<PAGE> 1
FORM 10-Q
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For quarterly period ended June 30, 1995
or
/ / TRANSITION REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from_________to_______________________________________
Commission file number 0-16303
BOUNTY GROUP, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 76-0214013
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2500 Tanglewilde, Suite 250, Houston, Texas 77063
(Address of principal executive offices)
(713) 975-1900
(Issuer's telephone number)
NONE
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the registrant (1) has 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 of the past 90 days. Yes X No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
Class OUTSTANDING AT JUNE 30, 1995
---------------------------- ----------------------------
<S> <C>
Common Stock, $.10 par value 1,128,327
</TABLE>
<PAGE> 2
BOUNTY GROUP, INC.
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page
Number
<S> <C>
Item 1. Consolidated Financial Statements
Consolidated Balance Sheet (Unaudited) at June 30, 1995 and
at December 31, 1994....................................................................3
Consolidated Statement of Operations (Unaudited) Three and Six
Months Ended June 30, 1995 and June 30, 1994............................................4
Consolidated Statement of Cash Flows (Unaudited) Six Months
Ended June 30, 1995 and June 30, 1994...................................................5
Notes to Consolidated Financial Statements (Unaudited)....................................6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations...............................................................8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.........................................................12
Signature Page.....................................................................................13
</TABLE>
<PAGE> 3
BOUNTY GROUP, INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1995 1994
----------- -----------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 238,792 $ 80,167
Accounts receivable:
Trade 100,095 120,747
Sale of offshore properties (Note 3) 53,367 63,764
Due from stockholders and affiliates 27,304 --
Other 37,103 39,530
----------- -----------
TOTAL CURRENT ASSETS 456,661 304,208
Property, plant and equipment:
Oil and gas properties (Full Cost Method), net of accumulated
depreciation of $5,783,972 and $5,653,270, respectively 2,533,196 2,497,467
Furniture, fixture and equipment, net of accumulated
depreciation of $67,554 and $51,273 respectively 44,705 56,531
Other assets:
Restricted cash (Note 2) 100,000 100,000
Other noncurrent assets 24,331 21,899
----------- -----------
TOTAL ASSETS $ 3,158,893 $ 2,980,105
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current maturities of long-term debt $ 16,135 $ 21,326
Plugging and abandonment liability (Note 3) 115,250 115,250
Accounts payable and accrued liabilities 249,543 215,567
Due to stockholders and affiliates 13,131 31,559
Convertible debt payable to stockholders (Note 4) 685,770 --
----------- -----------
TOTAL CURRENT LIABILITIES 1,079,829 383,702
Long-term debt 14,464 22,693
Convertible debt payable to stockholders (Note 4) 800,000 1,055,770
----------- -----------
TOTAL LONG-TERM LIABILITIES 814,464 1,078,463
TOTAL LIABILITIES 1,894,293 1,462,165
----------- -----------
STOCKHOLDERS' EQUITY:
Preferred stock, $1 par value - shares authorized
1,000,000; none issued and outstanding -- --
Common stock, $.10 par value - shares authorized
5,000,000; 1,128,327 issued and outstanding 112,833 112,833
Additional capital 6,681,526 6,681,526
Accumulated deficit (5,529,759) (5,276,419)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 1,264,600 1,517,940
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,158,893 $ 2,980,105
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
3
<PAGE> 4
BOUNTY GROUP, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------ ------------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES:
Oil and gas sales $ 127,635 $ 171,086 $ 336,627 $ 381,915
Other income 1,606 4,305 1,900 5,097
----------- ----------- ----------- -----------
TOTAL REVENUE 129,241 175,391 338,527 387,012
EXPENSES:
Production costs 56,781 60,184 154,980 135,106
Depreciation, depletion
and amortization 64,709 65,299 146,983 137,240
General and administrative 113,611 174,556 233,013 295,667
Interest expense 30,890 8,477 54,479 15,564
----------- ----------- ----------- -----------
TOTAL EXPENSES 265,991 308,516 589,455 583,577
LOSS FROM OPERATIONS (136,750) (133,125) (250,928) (196,565)
Provision for income tax 777 -- 2,412 --
