SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15 (d)
of the Securities and Exchange Act of 1934
For the Quarter Ended February 28 , 1997
Commission File Number 01-19001
MILLER DIVERSIFIED CORPORATION
---------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Nevada 84-1070932
------------------------ ---------------------
(State or other jurisdic- (I.R.S. Employer Iden-
tion of incorporation or tification Number)
organization)
Mailing Address:
P. O. Box 937
La Salle, Colorado 80645
23360 Weld County Road 35
La Salle, Colorado 80645
-------------------------------------
(Address of Principal Executive Office)
(970) 284-5556
--------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
----- -----
Number of shares of Common Stock, par value $.0001, outstanding on February 28,
1997, 6,364,640.
Transitional Small Business Disclosure Format: YES NO X
----- -----
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
MILLER DIVERSIFIED CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
- -------------------------------------------------------------------------------
February 28, August 31,
1997 1996
- -------------------------------------------------------------------------------
ASSETS
Current Assets:
Cash $ 635,511 $ 86,551
Trade accounts receivable 839,932 735,809
Trade accounts receivable - related parties 33,774 116,692
Account receivable - related party 373,259 81,102
Income tax refunds receivable 2,714 --
Inventories 361,597 283,279
Prepaid expenses 38,335 21,725
Deposits on feeder cattle -- 14,520
- -------------------------------------------------------------------------------
Total Current Assets 2,285,122 1,339,678
- -------------------------------------------------------------------------------
Property and Equipment:
Land held for sale 700,000 700,000
Feedlot facilities under capital lease
- related party 1,497,840 1,497,840
Equipment 82,251 81,007
Equipment under capital leases - related party 149,453 149,453
Leasehold improvements 82,260 72,173
--------- ---------
2,511,804 2,500,473
Less: Accumulated depreciation and amortization 560,016 506,964
- -------------------------------------------------------------------------------
Total Property and Equipment 1,951,788 1,993,509
- -------------------------------------------------------------------------------
Other Assets:
Note receivable - related party 250,000 250,000
Water shares held for sale 120,000 120,000
Deferred income taxes 124,018 124,018
Deposits and other 1,500 1,500
- -------------------------------------------------------------------------------
Total Other Assets 495,518 495,518
- -------------------------------------------------------------------------------
TOTAL ASSETS $ 4,732,428 $ 3,828,705
- -------------------------------------------------------------------------------
Continued on next page.
<PAGE>
MILLER DIVERSIFIED CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS - Continued
------------------------------------------------------------------------------
February 28, August 31,
1997 1996
------------------------------------------------------------------------------
LIABILITIES
Current Liabilities:
Bank overdraft $ 71,168 $ 16,710
Notes payable -- 160,000
Trade accounts payable 644,190 534,839
Accrued expenses 21,199 21,989
Accrued income taxes payable -- 86,579
Customer advance feed contracts 1,114,439 14,907
Customer advance feed contracts - related parties 73,035 175,263
Current portion of capital lease
obligations-related party 35,025 47,880
- -------------------------------------------------------------------------------
Total Current Liabilities 1,959,056 1,058,167
- -------------------------------------------------------------------------------
Capital Lease Obligations - related party 1,031,833 1,044,551
- -------------------------------------------------------------------------------
Total Liabilities 2,990,889 2,102,718
- -------------------------------------------------------------------------------
Commitments
STOCKHOLDERS' EQUITY
Preferred Stock -- --
Common Stock, par value $.0001 per share; 25,000,000
shares authorized; 6,364,640 issued and outstanding 636 636
Additional Paid-In Capital 1,351,693 1,351,693
Retained Earnings 389,210 373,658
- -------------------------------------------------------------------------------
Total Stockholders' Equity 1,741,539 1,725,987
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,732,428 $ 3,828,705
================================================================================
See Accompanying Note to Unaudited Consolidated Financial Statements.
