U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE EXCHANGE ACT
For The Quarterly Period Ended: Commission File Number:
September 30, 1997 0-17776
LEAK-X ENVIRONMENTAL CORPORATION
(Exact name of Small Business Issuer as specified in Its Charter)
Delaware 23-2823596
(State or other jurisdiction of (IRS Employer Identi-
Incorporation or Organization) fication Number)
790 East Market Street, Suite 270, West Chester, PA 19382
(Address of Principal Executive Offices) (Zip Code)
(610) 344-3380
(Issuer's Telephone Number, Including Area Code)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports) and (2)
has been subject to filing requirements for the past 90 days.
Yes X No
The number of shares of Common Stock, par value $.001 per share, outstanding
as of November 6, 1997 is 1,219,645 shares.
Transitional Small Business Disclosure Format: Yes No X
<TABLE>
<CAPTION>
LEAK-X ENVIRONMENTAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1997 1996
(Unaudited)
<S> <C> <C>
ASSETS:
CURRENT ASSETS
Cash and cash equivalents $ 85,216 $ 156,617
Accounts receivable, net 2,197,488 1,383,857
Estimated earnings in excess of billings 62,794 20,357
Inventory 222,016 398,848
Other current assets 136,428 84,765
Net assets of discontinued operations 499,234 499,234
TOTAL CURRENT ASSETS 3,203,176 2,543,678
PROPERTY AND EQUIPMENT, NET 159,625 197,851
OTHER ASSETS
Goodwill, net of accumulated amortization of $120,666
in 1997 and $75,666 in 1996 1,705,325 1,750,325
Patents and other assets, net of accumulated
amortization of $3,302 in 1997 and $2,982 in 1996 45,571 20,329
TOTAL OTHER ASSETS 1,750,896 1,770,654
TOTAL ASSETS 5,113,697 4,512,183
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES
Accounts payable and accrued expenses 2,313,145 1,625,832
Unearned revenue 11,040 112,272
Line of credit 422,000 222,000
Notes payable to directors 100,000 0
Current portion of long term debt 40,128 50,337
Net liabilities of discontinued operations 458,041 501,707
TOTAL CURRENT LIABILITIES 3,344,354 2,512,148
LONG TERM DEBT 22,658 215,176
STOCKHOLDERS' EQUITY
Preferred stock $.01 par value:
500,000 shares authorized,
0 Issued and outstanding in 1997 and 1996 0 0
Common stock $.001 par value:
5,000,000 shares authorized,
1,219,645 issued and outstanding in 1997 and 1996 1,220 1,220
Additional paid-in capital 8,308,015 8,308,015
Accumulated deficit (6,562,550) (6,524,376)
TOTAL STOCKHOLDERS' EQUITY 1,746,685 1,784,859
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $5,113,697 $4,512,183
</TABLE>
See notes to consolidated financial statements
LEAK-X ENVIRONMENTAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
<TABLE>
<CAPTION>
Three Months Ended September 30,
1997 1996
<S> <C> <C>
Revenues:
Service $2,237,357 $2,011,593
Product 800,104 274,278
3,037,461 2,285,871
Cost of Revenues:
Service 1,813,662 1,553,977
Product 588,229 272,995
2,401,891 1,826,972
Selling, general and
administrative expenses 617,823 593,028
Operating income (loss) 17,747 (134,129)
Other income (3,354) (2,744)
Interest expense 15,931 10,592
Net income (loss) before taxes 5,170 (141,977)
Income tax expense 1,018 452
Net income (loss) $4,152 ($142,429)
Weighted average shares of
common stock outstanding 1,219,645 1,219,645
Net income (loss) per share $0.00 ($0.12)
</TABLE>
See notes to consolidated financial statements
LEAK-X ENVIRONMENTAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1997 1996
<S> <C> <C>
Revenues:
Service $5,524,477 $4,758,788
Product 1,935,479 1,390,774
7,459,956 6,149,562
Cost of Revenues:
Service 4,325,862 3,563,229
Product 1,349,779 1,224,685
5,675,641 4,787,914
Selling, general and
administrative expenses 1,786,202 1,841,442
Operating loss (1,887) (479,794)
Other income (19,304) (15,473)
Interest expense 52,893 42,951
Net loss before taxes (35,476) (507,272)
Income tax expense 2,698 821
Net loss ($38,174) ($508,093)
Weighted average shares of
common stock outstanding 1,219,645 1,142,940
