SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q/A
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended December 31, 1998; 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 000-19577
---------
HARMONY HOLDINGS, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 95-4333330
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
5501 EXCELSIOR BLVD.
MINNEAPOLIS, MN 55416
(Address of Principal Executive Offices)
(Zip Code)
(612) 925-8840
(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 last practicable date.
Class Outstanding at February 10, 1999
------------------- --------------------------------
COMMON STOCK, PAR VALUE 7,506,660 SHARES
$.01 PER SHARE
1
<PAGE>
INDEX
HARMONY HOLDINGS, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets - December 31, 1998 and June 30, 1998.
Consolidated Statements of Operations -- Three and six months ended
December 31, 1998 and 1997.
Consolidated Statements of Cash Flows -- Six months ended December
31, 1998 and 1997.
Notes to consolidated financial statements -- December 31, 1998.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
HARMONY HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
AMENDED
DECEMBER 31, JUNE 30,
1998 1998
------------------------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,340,657 $ 3,834,023
Accounts receivable 3,814,037 6,604,186
Allowance for doubtful accounts (109,206) (43,717)
Unbilled accounts receivable 578,901 327,475
Other current assets 1,379,537 1,051,296
Notes Receivable 4,600 235,155
------------------------------
Total Current Assets 7,008,526 12,008,418
Property and equipment, net 2,369,247 2,123,412
Goodwill, net 175,000 2,545,885
Other assets 456,917 249,400
------------------------------
Total Assets $ 10,009,690 $ 16,927,115
==============================
LIABILITY & SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,743,074 $ 3,199,760
Accrued liabilities 1,061,220 4,406,014
Accrued restructuring costs 887,794 --
Line of credit 2,205,384 2,750,000
Note payable - CBC 875,000 --
Deferred income 1,788,836 2,342,133
------------------------------
Total Current Liabilities 10,561,308 12,697,907
Total Liabilities 10,561,308 12,697,907
------------------------------
Shareholders' equity:
Common stock, $.01 par value:
Authorized shares- 20,000,000
Issued & outstanding shares- 7,506,660
September 30 and 7,237,429 June 30, 1998 75,067 72,375
Additional paid-in capital 16,365,596 15,800,687
Accumulated deficit (16,992,281) (11,643,854)
------------------------------
Total Shareholders' Equity (551,618) 4,229,208
------------------------------
Total Liabilities & Shareholders' Equity $ 10,009,690 $ 16,927,115
==============================
</TABLE>
<PAGE>
HARMONY HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
AMENDED AMENDED
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------------------------ ------------------------------
1998 1997 1998 1997
------------------------------ ------------------------------
<S> <C> <C> <C> <C>
Revenues:
Contract revenues $ 14,079,885 $ 11,340,760 $ 31,384,284 $ 22,720,236
Cost of production 12,305,295 9,130,992 26,828,754 18,254,490
------------------------------ ------------------------------
Gross profit 1,774,590 2,209,768 4,555,530 4,465,746
Operating expenses:
Selling 817,365 567,237 1,634,049 1,199,451
General and administrative 1,808,444 2,171,276 3,848,590 4,189,387
------------------------------ ------------------------------
Income (loss) from productions (851,219) (528,745) (927,109) (923,092)
Subsidiary stock option compensation 108,800 -- 217,600 --
Depreciation & amortization 264,980 174,337 474,336 350,071
Restructuring costs and impairment of assets 3,532,495 -- 3,532,495 --
------------------------------ ------------------------------
Income (loss) from operations (4,757,494) (703,082) (5,151,540) (1,273,163)
Interest income 14,763 9,604 29,925 29,487
Interest expense (97,563) (8,541) (217,210) (12,236)
------------------------------ ------------------------------
Net income (loss) before income taxes (4,840,294) (702,019) (5,338,825) (1,255,912)
Income taxes -- (20,106) 9,601 23,142
------------------------------ ------------------------------
