SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORTS UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1999
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 0-21662
Strategia Corporation
(Exact name of registrant as specified in its charter)
Kentucky 61-1064606
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
PO Box 37144, Louisville, KY 40233-7144
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 502-426-3434
Former name, former address, and former fiscal year, if changed since last
report.
6040 Dutchmans Lane, Suite 400, Louisville, KY 40205-3271
Indicate by check [X] whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date - 4,667,677 as of September
30, 1999.
STRATEGIA CORPORATION AND SUBSIDIARIES
<TABLE>
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
September 30, December 31,
1999 1998
(Unaudited) (Audited)
Assets
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,985,527 $ 761,650
Accounts receivable, net 4,379,377 3,207,375
Unbilled revenues 2,341,144 1,386,810
Other current assets 386,279 491,706
Total current assets 9,092,327 5,847,541
Property and equipment
Cost 20,909,370 21,593,384
Less accumulated depreciation 16,750,057 15,500,460
Net property and equipment 4,159,313 6,092,924
Other assets 304,113 381,418
$13,555,753 $12,321,883
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of long-term debt $ 58,167 $ 50,726
Current installments of obligations
under capital leases 311,068 505,931
Deferred revenue 21,479 395,438
Accounts payable 983,387 1,663,736
Accrued expenses and other liabilities 3,055,252 1,708,408
Accrued income taxes 200,100 42,767
Total current liabilities 4,629,453 4,367,006
Long-term debt, excluding current installments 837,447 882,407
Obligations under capital leases,
excluding current installments 36,455 272,253
Deferred revenue 1,147,674 1,010,547
Deferred income taxes 74,890 352,825
Minority interest 189,439 71,201
Total liabilities 6,915,358 6,956,239
Stockholders' equity:
Common stock without par value. Authorized
15,000,000 shares; issued and outstanding
4,667,677 shares 13,883,965 13,883,965
Accumulated deficit (7,041,565) (8,509,606)
Accumulated other comprehensive loss (202,005) (8,715)
Total stockholders' equity 6,640,395 5,365,644
$13,555,753 $12,321,883
</TABLE>
See notes to unaudited condensed consolidated financial statements.
STRATEGIA CORPORATION AND SUBSIDIARIES
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Service revenues $ 3,013,229 $ 2,075,985 $ 9,446,170 $ 8,953,621
Operating expenses:
Cost of services 1,979,025 2,251,283 5,426,727 6,474,178
Selling, general and
administrative expenses 863,235 1,420,339 2,775,311 3,720,119
Other charges 18,600 - 333,600 -
2,860,860 3,671,622 8,535,638 10,194,297
Operating income (loss) 152,369 (1,595,637) 910,532 (1,240,676)
Other (income) expense:
Interest expense 34,288 23,049 104,667 103,959
Interest income (13,595) (11,667) (18,420) (63,502)
Other (income)expense - - - -
20,693 11,382 86,247 40,457
Income (loss) before
income taxes 131,676 (1,607,019) 824,285 (1,281,133)
Income tax provision 4,748 - 14,248 19,845
Income (loss) from
continuing operations 126,928 (1,607,019) 810,037 (1,300,978)
Income (loss) from
discontinued operations 500,662 85,046 658,004 (464,974)
Net income (loss) $ 627,590 $(1,521,973) $ 1,468,041 $(1,765,952)
Income (loss) per share of common stock from continuing operations:
Basic $ 0.03 $ (0.34) $ 0.17 $ (0.28)
Diluted $ 0.03 $ (0.34) $ 0.17 $ (0.28)
Net income (loss) per share of common stock:
Basic $ 0.13 $ (0.33) $ 0.31 $ (0.38)
Diluted $ 0.13 $ (0.33) $ 0.31 $ (0.38)
Weighted average number of common
shares outstanding 4,667,677 4,667,677 4,667,677 4,667,677
</TABLE>
See notes to unaudited condensed consolidated financial statements.
