SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM 10-Q
----------
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _______________ TO ____________________
EUROMED, INC.
(Exact name of registrant as specified in its charter)
COMMISSION FILE NUMBER 0-27720
NEVADA 88-0317700
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
WILHELMINAKANAAL NORD 6
NL 4092 VR OOSTERHOUT, THE NETHERLANDS
(Address of principal executive offices) (Zip Code)
011-31-16-242-4424
(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
As of August 14, 1997, there were 2,277,000 shares outstanding of the
registrant's common stock, $0.01 par value.
- --------------------------------------------------------------------------------
<PAGE>
INDEX
PART I. FINANCIAL INFORMATION
PAGE NO.
--------
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED):
Condensed Consolidated Balance Sheets -
December 31, 1996 and June 30, 1997 3
Condensed Consolidated Statements of Operations -
Three months and six months ended June 30, 1996 and 1997 5
Condensed Consolidated Statements of Cash Flows -
Six months ended June 30, 1996 and 1997 6
Notes to Condensed Consolidated Financial Statements 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 9
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 13
<PAGE>
EUROMED, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands of US dollars)
December 31, June 30,
1996 1997
------------ -----------
(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents $ 411 $ 275
Trade accounts receivable 1,155 1,564
Loan receivable 548 283
Due from affiliated companies and
other related parties 695 520
Inventory 4,526 3,609
Other receivables and prepaid expenses 349 110
Net assets of discontinued operations 2,802 3,104
-------- --------
TOTAL CURRENT ASSETS 10,486 9,465
-------- --------
Vehicles, Furniture and Equipment, at cost 815 910
Less: Accumulated depreciation and
amortization (406) (478)
-------- --------
NET VEHICLES, FURNITURE AND
EQUIPMENT 409 432
-------- --------
Other Assets
Intangible assets less accumulated
amortization of $256,000 and $307,000
in 1996 and 1997, respectively 607 586
Other 172 51
-------- --------
TOTAL OTHER ASSETS 779 637
-------- --------
TOTAL ASSETS $ 11,674 $ 10,534
======== ========
See accompanying notes to consolidated financial statements.
3
<PAGE>
EUROMED, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands of US dollars)
December 31, June 30,
1996 1997
----------- ----------
(Unaudited)
LIABILITIES
Current liabilities
Loan payable $ 311 $ 356
Bank overdraft 3,540 3,632
Trade accounts payable 3,076 2,436
Due to affiliated companies, controlling
interests and other related parties 69 --
Taxes payable and other accrued expenses 1,061 1,464
-------- --------
TOTAL CURRENT LIABILITIES 8,057 7,888
Long-term debts
Unsecured loan from B.V. Wisteria -- --
Unsecured loan from Hybrida B.V -- --
Unsecured loan from Pantapharma B.V 90 --
Other long-term debt -- --
--------- --------
TOTAL LIABILITIES 8,147 7,888
--------- --------
Stockholders' Equity
Preferred Stock, par value $.01 per share;
5,000,000 shares authorized; no shares
issued and outstanding -- --
Common Stock, par value $.01 per share;
20,000,000 shares authorized; 4,000,000 and
2,300,000 shares issued and outstanding,
respectively 40 23
Additional paid-in capital 6,276 6,293
Retained earnings (deficit) (2,624) (3,510)
Cumulative currency translation adjustment (33) (28)
--------- --------
3,659 2,778
Less: 23,000 Treasury Shares, at cost (132) (132)
--------- --------
TOTAL STOCKHOLDERS' EQUITY 3,527 2,646
--------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 11,674 $ 10,534
========= ========
See accompanying notes to consolidated financial statements.