Net income (loss) $ (4,840,294) $ (681,913) $ (5,348,426) $ (1,279,054)
============================== ==============================
Net income (loss) per share $ (0.66) $ (0.11) $ (0.73) $ (0.20)
============================== ==============================
Weighted average number of shares outstanding 7,389,603 6,481,779 7,313,516 6,497,614
============================== ==============================
</TABLE>
<PAGE>
HARMONY HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
AMENDED
SIX MONTHS ENDED
DECEMBER 30,
------------------------------
1998 1997
------------------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (5,348,426) $ (1,279,054)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation & amortization 474,336 348,806
Impairment of assets 2,215,175 --
Issuance of non-cash compensation expense 217,600 75,000
Decrease (increase) in:
Accounts receivable 2,855,638 2,501,574
Unbilled accounts receivable (251,426) (3,396)
Other assets (328,241) (231,924)
Increase (decrease) in:
Accounts payable 543,314 (429,815)
Accrued liabilities (3,344,794) (1,883,940)
Deferred income (553,297) 573,034
Accrued restructuring costs 887,794 --
------------------------------
Net cash used in operating activities: (2,632,327) (329,715)
INVESTING ACTIVITIES:
Capital expenditures (771,978) (336,106)
Notes receivable 230,555 (4,789)
------------------------------
Net cash used in investing activities (541,423) (340,895)
------------------------------
FINANCING ACTIVITIES:
Line of credit (544,616) --
Debt proceeds 875,000 --
Proceeds from issuance (repurchase) of common stock 350,000 (554,750)
------------------------------
Net cash provided by/(used in) financing activities 680,384 (554,750)
------------------------------
Increase (decrease) in cash and cash equivalents (2,493,366) (1,225,360)
Cash and cash equivalents at beginning of year 3,834,023 2,354,625
------------------------------
Cash and cash equivalents at end of year $ 1,340,657 $ 1,129,265
==============================
</TABLE>
<PAGE>
Harmony Holdings, Inc.
Notes to Consolidated Financial Statements (unaudited)
December 31, 1998
Note 1 Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and pursuant to the rules and regulations of the
Securities and Exchange Commission. Accordingly, they do not include all the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals with the exception of the adjustments
discussed in Note 2) considered necessary for a fair presentation have been
included. Operating results for the six-month period ended December 31, 1998 are
not necessarily indicative of the results that may be expected for the year
ended June 30, 1999. For further information, refer to the consolidated
financial statements and footnote thereto included in the Company's Form 10-K
for the year ended June 30, 1998.
Note 2 Significant Transactions During Fiscal Year Ending June 30, 1999
The following significant transactions occurred during the first six months of
the fiscal year ending June 30, 1999 and are considered not-recurring:
A. In July 1998, Children's Broadcasting Corporation ("CBC") purchased
250,000 shares of the Company's common stock on the open market. The
purchase of these shares resulted in an increase in CBC's ownership of
the Company to approximately 44.1%.
B. In July 1998, the Company replaced its then existing bank line of credit
with an asset-based loan and security agreement with Heller Financial,
Inc. ("Heller"). This loan and security agreement provides for the
following borrowings: a revolving line of credit with maximum
availability of $4,500,000 based on acceptable accounts receivable,
which line of credit bears interest at a variable rate (9.25% at
December 31, 1998); and a $500,000 term note to be disbursed at the sole
discretion of Heller. The loan and security agreement requires the
Company to comply with certain restrictive covenants and is guaranteed
by CBC.
C. In November 1998, CBC made an equity investment in the Company of
$350,000 by purchasing 269,231 shares of the Company's common stock for
a price of $1.30 per share. CBC's also purchased an additional 225,000
shares of the Company's common stock from individual shareholders. CBC's
ownership in the Company is now approximately 49.1%.