STRATEGIA CORPORATION AND SUBSIDIARIES
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Net income (loss) $ 627,590 $(1,521,973) $ 1,468,041 $(1,765,952)
Other comprehensive
income (loss), net of tax:
Foreign currency translation
adjustments 72,705 169,726 (193,290) 162,713
Comprehensive
income (loss) $ 700,295 $(1,352,247) $ 1,274,751 $(1,603,239)
</TABLE>
See notes to unaudited condensed consolidated financial statements.
STRATEGIA CORPORATION AND SUBSIDIARIES
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Nine Months Ended
September 30,
1999 1998
<S> <C> <C>
Cash flows from operating activities:
Income (loss) from continuing operations $ 810,037 $(1,300,978)
Adjustments to reconcile income (loss)
from continuing operations to net cash
provided by operating activities:
Depreciation and amortization 551,845 739,430
Other noncash items 326,966 17,964
Income from discontinued operations,
net of depreciation, deferred income
taxes and other noncash items 1,861,067 1,071,741
Change in operating assets and liabilities:
Accounts receivable (1,172,002) (1,861,880)
Unbilled revenues (954,334) (888,437)
Other current assets 105,427 (177,044)
Accounts payable (680,349) 93,206
Accrued expenses and other current
liabilities 1,191,844 528,251
Accrued income taxes 157,333 268,849
Other assets 57,042 389,431
Deferred revenues (236,832) 1,314,449
Net cash provided by
operating activities 2,018,044 194,982
Cash flows from investing activities:
Purchases of property and equipment (319,380) (1,526,109)
Net cash used in investing
activities (319,380) (1,526,109)
Cash flows from financing activities:
Principal payments on long-term debt and
obligations under capital leases, net (423,662) (695,096)
Net cash used in financing
activities (423,662) (695,096)
Effect of exchange rate on changes in cash (51,125) (71,119)
Net increase (decrease) in cash and cash
equivalents 1,223,877 (2,097,342)
Cash and cash equivalents at beginning of
year 761,650 3,866,763
Cash and cash equivalents at end of period $ 1,985,527 $ 1,769,421
</TABLE>
See notes to unaudited condensed consolidated financial statements.
STRATEGIA CORPORATION AND SUBSIDIARIES
<TABLE>
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
<CAPTION>
Accumulated
Other
Common Accumulated Comprehensive
Stock Deficit Income (Loss) Total
<S> <C> <C> <C> <C>
Balance at
December 31,
1998 $ 13,883,965 $(8,509,606) $ (8,715) $ 5,365,644
Net income for
three months
ended March 31 - 605,035 - 605,035
Foreign currency
translation adjustment - - (171,100) (171,100)
Balance at March
31, 1999 $ 13,883,965 $(7,904,571) $(179,815) $ 5,799,579
Net income for three months
ended June 30 - 235,416 - 235,416
Foreign currency
translation adjustment - - (94,895) (94,895)
Balance at June 30, 1999 $ 13,883,965 $(7,669,155) $(274,710) $ 5,940,100
Net income for three
months ended September 30 - 627,590 - 627,590
Foreign currency translation
adjustment - - 72,705 72,705
Balance at
September 30, 1999 $ 13,883,965 $(7,041,565) $(202,005) $ 6,640,395
</TABLE>
See notes to unaudited condensed consolidated financial statements.
STRATEGIA CORPORATION AND SUBSIDIARIES
NOTES TO SEPTEMBER 30, 1999, CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) This financial information should be read in conjunction with the
consolidated financial statements, and the notes thereto, included in the
Company's December 31, 1998, Annual Report on Form 10-KSB. In the opinion of
the Company, the accompanying unaudited condensed consolidated financial
statements contain all adjustments (consisting of only normal recurring
accruals, except for the charge related to the lease assignment as explained
in Note 3 below) necessary to present fairly the financial position as of
September 30, 1999, and the results of operations and cash flows for the period
then ended. Certain prior year data has been reclassified to conform to
current year presentation.
