<PAGE>
U.S. 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 Quarter Ended June 30, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE EXCHANGE ACT
For the transition period from _________ to _________
Commission file number 0-22190
---------------------------------------
ELTRAX SYSTEMS, INC.
(Exact name of Registrant as specified in its charter)
MINNESOTA 41-1484525
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
2000 Town Center, Suite 690, Southfield, MI 48075
(Address of principal executive offices)
(248) 358-1699
(Issuer's telephone number)
--------------------------------------
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 .
---- ----
Shares of the Registrant's Common Stock, par value $.01 per share, outstanding
as of August 7, 1998: 12,573,438.
<PAGE>
PART I-ITEM 1: FINANCIAL STATEMENTS
ELTRAX SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents $ 5,480,816 $ 366,364
Accounts receivable, net 7,566,786 9,353,349
Inventories, principally purchased components 3,766,297 4,298,794
Other current assets 833,584 602,062
------------ ------------
Total current assets 17,647,483 14,620,569
Furniture and equipment, net 997,218 863,174
Goodwill, net 5,816,864 6,007,259
------------ ------------
Total assets $ 24,461,565 $ 21,491,002
------------ ------------
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Line of credit $ 2,000,000 $ 4,744,529
Accounts payable 5,336,618 6,010,516
Accrued compensation 532,775 575,383
Accrued expenses 1,110,870 1,196,222
Unearned revenue 901,037 967,507
Income taxes payable 297,259 496,123
------------ ------------
Total current liabilities 10,178,559 13,990,280
Shareholders' equity
Common stock, $.01 par value, 50,000,000 shares authorized;
12,573,438 and 10,847,771 shares issued and outstanding 125,735 108,478
Additional paid-in capital 32,155,492 24,741,499
Accumulated deficit (17,998,221) (17,349,255)
------------ ------------
Total shareholders' equity 14,283,006 7,500,722
------------ ------------
Total liabilities and shareholders' equity $ 24,461,565 $ 21,491,002
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
2
<PAGE>
ELTRAX SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED JUNE 30, FOR THE SIX MONTHS ENDED JUNE 30,
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenue $ 11,978,579 $ 11,343,064 $ 26,953,452 $ 21,605,258
Cost of revenue 9,236,324 9,984,051 20,854,279 18,489,997
------------- ------------- ------------- -------------
Gross profit 2,742,255 1,359,013 6,099,173 3,115,261
Operating expenses:
Selling, general and administrative 3,018,909 2,956,954 6,373,046 5,063,023
Amortization of goodwill 98,835 106,163 190,395 208,400
Adjustment of Datatech goodwill - 2,458,000 - 2,458,000
------------- ------------- ------------- -------------
Total operating expenses 3,117,744 5,521,117 6,563,441 7,729,423
------------- ------------- ------------- -------------
Operating loss (375,489) (4,162,104) (464,268) (4,614,162)
Interest expense, net 86,231 67,760 184,698 113,503
------------- ------------- ------------- -------------
Loss before income taxes (461,720) (4,229,864) (648,966) (4,727,665)
Income tax expense - 1,315,970 - 1,315,970
------------- ------------- ------------- -------------
Net loss $ (461,720) $ (5,545,834) $ (648,966) $ (6,043,635)
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Net loss per common share
- basic and diluted $ (0.04) $ (0.71) $ (0.06) $ (0.77)
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Weighted average shares outstanding-basic 11,215,070 7,812,063 11,033,490 7,809,411
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE>
ELTRAX SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30,
1998 1997
------------ --------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (648,966) $ (6,043,635)
Adjustments to reconcile net loss to net cash provided by
(used for) operating activities:
Amortization 190,395 208,400
Depreciation 159,800 33,992
Warrants issued for services 18,000 -
Adjustment of Datatech goodwill - 2,458,000
Adjustment to deferred income taxes - 1,315,970
Changes in current operating items:
Accounts receivable, net 1,786,563 (956,976)
Inventories 532,497 (500,985)
Other current assets (231,522) (29,033)
Accounts payable (673,898) 2,439,600
Accrued compensation (42,608) 328,843
Accrued expenses (85,352) (170,452)
Other current liabilities (265,334) (298,242)
------------ --------------
Net cash provided by (used for) operating activities: 739,575 (1,214,518)
------------ --------------
INVESTING ACTIVITIES:
Cash paid in connection with acquisition of MST - (2,028,214)
Purchases of furniture and equipment, net (293,844) (108,196)
------------ --------------
Net cash used for investing activities: (293,844) (2,136,410)
------------ --------------
FINANCING ACTIVITIES:
Distributions to shareholders - (258,728)
Proceeds from (payments on) credit line, net (2,744,529) 3,665,592
Proceeds from issuances of common stock 7,413,250 38,227
------------ --------------
Net cash provided by financing activities: 4,668,721 3,445,091
------------ --------------
Increase in cash and cash equivalents 5,114,452 94,163
------------ --------------
CASH AND CASH EQUIVALENTS:
Beginning of period 366,364 694,901
------------ --------------
End of period $ 5,480,816 $ 789,064
------------ --------------
------------ --------------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE>
ELTRAX SYSTEMS, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared by Eltrax Systems, Inc. (the "Company" or "Eltrax") in
accordance with generally accepted accounting principles, pursuant to the
rules and regulations of the Securities and Exchange Commission. Pursuant
to such rules and regulations, certain financial information and footnote
disclosures normally included in the financial statements have been
condensed or omitted.
