SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
__________________________________
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended September 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: 0-22944
US WATS, INC.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
New York 22-3055962
- ------------------------------- -------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
111 Presidential Boulevard
Bala Cynwyd, Pennsylvania 19004
- -------------------------- ----------
(Address of principal executive offices) (Zip Code)
(610) 660-0100
----------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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.
Outstanding at
Common Stock November 14, 1996
------------ -----------------
$.001 15,652,100
<PAGE>
US WATS, INC. AND SUBSIDIARIES
FORM 10-Q
INDEX
Page (s)
--------
PART I
- ------
FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets--
September 30, 1996 (unaudited) and December 31, 1995 3-4
Consolidated Statements of Operations--
Three and Nine Months Ended September 30, 1996 and
1995 (unaudited) 5
Consolidated Statements of Cash Flows--
Nine Months Ended September 30, 1996 and
1995 (unaudited) 6
Notes to Consolidated Financial Statements (unaudited) 7-9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-13
PART II
- -------
OTHER INFORMATION 14
SIGNATURE PAGE 15
-2-
<PAGE>
PART I
- ------
Financial Information
Item 1.
- -------
Financial Statements
US WATS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1996 1995
---------------------------
Assets
------
Current Assets
Cash and cash equivalents $1,330,200 $680,834
Accounts receivable, net of allowance for
doubtful accounts of $544,117 for 1996,
and $268,921 for 1995 6,700,132 4,900,066
Prepaid expenses and other 133,567 107,191
---------- ---------
Total Current Assets 8,163,899 5,688,091
---------- ---------
Property and Equipment
Telecommunications equipment 3,347,520 3,046,877
Equipment 1,305,701 1,231,346
Software 562,636 484,199
Office furniture and fixtures 128,770 119,630
Leasehold improvements 35,226 35,226
---------- ---------
5,379,853 4,917,278
Less accumulated depreciation and amortization 2,067,361 1,426,463
---------- ---------
Total Property and Equipment, net 3,312,492 3,490,815
---------- ---------
Other assets, principally deposits 283,115 321,455
---------- ---------
$11,759,506 $9,500,361
=========== ==========
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE>
US WATS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1996 1995
---------------------------
Liabilities and Shareholders' Equity
------------------------------------
Current Liabilities
Note payable $1,696,561 $1,175,164
Capital lease obligations, current portion 188,013 130,664
Accounts payable 5,609,550 4,581,373
Accrued commissions 603,517 753,596
Accrued expenses and other 608,932 361,010
State and Federal taxes payable 710,749 475,012
Deferred revenue 264,984 371,791
---------- ----------
Total Current Liabilities 9,682,306 7,848,610
---------- ----------
Long-Term Liabilities
Capital lease obligations, net of current portion 552,048 601,037
---------- ----------
Commitments and Contingencies
Redeemable preferred stock, $.01 par, authorized
150,000 shares; 30,000 shares issued
and outstanding in 1996 and 1995
Redemption value: $11.00 per share 300,000 300,000
---------- ----------
Preferred stock, $.01 par, authorized
850,000 shares, none issued and outstanding -- --
Common Shareholders' Equity
Common stock, $.001 par, authorized
30,000,000 shares;
issued 15,902,100 shares in 1996,
and 15,852,100 shares in 1995 15,902 15,852
Additional paid-in capital 2,623,350 2,573,400
Deficit (1,413,850) (1,838,288)
---------- ----------
1,225,402 750,964
Common stock held in treasury
(250,000 shares), at cost (250) (250)
---------- ----------
1,225,152 750,714
---------- ----------
$11,759,506 $9,500,361
=========== ==========
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE>
US WATS, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ------------------------
1996 1995 1996 1995
---- ---- ---- ----
Revenues $10,222,492 $6,934,942 $28,576,118 $20,605,441
Cost of sales 7,017,683 4,468,180 18,813,045 10,654,785
----------- ---------- ----------- -----------
Gross profit 3,204,810 2,466,762 9,763,073 9,950,656
Selling, general, and
administrative expenses 3,051,169 2,828,926 9,158,056 8,918,265
----------- ---------- ----------- -----------
Income (loss) from
operations 153,626 (362,164) 605,017 1,032,391
----------- ---------- ----------- -----------
Other income (expense)
Interest income 19,607 16,684 41,444 52,667
Interest expense 76,633 32,281 201,773 49,533
----------- ---------- ----------- -----------
Total other income
(expense) (57,026) (15,597) (160,329) 3,134
Income (loss) before
income taxes 96,615 (377,761) 444,688 1,035,525
Income taxes -- (111,000) -- 195,000
----------- ---------- ----------- -----------
Net income (loss) before
preferred dividends 96,615 (266,761) 444,688 840,525
Preferred dividends earned 6,750 11,250 20,250 49,805
----------- ---------- ----------- -----------
Net income (loss) available
to common shareholders $89,865 $(278,011) $424,438 $790,720
=========== ========== =========== ===========
Earnings (loss) per common
shares available to common
