CONFORMED
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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
MARCH 31, 1997; 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: 0-20728
RIMAGE CORPORATION
(Exact name of Registrant as specified in its charter)
Minnesota 41-1577970
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
7725 Washington Avenue South, Edina, MN 55439
(Address of principal executive offices)
612-944-8144
( Registrant's telephone number, including area code)
NA
(Former name, former address, and former fiscal year, if changed
since last report.)
Common Stock outstanding at May 12, 1997 -- 3,084,500 shares
of $.01 par value Common Stock.
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 ____
RIMAGE CORPORATION
FORM 10-Q
TABLE OF CONTENTS
FOR THE QUARTER ENDED MARCH 31, 1997
Description Page
----------- ----
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of
March 31, 1997 (unaudited) and
December 31, 1996............................... 3
Consolidated Statements of Operations
(unaudited) for the Three Months
Ended March 31, 1997 and 1996..................... 4
Consolidated Statements of Cash Flows
(unaudited) for the Three Months
Ended March 31, 1997 and 1996..................... 5
Condensed Notes to Consolidated
Financial Statements (unaudited).................. 6-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............ 9-12
PART II OTHER INFORMATION................................................. 12
Item 1-5. None
Item 6. Exhibits
SIGNATURES................................................................. 13
<TABLE>
<CAPTION>
RIMAGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS MARCH 31, DECEMBER 31,
1997 1996
------------ ------------
Current assets: (unaudited)
<S> <C> <C>
Cash .............................................................. $ 19,646 $ 117,322
Trade accounts receivable, net of allowance for doubtful accounts
and sales returns of $1,074,833 and $1,084,910, respectively 7,178,095 5,070,738
Inventories (note 2) .............................................. 3,597,534 4,027,553
Income tax receivable ............................................. 626,000 818,790
Prepaid expenses and other current assets ......................... 447,442 293,037
Current installments of investment in sales-type leases .......... 202,757 217,952
------------ ------------
Total current assets .................................... 12,071,474 10,545,392
------------ ------------
Property and equipment, net ........................................... 7,278,206 7,814,430
Investment in sales-type leases, net of
current installments ............................................. 138,131 182,332
Goodwill .............................................................. 909,228 929,407
Other noncurrent assets ............................................... 475,831 537,944
------------ ------------
Total assets ............................................ $ 20,872,870 $ 20,009,505
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of notes payable (note 4) ........................... $ 6,681,466 $ 6,052,709
Current installments of capital lease obligations ................... 319,528 311,343
Trade accounts payable .............................................. 4,848,028 4,295,400
Accrued expenses .................................................... 1,373,389 1,746,912
Deferred income and customer deposits ............................... 583,683 429,822
------------ ------------
Total current liabilities ..................................... 13,806,094 12,836,186
Capital lease obligations, less current installments .................. 2,948,185 3,031,759
------------ ------------
Total liabilities ............................................. 16,754,279 15,867,945
------------ ------------
Minority interest in inactive subsidiary .............................. 57,907 57,907
Stockholders' equity:
Common stock ........................................................ 30,845 30,845
Additional paid-in capital .......................................... 10,447,798 10,447,798
Accumulated deficit ................................................. (6,315,261) (6,330,291)
Foreign currency translation adjustment ............................. (102,698) (64,699)
------------ ------------
Total stockholders' equity .................................... 4,060,684 4,083,653
------------ ------------
Total liabilities and stockholders' equity ........................ $ 20,872,870 $ 20,009,505
============ ============
See accompanying notes to consolidated financial statements
</TABLE>
<TABLE>
<CAPTION>
RIMAGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
1997 1996
------------ ------------
<S> <C> <C>
Revenues ........................................................... $ 10,826,773 $ 11,050,506
Cost of revenues ................................................... 8,262,083 7,881,997
------------ ------------
Gross profit ............................................. 2,564,690 3,168,509
------------ ------------
Operating expenses:
Engineering and development ..................................... 556,693 776,848
Selling, general and administrative ............................. 1,735,918 2,210,886
------------ ------------
Total operating expenses ................................. 2,292,611 2,987,734
------------ ------------
Operating earnings ....................................... 272,079 180,775
------------ ------------
Other (expense) income :
Interest ........................................................ (267,138) (139,447)
Gain (loss) on currency exchange ................................ (2,419) 5,093
