<PAGE>
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 May 31, 1996
/ / 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 0-14749
ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
(Exact name of small business issuer as specified in its charter)
COLORADO 84-0910696
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
265 TURNER DRIVE, DURANGO, CO 81301
(Address of principal executive offices) (Zip Code)
(303) 259-0554
(Issuer's telephone number, including area code)
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 .
---- ----
At July 5, 1996 there were 2,905,149 shares of common stock outstanding.
This document contains 17 pages including exhibits.
The exhibit index is located on page 15.
<PAGE>
ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
FORM 10-Q FOR THE QUARTER ENDED May 31, 1996
TABLE OF CONTENTS
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements................................... 3
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.......... 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K....................... 15
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
PAGE NO.
--------
Financial Statements
Balance Sheets - May 31, 1996 (unaudited) and February 29, 1996....... 4
Statements of Income - Three-month periods ended May 31, 1996
(unaudited) and May 31, 1995 (unaudited)............................. 6
Statements of Cash Flows
Three-month periods ended May 31, 1996 (unaudited) and May 31,
1995 (unaudited)................................................... 7
3
<PAGE>
ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
BALANCE SHEETS
MAY 31, FEBRUARY 29,
1996 1996
----------- ------------
ASSETS (UNAUDITED)
CURRENT ASSETS
Cash and cash equivalents $ 921,505 $ 528,787
Accounts and notes receivable -
trade, less allowance for doubtful
accounts of $43,196 at May 31 and
$28,196 at February 29 1,602,582 1,463,901
Inventories 2,748,788 2,504,908
Deferred tax asset 59,219 59,219
Other 581,508 224,001
----------- -----------
Total current assets 5,913,602 4,780,816
PROPERTY AND EQUIPMENT - AT COST
Land 122,558 122,558
Building 3,558,692 3,596,905
Leasehold improvements 1,989,375 1,753,165
Machinery and equipment 5,533,366 4,898,174
Furniture and fixtures 2,578,546 2,330,057
Transportation equipment 228,259 228,816
----------- -----------
14,010,796 12,929,675
Less accumulated depreciation and
amortization (2,744,388) (2,468,084)
----------- -----------
11,266,408 10,461,591
OTHER ASSETS
Notes and accounts receivable due
after one year 100,206 111,588
Goodwill, net of accumulated amortization
of $259,641 at May 31 and $253,740 at
February 29 330,359 336,260
Other 574,130 624,185
----------- -----------
1,004,695 1,072,033
----------- -----------
$18,184,705 $16,314,440
----------- -----------
----------- -----------
The accompanying notes are an integral part of these statements.
4
<PAGE>
ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
BALANCE SHEETS - CONTINUED
MAY 31, FEBRUARY 29,
1996 1996
----------- ------------
LIABILITIES AND EQUITY (UNAUDITED)
CURRENT LIABILITIES
Short-term debt $ - $1,000,000
Current maturities of long-term debt 429,562 134,538
Accounts payable - trade 1,279,455 998,520
Accrued compensation 530,181 335,926
Accrued liabilities 184,292 214,460
Income taxes payable 11,198 54,229
----------- -----------
Total current liabilities 2,434,688 2,737,673
LONG-TERM DEBT, less current maturities 4,193,290 2,183,877
DEFERRED INCOME TAXES 275,508 275,508
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY
Common stock - authorized 7,250,000
shares, $.03 par value; issued
3,034,302 shares at May 31 and at
February 29 91,029 91,029
Additional paid-in capital 9,703,985 9,703,985
Retained earnings 2,502,104 2,338,267
----------- -----------
12,297,118 12,133,281
Less common stock held in treasury,
at cost - 129,153 shares at May 31
and at February 29 1,015,899 1,015,899
----------- -----------
11,281,219 11,117,382
----------- -----------
$18,184,705 $16,314,440
----------- -----------
----------- -----------
The accompanying notes are an integral part of these statements.
