<PAGE> 1
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 September 30, 1998
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 0-21352
APPLIED INNOVATION INC.
(Exact name of registrant as specified in its charter)
DELAWARE 31-1177192
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification no.)
5800 INNOVATION DRIVE, DUBLIN, OHIO 43016
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (614)-798-2000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ___
As of November 9, 1998 there were 15,819,932 shares of common stock
outstanding.
<PAGE> 2
<TABLE>
APPLIED INNOVATION INC.
Table of Contents
<CAPTION>
Page
----
<S> <C>
Facing Page 1
Table of Contents 2
Part I. Financial Information
- ------- ---------------------
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
September 30, 1998 (unaudited) and December 31, 1997 3
Condensed Consolidated Statements of Operations for the three and
nine months ended September 30, 1998 and 1997 (unaudited) 4
Condensed Consolidated Statements of Stockholders' Equity for the nine
months ended September 30, 1998 and 1997 (unaudited) 5
Condensed Consolidated Statements of Cash Flows for the nine
months ended September 30, 1998 and 1997 (unaudited) 6
Note to Condensed Consolidated Financial Statements (unaudited) 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8 - 11
Item 3. Quantitative and Qualitative Disclosure About Market Risk 11
Part II. Other Information
- --------------------------
Items 1 - 5 12
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits 12
(b) Reports on Form 8-K 12
Signatures 13
</TABLE>
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<PAGE> 3
<TABLE>
APPLIED INNOVATION INC.
Condensed Consolidated Balance Sheets
<CAPTION>
Assets
------
(Unaudited)
September 30, 1998 December 31, 1997
------------------ -----------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $14,115,508 $ 8,195,156
Accounts receivable, net of allowance 8,656,066 11,944,692
Inventory 3,553,539 3,176,299
Prepaid expenses 244,055 298,362
Deferred income taxes 1,270,000 1,145,000
----------- -----------
Total current assets 27,839,168 24,759,509
Property, plant and equipment - net 9,780,617 12,833,943
Other assets 122,418 114,096
----------- -----------
Total Assets $37,742,203 $37,707,548
=========== ===========
</TABLE>
<TABLE>
Liabilities and Stockholders' Equity
------------------------------------
<CAPTION>
September 30, 1998 December 31, 1997
------------------ -----------------
<S> <C> <C>
Current liabilities:
Accounts payable $ 1,796,125 $ 3,365,815
Accrued expenses 4,986,804 2,583,426
Accrued warranty expenses 2,610,341 2,155,325
----------- -----------
Total current liabilities 9,393,270 8,104,566
----------- -----------
Deferred income taxes 104,000 200,000
----------- -----------
Stockholders' equity:
Common stock; $.01 par value; 30,000,000 shares
authorized; 15,819,932 shares issued and outstanding
in September, 1998; 15,790,832 shares issued and
outstanding in December, 1997 158,199 157,908
Additional paid-in capital 8,465,122 8,407,058
Retained earnings 19,621,612 20,838,016
----------- -----------
28,244,933 29,402,982
----------- -----------
Total Liabilities and Stockholders' Equity $37,742,203 $37,707,548
=========== ===========
</TABLE>
See accompanying note to condensed consolidated financial statements.
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<PAGE> 4
<TABLE>
APPLIED INNOVATION INC.
Condensed Consolidated Statements of Operations (Unaudited)
<CAPTION>
Three months ended September 30, Nine months ended September 30,
-------------------------------- -------------------------------
1998 1997 1998 1997
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Net sales $14,020,173 $10,527,166 $40,321,748 $31,170,692
Cost of sales 5,598,202 4,868,312 16,974,972 14,020,868
----------- ----------- ----------- -----------
Gross profit 8,421,971 5,658,854 23,346,776 17,149,824
Operating expenses:
Research and development 3,183,857 3,022,363 10,471,342 8,860,087
Selling, general, and administrative 3,741,502 4,860,562 11,393,299 11,408,043
Non-recurring charge related to termination
of Access Products development activity 3,800,000 -- 3,800,000 --
----------- ----------- ----------- -----------
Loss from operations (2,303,388) (2,224,071) (2,317,865) (3,118,306)
Other income 202,161 124,732 474,461 421,384
----------- ----------- ----------- -----------
Loss before income taxes (2,101,227) (2,099,339) (1,843,404) (2,696,922)
Income taxes (715,000) (780,000) (627,000) (1,001,848)
----------- ----------- ----------- -----------
Net loss $(1,386,227) $(1,319,339) $(1,216,404) $(1,695,074)
=========== =========== =========== ===========
Basic earnings (loss) per share $ (0.09) $ (0.08) $ (0.08) $ (0.11)
=========== =========== =========== ===========
Diluted earnings (loss) per share $ (0.09) $ (0.08) $ (0.08) $ (0.11)
=========== =========== =========== ===========
Weighted average shares outstanding
for basic earnings (loss) per share 15,816,907 15,790,832 15,803,365 15,784,832
=========== =========== =========== ===========
Weighted average shares outstanding
for diluted earnings (loss) per share 15,816,907 15,790,832 15,803,365 15,784,832
=========== =========== =========== ===========
</TABLE>
See accompanying note to condensed consolidated financial statements.