Other, net ...................................................... 12,508 25,054
------------ ------------
Total other expense, net ................................. (257,049) (109,300)
------------ ------------
Earnings before income taxes ............................. 15,030 71,475
Income tax expense ....................................... 0 24,000
------------ ------------
Net earnings ............................................. $ 15,030 $ 47,475
============ ============
Net earnings per common and common
equivalent share ....................................... $ 0.01 $ 0.02
============ ============
Weighted average shares and share equivalents outstanding 3,087,891 3,085,550
============ ============
See accompanying notes to consolidated financial statements
</TABLE>
<TABLE>
<CAPTION>
RIMAGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
1997 1996
----------- -----------
Cash flows from operating activities:
<S> <C> <C>
Net earnings ............................................... $ 15,030 47,475
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Depreciation and amortization .......................... 715,720 365,203
Change in reserve for excess and obsolete inventories .. (31,141) 1,206
Change in reserve for doubtful accounts ................ (10,077) (40,438)
Gain on sale of property, plant, and equipment ......... 0 7,650
Changes in operating assets and liabilities:
Trade accounts receivable .............................. (2,097,280) 3,528,183
Inventories ............................................ 461,160 408,709
Prepaid expenses and other current assets .............. (154,405) (311,726)
Income tax receivable .................................. 192,790 (39,004)
Accounts payable ....................................... 552,628 (3,225,174)
Accrued expenses ....................................... (373,523) 201,667
Deferred income and customer deposits .................. 153,861 (86,250)
----------- -----------
Net cash (used in) provided by operating activities (575,237) 857,501
----------- -----------
Cash flows from investing activities:
Purchase of property, plant, and equipment .................. (97,204) (178,917)
Other assets ................................................ (19,775) 33,884
Payments on investment in sales-type leases ................. 59,396 71,841
----------- -----------
Net cash used in investing activities .................. (57,583) (73,192)
----------- -----------
Cash flows from financing activities:
Proceeds from stock option exercise ......................... 0 52,500
Principal payments on capital lease obligation .............. (75,389) (8,011)
Proceeds from other notes payable ........................... 8,361,233 2,461,000
Repayment of other notes payable ............................ (7,732,476) (3,150,680)
----------- -----------
Net cash provided by (used in) financing activities .... 553,368 (645,191)
----------- -----------
Effect of exchange rate changes on cash ............................ (18,224) (21,402)
----------- -----------
Net increase (decrease) in cash .................................... (97,676) 117,716
Cash, beginning of period .......................................... 117,322 230,014
----------- -----------
Cash, end of period ................................................ $ 19,646 $ 347,730
=========== ===========
Supplemental disclosures of net cash paid (received) during the
period for:
Interest .................................................... $ 190,748 $ 140,049
=========== ===========
Income taxes ................................................ $ (147,924) $ 28,950
=========== ===========
See accompanying notes to the consolidated financial statements.
</TABLE>
RIMAGE CORPORATION AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(1) BASIS OF PRESENTATION AND NATURE OF BUSINESS
The consolidated financial statements include the accounts of Rimage
Corporation, Rimage Europe GmbH, A/G Systems Inc., d/b/a
Duplication Technology Inc. (Duplication Technology), Knowledge
Access International (Knowledge Access) and ALF Products Inc.
d/b/a ALF/Rimage (ALF Products); and operations of Rimage Services
Group (formerly Dunhill Software Services which merged with Rimage
in 1995 using pooling-of-interest accounting), collectively
hereinafter referred to as Rimage or the Company. All material
intercompany accounts and transactions have been eliminated upon
consolidation.
Effective September 29, 1995, Rimage Corporation and Dunhill Software
Services (Dunhill) completed a merger. Dunhill had been a
significant customer of Rimage. For financial reporting purposes,
the merger has been recorded using the pooling-of-interests method
of accounting under generally accepted accounting principles.
Following this merger, the Company operates in two segments, Rimage
Systems Group and Rimage Services Group. The Rimage Systems Group
consists of substantially all of the former Rimage Companies. The
Rimage Services Group consists of the former Dunhill operation in
addition to the existing service business at Duplication
Technology.
The Systems Group develops, manufacturers and distributes duplication,
and demagnetization equipment for computer media and associated
peripheral devices. The Services Group provides computer media
duplication and production services to software developers and
manufacturers and information publishers.
The Company extends unsecured credit to its customers, substantially
all of whom are computer hardware, software and service companies,
software developers and manufacturers or information publishers.