<PAGE>
MILLER DIVERSIFIED CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF EARNINGS
- -------------------------------------------------------------------------------
Six Months Ended February 28, February 29,
1997 1996
- -------------------------------------------------------------------------------
Revenues:
Feed and other sales $ 4,704,409 $ 4,529,412
Feedlot services 1,117,356 773,150
Other 46,418 196,847
Interest 13,781 21,573
Interest on note receivable related party 7,500 7,500
- -------------------------------------------------------------------------------
Total Revenues 5,889,464 5,528,482
- -------------------------------------------------------------------------------
Costs and Expenses
Cost of feed and other sales 4,376,730 4,094,941
Cost of feedlot services 1,027,866 632,092
Selling, general and administrative 395,435 623,002
Interest 10,998 26,946
Interest on capital leases - related party 59,175 63,658
- -------------------------------------------------------------------------------
Total Costs and Expenses 5,870,204 5,440,639
- -------------------------------------------------------------------------------
Earnings before Income Taxes 19,260 87,843
Income Taxes 3,708 26,923
- -------------------------------------------------------------------------------
NET EARNINGS $ 15,552 $ 60,920
- -------------------------------------------------------------------------------
EARNINGS PER COMMON SHARE AND
COMMON EQUILAVENT SHARE $ Nil $ .01
- -------------------------------------------------------------------------------
Weighted Average Number of Common and
Common Equilavent Shares Outstanding 6,793,702 5,764,640
- -------------------------------------------------------------------------------
See Accompanying Note to Unaudited Consolidated Financial Statements.
<PAGE>
MILLER DIVERSIFIED CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF EARNINGS
- -------------------------------------------------------------------------------
Three Months Ended February 28, February 29,
1997 1996
- -------------------------------------------------------------------------------
Revenues:
Feed and other sales $ 2,106,218 $ 2,192,364
Feedlot services 666,262 439,524
Other 21,265 93,505
Interest 9,964 4,194
Interest on note receivable related party 3,750 3,750
- -------------------------------------------------------------------------------
Total Revenues 2,807,459 2,733,337
- -------------------------------------------------------------------------------
Costs and Expenses
Cost of feed and other sales 1,964,480 1,983,341
Cost of feedlot services 636,248 377,535
Selling, general and administrative 202,496 343,627
Interest 2,582 9,077
Interest on capital leases - related party 29,565 31,350
- -------------------------------------------------------------------------------
Total Costs and Expenses 2,835,371 2,744,930
- -------------------------------------------------------------------------------
Loss Before Income Taxes (27,912) (11,593)
Income Tax Benefits (11,940) ( 8,527)
- -------------------------------------------------------------------------------
NET LOSS $ (15,972)$ (3,066)
- -------------------------------------------------------------------------------
EARNINGS PER COMMON SHARE AND
COMMON EQUILAVENT SHARE $ Nil $ Nil
- -------------------------------------------------------------------------------
Weighted Average Number of Common and
Common Equilavent Shares Outstanding 6,793,702 5,764,640
- -------------------------------------------------------------------------------
See Accompanying Note to Unaudited Consolidated Financial Statements.
<PAGE>
MILLER DIVERSIFIED CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
Six Months Ended February 28, February 29,
1997 1996
- -------------------------------------------------------------------------------
Cash Flows from Operating Activities:
Cash received from customers $ 7,116,576 $ 6,269,501
Cash paid to suppliers and employees (5,976,370) (5,343,948)
Interest received 21,281 29,073
Interest paid (71,806) (94,945)
Taxes paid (93,000) (20,806)
- --------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 996,681 838,875
- --------------------------------------------------------------------------------
Cash Flows From Investing Activities:
Acquisition of property and equipment (11,331) (13,796)
Collections on loan to related party -- 107,455
- --------------------------------------------------------------------------------
Net Cash Provided (Used) by Investing Activities (11,331) 93,659
- --------------------------------------------------------------------------------
Cash Flows From Financing Activities:
Proceeds from notes payable 1,138,000 1,270,000
Principal payments on:
Short-term notes payable (1,298,000) (1,946,000)
Capital lease obligations - related party (25,573) (52,650)
Net increase (decrease) in short-term cattle financing (305,275) 98,001
Increase in cash overdraft 54,458 --
- --------------------------------------------------------------------------------
Net Cash Used by Financing Activities (436,390) (630,649)
- --------------------------------------------------------------------------------
Net Increase in Cash 548,960 301,885
Cash, Beginning of Period 86,551 72,272
- --------------------------------------------------------------------------------
Cash, End of Period $ 635,511 $ 374,157
- -------------------------------------------------------------------------------
Continued on next page.
