UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File
For Quarter Ended March 31, 2000 Number 0-9209
-------------------- ------
RIVERSIDE GROUP, INC.
(Exact name of registrant as specified in its charter)
Florida 59-1144172
- ------------------------------------------ ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7800 Belfort Parkway, Jacksonville, Florida 32256
- ------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code number
904-281-2200
------------
Indicate by a 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, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
-----
On May 8, 2000, there were 4,767,123 shares of the Registrant's common stock
outstanding.
<PAGE>
RIVERSIDE GROUP, INC.
INDEX
<TABLE>
<CAPTION>
Page
PART I. FINANCIAL INFORMATION Number
------
<S> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
March 31, 2000 (Unaudited)
and December 31, 1999 3
Condensed Consolidated Statements
of Operations
Three months ended
March 31, 2000 and 1999 (Unaudited) 4
Condensed Consolidated Statements of
Cash Flows
Three months ended
March 31, 2000 and 1999 (Unaudited) 5
Notes to Condensed Consolidated
Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 17
Item 3. Quantitative and Qualitative Disclosures about
Market Risk 24
PART II.
Item 2. Changes in Securities 25
Item 5. Other Information 25
Item 6. Exhibits and Reports on Form 8-K 25
</TABLE>
2
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Riverside Group, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
--------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 653 $ 277
Accounts receivable, less allowance for doubtful
accounts of $5 at 2000 and $3 at 1999 517 259
Investment in Greenleaf Technologies Corp. 3,523 1,253
Notes receivable 30 30
Prepaid expenses 25 19
----------- ------------
Total current assets 4,748 1,838
Investment in Wickes Inc. 14,249 15,799
Investment in Buildscape Inc. (947) (947)
Real Estate held for sale 8,993 8,996
Property, plant and equipment, net 299 340
Other assets (net of accumulated amortization of
$35 in 2000 and $46 at 1999) 180 157
----------- ------------
Total assets $ 27,522 $ 26,183
=========== ============
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Current debt and current maturities of long-term debt $ 11,800 $ 11,813
Accounts payable 531 430
Accrued liabilities 2,350 1,758
----------- ------------
Total current liabilities 14,681 14,001
Long-term debt 469 469
Mortgage debt 11,345 11,345
Net liabilities of discontinued operations 21 21
Other long-term liabilities 83 83
----------- ------------
Total liabilities 26,599 25,919
Commitments and contingencies (Note 5)
Common stockholders' equity :
Common stock, $.10 par value; 20,000,000 shares authorized; 477 477
4,767,123 issued and outstanding in 2000 and 1999
Additional paid in capital 16,468 16,468
Accumulated other comprehensive income 3,523 1,253
Retained earnings (deficit) (19,545) (17,934)
----------- ------------
Total common stockholders' equity 923 264
----------- ------------
Total liabilities and common stockholders' equity $ 27,522 $ 26,183
=========== ============
See Accompanying Notes to Condensed Consolidated Financial Statements.
3
</TABLE>
<PAGE>
Riverside Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(unaudited)
(in thousands except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended March,
---------------------------------------------------
2000 1999
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<S> <C> <C>
Revenues:
Sales and service revenues $ 404 $ 481
Net investment loss (18) (29)
Net realized investment gains 576 ---
Other operating income 3 25
---------- ------------
965 477
---------- ------------
Costs and expenses:
Cost of sales 124 78
Provision for doubtful accounts 2 (59)
Depreciation, goodwill and trademark amortization 62 60
Selling, general and administrative expenses 480 1,584
Interest expense 611 653
---------- ------------
1,279 2,316
---------- ------------
Loss before equity in earnings (losses) of
related parties and minority interest: (314) (1,839)
Equity in losses of Wickes, Inc. (1,297) (1,325)
---------- ------------
Net loss $ (1,611) $ (3,164)
========== ============
Basic and diluted loss per common share:
Loss per share $ (0.34) $ (0.61)
Weighted average number of common shares
used in computing earnings per share 4,759,123 5,213,186
See Accompanying Notes to Condensed Consolidated Financial Statements.
4
</TABLE>
<PAGE>
Riverside Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
For the Three Months Ending
------------------------------------------------
2000 1999
<S> <C> <C>
---- ----
Cash Flow from Operating Activities
Net loss $ (1,611) $ (3,164)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation expense 51 44
Amortization expense 11 16
Amortization of bond discount --- 56
Provision for doubtful accounts 2 (59)
Net realized investment gains (576) ---
Equity in earnings of unconsolidated subsidiaries 1,297 1,325
Change in other assets and liabilities:
Increase in accounts receivable (260) (131)
Decrease in notes receivable --- 157
Increase in other assets (39) (83)
Increase(decrease) in accounts payable and accrued liabilities 693 (82)
Increase in discontinued operations, other liabilities
and current income taxes --- 23
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Net Cash Used In Operating Activities (432) (1,898)
------------- ------------
Cash Flows from Investing Activities
Purchase of investments:
Property, plant and equipment (8) (120)
Investment in real estate --- (3)
Proceeds from sales of investments:
Investment in real estate --- 44
Securities of Greenleaf Technologies Corp. 528 ---
Securities of Wickes Inc. 301 1,180
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Net Cash Provided By Investing Activities 821 1,101
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Cash Flows from Financing Activities
Repayment of debt (13) (61)
Increase in borrowings --- 532
------------ -----------
Net Cash Provided By (Used in) Financing Activities (13) 471
Net Increase (Decrease) in Cash and Cash Equivalents 376 (326)
Cash and cash equivalents at beginning of period 277 509
------------ -----------
Cash and cash equivalents at end of period $ 653 $ 183
============ ===========
See Accompanying Notes to Condensed Consolidated Financial Statements.
