SECURITIES AND EXCHANGE COMMISSION
450 FIFTH STREET, N.W.
WASHINGTON, D.C. 20549
Form 10-KSB
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
[ X ] Annual Report Pursuant to Section 13
or 15(d) of The Securities Exchange Act of 1934
For the fiscal year ended February 28, 1998
or
[ ] Transitional Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the transition period from to
Commission File Number 0-21547
MEISENHEIMER CAPITAL, INC.
(Exact Name of registrant as specified in its charter)
Delaware 06-1101766
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
46 Quirk Road, Milford, Connecticut 06460
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (203) 877-9508
Securities registered pursuant to Section 12(b) of the Act: Common Stock -
$.01 par value
Securities registered pursuant to Section 12(g) of the Act:
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K. [ X ]
State the aggregate market value of the voting stock held by non-affiliates
of the registrant. The aggregate market value shall be computed by reference to
the price at which the stock was sold, the average bid and asked prices of such
stock, as of a specified date within 60 days prior to the date of filing.
$521,536.75
APPLICABLE ONLY TO CORPORATE REGISTRANTS
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
The number of shares of the registrant's Common Stock outstanding as of
June 1, 1998 was 4,477,084 shares.
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Part I
ITEM 1. DESCRIPTION OF BUSINESS
General
Meisenheimer Capital, Inc. ("MCI" or the "Company") was
organized under the laws of the State of Delaware in December, 1983. In 1984,
the company made an initial public offering pursuant to a Registration Statement
on Form S-18 which was declared effective by the Securities and Exchange
Commission on or about July 27, 1984. Pursuant to the offering, the Company sold
1,130,000 Units at $1.00 a Unit for net proceeds of approximately $995,000. Each
Unit consisted of one share of common stock (the "Common Stock") and one warrant
entitling the holder thereof to purchase one share of Common Stock. The Warrants
expired in April, 1985.
Since 1984, the Company has been engaged, through its
subsidiary, the United States Basketball League, Inc. ("USBL") in the business
of developing and managing a professional basketball league, the "United States
Basketball League" (the "League"). In 1992, the Company acquired another
subsidiary, Cadcom, Inc., ("Cadcom"), incorporated in the State of Connecticut
in 1987. Cadcom is engaged in the business of manufacturing component parts for
high tolerance aircraft parts. In August, 1995, MCI established another wholly
owned subsidiary, Meisenheimer Real Estate Holdings Inc. ("MCR") to acquire the
office and factory that it had been previously leasing.
MCI owns approximately 52% of the issued and outstanding stock
of USBL which consists of both common and preferred stock. The principals of MCI
and members of their immediate family (the "Meisenheimer Family") and affiliated
entities own approximately 31% and the balance of 17% is owned by members of the
public. MCI owns all of the issued and outstanding stock of Cadcom and MCR.
USBL Subsidiary
USBL owns and manages the United States Basketball League (the
"League"). The League was established to provide a professional summer
basketball league. The participating players are either recent college graduates
or free agents not under contract with teams in the National Basketball
Association (the "NBA") or are players under contract to foreign teams but who
are permitted to play in the United States in their off-season. The League
provides a vehicle to these players to improve their skills and further affords
the players the opportunity to showcase their professional ability and possibly
be selected by one of the teams in the NBA. The League's season, from early May
to early July of each year, was designed specifically to give the players the
opportunity to be scouted by NBA teams and possibly be selected to participate
in the various summer camps of the individual teams comprising the NBA, which
summer camps are normally held in the latter part of July and August of each
year. To date, approximately 114 USBL players have made NBA rosters after
playing with teams in the League. USBL also provides a training program for
referees who aspire to referee in the NBA.
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Each team comprising the League has an active roster of twelve
players during the season, and each team plays 26 games per season. The League
also has playoffs at the conclusion of the regular season.
Since the inception of the League to the present time, the
number of active franchises has fluctuated from seven to its present high for
the 1998 season of twelve franchises. The current active franchises, divided
into two divisions, the Southern Division and the Northern Division, are located
in Atlanta, Georgia (the Atlanta Trojans); Jacksonville, Florida (the
Jacksonville Barracudas); Raleigh, North Carolina (the Raleigh Cougars); Tampa,
Florida (the Tampa Bay Windjammers); Powell, Ohio (the Columbus Cagerz);
Washington, DC (the Washington Congressionals); Atlantic City, New Jersey (the
Atlantic City Seagulls); Franklin, New Hampshire (the New Hampshire Thunder
Loons); Milford, Connecticut (the Connecticut Skyhawks); Oyster Bay, New York
(the Long Island Surf); Camden, New Jersey (the Camden Power); and Ocean, New
Jersey (the New Jersey Shorecats). In addition, there are two inactive
franchises owned by MCI which pay annual royalty fees.
Since 1984 and up to the end of the fiscal year ended February
28, 1998 ("Fiscal 1998"), USBL had sold a total of 32 franchises at various
prices ranging from $10,000 to $150,000. An affiliate of the company also paid
$100,000 for a franchise. The current asking price for a franchise is $300,000;
however, the Company has not been able to consummate a sale at that price.
During the past five fiscal years, 1994 through Fiscal 1998,
the Company sold franchises to non-affiliates for cash as set forth below:
Franchise Sales Price Cash Received
--------- ----------- -------------
1. Mississippi Coast Gamblers $100,000 $ 25,000
2. Memphis Fire $100,000 $ 15,000
3. Florida Sharks $ 75,000 $ 75,000
4. Carolina Cardinals $250,000 $ 25,000
5. Atlantic City Seagulls $150,000 $ 50,000
6. Camden Power (formerly Philadelphia Power) $300,000 $ 50,000
7. New Hampshire Thunder Loons $150,000 $100,000
8. New Jersey Shorecats $150,000 $ 60,000
9. Washington Congressionals $300,000 $ 30,000
Unless the sales price has been paid in full at the time of purchase, each of
the foregoing franchises is required to pay the full sales price over time, and
in the event payments are not met, USBL retains the right to repossess the
franchise.
At least 16 franchises previously sold have been terminated
because of non-payment of franchise obligations. In addition and during the
fiscal year ended February 29, 1996 ("Fiscal 1996"), USBL sold five (5)
franchises in a barter transaction receiving in exchange 2,000,000 units
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of negotiable television advertising due bills, and during the first quarter of
Fiscal 1997 USBL entered into an agreement to receive an additional 2,000,000
units of negotiable television advertising due bills in exchange for five
additional franchises. The 4,000,000 units of advertising time are with American
Independent Network ("AIN") which employs satellite transmissions to certain
affiliated television stations in approximately 90 cities throughout the United
States. Management has valued the advertising due bills received in Fiscal 1996
and the first quarter of Fiscal 1997 at $500,000. (See Financial Information.)
USBL has already used approximately 300,000 units to broadcast certain selective
League games. During Fiscal 1998, the Company did not use any of the Units. The
Company may use the remainder of the available television time to broadcast its
games or, in the alternative, sell off the available television time assuming
that USBL can locate buyers. The barter transaction requires that the 10
franchise teams must be established within ten years from the date of the
transactions. To date, none of these franchises have been activated. The Company
has no assurance that any of the franchises will ever be established. In
addition, the Company retains the right to approve or disapprove the ultimate
franchisee.
Under the standard franchise agreement employed by USBL, the
term of the franchise is for ten (10) years with rights of renewal. In addition
to the initial purchase price for the franchise, the franchisees are currently
required to pay an annual royalty fee of $15,000 per year. Currently, six of the
franchises are in arrears in their annual royalty fees. The Company has the
right to terminate these franchises but has not elected to do so. In addition,
because of the Company's desire to have the League expand, the Company, in the
past, has waived annual royalty fees under certain circumstances.
The Franchise Agreement employed by USBL also entitles USBL to
receive television revenues on a sharing basis with the teams in connection with
any television broadcasting of national or regional games. To date, USBL has not
received any revenues. The Franchise Agreement also provides for USBL to receive
revenues from the sale of team and league merchandise. Revenues from these
sources have been negligible. The Franchise Agreement also requires USBL to use
its good faith efforts to obtain sponsorships for each team and the league. Such
sponsorship is generally from local or national corporations. The sponsorships,
which for the last several years have been negligible, have generally taken the
form of free basketballs, uniforms, air line tickets and discount accommodations
for traveling teams.
Since the inception of the League and to date, only two of the
franchises have operated profitably. This has been primarily due to the
inability of USBL, because of insufficient capital, to properly promote the
League, and USBL's inability to attract any meaningful sponsorships for the
individual teams. Likewise, gate attendance for some teams has historically been
poor. As a result, the sale of additional franchises either to maintain a
constant level of active franchises or to enlarge the League has historically
proven difficult for USBL.
From the inception of the League, USBL has operated at a loss.