-4-
<PAGE> 5
<TABLE>
APPLIED INNOVATION INC.
Condensed Consolidated Statements of Stockholders' Equity (Unaudited)
Nine Months Ended September 30, 1998 and 1997
<CAPTION>
Common Stock
-------------------------
Number Additional
of Paid-in Deferred Retained
Shares Amount Capital Compensation Earnings
---------- --------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Balance January 1, 1998 15,790,832 $157,908 $8,407,058 $ -- $20,838,016
Stock options exercised 29,100 291 49,982 -- --
Tax benefit associated with
exercise of stock options -- -- 8,082 -- --
Net loss for the period -- -- -- -- (1,216,404)
---------- -------- ---------- -------- -----------
Balance - September 30, 1998 15,819,932 $158,199 $8,465,122 $ -- $19,621,612
========== ======== ========== ======== ===========
Balance - January 1, 1997 15,764,632 $157,646 $8,360,502 $(51,501) $21,475,211
Stock options exercised 26,200 262 16,863 -- --
Tax benefit associated with
exercise of stock options -- -- 29,693 -- --
Amortization of deferred
compensation -- -- -- 36,744 --
Net loss for the period -- -- -- -- (1,695,074)
---------- -------- ---------- -------- -----------
Balance - September 30, 1997 15,790,832 $157,908 $8,407,058 $(14,757) $19,780,137
========== ======== ========== ======== ===========
</TABLE>
See accompanying note to condensed consolidated financial statements.
-5-
<PAGE> 6
<TABLE>
APPLIED INNOVATION INC.
Condensed Consolidated Statements of Cash Flows (Unaudited)
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1998 1997
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,216,404) $(1,695,074)
Adjustments to reconcile net loss to net cash
provided by operating activities
Depreciation 2,139,542 1,581,057
Loss on sale of assets 1,955,433 3,340
Provision for deferred income taxes (221,000) 213,167
Provision for deferred compensation -- 36,744
Effects of change in operating assets and liabilities:
Accounts receivable 3,288,626 232,014
Inventory (377,240) (844,736)
Income taxes -- (1,073,099)
Prepaid expenses 54,307 138,457
Other assets (8,322) (3,214)
Accounts payable (1,569,690) 660,325
Accrued expenses 2,858,394 559,253
----------- -----------
Net cash provided (used) by operating activities 6,903,646 (191,766)
----------- -----------
Cash flows from investing activities:
Purchases of property and equipment (1,071,494) (3,250,655)
Proceeds from sale of assets 29,845 9,500
----------- -----------
Net cash used by investing activities (1,041,649) (3,241,155)
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of common stock 50,273 46,818
Tax benefit associated with exercise of stock options 8,082 29,693
----------- -----------
Net cash provided by financing activities 58,355 76,511
----------- -----------
Increase (decrease) in cash and cash equivalents 5,920,352 (3,356,410)
Cash and cash equivalents - beginning of period 8,195,156 12,278,092
----------- -----------
Cash and cash equivalents - end of period $14,115,508 $ 8,921,682
=========== ===========
</TABLE>
See accompanying note to condensed consolidated financial statements.
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<PAGE> 7
APPLIED INNOVATION INC.
Note to Condensed Consolidated Financial Statements (unaudited)
1. Basis of presentation - The condensed consolidated balance sheet as of
September 30, 1998, the condensed consolidated statements of operations for the
three and nine months ended September 30, 1998 and 1997, the condensed
consolidated statements of stockholders' equity for the nine months ended
September 30, 1998 and 1997, and the condensed consolidated statements of cash
flows for the nine month periods then ended have been prepared by the Company,
without audit. In the opinion of management, all adjustments, which consist
solely of normal recurring adjustments, necessary to present fairly, in
accordance with generally accepted accounting principles, the financial
position, results of operations and changes in cash flows for all periods
presented have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. These condensed consolidated financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's December 31, 1997 Annual
Report on Form 10-K. The results of operations for the period ended September
30, 1998 are not necessarily indicative of the results for the full year.