5
</TABLE>
<PAGE>
RIVERSIDE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
Basis of Financial Statement Presentation
-----------------------------------------
The condensed consolidated financial statements present the financial
position, results of operations, and cash flows of Riverside Group, Inc. and its
wholly-owned and majority-owned subsidiaries (the "Company"). The Company no
longer owns a majority interest in Buildscape, Inc. ("Buildscape") and at
October 21, 1999, the Company began to report its investment in Buildscape on
the equity method (see Note 3. "Investment in Buildscape"). Accordingly, the
Company's consolidated balance sheet as of December 31, 1999 does not include
the accounts of Buildscape. The Company's condensed consolidated statements of
operations and cash flows for the period ending March 31, 1999, include
Buildscape on a consolidated basis.
The condensed consolidated balance sheets as of March 31, 2000, the
condensed consolidated statements of operations for the three months ended March
31, 2000 and 1999 and the condensed consolidated statements of cash flows for
the three months ended March 31, 2000 and 1999, have been prepared by the
Company without audit. In the opinion of management, all adjustments (which
include only normal recurring adjustments) necessary to present fairly the
financial position, results of operations and cash flows as of March 31, 2000,
and for all periods presented have been made. The results for the three month
period ended March 31, 2000 are not necessarily indicative of the results to be
expected for the full year or for any interim period.
The Company accounts for its investment in Greenleaf securities
according to the provisions of FAS No. 115, "Accounting for Certain Investments
in Debt and Equity Securities." This statement requires that all applicable
investments be classified as trading securities, available-for- sale, or
held-to-maturity securities. Greenleaf securities have been classified as
available-for-sale securities, and as such, will be reported at fair value based
upon the closing price on the exchange on which they are traded on the last day
of the quarter. The unrealized gains and losses are excluded from earnings, but
reported within shareholders' equity in accumulated other comprehensive income
(net of the effect of income taxes) until they are sold. At the time of sale,
any gains or losses, calculated by the specific identification method, will be
recognized as a component of operating results.
Certain information and footnote disclosures normally included in
consolidated financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested that these
condensed consolidated financial statements be read in conjunction with the
consolidated financial statements, the related Auditor's report, and notes
thereto included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1999 filed with the Securities and Exchange Commission.
6
<PAGE>
Comprehensive Income
-------------------
Changes in the components of other comprehensive income and in
accumulated other comprehensive income for the first three months of 2000 are
as follows:
<TABLE>
<CAPTION>
Unrealized Total
Gains on Comprehensive
Securities Income
---------- -------------
<S> <C> <C>
Balance at December 31, 1999 $ 1,253 $ (1,425)
Change during the first three months of 2000 2,270 659
--------- ----------
Balance at March 31, 2000 $ 3,523 $ (766)
========= ==========
</TABLE>
Earnings Per Share
------------------
Basic and diluted earnings per common share is calculated in accordance
with Statement of Financial Accounting Standards No. 128, "Earnings Per Share".
Earnings per share are based on the weighted average number of shares of common
stock outstanding during each period (4,759,123 shares in 2000 and 5,213,186
shares in 1999). Since the Company had a net loss, the options had an
anti-dilutive effect, and therefore, are excluded from the calculation of
diluted earnings per share.
2. INVESTMENT IN WICKES
--------------------
As of March 31, 2000, Riverside beneficially owned 2,949,413 shares of
Wickes' common stock, which constituted 36% of Wickes' outstanding voting and
non-voting common stock.
Summary financial information of Wickes for the first quarter of 2000
follows (in thousands):
<TABLE>
<CAPTION>
(unaudited) (audited)
March 25, 2000 Dec. 25, 1999
--------------- -------------
<S> <C> <C>
Balance Sheet Data
Current assets $ 250,630 $ 241,835
Total assets 344,197 334,636
Current liabilities 86,584 79,312
Long-term debt and other long-term liabilities 229,890 224,505
Common stockholders' equity 27,723 30,819
Three Months Ended March 31,
----------------------------
(unaudited) (unaudited)
2000 1999
---- ----
Income Statement Data:
Net sales $ 215,754 $ 191,110
Cost of sales 162,081 145,203
Gross profit 53,673 45,907
Selling, general & administrative 51,456 44,643
Other expenses 7,933 7,182
Other income (808) (889)
Loss before income tax (4,908) (5,029)
Net loss (3,199) (3,276)
</TABLE>
3. INVESTMENT IN BUILDSCAPE
------------------------
On October 21, 1999, Imagine Investments, Inc. ("Imagine") made a $10
million investment into Buildscape by converting $3 million of debt into common
stock, exchanging 520,000 shares of Riverside stock for Buildscape common stock
and investing an additional $5 million for Buildscape preferred shares.
In connection with the transaction, Imagine was granted the right to
vote the Company's common shares on all matters with the exception of a change
in control. As of October 22, 1999, the Company owned 62% of the Buildscape
common stock; however, since the Company's voting rights are controlled by
Imagine, the Company is accounting for its investment in Buildscape on the
equity method. The Company retained the remaining 3,119,067 outstanding shares
of Buildscape's common stock. As a result of this transaction, as of March 31,
2000, the Company owned (before Buildscape employee's stock options) 47% of
Buildscape on a fully converted basis. Imagine owned 38% of the common and 100%
of the preferred shares of Buildscape, or 53% on a fully converted basis . For
information regarding a further reduction in the Company's ownership in
Buildscape, see Note 9, "Subsequent Events".
