<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
-----------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from -------------- to -----------------
Commission file number 1-7335
-----------------
LEE PHARMACEUTICALS
- -------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
California 95-2680312
------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1444 Santa Anita Avenue, South El Monte, California 91733
- -------------------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(818) 442-3141
- -------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- -------------------------------------------------------------------------------
N / A
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the registrant (1) 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
----- -----
As of March 31, 1997, there were outstanding 4,135,162 shares of common
stock of the registrant.
Transitional Small Business Disclosure Format (check one):
Yes No X
----- -----
<PAGE>
Form 10-QSB
LEE PHARMACEUTICALS
BALANCE SHEET
MARCH 31, 1997
(DOLLARS IN THOUSANDS)
(UNAUDITED)
ASSETS
Cash $ 14
Accounts and notes receivable (net of allowances: $340) 1,106
Due from related party 94
Inventories:
Raw materials $1,589
Work in process 277
Finished goods 657
------
Total inventories 2,523
Other current assets 1,126
------
Total current assets 4,863
Property, plant and equipment (less accumulated
depreciation and amortization: $6,036) 503
Goodwill and other assets (net of
accumulated amortization: $4,061) 3,297
------
TOTAL $8,663
------
------
See notes to financial statements.
2
<PAGE>
Form 10-QSB
LEE PHARMACEUTICALS
BALANCE SHEET
MARCH 31, 1997
(DOLLARS IN THOUSANDS)
(UNAUDITED)
LIABILITIES
Bank overdraft $ 74
Note payable to bank 8
Notes payable, other 982
Current portion - royalty agreements 660
Accounts payable 1,391
Other accrued liabilities 1,020
Due to related parties 361
Deferred income 65
------
Total current liabilities 4,561
Long-term notes payable to related parties 3,320
Long-term notes payable, other 1,003
Long-term notes payable to bank 316
Long-term payable-royalty agreements, less current portion $660 451
Deferred income 174
------
Total liabilities 9,825
------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIENCY
Common stock, $.10 par value; authorized, 7,500,000 shares;
issued and outstanding, 4,135,162 shares 413
Additional paid-in capital 4,222
Accumulated deficit (5,797)
------
Total stockholders' deficiency (1,162)
------
TOTAL $ 8,663
------
------
See notes to financial statements.
3
<PAGE>
Form 10-QSB
LEE PHARMACEUTICALS
STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended March 31, Ended March 31,
1997 1996 1997 1996
----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Gross revenues $2,453 $2,170 $4,445 $4,140
Less: Sales returns (126) (380) (345) (547)
Cash discounts and other (38) (12) (65) (30)
------ ----- ------ ------
Net revenues 2,289 1,778 4,035 3,563
------ ----- ------ ------
Costs and expenses:
Cost of sales 997 744 1,764 1,473
Selling and advertising expense 826 927 1,539 1,701
General and administrative expense 458 439 800 786
------ ----- ------ ------
Total costs and expenses 2,281 2,110 4,103 3,960
------ ----- ------ ------
Income (loss) from operations 8 (332) (68) (397)
Other (loss) income (13) 22 46 38
------ ----- ------ ------
Net loss $ (5) $(310) $(22) $(359)
------ ----- ------ ------
------ ----- ------ ------
Per share:
Net loss $.00 $(.08) $.00 $(.09)
------ ----- ------ ------
------ ----- ------ ------
See notes to financial statements.
