<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended June 30, 1998
Commission file Number 1-4591
FAIRMOUNT CHEMICAL CO., INC.
(Exact name of registrant as specified in its charter.)
New Jersey 22-0900720
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
117 Blanchard Street, Newark, NJ 07105
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (201)-344-5790
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date:
Common Stock, $1 Par Value - 8,292,866 shares as of May 7, 1998
Transitional small business disclosure format (check one);
YES [ ] NO [ X ]
<PAGE> 2
Page 2
Form 10-QSB
PART I. FINANCIAL INFORMATION
FAIRMOUNT CHEMICAL CO., INC.
STATEMENTS OF INCOME AND ACCUMULATED DEFICIT
For The Three Months and Six Months Ended June 30, 1998 and 1997
(Unaudited)
(Dollar amounts rounded to hundreds, except per share data)
<TABLE>
<CAPTION>
1998 1997
Three Months Six Months Three Months Six Months
<S> <C> <C> <C> <C>
Net Sales $3,427,600 $6,645,400 $3,440,200 $6,597,000
Cost of goods sold 2,670,200 5,135,800 2,954,500 5,629,600
- -----------------------------------------------------------------------------------------------------
Gross Profit 757,400 1,509,600 485,700 967,400
Research 99,900 184,900 118,900 235,500
Selling, general and
administrative expense 479,400 946,400 455,000 1,030,900
---------------------------------------------------------------------------------------------------
Operating Income (Loss) 178,100 378,300 (88,200) (299,000)
Interest (Income) Expense 32,500 68,400 19,000 36,200
Restructuring charge - - 330,000 330,000
Insurance proceeds - (1,140,100) (200,000) (200,000)
Other (Income) Expense (7,600) (23,900) 11,500 14,200
- -----------------------------------------------------------------------------------------------------
Net Income (Loss) Before
Provision for Income Taxes 153,200 1,473,900 (248,700) (479,400)
Provision for Income Taxes - - - -
- -----------------------------------------------------------------------------------------------------
Net income(Loss) 153,200 1,473,900 (248,700) (479,400)
Accumulated Deficit
Beginning of Period (13,545,500) (14,866,200) (14,800,700) (14,570,000)
----------------------------------------------------------------------------------------------------
Accumulated Deficit
End of Period $(13,392,300) $(13,392,300) $(15,049,400) $(15,049,400)
====================================================================================================
Basic Earnings per share $ .02 $ .18 $ (.03) $ (.06)
----------------------------------------------------------------------------------------------------
Diluted Earnings per share $ .01 $ .11 $ (.03) $ (.06)
----------------------------------------------------------------------------------------------------
</TABLE>
See Accompanying Notes to Financial Statements.
<PAGE> 3
Page 3
Form 10-QSB
FAIRMOUNT CHEMICAL CO., INC.
BALANCE SHEETS
(Dollar amounts rounded to hundreds)
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
-------------- -----------------
(Unaudited)
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash $ 2,021,400 $ 711,800
Accounts receivable-trade 2,154,600 1,845,700
Inventories (Note 5) 2,089,000 1,709,600
Prepaid expenses 159,100 282,500
Other current assets 103,800 102,800
-----------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 6,527,900 4,652,400
-----------------------------------------------------------------------------------------------------
Property, plant and equipment
less accumulated depreciation of
$4,294,400 and $3,934,400 4,283,000 4,504,400
Other assets 44,900 44,900
-----------------------------------------------------------------------------------------------------
TOTAL ASSETS $10,855,800 $9,201,700
========================================================================================================
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 757,800 $ 499,900
Accrued compensation 60,300 55,900
Pension liability 269,900 194,800
Other accrued liabilities 298,100 127,000
Short-term bank borrowings 187,100 387,100
-----------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 1,573,200 1,264,700
-----------------------------------------------------------------------------------------------------
Promissory Notes to affiliated parties 1,571,600 1,571,600
Long-term bank borrowings 8,600 33,900
Pension liability 383,300 486,300
STOCKHOLDERS' EQUITY
Preferred stock, par value $1 per share
authorized - 10,000,000 shares; 5,400,000
shares issued and outstanding 5,400,000 5,400,000
Common stock, par value $1 per share
authorized - 15,000,000 shares; 8,293,366 shares
issued and outstanding in 1998 and 1997 8,293,400 8,293,400
Less: Treasury stock (at cost) - 500 shares (500) (500)
Capital in excess of par value 7,316,000 7,316,000
Accumulated deficit (13,392,300) (14,866,200)
Additional minimum pension liability (297,500) (297,500)
------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 7,319,100 5,845,200
-----------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 10,855,800 $ 9,201,700
========================================================================================================
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE> 4
Page 4
Form 10-QSB
FAIRMOUNT CHEMICAL CO., INC.
STATEMENTS OF CASH FLOWS
For The Six Months Ended June 30, 1998 and 1997
(Unaudited)
(Dollar amounts rounded to hundreds)
<TABLE>
<CAPTION>
1998 1997
---------------------
CASH FLOW FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net Income (Loss) $ 1,473,900 $ (479,400)
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 360,000 323,800
Increase (decrease) from changes in:
Accounts receivable-trade (308,900) (148,600)
Inventories (379,400) 162,900
Prepaid expenses 123,400 (44,400)
Other current assets (1,000) 7,700
Accounts payable 257,900 177,700
Accrued compensation 4,400 (21,500)
Other liabilities 143,200 155,000
--------------------------------------------------------------------------------------------
Cash Flow Provided By Operating Activities 1,673,500 133,200
- -----------------------------------------------------------------------------------------------
CASH FLOW (USED IN) INVESTING ACTIVITIES:
Capital expenditures (138,600) (331,700)
--------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities (138,600) (331,700)
--------------------------------------------------------------------------------------------
CASH FLOW (USED IN) PROVIDED BY FINANCING ACTIVITIES:
Bank borrowings (225,300) 274,600
--------------------------------------------------------------------------------------------
Net Cash (Used in) Provided By Financing Activities (225,300) 274,600
--------------------------------------------------------------------------------------------
INCREASE IN CASH 1,309,600 76,100
Cash at Beginning of Period 711,800 427,900
- -----------------------------------------------------------------------------------------------
CASH AT END OF PERIOD $ 2,021,400 $ 504,000
===============================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 68,400 $ 38,000
====== ======
Income taxes paid $ - $ -
========== ======
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE> 5
Page 5
Form 10-QSB
FAIRMOUNT CHEMICAL CO., INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
Note 1. Summary of Significant Accounting Policies
ORGANIZATION
The accompanying financial statements, which should be read in
conjunction with the financial statements of Fairmount Chemical Co., Inc. ("the
Company") included in the 1997 Annual Report filed on Form 10-KSB, are unaudited
but have been prepared in the ordinary course of business for the purpose of
providing information with respect to the interim period. The Company believes
that all adjustments (none of which were other than normal recurring accruals)
necessary for a fair presentation for such periods have been included.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform with the
1998 presentation.
