U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended SEPTEMBER 30, 1995
OR
[ ] Transition Report Under Section 13 or 15(d)
of the Exchange Act
For the Transition Period From to
Commission File Number 1-10185
DOCUCON, INCORPORATED
(Exact name of small business issuer as specified in its charter)
Delaware 74-2418590
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
7461 Callaghan Road
San Antonio, Texas 78229
(Address of principal executive offices)
(210) 593-0183
(Issuer's telephone number)
Check whether the issuer (1) 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
State the number of shares outstanding of each of the issuer's classes
of common equity as of November 9, 1995. 11,771,228
<PAGE>
DOCUCON, INCORPORATED
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Item 1: Balance Sheets - September 30, 1995, and December 31, 1994 3
Statements of Operations - For the Three Months and
Nine Months Ended September 30, 1995 and 1994 5
Statements of Cash Flows - For the Nine Months Ended
September 30, 1995 and 1994 6
Notes to Financial Statements 8
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations 11
PART II. OTHER INFORMATION
Items 1-6: Other Information 14
SIGNATURES 15
-2-
<PAGE>
PART I - FINANCIAL INFORMATION
DOCUCON, INCORPORATED
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30,
1995 December 31,
ASSETS (UNAUDITED) 1994
------------- ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and temporary cash investments ..................................................... $ 111,273 $ 376,798
Accounts receivable - trade, net of allowance for doubtful accounts of
$4,802 and $28,093, respectively-
U.S. Government ..................................................................... 70,454 119,249
Commercial .......................................................................... 1,295,711 1,347,075
Unbilled revenues ....................................................................... 1,017,620 156,305
Other receivables ....................................................................... 1,024 3,830
Prepaid expenses ........................................................................ 131,415 169,543
---------- ----------
Total current assets ................................................... 2,627,497 2,172,800
---------- ----------
PROPERTY AND EQUIPMENT ..................................................................... 6,494,161 6,034,459
Less- Accumulated depreciation .......................................................... 3,987,552 3,286,816
----------
Net property and equipment ............................................. 2,506,609 2,747,643
----------
SOFTWARE DEVELOPMENT COSTS, net ............................................................ 325,336 280,901
---------- ----------
GOODWILL, net .............................................................................. 343,476 357,433
----------
Total assets ........................................................... $5,802,918 $5,558,777
========== ==========
</TABLE>
See Notes to Financial Statements.
-3-
<PAGE>
PART I - FINANCIAL INFORMATION
DOCUCON, INCORPORATED
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30,
1995 December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY (UNAUDITED) 1994
------------ ------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable .......................................................................... $ 1,129,905 $ 755,305
Accrued liabilities ....................................................................... 712,257 597,148
Line of credit ............................................................................ 400,000 --
Note payable .............................................................................. -- 10,560
Current maturities of capital lease obligations ........................................... 7,787 20,930
Deferred revenues ......................................................................... 341,363 91,018
----------- -----------
Total current liabilities ................................................ 2,591,312 1,474,961
----------- -----------
LONG-TERM DEBT ............................................................................... 1,500,000 1,500,000
----------- -----------
CAPITAL LEASE OBLIGATIONS, less current maturities ........................................... -- 3,094
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $1.00 par value, 10,000,000 shares authorized- Series A, 60
shares authorized; 21 and 23 shares outstanding as of
September 30, 1995, and December 31, 1994, respectively ............................... 21 23
Common stock, $.01 par value, 25,000,000 shares authorized;
11,771,228 and 11,544,280 shares issued and outstanding as of
September 30, 1995, and December 31, 1994, respectively ................................. 117,712 115,442
Additional paid-in capital ................................................................ 9,474,508 9,456,677
Accumulated deficit ....................................................................... (7,880,635) (6,991,420)
----------- -----------
Total stockholders' equity ............................................... 1,711,606 2,580,722
----------- -----------
Total liabilities and stockholders' equity ............................... $ 5,802,918 $ 5,558,777
=========== ===========
</TABLE>
See Notes to Financial Statements.
