SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended February 28, 1997
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 0-14019
Ridgewood Hotels, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 58-1656330
- ------------------------------- ------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2859 Paces Ferry Road, Suite 700
Atlanta, Georgia
30339
- -------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(770) 434-3670
----------------------------------------------------
(Registrant's telephone number, including area code)
Ridgewood Properties, Inc.
----------------------------------------------------
(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 _____
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Section 12, 13 or
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
Yes _____ No _____
<TABLE>
PART I. FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS
-----------------------------
RIDGEWOOD HOTELS, INC. AND SUBSIDIARIES
---------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
FEBRUARY 28, 1997 AND AUGUST 31, 1996
-------------------------------------
($000'S omitted, except per share data)
---------------------------------------
<CAPTION>
(Unaudited)
February 28, August 31,
ASSETS 1997 1996
------ ----------- -----------
<S> <C> <C>
Real Estate Investments:
Real Estate Properties
Operating Properties $ 1,351 $ 1,383
Land Held for Sale or
Future Development 8,044 9,769
------------ ------------
9,395 11,152
Mortgage Loans 4 5
------------ ------------
Total real estate investments 9,399 11,157
Allowance for Possible Losses (3,544) (4,700)
------------ ------------
Net real estate investments 5,855 6,457
Investment in Limited Partnership 881 957
Cash and Cash Equivalents 690 298
Deposits on Future Hotel Acquisitions 700 --
Other Assets 1,736 1,012
------------ ------------
$ 9,862 $ 8,724
============ ============
<FN>
The accompanying notes are an integral part of these consolidated
financial statements.
</FN>
</TABLE>
<TABLE>
RIDGEWOOD HOTELS, INC. AND SUBSIDIARIES
---------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
FEBRUARY 28, 1997 AND AUGUST 31, 1996
-------------------------------------
($000's omitted, except per share data)
---------------------------------------
<CAPTION>
(Unaudited)
February 28, August 31,
LIABILITIES AND SHAREHOLDERS' INVESTMENT 1997 1996
---------------------------------------- ------------ ------------
<S> <C> <C>
Accounts Payable $ 102 $ 103
Accrued Salaries, Bonuses and
Other Compensation 823 782
Accrued Property Tax Expense 48 151
Accrued Interest and Other Liabilities 415 389
Term Loans 2,835 2,858
------------ ------------
Total Liabilities 4,223 4,283
------------ ------------
Commitments and Contingencies
Shareholders' Investment
Series A Convertible Preferred Stock,
$1 par value, 1,000,000 shares authorized, 450,000
shares issued and outstanding at February 28, 1997
and August 31, 1996, liquidation preference
and callable at $3,600,000. 450 450
Common Stock, $.01 par value, 5,000,000
shares authorized, 1,538,480 and 1,088,480 shares
issued and outstanding at February 28, 1997 and
August 31, 1996, respectively. 15 11
Paid-in Surplus 16,513 16,202
Accumulated Deficit since December 30, 1985 (11,339) (12,222)
------------ ------------
5,639 4,441
------------ ------------
$ 9,862 $ 8,724
============ ============
<FN>
The accompanying notes are an integral part of these consolidated
financial statements.