7
<PAGE>
Summary financial information of Buildscape for the first quarter of
2000 follows (in thousands):
<TABLE>
<CAPTION>
(unaudited) (audited)
March 31, 2000 Dec. 31, 1999
--------------- -------------
Balance Sheet Data
<S> <C> <C>
Current assets $ 420 $ 2,677
Total assets 1,587 3,587
Current liabilities 1,570 1,592
Common stockholders' equity 17 1,995
Three Months Ended March 31,
----------------------------
(unaudited) (unaudited)
2000 1999
---- ----
Income Statement Data:
Net Sales $ 127 $ 65
Cost of goods 105 32
Gross profit 22 33
Total expenses 2,018 1,153
Other income (18) --
Net loss (1,978) (1,120)
</TABLE>
4. INVESTMENT IN GREENLEAF
-----------------------
As of September 30, 1998, the Company entered into and completed an
agreement with Greenleaf, based in Iselin, New Jersey, whereby the Company
acquired common shares of Greenleaf in exchange for 100% of the common stock of
the Company's former wholly-owned subsidiary, Gameverse. As a result of
Greenleaf's dissatisfaction with the transaction, on January 28, 2000, the
Company and Greenleaf executed a Settlement Agreement (the "Greenleaf
Settlement"). In the Greenleaf Settlement, the Company retained 10,000,000
shares of the 14,687,585 shares that it had originally received. The Company
also retained a five year option to acquire 2,000,000 additional newly issued
shares of Greenleaf's common stock at an exercise price of $.25 per share. In
addition to the 10,000,000 retained shares, 3,000,000 of the Greenleaf's shares
are held in an escrow account (the "Escrow Shares"), pursuant to an escrow
agreement acceptable to Greenleaf and the Company. The proceeds from the sale of
the escrow shares are to be used to fund a mutually agreeable joint venture for
the marketing of technology and internet-related products, to be owned in equal
amounts by Greenleaf and the Company. In connection with the settlement,
Riverside granted Greenleaf a stock option to purchase 5% of the issued and
outstanding shares of Cybermax, Inc. ("Cybermax"), a wholly-owned subsidiary
of the Company. The exercise price is $1,000,000 and the expiration date of
the option is September 30, 2003. In addition, the Company entered into an
agreement with a subsidiary of Greenleaf, Future Com. ("Future"), for use of
satellite air time, related technology, hardware and software, on an
as-needed basis, at fair market value.
INVESTMENT SECURITIES - AVAILABLE FOR SALE
In accordance with SFAS 115 and Securities and Exchange Commission ("SEC")
Rule 144, 3,131,833 shares of the Company's common stock in Greenleaf are
classified as available for sale as of March 31, 2000. The cost basis is $0 and
the estimated fair market value is $3,523,312, resulting in gross unrealized
gains of $3,523,312. Sales of Greenleaf shares are limited by SEC Rule 144 to
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(i) the greater of the average weekly reported volume of trading in such
securities during the four calendar weeks preceding such a sale or (ii) 1% of
Greenleaf's outstanding shares during a 90 day period. Based on the Company's
intention to sell the maximum number of shares allowed in order to fund current
operations and debt, such shares have been classified as available for sale and
accordingly the value of such shares has been reflected as a component of compre
- -hensive income, net of applicable tax of $0. No taxes have been provided as
the Company has available net operating loss carryforwards and strategies which
would result in no tax liability upon the sale of these securities.
5. COMMITMENTS AND CONTINGENCIES
-----------------------------
WICKES INC.
As of March 25, 2000, Wickes had accrued approximately $131,000
(included in accrued liabilities as of March 25, 2000) for remediation of
certain environmental and product liability matters, principally underground
storage tank removal.
Many of the sales and distribution facilities presently and formerly
operated by Wickes contained underground petroleum storage tanks. All such tanks
known to Wickes located on facilities owned or operated by Wickes have been
filled or removed in accordance with applicable environmental laws in effect at
the time. As a result of reviews made in connection with the sale or possible
sale of certain facilities, Wickes has found petroleum contamination of soil and
ground water on several of these sites and has taken, and expects to take,
remedial actions with respect thereto. In addition, it is possible that similar
contamination may exist on properties no longer owned or operated by Wickes, the
remediation of which Wickes could under certain circumstances be held
responsible. Since 1988, Wickes has incurred approximately $2.0 million of
costs, net of insurance and regulatory recoveries, with respect to the filling
or removing of underground storage tanks and related investigatory and remedial
actions. Insignificant amounts of contamination have been found on excess
properties sold over the past four years. Wickes currently has reserved
approximately $43,000 for estimated clean up costs at 11 of its locations.
Wickes has been identified as having used two landfills which are now
Superfund clean up sites, for which it has been requested to reimburse a portion
of the clean-up costs. Based on the amounts claimed and Wickes' prior
experience, Wickes has established a reserve of $28,000 for these matters.
Wickes is one of many defendants in two multi-plaintiff suits filed in
August of 1996 by approximately 200 claimants for unspecified damages as a
result of health problems claimed to have been caused by inhalation of silica
dust, a byproduct of concrete and mortar mix, allegedly generated by a cement
plant with which Wickes has no connection other than as a customer. Wickes has
entered into a cost sharing agreement with its insurers, and any liability is
expected to be minimal.
Wickes is one of many defendants in approximately 159 actions, each of
which seeks unspecified damages, in various Michigan state courts against
manufacturers and building material retailers by individuals who claim to have
suffered injuries from products containing asbestos. Each of the plaintiffs in
these actions is represented by one of two law firms. Wickes is aggressively
9
<PAGE>
defending these actions and does not believe that these actions will have a
material adverse effect on Wickes. Since 1993, Wickes has settled 30 similar
actions for insignificant amounts, and another 224 of these actions have been
dismissed. As of March 25, 2000 none of these suits have made it to trial.
Losses in excess of the amounts accrued as of March 25, 2000 are possible
but an estimate of these amounts cannot be made.
Wickes is involved in various other legal proceedings which are
incidental to the conduct of its business. Certain of these proceedings involve
potential damages for which Wickes' insurance coverage may be unavailable. While
Wickes does not believe that any of these proceedings will have a material
adverse effect on Wickes' financial position, annual results of operations or
liquidity, there can be no assurance of this.
Wickes' assessment of the matters described in this note and other
forward-looking statements in this Form 10-Q are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995
("Forward-Looking Information") and are inherently subject to uncertainty. The
outcome of the matters described in this note may differ from Wickes' assessment
of these matters as a result of a number of factors including, but not limited
to, matters unknown to Wickes at the present time, development of losses
materially different from Wickes' experience, Wickes' ability to prevail against
its insurers with respect to coverage issues to date, the financial ability of
those insurers and other persons from whom Wickes may be entitled to indemnity,
and the unpredictability of matters in litigation.
