U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE EXCHANGE ACT
For the transition period from to
Commission File No. 0-15303
UNICO, INC.
(Name of Small Business Issuer in Its Charter)
Delaware 73-1215433
(State of Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
Harbor Park, 333 Ludlow Street, Stamford, CT 06902
(Address of Principal Executive Offices) (Zip Code)
(203) 323-6239
(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 No X
State the number of shares outstanding of each of the
issuer's classes of common equity, as of the latest
practicable date: As of October 19, 1999, the Company had
6,759,160 shares of Common Stock outstanding, $0.001 par
value.
UNICO, INC.
Form 10-QSB Quarterly Report
For the Period Ended June 30, 1999
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Page
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements 3
Unaudited Consolidated Statement of Financial Condition
at June 30, 1999 and 1998 for Unico, Inc. and Subsidiary 4-5
Unaudited Consolidated Statement of Operations at June 30,
1999 and 1998 for Unico, Inc. and Subsidiary 6
Unaudited Consolidated Statement of Stockholders' Equity
(Deficiency) at June 30, 1999 and December 31, 1998
for Unico, Inc. and Subsidiary 7-8
Unaudited Consolidated Statement of Cash Flows ended June 30,
1999 and December 31, 1998 for Unico, Inc. and Subsidiary 9
Notes to Interim Consolidated Financial Statements 10-11
Item 2. Management's Discussion and Analysis of Financial
Conditions and Results of Operations 12
PART II - OTHER INFORMATION 13
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Signatures 13
</TABLE>
- ------------------------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
BASIS OF PRESENTATION
The accompanying unaudited financial statements are
presented in accordance with generally accepted
accounting principles for interim financial information
and the instructions to Form 10-QSB and item 310 under
subpart A of Regulation S-B. Accordingly, they do not
include all of the information and footnotes required by
generally accepted accounting principles for complete
financial statements. The accompanying statements should
be read in conjunction with the audited financial
statements for the years ended December 31, 1998 and
1997. In the opinion of management, all adjustments
(consisting only of normal occurring accruals) considered
necessary in order to make the financial statements not
misleading, have been included. Operating results for
the six months ended June 30, 1999 are not necessarily
indicative of results that may be expected for the year
ending December 31, 1999. The financial statements are
presented on the accrual basis.
UNICO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
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June 30, December 31,
1999 1998
---------- --------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ - $ 105,404
Accounts and notes receivable (net of
allowance for uncollectible accounts) - 350,354
Receivable from NexGen - 834,665
Inventory - 117,564
Prepaid expenses - 28,379
-----------------------------
Total current assets - 1,436,366
-----------------------------
PROPERTY AND EQUIPMENT, AT COST
Furniture, fixtures and equipment - 4,354,072
Leasehold improvements - 81,029
(Less) Accumulated depreciation and
amortization - (2,602,599)
----------------------------
Net property and equipment - 1,832,502
OTHER ASSETS
Gas, oil and mineral
lease in Texas 40,027,951 -
Other - 8,105
-------------------------------
Total other assets 40,027,951 8,105
-------------------------------
TOTAL ASSETS $ 40,027,951 $ 3,276,973
--------------------------------
--------------------------------
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UNICO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
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June 30, December 31,
1999 1998
---------- --------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 232,470 $ 531,983
Accrued liabilities - 170,206
Line of credit - 74,988
Current portion of long-term liabilities - 594,668
Deferred revenue - 103,000
---------------------------------
Total current liabilities 232,470 1,474,845
---------------------------------
LONG-TERM LIABILITIES
Notes payable - 83,058
Deferred rent - 374,376
---------------------------------
Total long-term liabilities - 457,434
---------------------------------