-4-
<PAGE>
DOCUCON, INCORPORATED
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30 Ended September 30
---------------------------------- -------------------------------
1995 1994 1995 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATING REVENUES ................................. $ 2,304,773 $ 2,230,335 $ 8,191,280 $ 6,500,010
------------ ------------ ------------ ------------
COSTS AND EXPENSES:
Production ...................................... 1,400,589 1,470,127 5,305,246 4,220,457
Research and development ........................ 41,809 200,996 384,918 465,832
General and administrative ...................... 290,986 223,291 757,606 685,859
Marketing ....................................... 474,613 352,705 1,764,015 1,091,864
Depreciation and amortization ................... 240,728 302,919 773,680 864,411
Writedown of other assets ....................... -- 145,942 -- 145,942
------------ ------------ ------------ ------------
2,448,725 2,695,980 8,985,465 7,474,365
------------ ------------ ------------ ------------
OPERATING LOSS ..................................... (143,952) (465,645) (794,185) (974,355)
OTHER INCOME (EXPENSE):
Interest expense ................................ (40,728) (35,783) (110,562) (108,187)
Other, net ...................................... 2,407 4,665 15,532 21,999
------------ ------------ ------------ ------------
LOSS BEFORE INCOME TAXES ........................... (182,273) (496,763) (889,215) (1,060,543)
INCOME TAX EXPENSE ................................. -- -- -- --
NET LOSS ........................................... (182,273) (496,763) (889,215) (1,060,543)
PREFERRED STOCK DIVIDEND REQUIREMENTS .............. 14,675 15,813 45,896 47,357
------------ ------------ ------------ ------------
NET LOSS APPLICABLE TO COMMON
STOCKHOLDERS .................................... $ (196,948) $ (512,576) $ (935,111) $ (1,107,900)
============ ============ ============ ============
PRIMARY LOSS PER COMMON SHARE AND
COMMON SHARE EQUIVALENTS ........................ $ (.02) $ (.04) $ (.08) $ (.10)
============ ============ ============ ============
WEIGHTED AVERAGE COMMON SHARES AND
COMMON SHARE EQUIVALENTS ........................ 11,722,583 11,544,280 11,662,841 11,553,202
============ ============ ============ ============
</TABLE>
See Notes to Financial Statements.
-5-
<PAGE>
DOCUCON, INCORPORATED
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months
Ended September 30
-------------------------------
1995 1994
----------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ................................................................................ $ (889,215) $(1,060,543)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities-
Depreciation and amortization ....................................................... 773,680 864,411
Writedown of other assets ........................................................... -- 145,942
Changes in current assets and current liabilities-
(Increase) decrease in receivables and unbilled revenues .......................... (758,350) 652,591
(Increase) decrease in prepaid expenses ........................................... 38,128 69,716
Increase (decrease) in accounts payable and accrued liabilities ................... 489,709 (423,111)
Increase (decrease) in deferred revenues .......................................... 250,345 7,233
---------- -----------
Net cash provided by (used in) operating activities ....................... (95,703) 256,239
---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ................................................................ (462,567) (318,929)
Capitalized software development costs .............................................. (100,557) --
Net cash used in investing activities ..................................... (563,124) (318,929)
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances under line of credit ....................................................... 400,000 --
Principal payments under capital lease obligations .................................. (16,237) (15,259)
Net proceeds from exercise of stock options ......................................... 20,099 --
Principal payments on notes payable ................................................. (10,560) (424,684)
Stock registration costs ............................................................ -- (7,850)
---------- -----------
Net cash provided by (used in) financing activities ....................... 393,302 (447,793)
---------- -----------
NET DECREASE IN CASH AND TEMPORARY CASH INVESTMENTS ........................................ (265,525) (510,483)
---------- -----------
CASH AND TEMPORARY CASH INVESTMENTS, beginning of period ................................ 376,798 633,141
---------- -----------
CASH AND TEMPORARY CASH INVESTMENTS, end of period ...................................... $ 111,273 $ 122,658
========== ===========
</TABLE>
-6-
<PAGE>
DOCUCON, INCORPORATED
STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
Nine Months
Ended September 30
-----------------------------
1995 1994
------------- ------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for-
Interest $ 80,156 $ 108,929
Income taxes - 22,447
------------- ------------
$ 80,156 $ 131,376
============= ============
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Inconnection with an acquisition discussed in Note 6, during the first
quarter of 1994, the Company acquired approximately $1,015,000 in assets,
assumed approximately $1,179,000 in liabilities and recorded approximately
$372,000 in goodwill.