<PAGE>
MILLER DIVERSIFIED CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
- --------------------------------------------------------------------------------
Six Months Ended February 28, February 29,
1997 1996
- -------------------------------------------------------------------------------
RECONCILIATION OF NET EARNINGS TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
Net earnings $ 15,552 $ 60,920
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization expense 53,052 84,270
Recognition of deferred gain -- (9,309)
Changes in assets and liabilities net of short-term cattle financing:
(Increase) decrease in:
Trade accounts receivable 168,173 393,315
Trade accounts receivable - related party 82,918 37,013
Accounts receivable - related party -- (62,413)
Income taxes receivable (2,714) 11,082
Inventories (85,510) (155,195)
Prepaid expense (16,610) (29,141)
Deposits and other -- (100)
Increase (decrease) in:
Trade accounts payable and accrued expenses 163,254 164,326
Income taxes payable (86,579) (4,965)
Customer advance feed contracts 1,099,531 313,467
Customer advance feed contracts-related parties (102,228) 35,605
- -------------------------------------------------------------------------------
Net Cash Provided by Operating Activities $ 966,681 $ 838,875
- -------------------------------------------------------------------------------
See Accompaning Note to Unaudited Consolidated Financial Statements.
<PAGE>
MILLER DIVERSIFIED CORPORATION AND SUBSIDIARY
NOTE TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The consolidated balance sheets as of February 28, 1997 and August 31, 1996, the
consolidated statements of earnings for the three months and six months ended
February 28, 1997 and February 29, 1996 and consolidated statements of cash
flows for the six months ended February 28, 1997 and February 29, 1996 have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted as
allowed by the rules and regulations of the Securities and Exchange Commission.
In preparation of the above-described financial statements, all adjustments of a
normal and recurring nature have been made in addition to the transactions
described in the preceding paragraphs. The Company believes that the
accompanying unaudited financial statements contain all adjustments necessary to
present fairly the results of operations and cash flows for the periods
presented. Further, management believes that the disclosures are adequate to
make the information presented not misleading. It is suggested that these
financial statements be read in conjunction with the annual financial statements
and the notes thereto. The operations for the six months and three months
periods ended February 28, 1997 are not necessarily indicative of the results to
be expected for the year.
<PAGE>
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
A summary of the net earnings (loss) by quarter for the first six months of
the fiscal year ended February 28, 1997, compared to the same periods the year
before is as follows:
----------------------------------------------------------------
February 28, February 29, Decrease
Six Months Ended 1997 1996
----------------------------------------------------------------
First Quarter $ 31,524 $ 63,986 $(32,462)
Second Quarter (15,972) (3,066) (12,906)
----------------------------------------------------------------
$ 15,552 $ 60,920 $(45,368)
The most significant factor that affects operating results is the average
head numbers of cattle per day ("average head days") in the Company's feedlot
because feed is sold and feedlot services are rendered to the cattle owners.
Sales of feed and feedlot services account for 95% or more of the Company's
revenues. The average head days for the periods being compared were as follows:
----------------------------------------------------------------
February 28, February 29, Increase
Six Months Ended 1997 1996
----------------------------------------------------------------
First quarter 16,377 15,782 595
Second quarter 15,616 15,038 578
Six months combined 15,821 15,241 580
The 580, or 3.7%, increase in average head days, impacts several areas, as
described below.
