<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended December 31, 1997
Commission file number 0-9964
BESICORP GROUP INC.
______________________________________________________________________________
(Exact name of small business issuer as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
New York 14-1588329
</TABLE>
______________________________________________________________________________
<TABLE>
<CAPTION>
<S> <C>
(State or other jurisdiction of (Internal Revenue Service
incorporation or organization) Employer Identification No.)
</TABLE>
1151 Flatbush Road, Kingston, New York 12401
______________________________________________________________________________
(Address of principal executive office) (Zip Code)
Issuer's Telephone Number, including area code: (914) 336-7700
N/A
_____________________________________________________________________________
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15 (d) of the Exchange Act during the preceding 12 months (or for such
shorter period that the Registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
<PAGE>
Yes __X__ No____
<TABLE>
<CAPTION>
<S> <C>
Common stock outstanding as of February 10, 1998 2,956,720
Transitional Small Business Disclosure Format Yes______ No ___X___
</TABLE>
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1 - FINANCIAL STATEMENTS
BESICORP GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(unaudited)
<TABLE>
<CAPTION>
December 31, 1997 March 31, 1997
----------------- --------------
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 650,003 $ 210,533
Short-term investments 1,048,689 1,012,814
Trade accounts receivable (less allowance for doubtful
accounts of $39,346) 392,155 604,263
Due from affiliates 151,487 1,338,802
Current portion of long-term notes receivable: Others
(includes interest of $3,211 and $11,201, respectively) 97,477 97,016
Inventories 1,140,165 1,180,265
Refundable income taxes 187,187 0
Deferred income taxes 362,600 362,600
Other current assets 216,861 316,601
------------------ ---------------
Total Current Assets 4,246,624 5,122,894
------------------ ---------------
Property, Plant and Equipment:
Land and improvements 279,910 279,910
Buildings and improvements 1,902,666 1,890,065
Machinery and equipment 1,215,695 961,335
Furniture and fixtures 240,352 195,941
Construction in progress 8,079 8,079
----------------- --------------
3,646,702 3,335,330
Less accumulated depreciation and amortization 1,599,880 1,398,576
----------------- ---------------
Net Property, Plant and Equipment 2,046,822 1,936,754
------------------ ---------------
Other Assets:
Patents and trademarks, less accumulated amortization of
$662,109 and $651,526, respectively 38,485 47,184
Long-term notes receivable:
Affiliates 555,376 555,376
Others 2,073,431 2,168,246
Deferred costs 1,919,473 1,480,728
Deferred income taxes 325,327 369,700
Other assets 324,294 155,917
----------------- --------------
Total Other Assets 5,236,386 4,777,151
----------------- --------------
TOTAL ASSETS $ 11,529,832 $ 11,836,799
----------------- --------------
----------------- --------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
BESICORP GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(unaudited)
<TABLE>
<CAPTION>
December 31, 1997 March 31, 1997
----------------- --------------
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities:
Accounts payable and accrued expenses $ 1,458,481 $ 1,745,142
Current portion of long-term debt 267,114 115,598
Current portion of accrued reserve and warranty expense 148,888 215,733
Taxes other than income taxes 95,481 101,786
Income taxes payable 742,576 366,786
------------------ ----------------
Total Current Liabilities 2,712,540 2,545,045
Investment in Partnerships 633,401 2,559,282
Long-Term Accrued Reserve and Warranty Expenses 154,223 165,950
Long-Term Debt 3,787,281 3,834,483
------------------ ----------------
Total Liabilities 7,287,445 9,104,760
----------------- ----------------
Shareholders' Equity:
Common stock, $0.10 par value: authorized 5,000,000
shares; issued 3,234,954 shares 323,495 323,495
Additional paid-in capital 4,869,690 4,925,524
Retained earnings (deficit) 711,680 (810,645)
----------------- --------------
5,904,865 4,438,374
Less: treasury stock at cost (278,234 shares and 300,298
shares, respectively) (1,662,478) (1,706,335)
----------------- --------------
Total Shareholders' Equity 4,242,387 2,732,039
----------------- --------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 11,529,832 $ 11,836,799
----------------- --------------
----------------- --------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
BESICORP GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
December 31, December 31,
----------------------- ----------------------------------
1997 1996 1997 1996
--------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Product sales $ 788,193 $1,130,078 $ 3,056,859 $ 3,559,503
Development and management
fees 162,133 71,129 1,070,139 294,179
Other revenues 102,320 83,508 237,703 262,570
Income from partnerships 2,418,708 1,800,276 7,408,310 6,006,356
Interest and other
investment income 39,700 38,158 134,614 105,998
Other income 0 152,337 0 158,109
--------- --------- ----------- -----------
Total Revenues 3,511,054 3,275,486 11,907,625 10,386,715
--------- --------- ----------- -----------
Costs and Expenses:
Cost of product sales 776,517 1,145,252 2,850,416 3,334,057
Selling, general and
administrative expenses 2,406,166 1,798,900 6,490,961 5,922,670
Interest expense 207,619 85,792 404,134 265,651
Other expense 40 0 8,387 0
--------- --------- ----------- -----------
Total Costs and Expenses 3,390,342 3,029,944 9,753,898 9,522,378
--------- --------- ----------- -----------
Income Before Income Taxes 120,712 245,542 2,153,727 864,337
Provision (Credit) for
Income Taxes (68,802) 86,251 631,402 224,412
--------- --------- ----------- -----------
Net Income $ 189,514 $ 159,291 $ 1,522,325 $ 639,925
--------- --------- ----------- -----------
--------- --------- ----------- -----------
Basic Earnings per Common
Share $ .06 $ .05 $ .52 $ .22
--------- --------- ----------- -----------
--------- --------- ----------- -----------
Basic Weighted Average
Number of Shares
Outstanding (in Thousands) 2,957 2,915 2,946 2,914
--------- --------- ----------- -----------
--------- --------- ----------- -----------
Diluted Earnings per Common
Share $ .06 $ .05 $ .51 $ .21
--------- --------- ----------- -----------
--------- --------- ----------- -----------
Diluted Weighted Average
Number of Shares
Outstanding (in Thousands) 3,016 3,025 3,003 3,024
--------- --------- ----------- -----------
--------- --------- ----------- -----------
Dividends per Common Share $ NONE $ NONE $ NONE $ NONE
--------- --------- ----------- -----------
--------- --------- ----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
BESICORP GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Nine months ended December 31,
------------------------------------
1997 1996
----------- -----------
<S> <C> <C>
Operating Activities:
Net income $ 1,522,325 $ 639,925
Adjustments to reconcile net income to net
cash provided by operating activities:
Deferred income taxes 44,373 0
Amortization of discounts on notes (1,647) (1,647)
Depreciation and amortization 216,855 289,026