</FN>
</TABLE>
<TABLE>
RIDGEWOOD HOTELS, INC. AND SUBSIDIARIES
-----------------------------------------
STATEMENTS OF CONSOLIDATED INCOME (LOSS)
---------------------------------------
FOR THE THREE AND SIX MONTHS ENDED FEBRUARY 28, 1997 AND FEBRUARY 29, 1996
--------------------------------------------------------------------------
($000's omitted, except per share data)
---------------------------------------
<CAPTION>
For the Three Months Ended For the Six Months Ended
----------------------------- -----------------------------
February 28, February 29, February 28, February 29,
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES:
Operating revenues ................................ $ 857 $ 730 $ 1,493 $ 1,250
Revenues from hotel management .................... 243 173 498 232
Sales of real estate properties ................... 66 184 2,011 419
Equity in net loss of partnership ................. (55) -- (52) --
Income from loans and temporary investments ....... 11 13 11 36
Consulting fee .................................... 398 -- 398 --
------------- ------------- ------------- -------------
1,520 1,100 4,359 1,937
------------- ------------- ------------- -------------
COSTS AND EXPENSES:
Operating expenses ................................ 596 564 1,161 1,113
Expenses of hotel management ...................... 196 216 386 260
Expenses of real estate sales ..................... 13 110 880 290
Depreciation and amortization ..................... 64 39 127 78
Interest expense .................................. 86 85 171 169
General, administration and other ................. 372 376 681 671
Business development .............................. 38 43 70 83
------------- ------------- ------------- -------------
1,365 1,433 3,476 2,664
------------- ------------- ------------- -------------
NET INCOME (LOSS) ..................................... $ 155 $ (333) $ 883 $ (727)
============= ============= ============= =============
EARNINGS (LOSS) PER COMMON AND
COMMON EQUIVALENT SHARE ............................. $ 0.05 $ (0.35) $ 0.65 $ (0.80)
============= ============= ============= =============
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
<TABLE>
RIDGEWOOD HOTELS, INC. AND SUBSIDIARIES
---------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
------------------------------------
FOR THE SIX MONTHS ENDED FEBRUARY 28, 1997 AND FEBRUARY 29, 1996
---------------------------------------------------------------
Decrease in Cash and Cash Equivalents
-------------------------------------
($000's Omitted)
----------------
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) ............................................. $ 883 $ (727)
Adjustments to reconcile net income (loss) to net
cash used by operating activities:
Depreciation and amortization ............................. 127 82
Gain from sales of real estate property ................... (1,131) (129)
Increase in other assets .................................. (439) (319)
Decrease in accounts payable and
accrued liabilities ..................................... (37) (48)
------------- -------------
Total adjustments ......................................... (1,480) (414)
------------- -------------
Net cash used by operating activities ..................... (597) (1,141)
Cash flows from investing activities:
Principal payments received on mortgage loans ............... 1 38
Proceeds from sales of real estate .......................... 1,701 444
Additions to real estate properties ......................... (31) (138)
Investment in limited partnership ........................... 76 (539)
Deposits on future hotel acquisitions ....................... (700) --
------------- -------------
Net cash received (used) from investing activities ........ 1,047 (195)
Cash flows from financing activities:
Repayments of notes payable ................................. (23) (18)
Payment of dividends on preferred stock ..................... (135) (90)
Issuance of common stock .................................... 100 --
------------- -------------
Net cash used by financing activities ..................... (58) (108)
------------- -------------
Net increase (decrease) in cash and cash equivalents ............ $ 392 $ (1,444)
Cash and cash equivalents at beginning of period ................ 298 1,880
------------- -------------
Cash and cash equivalents at end of period ...................... $ 690 $ 436
============= =============
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
<TABLE>
RIDGEWOOD HOTELS, INC. AND SUBSIDIARIES
---------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
------------------------------------
FOR THE SIX MONTHS ENDED FEBRUARY 28, 1997 AND FEBRUARY 29, 1996
---------------------------------------------------------------
Decrease in Cash and Cash Equivalents
-------------------------------------
($000's Omitted)
----------------
<CAPTION>
1997 1996
------------- ----------
<S> <C <C>
Supplemental disclosure of cash flow information
and non-cash activity:
Issuance of 125,000 shares of common stock at $.01 par value
in conjunction with purchase of hotel management company ... $ -- $ 1,250