(2) INVENTORIES
Inventories consist of the following as of:
March 31, December 31,
1997 1996
(unaudited)
- ---------------------------------------------------------------------------
Finished goods and demonstration equipment $ 1,161,166 1,026,303
Work-in-process 489,714 527,378
Purchased parts and subassemblies 2,510,513 3,063,872
- ---------------------------------------------------------------------------
4,156,393 4,617,553
Less reserve for excess inventories 558,859 590,000
- ---------------------------------------------------------------------------
$ 3,597,534 4,027,553
===========================================================================
(3) SEGMENT REPORTING
The following table summarizes certain financial information for the
Systems and Service segments:
Three Months Ended March 31,
(unaudited)
---------------------------------
(in thousands) 1996 1997
- -------------------------------------------------------------------------
Revenues from unaffiliated customers:
Systems $ 4,731 4,728
Service 6,096 6,322
Operating earnings (loss):
Systems 425 (135)
Service $ (153) 316
March 31, December 31,
1997 1996
(unaudited)
----------- ------------
Net identifiable assets:
Systems $ 8,641 9,137
Service 12,232 10,873
As of and for the quarter ended March 31, 1997, foreign revenues from
unaffiliated customers, operating loss, and net identifiable
assets were $895,309, $4,717 and $1,978,454, respectively. As of
and for the quarter ended March 31, 1996, foreign revenues from
unaffiliated customers, operating earnings, and net identifiable
assets were $1,284,828, $51,530, and 2,238,658, respectively.
(4) NOTES PAYABLE TO BANK
On October 13, 1995, Rimage signed a new Credit Agreement which
consolidated and redefined all previously outstanding Rimage and
Dunhill debt. This credit agreement covered all of the term and
revolving notes discussed below. The Company was required to
maintain certain financial ratios as a part of the agreement. The
Company obtained a waiver from the bank regarding the tangible
capital base, working capital amount, leverage ratio, and net
profit requirement which were not in compliance as of and for the
year ended December 31, 1996.
The Company had a term note agreement with a bank. Borrowings under
the agreement were secured by substantially all Company assets,
accrued interest at the bank's reference rate plus two and
one-half percent and were payable on demand. The outstanding
amount as of December 31, 1996 was $2,583,302.
The Company also had a revolving line of credit agreement which was
payable on demand. The line of credit provided for borrowings up
to $5,000,000. Borrowings under this agreement were secured by
substantially all Company assets and accrued interest at the
bank's reference rate plus two and one-quarter percent. Borrowings
outstanding under this line were $3,469,407 on December 31, 1996.
Effective March 31, 1997, Rimage signed an Amended and Restated Credit
Agreement which amended the October 13, 1995 Credit Agreement and
covers the term and revolving notes discussed above.
Under the Amended and Restated Credit Agreement, the term note
discussed above remains payable, subject to demand at any time, in
consecutive monthly installments of $77,800, plus accrued interest
at two and three-quarters percent above the bank's reference rate
until April 1, 1998 when the remaining principal balance and all
unpaid accrued interest is due. The outstanding amount as of March
31, 1997 was $2,349,970.
Also available to the Company under the Amended and Restated Credit
Agreement are advances based on various percentages of qualified
asset amounts, up to a maximum advance of $5,000,000. Outstanding
advances are secured by substantially all Company assets and
accrue interest at a rate equal to the bank's reference rate plus
two and one-half percent. All advances are due and payable on
demand. Borrowings outstanding under this line were $4,331,496 on
March 31, 1997.
Due to the demand feature of the Amended and Restated Credit
Agreement, the Company has reflected all outstanding balances as
current liabilities. The Company believes its banking relationship
is good and that satisfactory financing will be available on terms
acceptable to the Company for the forseeable future.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following table sets forth, for the periods indicated, selected
items from the Company's consolidated statements of operations, shown
in thousands. Three months ended March 31,
<TABLE>
<CAPTION>
1997 1996 %
Change
------ ------ ------
<S> <C> <C> <C>
Revenues from unaffiliated customers:
Systems..................................................... $4,731 $4,728 -%
Services.................................................... 6,096 6,322 (3.6%)
------ ------
Total revenues...................................... 10,827 11,051 (2.0%)
Gross profit:
Systems..................................................... 1,937 1,993 (2.8%)
Service.................................................... 628 1,176 (46.6%)
------ ------
Total cost of revenues.............................. 2,565 3,169 (19.1%)
Operating expenses:
Systems..................................................... 1,512 2,129 (29.0%)
Service..................................................... 781 859 (9.1%)
------ ------
Total operating expenses............................ 2,293 2,988 (23.3%)
operating earnings (loss):
Systems..................................................... 425 (135) 415.8%
Service..................................................... (153) 316 (148.4%)
------ ------
Total operating earnings............................ $272 $181 50.3%
====== ======
</TABLE>
RESULTS OF OPERATIONS
Rimage designs, manufactures and sells computer media duplication and printing
systems, and also provides media duplication services. The Company's revenues
decreased by 2% in the first quarter of 1997 when compared to first quarter of
1996. Consolidated net earnings for the quarter ended March 31, 1997 were
$15,030 compared to first quarter 1996 net earnings of $47,475.