4
<PAGE>
EUROMED, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands of US dollars, except per share data)
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended Six months ended
--------------------- -------------------
June 30, June 30, June 30, June 30,
1996 1997 1996 1997
--------- --------- ------- ----------
<S> <C> <C> <C> <C>
Sales $ 8,508 $ 7,012 $17,876 $ 14,144
Cost of goods sold 7,636 6,404 16,185 13,267
--------- --------- ------- ----------
Gross profit 872 608 1,691 877
Selling, general and
administrative expenses 600 1,016 1,091 1,687
--------- --------- ------- ----------
Operating Profit (Loss) 272 (408) 600 (810)
Interest income 78 - 103 29
Interest (expense) (80) (135) (151) (209)
--------- --------- ------- ----------
Income (loss) before income
taxes 270 (543) 552 (990)
Income tax (expense) benefit (83) (11) (189) 104
--------- --------- ------- ----------
Net income (loss) $ 187 $ (554) $ 363 $ (886)
========= ========= ======= ==========
Earnings (loss) per share $ .06 $ (.24) $ .14 $ (.39)
========= ========= ======= ==========
Weighted Average Number of
Common Shares Outstanding 3,150,000 2,300,000 2,650,824 2,300,000
========= ========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
EUROMED, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of US dollars)
(UNAUDITED)
Six months ended
--------------------
June 30, June 30,
1996 1997
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 363 $ (886)
Adjustments to reconcile
cash flows from operations:
Amortization of intangible assets 43 51
Depreciation expense 65 72
Changes in operating assets and liabilities:
Trade accounts receivable 530 (409)
Due from affiliated companies and other
related parties 126 175
Inventory (747) 917
Other receivables and prepaid expenses (164) 360
Trade accounts payable 1,168 (640)
Due to affiliated companies, controlling
interests and other related parties (1) (69)
Taxes payable and other accrued expenses 137 403
------- -------
Net cash provided by (used in) operating activities 1,520 (26)
------- -------
See accompanying notes to consolidated financial statements.
(Continued)
\ 6
<PAGE>
EUROMED, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of US dollars)
(UNAUDITED)
Continued
Six months ended
--------------------
June 30, June 30,
1996 1997
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of intangible assets $ (108) $ (30)
Borrowings by and repayments
from customers (433) 265
Purchase of vehicles, furniture
and equipment, at cost (142) (95)
Net assets of discontinued operations -- (302)
------- -------
Net cash used in investing activities (683) (162)
------- -------
CASH FLOW FROM FINANCING ACTIVITIES:
Common stock issued 12 --
Borrowing under bank overdraft facility (2,483) 137
Add paid in capital 5,862 --
Change in long-term debt (879) (90)
------- -------
Net cash provided by financing activities 2,512 47
------- -------
Effect of currency translation adjustment on cash 13 5
------- -------
Net increase (decrease) in cash and cash equivalents 3,362 (136)
Cash and cash equivalents
at the beginning of the six month period 64 411
------- -------
Cash and cash equivalents
at the end of the six month period $ 3,426 $ 275
======= =======
Cash paid during the six month period:
Interest $ 91 $ --
Income taxes $ -- $ --
See accompanying notes to consolidated financial statements.
7
<PAGE>
EUROMED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
a. Interim Financial Statements
The consolidated financial information for the interim periods presented
herein has not been audited by independent accountants, but in the opinion of
management, all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the condensed consolidated balance sheets
and the condensed consolidated statements of earnings and cash flows at the
dates and for the periods indicated have been made. Results of operations for
interim periods are not necessarily indicative of results of operations for the
respective full years.
b. Description of business
EuroMed's operating companies, Galenica, B.V. ("Galenica") and Confedera,
B.V. ("Confedera") (the "Companies"), both based in Oosterhout, The Netherlands,
have a primary business of the wholesale distribution of medicines. The
Companies' customers are primarily located in The Netherlands. The Companies'
products are readily available and the Companies are not dependent on a single
supplier or a few suppliers.
c. Earnings Per Share
Earnings per share are computed on the weighted average number of shares
and dilutive equivalent shares of common stock outstanding during the
three-month and six month periods ended June 30, 1997, using the treasury stock
method.
8
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
GENERAL
EuroMed, Inc. ("EuroMed" or the "Company") is an American pharmaceutical
company involved in the import and wholesale distribution of branded and generic
medicines within The Netherlands, and in the export of generic medicines
throughout the world. EuroMed's business is influenced in general by various
economic, market and political trends in The Netherlands and Europe.
EuroMed operates through its wholly-owned Netherlands subsidiaries,
Galenica, B.V. ("Galenica") and Confedera, B.V. ("Confedera") in: (i) the
parallel import of EuroSpecialties, which are prescription ("ethical") branded
pharmaceuticals registered and marketed throughout Europe under international
patent and a European brand; (ii) the wholesale distribution of EuroSpecialties
and generic pharmaceuticals to pharmacies and other wholesalers in The
Netherlands; (iii) the wholesale distribution of DutchSpecialties, which are
ethical branded pharmaceuticals under international patent, registered and
marketed as a brand specifically within The Netherlands; (iv) the wholesale
distribution of over-the-counter ("non-ethical") pharmaceuticals to pharmacies
and other wholesalers in The Netherlands; and (v) the export of generic
pharmaceuticals to developing nations of the world.