Assumption of notes payable in conjunction with
purchase of hotel management company ....................... $ -- $ 106,000
Decrease in allowance for possible losses
due to sale of parcel of land ............................. $ 1,156,000 --
During the second quarter of fiscal year 1997, the
Company's President and Chief Financial Officer exercised
their stock options for 450,000 shares of the Company's
common stock. In conjunction with the exercise, promissory
notes and cash were received by the Company and common stock
issued as follows:
Cash received from Company's President ................... $ 100,000 --
Promissory notes received from President
and Chief Financial Officer ............................ $ 350,000 --
Issuance of 450,000 shares of common stock
at $.01 par value ...................................... $ 4,500 --
</TABLE>
RIDGEWOOD HOTELS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 28, 1997 AND FEBRUARY 29, 1996
(Unaudited)
1. GENERAL:
Ridgewood Hotels, Inc. (the "Company") is primarily engaged in
the business of acquiring, developing, operating and selling real estate
property in the Southeast and "Sunbelt" areas. Additionally, the Company,
through its investment in a limited partnership, is engaged in acquiring
and managing hotel properties in the Southeast, as well as managing other
hotels throughout the country. The Company also owns and operates a hotel
in Longwood, Florida. All of the Company's other properties are land
properties held for sale, and no additional development is currently
anticipated for the land. The Company was incorporated under the laws of
the State of Delaware on October 29, 1985. In January 1997, the Company
changed its name from Ridgewood Properties, Inc. to Ridgewood Hotels, Inc.
Prior to December 31, 1985, the Company operated under the name CMEI, Inc.
The Company's common stock is currently listed in the
broker-dealer "Pink Sheets" and trades in the over-the-counter market. Of
the Company's issued and outstanding shares of common stock, 51% of the
common stock is owned by the Company's President, N. Russell Walden. All
of the Company's issued and outstanding shares of preferred stock are
owned by Triton Group, Ltd.
The accompanying financial statements of the Company present
the historical cost basis amount of assets, liabilities and shareholders'
investment of the real estate business for the periods presented. The
consolidated financial statements include the accounts of the Company, its
wholly-owned subsidiaries and its joint venture investments after the
elimination of all intercompany amounts.
2. BASIS OF PRESENTATION:
The accompanying consolidated financial statements have been
prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. In the opinion of
management, the consolidated financial statements reflect all adjustments,
consisting of normal recurring adjustments, which are necessary to present
fairly the financial position, results of operations and changes in cash
flow for the interim periods covered by this report. Although certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, management believes that the disclosures are adequate to make
the information presented not misleading. These financial statements
should be read in conjunction with the audited consolidated financial
statements and notes thereto included in the Company's annual report for
the fiscal year ended August 31, 1996. The results of operations for the
six months ended February 28, 1997 are not necessarily indicative of the
results to be expected for the fiscal year ending August 31, 1997.
The Company has net operating loss carryforwards for both book
and tax purposes which may be used to offset future taxable income. In
September 1993, the Company adopted SFAS 109. The adoption of SFAS 109
did not have a material effect on the Company's consolidated financial
position or results of operations.
The Company accounts for its investment in the limited partnership
under the Equity Method of Accounting after the elimination of all
intercompany transactions, including management fees.
For the purpose of the Statement of Cash Flows, cash includes
cash equivalents which are highly liquid investments with maturity of
three months or less.
Certain prior year amounts have been reclassified to conform with the
current presentation.
3. ALLOWANCE FOR POSSIBLE LOSSES:
The allowance for possible losses decreased by $1,156,000 during the
six months ended February 28, 1997 due to the sale of a portion of the
land in Dallas, Texas, for which a reserve had previously been
established.
4. DEPOSITS ON FUTURE HOTEL ACQUISITIONS:
As of February 28, 1997, the Company has paid $700,000 of cash as
deposits on the purchase of four hotels. Of this amount, $550,000
pertains to non-refundable deposits on the purchase of a hotel and
the underlying land in Atlanta, Georgia. Subsequent to February 28,
1997, the Company paid an additional $125,000 of non-refundable
deposits on this hotel as well as a $100,000 good faith deposit to
a potential lender for financing of the hotel. The Company must
purchase the hotel by April 30, 1997 in order not to forfeit the
total deposits of $775,000.
