UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 or 15 (d)
OR THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1997
Commission file number 0-12172
Lincoln Logs Ltd.
(Exact name of small business issuer as specified in its charter)
New York 14-1589242
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Riverside Drive, Chestertown, New York 12817
(Address of principal executive offices)
(518) 494 - 5500
(Issuer's telephone number)
Neither name, address nor fiscal year has changed since last report
(Former name, former address and former fiscal year, if changed since last
report.)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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_________
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
Class Outstanding at October 31, 1997
Common Stock, $ .01 par value 945,759
- 1 -
LINCOLN LOGS LTD. AND SUBSIDIARIES
INDEX
Page Number
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
Consolidated balance sheets as of October 31, 1997
and January 31, 1997 (restated) 3 - 4
Consolidated statements of operations
for the nine months ended October 31, 1997
and October 31, 1996 (restated) 5
Consolidated statements of operations
for the three months ended October 31, 1997
and October 31, 1996 (restated) 6
Consolidated statements of cash flows
for the nine months ended October 31, 1997
and October 31, 1996 (restated) 7
Notes to consolidated financial statements 8 - 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS 11 - 13
PART II. OTHER INFORMATION 14
SIGNATURES 15
- - 2 -
LINCOLN LOGS LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS AS OF
OCTOBER 31, 1997 AND RESTATED JANUARY 31, 1997
ASSETS
Restated
October 31, January 31,
1 9 9 7 1 9 9 7
(Unaudited) (Audited)
CURRENT ASSETS:
Cash and cash equivalents 330,971 $ 359,107
Trade accounts receivable, net of$9,000
allowance for doubtful accounts 40,334 274,910
Notes receivable 18,500 18,500
Inventories (principally raw materials) 759,516 623,075
Prepaid expenses and other current
assets 347,591 426,131
Income taxes receivable and prepaid 800 ---
Due from related party 1,779 1,779
-------- ----------
TOTAL CURRENT ASSETS 1,499,491 1,703,502
PROPERTY, PLANT AND EQUIPMENT:
Land 784,800 784,800
Buildings and improvements 2,125,626 2,125,626
Machinery and equipment 623,777 623,777
Furniture and fixtures 1,312,703 1,252,156
Transportation equipment 146,218 146,218
---------- ----------
4,993,124 4,932,577
Less: accumulated depreciation (3,250,499) ( 3,154,499)
---------- -----------
TOTAL PROPERTY, PLANT AND
EQUIPMENT - net 1,742,625 1,778,078
OTHER ASSETS:
Due from related party 72,565 74,425
Assets held for resale 38,189 38,189
Cash surrender value of life insurance,
net of loan of $80,000 9,321 9,321
Deposits and other assets 988 988
Intangible assets, net of amortization 20,051 27,345
------- ---------
TOTAL OTHER ASSETS 141,114 150,268
-------- ---------
TOTAL ASSETS $ 3,383,230 $ 3,631,848
========== =========
See notes to consolidated financial statements.
- 3 -
LINCOLN LOGS LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS AS OF
OCTOBER 31, 1997 AND RESTATED JANUARY 31, 1997
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Restated
October 31, January 31,
1 9 9 7 1 9 9 7
(Unaudited) (Audited)
CURRENT LIABILITIES:
Current installments of long-term debt:
Related parties $ 500,000 $ 18,084
Others 219,208 ---
Notes payable (note 5):
Related parties 315,000 335,000
Others 213,127 175,000
Trade accounts payable 1,358,453 940,598
Customer deposits 1,021,661 1,151,439
Accrued payroll, related taxes and
withholdings 13,289 43,428
Accrued income taxes --- 769
Due to related parties 120,484 108,820
Accrued expenses 335,666 366,395
-------- ---------
TOTAL CURRENT LIABILITIES 4,096,888 3,139,533
LONG-TERM DEBT, net of current installments:
Convertible subordinated debentures:
Related parties --- 500,000
Others --- 200,000
Other 9,961 25,283
Other long-term liability 89,321 89,321
---------- ----------
TOTAL LIABILITIES 4,196,170 3,954,137
STOCKHOLDERS' EQUITY (DEFICIENCY):
Preferred stock, $ .01 par value; authorized
1,000,000 shares; issued - 0 - shares --- ---
Common stock, $ .01 par value; authorized
10,000,000 shares at October 31, 1997 and
5,000,000 shares at January 31, 1997;
issued 1,449,999 shares 14,500 14,500
Additional paid-in capital 3,894,286 3,894,286
Accumulated deficit (3,837,291) (3,346,640)
------------ ----------
71,495 562,146
Less: cost of 504,240 shares of common
stock in treasury at October 31,1997
and January 31, 1997 ( 884,435) ( 884,435)
------------- -------------
TOTAL STOCKHOLDERS' DEFICIENCY ( 812,940) ( 322,289)
-------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIENCY) $ 3,383,230 $ 3,631,848
============ ============
See notes to consolidated financial statements.