Generics are therapeutically equivalent ethical pharmaceuticals
manufactured after the expiration of any patents, and marketed as more
competitively priced substitutes for branded ethical pharmaceuticals. Parallel
imports are EuroSpecialties purchased within Europe's supranational free market,
the fifteen member European Union ("EU"), imported into The Netherlands, often
repackaged in the Dutch language, and resold wholesale to pharmacies and other
wholesalers at an arbitrage profit. Arbitrage is primarily the result of pricing
practices of multinational pharmaceutical companies, differing national health
and social policies among EU member states, and currency fluctuations within the
EU. The price differences for identical EuroSpecialties in different EU member
states make parallel trade, or the trade of registered pharmaceuticals from a
low-price market into a high-price market, particularly attractive.
The retail price of pharmaceuticals reflects not only direct production and
local distribution costs but also the cost of research and development. These
costs vary enormously from one country to another. Fluctuations in exchange
rates, differential pricing by multinational pharmaceutical companies, and
varying levels of pressure exerted by the system and social security services in
different EU member states, explain the difference in prices within Europe,
especially for relatively old pharmaceuticals.
On June 1, 1996, the government of The Netherlands implemented legislation
that reduced the prices of pharmaceuticals to approximately the average prices
for equivalent items in Belgium, France, Germany and Great Britain. The law
establishes a prohibition on the sale of pharmaceuticals to retail pharmacies at
a higher price than the maximum price decree. This has effectively reduced the
prices paid for pharmaceuticals in The Netherlands an average of 17.5%.
On March 25, 1997, the Board of Directors approved a five-point
restructuring plan, which has since been implemented. The five-point
restructuring plan consists of: (i) a settlement of all claims between the
Company and Messrs. Doets and Roozekrans, whereby they returned 850,000 shares
of Common Stock to the Company (on April 18, 1997 these shares were returned to
the Company and cancelled); (ii) the sale of Pluripharm International B.V.
("Pluripharm") which took place on July 4, 1997; (iii) the return of 850,000
shares of Common stock by B.V. Wisteria and its affiliates (which took place on
July 4, 1997) (iv) a plan to repurchase in the open-market 300,000 shares of
Common Stock; and (v) the undertaking of a new strategy of acquiring healthcare
related companies or assets outside of The Netherlands, including possible
purchases of health care companies or assets in the United States. 9
<PAGE>
RESULTS OF OPERATIONS
Three Months Ended June 30, 1997 Compared to Three Months Ended June 30, 1996
Sales. Sales of pharmaceuticals decreased 17.6% to $7,012,000 for the three
months ended June 30, 1997 compared with $8,508,000 for the three months ended
June 30, 1996. The decrease in sales of pharmaceuticals was primarily a result
of the government implementing the maximum price law in June of 1996 which had
the effect of lowering the consumption of pharmaceutical products from
wholesalers.
Cost of Goods Sold. Cost of pharmaceuticals sold decreased 16.1% to
$6,404,000 (91.3% of sales) for the three months ended June 30, 1997 compared
with $7,636,000 (89.8% of sales) for the three months ended June 30, 1996. The
decrease in the cost of pharmaceuticals sold was primarily a result of a
decrease in sales. EuroMed's cost of goods sold percent was increased by the
selling of inventory purchased at static rates and sold for the maximum price
allowed by The Netherlands maximum price law.
Gross Profit. Gross profit decreased 30.3% to $608,000 (8.7% of sales) for
the three months ended June 30, 1997 compared with $872,000 (10.2% of sales) for
the three months ended June 30, 1996. The decrease in gross profit was primarily
a result of a decrease in sales, while the decrease in gross profit as a percent
of sales was primarily a result of client pharmacies acquiring products at the
rates dictated by the government imposed maximum price law.
Selling and General and Administrative Expenses. Selling, general and
administrative expenses increased 69.3% to $1,016,000 (14.5% of sales) for the
three months ended June 30, 1997 compared with $600,000 (7.1% of sales) for the
three months ended June 30, 1996. The increase in selling, general and
administrative expenses was primarily a result of a decrease in sales and an
increase in the number of employees, while the increase as a percent of sales
was primarily a result of decreased operating efficiencies. Further, the Company
has experienced an increase in professional fees related to the Company's
divestiture of Pluripharm, continuing legal fees related to ongoing litigation,
and ongoing financial auditing costs.