DISCLOSURE OF ACCOUNTING POLICY:
The Company considers funds invested in highly liquid investments having a
maturity of 90 days or less to be temporary cash investments.
See Notes to Financial Statements.
-7-
DOCUCON, INCORPORATED
NOTES TO FINANCIAL STATEMENTS
NOTE 1
The financial statements included herein have been prepared by Docucon,
Incorporated (the Company), without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission. However, all adjustments have been
made which are, in the opinion of the Company, necessary for a fair presentation
of the results of operations for the periods covered. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations, although the Company believes
that the disclosures are adequate to make the information presented not
misleading. It is recommended that these financial statements be read in
conjunction with the financial statements and the notes thereto included in the
Company's Annual Report on Form 10-KSB for the fiscal year ended December 31,
1994.
Since its inception, the Company has incurred losses of approximately $7.9
million which have been funded primarily through a public offering, issuances of
preferred stock, the exercise of warrants and debt financing. Unless results of
operations improve over those experienced thus far in 1995, the Company will be
unable to ensure its continuing operations independent of additional capital
infusions.
The Company has taken actions including the expansion of its customer base,
improvements in operating efficiencies, cost cutting measures and exploring the
potential of forming strategic marketing partnerships with one or more firms
that provide products and services to the legal community. The Company believes
that it is likely that its operating results during the balance of 1995 will
generate sufficient working capital to sustain its operations throughout the
year. See "Liquidity and Capital Resources" included in "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
NOTE 2
Organization and description
of the Company-
Docucon, Incorporated, was incorporated in June 1986 to engage in the business
of providing technical services to its customers for the conversion of paper and
microform documents to computer-accessible media. Paper or microform documents
are scanned by sophisticated computer equipment and stored and indexed on
optical disks or magnetic media.
NOTE 3
Summary of significant accounting policies-
Property and equipment-
Property and equipment are recorded at original cost or the present value of the
capital lease payments for assets under capital lease arrangements. Maintenance
and repairs are charged to expense as incurred and betterments which increase
the value or extend the useful life of the property are capitalized. Gains or
losses on sales or other dispositions of property and equipment are credited or
charged to income.
-8-
DOCUCON, INCORPORATED
NOTES TO FINANCIAL STATEMENTS (Continued)
Depreciation is provided using the straight-line method over the lesser of the
capital lease term or estimated useful lives of the related assets. The
Company's fixed assets are currently depreciated over periods ranging from two
to five years beginning in the month the property is placed in service. The
Company's building is being depreciated over 40 years.
Revenue recognition-
Revenues from conversion service contracts are recognized at the time services
are provided and are based upon the number of documents converted and the
conversion rates established in the contracts.
Revenues from software licensing fees are recognized upon delivery of the
software. Revenues from maintenance and telephone support contracts are
recognized ratably over the term of the contract, typically one year.
Software development costs-
The Company capitalizes software development costs and amortizes those costs
over the estimated useful life of the software. The Company incurred
approximately $417,000 related to the development of software
(WIN.LAW), which was to be used to supplement the Company's litigation support
services. During 1994, the Company wrote off the unamortized cost of WIN.LAW
when it became apparent that the carrying value would not be realized.
Included in software development costs is $250,000 for advanced litigation
support software (Litigator's Notebook(TM)) which was acquired during March
1994. Also included in software development costs is approximately $101,000 of
costs which were incurred during 1995 to develop software which will support and
complement Litigator's Notebook(TM). These costs are being amortized over a
five-year period.
Goodwill-
In connection with the acquisition discussed in Note 6 below, the Company
recognized goodwill of approximately $372,000. This goodwill is being amortized
on a straight-line basis over 20 years.