In the opinion of management, the accompanying unaudited condensed
financial statements contain all necessary adjustments, consisting only of
those of a recurring nature, and disclosures to present fairly the
financial position as of June 30, 1998 and the results of operations and
cash flows for the periods ended June 30, 1998 and 1997. The condensed
consolidated financial statements include the accounts of Eltrax Systems,
Inc. ("Eltrax") and its subsidiaries, Nordata, Inc. and Four Corners
Technology, Inc. Effective January 1, 1998 all other subsidiaries of the
Company were merged into Eltrax Systems, Inc. Significant intercompany
transactions have been eliminated.
The year-end condensed consolidated balance sheet was derived from audited
consolidated financial statements, but does not include all disclosures
required by generally accepted accounting principles. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's annual report on Form 10-KSB for the year
ended December 31, 1997.
2. LINE OF CREDIT
The Company's line of credit agreement contains certain restrictive
covenants, including, maintaining a current ratio of at least 1.1:1.0,
maintaining an indebtedness ratio of no greater than 1.3:1.0, meeting
certain targets for earnings after taxes, interest, depreciation,
and amortization as well as certain reporting covenants. For the quarter
ended June 30, 1998, the Company was not in compliance with the current
ratio for April and May and the positive earnings covenant for each month
in the quarter. At the Company's request, the bank has waived its rights
related to these events of non-compliance through June 30, 1998. The
Company has classified these borrowings as current as there is no assurance
that they will continue to comply with these covenants for the remainder
of 1998.
5
<PAGE>
3. NET INCOME (LOSS) PER SHARE
Income (loss) per share is determined by dividing income (loss) by the
weighted average number of common shares outstanding. Common stock
equivalents represent shares issuable upon the assumed exercise of dilutive
stock options and warrants. Common stock equivalents have been excluded
from diluted loss per share calculations as their inclusion would be
antidilutive.
4. STOCK WARRANT EXERCISE
In June 1998, the Company issued 1,716,667 shares upon the exercise of
several previously issued stock warrants. The warrant exercises resulted in
cash proceeds to the Company of $7,375,000. After the exercise of these
warrants, 541,785 stock warrants remained outstanding, with exercise
prices from $5.25 to $6.00 per share.
5. LITIGATION
The Company is involved in several legal proceedings arising from its
normal business operations. In management's opinion the ultimate outcome
of these proceedings will not have a material impact on the Company's
financial position.
6. INCOME TAXES
During the second quarter of 1997, the Company increased the valuation
allowance applied to its deferred tax assets by recording $1,315,970 in
income tax expense.
7. SUBSEQUENT EVENT
On August 7, 1998 the Company announced that it had signed a letter of
intent to acquire Encore Systems, Inc., Global Systems and Support, Inc.
and Five Star Systems, Inc. in a cash and stock transaction valued at
$12 million. The completion of this transaction is subject to due
diligence and other conditions. The Company expects to close this
acquisition on or before August 31, 1998.
