SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________________
FORM 10-QSB
____________________________________________
Quarterly Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the Quarter Ended September 30, 1998
Commission File Number 0-21522
WILLAMETTE VALLEY VINEYARDS, INC.
(Exact name of registrant as specified in charter)
Oregon 93-0981021
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
________________________________________________
8800 Enchanted Way, S.E., Turner, Oregon 97392
(503)-588-9463
(Address, including Zip code, and telephone number,
including area code, of registrant's principal
executive offices)
_________________________________________________
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.
[X] YES [ ] NO
Number of shares of common stock outstanding as of
September 30, 1998
4,232,681 shares, no par value
Transitional Small Business Disclosure Format
[ ] YES [X] NO
WILLAMETTE VALLEY VINEYARDS, INC.
INDEX TO FORM 10-Q
Part I - Financial Information
Item 1--Balance Sheet
Statement of Operations
Cash Flow
Notes to Consolidated Financial Statements
Item 2--Management's Discussion and Analysis of Financial
Condition and Results of Operations
Part II - Other Information
Item 4--Exhibits and Reports of Form 8-K
Signature
WILLAMETTE VALLEY VINEYARDS, INC.
Balance Sheet
September 30, December 31,
1998 1997
ASSETS (unaudited) ____________
Current Assets:
Cash and cash
equivalents $ 394,682 $ 13,541
Accounts receivable
trade, net 721,893 820,526
Income taxes
receivable 24,436 24,436
Other receivable - 3,122
Inventories 3,782,246 4,171,027
Prepaid expenses 128,819 75,171
Deferred income
taxes 94,813 94,813
_______ _________
Total current
assets 5,146,889 5,202,636
Vineyard development
cost, net 1,704,059 1,506,906
Property, land and equipment,
net (see note) 6,752,874 6,859,835
Investments 12,084 105,040
Notes receivable 46,215 148,448
Debt issuance costs, net 121,827 122,870
_________ _________
Total assets $ 13,783,948 $ 13,945,735
LIABILITIES AND SHAREHOLDERS EQUITY
Current liabilities
Line of credit $ 1,697,667 $ 1,517,297
Current portion of
long term debt 124,192 124,192
Accounts payable 168,089 363,419
Accrued commissions
and payroll 205,770 225,297
Grapes payable 87,910 501,238
Income tax payable 7,289 -
________ ________
Total current
liabilities 2,290,917 2,731,443
Long-term debt 4,185,410 3,920,751
Deferred income taxes 188,275 188,275
_________ ________
Total liabilities 6,664,602 6,840,469
Shareholders' equity
Common stock, no par value - 10,000,000
shares authorized, 4,232,681 shares issued
outstanding 6,781,255 6,779,067
Retained earnings 338,091 326,199
________ ________
Total shareholders'
equity 7,119,346 7,105,266
Total liabilities and shareholders'
equity $ 13,783,948 $ 13,945,735
The accompanying notes are an integral part of this
financial statement
WILLAMETTE VALLEY VINEYARDS, INC.
Statement of Operations
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
1998 1997 1998 1997
Net Revenues
Case Revenue $1,678,549 $1,309,636$4,124,564 $3,386,937
Bulk Revenue _ - - 323,645 -
Total Revenue 1,678,549 1,309,636 4,448,209 3,386,937
Cost of Sales
Case 814,631 577,289 1,913,924 1,514,580
Bulk - - 306,314 -
Total Cost
of Sales 814,631 577,289 2,220,238 1,514,580
Gross Margin 863,918 732,347 2,227,971 1,872,357
Selling, general and administrative
expense 654,270 636,134 1,861,344 1,723,170
Net operating
income 209,648 96,213 366,627 149,187
Other income (expense)
Interest income 5,549 4,808 22,218 24,540
Interest
expense (123,555) (114,328) (373,311)(298,639)
Other income - 3,263 3,647 11,389
Net income (loss) before
income taxes 91,642 (10,044) 19,181 (113,523)
Income tax 7,289 - 7,289 -
Net income (loss) 84,353 (10,044) 11,892 (113,523)
Retained earnings beginning
of period 253,738 154,858 326,199 258,337
Retained earnings end
of period 338,091 144,814 338,091 144,814
Basic gain (loss) per
common share .02 - - (.03)
Diluted gain (loss) per
common share .02 - - (.03)
Weighted average number of
basic common shares
outstanding 4,232,681 4,226,096 4,232,681 4,056,411
WILLAMETTE VALLEY VINEYARDS, INC.
