<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended November 30, 1996
-----------------------
OR
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Transition Period From to .
------------ ------------
Commission File Number 0-18656
--------
PONDER INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 75-2268672
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
5005 Riverway Drive, Suite 550
Houston, Texas 77056
(Address of principal executive offices, zip code)
(713)965-0653
(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
--------- ----------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
Class Outstanding at December 31, 1996
---------------------------- ----------------------------------
Common Stock, $.01 par value 12,346,124
<PAGE> 2
PONDER INDUSTRIES, INC., AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PAGE
----
PART I FINANCIAL INFORMATION
- - - - ------ ---------------------
<S> <C>
Item 1: Condensed Consolidated Balance Sheets as of November 30, 1996,
and August 31, 1996 3
Condensed Consolidated Statements of Operations for the Three
Months Ended November 30, 1996 and 1995 5
Condensed Consolidated Statements of Cash Flows for the Three
Months Ended November 30, 1996 and 1995 6
Notes to Condensed Consolidated Financial Statements 8
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations 10
PART II OTHER INFORMATION
- - - - ------- -----------------
Item 1: Legal Proceedings 11
Item 2: Changes in Securities 11
Item 3: Defaults Upon Senior Securities 11
Item 4: Submission of Matters to a Vote of Security Holders 11
Item 5: Other Information 11
Item 6: Exhibits and Reports on Form 8-K 11
</TABLE>
-2-
<PAGE> 3
PONDER INDUSTRIES, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
November 30,
1996 August 31,
ASSETS (Unaudited) 1996
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 180,300 $ 397,927
Receivables, net of allowance for doubtful accounts of $153,491 and
$138,491 at November 30 and August 31, respectively
4,144,587 3,646,960
Other receivable 500,000 500,000
Parts and supplies 3,144,710 3,046,288
Prepaid expenses and other 457,592 514,464
------------ ------------
Total current assets 8,427,189 8,105,639
------------ ------------
PROPERTY AND EQUIPMENT 30,041,245 28,170,569
Less- Accumulated depreciation and amortization (13,223,662) (12,644,782)
------------ ------------
16,817,583 15,525,787
------------ ------------
OTHER ASSETS 2,176,297 2,184,435
DEFERRED ASSETS, net 805,302 853,408
GOODWILL, net 1,377,254 1,232,807
------------ ------------
4,358,853 4,270,650
------------ ------------
$ 29,603,625 27,902,076
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-3-
<PAGE> 4
PONDER INDUSTRIES, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
<TABLE>
<CAPTION>
November 30,
1996 August 31,
LIABILITIES AND STOCKHOLDERS' EQUITY (Unaudited) 1996
----------- --------------
<S> <C> <C>
CURRENT LIABILITIES:
Current maturities of long-term debt $ 1,200,905 $ 1,393,001
Bank overdraft 615,855 529,813
Accounts and notes payable, trade 3,917,394 2,863,477
Accrued liabilities 1,550,852 2,122,559
-------------- -------------
Total current liabilities 7,285,006 6,908,850
-------------- -------------
LONG-TERM DEBT, less current maturities 5,403,423 4,148,207
-------------- -------------
OTHER LONG-TERM LIABILITIES 602,281 449,418
-------------- -------------
DEFERRED TAXES PAYABLE 889,587 233,081
-------------- -------------
CONVERTIBLE DEBENTURES 9,150,000 9,150,000
-------------- -------------
COMMITMENTS AND CONTINGENCIES (Note 2)
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value, authorized 50,000,000 shares, issued
12,635,997 shares and 12,131,347 shares at November 30 and August 31,
respectively, of which 289,873 are held as treasury shares 126,360 121,313
Additional paid-in capital 21,893,915 21,880,361
Cumulative foreign currency translation adjustment 134,097 23,596
Accumulated deficit (14,656,823) (13,775,188)
-------------- -------------
7,497,549 8,250,082
LESS:
Note receivable for common stock (63,540) (63,540)
Deferred compensation (132,943) (146,284)
Treasury stock (1,027,738) (1,027,738)
-------------- -------------
Total stockholders' equity 6,273,328 7,012,520
-------------- -------------
$ 29,603,625 $ 27,902,076
============== =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-4-
<PAGE> 5
PONDER INDUSTRIES, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months
Ended November 30
----------------------------
1996 1995
------------ ------------
<S> <C> <C>
TOOL RENTALS AND SALES $ 5,141,125 $ 2,145,851
COSTS OF SERVICE AND SALES 2,202,620 846,965
------------ ------------
Gross profit 2,938,505 1,298,886
------------ ------------
EXPENSES:
Operating 2,320,280 825,999
General and administrative 1,157,054 429,909
------------ ------------
3,477,334 1,255,908
------------ ------------