6
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Certain statements in this Form 10-Q and in future filings by the Company with
the Securities and Exchange Commission and in the Company's written and oral
statements made by or with the approval of an authorized executive officer
constitute "forward-looking statements" within the meaning of the Securities Act
of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and
the Company intends that such forward-looking statements be subject to the safe
harbors created thereby. The words "believe," "expect" and "anticipate" and
similar expressions identify forward-looking statements. These forward-looking
statements reflect the Company's current views with respect to future events and
financial performance, but are subject to many uncertainties and factors
relating to the Company's operations and business environment which may cause
the actual results of the Company to be materially different from any future
results expressed or implied by such forward-looking statements. Examples of
such uncertainties include, but are not limited to, changes in customer demand
and requirements, new product announcements, interest rate fluctuations, changes
in federal income tax laws and regulations, competition, industry specific
factors and world wide economic and business conditions. For a more
comprehensive list of uncertainties, see the section entitled "Certain Important
Factors" in the Company's Report on Form 10-KSB for the year ended December 31,
1997. The Company undertakes no obligation to publicly update or revise any
forward-looking statements whether as a result of new information, future events
or otherwise.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THE THREE MONTHS ENDED JUNE 30,
1997:
Total revenue for the three months ended June 30, 1998 increased by $636,000 to
$11,979,000 as compared to revenue of $11,343,000 for the three months ended
June 30, 1997. The increase resulted primarily from the acquisition of several
companies subsequent to the second quarter of 1997 offset by a decrease in sales
of the Company's former Datatech subsidiary of approximately $5,000,000 from the
prior period due to the closing of all remaining Datatech operations by March
31, 1998. The Datatech operation was significantly curtailed in late 1997, and
completely closed in early 1998.
The gross profit margin for the three months ended June 30, 1998 was 22.9%
compared to 12.0% for the three months ended June 30, 1997. The increase in
gross profit margin resulted from higher margins at the businesses acquired
subsequent to the second quarter of 1997, and the decrease in Datatech sales
which carried a low margin due to a number of nonrecurring charges in the second
quarter of 1997.
Second quarter operating expenses decreased by $2,403,000 to $3,118,000 compared
to operating expenses of $5,521,000 for the three months ended June 30, 1997.
The decrease in operating expenses resulted primarily from the charge in 1997
for the adjustment to Datatech goodwill of $2,458,000. Increases in operating
expenses from the inclusion of the companies acquired in 1997, as well as
operating expenses at the Company's newly established Network Operating Center,
were offset by reduced operating expenses related to Datatech.
7
<PAGE>
Net interest expense of $86,000 in the current year was slightly higher than the
expense of $68,000 during the three months ended June 30, 1997. Income tax
expense decreased in 1998 due to the 1997 tax provision attributable to the
adjustment made to deferred tax assets.
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1997:
Total revenue for the six months ended June 30, 1998 increased by $5,348,000 to
$26,953,000 as compared to revenue of $21,605,000 for the six months ended June
30, 1997. The increase resulted primarily from the acquisition of several
companies subsequent to the second quarter of 1997. Offsetting these increases
were the sales related to the Company's Datatech subsidiary which decreased by
approximately $10,000,000 from the prior period due to the closing of all
remaining Datatech operations by March 31, 1998.
The gross profit margin for the six months ended June 30, 1998 was 22.6%
compared to 14.4% for the six months ended June 30, 1997. The increase in gross
profit margin resulted from higher margins at the businesses acquired subsequent
to the second quarter of 1997, and the decrease in Datatech related sales which
carried a much lower margin.
Operating expenses for the first six months decreased by $1,166,000 to
$6,563,000 compared to operating expenses of $7,729,000 for the six months
ended June 30, 1997. The decrease in operating expenses resulted from the
significant charge in 1997 for Datatech goodwill of $2,458,000 offset by
increases from the inclusion of the companies acquired in the second half of
1997 and operating expenses at the Company's Network Operating Center. These
increases were offset by reduced operating expenses related to the wind-down
of Datatech.
Net interest expense of $185,000 in the current year was higher than the
expense of $114,000 during the six months ended June 30, 1997. The increase
is due to increased working capital requirements in 1998. Income tax expense
decreased in 1998 due to the 1997 tax provision attributable to the
adjustment made to deferred tax assets.
PRO FORMA FINANCIAL RESULTS
SELECTED PRO FORMA FINANCIAL DATA
The following selected unaudited pro forma financial data should be read in
conjunction with the Company's financial statements and related notes thereto
and "Management's Discussion and Analysis." The unaudited pro forma financial
data is derived from unaudited financial statements of the Company that are not
included herein. The pro forma results are not necessarily indicative of future
results.