NOTE 4
Common stock and preferred stock-
Each share of the Company's Preferred Stock ($25,000 stated value) is
convertible into 33,333 shares of Common Stock and earns cash dividends of 11
percent per annum. As of September 30, 1995, cumulative undeclared dividends on
the Preferred Stock approximated $303,000. As these dividends are undeclared,
they have not been recorded as a reduction of the Company's equity. During the
first nine months of 1994 and 1995, one share and two shares of Preferred Stock
were converted into Common Stock, respectively.
Stock options-
During the first quarter of 1995, the Company reduced the exercise price of all
outstanding options granted under the 1988 Stock Option Plan and the 1991
Director Non-Statutory Stock Option Plan to $.5625 per share.
-9-
DOCUCON, INCORPORATED
NOTES TO FINANCIAL STATEMENTS (Continued)
NOTE 5
Long-term debt-
In December 1992, permanent financing for the Company's office building was
obtained from a venture capital company. In connection with such financing, the
Company issued a four-year, 8 percent promissory note in the principal amount of
$1,500,000 secured by the building, paid a loan origination fee of $60,000 and
issued 900,000 warrants to purchase an equivalent number of shares of Common
Stock at an exercise price of $2.00 per share. As the exercise price exceeded
the current market price and the financing terms of the debt were at market, no
value was recorded for the warrants issued. The principal balance matures
December 15, 1996, and interest is due quarterly.
Line of credit-
The Company's bank credit agreement consists of a $400,000 revolving line of
credit which bears interest at prime plus 1.25 percent and matures in November
1995. Borrowings pursuant to the revolving line of credit are subject to a
borrowing base limitation and are secured by the Company's accounts receivable.
The Company pays a commitment fee of .5 percent per annum on the unused portion
of the working capital line of credit. The line of credit is subject to various
financial covenants including working capital and net worth requirements. As of
September 30, 1995, and subsequent to that date, the Company was not in
compliance with certain of the financial covenants. The Company is currently
negotiating with the bank for an extension of the line of credit and a waiver of
the covenant defaults. The Company had borrowed the maximum amount available
under this line as of September 30, 1995.
NOTE 6
J. Feuerstein Systems, Inc.-
In March 1994, the Company acquired substantially all of the assets of J.
Feuerstein Systems, Inc. (JFS), for $200,000 and the assumption of selected
liabilities. JFS provides consulting and support services and software products
to the legal profession. The acquisition resulted in the Company's recording
goodwill of approximately $372,000 and assets and liabilities of approximately
$1,015,000 and $1,179,000, respectively.
-10-
DOCUCON, INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company's operations during the quarter and nine months ended September 30,
1995, resulted in a net loss applicable to common stockholders of $196,948 and
$935,111 compared to a net loss of $512,576 and $1,107,900 for the comparable
periods in 1994. The Company's future success depends on its ability to generate
new business within the framework of its existing business lines.
Revenues remained relatively constant for the three months ended September 30,
1995, and increased by 26 percent, or $1,691,000 for the nine months ended
September 30, 1995, as compared to the same periods in 1994. Revenues earned
under Department of Defense (DOD) contracts increased slightly in the third
quarter of 1995 as compared to the 1994 quarter but were 17 percent lower in the
first nine months of 1995 than in the first nine months of 1994. The Company
began work late in the first quarter of 1995 on new 1995 DOD contract awards.
Revenues earned from non-DOD, commercial and litigation support service
contracts decreased by 46 percent for the quarter ended September 30, 1995, as
compared to the third quarter of 1994 as a result of the Company's decision to
limit production under litigation support service contracts. However, non-DOD
conversion service revenues increased by 33 percent during the 1995 nine-month
period as compared to the 1994 period due to the Company's performance under
additional contracts. Additionally, revenues earned from sales of the Company's
software products, JFS Litigator's Notebook(TM) and the related product lines
contributed to the increase in total revenues.
While production costs decreased 5 percent for the quarter ended September 30,
1995 as compared to the comparable quarter of 1994, they increased 26 percent
for the nine-month comparable period. The decrease in the comparable quarters
was a result of higher margin software sales. Although the increase for the
nine-month period was commensurate with the increase in revenues, higher margin
software sales offset abnormally high production costs in the litigation support
area.