Operating income (loss) (538,829) 42,978
OTHER INCOME (EXPENSE):
Interest, net (353,763) (66,553)
Gain on disposal of assets -- 4,790
Other 10,957 31,100
------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES (881,635) 12,315
------------ ------------
INCOME TAX EXPENSE -- --
------------ ------------
NET INCOME (LOSS) $ (881,635) $ 12,315
============ ============
NET LOSS PER SHARE $ (.07) $ --
============ ============
WEIGHTED AVERAGE COMMON SHARES AND COMMON SHARE
EQUIVALENTS OUTSTANDING 12,259,844 6,836,897
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-5-
<PAGE> 6
PONDER INDUSTRIES, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months
Ended November 30
------------------------
1996 1995
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (881,635) $ 12,315
Depreciation and amortization 692,370 157,179
Gain on disposal of assets -- (4,790)
Deferred compensation expense 13,341 --
Net change in operating assets and liabilities-
Receivables (497,627) (185,197)
Parts and supplies (98,422) 1,875
Prepaid expenses and other 56,872 (79,498)
Accounts and notes payable, trade 1,053,917 61,184
Accrued and other liabilities (404,658) (126,236)
---------- ----------
Net cash used in continuing operating activities (65,842) (163,168)
---------- ----------
CASH USED IN DISCONTINUED OPERATIONS -- (244,904)
---------- ----------
Net cash used in operating activities (65,842) (408,072)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (1,209,755) (292,896)
Proceeds from asset sales -- 25,764
---------- ----------
Net cash used in investing activities (1,209,755) (267,132)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of long-term debt (914,314) (1,542,990)
Financing and debt collateral payments (31,693) (4,601)
Proceeds from long-term debt borrowings 1,807,434 --
Bank overdraft 86,042 250,099
Proceeds from issuance of common stock -- 1,792,251
---------- ----------
Net cash provided by financing activities 947,469 494,759
---------- ----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 110,501 --
---------- ----------
NET CHANGE IN CASH AND CASH EQUIVALENTS (217,627) (180,445)
CASH AND CASH EQUIVALENTS, beginning of period 397,927 180,445
---------- ----------
CASH AND CASH EQUIVALENTS, end of period $ 180,300 $ --
========== ==========
</TABLE>
-6-
<PAGE> 7
<TABLE>
<CAPTION>
Three Months
Ended November 30
-------------------
1996 1995
-------- --------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION:
Cash paid for interest $ 91,242 $ 66,553
========= ========
Cash paid for income taxes $ -- $ --
========= ========
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Assets acquired for debt $ -- $925,474
========= ========
Assets acquired and liabilities assumed in connection with acquisitions $ 812,320 $ -
========= ========
Common stock issued in connection with acquisitions $ 18,601 $ -
========= ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-7-
<PAGE> 8
PONDER INDUSTRIES, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION:
The condensed consolidated financial statements included herein have been
prepared by Ponder Industries, Inc., and subsidiaries (collectively referred to
as the Company), without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. However, all adjustments have been made to
the accompanying financial statements which are, in the opinion of the
Company's management, necessary for a fair presentation of the Company's
financial position, results of operations and cash flows 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 herein not misleading. These consolidated
financial statements should be read in conjunction with the consolidated
financial statements and the notes thereto included in the Company's latest
Annual Report on Form 10-K.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
2. CONTINGENCIES:
In October 1995, the Securities and Exchange Commission (the Commission)
notified the Company that the staff of the Commission intended to recommend
that the Commission institute a cease and desist proceeding against the Company
and various former officers and directors of the Company on the basis of
alleged violations of the Securities Act of 1934 (the Exchange Act), primarily
related to the Company's accounting treatment with respect to revenue
recognition for the Company's former operations in Azerbaijan in the Company's
periodic reports filed with the Commission in late fiscal 1992 and fiscal 1993
and the Company's press release in August 1992 concerning the results of the
Azerbaijan operations. The Company has requested that the Commission not
follow the recommendations of the staff on the grounds that its accounting
treatment with respect to the Azerbaijan operations was appropriate under the
then existing circumstances and that the revenue was recognized in good faith.