Net Income. Results of operations decreased 396% to a loss of $554,000
(7.9% of sales) for the three months ended June 30, 1997, compared with $187,000
net income (2.2% of sales) for the three months ended June 30, 1996. The
decrease in net income was primarily the result of declining sales volume and
the effect of the implementation of the maximum price law upon the margins of
the Company.
RESULTS OF OPERATIONS
Six Months Ended June 30, 1997 Compared to Six Months Ended June 30, 1996
Sales. Sales of pharmaceuticals decreased 20.9% to $14,144,000 for the six
months ended June 30, 1997, compared with $17,876,000 for the six months ended
June 30, 1996. The decrease in sales of pharmaceuticals was primarily a result
of the government implementing the maximum price law in June 1996, which had the
effect of lowering the consumption of pharmaceutical products from wholesalers.
Further, the reduction in EuroMed sales can be attributed to the loss of retail
clients purchasing products related to retail outlet acquisitions and a more
competitive product discount program being offered by the Company's competitors.
10
<PAGE>
Cost of Goods Sold. Cost of pharmaceuticals sold decreased 18.0% to
$13,267,000 (93.8% of sales) for the six months ended June 30, 1997 compared
with $16,185,000 (90.5% of sales) for the six months ended June 30, 1996. The
decrease in the cost of pharmaceuticals sold was primarily a result of a
decrease in sales, while the increase as a percent of sales was primarily a
result of a more diversified product inventory. Further, EuroMed's cost of goods
sold percent was increased by the selling of inventory purchased at static rates
and sold for the maximum price allowed by The Netherlands maximum price law.
Gross Profit. Gross profit decreased 48.1% to $877,000 (6.2% of sales) for
the six months ended June 30, 1997 compared with $1,691,000 (9.4% of sales) for
the six months ended June 30, 1996. The decrease in gross profits was primarily
a result of a decrease in sales, while the decrease in gross profit as a percent
of sales was primarily a result of client pharmacies acquiring products at the
rates dictated by the government imposed maximum price law.
Selling and General and Administrative Expenses. Selling, general and
administrative expenses increased 54.6% to $1,687,000 (11.9% of sales) for the
six months ended June 30, 1997 compared with $1,091,000 (6.1% of sales) for the
six months ended June 30, 1996. The increase in selling, general and
administrative expenses was primarily a result of a decrease in sales and an
increase in the number of employees while the increase as a percent of sales was
primarily a result of decreased operating efficiencies. Further, the Company has
experienced an increase in professional fees related to the Company's
divestiture of Pluripharm, continuing legal fees related to ongoing litigation,
and ongoing financial auditing costs.
Net Income. Results of operations decreased 344% to a loss of $886,000
(6.3% of sales) for the six months ended June 30, 1997 compared with $363,000
net income (2.0% of sales) for the six months ended June 30, 1996. The decrease
in net income was primarily the result of declining sales volume and the effect
of the implementation of the maximum price law upon the margins of the Company.
LIQUIDITY AND CAPITAL RESOURCES
Cash (used in) operations was ($26,000) for the six months ended June 30,
1997 compared with $1,520,000 provided by operations for the six months ended
June 30, 1996. This decrease is a result of the Company's operating loss for the
six months ended June 30, 1997, and customers increasing their payment time for
billed products they have received.
EuroMed has experienced an increase in the accounts receivable from
$1,155,000 in 1996 to $1,564,000 in 1997. The increase in accounts receivable is
a result of an increase in payment time for billed products from the Company's
customers.
Net cash provided by financing activities was $47,000 for the six months
ended June 30, 1997 compared with $2,512,000 for the six months ended June 30,
1996. The Company's initial public offering of shares on March 19, 1996, was the
significant source of cash for the six months ended June 30, 1996.
Cash and cash equivalents at the end of the six months ended June 30, 1997
was $275,000 compared with $3,426,000 at the end of six months ended June 30,
1996.
Management is of the opinion that the proceeds from the Pluripharm
divestiture, together with existing borrowing capacity, should be sufficient to
finance and sustain operations at the present level for at least six months.
11
<PAGE>
PART II
ITEM 1. LEGAL PROCEEDINGS
The Company is currently involved in three legal proceedings, two of which
were initiated by the Company against one of its former directors, Gregory Alan
Gaylor, and the others of which Mr. Gaylor filed against the Company and other
parties. The first of those lawsuits is pending against Mr. Gaylor and Robert
Jansonius, another former Company director, in Nevada State Court. There has
been no substantive activity in this lawsuit in the past three months. The
second lawsuit was filed by the Company against Gaylor in the United States
District Court for the Northern District of Texas. Mr. Gaylor failed to enter an
appearance in this lawsuit, and a Final Judgment was entered against Mr. Gaylor
on July 30, 1997. The Final Judgment awarded the Company actual damages against
Mr. Gaylor in the amount of $5,350,000, and punitive damages in the amount of
$10,700,000 for Mr. Gaylor's malicious and intentional interference and
disparagement of the Company's management.