5
<PAGE>
ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
STATEMENTS OF INCOME
(unaudited)
THREE-MONTH PERIODS ENDED
----------------------------
MAY 31, 1996 MAY 31, 1995
------------ ------------
REVENUES
Sales of chocolate $4,259,854 $3,023,797
Franchise and royalty fees 703,039 695,982
---------- ----------
4,962,893 3,719,779
---------- ----------
COSTS AND EXPENSES
Cost of chocolate sales 2,103,925 1,611,530
Franchise costs 485,467 449,533
General and administrative 414,058 347,460
Retail operating expenses 1,621,956 828,166
---------- ----------
4,625,406 3,236,689
---------- ----------
Operating income 337,487 483,090
OTHER INCOME (EXPENSE)
Interest expense (85,214) (61,838)
Interest income 10,714 7,022
---------- ----------
(74,500) (54,816)
---------- ----------
INCOME BEFORE INCOME TAX EXPENSE 262,987 428,274
INCOME TAX EXPENSE
Provision for income taxes 99,150 160,603
---------- ----------
INCOME ALLOCABLE TO COMMON STOCKHOLDERS $ 163,837 $ 267,671
---------- ----------
---------- ----------
PRIMARY INCOME
PER COMMON AND EQUIVALENT SHARE $ .06 $ .10
---------- ----------
---------- ----------
Weighted average and equivalent shares 2,946,912 2,739,248
---------- ----------
---------- ----------
FULLY DILUTED INCOME
PER COMMON AND EQUIVALENT SHARE $ .06 $ .10
---------- ----------
---------- ----------
Weighted average and equivalent shares 2,950,554 2,748,224
---------- ----------
---------- ----------
The accompanying notes are an integral part of these statements.
6
<PAGE>
ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
STATEMENTS OF CASH FLOWS
(unaudited)
THREE-MONTH PERIODS ENDED
----------------------------
MAY 31, 1996 MAY 31, 1995
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 163,837 $ 267,671
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 282,205 159,388
Changes in operating assets
and liabilities:
Notes and accounts receivable (127,299) 80,039
Inventories (243,880) 68,663
Other assets (357,507) 43,822
Accounts payable 280,935 12,752
Income taxes payable (43,031) (106,382)
Accrued liabilities 164,087 117,119
----------- -----------
Net cash provided by operating
activities 119,347 555,428
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of other assets 50,055 (17,741)
Purchase of property and equipment (1,081,121) (1,459,706)
----------- -----------
Net cash used in investing
activities (1,031,066) (1,477,447)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 4,659,466 754,634
Principal payments on long-term debt (2,355,029) (52,842)
Proceeds from line of credit - 150,000
Principal payments on line of credit (1,000,000) (150,000)
Purchase and retirement of preferred stock - (26,025)
----------- -----------
Net cash provided by financing
activities 1,304,437 675,767
----------- -----------
NET INCREASE (DECREASE) IN CASH 392,718 (246,252)
Cash and cash equivalents at beginning of
period 528,787 382,905
----------- -----------
Cash and cash equivalents at end of period $ 921,505 $ 136,653
----------- -----------
----------- -----------
CASH PAID DURING THE PERIOD FOR:
Interest $ 86,798 $ 55,763
----------- -----------
----------- -----------
Taxes $ 154,714 $ 271,985
----------- -----------
----------- -----------
The accompanying notes are an integral part of these statements
7
<PAGE>
ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
NOTES TO FINANCIAL STATEMENTS
May 31, 1996
1. The interim financial statements included herein have been prepared by
the Company pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosure normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to
such rules and regulations, although the Company believes that the
disclosures are adequate to make the information presented not misleading. It
is suggested that these financial statements be read in conjunction with the
financial statements and notes included in the Company's Annual Report on
Form 10-K for the year ended February 29, 1996.
2. These statements reflect all adjustments which, in the opinion of
Management, are necessary for a fair presentation of the information
contained therein. Results of operations for interim periods are not
necessarily indicative of annual results.