SYSTEMS SEGMENT -- THREE MONTHS ENDED MARCH 31, 1997 AND 1996
Systems revenues (which include equipment sold from Rimage Systems -
Minneapolis, Rimage Europe, Duplication Technology, and Knowledge Access
International) for the quarter ended March 31, 1997 were consistent when
compared to the first quarter of 1996. Domestic revenues in the first quarter of
1997 increased by approximately $400,000 when compared to the first quarter of
1996, while European revenues decreased by a similar amount. The increase in
domestic revenues was primarily due to an increase in CD-Recordable ("CD-R")
equipment sales combined with stable diskette equipment sales. The decrease in
European revenues was primarily due to a significant decrease in diskette
equipment sales with stable CD-R equipment sales.
Gross profit in the first three months of 1997 decreased by approximately
$56,000, or 1.2% as a percentage of revenues, as compared to the same period of
1996. This decrease was due to a continued erosion of diskette equipment
margins, offset by improved CD-R equipment margins.
Operating expenses for the quarter ended March 31, 1997 decreased by
approximately $617,000 or 29.0% compared to the operating expenses in the same
period of 1996. This decrease was primarily a result of work force changes and
the decision to shut-down certain non-core business facilities and divisions in
December of 1996. The Company expects the trend of lower operating expenses in
1997 compared to operating expenses for the same periods in 1996 to continue.
Operating profit for the quarter ended March 31, 1997 was approximately $425,000
compared with an operating loss of approximately ($135,000) during the same
period of 1996. This improvement was due to the aforementioned decrease in
operating expenses during the first quarter of 1997 compared to the operating
expenses in the same period of 1996.
SERVICE SEGMENT -- THREE MONTHS ENDED MARCH 31, 1997 AND 1996
Service revenues (which include the revenues of the Rimage Service Group,
formerly "Dunhill", as well as the service business of Duplication Technology)
for the quarter ended March 31, 1997 decreased by approximately $226,000
compared to the same period of 1996. This decrease resulted primarily from lower
diskette duplication demand which was partially offset by incremental CD-ROM
duplication from the Company's new CD-ROM stamping facility and due to increased
outsourcing of product fulfillment.
Gross profit for the quarter ended March 31, 1997, as a percentage of revenues,
decreased to 10.3% from 18.6% during the same period of 1996. This decrease was
primarily due to lower gross profit from the aforementioned incremental CD-ROM
duplication and outsourcing revenues.
Operating expenses for the quarter ended March 31, 1997 decreased by
approximately $78,000 over the same period of 1996, and decreased, as a
percentage of revenues, to 12.8% in 1997 from 13.6% in 1996. This decrease was a
direct result of work force changes made in December of 1996.
Operating (loss) profit for the quarter ended March 31, 1997 and 1996 was
approximately ($153,000) and $316,000, respectively. This decrease was primarily
due to the aforementioned lower gross profit as a percentage of revenues.
CONSOLIDATED THREE MONTHS ENDED MARCH 31, 1997 AND 1996
Revenues for the three months ended March 31, 1997 decreased by approximately
$224,000 when compared to the same period of 1996. This decrease was a result of
a decline in Service revenues. The Company had three significant customers which
accounted for 17%, 5% and 0% of revenues during the quarter ended March 31,
1997, and 15%, 0% and 21% of revenues during the quarter ended March 31, 1996.
Gross profit for the quarter ended March 31, 1997 as a percentage of revenues,
decreased to 23.7% from 28.7% during the first quarter of 1996. This decrease
was primarily due to substantially lower margins at Services.
Operating expenses for the quarter ended March 31, 1997 decreased by
approximately $695,000 compared to the same period of 1996 and, as a percentage
of sales, decreased to 21.2% from 27.0% in the same period of 1996. This
decrease was a direct result of work force changes and the decision to shut-down
certain non-core business facilities and divisions in December of 1996.
Net other expense was approximately $148,000 higher in the first quarter of 1997
compared to the first quarter of 1996. This was primarily due to higher interest
expense as a direct result of increased borrowing for working capital. Due to
loss carryforwards, the Company did not record any income tax expense for the
quarter ended March 31, 1997. This is compared to income tax expense of $24,000
for the quarter ended March 31, 1996.
Net earnings were approximately $15,000 for the quarter ended March 31, 1997
compared to net earnings of approximately $47,000 for the same period of 1996.
Net earnings per share were $.01 for the quarter ended March 31, 1997 compared
to net earnings per share of $.02 for the same period of 1996.