Statement of Cash Flows
. (unaudited)
Nine Months Ended September
30,
1998 1997
Cash flows from operating activities:
Net income (loss) $ 11,892 $ (113,523)
Reconciliation of net loss to net cash used
for operating activities:
Depreciation and
amortization 446,523 368,834
Equity change 2,188 -
Changes in assets and liabilities:
Accounts receivable
trade 98,633 (101,676)
Other receivable 3,122 12,388
Inventories 388,781 (1,217,626)
Prepaid expenses (53,648) 9,056
Grape payable (413,328) (196,965)
Accounts payable(195,330) 482,089
Taxes payable 7,289 (15,000)
Accrued
liabilities (19,527) (28,080)
Net cash provided (used) by operating
activities 276,595 (800,503)
Cash Flow from investing activities
Construction expenditures and purchases of
equipment (296,142) (910,217)
Vineyard development
expenditures (240,573) (455,622)
Cash received for
investments 92,956 19,217
Notes receivable 102,233 (7,327)
Net cash used by investing
activities (341,526) (1,353,949)
Cash Flows from financing activities:
Line of credit borrowings
(repayment) 180,370 716,138
Debt issuance cost 1,043 (117,098)
Increase in long term debt 264,659 901,811
Net cash provided by financing
activities 446,072 1,500,851
Net increase (decrease) in cash and
cash equivalents 381,141 (653,601)
Cash and cash equivalents:
Beginning of period 13,541 794,885
End of period 394,682 141,284
The accompanying notes are an integral part of this
financial statement
WILLAMETTE VALLEY VINEYARDS, INC
NOTES TO FINANCIAL STATEMENTS
(unaudited)
1) BASIS OF PRESENTATION
The interim financial statements have been prepared by the
Company, without audit and subject to year-end adjustment,
in accordance with generally accepted accounting
principles, except that certain information and footnote
disclosures made in the latest annual report have been
condensed or omitted for the interim statements. Certain
costs are estimated for the full year and are allocated to
interim periods based on estimates of operating time
expired, benefit received, or activity associated with the
interim period. The financial statements reflect all
adjustments, which are, in the opinion of management,
necessary for fair presentation.
Forward Looking Statement:
This Management's Discussion and Analysis of Financial
Condition and Results of Operation and other sections of this
Form 10-Q contain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of
1995. These forward-looking statements involve risks and
uncertainties that are based on current expectations,
estimates and projections about the Company's business, and
beliefs and assumptions made by management. Words such as
"expects," "anticipates," "intends," "plans,' "believes,"
"seeks," "estimates" and variations of such words and similar
expressions are intended to identify such forward-looking
statements. Therefore, actual outcomes and results may
differ materially from what is expressed or forecasted in
such forward-looking statements due to numerous factors,
including, but not limited to: availability of financing for
growth, availability of adequate supply of high quality
grapes, successful performance of internal operations, impact
of competition, changes in wine broker or distributor
relations or performance, impact of possible adverse weather
conditions, impact of reduction in grape quality or supply
due to disease, impact of governmental regulatory decisions,
successful assimilation of Tualatin Vineyards Inc.'s business
with that of the Company and other risks detailed below as
well as those discussed elsewhere in this Form 10-Q and from
time to time in the Company's Securities and Exchange
Commission filings and reports. In addition, such statements
could be effected by general industry and market conditions
and growth rates, and general domestic economic conditions.