3. Inventories consist of the following:
MAY 31, 1996 FEBRUARY 29, 1996
------------ -----------------
Ingredients and supplies $1,138,040 $1,117,517
Finished Candy 1,610,748 1,387,391
---------- ----------
$2,748,788 $2,504,908
---------- ----------
---------- ----------
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company derives its revenues from four principal sources: (1)
factory sales, which consist of candy sales to its franchised store
locations; (2) retail sales, which consist of candy sales at retail by its
Company-owned stores; (3) franchise fees, which consist of fees earned from
the sale of franchises; and (4) royalties and marketing fees.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain
unaudited financial information and other operating data related to the
Company's operation:
(ALL AMOUNTS OTHER THAN STORE DATA IN THOUSANDS)
FIRST QUARTER FIRST QUARTER $ %
FISCAL 1997 FISCAL 1996 CHANGE CHANGE
------------- ------------- -------- ------
REVENUE COMPONENT
Factory Sales $1,728.1 $1,552.1 $ 176.0 11.3%
Retail Sales 2,531.8 1,471.7 1,060.1 72.0
Franchise Fees 193.6 245.5 (51.9) (21.1)
Royalties/Marketing
fees 509.4 450.5 58.9 13.1
-------- -------- -------- -----
Total $4,962.9 $3,719.8 $1,243.1 33.4%
-------- -------- -------- -----
-------- -------- -------- -----
STORE DATA
-----------------
MAY 31, MAY 31,
1996 1995
------- -------
Number Of Stores
Open At End Of Period:
Company 45 26
Franchised 162 133
--- ---
Total 207 159
--- ---
--- ---
9
<PAGE>
REVENUES
FACTORY SALES. Factory sales increased $176,000 or 11.3% to $1.7
million in the first quarter of fiscal 1997, compared to $1.6 million in the
first quarter of fiscal 1996. This increase resulted from the larger number
of franchised stores in existence throughout the quarter, augmented by the
impact of a 2.6% price increase effected in January of 1996. Same store
pounds purchased from the factory declined 10.2% in the first quarter of
fiscal 1997 compared to the first quarter of fiscal 1996 partially offsetting
the impact of increased stores and increased price. When computing same
store pounds purchased from the factory, purchases by franchised stores open
for 3 months in each period are compared. This decline in same store pounds
purchased resulted primarily from the effect of different timing of product
shipment for the Easter holiday in fiscal 1997 relative to fiscal 1996 (an
earlier Easter in fiscal 1997 resulted in shipment of Easter product in the
last quarter of fiscal 1996).
RETAIL SALES. Retail sales increased $1,060,100 or 72.0% to $2.5
million in the first quarter of fiscal 1997, compared to $1.5 million in the
first quarter of fiscal 1996. This increase resulted primarily from a larger
number of Company-owned stores in existence throughout the quarter. The
impact of a 2.7% same store sales decline at Company-owned stores partially
offset the impact of this increased number of stores. The decline in same
store sales is believed to result from the effect of lower foot traffic in
the factory outlet mall environment in which most Company-owned stores
operate and as a result of a decline in revenues in the second year of
operation from grand opening levels of revenue at stores established in the
last fiscal year at new factory outlet malls.
Additionally, the majority of new Company-owned stores established in
the last fiscal year were located in geographical areas where the Company is
less well known and is seeking to establish name identification. The Company
believes that growth in same store sales as well as in absolute volume levels
are lower than they otherwise would be as a result of this effort to
establish itself in new areas.
ROYALTIES, MARKETING FEES AND FRANCHISE FEES. Royalties and marketing
fees increased $58,900 or 13.1% to $509,400 in the first quarter of fiscal
1997, compared to $450,500 in the first quarter of fiscal 1996. This
increase resulted from increased royalty income from a larger number of
franchised stores operating in the first quarter of 1997 compared to the
first quarter of fiscal 1996, augmented by the effect of increased same store
sales at franchised stores of 1.2%. Franchise fee revenues in the first
quarter of fiscal 1997 declined from that earned in the first quarter of
fiscal 1996 ($193,600 in comparison with $245,500). Franchise signings
declined to 6 in the first quarter of fiscal 1997 from 13 in the first
10
<PAGE>
quarter of 1996, due to difficulty in obtaining appropriate locations for new
franchised stores.