This has been due to the poor sales of franchises and the inability of the
franchisees to pay their annual royalty fees. As a result, both MCI and USBL
have been dependent on loans and advances from officers, directors and their
affiliates. (See "Financial Information" and "Certain Relationships and Related
Transactions".) For Fiscal years ended 1995, 1996, 1997 and 1998, the Company's
auditors and
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USBL's auditors have expressed concerns in their opinion as to the ability of
both MCI and USBL to continue as going concerns. See "Financial Information".
USBL currently employs four full time employees consisting of
the President, Daniel T. Meisenheimer III, who also acts as Commissioner of the
League; a Director of Administration; a Director of Public Relations, and a
Director of Operations. During the League season, the Company employs additional
staff including approximately 50 referees who are paid on a per game basis. In
addition, USBL plans to establish an advisory board consisting of former
basketball stars and franchise owners.
Future Plans of USBL
USBL has, as its ultimate goal, the establishment of at least
sixty (60) franchises throughout the United States, consisting of fifteen (15)
teams in four regional divisions. This would result in regional play-off games
and then a final championship series. The Company is also attempting to develop
a formal association with the NBA. During Fiscal year 1998, the NBA selected
USBL to handle a pre-draft camp for the Korean Basketball League for which it
received a nominal fee. At the present time, the Continental Basketball
Association (the "CBA"), a league consisting of nine teams, is regarded as the
minor league of the NBA, and as such, receives financial support from the NBA.
The Company believes that a formal association with the NBA would enhance the
value of the franchises and attract more significant gate attendance. Likewise,
the Company intends to use some of the television time available to it to
broadcast more games which the Company believes would create additional fan
interest and serve to attract additional franchisees. However and given the
difficulties encountered by the Company to date in the sale of additional
franchises, the Company may not be able to achieve its long-range goals without
additional capital to properly promote the League. While gate attendance has
been poor historically, there has been steady growth over the past three
seasons. For Fiscal 1998, there was an increase in attendance of 14% over Fiscal
1997. If gate attendance continues to increase, the Company believes that this
will facilitate franchise sales.
Cadcom, Inc.
MCI's other operating subsidiary is Cadcom Inc. ("Cadcom")
which was incorporated in Connecticut in 1987. Cadcom is wholly owned by MCI and
was acquired by MCI in February, 1992 from Synercom Inc. ("Synercom"), a
corporation owned and controlled by the President of MCI and members of the
Meisenheimer Family.
Cadcom operates as a subcontractor manufacturing aluminum and
stainless steel components for high tolerance aircraft parts for both fixed wing
aircraft and helicopters which components are mainly used in pressure switches,
fuel valves and various indicators and instruments. Approximately ninety-seven
percent (97%) of Cadcom's business is derived from orders it receives from
Spectrum Associates Inc. ("Spectrum"), a Connecticut corporation owned and
controlled by Synercom. Spectrum manufacturers crash resistant breakaway valves,
pressure switches, indicators and other specialized components for the aircraft
industry. Approximately fifteen (15%) percent of Spectrum's revenues are derived
from orders from Sikorsky Aircraft Inc. and thirty (30%) percent
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is derived from orders from various divisions of the U.S. Armed Forces and the
Department of Defense. The balance of Spectrum's orders are from other major
aircraft manufacturers. Spectrum contracts with Cadcom as a subcontractor for
approximately 65% of Spectrum's requirements for aluminum and stainless steel
components. Cadcom is presently making efforts to diversify its customer base to
eliminate its dependence upon Spectrum; however, there can be no assurances that
Cadcom will be able to diversify its customer base.
Cadcom's manufacturing process is controlled by rigid
standards established by both the Federal Aviation Authority ("FAA") and the
Department of Defense. The manufacturing process utilizes highly sophisticated
computer-controlled turning and milling machinery. Approximately thirty (30%)
percent of the equipment is rented by Cadcom under capital leases from Synercom.
In Fiscal 1997, Cadcom contributed approximately 98% of the total revenues
generated by MCI. In prior years, Cadcom accounted for almost all of MCI's
revenues. Because of Cadcom's dependency on Spectrum, any decline in Spectrum's
business would have an adverse impact on Cadcom's results of operations. Cadcom
is actively seeking other outside business to lessen its dependency on Spectrum.
Cadcom employs ten (10) people consisting of a plant manager
and office manager and seven factory personnel.
Government Regulation
Because USBL is actively engaged in the sale of franchises, it
is required to comply with the laws established by those states in which it has
offered and currently offers franchises. Such compliance includes registering as
a franchisor and approval of the Franchise Agreement with appropriate State
agencies. USBL is currently in full compliance.
Cadcom is subject to manufacturing standards established by
both the FAA and the Department of Defense. As such, it is subject to inspection
by the FAA and the Department of Defense to insure that the manufacturing
process and the end products comply with such regulations. Likewise, Cadcom is
subject to both local and state environmental regulations. As of this date,
Cadcom is in full compliance with all local and state regulations.
ITEM 2. DESCRIPTION OF PROPERTY
In August, 1995, MCI, through its wholly-owned subsidiary,
Meisenheimer Capital Real Estate Holdings Inc. ("MCR") acquired the real estate
at 46 Quirk Road, Milford, Connecticut, from Genvest, a limited partnership
whose partners consist of the President of MCI and the Meisenheimer Family. The
property was formerly leased by MCI and its subsidiaries from Genvest. The
property consists of a building housing office and manufacturing space of
approximately 6,000 square feet. USBL currently pays a $1,000 a month rent for
approximately 1,500 square feet under a lease which expires on December 31,
1998. Cadcom pays $3,250 a month for approximately 3,500 square feet under a
lease which expires on December 31, 1999. A portion of the space is rented to
unaffiliated parties. The consideration paid to Genvest by MCI consisted of the
issuance of 200,978
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shares of the Common Stock of MCI plus cash of a $120,000. MCR borrowed funds of
$120,000 from a financial institution which loan is secured by a 20 year
mortgage on the property. The loan is guaranteed by MCI.
ITEM 3. LEGAL PROCEEDINGS
There are no legal proceedings pending or threatened against
the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the Fiscal Year ended February 28, 1998 no matters were
submitted to a vote of security holders.
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Part II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Market Information
The Company's Common Stock trades on the non-NASDAQ
over-the-counter market (Bulletin Board) under the symbol "MEIS."
The following is the range of high and low closing bid prices
for each quarter for the fiscal years ended February 28, 1997 and February 28,
1998:
Fiscal 1997
High Low
First Quarter Ended 5/31/96 $3.125 $2.00
Second Quarter Ended 8/31/96 $2.875 $1.0625
Third Quarter Ended 11/30/96 $1.21875 $0.625
Fourth Quarter Ended 2/28/97 $1.3125 $0.75
Fiscal 1998
High Low
First Quarter Ended 5/31/97 $0.75 $0.4375
Second Quarter Ended 8/31/97 $0.625 $0.375
Third Quarter Ended 11/30/97 $0.625 $0.25
Fourth Quarter Ended 2/28/98 $0.4375 $0.375
The foregoing bid prices (high and low) for each quarter
represent quotations between dealers without adjustments for retail markups,
markdowns or commissions and may not represent actual transactions, as reported
by the National Association of Securities Dealers Composite Feed or other
qualified inter-dealer quotation medium.
Approximate Number of Equity Security Holders
There were approximately 350 holders of MCI Common Stock as of
May 15, 1998.
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Dividends
The Company has not paid any dividends since its inception,
and it does not anticipate paying any dividends in the foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF FINANCIAL OPERATIONS
FISCAL YEAR 1997 COMPARED TO FISCAL YEAR 1996
Results of Operations
Revenues for the fiscal year ended February 28, 1997 ("Fiscal
97") were $1,378,128 as compared to revenues of $1,118,969 for the fiscal year
ended February 29, 1996 ("Fiscal 96"). This increase of $259,159 was due to an
increase of franchise fees generated by the Company's subsidiary, USBL. During
Fiscal 97 USBL sold five franchises in exchange for $2,000,000 of advertising
credits which have been valued by the Company at $250,000 together with receipt
of cash proceeds of initial franchise fees of $105,000. The Company also
received $300,000 of barter units valued by the Company at $50,000. The
Company's other operating subsidiary, Cadcom, also increased its revenues by
$25,000 in Fiscal 97 as compared to Fiscal 96.
Operating expenses for Fiscal 97 increased by $116,109 to
$363,995 as compared to operating expenses of $1,247,886 in Fiscal 96. This
increase was due in part to an increase in costs of sales for Cadcom of $44,000
and other operational expenses of $42,000. Likewise, USBL's operating expenses
increased approximately $26,000 for Fiscal 97 primarily as a result of the
payment of consulting fees in connection with the expansion of the League.
