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 FOR THE QUARTERLY PERIOD ENDED JUNE 30,
1999
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 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)
Check whether the issuer (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 for the past 90 days.
Yes X No
The number of shares of Common Stock, par value $.001 per share, outstanding
as of August 10, 1999 is 990,126 shares.
Transitional Small Business Disclosure Format: Yes X No
CONSOLIDATED BALANCE SHEETS
LEAK-X ENVIRONMENTAL CORPORATION AND SUBSIDIARIES
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June 30, December 31,
1999 1998
(Unaudited)
ASSETS:
CURRENT ASSETS
Cash and cash equivalents $ 17,164 $ 1,742
Accounts receivable 832,880 1,492,982
Estimated earnings in
excess of billings 23,418 89,980
Other current assets 140,638 85,423
Net assets of
discontinued operations 450,000 450,000
TOTAL CURRENT ASSETS 1,464,100 2,120,127
PROPERTY AND EQUIPMENT, NET 75,395 82,371
OTHER ASSETS 6,269 6,269
TOTAL ASSETS $ 1,545,764 $ 2,208,767
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES
Accounts payable
and accrued expenses $ 1,144,531 $ 1,723,455
Unearned revenue 43,423 123,989
Line of credit 393,423 335,403
Current portion of
long term debt 150,000 150,000
Net liabilities of
discontinued operations 429,810 450,000
TOTAL CURRENT LIABILITIES 2,161,187 2,782,847
LONG-TERM DEBT 50,000 112,500
STOCKHOLDERS' EQUITY
Common stock $.001 par value:
5,000,000 shares authorized,
990,126 issued and outstanding 990 990
Additional paid-in capital 8,310,195 8,310,195
Accumulated deficit (8,976,608) (8,997,765)
TOTAL STOCKHOLDERS' EQUITY (665,423) (686,580)
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 1,545,764 $ 2,208,767
See notes to consolidated financial statements
</TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
LEAK-X ENVIRONMENTAL CORPORATION AND SUBSIDIARIES
(Unaudited)
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Three Months Ended June 30,
1999 1998
Revenues $ 901,540 $ 1,568,144
Cost of revenues 529,921 1,126,404
Gross profit 371,619 441,740
Selling, general and
administrative expenses 383,299 429,973
Operating income (11,680) 11,767
Other income 0 (816)
Interest expense 9,155 3,504
Net income before taxes and
discontinued operations (20,835) 9,079
Income tax expense (5,450) 821
Net income before
discontinued operations (15,385) 8,258
Discontinued Operations:
Operating Income ------- (67,983)
Loss on Sale of Discontinued Operations ------- --------
0 (67,983)
Net Income $ (15,385) $ (59,725)
Weighted average number of shares of common
stock outstanding Basic 990,126 1,219,645
Diluted 990,126 1,288,137
Net income per share:
Basic: Continuing operations ($0.02) $0.01
Discontinued operations $0.00 ($0.06)
Total Basic ($0.02) ($0.05)
Diluted: Continuing operations ($0.02) $0.01
Discontinued operations $0.00 ($0.05)
Total Diluted ($0.02) ($0.04)
See notes to consolidated financial statements
</TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
LEAK-X ENVIRONMENTAL CORPORATION AND SUBSIDIARIES
(Unaudited)
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Six Months Ended June 30,
1999 1998
Revenues $ 2,062,944 $ 3,387,587
Cost of revenues 1,234,189 2,476,184
Gross profit 828,755 911,403
Selling, general and administrative expenses 792,994 852,451
Operating income 35,761 58,952
Other income (858) (4,188)
Interest expense 11,743 7,008
Net income before taxes and
discontinued operations 24,876 56,132
Income tax expense 3,719 1,642
Net income before
discontinued operations 21,157 54,490
Discontinued Operations:
Operating Income ------- (46,039)
Loss on Sale of
Discontinued Operations ------- -------
0 (46,039)
Net Income $ 21,157 $ 8,451
Weighted average number of shares of common
stock outstanding Basic 990,126 1,219,645
Diluted 990,126 1,288,137
Net income per share:
Basic: Continuing operations $0.02 $0.05
Discontinued operations $0.00 ($0.04)
Total Basic $0.02 $0.01
Diluted: Continuing operations $0.02 $0.04
Discontinued operations $0.00 ($0.04)
Total Diluted $0.02 $0.00
See notes to consolidated financial statements
</TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
LEAK-X ENVIRONMENTAL CORPORATION AND SUBSIDIARIES
(Unaudited)
