<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1998,
Commission file number: 0-12806
DYNATEC INTERNATIONAL, INC.
(Name of small business issuer in its charter)
Utah 87-0367267
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
3820 Great Lakes Drive
Salt Lake City, UT 84120
(Address of principal (Zip Code)
executive offices)
Issuer's telephone
number: (801) 973-9500
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under to Section 12(g) of the Exchange Act:
Common Stock (Par Value $0.01 per share)
(Title of Class)
Check whether the issuer (1) 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 / /
As of May 14, 1998, the Registrant had 2,780,112 shares of Common Stock
outstanding. The aggregate market value of voting stock held by non-affiliates
of the Company at May 14, 1998 was $20,728,768.
Transitional small business disclosure format. Yes / / No /X/
<PAGE>
PART I. - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Reference is made to the attached Unaudited Consolidated Condensed
Financial Statements for the first quarter of calendar years 1998 and 1997.
These condensed financial statements are hereby incorporated by reference.
The information for the Company's first three months of calendar years 1998
and 1997 ended March 31, 1998 and 1997 is unaudited, but in the opinion of
management reflects all adjustments which are necessary for a fair
presentation of operations for such periods.
2
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS:
For the quarter ended March 31, 1998, the Company generated total revenues
of $3,647,786 compared to total revenues of $2,554,618 in the prior three
month period ended March 31, 1997. Comparative period revenues increased
$1,093,168 or 43%.
Overall, the Company experienced a net income of $683,878 for the first
quarter of 1998 compared to a net loss of $511,864 for the first quarter of
1997, primarily due to the sale of non-exclusive rights to market company
products to an overseas supplier.
TELEPHONE ACCESSORIES:
For the quarter ended March 31, 1998, there was an overall increase of
$254,997 (17%) in the revenues generated from the Telephone Accessory product
segment of the Company compared to total revenues for the quarter ended March
31, 1997. Although the sales mix for various shoulder rests changed
slightly, overall 1998 sales of shoulder rests remained fairly constant,
increasing by approximately $96,799 over 1997 sales. The remainder of the
increase was attributable to increased volume on sales of other telephone
accessory products.
HARDWARE/HOUSEWARES:
The Hardware/Housewares products segment produced an increase in
revenues during the three month period ended March 31, 1998 of $189,0151 or
23% compared to the period ended March 31, 1997. During 1997, the Company
introduced several new drawer organizer products which have accounted for the
majority of the increase in the current year. Sales in this segment continue
to grow as the Company continues to aggressively market and expand the
housewares product lines.
MASS MARKET:
Sales in the Mass Market segment were $114,051 for the quarter ended
March 31, 1998 compared to $-0- for the quarter ended March 31, 1997.
Virtually all of the sales in this segment were to Dolgencorp, Inc.
Historically, products in this segment have consisted of cameras, audio
cassette tapes, three piece flashlights, and disposable lighters.
FLASHLIGHTS:
Total sales in the Flashlight segment were $190,941 compared to $128,143
for the periods ended March 31, 1998 and 1997, respectively. In February of
1998, Nordic Technologies, Inc. (Nordic), a wholly owned subsidiary of the
Company, signed a letter of intent setting forth terms and conditions to form
the basis of a joint venture/partnership with a flashlight
3
<PAGE>
supplier in Taiwan. According to terms of this letter of intent, Nordic and
the supplier would each own 50% of the new company with Nordic occupying four
of the seven Board of Director seats of the new company. Other terms of the
agreement are still under negotiation.
TELECOMMUNICATIONS HEADSETS
Revenues in the Telecommunication Headset segment were $455,095 for the
quarter ending March 31, 1998 compared to $-0- for the same period in 1997.
The Company has been aggressively developing a line of telecommunications
products to include wired and wireless telephone headsets, telephones,
conference speakers, and other products. In first quarter 1998 initial
orders for telephonic amplifiers and headsets were filled with Lucent
Technologies. The Company has been able to secure pages in several catalogues
of providers for various office products which will be coming out during
second and third quarter.
In the period ended March 31, 1998, the Company recognized revenue
related to an agreement with an overseas supplier whereby non-exclusive
rights to market Company products internationally were sold for $580,000.
According to the agreement, the purchase price was paid by the sale of
Company stock owned by the supplier. The supplier sold the stock in March of
1998, and the cash was received by the Company in April of 1998. The
receivable associated with this transaction is reflected as part of related
party and other receivables in the accompanying condensed balance sheet.