Net loss per share ($0.03) ($0.44)
</TABLE>
See notes to consolidated financial statements
LEAK-X ENVIRONMENTAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1997 1996
<S> <C> <C>
CASH FLOW FROM
OPERATING ACTIVITIES:
Net loss ($38,174) ($508,093)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation 52,202 52,221
Goodwill amortization 45,000 44,908
Gain on sale of asset (4,831) -----
Valuation of stock options ----- 20,250
(Increase) decrease in accounts receivable (813,631) 363,817
Increase in costs and estimated
earnings in excess of billings (42,437) (17,925)
Decrease in inventories 176,832 121,997
Increase in other current assets (51,664) (20,394)
Increase in accounts payable 694,655 32,538
Decrease in billings in excess of cost (101,233) (168,206)
Increase (decrease) in accrued
expenses and other liabilities (7,340) 76,213
Change in net assets of discontinued operations (43,666) (2,274)
NET CASH USED BY OPERATIONS ($134,287) ($4,948)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditure (23,224) (35,881)
Merger with Groundwater Recovery Systems, Inc. ------ (22,730)
Sale of assets 14,079 -----
Increase in other assets, net (25,242) (23,268)
NET CASH USED BY INVESTING ACTIVITIES ($34,387) ($81,879)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings (payments) on line of credit 200,000 (228,000)
Payments on long-term debt (40,957) (38,678)
Payments on notes payable to directors (61,770) -----
Conversion of Preferred Stock Fee ------ (3,477)
Proceeds from subscription receivable,
net of expenses ------ 153,522
NET CASH PROVIDED/(USED) BY
FINANCING ACTIVITIES $97,273 ($116,633)
NET INCREASE IN CASH ($71,401) ($203,460)
CASH, beginning of the year 156,617 442,946
CASH, end of the period $85,216 $239,486
</TABLE>
See notes to consolidated financial statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
LEAK-X ENVIRONMENTAL CORPORATION AND SUBSIDIARIES
(UNAUDITED)
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Note 1. Basis of Presentation
General
The accompanying unaudited consolidated financial statements of Leak-X
Environmental Corporation (the "Company") have been prepared in accordance
with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
considered necessary for a fair presentation (consisting of normal recurring
accruals) have been included. The preparation of financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. Operating results for the nine month period ended September 30,
1997 are not necessarily indicative of the results that may be expected for
the year ending December 31, 1997. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-KSB for the year ended December 31, 1996.
Per share data for the periods are based upon the weighted average number
of common shares outstanding during such periods, plus net additional shares
issued upon exercise of options and warrants. Outstanding options and
warrants have not been included in the computation of per share data in the
three and nine month periods ended September 30, 1997 or September 30, 1996 as
they would be immaterial or anti-dilutive, respectively.
Recent Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board, "FASB",
issued SFAS No.128, "Earnings Per Share," which becomes effective in Fiscal
1998. Early application is not permitted. SFAS No. 128 simplifies the
standards for computing earnings per share, or "EPS". It replaces the
presentation of primary EPS with the presentation of basic EPS. Basic EPS
excludes dilution and is computed by dividing income available to common
stockholders by the weighted average number of shares outstanding for the
period. If SFAS No. 128 had been applied to the results reported on Form
10-QSB's since Fiscal 1996, the Company's basic EPS would not have changed
since its results from operations were primarily losses.
In February 1997, The FASB issued SFAS No. 129, "Disclosure of
Information about Capital Structure," which becomes effective in Fiscal 1998.
