<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
{X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 1998
{ } TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from_______________ to________________.
Commission File No. 0-4410
TELECOMM INDUSTRIES CORP.
-------------------------
(Exact name of Issuer as specified in its charter)
DELAWARE 34-1765902
(State of Incroporation) (I.R.S. Employer Indentification No.)
1743 Quincy Ave.
Naperville, Illinois 60540
(Address of principal executive offices)
630-369-7111
(Issuer's telephone number)
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 equity, as the latest practical date: COMMON STOCK, $0.01 PAR VALUE:
(as of March 31, 1998): 12,650,746.
---------
Transitional Small Business Disclosure Format:
Yes_____ No __X__
<PAGE>
TELECOMM INDUSTRIES CORP. AND SUBSIDIARY
INDEX
PART I FINANCIAL INFORMATION PAGE NO.
Item 1. Financial Statements (unaudited) 3
Consolidated Balance Sheets-
March 31, 1998 and December 31, 1997 4
Consolidated Statements of Operations-
three months ended March 31, 1998 and
March 31, 1997 5
Consolidated Statements of Cash Flow-
three months ended March 31, 1998 and
March 31, 1997 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis 9
PART II OTHER INFORMATION
Item 2. Changes in Securities and use of Proceeds 13
Item 6. Exhibits and Reports on Form 8-K 13
2
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
The Registrant's Financial Statements follow this page.
3
<PAGE>
TELECOMM INDUSTRIES CORP. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1998 AND 1997
<TABLE>
<CAPTION>
(Unaudited)
March 31, December 31,
1998 1997
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 240,172 $ 97,779
Accounts receivable - trade 3,688,025 3,387,943
Inventories 1,751,701 1,412,196
Prepaid income taxes 59,557 59,557
Prepaid expenses 138,933 133,936
Employee advances 93,446 147,601
----------- -----------
Total current assets 5,971,834 5,239,012
Property and equipment, net 1,538,450 1,481,566
Accounts receivable, long-term portion 3,793,151 2,992,137
Intangibles, net 3,969,809 3,462,958
----------- -----------
Total assets $15,273,244 $13,175,673
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit $ 2,332,296 $ 1,371,210
Current portion of long-term debt 475,563 404,780
Accounts payable - trade 1,625,817 1,139,776
Accrued payroll and related expenses 326,729 268,191
Accrued bonus 390,000 575,500
Accrued commissions and contractor fees 109,561 180,813
Customer deposits 132,475 118,504
Deferred income taxes 342,321 342,321
Income taxes payable 109,744 109,399
Other accrued expenses 132,332 149,730
----------- -----------
Total current liabilities 5,976,838 4,660,224
Long-term debt, less current portion 2,807,983 2,862,976
Deferred revenue 10,936 10,362
Deferred income taxes 1,048,998 906,913
----------- -----------
Total liabilities 9,844,755 8,440,475
----------- -----------
Stockholders' equity:
Common stock $.01 par value: authorized
20,000,000 shares: issued 12,650,746
and 12,300,746: outstanding 12,121,559 and
11,771,559, at March 31, 1998 and
December 31, 1997 126,508 123,008
Additional paid-in capital 3,994,132 3,577,632
Treasury stock: 529,187 shares at cost (317,512) (317,512)
Receivables from stockholders (55,717) (110,065)
Retained earnings 1,681,078 1,462,135
----------- -----------
Total stockholders' equity 5,428,489 4,735,198
----------- -----------
Total liabilities and stockholders' equity $15,273,244 $13,175,673
----------- -----------
----------- -----------
</TABLE>
See notes to unaudited consolidated financial statements
4
<PAGE>
TELECOMM INDUSTRIES CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE QUARTERS ENDED MARCH 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Net revenues $ 5,488,137 $ 2,594,059
Commissions, contractor fees, and related expenses 2,372,928 828,605
Selling, general and administrative expenses 2,680,962 1,532,925
----------- -----------
Operating income 434,247 232,529
