<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
XX QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
AND EXCHANGE ACT OF 1934 For the quarterly period ended September
30, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-10054
COMMODORE ENVIRONMENTAL SERVICES, INC.
(Exact name of Registrant as specified in its charter)
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DELAWARE 87-0275043
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
150 EAST 58TH STREET, 10155
NEW YORK, NEW YORK (Zip Code)
(Address of Principal Executive Offices)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (212) 308-5800
Not Applicable
(Former name, address and former fiscal year, if changed since last report)
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 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
Number of shares of common stock outstanding at November 11, 1998 (latest
practicable date):
Issued and Outstanding: 62,796,477
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COMMODORE ENVIRONMENTAL SERVICES,INC
FORM 10-Q
INDEX
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PAGE
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PART I. FINANCIAL INFORMATION .......................................3
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets -
September 30, 1998 and December 31, 1997...................3
Condensed Consolidated Statement of Operations -
Three months ended September 30, 1998 and 1997
Nine months ended September 30, 1998 and 1997..............5
Condensed Consolidated Statement of Cash Flows -
Nine months ended September 30, 1998 and
September 30, 1997.........................................6
Notes to Condensed Consolidated Financial Statements.........7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................10
PART II. OTHER INFORMATION ..........................................14
SIGNATURES ..............................................................15
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2
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PART I - FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
COMMODORE ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
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<CAPTION>
(000'S OMITTED)
SEPTEMBER 30, DECEMBER 31,
1998 1997
---------- ----------
ASSETS (UNAUDITED) (UNAUDITED)
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Current Assets:
Cash and cash equivalents $ 39 $13,542
Accounts receivable, net 3,064
Notes and advances from related parties 150 3,866
Restricted cash 50 310
Inventory 360
Prepaid assets and other current assets 402
------- -------
TOTAL CURRENT ASSETS 239 21,544
Other receivables 325 516
Other investments 357 911
Investment in and loans to unconsolidated
subsidiary 7,914
Property and equipment, net 64 2,498
Note receivable 642 912
Deferred financing costs 24 96
Patents and completed technology, net 4,288 1,150
Goodwill, net 7,353
Other assets 18 36
------- -------
TOTAL ASSETS $13,871 $35,016
======= =======
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See notes to condensed consolidated financial statements.
3
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COMMODORE ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS -- (CONT'D)
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(000'S OMITTED)
SEPTEMBER 30, DECEMBER 31,
1998 1997
---------- ----------
LIABILITIES AND STOCKHOLDER'S EQUITY (UNAUDITED) (UNAUDITED)
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Current Liabilities:
Accounts payable and accrued liabilities $ 563 $ 2,150
Current portion of long term debt 4,000 1,226
Other accrued liabilities 923 4,960
-------- --------
TOTAL CURRENT LIABILITIES 5,486 8,336
Bonds payable and other long-term debt 4,019
Deferred gain 621 656
Promissory note to related party 2,250 2,250
-------- --------
TOTAL LIABILITIES 8,357 15,261
Minority interest in subsidiary 12,558
Redeemable preferred stock 3,557
Stockholders' Equity:
Preferred stock, par value $.01 per share
authorized 10,000,000 issued and
outstanding 3,917,378 and 4,309,577 39 43
Common stock, par value $.01 per share
authorized 100,000,000, issued and
outstanding 62,796,477 and 59,233,368 628 592
Additional paid in capital 45,953 46,074
(Deficit) (41,081) (43,044)
-------- --------
5,539 3,665
Less cost of 506,329 shares of common stock
held in treasury (25) (25)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 5,514 3,640
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 13,871 $ 35,016
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
4
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COMMODORE ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
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<CAPTION>
(000'S OMITTED)
THREE MONTHS NINE MONTHS
ENDED SEPT 30, ENDED SEPT 30,
------------------------- -------------------------
1998 1997 1998 1997
-------- -------- -------- --------
(UNAUDITED) (UNAUDITED)
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REVENUES
Contract revenues $ -- $ 5,738 $ 1,259 $ 15,717
COSTS AND EXPENSES
Cost of sales 52 4,481 1,013 12,479
Research and development 27 752 200 2,185
General and administrative 480 4,160 2,232 11,032
Depreciation and amortization 76 289 246 771
-------- -------- -------- --------
Total costs and expenses 635 9,682 3,691 26,467
OPERATING LOSS (635) (3,944) (2,432) (10,750)
Other income (expense):
Interest income 136 368 419 828
Interest expense (154) (265) (467) (874)
Equity in losses from unconsolidated
subsidiary (1,148) (512) (3,999) (1,466)
Gain on sale of subsidiary stock 8,024
Minority interest 1,200 418 3,558
-------- -------- -------- --------
NET INCOME (LOSS) $ (1,801) $ (3,153) $ 1,963 $ (8,704)
======== ======== ======== ========
NET INCOME (LOSS) PER SHARE - Basic
(Based on weighted average shares of
62,290,000 and 61,038,000 in 1998
and 58,252,000 and 57,872,000 in 1997) $ (.03) $ (.05) $ .03 $ (.15)
======== ======== ======== ========
NET INCOME (LOSS) PER SHARE - Diluted
(Based on weighted average shares of
62,290,000 and 64,820,000 in 1998
and 58,252,000 and 57,872,000 in 1997) $ (.03) $ (.05) $ .03 $ (.15)
======== ======== ======== ========
</TABLE>
See notes to condensed consolidated financial statements.