shareholders $.01 $(.02) $.02 $.05
=========== ========== =========== ===========
Weighted average number of
shares in computation 17,980,655 17,355,764 17,790,655 17,130,927
=========== ========== =========== ===========
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE>
US WATS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended
September 30,
1996 1995
------------------------
Cash flows from operating activities
Net Income before preferred dividends $444,688 $840,525
Adjustments to reconcile income
to net cash provided by operating activities
Depreciation and amortization 679,226 654,382
Provision for bad debts 367,614 671,802
Litigation settlement -- (2,882,223)
Issuance of stock bonus -- 25,000
Net decrease in non-cash current assets
Accounts receivable (2,167,680) (648,495)
Prepaid expenses and other (26,376) (50,841)
Net increase (decrease) in non-debt current
liabilities
Taxes payable 235,737 331,822
Accounts payable 1,028,177 525,489
Accrued expenses (205,788) 186,034
(Increase) decrease in deposits 1,874 (20,000)
(Increase) decrease in prepaid other assets (1,862) 1,500
---------- ---------
Net cash provided by (used in) operating activities 355,610 (365,005)
---------- ---------
Cash flows from investing activities
Purchase of property and equipment (338,115) (473,757)
---------- ---------
Net cash used in investing activities (338,115) (473,757)
---------- ---------
Cash flows from financing activities
Advances of notes payable 521,397 869,132
Preferred stock dividends (20,250) (56,005)
Payment of loan acquisition fees -- (102,447)
Advances from officers/directors 196,824 --
Repayments of capital lease obligations (116,100) --
Proceeds from issuance of common stock options 50,000 25,000
---------- ---------
Net cash provided by financing activities 631,871 735,680
---------- ---------
Net increase (decrease) in cash 649,366 (103,082)
Beginning cash 680,834 628,573
---------- ---------
Ending cash $1,330,200 $525,491
========== ========
The accompanying notes are an integral part of these financial statements.
-6-
<PAGE>
US WATS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Background
- --------------
US WATS, Inc. (the "Company") is a switch-based interexchange carrier
providing long distance telephone communications services primarily to small
and medium-sized business customers. The Company also provides inbound-800
long distance services, as well as other telecommunications services such as
travel cards (calling cards), cellular, paging, dedicated access, data
services, pre-paid calling cards (debit cards), international callback, and
carrier termination services. The Company uses its own switches and
facilities to originate, transport and terminate calls for customers
generally located in the Mid-Atlantic region and California (on-net areas).
The Company currently serves its customers with two Digital Switch
Corporation toll switches located in Philadelphia, Pennsylvania, and Oakland,
California. Traffic is trunked between the Company's two (2) switches with
leased long haul facilities. For calls originating or terminating outside
the Company's own network (off-net area), the Company utilizes the services
provided by other long distance companies. The majority of the Company's
revenues are currently derived from its customers located on the East Coast.
The accompanying unaudited interim consolidated financial statements and
related notes have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission and in the opinion of management, include
all adjustments necessary for a fair presentation of such financial
statements. Such adjustments consist only of normal recurring items.
Certain information and note disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been omitted pursuant to such rules and regulations. Certain
amounts in the prior period financial statements have been reclassified to
conform to the current period presentation. The results of operations for
the nine months ended September 30, 1996 are not necessarily indicative of
results to be expected for the full year.
The accompanying unaudited interim consolidated financial statements and
related notes should be read in conjunction with the financial statements and
related notes included in the Company's Form 10-K for the year ended December
31, 1995.
2. Summary of Significant Accounting Policies
- ----------------------------------------------
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its three wholly-owned subsidiaries, USW Corporation, USW Enterprises, Inc.,
and Carriers Group, Inc. of Nevada, after elimination of all inter-company
accounts, transactions and profits.
Asset Acquisition
The Company entered into an asset purchase agreement with Carriers Group,
Inc. of California on October 17, 1996 for the purchase of various fixed
assets, certain billing software, and its customer list. The purchase price
was paid in stock and cash. The total consideration was not material.
-7-
<PAGE>
Revenue Recognition
The Company recognizes revenue based upon the customer's usage of services.
The Company bills its customers for service on a monthly basis.
Cash and Cash Equivalents
The Company considers cash in bank and repurchase agreements with a maturity
of three months or less when purchased as cash and cash equivalents.