2) INVENTORIES BY MAJOR CLASSIFICATION ARE SUMMARIZED AS
FOLLOWS:
September 30, December
31,
1998 1997
Winemaking and packaging
materials $ 40,154 $ 189,062
Work-in-progress (costs relating
to unprocessed and/or bulk
wine products 815,775 1,725,910
Finished goods (bottled wines
and related products) 2,926,317 2,256,055
_________ _________
$ 3,782,246 $ 4,171,02
3) PROPERTY AND EQUIPMENT CONSIST OF THE FOLLOWING:
September 30, December 31,
1998 1997
Land and improvements $ 1,039,742 $ 1,031,115
Winery building and hospitality
center 4,523,355 4,506,344
Equipment 3,534,137 3,263,633
________ ________
9,097,234 8,801,092
Less accumulated
depreciation (2,344,360)
(1,941,257)
__________ _________
6,752,874 6,859,835
Management's Discussion and Analysis of
Financial Condition and Results of Operation
RESULTS OF OPERATIONS
Management is continuing to see positive results from the
course correction taken when Founder and CEO Jim Bernau
returned to operate the Company full-time mid-September of
last year.
Sales - For the nine months ending September 30, 1998,
retail revenues have increased 7%, in-state self-
distribution revenues increased 15% and out-of-state
distributor sales increased 45% over the same nine months
of 1997. Out-of-state sales were effected by a buy-in of
wine in September 1998 before the price increases.
Management is expecting a slow down in sales revenue growth
due to the price increases, which become fully effective
October 1, 1998.
Management is focused on increasing the number of high
quality restaurant and retail placements to offset the
anticipated reduction in single store sales.
Expenses - Inventories were reduced by $388,781 since the
beginning of the year. This reduction has brought
inventories back into balance, reducing related interest
costs and permitting the Company to focus on increasing
gross margins through price increases. SG&A expenses have
been reduced from 51% of revenue for the first nine months
of 1997 to 42% for the first nine months of 1998. These
savings have resulted from tight spending controls,
expense/profit analysis by proposed activity and labor
expense reductions. For the first nine months of 1998,
retail sales increased 7%; expenses were reduced 9%,
resulting in a 42% increase in revenues after deducting
cost of goods and direct retail operating expenses.
Management will focus in the next six months on reducing
out-of-state sales expenses relative to revenues.
Margins - For the nine months ending September 30, 1998,
gross margins, excluding the sale of bulk wine, declined
from 55% to 54% from the same period in 1997 due to
increases in depletion allowances used to reduce
inventories and increases in wine production expenses.
Wine prices were raised to Oregon wholesale customers by an
average of 8% and in the Company's tasting room by 10% in
July. Price increases of 18% on average went into effect
for out-of-state sales on September 1st. All prices, by
varieties, were raised uniformly and because of the product
mix, the out-of-state increase in the average price is
higher than in-state. New Willamette Valley Vineyards
products with higher margins are scheduled to be introduced
next year. The "Tualatin Estate" brand is being introduced
in the Fourth Quarter at higher margins and the Southern
Oregon "Griffin Creek" brand is being launched in November
as a high margin portfolio of Bordeaux and Rhone style
wines. Harvey Steiman, Editor at Large of the Wine
Spectator, called Tualatin Estate's first release, Semi-
Sparkling Muscat, "A darn good one...It might be good enough
to start a trend". The Wine Enthusiast Magazine Senior
Editor, Michael Schachner, gave the Griffin Creek Merlot a
"90", proclaiming, "The wine is simultaneously power-packed
and supple...I recommend that you keep an eye on Griffin
Creek".
Management will focus on presenting and placing these
higher margin products into distribution as well as seeking
positive reviews from wine publications. The Company is
expected to experience higher per case production costs as
higher quality grapes, French oak barrels and new
winemaking techniques are utilized, as well as additional
marketing expenses introducing these new brands and
products. Management believes that the sale of these
higher quality, higher priced wines however, will more than
compensate for the increased expenses associated with
producing these wines thusly improving margins and net
profits.
Operating Results - Net operating income increased 146%
from $149,187 for the first nine months of 1997 to $366,627
for the first nine months of 1998. For the nine months
ended September 30, 1998, the net income increased to
$11,892, an increase of $125,415, as compared to the same
period in 1997. Net income for the nine-month period ended
September 30, 1998, was adversely impacted by depreciation
and interest of approximately $71,086 related to the
Tualatin winery facility. To reduce costs and increase
productivity, the Company moved all winery operations to
its Turner site. Management is seeking to lease this
facility. Management expects to achieve a net benefit when
the additional grapes grown under its supervision are
eventually sold as wine and additional plantings produce a
commercial crop beginning in 2001.