5. INCOME TAXES:
The Company's income tax provision for the three and six months ended
February 28, 1997 and February 29, 1996 is as follows:
For the Three For the Six
Months Ended Months Ended
------------- ------------
Feb. 28, Feb. 29, Feb. 28, Feb. 29,
1997 1996 1997 1996
-------- -------- -------- --------
Income tax provision $ 62,000 -- $353,000 --
Utilization of net
operating loss
carryforwards (62,000) -- (353,000) --
-------- -------- -------- --------
Net income tax provision -- -- -- --
======== ======== ======== ========
6. SHAREHOLDERS' INVESTMENT:
Gain (Loss) Per Common Share --
Gain (loss) per common share is calculated based upon the
weighted average number of shares outstanding of approximately
1,228,000 and 1,158,000 for the three and six months ended February
28, 1997, respectively, and 1,079,000 and 1,021,000 for the three and
six months ended February 29, 1996, respectively. Dividends paid on
preferred stock were $45,000 and $135,000, respectively, for the
three and six months ended February 28, 1997; and $45,000 and
$90,000, respectively, for the three and six months ended February
29, 1996. These dividends were deducted from the net income (and
added to the net loss) for purposes of computing the earnings (loss)
per common share.
Stock Option Plan --
On March 30, 1993, the Company granted options to purchase
378,000 shares of common stock at a price of $1.83 per share to its
key employees and one director under the Ridgewood Properties, Inc.
Stock Option Plan (the "Plan"). The options vested over a four year
period in 25% increments. All options expire ten years from the date
of grant, unless earlier on account of death, disability, termination
of employment, or for other reasons outlined in the Plan. As of
February 28, 1997, all of the options are exercisable.
On January 28, 1994, the Company granted options to
purchase 375,000 and 75,000 shares of common stock at a price of
$1.00 per share to its President and Chief Financial Officer,
respectively, under the Plan. On January 31, 1997, all of the
options were exercised. In conjunction with the exercise,
promissory notes totalling $350,000 and $100,000 cash was received in
exchange for the Company's common stock. Subsequent to February 28,
1997, the President paid off his promissory note in the amount of
$275,000. The $75,000 promissory note due from the Chief Financial
Officer is payable in full on January 31, 1998 and accrues interest
at a rate per annum of 8.25%.
Warrants --
On December 16, 1996, 75,000 warrants were issued to Hugh
Jones, a hotel acquisitions consultant for the Company. Each warrant
represents the right to purchase from the Company one share of common
stock at the exercise price of $3.50 per share. The warrants may be
exercised at any time within five years from the date of issuance.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED FEBRUARY 28, 1997
COMPARED TO THE THREE AND SIX MONTHS ENDED
FEBRUARY 29, 1996
LIQUIDITY AND CAPITAL RESOURCES --
In June 1995, the Company entered into a loan with a
commercial lender to refinance the Ramada Inn in Longwood, Florida.
The loan proceeds are $2,800,000. The loan is for a term of 20 years
with an amortization period of 25 years, at the rate of 10.35%.
Principal and interest payments are approximately $26,000 per month
beginning August 1, 1995. In addition, the Company is required to
make a repair escrow payment comprised of 4% of estimated revenues,
as well as real estate tax and insurance escrow payments. The total
amount for these items will be a payment of approximately $20,000 per
month and can be adjusted annually. The escrow funds will be used as
tax, insurance and repair needs arise. As of February 28, 1997,
there was approximately $159,000 of escrowed funds related to this
loan agreement.
During the first six months of fiscal year 1997, the
Company sold land in Florida, Texas and Georgia for net proceeds of
approximately $1,220,000, $432,000 and $57,000, respectively.