THE COMPANY AND WICKES
The Company and Wickes are involved in various other legal proceedings
which are incidental to the conduct of their businesses. The Company does not
believe that any of these proceedings will have a material adverse effect on the
Company.
In connection with the sale of Dependable Insurance Company, a former
property and casualty subsidiary of the Company, the Company agreed to indemnify
the purchaser for certain losses on various categories of liabilities. Terms of
the indemnities provided by the Company vary with regard to time limits and
maximum amounts. American Financial Acquisition Corporation subordinated
debentures in the amount of $2.1 million are pledged as collateral on these
indemnities.
Although future loss development will occur over a number of years, the Company
believes, based on all information presently available, that these indemnities
will not have a material adverse effect on the Company's financial position or
results of operations.
On December 1, 1997, the Company completed the sale of its mortgage
lending operation to an unrelated third party. The Company did not realize any
gain or loss from the transaction, but agreed to indemnify the purchaser against
losses on the construction loan portfolio that was transferred. The Company
currently has 62,500 shares of its Wickes' common stock pledged as collateral
for this indemnification obligation. As the construction loan portfolio
decreases, the
10
<PAGE>
shares held as collateral will be released. The Company believes that these
indemnities will not have a material adverse effect on the Company's financial
position or results of operations.
LIQUIDITY AND MANAGEMENT'S PLANS
The accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern. The Company is primarily
a holding company which derives its financial resources through asset sales,
additional borrowings or other financings. As described below, the principal
source of funds in the past has been borrowings and sales of shares of Wickes
common stock. However, because the Company has executed the Greenleaf Settlement
(see Note 4, "Investment in Greenleaf), the Company will now be able to sell
shares of its Greenleaf stock to cover some of its operating deficit and debt
obligations, subject to the limitations and restrictions described below. The
Company is currently working on additional options as discussed below. The
primary use of funds is interest and principal payments on the Company's debt
and to fund the operations of its wholly-owned subsidiary, Cybermax. Cybermax is
generating sales and the Company projects by the end of this year, Cybermax will
generate cash from operations sufficient to fund its operations. However, there
can be no assurance that this will occur.
The Company estimates that as of May 10, 2000, it will have
approximately $382,000 of accounts payable and other current liabilities
(excluding interest payable), approximately $257,000 of which are past due. In
March of 2000, the Company and Wickes renegotiated the terms of the Company's
note to Wickes, deferring all principal payments due for one year, including the
delinquent principal payments for November of 1999 and February of 2000. As of
May 10, 2000, $116,662 of interest is currently past due on the Company's note
to Imagine. Additionally, the $10,000,000 principal of the Company's 11% Notes
is due in September 2000, and the $1,800,000 principal of the Company's
short-term loan from Imagine is due August 2000.
In March of 2000, the Company and the 11% Note holders modified their
original agreement, to permit the Company to use 100% of the net sales proceeds
from the sale of its Greenleaf shares to pay the semi-annual interest due on
March 31, 2000, in lieu of payment against the principal balance of the notes.
The Company sold sufficient shares of Greenleaf prior to March 31 to make the
interest payment on the 11% notes within the allowable grace period prescribed
in the note agreement. Pursuant to the Note modifications, the Company also
agreed to make a principal payment of approximately $550,000 on or before April
30, 2000. However, the Company was unable to sell a sufficient amount of the
Greenleaf shares to meet the April 30 deadline. The Company received notice of
default from the note holders and is currently negotiating a forbearance
agreement that will preclude the note holders from taking any action to
accelerate the payment of the notes, as long as the Company performs pursuant to
the terms of the agreement. The terms will include funding the balance of the
$550,000 principal payment that was due April 30 and selling additional shares
of Greenleaf in subsequent months with the entire proceeds applied to reduce the
outstanding principal on the notes.
As stated above, the two assets that the Company may sell to cover
immediate cash needs are Wickes and Greenleaf shares. However, as of April 14,
2000, virtually all of the Company's
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<PAGE>
3,000,513 shares of Wickes common stock were pledged to secure various
obligations of the Company, as discussed below. On the closing of the Imagine
short-term loan, Imagine released 81,970 shares of Wickes stock, thereby
permitting the Company to sell such shares. The Company currently owns 9,620,000
shares of Greenleaf common stock and has a five year option to purchase two
million shares at .$25 per share. All 9,620,000 shares owned are pledged to
secure the Company's 11% Notes, and any proceeds of sale are required to be
applied as discussed above. The Company owns an additional three million shares
of Greenleaf that are held in an escrow account, pursuant to an escrow agreement
between the Company and Greenleaf (see Note 4. "Investment in Greenleaf").
The Company has begun selling shares of Wickes and Greenleaf stock to
meet the immediate cash requirements of interest due and operations. Through May
10, 2000, the Company has sold 72,000 shares of Wickes and 380,000 shares of
Greenleaf stock for proceeds of approximately $418,730 and $743,595,
respectively. Proceeds from the sale of Wickes shares will be used for the
interest due to Wickes and current operating costs. The Company also plans to
sell an additional 10,000 shares of Wickes stock, the balance of the amount
allowable under Rule 144, over the next 30 days.
The Company's $11.3 million of real estate indebtedness is secured by
the Company's real estate and 2,016,168 shares of Wickes common stock.
Approximately $1,005,366 of payments due at December 31, 1999 has been deferred.
Additional collateral would be required in the event there is any collateral
deficit, at any quarterly valuation date, which would depend upon factors
including the market value of Wickes' common stock and the timing and amount of
real estate sales.
The Company currently has all of its remaining 144 acres of its
investment in real estate under contract to sell. The sales proceeds, estimated
at $15.7 million (after closing costs) will be used to pay off the current
mortgage debt of $11.3 million plus accrued interest and property taxes and the
balance of the proceeds will be used to pay down the principal due on the 11%
notes. The closing on the sale is subject to the buyer obtaining re-zoning
permits. The buyer is entitled not to close on the sale without forfeiture of
the earnest money if the permits are not received. If the permits are received,
the buyer will forfeit earnest money of $10,000 if they fail to close the sale.