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Six Months Ended June 30,
1999 1998
CASH FLOW FROM OPERATING ACTIVITIES:
Net income 21,157 8,451
Adjustments to reconcile net income to net cash
provided by/(used) in operating activities of
continuing operations:
Loss from discontinued operations ------ 46,039
Depreciation 18,600 18,000
Changes in assets and liabilities:
Accounts receivable 660,102 (149,557)
Costs and estimated earnings
in excess of billings 66,562 69,181
Other current assets (55,215) (35,951)
Accounts payable (555,324) (80,052)
Billings in excess of cost (80,566) (82,101)
Accrued expenses and other liabilities (23,600) 42,046
NET CASH PROVIDED BY / (USED IN) OPERATING
ACTIVITIES OF CONTINUING OPERATIONS 51,716 (163,944)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (11,624) (10,737)
Increase in other assets, net ------- (43,129)
NET CASH USED IN INVESTING ACTIVITIES OF
CONTINUING OPERATIONS (11,624) (53,866)
CASH FLOWS FROM FINANCING ACTIVITIES:
Advance on line-of-credit 58,020 -------
Payments on long-term debt (62,500) -------
Decrease in advances to discontinued operations ------- 125,250
NET CASH PROVIDED BY / (USED IN) FINANCING
ACTIVITIES OF CONTINUING OPERATIONS (4,480) 125,250
NET CASH PROVIDED BY / (USED IN)
CONTINUING OPERATIONS 35,612 (92,560)
NET CASH PROVIDED BY / (USED IN)
DISCONTINUED OPERATIONS (20,190) 2,739
NET INCREASE/ (DECREASE) IN CASH 15,422 (89,821)
CASH, beginning of the period 1,742 240,769
CASH, end of the period 17,164 150,948
See notes to consolidated financial statements
</TABLE>
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
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 six-month period ended June 30, 1999 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 1999. 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, 1998. Per share data
for the periods are based upon the weighted average number of shares of common
stock outstanding during such periods, plus net additional shares issued upon
exercise of options and warrants (see Note 4).
Note 2. Financial Matters
Total interest expense for the six months ended June 30, 1999 and June
30, 1998 was $11,743 and $7,008, respectively.
Note 3. Discontinued Operations
Net assets of discontinued operations at June 30, 1999 consist of
accounts receivable of $450,000. Net liabilities of discontinued operations
at June 30, 1999 include accounts payable and accrued expenses of $346,251 and
$83,559, respectively.
Note 4. Income Per Share
The following is a reconciliation of the numerator and denominator
underlying the income per share calculations:
Six Months Ended June 30, 1998
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Income Shares Per Share
(Numerator) (Denominator) Amount
Income from continuing operations
available to common stockholders $ 54,333 1,219,645 $0.05
Effect of dilutive securities:
Incremental shares of assumed
conversions of options 68,492
Diluted income from continuing operations
available to common stockholders and
assumed conversions $ 54,333 1,288,137 $0.04
</TABLE>
The reconciliations for the three months ended June 30, 1998 and the
three-month and six-month periods ended June 30, 1999 have not been presented
since any incremental shares converted would have been immaterial or
anti-dilutive, respectively.
Note 5. Line of Credit
On August 6, 1999, the Company signed a Modification (the "Modification")
to its Loan Agreement (the "Loan Agreement") with First Union National Bank.
The Loan Agreement permits the Company to borrow up to $750,000, based on a
percentage of eligible accounts receivable. The Modification provides for the
borrowing base to increase from 60% of eligible accounts receivable to 75% of
eligible accounts receivable, as defined. All other terms of the Loan
Agreement remain the same. The eligible accounts receivable, as defined by
the terms of the Loan Agreement, were $718,376 at June 30, 1999. The
calculated borrowing base of 60% of eligible accounts receivable was $431,025,
for which the Company has utilized $393,423 as of June 30, 1999. Borrowings
under this facility are collateralized by a security interest in substantially
all of the assets of the Company and impose restrictions on the payment of
dividends and stock redemptions and the sale of property.