The third lawsuit was filed by Mr. Gaylor and Jan Bouwman (another former
Company director) against the Company and others on May 23, 1997, in the State
District Court of Clark County, Nevada. The allegations in this third lawsuit
include claims for corporate misgovernance, breach of fiduciary duty,
negligence, breach of contract, and defamation. Mr. Gaylor and Mr. Bowman
initially obtained an ex parte temporary restraining order prohibiting the
Company's divestiture of Pluripharm International, B.V. ("Pluripharm"), was
dissolved on May 30, 1997. Thereafter, Mr. Gaylor and Mr. Bouwman amended their
lawsuit to assert claims against the Company derivatively on behalf of all of
the Company's minority shareholders. Mr. Gaylor and Mr. Bouwman also requested
relief in the form of a receivership and an injunction. On July 3, 1997, the
Court denied the requested relief but, with the agreement of the Company,
appointed a master to conduct an investigation of specific transactions. The
master's report has not been received and discovery in the case has not been
completed. The Company denies the allegations in the suit and intends to
vigorously defend the case.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On May 26, 1997, EuroMed held its annual meeting of stockholders (the
"Meeting"). At the meeting, the stockholders considered and voted upon the
following matters with the results indicated:
(1) The following directors, constituting all of the directors of the
Company, were elected to serve as directors for the ensuing year:
Votes For Votes Against
A. Francois Hinnen 2,119,700 4,000
Robert W. C. Veldman 2,119,700 4,000
David Anderson 2,119,700 4,000
Jesse Shelmire IV 2,119,700 4,000
Robert Shuey III 2,119,700 4,000
(2) The stockholders of the Company ratified the selection of Killman,
Murrell & Company, P.C. as independent public accountants for the Company for
the fiscal year ending December 31, 1997, by the following vote: 2,119,700 votes
for, 4,000 votes against.
Subsequent to the meeting, Mssrs. Veldman and Anderson have resigned as
directors of EuroMed.
12
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Number and Description of Exhibit
Number Exhibit Description
2.1 Assets and Liabilities Transfer Agreement by and between Pluripharm
International B.V. and Houdstermaatscheppy B.V. dated July 4, 1997.(2)
3.1 Restated Articles of Incorporation of the Registrant.(1)
3.2 Bylaws of the Registrant.(1)
4.1 Specimen Common Stock Certificate.(1)
10.1 Summary of Management Contract dated February 15, 1997, by and between
EuroMed, Inc. and the Anderson Group.(2)
27.1 Financial Data Schedule.(*)
* Filed herewith.
(1) Previously filed as an Exhibit to the company's Registration
Statement No. 33-80805 on Form S-1 and incorporated herein by
reference.
(2) Previouly filed as an Exhibit to Report in Form 8-K dated
July 4, 1997, and incorporated herein by reference
(b) Reports of Form 8-K
None
13
<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.
EuroMed, Inc.
Dated: August 14, 1997
Signature Title
/s/ A. Francois Hinnen President and
- ------------------------
A. Francois Hinnen Chief Executive Officer
/s/ David Anderson Chief Financial Officer
- ------------------------
David Anderson
14
<PAGE>
Exhibit Index
Exhibit No. Description
27.1 Financial Data Schedule.(*)
(*) Filed herewith
15
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 275
<SECURITIES> 0
<RECEIVABLES> 1,564
<ALLOWANCES> 0
<INVENTORY> 3,609
<CURRENT-ASSETS> 9,465
<PP&E> 910
<DEPRECIATION> (478)
<TOTAL-ASSETS> 10,534
<CURRENT-LIABILITIES> 7,888
<BONDS> 0
0
0
<COMMON> 23
<OTHER-SE> 2,623
<TOTAL-LIABILITY-AND-EQUITY> 10,534
<SALES> 7,012
<TOTAL-REVENUES> 7,012
<CGS> 6,404
<TOTAL-COSTS> 1,016
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 135
<INCOME-PRETAX> (543)
<INCOME-TAX> (11)
<INCOME-CONTINUING> (554)
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (554)
<EPS-PRIMARY> (.24)
<EPS-DILUTED> (.24)
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