----------- ----------- ----------- -----------
NET LOSS (137,527) (133,125) (253,340) (196,565)
=========== =========== =========== ===========
LOSS PER COMMON SHARE ($0.12) ($0.12) ($0.22) ($0.17)
=========== =========== =========== ===========
AVERAGE SHARES OUTSTANDING 1,128,327 1,125,327 1,128,327 1,125,327
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
4
<PAGE> 5
BOUNTY GROUP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1995 1994
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($253,340) ($196,565)
Adjustments to reconcile net loss:
Depreciation, depletion and amortization 146,983 137,240
Interest expense 52,696 --
Changes in components of working capital:
Decrease in accounts receivable 20,652 84,033
Decrease (increase) in other current assets 2,427 (25,459)
Increase in accounts payable and accrued liabilities 33,976 10,101
Increase in noncurrent receivables and other (2,432) (3,042)
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 962 6,308
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property, plant and equipment 19,502 87,590
Additions to property, plant and equipment (179,991) (358,011)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (160,489) (270,421)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term borrowings (13,420) (25,713)
Proceeds from borrowings from stockholders and affiliates 350,000 630,000
Payments on notes payable from stockholders and affiliates (18,428) 88,359
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 318,152 515,928
--------- ---------
DECREASE IN CASH AND CASH EQUIVALENTS 158,625 251,815
Cash and cash equivalents at beginning of period 80,167 129,476
--------- ---------
Cash and cash equivalents at end of period $ 238,792 $ 381,291
========= =========
CASH PAID DURING THE PERIOD FOR:
Interest $ 1,783 $ 6,003
Income taxes $ 2,412 $ 0
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
5
<PAGE> 6
BOUNTY GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. MANAGEMENT'S OPINION REGARDING THE PREPARATION OF INTERIM FINANCIAL
STATEMENTS
The consolidated financial statements included herein have been
prepared by management of Bounty Group, Inc. (the "Company") without audit
pursuant to the rules and regulations of the Securities and Exchange Commission.
Accordingly, they reflect all adjustments which are, in the opinion of
management, necessary for a fair presentation of the financial results for the
interim periods. Certain information and notes normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations. However,
management believes that the disclosures are adequate to make the information
presented not misleading. These consolidated financial statements should be read
in conjunction with the financial statements and the notes thereto included in
the Company's Annual Report on Form 10-K for the year ended December 31, 1994.
Certain reclassifications have been made in the 1994 amounts to
conform with the 1995 presentation.
NOTE 2. ORGANIZATION AND PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Bounty
Group, Inc. and its wholly owned subsidiary. All significant intercompany
accounts and transactions have been eliminated.
NOTE 3. SALE OF THE COMPANY'S OFFSHORE PROPERTIES
In January 1994, the Company completed the sale of its offshore
properties and gas imbalance positions to a gas transportation company, Excel
Resources, Inc. ("Excel") effective December 1, 1993.
Excel paid $46,100 at closing with the remaining balance payable in 12
equal monthly interest free installments of $13,830 each commencing March 1994.
In addition, the Company received 92,200 shares of Excel Common Stock which
cannot be sold until January 27, 1996 (two years after the issuance of the
shares). If the shares are publicly traded in January 1996, Excel guarantees to
repurchase 75% of the shares at $8 a share or issue additional shares to Bounty
so that 75% of the shares plus the additional issued shares have a market value
of $553,200. Based on the uncertainties surrounding the financial situation of
Excel, the Company has recorded its investment in Excel's shares at fair market
value instead of the guaranteed price. Due to the lack of a valuation report of
Excel and a market for the Excel shares at the time of the transaction, the
Company used its percentage of book value of Excel at September 30, 1993, to
establish a fair market value for the shares. The Company will continue to
monitor this investment to ensure that it is stated at the lower of cost or
market. In 1996, if Excel s shares are sold, the associated realized gain or
loss will be recorded in accordance with Statement of Financial Accounting
Standards ("SFAS") No. 115.