Total liabilities 232,470 1,932,279
---------------------------------
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY
Preferred stock, Series A, C & Redeemable
All recalled and retired - -
Common stock
$.01 par value, 20,000,000 shares authorized,
6,759,160 and 1,877,272 shares issued and
outstanding at June 30, 1999 and
December 31, 1998 respectively 67,592 18,773
Additional paid-in capital 47,451,095 7,921,443
Stock dividend declared - 172,665
Retained earnings (deficit) (7,723,206) (6,768,187)
-------------------------------------
Total stockholders' equity 39,795,481 1,344,694
------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $40,027,951 $ 3,276,973
------------------------------------
------------------------------------
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UNICO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE QUARTERS ENDED JUNE 30, 1999 AND 1998
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1999 1998
---------- --------------
REVENUE
Other $ - $ -
---------------------------------
Total revenue - -
---------------------------------
EXPENSES
General and administrative 89,470 (73,153)
Interest expense - 7,048
---------------------------------
Total expenses 89,470 (66,105)
---------------------------------
INCOME (LOSS) BEFORE INCOME TAXES 66,105
INCOME TAX PROVISION -
---------------------------------
NET INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS (89,470) 66,105
EXTRAORDINARY GAIN FROM
FORGIVENESS OF DEBT - 1,314,248
---------------------------
EXTRAORDINARY GAIN (LOSS)
FROM BUSINESS DISSOLUTION - 173,187
---------------------------
NET INCOME (LOSS) $ (89,470) $ 1,553,540
---------------------------
---------------------------
BASIC NET INCOME (LOSS) PER COMMON SHARE
Weighted average common shares outstanding 3,688,004 1,877,272
------------------------------
------------------------------
Income (loss) from continuing operations $ (0.02) $ 0.04
Income (loss) from forgiveness of debt - 0.70
Income (loss) from discontinued operations - 0.09
------------------------------
NET INCOME (LOSS) PER COMMON SHARE $ (0.02) $ 0.83
------------------------------
------------------------------
</TABLE>
UNICO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
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1999 1998
---------- --------------
REVENUE
Other $ - $ 7,973
---------------------------------
Total revenue - -
---------------------------------
EXPENSES
General and administrative 145,503 44,729
Interest expense - 12,729
---------------------------------
Total expenses 145,503 57,458
---------------------------------
INCOME (LOSS) BEFORE INCOME TAXES (145,503) (49,485)
INCOME TAX PROVISION - -
---------------------------------
NET INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS (145,503) (49,485)
EXTRAORDINARY GAIN FROM
FORGIVENESS OF DEBT - 1,314,248
EXTRAORDINARY GAIN (LOSS)
FROM BUSINESS DISSOLUTION (3,931) 228,660
---------------------------------
NET INCOME (LOSS) $ (149,434) $ 1,493,423
---------------------------------
---------------------------------
BASIC NET INCOME (LOSS) PER COMMON SHARE
Weighted average common shares outstanding 2,787,640 1,877,272
Income (loss) from continuing operations $ (0.05) $ (0.03)
Income (loss) from forgiveness of debt - 0.70
Income (loss) from discontinued operations - 0.13
---------------------------------
NET INCOME (LOSS) PER COMMON SHARE $ (0.05) $ 0.80
---------------------------------
---------------------------------
See Notes to Financial Statements
</TABLE>
UNICO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
FOR THE PERIODS ENDED JUNE 30, 1999 AND DECEMBER 31, 1998
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Preferred Stock
Redeemable Series A Series C Common Stock
Shares Amount Shares Amount Shares Amount Shares Amount
Balance
December 31, 1997 70 $ 1 - $ - 428,185 $ 4,282 706,359 $ 7,064
Deferred compensation earned
Stock issued in forgiveness
of debt - TC EQUITIES 600,000 6,000
Converted preferred
to common stock (70) (1) (428,185) (4,282) 570,913 5,709
All stock options & warrants
canceled or expired
Proceeds from pending sale
of subsidiary - United Marketing
Solutions, Inc.
Stock dividend declared
Net income
- -----------------------------------------------------------------------------------------
Balance
December 31, 1998 - - - - - - 1,877,272 18,773
Sale of subsidiary - United
Marketing Solutions, Inc.