REVENUE
Revenue is recognized on the date of invoice to a customer (invoices
are prepared on or after the date of shipment).
INCOME TAXES
The Company accounts for income taxes in accordance with the asset and
liability method. Under the asset and liability method, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled.
No provisions for income taxes have been recorded by the Company as a
result of net operating losses utilized. A valuation allowance has been recorded
at June 30, 1998 and 1997 for that portion of deferred tax assets which are not
presently considered more likely than not to be realized.
FINANCIAL STATEMENTS
The statements of income and accumulated deficit for the three months
and six months ended June 30, 1998 and 1997, the statements of cash flows for
the six months ended June 30, 1998 and 1997, and the balance sheet as of June
30, 1998 are unaudited. The balance sheet as of December 31, 1997 is audited.
<PAGE> 6
Notes to Financial Statements (Continued)
Page 6
Form 10-QSB
Note 2. Earnings Per Share
In February 1997, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings
Per Share" ("SFAS 128"). SFAS 128 became effective for financial statements for
both interim and annual periods ending after December 15, 1997. It also required
all prior period earnings per share data presented to be restated. Under SFAS
128, basic earnings per share are based on the net income/(loss) of the Company
since there were no preferred dividends paid in the three and six month periods
ending June 30, 1998 and June 30, 1997. The net income of the Company for the
three and six month periods ending June 30, 1998 is divided by the weighted
average number of shares of common stock outstanding adjusted for dilutive
common stock equivalents. Common stock equivalents include shares outstanding
under stock option plans and preferred stock, as converted to common stock in
the ratio of one-to-one. The share base for the three and six month periods
ending June 30, 1998 was 13,693,366 (based on 8,293,366 of common shares and
5,400,000 of convertible preferred shares). The net loss of the Company for the
three and six month periods ending June 30, 1997 is divided by only the weighted
average number of shares of common stock outstanding (8,293,366 shares). Due to
the Company reporting a loss for the periods ending June 30, 1997 and March 31,
1997, the conversion of the preferred stock is not assumed as the result is
anti-dilutive. The exercise price exceeded the average market price for all of
the outstanding stock options of the Company during the three and six month
periods ending June 30, 1998 and June 30, 1997 and therefore, it is not assumed
that any options are exercisable for purposes of calculating earnings per share.
Stock options of 72,500 were outstanding as of June 30, 1998 and June 30, 1997,
respectively.
Note 3. Long Term Debt To Affiliated Parties
A. As of January 1, 1993 the Company owed William E. Leistner
$5,603,700 (the "Leistner Loan"). At the Board Meeting following the 1993 Annual
Meeting, the board approved the sale of 5,400,000 shares of cumulative
convertible Preferred Stock, $1.00 par value per share, in a private transaction
to Leistner, the Company's principal stockholder, in consideration of retirement
of debt owed to Leistner of $5,400,000. The balance of the Leistner Loan was
paid out of corporate funds of approximately $203,700 during May 1993. This
transaction retired the principal of the Leistner Loan. Accrued interest of
$491,600 remained. On July 2, 1997 the Company replaced the $491,600 balance of
the Leistner Loan, that was due April 1, 1998, with a promissory note to the
Leistner Estate for the same amount, due January 1, 2005.
B. On March 20, 1992, a Credit Facility Loan Agreement ("Credit
Facility") was created with monies contributed to a fund ("the Fairmount Fund")
by William E. Leistner and the Estate of Olga H. Knoepke. At that date, the
Fairmount Fund provided the Company with a $2,494,000 credit facility under
which all borrowings paid interest at the rate of 5% per annum. The outstanding
borrowings from the Credit Facility were $1,080,000. On July 2, 1997 the Credit
Facility was terminated and the Company replaced the $1,080,000 of credit
facility borrowings with new promissory notes due January 1, 2005. The Leistner
Estate received a note for $648,000. Three notes were issued to beneficiaries of
the Knoepke Estate. These three notes were issued to the da Mota Family
Partnership - $224,640, Glen da Mota - $142,560 and Lynn da Mota - $64,800.
<PAGE> 7
Notes to Financial Statements (Continued)
Page 7
Form 10-QSB
All of the promissory notes described above have similar terms and
conditions. Interest on the unpaid principal from January 1, 1997 through
December 31, 1997 is at the rate of 6% per annum. Interest payable from January
1, 1998 through December 31, 1998 is at the rate of 7% per annum. Interest
payable thereafter commencing with 1999, is at the corporate base rate posted by
Citibank, N.A. (or its successor) on the last banking day of the previous
calendar year. All of the promissory notes are subordinated to the Company's
line of credit financing with Summit Bank and are collaterized by security
agreements on the Company's accounts receivables, inventories and personal
property.
The promissory note to the Leistner Estate for $491,600 is subordinated
to the Company's line of credit financing with Summit Bank and to the new
promissory notes, totaling $1,080,000, that replaced the Credit Facility.