Recently, the staff indicated it would not recommend action concerning the
Exchange Act filings but did intend to recommend that the Commission take
action with respect to the press release. That recommendation is currently
pending and, at this time, there has been no indication as to what action the
Commission will take.
The Company is a defendant in a lawsuit by a former employee seeking damages
for a wrongful termination. The suit was filed in December 1993. The suit
seeks approximately $317,000 in unpaid wages and value of $142,695 for 38,052
shares of stock he would have earned during the remainder of his contract term.
In May of 1995, the former employee sought to enjoin the Company from
conducting an auction sale of certain assets; as a result of those injunctive
proceedings, the Court ordered that $200,000 of the proceeds from the auction
be tendered into the registry of the Court to satisfy any possible adverse
judgment against the Company. The Company asserts that the former employee was
properly terminated under the terms of his contract and is vigorously
contesting the claim and believes that its has meritorious defenses regarding
this matter.
-8-
<PAGE> 9
PONDER INDUSTRIES, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In August 1996, a case was filed in the United States District Court for the
Western District of New York alleging that the Company breached an obligation
to convert certain debentures held by the plaintiff into the Company's common
stock. The plaintiff assets damages in an amount in excess of $50,000,
attorney's fees and costs and seeks an order compelling the Company to convert
the plaintiff's debentures into common stock. The Company is contesting the
plaintiff's claims and has responded to the plaintiff's complaint by filing
counterclaims and third-party claims against the plaintiff, the Company's other
convertible debenture holders and the placement agent on the convertible
debenture offering alleging various violations of the Securities Exchange Act,
common law fraud, civil conspiracy, negligent misrepresentation, breach of
contract, breach of fiduciary duty, negligence, indemnification and seeking a
declaration that the Company has no obligation to convert the debentures and no
liability for failure to so convert. Also, in August 1996, an action was filed
in the United States District Court for the Northern District of Illinois,
Eastern Division, by two other convertible debenture holders of the Company who
allege that the Company breached an obligation to convert certain debentures
held by the plaintiffs into the Company's common stock. The plaintiffs seek a
declaratory judgment setting forth the rights and liabilities of the parties
and an award of shares of common stock or an undisclosed amount of money
allegedly due them. The Company is contesting plaintiffs' claims and has
removed the action to federal court and has moved to transfer it to the Western
District of New York pursuant to a forum selection clause in the agreements
between the parties. The plaintiffs have recently agreed to the transfer of
the action to the Western District of New York.
The Company is also a party to additional claims and legal proceedings arising
in the ordinary course of business. Although no assurances can be given, the
Company believes it has meritorious defenses to all of the above actions and
intends to defend itself vigorously. The Company believes it is unlikely that
the final outcome of any of the claims or proceedings to which the Company is a
party, including those described above, would have a material adverse effect on
the Company's financial statements; however, due to the inherent uncertainty of
litigation, the range of possible loss, if any, cannot be estimated with a
reasonable degree of precision and there can be no assurance that the
resolution of any particular claim or proceeding would not have an adverse
effect on the Company's results of operations for the interim period in which
such resolution occurred.
-9-
<PAGE> 10
PONDER INDUSTRIES, INC., AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion is included to describe the Company's financial
position and results of operations for the three-month periods ended November
30, 1996 and 1995. The Condensed Consolidated Financial Statements and notes
thereto contain detailed information that should be referred to in conjunction
with this discussion.