</TABLE>
4
<PAGE>
Form 10-QSB
LEE PHARMACEUTICALS
STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
FOR THE SIX MONTHS
ENDED MARCH 31,
1997 1996
----------- -----------
(UNAUDITED) (UNAUDITED)
Cash flows from operating activities:
Net (loss) $ (22) $ (359)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation 54 93
Amortization of intangibles 684 465
(Decrease) in deferred income (33) (33)
(Gain) on disposal of property, plant,
and equipment (13) (9)
Change in operating assets and liabilities:
Decrease (increase) in accounts receivable 6 (153)
(Increase) in due from related party (21) -
(Increase) in inventories (225) (21)
Decrease (increase) in other current assets 24 (4)
(Decrease) in accounts payable (253) (238)
Increase in accounts payable related party (57) (87)
Increase in notes payable, other 273 172
Increase in other accrued liabilities 421 312
(Decrease) in accrued royalties (76) -
------ ------
Total adjustments 784 497
------ ------
Net cash provided by operating activities 762 138
------ ------
Cash flows from investing activities:
Additions to property, plant, and equipment (76) (11)
Proceeds from sale of equipment 13 9
Acquisition of product brands (1,092) (114)
------ ------
Net cash (used in) investing activities (1,155) (116)
------ ------
Cash flows from financing activities:
(Payments on) bank loans (61) -
Proceeds from notes payable to related party 80 22
Proceeds from notes payable, other 703 8
(Decrease) in long-term royalty agreements (330) (330)
Increase in bank overdraft 2 168
------ ------
Net cash provided by (used in) financing
activities 394 (132)
------ ------
Net Increase (decrease) in cash 1 (110)
Cash, beginning of year 13 123
------ ------
Cash, end of period $ 14 $ 13
------ ------
------ ------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 258 $ 112
------ ------
------ ------
Acquisition of product brands:
Fair value of assets acquired 1,497 114
Fair value of liabilities incurred $ 405 -
Net cash payments $1,092 114
------ ------
------ ------
See notes to financial statements.
5
<PAGE>
Form 10-QSB
NOTES TO FINANCIAL INFORMATION
1. Basis of presentation:
The accompanying balance sheet as of March 31, 1997, and the statements of
operations and cash flows for the periods ended March 31, 1997, and 1996,
have not been audited by independent accountants but reflect all
adjustments, consisting of any normal recurring adjustments, which are, in
the opinion of management, necessary to a fair statement of the results for
such periods. The results of operations for the six months ended March 31,
1997, are not necessarily indicative of results to be expected for the year
ending September 30, 1997.
Certain information and footnote disclosure normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been omitted pursuant to the requirements of the Securities
and Exchange Commission, although the Company believes that the disclosures
included in these financial statements are adequate to make the information
not misleading.
The financial statements should be read in conjunction with the financial
statements and notes thereto included in the Company's annual report on
Form 10-KSB for the fiscal year ended September 30, 1996.
The Company is involved in various matters involving environmental cleanup
issues. See "Item 2. Management's Discussion and Analysis or Plan of
Operations" and Note 10 of Notes to Financial Statements included in the
Company's Form 10-KSB for the fiscal year ended September 30, 1996. The
ultimate outcome of these matters cannot presently be determined.
Environmental expenditures that relate to an existing condition caused by
past operations, and which do not contribute to current or future revenue
generation, are expensed. The Company's proportionate share of the
liabilities are recorded when environmental remediation and/or cleanups are
probable, and the costs can be reasonably estimated.
2. Net loss per share:
Net loss per share is based on the weighted average number of shares of
common stock outstanding during the periods presented. Common stock
equivalents (common stock options) are not included in these calculations
where their effect on net loss per share is anti-dilutive. The weighted
average number of shares was 4,135,162 for all periods presented.
3. Note payable to bank:
Effective April 26, 1996, the Company renewed its real estate loan with the
bank. The note payable to the bank, secured by deed on land and building,
requires a monthly payment of $4,200, including interest at Bank of
America's base rate plus 4%, maturing March 2001. At March 31, 1997, the
interest rate was 12.5%. The note is guaranteed by the former Chairman of
the Company and the Company's President.
4. Line of credit:
In May 1996, the Company obtained $1,000,000 of financing, in the form of a
revolving credit facility. The financing is secured by accounts
receivable, equipment, inventories and certain other assets. It is a two
year agreement, maturing May 1998, and will automatically continue
thereafter until either party terminates on a 90 day prior written notice.