Interest paid on the promissory notes/long term debt to affiliated parties was
$55,000 and $24,000 for the six months ended June 30,1998 and June 30,1997,
respectively. Interest paid on the promissory notes/long-term debt to affiliated
parties was $27,500 and $9,200 for the three months ended June 30, 1998 and June
30, 1997, respectively.
On October 9, 1997 the executors of the Leistner Estate endorsed two
promissory notes of $648,000 and $491,600 to the order of the Howard Leistner,
Hedi Mizrack and Gilbert Leistner Irrevocable Grantor Trust (the "Trust"). This
trust was established to expedite the settlement of the Leistner Estate and to
be the repository of the common and preferred shares of Fairmount Chemical, as
well as the promissory notes held by the Leistner Estate. This trust will
terminate on June 19, 2002.
The Company has a $1,250,000 line of credit from Summit Bank. The line
of credit is comprised of two separate available balances. There is $750,000
available for working capital purposes and $500,000 available to finance capital
expenditures. Interest on the borrowings are at the bank's prime rate plus 1%.
Borrowings and repayments under the working capital line of credit are handled
on a revolving credit basis. Borrowings against the capital expenditure line of
credit are treated as a three-year note. The line of credit is subject to an
annual review for renewal. The bank has been given a first security interest in
the accounts receivable, inventory and personal property of the company. The
line of credit was renewed during the second quarter of 1998.
All loans payable and future borrowings under the Credit Facility have
been collateralized by the accounts receivable and machinery and equipment of
the Company.
Note 4. Majority Stockholder
The Howard R. Leistner, Hedi Mizrack and Gilbert Leistner Irrevocable
Grantor Trust owns approximately 57.8% of the common stock of the Company.
Howard R. Leistner, Hedi Mizrack and Gilbert Leistner each have sole voting and
investment power over 1,596,400 shares of common stock, out of a total of
4,789,200 of common stock, held in the Leistner Trust. The Trust also owns all
5,400,000 outstanding shares of the cumulative convertible preferred stock.
<PAGE> 8
Notes to Financial Statements (Continued)
Page 8
Form 10-QSB
Note 5. Inventory
Inventories at June 30, 1998 and December 31, 1997 consisted of the
following:
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
------------- -----------------
<S> <C> <C>
Finished Goods $ 1,705,400 $ 1,452,800
Raw Material 383,600 256,800
------- -------
$ 2,089,000 $ 1,709,600
========= =========
</TABLE>
Note 6. Contingencies
The Company has received notice from the New Jersey Department of
Environmental Protection ("NJDEP") that the NJDEP is investigating whether any
material from the Company has caused or contributed to the contamination
detected at the Ciuba landfill property in Newark. The NJDEP alleges that there
is a possibility that during the 1970's the Company disposed of waste generated
at the Company's facility through contracts with certain garbage removal
companies located at the Ciuba landfill. The Company has also received notice
from the United States Environmental Protection Agency ("USEPA") that the USEPA
has information indicating that hazardous substances from the Company may have
been discharged into the Passaic River. It is the Company's understanding that
these allegations by the EPA are related to historical rather than present
events. The Company has taken the position that its material neither caused nor
contributed to the contamination of the Passaic River and that it has not
discharged hazardous substances into the Passaic River. In both cases, it is
possible that potentially responsible parties will bring claims against
Fairmount alleging that it is at least partially responsible for the
contamination.
During the second quarter of 1997 the Company received notice of two
claims for personal injuries to individuals working at a location adjacent to
the Company's property. The injuries were allegedly sustained as a result of the
March 25, 1997 explosion of the Company's property. The Company has not received
details as to the extent of the injuries or for the dollar value of the claim.
The Company is subject to various claims, including environmental
matters and other routine litigation arising in the normal course of its
business. Based on the advice of legal counsel, management believes that the
resolution of such matters will not have a material adverse affect on the
financial position of the Company, but could be material to the results of
operations of the Company in any one accounting period.
<PAGE> 9
Page 9
Form 10-QSB
FAIRMOUNT CHEMICAL CO., INC.
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
June 30, 1998
Liquidity and Capital Resources
To meet its liquidity requirements, including its capital program, the
Company accesses funds generated from operations, its available cash balances
and its bank line of credit with Summit Bank in Hackensack, New Jersey. The line
of credit was renewed during the second quarter of 1998.
The Company's working capital increased by $1,567,000 during the first
six months of 1998 compared to a decrease of $259,700 for the same period in
1997. The increase was primarily due to a payment of $1,140,100 received from
the Company's property insurance carrier as part of the settlement for the
property damages sustained from a dryer explosion during March, 1997. Also
contributing to the increase in working capital was higher inventory - $379,400,
higher receivables - $308,900 and lower bank borrowings - $200,000. The
inventory was higher due to increased production of two products. One product's
production was increased to avoid projected production bottlenecks around
mid-year and the other product's inventory was increased in anticipation of high
third quarter shipments.
The increase in accounts receivable were due to high volumes of
shipments during June, which is usually one of the best months of the year for
shipments. Bank borrowings were lower during the first six months of 1998 as the
Company paid down some of its borrowings from the working capital line of credit
during the first quarter of the year. The increase in working capital in these
areas was partially offset by higher accounts payable - $257,900 and higher
accrued expenses - $171,100, coupled with lower prepaid expenses - $123,400.
Accounts payable were higher due to the Company's biweekly check run not being
due to go out until early in the month of July. Accrued expenses increased due
mainly to the accrual of expenses for a planned two week plant maintenance
shutdown during the third quarter of 1998. This accrual more evenly matches
revenues with expenses, by allocating the two weeks of payroll costs from the
third quarter shutdown to the other months of the year. Prepaid expenses were
lower due to monthly charges to income.
Management's Discussion and Analysis of Financial Condition and Results of
Operations (Cont'd)
On June 15, 1998 James F. Gilday resigned as Vice President, Chief
Financial Officer and Treasurer of the Company. On July 20, 1998 William C.
