<PAGE> 1
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 December 31, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission File Number: 000-26740
AMERICAN HEALTHCHOICE, INC
(Name of small business issuer in its charter)
New York 11-2931252
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification number)
1300 W. Walnut Hill Lane Suite 275, Irving, TX 75038
---------------------------------------------- -----
(Address of principal executive offices) (Zip code)
Issuer's telephone number: 972.751.1900
Check whether the issuer (1) 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 December 31, 1997, there were outstanding 9,870,614 shares of the
issuer's Common Stock, par value $.001 per share.
Transitional Small Business Disclosure Format
Yes [X] No [ ]
1
<PAGE> 2
AMERICAN HEALTHCHOICE, INC.
QUARTERLY REPORT ON FORM 10-QSB FOR
QUARTER ENDED DECEMBER 31, 1997
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets......................3
Condensed Consolidated Statements of Income...............4
Condensed Consolidated Statements of Cash Flows............5
Notes to Condensed Consolidated Financial Statements.......6
Item II. Management's Discussion and Analysis of Results of Operations and
Financial Condition........................................7
PART II
OTHER INFORMATION
Item I. Legal Proceedings.........................................10
Item II. Changes in Securities.....................................10
Item III. Defaults Upon Senior Securities...........................10
Item IV. Submission of Matters to a Vote of Securities Holders.....10
Item V. Other Information.........................................10
Item VI. Exhibits and Reports of Form 8-K..........................10
Signatures...................................................................11
</TABLE>
2
<PAGE> 3
PART I
FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
AMERICAN HEALTHCHOICE, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1997 1997
(unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash $ 1,123,001 $ 582,770
Accounts Receivable, less allowance for doubtful accounts
of $7,239,277 at September 30, 1997 and $ 7,645,596 at
December 31, 1997 8,701,643 8,392,423
Advances and notes receivable 340,059 342,246
Other current assets 125,448 108,481
------------ ------------
Total current assets 10,290,151 9,425,920
Property and equipment, net 1,683,706 1,644,831
Goodwill, net 448,112 446,038
Other assets 15,460 15,460
------------ ------------
Total assets $ 12,437,429 $ 11,532,249
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 506,827 $ 455,184
Current portion of capital lease obligations 133,453 100,940
Accrued payroll and payroll taxes 266,464 279,339
Accounts payable and accrued expenses 1,096,329 954,996
Income taxes 31,629 --
Convertible debenture 3,550,000 3,550,000
------------ ------------
Total current liabilities 5,584,702 5,340,459
Long-term debt, less current portion 471,465 471,465
Capital lease obligations, less current portion 311,085 308,702
------------ ------------
Total liabilities 6,367,252 6,120,626
Commitments
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value; 5,000,000 shares authorized;
none issued
Common stock, $.001 par value; 115,000,000 shares authorized;
9,870,614 shares issued and outstanding 9,871 9,871
Options to acquire common stock 685,664 685,664
Additional paid-in capital 12,003,258 12,003,258
Accumulated deficit (6,628,616) (7,287,170)
------------ ------------
Total stockholders' equity 6,070,177 5,411,623
------------ ------------
Total liabilities and stockholders' equity $ 12,437,429 $ 11,532,249
============ ============
</TABLE>
See accompanying notes to these
unaudited interim condensed consolidated financial statements.
3
<PAGE> 4
AMERICAN HEALTHCHOICE, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended
December 31,
1996 1997
------------------------------
<S> <C> <C>
NET PATIENT REVENUES $ 2,530,623 $ 1,917,962
OPERATING EXPENSES:
Compensation and benefits 2,460,293 1,600,341
Advertising and promotion 181,342 88,263
Depreciation and amortization 112,047 67,219
General and administrative 1,499,529 903,572
----------- -----------
Total operating expenses 4,253,211 2,659,395
----------- -----------
OTHER INCOME (EXPENSE):
Interest Income -- 6,933
----------- -----------
Total other income -- 6,933
----------- -----------
LOSS BEFORE INCOME TAXES AND PRO FORMA
INCOME TAXES (1,722,588) (734,500)
INCOME TAXES:
Current (72,348) --
Deferred (456,486) --
----------- -----------
Total income taxes (528,834) --
----------- -----------
NET LOSS BEFORE PRO FORMA INCOME TAXES (1,193,754) (734,500)
Pro forma income tax benefit (115,413) --
----------- -----------
NET LOSS AFTER PRO FORMA INCOME TAXES $(1,078,341) $ (734,500)
=========== ===========
BASIC EARNINGS PER SHARE AFTER PRO FORMA
INCOME TAXES $ (.15) $ (.09)
=========== ===========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 7,228,865 8,082,426
=========== ===========
</TABLE>
See accompanying notes to these
unaudited interim condensed consolidated financial statements.