Advertising and travel expenses for USBL approximated prior
years.
Consolidated net loss for Fiscal 97 amounted to $30,863 as
compared to a loss of $160,721 in Fiscal 96. Although revenues for Fiscal 97
were greater than for Fiscal 96, the Company continues to incur losses. The loss
is attributable to the inability of USBL to generate franchise fees and royalty
fees from third parties. The Company also incurred income taxes of $10,000 for
Fiscal 97 as compared to $16,000 in Fiscal 96.
FISCAL YEAR 1998 COMPARED TO FISCAL YEAR 1997
Results of Operations
Revenues for the fiscal year ended February 28, 1998 ("Fiscal
98") were $1,379,217 as compared to revenues of $1,378,128 for the fiscal year
ended February 28, 1997 ("Fiscal 97"). Revenues of the basketball league
operations, including franchise and royalty fees, increased by $50,000 after
elimination of intercompany transactions. The USBL received advertising credits,
valued at $250,000, in both Fiscal 1998 and 1997 in connection with the sales of
franchises. In
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addition, revenues from Cadcom's manufacturing operations remained relatively
consistent with those from the prior year.
Operating expenses for Fiscal 98 decreased by $36,479 to
$1,327,516, as compared to operating expenses of $1,363,995 in Fiscal 97. The
decrease represents management's efforts to control expenditures. For example,
USBL's consulting and advertising decreased $81,000 and $12,000, respectively,
between Fiscal 1997 and Fiscal 1998.
In Fiscal 98 the Company recognized a loss on investments of
$65,000. This represents the decrease in the market value of certain equity
investments that, in the opinion of management, is other than temporary.
Consolidated net loss for Fiscal 98 amounted to $72,251, as
compared to a loss of $30,863 in Fiscal 97. The increase in the loss is
attributable to the loss recognized on the valuation of investments, offset by
the decrease in operating expenses.
Liquidity and Capital Resources
The Company's working capital deficiency increased by
approximately $88,000 to $630,000 at February 28, 1998, as compared to $542,000
at February 28, 1997. This increase was primarily due to the loss incurred in
Fiscal 98.
The Company is making efforts to alleviate its working capital
deficiency by seeking additional equity capital, primarily for the USBL. The
USBL is the subsidiary that accounts for a major portion of the working capital
deficiency and, in management's opinion, has the greatest potential for future
growth. The Company believes that its units of advertising credits, valued at
approximately $684,000, will enable it to attract more interest in the league
for both fans and potential franchisees by utilization of the advertising
credits for free television broadcasting of League games. In addition, the USBL
is considering raising additional capital through a private placement. However,
there can be no assurances that the Company will be successful in its efforts to
reduce the working capital deficiency.
The Company's statement of cash flows for Fiscal 98 reflects
cash used in operations of approximately $2,100, reflecting the net loss
($72,500) and an increase in prepaid advertising credits ($250,000), offset by
non-cash charges such as minority interest ($29,000), the realized loss on
investment ($65,000), and depreciation and amortization ($72,000), as well as a
decrease in inventories ($23,000) and an increase in accounts payable and
accrued expenses. The statement also reflects cash provided by financing
activities of $28,700, reflecting cash provided from net shareholder advances
($91,000) and a note payable-bank ($25,000), offset by repayment of notes,
mortgages and capital leases ($87,000).
The Company and its wholly-owned subsidiaries file a
consolidated federal income tax return, and as of February 28, 1998, they had
approximately $600,000 in net operating loss carryforwards available to offset
future taxable income. USBL files a separate federal tax return,
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and as of February 28, 1998 it had approximately $1,300,000 in net operating
loss carryforwards to offset future taxable income.
ITEM 7. FINANCIAL STATEMENTS (Appearing after Index to Exhibits)
Page
Report of Independent Certified Public Accountants F-2
Consolidated balance sheets as of February 28, 1998 and February 28, 1997 F-3
Consolidated statements of operations for the years ended F-4
February 28, 1998 and February 28, 1997
Consolidated statement of stockholders' equity for the years ended F-5
February 28, 1998 and February 28, 1997
Consolidated statements of cash flows for the years ended F-6
February 28, 1998 and February 28, 1997
Notes to consolidated financial statements F-7 - F-15
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PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTER AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
Directors, Executive Officers, Promoters and Control Persons.
The following persons are the current directors and executive
officers.
Name Age Position
Daniel T. Meisenheimer III 47 Chairman of the Board President
and Treasurer
Richard C. Meisenheimer 44 Vice President, Director and
Secretary
Daniel T. Meisenheimer, Jr. 70 Director
All directors hold office until the next annual meeting of Stockholders and the
election and qualification of their successors. Officers are appointed annually
by the Board of Directors and subject to existing employment agreements serve at
the discretion of the Board.
Background of Executive Officers and Directors
Daniel T. Meisenheimer III has been President and Treasurer of
MCI since the inception of MCI in 1984. Mr. Meisenheimer is also Chairman of the
Board, President and Treasurer of the Company's subsidiaries, USBL, Cadcom, and
MCR. Since 1982 Mr. Meisenheimer has also been employed as a Vice President of
Spectrum, which is Cadcom's sole customer. Mr. Meisenheimer is also a
shareholder and Director of Synercom Inc. ("Synercom"), a family-owned holding
company which owns all of the outstanding stock of Spectrum and which owns
approximately twenty-two percent of the outstanding stock of MCI. Between 1981
and 1984, Mr. Meisenheimer owned and operated an investment advisory firm. Prior
to that and from 1977 to 1981, Mr. Meisenheimer was employed as a registered
representative with Merrill Lynch, Inc.
Richard C. Meisenheimer, brother of Daniel T. Meisenheimer III, has been
Vice President, Secretary and Chief Financial Officer of MCI since its
inception. Mr. Meisenheimer has also been associated with Spectrum in various
capacities since 1976. In 1993, Mr. Meisenheimer became President of Spectrum,
succeeding his father, Daniel T. Meisenheimer, Jr. Mr. Meisenheimer is also Vice
President, Secretary and Director of MCI's subsidiaries, USBL, Cadcom and MCR.
Mr. Meisenheimer is also a Director and shareholder of Synercom.
Daniel T. Meisenheimer, Jr., father of Richard C. Meisenheimer and Daniel
T. Meisenheimer III, has served as a Director of MCI since its inception. He is
also a Director of MCI's subsidiaries, USBL, Cadcom and MCR. Mr. Meisenheimer
was the founder of Spectrum
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which began operations in 1957. He served as Chairman and President of that
company until 1993, when his son Richard C. Meisenheimer assumed the position of
President. Mr. Meisenheimer is still Chairman of Spectrum. Mr. Meisenheimer is
also President and a Director of Synercom.
Compliance with Section 16(a) of the Exchange Act
All officers, directors, and beneficial owners of more than
10% of MCI's Common Stock have complied with Section 16(a) of the Exchange Act.
ITEM 10. EXECUTIVE COMPENSATION
MCI
Historically, the only two officers of MCI, Daniel T.
Meisenheimer III, President and Treasurer, and Richard C. Meisenheimer, Vice
President and Secretary, have not received any salaries from MCI. However, on
March 1, 1994, the Company awarded Mr. Daniel T. Meisenheimer III, 200,000
options to purchase 200,000 shares of the Common Stock in recognition of past
services to MCI. The options are exercisable at $0.25 a share. On June 5, 1995,
Mr. Meisenheimer exercised options to purchase 100,000 shares. At the time of
the exercise, the bid price for MCI Common Stock was $1.00 a share. Richard C.
Meisenheimer also received 100,000 options in recognition of past services. Each
option entitles Mr. Meisenheimer to purchase one share of the Common Stock at
$0.25 per share. Mr. Meisenheimer has not exercised any options. On March 1,
1996 the Company entered into employment agreements with Daniel T. Meisenheimer
III and Richard C. Meisenheimer.
The agreement with Daniel T. Meisenheimer III is for a period
of two years expiring on February 28, 1998. For the first year Mr. Meisenheimer
is to receive a salary of $2,000 a month. However, if in the opinion of the
Board of Directors the payment of salary to Mr. Meisenheimer would have an
adverse impact on the Company's cash flow then the Company is authorized to
withhold payments. The agreement further provides that in the event any monthly
salary is withheld then for each month of salary omitted Mr. Meisenheimer is to
receive 10,000 options. Each option entitles Mr. Meisenheimer to purchase one
share of Common Stock at $1.00 a share. The options are to be issued at the end
of the fiscal year. During the second year of the employment agreement, Mr.
Meisenheimer is to receive a monthly salary of $5,000 and if the Company elects
not to pay Mr. Meisenheimer the cash salary, then he is to receive 10,000
options for each month of salary omitted which are to be issued at the end of
the fiscal year.
