<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE EXCHANGE ACT
For the transition period from ____________ to ________________
Commission file number 0-23416
MODERN MEDICAL MODALITIES CORPORATION
(Exact name of Small Business Issuer as Specified in Its Charter)
New Jersey 22-3059258
- ---------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1719 Route 10, Suite 117
Parsippany, New Jersey 07054
- ---------------------- -----
(Address of principal executive offices) (Zip Code)
(973) 538-9955 (Issuer's telephone number, including area code)
Check whether the issuer: (1) 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
|_|
The number of shares outstanding of the registrant's Common Stock,
$.0002 Par Value, on August 12, 1999 was 2,237,777 shares.
Transitional Small Business Disclosure Format (check one):
Yes |_| No |X|
<PAGE>
MODERN MEDICAL MODALITIES CORPORATION
JUNE 30, 1999 QUARTERLY REPORT ON FORM 10-QSB
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Page Number
Item 1. Financial Statements ................................................ 3
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations...........................................14
PART II - OTHER INFORMATION
Item 1. Legal Proceedings....................................................22
Item 4. Submission of Matters to a Vote of Security Holders..................22
Item 6. Exhibits and Reports on Form 8-K.....................................23
2
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-QSB contains forward-looking
statements as defined by the Private Securities Litigation Reform Act of 1995.
Forward-looking statements include statements concerning plans, objectives,
goals, strategies, future events or performance and underlying assumptions and
other statements, which are other than statements of historical facts. These
statements are subject to uncertainties and risks including, but not limited to,
product and service demand and acceptance, changes in technology, economic
conditions, the impact of competition and pricing, government regulation, and
other risks defined in this document and in statements filed from time to time
with the Securities and Exchange Commission. All such forward-looking statements
are expressly qualified by these cautionary statements and any other cautionary
statements that may accompany the forward-looking statements. In addition,
Modern Medical Modalities Corporation disclaims any obligations to update any
forward-looking statements to reflect events or circumstances after the date
hereof.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Independent Accountants' Review Report...............................4
Consolidated Balance Sheets as of June 30, 1999 and December
31, 1998........................................................5
Consolidated Income Statements for the six and
three months ended June 30, 1999 and 1998.......................... 7
Consolidated Statements of Cash Flows
for the six months ended June 30, 1999 and 1998.................8
Notes to Consolidated Financial Statements........................9-13
3
<PAGE>
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
To the Board of Directors
Modern Medical Modalities Corp.
We have reviewed the consolidated balance sheet of Modern Medical Modalities
Corp. and Subsidiaries as at June 30, 1999, and the related consolidated income
statements, and cash flows for the six months then ended, in accordance with
Statements on Standards for Accounting and Review Services issued by the
American Institute of Certified Public Accountants.
A review of interim financial information consists principally of obtaining an
understanding of the system for the preparation of interim financial
information, applying analytical review procedures to financial data, and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit in accordance with generally accepted
auditing standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole. Accordingly, we do not
express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the consolidated financial statements referred to above for them to
be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Modern Medical Modalities Corp. and
Subsidiaries as at December 31, 1998, and the related consolidated statements of
operations, stockholders' equity, and cash flows for the year then ended not
presently herein, and in our report dated March 10, 1999, we expressed an
unqualified opinion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying consolidated balance sheet as at
June 30, 1999 is fairly presented, in all material respects, in relation to the
consolidated balance sheet from which it has been derived.
Vincent J. Batyr & Co.
Tarrytown, NY
August 6, 1999
4
<PAGE>
MODERN MEDICAL MODALITIES CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
----------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 41,934 $ 56,313
Restricted cash for line of credit repayment 600,000 600,000
Accounts receivable (less contractual allowances of
$ 2,544,424 and $ 2,447,579, respectively) 2,510,331 2,816,356
Account receivable - joint venture 3,849 585,607
Current portion of note receivable
from affiliate 113,889 141,667
Current portion of note receivable 46,590 46,590
Loan receivable - affiliates 128,750 128,750
Due from officers 126,368 126,368
Due from affiliates 54,733 77,600
Other receivables 82,456 82,014
Prepaid expenses -- 11,023
----------- -----------
Total current assets 3,708,900 4,672,288
----------- -----------
Other assets:
Furniture, fixtures, equipment and leasehold improvements
(net of accumulated depreciation and amortization
of $4,565,769 and $ 5,742,206, respectively) 5,430,288 6,703,426
Note receivable, net of current portion 113,736 113,736
Organization costs (net of accumulated amortization
of $ 29,340 and $ 25,901, respectively) 67,147 71,797
Investment in joint venture 342,314 290,998
Deposits 25,530 40,446
Deferred tax asset 427,376 484,718
Other long term assets -- 6,381
----------- -----------
Total other assets 6,406,391 7,711,502
----------- -----------
$10,115,291 $12,383,790
=========== ===========
</TABLE>
See Notes to Interim Financial Statements
5
<PAGE>
MODERN MEDICAL MODALITIES CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
------------ ------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit $ 595,552 $ 595,552
Accounts payable 1,258,325 1,892,755
Accrued expenses 355,705 1,029,677
Loan payable - joint venturer 71,942 71,942
Loans payable - affiliates -- 202,000
