<PAGE> 1
==============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________________
FORM 10-Q
(MARK ONE)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to_______________
Commission File Number 0-14613
CST ENTERTAINMENT, INC.
(FORMERLY CST ENTERTAINMENT IMAGING, INC.)
(Exact name of registrant as specified in its charter)
DELAWARE 13-2614435
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
5901 GREEN VALLEY CIRCLE, SUITE 400
CULVER CITY, CALIFORNIA 90230
(Address of principal executive offices)
(Zip Code)
(310) 417-3444
(Registrant's telephone number including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
________________________________
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or 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
------- -------
The Registrant has 27,278,340 shares of common stock, par value $0.15
per share, issued and outstanding as of October 15, 1996.
Total number of sequentially numbered pages in this document: __
==============================================================================
<PAGE> 2
CST ENTERTAINMENT, INC.
FORM 10-Q FOR QUARTER ENDED
SEPTEMBER 30, 1996
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART I -- FINANCIAL INFORMATION
Item 1. Balance Sheets at June 30, 1996 and September 30, 1996 . . . . . . . . . . . . . . . . . . . . . . . 4
Statements of Operations for the Quarter Ended
September 30, 1995 and 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Statements of Cash Flows for Quarter Ended September 30, 1995 and
and 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-7
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-9
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10-12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Item 2. Change in Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Item 4. Submission of Matters to a Vote of Securities Holders . . . . . . . . . . . . . . . . . . . . . . . 13
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Signature Page . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
<PAGE> 3
(This page has been left blank intentionally.)
<PAGE> 4
ITEM 1. FINANCIAL STATEMENTS
CST ENTERTAINMENT, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
June 30, September 30,
1996 1996
------------- --------------
<S> <C> <C>
Current assets:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 54,304 $ 18,706
Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . 896,049 221,430
Work-in-process . . . . . . . . . . . . . . . . . . . . . . . . . . 769,299 454,544
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . 98,257 150,518
Receivable from related parties . . . . . . . . . . . . . . . . . . 15,000 15,000
-------------- --------------
Total current assets . . . . . . . . . . . . . . . . . . . . . . 1,832,909 860,198
Property and equipment:
Color conversion equipment . . . . . . . . . . . . . . . . . . . . 3,896,789 3,896,789
Leasehold improvements and other equipment . . . . . . . . . . . . 1,615,020 1,615,020
Capitalized software . . . . . . . . . . . . . . . . . . . . . . . 1,432,377 1,460,571
-------------- --------------
6,944,186 6,972,380
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . 5,792,607 5,960,352
-------------- --------------
1,151,579 1,012,028
Other assets:
Patent, net of accumulated amortization of
$554,844 and $554,844 . . . . . . . . . . . . . . . . . . . . . . - -
Film library, net of accumulated amortization of
$4,782,775 and $5,010,275 . . . . . . . . . . . . . . . . . . . . 2,143,417 1,415,917
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,633 16,633
Notes receivable from directors/officers . . . . . . . . . . . . . 125,000 100,000
-------------- --------------
2,285,050 1,532,550
-------------- --------------
$ 5,269,538 $ 3,404,776
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit . . . . . . . . . . . . . . . . . . . . . . . . . . $ 507,826 56,747
Current portion of term loan . . . . . . . . . . . . . . . . . . . 250,200 250,200
Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 735,652 734,884
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . 488,635 419,855
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . 1,227,205 1,177,163
Deferred income . . . . . . . . . . . . . . . . . . . . . . . . . . 825,300 361,300
Loans payable to related party . . . . . . . . . . . . . . . . . . 85,000 -
-------------- --------------
Total current liabilities . . . . . . . . . . . . . . . . . . . . 4,119,818 3,000,149
-------------- --------------
Non-current portion of term loan . . . . . . . . . . . . . . . . . . 640,425 577,875
Stockholders' equity:
Common stock, par value $0.15 per share; authorized
40,000,000 shares; issued and outstanding 27,278,340
and 27,278,340 . . . . . . . . . . . . . . . . . . . . . . . . . 4,091,752 4,091,752
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . 56,097,740 56,115,740
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . (59,680,197) (60,380,740)
-------------- --------------
509,295 (173,248)
-------------- --------------
$ 5,269,538 $ 3,404,776
-------------- --------------
</TABLE>
See accompanying notes to financial statements.