5
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COMMODORE ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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(000'S OMITTED)
NINE MONTHS ENDED
SEPTEMBER 30,
1998 1997
-------- --------
(UNAUDITED)
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OPERATING ACTIVITIES
Net income (loss) $ 1,963 $ (8,704)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 211 238
Interest (non cash) 72 72
Gain on sale of subsidiary stock (8,024)
Undistributed losses of unconsolidated subsidiary 3,999 1,466
Changes in net assets of subsidiary prior to
deconsolidation 3,236
Minority ownership in losses (418) (3,558)
Issuance of stock options 623
Issuance of common stock for services 55
Changes in assets and liabilities:
Accounts receivable 3,777
Inventories
Other assets 50
Restricted cash 642
Accounts payable and accrued liabilities 84 (1,152)
Other current liabilities 14
-------- --------
NET CASH (USED IN) OPERATING ACTIVITIES 1,178 (5,999)
-------- --------
INVESTING ACTIVITIES
Payments received on receivables 443 75
Acquisition of patents (116)
Acquisition of completed technology (4,436)
Purchase of equipment (66) (1,346)
Other investments (3,565)
-------- --------
NET CASH (USED IN) INVESTING ACTIVITIES (4,059) (4,952)
-------- --------
FINANCING ACTIVITIES
Proceeds from sale of subsidiary stock 5,450 12,695
Issuance of preferred stock 7,832
Payment of line of credit (5,733)
Issuance of common stock 55
Payment of long term debt (7)
Payment of dividends on preferred stock (125) (508)
Advances to related parties (5,600) (2,016)
Payments from related parties 668
Other (296)
-------- --------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES 393 12,022
-------- --------
INCREASE (DECREASE) IN CASH (2,488) 1,071
Deconsolidation of subsidiary owned cash (11,015)
Cash at beginning of period 13,542 15,280
-------- --------
CASH AT END OF PERIOD $ 39 $ 16,351
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
6
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COMMODORE ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1998
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements for
Commodore Environmental Services, Inc. and Subsidiaries (the "Company") have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. The financial statement information was derived from
unaudited financial statements unless indicated otherwise. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three and nine month periods ended September
30, 1998 are not necessarily indicative of the results that may be expected for
the year ending December 31, 1998.
The accompanying unaudited condensed consolidated financial statements
should be read in conjunction with the Company's audited financial statements
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1997.
NOTE B - COMMITMENTS AND CONTINGENCIES
The Company has matters of litigation arising in the ordinary course of its
business which in the opinion of management will not have a material adverse
effect on the financial condition or results of operations of the Company.
NOTE C - INCOME TAXES
The Company intends to utilize its net operating loss carryforwards to
offset any income tax expenses and therefore anticipates it will not incur an
income tax liability as a result of net income for the first nine months of
1998.
7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
General
The current principal businesses of the Company are conducted through its
35% owned affiliate Applied, and consist of the development of technologies for
the destruction and neutralization of hazardous waste and the separation of
hazardous waste from other materials. Applied owns technologies related to the
separation and destruction of polychlorinated biphenyls (PCBs) and
chloroflourocarbons (CFCs).
