UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OF 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period June 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to .
Commission file number 0-27240
ECOTYRE TECHNOLOGIES, INC.
-----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 11-3234026
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
895 Waverly Avenue, Holtsville, New York 11742
----------------------------------------------------------------
(Address of principal executive offices)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 of 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
------ -------
As of August 19, 1997, 2,215,853 shares of $.001 par value Common Stock of
the registrant were outstanding.
Index schedule found on Page No. 2
Page 1 of 15 pages
- 1 -
<PAGE>
ECOTYRE TECHNOLOGIES, INC.
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets - June 30, 1997 and March 31, 1997 3
Condensed Statements of Operations - Three Months Ended June 30,
1997 and 1996 4
Condensed Statements of Cash Flows - Three Months Ended June 30,
1997 and 1996 5
Notes to Condensed Financial Statements 6 - 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations 9 - 11
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
</TABLE>
- 2 -
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ECOTYRE TECHNOLOGIES, INC.
CONDENSED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
As of As of
June 30, 1997 March 31, 1997
(Unaudited)
------------- --------------
<S> <C> <C>
ASSETS
Current:
Cash and cash equivalents $ 141,513 $ 127,392
Account receivable, less allowance for possible
losses of $17,000 979,479 958,798
Inventories (Note 2) 635,796 431,561
Prepaid expenses 237,561 241,087
Other current assets 221,119 120,999
-------------- ---------------
Total current assets 2,215,468 1,879,837
Property and equipment, less accumulated depreciation 2,383,139 2,295,089
Security deposits 216,079 244,815
Other assets 433,441 396,003
-------------- --------------
$ 5,248,127 $ 4,815,744
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current:
Current maturities of long-term debt $ 97,000 $ 115,000
Accounts payable 1,199,793 1,003,386
Accrued expenses 130,826 149,687
Preferred stock dividends payable 60,139 120,277
Current maturities of capitalized leases 8,400 7,979
Current maturities of machinery loan 206,853 150,011
-------------- --------------
Total current liabilities 1,703,011 1,546,340
Long-term debt, less current maturities 150,000 150,000
Capitalized leases, less current maturities 14,549 16,711
Machinery loan, less current maturities 789,606 849,989
Deferred rent credits 319,799 313,169
-------------- --------------
Total liabilities 2,976,965 2,876,209
-------------- --------------
Class A Redeemable Convertible Preferred Stock, 2,000,000
shares authorized; issued and outstanding - 1,202,775
(redemption amount of $1,202,775) - 1,193,090
-------------- --------------
Commitments
Stockholders' equity (Note 4):
Serial Preferred Stock, $.001 par value, 1,325,000 shares
authorized; none issued - -
Class A Preferred Stock, $.001 par value, 2,000,000 shares
authorized; 1,325,000 issued and outstanding (liquidation
value $1,325,000) 1,325,000 -
Class B Preferred Stock, $.001 par value, 675,000 shares
authorized; 450,000 issued and outstanding (liquidation
value $450,000) 450,000 -
Common stock, $.001 par value, 20,000,000 shares authorized;
issued and outstanding - 1,171,971 and 908,143 1,172 908
Paid-in capital 8,179,252 7,852,407
Deficit (7,684,262) (7,106,870)
------------ --------------
Total stockholders' equity 2,271,162 746,445
------------ --------------
$ 5.248,127 $ 4,815,744
============ ==============
<FN>
See accompanying notes to financial statements
</FN>
</TABLE>
- 3 -
<PAGE>
ECOTYRE TECHNOLOGIES, INC.