COSTS AND EXPENSES
COST OF CHOCOLATE SALES. Cost of chocolate sales, which includes costs
incurred by the Company to manufacture candy sold to its Company-owned and
franchised stores, increased 30.6% from $1.6 million in the first quarter of
fiscal 1996 to $2.1 million in the first quarter of fiscal 1997. Cost of
chocolate sales as a percentage of revenue decreased to 49.4% in the first
quarter of fiscal 1997 from 53.3% in the first quarter of fiscal 1996. This
improvement resulted from an increase in higher margin retail sales as a
percentage of total revenue and from the impact of a 2.6% factory price
increase.
Although reduced factory margins were not a material adverse factor in
the calculated overall cost of sales percentage relationship(decline in
factory margins relative to first quarter of fiscal 1996 of .86% resulting
from increased material usage and lesser labor efficiencies in the
manufacture of the Company's products) for the quarter, the Company is
experiencing factory margins approximately 2% lower than recent year
historical averages. The Company is engaged in a concerted effort to correct
for the cause of increased material usage, as well as to improve labor
efficiencies with the goal of returning factory margins to historical levels
and to continue the improvement which it had been experiencing in its
margins. Factory margins have improved from lower numbers experienced in the
second half of fiscal 1996 as a result of these efforts. There can be no
guarantee that such margin improvements will continue or that reduced gross
margin performance at the factory will not continue.
FRANCHISE COSTS. Franchise costs increased 8.0% from $449,500 in the
first quarter of fiscal 1996 to $485,500 in the first quarter of fiscal 1997.
As a percentage of the total of royalty, marketing fees and franchise fee
revenues, franchise costs increased to 69.1% of such fees in the first
quarter of fiscal 1997 from 64.6% in the first quarter of fiscal 1996.
Reduced franchise fee revenues relative to the first quarter of last year is
the primary cause of this increase in relative percentage.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expense
increased 19.2% from $347,500 in the first quarter of fiscal 1996 to $414,100
in the first quarter of fiscal 1997, as a result of increased expense for
administrative support personnel. As a percentage of total revenues, general
and administrative expense declined from 9.3% in the first quarter of fiscal
1996 to 8.3% in the first quarter of fiscal 1997, primarily due to a
significant increase in total revenues, without a proportionate increase in
general and administrative expense.
11
<PAGE>
RETAIL OPERATING EXPENSES. Retail operating expenses increased from
$828,200 in the first quarter of fiscal 1996 to $1,622,000 in the first
quarter of fiscal 1997; an increase of 95.8%. This increase resulted
partially from the effect of the larger number of Company-owned stores in
existence throughout the first quarter and partially as a result of increased
expenses incurred in the "startup" phase of many new stores established in
late fiscal 1996 with such expenses continuing into the first quarter of
fiscal 1997. As a percentage of retail sales revenues, retail operating
expenses increased from 56.3% in the first quarter of fiscal 1996 to 64.1% in
the first quarter of fiscal 1997 as a result of insufficient sales volume
leveraging resulting from the decline in same store retail sales at
Company-owned stores discussed above, partially as a result of this
"start-up" effect and partially as a result of a greater "mix" of stores
located in environments with a selling "season" beginning after the first
quarter of the Company's fiscal year.
The Company has begun a program of conversion of Company-owned store
locations to franchised locations of stores not meeting minumum economic
performance criteria. The Company intends to place for sale to franchisees
Company-owned stores not meeting such criteria and thereby not justifying
ongoing investment of Company funds and management time and attention. The
Company does not expect such conversion and sale to have appreciable positive
or negative impact on Company earnings performance because store profits
sacrificed in such cases are expected to be approximately compensated for by
royalties generated and cost of capital saved. Gains realized on store
disposition are also not expected to be material to Company results of
operations. There can be no guarantee, however, that such conversions of
Company-owned stores to franchised locations will not create loss of
Company-owned store profits in excess of royalties generated and cost of
capital saved thereby producing negative impact on future Company
profitability.