Applied is currently working on the commercialization of these technologies
through various acquisitions licensing agreements and joint ventures. Through
Advanced Sciences, Inc. ("ASI")., a subsidiary acquired in October 1996, Applied
has contracts with various government agencies and private companies in the
United States and abroad. As some government contracts are funded in one year
increments, there is a possibility for cutbacks. As these contracts constitute a
major portion of the subsidiary's revenues, such a reduction would materially
affect the operations. However management believes the subsidiary's existing
client relationships will allow Applied to obtain new contracts in the future.
Commodore Separation Technologies, Inc., a subsidiary of Applied, whose
principal business is to separate and extract various solubilized materials from
liquid and gaseous streams is currently in the development stage and intends to
commercialize its separation and recovery system.
In March 1998, the Company, through its wholly-owned subsidiary Commodore
Polymer Technologies, Inc., ("Polymer Technologies"), purchased the business
(consisting of customer, supplier and industry relationships) related to the
ceramic polymer known as CERASET (the "CERASET Business") from a subsidiary of
Lanxide, a company which specializes in the manufacture of ceramic bonding and
refractory materials. In connection with such purchase, Polymer Technologies
also required a license, subject to pre-existing and certain future licenses, to
utilize the technologies related to the CERASET polymers (the "CERASET
License"), and acquired the right to use the trademark "CERASET" in connection
with the marketing and sales of products containing CERASET polymers (the
CERASET Trademark"), on a worldwide basis (excluding Japan). The CERASET
materials and processes provide additional performance advantage for reinforced
metals and reinforced ceramics, and extend the Company's business portfolio into
rapidly expanding area of high-performance polymer composites, adhesives,
sealants and coatings. Lanxide is affiliated with the Company by significant
common beneficial ownership, and a debtor/creditor relationaship prior to the
consummation of the transaction.
8
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Pursuant to the terms of the CERASET License, Polymer Technologies has
agreed to pay a subsidiary of Lanxide a royalty equal to 4% of the net sales
price of all products sold by Polymer Technologies and any of its sublicensees,
which are manufactured using the CERASET technology until the aggregate royalty
payments equal $4 million. Thereafter, Lanxide's subsidiary will be entitled to
receive a royalty payment equal to 2% of the net sales price of all products
sold by Polymer Technologies and its sublicensees, which are manufactured using
the CERASET technology.
Polymer Technologies was incorporated in Delaware on March 3, 1998, has
commenced operations and has generated nominal revenues to date.
From the Company's acquisition of Commodore Applied Technologies,
Inc. ("Applied")'s predecessor (Commodore Laboratories, Inc. (formerly
A.L. Sandpiper Corporation)) in December 1993 to the February 1998
Private Placement, the Company owned a controlling equity interest in
Applied and its subsidiaries, including Commodore Solution
Technologies, Inc. ("Solution"), Commodore Separation Technologies,
Inc. ("Separation"), Commodore Advanced Sciences, Inc. ("Advanced
Sciences") )which accounts for substantially all of Applied's revenues
and Commodore CFC Technologies. During such period the Company had
not generated material revenues, except from the operation of Advanced
Sciences, or any profits.
As a result of the 1997 Private Placement and the February 1998 Private
Placement (as defined in the Company's 1998 Annual Report on form 10-k), the
Company's ownership interest in Applied decreased to approximately 35% as of
September 30, 1998. While the Company's financial condition for the year ended
December 31, 1997 consolidated that of Applied and its operating subsidiaries,
including Advanced Sciences, beginning with February of 1998 and as long as the
Company equity interest in Applied is less than 50%, the Company will no longer
consolidate the financial condition and results of Applied and its
subsidiaries.
Applied's principal businesses consist of the development of technologies or
the destruction or neutralization of hazardous waste and the separation of
hazardous waste from other materials. Applied owns technologies related to the
separation and destruction of polychlorinated biphenyls (PCBs) and
chloroflourocarbons (CFCs). In addition, Applied owns 100% of Advanced Sciences,
a subsidiary acquired in October 1996. Advanced Sciences has contracts with
various government agencies and private companies throughout the United States
and abroad relating engineering and scientific services. Applied also owns 87%
of Separation whose principal business is to separate and abstract various
solubilized materials from liquid and gaseous streams. The consolidated
financial statements do not include the accounts of Applied and its
majority-owned subsidiaries.