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Three Months Ended
June 30,
----------------------------------
1997 1996
---- ----
(Unaudited) (Unaudited)
----------------------------------
<S> <C> <C>
Net sales $ 1,121,261 $ 218,802
Cost of sales 1,104,190 640,653
-------------- ---------------
Gross profit 17,071 (421,851)
-------------- ---------------
Operating expenses:
Selling and shipping 162,340 168,310
General and administrative 291,195 283,069
-------------- ---------------
Total Operating Expenses 453,535 451,379
-------------- ---------------
Loss from Operations (436,464) (873,230)
-------------- ---------------
Other Expenses, income
Interest expense, net of interest income 36,678 (1,753)
Loss on Marketable Securities 93,783 -
-------------- ---------------
Total Other Expenses (Income) 130,461 (1,753)
-------------- ---------------
Loss Before Taxes (566,925) (871,477)
Income Taxes 10,457 3,749
-------------- ---------------
Net loss $ (577,382) $ 875,226
Preferred stock dividends (Note 3 ) $ (336,275) $ 92,014
-------------- ---------------
Net loss attributable to common stockholders $ (913,657) $ (967,240)
============== ===============
Net loss per share (Notes 3 and 4) $ (0.92) $ (2.17)
============== ===============
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
- 4 -
<PAGE>
ECOTYRE TECHNOLOGIES, INC.
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
June 30,
---------------------------------
1997 1996
---------------------------------
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating expenses:
Net loss $ (577,382) $ (875,226)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 40,606 52,543
Deferred rent 6,630 12,019
Loss on sale of marketable securities 93,783 -
Decrease (increase) in assets:
Accounts receivable (20,681) (34,701)
Inventory (204,235) (79,157)
Other assets (207,189) (6,748)
Increase (decrease) in liabilities:
Accounts payable 196,407 (23,108)
Accrued expenses (18,861) 21,136
--------------- -------------
Net cash used in operating (690,922) (933,242)
--------------- -------------
activities:
Cash flows from investing activities:
Proceeds from sale of marketable securities securities: 356,217 -
Capital expenditures - net (128,656) (365,454)
--------------- -------------
Net cash provided by (used in) investing 227,561 (365,454)
--------------- -------------
activities:
Cash flows from financing activities:
Proceeds from sale of common stock 500,500 -
Repayment of working capital loan (18,000) -
Repayment of capitalized lease obligations and
equipment loans (5,018) (25,420)
Proceeds from bank loan - 183,333
Repayment of bank loan - (200,000)
Repayment of IPO expense - (1,601)
--------------- -------------
Net cash provided by (used in) financing 477,482 (43,688)
activities
Net increase (decrease) in cash 14,121 (1,342,384)
Cash and cash equivalents, beginning of period 127,392 2,782,952
--------------- -------------
Cash and cash equivalents, end of period 141,513 1,440,568
--------------- -------------
Interest paid $ 6,867 17,636
<FN>
See accompanying notes to financial statements
</FN>
</TABLE>
- 5 -
<PAGE>
ECOTYRE TECHNOLOGIES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Basis of Presentation
The accompanying unaudited condensed financial statements included herein
have been prepared in accordance with generally accepted accounting principles
for interim period reporting in conjunction with the instructions to Form
10-QSB. Accordingly, these statements do not include all of the information
required by generally accepted accounting principles for annual financial
statements, and are subject to year-end adjustments. In the opinion of
management, all known adjustments (consisting of normal accruals and reserves)
necessary to present fairly the interim financial results for the period have
been included. It is suggested that these interim statements be read in
conjunction with the financial statements and related notes included in the
Company's 10-KSB for the year ended March 31, 1997.
The operating results for the three months ended June 30, 1997 are not
necessarily indicative of the results to be expected for the year ended March
31, 1998.
Note 2. Inventories
Inventories have been valued at the lower of cost or market. The components
of inventory at June 30, 1997 and March 31, 1997 consist of:
<TABLE>
<CAPTION>
June 30, March 31,
1997 1997
---------------------------------------
<S> <C> <C>
Raw materials $ 341,991 $ 252,221
Work in process 29,940 9,765
Finished goods 263,865 169,575
------------ --------------
$ 635,796 $ 431,561
============ ==============
</TABLE>
Note 3. Net Loss Per Share
Net loss per share is based on the weighted average number of Common Stock
outstanding during each period. Common Stock equivalents and other potentially
dilutive securities are antidilutive. Net loss has been adjusted for accretion
of preferred dividends. (See Note 4)
- 6 -
<PAGE>
ECOTYRE TECHNOLOGIES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
(Continued)
Note 4. Private Placements
In April 1997, the Company completed a private placement of its common
stock which provided net proceeds of $275,625 by issuing 112,501 shares of its
common stock at a price of $2.45 per share.