Current portion of long term debt 2,237,265 2,789,678
Due to affiliate 291,229 49,466
Due to related party 4,389 4,389
------------ ------------
Total current liabilities 4,814,407 6,635,459
------------ ------------
Other liabilites:
Long-term debt, net of current portion 2,817,655 3,034,863
Due to joint venturer -- 218,717
------------ ------------
Total other liabilities 2,817,655 3,253,580
------------ ------------
Total liabilities 7,632,062 9,889,039
------------ ------------
Minority interest 151,620 187,489
Stockholders' equity:
Common stock, $0.0002 par value,
Authorized - 2,500,000 shares
Issued and outstanding - 1,895,271 shares 379 317
Additional paid-in capital 3,866,389 3,866,389
Retained earnings (deficit) (1,535,159) (1,559,444)
------------ ------------
Total stockholders' equity 2,331,609 2,307,262
------------ ------------
$ 10,115,291 $ 12,383,790
============ ============
</TABLE>
See Notes to Interim Financial Statements
6
<PAGE>
MODERN MEDICAL MODALITIES CORP. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended For the Three Months Ended
------------------------------ ------------------------------
June 30, June 30, June 30, June 30,
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Operating income:
Net revenue from services $ 1,932,033 $ 4,019,879 $ 977,041 $ 2,223,199
----------- ----------- ----------- -----------
Total operating income 1,932,033 4,019,879 977,041 2,223,199
----------- ----------- ----------- -----------
Operating expenses:
Selling, general and administrative 1,177,560 3,773,763 511,589 1,800,672
Bad debts -- 18,504 -- 12,422
Depreciation and amortization 558,681 883,293 278,209 452,630
----------- ----------- ----------- -----------
Total operating expenses 1,736,241 4,675,560 789,798 2,265,724
----------- ----------- ----------- -----------
Income (loss) from operations 195,792 (655,681) 187,243 (42,525)
----------- ----------- ----------- -----------
Other income (expenses):
Interest income 19,135 40,117 13,668 15,599
Interest expense (321,144) (623,251) (156,129) (399,547)
Miscellaneous income -- 78,500 -- 29,600
Income from joint ventures 75,656 164,837 36,617 113,964
Income from minority owned
subsidiary -- -- -- --
Gain (loss) on sale of subsidiary, net of income
taxes of $43,000 and $319,326, respectively 57,000 (423,293) -- (423,293)
Loss on disposal of subsidiary
net of income taxes of $72,268 -- (95,796) -- (95,796)
Restructuring of note receivable
net of income taxes of $321,490 -- (426,160) -- --
----------- ----------- ----------- -----------
Total other income (expense) (169,353) (1,285,046) (105,844) (759,473)
----------- ----------- ----------- -----------
Income (loss) before income taxes
and minority interest 26,439 (1,940,727) 81,399 (801,998)
Provision for income taxes 14,342 (466,677) 52,302 (123,767)
----------- ----------- ----------- -----------
Income before minority interest 12,097 (1,474,050) 29,097 (678,231)
Minority interest 12,188 (60,929) (11,493) (139,191)
----------- ----------- ----------- -----------
Net income (loss) $ 24,285 $(1,534,979) $ 17,604 $ (817,422)
=========== =========== =========== ===========
Basic earnings per share
Net income (loss) $ 0.01 $ (0.48) $ 0.01 $ (0.26)
=========== =========== =========== ===========
Number of weighted shares outstanding:
Basic 1,818,560 3,168,292 1,759,146 3,168,292
=========== =========== =========== ===========
</TABLE>
See Notes to Interim Financial Statements
7
<PAGE>
MODERN MEDICAL MODALITIES CORP. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended
June 30,
------------------------------
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities
Net income (loss) $ 24,285 $(1,534,979)
----------- -----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 558,681 883,293
Contractual allowances 96,845 (306,943)
Bad debts -- 18,504
Income from an unconsolidated joint venture (75,656) (164,837)
Minority interest (12,188) 60,929
Deferred income taxes 57,342 (1,379,761)
Loss on sale of subsidiary 57,000 742,619
Loss on disposal of subsidiary -- 168,064
Restructuring of note receivable -- 747,650
Income from unconsolidated affiliate -- --
Increase (decrease) in cash attributable to
changes in operating assets and liabilities:
Accounts receivable 209,180 1,668,760
Accounts receivable - joint venturer 581,758 (220,445)
Other receivable (442) 47,554
Due from affiliate 22,867 (75,600)
Due from officers -- 94,343
Due from related party -- 300,000
Prepaid expenses 11,023 34,105
Deposits 14,916 51,083
Distributions from a joint venture -- --
Due to affiliate 241,763 (23,594)
Due to related party -- (100,000)
Accounts payable (634,430) 242,574
Accrued expenses (673,972) 262,265
Advances from joint ventures (218,717) --
Advances to unconsolidated affiliate -- --
----------- -----------
Total adjustments 235,970 3,050,563
----------- -----------
Net cash provided (used) by operating activities 260,255 1,515,584
----------- -----------
Cash flow from investing activities:
Fixed asset acquisitions (124,506) (723,941)
Fixed assed dispositions 848,562 1,539,665
Proceeds from loan receivable - affiliate -- (7,500)
Restructuring of note receivable -- --
Proceeds from note receivable 27,778 36,111
Organization costs 1,211 --
Investment in joint venture (51,316) (82,547)
Decrease in minority interest (28,834)
----------- -----------
Net cash provided (used) by investing activities 701,729 761,788
Cash flow from financing activities:
Reduction of goodwill -- 1,419,213
Proceeds from issuance of long-term debt 86,460 --
Issuance of capital stock 62 --
Joint venture advances -- --
Disposal of long term debt (443,417) (2,993,493)
Loans payable - affiliates (202,000) --
Principal payments on long-term debt (417,468) (656,509)
----------- -----------
Net cash provided (used) by financing activities (976,363) (2,230,789)
----------- -----------
Net increase in cash and equivalents (14,379) 46,583
Cash and equivalents, begining of year 656,313 719,217
----------- -----------
Cash and equivalents, end of year $ 641,934 $ 765,800
=========== ===========
</TABLE>
See Notes to Interim Financial Statements
8
<PAGE>
NOTES TO INTERIM FINANCIAL STATEMENTS
June 30, 1999
(Unaudited)
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION.
Modern Medical Modalities Corporation (the "Company") was
incorporated in the State of New Jersey on December 6, 1989. The
Company provides high technology medical equipment and management
services to hospitals and physicians.