Another factor that affected earnings for the six months ended February 28,
1997 and February 29, 1996, and that did or will impact average head numbers and
earnings later in the fiscal year, is the Company's "fall calf program". As a
service to customers, the Company purchases for them calves weaned in the fall
and places them with local farmer-feeders who feed and care for the calves until
the following February through April when the cattle are transferred to the
Company's feedlot. These fall calf programs are undertaken on essentially a
breakeven basis; that is, the amounts paid to the farmer-feeders are about the
same as the amounts charged to the customers. The Company offers this service to
improve placements in February through April when cattle placements are usually
low. The revenues are recorded as sales of feedlot services and the costs as the
cost of feedlot services. Therefore, a high volume in the fall calf program can
reduce the gross profit percentage on sales of feedlot services. For the quarter
ended February 28, 1997, the Company had 4,146 head in its fall calf program as
compared to 1,310 head the previous year. This resulted in an increase in the
sales and costs of the fall calf program for the six months ended February 28,
1997 over the same period the previous year of about $329,000 and caused a small
decrease in the gross profit percentage from sales of feedlot services as noted
below.
<PAGE>
Other key factors that affect earnings are the gross profit percentages on
feed and other sales, and on feedlot services. The following is a brief summary
of gross profit and gross profit percentages on feed and other sales:
----------------------------------------------------------------------
February 28, February 29, Increase
Six Months Ended 1997 1996 (Decrease)
----------------------------------------------------------------------
Feed and other sales $4,704,409 $4,529,412 $ 174,997
Cost of feed and
other sales 4,376,730 4,094,941 281,789
----------------------------------------------------------------------
Gross profit $ 327,679 $ 434,471 $ (106,792)
Gross profit percentage 7.0% 9.6% (2.6%)
A variety of feed ingredients are combined in varying percentages and sold
as various rations. The ingredients are separately marked up so the gross profit
percentage on feed sales is affected by three variables:
(1) the type and quantity of individual rations sold (2) management's
discretionary pricing decisions (3) feed ingredients sold under customer
advance feed contracts which are not subject to management's discretionary
pricing decisions
The $106,792 decrease in gross profit from feed and other sales for the
period ended February 28, 1997 from the same period the previous year is a
result of changes in two variables described above. For the period ended
February 28, 1997, more rations were sold which contained more ingredients that
do not contribute as many dollars to the gross profit due to their lower cost
and markup. Also, the price of corn, the main ingredient in the majority of the
rations sold, had reached near record highs during the fourth quarter of the
previous year and first quarter of the current year. In an effort to maintain a
competitive edge in the industry by keeping feeding costs down, as well as build
goodwill with its customers, management lowered the markup on corn for the six
months ended February 28,1997 from the same period the previous year. Management
is not anticipating the continuance of this lower markup policy into the balance
of the fiscal year. Management has implemented procedures by which certain
feedlot services are expected to generate additional revenues.
<PAGE>
The following is a brief summary of the gross profit and gross profit
percentages on sales of feedlot services:
----------------------------------------------------------------------
February 28, February 29, Increase
Six Months Ended 1997 1996 (Decrease)
----------------------------------------------------------------------
Sales of feedlot services $1,117,356 $ 773,150 $ 344,206
Cost of feedlot services 1,027,866 632,092 395,774
Gross profit $ 89,490 $ 141,058 $ (51,568)
Gross profit percentage 8.0% 18.2% (10.2%)
Sales of feedlot services consist primarily of yardage (pen rent) charged
to the owners of the cattle on feed and grain processing charged for the
processing of certain feed ingredients before they can be fed to the cattle.
Yardage charges for the quarter ended February 28, 1997 increased $49,470 or
15.38% from the same period the prior year due to the increased head numbers and
procedural changes as described previously. Grain processing charges, however,
decreased $34,382 or 13.2% for the period ended February 28, 1997 due to the mix
of ingredients as described above.
As previously noted, the sales and cost of sales for the fall calf program
are also included in the sales and cost of sales of feedlot services. If the
fall calf program sales and costs are excluded, the gross profit percentage for
the period ended February 28, 1997 is 16.3% compared to 26.4% for the same
period the previous year.
The cost of feedlot services consists largely of feedlot operating
expenses. The total cost of feedlot services increased $395,774 for the period
ended February 28, 1997 compared to the same period the prior year. If the fall
calf program costs are excluded, the increase for the period ended February 28,
1997 compared to the same period the prior year is $66,226. As a result of the
increase in average head days and a change in the types of ingredients used in
the rations, labor costs increased about $52,500 and equipment fuel and repair
costs increased approximately $11,600. The balance of the change is due to
increases and decreases in various expenses. Management does not anticipate any
additional increases in labor, although labor costs are expected to remain at or
slightly below current levels.