Mr. Richard C. Meisenheimer's employment agreement is also for
a period of two years and provides for a monthly salary of $400 per month. The
Board of Directors may also withhold payment of such salary if such payment
would have an adverse impact on the Company's cash flow. In that event, Mr.
Meisenheimer is to receive 2,000 options for each month of salary omitted. Each
option entitles Mr. Meisenheimer to purchase one share of the Company's Common
Stock at $1.00 per share. In the second year, Mr. Meisenheimer is to receive
$800 a month and if
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any salary is omitted then 4,000 options will be issued for each month of salary
omitted. All options are issued at the end of each fiscal year.
Pursuant to the employment agreements, Mr. Daniel T.
Meisenheimer III has only received a total of $4,000 of salary for Fiscal 97.
Mr. Richard C. Meisenheimer has only received a total of $800 for Fiscal 97. The
Board of Directors elected to withhold any further payment of salaries because
of the impact on cash flow. For Fiscal 1997, because of the Company's decision
not to pay salaries, Mr. Daniel T. Meisenheimer III received 100,000 options and
Mr. Richard C. Meisenheimer received 20,000 options. As a result of the
Company's financial condition, Mr. Daniel T. Meisenheimer, III and Mr. Richard
C. Meisenheimer agreed to terminate the compensation provisions of their
employment agreements at the beginning of the year ended February 28, 1998.
The following tables reflect the salaries received by Daniel
T. Meisenheimer III and Richard C. Meisenheimer and the options received by
Daniel T. Meisenheimer III, and Richard C. Meisenheimer and the amount of
options exercised for the fiscal years ended February 28, 1997 and 1998:
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Re-
Other stricted Securities
Annual Stock Underlying LTIP All Other
Compen- Awarded Options/ Payouts Compen-
Name and Principal Position Year Salary($) Bonus($) sation ($) ($) SARs (#) ($) sation ($)
- --------------------------- ---- --------- -------- ---------- ----- -------- ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Daniel T. Meisenheimer III 1998 -0- -0- -0- -0- -0- -0- -0-
President 1997 21,000(1) -0- -0- -0- -0- -0- -0-
Richard C. Meisenheimer 1998 -0- -0- -0- -0- -0- -0- -0-
President 1997 4,200(2) -0- -0- -0- -0- -0- -0-
<FN>
- ---------------
(1) Includes 100,000 options in lieu of cash salary. Each option is
exercisable into one share of Common Stock at $1.00 per share. The options have
been valued at $17,000.
(2) Includes 20,000 options in lieu of cash salary. Each option is
exercisable into one share of Common Stock at $1.00 per share. The options have
been valued at $3,400.
</FN>
</TABLE>
<TABLE>
Option/SAR Grants in Last Fiscal Year
<CAPTION>
Number of Securities Percent of Total
Underlying Options/ Options/SARs Granted to Exercise or Base
Name SARs Granted (#) Employees in Fiscal Year Price ($/Sh) Expiration Date
(a) (b) (c) (d) (e)
<S> <C> <C>
Daniel T. Meisenheimer III -0- -0-
Richard C. Meisenheimer -0- -0-
</TABLE>
14
<PAGE>
USBL
On January 1, 1996, USBL entered into employment agreements
with Daniel T. Meisenheimer III who serves as President and Chief Executive
Officer, and Richard C. Meisenheimer, who serves as Vice President and Chief
Financial Officer. The employment agreement for Daniel T. Meisenheimer III
provides for a monthly salary of $2,000 during the first year and $5,000 a month
for the second year. If, in the opinion of the Board of Directors of USBL, the
payment of salary would have an adverse impact on the Company's cash flow, then
the Company is authorized to withhold payments. For every month of salary
omitted, Mr. Meisenheimer is to receive 10,000 options. Each option entitles Mr.
Meisenheimer to purchase one share of USBL Common Stock at $1.00 a share. All
options are to be issued at the end of each 12 month period. During the calendar
year ended December 31, 1996, Mr. Meisenheimer received a total cash salary of
$4,000 and received 100,000 options in lieu of salary. Mr. Meisenheimer did not
receive any salaries for the months of January and February 1997 and as such is
presently entitled to receive 20,000 options.
In view of the fact that neither Daniel T. Meisenheimer III
nor Richard C. Meisenheimer had received any compensation for services from USBL
since the inception of the company, on September 1, 1995, the Board of Directors
adopted an option program reserving 200,000 shares to provide each officer with
20,000 options on the first business day of each calendar year commencing
January 1, 1996. Under the plan, each option entitles the holder to purchase one
share of common stock at an exercise price equal to the closing bid price on the
date of grant. The options were to expire five years from date of grant or nine
months after retirement of either officer. On January 2, 1996 (Fiscal 1996)
Daniel T. Meisenheimer III and Richard C. Meisenheimer each received 20,000
options exercisable into common stock at $2.25 a share, the closing bid price of
USBL Common Stock on that date. On August 20, 1996, the company and the two
officers agreed to rescind the remainder of the option program.
USBL also entered into an employment agreement with Richard C.
Meisenheimer on January 1, 1996. The agreement is similar to that of Daniel T.
Meisenheimer III, except that Richard C. Meisenheimer is to receive a salary of
$800 a month during the first year and $1,600 a month for the second year. For
each month's salary omitted, Richard C. Meisenheimer is to receive 4,000
options. Each option entitles Mr. Meisenheimer to purchase one share of USBL
Common Stock at $1.00 a share. All options are awarded at the end of each year.
During the calendar year ended December 31, 1996 (Fiscal 97) Mr. Meisenheimer
received a total of $1,600 of salary and received 40,000 options in lieu of
salary. Mr. Richard C. Meisenheimer did not receive any salary for the months of
January and February 1997 and is presently entitled to receive 8,000 options. On
March 1, 1997, both Mr. Daniel T. Meisenheimer III and Richard C. Meisenheimer
agreed to terminate the compensation provisions of their employment agreements
in view of USBL's financial condition.
15
<PAGE>
The following tables reflect the salaries and options received
by Daniel T. Meisenheimer III and Richard C. Meisenheimer for the fiscal years
ended February 28, 1997 and 1998:
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Re-
Other stricted Securities
Annual Stock Underlying LTIP All Other
Compen- Awarded Options/ Payouts Compen-
Name and Principal Position Year Salary($) Bonus($) sation ($) ($) SARs (#) ($) sation ($)
- --------------------------- ---- --------- -------- ---------- ----- -------- ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Daniel T. Meisenheimer III 1998 -0- -0- -0- -0- -0- -0- -0-
President 1997 45,000(1) -0- -0- -0- -0- -0- -0-
Richard C. Meisenheimer 1998 -0- -0- -0- -0- -0- -0- -0-
President 1997 18,000(2) -0- -0- -0- -0- -0- -0-
<FN>
- ---------------
(1) Includes 100,000 options to purchase 100,000 shares of the Common Stock of USBL. The options are valued
at $41,000.
(2) Includes 40,000 options to purchase 40,000 shares of the Common Stock of USBL. The options are valued at
$16,400.
</FN>
</TABLE>
<TABLE>
Option/SAR Grants in Last Fiscal Year
<CAPTION>
Number of Securities Percent of Total Exercise or
Underlying Options/ Options/SARs Granted to Base Price
Name SARs Granted (#) Employees in Fiscal ($/Sh) Expiration Date
(a) (b) Year (d) (e)
(c)
<S> <C> <C>
Daniel T. Meisenheimer III -0- -0-
Richard C. Meisenheimer -0- -0-
</TABLE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth certain information as of July
15, 1996 with respect to the beneficial ownership of the outstanding Common
Stock of the Company by (i) any holder of more than five (5%) percent; (ii) each
of the Company's officers and directors; and (iii) the directors and officers of
the Company as a group:
16
<PAGE>
Amount and Nature of Approximate
Name and Address of Beneficial Owner Beneficial Ownership Percent of Class
Daniel T. Meisenheimer III (1) 1,390,500 31%
c/o The United States Basketball League
46 Quirk Road
Milford, CT 06460
Richard C. Meisenheimer (2) 389,500 8.7%
c/o The United States Basketball League
46 Quirk Road
Milford, CT 06460
Daniel T. Meisenheimer, Jr. (3) 525,000 11.7%
c/o The United States Basketball League
46 Quirk Road
Milford, CT 06460
Synercom Inc. (4) 980,000 22.5%
c/o The United States Basketball League
46 Quirk Road
Milford, CT 06460
All Officers and Directors as a Group 3,285,000 73.5%
- -------------------------
(1) Daniel T. Meisenheimer III is the President of MCI. The shares listed
above include shares owned by his wife and minor children. Included are 100,000
options issued to Mr. Meisenheimer to purchase 100,000 of the Common Stock at
$1.00 per share which Mr. Meisenheimer received in lieu of salary and 100,000
options awarded to Mr. Meisenheimer in September 1995 for past services. Mr.