The consolidated financial statements include the accounts of
the Company, its wholly-owned subsidiaries, Medical Marketing and
Management, Inc., Somerset Imaging Corporation, South Plainfield
Imaging, Inc., Medi-Corp., USA, South Jersey Medical Equipment Leasing
Corp., Amherst Medical Equipment Leasing Corp., Open MRI of Morristown,
Inc., West Paterson Medical Equipment Leasing Corp., Ohio Medical
Equipment Leasing Corporation, its majority owned subsidiaries, and
Metairie Medical Equipment Leasing Corp., a 100% owned subsidiary which
was incorporated in June 1997, and its majority owned joint ventures,
Plainfield MRI Associates, Joint Venture, MRI Imaging Center at PBI,
and Open MRI & Imaging Center of Metairie, LLC. The Company has an 84%,
75%, and 85% interest, respectively, in the joint ventures and by
contract manages the joint ventures, in which it is the managing joint
venturer and it has unilateral control. Investments in unconsolidated
joint ventures, Union Imaging Associates, Joint Venture, and Open MRI
of Morristown, Joint Venture, in which the Company has a 10% and 2%,
interest, respectively, and significant influence, are accounted for
under the equity method. All significant intercompany transactions and
accounts have been eliminated in the consolidation.
The accompanying unaudited consolidated financial statements
and footnotes have been condensed and, therefore, do not contain all
required disclosures. Reference should be made to the Company's annual
financial statement filed on Form 10-K for the year ended December 31,
1998.
The financial statements for the six month period ended June
30, 1999 and 1998 have not been audited. In the opinion of management,
the unaudited interim consolidated financial statements reflect all
adjustments and accruals, consisting only of normal recurring
adjustments and accruals, necessary to present fairly the financial
position of the Company as at June 30, 1999 and the results of its
operations for the six month periods ended June 30, 1999 and 1998 and
statements of cash flows for the six month periods ended June 30, 1999
and 1998. The results for the six month periods ended June 30, 1999 and
1998 are not necessarily indicative of the results to be expected for
the full year.
The accounting policies followed by the Company are set forth
in Note 1 to the Company's financial statements included in its Annual
Financial Statement filed on form 10-K for the year ended December 31,
1998, which is incorporated herein by reference. Specific reference is
made to this report for a description of the Company's securities and
the notes to financial statements included therein.
9
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The carrying amounts of cash, accounts receivable, short-term
notes receivable, accounts payable, and short-term debt approximate
fair value due to the short maturity of the instruments and the
provision for what management believes to be adequate reserves for
potential losses. It was not practical to estimate the fair value of
long-term notes receivable and long-term debt because quoted market
prices do not exist and an estimate could not be made through other
means without incurring excessive costs.
Certain items in the 1998 financial statements have been
reclassified to conform with the 1999 presentation. These
reclassifications had no effect on the financial position, net income
or stockholders' equity for the periods presented.
NOTE 2 - EARNINGS (LOSS) PER SHARE.
Earnings (loss) per share are computed by dividing net income
(loss) by the weighted average number of common stock and common stock
equivalent shares outstanding during each period. Earnings per share -
diluted for the six months ended June 30, 1999 is not presented in the
consolidated statements of operations since it is not dilutive.
NOTE 3 - DISPOSAL OF SUBSIDIARY.
In January 1999, the Company sold its 50% interest in Doctors
Imaging Associates, Joint Venture for $100,000. As a result of this
disposition, the Company recorded a gain on sale of subsidiary in the
amount of $57,000, net of income taxes in the amount of $43,000.
NOTE 4 - PROPERTY AND EQUIPMENT, NET.
Property and equipment, net, consisted of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
----------- -----------
(unaudited)
<S> <C> <C>
Medical equipment $ 9,134,306 $11,459,664
Buildings 310,860 310,860
Furniture and fixtures 65,830 65,830
Automobiles 51,017 22,860
Leasehold improvements 434,044 586,418
----------- -----------
9,996,057 12,445,632
Less: Accumulated depreciation
and amortization 4,565,769 5,742,206
----------- -----------
10
<PAGE>
$ 5,430,288 $ 6,703,426
=========== ===========
</TABLE>
NOTE 5 - INVESTMENT IN AN UNCONSOLIDATED JOINT VENTURE.
Summarized (unaudited) financial information of the
unconsolidated joint venture, Union Imaging Associates, Joint Venture,
in which the Company has a 10% minority interest, is as follows:
<TABLE>
<CAPTION>
Total Long-term Total Total
Assets Debt Liabilities Capital
<S> <C> <C> <C> <C>
June 30, 1999 4,655,407 1,241,912 1,799,406 2,856,001
December 31, 1998 4,485,673 1,271,846 1,741,863 2,743,810
</TABLE>
<TABLE>
<CAPTION>
(10%)
Gross Net Allocation
Revenues Income Of Income
--------------- ------------- --------------
<S> <C> <C> <C>
For the six months ended
June 30, 1999 2,537,025 691,579 69,158
For the year ended
December 31, 1998 4,141,948 1,492,754 149,275
</TABLE>
NOTE 6 - LINE OF CREDIT.
In April 1995, the Company secured a line of credit with Summit Bank of
New Jersey for $600,000 at the bank's prime rate for commercial borrowers. As of
June 30, 1999 the amount of the liability under the line of credit was $595,552.
The line of credit is secured by a certificate of deposit in the amount of
$600,000.
NOTE 7 - LONG-TERM DEBT.
Long-term debt consists of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
---------- ----------
(unaudited)
<S> <C> <C>
Capitalized lease obligations $4,083,940 $4,758,726
Accounts receivable financing (a) 970,980 1,065,815
---------- ----------
5,054,920 5,824,541
Current portion 2,237,265 2,789,678
---------- ----------
11
<PAGE>
Long-term debt, net of current portion $2,817,655 $3,034,863
---------- ----------
</TABLE>
(a) Capital Lease Obligations:
The Company entered into certain leases for the rental of
equipment, which have been recorded as capital leases for financial
statement reporting purposes and are included in equipment.