On June 18, 1997, the Company commenced a second private placement of its
common stock which provided net proceeds through June 30,1997 of $224,875 by
issuing 179,900 shares of its common stock at a price of $1.25 per share.
Subsequent to June 30, 1997, the Company sold an additional 821,800 shares
of its common stock at a price of $1.25 per share resulting in additional
proceeds of $1,027,250.
Class A Redeemable Convertible Preferred Stock.
Effective April 17, 1997, the Certificate of Incorporation of the Company
was amended upon approval from its redeemable Convertible Preferred shareholders
to modify their existing stock. The redemption provision has been eliminated and
the conversion rate of Preferred Stock into Common Stock has been reduced. The
Class A Convertible Preferred Stock is now convertible by multiplying the number
of shares to be converted by the sum of $1.00 plus all accrued and unpaid
dividends divided by the lesser of $21.00 per share or 75% of the closing bid
price for a five day trading period immediately prior to the conversion date.
Commencing July 15, 1997, each holder of Class A Convertible Preferred Stock
shall be entitled to convert up to 25% of their shares per month..
The discount in the conversion rate of the convertible preferred stock to
common is required to be reflected as additional dividends ratably over the
conversion period. Accordingly, the Company recorded accreted preferred stock
dividends related to this discount of $266,451 or ($.27) per share (attributable
to the common stockholders) during the period ended June 30, 1997.
Class B Convertible Preferred Stock.
Effective April 17, 1997, the Certificate of Incorporation of the Company
was amended upon approval from its Board of Directors to authorize 675,000
shares of Class B Convertible Preferred Stock, with a par value of $.001 per
share (liquidation preference $1.00 per share; cumulative dividend of 10%).
In April 1997, a principal stockholder of the Company purchased 450,000
shares of Class B Convertible Preferred Stock for $450,000. Such preferred stock
is convertible into common stock by multiplying the number of shares to be
converted by the sum of $1.00 plus all accrued unpaid dividends divided by $2.45
per share. The holder of the Class B Convertible Preferred Stock has agreed not
to convert or sell said stock until May 22, 1998.
Reverse Stock Split.
On June 2, 1997, the Company, with the approval of its shareholders,
effectuated a one-for-seven reverse stock split. All share and per share
information in the financial statements reflects the effects of the reverse
stock split.
- 7 -
<PAGE>
Note 5. Income Taxes
Income taxes are based on annualized statutory federal and state income tax
rates. The provision for income taxes exclude a benefit for net operating loss
carryforwards.
Note 6. Supplemental Cash Flow Information
Non-cash investing and financing activities during the three months period
ending June 30, 1997 were as follows:
<TABLE>
<S> <C>
Sale of Class B Preferred Stock for marketable securities $ 450,000
Exchange of Class A Redeemable Preferred shares and
annual dividends for Class A Convertible Preferred
shares $ 1,325,000
Accretion and accrual of Preferred Stock dividends $ 336,275
Cancellation of consulting agreement and return of
related common shares $ 100,000
</TABLE>
- 8 -
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operation
General
The Company operated as a wholesale distributor of remolded automobile
tires since its inception in April 1993. In accordance with its business plan,
the Company has substantially curtailed distribution operations, concentrating
its efforts on its manufacturing operations. In its distribution operations, the
Company resold its products primarily to retail tire replacement centers and
tire distributors.