EXPENSES
Overall gross margins of the Company for the quarters ending March 31,
1998 and 1997 were 37% and 30% , respectively. This overall increase in
gross margin is largely attributable to increased sales of telephone
accessory and headset products which have gross margins ranging from 35% to
50%.
The Company spent $33,200 and $136,154 in research and development
expenses for the quarters ending March 31, 1998 and 1997. Most of the
research and development expenses over these two periods was spent in
developing the headset and flashlight product lines. Research and development
expenses have decreased during 1998, as current year research and development
efforts relate to product enhancements as opposed to initial product
development.
LIQUIDITY AND CAPITAL RESOURCES:
At March 31, 1998, the company experienced a net increase in its cash
position of $346,753 from December 31, 1997. The Company had a decrease in
cash from operations of $438,364. The majority of this decrease was caused
by increase in accounts receivable ($598,513) and inventory ($465,297) offset
by first quarter income. The increase in inventories was offset by a
corresponding increase in accounts payable of $238,221 for the same period.
The Company experienced a net increase in cash position resulting from the
receipt of funds
4
<PAGE>
($940,000) pursuant to a Regulation S stock offering, as authorized by the
Board of Directors in March of 1997, partially offset by capital expenditures
of $167,478 in the quarter ending March 31, 1998. The Company anticipates
that the inventory and related payables will increase throughout 1998 as
sales increase in the flashlight and telecommunication headset segments.
Current assets increased from $5,092,374 at December 31, 1997 to
$6,691,797 at March 31, 1998. Of this increase, approximately $465,297
reflects increases in inventory which are offset by increases in accounts
payable and the obligation under the line of credit of $547,338 as the
company prepares for increased sales in calendar year 1998. Additionally,
accounts receivable also increased due to increased first quarter sales of
approximately $168,323 over fourth quarter 1997.
Under the terms of the line-of credit agreement with a bank, the Company
is required to maintain certain financial covenants and ratios. The bank may
withdraw the lines-of-credit upon default by the Company of various provisions
in the line-of-credit agreement. At March 31, 1997 the Company was not in
compliance with the provisions requiring a minimum current ratio of 1.5 to 1.
The ratio of total current assets to total current liabilities was 1.34 at
March 31, 1998.
The Company has received a commitment letter from a financing
institution offering a new, larger line-of-credit to pay off the current line
and to fund future operations. In addition, the Board of Directors approved
the terms of an engagement letter with a financial services firm which
provides for the placement of $1,500,000 in convertible debentures and up to
$10,000,000 in common stock in the form of an equity line-of-credit.
5
<PAGE>
PART II - OTHER INFORMATION
ITEM 3 - EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM -8K
(a.) Exhibit List.
Exhibit 27-SDS
(b.) Reports on Form 8-K.
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized on the May 19, 1998.
DYNATEC INTERNATIONAL, INC.
/s/ F. Randy Jack
-----------------------------------
F. Randy Jack
President-Chief Operating Officer
/s/ Jerry R. Andersen
-----------------------------------
Jerry R. Andersen
Vice President-Chief Financial Officer
6
<PAGE>
EXHIBIT 1
DYNATEC INTERNATIONAL, INC.
CONDENSED FINANCIAL STATEMENTS
March 31, 1998 and 1997
1
<PAGE>
C O N T E N T S
Page
----
CONDENSED BALANCE SHEETS 3
CONDENSED STATEMENTS OF OPERATIONS 5
CONDENSED STATEMENTS OF CASH FLOWS 6
NOTES TO CONDENSED FINANCIAL STATEMENTS 8
2
<PAGE>
DYNATEC INTERNATIONAL, INC.
CONDENSED BALANCE SHEETS
MARCH 31, 1998 AND DECEMBER 31, 1997
<TABLE>
March 31, 1998 Dec. 31, 1997
(Unaudited) (Audited)
----------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 679,647 $ 332,894
Trade accounts receivable, net of allowance for
doubtful accounts of $21,038 in 1998 and $29,684
in 1997 2,148,401 1,549,888
Related party and other receivables 633,520 426,131
Inventories (Note 2) 2,987,446 2,522,149
Prepaid expenses 226,468 234,120
Other 16,315 27,192
----------- ----------
TOTAL CURRENT ASSETS 6,691,797 5,092,374
PROPERTY, PLANT AND EQUIPMENT, NET 3,941,811 3,941,587
OTHER ASSETS
Deposits 55,361 107,631
Intangible assets, net 251,633 267,825
----------- ----------
TOTAL OTHER ASSETS 306,994 375,456
----------- ----------
TOTAL ASSETS $10,940,602 $9,409,417
----------- ----------
----------- ----------
</TABLE>
The accompanying notes are an integral part of
these condensed financial statements.