Closing is scheduled for May 22, however, the buyer upon meeting certain
conditions, may request extensions until August 22, 2000 to close this sale.
Management is currently reviewing alternative sales proposals for partial sales
of the real estate.
The Company is having discussions with present and prospective lenders
regarding refinancing all, or the portion due after application of the real
estate proceeds, of the 11% notes due September 30, 2000 and the note payable to
Imagine due August 31, 2000. The Company anticipates that sales of Greenleaf
and/or Wickes shares or other asset sales or borrowings will make up the
shortfall on these loans. However, there can be no assurance of this.
The Company's assessment of the matters described in this note and
other Forward-Looking Information and is inherently subject to uncertainty. The
outcome of certain matters described in this note may differ from the Company's
assessment of these matters as a result of a number of
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<PAGE>
factors including but not limited to: matters unknown to the Company at the
present time, development of losses materially different from the Company's
experience, Wickes' ability to prevail against its insurers with respect to
coverage issues to date, the financial ability of those insurers and other
persons from whom Wickes may be entitled to indemnity, and the unpredictability
of matters in litigation.
In addition, the discussion above of the Company's future operations,
liquidity needs and sufficiency constitutes Forward-Looking Information and is
inherently subject to uncertainty as a result of a number of risk factors
including, among other things: (i) the success of and level of cash flow
generated by Cybermax, (ii) the Company's ability to achieve the level of real
estate sales required to meet scheduled real estate debt principal and interest
payments and to avoid the requirement that the Company provide additional
collateral for this debt, (iii) the Company's ability to borrow, which may
depend upon, among other things, the trading price of Wickes common stock, the
value and liquidity of the Company's Greenleaf securities, and the success of
Cybermax and Buildscape, (iv) the ability of the Company to raise funds through
sales of Wickes and Greenleaf common stock and (v) uncertainty concerning the
possible existence of indemnification claims resulting from the Company's
discontinued operations. Future real estate sales depend upon a number of
factors, including re-zoning permits, interest rates, general economic
conditions, and conditions in the commercial real estate markets in Atlanta,
Georgia and Jacksonville, Florida. In addition to the factors described above,
the Company's ability to sell Wickes and Greenleaf common stock would depend
upon, among other things, the trading prices for these securities, and, in light
of the relatively low trading volume for Wickes, possibly the Company's ability
to find a buyer or buyers for these securities in a private transaction or
otherwise.
6. LONG TERM AND MORTGAGE DEBT
---------------------------
Consolidated long-term and mortgage debt is comprised of the following
as of March 31, 2000 (in thousands):
<TABLE>
<CAPTION>
<S> <C>
1 LONG-TERM DEBT
Collateralized Notes $ 10,000
Other 2,269
Less: current maturities (11,800)
------------
Total Company long-term debt less current maturities $ 469
MORTGAGE DEBT
Mortgage debt, non-recourse $ 11,345
Total long-term and mortgage debt -----------
less current maturities $ 11,814
===========
</TABLE>
COLLATERALIZED NOTES ("THE 11% NOTES)
On August 25, 1999, the Company and the 13% Note Holders executed an
agreement (the "11% agreement"), whereby the Company's 13% Notes that were
13
<PAGE>
scheduled to mature in September 1999, were replaced with new unsubordinated
promissory notes due September 30, 2000 bearing 11% interest. The 11% Notes are
secured by a junior lien on the collateral securing the Company's real estate
indebtedness and 10 million shares of Greenleaf common stock. On March 24, 2000,
the Company and the 11% Note Holders executed a modification to the 11%
agreement. This modification allows the Company to use 100% of the net sales
proceeds from the sale of its Greenleaf shares to be applied against the
semi-annual interest payment due March 31, 2000 in lieu of payment against the
principal. In addition, the Company agreed to make a principal reduction of
$550,000 on the 11% Notes on or before April 30, 2000. The Company was unable to
sell a sufficient amount of the Greenleaf shares to meet the April 30 deadline,
and received a notice of default from the note holders on May 8, 2000. The
Company is currently negotiating a forbearance agreement that will preclude the
note holders from taking any action to accelerate the payment of the notes, as
long as the Company performs pursuant to the terms of the agreement. The terms
will include funding the balance of the $550,000 principal payment that was due
April 30 and selling additional shares of Greenleaf stock in subsequent months
with the entire proceeds applied to reduce the outstanding principal on the
notes.
OTHER
WICKES PROMISSORY NOTE
In March of 2000, the Company and Wickes renegotiated the terms of the
note, deferring all principal payments, including the delinquent principal
payments due in November of 1999 and February of 2000, for one year at which
time the principal payments would be due on a quarterly basis. The interest on
this note will be payable on a quarterly basis.
IMAGINE SHORT-TERM LOAN
As of May 9, 2000, the Company had made payments of $9,553 under the
Imagine short- term loan but was delinquent with respect to required payments of
approximately $116,662 of interest. In connection with the Greenleaf Settlement,
the Company granted Greenleaf a stock option to purchase 5% of the issued and
outstanding shares of Cybermax. However, the Company is currently in violation
of the loan agreement and, is having discussion with alternative financing
sources to replace this loan if a waiver of default cannot be reached with
Imagine. The Company believes that if Greenleaf exercises this stock option,
then the Imagine short-term loan will be paid in full.
7. INCOME TAXES
------------
The Company's effective tax rate was 0% for the three months ended March
31, 2000 and 1999.
The Company has established a reserve for the full amount of deferred
tax assets. In management's opinion, it is unlikely the deferred tax assets will
be realized in the near future.