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<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1998 VS. THIRD
QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1997
Net sales for the third quarter of 1998 were $14,020,000, an increase of 33%
from net sales of $10,527,000 for the third quarter of 1997. Year-to-date net
sales for 1998 were up 29% over 1997. This increase is attributable to a higher
number of systems sold. Third quarter sales were all from the Data
Communications Network (DCN) Products Group. Because of the Company's
concentration of sales to Regional Bell Operating Companies (RBOC's) and long
distance phone companies, a small number of customers have represented
substantial portions of net sales. For the first nine months of 1998, sales to
four companies comprised 63% of total net sales. Each of the four customers
contributed between 14% and 19% of net sales. The Company sells to all of the
RBOC's.
Gross profit as a percentage of net sales was 60% for the third quarter of 1998
versus 54% for the same period in 1997. Year-to-date gross profit percentages
were 58% for 1998 and 55% for 1997. The increase in gross profit as a percentage
of net sales for the first nine months was a result of increased operating
efficiencies created by higher production volumes.
Research and development (R&D) expenses increased 5% to $3,184,000 for the third
quarter of 1998 from $3,022,000 for the same period in 1997. R&D decreased as a
percentage of net sales to 23% for the third quarter of 1998 from 29% for the
third quarter of 1997. Year-to-date R&D expenses were $10,471,000 for the first
nine months of 1998 and $8,860,000 for the first nine months of 1997. As a
percentage of net sales, this represents 26% for 1998 and 28% for 1997. R&D
expenses for the DCN Products Group and Access Products Group are included in
the three month and nine month comparisons. R&D expenses for the DCN Products
Group were $1,551,000 for the third quarter of 1998 as compared to $1,501,000
for the third quarter of 1997. For the nine months ended September 30, 1998, R&D
expenses for the DCN Products Group were $4,208,000 as compared to $4,823,000
for the same period of the prior year. R&D expenses for the Access Products
Group were $1,633,000 and $6,263,000 for the three and nine months ended
September 30, 1998. The Company announced the termination of all Access Products
development activity on September 14, 1998. The Company anticipates decreased
R&D expenses in future quarters due to the termination of the Access Products
Group.
Selling, general and administrative expenses (SG&A) decreased to $3,742,000 in
the third quarter of 1998 from $4,861,000 for the same period in 1997. As a
percentage of net sales, this represents 27% in the third quarter of 1998 and
46% in the third quarter of 1997. The decrease in SG&A expenses was primarily
attributable to a $740,000 expense for accounts receivable determined to be not
collectable and $215,000 for severance costs recognized in the third quarter of
1997. Year-to-date SG&A was $11,393,000 for 1998 and $11,408,000 for 1997 and
represented 28% of net sales in 1998 and 37% in 1997.
-8-
<PAGE> 9
A non-recurring charge of $3.8 million was taken in the third quarter of the
current year to account for the termination of the Access Products development
activity. This charge is separately stated on the Condensed Consolidated
Statements of Operations and reflects estimated costs associated with the
termination of the Access Products Group. The expense includes approximately
$1.1 million of severance related costs, a charge of $2.4 million to write down
specific Access Products Group assets and $0.3 million related to occupancy
costs, asset moving costs and other associated termination costs.
As a result of the above factors, there was a loss from operations of $2,303,000
in the third quarter of 1998 compared to a loss from operations of $2,224,000 in
the third quarter of 1997. Third quarter loss from operations represents 16% and
21% of net sales in 1998 and 1997, respectively. Year-to-date results of
operations were a loss of $2,318,000 for 1998 versus a loss of $3,118,000 in
1997. Year-to-date loss from operations represents 6% and 10% of net sales in
1998 and 1997, respectively.
The Company's effective income tax rate was 34% for the current quarter versus
an effective rate of 37% for the same period in 1997.
LIQUIDITY AND CAPITAL RESOURCES
Cash increased by $5,920,000 during the first nine months of 1998 to $14,116,000
at September 30, 1998. Operating activities provided $6,904,000 in cash. During
the same period in 1997, cash decreased by $3,356,000 to $8,922,000 at September
30, 1997.