SFAS No.129 requires the following disclosures: liquidation preferences of
preferred stock, information about rights and privileges of outstanding equity
securities and redemption criteria for all issues of capital stock. Due to
the Securities and Exchange Commissions' disclosure requirements of
publicly-held entities, there will be no additional disclosure required by the
Company.
In June 1997, the FASB issued SFAS No.130, "Reporting Comprehensive
Income," which becomes effective in Fiscal 1998. SFAS No.130 requires the
disclosure of the components of the change in equity of a business enterprise
during a period from transactions and other events except for distributions
and investments to be reported in the statement of operations, cash flows and
in ceratin circumstances as a component of equity as a separate category,
"accumulated other comprehensive income." Examples of items included in
comprehensive income are foreign currency translation adjustments, unrealized
securities gains or losses and pension liability adjustments. In addition,
publicly-held entities will be required to provide such disclosure on an interim
basis. Currently, there is no increased disclosure for items defined
under comprehensive income for the Company.
In June 1997, the FASB issued SFAS NO. 131, "Disclosure about Segments of
an Enterprise and Related Information," which becomes effective in Fiscal 1998
for publicly-held entities only. SFAS No. 131 requires the disclosure of
various data pertaining to entities operating with different business
segments. The Company does operate in two different business segments and the
statement of operations currently discloses the required data relating to the
Company under SFAS No. 131. The implementation of SFAS No. 131 will not
require any additional material disclosure.
Note 2. Financial Matters
Total interest expense for the nine months ended September 30, 1997 and
September 30, 1996 was $52,893 and $42,951, respectively.
Note 3. Discontinued Operations
Net assets of discontinued operations at September 30, 1997 consist of
accounts receivable of $499,234. Net liabilities of discontinued operations
at September 30, 1997 include accounts payable and accrued expenses of
$346,314 and $111,727, respectively.
Note 4. Line of Credit
On July 29, 1997, the Company signed a Loan Modification Agreement (the
"Agreement") to the Company's Revolving Credit Agreement (the "Credit
Agreement") with First Union National Bank. The Agreement extended the
Company's Credit Agreement to December 31, 1997. All other terms of the
existing Credit Agreement remained unchanged. The Company was not in default
of any covenants of the Credit Agreement at September 30, 1997. The Company
had $328,000 of available borrowing at September 30, 1997.
Note 5. Notes Payable to Directors
On May 12, 1997, the Company entered into an agreement with George A.
Nolan and James G. Warburton, Directors of the Company and Officers of
Groundwater Recovery Systems, Inc. ("GRS"), a wholly-owned subsidiary of the
Company, to waive a total of $52,005 each in salary for the period January 1,
1997 through September 30, 1997. The agreement requires aggregate payments of
$61,770 to be made on the notes payable to Messrs. Nolan and Warburton for the
same period. Through September 30, 1997, Messrs. Nolan and Warburton waived a
total of $96,760 in salary and $5,850 in office expense reimbursement and
received an aggregate amount of $61,770 in payment on the notes payable to
directors. The Company also granted 15,000 incentive stock options each to
George Nolan and James Warburton pursuant to the Company's 1996 Stock Option
Plan at an exercise price of $1.50 per share with 5,000 additional options
each which would be granted upon audit if certain operating profits are met
for the fiscal year ended December 31, 1997.
Note 6. Stockholders' Equity
In August 1997, the Company reduced the authorized number of shares of
Common Stock from 30,000,000 to 5,000,000 and the authorized number of shares
of Preferred Stock from 5,000,000 to 500,000.
Item 2. Management's Discussion and Analysis or Plan of Operation
Results of Operations
Quarter ended September 30, 1997 compared to the Quarter ended September 30,
1996
The Company reported income of $4,152, or $0.00 per share for the quarter
ended September 30, 1997 (the "1997 Quarter"), as compared to a net loss of
$142,429, or ($0.12) per share for the quarter ended September 30, 1996 (the
"1996 Quarter"). This improvement is primarily a result of increased sales
and ongoing cost containment programs.
