SECURITIES AND EXCHANGE COMMISSION
Washington, DC. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the Quarter Ended November 30, 1997
Commission file number 0-28506
AMERICAN DIGITAL COMMUNICATIONS, INC.
(Exact name of small business issuer as specified in its charter)
Wyoming 13-3411167
(State of Incorporation) (IRS. Employer ID No.)
5575 DTC Parkway
Suite 355, Englewood, Colorado 80111
(Address of Principal Executive (Zip Code)
Offices)
(303) 770-8283
(Registrant's Telephone No. incl. area code)
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 __
The number of shares outstanding of each of the Registrant's class of common
equity, as of November 30, 1997 are as follows:
Class of Securities Shares Outstanding
------------------- ------------------
Common Stock, $.0001 par value 23,448,407
This quarterly report on Form 10-QSB contains 14 pages.
INDEX
PART I Financial Information
Item 1. Financial Statements
Balance Sheet................... 3
Statements of Operations........ 5
Statements of Cash Flows........ 6
Notes to Financial Statements... 7
Item 2. Management's Discussion and
Analysis or Plan of Operations.. 9
Cautionary Statement Pursuit to Safe Harbor Provisions of the
Private Securities Litigation Reform Act of 1995.
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K 14
A) Exhibit 27 Financial Data Schedule
B) Form 8-K - None
Signature........................ 14
AMERICAN DIGITAL COMMUNICATIONS, INC.
BALANCE SHEET
(UNAUDITED)
ASSETS Nov. 30, February 28,
1997 1997
-------- ------------
Current Assets:
Cash 25,685 31,701
Accounts receivable - 21,110
Notes Receivable 8,548 8,548
Inventories 201,143 469,415
Radio tower equipment and related
licenses held for sale - 2,126,636
Securities, free trading 21,873 -
Other current assets - 3,888
---------- ----------
Total current assets 257,249 2,661,298
Property and equipment:
Office equipment 50,052 125,052
Furniture and fixtures 26,082 26,082
---------- ----------
76,134 151,134
Less: Accumulated depreciation (70,349) (142,286)
---------- ----------
Net property and equipment 5,785 8,848
Other assets:
Distribution rights, net of amortization 693,948 1,344,599
Securities, restricted 1,589,847 -
---------- ----------
Total other assets 2,271,717 1,344,599
TOTAL ASSETS 2,534,751 4,014,745
========== ==========
See accompanying notes to financial statements.
American Digital Communications, Inc.
Balance Sheet
(UNAUDITED)
LIABILITIES AND SHAREHOLDERS' EQUITY Nov. 30, February 28,
1997 1997
-------- ------------
Current Liabilities:
Accounts payable 68,562 149,531
Accounts payable - related parties 14,273 9,510
Accrued payroll and payroll taxes - 4,933
Accrued interest - related parties - 248,471
Accrued warranty liability 7,802 10,373
Notes payable 20,000 50,370
Notes payable - related parties 10,370 10,370
Current portion of capital lease obligations 6,195 6,195
Current portion of long term note - 806,077
---------- ----------
Total current liabilities 127,202 1,295,460
Long term debt:
Capital lease obligations 1,772 5,597
Long term note payable - licensee 50,295 -
Long term note payable - related party 348,575 535,299
---------- ----------
Total long term debt 400,642 540,896
Shareholders' equity:
Common stock, $.0001 par value; Unlimited
shares authorized, issued and outstanding
23,448,407 shares, issued and outstanding
23,627,431 on February 28, 1997. 2,345 2,363
Additional paid in capital 7,759,767 7,747,767
Common stock subscribed 91,000 93,300
Accumulated deficit (5,846,205) (5,665,041)
----------- -----------
Total shareholder's equity 2,006,907 2,178,389
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 2,534,751 4,014,745
=========== ===========
See acompanying notes to financial statements.
American Digital Communications, Inc.