Net working capital was $18,446,000 at September 30, 1998 compared to
$16,655,000 at December 31, 1997. Current ratios on those dates were 3.0:1 and
3.1:1, respectively. The Company had no long-term debt at September 30, 1998 or
December 31, 1997.
Net capital expenditures were $1,071,000 for the first nine months of 1998 and
$3,251,000 for the same period in 1997. A facility was opened in North Carolina
in the first quarter of 1997, which required capital expenditures for leasehold
improvements and office equipment and furnishings. This facility was closed on
September 14, 1998.
On October 22, 1998, the Company's Board of Directors approved a stock
repurchase program which allows the Company to repurchase up to one million
shares of its Common Stock, $.01 par value, through October 22, 1999. The
Company intends to finance the stock repurchase program using cash reserves.
The Company expects existing cash, cash equivalents, and cash to be generated
from future operations will provide sufficient capital to meet the business
needs of the Company through the next 12 months.
-9-
<PAGE> 10
YEAR 2000
The Company faces year 2000 compliance issues similar to those faced by other
companies which design, manufacture, and sell equipment used in the
telecommunications industry. Year 2000 compliance issues typically arise with
respect to computer software systems and programs that use only two digits,
rather that four digits, to represent a particular year. Consequently, these
systems and programs may not process dates beyond the year 1999 and may result
in miscalculation or system failures causing disruptions of business operations.
The Company's product development processes currently contain steps to include
year 2000 compliance verification for all current and future products. Most of
the Company's products are currently year 2000 compliant, and the Company
believes that compliance for all of its products will be achieved prior to
January 1, 2000. Customers may upgrade non-compliant products to existing
compliant products. Although the products currently offered by the Company have
been tested for year 2000 compliance, any failure of the Company's products to
perform, including the failure to process dates beyond the year 1999, could have
a material adverse effect on the Company's business, financial condition, and
results of operations. The Company's future revenue could be impacted if
customers divert portions of their capital expenditure budgets toward the year
2000 issue and away from programs that include purchases of the Company's
products.
The Company is in the process of assessing its internal computer information
systems and non-computer systems, which contain embedded computer technology, to
determine if such systems are year 2000 compliant. The Company's review of its
internal computer and non-computer information systems in not expected to be
complete until January, 1999. However, based upon review work already completed,
the Company presently believes that the amount of remediation work required to
address year 2000 problems is not extensive. The Company has replaced certain of
its financial and operational systems in the last several years, and management
believes that the new equipment and software substantially address year 2000
issues.
At this time, the Company has not calculated the total estimated cost of
addressing year 2000 issues. However, the Company does not expect the total
costs involved with year 2000 issues to be material. All costs related to year
2000 evaluation and compliance are being expensed by the Company. The Company
cannot guarantee that its efforts will prevent all consequences and there may be
undetermined future costs due to business disruption that may be caused by
customers, suppliers, or unforeseen circumstances.
The Company is still in the process of developing a contingency plan addressing
it's most likely year 2000 worst case scenario. The Company believes that the
potential impact of a failure of its products in its customers'
telecommunications networks would be minimal due to the function that its
products serve. The Company's products assist customers in managing their
telecommunications networks but do not carry telecommunications traffic.
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<PAGE> 11
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The foregoing Management's Discussion and Analysis of Financial Condition and
Results of Operations contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended, which are intended to be
covered by the safe harbors created thereby. These statements include, but may
not be limited to, all statements regarding intent, beliefs, expectations,
projections, forecasts, and plans of the Company and its management, and include
statements regarding future R&D expenditures (paragraph 3), implementation and
financing of the stock repurchase program (paragraph 11), sufficiency of capital
resources (paragraph 12) and preparedness and compliance with year 2000 issues
(paragraphs 13 through 17). These forward-looking statements involve numerous
risks and uncertainties, including, without limitation, the fact that the
Company may decide to substantially increase R & D expenditures to meet the
needs of its business and customers, currently unforeseen circumstances could
require the use of capital resources, year 2000 issues are not fully determined
and resolved and could require additional efforts and expenditures and could
impose additional and unknown risks, and the various risks inherent in the
Company's business and other risks and uncertainties detailed from time to time
in the Company's periodic reports filed with the Securities and Exchange
Commission, including, the Company's Annual Report on Form 10-K. One or more of
these factors have affected, and could in the future affect, the Company's
business and financial results in future periods and could cause actual results
to differ materially from plans and projections. Therefore, there can be no
assurance that the forward-looking statements included in this press release
will prove to be accurate. In light of the significant uncertainties inherent in
the forward-looking statements included herein, the inclusion of such
information should not be regarded as a representation by the Company, or any
other person, that the objectives and plans of the Company will be achieved. All
forward-looking statements made in this press release are based on information
presently available to the management of the Company. The Company assumes no
obligation to update any forward-looking statements.