(a) Accounts Receivable Financing:
The Company entered into an agreement with DVI Business Credit
to finance up to $2,000,000 of the accounts receivable balances from
two of the Company's wholly-owned subsidiaries, a minority-owned
subsidiary, and two of its majority-owned joint ventures. Advances
would bear interest at the prime rate plus 4%. At June 30, 1999, the
amount financed under this agreement totaled $970,980.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
(a) Advisory Agreement
In January 1999, the Company entered into an advisory
agreement with Allen Wolfson ("Advisor"), for a period of six months.
The agreement will be automatically extended on an annual basis. The
agreement can be terminated with at least thirty (30) days written
notice prior to the end of the agreement. Advisor shall assist the
Company in its effecting the purchase of businesses and assets relative
to its business and growth strategy.
On July 19, 1999 the Company issued 330,000 shares of its
common stock to Allen Wolfson, as compensation, as required by the
advisor agreement.
In January 1999, the Company entered into a consulting
agreement with Richard Suber for a period of six months. The agreement
may be extended on a month to month basis. Consultant shall render
services regarding: potential strategies for generating new business
for the Company, structuring of potential business opportunities for
the Company, general corporate filings as needed, and document
preparation as needed to accomplish the above.
The Company shall pay consultant a retainer fee of 20,000
shares of its common stock.
NOTE 9 - STOCKHOLDERS' EQUITY
On March 11, 1999, the Company effectuated a one for two
reverse stock split of the Company's issued and outstanding shares of
common stock. The reverse stock split became effective on March 12,
1999. After the reverse stock split, the Company has 1,759,146 shares
of common stock issued and outstanding and a total of
12
<PAGE>
2,500,000 shares authorized for issuance.
On April 12, 1999 Benson Shore Capital, LLC, exercised its
option to acquire 136,125 shares (adjusted for the one for two reverse
stock split of the Company's common stock) at $0.01 per share
NOTE 10 - SUBSEQUENT EVENTS
(a) Private Placement Offering.
In July, 1999, the Board of Directors of the Company passed a
resolution authorizing the management of the Company to initiate steps
for a private placement of the Company's securities in order to raise
capital. Management was granted authority to prepare a Private
Placement Memorandum pursuant to Regulation D Rules governing the
Limited Offer and Sale of Securities Without Registration Under the
Securities Act of 1933 (as amended) and to register the securities in
any state jurisdiction that management felt was required and
appropriate.
On July 20, 1999, the Company closed $283,000 of its private
placement for an aggregate of 148,702 shares of its common stock. The
number of shares of common stock was determined by taking the average
closing bid price for the five trading days prior to July 20, 1999 and
deducting 30% from such average.
The Company incurred expenses of $49,590 in connection with
the private placement. Additionally, 25,000 shares were issued to
underwriters in connection with the private placement.
(b) Consulting Agreement.
On July 19, 1999 the Company issued 330,000 shares of its
common stock to Allen Wolfson, as compensation, as required by the
advisor agreement.
13
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH THE
FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE HEREIN. EXCEPT FOR
HISTORICAL INFORMATION CONTAINED HEREIN, CERTAIN STATEMENTS HEREIN ARE
FORWARD-LOOKING STATEMENTS THAT ARE MADE PURSUANT TO THE SAFE HARBOR PROVISIONS
OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. FORWARD-LOOKING
STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS AND UNCERTAINTIES THAT MAY CAUSE THE
COMPANY's actual results in future periods to DIFFER MATERIALLY FROM FORECASTED
RESULTS. THOSE RISKS INCLUDE, AMONG OTHERS, THE RECEIPT AND TIMING OF FUTURE
CUSTOMER ORDERS, PRICE PRESSURES AND OTHER COMPETITIVE FACTORS LEADING TO A
DECREASE IN ANTICIPATED REVENUES AND GROSS PROFIT MARGINS.
In 1994, Modern Medical Modalities Corporation (the "Company") started Medical
Marketing & Management, Inc. which markets not only the sites of the Company,
but for other physician groups and hospitals. In November 1994, the Company
acquired Prime Contracting Corp. ("Prime") in a business combination accounted
for as a pooling of interests. Prime is a full service contractor who provides
turnkey design and construction services for medical facilities primarily on the
east coast of the United States. On December 27, 1995, the Company entered into
an agreement with a related party to sell all of the common stock of Prime for
$1,200,000.
In 1995, the Company purchased Empire State Imaging Associates, Inc. ("Empire
State"). On December 27, 1996, the Company sold 65% of the common stock of
Empire State for $250,000 to a related party. The Company commenced operations
during the second, third and fourth quarters of 1995 and the first quarter of
1996, respectively, at sites located in Passaic and Somerset, New Jersey;
Amherst, New York; and Morristown, New Jersey. During the third quarter of 1996,
the Company, through its wholly-owned subsidiary, West Paterson Medical
Equipment Leasing Corp. ("WPMEL"), entered into a lease and management services
agreement at a site specializing in diagnostic imaging located in West Paterson,
New Jersey. In addition, the Company through its wholly-owned subsidiary Ohio
Medical Equipment Leasing Corporation ("OME") entered into a purchase and
consulting agreement to acquire a 50.2% interest as a general (managing) partner
of a diagnostic imaging center located in Sylvania, Ohio. Many of the
fluctuations on the line items on the balance sheets and the statements of
operations are directly attributable to the acquisition and start-up of these
entities.
In February 1997, the Company acquired a 25% interest from an affiliated party
in Open MRI & Diagnostic Services of Toms River, Inc.
In March 1997, the Company entered into a contract for the sale of its stock in
this entity. Under the terms of the sale, the purchasing party paid $75,000 in
advance, $175,000 at closing and the balance of $750,000 is payable in monthly
installments of $25,000 commencing in April 1998.