Realized and unrealized losses 9,620 3,104
Partnership income recognized (7,408,310) (6,006,356)
Distributions from partnerships 5,482,429 5,925,333
Changes in assets and liabilities:
Short-term investments (32,806) (253,458)
Accounts and notes receivable 1,495,424 268,406
Inventory 40,100 20,422
Accounts payable and accrued expenses (286,661) 267,257
Taxes payable 182,298 (370,791)
Other assets and liabilities, net (587,838) (675,137)
------------- --------------
Net cash provided by operating activities 676,162 106,084
------------- --------------
Financing Activities:
Increase in borrowings 247,000 178,000
Repayment of borrowings (209,061) (198,535)
Purchase of common stock (140,077) (1,250)
Issuance of common stock 128,100 7,549
----------- -----------
Net cash provided (used) by financing activities 25,962 (14,236)
----------- -----------
Investing Activities:
Capital contributions to partnerships 0 (2,500)
Acquisition of property, plant and equipment (262,654) (33,243)
------------- --------------
Net cash used by investing activities (262,654) (35,743)
------------- --------------
Increase in Cash and Cash Equivalents 439,470 56,105
Cash and Cash Equivalents - Beginning 210,533 90,579
----------- -----------
Cash and Cash Equivalents - Ending $ 650,003 $ 146,684
----------- -----------
----------- -----------
Supplemental Cash Flow Information:
Interest paid $ 287,225 $ 334,745
Income taxes paid 398,426 719,163
Additions which were financed and not included
above:
Property, plant and equipment $ 66,375 $ 0
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
BESICORP GROUP INC. AND SUBSIDIARIES
UNAUDITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. The accompanying unaudited financial statements have been prepared in
accordance with the generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB. Accordingly,
they do not include all the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of Management, the accompanying consolidated financial statements contain all
adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the financial position of Besicorp Group Inc. (together with its
subsidiaries, the "Company") as of December 31, 1997, and March 31, 1997; the
results of operations for the three- and nine-month periods ended December 31,
1997 and 1996; and the statement of cash flows for the corresponding nine-month
periods. Certain items in the Fiscal 1997 financial statements have been
restated to conform with the Fiscal 1998 presentation.
The balance sheet at March 31, 1997 has been derived from the audited financial
statements at that date, but does not include all the information and footnotes
required by generally accepted accounting principles for complete financial
statements. For further information, refer to the audited financial statements
and footnotes thereto included in the Form 10-KSB filed by the Company for the
year ended March 31, 1997.
B. Business
The Company specializes in the development of power projects and energy
technologies. Working with partners, the Company develops independent power
projects. The Company also provides engineering, system design, project
management and turnkey installation of photovoltaics and thermal energy systems,
and fabricates, manufactures, markets and distributes alternative energy
projects through a domestic and international network.
C. Basic/Diluted Earnings per Common Share
Effective December 15, 1997, the Company adopted the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 128, Earnings per Share. The
Statement requires companies with a complex capital structure to report both
Basic Earnings per Share and Diluted Earnings per Share. Diluted Earnings per
Share considers the effect of potential common shares such as stock options and
warrants. The reporting requirements of SFAS No. 128 are reflected on the face
of the Consolidated Statement of Operations. For the three-month periods ended
December 31, 1997 and 1996, there was no difference between Basic Earnings per
Share and Diluted Earnings per Share. For the nine months ended December 31,
1997, Diluted Earnings per Share was $.51 as compared to Basic Earnings per
Share of $.52, a dilution of $.01 per share. For the nine months ended December
31, 1996, Diluted Earnings per Share was $.21 as compared to Basic Earnings per
Share of $.22, a dilution of $.01 per share. The dilution in the nine-month
periods ended December 31, 1997 and 1996 is due to the net incremental effect of
incentive stock options and warrants of 56,715 shares and 109,920 shares,
respectively.
<PAGE>
D. The results of operations for the three- and nine-month periods ended
December 31, 1997 are not necessarily indicative of the results to be expected
for any other interim period or for the full year.
E. Inventories
Inventories are carried at the lower of cost (first-in, first-out method), or
market. Inventories at December 31, 1997 and March 31, 1997, consist of:
<TABLE>
<CAPTION>
December 31, 1997 March 31, 1997
<S> <C> <C>
Assembly parts $ 490,263 $ 479,689
Finished goods 649,902 700,576
------------------ ---------------
$ 1,140,165 $ 1,180,265
------------------ ---------------
------------------ ---------------
</TABLE>
F. Deferred Costs
Deferred costs and reimbursable costs at December 31, 1997 and March 31, 1997
were as follows:
<TABLE>
<CAPTION>
Internal Costs Third
Payroll Expenses Party Costs Total
<S> <C> <C> <C> <C>
Balance March 31, 1997 $ 917,671 $ 267,947 $ 295,110 $1,480,728
Additions 204,125 27,404 284,765 516,293
Expensed 0 0 0 0
Reimbursements (74,500) 0 (3,048) (77,548)
--------- -------- ----------- ---------
Balance December 31, 1997 $1,047,296 $ 295,350 $ 576,827 $1,919,473
------------ ----------- -------------- ------------
------------ ----------- -------------- ------------
</TABLE>
G. Investments in Partnerships
The Company has partnership interests in six completed gas-fired cogeneration
plants located in New York State. At December 31, 1997 and March 31, 1997, the
balance of recorded investments was comprised of the following:
<TABLE>
<CAPTION>
December 31, 1997 March 31, 1997
<S> <C> <C>
Capital contributions and investments $ 2,976,813 $ 2,976,813
Partnership distributions (26,100,205) (20,617,776)
Recognized share of income (losses) 22,489,991 15,081,681
----------------- --------------
$ (633,401) $ (2,559,282)
----------------- --------------
----------------- --------------
</TABLE>
The aggregate financial position and results of operations for the partnerships
as reported in the financial statements issued by the respective partnerships as
at September 30, 1997 (unaudited) and December 31, 1996 (audited) and for the
nine months and year then ended were as follows:
<TABLE>
<CAPTION>
Nine Months Ended Year Ended
September 30, 1997 December 31, 1996
<S> <C> <C>
Total Partnerships:
Assets $ 519,536,564 $ 535,270,470
Plant and equipment 391,706,980 400,616,762
Secured debt 514,239,212 516,799,694
Partners' deficit (18,737,255) (22,332,572)
Revenues 110,480,366 150,595,750
Income 14,825,915 15,701,763
Company's Share:
Partners' deficit (7,949,797) (9,789,803)
Income 7,420,628 8,393,340
</TABLE>
<PAGE>
The operating assets of the partnerships in which the Company has investments
secure the projects' debt, and the expected significant losses incurred by the
partnerships in the early years of operation are funded by that debt.