3
<PAGE>
DYNATEC INTERNATIONAL, INC.
CONDENSED BALANCE SHEETS (CONTINUED)
MARCH 31, 1998 AND DECEMBER 31, 1997
<TABLE>
March 31, 1998 Dec. 31, 1997
(Unaudited) (Audited)
----------- ---------
<S> <C> <C>
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Short-term note payable $ 1,653,873 $ 1,331,169
Current portion of long-term debt 745,845 1,003,477
Current portion of capital lease obligations 16,492 15,699
Accounts payable 1,230,853 992,632
Accounts payable-other 961,250 85,000
Accrued expenses 153,362 238,121
Accrued advertising 128,481 350,000
Accrued royalties payable 91,401 17,882
----------- -----------
TOTAL CURRENT LIABILITIES 4,981,557 4,033,980
LONG-TERM LIABILITIES
Long-term debt 1,899,259 1,994,355
Capital lease obligations 40,912 46,086
Deferred income taxes 5,036 5,036
----------- -----------
TOTAL LIABILITIES 6,926,764 6,079,457
STOCKHOLDERS' EQUITY
Common stock, $.01 par value, authorized
100,000,000 shares 2,871,627 issued at
December at March 31, 1998 and 2,859,940
issued at December 31, 1997 28,716 28,599
Treasury stock, at cost, 91,515 shares (915,150) (915,150)
Additional paid-in capital 5,596,723 5,596,840
Accumulated deficit (696,451) (1,380,329)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 4,013,838 3,329,960
----------- -----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $10,940,602 $ 9,409,417
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of
these condensed financial statements.
4
<PAGE>
DYNATEC INTERNATIONAL, INC.
CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(UNAUDITED)
<TABLE>
Three Months Three Months
Ended Ended
March 31, March 31,
1998 1997
---------- ----------
<S> <C> <C>
REVENUE AND PRODUCT RIGHTS (Note 9) $4,227,786 $2,554,618
COST OF SALES 2,281,051 1,779,783
---------- ----------
GROSS PROFIT 1,946,735 774,835
EXPENSES
Selling expenses 665,767 587,749
Research and development 33,200 136,154
General and administration expenses 439,215 457,563
Provision for losses on accounts receivable - - 5,000
---------- ----------
TOTAL EXPENSES 1,138,182 1,186,466
---------- ----------
OPERATING GAIN (LOSS) 808,553 (411,631)
OTHER INCOME/(EXPENSE)
Interest income 3,340 3,982
Interest expense (107,009) (103,715)
Loss on sale of asset (21,006) - -
---------- ----------
TOTAL OTHER EXPENSE (124,675) (99,733)
---------- ----------
INCOME (LOSS) FROM CONTINUING OPERATIONS 683,878 (511,364)
INCOME TAX EXPENSE (Note 6) - - (500)
---------- ----------
NET INCOME (LOSS) $ 683,878 $ (511,864)
---------- ----------
---------- ----------
BASIC NET INCOME (LOSS) PER SHARE $ 0.25 $ (0.25)
---------- ----------
---------- ----------
DILUTED NET INCOME (LOSS) PER SHARE $ 0.20 $ (0.25)
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of
these condensed financial statements.
5
<PAGE>
DYNATEC INTERNATIONAL, INC.
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(UNAUDITED)
<TABLE>
Three Months Three Months
Ended Ended
March 31, March 31,
1998 1997
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 683,878 $(511,864)
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Depreciation 87,333 110,670
Amortization 15,942 16,067
Loss on sale of assets 21,006 - -
Provision for losses on accounts receivable - - 5,000
Changes in operating assets and liabilities:
Trade accounts receivable (598,513) (391,145)
Related party and other accounts receivable (207,389) - -
Inventories (465,297) (151,507)
Prepaid expenses 7,652 (15,719)
Other 10,877 6,500
Deposits 52,270 (30,290)
Accounts payable 238,221 401,658
Accounts payable-other (63,750) - -
Accrued expenses (72,594) (62,725)
Accrued advertising (221,519) - -
Accrued royalties payable 73,519 7,378
Income tax payable - - 100
--------- ---------
NET CASH USED IN OPERATING ACTIVITIES $(438,364) $(615,877)
--------- ---------
</TABLE>
The accompanying notes are an integral part of
these condensed financial statements.