Revenue
Winery Operations
The Company's revenues from winery operations are
summarized as follows:
Three Months ended Nine Months ended
September 30, September 30,
1998 1997 1998 1997
Tasting Room Sales and Rental
Income $ 274,378 $ 244,277 $ 652,706 $596,179
On-site and off-site
festivals 131,616 144,992 357,117 323,005
In-state sales 530,555 552,273 1,532,746 1,331,495
Out-of-state sales810,650 400,126 1,747,488 1,208,427
Bulk wine sales - 18,792 323,645 56,516
Total Revenue $ 1,747,199 $ 1,360,460 $4,613,702 $3,515,662
Less Excise Taxes 68,650 50,824 165,493 128,685
Net Revenue $ 1,678,549 $ 1,309,636 $4,448,209 $3,386,937
Tasting Room sales and rental income for the three months
ended September 30, 1998 increased 12% over the same period
in 1997. For the first nine months of 1998, sales in this
category increased 9% over the same period in 1997. To
promote continual growth in revenue in the hospitality and
rental program, the Company has contracted its hospitality
and catering service to an outside company. This move
allows the Company to offer the customer a more complete
set of services while saving the department the annual
salary of one employee. In the third quarter of 1998, the
Company took steps to increase sales by phone. The Company
hired several persons to make sales solicitations by phone.
Sales from phone solicitation increased by $42,000 in the
third quarter of 1998 as compared to the same period in the
prior year.
On-site and off-site festival sales for the three months
ended September 30, 1998 decreased 9% over the third
quarter of 1997. For the first nine months of 1998, sales
in this category increased 11% over the same period in
1997. During the third quarter of 1998, the Company
eliminated one of its major on-site programs. In the past
several years, revenues have declined from the on-site
festivals and expenses to produce them have increased.
Revenue from the Company's Bluegrass Festival decreased
from $30,000 in 1995 to a low of $13,000 in 1997.
Decisions regarding festivals are now based solely on the
expected profit the event will produce for the Company.
Sales in the state of Oregon, through the Company's
independent sales force, decreased 4% in the three months
ending September 30, 1998 compared to the same period in
1997. For the first nine months of 1998, in-state sales
increased 15% over the same period in 1997. Beginning July
1, 1998, the Company increased the price of its wine by an
average of 8% in state. In July and August of 1998, sales
decreased 7% and 8% respectively over 1997. In September
1998, sales increased slightly by 3% over the previous
year. It appears that in this quarter, the price increase
did not significantly effect in-state sales revenue in the
third quarter of 1998. Although, higher prices increased
the average revenue per case the number of cases sold in
the third quarter of 1998 declined by more than 12%
compared to the third quarter of 1997. The increase in
revenue for the nine months ended September 30, 1998 as
compared to the same period in 1997 was due to two reasons.
First, sales of White Riesling in a special two-bottle
package, which in the first and second quarters of 1998 led
to increases in revenue of nearly $98,000 over the same
periods in 1997. Second, the Company's focus on the sale
of higher margin products achieved significant increases in
sales of Pinot Gris and Pinot Noir in the first nine months
of 1998 as compared to sales in the same period for 1997.
The May 15, 1998 issue of the Wine Spectator Magazine rated
the 1996 Willamette Valley Vineyards Chardonnay as a
leading "top pick\best buy" in the world class category.
The article also quoted Harvey Steiman, editor at large,
"Willamette Valley Vineyards, Oregon's second largest
winery, is on its way to becoming that state's most
reliable producer of widely available wine...The best is
yet to come." With that great endorsement, the Company
spent a considerable amount of funds in advertising to
project the Company's Chardonnay image as a best value in
its class and as a leading Oregon brand. In the months of
May through September, the Company sold 5,722 cases of
Vintage Chardonnay as compared to 1,516 cases in the prior
year.