Statements of Operations
(UNAUDITED)
Nine Months Ended Three Months Ended
Nov. 30, Nov. 30,
1997 1996 1997 1996
---- ---- ---- ----
Revenue
Equipment sales 113,275 506,312 - 169,242
220 MHz equip. /
Distribution rights 4,051,000 - 3,696,000 -
-------- --------- --------- ---------
Total revenue 468,275 337,070 240,254 138,685
Costs and expenses:
General and administrative 302,691 525,422 87,451 171,113
Cost of equipment sales 81,667 582,713 - 197,893
Cost of 220 MHz equip./
Distribution rights 3,941,784 - 3,229,302 -
Depreciation 19,297 37,816 1,021 13,122
Consulting fee / retainer - 20,000 - -
---------- --------- -------- ---------
Total costs and expenses 4,345,439 1,165,951 3,317,774 382,128
---------- --------- -------- ---------
Net Loss: (181,164) (659,639) 378,226 (212,886)
---------- --------- -------- ---------
Net loss per share of
common stock (0.01) (0.03) 0.02 (0.01)
---------- --------- --------- ---------
Weighted average number of
common shares outstanding 23,627,431 16,371,652 23,448,407 17,763,655
----------- ---------- ---------- ----------
See accompanying notes to financial statements.
American Digital Communications, Inc.
Statements of Cash Flows
(UNAUDITED)
Increase (Decrease) in Cash Three Months Ended
Nov. 30,
1997 1996
---- ----
Net cash used in operations
Net loss 378,226 (212,886)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 13,099 23,120
Loss on sale of fixed assets - -
Issuance of stock for interest expense - -
Issuance of common stock for services and
in conjunction with asset purchase agreements - -
Changes in:
Accounts receivable - 24,715
Inventory - (266,782)
Other current assets 136,015 15,133
Accounts payable (13,606) (22,615)
Accrued payroll and payroll taxes - -
Other accrued liabilities 526,513 (57,596)
--------- --------
Net cash used in operating activities 1,040,247 (496,911)
--------- --------
Cash flows from investing activities:
Purchase of office and radio tower equipment - (63,909)
License expenditures - -
Deposits - payments - 525,798
Proceeds from sale of fixed assets - -
--------- ---------
Net cash provided by (used in) investing activities - (461,889)
--------- ---------
Cash flows from financing activities:
Proceeds from sale of common stock, net - 47,800
Payments of capital lease obligations (1,275) 2,000
Payments of note payable (1,024,548) 423
--------- ---------
Net cash provided by (used in) financing activities: (1,025,823) 50,223
--------- ---------
Increase (decrease) in cash 14,424 15,201
--------- ---------
Cash, beginning of period 11,261 35,882
--------- ---------
Cash, end of period 25,685 51,083
--------- ---------
See accompanying notes to financial statements.
American Digital Communications, Inc.
Notes to Financial Statements
November 30, 1997
Basis of Presentation.
- ----------------------
The unaudited financial statements and related notes have
been prepared in accordance with the rules and regulations of the
Securities and Exchange Commission. Accordingly, certain information
and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles
have been omitted pursuant to such rules and regulations. In the opinion
of management, all adjustments considered necessary for a fair
presentation have been included. The accompanying financial
statements and related notes should be read in conjunction with the
audited financial statements of the Company, and notes thereto, for the
fiscal year ended February 28, 1997. The accounting policies utilized in
the preparation of the financial statements herein presented are the
same as set forth in the Company's annual financial statements.
Business.
- ---------
Certain matters discussed in this Quarterly Report may
constitute forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995 (the "Reform Act") and as such
may involve risks and uncertainties. These forward-looking statements
relate to, among other things, expectations of the business environment
in which the Company operates, projections of future performance,
perceived opportunities in the market and statements regarding the
Company's goals. The Company's actual results, performance, or
achievements expressed or implied in such forward-looking statements
may differ. For discussion of the factors that might cause such a
difference, see Item 2 Management's Discussion and Analysis or Plan of
Operations.
Overview.
- ---------
American Digital Communications, Inc. ("American Digital",
"ADC" or the "Company") is a corporation organized June 30, 1993
under the laws of the state of Wyoming. The Company's executive
offices are located at 5575 DTC Parkway, Suite 355, Englewood,
Colorado 80111, and its telephone number is (303) 770-8283, fax (303)
770-8315 and web address www.adcm.com.