Consequently, the Company, having no obligation to fund the losses or pay the
partnerships' debt, does not generally record the losses in the financial
statements. The income from partnerships, which has been recorded on the
financial statements during the nine months ended December 31, 1997 in the
amount of $7,408,310, has been recognized on partnerships where income has
exceeded prior unrecognized accumulated losses. No income was reported on one
partnership where current income of $7,236 did not exceed prior unrecognized
accumulated losses.
In addition, one of the partnerships, as a result of the denial of a motion for
a preliminary injunction and as a result of the construction lender exercising
certain rights under a pledge agreement, filed a voluntary petition to
reorganize under Chapter 11 of the Bankruptcy Code and is seeking enforcement of
the power purchase agreement ("PPA"). As a result, amounts pertaining to this
partnership are excluded from the partnerships' financial position and results
of operations presented above.
On August 1, 1996 Niagara Mohawk Power Corporation ("NIMO") offered to terminate
44 of its PPA's with 19 independent power producers ("IPP's"), including five
contracts held by the Company's partnerships. NIMO is the principal purchaser of
power produced by the Company's five operating projects. On March 10, 1997 an
agreement in principle was announced whereby NIMO would restructure or terminate
the 44 PPA's. On July 10, 1997 it was announced that a master restructuring
agreement ("MRA") was entered into between NIMO and 16 IPP's holding 29 PPA's,
including the Company's five PPA's, formalizing the agreement in principle with
respect to those parties. The IPP's will receive combinations of cash and common
stock. Certain IPP's also will enter into restructured contracts. On September
25, 1997 NIMO announced that it had reached an agreement in principle with the
staff of the New York Department of Public Service on a rate and restructuring
plan (including recommended approval of the MRA) which will be documented, filed
publicly, and be subject to a review process prior to being voted on by the
Public Service Commission. Any restructuring, pursuant to this agreement,
remains subject to the approval of third parties for both the Partnerships
and NIMO, and there can be no assurance as to the consummation of the MRA or to
the ultimate impact such consummation, if any, will have on the Company's
operations.
H. Revenue Recognition
Revenues on sales of products are recognized at the time of shipment of goods.
Development and management fee revenue is recognized when deemed payable under
<PAGE>
the agreement.
I. Legal Proceedings
See Part II, Item 1 which is incorporated by reference.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company's net income for the three months ended December 31, 1997 increased
by $30,223, or 19%, to $189,514 from the net income of $159,291 recorded for the
three months ended December 31, 1996. Net income for the nine months ended
December 31, 1997 of $1,522,325 represents an increase of $882,400, or 138%,
from the net income of $639,925 for the nine months ended December 31, 1996. The
factors which contributed to these changes in net income are discussed below.
Third Quarter Developments and Subsequent Events
As previously disclosed, the Company and Kamine Development Corporation
("KDC") engaged PaineWebber Incorporated ("PW") to solicit participants for a
potential business combination invloving its independent projects which
supply electricity to NIMO. PW notified KDC and the Company on December 12, 1997
of its intent to terminate the engagement effective November 18, 1997. Since
that time PW has provided no further services. Certain open issues are still
to be resolved in view of the termination of the agreement including, but
not limited to, reimbursement of expenses and indemnification, if any.
The Company has since engaged Josephthal & Company, Inc.
to render certain investment banking services to it in connection with a
potential business combination.
In a decision dated December 19, 1997, the shareholder derivative action
entitled James Lichtenberg v. Michael F. Zinn, et al. (see Part II, Item I,
Legal Proceedings), in which the company was named as nominal defendant, was
dismissed by the Supreme Court of the State of New York, Ulster County. The
Court upheld the determination of a Special Litigation Committee ("SLC")
comprised of independent members of the Company's Board of Directors that the
derivative action was not in the best interest of the Company. Based on their
investigation and report, the SLC directed that the Company's attorneys seek
dismissal of the litigation. The decision grants the Company's motion to dismiss
in all respects.
On February 6, 1998 the Company acknowledged that Rochester Gas & Electric Corp.
("RG&E") had announced an agreement in principle to settle legal proceedings
relating to the Allegany Cogeneration Facility in Hume, New York in which the
Company, through its subsidiary, Beta Allegany Inc. ("Beta Allegany"), holds a
partnership interest. The project partnership, Kamine/Besicorp Allegany L.P.
("KBA"), has been operating under Chapter 11 of the United States Bankruptcy
Code since November 13, 1995. Management of Beta Allegany has been controlled by
General Electric Capital Corp. ("GECC"), the project
<PAGE>
lender, since November 5, 1995, and the Company has not been a party to the
discussions leading up to RG&E's announcement. The complete terms of the
agreement in principle were not announced, but RG&E said that is contingent upon
reaching finalized agreements between RG&E and GECC, as well as with other
interested parties. Further, RG&E said that the agreement in principle is
contingent upon approval by the New York State Public Service Commission and
United States Bankruptcy Court. The Company is consulting with counsel as to its
options with respect to the agreement. At the present time, however, the Company
is unable to assess the financial impact of the agreement in principle.