Kaltnecker was hired as Controller of the Company.
<PAGE> 10
Page 10
Form 10-QSB
The Company has conducted a comprehensive review of its computer
systems to identify the system that could be affected by the "Year 2000" issue
and has developed an implementation plan to resolve the issue. The Year 2000
problem is the result of computer programs being written using two digits rather
than four to define the applicable year. Any of the Company's programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in a major system failure or
miscalculations. The Company presently expects that with modifications to the
existing software and converting to new software, the Year 2000 problem will not
pose significant operational problems for the company's computer systems. The
Company expects to complete its computer conversion and modifications by
December 31, 1998. However, if such modifications and conversions are not
completed timely, the Year 2000 problem may have a material impact on the
operations of the company.
Results of Operations
Net sales for the first six months of 1997 were $6,645,400, an increase
of $48,400 versus the same period in 1997. The increase in sales was primarily
due to an increase in sales volumes of imaging chemicals - $854,800; partially
offset by lower volumes and prices of polymer additives - $333,500 lower volumes
of specialty chemicals - $324,200, lower volumes of hydrazine derivatives -
$116,900 and lower volumes, but higher prices of hydrazine blends - $31,800. Net
sales for the three months ended June 30, 1998 were $3,427,600 a decrease of
$12,600 versus the second quarter of 1997. The decrease in net sales was due to
lower volumes and prices for polymer additives - $223,500, lower volumes of
hydrazine derivatives - $78,900 and lower volumes of hydrazine blends - $29,300;
partially offset by higher volumes of imaging chemicals - $277,600 and higher
volumes of specialty chemicals - $41,500.
The gross profit for the first six months of 1998 was $1,509,600
and increase of $542,200 or 56.0% versus the same period in 1997. The increase
was mainly due to increased volumes of high margin imaging chemicals, coupled
with lower manufacturing payroll expenses due to the Company's restructuring
during the second quarter of 1997; partially offset by the lower sales volumes
of polymer additives, specialty chemicals and hydrazine derivatives. The gross
profit for the three months ending June 30, 1998 increased $271,700 or 55.9%
versus the same period in 1997. The increase in gross profit for the second
quarter resulted from the reasons previously mentioned that impacted the first
six months, except for volumes of specialty chemicals which were higher in the
second quarter of 1998 versus the second quarter of 1997.
Research, selling, general and administrative expenses for the first
six months of 1998 were $135,100 or 10.7% lower than the same period in 1997 due
to the restructuring during the second quarter of 1997. Research, selling and
general and administrative expenses for the three months ended June 30, 1998
increased $5,400 or .9% versus the same period in 1997. The higher expenses in
the second quarter of 1998 were the result of higher legal and computer related
expenses; which were mostly offset by lower payroll expenses due to the second
quarter restructuring in 1997.
<PAGE> 11
Page 11
Form 10-QSB
Interest expense was higher during the first six months and the second
quarter of 1998 versus 1997 due to the Company starting to pay interest in 1998
on the new promissory note that replaced the former accrued interest on the
Leistner loan (see Note 3). There was no interest paid on this obligation in
1997. Interest expense was also higher due to an increase of 1% in the interest
rate on the remaining debt owed to affiliated parties per the new promissory
note agreements, coupled with higher bank borrowings for the first quarter of
1998, from the Company's working capital line of credit.
During January, 1998 the Company received a payment of $1,140,100 from
its property insurance carrier as part of the settlement for the property
damages sustained from a March, 1997 dryer explosion. This payment was an
addition to a $200,000 initial payment received during the second quarter of
1997. The Company is continuing to negotiate with its carrier for an additional
amount in final settlement of this claim. The amount the Company is negotiating
for is somewhere between the two amounts already received. The outcome of the
final resolution of this claim is uncertain. For the period ending March 31,
1998 the effect of the $1,140,100 payment on basic earnings per share and
diluted earnings per share was $.14 per share and $.08 per share, respectively.
Basic earnings and diluted earnings per share for the six month period
ending June 30, 1998, excluding the receipt of the $1,140,100 of insurance
proceeds was $.04 per share and $.03 per share, respectively.
No provisions for income taxes have been recorded by the Company as a
result of net operating losses utilized. A valuation allowance has been recorded
at June 30, 1998 and 1997 for that portion of deferred tax assets, which are not
presently considered more likely than not to be realized.
<PAGE> 12
Page 12
Form 10-QSB
PART II - OTHER INFORMATION
Item 4. Submission of Matters to Vote of Security Holders
On May 20, 1998 the Company held its annual meeting of stockholders at
the law offices of Ross & Hardies in New York City. There were two issues that
shareholders voted on; the election of the Board of Directors and the
appointment of independent auditors for 1998. There were 8,293,366 shares
eligible to vote. All three nominees were elected to the Board of Directors as
follows:
<TABLE>
<CAPTION>
Nominee In Favor Against
------- -------- -------
<S> <C> <C>
Howard R. Leistner 5,960,439 40,733
Dr. Reidar T. Halle 5,960,439 40,733
Richard Mizrack 5,960,439 40,733
</TABLE>
KPMG Peat Marwick LLP was ratified as independent auditors for 1998 as
follows:
<TABLE>
<S> <C>
In Favor: 4,387,547
Against: 15,006
Abstain: 2,219
</TABLE>
Item 6.Exhibits and Reports on Form 8-K
Exhibits 10 Material Contracts
Employment agreement by and between Reidar Halle Ph.D. and
Fairmount Chemical Co., Inc.
Reports on Form 8-K
No reports have been filed on Form 8-K during this quarter.
<PAGE> 13
Page 13
Form 10-QSB
FAIRMOUNT CHEMICAL CO., INC.
SIGNATURE
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.
FAIRMOUNT CHEMICAL CO., INC.