American Digital Communications (ADC) is the successor to
Mont Rouge Resources, Inc., a New York corporation organized on
March 19, 1987. The company completed a small public offering in 1987
and in March of 1988 acquired American Fidelity Holding Corporation, a
Delaware corporation, in a stock-for-stock exchange. The acquisition
was rescinded in 1989, and the company was dormant until early 1993.
Mont Rouge Resources redomiciled to the State of Wyoming on
February 14, 1993 . At this point, management made the decision to
enter the wireless communications business and became active in June,
1993.
The company's initial strategy was to acquire wireless
communications 800 MHz analog licenses with the intent of eventually
implementing an Enhanced Specialized Mobile Radio (ESMR) service.
Even though the company completed agreements for approximately nine
hundred 800 MHz channels, it was not successful in securing sufficient
contiguous spectrum in any market. The reason was simple. During this
time Nextel, OneComm, Dial-Call, Pittencrief and others were acquiring
the 800 and 900 MHz licenses and beginning to implement 800 MHz
analog to digital conversion strategies utilizing Motorola's ESMR
technology (later called iDEN).
Mr. Gene Klawetter joined the Company in 1994 as President /
CEO. Given the shortage of 800 MHz licenses and the accelerated
conversion of the 800 MHz spectrum to digital he decided to amicably
dissolve ADC's pending agreements for tentatively acquiring these
licenses, put the company in order and to pursue aggregation of 220
MHz licenses. Strategically ADC planned to implement the 220 MHz
spectrum as an "off-load" platform for low cost analog dispatch users,
users that were being squeezed out of the 800 MHz playing field as a
result of the fast-paced digital conversion which was taking place. The
strategy was subsequently proven to be excellent as the industry's need
for alternative voice dispatch spectrum became paramount.
220 MHz Operations.
- -------------------
In 1991 the FCC had granted, through lottery, 3,300 licenses
and 4 national licenses in the 220 MHz spectrum. An early lawsuit,
however, brought by a disgruntled potential licensee froze any activity in
the roll-out of the 220 industry. By 1994, the lawsuit was settled and 220
was launched in early April. ADC proceeded to acquire 500+ channels of
220 MHz spectrum and concurrently pursued funding to build out the
licenses.
The funding, it turned out, was extremely difficult to find.
Investment capital that was available to the wireless industry was finding
its way to the highly visible 800 MHz-based digital mobile radio
implementation. At the same time the FCC continued to change the
construction deadlines for 220 by granting extensions, some as short as
four months, a period of time so brief it discouraged many manufacturers
from taking the risk to make enough equipment to satisfy the potential
construction demand. Motorola, a significant player in any wireless
market elected not to develop equipment for 220 MHz, an unheard of
occurrence which caused the investment community to conclude, "if
Motorola is not in 220, it must not be very good or very significant." This,
among other factors, became major impediments to finding timely
funding support for construction and operation of 220 MHz.
As a result of the dynamics occurring throughout the wireless
industry, 220 development was slow. To date, minimal national license
build-out has occurred. It is estimated that less than 750 of the original
3,300 licenses have been built. The reason for this poor performance
was lack of funding brought about by 1) construction deadline issues, 2)
insufficient demand to generate product availability, 3) delay caused by
the original lawsuit, 4) the spectrum auction process, 5) available funds
diverted to other wireless activity, i.e. PCS, Digital Paging, IVDS, etc.,
and 6) a final set-in-stone construction deadline of 8/17/96. The Federal
Government , as a result of item 6, will recapture a significant number of
un-built licenses. In the late fall of 1997, the FCC will conduct 220 MHz
spectrum auctions. This move will, in all probability, place a premium on
the price of the new 220 MHz licenses awarded in the auction of which
only a few large participants can take advantage.
Nevertheless, the 220 MHz spectrum will be exploited and will
eventually be successful... but only for a few larger aggregators who are
emerging with the bulk of the existing licenses and who will have deep
enough pockets to not only compete in the upcoming auctions but have
sufficient capital to operate large networks.
While ADC was unable to construct as many licenses as it had
targeted during this time, the Company accomplished a great deal.