Net revenue increased 33% to $3,037,461 for the 1997 Quarter compared to
$2,285,871 for the 1996 Quarter. The increase in revenues is attributable to
an 11% increase in environmental consulting services primarily from higher
construction management revenues and a 125% increase in the Company's
groundwater remediation revenues due to a heightened demand for remediation
equipment. The Company's gross margin remained stable at 21% for the 1997
Quarter as compared to a gross margin of 20% in the 1996 Quarter.
Selling, general and administrative expenses ("SG&A expenses") increased
4% to $617,823 for the 1997 Quarter, as compared to $593,028 in the 1996
Quarter. SG&A expenses decreased $34,890 at the Company's groundwater
remediation business primarily as a result of $38,720 in salary waivers by two
directors in the 1997 Quarter. Corporate overhead increased $10,584 due to
the addition of Directors & Officers insurance and additional costs related to
the pursuit of the Company's growth and acquisition strategy. SG&A expenses
at the Company's environmental consulting business increased $49,101 primarily
due to higher overhead costs associated with the investment in development of
a new office in Metro New York City.
The Company incurred higher interest expense of $15,931 in the 1997
Quarter, as compared to $10,592 in the 1996 Quarter due to a greater use of
debt in the 1997 Quarter.
Nine Months ended September 30, 1997 compared to the Nine Months ended
September 30, 1996
Net revenue increased 21% to $7,459,956 for the nine months ended
September 30, 1997 (the "1997 Period") compared to $6,149,562 for the nine
months ended September 30, 1996 (the "1996 Period"). The increase in revenues
is attributable to a 16% increase in the environmental consulting business
with higher construction management revenues and a 32% increase at the
Company's groundwater remediation business due to a steady increase in demand
for remediation equipment.
The Company's gross margin increased to 24% for the 1997 Period as compared
to a gross margin of 22% in the 1996 Period. The improvement in the gross
margin is primarily a result of overall improvement in the Company's
groundwater remediation business due to stronger margins from cost containment
programs and higher sales volume.
SG&A expenses decreased by $55,240 to $1,786,202 for the 1997 Period, as
compared to $1,841,442 in the 1996 Period. SG&A expenses decreased $275,174
at the Company's groundwater remediation business as a result of cost
containment programs which include salary waivers totaling $96,760 by two
directors in the 1997 Period. Corporate overhead increased $124,445 due to
the addition of employment contracts for two of the Company's executive
officers, the addition of Directors & Officers insurance and additional costs
related to the pursuit of the Company's growth and acquisition strategy. SG&A
expenses at the Company's environmental consulting business increased $95,489
due to higher overhead costs primarily associated with the investment in
development of a new office in Metro New York City.
The Company incurred higher interest expense of $52,893 in the 1997
Period, as compared to $42,951 in the 1996 Period due to a higher use of debt
in the 1997 Period. The $38,174 loss in the 1997 Period is a significant
improvement over the $508,093 loss reported for the 1996 Period. The
improvement is attributable to all aspects of the Company's business. The
Company's environmental consulting business continues to grow with the opening
of two new offices within the last two years. The Company's groundwater
remediation business made significant reductions in its overhead expenses
which has allowed the Company to enjoy higher margins on rising sales volume
this year.
Liquidity and Capital Resources
The Company used $134,287 in cash from operating activities in the 1997
Period as compared to using $4,948 in the 1996 Period. The primary difference
in the utilization of cash from operating activities was a $813,631 increase
in accounts receivable in the 1997 Period as compared to a $363,817 decrease
in the 1996 Period. Accounts payable increased by $694,655 in the 1997 Period
as compared to an increase of $32,538 in the 1996 Period. These changes
reflect a period of growing sales in the 1997 Period, as compared to a period
of declining sales in the 1996 Period. In addition, the Company incurred a
substantially lower loss of $38,174 in the 1997 Period as compared to a loss
of $508,093 in the 1996 Period.