Meisenheimer and his family also own 425,000 shares of the common stock and
136,409 shares of the preferred stock of MCI's subsidiary, USBL.
(2) Richard C. Meisenheimer is Vice President and a Director of MCI. The
shares listed above include shares owned by his wife and minor children and
20,000 options which Mr. Meisenheimer received in lieu of salary. Also included
are 100,000 options awarded to Mr. Meisenheimer in September 1995 for past
services. Mr. Meisenheimer also owns 500 shares of the common stock and 77,875
of the preferred stock of MCI's subsidiary, USBL. In addition, Spectrum, of
which Richard C. Meisenheimer is President, owns 207,857 shares of the common
stock and 240,000 shares of preferred stock of USBL. Also, Synercom, of which
Mr. Meisenheimer is President, owns 22.5% of the outstanding stock of MCI.
(3) Daniel T. Meisenheimer, Jr., a Director of MCI, is the father of Daniel
T. Meisenheimer III and Richard C. Meisenheimer. The shares listed above include
shares owned by his wife, Mary Ellen Meisenheimer. Mr. Meisenheimer also owns
5,000 shares of USBL common stock and 182,723 shares of USBL preferred stock.
Mr. Meisenheimer is Chairman of the Board of Synercom.
(4) Synercom is owned jointly by Daniel T. Meisenheimer III, Richard C.
Meisenheimer, Daniel Meisenheimer, Jr., and his wife, Mary Ellen Meisenheimer.
Synercom also owns all of the outstanding stock of Spectrum Associates, Inc.
("Spectrum"), which is the sole customer of MCI's subsidiary, Cadcom. As such,
Synercom's ownership in MCI is considered as part of Management's ownership.
17
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Loans
For at least the last ten years the principals of MCI and
their affiliated companies have made loans to USBL, MCI's subsidiary. As of
February 28, 1998 ("Fiscal 1998"), USBL was indebted to the principals or their
affiliated companies in the principal sum of $311,743 together with accrued
interest at six percent (6%) per annum of $113,149. All of the outstanding debt
is payable upon demand. Of the foregoing amount, Spectrum is owed the principle
sum of $80,840 plus accrued interest of $63,765. The principals (Daniel T.
Meisenheimer III, Richard C. Meisenheimer and Daniel T. Meisenheimer, Jr.) are
owed $117,754 plus accrued interest of $49,384. The remainder of $54,746 is due
from USBL to MCI, the parent, which is eliminated on the accompanying
consolidated financial statements.
Cadcom
Cadcom was acquired by MCI in February 1992 from Synercom,
Inc., a company owned and controlled by the Meisenheimer Family. Cadcom is
totally dependent upon orders received from Spectrum, a privately held company,
also owned by the Meisenheimer Family. As such, substantially all of Cadcom's
business is derived from Spectrum. Intercompany pricing is done on "an arm's
length" basis and with respect to orders from the military or the defense
department is subject to competitive bid. Cadcom is paid by Spectrum in
accordance with normal credit terms. In addition and when Cadcom was acquired by
MCI from Synercom, Inc., MCI granted Synercom, Inc. the right of first refusal
to buy the Cadcom common stock in the event MCI determined to sell Cadcom.
Capital Leases
In fiscal 1995, Cadcom entered into capital leases for new
machinery. Cadcom is leasing the equipment from Synercom, Inc. During fiscal
1996 Cadcom also entered into capital leases with Synercom for additional
manufacturing equipment. The total amount of outstanding lease payments amounts
to $203,741. Monthly payments to Synercom for the leased equipment amount to
$8,950.
Ownership of Franchise
In 1988, Richard C. Meisenheimer, Vice President, and several
other individuals purchased, through a corporation, a franchise from USBL, the
Connecticut Skyhawks. The purchase price was $50,000 and annual royalty payments
have been made to USBL for each year to date. On August 31, 1996, Spectrum, a
company owned and controlled by the Meisenheimer Family purchased a franchise
from USBL for $100,000. The franchise is not currently active but pays the
annual royalty fee.
18
<PAGE>
Purchase of Real Estate
Prior to August 1995, MCI, USBL and Cadcom had been renting
office and manufacturing facilities from Genvest L.P., a limited partnership
consisting of members of the Meisenheimer Family. In August, 1995 MCI, through
its subsidiary MCR, purchased the facilities from Genvest, L.P., for $340,000
through the issuance of 200,978 shares of the Common Stock of MCI to Genvest,
L.P., and borrowed the sum of $120,000 from a financial institution secured by a
20-year mortgage on the property. Richard C. Meisenheimer has personally
guaranteed the mortgage.
19
<PAGE>
PART IV
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
Financial Statements
All financial statements as set forth under Item 7
Exhibits
The following exhibits are incorporated by reference to the Exhibit bearing
the same number on the Registrant's Registration Statement on Form 10-SB filed
with the Commission on October 15,1996, effective March 24, 1997. Commission
File No. 0-25147:
3.1 Certificate of Incorporation of Meisenheimer Capital, Inc. ("MCI")
3.2 Certificate of Renewal of Certificate of Incorporation of MCI
3.3 By-Laws of MCI
4.1 Form of Stock Certificate
4.2 Form of Option
10.1 Employment Agreement of Daniel T. Meisenheimer III with MCI
10.2 Employment Agreement of Richard C. Meisenheimer with MCI
10.3 Employment Agreement of Daniel T. Meisenheimer III with MCI's
subsidiary, The United States Basketball League, Inc. ("USBL")
10.4 Employment Agreement of Richard C. Meisenheimer with USBL
10.5 Mortgage Note between Fleet Bank, National Association and Meisenheimer
Capital Real Estate Holdings, Inc. and Guaranty of MCI
10.6 Lease between Meisenheimer Capital Real Estate Holdings, Inc. and
Cadcom, Inc.
10.7 Lease between Meisenheimer Capital Real Estate Holdings, Inc. and USBL
10.8 Equipment Lease Agreement between Synercom, Inc. and MCI's subsidiary,
Cadcom, Inc., dated September 11, 1992
20
<PAGE>
10.9 Equipment Lease Agreement between Synercom, Inc. and MCI's subsidiary,
Cadcom, Inc., dated July 1, 1995
10.10 Standard Franchise Agreement of USBL
10.11 Agreement between USBL and Topaz Selections Ltd. for Barter Transaction
for acquisition of advertising due bills in exchange for franchises
21
<PAGE>
SIGNATURES
Pursuant to requirements of Section 13 or 15(d) of the
Securities Act of 1934, the Registrant has duly caused this Annual Report and
any subsequent amendments thereto to be singed on its behalf by the undersigned,
thereunto duly authorized.
June 11, 1998
MEISENHEIMER CAPITAL, INC.
/s/ Daniel T. Meisenheimer III
Daniel T. Meisenheimer III
Chairman of the Board and President
Pursuant to the requirements of the Securities Act of 1934, this Report
has been signed below by the following persons in their respective capacities
with the Registrant and on the dates indicated.
June 11, 1998 /s/ Daniel T. Meisenheimer III
Daniel T. Meisenheimer III
Chairman of the Board and President
June 11, 1998 /s/ Richard C. Meisenheimer
Richard C. Meisenheimer
Director and Vice President
<PAGE>
MEISENHEIMER CAPITAL, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
Page
Report of Independent Certified Public Accountants F-2
Consolidated balance sheets as of February 28, 1998 and February 28, 1997 F-3
Consolidated statements of operations for the years ended F-4
February 28, 1998 and February 28, 1997
Consolidated statement of stockholders' equity for the years ended F-5
February 28, 1998 and February 28, 1997
Consolidated statements of cash flows for the years ended F-6
February 28, 1998 and February 28, 1997
Notes to consolidated financial statements F-7 - F-15
<PAGE>
Independent Auditors' Report
Board of Directors
Meisenheimer Capital, Inc.