Twenty three licenses for a total of 115 channels were constructed and
are operational. ADC was able to establish a strategic relationship with
Simmonds Capital Ltd. SCL is the parent organization of Simmonds
Electronics (of Canada). Midland International, Helix, Simmonds
Distribution, PowerTel and a principal in Intek Diversified Inc. Intek is a
merger between Securicor Radiocoms Ltd. (a significant manufacturer of
220 MHz radio equipment), RoamerOne (a large 220 MHz aggregator),
and Midland International Corp. (a distributor of wireless radio equipment
in the US) and is the largest 220 MHz operator in the United States. SCL
and / or its affiliates own approximately 30% of ADC's stock and has
been instrumental in ADC's success in building out the 23 systems. To a
degree, ADC has become operational, even though cash flow is not yet
at an acceptable level.
Distribution Rights Operations.
- -------------------------------
In November 1995, the Company became exclusive licensee in
the US for the next ten years for distribution of 800 MHz Midland LTR
Radios. This activity enabled the Company to become operational in
January 1996.
On October 1, 1996, the Company entered into a Letter of Intent
to acquire international distribution rights for the Midland Land Mobile
Radio (LMR) products from Midland International Limited, a wholly
owned subsidiary of Simmonds Capital Limited (SCL). Under the terms
of the agreement, the primary markets include most of Western Canada,
Mexico, South America, The Pacific Rim, Australia and Southeast Asia.
This transaction was consummated on November 8, 1996. As a part of
the agreement, the Company could receive up to $1,000,000 in credit for
the purpose of acquiring inventory. To date, the Company has signed
one three year note for $348,573.
The terms of the November 8, 1996 acquisition calls for the
Company to acquire the distribution rights to the Midland LMR products
for the indicated international markets with a combination of 1,750,000
shares of the Company's common stock which was issued under
Regulation S guidelines with 41 day holding period and 3,000,000
shares of Regulation S common stock with a 12 month holding period.
For accounting purposes the restricted common stock was entered on
the books at $367,500 and $630,000 respectively.
In the quarter ended August 31, 1997, the Company completed
the sale of its distribution rights of Midland LMR products in Mexico,
South America, Pacific Rim, Australia, New Zealand, Thailand and
Southeast Asia. The transaction was completed with the exchange of
120,000 free trading shares of Intek Diversified common stock and the
distribution rights. At the time of this transaction, Intek stock was valued
at $2.00 per share. The causal effect of this necessary cash
management strategy was a $390,000 write-down of the asset.
Concurrently, the Company's option to acquire Midland Europe Limited
expired on June 30, 1997.
Due to Related Party.
- ---------------------
A significant shareholder of the Company, loaned the Company
$75,000 on March 15, 1994. This year, the Company signed a new note
due in 1997. As of November 30, 1997 the outstanding balance on the 9%
interest bearing note was $10,370 plus accrued interest.
In December 1995, the Company constructed its first 13 220
MHz communications systems and financed the systems for $1,047,900
through Ventel, Inc. In February 1996, the Company sold three of the
financed, constructed systems. In April 1997, the Company also sold
one system and had owned Ventel, Inc. $756,077 plus interest, a
total of approximately $1,004,548. The Company has retire this note
from the proceeds of its sale.
In August 1996, the Company financed and constructed 13
additional "turn-key" communication systems through Securicor Ltd. The
terms were $897,000, half in cash, half in common stock (1,150,000
shares at $0.39). As a part of the terms of sale, this stock was
returned to the Company upon closing of the transaction with Intek
Diversified in November 1997.
Item 2. Management's Discussion and Analysis or Plan of Operation.
----------------------------------------------------------
On April 15, 1997, the Company and Intek Diversified
Corporation (Intek) of Torrance, California reached an agreement and
entered into a letter of intent by which Intek acquired ADC's 22
constructed 220 MHz systems.
Under the terms of the contract, Intek paid ADC $75,000 prior to
closing. Part of the purchase price wass paid by returning to the
Company 1,150,000 shares of ADC common which was issued in
August, 1996 at $0.39 per share as partial payment to finance the
acquisition of Securicor transmitter equipment. Additionally, ADC
received 2.7 million shares of Ventel, Ltd. stock currently held by Intek at
$0.11 per share or $286,000. The total value of this transaction, as
stated in the Agreement, was approximately $3.7 million.