Other income (expense):
Gain on disposal of assets 750 -
Interest income - 2,692
Interest expense (70,208) (32,683)
----------- -----------
(69,458) (29,991)
----------- -----------
Income from operations before income tax expense 364,789 202,538
Income tax expense 145,846 81,015
----------- -----------
Net income $ 218,943 $ 121,523
----------- -----------
----------- -----------
Net Income per common share:
Basic $ 0.02 $ 0.01
----------- -----------
----------- -----------
Diluted $ 0.02 $ 0.01
----------- -----------
----------- -----------
Average number of common shares outstanding:
Basic 12,091,833 10,200,746
----------- -----------
----------- -----------
Diluted 12,891,833 10,500,746
----------- -----------
----------- -----------
</TABLE>
See notes to unaudited consolidated financial statements
5
<PAGE>
TELECOMM INDUSTRIES CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE QUARTERS ENDED MARCH 31,1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 218,943 $ 121,523
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization 152,133 69,868
Deferred revenue 574
Deferred income taxes 142,085 80,088
Reserve for bad debt 2,803
Gain on sales of fixed assets (750)
Changes in assets and liabilities:
Accounts receivable - trade (216,621) 383,224
Accounts receivable - long term portion (651,015) (409,671)
Inventories (318,768) 118,093
Prepaid income taxes - (7,205)
Prepaid expenses (1,097) 25,324
Employee advances 57,156 (101,725)
Accounts payable - trade 456,042 (215,856)
Accrued payroll and related expenses 49,253 34,572
Accrued bonus (200,500) (371,900)
Accrued commissions and contractor fees (71,252) (46,289)
Customer deposits 13,970 (48,519)
Income taxes payable 345 (10,074)
Other accrued expenses (28,523) (142,368)
--------- ---------
Total adjustments (614,165) (642,438)
--------- ---------
Net cash used in operating activities (395,222) (520,915)
Cash flows from investing activities:
Purchases of property and equipment (147,416) (43,164)
Purchase acquitions, net of cash acquired (10,000) (368,233)
Proceeds from stockholders receivables 54,348 -
--------- ---------
Net cash used in investing activities (103,068) (411,397)
--------- ---------
Cash flows from financing activities:
Payments on long-term debt (107,070) (79,655)
Proceeds from issuance of long-term debt 19,140 226,486
Proceeds from common stock purchased by employees - 45,000
Notes receivable - related parties - 400,000
Net borrowings under line of credit 728,613 285,536
--------- ---------
Net cash provided by financing activities 640,683 877,367
--------- ---------
Net increase (decrease) in cash 142,393 (54,945)
Cash at beginning of period 97,779 238,312
--------- ---------
Cash at end of period $ 240,172 $ 183,367
--------- ---------
--------- ---------
Supplemental disclosures of cash flow information:
Cash paid for interest $ 57,608 $ 32,683
--------- ---------
--------- ---------
Cash paid for income taxes $ - $ -
--------- ---------
--------- ---------
Non-cash investing and financing activities:
Common stock issued for purchases $ 420,000 $ 423,325
--------- ---------
--------- ---------
Notes issued for purchase acquisition $ 20,000 $ 200,000
--------- ---------
--------- ---------
</TABLE>
See notes to unaudited consolidated financial statements
6
<PAGE>
TELECOMM INDUSTRIES, CORP. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. MANAGEMENT REPRESENTATION - The accompanying unaudited consolidated interim
financial statements of Telecomm Industries Corp. ("Telecomm" or the
"Company") have been prepared without audit and do not include all of the
information and note disclosures required by generally accepted accounting
principles. The statements reflect all adjustments that are, in the opinion
of management, necessary to present fairly the financial position of the
Company as of March 31, 1998 and the results of its operations for the
quarter then ended. These adjustments are of normal and recurring nature.