- - 4 -
LINCOLN LOGS LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE NINE
MONTHS ENDED OCTOBER 31, 1997 AND RESTATED 1996
(UNAUDITED)
Nine Months Ended
October 31,
1 9 9 7 1996 - Restated
SALES, net of commissions of $946,388
and $858,497, respectively $ 5,924,706 $ 6,140,243
COST OF SALES 4,319,146 4,229,912
------------- ----------
GROSS PROFIT 1,605,560 1,910,331
OPERATING EXPENSES:
Selling, general and administrative 1,975,673 1,921,486
---------- ----------
(LOSS) FROM OPERATIONS ( 370,113) ( 11,155)
OTHER INCOME (EXPENSE):
Interest income 29,931 34,060
Interest expense ( 166,954) ( 173,983)
Other 16,485 20,590
---------- ----------
Total other income (expense) - net ( 120,538) ( 119,333)
----------- --------
(LOSS) BEFORE INCOME TAXES ( 490,651) ( 130,488)
INCOME TAXES --- ---
----------- ----------
NET (LOSS) $ ( 490,651) $ ( 130,488)
============ ===========
PER SHARE DATA (note 3):
Primary (loss) per common share $ ( .52) $ ( .14)
See notes to consolidated financial statements.
- - 5 -
LINCOLN LOGS LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE
MONTHS ENDED OCTOBER 31, 1997 AND RESTATED 1996
(UNAUDITED)
Three Months Ended
October 31,
1 9 9 7 1996 - Restated
SALES, net of commissions of $404,586
and $273,597, respectively $ 2,052,004 $ 2,291,550
COST OF SALES 1,512,253 1,662,625
------------- ---------
GROSS PROFIT 539,751 628,925
OPERATING EXPENSES:
Selling, general and administrative 640,019 572,898
------------ -----------
(LOSS) INCOME FROM OPERATIONS ( 100,268) 56,027
OTHER INCOME (EXPENSE):
Interest income 9,441 12,560
Interest expense ( 52,628) ( 57,191)
Other 11,392 9,463
------------ -----------
Total other income (expense) - net ( 31,795) ( 35,168)
------------- ------------
(LOSS) INCOME BEFORE INCOME TAXES ( 132,063) 20,859
INCOME TAXES --- ---
---------------- --------------
NET (LOSS) INCOME $ ( 132,063) $ 20,859
=============== =============
PER SHARE DATA (note 3):
Primary earnings per common share $ ( .14) $ .02
Fully diluted earnings per common
and common equivalent share $ ( .14) $ .01
See notes to consolidated financial statements.
- 6 -
LINCOLN LOGS LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE
MONTHS ENDED OCTOBER 31, 1997 AND RESTATED 1996
(UNAUDITED)
Nine Months Ended
October 31,
1 9 9 7 1996 - Restated
OPERATING ACTIVITIES:
Net income (loss ) $ ( 490,651) $ ( 130,488)
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Depreciation and amortization 103,295 112,509
Changes in operating assets and liabilities:
Trade accounts receivable 234,575 ( 287,586)
Inventories ( 136,441) 7,649
Prepaid expenses and other current assets 78,540 ( 120,627)
Trade accounts payable 545,982 238,199
Customer deposits ( 129,778) 137,223
Accrued expenses and other current
liabilities ( 60,868) 37,144
Due to related parties 11,664 ---
Accrued and prepaid income taxes ( 1,569) ( 921)
------------ --------------
Net cash provided (used) by
operating activities 154,749 ( 6,898)
INVESTING ACTIVITIES:
Additions to property, plant and equipment ( 60,547) ( 26,234)
Increase in deposits and other assets --- ( 299)
Decrease in due from related parties 1,860 1,020
-------- -----------
Net cash (used) by investing activities ( 58,687) ( 25,513)
------------ -----------
FINANCING ACTIVITIES:
Current installments of long-term debt 1,124 ---
Proceeds from notes payable, net --- 70,000
Repayments of notes payable ( 110,000) ---
Reduction of other credit - redeemable
common stock --- ( 94,305)
Reductions in long-term debt ( 15,322) ( 134,736)
---------------- -----------
Net cash (used) by financing activities ( 124,198) ( 159,041)
-------------- -----------
Net (decrease) in cash and cash equivalents ( 28,136) ( 191,452)
Cash and cash equivalents at beginning of period 359,107 373,636
----------- -----------
Cash and cash equivalents at end of period $ 330,971 $ 182,184
=============== ==========
See notes to consolidated financial statements.