4
<PAGE> 5
CST ENTERTAINMENT, INC.
STATEMENTS OF OPERATIONS
QUARTER ENDED SEPTEMBER 30, 1995 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1996
-------------- ---------------
<S> <C> <C>
Revenue:
Coloring income . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 678,780 $ 931,750
Licensing/royalty income . . . . . . . . . . . . . . . . . . . . . . 400,000 175,000
Library sales income . . . . . . . . . . . . . . . . . . . . . . . . - 500,000
-------------- ---------------
1,078,780 1,606,750
-------------- ---------------
Expense:
Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 526,735 845,171
Cost of library rights sold . . . . . . . . . . . . . . . . . . . . . - 500,000
Research and development . . . . . . . . . . . . . . . . . . . . . . 36,782 5,694
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . 137,071 172,870
Film library amortization . . . . . . . . . . . . . . . . . . . . . . 222,000 227,500
General and administrative . . . . . . . . . . . . . . . . . . . . . 351,361 510,657
Participation and licensing . . . . . . . . . . . . . . . . . . . . . 280,000 -
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . 14,608 45,401
-------------- ---------------
1,568,557 2,307,293
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (489,777) $ (700,543)
============== ===============
Per share:
Net loss per share . . . . . . . . . . . . . . . . . . . . . . . . . $ (0.02) $ (0.03)
============== ===============
Weighted average number of common shares outstanding . . . . . . . . 26,201,046 27,278,340
============== ===============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE> 6
CST ENTERTAINMENT, INC.
STATEMENTS OF CASH FLOWS
QUARTER ENDED SEPTEMBER 30, 1995 AND 1996
(UNAUDITED)
INCREASE (DECREASE) IN CASH
<TABLE>
<CAPTION>
1995 1996
-------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (489,777) $ (700,543)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . 359,071 400,370
Non-cash payment of expenses . . . . . . . . . . . . . . . . . . . - 54,145
Non-cash revenue from commitments payable . . . . . . . . . . . . (174,258) -
(Increase) decrease in operating assets:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . (74,660) 674,619
Work in process . . . . . . . . . . . . . . . . . . . . . . . . . (641,370) 314,755
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . (35,807) (57,386)
Receivable from related parties . . . . . . . . . . . . . . . . . 200,000 -
Notes receivable from directors/officers . . . . . . . . . . . . . - 25,000
Increase (decrease) in liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . (1,859) (68,780)
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . 337,736 (50,042)
Deferred income . . . . . . . . . . . . . . . . . . . . . . . . . 116,973 (464,000)
-------------- ---------------
Total adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . 85,826 828,681
-------------- ---------------
Net cash (used in) provided by operating activities . . . . . . . (403,951) 128,138
-------------- ---------------
Cash flows from investing activities:
Additions to property and equipment . . . . . . . . . . . . . . . . . (4,651) -
Additions to capitalized software . . . . . . . . . . . . . . . . . . (108,515) (28,194)
Additions to film library . . . . . . . . . . . . . . . . . . . . . . (42,141) -
Sales of film library rights . . . . . . . . . . . . . . . . . . . . - 500,000
-------------- ---------------
Net cash (used in) provided by investing activities . . . . . . . (155,307) 471,806
-------------- ---------------
Cash flows from financing activities:
Payments of notes payable . . . . . . . . . . . . . . . . . . . . . . (25,413) (768)
Payments on term loan . . . . . . . . . . . . . . . . . . . . . . . . - (62,550)
Additions to notes and loans payable . . . . . . . . . . . . . . . . 500,000 -
Borrowings from line of credit . . . . . . . . . . . . . . . . . . . - 1,347,053
Pay-down on line of credit . . . . . . . . . . . . . . . . . . . . . - (1,834,277)
Loans payable to related party . . . . . . . . . . . . . . . . . . . 100,000 (85,000)
-------------- ---------------
Net cash provided by (used in) financing activities . . . . . . . 574,587 (635,542)
-------------- ---------------
Net increase (decrease) in cash . . . . . . . . . . . . . . . . . . . . 15,329 (35,598)
Cash at beginning of period . . . . . . . . . . . . . . . . . . . . . . 24,694 54,304
-------------- ---------------
Cash at end of period . . . . . . . . . . . . . . . . . . . . . . . . . $ 40,023 $ 18,706
============== ===============
</TABLE>
(Continued)
6
<PAGE> 7
CST ENTERTAINMENT, INC.