Milford, Connecticut
We have audited the consolidated balance sheets of Meisenheimer Capital, Inc.
and Subsidiaries as of February 28, 1998 and 1997, and the related consolidated
statements of operations, stockholders' equity and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Meisenheimer
Capital, Inc. and Subsidiaries as of February 28, 1998 and 1997 and the results
of their operations and their cash flows for the years then ended, in conformity
with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company's recurring losses from operations, its
inability to collect annual franchise fees and its reliance on related party
revenue transactions raise substantial doubt about its ability to continue as a
going concern. Management's plans in regard to these matters are also described
in Note 1. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ Holtz Rubenstein & Co., LLP
HOLTZ RUBENSTEIN & CO., LLP
Melville, New York
June 11, 1998
F-2
<PAGE>
MEISENHEIMER CAPITAL, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED BALANCE SHEETS
<CAPTION>
February 28,
ASSETS (Note 9) 1998 1997
------ ---------- ------------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 36,560 $ 11,371
Accounts receivable (Note 10) 91,141 77,412
Inventories (Note 5) 93,616 116,600
Investments (Note 4) 24,526 26,547
Other current assets 6,087 10,095
------------------- --------------
Total current assets 251,930 242,025
PROPERTY AND EQUIPMENT, net (Notes 6, 8 and 9) 452,372 523,331
GOODWILL (Note 6) 27,729 28,545
PREPAID BARTER UNITS (Note 11) - 50,000
PREPAID ADVERTISING CREDITS (Note 11) 684,062 434,062
OTHER - 39,500
------------------- --------------
$ 1,416,093 $ 1,317,463
=================== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses (Notes 10 and 12) $ 225,963 $ 174,619
Capital lease obligation - current portion (Note 8) 38,688 89,649
Loans payable - stockholders (Note 10) 608,053 516,858
Note and mortgage payable - current portion (Note 9) 9,504 3,184
--------------- --------------
Total current liabilities 882,208 784,310
----------------- --------------
CAPITAL LEASE OBLIGATION, net of
current portion (Note 8) - 30,914
---------------- --------------
NOTE AND MORTGAGE PAYABLE,
net of current portion (Note 9) 118,151 104,376
----------------- --------------
MINORITY INTEREST IN CONSOLIDATED
SUBSIDIARY 128,000 99,000
----------------- --------------
COMMITMENT (Note 10)
STOCKHOLDERS' EQUITY (Notes 12 and 13):
Common stock, $0.01 par value, 10,000,000 shares
authorized; 4,477,084 shares issued and outstanding 44,771 44,771
Additional paid-in capital 3,367,008 3,367,008
Unrealized loss on available-for-sale investments - (62,078)
Deficit 3,123,359) (3,050,838)
Treasury stock, at cost, 1,000 shares (686) -
----------------- -------------
Total stockholders' equity 287,734 298,863
----------------- --------------
$ 1,416,093 $ 1,317,463
=================== ==============
</TABLE>
See notes to consolidated financial statements
F-3
<PAGE>
MEISENHEIMER CAPITAL, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
Years Ended
February 28,
1998 1997
<S> <C> <C>
REVENUES: (Notes 9 and 11)
Net sales $ 756,191 $ 780,903
Franchise fees and related revenue 623,026 597,225
----------- -----------
Total revenues 1,379,217 1,378,128
----------- -----------
OPERATING EXPENSES: (Note 9)
Cost of goods sold 609,392 611,001
Selling, general and team expenses 718,124 752,994
----------- -----------
Total operating expenses 1,327,516 1,363,995
----------- -----------
Income from operations 51,701 14,133
----------- -----------
OTHER INCOME (EXPENSE):
Realized loss on available-for-sale investments (Note 4) (65,019) --
Interest expense (30,532) (40,899)
Interest income 582 1,942
Other -- (10,000)
----------- -----------
Total other income and expense (94,969) (48,957)
----------- -----------
LOSS BEFORE MINORITY INTEREST AND TAXES (43,268) (34,824)
MINORITY INTEREST IN NET INCOME
(LOSS) OF SUBSIDIARY 29,000 (14,000)
PROVISION FOR INCOME TAX (Note 16) 253 10,039
----------- -----------
NET LOSS $ (72,521) $ (30,863)
=========== ===========
NET LOSS PER SHARE $ (.01) $ (.01)
=========== ===========
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 4,476,084 4,470,158
=========== ===========
</TABLE>
See notes to consolidated financial statements
F-4
<PAGE>
MEISENHEIMER CAPITAL, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Notes 12 and 13)
<CAPTION>
Unrealized
Loss on
Additional Available-
Common Stock Paid-in For-Sale Treasury Stock
Total Shares Amount Capital Investments Shares Amount Deficit
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, February 29, 1996 $ 251,987 4,469,528 $ 44,695 $ 3,236,908 $ (9,641) -- $ -- $(3,019,975)
Issuance of stock in connection 4,375 3,500 35 4,340 -- -- -- --
with warrant exercise
Issuance of stock, options and 97,000 -- -- 97,000 -- -- -- --
warrants by subsidiary to
minority holders
Issuance of options for services 21,000 -- -- 21,000 -- -- -- --
Marketable securities valuation (52,437) -- -- -- (52,437) -- -- --
adjustment
Net loss (30,863) -- -- -- -- -- -- (30,863)
----------- ----------- ----------- ----------- ----------- --------- ------- -----------
Balance, February 28, 1997 298,863 4,477,084 44,771 3,367,008 (62,078) -- -- (3,050,838)
Marketable securities valuation 62,078 -- -- -- 62,078 -- -- --
adjustment
Purchase of treasury stock, net (686) -- -- -- -- 1,000 (686) --
Net loss (72,521) -- -- -- -- -- -- (72,521)
----------- ----------- ----------- ----------- ----------- --------- ------- -----------
Balance, February 28, 1998 $ 287,734 4,477,084 $ 44,771 $ 3,367,008 $ -- 1,000 $ (686) $(3,123,359)
=========== =========== =========== =========== =========== ========= ======== ===========
</TABLE>
See notes to consolidated financial statements
F-5
<PAGE>
MEISENHEIMER CAPITAL, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Years Ended
February 28,
1998 1997
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (72,521) $ (30,863)
--------- ---------
Adjustments to reconcile net loss to net
cash used in operating activities:
Issuance of stock options for services -- 7,801
Minority interest 29,000 (14,000)
Stock options issued as compensation -- 21,000
Stock received for franchise revenue -- (19,500)
Services exchanged for inventory -- (11,000)
Inventory allowance -- 2,500
Prepaid barter credits 50,000 (50,000)
Prepaid advertising credits (250,000) (250,000)
Realization of prepaid advertising credits -- 40,938
Realized loss on investment 65,019 --
Depreciation and amortization expense 72,303 82,120
(Increase) decrease in assets:
Accounts receivable (13,729) 25,605
Inventories 22,984 (15,730)
Other current assets 4,008 (4,095)
Other 39,500 --
(Increase) decrease in liabilities:
Accounts payable and accrued expenses 51,344 (68,788)
--------- ---------
70,429 (253,149)
--------- ---------
Net cash used in operating activities (2,092) (284,012)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (528) (6,340)
Disposition of property and equipment -- 15,006
Purchase of investments (920) (11,887)
Investment in partnership -- (39,500)
--------- ---------
Net cash used in investing activities (1,448) (42,721)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock warrants -- 4,375
Payments on note and mortgage payable (4,905) (6,175)
Proceeds from note payable - bank 25,000 --
Payments on capital lease obligation (81,875) (83,178)
Proceeds from minority shareholders for subsidiary stock -- 160,000
Advances from shareholders, net 91,195 10,794
Purchase of treasury stock (686) --
--------- ---------
Net cash provided by financing activities 28,729 59,916
--------- ---------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 25,189 (266,817)
CASH AND CASH EQUIVALENTS, beginning of year 11,371 278,188
--------- ---------
CASH AND CASH EQUIVALENTS, end of year $ 36,560 $ 11,371
========= =========
SUPPLEMENTAL DISCLOSURES:
Cash payments made during the year:
Interest $ 22,910 $ 40,999
========= =========
Taxes $ 12,550 $ 15,996
========= =========
</TABLE>
See notes to consolidated financial statements
F-6
<PAGE>
MEISENHEIMER CAPITAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED FEBRUARY 28, 1998 AND 1997
1. Description of Business and Basis of Presentation:
Meisenheimer Capital, Inc. ("MCI") is a holding company, with three
operating subsidiaries: Cadcom, Inc. ("Cadcom") (100% owned by MCI),
Meisenheimer Capital Real Estate Holdings, Inc. ("MCREHI") (100% owned by MCI),
and the United States Basketball League, Inc. ("USBL") (61.19% owned by MCI).
Cadcom, Inc. is a machine shop which manufactures aluminum and stainless
steel aircraft parts. Substantially all of Cadcom's sales were to one customer,
Spectrum Associates, an affiliate of MCI.
MCREHI owns a commercial building in Milford, Connecticut.
The USBL operates a professional summer basketball league through
franchises located in the eastern part of the United States.
The Company has a consolidated deficit of approximately $3,100,000. This
factor, as well as the Company's reliance on related parties and significant
non-cash transactions (see Notes 10 and 11) create an uncertainty as to the
Company's ability to continue as a going concern. The Company is making efforts
to revitalize the USBL by raising equity capital and marketing new franchises
and Cadcom is trying to expand its machine shop business by seeking new
customers for its services. However, there can be no assurance that the Company
will be successful in accomplishing these objectives. Because of the
uncertainties surrounding the ability of the Company to continue its operations,
there is substantial doubt about the Company's ability to continue as a going
concern. The financial statements do not include any adjustments that might be
necessary should the Company be unable to continue as a going concern.