Therefore, the accompanying interim financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Form 10-KSB of the Company for the year ended December 31,
1997.
2. EARNINGS PER SHARE - Computations of basic and diluted earnings per share
of common stock have been made in accordance with the Financial Accounting
Standards Board's Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("SFAS No. 128"). The Company was required to adopt
the provisions of SFAS No. 128 beginning with the year ended December 31,
1997. All prior and interim period earnings per share amounts have been
restated accordingly. All securities that have an anti-dilutive effect on
earnings per share have been excluded from such computations.
Reconciliation of Numerators and Denominators of the Basic
and Diluted EPS Computations
<TABLE>
<CAPTION>
For the quarter ended March 31, 1998
-------------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Amount
----------- ------------- ---------
<S> <C> <C> <C>
Net income $ 218,943
Basic EPS:
Income available to common stockholders;
weighted average common stock outstanding 218,943 12,091,833 $ .02
Effect of dilutive securities options 800,000
----------- ------------- ---------
Diluted EPS:
Income available to stockholders of common
shares and common stock equivalents $ 218,943 12,891,833 $ .02
----------- ------------- ---------
----------- ------------- ---------
<CAPTION>
For the quarter ended March 31, 1997
-------------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Amount
----------- ------------- ---------
<S> <C> <C> <C>
Net income $ 121,523
Basic EPS:
Income available to common stockholders;
weighted average common stock outstanding 121,523 10,200,746 $ .01
Effect of dilutive securities options 300,000
----------- ------------- ---------
Diluted EPS:
Income available to stockholders of common
shares and common stock equivalents $ 121,523 10,500,746 $ .01
----------- ------------- ---------
----------- ------------- ---------
</TABLE>
7
<PAGE>
Options to purchase 300,000 shares of common stock at $3.00 to $10.00 per
share were outstanding during the quarter, but were not included in the
computation of diluted EPS because the options' exercise price was greater
than the average market price of the common shares during the period.
3. ACQUISITIONS - On February 20, 1998, the Company acquired Division-Tel
Communications, Inc. ("Division-Tel") under the provisions of an Asset
Purchase Agreement. Under the terms of this agreement, the Company issued
350,000 shares of its common stock valued at $420,000, paid $10,000 in
cash, issued a $20,000 promissory note, due August 1998 (bearing interest
at a fixed rate of 9%), and assumed approximately $370,000 of
Division-Tel's liabilities in exchange for all of the outstanding common
stock of Division-Tel.
The net purchase price was allocated as follows:
<TABLE>
<S> <C>
Current assets $ 245,876
Property and equipment 80,599
Other assets 6,900
Goodwill 487,105
Liabilities assumed (370,480)
----------
Net purchase price 450,000
Less: common stock issued 420,000
Non-cash note payable 20,000
----------
Cash paid for acquisition $ 10,000
----------
----------
</TABLE>
4. SUBSEQUENT EVENTS - On April 22, 1998, the Company's primary lender issued
a commitment letter to increase the existing line of credit by $500,000 and
to extend an additional term note of $1,000,000.
5. RECLASSIFICATION - Certain reclassifications have been made to the 1997
consolidated condensed financial statements to conform to the 1998 method
of presentation.
8
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
OVERVIEW
Telecomm is one of the nation's largest RBOC distributors. The Company
sells voice, data, cellular, video and telephone information network solutions
to business customers throughout its five-state region. Ameritech and Bell
South are Telecomm's primary RBOC partners. In addition, Telecomm represents
numerous manufacturers of voice and data equipment by marketing, installing and
maintaining their telecommunications equipment. Telecomm also operates as a
value added reseller of data equipment.