D. In November 1998, the Company announced and began the process of
discontinuing operations of its Harmony Pictures division. This division
consists of Harmony Pictures, Inc., Melody Films, Inc., Lexington Films,
Inc., and Pure Films, Inc. During the last fiscal year, this division
recorded revenues of $10,867,000 and operating losses of $1,625,000.
Results of operations for the division for the three and six months
ended December 1998 and 1997 were:
Three Months Ended Six Months Ended
12/31/98 12/31/97 12/31/98 12/31/97
-------------------- --------------------
Revenues $715,000 $3,350,000 $1,855,000 $5,801,000
<PAGE>
Operating Loss $(217,000) $(184,000) $(812,000) $(592,000)
In connection with discontinuing the division's operations, management
has estimated and accrued restructuring costs totaling $888,000. These
costs were accrued when the discontinuance decisions were announced and
the restructure costs could be reasonably estimated. These costs include
severance payments, contract buyouts, lease obligations, non-refundable
prepayments, and general office shut-down logistics. The Company
believes all obligations will have been met by the close of the third
quarter ending March 31, 1999. Upon reaching the decision to discontinue
the division's operations, management determined that the goodwill
associated with the divisions was fully impaired. Accordingly, an
impairment charge equaling the net book value of the goodwill,
$2,215,000 was recognized in the quarter ended December 31, 1998.
E. In November and December 1998, CBC advanced the Company working capital
of $75,000, $500,000, $200,000, and $100,000 in four separate
transactions. These advances are evidenced by four promissory notes,
each due within 30 days of after demand and each bearing interest at a
rate of 10% per annum.
F. In January 1999, CBC advanced the Company working capital of $75,000,
$1,100,000 and $900,000 in three separate transactions. These advances
are evidenced by three promissory notes, each due within 30 days after
demand and each bearing interest at a rate of 10% per annum.
G. In February 1999, the Company filed a report on Form 8-K with the
Securities and Exchange Commission announcing that effective as of close
of business on February 9, 1999, the Company's shares of common stock
were removed from the Nasdaq SmallCap Market and are now being traded on
the OTC Bulletin Board which is run and operated by Nasdaq. This action
was a result of the Company falling below the net tangible asset
threshold required to remain listed on the Nasdaq SmallCap Market.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Statements in this report that are forward-looking are based on
current expectations, and actual results may differ materially. Forward-looking
statements involve numerous risks and uncertainties that could cause actual
results to differ materially, including, but not limited to, the possibilities
that the demand for the Company's services may decline as a result of possible
changes in general and industry specific economic conditions and the effects of
competitive pricing and such other risks and uncertainties as are described in
this report on Form 10-Q and other documents previously filed or hereafter filed
by the Company from time to time with the Securities and Exchange Commission.
Overview
During the periods reported herein, the Company operated through
four major groups, or divisions. Each division consists of one of the Company's
subsidiaries, which subsidiary in turn may operate one or more of its own
subsidiaries. The four principal subsidiaries that represent the major operating
divisions are The End, Inc. ("The End"), The End (London), LTD. ("The End
(London)"), Curious Pictures Corporation ("Curious Pictures"), and Harmony
Pictures, Inc. ("Harmony Pictures"). The End (London) was formed in 1997 and, as
a start-up company, did not contribute to the Company's overall operations
during the six months ended December 31, 1997 to the extent it has as a fully
operational division during the six months ended December 31, 1998.
During the second quarter of fiscal year 1999, the Company
discontinued the operations of Harmony Pictures. The three remaining principal
subsidiaries continue to recognize increasing revenues and are fully
operational.