The Company commenced limited manufacturing operations in December 1995 at
its 65,000 square foot leased facility in Holtsville, New York. See
"Properties". To commence manufacturing, the Company had purchased 20 mold
presses, molds, one extruder, one buffing machine and related ancillary
equipment. Additional equipment was purchased in 1996 to increase the Company's
production capacity and limit down time due to machinery failures and
maintenance. The Company ordered new molds from Italy in November 1996 to be
utilized in its current presses which should allow the Company to increase its
production of popular high performance and light truck tires with anticipated
higher profit margins, decreasing its production of smaller tire sizes which are
sold at lower margins. The molds have arrived at the Company's facility and
certain of the new light truck tire sizes are in production while others are
presently being tested. Also, in March 1997, the Company acquired certain of the
assets of Butler Retreading, Inc., (the "Butler Acquisition") a private 18 year
old high performance retreading Company based in Marietta, Georgia. Butler's
equipment is expected to increase the Company's present press capacity and
position the Company to increase sales, with intended higher gross profit
margins from the new mix of tires it will produce. The business acquisition,
which includes Butler's client base, machinery, equipment and inventory, was
financed principally by the proceeds of a $1,000,000 loan from PhoenixCor. Inc.,
a wholly owned subsidiary of Sumitoma Bank.
Results of Operations
Three Months Ended June 30, 1997 Compared to Three Months Ended June 30, 1996.
Net Sales. The Company's net sales of $1,121,261 for the three months ended
June 30, 1997 represent an increase of $902,459 compared to net sales for the
three months ended June 30, 1996. The increase is attributable to the Company's
operations of its manufacturing facility for the entire quarter ending June 30,
1997 as compared to limited operations during the prior comparable fiscal
quarter.
Cost of Sales. The Company's cost of sales for the three months ended June
30, 1997 was $1,104,190 as compared to $640,653, representing an increase of
$463,537. This increase was due primarily to the increase of purchases of raw
materials required to support increased manufacturing output. Although the
Company operated its facility for the entire quarter ended June 30, 1997, it
experienced delays and inefficiencies in production primarily due to the receipt
of improperly formulated raw materials. During the fiscal quarter ended June 30,
1996, the Company was primarily in its initial stages of manufacturing.
Gross Profit . The Company's gross profit for the three months ended June
30, 1997 was $17,071 as compared to a gross loss of ($421,851) for the three
months ended June 30, 1996. The increase in gross profit is directly related to
the Company operating its facility at a higher percentage of capacity during the
quarter ended June 30, 1997 than during the start-up period in its prior
comparable fiscal quarter.
Operating Expenses. The Company incurred selling, shipping, general and
administrative expenses of $453,535 in the three months ended June 30, 1997 as
compared to $451,379 in the three months ended June 30, 1996. Such expenses
represent 40% and 206% of net sales for the quarters ended June 30, 1997 and
June 30, 1996, respectively. The decline of such expenses as a percentage of
sales represents the Company's continuing efforts to contain such expenses as it
expands its operations. The slight decline of selling and shipping expenses
relates to savings achieved from the implementation of logistics analysis to the
shipping process and a change in the sales compensation structure. The decline
was offset by a slight increase in general administrative expenses relating to
an increase in employee fringe benefits.
- 9 -
<PAGE>
Other Expenses. The Company incurred other expenses of $130,461 for the 3
months ended June 30, 1997 compared to net interest income of $1,743 for the
three months ended June 30, 1996. The increase in other expenses was $132,214.
Interest expenses increased by $38,431 reflecting the Company's higher
outstanding borrowing principally related to the machinery loan. During the
prior fiscal quarter, the Company had net interest income of $1,743 relating
primarily to the interest earned on the invested proceeds from its initial
public offering. The Company also incurred a loss of $93,783 relating to the
sale of marketable securities. Such marketable securities were received in
exchange for the sale of the Company's Class B Convertible Preferred Stock.
Net Loss. As a result of the foregoing factors, the Company's net loss
decreased from ($875,226) for the quarter ended June 30, 1996 to a net loss of
($577,382) for the quarter ended June 30, 1996. The net loss attributable to
common stockholders decreased from $967,240 or $2.17 per share to $913,657 or
$.92 per share. As further explained in Note 4, the principal component of the
increase in the preferred stock dividends relates to preferred dividends
accreted of $266,451.