6
<PAGE>
DYNATEC INTERNATIONAL, INC.
CONDENSED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(UNAUDITED)
<TABLE>
Three Months Three Months
Ended Ended
March 31, March 31,
1998 1997
--------- ---------
<S> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of assets $ 47,000 $ - -
Receivable from related parties - - 60,876
Capital expenditures (167,478) (87,699)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (120,478) (26,823)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under line of credit agreements 322,704 (372,215)
Decrease in debt issuance costs - - 3,255
Net borrowings (payments) on long-term debt (352,728) 339,811
Net payments on capital lease obligations (4,381) (6,808)
Cash received for future Regulation S offerings 940,000 - -
Issuance of Stock pursuant to Regulation S offerings - - 500,000
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 905,595 464,043
--------- ---------
INCREASE (DECREASE) IN CASH 346,753 (178,657)
CASH AT BEGINNING OF YEAR 332,894 240,145
--------- ---------
CASH AT END OF PERIOD $ 679,647 $ 61,488
--------- ---------
--------- ---------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid for interest $ 118,818 $ 93,587
Cash paid for income taxes - - 400
</TABLE>
The accompanying notes are an integral part of
these condensed financial statements.
7
<PAGE>
DYNATEC INTERNATIONAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited, condensed financial statements have been
prepared in accordance with the instructions to Form 10-QSB, and
therefore, do not include all information and footnotes necessary
for a complete presentation of the results of operations, the
financial position, and cash flows, in conformity with generally
accepted accounting principles. This report on Form 10-QSB for the
three months ended March 31, 1998 should be read in conjunction with
the Company's annual report on form 10-KSB for the year ended
December 31, 1997.
The accompanying unaudited condensed consolidated financial balance
sheets, statements of operations and cash flows reflect all normal
recurring adjustments which are, in management's opinion, necessary
for a fair presentation of the Company's financial position, results
of operation, and cash flows. The results of operations for the
interim period ended March 27, 1998 are not necessarily indicative
of the results to be expected for the full year.
NOTE 2 - INVENTORIES
Effective January 31, 1998, the Company changed its method of
determining the cost of inventory from last-in, first-out (LIFO) to
first-in, first-out (FIFO). Historically, the difference between
the LIFO and current costs of inventories has been immaterial.
Inventories, consisting principally of telephone accessory,
hardware/houseware, flashlights, telecommunication headsets, and
other miscellaneous products sold to mass market merchandisers as of
March 31, 1998 and December 31, 1997 are summarized as follows:
<TABLE>
March 31 December 31
1998 1997
---------- ----------
<S> <C> <C>
Raw $1,185,819 $ 831,483
Finished 1,801,627 1,690,666
---------- ----------
$2,987,446 $2,522,149
---------- ----------
---------- ----------
</TABLE>
NOTE 3 - NET EARNINGS PER SHARE
On December 31, 1997, the Company adopted the provisions of FAS No.
128, Earnings Per Share. FAS 128 requires the presentation of both
basic and diluted earnings per share (EPS). Basic EPS is the
amount of net income or loss divided by the weighted average number
of shares of common stock outstanding. Diluted EPS is the amount of
income or loss for the period divided by the weighted average
number of shares plus all potentially dilutive common shares.
In calculating EPS, the earnings were the same for both the basic
and diluted calculation. The effect of common stock options is not
included in the 1997 calculation as such options would
8
<PAGE>
DYNATEC INTERNATIONAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
be anti-dilutive. A reconciliation between the basic and diluted
weighted-average number of shares outstanding as of March 31, 1998
and 1997 is summarized as follows:
<TABLE>
1998 1997
---------- ----------
<S> <C> <C>
Basic weighted-average number of shares 2,779,882 2,047,982
Weighted-average number of common stock options 584,090 - -
---------- ----------
Diluted weighted-average number of shares 3,363,972 2,047,982
---------- ----------
---------- ----------
</TABLE>
NOTE 4 - YEAR 2000
During 1997, the Company developed a plan to deal with the Year 2000
problem and began converting its computer systems to be Year 2000
compliant. During the fourth quarter of 1997 and the first quarter
of 1998, the Company began converting to a new accounting and
materials resource planning software program. The Year 2000 problem
is the result of the computer programs being written using two
digits rather than four to define the applicable year. The Company
is capitalizing costs associated with the new software as the new
software is being implemented to provide better inventory tracking
and accounting controls. All other system changes are being
expensed as incurred. The Company does not anticipate any year
2000 compliance problems.