4
<PAGE> 5
AMERICAN HEALTHCHOICE, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
December 31,
1996 1997
-------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $(1,193,754) $ (734,500)
Adjustments to reconcile net loss to net cash from
operating activities:
Allowance for doubtful accounts 1,553,684 406,319
Deferred taxes (528,834) --
Depreciation and amortization 112,047 67,219
Gain on write off of note payable (79,363) --
Change in operating assets and liabilities, net:
Accounts receivable-trade (1,704,315) (97,099)
Other current assets 277,470 (16,967)
Accounts payable and accrued expenses 120,362 (160,087)
Other, net (160,587) 109,881
----------- -----------
Net cash used in operating activities (1,603,290) (425,234)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Advances and notes receivables, net -- (2,187)
Purchases of property and equipment (306,256) (26,272)
Write off of goodwill 160,000 --
Other assets -- --
----------- -----------
Net cash used in investing activities (146,256) (28,459)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from bridge loan 2,200,000 --
Proceeds from capital leases 186,040 --
Payments on notes payable and capital leases (831,370) (86,538)
Proceeds from sale of stock options 43,750 --
Notes to stockholder (131,370) --
Proceeds from revolving credit 624,133 --
Write off of note payable (166,361) --
----------- -----------
Net cash provided (used) by financing activities 1,924,822 (86,538)
----------- -----------
Increase (decrease) in cash 175,276 (540,231)
CASH, beginning of period 159,166 1,123,001
----------- -----------
CASH, end of period $ 344,442 $ 582,770
=========== ===========
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS:
Stock subscription related to bridge loan $ 970,200 $ --
=========== ===========
</TABLE>
See accompanying notes to these
unaudited interim condensed consolidated financial statements.
5
<PAGE> 6
AMERICAN HEALTHCHOICE, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION, BUSINESS, AND OPERATING LOSSES
American HealthChoice, Inc. and subsidiaries (the Company) consists of a parent
company and twenty-two clinics providing medical, physical therapy, and
chiropractic services in San Antonio, McAllen, Brownsville and Houston, Texas,
New Orleans, Louisiana and in the metro area of Atlanta, Georgia. Additionally,
the Company owns one center that provides diagnostic services. Four of the
physical therapy clinics are statically located next to a corresponding
chiropractic clinic. Substantially all of the Company's revenues are derived
from chiropractic, physical therapy and medical services provided to individuals
living in the vicinity of the clinics.
2. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements have been prepared
by the Company. Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. In the opinion of the
Company's management, the disclosures made are adequate to make the information
presented not misleading, and the condensed consolidated financial statements
contain all adjustments necessary to present fairly the financial position as of
December 31, 1997, results of operations for the three months ended December 31,
1996 and 1997, and cash flows for the three months ended December 31, 1996 and
1997.
The results of operations for the three months ended December 31, 1997 are not
necessarily indicative of the results to be expected for the full year. It is
suggested that the December 31, 1997 financial information be read in
conjunction with the financial statements and notes thereto included in the
Company's Form 10-KSB dated September 30, 1997.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation policy - The accompanying condensed consolidated financial
statements include the accounts of the Company and its wholly-owned
subsidiaries. All material inter-company accounts and transactions have been
eliminated in consolidation.
Net patient revenues - Revenue is recognized upon performance of services.
Substantially all of the Company's revenues are derived from personal injury
claims, claims filed on major medical policies, worker's compensation policies,
Medicare, and Medicaid. Allowances for discounts on services provided are
recognized in the periods the related revenue is earned. Allowances are
maintained at levels considered appropriate by management based upon historical
charge-off experience and other factors deemed pertinent by management.
Property and equipment, net - Property and equipment are stated at cost less
accumulated depreciation. Depreciation is provided over the estimated useful
lives of the related assets, primarily using the straight line method. Leasehold
improvements are amortized over the shorter of the lease term or the estimated
useful lives of the improvements.
Goodwill - Goodwill arose from the Company's acquisitions of various clinics and
is being amortized on the straight-line method over 20 years.