On August 10, 1999, the Company entered into a definitive agreement to sell
its French subsidiaries to a subsidiary of Guardian iT plc ("Guardian"), a
United Kingdom based disaster recovery company. These three French companies
comprise the entirety of the Company's international business segment. Twinsys
Dataguard S.A. ("Twinsys"), a wholly-owned subsidiary of Strategia, provides
disaster recovery and contingency planning services to users of Bull
computers. Twin-X S.A. ("Twin-X"), a 60% owned subsidiary of Twinsys,
provides similar services to users of Unix-based computer systems. Strategia
Europe S.A.S. ("Strategia Europe"), a wholly-owned subsidiary of Strategia,
provides Year 2000 services in France. Since the Company will be exiting its
international business segment, the financial results for all periods reported
have been restated to reflect the results of these European subsidiaries as
discontinued operations. Continuing operations reflect the financial results
of the Company's U.S. business.
Based upon the combined balance sheets of the French subsidiaries at December
31, 1998, net proceeds to the Company from the sale are estimated to be $6.9
million. This would result in a gain of approximately $4.0 million. There
will be an adjustment to the purchase price based on the change in the French
subsidiaries combined net asset value between December 31, 1998, and the
closing date. It is anticipated that the sale, which was approved by the
Company's shareholders on November 4, 1999, will close on or about
November 10, 1999. It is expected that this will result in an increase in the
net cash proceeds to the Company. Of the total cash consideration, $1.275
million will be paid into an escrow account at closing to support any
potential warranty claims that the purchaser may subsequently have against the
Company. Subject to deductions, $637.5 thousand will be released from the
escrow account on March 31, 2000, and the remaining $637.5 thousand on
September 30, 2000.
Results of operations and the composition of net assets of the discontinued
operations are shown below:
Three months ended Nine months ended
September 30 September 30
1999 1998 1999 1998
[S] [C] [C] [C] [C]
Revenues $3,583,638 $2,526,856 $9,725,013 $6,781,519
Income (loss) before
income taxes 609,439 152,496 859,837 (390,823)
Income tax provision 108,777 67,450 201,833 74,151
Net income (loss) from
operations $ 500,662 $ 85,046 658,004 $ (464,974)
September 30 December 31
1999 1998
[S] [C] [C]
Current assets $5,549,525 $3,381,141
Current liabilities 2,915,041 2,396,669
Working capital 2,634,484 984,472
Fixed assets 1,298,466 2,534,230
Other non-current assets 247,644 300,513
Non-current liabilities (1,443,515) (1,593,027)
Net assets $2,737,079 $2,226,188
The income tax provision(s) for the discontinued operations does not
approximate the French statutory rate because the French subsidiaries do not
file consolidated income tax returns; losses incurred by one company are not
able to be offset by income from another. Additionally, in 1999 Strategia
Europe will be able to make use of operating loss carryforwards primarily
incurred in 1998 and, therefore, no tax provision has been made in Strategia
Europe's three months or nine months financial results.
(2) The Company's continuing U.S. operations provides information technology
services, including Year 2000 services, disaster recovery services, and
outsourcing services. During the nine months ended September 30, 1999,
approximately 92% of the $9.4 million revenues were generated by Year 2000
services; compared to 86% in the year ended December 31, 1998.
(3) Revenues from fixed-price Year 2000 and other consulting engagements were
recognized on the percentage-of-completion method. Actual costs incurred to
date, as a percentage of estimated total contract costs, were used to
determine the percentage-of-completion, since management considers expended
costs to be the best available measure of progress on these contracts.
Contract costs included all direct costs related to contract performance.
Provisions for estimated losses on uncompleted contracts, when required, have
been provided for in the period in which such losses were determined.