Registrant
August 10, 1997 /S/Reidar T. Halle
- --------------- -----------------
Date Reidar T. Halle
Chief Executive Officer &
President
August 10, 1997 /S/William C. Kaltnecker
Date William C. Kaltnecker
Controller
<PAGE> 1
EXHIBIT 10
REIDAR HALL E, PH.D.
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement"), is made and entered into
this 23rd day of July 1998, and shall be effective as of the 12th day of
January, 1998 (the "Effective Date"), by and between Fairmont Chemical Co.,
Inc., a New Jersey Corporation (the "Employer"), and Reidar Halle, Ph.D. (the
"Executive").
RECITALS
A. The Employer desires to employ the Executive as an officer of the
Employer and the Executive is willing to accept such employment upon the terms
and conditions hereinafter set forth.
B. The Employer recognizes that circumstances may arise in which a
change of control of the Employer through acquisition or otherwise may occur
thereby causing uncertainty of employment without regard to the competence or
past contributions of the Executive which uncertainty may result in the loss of
valuable services of the Executive and the Employer and the Executive wish to
provide reasonable security to the Executive against changes in the employment
relationship in the event of any such change of control.
NOW, THEREFORE, in consideration of the promises and of the covenants
and agreements hereinafter contained, it is covenanted and agreed by and between
the parties hereto as follows:
AGREEMENTS
1. POSITION AND DUTIES. The Employer hereby employs the Executive as
the President and Chief Executive Officer of the Employer or in such other
senior executive capacity as shall be mutually agreed between the Employer and
the Executive. During the period of the Executive's employment hereunder, the
Executive shall devote his best efforts and full business time, energy, skills
and attention to the business and affairs of the Employer. The Executive's
duties and authority shall consist of and include all duties and authority
customarily performed and held by persons holding equivalent positions with
business organizations similar in nature and size to the Employer, as such
duties and authority are reasonably defined, modified and delegated from time to
time by the Board of Directors of the Employer (the "Board"). The Executive
shall have the powers necessary to perform the duties assigned to him and shall
be provided such supporting services, staff, secretarial and other assistance,
office space and accouterments as shall be reasonably necessary and appropriate
in the light of such assigned duties.
2. COMPENSATION. As compensation for the services to be provided by the
Executive hereunder, the Executive shall receive the following compensation,
expense reimbursement and other benefits:
<PAGE> 2
(a) BASE COMPENSATION. The Executive shall receive an
aggregate annual base salary at the rate of One-Hundred and Forty-One Thousand
Five-Hundred Dollars ($141,500.00) payable in installments in accordance with
the regular payroll schedule of the Employer. Such base salary shall be subject
to review annually commencing in 1999 and may be adjusted from time to time by
the Board, but shall not be reduced unless the Employer experiences five (5)
consecutive calendar quarters with pre-tax operating losses.
(b) PERFORMANCE BONUS. The Executive shall be eligible to
receive an annual cash bonus, which for 1998 shall be fifteen percent (15%) of
his base annual salary if pre-tax annual profits of the Employer for such year
equal or exceed Five Hundred Thousand Dollars ($500,000). The annual cash bonus
amount and earning criteria shall be established by the Board for years after
1998. Nothing in this Agreement shall require the Board to provide a bonus in
any particular year.
(c) STOCK OPTIONS. The Executive shall have options to
purchase One Million (1,000,000) shares of common stock of the Employer at an
exercise price of eleven cents ($.11) per share subject to the following
schedule:
<TABLE>
<CAPTION>
Exercise Date Exercisable Options
------------- -------------------
<S> <C>
(i) January 12, 1999 334,000
(ii) January 12, 2000 333,000
(iii) January 12, 2001 333,000
</TABLE>
Provided, however, that (A) upon an employment termination before
January 12, 1999 (other than a voluntary termination by the Executive or a
termination as defined herein under Section 5(c)) the option exercise under
Section 2(c)(i), shall be permitted within the ninety (90) days following the
date of such termination, and (B) in the event of a Change of Control (as
defined herein under Section 5(f)(iii)) at any time prior to January 12, 2001,
all of the unpurchased shares under this Section 2(c) for which the option
exercise date will have then passed may be purchased. The Executive must elect
to exercise any options to the extent then exercisable, within ninety (90) days
following termination of employment, or the options, shall lapse. All options
shall lapse upon the death of the Executive.
(d) REIMBURSEMENT OF EXPENSES. The Executive shall be
reimbursed, upon submission of appropriate vouchers and supporting
documentation, for all travel, entertainment and other out-of-pocket expenses
reasonably and necessarily incurred by the Executive in the performance of his
duties hereunder and shall be entitled to attend seminars, conferences and
meetings relating to the business of the Employer consistent with the Employer's
established policies in that regard.
(e) BENEFITS. The Executive shall be entitled to all benefits
specifically established for him and, when and to the extent he is eligible
therefor, to participate in all plans and benefits generally accorded to senior
executives of the Employer, which may
2
<PAGE> 3
include, but not be limited to, pension, profit-sharing, supplemental
retirement, incentive compensation, bonus, disability income, split-dollar life
insurance, group life, medical and hospitalization insurance, and similar or
comparable plans, and also to perquisites extended to similarly situated senior
executives, provided, however, that such plans, benefits and perquisites shall
be no less than those made available to all other employees of the Employer.
(f) VACATIONS. The Executive shall be entitled to an annual
vacation in accordance with the vacation policy of the Employer which vacation
shall be taken at a time or times mutually agreeable to the Employer and the
Executive.
(g) WITHHOLDING. The Employer shall be entitled to withhold
from amounts payable to the Executive hereunder, any federal, state or local
withholding or other taxes or charges which it is from time to time required to
withhold. The Employer shall be entitled to rely upon the opinion of its legal
counsel with regard to any question concerning the amount or requirement of any
such withholding.