Other revenues decreased $150,429. This decrease is primarily the result of
sale of two of the Company's commodity brokerage subsidiaries, LaSalle
Commodities and Cattle Services Co. and Miller Trading Co., in May 1996. For the
period ended February 29, 1996, these discontinued operations had generated
approximately $140,000 in revenues. Due to corresponding reductions in
management, sales and adminstrative cost, as described below, management does
not expect loss of revenue from the discontinued operations to have a negative
affect on the Company's earnings. The balance of the increase is the result of
increases and decreases in various accounts.
Interest income decreased $7,792 or 36.1% for the period ended February 28,
1997 over the same period the prior year due to the Company's "carrying" or
financing fewer customer feeding charges. This reduction in revenues is
accompanied by a reduction in interest expense, as discussed below, and
therefore does not have a negative affect on the Company's earnings.
<PAGE>
Selling, general, and administrative expenses decreased $227,567 for the
period ended February 28, 1997 over the same period the prior year. Payroll
expenses, related to the decrease in the revenues from discontinued operations
as described above, decreased $88,100, while telephone and advertising expenses,
the two most significant expenses of the discontinued operations, decreased
$34,300. For the quarter ended February 28, 1997, the Company incurred $8,300 in
customer death loss adjustments, compared to $32,900 for the same period the
previous year, a decrease of $26,300. These adjustments, although not required,
are made to customers for the purpose of creating goodwill and/or when
management feels that death losses incurred by a customer are extraordinary in
nature. Legal and accounting fees decreased $32,300 for the period ended
February 28, 1997 over the same period the prior year. During the period ended
February 29, 1996 the Company was involved in litigation with the past president
of Genetic Engineering, Inc. which had merged with the Company, concerning debts
allegedly owed him. A settlement was reached in April 1996. The balance of the
increase in selling, general, and administrative expenses are various increases
and decreases in several accounts.
Interest expense decreased $15,948 for the period ended February 28, 1997
over the same period the prior year. This is the result of reduced borrowings.
The need to borrow funds was reduced by a decrease in the amount of customer's
feed charges that the Company financed, as described previously, and the
increase in funds received from customer advance feed contracts, as described
below.
Income taxes are directly related to the net earnings before income taxes
and certain assumptions that are made with the estimations. For the period ended
February 28, 1997, income taxes decreased $23,215 from the same period the prior
year while pretax income decreased $68,583.
Liquidity and Capital Resources
For the six months ended February 28, 1997, the internally-generated funds
from operating activities were $996,681 compared to $838,875 for the same period
the previous year, an increase of $157,806. Although cash received from
customers for the period increased $847,075, cash paid to suppliers and
employees increased only $632,422, for a total cash increase of $214,653.
Interest received for the period decreased $7,792, while interest paid decreased
$23,139, for a total cash increase of $15,347. For the period ended February 28,
1997, net income tax payments totalled $93,000 compared to $20,806 for the same
period the previous year, a net cash decrease of $72,194.
For the six months ended February 28, 1997 the net cash that was used by
investing operations of $11,331 compared to the net cash provided by investing
operations the same period the previous year of $93,659, resulting a net cash
decrease of $104,990. For the period ended February 28, 1997, acquisition of
property and equipment decreased $2,6465 while collections on a loan from a
related party decreased $107,455.
<PAGE>
The net cash used by financing activities was $436,390 for the six months
ended February 28, 1997, a decrease of $194,259 from the usage of $630,649 for
the same period the prior year. The change in net borrowings over repayments of
notes and other obligations resulted in a $516,000 decrease in funds used for
the six months ended February 28, 1997 compared to the same period the previous
year. Net short-term cattle financing for the six months ended February 28, 1997
used $305,275 compared to the provision of funds the same period the prior year
of $98,001, a decrease in funds provided of $403,276. The increase in the cash
overdraft, provided an additional $54,458 for the six months ended February 28,
1997.