Results of Operations:
Three and Six months Ended December 31, 1998 Compared to Three and
Six Months Ended December 31, 1997:
The Company's total revenues increased $2,739,000 or 24% from
$11,341,000 in the second quarter of fiscal year 1998 to $14,080,000 in the
second quarter of fiscal year 1999. Revenues during the first half of the
current year increased 38% from $22,720,000 at December 31, 1997 to $31,384,000
at December 31, 1998. This increase in revenue represents revenue increases of
$5.7 million by The End (London), $3.9 million by The End, and $3.2 million by
Curious Pictures. These increases are due primarily to the improved resources
with which the subsidiaries are able to attract and retain directors. Revenue
decreased at Harmony Pictures $4.0 million during the first half of the current
year. As mentioned above, the Company has discontinued the operations of Harmony
Pictures.
Cost of production is directly related to revenues and includes all
direct costs incurred in connection with the production of television
commercials including film, crews, location fees and commercial directors' fees.
Cost of production as a percentage of revenues increased from approximately 81%
to 87% during the second quarter of fiscal year 1999 compared to the same period
of fiscal year 1998, and increased from 80% to 85% during the first half of the
current fiscal year compared to the first half of fiscal year 1998. This
increase is due to bids submitted by the Company at lower margins than the
previous year in an attempt to increase operating revenues and, in part due to
the cost of revenues of Harmony Pictures, which exceeded 89% of Harmony
Pictures' contract revenues during the six months ended December 31, 1998. As a
result of the increase in the cost of production, gross margins as a percentage
of revenues decreased from 19% for the quarter ended December 31, 1997 to 13% in
the quarter ended December 31, 1998, and decreased from 20% for the six months
ended December 31, 1997 to 15% for the same period ending December 31, 1998.
<PAGE>
Selling expenses consist of sales commissions, advertising and
promotional expenses, travel and other expenses incurred in the securing of
television commercial contracts. Selling expenses totaled $817,000 in the second
quarter of fiscal year 1999 compared to $567,000 in the second quarter of fiscal
year 1998, an increase of 44%. During the first half of fiscal year 1999, these
expenses increased 36% compared to the same period in fiscal year 1998 due
primarily to expenses related to The End (London), which incurred only $50,000
of selling expenses during the first half of the last fiscal year compared to
$500,000 during the current fiscal year.
General and administrative expenses consist of overhead costs such
as office rent and expenses, executive, general and administrative payroll, and
related items. General and administrative expenses decreased $363,000 in the
second quarter of fiscal year 1999 to $1,808,000 as compared to $2,171,000 for
the second quarter of fiscal year 1998. These expenses decreased 8% during the
first six months of fiscal year 1999 as compared to the same period in fiscal
year 1998 due primarily to the cessation of operations at Harmony Pictures.
During comparable six-month periods of fiscal year 1999 and fiscal year 1998,
general and administrative expenses at Harmony Pictures decreased $497,000 due
to the discontinuation of its operations. While these expenses increased
somewhat at the remaining three divisions, general and administrative expenses
decreased $6,000 at the corporate level.
The $109,000 stock option compensation expense reported during the
quarter ended December 31, 1998 and $218,000 reported for the six months ended
December 31, 1998 represent a non-cash charge resulting from certain managers of
Curious Pictures earning stock options under a December 15, 1996 agreement
between the Company and the managers.
Depreciation and amortization expense increased in the second
quarter of fiscal year 1999 by 52% and in the first half of fiscal year 1999 by
35% compared to the same periods of fiscal year 1998 due to the increase in
depreciable assets.
Upon reaching the decision to discontinue the Harmony Pictures
division, management determined that the goodwill associated with the division
was fully impaired. Accordingly, an impairment charge of $2,215,000 was
recognized in the current quarter. This current period charge will decrease the
Company's future amortization expense and is combined with other restructuring
costs of $1,317,000 on the accompanying income statement. The restructuring
costs relate to the incremental costs of discontinuing the division and include
severance payments, contract buyouts, lease obligations, non-refundable
prepayments, and general office shut down logistics.
Interest income increased slightly during the three and six months
ended December 31, 1998 compared to similar periods ending December 31, 1997.