The Company signed a contract for the sale of its land in
Maitland, Florida for net proceeds of approximately $1,300,000. The
sale is scheduled to close in April 1997, but the contract has
several contingencies which allow the buyer to withdraw at any time.
In January 1997, the Company's President and Chief
Financial Officer exercised their stock options for 450,000 shares of
the Company's common stock. In conjunction with the exercise,
$350,000 of promissory notes and $100,000 cash was received in
exchange for the Company's common stock. Subsequent to February 28,
1997, the President paid off his promissory note in the amount of
$275,000.
As of February 28, 1997, the Company has paid $700,000 of
cash as deposits on the purchase of four hotels. Of this amount,
$550,000 pertains to non-refundable deposits on the purchase of a
hotel in Atlanta, Georgia. Subsequent to February 28, 1997, the
Company paid an additional $125,000 of non-refundable deposits on
this hotel as well as a $100,000 good faith deposit to a potential
lender for financing of the hotel. The Company must purchase the
hotel by April 30, 1997 in order not to forfeit the total deposits of
$775,000.
On August 16, 1995, RW Hotel Partners, L.P. was organized
as a limited partnership (the "Partnership") under the laws of the
State of Delaware. Concurrently, the Company formed Ridgewood
Georgia, Inc. (formerly Ridgewood Hotels, Inc.), a Georgia
corporation ("Ridgewood Georgia") which became the sole general
partner in the Partnership with RW Hotel Investments Associates,
L.L.C. ("Investor") as the limited partner. Ridgewood Georgia has a
1% base distribution percentage versus 99% for the Investor.
However, distribution percentages do vary depending on certain
defined preferences and priorities pursuant to the Partnership
Agreement ("Agreement") which are discussed below. The partnership
was originally formed to acquire a hotel property in Louisville,
Kentucky. The partnership consists of six hotel properties at
February 28, 1997. The terms of this partnership will serve as a
guideline for other potential acquisitions with the Investor or other
investors.
Income and loss are allocated to the Company and the
limited partner based upon the formula for allocating distributable
cash as described below but subject to an annual limitation which
would result in no more than 88% of partnership income or loss (as
defined) being allocated to the limited partner.
Distributable Cash is defined as the net income from the
property before depreciation plus any net sale proceeds and net
financing proceeds less capital costs. Distributions of
Distributable Cash shall be made as follows:
- First, to the Investor until there has been distributed
to the Investor an amount equal to a 15% cumulative internal rate of
return on the Investor's investment.
- Second, to Ridgewood Georgia until the aggregate amount
received by Ridgewood Georgia equals the aggregate cash contributions
made by Ridgewood Georgia to the Partnership (as of February 28,
1997, Ridgewood Georgia had contributed approximately $748,000).
- Third, 12% to Ridgewood Georgia and 88% to the Investor
until there has been distributed to the Investor an amount equal to a
25% cumulative internal rate of return on Investor's investment.
- Fourth, 75% of the residual to the Investor and 25% to
Ridgewood Georgia.
A Management Agreement exists between the Partnership and
the Company as Manager ("Manager") for the purpose of managing hotels
in Kentucky, Georgia and South Carolina. The Manager shall be
entitled to the following property management fees:
(1) 2.5% of the gross revenues from the hotel property.
(2) 1% of the gross revenues from the hotel property as
an incentive fee if distributable cash equals or exceeds 13.5% of
certain aggregate acquisition costs. No management fees were payable
with respect to the first 12-month period of management of the hotel
in Kentucky.
A Construction Management Agreement exists between the
Partnership and the Manager for the purpose of managing future
improvements to the properties.
The Company currently has approximately $748,000 invested
in the Partnership. Also, at February 28, 1997, the Company recorded
approximately $157,000 equity in the income of the Partnership,
bringing the total investment in the limited Partnership to
approximately $881,000. The Partnership purchased a hotel in
Louisville, Kentucky for approximately $16,000,000. In December 1995
and January 1996, the Partnership purchased four hotel properties in
Georgia for approximately $15,000,000 and a hotel in South Carolina
for $4,000,000, respectively. The Company may make future capital
contributions to the Partnership. Management expects to fund such
capital contributions through available cash or from loans from the
Partnership. Additionally, the Company may invest in other
partnerships to acquire hotels in the future.