In March of 1998, the Company sold to the KFC Venture LLC, 15% of Open MRI and
Imaging Center of Metaire, LLC for $250,000 payable $100,000 upon execution of
the agreement and $25,000 a month for six months. Under the terms of the
agreement, $125,000 of the $250,000 must be paid back to KFC Venture LLC without
interest before any profits can be distributed. Until such time, all
distributions shall be divided equally with fifty percent of said distribution
being paid to KFC Ventures, LLC as a return of its initial capital investment up
to the amount of $125,000 and the other fifty percent of said distribution being
distributed to the members in accordance with their percentage interests in the
Company.
14
<PAGE>
On May 7, 1998, the Company entered into an agreement to sell 70% of its 72%
ownership of Open MRI of Morristown, Joint Venture (Open MRI) for $300,000. The
terms required $100,000 payable at signing, and monthly payments in the amount
of $50,000 on May 1, June 1, July 1 and August 1, 1998. The Company retained the
option to repurchase from the buyers, ADS Investment Corp. and Oak Knoll
Management Corporation (related party), the 70% interest upon payment of $50,000
plus all prior payments and any additional costs incurred by the buyers. The
option expired on August 31, 1998.
On August 20, 1998, the Company, ADS Investment Corp. and Oak Knoll Management
Corporation (related party) modified the original agreement from a sale to a
loan. The terms of the new agreement are as follows: a loan in the amount of
$300,000, with interest due and payable at 12% per annum, secured by 70% of the
Company's 72% ownership of Open MRI. The loan is due and payable on September
30, 1998. The agreement also requires the personal guarantees made by the
lenders to DVI Business Credit Corporation on behalf of the Company be replaced
by September 30, 1998 as a condition of satisfactory settlement of the loan. For
services rendered between May 7, 1998 and the date of maturity of this loan, all
distributions made to the lending parties by Open MRI will remain the property
of the lending parties.
On September 30, 1998 the Company effectively sold 70% of its interest in Open
MRI for $300,000 and the purchaser's agreement to provide the Company's
creditor, DVI Business Credit, personal guaranties of the principals of
purchaser in an amount not to exceed $150,000. The Company recorded a gain on
this transaction in the amount of $30,171. The Company has retained a 2%
ownership interest in Open MRI.
In September 1998, the management contract with Southern Medical Consultants LLP
was terminated for the management of Open MRI of Metaire. According to the
letter agreement of March 30, 1998, if Southern Medical is not active in the
site nor managing the site through the end of the lease payments, then no stock
transfers will be made. No stock transfers have been made to date.
During the first quarter of 1999 the Company agreed to sell its fifty percent
interest in Doctors Imaging Associates for $100,000, provided that the purchaser
arranged to have Modern Medical Modalities Corporation removed as a debtor of
the equipment at such site with DVI Financial Services, as well as certain other
conditions. On May 12, 1999, the final conditions were met.
RESULTS OF OPERATIONS:
For the three months ended June 30, 1999 as compared to the three months ended
June 30, 1998
Revenue
Operating revenue was $2,223,199 for the three months ended June 30, 1998 and
$977,041 for the comparable period in 1999, a decrease of $1,246,158. Such
decrease is directly related to the sale of: (i) Open MRI at Corvas of $383,139;
and (ii) Doctors Imaging Associates of $333,158, and the return of Ohio Medical
Equipment Leasing Corporation to DVI Financial Services of $349,847.
Additionally, there has been a reduction of $180,190 of marketing contracts
which are in the final phases of winding down.
15
<PAGE>
Depreciation and Amortization
Depreciation and amortization expense decreased by $184,421 for the three months
ended June 30, 1999 as compared to June 30, 1998. This reduction is directly
attributable to the sale of Open MRI at Corvas and Doctors Imaging Associates,
and to the return of Ohio Medical Equipment Leasing Corporation in 1998.
Interest Expense
Interest expense decreased by $243,418 for the three months ended June 30, 1999
as compared to June 30, 1998. The sale of Open MRI at Corvas and Doctors Imaging
Associates and the return of Ohio Medical Equipment Leasing Corporation resulted
in an aggregate decrease of $112,719 for the period. The remaining decrease of
$131,000 is attributable to the refinancing of three of the Company's sites
which was completed in the fourth quarter of 1998.
Selling, General and Administrative
Operating expenses for the three months ended June 30, 1999 was $511,589 as
compared to $1,800,000 for the comparable period in 1998, a decrease of
$1,288,411. Such decrease is attributable to corporate reductions of
approximately $500,000 and the elimination of outside professional services of
approximately $200,000. Additionally, the Company has restructured the method it
uses to service its equipment, resulting in savings of approximately $325,000.
The Company's maintenance expenses decreased by approximately $100,000 as a
result of the reduction in the number of sites the Company operates.
For the six months ended June 30, 1999 as compared to the six months ended June
30, 1998
Operating Revenue
For the six months ended June 30, 1999 operating revenue was $1,932,033 as
compared to $4,019,879 for the six months ended June 30, 1998. The decrease in
revenues of $2,087,846 was a direct result of the sale of Open MRI at Corvas of
$619,982, the sale of Doctors Imaging Associates of $571,258 and the return of
Ohio Medical Equipment Leasing Corporation to DVI Financial Services of
$774,770.
Depreciation Expense
Depreciation expense for the six months ended June 30, 1999 was $558,681 as
compared to $883,293 for the comparable prior year period, a reduction of
approximately $324,612. This decrease is directly attributable to the sale of
Open MRI at Corvas and Doctors Imaging Associates and the return of Ohio Medical
Equipment Leasing Corporation.