6
<PAGE> 7
BOUNTY GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
The Company has agreed to pay a portion of the plugging and abandonment
costs if a specific well that was sold to Excel has to be plugged within three
years of the closing. The Company has recorded an estimated liability for this
item. In addition, as part of this sale, all imbalance positions related to the
offshore properties were assumed by Excel.
Excel was not current with the installment payments as of June 30,
1995. If any amount under the note turns out to be uncollectable, the Company
intends to offset this amount against the plugging liability that the Company
agreed to pay. Accordingly, no reserve for bad debt has been recorded.
NOTE 4. RELATED PARTY TRANSACTIONS
RELATIONSHIPS:
In June 1995 Norse Petroleum AS, the owner of approximately 68% of
the Common Stock of the Company, transferred all of its shares of the Company's
Common Stock and convertible notes which it held to its wholly-owned
subsidiary, Norse AS. As of August 15, 1995, Norse Petroleum AS sold all its
shares in Norse AS to a Norwegian company, Bounty Finans AS. The stockholders
in Bounty Finans AS are also the primary stockholders in Norse Petroleum AS.
DUE TO AFFILIATES:
In March 1995, the Company obtained a two year, convertible note for
$350,000 from Norse Petroleum AS. The note carries an interest rate of 10% per
annum and the conversion price for the stock is $1.00.
Also, in March 1995, the Company rolled up the interest for the first
nine months of 1995 into a two year, convertible note for $80,000 with a
conversion price for the stock at $1.00. The note carries an interest rate of
10% per annum, commencing January 1, 1996.
In addition, in March 1995, the Company issued a new convertible note
to Norse Petroleum AS for $55,770 with interest at 10 % per annum, due March 31,
1996 and with a conversion price for the stock at $1.00. The new note was in
exchange for a note due June 30, 1995 which had a remaining principal balance of
$55,770 and was convertible at a conversion price for the stock at $1.00. The
note exchange was effected as a means of extending the maturity of the old note.
At June 1995, Norse Petroleum AS held subordinated convertible notes
of the Company in the aggregate principal amount of $1,485,770 maturing between
1996 and 1997.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
REVENUES
Revenues, volumes and prices for the three and six months ended June
30, 1995 and June 30, 1994 are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------- -------------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Oil and gas sales (1) $127,635 $171,086 $336,627 $381,915
======== ======== ======== ========
Volumes sold for the period
(Mcf equivalents) 65,386 71,920 157,653 149,680
====== ====== ======= =======
Average daily sales
(Mcf equivalent/day) 727 799 876 832
=== === === ===
Average sales price
(Mcf equivalent) $1.95 $2.38 $2.14 $2.55
===== ===== ===== =====
</TABLE>
(1) During the six months of 1995 approximately 85% of the revenues were
derived from natural gas sales, compared to 97% for the same period in
1994.
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1995 VS. JUNE 30, 1994:
Oil and gas revenues for the quarter and the six months ended June
30, 1995, decreased 25% and 12% respectively, compared to the same prior year
periods. The decrease is attributable to the following:
Texas wells: The production increased $14,041 for the quarter and
$22,689 for the six months ended June 30, 1995 as compared to the same periods
of 1994. The increase in production is mainly due to a well that was shut-in for
rework in 1994, now is back on production. The average price for the quarter
ended June 30, 1995 and 1994 stayed the same while for the six months ended June
30, 1995 the price decreased 2% compared to the same period of 1994.
New York wells: Revenues from the New York properties decreased
$57,492 for the quarter and $67,977 for the six months ended June 30, 1995, as
compared to the same periods in 1994. Production decreased 19% for the quarter
and 3% for the six months ended June 30, 1995 compared to the same prior year
periods. The decrease in production is due to shut-ins of a significant number
of the Company s wells in May and June of 1995. The Company has experienced
shut-ins in prior years, but never as early as May. Normally, the shut-ins start
in July. The average price for the quarter and the six months ended June 30,
1995 decreased 19% and 2% respectively, compared to the same periods of 1994.