The loan and security agreement is subject to a minimum interest of $3,000
per month. The loan bears interest at Bank of America's prime plus 8%.
5. Acquisitions:
On October 16, 1996, the Company purchased certain assets from Lactona
Corporation for $175,000 plus inventory valued at approximately $30,000.
The Company remitted $75,000 at closing. Payments of $3,000, including
interest, are due the 16th of each month starting November 1996 and ending
September 1999 and any remaining amount on October 16, 1999. Interest is
to be computed at the highest prime rate during the payment period. The
highest prime rate was 8.25% on March 16, 1997.
6
<PAGE>
Form 10-QSB
On October 21, 1996, the Company purchased certain assets from Roberts
Laboratories, Inc. for $1,168,089. The Company remitted $100,000 at
closing. Payments of $19,752 are due on the first of each month starting
November 1, 1996, and ending on October 1, 2000. Any remaining unpaid
balance is due on November 1, 2000. Interest shall be paid at the highest
prime rate during the preceding month.
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
MATERIAL CHANGES IN RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997, AND MARCH 31, 1996
Gross revenues for the three months ended March 31, 1997, were $2,453,000,
an increase of approximately $283,000 or 13% from the comparable three
months period ended March 31, 1996. The increase in gross revenues was due
to the volume generated from the newly acquired brands such as;
Aquafilter-R-, two oral care brands, and 28 items including ointments,
nutritional supplements, vitamins, analgesics, and various over-the-counter
brands. These acquisitions are discussed in Note 5 above. The above
increased sales volume was partially offset by reduced sales revenues of
the nail category products. The Company's gross revenues from nail products
have continued to decline, but at a lesser rate than reported in the prior
quarterly Form 10-QSB filings. The decline is primarily due to customers
discontinuance of several of the nail extender SKU's (stock keeping units).
In addition, revenues from the Company's line of depilatories were lower
in the current quarter as compared to the quarter ended March 31, 1996.
Net revenues increased approximately $511,000 or 29% for the three months
ended March 31, 1997, as compared to the three months ended March 31, 1996.
The change in net revenues was due to the increase in gross revenues
discussed above. In addition, the sales returns declined $254,000 or 67%
when comparing the three months ended March 31, 1997, and 1996. The lower
sales returns during the current quarter was the result of fewer returns
related to the nail extender category. As discussed earlier the nail
products sales volume has continued to decline, thereby resulting in lesser
returns of the nail extender category. The Company's retail customers have
continued to change their planograms, where they are stocking fewer SKU's
of the Company's products.
Cost of sales was 41% of gross revenues for the quarter ended March 31,
1997, compared to 34% for the quarter ended March 31, 1996. The percentage
was slightly higher due to the non-recurring start-up costs associated with
the internal production of the product lines associated with the recent
brand acquisitions previously discussed, non-recurring freight charges
related to the transporting of inventory and equipment related to acquired
brands, and an increase in manufacturing labor dollars as a result of two
(September 1996 and March 1997) hourly rate increases in the minimum wages.
Selling and advertising expenses declined $101,000 or 11% when comparing
the three months ended March 31, 1997, with the three months ended March
31, 1996. The reduction of expenses were mainly due to the following
factors; (1) lower salary and wages and related fringe benefits, (2)
reduced commission expense due to a decrease in the commission rate and a
structural change in responsibility from actual geography (geographic
territory) to specific accounts in that geography, and (3) a non-recurring
"special allowance" which was awarded to a key customer in fiscal 1996.
The previously mentioned reduced expenses were slightly offset by an
increase in amortization costs because of the recent acquisitions; one
brand in late September 1996 and two brands in October 1996.