Transaction Amount
----------- ------
Gross sale at $168,000 per system paid as follows:
Cash 75,000
1,150,000 shares ADC @ $0.39 per share 448,500
2,700,000 shares Ventel @ $0.11 per share 286,000
759,473 shares Intek Diversified @ $3.80 per share 2,886,500
---------
Total value as stated in the Agreement: 3,696,000
=========
As noted, Intek issued stock for payment of the net balance
based upon a share price of $3.80. At the time of actual closing, the
share price was less than the $3.80 strike price.
The Company has been in discussions to settle the 3 year, 8%
inventory note which was negotiated with Simmonds Communications
Ltd. (SCL) in November 1996. The Company, after settling its debt with
Ventel Inc., netted approximately 418,000 Intek shares which can possibly
be leveraged for cash as needed, depending on terms. However there can be
no assurance of this until done.
The Company entered the wholesale radio business as an
adjunct to that of operating and providing radio dispatch services. With
the decision to exit the 220 MHz market it also followed to somewhat
modify ADC's original strategy for the land mobile radio product
distribution business. After careful consideration ADC made the decision
to sublicense territories and deploy certain assets in order to more
aggressively pursue other opportunities.
Original
Assets Disposition Book Value
------ ----------- ----------
Exclusive US marketing rights For sale or sun-license $360,000
to Midland 800 MHz LTR land
mobile radios
Exclusive Midland LMR marketing Territory sub-licensed, $367,500
rights to certain western option to own
Canadian provinces
* The Company is presently receiving modest quarterly royalty
payments in conjunction with this sub-license agreement.
The Midland marketing rights have been sub-licensed or sold on a
negotiated basis with either 3 or 5 year payouts. In the transactions
negotiated, the structure involves a cash down payment with ownership
retained by ADC and a royalty paid by the purchasing party to ADC for a
fixed term. The purchaser will have an option to buy at the end of that
term with the royalty payments applied to and deducted from the principal.
At the end of the term, it is anticipated that the amortized book value
will be such that the sale is favorable to ADC. While it is expected that
the disposition of the above assets will go according to plan and be
favorable to the Company, there can be no assurance that such will be the
case.
In the quarter ended November 30, 1997, the 220 MHz liquidation and full
deployment of the remaining assets was completed. The Company's 220 MHz
liquidation included reductionof shares outstanding by 1.15M. The Company
will hold as much as 2.7 million shares of Ventel stock, and with satisfying
the Ventel debt, now holds approximately 418K shares of Intek stock.
Further, the company has all of its assets deployed under some form of
revenue agreement with the revenue applied against a predetermined purchase
price. With the completion of the asset deployment the Company has fully
disengaged from the radio business.
The decision is also consistent with the Company's near-term
objectives of employing assets in such a way as to realize immediate
operating results by generating 1) short-term cash and 2) ongoing
revenue streams.
On September 10, 1997, the Company announced its Letter of
Intent to acquire a majority of the assets of SCL Wireless Inc., whose
principal business includes wireless broadband communications
services. Additionally, included in the acquisition are the world-wide
distribution rights and all assets of TrackPower and its associated
operations.
With TrackPower, the Company will become an applications
specific content provider delivering a digital image signal throughout
North America via wireless broadband communications. The specific
application involves live horse racing and the opportunity to wager via
interactive communications utilizing on-premise television i.e.. home,
track, public establishment or theatre. The planned wireless broadband
communications footprint will generally cover all of North America.
On December 3, 1997, the Company announced its finalization of the LOI
announced September 10, 1997. The closing of this agreement is scheduled
for the first quarter of 1998. This closing calls for the issuance to SCL
$1,000,000 face value in the form of a convertible preferred stock,
convertible into 1,000,000 ADC common shares. Additionally, ADC will issue
to SCL warrants to purchase 500,000 common shares at an exercised price
of $2.00.
Liquidity and Capital Resources.
- --------------------------------
Cash on hand at quarter end was nominal in light of the
Company's acquisition plan. During the quarter ended November 30, 1997,
the Company completed the sale of all 22 220 MHz systems for approximately
3.7M.