9
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Results from Operations
Three and Nine Months Ended September 30, 1998 Compared to Three and
Nine Months Ended September 30, 1997
Gross revenues for the third quarter of 1998 were $0 as compared to
$5,738,000 for the third quarter of 1997. Gross revenues for the nine month
period ended September 30, 1998 were $1,259,000 as compared to $15,717,000 for
the nine month period ended September 30, 1997. Such revenues for 1998 were
primarily due to one month of Applied's operations. As of February 1998, the
Company no longer consolidates the financial results of Applied and its
subsidiaries Separation and Advanced Sciences, as its ownership percentage had
decreased to below 50%. Cost of sales for the three and nine months ended
September 30, 1998 were $52,000 and $1,013,000 as compared to $4,481,000 and
$12,479,000 for the three and nine months ended September 30, 1997. The decrease
in cost of sales was due to Applied results not being consolidated after January
1998. In the third quarter of 1998, the Company began to generate nominal sales
from CERASET.
General and administrative expenses totalled $480,000 for the third quarter
of 1998 as compared to $4,160,000 for the third quarter of 1997, and general and
administrative expenses totalled $2,232,000 for the nine month period ended
September 30, 1998 as compared to $11,032,000 for the nine month period ended
September 30, 1997. The decrease in general and administrative expenses was due
to Applied results not being consolidated after January 1998.
In the third quarter of 1998, the Company incurred $27,000 of research and
development expenses associated with research, development and marketing of
CERASET, as compared to $752,000 in the third quarter of 1997, for the research,
development and marketing of the destruction of hazardous substances. For the
nine-month period ended September 30, 1998, the Company incurred $200,000 of
research and development expenses as compared to $2,185,000 for the nine-month
period ended September 30, 1997. The decrease in research and development costs
is due to Applied results not being consolidated after January 1998.
In the third quarter of 1998, the Company generated interest income of
approximately $136,000 as compared to $368,000 for the third quarter of 1997.
For the nine months ended September 30, 1998, interest income was $419,000 as
compared to $828,000 for the nine months ended September 30, 1997. The interest
income in 1998 was principally generated from the Company's loans to Applied.
1997 interest income was principally generated from temporary investments which
were purchased with the net proceeds from the sale of its subsidiary's stock.
Interest expense was $154,000 for the third quarter of 1998 as compared to
$265,000 for the third quarter of 1997; and interest expense was $467,000 for
the nine-month period ended September 30,
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1998 as compared to $874,000 for the nine-month period ended September 30, 1997.
The decrease in interest expense from 1997 to 1998 was due to Applied results
not being consolidated after January 1998.
The Company recorded equity in losses of subsidiary of $1,148,000 and
$3,999,000 for the three and nine months ended September 30, 1998 as compared to
$512,000 and $1,466,000 for the three and nine months ended September 30, 1997.
The 1998 results primarily reflect the Company's minority ownership in Applied's
losses for the respective periods. The 1997 results, which consolidate the
results of Applied, primarily reflect Applied's ownership in its
Teledyne-Commodore LLC joint venture.
As a result of the 1998 Private Placement of the Company owned Applied
common stock and conversions of the Series D Preferred Stock of the Company
outstanding as of December 31, 1997, the Company recorded a gain on sale of
subsidiary stock of $8,024,000
Minority interest reflects the portion of the consolidated results of the
Company which relate to minority shareholders of Applied. The Company recorded
minority interest income of $1,200,000 and $3,558,000 for the three and nine
months ended September 30, 1997, and $418,000 during the first month of 1998.
There is no minority interest after January 1998 since Applied results were no
longer consolidated.
The Company had a net loss of $1,801,000 for the three month period ended
September 30, 1998 as compared to a net loss of $3,153,000 for the three month
period ended September 30, 1997. The Company had net income of $1,963,000 for
the nine month period ended September 30, 1998 as compared to a net loss of
$8,704,000 for the nine month period ended September 30, 1997. The fluctuation
in results have been described in the individual paragraphs above.
Liquidity and Capital Resources
In February 1998, the Company completed the First Tranche Sale in connection
with the February 1998 Private Placement from which it received net proceeds of
approximately $5,450,000. In connection with the First Tranche Sale, the Company
incurred transaction costs of $550,000. Upon receipt of such net proceeds, the
Company provided Applied with a $5,450,000 unsecured loan, evidenced by
Applied's 8% non-convertible note due on the earlier to occur of (a) December
31, 1999, or b) consummation of any public offering or private placement of
securities of Applied with net proceeds aggregating in excess of $6,000,000,
other than in respect of working capital financing or secured financing of
assets received by Applied in the ordinary course of business from any bank or
other lending institution, subject to certain conditions. Applied will use the
net proceeds of the loan solely for working capital and general corporate
purposes and not for the satisfaction of any portion of Applied debt or to
redeem any Applied equity or equity-equivalent securities.