OTHER EXPENSE
Other expense of $74,500 incurred in the first quarter of fiscal 1997
increased 35.9% from the $55,000 incurred in the first quarter of fiscal
1996. This increase resulted from increased interest expense caused by
borrowings in support of the Company's Company-owned store expansion.
INCOME TAX EXPENSE
The Company's effective income tax rate in the first quarter of fiscal
1997 was 37.7% approximating the 37.5% in the first quarter of fiscal 1996.
LIQUIDITY AND CAPITAL RESOURCES
In the first quarter of fiscal 1997 the Company generated $119,347 in
operating cash flow in comparison with $555,428 in the first quarter of
fiscal 1996. Operating cash flow declined as a result of lower net income
12
<PAGE>
generated in the current year first quarter relative to last year and as a
result of investment in prepayments of development expense for new Fuzziwig's
locations.
At May 31, 1996, working capital was $3,478,914 in comparison with
$2,043,143 at February 29, 1996, a $1,435,771 increase. This increase
resulted primarily from fixed asset financing achieved recovering cash from
investments in Company store operating assets previously funded from
operating cash flows.
Cash and cash equivalent balances increased from $528,787 at February
29, 1996 to $921,505 at May 31, 1996 as a result of this financing. The
Company's current ratio was 2.4/1, at May 31, 1996 in comparison with 1.7/1
at February 29, 1996.
The Company's long-term debt is comprised primarily of real estate
mortgage financing provided by a local banking facility used to finance the
Company Factory (unpaid balance as of May 31, 1996 $1,639,600), and Chattel
mortgage financing (unpaid balance as of May 31, 1996 $2,979,700) provided by
both local and national financing facilities and used to fund the Company
store expansion.
The Company possesses a $2,000,000 working capital line of credit at May
31, 1996 secured by accounts receivable and inventories which line had a
$-0- balance at that date.
The Company possesses fixed asset availability lines of credit totaling
$5,000,000 for use by the Company in its Company-owned store expansion
program (balance utilized and owed at May 31, 1996, under these availability
lines, $2,300,000).
For the balance of fiscal 1997, the Company anticipates making $4.7
million in capital expenditures. Of this sum, approximately $4.5 million is
anticipated to be used for the opening of new Company-owned stores, with the
balance anticipated to be used for the purchase of capital equipment for the
factory, as well as for additional computer equipment for the Company's
administrative functions.
The Company believes that cash flow from operating activities and
available bank lines of fixed asset and working capital credit will be
sufficient to service debt, fund anticipated capital expenditures and provide
necessary working capital at least through the end of fiscal 1997. There can
be no guarantee, however, that unforeseen events will not require the Company
to secure additional sources of financing. The Company may also seek
additional financing from time to time, through borrowings or public or
private offerings of equity or debt securities, to fund its future expansion
plans.
IMPACT OF INFLATION
13
<PAGE>
Inflationary factors such as increases in the costs of ingredients and
labor directly affect the Company's operations. Most of the Company's leases
provide for cost-of-living adjustments and require it to pay taxes, insurance
and maintenance expenses, all of which are subject to inflation. Additionally
the Company's future lease cost for new facilities may reflect potentially
escalating cost of real estate and construction. There is no assurance that
the Company will be able to pass on its increased costs to its customers.
Depreciation expense is based on the historical cost to the Company of
its fixed assets, and therefore is less than it would be if it were based on
current replacement cost. While property and equipment acquired in prior
years will ultimately have to be replaced at higher prices, it is expected
that replacement will be a gradual process over many years.