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
COSTS AND EXPENSES
Production costs decreased 6% for the quarter and increased 15% for
the six months ended June 30, 1995, compared to the same prior year periods. The
decrease in second quarter is a result of less activity in New York due to the
shut-in of several wells. The increase for the six months ended June 30, 1995,
is in whole attributable to the New York properties and results from the rework
of 14 wells purchased by the Company last fall, an increase in number of wells
operated by the Company and an extra fee charged for outside accounting for the
New York wells in 1995.
General and administrative expenses which are net of operator fees
received by the Company, decreased 54% for the quarter and 27% for the six
months ended June 30, 1995, compared to the same prior year periods. Employee
salaries and related costs remained the same for the quarter and decreased 8%
for the six months ended June 30, 1995, compared to the same prior year periods.
The decrease for the six months is primarily due to a reduced work force in New
York. The Company shares office space and some personnel with Norse Exploration,
Inc., a former subsidiary of Norse Petroleum AS. Rent, telephone and other
general office expenses decreased 95% in the second quarter and 32% in the first
six months of 1995, compared to the same periods of 1994. The decrease is
primarily a result of extra expenses incurred in 1994 in connection with moving
office and storage area and a higher travel activity. Consulting, audit and
legal fees decreased 58% for the quarter and 34% for the six months ended June
30, 1995, compared to the same prior year period. The decrease is mainly due to
extra expenses incurred in 1994 in connection with the sale of the offshore
properties and the potential acquisition of Norse Petroleum (U.S.) Incorporated.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash provided from operation of $962 for the six months
ended June 30, 1995, compared to $6,308 in the prior year. The Company's working
capital decreased from a deficit of $79,494 at year end to a deficit of $623,168
as of June 30, 1995. The negative working capital is mainly a result of long
term notes becoming current, the reduced prices received for the Company s gas
and the extra expenses for rework of the new wells. In addition, a substantial
number of the Company s wells have been shut-in during parts of May and June of
1995.
INVESTMENTS
As of early May 1995, 15 of the 18 wells in the Area of Mutual Interest
("AMI") Program for drilling of oil wells have been successfully completed.
Based on the appraisal done by the independent engineering firm Wright &
Company, Inc. by year-end 1994, the recoverable reserves from each of the above
captioned wells are anticipated to be 6,000 - 8,000 barrels. The remaining three
wells are expected to be drilled in the late summer of 1995. The Company is in
the market to sell its interest in this drilling program.
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION (CONTINUED)
Future Commitments and Cash Flow
On March 24, 1995, the Company entered into an Agreement with Ardent
Resources, Inc. ("Ardent"), a New York independent oil and gas producer, for
participation in two AMI programs for exploring the possible extension of the
Ohio Rose Run play in western New York. The Ohio Rose Run play is considered
to be one of the more economical prolific plays in the Appalachian Basin, with
reserves of 1 to 3 billion cubic feet of gas equivalent for successful wells.
The AMI's constitute gross leasehold positions of approximately 30,000 acres.
In the two AMI's, the Company has a 5% and 25% interest, respectively. Six
wells are planned to be drilled in the next twelve months. As part of the
agreement the Company acquired a 5% interest in a deep drilled well in Wyoming
County, New York. The current production from this well is not significant and
is more like a regular Medina well. However, more evaluation is required to
determine the reservoir. The Company's initial commitment in the AMI's is
anticipated to be up to $350,000 which is financed through a loan from Norse
Petroleum AS of the same amount.
The Company is currently receiving gas prices which are 22% less than
at the same period last year and a substantial amount of the Company's wells
have been shut-in for several months. This is having a detrimental effect to
the Company, which is experiencing a cash shortfall at the time. Management
is currently exploring the various possibilities to obtain more financial
support either through new loans or through selling off existing wells.
The Company is in discussion with Norse AS to restructure the debt of
$1,485,770, maturing between February 1996 and March 1997. The Company does
not know, at this time, from what source cash would be obtained to repay these
notes and any accrued interest if an agreement to restructure is not reached.