Property and Equipment
Property and equipment are recorded at cost. Depreciation is calculated for
financial reporting purposes using the straight line method over the
estimated useful lives of the assets:
Telecommunications equipment ................... 7 years
Furniture fixtures and other ................... 5 years
Deferred Financing Costs
Loan origination costs are amortized by the straight-line method over the
term of the related loan.
Accounts Payable
Accounts payable includes the cost of access charges due local telephone
companies and long distance transport purchased from long distance carriers.
Use of Estimates
The preparation of the Consolidated Financial Statements in conformity with
generally accepted accounting principles requires the use of management's
estimates.
Earnings Per Common Share
Earnings per common share is based upon the weighted average number of common
and common equivalent shares outstanding for the nine months ended September
30, 1996 and considers stock options, warrants, and convertible preferred
stock.
-8-
<PAGE>
3. Uninsured Cash
- ------------------
The Company, from time-to-time, invests its cash balances in excess of its
operating needs for short-term periods in repurchase agreements. These
arrangements are more fully described in the Company's Form 10-K for the year
ended December 31, 1995.
4. Related Party Transactions
- ------------------------------
On May 11, 1995, the Company agreed to issue to each of two
directors/officers of the Company 600,000 Warrants to purchase Common Stock,
in consideration for limited personal guarantees to be provided in connection
with the revolving credit facility. Each Warrant entitles the holder to
purchase one share of Common Stock of the Company at a price of $1.0625 per
share until May 11, 2000. The Warrants are non-transferable by the officers,
and the stock issuable upon exercise of Warrants is subject to the
restrictions of Rule 144 of the Federal Securities laws.
During the quarter ended March 31, 1996, two officers/directors made advances
to the Company. At June 30, 1996, $196,824 was owed to these
officers/directors which is recorded as accrued expenses and other. Interest
on the advances are payable at 10% per annum. The notes are due on demand.
5. Asset Acquisition
- ----------------------
The Company has a contract with commitment levels as follows:
Commitment Remaining at September 30, 1996
Company Service Length of Commitment Approx $ Commitment
- ------- ------- -------------------- -------------------
WILTEL 1+, 800, Private Line 38 months $9,500,000(1)
(1) The Company is at or above minimum monthly requirement.
6. Litigation
The Company is party, in the ordinary course of business, to litigation
involving services rendered, contract claims and other miscellaneous causes
of action arising from its business. Although such matters are immaterial
individually, the aggregate effect of all such matters, if resolved
adversely, could affect the financial position of the Company. Management
does not consider that any such matters depart from usual routine litigation
and, in its judgement, the Company's financial condition or results of
operations will not be materially affected by such proceedings.
-9-
<PAGE>
Item 2.
- -------
Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
During the quarter ended September 30, 1996, the Company implemented its new
agent and reseller sales program. The goal of this strategy is to
substantially increase the Company's number of customers and revenue located
in four targeted regions: the Northeast, Mid-Atlantic, West, and Mid-West.
The West and Mid-West regions have previously accounted for less than 5.0% of
the Company's retail revenue.
The Company's new agent program involved significant changes in the Company's
pricing and commission payment methods. Previously, the Company offered
competitive pricing only where the Company was able to originate and
terminate calls using its own facilities (on-net). As a result, the Company
attracted little off-net traffic and was effectively unable to obtain all of
its agent's and reseller's business.
As part of this program, the Company changed from a percentage-based
commission program to a volume discounted "buy price" program. The Company's
state-by-state interstate rates were replaced by a postalized rate, thus
eliminating the distinction between areas where the Company had and did not
have facilities. This postalized rate was also more competitive than the
Company's previous on-net rates. As a result, the Company expects its
commission expense as a percentage of revenue to increase. It is expected
that the effect of this will be mitigated by price reductions by the
Company's agents. A combination of competitive forces and continued
reductions in retail rates per minute required that the Company offer a more
competitive agent program. Management believes that lower attrition rates
and additional volume from new business will more than offset the effect of
this price decrease.
The Company has experienced reductions in retail rates for its 1+ and 800
interstate products of approximately 6.0% to 7.5%, respectively, over the
course of the first nine months of 1996. The Company's new buy rates have
led to both a significant increase in agents under contract and new accounts
added to the Company's network during the end of the Company's third quarter.
The Company has deployed five regional agent managers in the four regions
mentioned above in order to attract, train, and develop business from agents
within these regions. The Company will continue to provide customer and
technical support from its home office.