Stock dividend paid
Net (loss)
- -----------------------------------------------------------------------------------------
Stock issued for services 250,000 2,500
Correction number of shares 51,888 519
Stock issued for Silver
Valley Energy, Inc. 4,580,000 45,800
- -----------------------------------------------------------------------------------------
Balance
June 30, 1999 - $ - - $ - - $ - 6,759,160 $ 67,592
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
</TABLE>
UNICO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
FOR THE PERIODS ENDED JUNE 30, 1999 AND DECEMBER 31, 1998
CONTINUE
--------
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Additional Stock
Paid-In Dividend Deferred Accumulated
Capital Declared Compensation Deficit Total
----------- --------- ------------- ----------- -----
Balance
December 31, 1997 $ 6,815,135 $ $ (4,557) $ 8,226,004 $(1,404,079)
Deferred compensation earned 4,557 4,557
Stock issued in forgiveness
of debt - TC EQUITIES 174,000 180,000
Converted preferred
to common stock (1,426) -
All stock options & warrants
canceled or expired
Proceeds from pending sale
of subsidiary - United Marketing
Solutions, Inc. 1,106,399 1,106,399
Stock dividend declared (172,665) 172,665
Net income 1,457,817 1,457,817
- -----------------------------------------------------------------------------------------
Balance
December 31, 1998 7,921,443 172,665 - (6,768,187 1,344,694
Sale of subsidiary -
United Marketing
Solutions, Inc. (306,980)
Stock dividend paid (172,665) (172,665)
Net (loss) (149,434) (149,434)
- -----------------------------------------------------------------------------------------
Stock issued for services 5,000 700
Correction number of
shares (519)
Stock issued for Silver Valley
Energies, Inc. 39,832,151 39,877,951
- -----------------------------------------------------------------------------------------
Balance
June 30, 1999 47,451,095 - - $(7,723,206) $39,795,481
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
</TABLE>
UNICO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
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1999 1998
---------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (149,434) $ 1,493,423
Adjustments to reconcile
net income to net cash
provided by operating activities:
Depreciation and amortization 98,404 316,467
Provision for bad debts - (19,837)
Deferred income taxes - 18,000
Stock issued for services rendered 7,500 -
Changes in operating assets and liabilities
(Increase) decrease accounts and
notes receivable 350,354 24,188
(Increase) decrease receivable
from NexGen 834,665 -
(Increase) decrease prepaid
expenses and inventory 145,943 (72,896)
(Increase) decrease deposits and other 8,105 -
Increase (decrease) accounts payable &
accrued liabilities (544,707) (399,805)
Increase (decrease) deferred
revenue and rent (477,376) 37,866
- -----------------------------------------------------------------------------------------
Net cash (used) by operating activities 273,454 1,397,406
- -----------------------------------------------------------------------------------------
CASH FLOW FROM INVESTING ACTIVITIES
Sale of property 1,734,098 (85,012)
- -----------------------------------------------------------------------------------------
Net cash (used) by investing activities 1,734,098 (85,012)
- -----------------------------------------------------------------------------------------
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from notes payable - 175,500
Payment of notes payable (677,726) (87,000)
Debt forgiveness - (1,441,412)
Payment of cash dividend declared 172,665 -
Net (loss) on sale of subsidiary -
United Marketing Solutions, Inc. (1,112,565) -
Acquisition of Subsidiary -
Silver Valley Energy, Inc. 150,000 -
Net cash provided by financing activities (2,112,956) (1,352,912)
- -----------------------------------------------------------------------------------------
(DECREASE) IN CASH AND CASH EQUIVALENTS (105,404) (40,518)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 105,404 129,860
- -----------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ - $ 89,342
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
SUPPLEMENTAL CASH FLOW DISCLOSURE
Cash paid for income taxes $ - $ -
Cash paid for interest - 12,729
NON CASH ITEMS:
Stock issued to acquire Subsidiary
- Silver Valley Energy, Inc. $39,877,951 $ -
Stock issued for services 7,500 -
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
</TABLE>
UNICO AND SUBSIDIARY
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIODS ENDED JUNE 30, 1999 AND 1998
NOTE 1 - BASIS OF PRESENTATION
---------------------
The interim consolidated financial statements at June
30, 1999 and for the three and six month periods ended
June 30, 1999 and 1998 are unaudited, but include all
adjustments which the Company considers necessary for a
fair presentation. The December 31, 1998 balance sheet was
derived from the Company's audited financial statements.