14
<PAGE>
8. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
-----------------------------------------
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," standardizes the accounting for derivative instruments by requiring
that all derivatives be recognized as assets and liabilities and measured at
fair value. In June 1999, SFAS No. 137, "Accounting for Derivative Instruments
and Hedging Activities--Deferral of the Effective Date of SFAS No. 133," was
issued amending SFAS No. 133 by deferring the effective date for one year, to
fiscal years beginning after June 15, 2000. The Company currently is evaluating
the effects of this pronouncement.
9. SUBSEQUENT EVENTS
-----------------
On May 12, 2000, Buildscape entered into a stock purchase agreement
with Imagine and The Dow Chemical Company ("Dow") pursuant to which Dow will
purchase Series A Preferred stock and Common Stock in Buildscape from Imagine
and also purchase newly issued Series B Preferred Stock directly from
Buildscape. The Series B Preferred Stock is to be acquired in two transactions,
the second phase scheduled to close upon the completion of certain milestones by
Buildscape. Dow also has an option to acquire additional shares in Buildscape
that will increase their ownership to 50.1%. Upon the completion of all of these
transactions, Riverside's ownership in Buildscape will be reduced from 47% to
35%, on a fully converted basis.
On April 14, 2000, the Company's Board of Directors approved the issuance
of grants and the right to acquire options held by the Company related to one of
the Company's investments in Greenleaf. The grants and options approved by the
Board of Directors were pursuant to that described and committed to employees on
October 1, 1998. The terms of the commitments to the employees which were
approved by the Board of Directors began the vesting period for the options on
October 1, 1998. Accordingly, in the second quarter of 2000, the Company will
record a charge to income which represents the value of the shares granted and
the vested portion of options granted as represented by the passage of time from
the commitment date until the date approved by the Board of Directors. Such
approval effectively results in the awarding of vested grants and options and
the recognition of compensation expense accordingly.
Management has proposed the grant of additional shares and options to
certain officers and employees. The issuance of these is subject to the
Company's Board of Directors review and approval.
On April 7, 2000, the Board engaged an outside consulting firm to conduct
a compensation analysis of incentive programs. The Board has not taken any
further action pending receipt of the report.
15
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- ------------------------------------------------------------------------
The following discussion should be read in conjunction with the Condensed
Consolidated Financial Statements and Notes thereto contained elsewhere herein
and in conjunction with the Consolidated Financial Statements and Notes thereto
and Management's Discussion and analysis of Financial Condition and Results of
Operations contained in the Company's Annual Report on Form 10-K for the year
ended December 31, 1999.
RESULTS OF OPERATIONS
GENERAL
The Company reported results of operations for the three months ended March
31, 2000 and 1999, as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
(unaudited) (unaudited)
2000 1999
---- ----
<S> <C> <C>
Earnings(loss) before income taxes and equity
in related parties(1)(2) $ (314) $ (1,839)
Income tax benefit -- --
Equity in losses of Wickes Inc. (1,297) (1,325)
----------- ---------
Net loss $ (1,611) $ (3,164)
=========== =========
</TABLE>
(1) Includes realized investment gains of $576,000 and $0 for the first
quarters of 2000 and 1999, respectively.
(2) The Company accounted for its investment in Buildscape under the equity
method for the first quarter of 2000. During the first quarter of 1999,
the Company consolidated Buildscape's operations with those of the
Company and its subsidiaries.
LINES OF BUSINESS
The following table sets forth certain financial data for the three months
ending March 31, 2000 and 1999, respectively, for the following segments:
Buildscape, Cybermax, Wickes and the Parent Group. Buildscape's operations are
consolidated with those of the Company and its subsidiaries through October 21,
1999. The Company accounted for its investment in Buildscape under the equity
method for the first quarter of 2000. The "Parent Group" includes real estate,
parent company, and discontinued operations and all eliminating entries for
inter-company transactions.
16
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended March 31,
2000 1999
---- ----
(in thousands)
<S> <C> <C>
SALES:
Buildscape(1) $ -- $ 65
Cybermax 404 400
Wickes -- --
Parent Group -- 16
----------- ----------
Total $ 404 $ 481
=========== ==========
COST OF SALES:
Buildscape(1) $ -- $ 32
Cybermax 124 43
Wickes -- --
Parent Group -- 3
----------- ----------
Total $ 124 $ 78
=========== ==========
OTHER OPERATING INCOME:
Buildscape(1) $ -- $ --
Cybermax 3 1
Wickes -- --
Parent Group -- 24
---------- ---------
Total $ 3 $ 25
========== =========
INVESTMENT INCOME AND REALIZED
GAINS/(LOSSES):
Buildscape(1) $ -- $ --
Cybermax -- --
Wickes 48 --
Parent Group 510 (29)
---------- ---------
Total $ 558 $ (29)
========== =========
EXPENSES:
Buildscape(1) $ -- $ 1,116
Cybermax 454 553
Wickes -- --
Parent Group 90 (85)
--------- --------
Total $ 544 $ 1,585
========= ========
<PAGE>
Three Months Ended March 31,
2000 1999
---- ----
(in thousands)
INTEREST EXPENSE:
Buildscape(1) $ -- $ 37
Cybermax -- 1
Wickes(2) 274 381
Parent Group 337 234
--------- ---------
$ 611 $ 653
========= =========
EARNINGS(LOSS) BEFORE INCOME TAXES, EQUITY IN RELATED PARTIES, MINORITY
INTEREST AND DISCONTINUED OPERATIONS:
Buildscape(1) $ -- $ (1,120)
Cybermax (171) (196)
Wickes(2) (226) (381)
Parent Group 83 (142)
-------- --------
Total $ 314 $ (1,839)
======== ========
IDENTIFIABLE ASSETS:
Buildscape(1) $ (947) $ 341
Cybermax 555 867
Wickes 14,249 12,490
Parent Group 13,665 10,008
-------- ---------
Total $ 27,522 $ 23,706
======== =========
</TABLE>
(1) After October 21, 1999, the Company's balance sheet and statements of
operations reflect the Company's investment in Buildscape on the equity method.
(2) Includes $274,000, and $381,000 for an interest allocation from Riverside on
its 11% secured notes and 13% subordinated notes for 1999, and 1998,
respectively.