Liquidity and Capital Resources
As indicated in the Company's annual report on Form 10-KSB, the Company's
financial statements have been prepared assuming that the Company will continue
operating as a going concern. The Company has sustained losses since inception
and requires additional working capital. These factors raise substantial doubt
about the Company's ability to continue as a going concern. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
The Company used cash in operating activities in the amount of $690,922 for
the three months ended June 30, 1997 and $933,242 for the three months ended
June 30, 1996 which was primarily related to the loss from operations. The
Company purchased machinery and equipment in the amounts of $128,656 and
$365,454 for the three months ending June 30, 1997 and 1996, respectively.
Financing provided to fund operating activities and fixed asset purchases for
the three months ended June 30, 1997 was provided by the proceeds from a private
placement of common stock of $500,500 and proceeds from the sale of marketable
securities of $356,217. Operating and investing activities for the three months
ended June 30, 1996 were funded from a bank loan of $183,333 and the utilization
of cash and equivalents from the proceeds of the Company's 1995 initial public
offering.
On March 21, 1997, the Company acquired certain assets of Butler
Retreading, Inc. The aggregate purchase price was approximately $939,000
consisting of $750,000 in cash provided by long term financing and 42,857 shares
of common stock of the Company valued at $189,000, or $4.41 per share, the
quoted market price of the Company's shares as of March 21, 1997.
In connection with the acquisition, the Company entered into a new loan
agreement with a financing company. That company assumed the balance of the
previous loan in the amount of $139,589 and provided financing in the amount of
$860,411, for a total new loan of $1,000,000. The loan is payable in 3 monthly
installments of $11,205 from April 1997 through June 1997, 3 monthly
installments of $19,609 from July 1997 through September 1997 and 42 monthly
installments of $28,012 thereafter, including interest at 11.4% per annum. The
new lender has a security interest in all of the Company's equipment and
inventory.
- 10 -
<PAGE>
The Company has entered into a 10-year, 9-month lease with one five year
renewal option for approximately 65,000 square feet of manufacturing, warehouse
and office space in Holtsville, New York during fiscal 1995, which provides for
minimum annual rental obligations of approximately $282,750, plus utilities and
maintenance, subject to 5% annual increases. As long as the Company is in
substantial compliance with its obligations under this Lease, it has an option
to purchase these premises for $2,500,000. If this option has not been exercised
by October 1, 1997, the purchase price will increase by 5% of that date and on
each anniversary thereof up to and including October 1, 2004. If the Company
elects to purchase these premises, it will be required to tender a deposit equal
to 10% of the purchase price and consummate the purchase within sixty (60) days
thereafter, whereupon the balance of the purchase price will be due. This option
may be exercised at any time up to July 31, 2005. The Company is utilizing this
facility for its manufacturing operations, as well as for warehousing its
inventory and as its corporate offices. The Company's capital requirements may
change depending upon numerous factors and the Company may require additional
financing from time to time, particularly in order to effectuate expansion
activities, if any. As of June 30, 1997, the Company has no significant
commitments for additional capital expenditures.
At June 30, 1997, the Company had cash and cash equivalents of $141,513 and
working capital of $512,457. As further discussed in Note 4, the Company raised
approximately $950,000 from the private placement of common stock and has
effectuated an amendment to its Class A Convertible Preferred stock removing the
requirement to pay approximately $1,325,000 on January 15, 1998. As also
discussed in Note 4, the Company raised an additional $1,027,000 subsequent to
June 30, 1997 from the private placement of its common stock. The Company
believes that it will be required to raise additional working capital to meet
its continuing obligations. If the Company is unsuccessful in achieving positive
cash flow from its operations or generating additional working capital, the
Company's business will be materially and adversely affected.
Seasonality
While there is a year-round demand for automobile tires, automobile tire
sales in the Northeastern United States are generally strongest during the
second and third calendar quarters of the year. Seasonality may have an impact
on the Company's operations including cash flow, insofar as the Company is
required to control inventory levels to reflect projected quarterly sales.