Research and development costs decreased 79 percent and 17 percent for the third
quarter and nine months ended September 30, 1995, compared to the same periods
in 1994 due to the Company working on a software development project in 1995.
Additionally, the Company devoted a portion of its resources normally devoted to
research and development to production during the second and third quarters of
1995. The Company continued to devote resources to the expansion of the
capabilities of its JFS Litigator's Notebook(TM) and related software products,
as well as development and enhancement of its document conversion capabilities.
Marketing expenses increased 35 percent and 62 percent during the third quarter
and first nine months of 1995 as compared to the same periods in 1994. The
Company built national marketing teams in the latter part of 1994 to support new
and aggressive marketing efforts for litigation support services and its line of
software products. As part of the Company's decision to limit production of
litigation support services, related marketing efforts were curtailed and
expenses increased at a lower rate in the third quarter of 1995.
Depreciation and amortization expenses decreased 21 percent and 10 percent for
the third quarter and first nine months of 1995 as compared to the same periods
in 1994. The Company continues to add and replace capital equipment as
necessary, and the decrease in depreciation and amortization charges is due to a
previous large addition of equipment that is now fully depreciated.
-11-
DOCUCON, INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company's operations have been supplemented through
bank borrowings, capital contributions, borrowings from affiliated and
unaffiliated lenders, capital lease agreements, an initial public offering of
the Company's Common Stock in 1989, the conversion of warrants into Common Stock
and Preferred Stock placements.
The Company was awarded a $12.3 million contract by the DOD in 1991 which was
subsequently increased by $1.5 million. Although the Company was not the
successful bidder on a new 1994 contract similar to the 1991 contract, the 1994
contract ultimately was terminated at the convenience of the government. The
Company received various awards totaling $3 million through the third quarter of
1995 as extensions to the 1991 contract. Early in the fourth quarter of 1995,
the Company received an additional $2 million award from the DOD. The Company is
optimistic that it will receive additional awards for conversion services from
the DOD in the future.
The Company continues to perform conversion services under various contracts and
service orders with commercial corporations, corporate legal departments and law
firms. A major contract for litigation support services has been terminated
which has resulted in a substantial reduction to the size of the Company's
litigation support service backlog.
With the addition of J. Feuerstein Systems, Inc. (JFS), in 1994, the Company has
made a significant investment in the marketing and development areas of its
litigation support products and services. To date, these investments have
resulted in substantially increased revenues in both the services and product
areas but has not yet resulted in profitability. Disappointing margins in the
litigation support area have resulted in the Company's decision to limit its
efforts in this area to users of its software product. During the latter part of
the second quarter, the Company consolidated its litigation support marketing
efforts with the software product marketing efforts, which has resulted in
reduced selling expenses.
The Company has an 8 percent promissory note due December 1996 in the principal
amount of $1,500,000. This note is secured by the Company's office building. In
connection with the purchase of the Company's office building in 1992, the
Company issued 900,000 warrants to purchase an equivalent number of shares of
Common Stock at an exercise price of $2.00 per share. The Company now occupies
approximately 80 percent of the building; the remaining space is currently
leased to outside tenants. The Company believes that the building will fulfill
its needs for the foreseeable future.
Accounts receivable and unbilled revenues increased by approximately $761,000
from December 31, 1994, to September 30, 1995. Subsequent to September 30, a
significant portion of the unbilled revenues has been billed, and the Company
expects to receive payment in the near future. Accounts payable and accrued
expenses increased by approximately $490,000 from December 31, 1994, to
September 30, 1995. This increase is a result of increased sales volume and the
coordination of payments with the collection of accounts receivable.
-12-
DOCUCON, INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
The Company expects to fund its operations and marketing activities through
utilization of cash on hand and cash generated from operations. While the
Company is in technical default of the line-of-credit covenants, it has borrowed
$400,000 to fund short-term cash needs and is currently negotiating with the
bank to extend the line of credit beyond the current maturity date of November
1995. These funds are expected to be adequate for the Company's needs for at
least the next 12 months. The Company has not entered into any agreements with
respect to future acquisitions. Should the Company enter into any such
agreements, the Company would, in all likelihood, be required to raise outside
capital to consummate such transactions.