Because of a change in Ameritech's commission payment structure, the
Company adopted a new compensation plan for its sales force in 1996. Before
June 1996, Ameritech paid 100% of the commissions earned at the time the service
was installed. After June 1996, Ameritech began paying Telecomm 60% of the
commissions earned at the time the service was installed and the remaining 40%
over the life of the contract. The Company adopted an aggressive commission
policy which enabled it to adjust to the new method of payment from Ameritech,
while continuing to actively attract and maintain skilled, experienced
salespeople.
In addition, Ameritech's new billing and customer record consolidates and
standardizes its five non-standard billing systems. The combined effect on the
Company of the change in timing of commission payments and the new system
implementation lengthened the collection period for Ameritech receivables,
adversely affecting the Company's working capital and cash flow.
Under Ameritech's accelerator bonus system, significant bonuses are awarded
to the Company for each commission dollar earned over a certain threshold. Once
the threshold is reached, revenue derived from Ameritech sales increases at a
greater rate than prior to the Company's obtaining the target. Also, once the
target is reached, the Company earns promotional and co-op advertising dollars
to be spent in the subsequent year.
While Ameritech is Telecomm's most significant supplier, Telecomm's recent
acquisitions have enabled it to diversify its product mix. Unitel, acquired in
August 1997, derives revenues predominantly from equipment and service sales.
Prior to the Unitel acquisition, Telecomm derived revenues primarily from RBOC
commissions. Management believes that this diversification will enable Telecomm
to continue its rapid growth and maintain its relationship with Ameritech while
at the same time significantly reducing its reliance on Ameritech.
YEAR 2000 TECHNOLOGY
Based upon a preliminary study by management, Telecomm does not expect to
incur material costs to modify its current computer information systems to
enable proper processing of transactions relating to the year 2000 and beyond.
However, Telecomm continues to evaluate whether additional corrective action
will be necessary. Telecomm made no material expenditures in the first quarter
of 1998 relating to year 2000 technology.
9
<PAGE>
FIRST QUARTER OF 1998 VS. FIRST QUARTER OF 1997
The Company's net revenues increased 112% to $5.5 million for the first
three months of 1998 from $2.6 million in the comparable 1997 period. $2.0
million, or 69%, of this increase was due to sales generated by Unitel, Inc.
("Unitel"), which was acquired by the Company in August 1997. The remaining
increase was primarily attributable to increased commissions from network
services sales and equipment sales and related services generated by
Telecomm's other operations. Net revenues from equipment sales and related
services increased 149% to $2.7 million in the first three months of 1998 (of
which $1.9 million related to voice equipment and $.8 million related to data
network services), from $1.1 million in the first three months of 1997,
including $1.3 million in Unitel sales in the 1998 period. Net revenues from
network services sales increased 79% to $2.6 million in the first three
months of 1998 (of which $1.9 million related to voice network services and
$.7 million related to data network and services), from $1.4 million in the
comparable period for 1997, including $.6 million from Unitel sales in the
1998 period. For the three months ended March 31, 1998, sales of equipment
and related services represented 50% of net revenues, sales of network
services represented 47% of net revenues, and long-distance and other
services represented 3% of net revenue compared to 42%, 55%, and 2%,
respectively for the three months ended March 31, 1997.
Commissions, contractor fees and related expenses increased $1.5 million to
$2.4 million in the first three months of 1998, a 186% increase from such
expenses of $.8 million in the first three months in 1997. $1.1 million, or
75%, of this increase is attributable to costs associated with Unitel sales.
The remainder of the increase was primarily due to increased costs of labor and
equipment to support sales generated by Telecomm's other operations in the first
three months of 1998. As a percentage of net revenues, these expenses increased
to 43% during the first three months of 1998 from 32% during the first three
months of 1997. This increase was primarily due to costs associated with Unitel
sales, which were 59% of net revenues, and the increased focus on equipment
sales of other divisions of the Company. Commissions, contractor fees and
related expenses for equipment sales, which are primarily conducted by the
Company through Unitel, require a higher percentage of the Company's revenues
than the Company's other sales and services.