2. Summary of Significant Accounting Policies:
a. Principles of consolidation
The consolidated financial statements include the accounts of MCI and
its three operating subsidiaries. All significant intercompany balances and
transactions have been eliminated and applicable minority interests have been
reflected in consolidation.
b. Cash and cash equivalents
For purposes of the cash flow statement, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash and cash equivalents.
c. Revenue recognition
The Company and its subsidiaries generally use the accrual method of
accounting. However, due to the uncertainty of collecting royalty and franchise
fees from its franchisees, the USBL recognizes revenue when it is received. As
described more fully in Note 11, management recorded the advertising due bills
received in exchange for initial franchise fees based upon the fair market value
of such due bills. The fair market value was determined based upon the value of
the franchises sold as there is no ready active market to convert the due bills
to cash.
F-7
<PAGE>
2. Summary of Significant Accounting Policies: (Cont'd)
c. Revenue recognition (Cont'd)
Cadcom recognizes revenue on the accrual method based upon the
shipping date of orders in process which are of a short-term nature.
d. Available-for-sale investments
Available-for-sale securities are carried at fair value with the
unrealized holding gain (loss), net of deferred income taxes, included in
stockholders' equity. A decline in the market value of any available-for-sale
security below cost that is deemed other than temporary is charged to operations
resulting in the establishment of a new cost basis for the security.
e. Inventories
Manufacturing inventories (Cadcom) are stated at the lower of cost, on
the first-in, first-out method or market. The USBL's inventory consists of USBL
trading cards, basketball uniforms, sporting equipment and printed promotional
material. Most of the USBL's inventory was obtained through barter transactions
whereby the USBL granted suppliers with advertising space or air time in return
for the supplier's products. These transactions were accounted for based upon
the fair values of the assets and services involved in the transactions.
f. Property and equipment
Property and equipment are recorded at cost. Major additions are
capitalized while minor improvements, which do not extend the useful life of an
asset, are expensed in the period incurred.
Depreciation has been provided utilizing both the straight-line and
accelerated cost recovery systems. Assets are depreciated over their estimated
useful life or at the statutory rate provided (predominantly 7 years for
equipment and 39 years for real estate).
g. Income taxes
MCI, MCREHI and Cadcom file a consolidated federal income tax return.
As of February 28, 1998, MCI and Cadcom had approximately $600,000 in net
operating loss carryforwards available and the USBL had a net operating loss
carryforward of approximately $1,300,000. Both loss carryforwards are available
through February 28, 2011, to offset future taxable income.
Deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and liabilities,
and are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to reverse. A valuation allowance has been
provided for the deferred tax asset resulting from the net operating loss
carryforward.
h. Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-8
<PAGE>
2. Summary of Significant Accounting Policies: (Cont'd)
i. Advertising costs
Advertising costs are expensed as incurred, and were approximately
$74,000 and $87,000 for the years ended February 28, 1998 and 1997,
respectively.
j. Loss per share
In 1998, the Company adopted Statement of Financial Accounting
Standards No. 128, "Earnings Per Share" (SFAS No. 128). This Statement
establishes standards for computing and presenting earnings (loss) per share
(EPS). SFAS No. 128 requires dual presentation of basic and diluted EPS. Basic
EPS excludes dilution and is computed by dividing net income available to common
stockholders by the weighted average number of common shares outstanding for the
period. Diluted EPS reflects the potential dilution that could occur if stock
options or convertible securities were exercised or converted into common stock.
The Company's adoption of SFAS No. 128 did not materially change current and
prior years' EPS.
Basic and diluted loss per share amounts were equivalent for the years
ended February 28, 1998 and 1997.
k. Stock based compensation
The Company applies APB Opinion No. 25 and related interpretations in
accounting for stock-based compensation to employees. Stock compensation to
non-employees is accounted for at fair value in accordance with FASB Statement
No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123").
l. New accounting standards
In June 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 130, "Reporting Comprehensive Income," which establishes standards for
reporting and display of comprehensive income, its components and accumulated
balances. Comprehensive income is defined to include all changes in equity
except those resulting from investments by owners and distribution to owners.
Among other disclosures, SFAS No. 130 requires that all items that are required
to be recognized under current accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements.
In addition, in June 1997, the FASB issued SFAS No. 131, "Disclosures
About Segments of an Enterprise and Related Information," which establishes
standards for reporting information about operating segments. It also
establishes standards for disclosures regarding products and services,
geographic areas and major customers.
Both of these new standards are effective for periods beginning after
December 15, 1997 and require comparative information for earlier years to be
restated. The implementation of these new standards will not affect the
Company's results of operations and financial position, but may have an impact
on future financial statement disclosures.
3. Segment Information:
The consolidated financial statements include the accounts of Meisenheimer
Capital, Inc. and its three operating subsidiaries: Cadcom, Inc., Meisenheimer
Capital Real Estate Holdings, Inc. and the United States Basketball League, Inc.
The following summarizes the contribution to consolidated revenues and expenses
by each company (after elimination of intercompany trans actions and minority
interest).
F-9
<PAGE>
3. Segment Information: (Cont'd)
Year ended February 28, 1998:
<TABLE>
<CAPTION>
MCI MCREHI Cadcom USBL Total
<S> <C> <C> <C> <C> <C>
Revenues $ -- $ 11,350 $ 756,191 $ 611,676 $ 1,379,217
Operating expenses 156,493 13,831 773,407 383,785 1,327,516
Operating profit (loss) (156,493) (2,481) (17,216) 227,891 51,701
Net income (loss) (221,812) (17,075) (22,922) 189,288 (72,521)
Identifiable assets 31,225 303,593 296,523 784,752 1,416,093
Year ended February 28, 1997:
MCI MCREHI Cadcom USBL Total
Revenues $ 12,000 $ 8,925 $ 795,634 $ 561,569 $1,378,128
Operating expenses 90,157 15,305 667,389 591,144 1,363,995
Operating profit (loss) (78,157) (6,380) 128,245 (29,575) 14,133
Net income (loss) (69,362) (17,978) 96,217 (39,740) (30,863)
Identifiable assets 130,985 315,628 325,573 545,277 1,317,463
</TABLE>
4. Investments in Marketable Securities:
At February 28, 1998, investments in available for sale securities
consisted of investments in equity securities. During 1998, the investments were
written down to their estimated realized value for declines in their market
value which, in the opinion of management, were other than temporary. The
Company recorded a charge to operations of approximately $65,000 for this
impairment.
5. Inventories:
Inventories consist of the following:
February 28,
1998 1997
Cadcom:
Raw materials $ 6,816 $ 7,600
Work in process 9,300 21,000
Finished goods 59,000 71,000
USBL inventory 18,500 17,000
----------- -----------
$ 93,616 $ 116,600
=========== ===========
6. Property and Equipment:
Property and equipment, at cost, consists of the following:
February 28,
1998 1997
Land $ 121,253 $ 121,253
Building 197,836 197,836
Equipment 733,993 728,777
Transportation equipment 52,090 52,090
--------------- -------------
1,105,172 1,099,956
Less accumulated depreciation 652,800 576,625
---------------- -------------
$ 452,372 $ 523,331
================ =============
F-10
<PAGE>
7. Goodwill:
Goodwill arising from the acquisition of Cadcom is being amortized over
40 years and consisted of the following:
February 28,
1998 1997
Excess of cost over net assets $ 32,625 $ 32,625
Less accumulated amortization 4,896 4,080
---------- ---------
$ 27,729 $ 28,545
=========== =========
8. Lease Commitments:
Capital leases
Cadcom leases certain manufacturing equipment under capital leases. The
Company has capitalized manufacturing machinery in the amount of $365,100.
Accumulated depreciation on this machinery at February 28, 1998 and 1997 was
$273,313 and $228,615, respectively.
Operating leases
Cadcom rents its Milford, Connecticut facility under a non-cancellable
operating lease from MCREHI. The minimum annual lease payments under this lease
were $41,400. MCI and USBL leased office space in the same building on a
month-to-month basis for $1,000 per month. Accordingly, the rent charges have
been eliminated in consolidation.