Through August 1997, the Company executed the purchase options under
the 220 MHz Management Agreements for all constructed licenses for their
sale to Intek Diversified Corporation. Each of these 22 220 MHz
communication systems were constructed and became operational. In
the main, most licensees accepted stock as payment for the license.
However, five licensee did accept a 3 year note for a total of $50,295 as
a part of this activity.
Under the terms and conditions of the Management Options Agreement
entered into by each licenseholder, the Company was obligated to certain
construction payments to each licensee. In addition, the Agreement
specified a purchuse option payment due the licensee should the Company
wish to exercise its purchuse option rights. In order to sell the systems
to Intek Diversified, all purchase option were exercised.
The construction and purchase option payments were made in a combination
of long term notes, cash, Company stock and Intek Diversified stock. A
breakout of the total payments is as follows.
Construction Payments 65,000
Purchase Option Payments 261,000
-------
TOTAL 326,000
Cash 48,000
Notes 50,000
Intek Shares to be Isuued* 42,601
$ Value of Shares 138,000
ADC Shares Issued 331,942
$ Value of Shares 90,000
-------
TOTAL 326,000
* Shares were issued to licensees as soon as licenses were transferred
to Intek Diversified.
Although the Company has been operational since January of
1996, historical lack of operating cash flow has meant that it has been
dependent on sales of its securities, borrowings, leasehold financing or
other extensions of credit. The Company intends to raise additional
capital in the current fiscal year, either through the sale of equity
securities or a combination of equity sales, borrowings and leasehold
financing as needed according to the Company's new line of business
plan. Market conditions will dictate what the Company can do in this
regard.
Financial Conditions and Results of Operations.
- -----------------------------------------------
During the quarter ended November 30, 1997, total assets
decreased from $3,186,256 to $2,534,751 and shareholders' equity
increased from $1,618,983 to $2,006,907. The ratio of current assets
versus current liabilities is 2:1. Cash on hand at November 30, 1997 was
approximately $25,000. The Company expects this to change radically
as it sheds its current assets as discussed earlier. It is anticipated that
this will be of relative short duration with substantially greater revenues
realized from the acquisition of a new line of business. While the
Company believes this to be the direction it will take, there can be no
assurances it will happen as planned.
The Company realized a profit of $378,226 during the quarter
ended November 30, 1997. The activities during the fiscal quarter ended
were mainly part of the sale of the Company's 220 MHz communicatio systems.
CAUTIONARY STATEMENT PURSUANT TO SAFE HARBOR
PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM
ACT OF 1995
American Digital Communications, Inc.
This report contains certain statements of a forward-looking
nature relating to future events or the future financial performance of the
Company. Investors are cautioned that such statements are only
predictions and that actual events or results may differ materially. In
evaluating such statements, investors should specifically consider the
various factors which could cause actual results to differ materially from
those indicated in such forward-looking statements. The most important
factors that could cause actual results to differ from those expressed in
the forward-looking statements include, but are not limited to the
following:
- The failure of the Company's ability to close the current outstanding
letter of intent.
- The Company's inability to launch its new line of business as
planned.
- The inability to find a high technology Company for purchase,
acquisition, or merger.
- The risk of business interruption arising from the Company's
dependence on finding a new business.
- The Company's ability to manage potential expansion of operations.
- The Company's ability to attract and retain key personnel.
- The Company's ability to respond to rapid technological changes
within its sphere of interest or influence.
- Changes in rules and regulations of the Federal Communications
Commission.
- Changes in economic conditions affecting the Company's customers.
(Remainder of page left intentionally blank)
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K
Exhibits. None.
EX-27 Financial Data Schedule
Form 8-K None.
SIGNATURES
----------
Pursuant to the registration requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereto duly authorized.
DATE: JANUARY 14, 1997 BY:
/s/ R. Gene Klawetter
-----------------------------
R. Gene Klawetter
President / CEO / Director
DATE: JANUARY 14, 1997 BY:
/s/ Daniel M. Smith
-----------------------------
Daniel M. Smith
Acting Chief Financial Officer,
Controller, Chief Accounting Officer
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This schecdule contains summary financial information
extracted from form 10-QSB for this period ended
November 30, 1997 and is qualified in its entirety
by reference to such form 10-QSB.
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