This increase is due to cash balances being held longer at Curious Pictures and
The End (London). Interest expense for the second quarter of fiscal year 1999
was $98,000, an increase of $89,000 over the second quarter of fiscal year 1998.
During the first half of fiscal year 1999, interest expense increased $205,000
from $12,000 to $217,000 as a result of increased borrowings by the Company
under the new credit facility the Company entered into with Heller in July 1998.
No income tax expense was recorded in the second quarter of fiscal
year 1999 and income tax expense decreased to $10,000 from $23,000 during the
first six months of fiscal year 1999 compared to the same period of fiscal year
1998. The Company's effective income tax rate varied from the statutory federal
tax rate as a result of state taxes and an increase in the valuation allowance
booked against the deferred tax asset. A valuation allowance has been
established for the full amount of the Company's net deferred tax asset, as the
Company cannot
<PAGE>
determine that it is more likely than not that the deferred tax assets
(primarily net operating loss carryforwards) will be realized.
The Company as a whole incurred net losses of $4,840,000 and
$5,348,000 for the three and six-month periods ended December 31, 1999
respectively. The losses include the restructuring and asset impairment costs
totaling $3,532,000 related to the discontinued operations of Harmony Pictures.
During the first half of fiscal year 1999, the Company would have generated a
net loss of only $1,004,000 if it were not for the activities of Harmony
Pictures.
Liquidity and Capital Resources
The Company's liquidity, as measured by its working capital, was a
deficit of $3,553,000 at December 31, 1998 compared to a deficit of $689,000 at
June 30, 1998.
In July 1998, the Company replaced its bank line of credit with an
asset based loan and security agreement with Heller (see Note 2.B of the
financial statements). As part of this agreement, the Company is allowed to
borrow from a revolving line of credit, with a maximum availability of
$4,500,000 or a percentage of acceptable accounts receivable. The interest rate
is variable (9.25% at December 31, 1998). At December 31, 1998, the Company had
a $2,205,000 balance due on the line of credit.
As the Company's operations have not been able to support its
working capital needs, CBC, the Company's principal stockholder, has resolved to
invest such funds in the Company as necessary to meet its working capital
requirements through June 30, 1999. This may involve loans or the purchase of
securities. In November 1998, CBC made an equity investment in the Company of
$350,000 by purchasing 269,231 shares of the Company's common stock for a price
of $1.30 per share. CBC's ownership in the Company is now approximately 49.1%.
Throughout November and December 1998, CBC advanced the Company an aggregate of
$875,000 as evidenced by four promissory notes, each due within 30 days of
demand and each bearing interest at a rate of 10% per annum. Additionally, in
January CBC advanced the Company an aggregate of $2,075,000 as evidenced by
three promissory notes bearing the same terms described above.
In November 1998, management of the Company determined it was in the
best interest of the Company to discontinue the operations of the Harmony
Pictures division. The division consists of Harmony Pictures, Inc., Melody
Films, Inc., Lexington Films, Inc. and Pure Film, Inc. For the year ended June
30, 1998, those entities recorded revenues of $10,867,000 and an operating loss
of $1,625,000. For the six months ended December 31, 1998, those entities
recorded revenues of $1,855,000 and an operating loss of $812,000. An additional
one-time restructuring expense of approximately $1,317,000 related to the
discontinued operations of the division was recorded in quarter ended December
31, 1998. Additionally, management determined that the goodwill associated with
the division was fully impaired. Accordingly, an impairment charge equaling the
net book value of the goodwill, $2,215,000 was recognized in the current
quarter. The Company believes that by discontinuing operations at the Harmony
Pictures division it will be able to meet its working capital requirements in
the future.
Consolidated cash was $1,341,000 at December 31, 1998 and
$3,834,000 at June 30, 1998, a decrease of $2,493,000.