The following discussions describe the Company's summary results as if the Four
Corners Technology, Inc., Hi-Tech Connections, Inc., DataComm Associates, Inc.,
and Telecom Associates, Inc. acquisitions (which were consummated at various
dates throughout 1997) had taken place as of the beginning of the six month
period ended June 30, 1997.
8
<PAGE>
PRO FORMA FINANCIAL DATA:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30, 1998 JUNE 30, 1997
------------- -------------
<S> <C> <C>
Revenue $11,979,000 $15,600,000
Net Loss (462,000) (5,681,000)
Net Loss per share (.04) (.59)
</TABLE>
COMPARISON OF PRO FORMA FINANCIAL DATA FOR THE THREE MONTHS ENDED JUNE 30, 1998
AND 1997
Revenue for the three months ended June 30, 1998 decreased by $3,621,000 to
$11,979,000 compared to pro forma revenue of $15,600,000 for the three months
ended June 30, 1997. The decrease is due primarily to the closing of Datatech
which reduced revenue by approximately $5,000,000 from 1997 as well as the
decision made to stop servicing certain distribution customers. Offsetting this
increase was higher revenue in each of the remaining regions except the
Southeast. Southeastern revenue was below the prior year primarily due to the
elimination of certain distribution customers in March 1998.
The gross profit margin as a percentage of revenue for the three months ended
June 30, 1998 was 22.9% which was higher than the 16.4% pro forma gross profit
margin for the three months ended June 30, 1997. The increased margin resulted
primarily from the reduced proportion of Datatech and distribution sales which
carried a lower margin than the remaining sales as well as certain nonrecurring
charges at Datatech.
Pro forma operating expenses decreased by $3,734,000 to $3,118,000 compared
to pro forma operating expenses of $6,852,000 for the three months ended June
30, 1997. The decrease is attributable to the $2,458,000 Datatech goodwill
adjustment in 1997 as well as Datatech operating expenses, which were reduced
due to the closing of the operation.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1998 JUNE 30, 1997
------------- -------------
<S> <C> <C>
Revenue $26,953,000 $30,804,000
Net Loss (649,000) (6,073,000)
Net Loss per share (.06) (.63)
</TABLE>
COMPARISON OF PRO FORMA FINANCIAL DATA FOR THE SIX MONTHS ENDED JUNE 30, 1998
AND 1997
Total pro forma revenue for the six months ended June 30, 1998 decreased by
$3,851,000 to $26,953,000 compared to pro forma revenue of $30,804,000 for the
six months ended June 30, 1997. The decrease is due primarily to the closing of
Datatech which dropped revenue by approximately $10,000,000 from 1997 as well as
the decision made to stop servicing certain distribution customers. Offsetting
this increase was higher revenue in each of the remaining regions.
9
<PAGE>
The gross profit margin as a percentage of revenue for the six months ended June
30, 1998 was 22.6% which was higher than the 18.3% pro forma gross profit margin
for the six months ended June 30, 1997. The increased margin resulted from the
reduced proportion of Datatech and distribution sales which carried a lower
margin.
Pro forma operating expenses decreased by $3,719,000 to $6,563,000 compared to
pro forma operating expenses of $10,282,000 for the six months ended June 30,
1997. The largest components of the decrease were the adjustment to Datatech
goodwill and the elimination of Datatech operating expenses.
LIQUIDITY AND CAPITAL RESOURCES
The level of cash and cash equivalents increased by $5,115,000 from $366,000 at
December 31, 1997 to $5,481,000 on June 30, 1998. The Company's short-term
borrowings under its bank line at State Street decreased by $2,745,000 to
$2,000,000 at June 30, 1998. The increase in cash and cash equivalents of
$5,115,000 together with the decrease in the credit line of $2,745,000 are
directly attributable to the $7,375,000 received in June through the exercise of
warrants. The availability under the credit line is limited to the Company's
borrowing base, which is a function of certain accounts receivable and
inventories. At June 30, 1998, the borrowing base was approximately $6,000,000.
Cash provided by operating activities was $740,000 for the first six months of
1998 reflecting the $649,000 net loss offset by approximately $368,000 of
non-cash charges and a decrease in working capital items of $1,020,000. Accounts
receivable decreased by $1,787,000 reflecting lower second quarter sales, which
were in large part due to the elimination of certain distribution activities. In
addition, a corresponding decrease in inventory of $532,000 occurred, resulting
in lower accounts payable.