Interest Expense
Interest expense decreased for the six month period ended June 30, 1999 to
$321,144 from $623,251 for the comparable prior year period, a decrease of
$302,107. This decrease is
16
<PAGE>
attributable to the Company's sale of Open MRI at Corvas and Doctors Imaging
Associates and the return of Ohio Medical Equipment Leasing Corporation, in the
aggregate amount of $185,691, and the remaining $116,416 is directly
attributable to the refinancing of three of the Company's centers.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the six months ended June 30,
1999 were $1,177,560 as compared to $3,773,763 for the comparable period in
1998, a decrease of approximately $2,600,000. Such decrease is largely
attributable to the sale of sale of various centers of approximately $1,300,000
as well as corporate reductions of approximately $500,000 and the use of outside
professional services of approximately $200,000. Additionally, the Company has
restructured the way it services its equipment at its sites which has resulted
in savings to the Company in excess of $325,000.
Accounts Receivable
Substantially, all of the reductions to the current assets and liabilities when
comparing the six months ended June 30, 1999 to the six months ended June 30,
1998 resulted from the sale of two sites in 1998 and one in 1999. The decreases
in accounts receivable was partially off-set by increased volume at the
remaining sites.
LIQUIDITY AND CAPITAL RESOURCES:
The Company has a working capital deficiency of $1,108,507 at June 30, 1999 as
compared to a working capital deficiency of $1,963,000 at December 31, 1998.
In March of 1998, the Company sold to the KFC Venture LLC, 15% of Open MRI and
Imaging Center of Metaire, LLC for $250,000 payable $100,000 upon execution of
the agreement and $25,000 a month for six months. Under the terms of the
agreement, $125,000 of the $250,000 must be paid back to KFC Venture LLC without
interest before any profits can be distributed. Until such time, all
distributions shall be divided equally with fifty percent of said distribution
being paid to KFC Ventures, LLC as a return of its initial capital investment up
to the amount of $125,000 and the other fifty percent of said distribution being
distributed to the members in accordance with their percentage interests in the
Company.
On May 7, 1998, the Company entered into an agreement to sell 70% of its 72%
ownership of Open MRI of Morristown, Joint Venture (Open MRI) for $300,000. The
terms required $100,000 payable at signing, and monthly payments in the amount
of $50,000 on May 1, June 1, July 1 and August 1, 1998. The Company retained the
option to repurchase from the buyers, ADS Investment Corp. and Oak Knoll
Management Corporation (related party), the 70% interest upon payment of $50,000
plus all prior payments and any additional costs incurred by the buyers. The
option expired on August 31, 1998.
In June 1998, the Company exercised its option to return its 50.2% interest in a
diagnostic imaging center located in Sylvania, Ohio. The $168,000 represents
unrecoverable working capital advances made to that center.
17
<PAGE>
On August 20, 1998, the Company, ADS Investment Corp. and Oak Knoll Management
Corporation (related party) modified the original agreement from a sale to a
loan. The terms of the new agreement are as follows: a loan in the amount of
$300,000, with interest due and payable at 12% per annum, secured by 70% of the
Company's 72% ownership of Open MRI. The loan is due and payable on September
30, 1998. The agreement also requires the personal guarantees made by the
lenders to DVI Business Credit Corporation on behalf of the Company be replaced
by September 30, 1998 as a condition of satisfactory settlement of the loan. For
services rendered between May 7, 1998 and the date of maturity of this loan, all
distributions made to the lending parties by Open MRI will remain the property
of the lending parties.
On September 30, 1998 the Company effectively sold 70% of its interest in Open
MRI for $300,000 and the purchaser's agreement to provide the Company's
creditor, DVI Business Credit, personal guaranties of the principals of
purchaser in an amount not to exceed $150,000. The Company recorded a gain on
this transaction in the amount of $30,171. The Company has retained a 2%
ownership interest in Open MRI.
In September 1998, the management contract with Southern Medical Consultants LLP
was terminated for the management of Open MRI of Metaire. According to the
letter agreement of March 30, 1998, if Southern Medical is not active in the
site nor managing the site through the end of the lease payments, then no stock
transfers will be made. No stock transfer has been made.
During 1998, the Company refinanced the following sites:
<TABLE>
<CAPTION>
OLD NEW DECREASE
<S> <C> <C> <C>
Passaic Beth Israel MRI $45,255 $24,557 $20,698
South Jersey Imaging 37,267 23,217 14,356
South Plainfield Imaging 36,350 13,207 22,943
-------
Monthly reduction in debt funding $57,997
</TABLE>
On an annual basis the above refinancing results in a cash savings of $695,694.
All of the above refinanced loans are for sixty (60) months.
In addition, for the year ended December 31, 1998, the Company reduced the
outstanding accounts receivable working capital line of credit by approximately
$635,000 ($1,302,000 to $667,000) and for the six months ended June 30, 1999 the
outstanding balance has been further reduced to $543,000. The Company intends to
continue to reduce the outstanding principal balance on this line of credit at a
rate of 10% of the cash receipts of the applicable imaging centers.
During 1998, the Company reduced personnel salaries by a total of $443,000,
including fringe benefits. The duties of those employees whose jobs were
eliminated were reassigned to other Company employees.
In July 1999, the Company sold 148,702 shares of its common stock to accredited
investors in a private placement transaction pursuant to Regulation D Rule 506
of the Securities Act of 1933, as amended. The Company received gross proceeds
of $283,000, before offering expenses of
18
<PAGE>
approximately $49,590, which the Company intends to use for working capital and
general corporate purposes.
These are the only trends, commitments, events and/or material uncertainties
known to the Company.
VALUATION OF ACCOUNTS RECEIVABLE:
The Company values its uncollected accounts receivable as part of its
determination of profit. The Company constantly reviews the accounts receivable
valuation. The continuing monthly review, gathering of additional information,
as well as changing reimbursement rate, may cause adjustments to the accounts
receivable valuation.
HEALTHCARE SYSTEM:
The Healthcare system is in a state of change and will continue so for the next
several years. Small medical group practices are referring patients to free
standing centers as an alternative to costly hospital care. The cost of this
medical equipment and the patient volume needed to justify the expenditure is
not practical for individual and small group practices. Providing MRI and CT
Scans for these physicians in these free standing centers offers an attractive
method to protect eroding income, offer state-of-the-art technology and maintain
patient loyalty.