Revenues from non-fixed-price contracts were recognized as services were
provided and costs were incurred. Selling, general and administrative costs
were charged to expense as incurred.
The Company recorded a charge in the amount of $315 thousand at June 30, 1999,
for an estimated loss to be incurred in the assignment of a lease for office
space to a third party. This charge was increased by $18.6 thousand in the
September 30, 1999, quarter. This provision covers expenses to be incurred
from a write-down of leasehold improvements and other fixed assets, broker
fees and net monthly rent not covered by the assignee, and office relocation
costs.
The Company had U.S. net operating loss carry-forwards of approximately $8.1
million at December 31, 1998, which virtually eliminated the requirement for a
Federal income tax provision in 1999.
(4) Basic and diluted income (loss) per share is based on the income (loss)
from continuing operations or the net income (loss) being divided by the
weighted average number of common and equivalent shares outstanding during the
period.
STRATEGIA CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
Preliminary Note Regarding Forward Looking Information
The information set forth below in "Management's Discussion and Analysis" as
well as other sections of this report includes forward-looking statements.
For this purpose, the words "believes," "anticipates," "plans," "expects,"
and similar expressions are intended to identify forward-looking statements.
Factors that could cause the Company's actual results to differ materially
from those indicated by the forward-looking statements include the uncertain
market for Year 2000 services, the availability of technical personnel, the
Company's relationship with automated tool vendors, the limited time in which
a market for Year 2000 services is expected to exist, the Company's need to
expand the services it offers beyond Year 2000 services, events that affect
the timing of the Company's recognition of service revenues, the Company's
financial resources, and competitive factors. These and other factors are
set forth below in "Management's Discussion and Analysis" and described in
greater detail in the Company's annual report on Form 10-KSB for the year
ended December 31, 1998, under the heading "Certain Factors that May Affect
Future Results."
Results of Operations
On August 10, 1999, the Company entered into a definitive agreement to sell
its French subsidiaries to a subsidiary of Guardian iT plc ("Guardian"), a
United Kingdom based disaster recovery company. Since the Company will be
exiting its international business segment, the financial results for all
periods reported have been restated to reflect the results of these European
subsidiaries as discontinued operations. Continuing operations reflect the
financial results of the Company's U.S. business.
Revenues from continuing operations increased 45% to $3.0 million for the
three months ended September 30, 1999, as compared to the third quarter of
1998. Income from continuing operations for the three months ended September
30, 1999, was $127 thousand, or $ .03 per share, compared to a loss from
continuing operations of $1.6 million, or $ .34 per share, in the 1998 third
quarter. For the nine months, revenues from continuing operations increased
to $9.4 million, a 5% increase over the $9.0 million in the comparable 1998
period. Income from continuing operations for the nine months was $810
thousand, or $ .17 per share, versus a 1998 loss of $1.3 million, or $ .28 per
share.
Net income was $628 thousand, or $ .13 per share, for the three months ended
September 30, 1999, and $1.5 million, or $ .31 per share, for the nine months
ended September 30, 1999. For the nine months ended September 30, 1998, the
net loss was $1.8 million, or a net loss per share of $ .38.
The increase in revenues from continuing operations for the nine months was
primarily a result of an increase in Year 2000 services revenues in the three
month period ended September 30, 1999, as compared to the same prior year
period. Disaster recovery revenues declined by approximately $500 thousand in
the first nine months of 1999 versus 1998.
The improvement in income from continuing operations for the 1999 third
quarter was a result of the improvement in revenues and also due to actions
taken in December 1998 to bring staffing and other costs in line with the
current level of revenues and more effective management of Year 2000 projects.
The majority of the Year 2000 engagements were fixed-price engagements. It
should be noted that contribution margins each period may be impacted by how
effectively certain engagements are managed, as well as whether or not costs
were appropriately estimated when the proposals were submitted to the
customers.