Revenue for the quarter ended September 30, 1996 exceeded the level earned
for the prior quarter by approximately $795,000 representing an approximate
8.4% increase. The Company's new agent and reseller programs contributed
approximately 50% of this increase. The Company expects the growth in retail
revenue to accelerate as it adds regional agent managers and recruits
additional agents and resellers. Retail revenue accounted for approximately
71.8% of the Company's revenue for the quarter ended September 30, 1996. The
Company expects to maintain this percentage of retail business for the
foreseeable future. Revenue for the quarter ended September 30, 1996 was the
highest quarterly revenue recorded by the Company to date.
Revenue for the quarter ended September 30, 1996 exceeded the amount earned
in the quarter ended September 30, 1995 by approximately $3,290,000, an
increase of approximately 47.4%. This increase was due to revenue from the
Company's carrier termination product of approximately $2,030,000 and retail
revenue of approximately $795,000. The carrier termination product is
utilized to more fully utilize its network capacity and justify its network
expansion.
-10-
<PAGE>
Revenue year-to-date September 30, 1996 increased over the prior year amount
by approximately $7,970,000 primarily as a result of revenue generated by the
Company's carrier termination product of approximately $4,450,000,
International Callback of approximately $2,265,000, and retail revenue of
approximately $1,415,000. The Company expects this trend of increasing
retail revenue to continue to accelerate as a result of the agent marketing
strategy outlined above.
Gross profit as a percentage of revenue for the quarter ended September 30,
1996 (31.4%), declined from the level earned in the quarter ended June 30,
1996 (35.9%). Gross profit year-to-date September 30, 1996 was approximately
34.2%. As discussed in the Company's Management's Discussion and Analysis
for the quarter ended June 30, 1996, the Company has been awaiting the
installation of numerous high capacity long-haul and originating circuits in
order to process, on its own facilities, its significantly increasing traffic
levels. Minutes billed for the quarter ended September 30, 1996 increased
approximately 15% over the level billed for the quarter ended June 30, 1996.
The Company's vendors were unexpectedly unable to provide the installation of
these circuits near standard intervals. As the installation of these
circuits fell behind the requirements of the increasing call volumes,
abnormally high amounts of traffic began to overflow to the Company's
vendors, resulting in significant increases in costs. These overflow volumes
became significant during August and September, resulting in significant
reductions in gross margin for such traffic in those months. The Company
estimates the cost incurred of this excess overflow to be approximately
$125,000 for the quarter ended September 30, 1996.
The majority of the circuits ordered were installed by mid-November. As a
result, the Company expects its volume of overflow to fall to normal levels,
resulting in an increase in gross margins midway through the fourth quarter
of 1996. The delays experienced also caused the Company to delay the
provisioning of certain accounts, resulting in reduced revenue and associated
gross margin. The Company expects that it will be able to provision these
additional accounts by the end of the year.
Gross profit as a percentage of sales earned in the quarter ended September
30, 1996 (approximately 31.4%) also declined as compared to the quarter ended
September 30, 1995 (approximately 35.6%) due substantially to the excess
overflow and facilities difficulties discussed above.
Gross profit as a percentage of sales for the year-to-date September 30, 1995
(48.3%) was significantly higher than the amount earned September 30, 1996
(approximately 34.2%) year-to-date due to a non-recurring benefit of
approximately $2,885,000 generated by the reversal of an account payable in
settlement of litigation with a vendor during 1995. Gross profit, exclusive
of this and certain non-recurring disputed charges related to 800 services,
would have been approximately 34.9%.
Selling, General & Administrative (SG&A) costs for the quarter ended
September 30, 1996 increased approximately $220,000 over the amount recorded
in the quarter ended September 30, 1995, but fell significantly as a
percentage of revenue (29.9% versus 40.8%). SG&A for the year-to-date
September 30, 1996 also increased in amount as compared to the prior
year-to-date (approximately $240,000) but declined as a percentage of
revenue, from approximately 43.3% to approximately 32.1%. Several factors
have contributed to this improvement. Better utilization of the Company's
automated procession systems in 1996 and increased wholesale traffic, led to
an increase in its personnel efficiencies. In 1995 the Company also
experienced unusually high legal costs as a result of its litigation with
Colonial Penn Group, Inc. and AT&T, as well as higher bad debt.
Non-recurring expenses incurred during the quarter ended September 30, 1995
were approximately $250,000. As a result, recurring SG&A for the quarter ended
September 30, 1996 increased approximately $470,000 over the level for the
quarter ended September 30, 1995. This increase was primarily due to increases
in commission expense from increased agent and reseller revenue. Recurring
-11-
<PAGE>
SG&A for the year-to-date September 30, 1996 increased approximately
$1,390,000 over the amount for the year-to-date September 30, 1995 due to
increased commissions on agent and reseller revenue and increased salary
costs. Salary costs as a percentage of revenue decreased from approximately
9.7% for the year-to-date September 30, 1995 to approximately 8.0% for the
year-to-date September 30, 1996 due to increased personnel efficiencies.