- 7 -
LINCOLN LOGS LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1997 AND 1996
(1) BASIS OF PRESENTATION
The financial statements as of and for the year ended January 31, 1997 ("the
fiscal 1997 financial statements") and the interim financial information as
of and for the three-month and nine-month periods ended October 31, 1996 ("the
fiscal 1997 third quarter financial information") have been restated to reflect
the correction of errors that have been detected in the fiscal 1997 financial
statements included in the 1997 Annual Report on Form 10-KSB and the fiscal
1997 third quarter financial information included in the October 31, 1996
Form 10-QSB filed with the Securities and Exchange Commission. The effect
of the correction of these errors on information previously reported on the
fiscal 1997 Form 10-KSB can be obtained from the Amended Annual Report on Form
10-KSB-A filed by the Company.
The results of operations for the nine-month periods ended October 31, 1997 and
1996 are not indicative of the results to be expected for the full year, due to
the seasonal nature of the business.
The interim financial information included herein is unaudited; however,
such information reflects all adjustments (consisting solely of normal
recurring adjustments) which are, in the opinion of management, necessary for a
fair presentation of results for the interim periods. The financial
statements and Management's Discussion and Analysis of Financial Condition
and Results of Operations should be read in conjunction with the Company's
financial statements as of and for the year ended January 31, 1997
included in Form 10-KSB-A filed on May 1, 1998.
(2) RESTATEMENT OF PRIOR PERIOD RESULTS
The Company has restated previously issued financial results for the year
ended January 31, 1997 and the three-month and nine-month periods ended
October 31, 1996. The restated financial results reflect the correction of
errors in the Company's accounting procedures related to sales cut-off,
commission expense, recording of certain accruals and inventory
reconciliation. The following summarizes the impact of the restatement on the
financial information included herein:
<TABLE>
Nine Months Ended Three Months Ended
--- October 31, 1996 --- --- October 31, 1996 ---
<S> <S> <S> <S>
As Reported Restated As Reported Restated
<C> <C> <C> <C>
Sales, net of commissions $ 6,240,429 $ 6,140,243 $ 2,391,736 $ 2,291,550
Cost of sales $ 4,006,978 $ 4,229,912 $ 1,574,423 $ 1,662,625
Gross profit $ 2,233,451 $ 1,910,331 $ 817,313 $ 628,925
Selling, general and
administrative expenses $ 1,832,165 $ 1,921,486 $ 531,577 $ 572,898
Net (loss) earnings $ 281,953 $ ( 130,488) $ 250,568 $ 20,859
Primary (loss) earnings per share $ .30 $ ( .14) $ .26 $ .02
Fully diluted (loss) earnings per share $ .08 $ ( .14) $ .06 $ .01
--- January 31, 1997 ---
As Reported Restated
Trade accounts receivable $ 318,846 $ 274,910
Inventories $ 618,248 $ 623,075
Prepaid expenses and other
current assets $ 431,824 $ 426,131
Customer deposits $ 987,268 $ 1,151,439
Accrued salaries and wages $ 36,426 $ 43,428
Accrued expenses $ 314,391 $ 366,395
Accumulated deficit $(3,077,661) $(3,346,640)
</TABLE>
(3) EARNINGS (LOSS) PER SHARE
Primary earnings per common share is computed by dividing net earnings by the
weighted average number of common shares outstanding during the respective
periods. The weighted average number of common shares used to compute
primary earnings per share was 945,759 for each of the three-month and
nine-month periods ended October 31, 1997 and 1996.
Fully diluted earnings per common and common equivalent share is computed
based on the weighted average number of common and common equivalent shares
outstanding during the respective periods, assuming the convertible subordinated
debentures were converted into common stock at the beginning of the period after
giving retroactive effect to the elimination of interest expense, net of income
tax effect, applicable to the convertible subordinated debentures. The fully
diluted weighted average number of common and common equivalent shares was
4,445,759 for the three-month period ended October 31, 1996.
(4) INCOME TAXES
The Company accrues income tax expense on an inter-period basis as necessary,
and accrues income tax benefits only when it is more likely than not that such
tax benefits will be realized. No income tax benefit nor expense was accrued
in the nine months ended October 31, 1997 and 1996.