Selling, general and administrative expenses decreased to $863 thousand,
or 29% of revenues, in the three months ended September 30, 1999, as compared
to $1.4 million, or 68% of revenues, in the comparable 1998 period. In the
nine-month period ended September 30, 1999, selling, general and
administrative expenses decreased by $945 thousand to 29% of revenues from 42%
of revenues in the 1998 nine-month period.
The Company recorded a charge in the amount of $333.6 thousand in the nine
months ended September 30, 1999, for a loss to be incurred in connection with
the assignment of a lease for office space to a third party. This charge
covers expenses from a write-down of leasehold improvements and other fixed
assets, broker fees and net monthly rent not covered by the lease assignment,
and office relocation costs. The assignment of this lease, effective
October 1, 1999, will reduce cash operating costs between October 1, 1999,
and December 31, 2003, by nearly $1.2 million.
Net financing costs (interest expense less interest income) increased in 1999
versus the comparable 1998 periods due to reduced short-term investments that
resulted from the negative cash flow incurred in the fiscal year ended
December 31, 1998.
The Company has substantial net operating loss carry-forwards that virtually
eliminate the need for a Federal income tax provision.
Financial Condition, Liquidity and Capital Resources
The Company has an accumulated deficit of $7.0 million at September 30, 1999,
having incurred $5.5 million in losses during the two years ended December 31,
1998. Those losses were primarily due to the cost of establishing and
maintaining an infrastructure to market and deliver Year 2000 services. The
market did not develop as anticipated and in December 1998 the Company
implemented a restructuring plan that included a U.S. workforce reduction of
approximately 30% from the level at the beginning of the 1998 fourth quarter.
The Company continues to take steps to reduce costs and more properly align
costs with its current level of business. Additionally, as the demand for
Year 2000 services declines, the Company needs to replace Year 2000 service
revenues with other IT service revenues. The Company anticipates that
revenues from continuing operations for the fourth quarter of 1999 will
decrease significantly from the $3.0 million reported in the third quarter
and, as a result, the Company will incur a loss from continuing operations.
The ability of the Company to continue as a going concern is dependent upon
completing the transaction to sell the French subsidiaries to Guardian and, in
the longer term, on management's ability to successfully develop new IT
service revenues and achieve consistently profitable operations. The sale of
the French subsidiaries, based on their combined balance sheets at
September 30, 1999, would result in net proceeds to the Company of
approximately $6.9 million. Because of the net operating loss carryforwards
generated by the Company in prior years, no Federal or state income tax
provision is anticipated on the gain from the sale.
At September 30, 1999, the Company had working capital totaling $4.5 million
as compared to $1.5 million at December 31, 1998. Cash has increased by $1.2
million and accounts receivable and unbilled revenues have increased a
combined $2.1 million since December 31, 1998. The increase is attributable
to the improvement in revenues and profits.
Net property and equipment declined by $1.9 million since December 31, 1998.
This was due primarily to the depreciation expense and a reserve provided for
loss on disposal of fixed assets to be sold in connection with the lease
assignment transaction exceeding assets purchased.
Cash flow in the first nine months of 1999 was a positive $1.3 million (before
the effect of exchange rates on change in cash) as compared to a cash outflow
of $2.0 million in the first nine months of 1998. This improvement was
primarily a result of a $2.0 million improvement in net cash provided by
operating activities, reduced capital expenditures of $1.2 million, and a
reduction in net long-term debt and capitalized lease payments.
The Company maintains any excess cash balances in short-term, investment-grade,
interest-bearing securities. The Company has no present plans to make
significant capital expenditures this year. Assuming the Company completes
the sale of the French subsidiaries as contemplated, the Company believes it
has adequate resources to support its cash requirements for the next twelve
months.