The Company recently received notification that the Fort James (formerly James
River II) paper mill, the steam host for the Carthage Cogeneration Facility
located in Carthage, New York, will close on or about April 1, 1998. The
Company, through two subsidiaries, holds a partnership interest in the
cogeneration project. The cogeneration plant has supplied steam to the paper
mill and, through a PPA, electricity to NIMO since the plant commenced
commercial operations in November 1991. The Company is currently evaluating its
options regarding the prospective paper mill closing. The Company is uncertain
as to what effect this development will have on the future operation of the
plant.
The Board has resolved to increase the number of directors from three to five.
On February 19, 1998, the Company announced that its Board of Directors
appointed Melanie Norden as the Company's fourth director and is currently
seeking a fifth member. Ms. Norden is the founder of BENCHMARKS,
a full service consulting firm, providing consultation, management and planning
services in fundraising, organizational development, conference and event
planning and execution, volunteer, board and staff training, and
public relations and marketing. BENCHMARKS, which provides services to both
for-profit and not-for-profit clients, has a diverse client base which has
included, among others, the International Planned Parenthood Federation, the
National Coalition for Women's Business Enterprise, the University of the
West Indies, and Mt. Sinai Medical Center.
REVENUES
Consolidated
Consolidated revenues increased by $235,568, or 7%, to $3,511,054 during the
three months ended December 31, 1997 as compared to $3,275,486 during the three
months ended December 31, 1996. Consolidated revenues for the nine months ended
December 31, 1997 increased by $1,520,910 from $10,386,715 to $11,907,625, an
increase of 15%, compared to the same period in the prior year.
Project Segment
Development and Management Fees. Revenues attributable to Development and
Management Fees for the Company's independent power projects ("Project Segment")
during the three months ended December 31, 1997 increased by $91,004 to $162,133
as compared to $71,129 for the three months ended December 31, 1996. The Company
received no development fees or reimbursements in excess of deferred costs
during the quarters ended December 31, 1997 and 1996.
Revenues attributable to Development and Management Fees during the nine months
ended December 31, 1997 increased by $775,960 to $1,070,139 as compared to
$294,179 for the nine months ended December 31, 1996. The increase during the
nine months ended December 31, 1997 is due primarily to development fees of
$600,000 received from the Beaver Falls project in connection with conversion of
the construction financing to term financing. The Company also earned $470,139
in management fees during the nine months ended December 31, 1997 in connection
with its projects compared to $294,179 during the nine months ended December 31,
1996. The Company received no reimbursements in excess of deferred costs during
the nine months ended December 31, 1997 and December 31, 1996.
<PAGE>
Income from Partnerships. During the three-month period ended December 31, 1997,
the Company recognized $2,418,708 of income from partnerships, an increase of
$618,432 compared to $1,800,276 recognized for the three months ended December
31, 1996. The increase during the current three-month period is due primarily to
income of $601,147 and $886,685 recorded on the South Glens Falls and Beaver
Falls projects, respectively. This represented respective increases of $462,580
and $124,376 over income of $138,567 and $762,309 recorded on the South Glens
Falls and Beaver Falls projects, respectively, for the three months ended
December 31, 1996.
During the nine-month period ended December 31, 1997, the company recognized
$7,408,310 of income from partnerships, an increase of $1,401,954 compared to
$6,006,356 for the nine months ended December 31, 1996. The increase during the
current nine-month period is primarily due to income of $2,651,724 recorded on
the Beaver Falls project, an increase of $1,300,396 as compared to income of
$1,351,328 recorded on that project for the nine months ended December 31, 1996.
While it is anticipated that certain partnerships will continue to generate
income over the balance of the year, the Company can not reliably estimate the
future operations of the cogeneration partnerships to determine the Company's
share of future earnings. Results for the current quarter are not necessarily
indicative of results for other quarters or for the fiscal year.
Product Segment
Revenues for the Company's energy technology products (the "Product Segment")
sales activities during the three-month period ended December 31, 1997 decreased
by $341,885 to $788,193 as compared to $1,130,078 for the three months ended
December, 1996. The decrease for the period is due primarily to lower sales of
solar electric products of $256,552 and heat transfer products of $80,199. The
higher sales of solar electric products recorded during the three months ended
December 31, 1996 reflect a non-recurring sale of solar panels to a single
customer.
During the nine-month period ended December 31, 1997, revenues decreased by
$502,644 to $3,056,859 as compared to $3,559,503 for the nine months ended
December 31, 1996. The decrease is due to lower sales of solar thermal products
of $311,362 and heat transfer products of $286,320. The reduction in sales of
solar thermal products is the result of competitive pricing activity and several
new competing product entries in the pool heating market. The reduction in sales
of heat transfer products in both current periods is due to the Company's
decision to discontinue the non-agricultural portion of this product line in the
third quarter of Fiscal 1997.
Other Revenues
Other revenues derived from the Project and Product Segments increased by
$18,812 and decreased by $24,867 for the respective three- and nine-month
periods ended December 31, 1997 versus the same periods last year. Other
revenues are primarily comprised of revenue received from the New York State
Energy Research and Development Authority ("NYSERDA") in accordance with funding
agreements with the Company. Revenues received from NYSERDA may vary from
quarter to quarter based upon the degree of completion of the varied
<PAGE>
tasks outlined in these agreements.
Interest and Other Investment Income
Interest and other investment income during the three months ended December 31,
1997 increased by $1,542 to $39,700 compared to $38,158 for the three months
ended December 31, 1996. During the nine months ended December 31, 1997,
interest and other investment income increased by $28,616 to $134,614 compared
to $105,998 for the nine months ended December 31, 1996. The increase in both
current periods is due primarily to higher invested principal balances during
those periods.
Other Income
There was no Other Income recorded for the three- and nine-month periods ended
December 31, 1997. Other Income of $152,337 and $158,109 recorded for the
respective three- and nine-month periods ended December 31, 1996 primarily
represented income earned from the settlement of a complaint against a
competitor.
COSTS AND EXPENSES
Cost of Product Segment Sales
Cost of product sales for the three-month periods ended December 31, 1997 and
1996 was $776,517 and $1,145,252, respectively, or 99% and 101% of revenues
attributable to product sales. During the nine-month periods ended December 31,
1997 and 1996, cost of product sales was $2,850,416 and $3,334,057,
respectively, or 93% and 94% of product sales.