SEASONALITY
The Company is subject to seasonal fluctuations in sales, which cause
fluctuations in quarterly results of operations. Historically, the strongest
sales of the Company's products have occurred during the Christmas and summer
vacations seasons. In addition, quarterly results have been, and in the
future are likely to be, affected by the timing of new store openings and
sales of franchises. Because of the seasonality of the Company's business
and the impact of new store openings and sales of franchises, results for any
quarter are not necessarily indicative of results that may be achieved in
other quarters of for a full fiscal year.
EFFECT OF NEW ACCOUNTING STANDARD
Financial Accounting Standard (FAS) 121, "Accounting for the Impairment
of Long-Lived Assets", is effective for fiscal years beginning after December
15, 1995. This standard provided for the reduction of asset values of assets
defined in the Standard as long-lived, with the impact of this reduction
being charged to results of operations. The Company adopted this accounting
standard as of its fiscal year beginning March 1, 1996. There was no impact
on results of operations for the quarter ended May 31, 1996 of adoption of
this standard.
14
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
11.1 Statement regarding computation of earnings per common share
(filed herewith at page 17).
(b) REPORTS ON FORM 8-K
No reports on form 8-K were filed during the three months ended May 31, 1996.
15
<PAGE>
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.
ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
Date: July 10, 1996 /s/ Franklin E. Crail
----------------- --------------------------------------
Franklin E. Crail
(Chairman of the Board,
President and Treasurer)
Date: July 10, 1996 /s/ Lawrence C. Rezentes
----------------- --------------------------------------
Lawrence C. Rezentes
(Vice President - Finance)
16
<PAGE>
EXHIBIT 11.1
ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
COMPUTATION OF INCOME PER COMMON SHARE
THREE-MONTH PERIODS ENDED
-------------------------------
MAY 31, 1996 MAY 31, 1995
------------ ------------
PRIMARY INCOME PER SHARE
Net income allocable to common and
common equivalent shares $ 163,837 $ 267,671
---------- ----------
---------- ----------
Weighted average number of common
shares outstanding 2,905,149 2,641,817
Net effect of dilutive stock options
based on the Treasury Stock Method
using average market price 41,763 97,431
---------- ----------
Weighted average number of common and
common equivalent shares outstanding 2,946,912 2,739,248
---------- ----------
---------- ----------
PRIMARY INCOME PER COMMON AND COMMON
EQUIVALENT SHARE $ .06 $ .10
---------- ----------
---------- ----------
FULLY DILUTED INCOME PER SHARE
Net income allocable to common and
equivalent shares $ 163,837 $ 267,671
---------- ----------
---------- ----------
Weighted average number of common
shares outstanding 2,905,149 2,641,817
Net effect of dilutive stock options
based on the Treasury Stock Method
using the greater of the average or
ending market price 45,405 106,407
---------- ----------
Weighted average number of common
and common equivalent shares
outstanding 2,950,554 2,748,224
---------- ----------
---------- ----------
INCOME PER COMMON AND COMMON EQUIVALENT
SHARES ASSUMING FULL DILUTION $ .06 $ .10
---------- ----------
---------- ----------
17
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-START> MAR-01-1996
<PERIOD-END> MAY-31-1996
<CASH> 921,505
<SECURITIES> 0
<RECEIVABLES> 1,602,582
<ALLOWANCES> 0
<INVENTORY> 2,748,788
<CURRENT-ASSETS> 5,913,602
<PP&E> 14,010,796
<DEPRECIATION> 2,744,388
<TOTAL-ASSETS> 18,184,705
<CURRENT-LIABILITIES> 2,434,688
<BONDS> 4,193,290
0
0
<COMMON> 91,029
<OTHER-SE> 11,190,190
<TOTAL-LIABILITY-AND-EQUITY> 18,184,705
<SALES> 4,259,854
<TOTAL-REVENUES> 4,962,893
<CGS> 2,103,925
<TOTAL-COSTS> 4,625,406
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 74,500
<INCOME-PRETAX> 262,987
<INCOME-TAX> 99,150
<INCOME-CONTINUING> 163,837
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 163,837
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