17
<PAGE>
BUILDSCAPE
The following table sets forth information concerning the results of
Buildscape for 1999: (in thousands)
<TABLE>
<CAPTION>
Three Months Ended March 31,
2000 1999
---- ----
<S> <C>
Sales $ 127 $ 65
Cost of sales 105 32
--------- ----------
Net profit 22 33
Selling, general and administrative 1,894 1,103
Depreciation and amortization 124 13
Interest expense -- 37
--------- ----------
Total expenses 2,018 1,153
Other operating income 18 --
--------- ----------
Net loss $ (1,978) $ (1,120)
========= ==========
</TABLE>
On October 21, 1999, the Company sold to Imagine 38% of the common and
100% of the preferred shares of Buildscape. As a result, the Company accounted
for its investment in Buildscape on the equity method after October 21, 1999. In
addition, Buildscape entered into a stock purchase agreement with Imagine and
Dow on May 12, 2000, whereby after a series of transactions, the Company's
ownership will be further reduced. For additional information regarding
this stock purchase agreement see Note 9. "Subsequent Events".
In March 1999, Buildscapeauction.com was introduced. Although these
websites are conducting sales, development costs continue as the site content is
expanded and the functionality of the sites are enhanced and improved. Selling,
General and Administrative Expense ("SG&A") includes personnel and technology
costs relevant to developing the technology for the websites and the marketing
sales plan for Buildscape.
Buildscape has experienced cumulative operating losses, and its operations
are subject to certain risks and uncertainties, including, among others, risks
associated with technology and regulatory trends, evolving industry standards,
growth and acquisitions, actual and prospective competition by entities with
greater financial and other resources, the development of the Internet market
and the need for additional capital. There can be no assurances that Buildscape
will be successful in becoming profitable or generating positive cash flow in
the future. Buildscape is considered to be a development stage company.
CYBERMAX
The following table sets forth information concerning the results of Cybermax
for the first three months of 2000 and 1999, respectively: (in thousands)
<TABLE>
<CAPTION>
Three Months Ended March 31,
2000 1999
---- ----
<S> <C> <C>
Sales $ 404 $ 400
Cost of sales 124 43
-------- ---------
Net profit 280 357
Selling, general and administrative 408 531
Depreciation and amortization 46 22
Interest expense - 1
-------- ---------
Total expenses 454 554
Other operating income 3 1
-------- ---------
Net loss $ (171) $ (196)
======== =========
</TABLE>
Revenues for the first three months of 2000 were $404,000 compared to
$400,000 for the first three months of 1999. Revenues for the first three months
of 2000 include $303,000 of e- Commerce solution sales, $52,000 of equipment
sales and $49,000 of network services. Revenues for the first three months of
1999 include $339,000 of e-Commerce solution sales and $61,000 of network
services. The direct costs for the first three months of 2000 include $54,000
for e- Commerce solution sales, $30,000 of equipment sales, $38,000 of network
services and $2,000 of miscellaneous costs. The direct costs for the first three
months of 1999 include $43,000 of network services. During the first three
18
<PAGE>
months of 1999, the direct costs for the e-Commerce solution sales were
employee's salary which were included in the selling, general and administrative
line item. In 2000, these costs were provided by an outside consulting firm and
were included as a direct cost of selling the product.
Selling, general and administrative expenses decreased for the first
three months of 2000 to $408,000, compared to $531,000 during the first three
months of 1999. The primary reason for this decrease was the reduction of the
personnel in 2000 which was offset slightly by increases in contractual
services, software services and marketing and advertising.
WICKES INC.
The Company estimates that the Company's results of operations include
losses attributable to Wickes of $1,523,000 and $1,706,000 for the first three
months of March 31, 2000 and 1999, respectively.
The following discussion was obtained from the Wickes' Quarterly Report
on Form 10-Q for the first quarter of 2000.
The following discussion should be read in conjunction with the Condensed
Consolidated Financial Statements and Notes thereto contained elsewhere herein
and in conjunction with the Consolidated Financial Statements and Notes thereto
and Management's Discussion and Analysis of Financial Condition and Results of
Operations contained in Wickes' Annual Report on Form 10-K for the year ended
December 25, 1999.
The following table sets forth, for the periods indicated, the percentage
relationship to net sales of certain expense and income items. This information
includes the results from all sales and distribution and component manufacturing
facilities operated by Wickes, including those closed or sold during the period.
Three Months Ended
------------------
March 25, March 27,
2000 1999
---- ----
Net sales 100.0% 100.0%
Gross profit 24.9% 24.0%
Selling, general and
Administrative expense 23.9% 23.4%
Depreciation, goodwill and
Trademark amortization 0.8% 0.8%
Provision for doubtful accounts 0.2% 0.2%
Restructuring and unusual items -- --
Other operating income (0.4)% (0.5)%
Income from operations 0.4% 0.1%
19
<PAGE>
Wickes' first quarter historically has been adversely affected by
seasonal decreases in building construction activity in the Northeast and
Midwest resulting from winter weather conditions. Weather conditions during the
first quarter of 2000 were comparable to those of the first quarter of 1999. The
first quarter of 2000 generally had favorable economic conditions for the
building materials supply industry with single family housing starts only 3.4%
lower as compared to a very strong first quarter of 1999.
Net loss for the three months ended March 25, 2000 was $3,199,000
compared with a loss of $3,276,000 for the three months ended March 27, 1999.
The reduction in the net loss primarily is the result of increased sales and
gross profit partially offset by increases in SG&A expense, depreciation and
interest expense.
PARENT COMPANY AND OTHER SUBSIDIARIES
The following discussion relates to the operations of the Parent Company
and its subsidiaries, other than Buildscape, Cybermax and Wickes (the "Parent
Group").
The Parent Group's non-interest operating expenses for the first three
months of 1999 increased to $90,000 compared to $(85,000) during the same period
in 1999. The 1999 expenses include income of approximately $100,000, which
resulted from the release of a reserve established in prior years in connection
with the sale of the Company's former property and casualty operations.