Item 2. Management's Discussion and Analysis or Plan of Operation
Results of Operations
Quarter Ended June 30, 1999 Compared to the Quarter Ended June 30, 1998
The Company's net loss was $15,385, or ($0.02) per share, for the quarter
ended June 30, 1999 (the "1999 Quarter"), as compared to a net loss of
$59,725, or ($0.05) per share, for the quarter ended June 30, 1998 (the "1998
Quarter"). The loss in the 1999 Quarter is primarily attributable to a
decrease in revenues of $666,604, or 43%, to $901,540 for the 1999 Quarter, as
compared to $1,568,144 for the 1998 Quarter. The decrease in revenues was
anticipated and is a result of lower volume of construction management
services as the compliance deadline for the upgrade or replacement of
underground storage tanks passed in December 1998. Construction management
services have typically included a large portion of subcontractor costs which
became included in the Company's revenues, but resulted in lower margins.
The Company's gross margin improved significantly to 41% in the 1999
Quarter, as compared to 28% in the 1998 Quarter. As the demand for low margin
construction management services declined, the Company experienced a higher
percentage of traditional environmental engineering services which contribute
a higher gross margin.
Selling, general, and administrative ("SG&A") expenses decreased 11%, or
$46,674, to $383,299 for the 1999 Quarter, as compared to $429,973 in the 1998
Quarter. This decrease is primarily attributable to actions taken to reduce
the Company's corporate overhead costs. The Company's focus is to incur
minimum corporate overhead expenses in order to preserve its working capital
for growth within the Company's operating subsidiary.
The Company incurred higher interest expense of $9,155 in the 1999
Quarter, as compared to $3,504 in the 1998 Quarter, due to lower cash and
higher debt balances held by the Company. The income tax benefit of $5,450 in
the 1999 Quarter was higher due to the 1999 Quarter loss of $15,385, while the
1998 Quarter had income tax expense of $821 which was attributed to net income
of $9,079.
Six Months Ended June 30, 1999 Compared to the Six Months Ended June 30, 1998
The Company's net income was $21,157, or $0.02 per share, for the six
months ended June 30, 1999 (the "1999 Period"), as compared to net income of
$8,451, or $0.01 per share, for the six months ended June 30, 1998 (the "1998
Period").
Revenues decreased $1,324,643, or 39%, to $2,062,944 for the 1999 Period,
as compared to $3,387,587 for the 1998 Period. The decrease in revenues was
anticipated and is a result of a lower volume of construction management
services as the compliance deadline for the upgrade or replacement of
underground storage tanks passed in December 1998. Construction management
services have typically included a large portion of subcontractor costs which
became included in the Company's revenues, but resulted in lower margins.
The Company's gross margin improved to 40% in the 1999 Period, as
compared to 27% in the 1998 Period. As the demand for low margin construction
management services declined, the Company experienced a higher percentage of
traditional environmental engineering services which contribute a higher gross
margin.
SG&A expenses decreased 7%, or $59,457, to $792,994 for the 1999 Period,
as compared to $852,451 in the 1998 Period. This decrease is primarily
attributable to actions taken to reduce the Company's corporate overhead
costs. The Company's focus has been to incur minimal corporate overhead
expenses in order to preserve its working capital for growth within the
Company's operating subsidiary. The Company did incur higher SG&A expenses
for continued investment in its growth strategy, including the hiring of new
employees, a greater sales effort spent on the development of new business
prospects and continued marketing of its new environmental monitoring
services.
The Company incurred higher interest expense of $11,743 in the 1999
Period, as compared to $7,008 in the 1998 Period due to lower cash and higher
debt balances held by the Company. Income tax expense of $3,719 in the 1999
Period was higher than income tax expense of $1,642 in the 1998 Period due to
higher Fiscal 1998 expenses which were recorded in Fiscal 1999.
Liquidity and Capital Resources
The Company provided $51,716 of cash from operating activities of
continuing operations in the 1999 Period, as compared to utilizing $153,084 of
cash from operating activities in the 1998 Period. Net income of $21,157 in
the 1999 Period was higher than net income of $8,451 in the 1998 Period. The
1999 Period included a $660,102 decrease in accounts receivable and a $555,324
decrease in accounts payable, as compared to an increase of $149,557 in
accounts receivable and a decrease of $80,052 in accounts payable in the 1998
Period. This significant change in accounts receivable and accounts payable
is primarily due to the decrease in revenues from construction management
services.