Costs of Project Segment Development and Management Fees
Other than the settlement of deferred costs in conjunction with potential
project closings, there are no current specific costs and expenses identified
with development and management fee revenue. Costs and expenses associated with
this segment are the normal selling, general and administrative expenses of the
Company.
Selling, General and Administrative Expenses
Consolidated. Selling, general and administrative expenses ("SG&A") increased by
$607,266, or 34%, to $2,406,166 for the three-month period ended December 31,
1997 as compared to $1,798,900 for the three-month period ended December 31,
1996. During the nine-month period ended December 31, 1997, SG&A increased by
$568,291, or 10%, to $6,490,961, as compared to $5,922,670 for the nine-month
period ended December 31, 1996. As discussed below, both the Project and Product
segments contributed to the increase in the three-month period ended December
31, 1997, while the increase in the Product Segment was the primarily source of
increased SG&A for the nine months ended December 31, 1997.
Project Segment. For the Project Segment, SG&A for the three-month periods ended
December 31, 1997 and December 31, 1996 was $1,644,228 and $1,338,816,
respectively, representing 68% and 74% of the consolidated totals. The
<PAGE>
increase of $305,412 in the quarter ended December 31, 1997 was due primarily to
increased compensation expense of $101,012, resulting from lower
deferral of wages in connection with projects, from the judgment of $126,750
paid in connection with the Tecogen litigation (see Part II, Item 1, Legal
Proceedings) and increased corporate legal fees.
During the nine-month periods ended December 31, 1997 and 1996, Project Segment
SG&A was $4,331,699 and $4,292,265, respectively, representing 67% and 72% of
consolidated totals. The increase of $39,434 during the nine months ended
December 31, 1997 is due primarily to the payment of the Tecogen judgment
discussed above and increased Board of Directors compensation and related
expenses of $54,681 which were partially offset by decreased compensation
expense of $105,054.
Product Segment. SG&A expenses for the Company's Product Segment for the
three-month periods ended December 31, 1997 and 1996 were $761,938 and $460,084,
respectively, representing 32% and 26% of the consolidated totals. During the
nine months ended December 31, 1997 and 1996, the Company's Product Segment SG&A
expenses were $2,159,262 and $1,630,405, respectively, representing 33% and 28%
of the consolidated totals. This increase of $301,854 and $528,857 in the
respective current three- and nine- month periods is due primarily to the
addition of several management positions, as well as increases in the sales and
marketing support staff of the Company's solar electric business. Increased
solar electric advertising, promotional, and research and development spending
during both current periods also contributed to higher SG&A expenses. The
increase in the nine-month period is partially offset by a decrease in solar
thermal warranty expenses.
Interest Expense
Interest expense for the three-month period ended December 31, 1997 increased by
$121,827 to $207,619 compared to $85,792 for the three-month period ended
December 31, 1996. Interest expense for the nine-month period ended December 31,
1997 increased by $138,483 to $404,134 compared to $265,651 for the nine months
ended December 31, 1996. The increase in both the three- and nine-month periods
is due primarily to interest expense of $114,650 incurred in connection with the
Tecogen judgment and to higher interest payments associated with increased
borrowing under the Stewart and Stevenson, Inc. ("S&S") loan.
Provision (Credit) for Income Taxes
The provision (credit) for income taxes decreased during the three months ended
December 31, 1997 by $155,053 to $(68,802) compared to $86,251 for the same
period last year. The Credit for Income Taxes in the current period is the
result of the reversal of a prior-year over-accrual. During the nine- month
period ended December 31, 1997, the provision for income taxes increased by
$406,990 from $224,412 to $631,402 compared to the same period last year. The
Company provides federal and state income taxes based on enacted statutory rates
adjusted for projected benefits of tax operating loss carryforwards and other
credits.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital decreased by $1,043,765 from $2,577,849 at March
31, 1997, to $1,534,084 at December 31, 1997.
During the nine months ended December 31, 1997, cash of $676,162 was provided
from operations, primarily the result of the net income for the period of
$1,522,325, distributions received from partnerships of $5,482,429, a
development fee of $1,250,000 received from one project (which was recorded as
an account receivable at March 31, 1997), partially offset by Federal income tax
deposits of $375,000. These net increases in cash were partially offset by
adjustments for non-cash items, primarily comprised of partnership income of
$7,408,310.
During the current nine-month period, the Company's financing activities
resulted in an increase in cash of $25,962, primarily due to the Company's use
of a short-term line of credit of $247,000 partially offset by the repayment of
borrowings and by the purchase of the Company's common stock associated with the
repurchase of option shares.
Investing activities during the current nine-month period resulted in a decrease
in cash of $262,654 due to the acquisition of property, plant and equipment.
Financing for construction of the development projects is generally provided by
loans to the particular partnerships which are secured by the project assets
only. Except for the financing provided to the Allegany project, the Company
generally does not incur significant capital costs associated with construction
of these projects. The Company provided financing to the Allegany project in
Fiscal 1993 and 1994 utilizing $2,500,000 of its $3,000,000 line of credit under
the S&S loan agreement. On February 20, 1997 the Company borrowed the remaining
$500,000 available under the agreement. Depending upon the outcome of the
previously described agreement in principle between RG&E and GECC
and the resolution of the related litigations (see "Third Quarter
Developments and Subsequent Events" and Part II, Item 1, "Legal
Proceedings"), there is a possiblity that the Company may not recover all or
part of the financing provided to the Allegany project. This would result in the
write-off of any uncollectible amounts.
The Company expects that capital requirements for its operations, for repayment
of long-term debt and for project development costs will be met by its current
cash and short-term investment position as well as by anticipated cash flows
from ownership distributions from operations of the projects and the anticipated
cash flows from projects currently under development, and by future borrowings
against project interests and other corporate financings, as available. However,
as a result of the uncertainty created by the status of the NIMO contracts,
there can be no assurance that cash flows from future operations of the Company
or its ability to borrow in amounts and on terms acceptable to it will not be
adversely affected.