The Company's working capital (current assets minus current liabilities)
increased by $44,555 during the six months ended February 28, 1997 from $281,511
at August 31, 1996 to $326,066 at February 28, 1997. There were offsetting
increases and decreases to several current assets and current liabilities as
shown on the consolidated balance sheets.
Trade accounts receivable increased by $104,123 for the six months ended
February 28, 1997. Feed accounts receivable decreased $211,800 due to the
collection of financed amounts from customers; feeder cattle accounts receivable
increased $272,300 due to sales that were made on February 28, 1997. The
reduction in trade accounts receivable from related parties is due to the
decrease in sales to related parties.
Inventories increased $78,318 due to an increase in the level of feed
ingredient inventories on hand. The amount of feed ingredient inventories on
hand at any given time will fluctuate depending on such variables as anticipated
weather conditions, consumption levels, delivery schedules, and the number of
various ingredients being fed. These fluctuations are the result of normal
operations.
Deposits on feeder cattle decreased $14,520 due to the fact that the cattle
for which the deposits had been made have been delivered to the feedlot, and the
deposits made for them has been applied against the purchase price.
For the six months ended February 28, 1997 the bank overdraft increased
$54,458.
<PAGE>
Notes payable were reduced by $160,000 for the six months ended February
28,1997 mainly because of the increase in customer advance feed contracts of
$1,099,532. Customers make advance purchases of feed ingredients primarily in
December both for tax purposes and to stabilize their feeding costs. These
advance payments provide additional cash which lessens the amount of borrowed
funds required. The increase in trade accounts payable is due to normal business
transactions.
The Company has a revolving line of credit of $200,000 from a local bank
that matures December 31, 1997 and bears interest at 1.5% over the prime rate
(actual rate of 9.75% at February 28, 1997). There was no outstanding balance at
February 28, 1997 which meant that the Company could generate an additional
$200,000 cash if needed under this line of credit. The note is secured by feed
accounts receivable, feed inventories, and equipment. Miller Feeders, Inc. (MFI)
has a $300,000 revolving line of credit at the same local bank for the
procurement of feeder cattle for resale tocustomers. The line of credit matures
on December 31, 1997 and bears interest at 1.5% over the prime rate (actual rate
of 9.75% at February 28, 1997). There was no outstanding balance at February 28,
1997 which meant that MFI could borrow up to $300,000 to purchase feeder cattle
for resale to customers. The line is secured by feeder cattle inventories and
feeder cattle accounts receivable.
The Company had no material commitments for capital expenditures at
February 28, 1997.
The Company has signed a contract for the sale of the land held for sale
for $700,000. Closing on this contract is expected to be in May 1997.
Management believes it has adequate financial resources to conduct
operations at present and reasonably anticipated levels.
<PAGE>
PART II OTHER INFORMATION
Items 1 through 6 None.
<PAGE>
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.
MILLER DIVERSIFIED CORPORATION
(Registrant)
Date: April 10, 1997 /s/JAMES E MILLER
----------------------------------
James E. Miller
President,
Chief Executive Officer,
Chief Financial Officer
Date: April 10, 1997 /s/STEPHEN R. STORY
----------------------------------
Stephen R. Story
Secretary-Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Form 10-QSB for the 6 months ended February 28, 1997
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> FEB-28-1997
<CASH> 635,511
<SECURITIES> 0
<RECEIVABLES> 1,246,965
<ALLOWANCES> 0
<INVENTORY> 361,597
<CURRENT-ASSETS> 2,285,122
<PP&E> 2,511,804
<DEPRECIATION> 560,015
<TOTAL-ASSETS> 4,732,428
<CURRENT-LIABILITIES> 1,959,055
<BONDS> 0
0
0
<COMMON> 636
<OTHER-SE> 1,740,903
<TOTAL-LIABILITY-AND-EQUITY> 4,732,428
<SALES> 4,704,409
<TOTAL-REVENUES> 5,889,464
<CGS> 4,376,730
<TOTAL-COSTS> 1,027,866
<OTHER-EXPENSES> 395,435
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 70,173
<INCOME-PRETAX> 19,260
<INCOME-TAX> 3,708
<INCOME-CONTINUING> 15,552
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,552
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