Since the Company is not currently generating sufficient
operating cash to cover overhead and debt service, the Company must
continue to sell real estate, seek alternative financing or otherwise
recapitalize the Company. The Company also intends to aggressively
pursue the acquisition of hotels and hotel management contracts which
would provide additional cash flow.
RESULTS OF OPERATIONS --
The Company had gains from real estate sales of
approximately $53,000 and $1,131,000 for the three and six months
ended February 28, 1997. During the three and six months ended
February 29, 1996, the Company had gains from real estate sales of
approximately $74,000 and $129,000. Gains or losses on sales are
dependent upon the specific assets sold in a particular period and
the terms of each sale.
Operating revenues increased approximately $127,000, or
17%, and $243,000, or 19%, for the three and six months ended
February 28, 1997, respectively, compared to the three and six months
ended February 29, 1996 due to increased revenues at the Company's
hotel in Longwood, Florida.
Revenues from hotel management increased approximately
$70,000, or 40%, and $266,000, or 115%, for the three and six months
ended February 28, 1997, respectively, compared to the three and six
months ended February 29, 1996. The increase is due to the
acquisition of hotels and a hotel management company. In turn,
expenses of hotel management increased approximately $126,000, or
48%, for the six months ended February 28, 1997 compared to the six
months ended February 29, 1996. Expenses of hotel management
decreased by approximately $20,000, or 9%, for the three months ended
February 28, 1997 compared to February 29, 1996 due to less hotel
management staff than in the prior year's quarter ending February 29,
1996.
Due to the Company's investment in a limited partnership
during fiscal year 1996, the Company recognized equity in the loss of
the partnership of approximately $55,000 and $52,000 for the three
and six months ended February 28, 1997, respectively.
The Company received approximately $398,000 as a
consulting fee during the three and six months ended February 28,
1997. This consulting fee was earned by the Company for its
involvement in the negotiations and purchase of a large
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
A. Exhibits:
27 Financial Data Schedule
B. Reports on Form 8-K:
One report on Form 8-K was filed on February 5,
1997 to disclose the following:
1) The election by the Company's President and
Chief Financial Officer to exercise their
stock options with respect to 375,000 and
75,000 shares of common stock, respectively,
at a price of $1.00 per share.
2) The name of the corporation was changed to
Ridgewood Hotels, Inc.
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned
thereunto duly authorized.
RIDGEWOOD PROPERTIES, INC.
By: /s/ N. R. Walden
N. Russell Walden
President
By: /s/ Karen S. Hughes
Karen S. Hughes
Vice President,
Chief Accounting Officer
Date: April 14, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial information extracted from
the Consolidated Balance Sheets, Statements of Consolidated Loss and
Consolidated Statement of Cash Flows and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> FEB-28-1997
<CASH> 690,000
<SECURITIES> 0
<RECEIVABLES> 525,000
<ALLOWANCES> 3,544,000
<INVENTORY> 14,000
<CURRENT-ASSETS> 0
<PP&E> 3,052,000
<DEPRECIATION> 1,602,000
<TOTAL-ASSETS> 9,862,000
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
450,000
<COMMON> 15,000
<OTHER-SE> 5,174,000
<TOTAL-LIABILITY-AND-EQUITY> 9,862,000
<SALES> 2,011,000
<TOTAL-REVENUES> 4,359,000
<CGS> 880,000
<TOTAL-COSTS> 2,554,000
<OTHER-EXPENSES> 751,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 171,000
<INCOME-PRETAX> 883,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 883,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 883,000
<EPS-PRIMARY> 0.65
<EPS-DILUTED> 0.65
</TABLE>