PART II - OTHER INFORMATION
Item 1. - LEGAL PROCEEDINGS
Reference is made to Part I, Item 3. Legal Proceedings of the Company's Annual
Report on Form 10-KSB for the year ended March 31, 1997, which is incorporated
in its entirety except in regard to the litigations discussed below, which are
<PAGE>
restated, as appropriate, either in their entirety or relevant portions thereof,
except as amended to reflect recent developments.
* * *
On or about May 2, 1996 certain officers, directors, employees, former employees
of the Company, and certain spouses and affiliates thereof, were served
subpoenas by the U. S. Attorney's office for the production of documents and/or
potential testimony before a United States Grand Jury in White Plains, New York.
The Company complied with the document request contained in the subpoena. On May
15, 1997 the United States District Court, Southern District, New York, returned
an indictment against the Company and its then Chairman, Chief Executive Officer
and President, Michael F. Zinn, charging each with five counts of conspiring to
violate the Federal campaign finance laws and making false statements in
connection with the 1992 Congressional campaign of Maurice D. Hinchey.
On June 19, 1997 the Company and Mr. Zinn each entered guilty pleas to two
felony counts in United States District Court for the Southern District of New
York, White Plains, New York. The Company entered a guilty plea to one count of
causing a false statement to be made to the Federal Election Commission ("FEC")
and one count of filing a false tax return, both in connection with
contributions to the 1992 election campaign of Congressman Maurice Hinchey. Mr.
Zinn similarly entered a guilty plea to one count of causing a false statement
to be made to the FEC and one count of causing the filing of a false tax return
in connection with contributions to the 1992 election campaign of Congressman
Maurice Hinchey.,
On October 22, 1997 the Company and Mr. Zinn were sentenced by the Court in
connection with the guilty pleas entered. The Company was fined $36,000. Mr.
Zinn was fined $36,673 and sentenced to a six-month term of incarceration
(commencing November 12, 1997), and a two-year term of supervised release
thereafter. Effective November 11, 1997, Mr. Zinn tendered his resignation as
Chairman of the Board, Director, Chief Executive Officer and President of the
Company.
Effective with Mr. Zinn's resignation, Michael J. Daley, who had served as Vice
President, Chief Financial Officer and Corporate Secretary of the Company, was
appointed Chief Executive Officer and President of the Company and will continue
to serve as Chief Financial Officer of the Company. In addition, on November 7,
1997, Mr. Daley was appointed Director, replacing Harold Harris, who resigned
from the Board due to declining health.
In related actions effective November 11, 1997, Steven G. Nachimson, who had
served as Corporate Counsel and Assistant Corporate Secretary, became General
Counsel and Corporate Secretary of the Company; James E. Curtin, who had served
as Corporate Controller of the Company, became a Vice President of the Company
in addition to serving as Controller; and Joseph P. Novarro, who had served as
Vice President, Project Development, was appointed an Executive Officer of the
Company and will retain the same title.
While the $36,000 fine assessed by the Court against the Company will not have a
material impact on the Company's operations, the Company is uncertain as to what
effect or consequences the sentencings or the management transitions will have
on its current or future business activities.
<PAGE>
***
On August 8, 1997 John Bansbach commenced a shareholder derivative action in the
New York Supreme Court, Ulster County, entitled John Bansbach v. Michael Zinn,
et al., Index No. 97-8075. The Company is named as a nominal defendant in this
matter, which also names Michael F. Zinn, an officer and Director of the Company
at the time the action was filed, Michael J. Daley, an officer of the Company at
the time, and Gerald A. Habib, Harold Harris, and Richard E. Rosen, all
Directors of the Company at the time (collectively, "the named officers and
Directors"). The suit arises in connection with the criminal investigation,
indictments and guilty pleas described above. The plaintiff seeks to hold the
named officers and Directors liable to the Company for all sums advanced to Mr.
Zinn in connection with his defense of the criminal proceedings, and to Mr.
Daley, who was subpoenaed for information in connection with this matter, for
all legal expenses, costs and fines incurred by the Company itself in connection
with the criminal proceedings, and for all harm to the Company's reputation and
goodwill resulting from the criminal proceedings. On September 29, 1997 the
Company and the named officers and Directors moved to dismiss the action. The
motion has been fully briefed, but no decision has been issued. The Company
believes that meritorious defenses have been asserted and will vigorously
litigate the matter.
***
On March 29, 1993 James Lichtenberg commenced a shareholder's derivative action
now pending in New York Supreme Court, Ulster County, entitled Lichtenberg v.
Michael F. Zinn, et al. The Company is named as nominal defendant in this
shareholder's derivative action, which also names as defendants Michael F. Zinn,
Steven I. Eisenberg, and Martin E. Enowitz, who were directors and officers at
the time the action was filed. The complaint alleges that the directors breached
their fiduciary duties to the Company by, among other things, the issuance of
stock to themselves in lieu of cash compensation, allegedly for inadequate
consideration, and by the accounting treatment given to the Company's interest
in various partnerships which own and operate cogeneration facilities, which
allegedly depressed the price of the Company's stock. The plaintiff is seeking
an award of damages to the Company, including punitive damages and interest, an
accounting and the return of assets to the Company, the appointment of
independent members to the Board of Directors, the cancellation of shares
allegedly improperly granted, and the award to the plaintiff of costs and
expenses of the lawsuit including legal fees. The defendants denied the
allegations of the complaint. The Company believes that meritorious defenses
have been asserted, and that the outcome of the action will have no material
adverse impact upon the Company. On May 6, 1994 the Board of Directors of the
Company formed a Special Litigation Committee ("SLC") comprised of independent,
outside directors to investigate the allegations made in the action and
determine if continued prosecution of the action is in the best interest of the
Company. On March 28, 1995, after an extensive investigation of the allegations
made in the complaint, the SLC issued a resolution finding that the continued
prosecution of the derivative action was not in the best interest of the
Company. By further resolution dated April 27, 1995, the SLC instructed the
Company's outside counsel to take the necessary steps in court to seek to have
the action dismissed. Pursuant to resolution of the SLC, on May 18, 1995, a
<PAGE>
motion to dismiss the action based on the recommendation of the SLC was filed
with the Court and was being held in abeyance by the Court pending the
completion of limited discovery. On February 26, 1997 the Company renewed its
motion to dismiss. In a decision issued December 19, 1997, the Court granted the
Company's motion for summary judgment based upon the recommendation of the SLC,
and dismissed the derivative action in all respects.