-13-
PART II - OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes in Securities - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Shareholders was held on May 16, 1995.
(b) The following directors were elected to serve until the next
Annual Meeting of Shareholders, and until their successors are
elected and qualified:
Ralph Brown Edward P. Gistaro
Allan H. Hobgood Al Ireton
Philip Romano Chauncey Schmidt
(c) None.
(d) None.
Item 5. Other Matters - None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 11 - Computation of Earnings Per Share
(b) Reports on Form 8-K - None
-14-
PART II - OTHER INFORMATION (Continued)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DOCUCON, INCORPORATED
(Registrant)
By ___________________________
Edward P. Gistaro,
Chief Executive Officer and
Principal Financial Officer
By ___________________________
Lori Turner,
Controller and Treasurer
Dated:
-15-
EXHIBIT 11
DOCUCON, INCORPORATED
COMPUTATION OF EARNINGS PER SHARE
(Unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30 Ended September 30
---------------------------- -----------------------------
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
COMPUTATION OF PRIMARY EARNINGS PER SHARE:
Net loss .................................................. $ (182,273) $ (496,763) $ (889,215) $ (1,060,543)
Less- Preferred stock dividend requirements ................... (14,675) (15,813) (45,896) (47,357)
------------ ------------ ------------ ------------
Net loss applicable to common stockholders
used for computation ............................. $ (196,948) $ (512,576) $ (935,111) $ (1,107,900)
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK
OUTSTANDING ..................................................... 11,722,583 11,544,280 11,662,841 11,542,082
WEIGHTED AVERAGE INCREMENTAL SHARES OUTSTANDING UPON
ASSUMED CONVERSION OF OPTIONS AND WARRANTS ...................... -- -- -- --
------------ ------------ ------------ ------------
WEIGHTED AVERAGE COMMON SHARES AND COMMON SHARE
EQUIVALENTS USED FOR COMPUTATION ................................ 11,722,583 11,544,280 11,662,841 11,542,082
============ ============ ============ ============
PRIMARY EARNINGS PER COMMON SHARE AND COMMON SHARE
EQUIVALENT ...................................................... $ (.02) $ (.04) $ (.08) $ (.10)
============ ============ ============ ============
COMPUTATION OF FULLY DILUTED EARNINGS PER SHARE:
Net loss .................................................. $ (182,273) $ (496,763) $ (889,215) $ (1,060,543)
Preferred stock dividend requirements ..................... (14,675) (15,813) (45,896) (47,357)
Decrease in net loss applicable to common stock for-
Preferred stock dividends not incurred upon assumed
conversion of preferred stock ........................ -- -- -- --
------------ ------------ ------------ ------------
Net loss applicable to common stockholders
used for computation ............................. $ (196,948) $ (512,576) $ (935,111) $ (1,107,900)
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK
OUTSTANDING ..................................................... 11,722,583 11,544,280 11,662,841 11,542,082
WEIGHTED AVERAGE INCREMENTAL SHARES OUTSTANDING UPON
ASSUMED CONVERSION OF OPTIONS AND WARRANTS ...................... -- -- -- --
WEIGHTED AVERAGE INCREMENTAL SHARES OUTSTANDING UPON
ASSUMED CONVERSION OF THE PREFERRED STOCK ....................... -- -- -- --
------------ ------------ ------------ ------------
WEIGHTED AVERAGE SHARES USED FOR COMPUTATION ....................... 11,722,583 11,544,280 11,662,841 11,542,082
============ ============ ============ ============
EARNINGS PER COMMON SHARE AND COMMON SHARE
EQUIVALENT ASSUMING FULL DILUTION ............................... $(.02) (a) $(.04) (a) $(.08) (a) $(.10) (a)
============ ============ ============ ============
</TABLE>
(a) This calculation is submitted in accordance with Item
601(b)(11) of Regulation S-K although it is not required by
APB Opinion No. 15 because it results in dilution of less than
3 percent.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM [Identify from last specific financial statements] AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 111,273
<SECURITIES> 0
<RECEIVABLES> 1,370,967
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0
21
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</TABLE>