STATEMENTS OF CASH FLOWS
QUARTER ENDED SEPTEMBER 30, 1995 AND 1996
(UNAUDITED)
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
1995 1996
-------------- ---------------
<S> <C> <C>
Cash paid during the quarter for interest . . . . . . . . . . . . . . . $ 145 $ -
============== ===============
</TABLE>
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING & FINANCING ACTIVITIES
Quarter ended September 30, 1995
The Company capitalized $54,111 of depreciation expense under its
work-in-process.
Quarter ended September 30, 1996
The Company liquidated $18,000 of accounts payable by issuing 61,715
warrants to purchase the Company's common stock.
The Company paid $36,145 of interest expense on its line of credit and
term loan by adding such amounts to its available line of credit
balance. The Company also paid $62,550 of principal payments on its
term loan by adding such amounts to its available line of credit
balance.
See accompanying notes to financial statements.
7
<PAGE> 8
CST ENTERTAINMENT, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 1 - COMMENTS
In the opinion of the Company's management, the accompanying unaudited
financial statements contain all adjustments, consisting of only normal
recurring accruals, necessary to present fairly the Company's financial
position at September 30, 1996, the results of operations for the quarter ended
September 30, 1996 and 1995 and the cash flows for the quarter ended September
30, 1996 and 1995. Although management of the Company believes that the
disclosures in the financial statements are adequate to make the information
presented not misleading, certain information and footnote disclosures normally
included in financial statements that have been prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to the rules and regulations of the Securities and Exchange
Commission. For further information, refer to the financial statements and
footnotes thereto included in the Company's Annual Report on Form 10-K for the
year ended June 30, 1996.
The results of operations for the quarter ended September 30, 1996 are
not necessarily indicative of the results of operations to be expected for the
full year ending June 30, 1997.
Certain prior period amounts have been reclassified to conform to current
period's presentation.
NOTE 2 - DYNACS ENGINEERING AGREEMENT
During the quarter ended September 30, 1996, CST finalized its agreement
with Florida-based Dynacs Engineering, Inc. to utilize the production services
of Dynac's digital studio facilities in India. Dynacs will also provide
software programming and production support from its U.S.-based offices as part
of the agreement. CST estimates that 60 to 70 percent of the labor intensive
portion of its production work will be performed at Dynac's India facility.
Based on this, CST has reduced its production labor force to the equivalent of
one full-time shift, and anticipates significant annual savings in its
overhead.
NOTE 3 - MGM/UA AGREEMENT
In September 1996, the Company entered into an agreement with MGM/UA
whereby the Company sold its rights in the first four films produced under its
minimum seven picture agreement. In exchange, the Company received $500,000.
As such, the Company will not maintain any future rights and wrote off balances
carried on the books for these pictures in excess of the amount received in the
quarter ended June 30, 1996.
8
<PAGE> 9
CST ENTERTAINMENT, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 4 - WYATT EARP AGREEMENT
In August 1996, the Company entered in to an agreement with Allied
Communications, Inc. ("ACI") whereby the Company sold certain rights in its
Wyatt Earp - Return to Tombstone project. In exchange, the Company received
$175,000. The Company will still maintain certain rights related to the Wyatt
Earp project and is actively pursuing selling such rights.
NOTE 5 - AMERICAN STOCK EXCHANGE
In October 1996, the Company was informed by the American Stock Exchange
("AMEX") of its intent to remove the listing of CST's common stock. CST is
appealing the decision and has asked the Amex to resume trading pending the
appeal. AMEX has advised CST that the trading halt in its common stock will
not be lifted during the appeal process. Trading in CST's common stock was
halted by the AMEX on October 16, 1996.