3. CONFIDENTIALITY AND LOYALTY. The Executive acknowledges that
heretofore or hereafter during the course of his employment he has produced and
may hereafter produce and have access to material, records, data, trade secrets
and information not generally available to the public (collectively,
"Confidential Information") regarding the Employer and its subsidiaries and
affiliates. Accordingly, during and subsequent to termination of this Agreement,
the Executive shall hold in confidence and not directly or indirectly disclose,
use, copy or make lists of any such Confidential Information, except to the
extent that such information is or thereafter becomes lawfully available from
public sources, or such disclosure is authorized in writing by the Employer,
required by a law or any competent administrative agency or judicial authority,
or otherwise as reasonably necessary or appropriate in connection with
performance by the Executive of his duties hereunder. The Executive must provide
written notice, within seven (7) days of receipt, to the Employer of any request
by an administrative agency or judicial authority to provide Confidential
Information. All records, files, documents and other materials or copies thereof
relating to the Employer's business which the Executive shall prepare or use,
shall be and remain the sole property of the Employer, shall not be removed from
the Employer's premises without its written consent, and shall be promptly
returned to the Employer upon termination of the Executive's employment
hereunder. The Executive agrees to abide by the Employer's reasonable policies,
as in effect from time to time, respecting avoidance of interests conflicting
with those of the Employer.
4. INVENTIONS. Any invention, process, discovery, software development
or improvement (whether patentable or not) made, invented, discovered, acquired,
suggested or reduced to practice by the Executive in the course of his
employment under this Agreement, or within twelve (12) months thereafter as a
result of any idea conceived during such employment, and related in any manner
to the work, tests, experiments or other activities carried on by the Employer
or any of its subsidiaries shall be the absolute property of the Employer and
the Executive will promptly execute and deliver all documents and do all other
things necessary and proper to make all such inventions, processes, discoveries,
software, and improvements the absolute property of the
3
<PAGE> 4
Employer. The Executive will not reveal to anyone (otherwise than in the regular
course of the business of the Employer or of its subsidiaries) any information
concerning any such inventions, processes, discoveries, software or
improvements. The obligations of the Executive under this Section 4 will survive
any termination of employment and this Agreement.
5. TERM AND TERMINATION.
(a) BASIC TERM. The Executive's employment hereunder shall be
at the pleasure of the Board commencing as of the Effective Date, and shall
continue unless terminated by either party upon thirty (30) days' written
notice, or as provided herein under this Section 5.
(b) PREMATURE TERMINATION.
(i) In the event of the termination of this Agreement
by the Employer for any reason other than a termination in
accordance with the provisions of paragraph (c) of this
Section 5, then notwithstanding any mitigation of damages by
the Executive, the Employer shall pay the Executive an amount
equal to six (6) month's annual base salary.
(ii) Payment to the Executive will be made in a
single lump sum. Such payment shall not be reduced in the
event the Executive obtains other employment following the
termination of employment by the Employer.
(c) TERMINATION FOR CAUSE. This Agreement may be terminated
for cause as hereinafter defined. "Cause" shall mean: (i) the Executive's death
or his permanent disability, which shall mean the Executive's inability, as a
result of physical or mental incapacity, substantially to perform his duties
hereunder for ninety (90) days within a period of six (6) consecutive months;
(ii) a material violation by the Executive of any applicable material law or
regulation respecting the business of the Employer; (iii) the Executive being
found guilty of a felony or an act of dishonesty in connection with the
performance of his duties as an officer of the Employer, or which disqualifies
the Executive from serving as an officer or director of the Employer; or (iv)
the willful or negligent failure of the Executive to perform his duties
hereunder in any material respect. The Executive shall be entitled to at least
thirty (30) days' prior written notice of the Employer's intention to terminate
his employment for any cause (except the Executive's death) specifying the
grounds for such termination, a reasonable opportunity to cure any conduct or
act, if curable, alleged as grounds for such termination, and a reasonable
opportunity to present to the Board his position regarding any dispute relating
to the existence of such cause.
(d) TERMINATION UPON DEATH. In the event payments are due and
owing under this Agreement at the death of the Executive, payment shall be made
to such beneficiary as the Executive may designate in writing, or failing such
designation, to the executor of his estate, in full settlement and satisfaction
of all claims and demands on
4
<PAGE> 5
behalf of the Executive. Such payments shall be in addition to any other death
benefits of the Employer for the benefit of the Executive and in full settlement
and satisfaction of all payments provided for in this Agreement.
(e) TERMINATION UPON DISABILITY. The Employer may terminate
the Executive's employment after the Executive is determined to be disabled
under the current Employer program or by a physician engaged by the Employer. In
the event of a dispute regarding the Executive's disability, each party shall
choose a physician who together will choose a third physician to make a final
determination. The Executive shall be entitled to the compensation and benefits
provided for under this Agreement for any period during the term of this
Agreement and prior to the establishment of the Executive's Disability during
which the Executive is unable to work due to a physical or mental infirmity.
Notwithstanding anything contained in this Agreement to the contrary, until the
date specified in a notice of termination relating to the Executive's
Disability, the Executive shall be entitled to return to his positions with the
Employer as set forth in this Agreement in which event no Disability of the
Executive will be deemed to have occurred.
(f) TERMINATION UPON CHANGE OF CONTROL.
(i) In the event of a Change in Control (as defined
below) of the Employer and the termination of the Executive's
employment under either A or B below, the Executive shall be
entitled to payments specified herein under Section 5(b), and
shall be entitled to an additional amount equal to his annual
base salary as in effect on the date of the Change of Control.
The following shall constitute termination under this
paragraph:
A. The Executive terminates his employment
under this Agreement by a written notice to that
effect delivered to the Board within one (1) year
after the Change in Control.
B. The Agreement is terminated by the
Employer or its successor either in contemplation of
or after the Change in Control.