However, since the Company anticipates that approximately 50% of its sales will
be in the Western United States and other regions where all purpose automobile
tires are used year round, it does not believe that seasonality will have a
material adverse impact on its operations.
Change in Management
Marc de Logeres, former Chairman of the Board of Michelin Tyres, plc, the
United Kingdom subsidiary of the Michelin Group, former Chief Executive Officer,
President and Chairman of Michelin Tire Company in the United States and
Michelin Tire Company, Ltd. in Canada, consultant and co-chairman of the Board
of EcoTyre Technologies, Inc. since November, 1995 has agreed to extend his
consulting agreement and has accepted the position as the sole Chairman of the
Board of the Company. Maxwell Parsons has resigned as Co-Chairman of the Board
effective August 13, 1997.
- 11 -
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Registrant held its Annual Meeting of Stockholders on May 29, 1997.
(b) Not applicable.
(c) (i) Two directors were elected at the Annual Meeting of Stockholders to
serve in Class I until the Annual Meeting of Stockholders in 1999 or until their
successors are chosen and qualified. The names of these directors and votes cast
in favor of their election and shares withheld are as follows:
<TABLE>
<CAPTION>
Name Votes For Votes Withheld
---- --------- --------------
<S> <C> <C>
Vito F. Alongi 4,660,950 64,857
John W. King 4,660,950 64,857
</TABLE>
(ii) The directors approved a proposal to amend the Company's Certificate
of Incorporation to authorize an increase in the Company's authorized capital
from 20,000,000 shares of Common Stock to 30,000,000 shares of Common Stock.
Votes cast at this meeting were 4,406,800 shares for, 208,907 shares against and
110,100 shares abstaining.
(iii) The directors approved a proposal to amend the Company's Certificate
of Incorporation to authorize a one-for-three stock split of the Common Stock.
Votes cast at the meeting were 4,295,385 for, 204,557 against and 11,900
abstaining.
(iv) The directors approved a proposal to amend the Company's Certificate
of Incorporation to authorize a one-for-five stock split of the Common Stock.
Votes cast at this meeting were 4,263,196 for, 237,896 against and 10,750
abstaining.
(v) The directors approved a proposal to amend the Company's Certificate of
Incorporation to authorize a one-for-seven reverse stock split of the Common
Stock. Votes cast at this meeting were 4,174,331 for, 322,011 against and 15,500
abstaining.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
--------
27 - Financial Data Schedule (for electronic submission only)
(b) Reports on Form 8-K
-------------------
None
- 12 -
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated : August 19, 1997 ECOTYRE TECHNOLOGIES, INC.
------------------------------
(Registrant)
By: /s/ Vito F. Alongi
---------------------------
Vito F. Alongi,
President, Treasurer and Principal
Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements for the quarterly period ending June, 1997 and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> JUN-30-1997
<CASH> 141,513
<SECURITIES> 0
<RECEIVABLES> 996,479
<ALLOWANCES> 17,000
<INVENTORY> 635,796
<CURRENT-ASSETS> 2,215,468
<PP&E> 2,696,403
<DEPRECIATION> 313,264
<TOTAL-ASSETS> 5,248,127
<CURRENT-LIABILITIES> 1,703,011
<BONDS> 0
1,775,000
0
<COMMON> 1,172
<OTHER-SE> 494,990
<TOTAL-LIABILITY-AND-EQUITY> 5,248,127
<SALES> 1,121,261
<TOTAL-REVENUES> 1,121,261
<CGS> 1,104,190
<TOTAL-COSTS> 1,104,190
<OTHER-EXPENSES> 130,461
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 36,678
<INCOME-PRETAX> (566,925)
<INCOME-TAX> 10,457
<INCOME-CONTINUING> (577,382)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (577,382)
<EPS-PRIMARY> (.92)
<EPS-DILUTED> (.92)
</TABLE>