Selling, general and administrative expenses ("SG&A") increased $1.1
million to $2.6 million in the first three months of 1998, a 71% increase from
SG&A expenses of $1.5 million in the comparable 1997 period. Expenses
associated with Unitel sales accounted for $1.0 million, or 88%, of the
increase. As a percentage of net revenues, these expenses decreased to 49%
during the first three months of 1998, from 60% during the first three months of
1997, primarily as a result of increased net revenues of the Company without a
corresponding increase in the costs necessary to support the additional sales.
In the first three months of 1998 interest expense increased by $37,000, or
112%, to $70,000 from $33,000 in the comparable 1997 period, primarily because
of increased borrowings by the Company under its line of credit facility and the
long-term debt issued in connection with the acquisitions of Long-Tell
Communications, Inc. ("Long Tell"), Northeastern Communications, Inc. ("NCS")
and Unitel, in 1997 and Division-Tel Communications Group, Inc. ("Division-Tel")
in 1998.
10
<PAGE>
Income from continuing operations before income taxes increased by $162,000
to $365,000 in the first three months of 1998, an increase of 80% from $203,000
in the comparable 1997 period, primarily for the reasons stated above.
The provision for income taxes increased by $65,000 to $146,000 in the
first three months of 1998, compared to $81,000 in the first three months of
1997, due to increased earnings.
As a result of the foregoing, net income for the first three months of 1998
was $219,000, an increase of 80%, from the net income for the first three months
of 1997 of $121,000.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal capital requirements are to fund the internal
growth of network service sales, a network services receivable (which is
classified as a long-term accounts receivable), voice and date hardware
sales, the infrastructure to support and monitor the increased sales volume,
and new acquisitions.
Net cash used in operating activities was $.4 million in the first three
months of 1998 compared to net cash used in operating activities of $.5 million
in the first three months of 1997. The change was primarily due to a $.6
million increase in long term accounts receivable in the first three months of
1998, compared to a $.4 million increase in the first three months of 1997, an
increase of $.2 million in trade accounts receivable in the first three months
of 1998 compared to a $.4 million decrease in the comparable 1997 period, and a
$.3 million increase in inventory for the first three months of 1998 compared to
a $.1 million decrease in the comparable 1997 period. These changes were offset
by an increase in accounts payable of $.5 million in the first quarter of 1998
compared to a decrease of $.2 million for the comparable 1997 period and
combined decreases of $.3 million in accrued bonuses and commissions for the
first three months of 1998 compared to $.4 million for the first three months of
1997.
Net cash used in investing activities was $.1 million for the first quarter
of 1998 compared to $.4 million for the first quarter of 1997. This decrease is
primarily attributable to the use of cash in the acquisitions of NCS and Long
Tel in the first quarter of 1997, while only $.1 was million used for the
purchase of equipment and $10,000 was used for the acquisition of Division-Tel
in February 1998.
Net cash provided by financing activities was $.6 million in the first
three months of 1998 compared to $.9 million in the first three months of 1997.
This fluctuation is primarily attributable to the proceeds of $.7 million short
term borrowings under the Company's line of credit in 1998, offset by a net
reduction of long term debt of $.1 million. In the first quarter of 1997, cash
provided by financing activities consisted primarily of the collection of a note
receivable of $.4 million, proceeds of $.3 million of short term borrowings
under the Company's line of credit and a net increase in long term debt (due to
acquisitions) of $.1 million.
The change in the commission payment structure by Ameritech, which was
implemented in June 1996, and Ameritech's continuing implementation of a new
billing and customer record system, continues to lengthen the collection period
of receivables, adversely affecting the Company's working capital and cash
flow. Management believes cash flow will
11
<PAGE>
continue to be similarly affected as long as the existing Ameritech commission
structure remains.