NOTE 6 - SUBSEQUENT EVENT
In October, 1996, the Company settled its lawsuit with Interactive Tech,
Inc. ("Interactive Tech"), the Company involved with CST in the European joint
venture. Under the settlement, CST will issue Interactive Tech 400,000 shares
of common stock, in exchange for which Interactive Tech will forego all rights
related to the joint venture with CST.
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Results of Operations
Coloring revenue for the quarter ended September 30, 1996 increased
approximately 37%, as compared to 1995. In the quarter ended September 30,
1996, the Company delivered two significant colorized projects. The Company
also delivered numerous color FX projects during the quarter, which amounted to
approximately 45% of total color revenue. The Company is currently in
production on two additional significant coloring projects (approximately 200
minutes) and anticipates completion and delivery by fiscal year end June 30,
1997.
The decrease in Licensing/royalty income in 1996 is due primarily to the
results of the Featurizations division. The Company did not complete any
projects for its Featurizations division during the quarter ended September 30,
1996. However, the Company did sell certain rights in a previously produced
project (see Notes to Unaudited Financial Statement -- Note 4). During the
quarter ended September 30, 1995, the Company licensed four previously
completed 30-minute science fiction anthology segments.
The increase in library sales income is due to the sale of all rights to
the MGM films previously produced (see Notes to Unaudited Financial Statements
- -- Note 3) There was no such sale for the quarter ended September 30, 1995.
The average price per minute delivered increased 35% in the quarter ended
September 30, 1996 as compared to 1995. The increase is due primarily to the a
significant portion of the September 30, 1996 quarter end revenues being Color
FX projects which generate a higher price per minute. Additionally, the
difference is the result of the Company steadily increasing its rates charged
for services.
Delivered minutes increased 2% in the quarter ended September 30, 1996 as
compared to 1995. Minutes produced decreased 84% in the quarter ended
September 30, 1996 as compared to 1995. The changes in 1996 are attributable
to the differences in the Company's operations in 1996 as compared to 1995 as
described above. Also, in July 1996, the Company again reduced its labor force
by changing from two eight-hour shifts to the equivalent of one eight-hour
shift. The Company will be doing a significant portion of its production in
India (see Notes to Unaudited Financial Statements -Note 2).
The ratio of cost of production to color conversion revenue decreased 68%
in the quarter ended September 30, 1996 as compared to 1995 and is partly
attributable to the differences in the Company's operations in 1996 as compared
to 1995 as described above. The decrease is consistent with changes in the
Company's operations in 1996 as compared to 1995.
Production expense increased significantly in the quarter ended September
30, 1996 due to the change in the Company's revenue base. In the quarter ended
September 30, 1995, a major portion of the revenue was licensing and royalty
income. As such, capitalizable costs associated with these projects were
capitalized and are being amortized in accordance with Statement of Financial
Standards ("SFAS") No. 53. There were no projects completed for the
Featurizations division during the quarter ended September 30, 1996. The
increase is offset by the reduction in the production labor force as described
above.
Research and development costs decreased $31,088 in the quarter ended
September 30, 1996 as compared to 1995. The decrease is the result of more
research and development personnel in 1995 being deployed to provide
alternative adaptions and enhancements of animation and coloring software.
General and administrative expenses increased 45% in the quarter ended
September 30, 1996, as compared to 1995. The increases were due to more
projects in production in 1995 resulting in more overhead being capitalized to
the Company's film library and work-in-process than in the same period for
1996. No such costs were capitalized during the quarter ended September 30,
1996. Furthermore, the Company incurred significant expenses in outside legal
and consulting during the quarters ended September 30, 1996, as compared to
1995. The increases were offset slightly by the employment of fewer corporate
personnel in the Company.
10
<PAGE> 11
Participation and licensing expense decreased $280,000 for the quarter
ended September 30, 1996. In the quarter ended September 30, 1995, the Company
recorded a $280,000 license fee expense in conjunction with the delivery of the
four 30-minute science fiction anthology segments described above. The Company
had no such agreements entered into during the quarter ended September 30,
1996.
Interest expense increased $30,793 in the quarter ended September 30,
1996 as compared to 1995. The increase was due to the increase in interest
incurred on the notes payable, loans payable and line of credit.