11
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In November, 1996, the Company loaned $3,000,000 to Lanxide Performance
Materials, Inc. ("LPM"), a wholly owned subsidiary of Lanxide Corporation, which
specializes in the manufacture of ceramic bonding and refractory materials.
Lanxide is affiliated with the Company by significant common beneficial
ownership. The loan was evidenced by a promissory note, dated November 13, 1996
in the principal amount of $3,000,000 (the "LPM Note"), which was collateralized
by the assets of LPM and guaranteed by Lanxide. The LPM Note became due on
February 28, 1998. In March, 1998, Applied transferred to the Company a
promissory note in the principal amount of $1,500,000, together with $500,000 in
cash, as partial prepayment of the $4,000,000 unsecured loan from the Company to
Applied in September 1997. Upon receipt of such prepayment, the Company canceled
the LPM Note and paid Lanxide an additional $500,000 in cash, in exchange for
the CERASET Business, CERASET License and CERASET Trademark.
For the nine months ended September 30, 1998, the Company reported net
income of $1,963,000. At September 30, 1998, the Company had a working capital
deficit of $5,247,000 as compared to working capital of $13,208,000 at the
December 31, 1997. The Company did not pay dividends of $63,125 due September
30, 1998 on its Series AA Preferred Stock. Approximately $11,170,000 of working
capital at December 31, 1997 related to Applied which was deconsolidated in
February 1998. In addition, $3,000,000 of working capital at December 31, 1997
was used to acquire the CERASET Business, License and Trademark. The Company
also sold Applied common stock and lent the net proceeds to Applied, which is
recorded as an investment in unconsolidated subsidiary.
The Company anticipates that it will need additional financing during 1998
and 1999 to satisfy its current operating requirements. The Company believes
that it may be able to obtain such financing through the sale of its Applied
Common Stock in one or more private placement transactions.
Net Operating Losses
The Company has net operating loss carryforwards which expire in the years
2000 through 2012. The amount of net operating loss carryforward that can be
used in any one year will limited by the applicable tax laws which are in effect
at the time such carryforward can be utilized. A valuation allowance has been
established to offset any benefit from the net operating loss carryforwards as
it cannot be determined when or if the Company will be able to utilize the net
operating losses.
Forward Looking Statements
This report contains forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934. These forward-looking
statements are based largely on the Company's
12
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exceptations and are subject to a number of risks and uncertainties, certain of
which are beyond the Company's control. Actual results could differ materially
from these forward-looking statements as a result of, among other factors,
competitive conditions in the industries in which the Company operates, failure
to commercialize one or more of the technologies of the Company and the general
economic conditions that are less favorable than expected. In light of these
risks and uncertainties, there can be no assurance that the forward-looking
information contained in this report will in fact occur.
13
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There have been no material legal proceedings to which
the Company is a party which have not been disclosed in previous filings with
the Securities and Exchange Commission. There are no material developments to be
reported in any previously reported legal proceeding.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The Company did not pay dividends of $63,125 due September
30, 1998 on its Series AA Preferred Stock.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - 27 - Financial Data Schedule
(b) Reports on Form 8-K -
A report on Form 8-K was filed by the Company on
July 17, 1998 reporting under Item 5 the
resignation of certain directors and officers of
the Company and appointment of a new chairman and
officers of the Company.
14
<PAGE> 15
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.
COMMODORE ENVIRONMENTAL SERVICES, INC.
(Registrant)
By /s/ Andrew P. Oddi
---------------------------------
Andrew P. Oddi - Vice President
Treasurer
(Principal Financial Officer)
Date: November 11, 1998
15
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 39
<SECURITIES> 0
<RECEIVABLES> 150
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 239
<PP&E> 129
<DEPRECIATION> (65)
<TOTAL-ASSETS> 13,871
<CURRENT-LIABILITIES> 5,486
<BONDS> 2,250
0
39
<COMMON> 628
<OTHER-SE> 4,872
<TOTAL-LIABILITY-AND-EQUITY> 13,871
<SALES> 0
<TOTAL-REVENUES> 1,259
<CGS> 1,013
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,678
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 467
<INCOME-PRETAX> 1,963
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,963
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,963
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
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