Because of the Company's recent increased emphasis on equipment sales and
related services, an increase in inventory and trade credit is expected. Trade
credit arises from the willingness of the Company's creditors to grant payment
terms for inventory purchases. Although the Company has obtained favorable
payment terms on its trade credit from its vendors, there is no assurance that
the Company will be able to obtain such terms in the future.
Approximately $100,000 unused borrowing availability exists under the
credit line of the Company's credit facility at March 31, 1998. On April 22,
1998, the Company received a commitment letter from its primary lender to
increase the existing line of credit by $.5 million and to extend a term note
of $1.0 million. The Company has signed a 60 day promissory note to the primary
lender to provide $.5 million additional working capital until the credit
facility increase is in place. There is no assurance that increase in the line
of credit will be finalized. The Company believes that funds generated by
operations and the additional borrowings available under the increased credit
facility will be sufficient to meet working capital needs for the foreseeable
future.
The Company may also seek to obtain additional sources of funding,
including additional debt or equity financing, as the Company continues to
grow. There is no assurance that the Company will obtain such additional
funds or, that if obtained, such financing will be on terms favorable to the
Company.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this report that are not historical facts
are forward-looking statements that are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
set forth in the forward-looking statements. These risks and uncertainties
include, but are not limited to:
- the dependence of the Company on one principal supplier, Ameritech,
for a significant portion of its revenues;
- the effects of the proposed acquisition of Ameritech by Southwestern
Bell Communications announced on May 11, 1998;
- changes in Ameritech's commission payment plan and its billing and
record system, adversely affecting the Company's working capital and
long-term accounts receivable;
- fluctuations in quarterly revenues and earnings of the Company
depending on when Ameritech bonus acceleration targets are met;
- the ability of the Company to obtain additional financing to support
its growth;
- changes arising from greater competition in local telephone service
attributable to passage of the Telecommunications Act of 1996;
- the introduction of competitors into the market including competitors
with financial and other reserves significantly greater than those of
Telecomm;
- the ability of the Company to integrate the operations of Unitel and
its other recent acquisitions into the Company;
- the availability of other acquisitions and the integration of the
operations of those acquisitions, if completed, into the Company, and
the availability of financing for such acquisitions;
12
<PAGE>
- the ability of Telecomm to continue to grow its sales force internally
and to expand its product mix more toward the hardware business,
particularly in light of the increased competition in the
telecommunication markets in which Telecomm operates; and
- general economic conditions, and other risk factors discussed herein.
In addition, any of the risks detailed above may have an impact on the
Company's ability to obtain additional working capital funds under its current
credit facility. An investor or potential investor in the Company must consider
these risks.
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On February 20, 1998 the company issued 350,000 shares of its common stock
to Michael Meese in connection with the acquisition of Division Tel. The
foregoing issuance was exempt under Section 4(2) of the Securities Act of
1933, as amended.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. EXHIBITS
27 Financial Data Schedule
B. REPORTS ON FORM 8-K
None
13
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
TELECOMM INDUSTRIES CORP.
By: /s/ James M. Lowery
-------------------
James M. Lowery, Chairman
And: /s/ Eric A. Getzin
------------------
Eric Getzin, Chief Financial and
Accounting Officer
Date: May 15, 1998
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 240,172
<SECURITIES> 0
<RECEIVABLES> 3,688,025
<ALLOWANCES> 0
<INVENTORY> 1,751,701
<CURRENT-ASSETS> 5,971,834
<PP&E> 2,111,360
<DEPRECIATION> 572,910
<TOTAL-ASSETS> 15,273,244
<CURRENT-LIABILITIES> 5,976,838
<BONDS> 0
0
0
<COMMON> 126,508
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 5,428,439
<SALES> 0
<TOTAL-REVENUES> 5,488,137
<CGS> 2,372,928
<TOTAL-COSTS> 5,053,890
<OTHER-EXPENSES> (750)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 70,208
<INCOME-PRETAX> 364,789
<INCOME-TAX> 145,846
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 218,943
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