Depreciation and amortization expense increased 26% in the quarter ended
September 30, 1996 as compared to 1995. The increase is attributed to the
allocation of depreciation and amortization expense to production products in
the quarter ended September 30, 1995. No such allocation was made during the
quarter ended September 30, 1996. This increase was offset slightly by many of
the assets becoming fully depreciated during the current and previous quarter.
Depreciation and amortization expense before capitalization to production
products was $191,182 for the quarter ended September 30, 1995.
The increase in film amortization expense in the quarter ended September
30, 1996 is a direct result of amortization costs associated with licensing
revenues.
Liquidity and Capital Resources
The Company's working capital position as of September 30, 1996 was a
negative $2,139,951 as compared to a negative $458,878 as of September 30,
1995. The Company has experienced significant negative cash flows from
operations and the Company's independent certified public accountants included
an explanatory paragraph in their last fiscal year-end report with respect to
the Company's ability to continue as a going concern.
The following are the Company's plans for improving operations:
securement of production work; securement of working capital; production
capacity flexibility; development of Featurization products and other products
for its own library; expansion of the Company's Color FX division; animation
"inking and painting" production; and animation software licensing.
The Company has secured some contracts for color conversion work. The
Company continues to negotiate for contracts on substantial amounts of color
conversion work. Future color conversion revenues and profits are dependent
upon the successful attainment of these contracts, neither of which can be
assumed.
During the quarter ended September 30, 1996, the Company had no
expenditures on property and equipment for leasehold improvements and other
equipment. The Company anticipates it will have capital expenditures over the
next twelve months of between $100,000 and $300,000 for additional
work-stations and/or upgrade of current work-stations.
The Company expended $28,194 on the enhancement of coloring software in
the quarter ended September 30, 1996. The Company expects to devote additional
resources in the current fiscal year for the production and enhancements of its
proprietary software.
The Company anticipates future expenditures of $2 to $3 million over the next
twelve months for future library products.
Should the Company be successful in obtaining the contracts currently
under negotiation, the Company anticipates cash flows from operations to be
positive over the next twelve months. The Company believes it will cover any
needed cash requirements, including capital expenditures, over
11
<PAGE> 12
the next twelve months through operating cash flow, pre-sales of its library
products, sales of software products, placements of the Company's equity
securities or other financing arrangements which the Company is currently
pursuing.
The Company does not anticipate significant amounts of warrants or
employee stock options will be exercised in 1997 as the majority of the
Company's outstanding warrants and options are at an exercise price greater
than the current market price of the Company's common stock.
Future color conversion revenues and profits are dependent upon the
successful attainment of contracts currently in negotiations. The Company has
not yet attained annualized operating profitability. There can be no assurance
that the Company's efforts will be sufficiently successful to ensure the
ultimate viability of the Company.
12
<PAGE> 13
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. None.
Item 2. Change in Securities. None.
Item 3. Defaults Upon Senior Securities. None.
Item 4. Submission of Matters to a Vote of Security Holders. None.
Item 5. Other Information. None.
Item 6. Exhibits and Reports on Form 8-K. None.
13
<PAGE> 14
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CST ENTERTAINMENT, INC.
------------------------------------
JONATHAN D. SHAPIRO
President, Chief Executive Officer
and Chairman of the Board
November 8, 1996
14
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> SEP-30-1996
<CASH> 18,706
<SECURITIES> 0
<RECEIVABLES> 240,530
<ALLOWANCES> 19,100
<INVENTORY> 454,544
<CURRENT-ASSETS> 860,198
<PP&E> 6,972,380
<DEPRECIATION> 5,960,352
<TOTAL-ASSETS> 3,404,776
<CURRENT-LIABILITIES> 3,000,149
<BONDS> 0
0
0
<COMMON> 4,091,752
<OTHER-SE> (4,265,000)
<TOTAL-LIABILITY-AND-EQUITY> 3,404,776
<SALES> 931,750
<TOTAL-REVENUES> 1,606,750
<CGS> 845,171
<TOTAL-COSTS> 2,307,293
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 45,401
<INCOME-PRETAX> (700,543)
<INCOME-TAX> 0
<INCOME-CONTINUING> (700,543)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (700,543)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