Revenues of the Parent Group (excluding investment income) for the first
quarter of 2000 and 1999 were $0 and $40,000, respectively.
Interest expense (excluding interest allocation to Wickes for the Parent
Company's 11% and 13% notes of $274,000 in 2000 and $381,000 in 1999) for the
quarters ending March 31, 2000 and 1999, were $337,000 and $234,000,
respectively. In 2000, interest consisted of $71,000 on the Parent Company's
other debt and $266,000 on the Parent Company's real estate mortgage debt. In
1999, interest consisted of $1,000 on the Parent Company's other bank debt and
$233,000 on the Parent Company's real estate mortgage debt. The primary reason
for the increase in interest expense is due to additional debt of the Company
and higher interest rates on the Company's mortgage debt.
REAL ESTATE INVESTMENTS
The Company's real estate investments consist of $7,308,000 in Georgia
properties, $1,678,000 in Florida properties and $8,000 in other states.
The Company had no sales of its real estate investments in the first
three months of 2000 and 1999, respectively.
20
<PAGE>
INCOME TAXES
The Company's effective tax rate was 0% for the three months ended March
31, 2000 and 1999. The Company's equity in losses of Wickes has reduced the
Company's GAAP basis in its investment in Wickes creating deferred tax benefits
which will be realized upon sale or subsequent increase in GAAP basis of this
investment.
LIQUIDITY AND CAPITAL RESOURCES
The Parent Company's general liquidity requirements consist primarily of
funds for payment of debt and related interest and for operating expenses and
overhead.
Operations (exclusive of Wickes, which is prohibited from paying
dividends under its debt instruments) consist primarily of asset sales and
Cybermax's operations. Proceeds from real estate sales are required to be
applied to real estate debt reduction and are not available to the Parent
Company for other purposes.
The Parent Company's cash on hand and available borrowings will not be
sufficient to cover its debt and support its operations and overhead through
2000. Therefore, the Parent Company will need to obtain significant additional
funds through asset sales or additional borrowings or other financing for such
purposes and may need to reduce the level of operations of its wholly-owned
subsidiary, Cybermax. The principal source of funds for these purposes, and for
the payment of interest on the Parent Company's indebtedness, has been sales of
shares of Wickes and Greenleaf common stock.
The $10,000,000 principal amount of the Company's 11% Notes is due in
September 2000, and the $1,800,000 principal amount of the Company's short-term
loan from Imagine is due August 2000.
For a detailed discussion of the Parent Company's liquidity and
management's plans related thereto, see Note 5. "Commitments and Contingencies".
During the first three months of 2000, stockholders' equity increased by
a net of $659,000. The primary reason for the increase was the change in
unrealized gains on the Company's Greenleaf common stock which was approximately
$2,270,000. In addition, the Company recorded gains on the sale of its Greenleaf
common stock of $528,000. This increase was offset by losses attributable to
Wickes of approximately $1,523,000. In addition, the Parent Company and
Cybermax's operations incurred losses of approximately $616,000.
YEAR 2000
The Year 2000 issue is the result of certain computer programs that
were designed to use two digits rather than four to define the applicable year.
As a result, if the Company's computer programs with date-sensitive functions
are not Year 2000 compliant, they may recognize a date using "00" as the Year
1900 rather than the Year 2000. This could cause system failures,
miscalculations, the inability to process transactions, send invoices, or
process similar business activities.
21
<PAGE>
The Company's total cost for the Year 2000 project was approximately
$350,000, of which approximately $306,000 was used to replace the Company's
accounting software system. The remaining $44,000 is for the replacement of
systems, equipment and software which was accelerated due to the Year 2000
problem, and has been capitalized over the systems and software estimated useful
life.
To date, the Company has not experienced any significant Year 2000 problems
and will continue to monitor its systems over the next few months.
ITEM 3. QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- ------------------------------------------------------------------
None.
22
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
For information regarding the Company's legal proceedings, see
Note 5 of Notes to Condensed Consolidated Financial Statements
included elsewhere herein.
ITEM 2. CHANGES IN SECURITIES
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
For information regarding the Company's default on its 11%
collateralized notes, see Note 6 of Notes to Condensed
Consolidated Financial Statements included elsewhere herein.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1 Financial Data Schedule (SEC Use Only)
(b) Reports on Form 8-K
None
23
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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.
RIVERSIDE GROUP, INC.
By /s/ J. Steven Wilson
__________________________________
J. Steven Wilson
Chairman of the Board,
President and
Chief Executive Officer
By /s/ Catherine J. Gray
__________________________________
Catherine J. Gray
Senior Vice President and
Chief Financial Officer
Date: May 19, 2000
24
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Riverside Group, Inc. and Subsidiaries condensed consolidated balance
sheet and condensed statement of operations and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> Dec-31-2000
<PERIOD-START> Jan-01-2000
<PERIOD-END> Mar-31-2000
<EXCHANGE-RATE> 1
<CASH> 653
<SECURITIES> 0
<RECEIVABLES> 514
<ALLOWANCES> 5
<INVENTORY> 0
<CURRENT-ASSETS> 4,748
<PP&E> 299
<DEPRECIATION> 594
<TOTAL-ASSETS> 27,522
<CURRENT-LIABILITIES> 14,681
<BONDS> 0
0
0
<COMMON> 477
<OTHER-SE> 446
<TOTAL-LIABILITY-AND-EQUITY> 27,522
<SALES> 404
<TOTAL-REVENUES> 965
<CGS> 124
<TOTAL-COSTS> 124
<OTHER-EXPENSES> 480
<LOSS-PROVISION> 2
<INTEREST-EXPENSE> 611
<INCOME-PRETAX> (1,611)
<INCOME-TAX> (1,611)
<INCOME-CONTINUING> (1,611)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,611)
<EPS-BASIC> (.34)
<EPS-DILUTED> (.34)
</TABLE>