LEGISLATION:
In order to curb the potential for fraud and abuse under the Medicare and
Medicaid programs, Congress has enacted certain laws (the "Anti-Kickback Laws")
prohibiting the payment or receipt of any remuneration in return for the
referral of patients to a healthcare provider for the furnishing of medical
services or equipment, the payment for which may be made in whole or in part by
the Medicare or Medicaid programs. New Jersey, as well as other states, have
enacted similar state laws. The Anti-Kickback Laws apply to both sides of the
referral relationship: the provider making the referral and the provider
receiving the referral. Violation of the Anti- Kickback Laws is a criminal
felony punishable by fines of up to $25,000 and/or up to five years imprisonment
for each violation. Federal law also permits the Department of Health and Human
Services ("HHS") to assess civil fines against violators of the Anti-Kickback
Laws and to exclude them from participation in the Medicare and Medicaid
programs. These civil sanctions can be imposed in proceedings that do not
involve the same procedural requirements and standards of proof as would be
required in a criminal trial.
The Anti-Kickback Laws are broadly drafted and judicial decisions rendered thus
far, while made in the context of overt payments explicitly in exchange for
referrals, have broadly interpreted the scope of these laws.
Several federal courts considering the issue, including the U.S. Court of
Appeals having jurisdiction over New Jersey, have concluded that the
Anti-Kickback Laws would be violated if "any purpose" of a challenged economic
arrangement is to induce or pay for referrals, no matter how incidental that
purpose may be or how many other legitimate purposes may exist for the
arrangement in question. Accordingly, many types of business relationships
between healthcare providers, including
19
<PAGE>
investments in healthcare providers by physicians, hospitals or others who are
in a position to refer patients could be held to fall within the prohibitions of
the Anti-Kickback Laws or similar state laws.
The American Medical Association (the "AMA") has reaffirmed its original
Guidelines which were issued on May 6, 1992, which stated that physicians should
not refer patients to a health care facility outside their office in which they
do not have an active participation and only a passive investment interest.
These are ethical rules and recommendations of the AMA and they do not have a
binding legal effect.
HHS has adopted regulations specifying "safe harbors" for various payment
practices between providers and their referral sources. If a payment practice
were to come within the safe harbor and were not a "sham" to circumvent the
law's requirements, it would not be treated as an illegal Medicare/Medicaid
kickback or grounds for exclusion from the Medicare/Medicaid programs. While
failure to fall within a safe harbor does not mean that the practice is illegal,
HHS had indicated that it may give such arrangements closer scrutiny. In their
present form, no safe harbor would cover an investment interest in the Company.
The Company cannot predict whether other regulatory or statutory provisions will
be enacted by federal or state authorities which would prohibit or otherwise
regulate referrals by physicians to the Company thereby having a material
adverse effect on the Company's operations.
The federal AEthics in Patient Referrals Law of 1989", often referred to as the
"Stark Law", prohibited a physician with a "financial relationship" with an
entity that furnishes clinical laboratory services (or a physician with an
"immediate family member" with such a relationship) from making a referral to
that entity for clinical laboratory services for which payment may be made under
that entity for clinical laboratory services for which payment may be made under
Medicare. It also prohibited that entity from billing Medicare, an individual, a
third party payor, or other entity, for an item or service furnished pursuant to
a prohibited referral. It required any entity that collects any amounts as a
result of such a billing to refund those amounts. The law provided certain
exceptions, namely, certain situations that would not constitute referrals, and
certain situations that would not constitute a "financial relationship."
Later amendments to the Stark law extended the original prohibition on referrals
and billing to cover ten additional "designated health services," in addition to
clinical laboratory services, and extended the ban to services payable under
Medicaid, both beginning with referrals made after December 31, 1994.
The "designated health services" are clinical laboratory services; physical
therapy services (including speech language pathology services); occupational
therapy services; radiology services (including any diagnostic test or treatment
using x-rays, ultrasound or other imaging services, CT scan, MRI, radiation or
nuclear medicine, however, excluding invasive radiology where the imaging
modality is used to guide a needle, probe or catheter (such as cardiac
catheterization), and thus is clearly incidental to a separate major procedure;
also excluding screening mamography); radiation therapy services and supplies;
durable medical equipment and supplies; parenteral and enteral nutrients,
equipment and supplies; prosthetics, orthotics, and prosthetic devices and
supplies; home health services provided by a home health agency; outpatient
prescription drugs; inpatient and outpatient hospital services, whether provided
by the hospital or by others under arrangements with the hospital for which by
the hospital or by others under arrangements with the hospital for which the
hospital
20
<PAGE>
bills, but not including services provided by the hospital under a separate
license, such as home health care or physical therapy provided by a
hospital-owned home health agency or skilled nursing facility.
In 1991, New Jersey enacted the Health Care Cost Reduction Act, or so-called
"Codey Bill", (N.J.S.A. 45: 9-22.4 et seq.) which provided in part that a
medical practitioner shall not refer a patient, or direct one of its employees
to refer a patient, to a health care service in which the practitioner and/or
the practitioner's immediate family had any beneficial interest. The bill
specifically provided that for beneficial interests which were created prior to
the effective date of the Act, July 31, 1991, the practitioner could continue to
refer patients, or direct an employee to do so, if the practitioner disclosed
such interest to his patients. The disclosure must take the form of a sign
posted in a conspicuous place in the practitioner's office informing the
patients of such interest and stating that a listing of alternative health care
service providers could be found in the telephone directory. All physicians who
refer in the sites in New Jersey and also have a financial interest in those
sites have a sign posted as mandated by the law.