4. STOCKHOLDERS' EQUITY
The Company granted an investment group the right to acquire an option to
acquire the Company's common stock at specified prices over a defined period of
time. The agreement provides for each option to be issued in exchange for
$100,000, which amount will be applied to the purchase of common stock, when and
if the option is exercised. The following is a summary of the terms of the
transaction:
<TABLE>
<CAPTION>
LAST NONREFUNDABLE POSSIBLE
OPTION FEE TO TOTAL EXERCISE
PURCHASE ACQUIRE EXERCISE PRICE
DATE OPTION PRICE PER SHARE
- ---- ------ ----- ---------
<S> <C> <C> <C>
March 18, 1996 $ 100,000 $ 750,000 $ 2.25
June 18, 1996 $ 100,000 $ 750,000 $ 4.90
September 18, 1996 $ 100,000 $ 750,000 $ 4.90
December 18, 1996 $ 100,000 $ 750,000 $ 4.90
</TABLE>
6
<PAGE> 7
As of September 30, 1997, the investment group has exercised all options under
the first three options. Under the terms of the fourth options, the investment
group has the right to purchase an additional 233,854 shares of the Company's
common stock at $4.90 per share. The Company has granted registration rights to
all of the shares issued and to be issued in connection with this transaction.
In September 1997 the Company sold two 8% Cumulative Convertible Debentures all
dated September 12, 1997 in the aggregate amount of three million five hundred
fifty thousand dollars ($3,550,000) in a Regulation S offering. The Debentures
are convertible after 82 days at a conversion price equal to eighty (80%) of the
average closing bid price of the shares of common stock of the Company as quoted
on NASDAQ for the five (5) trading days preceding the date of conversion. The
interest on the note is payable in cash or in kind as shares. The investment
banking firm received $461,500 for all fees. As of February 2, 1998, the
Debentures had not been converted. Financing costs including interest for the
Debentures was recorded in the fourth quarter and subsequent interest was
recorded in the first quarter 1998.
The holders of any preferred stock which might be issued shall have such rights,
preferences and privileges as may be determined by the Company's board of
directors. Currently there are no holders of preferred stock.
5. PENDING ACQUISITIONS
The Company continually has groups approach the Company about the possibility of
merging or being acquired by the Company. Though the Company's efforts are
geared towards the current operations, the Company is now looking for
opportunities for growth. The Company has entered into letters of intent to
acquire various companies from time to time. These potential acquisitions are
subject to due diligence, further negotiations, execution of definitive
agreements and the success of the Company to obtain additional funds (total or
partial) for the acquisition price. Currently, there are no pending acquisitions
because management's attention over the last fiscal year was directed at the
Company's financial performance.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The Company owns 22 clinics, four of which have combined physical therapy
clinics in the same location. Additionally, the Company owns one center that
provides diagnostic services. The clinics are located in three states: Texas,
Louisiana, and Georgia. This is a decrease of five clinics over the prior fiscal
year and are noted with an asterisk. The following chart details the clinics,
locations, metropolitan areas served, services provided, and date acquired or
commenced operation by the Company.
<TABLE>
<CAPTION>
METROPOLITAN AREA
CLINIC LOCATION SERVED SERVICES PROVIDED DATE ACQUIRED
- ------ -------- ------ ----------------- -------------
<S> <C> <C> <C> <C>
North East MediClinic San Antonio, TX San Antonio primary medical care 12/95
Nationwide Sports & Injury Katy, TX Houston physical therapy 10/94
United Health Services Katy, TX Houston chiropractic 10/94
Nationwide Sports &
Injury San Antonio, TX San Antonio physical therapy 7/94
United Health Services San Antonio, TX San Antonio chiropractic 7/94
Nationwide Sports &
Injury San Antonio, TX San Antonio physical therapy 10/94
United Health Services San Antonio, TX San Antonio chiropractic 10/94
Nationwide Sports &
Injury San Antonio, TX San Antonio physical therapy 10/94
United Health Services San Antonio, TX San Antonio chiropractic 10/94
Corpus Christi Rehab Corpus Christi, TX Rio G. Valley Chiropractic 5/96
San Pedro MediClinic San Antonio, TX San Antonio primary medical care 10/94
South Bexar MediClinic* San Antonio, TX San Antonio primary medical care, 1/95
urgent care
Southcross MediClinic San Antonio, TX San Antonio urgent care, primary 12/95
medical care
United Chiropractic New Orleans, LA New Orleans chiropractic 7/94
New Orleans East
United Chiropractic
Uptown New Orleans, LA New Orleans chiropractic 7/94
Peachtree Medical Center Atlanta, GA Atlanta internal medicine 2/96
of Northside**
Peachtree Corners Norcross, GA Atlanta primary medical care, 9/95
Medical Center urgent care
Peachtree Medical Center Marietta, GA Atlanta internal medicine 2/96
of Windy Hill *
Peachtree Medical Center Conyers, GA Atlanta primary medical care 2/96
of Conyers
Peachtree Medical Center McDonough, GA Atlanta primary medical care 2/96
of McDonough
Valley Family Health McAllen, TX McAllen chiropractic 1/96
Center
Valley Family Health Weslaco, TX Weslaco primary medical care 7/96
Center *
University MediClinic * College Station, TX College Station primary medical care 7/96
ACME Brownsville Brownsville, TX Rio G. Valley chiropractic 7/96
Chiropractic
Corpus Christi Medical * Corpus Christi, TX Rio G. Valley primary medical care 8/96
Southmost Medical Clinic Brownsville, TX Rio G. Valley primary medical care 9/96
Disability Medicine McAllen, TX McAllen primary medical care 7/96
</TABLE>
* Clinics closed in second quarter of 1997.