LIQUIDITY AND CAPITAL RESOURCES
Net cash (used in) provided by operating activities was ($575,237) and $857,501
in the first quarter of 1997 and 1996, respectively. The 1997 use of cash from
operating activities resulted primarily from an increase in accounts receivable
of $2,097,280 and was partially offset by a decrease in inventories of $461,160
and an increase in accounts payable of $552,628.
Net cash used in investing activities was $57,583 and $73,192 during the first
quarter of 1997 and 1996, respectively. At March 31, 1997 the Company had no
significant commitments to purchase additional capital equipment.
At March 31, 1997, the Company's negative working capital was approximately
$1,735,000 compared to $2,291,000 at December 31, 1996. The net cash provided by
(used in) financing activities was $553,368 and ($645,191) for the quarters
ended March 31, 1997 and 1996, respectively. The Company increased its bank debt
by approximately $629,000 during the first quarter of 1997. The Company has a
line of credit agreement totaling $5,000,000 with a bank, which expires April 1,
1998. Advances under this line of credit are secured by substantially all the
Company's assets, are subject to borrowing base requirements, are due on demand
and bear interest at the bank's reference rate plus 2 and 1/4 percent. At March
31, 1997, the Company had borrowings under this line totaling $4,331,496. The
Company also has term note agreements totaling $2,349,970 under various terms
that are secured by substantially all the Company's assets, and bear interest at
the bank's reference rate plus 2 and 1/2 percent. The Company believes its
banking relationship is good and that satisfactory financing will be available
on terms acceptable to the Company for the foreseeable future.
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
Not Applicable.
Item 2. Changes in Securities
Not Applicable.
Item 3. Defaults Upon Senior Securities
Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable.
Item 5. Other Information
Not Applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit No. 11.1 Calculation of Earnings Per Share.
Exhibit No. 27.1 Financial Data Schedule
(b) Reports on Form 8-K:
Not Applicable.
SIGNATURES
In accordance with the Exchange Act, this report has been signed below by
following persons on behalf of the registrant and on the dates indicated.
RIMAGE CORPORATION
Registrant
Date: May 14, 1997 By /s/ Bernard P. Aldrich
------------------- ----------------------------------
Bernard P. Aldrich
Director, Chief Executive Officer,
and President
(Principal Executive Officer)
(Principal Financial Officer)
Date: May 14, 1997 By: /s/ Marvin J. Hohl
------------------- ----------------------------------
Marvin J. Hohl
Controller
(Principal Accounting Officer)
EXHIBIT 11.1
<TABLE>
<CAPTION>
RIMAGE CORPORATION
COMPUTATION OF NET EARNINGS PER SHARE OF COMMON STOCK
NET EARNINGS PER COMMON SHARE IS DETERMINED BY DIVIDING THE NET EARNINGS BY THE
WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK AND COMMON SHARE EQUIVALENTS
OUTSTANDING. THE FOLLOWING IS A SUMMARY OF THE WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING AND COMMON SHARE EQUIVALENTS:
THREE MONTHS ENDED
MARCH 31,
--------------------------
1997 1996
---------- ----------
<S> <C> <C>
Shares outstanding at beginning of period 3,084,500 3,051,000
---------- ----------
Common stock issued in stock option exercise 0 18,000
Shares outstanding at end of period 3,084,500 3,069,000
========== ==========
Weighted average shares of common stock outstanding 3,084,500 3,056,621
========== ==========
Common stock equivalents 388,853 412,953
Weighted average shares of common stock equivalents 3,391 28,929
========== ==========
Weighted average shares of common stock and stock equivalents 3,087,891 3,085,550
========== ==========
Net earnings $ 15,030 $ 47,475
========== ==========
Net earnings per share $ 0.01 $ 0.02
========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 19,646
<SECURITIES> 0
<RECEIVABLES> 7,178,095
<ALLOWANCES> 1,074,833
<INVENTORY> 3,597,534
<CURRENT-ASSETS> 12,071,474
<PP&E> 13,893,051
<DEPRECIATION> 6,614,845
<TOTAL-ASSETS> 20,521,764
<CURRENT-LIABILITIES> 13,454,989
<BONDS> 0
0
0
<COMMON> 30,845
<OTHER-SE> 4,029,839
<TOTAL-LIABILITY-AND-EQUITY> 20,521,764
<SALES> 10,826,773
<TOTAL-REVENUES> 10,826,773
<CGS> 8,262,083
<TOTAL-COSTS> 8,262,083
<OTHER-EXPENSES> 2,292,611
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 267,138
<INCOME-PRETAX> 15,030
<INCOME-TAX> 0
<INCOME-CONTINUING> 15,030
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,030
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