Management believes that future internally generated operating cash
flow should be sufficient to fund the existing operations based on current
market conditions. In the long run however, the Company will not have enough
cash flow to sustain operations. In order for the Company to accomplish the
needed growth through drilling and acquisitions and to improve its future
activities, the Company is dependent upon additional equity or other type of
external financing. Management will continue to consider issuing shares of its
Common Stock or convertible debenditures or any other option that may occur,
that could enable and attract more equity to the Company.
Future Outlook
The Company's Common Stock was traded in the NASDAQ Small Cap Market
from its formation in 1987 through August 3, 1995. The market price for Common
Stock was less than $1 per share for some time resulting in non-compliance
with the minimum bid price and market value of the public float for continued
listing on the NASDAQ Small Cap Market. On August 3, 1995, the Company's
Common Stock was delisted and is currently traded upon the OTC Bulletin Board.
On July 24, 1995, the Company sent a letter to all the stockholders in
respect to the market situation for the Common Stock, the low gas prices
received by the Company, the shut-ins of the
10
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION (CONTINUED)
wells and the too small critical mass to grow the Company by its own cash flow.
The letter also discussed the current financial distress coupled with the need
for future minimum investments. In the current situation, drastic cut backs on
expenses are necessary and management must continue to try out all possible
ways to raise additional capital.
The Board of Directors and management have been evaluating a number of
different avenues to improve the Company's cash flow. One step was to
deregister the Company's securities with the Securities and Exchange Commission
("SEC"). Based on the high direct and indirect costs involved with being
registered, the lack of feedback from the stockholders and the inability to
raise funds in the public market, the Board of Directors approved, after
carefully considerations, a proposal from management to immediately apply for
deregistering the Company's securities with the SEC. The Company will
accordingly no longer be filing the SEC provided reports or proxy materials
subsequent to this filing, although the Company will make certain basic
information available to market makers and stockholders. The Board of
Directors and the management are currently discussing and evaluating the future
for the Company as a private company, with or without current shareholders.
Management believes that the Company has quite a few interesting
opportunities for future development and growth in the Jamestown area, however
realizing these opportunities requires additional capital. There is no
assurance that the Company will be able to obtain such capital or on terms
which will not be substantially dilutive to stockholders.
11
<PAGE> 12
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Reports on Form 8-K
None
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.
BOUNTY GROUP, INC.
(Registrant)
Date: August 18, 1995 By: Oivind Risberg
--------------------------
Oivind Risberg
Acting President and CEO
Date: August 18, 1995 By: Hege K. Risberg
--------------------------
Hege K. Risberg
Treasurer
(Principal Accounting Officer)
13
<PAGE> 14
INDEX TO EXHIBITS
Exhibit 27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A)
CONSOLIDATED BALANCE SHEET AT JUNE 30, 1995, CONSOLIDATED STATEMENT OF
OPERATIONS AT JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH (B) JUNE 30, 1995 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 238,792
<SECURITIES> 0
<RECEIVABLES> 217,869
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 456,661
<PP&E> 8,429,427
<DEPRECIATION> 5,851,526
<TOTAL-ASSETS> 3,158,893
<CURRENT-LIABILITIES> 1,079,829
<BONDS> 14,464<F1>
<COMMON> 112,833
0
0
<OTHER-SE> 1,151,767
<TOTAL-LIABILITY-AND-EQUITY> 3,158,893
<SALES> 338,527
<TOTAL-REVENUES> 338,527
<CGS> 154,980
<TOTAL-COSTS> 379,996
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 54,479
<INCOME-PRETAX> (250,928)
<INCOME-TAX> 2,412
<INCOME-CONTINUING> (253,340)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (253,340)
<EPS-PRIMARY> (.22)
<EPS-DILUTED> 0
<FN>
<F1>DOES NOT INCLUDE SUBORDINATED CONVERTIBLE NOTE PAYABLE TO PARENT OF $800,000.
</FN>
</TABLE>