Net cash used by investing activities of continuing operations in the
1999 Period was $11,624, as compared to $53,866 net cash used in the 1998
Period. Capital expenditures in the 1999 Period of $11,624, which were
primarily for computer equipment, were slightly higher than the $10,737 in the
1998 Period. The 1998 Period included a $43,129 investment in the development
of the Company's new environmental monitoring services division.
Net cash used by financing activities of continuing operations was $4,480
in the 1999 Period, as compared to net cash provided from financing activities
of continuing operations of $114,390 in the 1998 Period. During the 1999
Period, the Company's cash management system, which applies excess cash
balances against its outstanding line of credit, resulted in an increase of
$58,020 on the line of credit balance. During the 1999 Period, the Company
paid out $62,500 on long-term debt and during the 1998 Period, the Company
received $114,390 from its discontinued operations in payback on outstanding
debt.
The Company's working capital deficit of $697,087 at June 30, 1999
remained consistent with the working capital deficit of $662,720 at December
31, 1998. The Company continues to manage its working capital to support the
Company's ongoing operations and make scheduled payments on its long-term
debt.
On August 6, 1999, the Company signed a Modification (the "Modification")
to its Loan Agreement (the "Loan Agreement") with First Union National Bank.
The Loan Agreement permits the Company to borrow up to $750,000, based on a
percentage of eligible accounts receivable. The Modification provides for the
borrowing base to increase from 60% of eligible accounts receivable to 75% of
eligible accounts receivable, as defined. All other terms of the Loan
Agreement remain the same. The eligible accounts receivable, as defined by
the terms of the Loan Agreement, were $718,376 at June 30, 1999. The
calculated borrowing base of 60% of eligible accounts receivable was $431,025,
for which the Company has utilized $393,423 as of June 30, 1999. Borrowings
under this facility are collateralized by a security interest in substantially
all of the assets of the Company and impose restrictions on the payment of
dividends and stock redemptions and the sale of property.
Backlog at June 30, 1999 of $1,600,000 was lower than the backlog of
$2,600,000 at December 31, 1998 as a result of the completion of some of the
larger volume construction work during the first half of 1999. The Company
believes that all of the current backlog will be completed in 1999, 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.
Computers, software, and other equipment utilizing microprocessors that
use only two digits to identify a year in a date field may be unable to
process accurately certain date-based information after the year 2000. This
is commonly referred to as the "Y2K" problem. The Company is utilizing
internal resources to address the potential impact of the Y2K problem. Key
areas of the Company's operations that are being addressed include external
customers and suppliers and internal computers and software.
Y2K considerations may have an effect on some of the Company's customers
and suppliers, and thus, indirectly on the Company. The Company is assessing
the potential effect on the Company with respect to customers and suppliers
with Y2K issues and does not expect a material affect on the Company's
financial condition or results of operation at this time. However, the
potential does exist that if customers of the Company are not Y2K compliant,
payments to the Company in the first quarter of the Year 2000 could be delayed
until the customers are able to correct their Y2K compliance deficiencies.
The Company has upgraded its internal computerized information systems to
ensure that it is able to process information that may be date sensitive and
to be Y2K compliant. No related software or hardware costs are expected. A
contingency plan is being formulated to address unavoidable Y2K risks with
customers, vendors, and other third parties.
Management has maintained control of overhead expenses and operating
margins. However, there is no assurance that the cost controlling measures
will be sufficient to permit the Company to meet its financial obligations
while providing capital for ongoing operations.
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: enforcement of environmental regulations,
business conditions, and growth in the industry and general economy;
competitive factors, such as rival designs and prices; changes in sales mix;
and the risk factors listed from time to time in the Company's SEC reports.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
In June 1999, the following lawsuit was settled at a cost of $2,500 from
Gaservice Maintenance Corporation ("Gaservice"), a subsidiary of the Company
whose operations have been discontinued, to the Company's insurance carriers,
CNA and Kemper (who contributed another $7,500). The total settlement was
$252,500. The civil action is captioned Westland Properties, Inc.; Westland
Garden State Plaza Limited, Partnership; and Westfield Corporation, Inc. vs.