9. Note and Mortgage Payable:
The Company had the following loan obligations outstanding:
<TABLE>
<CAPTION>
February 28,
1998 1997
<S> <C> <C>
Mortgage, dated August 16, 1995 secured by a commercial
building, interest at 7.98%, with monthly payments over
20 years of approximately $1,000 per month. The
Company's president has guaranteed the mortgage $103,975 $107,560
Term bank loan, secured by Company assets, with interest
at 8.06%, with monthly payments of $612, including
interest, through November 2001, collateralized by
Cadcom's assets 23,680 --
-------- --------
127,655 107,560
Less current portion 9,504 3,184
-------- --------
$118,151 $104,376
======== ========
</TABLE>
Maturities of notes and mortgages are as follows:
Years Ending
February 28,
1999 $ 9,500
2000 10,200
2001 11,100
2002 10,100
2003 5,300
Thereafter 81,500
$ 127,700
F-11
<PAGE>
10. Related Party Transactions:
Spectrum Associates, Spectrum Associates' parent company, Synercom, Inc.
and MCI are entities controlled and operated by MCI's president and members of
his immediate family. This group also owns a significant portion of the minority
interest in the USBL. In addition, the capital leases (see Note 8) are payable
to Spectrum Associates. Until February 28, 1992, Cadcom was a 100% owned
subsidiary of Synercom, Inc. Synercom, Inc. sold its 100% interest in Cadcom to
MCI. As part of this agreement MCI granted to Synercom a right of first refusal
to purchase all of the Cadcom shares sold to MCI should MCI propose to transfer
said shares to a third party. This right of first refusal is effective through
February 28, 2002, and is collateralized by all of Cadcom's assets.
Substantially all of the notes due to shareholders carry an interest rate
of 6% per year.
Substantially all of Cadcom's sales are to Spectrum Associates and as of
February 28, 1998 and 1997 all of the Company's accounts receivable are due from
Spectrum Associates.
MCI, through its subsidiary, MCREHI, purchased from Genvest, a
partnership controlled by the Company's president and his immediate family, a
commercial building in Milford, Connecticut for $320,000 during the fiscal year
ended February 29, 1996.
11. Non-Cash Transactions:
The USBL entered into the following non-cash transactions during the
fiscal year ended February 28, 1998:
o The sale of an additional five franchises for 2,000,000
negotiable advertising due bills from an independent cable television
network. The USBL has valued these due bills at $250,000. The deferred
charge on the balance sheet of $684,062 represents the unused amount
of the deferred advertising expense relating to the advertising due
bills earned through fiscal 1998. These advertising due bills can be
traded for various goods and services and they can be assigned sold or
transferred. However, they are not recognized as currency in the
United States although they can be traded as such. The credits will be
amortized at the time the advertising is utilized. The total of
6,000,000 advertising due bills were recorded at a substantial
discount from their face value. However, if the Company is unable to
realize the recorded value of this asset, a significant reduction in
overall equity may result.
o The Company issued 20,000 shares of its stock to a consultant
in exchange for his services during fiscal 1998. The value of the
shares were charged to earnings based upon their fair market value on
September 1, 1997 of $23,563.
o The Company recognized advertising income in exchange for
airline tickets and merchandise value at $30,000 during fiscal year
ended February 28, 1998.
The USBL entered into non-cash transactions during the fiscal year ended
February 29, 1997 including:
o The sale of 5 franchises for 2,000,000 negotiable advertising
due bills from an inde pendent cable television network. The USBL has
valued these due bills at $250,000.
o USBL issued warrants to purchase 30,000 shares of USBL common
stock at $3.00 per share in exchange for consulting services. The
value of these warrants, $9,000, has been recorded in accordance with
FASB 123.
o USBL sold a franchise in exchange for 300,000 negotiable Itex
Barter Units. The USBL has valued these barter units at $50,000.
F-12
<PAGE>
11. Non-Cash Transactions: (Cont'd)
o USBL sold a franchise to MCI in exchange for a promissory
note of $100,000.
o During the year USBL sold a franchise for $50,000 and 450,000
shares of USA Sports Group, Inc. common stock, valued at
$4,500.
12. Stock Options:
During the fiscal year ended February 28, 1995, the Company granted its
officers options to purchase 400,000 shares of common stock at $.25 per share.
100,000 of these options were exercised in June 1995, however, the shares have
not been issued and, accordingly, a liability of $25,000 has been included in
accrued expenses. The remaining 300,000 options were extended through February
28, 2005.
The Company was party to employment agreements, which were terminated in
fiscal 1998, with two officers which provided for the issuance of stock options
in lieu of cash salary. During the year ended February 28, 1997, the officers
were granted options to purchase 168,000 shares of common stock at an exercise
price of $1 per share. The excess of the trading value of the stock on the date
of grant over the exercise price of the options ($21,000) was recorded as
compensation expense in 1997. No options were granted under these agreements in
1998.
If the Company accounted for its stock options under the fair value
method of SFAS No. 123, "Accounting for Stock-Based Compensation," the Company's
net loss and loss per share would have increased to the pro forma amounts
indicated below:
Years Ended
February 28,
1998 1997
Net loss:
As reported $ (72,521) $ (30,863)
Pro forma (159,521) (125,783)
Loss per share:
As reported $ (.01) $ (.01)
Pro forma $ (.04) $ (.03)
The fair value of each option is estimated on the date of grant using the
Black-Scholes option pricing model with the following assumptions used for
grants:
Years Ended
February 28,
1998 1997
Dividend yield -0- -0-
Expected volatility 90.29% 19.06%
Risk free interest rate 5.5% 6.875%
Expected lives 5 years 10 years
As compensation for marketing services, relating to future equity
offerings in fiscal 1996, the Company granted its advisor 25,000 options to
purchase common stock at the market value on the date of the contract (February
1996) per share. These options are exercisable between July 1996 and July 1998.
An additional 25,000 options, with similar terms, will be granted contingent
upon successful future equity offerings.
F-13
<PAGE>
13. Stockholders' Equity:
During the year ended February 28, 1997, MCI issued 148,000 options to
its officers as compensation, in accordance with APB No. 25 compensation expense
is recorded and accordingly, additional paid in capital was increased by
$21,000, the value of the options.
During the year ended February 28, 1997, MCI's majority owned subsidiary
issued stock and recorded increased additional paid in capital of approximately
$140,000. Approximately 65% of this increase is attributable to the majority
shareholder and has been recorded as an increase in the consolidated financial
statements.
14. Savings Plan:
The Company has an employee savings plan that qualifies as a deferred
salary arrangement under Section 403(k) of the Internal Revenue Code. Under the
Savings Plan, participating employees may defer a portion of their pretax
earnings, up to the Internal Revenue Service annual contribution limit.
Management has elected not to contribute discretionary employer matching.
15. Fair Value of Financial Instruments:
The methods and assumptions used to estimate the fair value of the
following classes of financial instruments were:
Current Assets and Current Liabilities: The carrying amount of cash,
current receivables and payables and certain other short-term financial
instruments approximate their fair value.
Prepaid Advertising and Barter Credits: The carrying amount of prepaid
advertising credits approximate their fair value based upon the value of
franchises exchanged for the advertising credits (see Note 10).
Long-Term Liabilities: The carrying amounts of the capital
lease obligations and the mortgage payable approximate their fair value.
16. Income Taxes:
The provision for income taxes consists of the following:
February 28,
1998 1997
Current:
Federal $ - $ -
State and local 253 10,039
------- ---------
253 10,039
------- ---------
Deferred:
Federal - -
State and local - -
---------- --------
- -
---------- --------
$ 253 $ 10,039
======= =========
F-14
<PAGE>
16. Income Taxes: (Cont'd)
The components of the net deferred taxes as of February 28, 1998 are as
follows:
Deferred tax assets:
Net operating loss carryforward $ 715,000
Allowance for realization of assets (715,000)
----------------
$ -
A reconciliation between the actual income tax expense and income taxes
computed by applying the statutory federal income tax rate to income before
taxes is as follows:
February 28,
1998 1997
Computed income tax (credit) at 34% $ (6,700) $ (12,000)
Increase (decrease) in taxes resulting from:
Addition to allowance for realization of
deferred tax asset NOL carryforward 6,700 12,000
State and local taxes 253 10,039
-------- -----------
$ 253 $ 10,039
======== ===========
F-15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-END> FEB-28-1998
<CASH> 36,560
<SECURITIES> 24,526
<RECEIVABLES> 91,141
<ALLOWANCES> 0
<INVENTORY> 93,616
<CURRENT-ASSETS> 251,930
<PP&E> 1,105,172
<DEPRECIATION> 652,800
<TOTAL-ASSETS> 1,416,093
<CURRENT-LIABILITIES> 882,208
<BONDS> 118,151
<COMMON> 44,771
0
0
<OTHER-SE> 242,963
<TOTAL-LIABILITY-AND-EQUITY> 1,416,093
<SALES> 1,379,217
<TOTAL-REVENUES> 1,379,217
<CGS> 609,392
<TOTAL-COSTS> 609,392
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 47,319
<INTEREST-EXPENSE> 30,532
<INCOME-PRETAX> (72,268)
<INCOME-TAX> 253
<INCOME-CONTINUING> (72,521)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (72,521)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