NOTE 5 - NEW ACCOUNTING PRONOUNCEMENTS
The Company adopted Financial Accounting Standards No. 130 (SFAS
130), Reporting Comprehensive Income, effective January 1, 1998.
SFAS 130 establishes standards for reporting and displaying
comprehensive earnings and its components in financial statements.
As of March 31, 1998, the Company has no items to report as
components of comprehensive income.
NOTE 6 - INCOME TAXES
The Company has net operating loss carryforwards from prior years
which will exceed the income generated in the first quarter of 1998.
The deferred tax asset related to these carryfowards was fully
reserved for as of December 31, 1997. Accordingly, no income tax
expense is being reported for the period ended March 31, 1998.
9
<PAGE>
DYNATEC INTERNATIONAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
NOTE 7 - STOCKHOLDERS' EQUITY
As of March 31, 1998, $940,000 in funds, which is included in
accounts payable-other in the accompanying condensed balance sheet,
has been received in anticipation of future Regulation S common stock
offerings as approved by the Board of Directors in March 1997. The
terms and agreements for these stock offerings are still under
negotiation. Regulation S stock is typically sold at a significant
discount from market value because of its restricted nature.
NOTE 8 - STOCK OPTIONS
A summary of stock options is as follows for the period ended March
31, 1998:
<TABLE>
FIXED OPTIONS:
Shares Exercise
(000) Price
----- -----
<S> <C> <C>
Outstanding at December 31, 1997 934 $2.50
Granted 100 $6.50
Exercised (12) $2.50
-----
Outstanding at March 31, 1998 1,022 Various
-----
-----
Options exercisable at March 31, 1998 284 $2.50
-----
-----
Weighted average fair value of
options granted during first quarter $3.69
Weighted average remaining
contractual life for exercisable
options at March 31, 1998 3.9 years
VARIABLE OPTIONS:
Shares Exercise
(000) Price
----- -----
Outstanding at December 31, 1997 945 $2.50
Granted 840 $6.50
-----
Outstanding at March 31, 1998 1,785 Various
-----
-----
Weighted average fair value of
options granted during first quarter $5.58
</TABLE>
10
<PAGE>
DYNATEC INTERNATIONAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
NOTE 9 - OTHER
In February of 1998, the Company's subsidiary, Nordic Technologies,
Inc. (Nordic), signed a letter of intent setting forth terms and
conditions to form the basis of a joint venture/partnership with a
flashlight supplier in Taiwan. According to terms of this letter of
intent, Nordic and the supplier would each own 50% of the new company
with Nordic occupying four of the seven Board of Director seats of
the new company. Other terms of the agreement are still under
negotiation.
On April 2, 1998, the Board of Directors approved the terms of an
engagement letter with a financial services firm which provides for
the placement of $1,500,000 of Company convertible debentures and up
to $10,000,000 in common stock in the form of an equity line of
credit. Additionally, the Company has received a commitment letter
from a financing institution offering a new, larger line-of-credit to
pay off the current line and to fund future operations.
On December 11, 1997, the Company entered into an agreement with an
overseas supplier whereby non-exclusive rights to market Company
products internationally were sold. According to the agreement, the
purchase price was paid by the sale of Company stock owned by the
supplier. The supplier sold the stock in March of 1998, and the
proceeds of $580,000 were received by the Company in April of 1998.
The receivable associated with this transaction is reflected as part
of related party and other receivables in the accompanying condensed
balance sheet.
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 679,647
<SECURITIES> 0
<RECEIVABLES> 2,148,401
<ALLOWANCES> 0
<INVENTORY> 2,987,446
<CURRENT-ASSETS> 6,691,797
<PP&E> 3,941,811
<DEPRECIATION> 0
<TOTAL-ASSETS> 10,940,602
<CURRENT-LIABILITIES> 4,981,557
<BONDS> 1,899,259
0
0
<COMMON> 28,716
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 10,940,602
<SALES> 3,647,786
<TOTAL-REVENUES> 4,227,786
<CGS> 2,281,051
<TOTAL-COSTS> 3,419,233
<OTHER-EXPENSES> 124,675
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 107,009
<INCOME-PRETAX> 683,878
<INCOME-TAX> 0
<INCOME-CONTINUING> 683,878
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 683,878
<EPS-PRIMARY> 0.25
<EPS-DILUTED> 0.20
</TABLE>