Net cash used by investing activities in the 1997 Period was $34,387 as
compared to $81,879 net cash used in the 1996 Period. Capital expenditures,
which were primarily for computer equipment, were lower at $23,224 in the 1997
Period as compared to $35,881 in the 1996 Period. The 1997 Period included
$14,079 of cash received from the sale of assets. The 1996 Period included
$22,730 of cash paid as a result of the merger with GRS.
Net cash provided by financing activities was $97,273 in the 1997 Period
as compared to the use of $116,633 in the 1996 Period. During the 1997
Period, the Company borrowed $200,000 on its line of credit in order to
support a period of investment in materials for increasing sales and ongoing
operations. In the 1996 Period, the Company paid down $228,000 on its line of
credit and raised $153,522 through the completion of a private placement of
its common stock and warrants which commenced in December 1995. The Company
paid $61,770 on the notes payable to directors in the 1997 Period and
continued to make scheduled payments on its debt in the 1997 Period and 1996
Period.
The Company's working capital decreased to ($141,178) at September 30,
1997 as compared to $31,530 at December 31, 1996. The change in working
capital was primarily the result of a reclassification from long-term debt to
current liabilities for $100,000 related to the notes payable to directors
which becomes due on March 31, 1998. The Company utilizes working capital to
manage accounts payable, fund ongoing operations and make scheduled payments
on its long-term debt.
Backlog at September 30, 1997 of $5,400,000 was lower than the level at
December 31, 1996 of $6,800,000, primarily as a result of a higher percent of
completion of construction management work. The Company believes that
approximately 50% of the current backlog will be completed in 1997, although,
no assurance of this can be given. Much of the Company's backlog is subject
to termination at will and rescheduling without significant penalty.
On July 29, 1997, the Company signed a Loan Modification Agreement (the
"Agreement") to the Company's Credit Agreement with First Union National
Bank. The Agreement extended the Company's Credit Agreement to December 31,
1997. All other terms of the existing Credit Agreement remained unchanged.
The Company was not in default of any covenants of the Credit Agreement at
September 30, 1997. The Company had $328,000 of available borrowing at
September 30, 1997.
On May 12, 1997, the Company entered into an agreement with George A.
Nolan and James G. Warburton, Directors of the Company and Officers of GRS, to
waive a total of $52,005 each in salary for the period January 1, 1997 through
September 30, 1997. The agreement requires aggregate payments of $61,770 to
be made on the notes payable to Messrs. Nolan and Warburton for the same
period. In the 1997 Period, Messrs. Nolan and Warburton waived a total of
$96,760 in salary and $5,850 in office expense reimbursement and received an
aggregate amount of $61,770 in payment on the notes payable to directors. The
Company also granted 15,000 incentive stock options each to George Nolan and
James Warburton pursuant to the Company's 1996 Stock Option Plan at an
exercise price of $1.50 per share with 5,000 additional options each which
would be granted upon audit if certain operating profits are met for the
fiscal year ended December 31, 1997.
On August 22, 1997, The Nasdaq Stock Market received approval from the
Securities and Exchange Commission for changes in its Nasdaq SmallCap listing
requirements. The new quantitative maintenance and corporate governance
requirements for continued listing will become effective on February 23,
1998. The Company presently does not meet the net tangible assets ($2
million) requirement for continued listing. The Company is actively pursuing
alternatives to improve its net tangible assets in order to comply with all of
the applicable requirements in the time frame provided by Nasdaq.
The Company deems its present facilities and equipment adequate for its
immediate needs and it has no material commitments for capital expenditures.
The Company believes its present liquidity and cash flow are adequate for its
current needs. There can be no assurance, however, that additional financing,
whether from debt or equity, will be available to the Company when needed on
commercially reasonable terms, or at all.
The Company's management believes that inflation has not had a
significant impact on its business during the past three years.