***
The Allegany Cogeneration Facility was completed in December 1994. The Company
holds a 50% equity interest in the project through the project partnership,
KBA. Under the terms of the project's power
purchase agreement (the "Agreement"), power was to be supplied to
RG&E. On September 7, 1994, RG&E filed an action in the Supreme
Court of the State of New York, County of Monroe, against KBA, Kamine Allegany
Cogen Co., Inc., Beta Allegany Inc., Kamine Development Corp. and Allegany
Cogeneration Inc. The complaint, as amended, asks for a declaratory judgment
rescinding or reforming the Agreement on the grounds of mutual mistake,
impossibility, frustration, commercial impracticability and anticipatory breach
and also asserts claims for breach of contract and material misrepresentations
concerning the size of the plant. On January 3, 1995, KBA served its answer and
counterclaimed for breach of contract. On January 20, 1995, the defendants filed
a motion for summary judgment seeking the dismissal of RG&E's complaint. On
March 16, 1995, the Court denied defendants' motion, and KBA appealed the
denial. By order dated May 30, 1997, the Appellate Division affirmed the lower
Court's decision. RG&E thereafter filed a motion to amend its complaint, which
motion was subsequently stipulated to by KBA. On June 26, 1997, KBA removed the
action to the United States District Court for the Western District of New York
based on RG&E's adding of a federal claim. KBA's time in which to respond to the
amended complaint has not yet expired. Management of the Company believes RG&E's
actions have no basis, and KBA intends to vigorously defend this matter. On
January 20, 1998, GECC, the Allegany
Cogeneration Facility project lender, advised the Court that it had reached a
possible agreement in principle with RG&E regarding settlement of the lawsuit.
RG&E has stated that is
contingent upon reaching finalized agreements between RG&E and GECC, as well as
with other interested parties. Further, RG&E said that the agreement in
principle is contingent upon approval by the New York State Public Service
Commission and United States Bankruptcy Court. The Company is consulting with
counsel as to its options with respect to the agreement. At the present time,
however, the Company is unable to assess the financial impact of the agreement
on KBA or on it. Depending upon the scope of a finalized agreement, the
following
three described litigations involving RG&E's motion with the Bankruptcy Court,
Allegany Greenhouse, Inc. ("AGI"), and Ammerlaan Agro-Projecten B.V.
("Ammerlaan") could reach resolution.
***
On November 21, 1995, RG&E filed a motion with the Bankruptcy Court asking that
the Court abstain from hearing the state law claims raised in the adversary
proceedings and permit the parties to litigate those claims in the
<PAGE>
pending New York Supreme Court action. KBA opposed RG&E's motion, and the
Bankruptcy Court denied RG&E's request. On appeal, however, the District Court
reversed and remanded to the Bankruptcy Court for further consideration. On
remand, the Bankruptcy Court ruled on March 19, 1997, that the state law claims
raised in the adversary proceeding should be litigated in the pending New York
State Court action. The Bankruptcy Court also lifted the automatic stay so that
the State Court action could proceed. (As noted above, the State Court action
was subsequently removed by KBA to federal court.) In May 1996, RG&E filed an $8
million proof of claim in the bankruptcy case seeking to recoup certain moneys
it had paid while the temporary restraining order granted in the Western
District action was in effect. Management believes KBA has meritorious claims
against RG&E and maintains meritorious defenses against the claims asserted by
RG&E. KBA intends to vigorously litigate these matters. As of December 22, 1997,
the Bankruptcy Court has approved up to $33,390,000 in debtor-in-possession
interim financing through January 31, 1998, with a right on the part of GECC to
increase that amount to $36,590,000 and extend the term until March 31, 1998.
***
On October 26, 1994, KBA initiated an action in the Supreme Court of the State
of New York, County of New York, against AGI seeking, among other things, to
recover possession of the greenhouse which AGI had contracted to develop,
construct and operate on property adjacent to KBA's cogeneration facility. KBA
commenced this suit due to various defaults of AGI under its contractual
commitments to KBA, including its obligation to complete the greenhouse by July
31, 1994. To date, KBA has advanced to AGI the principal sum of approximately
$4,050,000, including the Company's share of $1,944,624, with accrued interest
due thereon. KBA is seeking damages in an amount not less than the principal and
accrued interest due under the term note in addition to other costs and
disbursements associated with this action, as well as possession of the
greenhouse and the real property upon which the greenhouse is located. KBA's
request for the appointment of a receiver was denied by the Court. On December
24, 1994, AGI filed a counterclaim against KBA, asserting claims for breach of
contract, tortious interference with business relations, fraud and damage to
trade reputation. On September 19, 1995, KBA exercised certain voting rights
pursuant to the greenhouse financing agreements and replaced the directors and
management of AGI. AGI subsequently relinquished possession of the greenhouse to
KBA. Management believes that KBA has meritorious claims against AGI and
meritorious defenses against AGI's counterclaims. In light of KBA's bankruptcy
proceedings, this action is presently on hold.