The accompanying unaudited financial statements are for
the interim periods and do not include all disclosures
normally provided in annual financial statements, and
should be read in conjunction with the Company's Form 10-KSB
for the year ended December 31, 1998. The accompanying
unaudited interim financial statements for the three and
six month periods ended June 30, 1999 are not necessarily
indicative of the results which can be expected for the
entire year.
The preparation of financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of
revenues and expenses during the reporting period.
Actual results could differ from those estimates.
NOTE 2 - COMMITMENTS & CONTINGENCIES
---------------------------
The Company is not exposed to any legal matters at this
time.
NOTE 3 - INCOME TAXES
------------
The Company accounts for income taxes in accordance
with the provisions of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("SFAS
109"), which requires an asset and liability approach to
accounting for income taxes. Under SFAS 109, deferred
tax assets or liabilities are computed on the difference
between the financial statement and income tax bases of
assets and liabilities ("temporary differences") using
the enacted marginal tax rate. Deferred income tax expenses
or benefits are based on the changes in the deferred tax asset
or liability from period to period.
Management has determined that it is not likely that
the Company will be able to realize all the tax benefits
from available net operating loss carryforwards and has,
therefore, provided a valuation allowance of an equal
amount. The income tax expense of $9,000 reflected in
the Statement of Operations for the quarter ended June
30, 1998 represents state income taxes payable by United
Marketing Solutions, Inc. on first quarter profits that
are not impacted by the net operating loss carryforwards.
NOTE 4 - COMMON STOCK
------------
On May 28, 1999, the Company acquired 100% ownership in
Silver Valley Energy, Inc. (SVE) in consideration for
4,580,000 restricted shares of common stock that was
issued September 30, 1999. SVE owns oil and gas lease
rights on approximately 1,340 acres in Pecos County,
Texas. The lease rights are renewable for an indefinite
period of time. The lease rights have been appraised by
certified petroleum geologists and registered professional
engineers at a present value of $40,027,951. SVE acquired
the oil and gas lease rights June 25, 1999. These
transactions are recognized in the financial statements as
of June 30, 1999, including the stock issued September 30,
1999. SVC accounted for the oil and gas lease rights on the
purchase method of accounting.
The Company also made a 3 for 1 reverse stock split
immediately before acquiring SVE. This 3 for 1 reverse
stock split has been recognized in these financial
statements retroactive to December 31, 1997 for
comparative purposes.
The stock transfer agent was changed May in 1999. In
the transition from the prior stock transfer agent, an
additional 51,888 shares of issued and outstanding stock
came to light. Management has not been able to identify or
explain who these outstanding shares are for or for what
purpose they were issued, or when.
NOTE 5 - DISCONTINUED OPERATIONS OF SUBSIDIARY
-------------------------------------
During 1998, the Company entered into an agreement to
sell its principal operating subsidiary United Marketing
Solutions, Inc. (UMSI), formerly United Coupon
Corporation. Accordingly, the results of operations for
1999 and 1998 are presented showing the results of
continuing operations and discontinued operations, net of
applicable income taxes (income tax benefits). UMSI was
fully disposed of and sold effective April 1, 1999.
NOTE 5 - DISCONTINUED OPERATIONS OF SUBSIDIARY - Continued
-------------------------------------------------
A summary of the subsidiary's operations for the three
month and six month periods ended June 30, 1999 are as
follows:
UNICO, INC. AND SUBSIDIARY
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIODS ENDED MARCH 31, 1999 AND 1998
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3 months ended 6 months ended
June 30, 1999 June 30, 1999
---------------- ---------------
REVENUE
Printing, design and advertising sales
Net $ - $ 1,902,906
Other - 62,383
----------------------------------------
Total revenue - 1,965,289
----------------------------------------
EXPENSES
Direct cost of sales - 1,495,041
General and administrative and
Franchise development - 474,159
----------------------------------------
Total expenses - 1,969,200
Net income (loss) before income
tax (provision) - (3,931)
Income tax provision - -
----------------------------------------
INCOME (LOSS) FROM OPERATIONS - $ (3,931)
-----------------------------------------
-----------------------------------------
</TABLE>
Unico Inc. 10Q-SB, June 30, 1999
- --------------------------------
Item 2.