** Clinic still operating but see "Item 3. Legal Proceedings".
8
<PAGE> 9
FORWARD-LOOKING INFORMATION
This report contains certain forward-looking statements and information relating
to the Company that are based on the beliefs of the Company's management as well
as assumptions made by and information currently available to the Company's
management. When used in the report, words such as "anticipate," "believe,"
"estimate," "expect," "intend," "should," and similar expressions, as they
relate to the Company or its management, identify forward-looking statements.
Such statements reflect the current views of the Company with respect to future
events and are subject to certain risks, uncertainties, and assumptions relating
to the operations, results of operations, liquidity, and growth strategy of the
Company, including competitive factors and pricing pressures, changes in legal
and regulatory requirements, interest rate fluctuations, and general economic
conditions, as well as other factors described in this report. Should one or
more of the risks materialize, or should underlying assumptions prove incorrect,
actual results or outcomes may vary materially from those described herein as
anticipated, believed, estimated, expected, or intended.
RESULTS OF OPERATIONS
Comparison of three months ended December 31, 1997 to three months ended
December 31, 1996:
For the three months ended December 31, 1997, net revenues amounted to
$1,917,962 compared to $2,715,559 for the same period in 1996. Although this was
a decrease in net patient revenues of 24%, operating costs were decreased an
even greater 37%. These decreases from 1996 was a result of the Company's cost
reduction efforts over the past year which included the closure of five
unprofitable clinics. The Company's net patient revenues for the three months
ended December 31, 1997; as a percentage of total revenues, for medical,
chiropractic, and physical therapy services amounted to 57%, 37%, and 6%
respectively, compared to 51% and 49%, (physical therapy was not separated in
1996) respectively, for the three months ended December 31, 1996.
The Company's operations are labor intensive with salaries and benefits
comprising the single largest item in operations. For the three months ended
December 31, 1997, compensation and benefits were $1,641,341 compared to
$2,460,293 the three months ended December 31, 1996 or a decrease of $818,952 or
33.3%. This decrease is a direct result of the Company's cost reduction efforts
over the past year which included the closure of five unprofitable clinics.
General and administrative expenses for the three months ended December 31, 1997
was $903,246 compared to $1,499,529 for the three months ended December 31, 1996
or a decrease of $596,283 or 66%. This decrease again reflects the cost cuts
implemented by the Company. The Company is continuing its efforts to reduce
costs and boost revenues by updating fee sheets, restructuring marketing,
reducing and restructuring debt as much as possible; instituting a new budgetary
process for all clinics and corporate management, installation of a new computer
system to provide greater data management for accounts receivables, and
establishment of internal audit and collection administration functions to
provide consistency and procedural structure within the clinics. The Company
believes that the effect of these and other changes that are still being
implemented will be reflected to a greater extent in the upcoming quarters.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1997, the Company had cash and working capital of $582,770
and $4,084,461 respectively. The Company's primary current asset is accounts
receivable which represent amounts due from patients for services rendered.
Approximately 70% of the Company's accounts receivable at December 31, 1997
represent receivables from the delivery of chiropractic and physical therapy
services, of which the majority represent personal injury claims which are
typically collected once the lawsuit or claim to which they relate is settled.
