be responsible for all
repairs required, excepting the roof, exterior walls, structural foundations,
and.
4. Alterations. Lessee shall not without first obtaining the written
consent of Lessor, make any alterations, additions, or improvements, in, to or
about the premises.
5. Ordinance and Statutes. Lessee shall comply with all statutes,
ordinances and requirements of all municipal, state and federal authorities now
in force, or which may hereafter be in force, pertaining to the premises,
occasioned by or affecting the use thereof by Lessee.
6. Assignment and Subletting. Lessee shall not assign this lease or
sublet any portion of the premises without prior written consent of the Lessor,
which shall not be unreasonably withheld. Any such assignment or subletting
without consent shall be void and, at the option of the Lessor, may terminate
this lease.
7. Utilities. All applications and connections for necessary utility
services on the demised premises shall be made in the name of Lessee only, and
Lessee shall be solely liable for utility charges as they become due, including
those for sewer, water, gas, electricity, and telephone services.
8. Entry and Inspection. Lessee shall permit Lessor or Lessor's agents
to enter upon the premises at reasonable time and upon reasonable notice, for
the purpose of inspecting the same, and will permit Lessor at any time within
sixty (60) days prior to the expiration of this lease, to place upon the
premises any usual "To Let" or "For Lease" signs, and permit persons desiring to
lease the same to inspect the premises thereafter.
1
<PAGE>
9. Possession. If Lessor is unable to deliver possession of the
premises at the commencement hereof, Lessor shall not be liable for any damage
caused thereby, nor shall this lease be void or voidable, but Lessee shall not
be liable for any rent until possession is delivered. Lessee may terminate this
lease if possession is not delivered within 15 days of the commencement of the
term hereof.
10. Indemnification of Lessor. Lessor shall not be liable for any
damage or injury to Lessee, or any other person, or to any property, occurring
on the demised premises or any part thereof, and Lessee agrees to hold Lessor
harmless from any claim for damages, no matter how caused.
11. Insurance. Lessee, at his expense, shall maintain plate glass and
public liability insurance including bodily injury and property damage insuring
Lessee and Lessor with minimum coverage as follows:
Lessor shall provide Lessor with a Certificate of Insurance showing Lessor
as additional insured. The Certificate shall provide for a ten-day written
notice to Lessor in the event of cancellation or material change of coverage.
To the maximum extent permitted by insurance policies which may be owned by
Lessor or Lessee, Lessee and Lessor, for the benefit of each other, waive any
and all rights of subrogation which might otherwise exist.
12. Eminent Domain. If the premises or any part thereof or any estate
therein, or any other part of the building materially affecting Lessee's use of
the premise, shall be taken by eminent domain, this lease shall terminate on the
date when title vests pursuant to such taking. The rent, and any additional
rent, shall be apportioned as of the termination date, and any rent paid for any
period beyond that date shall be repaid to Lessee. Lessee shall not be entitled
to any part of the award for such taking of any payment in lieu thereof, but
Lessee may file a claim for any taking of fixtures and improvements owned by
Lessee, and for moving expenses.
13. Destruction of Premises. In the event of a partial destruction of
the premises during the term hereof, from any cause, Lessor shall forthwith
repair the same, provided that such repairs can be made within sixty (60) days
under existing governmental laws and regulations, but such partial destruction
shall not terminate this lease, except that Lessee shall be entitled to a
proportionate reduction of rent while such repairs are being made, based upon
the extent to which the making of such repairs shall interfere with the business
of Lessee on the premises. If such repairs cannot be made within said sixty
(60) days, Lessor, at his option, may make the same within a reasonable time,
this lease continuing in effect with the rent proportionately abated as
aforesaid, and in the event that Lessor shall not elect to make such repairs
which cannot be made within (60) days, this lease may be terminated at the
option of either party. In the event that the building in which the demised
premises may be situated is destroyed to an extent of not less than one-third of
the replacement costs thereof, Lessor may elect to terminate this lease whether
the demised premises be injured or not. A total destruction of the building in
which the premises may be situated shall terminate this lease.
14. Lessor's Remedies on Default. If Lessee defaults in the payment of
rent, or any additional rent, or defaults in the performance of any of the other
covenants or conditions hereof, Lessor may give Lessee notice of such default
and if Lessee does not cure any such default within 15 days, after the giving of
such notice (of if such other default is of such nature that it cannot be
completely cured within such period, if Lessee does not commence such curing
within such 30 days and thereafter proceed with reasonable diligence and in good
faith to cure such default), then Lessor may terminate this lease or not less
2
<PAGE>
than 15 days' notice to Lessee. On the date specified in such notice the term
of this lease shall terminate, and Lessee shall then quit and surrender the
premises to Lessor, but Lessee shall remain liable as hereinafter provided. If
this lease shall have been so terminated by Lessor, Lessor may at any time
thereafter resume possession of the premises by any lawful means and remove
Lessee or other occupants and their effects. No failure to enforce any term
shall be deemed a waiver.