Cash provided by financing activities of $4,669,000 was primarily related to the
proceeds from the warrant exercises and the exercise of stock options offset by
a net reduction in the bank line of $2,745,000.
The acquisition referred to in Note 7 to the condensed consolidated financial
statements, if completed, will require the Company to utilize available
funds, draw down a portion of the line of credit and secure additional long term
financing for the cash portion of the acquisition price. Upon completion
of the additional financing, the Company anticipates that its line of credit
arrangement will be sufficient to fund current working capital requirements.
YEAR 2000 ISSUES
The Company is proceeding with its selection of software to be used in the
future for its internal operations and believes it will be installed and
functional by mid 1999. The Company is also instituting a program to notify
its customers of any year 2000 issues related to products sold by the
Company. This program will offer assistance to customers in complying with
year 2000 issues if they have purchased ongoing maintenance services from
Eltrax.
10
<PAGE>
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
On February 13, 1998, the Company instituted a collection action
against Orix Global Communication, Inc. ("Orix Global") in The
United States District Court for Nevada. On April 7, 1998, the
Company was served with a complaint filed by Orix Systems, Inc.
("Orix Systems"), a company related to Orix Global, alleging breach
of contract and other claims. The Company has removed the Orix
Global lawsuit to The United States District Court for Nevada and is
seeking to consolidate both lawsuits in the same proceeding. The
Company believes that the Orix Global claims are defensive to the
Company's claim and are without merit, and the Company is vigorously
contesting these claims.
Richard Hjelte, a former employee of the Company's Datatech
subsidiary, filed a lawsuit against the Company in The Superior
Court of California, Orange County, alleging that Mr. Hjelte's
employment was improperly terminated in 1997. Mr. Hjelte is
claiming severance pay and other damages. The Company believes that
Mr. Hjelte's suit is without merit and is vigorously contesting the
claims.
Item 2. CHANGES IN SECURITIES
None
Item 3. DEFAULTS UPON SENIOR SECURITIES
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's Annual Meeting of Shareholders held on May 19,
1998, holders of Eltrax Common Stock voted in favor of the following
actions:
<TABLE>
<CAPTION>
ELECTION OF AGAINST OR ABSTENTIONS OR
DIRECTORS FOR WITHHELD BROKER NON-VOTES
- ----------- --------- ---------- ----------------
<S> <C> <C> <C>
William P. O'Reilly 9,358,116 15,145
Clunet R. Lewis 9,358,126 15,135
Mack V. Traynor, III 9,233,116 140,145
James C. Barnard 9,357,626 15,635
Patrick J. Dirk 9,358,126 15,135
Stephen E. Raville 9,358,126 15,135
Thomas F. Madison 9,358,126 15,135
ADOPTION OF THE 1998
STOCK INCENTIVE PLAN 6,418,156 57,530 2,897,575
</TABLE>
11
<PAGE>
Item 5. OTHER INFORMATION
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule.
(b) Reports on Form 8-K
None
12
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Eltrax Systems, Inc.
Date: August 13, 1998 /s/ Nicholas J. Pyett
------------------------------
Nicholas J. Pyett
Chief Financial Officer
(Principal Financial and
Accounting Officer)
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 5,480,816
<SECURITIES> 0
<RECEIVABLES> 7,566,786
<ALLOWANCES> 0
<INVENTORY> 3,766,297
<CURRENT-ASSETS> 17,647,483
<PP&E> 997,218
<DEPRECIATION> 0
<TOTAL-ASSETS> 24,461,565
<CURRENT-LIABILITIES> 10,178,559
<BONDS> 0
0
0
<COMMON> 125,735
<OTHER-SE> 14,157,271
<TOTAL-LIABILITY-AND-EQUITY> 24,461,565
<SALES> 11,978,579
<TOTAL-REVENUES> 11,978,579
<CGS> 9,236,324
<TOTAL-COSTS> 9,236,324
<OTHER-EXPENSES> 3,117,744
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 86,231
<INCOME-PRETAX> (461,720)
<INCOME-TAX> 0
<INCOME-CONTINUING> (461,720)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (461,720)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> 0
</TABLE>