Interest expense for the quarter and year-to-date September 30, 1996
substantially exceeded the amounts incurred for the quarter and year-to-date
September 30, 1995 due to the financing of various capital asset additions
(primarily the Company's second toll switch) and increased working capital
needs created by the increased revenue levels.
The Company recorded net income before preferred dividends for the quarter
ended September 30, 1996 of approximately $97,000 versus approximately
$204,000 for the quarter ended June 30, 1996, a reduction of approximately
$107,000. As explained above, the Company experienced a delay in the
installation of certain long-haul and originating circuits, thus causing
abnormally high amounts of traffic to overflow to higher cost routes. The
reduced profitability was substantially due to the effect of this overflow.
Management believes that most of its abnormal overflow has been eliminated by
mid-November 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital ratio continued to improve during the current
year. The Company's working capital ratio at September 30, 1996 was .84:1.0
versus .72:1.00 at December 31, 1995 and .81:1.00 at June 30, 1996. Working
capital increased approximately $640,000 from its level at December 31, 1995
to September 30, 1996. This improvement was primarily due to the Company's
improved operating results.
Accounts receivable increased from its balance at December 31, 1995 by
approximately $1,800,000, primarily due to increased monthly traffic levels.
The Company has not experienced significant changes in its accounts
receivable turnover over the course of the year. Accounts payable have
increased approximately $1,030,000, also due primarily to the increased
traffic levels.
To date, the Company has financed its growth with limited equity capital.
During the past several years, the Company has financed its substantial
revenue growth and resulting working capital needs with a line of credit and
various equipment financings. Year to date September 30, 1996 the Company
has exceeded its year-to-date September 30, 1995 revenue levels by
approximately 39%.
During the third quarter of 1996, the Company launched an aggressive agent
and reseller program aimed at increasing its retail revenue in the four
regions discussed above. As a result, Management expects this program and
the Company's wholesale products to provide substantial revenue growth into
1997 thus creating the need for substantial additional working capital and
network expansion funds. The substantial increase in traffic is also
expected to require additional switching beyond the maximum capacity of the
Company's Philadelphia toll switch. As a result, it is expected that the
Company will need to install additional switching capacity in the
Mid-Atlantic region during 1997. The Company expects to finance this
purchase with a combination of cash and equipment financing. In addition,
the Company expects that it will require additional office space to
accommodate the expected growth in its customer support and administrative
staff. A relocation of the Company's offices in order to obtain more
efficient space is also under review.
-12-
<PAGE>
Management does not anticipate that operating cash flow will provide
sufficient working capital to finance its needed expansion. In order to
satisfy the capital needs of its expected growth, the Company is currently
planning to raise approximately $1 million to $3 million in equity in the
near future. It is also expected that the Company will also seek an increase
in its working capital line of credit. The Company may also utilize a
portion of funds raised for the acquisition of other long distance companies.
-13-
<PAGE>
PART II
- -------
Other Information
Item 1. Legal Proceedings
For a discussion of pending legal proceedings, see Note 6 to
the Consolidated Financial Statements contained in this
filing.
Item 2. Changes in Securities
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
The Company has scheduled its Annual Meeting of Shareholders
to be held on December 30, 1996.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: None.
(b) Reports on Form 8-K: None.
-14-
<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.
US WATS, Inc.
(Registrant)
By: /s/ Aaron R. Brown
--------------------------------------------
AARON R. BROWN,
Chief Executive Officer, Director, Treasurer
By: /s/ Ward G. Schultz
--------------------------------------------
WARD G. SCHULTZ,
Chief Financial Officer
Dated: November 14, 1996
<PAGE>
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<ARTICLE> 5
<S> <C>
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,330,200
<SECURITIES> 0
<RECEIVABLES> 7,244,249
<ALLOWANCES> 544,117
<INVENTORY> 0
<CURRENT-ASSETS> 8,163,899
<PP&E> 5,379,853
<DEPRECIATION> 2,067,361
<TOTAL-ASSETS> 11,759,506
<CURRENT-LIABILITIES> 9,682,306
<BONDS> 0
300,000
0
<COMMON> 15,902
<OTHER-SE> 1,209,250
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<TOTAL-REVENUES> 10,222,492
<CGS> 7,017,683
<TOTAL-COSTS> 0
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<LOSS-PROVISION> 148,152
<INTEREST-EXPENSE> 57,026
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