(ii) It is the intention of the Employer and the
Executive that no portion of any payment under this Agreement,
or payments to or for the benefit of the Executive under any
other agreement or plan, be deemed to be an "Excess Parachute
Payment" as defined in Section 280G of the Internal Revenue
Code of 1986, as amended (the "Code"), or its successors. It
is agreed that the present value of and payments to or for the
benefit of the Executive in the nature of compensation,
receipt of which is contingent on the Change of Control of the
Employer, and to which Section 280G of the Code applies (in
the aggregate "Total Payments") shall not exceed an amount
equal to one dollar less than the maximum amount which the
Employer may pay without loss of deduction under Section
280G(a) of the Code. Present value for purposes of this
Agreement shall be calculated in accordance with Section
280G(d)(4) of the Code. Within thirty (30) days following the
earlier of (A) the giving of the notice of
5
<PAGE> 6
termination or (B) the giving of notice by the Employer to the
Executive of its belief that there is a payment or benefit due
the Executive which will result in an excess parachute payment
as defined in Section 280G of the Code, the Executive and the
Employer, at the Employer's expense, shall obtain the opinion
of such legal counsel and certified public accountants as the
Executive may choose (notwithstanding the fact that such
persons have acted or may also be acting as the legal counsel
or certified public accountants for the Employer), which
opinions need not be unqualified, which sets forth (A) the
amount of the Base Period Income of the Executive, (B) the
present value of Total Payments and (C) the amount and present
value of any excess parachute payments. In the event that such
opinions determine that there would be an excess parachute
payment, the payment hereunder or any other payment determined
by such counsel to be includable in Total Payments shall be
modified, reduced or eliminated as specified by the Executive
in writing delivered to the Employer within thirty (3) days of
his receipt of such opinions or, if the Executive fails to so
notify the Employer, then as the Employer shall reasonably
determine, so that under the bases of calculation set forth in
such opinions there will be no excess parachute payment. The
provisions of this subparagraph, including the calculations,
notices and opinions provided for herein shall be based upon
the conclusive presumption that (A) the compensation and
benefits provided for in Section 2 hereof and (B) any other
compensation earned by the Executive pursuant to the
Employer's compensation programs which would have been paid in
any event, are reasonable compensation for services rendered,
even though the timing of such payment is triggered by the
Change of Control; provided, however, that in the event such
legal counsel so requests in connection with the opinion
required by this subparagraph, the Executive and the Employer
shall obtain, at the Employer's expense, and the legal counsel
may rely on in providing the opinion, the advice of a firm of
recognized executive compensation consultants as to the
reasonableness of any item of compensation to be received by
the Executive. In the event that the provisions of Sections
280G and 4999 of the Code are repealed without succession,
this subparagraph shall be of no further force or effect.
(iii) For purposes of this paragraph, the term
"Change in Control" shall mean: (A) any event which would
require the filing of a Form 13D under the Securities Exchange
Act of 1934, as amended, (whether or not such Form is filed)
by any person or group of persons stating that such person or
group is the beneficial owner or has voting control or proxies
for fifty percent (50%) or more of the voting securities of
the Employer and/or can elect a majority of the Board (unless
such group shall include at least two residual beneficiaries,
as defined below); or (B) the election, at any meeting of the
stockholders of the Employer of a majority of members of the
Board by a majority of the voting securities of the Employer,
which majority does not include the voting securities of the
Employer owned by at least two of the residual beneficiaries;
or (C) a
6
<PAGE> 7
complete liquidation or dissolution or an agreement for the
sale or other disposition of all or substantially all of the
assets of the Employer. For purposes of this Section, residual
beneficiaries shall mean any of the beneficiaries of the
Howard Leistner, Hedi Mizrack and/or Gilbert Leistner
Irrevocable Grantor Trust, or any issue of any such
beneficiary or spouse of any such beneficiary or issue
thereof.
6. NON-COMPETITION COVENANT.
(a) RESTRICTIVE COVENANT. As an essential ingredient of and in
consideration of this Agreement and the payment of the amounts described in
Section 2, the Executive hereby agrees that, except with the express prior
written consent of the Employer, for a period of one (1) year after the
termination of the Executive's employment with the Employer (the "Restrictive
Period"), he will not directly or indirectly compete with the business of the
Employer, including, but not by way of limitation, by directly or indirectly
owning, managing, operating, controlling, financing, or by directly or
indirectly serving as an employee, officer or director of or consultant to, or
by soliciting or inducing, or attempting to solicit or induce, any employee or
agent of Employer to terminate employment with Employer and become employed by
any person, firm, partnership, corporation, trust or other entity which owns or
operates a business similar to that of the Employer (the "Restrictive
Covenant"). If the Executive violates the Restrictive Covenant and the Employer
brings legal action for injunctive or other relief, the Employer shall not, as a
result of the time involved in obtaining such relief, be deprived of the benefit
of the full period of the Restrictive Covenant. Accordingly, the Restrictive
Covenant shall be deemed to have the duration specified in this Section 6(a)
computed from the date the relief is granted but reduced by the time between the
period when the Restrictive Period began to run and the date of the first
violation of the Restrictive Covenant by the Executive. The foregoing
Restrictive Covenant shall not prohibit the Executive from owning directly or
indirectly capital stock or similar securities which are listed on a securities
exchange or quoted on the National Association of Securities Dealers Automated
Quotation System which do not represent more than one percent (1%) of the
outstanding capital stock of any Corporation.
(b) REMEDIES FOR BREACH OF RESTRICTIVE COVENANT. The Executive
acknowledges that the restrictions contained in Sections 3 and 6(a) of this
Agreement are reasonable and necessary for the protection of the legitimate
business interests of the Employer, that any violation of these restrictions
would cause substantial injury to the Employer and such interests, that the
Employer would not have entered into this Agreement with the Executive without
receiving the additional consideration offered by the Executive in binding
himself to these restrictions and that such restrictions were a material
inducement to the Employer to enter into this Agreement. In the event of any
violation or threatened violation of these restrictions, the Employer, in
addition to and not in limitation of, any other rights, remedies or damages
available to the Employer under this Agreement or otherwise at law or in equity,
shall be entitled to preliminary and permanent injunctive relief to prevent or
restrain any such violation by the Executive and any and all persons directly or
indirectly acting for or with him, as the case may be.