As a result, the Company's collections on personal injury claims are often more
than a year after the services are rendered. This extended collection period can
and does cause cash flow difficulties. In addition, the Company has been
inadequately capitalized from inception to meet its current operational
requirements and to fund future acquisitions.
9
<PAGE> 10
PART II. OTHER INFORMATION
ITEM I. LEGAL PROCEEDINGS
The seller of Peachtree Medical Center Northside clinic has alleged contract
default by the Company and is claiming all rights to this clinic. The seller has
taken possession of the clinic to the exclusion of the Company. A suit was filed
in federal court by the seller, Dr. Bailey. The Company filed a counterclaim
which, among other claims, asks the Court to compel arbitration. Mediation did
not prove fruitful and as of December 1997 the Company is seeking arbitration.
Arbitration is with the American Association of Arbitration, Atlanta Ga., and
the case was filed in the United States District Court, Northern District of
Georgia, Atlanta Division.
The Company is engaged in litigation with a service supplier over unpaid
invoices. The suit was filed December 31, 1997. The Company believes that a
substantial portion of this claim is associated with the Northside clinic
litigation. The Company is still researching the merits of this claim. The case
is filed in the State District Court, 162nd Judicial District, Dallas County,
Tx.
The Company is engaged in litigation with the doctor who managed the Norcross,
Georgia clinic. The Company found it necessary to terminate the managing doctor.
The managing doctor then filed a claim against the Company for breach of
contract and sought an injunction to prevent the Company from enforcing its
non-compete clause. The Court declined to enter a temporary restraining order
against enforcement of the non-compete clause. The Company filed a counter claim
against the doctor primarily for losses the Company sustained while he managed
the clinic. The case is filed in the Superior Court of Gwinnett County, Ga.
One former doctor and two physicians assistants who worked at the Norcross,
Georgia clinic have filed a law suit naming the Company as a codefendant. The
one doctor and one of the physician assistants worked at the clinic prior to the
Company purchasing the clinic. The other physicians assistant left the clinic
within one year of the Company's purchase. The claim alleges a right to the
accounts receivable for patients the doctors treated at the clinic that were
collected after the doctors' employment ended with the clinic. The Company
denies any liability and intends to cross claim against the former managing
doctor of the clinic. The case is filed in the Superior Court of Gwinnett
County, Ga.
The Company was served a Complaint on January 26, 1998 alleging unspecified
damages arising from trademark infringement and related claims. The Company has
retained a law firm and is currently evaluating the allegations. The case is
filed in the United States District Court, Southern District of Texas, Houston
Division.
The Company is not involved in any other material litigation nor is management
aware of any pending litigation that would substantially impact the Company's
financial position
ITEM 2. CHANGES IN SECURITIES
There were no changes in securities during the three months ended December 31,
1997.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders, through the solicitation
of proxies or otherwise, during the three months ended December 31, 1997.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS OF FORM 8-K
The Company filed a report on Form 8-K on November 26, 1997 involved the
changing of auditors. Since December 31, 1997, no other Form 8-K's have been
filed.
10
<PAGE> 11
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AMERICAN HEALTHCHOICE, INC.
Date: February 10, 1998 By: /s/ Dr. J.W. Stucki
Dr. J.W. Stucki, Chief Executive
Officer and President
Date: February 10, 1998 By: /s/Jay R. Stucki
Jay R. Stucki, Chief Financial Officer and
Vice President - Finance
(Principal Financial and Accounting Officer)
11
<PAGE> 12
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 582,770
<SECURITIES> 0
<RECEIVABLES> 8,392,423
<ALLOWANCES> 7,645,596
<INVENTORY> 77,250
<CURRENT-ASSETS> 9,425,920
<PP&E> 1,644,831
<DEPRECIATION> 0
<TOTAL-ASSETS> 11,532,249
<CURRENT-LIABILITIES> 5,340,459
<BONDS> 0
9,871
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 11,532,249
<SALES> 2,884,827
<TOTAL-REVENUES> 1,917,962
<CGS> 2,659,395
<TOTAL-COSTS> 2,659,395
<OTHER-EXPENSES> (6,933)
<LOSS-PROVISION> 961,240
<INTEREST-EXPENSE> 45,189
<INCOME-PRETAX> (734,500)
<INCOME-TAX> 0
<INCOME-CONTINUING> (734,500)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (734,500)
<EPS-PRIMARY> (.09)
<EPS-DILUTED> (.09)
</TABLE>