- 9 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(5) NOTES PAYABLE
During fiscal years 1998 and 1997, the Company continued its Cant Financing
Program, which was initiated in 1994 to raise capital for the purchase of pine
and cedar cants (logs) to be held in inventory and then used by the Company in
the manufacture of its log home building packages. The notes are generally
collateralized by accounts receivable or the cant inventory thus purchased.
Notes issued in the current Cant Financing Program are for a fixed term and
amount and bear interest at an annual rate of 18% payable monthly. As of
October 31, 1997, a total of $510,000 has been loaned to the Company by
various individuals, including directors and shareholders, and is due on
June 30, 1998.
(6) SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION
During the nine months ended October 31, 1997, cash was paid in the amounts of
$166,954 for interest and $1,236 for income taxes. During the nine months
ended October 31, 1996, cash was paid in the amounts of $177,370 for interest
and $921 for income taxes.
Non-cash investing and financing activity:
During the nine month period ended October 31, 1997 the following
transactions took place:
- - The Company converted amounts due as Trade Accounts Payable
into a Note Payable in the amount of $128,127.
During the nine-month period ended October 31, 1996 the following
transaction took place:
- - The Company entered into a capital lease for a piece of office
equipment having a total cost of $5,282.
- 10 -
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Nine months ended October 31, 1997 vs. October 31, 1996, restated:
The Company's revenues, net of sales commissions, for the nine months ended
October 31, 1997 were $5,924,706 as compared to $6,140,243 in the same
nine-month period in 1996, a decrease of $215,537, or 4%. There was an 11%
decrease in the number of log home package units shipped during the current
nine-month period as compared to the previous year while the average sales
value per home package unit shipped was 6% higher than the previous year.
The increase in sales value per log home unit shipped resulted from a
combination of price increases put into effect in the prior
fiscal year and the shipment of larger log home packages. Additionally, there
was a 77% increase in the number of solarium units shipped as compared to the
previous year. This increase is primarily due to a broader base of
distribution of this product line in the Company's dealer/distributor
network. Solarium revenues represent approximately 5% of
the Company's total net revenues in the current fiscal period as compared with
the previous fiscal period when revenues from solarium sales represented
approximately 2% of total net revenues.
Gross profits amounted to $1,605,560, or 27% of net sales for the nine months
ended October 31, 1997 as compared to $1,910,331, or 31% for the same period in
1996. The decrease in gross profits is due to an increase in the cost of
certain raw materials and increased overhead. The increase in overhead costs
was due principally to the reallocation of certain personnel costs that are
more closely associated with the manufacturing and engineering process. The
increase in raw material costs was affected principally by a rise in the cost
of cants, both pine and cedar, by 10% and 25%, respectively.
Total operating expenses of $1,975,673, or 33% of net sales, have increased
$54,187 from the previous year's amount of $1,921,486, or 31% of net sales.
The increase in total operating expenses amounted to 3% and is partially
attributable to incurring project development costs related to a sales project
which did not come to fruition that was offset by the reallocation of certain
overhead costs as discussed in the preceding paragraph.
Three months ended October 31, 1997 vs. October 31, 1996, restated:
Sales, net of commissions, amounted to $2,052,004 for the three months ended
October 31, 1997 as compared to $2,291,550 in the same period in 1996, a
decrease of $239,546, or 10%. When compared with the previous year, there
was a 20% decrease in the number of log home package units shipped while the
average value per log home package shipped increased 14%. There was a 75%
increase in the number of solarium units shipped. The decrease in home
package units shipped was principally due to restrictive credit policies of
lending institutions during 1997 and, to a lesser extent, the difficulty of
obtaining contractors to build customers' homes. The delays caused by the
difficulty in obtaining appraisals, securing financing and submitting required
documentation to lenders resulted in many shipments being postponed to later
dates in the current fiscal year and into the next fiscal year. The increase
in the average value per unit shipped reflects both price increases and larger
units being shipped in the current period. While small in actual numbers
the increase in solarium units shipped is due to a broader base of
distribution of the product line in the Company's dealer/distributor network.
Gross profits were $539,751, or 26% of net sales, for the three months ended
October 31, 1997 as compared to $628,925, or 27% of net sales, for the same
period in 1996. The decrease in gross profits is due to increases in raw
material and overhead costs whose effect on gross profits has not been
totally offset by sales price increases realized in the third fiscal quarter.
Total operating expenses of $640,019, or 32% of net sales, have increased
$67,121, from the previous year's amount of $572,898, or 25% of net sales. The
increase in total operating expenses represents a 12% increase over the previous
year. The increase in expense is partially attributable to incurring project
development costs related to a sales project which did not come to fruition.