Out-of-state sales in the three months ending September 30,
1998 increased 102% over the same period in 1997. For the
first nine months of 1998, out-of-state sales increased 45%
over the same period in 1997. The Company sold Stanford
University alumni 1,600 cases of Vintage Chardonnay in
September 1998. This represents one of the largest single
sales in the Company's history. This also made up a
significant part of the increase in the sales of Chardonnay
mentioned in the paragraph above. Effective September 1st,
the Company raised prices to all out-of-state distributors,
which caused the distributors to make large purchases in
August prior to the price increase. The out-of-state
revenue in August 1998 exceeded August 1997 by $262,000.
After deducting the Stanford order in September, the
revenue increased slightly over September last year. The
Company now sells wine in 39 states as compared to 33
states in 1997. The Company experienced growth in the first
nine months of 1998 in both Pinot Noir and Pinot Gris. The
programmed price reduction of Pinot Gris in effect during
the first six months of 1998 increased the number of cases
sold in the first nine months of 1998 as compared to the
same period in 1997.
Bulk wine sales were made in the first half of 1998 to
further reduce excess inventories from the large harvest of
1997.
Excise taxes
The Company reports its excise taxes as a deduction of
sales revenue to equal net revenue (as shown on the
Statement of Operations). The amount for the first nine
months of 1998 was $165,493. For the same period in 1997,
the excise taxes collected were $128,685.
Gross Margin
As a percentage of revenue, gross margin decreased to 51%
for the quarter ending September 30, 1998 from 56% in the
third quarter of 1997. For the first nine months of 1998,
the gross margin decreased to 50% as compared to 55% for
the first nine months of 1997. After adjusting for the
lower margin bulk wine sales, the gross margin would have
been 54% for the first nine months of 1998 as compared to
55% for the same period in 1997. In the third quarter of
1998, the Company incurred additional expenses related to
its closed Tualatin production facility. Also in the third
quarter, the margin was nearly 5% lower in the out-of-state
category than the same period in 1997. This was due to the
large sale of Chardonnay to the Stanford University Alumni
at a quantity discount. This margin erosion was due to
higher production costs in 1998 over 1997 with no price
increase to the customer. For the nine months ended
September 30, 1998, the gross margin was reduced by the
effect of depletion allowances designed to stimulate sales
and reduce excess inventory which were in place in the
first six months of 1998. In the past few years, the
Company has experienced higher production costs,
specifically in the price of grapes it purchases from other
vineyards. In order to keep margins at a sustained level,
the Company has expanded its marketing efforts to sell
higher priced wines, which have a greater profit margin.
Selling, General and Administrative Expense
Selling, general and administrative expenses increased 3%
to $654,270 in the third quarter of 1998 from $636,134 in
the third quarter of 1997. For the first nine months of
1998, selling, general and administrative expenses
increased 8% to $1,861,344 from $1,723,170 in the first
half of 1997. The increase was principally attributed to
higher costs due to operating at a higher sales level. The
Company pays its in-state sales representatives and out-of-
state agents by commission and this is included as a
selling expense. Thus, as sales increase, the dollar
expenditure for commissions increases at the same rate.
Since commissions are based on a fixed percentage, there is
no adverse effect to margin. The total commission expense
for the first nine months of 1998 was $86,000 more than the
same period in 1997. Effective July 1st, the Company
reduced the percentages paid to in-state sales
representatives, which lowered the total commissions, paid
in the third quarter of 1998 by $26,000 compared to the
third quarter of 1997.
As a percentage of revenue, selling, general and
administrative expenses decreased to 39% in the third
quarter of 1998 from 49% in the third quarter of 1997. For
the first nine months of 1998, as a percentage of revenue,
selling, general and administrative expenses decreased to
42% from 51% for the same period last year. The effect of
reduction in personnel in the latter part of 1997 is
partially reflected in a lower percentage of expenses as
compared to revenue. In addition, the reorganization of
delivery routes in the remote areas of Oregon resulted in
the elimination of two vans and accompanying costs. Also,
as a part of its 1998 budget process, the Company
highlighted certain expenses on a "target list" due to
excess spending in 1997 in these accounts. The most
significant cost reduction in the nine months ended
September 30, 1998, was $17,000 in legal fees over the same
period in 1997. Other targeted areas for reduced spending
include telephones, office supplies, dues and publications,
and printing and postage. The Company closely monitors all
expenses in the selling, general, and administration and
measures all departments strictly against their own
budgets.