General and administrative expenses increased when comparing the quarters
ended March 31, 1997, and 1996. The nominal increase was approximately
$19,000 or 4%.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
SIX MONTHS ENDED MARCH 31, 1997, AND MARCH 31, 1996
Gross revenues for the six months ended March 31, 1997, were $4,445,000, an
increase of approximately $305,000 or 7% from the comparable six months
period ended March 31, 1996. The increase in gross revenues was due to the
volume generated from the newly acquired brands such
7
<PAGE>
Form 10-QSB
as; Aquafilter-Registered Trademark-, two oral care brands, and 28 items
including ointments, nutritional supplements, vitamins, analgesics, and
various over-the-counter brands. The above increased sales volume was
partially offset by reduced sales revenues of the nail category products.
This reduction of nail extender products has continued to decline over the
past years. Net revenues for the six months ended March 31, 1997, were
$4,035,000, an increase of $472,000 or 13%, from the comparable six months
period ended March 31, 1996. The reasons for lowered sales returns during
the six months period ended March 31, 1997, versus March 31, 1996, are the
same as explained above regarding material changes of the three months
period ended March 31, 1997, and 1996.
Cost of sales as a percentage of gross revenues for the six months ended
March 31, 1997, as compared to the six months period ended March 31, 1996,
was 40% versus 36% respectively. The higher cost of sales percentage for
the six months ended March 31, 1997, compared to March 31, 1996, is due to
the reasons explained above regarding the material changes of the three
months period ended March 31, 1997, and 1996.
Selling and advertising expenses decreased $162,000 or 10% when comparing
the six months ended March 31, 1997, with the six months ended March 31,
1996. The lower expenses were basically due to; (1) lower salary and wages
and related fringe benefits, (2) reduced commission expense due to a
lowered commission rate and changes in geographic territory
responsibilities of the sales representatives, and (3) a non-recurring
"special allowance" which was awarded to a key customer in fiscal 1996.
These reduced expenditures were slightly offset by an increase in
amortization costs as a result of recent brand acquisitions; one in late
September 1996 and two brands in October 1996.
General administrative expenses increased when comparing the quarters ended
March 31, 1997, and 1996. The nominal increase was approximately $14,000
or 2%
LIQUIDITY AND CAPITAL RESOURCES
During the three months ended March 31, 1997, working capital declined to
$302,000 from $395,000 at September 30, 1996. The ratio of current assets
to current liabilities was 1.07 to 1 at March 31, 1997, and 1.09 to 1 at
September 30, 1996. The decrease in working capital of $93,000 was
primarily due to an increase in current liabilities of $310,000 related to
the accrued liabilities of the unpaid product brand acquisitions.
The Company has an accumulated deficit of $5,797,000. The Company's
recurring losses from operations and inability to generate sufficient cash
flow from normal operations to meet its obligations as they came due raise
substantial doubt about the Company's ability to continue as a going
concern. The Company's ability to continue in existence is dependent upon
future developments, including obtaining additional financing and achieving
a level of profitable operations sufficient to enable it to meet its
obligations as they become due.
ENVIRONMENTAL MATTERS
The Company owns a manufacturing facility located in South El Monte,
California. The California Regional Water Quality Control Board (The
"RWQCB"), has alleged that the soil and shallow groundwater at the site are
contaminated. On August 12, 1991, the Board issued a "Cleanup and
Abatement Order" directing the Company to conduct further testing and
cleanup the site. The Company did not complete the testing, and in June,
1992, the RWQCB requested that the EPA evaluate the contamination and take
appropriate action. At the EPA's request, Ecology & Environment, Inc.
conducted an investigation of soil and groundwater on the Company's
property. Ecology & Environment Inc.'s Final Site Assessment Report, which
was submitted to the EPA in June, 1994, did not rule out the possibility
that some of the contamination originated onsite, and resulted from either
past or current operations on the property. While the Company may be
liable for all or part of the costs of remediating the contamination on its
property, the remediation cost is not known at this time. The EPA has not
taken any further action in this matter, but may do so in the future.