Exxon Company, USA; OXYUSA, Inc.; Richard Bertola; Carol Bertola; Lawrence
Bertola; Gaservice Corporation; Gaservice Maintenance Corporation; Gaservice
Acquisition Corporation; and John Does 1-70; and ABC Corporations 1-70,
Superior Court of New Jersey, Law Division - Bergen County. The plaintiffs in
this action claimed that a release of hazardous substances occurred on their
property and that it was allegedly caused by the defendants.
On July 1, 1999, the Company received a favorable ruling to its request
for removal of Leak-X Environmental Corporation as a defendant in lawsuits
with Exxon Corporation related to the discontinuation of Gaservice's
operations. In addition, the judge also ruled that Exxon is directly
responsible for payment to the subcontractors hired by Gaservice to perform
work at the Exxon sites in question. The separate lawsuits captioned Exxon
Corporation, Plaintiff, against Gaservice Maintenance Corporation and Leak-X
Environmental Corporation, Defendants, Supreme Court of the State of New York,
County of Kings, and Exxon Corporation, Plaintiff, against Gaservice Maintenance
Corporation and Leak-X Environmental Corporation, Defendants, Supreme Court of
the State of New York, County of Queens, were commenced in October 1995. The
plaintiff in these actions seeks a total of $239,500 in damages allegedly
sustained as a result of breach of contract by Gaservice, as well as alleged
negligence in retrofitting of tanks which resulted in the escape of vapors.
The Company filed counterclaims aggregating approximately $450,000 which
allege that (a) Exxon interfered with Gaservice's completion of all the
contracts; and (b) Exxon failed to pay for the actual work completed by
Gaservice. Certain subcontractors on the projects are joined into the actions
or have filed separate claims because Exxon also failed to provide payments
which would enable the subcontractors to be paid by Gaservice.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
10.1 Modification Number 1 to Loan Agreement with First Union National
Bank dated August 6, 1999.
27.1 Financial Data Schedule
27.2 Restated 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: August 12, 1999
LEAK-X ENVIRONMENTAL CORPORATION
by: /s/ Joyce A. Rizzo
Joyce A. Rizzo
Chief Executive Officer
by: /s/ Eileen E. Bartoli
Eileen E. Bartoli
Controller and Chief Financial Officer
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE LEAK-X
ENVIRONMENTAL CORPORATION CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1999, AND
THE RELATED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE
30, 1999, AND THE ACCOMPANYING NOTES, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 17,164
<SECURITIES> 0
<RECEIVABLES> 832,880
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,464,100
<PP&E> 283,039
<DEPRECIATION> 207,644
<TOTAL-ASSETS> 1,545,764
<CURRENT-LIABILITIES> 2,161,187
<BONDS> 50,000
0
0
<COMMON> 990
<OTHER-SE> (666,413)
<TOTAL-LIABILITY-AND-EQUITY> 1,545,764
<SALES> 2,062,944
<TOTAL-REVENUES> 2,062,944
<CGS> 1,234,189
<TOTAL-COSTS> 1,234,189
<OTHER-EXPENSES> 792,994
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,743
<INCOME-PRETAX> 24,876
<INCOME-TAX> 3,719
<INCOME-CONTINUING> 21,157
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,157
<EPS-BASIC> 0.02
<EPS-DILUTED> 0.02
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE LEAK-X
ENVIRONMENTAL CORPORATION CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1998, AND
THE RELATED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE
30, 1998, AND THE ACCOMPANYING NOTES, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 150,948
<SECURITIES> 0
<RECEIVABLES> 2,223,140
<ALLOWANCES> 35,000
<INVENTORY> 190,817
<CURRENT-ASSETS> 3,184,757
<PP&E> 478,391
<DEPRECIATION> 340,826
<TOTAL-ASSETS> 3,448,326
<CURRENT-LIABILITIES> 3,495,718
<BONDS> 0
0
0
<COMMON> 1220
<OTHER-SE> (48,612)
<TOTAL-LIABILITY-AND-EQUITY> 3,448,326
<SALES> 3,387,587
<TOTAL-REVENUES> 3,387,587
<CGS> 2,476,184
<TOTAL-COSTS> 2,476,184
<OTHER-EXPENSES> 852,451
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,008
<INCOME-PRETAX> 56,132
<INCOME-TAX> 1,642
<INCOME-CONTINUING> 54,490
<DISCONTINUED> (46,039)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,451
<EPS-BASIC> 0.05
<EPS-DILUTED> 0.04
</TABLE>