Interest Income, Other Income and Expense
Interest income/other income decreased to $5,549 for the
third quarter of 1998 from $8,071 for the third quarter of
1997, as the Company no longer receives interest income
from invested funds set aside for the completion of the
storage facility. For the first nine months of 1998,
interest income/other income decreased to $25,865 from
$35,929 for the first nine months of 1997.
Interest expense increased to $123,555 in the third quarter
of 1998 from $114,328 for the same period in 1997. For the
first nine months of 1998, interest expense increased to
$373,311 from $298,639 for the first nine months of 1997.
Interest costs in the first nine months rose as the Company
borrowed more funds to process and bottle wine from its
1996 and 1997 crushes; to finance the construction of a
20,000 square foot warehouse; and to purchase Tualatin
Vineyards Inc. Additional cash needs have resulted from
the Company becoming a larger grower of grapes, which means
the company needs more cash prior to the actual harvest of
grapes for labor and chemical costs not needed previously.
It should be pointed out that the Company has capitalized
$16,000 of interest for 1998 for vineyard development costs
for the 60 newly planted acres at its Tualatin site.
Income Taxes
The Company has operated with a small net profit for the
first nine months in 1998. The Company expects to be
profitable by the end of 1998 so it booked $7,289 for
income tax expanse.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1998, the Company had a working capital
balance of $2.9 million and a current ratio of 2.2:1. At
December 31, 1997, the Company had a working capital
balance of $2.5 million and a current ratio of 1.9:1.
The Company has a cash balance of $394,682 at September 30,
1998. Of the total cash available, the Company has $170,000
held in reserve to complete the development of the newly
planted 60 acres at Tualatin Vineyards. The remaining cash
will be used as working capital.
The Company obtained a line of credit of $2,000,000 from
Farm Credit Services in May 1997 and renewed the line of
credit in May 1998 for a one-year term. At September 30,
1998, the line of credit balance was $1,697,667 compared to
$1,517,297 at December 31, 1997.
The Company has a total long-term debt balance of
$4,309,602 owed to Farm Credit Services. This debt was used
to finance the Hospitality Center, invest in winery
equipment to increase capacity, complete the storage
facility, and purchase Tualatin Vineyards. The long term
debt increased in the first nine months of 1998 as Farm
Credit disbursed the remaining funds to plant additional
vineyards at Tualatin. Since May of 1998, the Company is
in compliance on its loan covenants with Farm Credit
Services.
At September 30, 1998, the Company has paid all grape
contracts for the 1997 fall production crop and has
contracted approximately $900,000 for the 1998 harvest due
and payable by April 1999.
PART II. OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K.
(a) Status of Computer Software for the year 2000.
The Company has reviewed its computer systems in order to
determine if the systems are "Year 2000 Compliant". To be
"Year 2000 Compliant" means that computer hardware and
software used by the Company will not be materially and
adversely affected by processing dates on or after January
1, 2000. This is known as the "Year 2000 Problem". The
Company believes the only computer system that could be
possibly affected by the Year 2000 Problem is the computer
system that the Company uses to maintain its financial
records and to produce financial reports. The Company uses
Platinum SQL software for all of its financial reporting.
The software's seller has represented to the Company in
writing that the software is Year 2000 Compliant. Based on
that representation, the Company believes its computer
systems will not be adversely affected by the Year 2000
Problem.
The Company will complete its assessment of the other
applications in use by the Company and current hardware in
November 1998. Complete plan and cost estimates will be
made available to management in December 1998. At this
time, its expects that expenditures for upgrades of current
hardware and software will be in the range of $30-40,000.
The Company expects to fund these changes through operating
cash flow and will spread the expenses throughout 1999.
SIGNATURES
Pursuant to the requirements of the Security Exchange Act
of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
WILLAMETTE VALLEY VINEYARDS, INC.
Date: By /s/ James W Bernau
James W Bernau
President
Date: By /s/ John Moore
John Moore
Controller
SIGNATURES
Pursuant to the requirements of the Security Exchange Act
of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
Date:
By James W Bernau
President
Date:
By John Moore
Controller
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<NET-INCOME> 84,353
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