Management's Discussion and Analysis of Financial
Conditions and Results of Operations.
Forward-Looking Statements
---------------------------
Forward-Looking statements, based on management's
current views and assumptions, are made throughout the
Management's Discussion and Analysis and elsewhere in
this report to stockholders. These statements are
subject to certain risks and uncertainties that could cause
actual results to differ materially from historical results
and those presently anticipated or projected. Among the
factors that may affect operating results are the following:
success of the Company's change in focus; competitive
environment; and general economic conditions.
Form 10-KSB for the year ended December 31, 1998 contains
further discussions on these matters.
Results of Operations
---------------------
On April 1, 1999, the Company sold off its only
subsidiary - United Marketing Solutions, Inc., which was
its only source of revenue at the time. So, there was no
revenue in the three months ending June 30, 1999, down
$1,965,269 from the three months ending March 31, 1999.
Future outlook
--------------
On May 28, 1999, the Company in exchange for stock
acquired all of the issued and outstanding shares of
Silver Valley Energy, Inc., a private held Texas
corporation. Silver Valley Energy, Inc. holds an
undeveloped oil, gas and mineral lease on approximately
1,340 acres in Pecos County, Texas. The oil and gas
property has been appraised and classified by Nova
Petroleum Resource Co., Certified Petroleum Geologists
and Registered Professional Engineers. The report
classifies the petroleum reserves as proved undeveloped
reserves containing 55,699,072 MCF natural gas, at a net
present value of $40,027,951.
With this and other planned acquisitions through the
issuance of common stock and additional external
financing, management is optimistic the Company will be
profitable in the near future.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. Not applicable
Item 2. Changes in Securities. None
Item 3. Defaults Upon Senior Securities. Not Applicable
Item 4. Submission of Matters to a Vote of Security
Holders.
On June 25, 1999, the shareholders of the Company approved
the acquisition of Silver Valley Energy, which includes
the assets of the Glass Mountains "799" property comprising
oil and gas reserves located in Pecos County, Texas in
exchange for stock of the Company. On June 5, 1999, the
Glass Mountains "799" property has been independently
valued at $40,027,951 by Joseph V. Rochefort, a certified
geologist.
Item 5. Other Information. None
Item 6. Exhibits and Reports of Form 8-K. None
Exhibit 27 - Financial Date Schedule - Electronic Filing
Only
SIGNATURES
Pursuant to the requirements of section 13 or 15(d) of
the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed in its behalf by the
undersigned, thereunto duly authorized, on November 19,
1999.
UNICO, INC.
-----------------
(Registrant)
Date: November 19, 1999 s/s Jay R. Weppler
-------------------
Jay R. Weppler
Chairman and President
EXHIBIT 27 - FINANCIAL DATA SCHEDULE
- ------------------------------------
[DESCRIPTION] ART. 5 FDS FOR 2ND QUARTER 10-Q
[TEXT]
[ARTICLE] 5
[MULTIPLIER] 1,000
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[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] DEC-31-1999
[PERIOD-END] JUN-30-1999
[CASH] 0
[SECURITIES] 0
[RECEIVABLES] 0
[ALLOWANCES] 0
[INVENTORY] 0
[CURRENT-ASSETS] 0
[PP&E] 40,027,951
[DEPRECIATION] 0
[TOTAL-ASSETS] 40,027,951
[CURRENT-LIABILITIES] 232,470
[BONDS] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 67,592
[OTHER-SE] 39,727,889
[TOTAL-LIABILITY-AND-EQUITY] 40,027,951
[SALES] 0
[TOTAL-REVENUES] 0
[CGS] 0
[TOTAL-COSTS] 0
[OTHER-EXPENSES] 89,470
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 0
[INCOME-PRETAX] <89,470>
[INCOME-TAX] 0
[INCOME-CONTINUING] <89,470>
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] <89,470>
[EPS-BASIC] <.02>
[EPS-DILUTED] <.02>
</TABLE>