The statements contained herein include forward looking statements that
involve a number of risks and uncertainties. In addition to the facts
discussed, among the other factors that could cause actual results to differ
materially are the following: business conditions and growth in the industry
and general economy; competitive factors, such as rival designs and prices;
inventory risks due to shifts in market demand; changes in sales mix; and the
risk factors listed from time to time in the Company's SEC reports.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The matters set forth were submitted to a vote of the Company's Security
Holders in connection with its Annual Meeting of Stockholders held August 21,
1997:
1. Election of six (6) Directors.
A. Name of Nominees
John S. Gelles
Joyce A. Rizzo
William H. Gelles, Jr.
George A. Nolan
James G. Warburton
Robert D. Goldman
The above nominees were elected by the Stockholders of the Company
to serve for the ensuing year and until their successors are elected and
qualified.
<TABLE>
<CAPTION.
B. The votes for the nominees were as follows:
<S> <C> <C> <C> <C>
% of
Nominee For Outstanding Withheld Abstain
John S. Gelles 1,011,928 83.0% 6,184 0
Joyce A. Rizzo 1,012,141 83.0% 5,971 0
William H. Gelles, Jr. 1,012,271 83.0% 5,841 0
George A. Nolan 1,012,333 83.0% 5,779 0
James G. Warburton 1,012,333 83.0% 5,779 0
Robert D. Goldman 1,012,333 83.0% 5,779 0
</TABLE>
2. Approval of the Company's 1997 Stock Option Plan: For, 726,656 shares
(60% of outstanding shares); Against, 16,227 shares; Abstain, 4,011 shares;
Broker non-votes, 0 shares. The Company's 1997 Stock Option Plan was approved
by the affirmative vote of the holders of a majority of the outstanding shares
of the Company.
3. Authorization of the amendment of the Company's Certificate of
Incorporation to decrease the authorized number of shares of Common Stock and
Preferred Stock: For, 733,511 shares (60% of outstanding shares); Against,
10,303 shares; Abstain, 3,080 shares; Broker non-votes, 0 shares. The amendment
of the Company's Certificate of Incorporation was authorized by the affirmative
vote of the holders of a majority of the outstanding shares of the Company.
4. Ratification of Mazars and Guerard LLP as independent auditors of the
Company's 1997 financial statements: For, 1,010,790 shares (83% of outstanding
shares); Against, 2,957 shares; Abstain, 4,365 shares; Broker non-votes,
0 shares. The ratification of Mazars and Guerard LLP was approved by the
affirmative vote of the holders of a majority of the outstanding shares of the
Company.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
(27) Financial Data Schedule
(b) Reports on Form 8-K:
None.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Dated: November 13, 1997
LEAK-X ENVIRONMENTAL CORPORATION
by: /s/ Joyce A. Rizzo
Joyce A. Rizzo
Chief Executive Officer
by: /s/ Eileen E. Bartoli
Eileen E. Bartoli
Chief Financial Officer
and Controller
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE LEAK-X
ENVIRONMENTAL CORPORATION CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER, 30, 1997,
AND THE RELATED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1997, AND THE ACCOMPANYING NOTES, AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 85,216
<SECURITIES> 0
<RECEIVABLES> 2,232,488
<ALLOWANCES> 35,000
<INVENTORY> 222,016
<CURRENT-ASSETS> 3,203,176
<PP&E> 452,087
<DEPRECIATION> 292,462
<TOTAL-ASSETS> 5,113,697
<CURRENT-LIABILITIES> 3,344,354
<BONDS> 22,658
0
0
<COMMON> 1,220
<OTHER-SE> 1,745,465
<TOTAL-LIABILITY-AND-EQUITY> 5,113,697
<SALES> 7,459,956
<TOTAL-REVENUES> 7,459,956
<CGS> 5,675,641
<TOTAL-COSTS> 5,675,641
<OTHER-EXPENSES> 1,786,202
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 52,893
<INCOME-PRETAX> (35,476)
<INCOME-TAX> 2,698
<INCOME-CONTINUING> (38,174)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (38,174)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