8
<PAGE>
Form 10-QSB
The Company and nearby property owners are in the process of engaging a
consultant to perform a site investigation with respect to soil and shallow
groundwater contamination. Based upon proposals received to date, the
Company currently estimates the cost to perform the site investigation to
be $175,000. Accordingly, while recognizing it may be jointly and
severally liable for the entire cost, the financial statements as of
September 30, 1995, recognized the proportionate amount ($87,500) which the
Company believes is its liability for a site investigation.
The tenants of nearby properties upgradient have sued the Company alleging
that hazardous materials from the Company's property caused contamination
on the properties leased by the tenants. The case name is DEL RAY
INDUSTRIAL ENTERPRISES, INC. v. ROBERT MALONE, ET AL., Los Angeles County
Superior Court, Northwest District, commenced August 21, 1991. In this
action, the plaintiff alleges environmental contamination by defendants of
its property, and seeks a court order preventing further contamination and
monetary damages. The Company does not believe there is any basis for the
allegations and is vigorously defending the lawsuit.
The Company's South El Monte manufacturing facility is also located over a
large area of possibly contaminated regional groundwater which is part of
the San Gabriel Valley Superfund site. The Company has been notified that
it is a potentially responsible party ("PRP") for the contamination. The
cost of cleanup of the groundwater is not known at this time. In September
1992, EPA announced that the levels of contamination in the Whittier
Narrows area of the Superfund site were sufficiently low and that it was
not planning a cleanup at this time, but rather would continue to monitor
the groundwater for an indefinite period. The Company's property is
adjacent to the Whittier Narrows area. Except as described above, it is
not clear what action the EPA will take with respect to the Company's
property.
In August 1995, the Company was informed that the EPA entered into an
Administrative Order on Consent with Cardinal Industrial Finishes
("Cardinal") for a PRP lead remedial investigation and feasibility study
(the "Study") which, the EPA states, will both characterize the extent of
groundwater contamination in South El Monte and analyze alternatives to
control the spread of contamination. The Company and others have entered
into the South El Monte Operable Unit Site Participation Agreement with
Cardinal pursuant to which, among other things, Cardinal will contract with
an environmental firm to conduct the Study. The Study is anticipated to
take eighteen to twenty-four months. The Company's share of the cost of
the Study is currently $15,000 and was accrued for in the financial
statements as of September 30, 1995.
The City of South El Monte, the city in which the Company has it's
manufacturing facility, is located in the San Gabriel Valley. The San
Gabriel Valley has been declared a Superfund site. The 1995 Water Quality
Control Plan issued by the California Regional Water Quality Control Board
states that the primary groundwater basin pollutants in the San
Gabriel Valley are volatile organic compounds from industry, nitrates from
subsurface sewage disposal and past agricultural activities. In addition,
the Plan noted that hundreds of underground storage tanks leaking gasoline
and other toxic chemicals have existed in the San Gabriel Valley. The
California Department of Toxic Substance Control have declared large areas
of the San Gabriel Valley to be environmentally hazardous and subject to
cleanup work.
The EPA announced it is studying the possibility that, although the vadose
soil and groundwater, while presenting cleanup problems, there may be a
contamination by DNAPs (dense non-aqueous phase liquids), i.e., "sinkers",
usually chlorinated organic cleaning solvents. The EPA has proposed to
drill six "deep wells" throughout the City of South El Monte at an
estimated cost of $1,400,000. The EPA is conferring with SEMPOA (South El
Monte Property Owners Association) as to cost sharing on this project.
SEMPOA has obtained much lower preliminary cost estimates. The outcome
cost and exact scope of this are unclear at this time.
The Securities and Exchange Commission has issued a formal order of
investigation concerning certain matters, including the Company's
environmental liabilities. The Company is cooperating with the
investigation.