15. Security Deposit. Lessee shall deposit with Lessor on the signing
of this lease the sum of zero Dollars ($) 0.00 as security deposit for the
performance of Lessee's obligations under this lease, including without
limitation, the surrender of possession of the premises in Lessor as herein
provided. If Lessor applies any part of the deposit to cure any default of
Lessee, Lessee shall upon demand deposit with Lessor the amount so applied so
that Lessor shall have the full deposit on hand at all times during the term of
this lease.
16. Tax Increase. In the event there is any increase during any year
of the term of this lease in the City, County or State real estate taxes over
and above the amount of such taxes assessed for the tax year during which the
term of this lease commences, whether because of increased rate or violation,
Lessee shall pay to Lessor upon presentation of paid tax bills an amount equal
to 100 % of the increase in taxes upon the land and building in which the leased
premises are situated. In the event that such taxes are assessed for a tax year
extending beyond the term of the lease, the obligation of Lessee shall be
proportionate to the portion of the lease term included in such year.
17. Common Area Expenses. In the event the demised premises are
situated in a shopping center or in a commercial building in which there are
common areas, Lessee agrees to pay his pro rata share of maintenance, taxes, and
insurance for the common area.
18. Attorney's Fees. In case suit should be brought for recovery of
the premises, or for any sum due hereunder, or because of any act which may
arise out of the possession of the premises, by either party, the prevailing
party shall be entitled to all costs incurred in connection with such action,
including a reasonable attorney's fee.
19. Notices. Any notice which either party may, or is required to
give, shall be given by mailing the same, postage prepaid, to Lessee at the
premises, or Lessor at the address shown below, or at such other places as may
be designated by the parties from time to time.
20. Heirs, Assigns, Successors. This lease is binding upon and inures
to the benefit of the heirs, assigns and successors in interest to the parties.
21. Option to Renew. Provided that Lessee is not in default in the
performance of this lease, Lessee shall have the option to renew the lease for
an additional term of 12 months commencing at the expiration of the initial
lease term. All of the terms and conditions of the lease shall apply during the
renewal term except that the monthly rent shall be the sum of $2,500. The
option shall be exercised by written notice given to Lessor not less than 30
days prior to the expiration of the initial lease term. If notice is not given
in the manner provided herein within the time specified, this option shall
expire.
22. Subordination. This lease is and shall be subordinated to all
existing and future liens and encumbrances against the property.
3
<PAGE>
23. Entire Agreement. The foregoing constitutes the entire agreement
between the parties and may be modified only by a writing signed by both
parties. The following Exhibits, if any, have been made a part of this lease
before the parties' execution hereof:
Signed this 1st day of October, 1999.
Sportan United Industries, Inc.
By By
- -------------------------------- --------------------------------
Lessee Lessor
4
<PAGE>
EXHIBIT 23.1
------------
INDEPENDENT AUDITOR'S CONSENT
We consent to use in the Annual Report on Form 10-KSB under the Securities
Exchange Act of 1934 for the year ended September 30, 1999, of Sportan United
Industries, Inc. of our report dated December 16, 1999.
/s/ Malone & Bailey
Houston, Texas
January 11, 2000
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> SEP-30-1999
<CASH> 18,490
<SECURITIES> 0
<RECEIVABLES> 127,913
<ALLOWANCES> (64,450)
<INVENTORY> 265,256
<CURRENT-ASSETS> 357,444
<PP&E> 117,539
<DEPRECIATION> (90,699)
<TOTAL-ASSETS> 384,284
<CURRENT-LIABILITIES> 321,910
<BONDS> 0
0
0
<COMMON> 7,000
<OTHER-SE> 55,374
<TOTAL-LIABILITY-AND-EQUITY> (62,374)
<SALES> 2,901,829
<TOTAL-REVENUES> 2,901,829
<CGS> 2,538,725
<TOTAL-COSTS> 730,473
<OTHER-EXPENSES> (203,071)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,950
<INCOME-PRETAX> (178,248)
<INCOME-TAX> 0
<INCOME-CONTINUING> (178,248)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (178,248)
<EPS-BASIC> (.02)
<EPS-DILUTED> (.02)
</TABLE>