LIQUIDITY AND CAPITAL RESOURCES
The Company was in a negative working capital position at both October 31, 1997
and October 31, 1996 of $2,597,397 and $1,444,393, respectively. For the
nine-month period ended October 31, 1997 working capital decreased $1,161,366 as
compared to a decrease of $58,414 in the same period in 1996. As of the
Company's fiscal year end at January 31, 1997 current liabilities exceeded
current assets by $1,436,031. For the nine months ended October 31, 1997 the
Company's operations were a net provider of $154,749 of cash, while in the
comparable period of the previous year it was a net user of cash in the
amount of $6,898. Overall, the Company experienced a net decrease in its cash
position of $28,136 at October 31, 1997 as compared with a decrease in its cash
position of $191,452 at October 31, 1996. During the nine months ended
October 31, 1997 and 1996 cash was primarily consumed by purchases of
equipment and the repayment of long-term debt obligations, including, in
1996, obligations related to the retirement of the Company's founder.
As of October 31, 1997 current liabilities exceeded current assets by
$2,597,397 and the Company had a net capital deficiency of $812,940. The
Company has not been successful in securing working capital through commercial
lenders or governmental agency sources. Funds generated by operations and the
renewal of the Cant Financing Program, together with the assistance of major
vendors who have provided extended payment terms to the Company are expected to
be sufficient for the remainder of the current year. There is, however, no
assurance that the Company will be able to generate adequate financing from
these sources. A reduction in the Company's sales activity, the
inability to renew borrowings under the Cant Financing Program when the notes
matured in June 1997 (and remain outstanding), or a reduction in vendor
assistance may further reduce its liquidity and, eventually, force the Company
to cease operations.
OTHER MATTERS
In January 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings Per Share", which is effective for the Company in fiscal
1998. This Statement, which modifies computation, presentation and disclosure
requirements for earnings per share, will not have a material impact on the
Company's calculation of earnings per share.
- 13 -
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On February 9, 1998, the Company was served with a Summons and
Complaint against it and three current members and one former member of its
Board of Directors by a shareholders group which alleges mismanagement, breach
of fiduciary duties and other matters. The Company responded to the Complaint
on behalf of itself and the current and former Board members on March 26, 1998,
and also filed a countersuit. The Company does not believe that it has any
liability with respect to the allegations and intends to defend itself
vigorously. In the opinion of the Company's counsel, the Company has
good defenses and believes the Complaint lacks merit.
Item 2. Changes in Securities
None
Item 3. Defaults of Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Shareholders held on October 6, 1997, three
proposals were presented and approved by the shareholders. They were the
approval of the independent accounting firm of KPMG Peat Marwick LLP to
continue as auditors for the Company, the approval of an Amendment to the
Company's Certificate of Incorporation to increase the number of authorized
shares of the Company's Common Stock to 10,000,000 shares from 5,000,000
shares, and the approval of an Amendment to and Re-Adoption of the Company's
Stock Option Plan. The proposal of Election of Directors was postponed.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
None
- 14 -
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has fully caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
LINCOLN LOGS LTD.
/ s / John D. Shepherd
John D. Shepherd
Chairman of the Board, President, Chief
Executive Officer and Treasurer
April 30, 1998
/ s / William J. Thyne
William J. Thyne
Chief Financial Officer, Principal Financial
Officer and Secretary
April 30, 1998
- 15 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS DATA EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS
AND THE CONSOLIDATED STATEMENTS OF OPERATIONS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> FEB-01-1997
<PERIOD-END> OCT-31-1997
<CASH> 330,971
<SECURITIES> 0
<RECEIVABLES> 49,334
<ALLOWANCES> 9,000
<INVENTORY> 759,516
<CURRENT-ASSETS> 1,499,491
<PP&E> 4,993,124
<DEPRECIATION> 3,250,499
<TOTAL-ASSETS> 3,383,230
<CURRENT-LIABILITIES> 4,096,888
<BONDS> 9,961
0
0
<COMMON> 14,500
<OTHER-SE> (827,440)
<TOTAL-LIABILITY-AND-EQUITY> 3,383,230
<SALES> 5,924,706
<TOTAL-REVENUES> 5,924,706
<CGS> 4,319,146
<TOTAL-COSTS> 4,319,146
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 166,954
<INCOME-PRETAX> (490,651)
<INCOME-TAX> 0
<INCOME-CONTINUING> (490,651)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (490,651)
<EPS-PRIMARY> (.52)
<EPS-DILUTED> (.52)
</TABLE>