Year 2000 Compliance Status
The Company is an information technology services company, the majority of its
current revenues being derived by providing Year 2000 consulting and project
management services. The Company also provides disaster recovery backup
services, with the majority of these revenues being generated in France (see
Note 1 concerning the sale of the French subsidiaries). The Company has made
a review of all of its critical systems, including revenue generating
computers, in both the United States and France. The cost of completing this
review was less than $100 thousand and was charged against operating expenses,
primarily during the year ended December 31, 1998.
The Company believes all critical equipment and systems to be Year 2000
compliant, with the exception of the Bull mainframe computer systems utilized
for disaster recovery backup service in the U.S. Although the Company has
leased a Bull 9000 mainframe computer, which is Year 2000 compliant in and of
itself, additional equipment must be acquired in order to make this system
Year 2000 compliant. The Company, after consulting with its Bull disaster
recovery customers, has decided not to make this investment and will cease to
offer Bull disaster recovery services after December 31, 1999. All other
critical systems are believed to be Year 2000 compliant.
The Company's resources are primarily its personnel and, to a certain extent,
the computer systems described above. The Company is not dependent upon
external suppliers for raw materials or other productive resources as
manufacturers and many other service businesses may be. The primary external
resources are the public utilities for electricity, telephone service, etc.
Therefore, the Company's risks of being able to maintain its own operations
are essentially limited to the public infrastructure risks to which all
business enterprises are exposed.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security-Holders
The 1999 Annual Meeting of the Company's shareholders was held on
November 4, 1999. Five directors were elected to a term lasting until the
next annual shareholders meeting: John A. Brenzel, James E. Buchart,
Robert H. Loeffler, Richard W. Smith, and John P. Snyder. The shareholders
approved the sale of the Company's French subsidiaries. Voting information
with respect to the matters submitted to shareholders is set forth below.
Election of Directors
For Withheld
Mr. Brenzel 4,153,711 62,908
Mr. Buchart 4,153,961 62,658
Mr. Loeffler 4,141,961 74,658
Mr. Smith 4,028,708 187,911
Mr. Snyder 4,153,461 63,158
Sale of French Subsidiaries
For Against Abstain
2,599,517 7,416 1,750
Item 5. Other Events.
On November 5, 1999, the Registrant announced that its shareholders
approved the pending sale of its French subsidiaries. It is anticipated that
the sale will close on or about November 10, 1999, but the closing remains
subject to the fulfillment of the remaining conditions set forth in the sale
agreement.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
27 - Financial Data Schedule
(b) Reports on Form 8-K
Form 8-K filed August 23, 1999, concerning the sale of the
French subsidiaries.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has
caused its quarterly report to be signed on its behalf by the undersigned,
hereunto duly authorized.
STRATEGIA CORPORATION
Date: November 9, 1999 By: /s/ Richard W. Smith
Richard W. Smith, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Richard W. Smith President and Director November 9, 1999
Richard W. Smith (Chief Executive Officer)
/s/ Paul E. Phillips, Jr. Vice President and November 9, 1999
Chief Financial Officer
Paul E. Phillips, Jr. (Principal Financial and Accounting Officer)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> $ 1,985,527
<SECURITIES> 0
<RECEIVABLES> 6,720,521
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 9,092,327
<PP&E> 20,909,370
<DEPRECIATION> 16,750,057
<TOTAL-ASSETS> 13,555,753
<CURRENT-LIABILITIES> 4,629,453
<BONDS> 0
<COMMON> 13,883,965
0
0
<OTHER-SE> (7,243,570)
<TOTAL-LIABILITY-AND-EQUITY> 13,555,753
<SALES> 0
<TOTAL-REVENUES> 9,446,170
<CGS> 0
<TOTAL-COSTS> 8,535,638
<OTHER-EXPENSES> (18,420)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 104,667
<INCOME-PRETAX> 824,285
<INCOME-TAX> 14,248
<INCOME-CONTINUING> 810,037
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,468,041
<EPS-BASIC> .31
<EPS-DILUTED> .31
</TABLE>