9
<PAGE>
Form 10-QSB
The Company has been seeking reimbursement of cleanup costs from its
insurance carriers. One carrier has paid certain amounts towards cleanup
costs that may be incurred and legal fees actually incurred. The Company
continues to seek reimbursement from other carriers, although no such
payments have been received or agreed to, and there can be no assurances
that any such payments will be received. Some carriers have denied
liability for costs, based on their review and analysis of the insurance
policies, the history of the site, the nature of the claims, and current
court decisions in such cases.
Currently, the Company does not have any reliable information on the likely
cleanup costs of its property. Thus, it cannot determine the extent, if
any, of its share of liability for any such cleanup costs.
10
<PAGE>
Form 10-QSB
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The information set forth under Part I, Item 2, "Management's Discussion and
Analysis or Plan of Operations - Environmental Matters" is incorporated herein
by reference. See also "Legal Proceedings" in the Company's Form 10-KSB for the
fiscal year ended September 30, 1996.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of the registrant occurred on March 11,
1997. At that meeting, the following directors were elected:
VOTES
----------------------
DIRECTOR FOR WITHHELD
-------- ------ ------------
Dr. Henry L. Lee 3,019,883 267,222
Ronald G. Lee 3,017,103 270,002
William M. Caldwell IV 3,019,503 267,602
VOTES
----------------------------------
FOR AGAINST ABSTAIN
--------- -------- --------
The appointment of George Brenner, CPA
as independent auditor 3,083,573 145,587 57,945
To approve the 1997 Employee Incentive
Stock Option Plan 1,107,122 332,204 43,305
To approve the 1997 Stock Option Plan
for Outside Directors 1,280,072 361,925 56,233
ITEM 6. EXHIBITS
The following exhibits have previously been filed by the Company:
3.1 - Articles of Incorporation, as amended (1)
3.4 - By-laws, as amended December 20, 1977 (2)
3.5 - Amendment of By-laws effective March 14, 1978 (2)
3.6 - Amendment to By-laws effective November 1, 1980 (3)
27 - Financial Data Schedule
(1) Filed as an Exhibit of the same number with the Company's Form
S-1 Registration Statement filed with the Securities
and Exchange Commission on February 5, 1973, (Registrant No.
2-47005), and incorporated herein by reference.
(2) Filed as Exhibits 3.4 and 3.5 with the Company's Form 10-K
Annual Report for the fiscal year ended September 30, 1978,
filed with the Securities and Exchange Commission and
incorporated herein by reference.
(3) Filed as an Exhibit of the same number with the Company's Form
10-K Annual Report for the fiscal year ended September 30, 1979,
filed with the Securities and Exchange Commission and
incorporated herein by reference.
11
<PAGE>
Form 10-QSB
SIGNATURES
In accordance with the requirements of the Securities Exchange Acts of 1934,
the registrant has caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LEE PHARMACEUTICALS
-------------------
(Registrant)
Date: May 14, 1997 RONALD G. LEE
------------ ----------------------
Ronald G. Lee
President
Date: May 14, 1997 MICHAEL L. AGRESTI
------------ ---------------------
Michael L. Agresti
Vice President - Finance
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 14
<SECURITIES> 0
<RECEIVABLES> 1,446
<ALLOWANCES> (340)
<INVENTORY> 2,523
<CURRENT-ASSETS> 4,863
<PP&E> 6,539
<DEPRECIATION> (6,036)
<TOTAL-ASSETS> 8,663
<CURRENT-LIABILITIES> 4,561
<BONDS> 0
0
0
<COMMON> 413
<OTHER-SE> (1,575)
<TOTAL-LIABILITY-AND-EQUITY> 8,663
<SALES> 4,035
<TOTAL-REVENUES> 4,445
<CGS> 1,764
<TOTAL-COSTS> 4,103
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 264
<INCOME-PRETAX> (22)
<INCOME-TAX> 0
<INCOME-CONTINUING> (22)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (22)
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