BUSINESS REVIEW
Ponder is an international oil field service and rental tool company that
specializes in the use of fishing tools for the recovery of unwanted
obstructions in oil and gas wells. The Company also rents specialized oil field
equipment such as pressure control equipment, tools, pipe and tubing used in
the drilling, completion and workover of wells. Ponder currently has 20
locations domestically and two internationally serving the North Sea area.
Demand for the Company's services and rentals depends primarily on the number
of oil and gas wells being drilled, the depth and drilling conditions of such
wells, and the level of workover activity. Drilling and workover activity is
largely dependent on the prices for oil and natural gas. Demand for oil and
natural gas the past year has allowed for much higher prices in 1996 that the
average prices for the past several years. World oil prices have been in the
mid to low $20's per barrel for several months and many industry analysts are
forecasting this situation to continue in 1997. These favorable market
conditions should continue and allow Ponder to continue its growth and return
to profitability.
LIQUIDITY AND CAPITAL RESOURCES
In November 1996, the Company completed a $10 million financing agreement with
KBK Financial, Inc. The agreement includes a $4 million revolving receivable
facility, a $2.5 million revolving credit note and a $3.5 million term note.
The receivable facility is a two year facility that is based on accounts
receivable and will be utilized for short-term liquidity needs. The $2.5
million revolving credit note is a five year facility based on inventory and
equipment and these funds will be used to acquire capital assets to expand the
business. The $3.5 million term note is a five and one-half year note,
interest only for the first six months and amortizes over the remaining five
years, collateralized by equipment. In December 1996, the Company borrowed
$3.5 million under the term note and paid off its existing bank debt of
approximately $3 million.
Working capital was approximately $1.1 million at November 30, 1996, as
compared to $1.2 million at August 31, 1996. The current ratio at November 30,
1996, was 1.16 to 1.0 as compared to 1.17 to 1.0 at August 31, 1996. The
long-term debt (assuming conversion of the convertible debentures) as a percent
of total capitalization was 30 percent at November 30, 1996, compared to 26
percent at August 31, 1996. The Company will have approximately $5 million
available under its financing agreements after paying off the bank debt and
certain payables outstanding at November 30, 1996.
Management believes the combination of working capital, the unused portion of
existing credit facilities and anticipated cash flows from operations provide
the Company with sufficient capital resources and liquidity to manage its
routine operations.
RESULTS OF OPERATIONS
A net loss of $882,000, or $.07 per share, was recorded for the three months
ended November 30, 1996, compared to net income of $12,000 for the same period
of the prior year. The Company's operating loss was $539,000, or $.04 per
share, compared to operating income of $43,000, or $.01 per share, for the same
period of the prior year.
Revenues increased $2,995,000, or 140 percent, to $5,141,000 for the three
months ended November 30, 1996, compared to $2,146,000 for the same period of
the prior year. The increase is due to a significant increase in the Company's
marketing effort and an increase in operating locations.
Cost of sales and services increased $1,356,000, or 160 percent, to $2,203,000
from $847,000 and operating expenses increased $1,494,000, or 181 percent, to
$2,320,000 from $826,000. These increases are due to the increase in sales
activity, establishing new store locations and the addition of operating
personnel.
General and administrative expenses increased $727,000, or 169 percent, to
$1,157,000 as compared to $430,000 for the prior period. The Company has
significantly increased its regional and corporate sales group and has
increased its corporate and administrative staff as a result of the expansion
effort. Additionally, the Company has incurred increased accounting, legal and
public corporation expenses associated with the increase in business activity.
Interest expense, net, increased $287,000 to $354,000 as compared to $67,000
for the comparable prior period. The increase is due primarily to $258,000
noncash interest and debt issue cost amortization on the 8 percent convertible
debentures issued effective April 26, 1996. The Company's interest expense on
higher debt levels is partially offset by a reduction in the average interest
rate of bank debt.
-10-
<PAGE> 11
PONDER INDUSTRIES, INC., AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1. Legal Proceedings - For a description of legal proceedings against the
Company, see Note 2 of the notes to condensed consolidated financial
statements included herein.
Item 2. Changes in Securities - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
*11 - Computation of Earnings (Loss) Per Share.
*27 - Financial Data Schedule.
- - - - ---------------
* Filed herewith
(b) Reports on Form 8-K - None
-11-
<PAGE> 12
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.