Under the present "Stark Bill", a physician who has a financial relationship
with an entity may not make a referral to the entity for the furnishing of
clinical laboratory services for which payment is made under the Medicare or
Medicaid programs. The Stark Bill, passed with an effective date of January 1,
1995, will expand the application of the Medicare ban on self- referrals after
December 31, 1994. The Stark Bill also extends the self-referral ban to physical
therapy services, radiology services including MRI and CT Scans, ultrasound
services, radiation therapy services and the furnishing of durable medical
equipment, the furnishing of parenteral and enteral nutrition equipment and
supplies, the furnishing of out-patient prescription drugs, ambulance services,
home infusion therapy services, occupational therapy services and in-patient and
out-patient hospital services (including services furnished in a psychiatric or
rehabilitation hospital). As of the date of this filing, the Company has not
experienced any material adverse effects of limited Medicare and Medicaid
referrals.
YEAR 2000 COMPLIANCE:
Many computer systems and software products worldwide and throughout all
industries will not function properly as the year 2000 approaches unless
changed, due to a once-common programming standard that represents years using
two-digits. This is the "Year 2000 problem" that has received considerable media
coverage. The Year 2000 readiness of the Company's customers and hardware and
software offerings from the Company's suppliers, subcontractors and business
partners may vary. The Year 2000 also presents a number of other risks and
uncertainties that could affect the Company, including utilities failures, lack
of personnel skilled in the resolution of Year 2000 issues, and the nature of
government responses to the issues, among others. While the Company continues to
believe that the Year 2000 matters discussed above will not have a material
impact on its business, financial condition or results of operations, it remains
uncertain whether or to what extent the Company may be affected.
21
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On June 25, 1998, the Company was named in an arbitration proceeding brought by
Stephen Findlay, former President of Prime Contracting, one of the Company?s
former subsidiaries. Mr. Findlay alleges that he is due certain monies pursuant
to his employment agreement with Prime Contracting, under which he was
terminated. The Company believes it has meritorious defenses and intends to
rigorously defend the arbitration.
The Company has been named in a legal suit brought by Stephen Findlay, former
President of Prime Contracting , one of the Companies former subsidiaries. Mr.
Findlay alleges that he is due certain monies pursuant to his employment
agreement, under which he was terminated from the present owners of the
subsidiary. The Company believes it has meritorious defense and will rigorously
defend the suit.
The Company has been named as a defendant in bankruptcy court by the estate of a
former member of Detex Services. The Estate claims that the Company did not
fulfill its obligations under a letter of intent. The Company believes that it
has meritorious defenses and intends to rigorously defend its position.
Other than the above, the Company is not a party to any material legal
proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On July 6, 1999, the Company held its annual meeting of stockholders at which
the following proposals were adopted: (1) the election of the Company's Board of
Directors; (2) an amendment to the Company's certificate of incorporation
increasing its authorized shares from 2,500,000 to 15,000,000; (3) the Company's
1999 Stock Option Plan of 500,000 shares; and (4) the appointment of Vincent J.
Batyr & Co. as the Company's independent certified public accountants for the
ensuing year.
Proposal 1
Each of the following persons were elected to serve on the Company's Board of
Directors: Roger Findlay 1,463,920 shares in favor, zero shares against and
66,429 shares were withheld from voting. Jan Goldberg 1,463,920 shares in favor,
zero shares against and 66,429 shares were withheld from voting. Gregory Maccia
1,463,920 shares in favor, zero shares against and 66,429 shares were withheld
from voting. Fred Mancinelli 1,455,920 shares in favor, zero shares against and
66,429 shares were withheld from voting. Carl Gideon 1,458,920 shares in favor,
zero shares against and 66,429 shares were withheld from voting.
Proposal 2
The amendment to the Company's restated and amended certificate of incorporation
to increase the number of authorized shares of the Company's common stock,
$.0002 par value per share,
22
<PAGE>
from 2,500,000 to 15,000,000 was approved by the following vote: 1,445,220
shares For, 45,605 shares Against and 31,024 shares Abstained.
Proposal 3
The Company's 1999 Stock Option Plan was voted for as follows: 428,017 shares
For, 62,505 shares Against and 38,524 shares Abstained.
Proposal 4
The Company's independent certified public accountants, Vincent J. Batyr & Co.
were elected for the ensuing year by the following vote: 1,406,670 shares For,
17,955 shares Against and 97,224 shares Abstained.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(b) Exhibits.
27 Financial Data Schedule
(b) Reports on Form 8-K.
None.
23
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
MODERN MEDICAL MODALITIES CORPORATION
Dated: August 13, 1999 By: /s/ ROGER FINDLAY
-----------------------------------------
Roger Findlay
President and Chairman of the Board
By: /s/ JAN GOLDBERG
-----------------------------------------
Jan Goldberg
Vice President, Principal Accounting
Officer, Treasurer and Director
By: /s/ GREGORY MARCIA
-----------------------------------------
Gregory Marcia
Vice President and Director
24
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENTS OF OPERATIONS INCLUDED IN
THE REGISTRANT'S FORM 10-QSB FOR THE QUARTER ENDED JUNE 30, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 41,934
<SECURITIES> 0
<RECEIVABLES> 5,054,755
<ALLOWANCES> 2,554,424
<INVENTORY> 0
<CURRENT-ASSETS> 3,708,900
<PP&E> 9,996,057
<DEPRECIATION> 4,565,769
<TOTAL-ASSETS> 10,115,291
<CURRENT-LIABILITIES> 4,814,407
<BONDS> 2,817,655
0
0
<COMMON> 379
<OTHER-SE> 2,331,230
<TOTAL-LIABILITY-AND-EQUITY> 10,115,291
<SALES> 1,932,033
<TOTAL-REVENUES> 1,932,033
<CGS> 1,736,241
<TOTAL-COSTS> 1,736,241
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 321,144
<INCOME-PRETAX> 26,439
<INCOME-TAX> 14,342
<INCOME-CONTINUING> 24,285
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,285
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