7
<PAGE> 8
7. INTERCORPORATE TRANSFERS. If the Executive shall be voluntarily
transferred to an affiliate of the Employer, such transfer shall not be deemed
to terminate or modify this Agreement and the employing corporation to which the
Executive shall have been transferred shall, for all purposes of this Agreement,
be construed as standing in the same place and stead as the Employer as of the
date of such transfer. For purposes hereof, an affiliate of the Employer shall
mean any corporation directly or indirectly controlling, controlled by, or under
common control with the Employer.
8. INTEREST IN ASSETS. Neither the Executive nor his estate shall
acquire hereunder any rights in funds or assets of the Employer, otherwise than
by and through the actual payment of amounts payable hereunder; nor shall the
Executive or his estate have any power to transfer, assign, anticipate,
hypothecate or otherwise encumber in advance any of said payments; nor shall any
of such payments be subject to seizure for the payment of any debt, judgment,
alimony, separate maintenance or be transferable by operation of law in the
event of bankruptcy, insolvency or otherwise of the Executive.
9. INDEMNIFICATION. The Employer shall hold harmless and indemnify the
Executive (and his heirs, executors and administrators) to the fullest extent
permitted under applicable law against all expenses and liabilities reasonably
incurred by him in connection with or arising out of any action, suit or
proceeding in which he may be involved by reason of his having been an officer
of the Employer (whether or not he continues to be an officer at the time of
incurring such expenses or liabilities), such expenses and liabilities to
include, but not be limited to, judgments, court costs and attorneys' fees and
the cost of reasonable settlements. Such indemnification may be provided through
the purchase of a standard directors' and officers' liability insurance policy
at the expense of the Employer.
10. GENERAL PROVISIONS.
(a) SUCCESSORS; ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the Executive, the Employer and his and its
respective personal representatives, successors and assigns, and any successor
or assign of the Employer shall be deemed the "Employer" hereunder. The Employer
shall require any successor to all or substantially all of the business and/or
assets of the Employer, whether directly or indirectly, by purchase, merger,
consolidation, acquisition of stock, or otherwise, by an agreement in form and
substance satisfactory to the Executive, expressly to assume and agree to
perform this Agreement in the same manner and to the same extent as the Employer
would be required to perform if no such succession had taken place.
(b) ENTIRE AGREEMENT; MODIFICATIONS. This Agreement
constitutes the entire agreement between the parties respecting the subject
matter hereof, and supersedes all prior negotiations, undertakings, agreements
and arrangements with respect thereto, whether written or oral. Except as
otherwise explicitly provided herein, this Agreement may not be amended or
modified except by written agreement signed by the Executive and the Employer.
8
<PAGE> 9
(c) ENFORCEMENT AND GOVERNING LAW. The provisions of this
Agreement shall be regarded as divisible and separate; if any of said provisions
should be declared invalid or unenforceable by a court of competent
jurisdiction, the validity and enforceability of the remaining provisions shall
not be affected thereby. This Agreement shall be construed and the legal
relations of the parties hereto shall be determined in accordance with the laws
of the State of New Jersey without reference to the law regarding conflicts of
law.
(d) ARBITRATION. Any dispute or controversy arising under or
in connection with this Agreement shall be settled exclusively by arbitration,
conducted before a panel of three arbitrators in New York City, in accordance
with the rules of the American Arbitration Association then in effect. Judgment
may be entered on the arbitrator's award in any court having jurisdiction;
provided, however, that the Executive shall be entitled to seek specific
performance of his right to be paid through the date of termination during the
pendency of any dispute or controversy arising under or in connection with this
Agreement.
(e) LEGAL FEES. All reasonable legal fees paid or incurred by
the prevailing party pursuant to any dispute or question of interpretation
relating to this Agreement shall be paid or reimbursed by the other party.
(f) WAIVER. No waiver by either party at any time of any
breach by the other party of, or compliance with, any condition or provision of
this Agreement to be performed by the other party, shall be deemed a waiver of
any similar or dissimilar provisions or conditions at the same time or any prior
or subsequent time.
(g) NOTICES. Notices pursuant to this Agreement shall be in
writing and shall be deemed given when received; and, if mailed, shall be mailed
by United States registered or certified mail, return receipt requested, postage
prepaid; and if to the Employer, addressed to the principal headquarters of the
Employer, attention: Chairman; or, if to the Executive, to the address set forth
below the Executive's signature on this Agreement, or to such other address as
the party to be notified shall have given to the other.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
FAIRMONT CHEMICAL CO., INC.
/S/Reidar Halle
REIDAR HALLE, PH. D.
By:/S/ Seymon Moshchitsky
Name: Seymon Moshitsky
Title: Vice-President Research
9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1998 AND THE CONSOLIDATED STATEMENT OF
OPERATIONS FOR SIX MONTHS ENDED JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 2,021,400
<SECURITIES> 0
<RECEIVABLES> 2,154,600
<ALLOWANCES> 0
<INVENTORY> 2,089,000
<CURRENT-ASSETS> 6,527,900
<PP&E> 8,677,400
<DEPRECIATION> 4,294,400
<TOTAL-ASSETS> 10,855,800
<CURRENT-LIABILITIES> 1,573,200
<BONDS> 0
8,293,400
0
<COMMON> 5,400,000
<OTHER-SE> (6,374,300)
<TOTAL-LIABILITY-AND-EQUITY> 10,855,800
<SALES> 6,645,400
<TOTAL-REVENUES> 6,645,400
<CGS> 5,135,800
<TOTAL-COSTS> 5,135,800
<OTHER-EXPENSES> 1,131,300
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 68,400
<INCOME-PRETAX> 1,473,900
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,473,900
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,473,900
<EPS-PRIMARY> 0.18
<EPS-DILUTED> 0.11
</TABLE>