PONDER INDUSTRIES, INC.
By: /s/ Larry D. Armstrong
-------------------------------
Larry D. Armstrong
President, Chief Executive Officer
and Chairman of the Board of
Directors
By /s/ Eugene L. Butler
--------------------------------
Eugene L. Butler
Executive Vice President,
Chief Financial Officer and
Director
Dated: January 13, 1997
-12-
<PAGE> 13
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- - - - ------- -----------
<S> <C>
*11 - Computation of Earnings (Loss) Per Share.
*27 - Financial Data Schedule.
</TABLE>
<PAGE> 1
PONDER INDUSTRIES, INC., AND SUBSIDIARIES
COMPUTATION OF EARNINGS (LOSS) PER SHARE
<TABLE>
<CAPTION>
Three Months Ended
November 30
-------------------------------
1996 1995
------------ ------------
<S> <C> <C>
COMPUTATION OF PRIMARY EARNINGS (LOSS) PER SHARE:
Net income (loss) $ (881,635) $ 12,315
============ ============
WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK
OUTSTANDING 12,243,850 6,836,897
WEIGHTED AVERAGE INCREMENTAL SHARES OUTSTANDING UPON
ASSUMED CONVERSION OF OPTIONS 15,994 --
------------ ------------
WEIGHTED AVERAGE COMMON SHARES AND COMMON SHARE
EQUIVALENTS USED FOR COMPUTATION 12,259,844 6,836,897
============ ============
PRIMARY EARNINGS (LOSS) PER COMMON SHARE AND COMMON
SHARE EQUIVALENTS $ (.07) $ --
------------ ------------
COMPUTATION OF FULLY DILUTED EARNINGS (LOSS) PER SHARE:
Net income (loss) $ (881,635) $ 12,315
Interest not incurred upon assumed conversion of convertible debentures 182,499 --
------------ ------------
Net income (loss) available to common stockholders
used for computation $ (699,136) $ 12,315
============ ============
WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK
OUTSTANDING 12,243,850 6,836,897
WEIGHTED AVERAGE INCREMENTAL SHARES OUTSTANDING UPON
ASSUMED CONVERSION OF OPTIONS 15,994 --
WEIGHTED AVERAGE INCREMENTAL SHARES OUTSTANDING UPON
ASSUMED CONVERSION OF CONVERTIBLE DEBENTURES 6,492,311 --
------------ ------------
WEIGHTED AVERAGE COMMON SHARES AND COMMON SHARE
EQUIVALENTS USED FOR COMPUTATION 18,752,155 6,836,897
============ ============
EARNINGS (LOSS) PER COMMON SHARE AND COMMON SHARE
EQUIVALENT ASSUMING FULL DILUTION $ (.04)(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 is antidilutive.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PONDER
INDUSTRIES, INC.'S CONDENSED CONSOLIDATED BALANCE SHEET AS OF NOVEMBER 30, 1996,
AND ITS CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS THEN
ENDED AND IS QUALIFIED IN ITS ENTIRETY TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> NOV-30-1996
<CASH> 180,300
<SECURITIES> 0
<RECEIVABLES> 4,798,078
<ALLOWANCES> 153,491
<INVENTORY> 3,144,710
<CURRENT-ASSETS> 8,427,189
<PP&E> 30,041,245
<DEPRECIATION> (13,223,662)
<TOTAL-ASSETS> 29,603,625
<CURRENT-LIABILITIES> 7,285,006
<BONDS> 14,553,423
0
0
<COMMON> 126,360
<OTHER-SE> 6,146,968
<TOTAL-LIABILITY-AND-EQUITY> 29,603,625
<SALES> 5,141,125
<TOTAL-REVENUES> 5,141,125
<CGS> 2,202,620
<TOTAL-COSTS> 2,202,620
<OTHER-EXPENSES> 3,477,334
<LOSS-PROVISION> 15,000
<INTEREST-EXPENSE> 353,763
<INCOME-PRETAX> (881,635)
<INCOME-TAX> 0
<INCOME-CONTINUING> (881,635)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (881,635)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> (.04)
</TABLE>