***
On December 2, 1994, Ammerlaan the contractor hired by AGI to construct the
greenhouse, filed a mechanics lien in the amount of $4,352,976 against the real
property on which the greenhouse is located. On January 17, 1995, Ammerlaan
initiated an action in the Supreme Court of the State of New York, County of
Allegany, against KBA, AGI, Kamine Development Corp., the Company, Industrial
Development Agency of Allegany County, GECC, Pooler Enterprises Inc. and
Fillmore Gas Company, Inc. to foreclose on its mechanics lien and to recover
certain monies allegedly owed it. On September 25, 1995, KBA filed counterclaims
against Ammerlaan, alleging that Ammerlaan had failed to
<PAGE>
design and construct the greenhouse in accordance with the contract
specifications and applicable building codes. On November 3, 1995, Ammerlaan
filed a motion for preliminary injunction seeking to enjoin KBA, Kamine
Development Corp., AGI's new management, and the Company from engaging in
construction activities at the greenhouse site without Ammerlaan's consent. On
November 3, 1995, the Court granted a temporary restraining order prohibiting
the foregoing parties from engaging in such activities pending the hearing on
the preliminary injunction. The hearing on the preliminary injunction, however,
was subsequently stayed as a result of KBA's bankruptcy filing. The Bankruptcy
Court subsequently granted KBA permission to undertake repairs to the greenhouse
over Ammerlaan's objections, and authorized the expenditure of $650,000 for that
purpose. On April 9, 1997, Ammerlaan filed a motion with the Bankruptcy Court
asking that the automatic stay be lifted with respect to the Allegany County
action. KBA opposed Ammerlaan's motion, which was heard by the Bankruptcy Court
on May 29, 1997. On September 3, 1997, the Bankruptcy Court denied Ammerlaan's
motion. In declining to lift the stay, however, the Bankruptcy Court expressly
noted that Ammerlaan was free to pursue its claims for damages against the
non-debtor defendants in the Allegany County action. Ammerlaan subsequently
appealed to the District Court from the denial of its motion and its opening
brief is due on February 10, 1998. On September 10, 1997, Ammerlaan filed a
motion with the Allegany County state court seeking to sever its claims against
the non-debtor defendants, including the Company. Ammerlaan's motion has not yet
been heard. Management believes that KBA has meritorious claims against
Ammerlaan and meritorious defenses to Ammerlaan's claims.
***
In April 1990 the Company commenced an action in United States District court,
Northern District of New York, against Tecogen, Inc. ("Tecogen") and its parent
company Thermo Electron Corporation, styled Besicorp Group Inc. et al. v.
Tecogen Incorporated, et al. for breach of contract and breach of warranty in
connection with the Company's purchase of a cogeneration system installed in St.
Francis Hospital by Tecogen on a "turnkey" basis. The Company sought
compensatory damages. Tecogen counterclaimed for the unpaid purchase price and
extras in the amount of approximately $187,000 plus interest. In October 1992
St. Francis Hospital shut down the operation of the cogeneration system. In
April 1993 the court excluded consequential and incidental damages and limited
the Company's recoverable damages. The case was tried without jury in March 1995
in the United States District Court in Syracuse, New York. At the conclusion of
trial the Company sought actual damages in excess of $1,000,000. In July 1993
the Company commenced a separate action in United States District Court,
District of New Jersey, against Tecogen, a licensed engineer who was an employee
of Tecogen, and Cortese Corporation for negligence, indemnification, and
professional malpractice. The New Jersey suit has been stayed pending the
decision in the New York Court.
On October 10, 1997 the United States District Court for the Northern District
of New York ruled on the March 1995 trial and held that Tecogen was liable to
the Company in the amount of $30,000 for certain breaches of warranty regarding
the cogeneration system purchased by the Company for Tecogen in 1988 and that
the Company was liable for payment of the last installment on the purchase price
of $156,750. Certain other lesser issues were resolved, both
<PAGE>
for and against the Company, but not involving damages. As a result of this
decision in the New York action, the related action in New Jersey Federal Court
is no longer stayed. The Company moved to set aside the money judgment against
it and also sought relief on the amount of interest owed on the judgment.
Tecogen cross-moved for an award of pre-judgment interest. On January 29, 1998
the Court reaffirmed its prior ruling and found that pre-judgment interest
should be awarded to Tecogen. As of February 4, 1998 the Company had paid to
Tecogen the base amount of the judgment of $127,750 (including post-judgment
interest of $1,000) and owes approximately $115,300 in interest. No
determination has been reached regarding an appeal of the decision.
Other than as disclosed above, there have been no material changes in the legal
proceedings to which the Company is a party as identified in Form 10-KSB for the
year ended March 31, 1997 and the Form 10-QSB for the quarter ended September
30, 1997.
Item 6. - EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
(a.) Exhibits
Exhibit 27 Financial Data Schedule
<S> <C> <C>
(b.) Reports on Form 8-K
On October 1, 1997 the Company filed a report on Form 8-K announcing that
the Company and Kamine Development Corp. engaged PaineWebber Incorporated to
solicit participants for a potential business combination involving its
independent power projects which supply electricity to Niagara Mohawk Power
Corporation.
On October 28, 1997 the Company filed a report on Form 8-K announcing the
Company and its chairman of the Board, President, and Chief Executive
Officer, Michael F. Zinn, were sentenced for offenses relating to illegal
contributions to the 1992 election campaign of Congressman Maurice Hinchey.
The Company also announced its plan for management continuity.
</TABLE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
<TABLE>
<CAPTION>
Besicorp Group Inc., Registrant
<S> <C>
Date: /s/ Michael J. Daley
Michael J. Daley
President, Chief Executive Officer,
and Chief Financial Officer
(principal executive and financial officer)
Date: /s/ James E. Curtin
James E. Curtin
Vice President and Controller
(principal accounting officer)
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS CONTAINED IN THE COMPANY'S FORM 10-QSB AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
<MULTIPLIER>1
<S><C>
<PERIOD-TYPE>9-MOS
<FISCAL-YEAR-END>MAR-31-1998
<PERIOD-END>DEC-31-1997
<CASH>650,003
<SECURITIES>1,048,689
<RECEIVABLES>431,501
<ALLOWANCES>39,346
<INVENTORY>1,140,165
<CURRENT-ASSETS>4,246,624
<PP&E>3,646,702
<DEPRECIATION>1,599,880
<TOTAL-ASSETS>11,529,832
<CURRENT-LIABILITIES>2,712,540
<BONDS>3,787,281
0
0
<COMMON>323,495
<OTHER-SE>3,918,892
<TOTAL-LIABILITY-AND-EQUITY>11,529,832
<SALES>3,056,859
<TOTAL-REVENUES>11,907,625
<CGS>2,850,146
<TOTAL-COSTS>2,850,146
<OTHER-EXPENSES>0
<LOSS-PROVISION>0
<INTEREST-EXPENSE>404,134
<INCOME-PRETAX>2,153,727
<INCOME-TAX>631,402
<INCOME-CONTINUING>1,522,325
<DISCONTINUED>0
<EXTRAORDINARY>0
<CHANGES>0
<NET-INCOME>1,522,325
<EPS-PRIMARY>.52
<EPS-DILUTED>.51
</TABLE>