Item 3. Quantitative and Qualitative Disclosure About Market Risk - inapplicable
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<PAGE> 12
Part II. Other Information
- -------- -----------------
Items 1 - 5. Inapplicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
APPLIED INNOVATION INC.
Exhibit 11
<TABLE>
Statement Regarding Computation of Earnings Per Share (unaudited)
For the nine months ended September 30, 1998 and 1997
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Weighted average number of common shares outstanding -
used for computation of basic earnings (loss) per share 15,803,365 15,784,832
Add net shares issuable pursuant to stock option plans less
shares assumed repurchased at the average market price 0 0
----------- -----------
Number of shares for computation of diluted earnings
(loss) per share 15,803,365 15,784,832
=========== ===========
Net income (loss) for basic and diluted earnings (loss) per share $(1,216,404) $(1,695,074)
=========== ===========
Basic earnings (loss) per share $ (.08) $ (.11)
=========== ===========
Diluted earnings (loss) per share $ (.08) $ (.11)
=========== ===========
</TABLE>
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
Form 8-K, dated September 14, 1998, reporting termination of
activities relating to the Access Products Group (item 5)
Form 8-K, dated October 23, 1998, reporting stock repurchase
program (item 5)
-12-
<PAGE> 13
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.
APPLIED INNOVATION INC.
-----------------------
(Registrant)
November 9, 1998 /s/ Gerard B. Moersdorf, Jr.
- ---------------- -------------------------------------
Date Gerard B. Moersdorf, Jr.
Chairman of the Board, President,
Chief Executive Officer and Treasurer
(Principal Executive Officer)
November 9, 1998 /s/ William H. Largent
- ---------------- -------------------------------------
Date William H. Largent
Senior Vice President - Operations
and Chief Financial Officer
(Chief Financial Officer)
November 9, 1998 /s/ John M. Spiegel
- ---------------- -------------------------------------
Date John M. Spiegel
Controller
(Principal Accounting Officer)
-13-
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000798399
<NAME> APPLIED INNOVATION INC.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 14,115,508
<SECURITIES> 0
<RECEIVABLES> 8,922,556
<ALLOWANCES> 266,490
<INVENTORY> 3,553,539
<CURRENT-ASSETS> 27,839,168
<PP&E> 14,518,625
<DEPRECIATION> 4,738,008
<TOTAL-ASSETS> 37,742,203
<CURRENT-LIABILITIES> 9,393,270
<BONDS> 0
0
0
<COMMON> 158,199
<OTHER-SE> 8,086,734
<TOTAL-LIABILITY-AND-EQUITY> 37,742,203
<SALES> 40,321,748
<TOTAL-REVENUES> 40,321,748
<CGS> 16,974,972
<TOTAL-COSTS> 16,974,972
<OTHER-EXPENSES> 25,574,641
<LOSS-PROVISION> 90,000
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,843,404)
<INCOME-TAX> (627,000)
<INCOME-CONTINUING> (1,216,404)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,216,404)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> (.08)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<CIK> 0000798399
<NAME> APPLIED INNOVATION INC.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 8,921,682
<SECURITIES> 0
<RECEIVABLES> 7,525,145
<ALLOWANCES> 110,642
<INVENTORY> 3,850,657
<CURRENT-ASSETS> 22,500,283
<PP&E> 16,627,709
<DEPRECIATION> 3,993,309
<TOTAL-ASSETS> 35,255,333
<CURRENT-LIABILITIES> 6,725,622
<BONDS> 0
0
0
<COMMON> 157,908
<OTHER-SE> 28,172,438
<TOTAL-LIABILITY-AND-EQUITY> 35,255,333
<SALES> 31,170,693
<TOTAL-REVENUES> 31,170,693
<CGS> 14,020,868
<TOTAL-COSTS> 14,020,868
<OTHER-EXPENSES> 20,268,130
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,696,918)
<INCOME-TAX> (1,001,848)
<INCOME-CONTINUING> (1,695,070)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,695,070)
<EPS-PRIMARY> (.11)
<EPS-DILUTED> (.11)
</TABLE>