Cash used in operating activities for the six months ended December
31, 1998 was $2,632,000. Accounts receivable at December 31, 1998 decreased
$2,856,000 from June 30, 1998, and other current assets at December 31, 1998
increased $580,000 from June 30, 1998. Accounts payable at December 31, 1998
increased $543,000 from June 30, 1998, accrued expenses decreased $3,345,000
from
<PAGE>
June 30, 1998 to December 31, 1998, and deferred income decreased $553,000
during that same period.
During the six months ended December 31, 1998, cash used in
investing activities was $541,000. This represents cash used for capital
expenditures incurred in the normal course of operations, less the payment of
the note receivable due the Company from a former officer.
Cash provided by financing activities during the six months ended
December 31, 1998 was $680,000 which was provided through the cash borrowings
from CBC and the proceeds from the issuance of common stock to CBC, net of
repayment of the line of credit referred to in Note 2.B of the financial
statements.
During the six months ended December 31, 1998, the Company incurred
a net loss of $5,348,000 and a cash flow from operations deficit of $2,632,000,
resulting in a working capital deficit of $3,553,000 and an accumulated deficit
totaling $16,992,000 at December 31, 1998. At this time the Company's only firm
external financing resource other than its existing asset based loan and
security agreement, which requires that the Company maintain minimum
stockholders equity of $3,000,000, is the commitment CBC has made to fund the
Company's working capital needs through the end of the current fiscal year. The
Company is currently taking steps to curtail its level of net operating losses
by discontinuing the operations of the Harmony Pictures division. If the losses
are not curtailed, the Company risks losing its line of credit and will need to
rely solely on CBC until other financing options become available. In order to
obtain the proceeds that the Company expects it may need during the next year,
the Company intends to attempt to raise additional debt and/or equity financing.
The Company is currently holding discussions with various possible financing
sources and believes that the requisite financing can be obtained. However, no
assurance can be given that the Company will, in fact, be able to obtain
additional financing or that the terms of such financing will be favorable to
the Company. The Company believes that both the expected benefits to be derived
from the current restructuring of the Company's operations, including the
discontinuation of operation at the Harmony Pictures division, the expected
level of operations during the next year, and the continued support of CBC may
offset some or all of any liquidity shortage that may occur.
Inflation
Inflation has not had a significant effect on the Company.
Year 2000 Compliance
The Year 2000 Issue is the result of computer programs being
written using two digits rather than four to define the applicable year. Any of
the Company's compute programs that have date-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result in
a system failure of miscalculations causing disruptions or operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar business activities. Management has made an
assessment of its systems and has been advised by its computer consultant that
its systems are Year 2000 compliant. Management also believes that its
television production equipment will not be impacted by the Year 2000 Issue
because the equipment is not date sensitive. Additionally, management believes
it will not be materially impacted by the Year 2000 compliance of third parties
with which it conducts business.
<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 hereunto duly authorized on May 14, 1999.
HARMONY HOLDINGS, INC.
BY: /s/ James G. Gilbertson
------------------------------
James G. Gilbertson
ITS: Chief Operation Officer and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 1,340,657
<SECURITIES> 0
<RECEIVABLES> 3,814,037
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 7,008,526
<PP&E> 2,477,621
<DEPRECIATION> (108,374)
<TOTAL-ASSETS> 10,009,690
<CURRENT-LIABILITIES> 10,561,308
<BONDS> 0
0
0
<COMMON> 75,067
<OTHER-SE> (626,685)
<TOTAL-LIABILITY-AND-EQUITY> 10,009,690
<SALES> 31,384,284
<TOTAL-REVENUES> 31,384,284
<CGS> 26,828,754
<TOTAL-COSTS> 26,828,754
<OTHER-EXPENSES> 9,707,070
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 217,210
<INCOME-PRETAX> (5,338,825)
<INCOME-TAX> 9,601
<INCOME-CONTINUING> (1,815,931)
<DISCONTINUED> (3,532,495)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,348,426)
<EPS-PRIMARY> (0.73)
<EPS-DILUTED> 0
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