U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
Commission file number 001-12671
The Hartcourt Companies, Inc.
(Exact name of small business issuer as specified in its character)
Utah 87-0400541
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
19104 S. Norwalk Boulevard, Artesia, California 90701
(Address of principal executive offices)
(562) 403-1126
(Issuer's telephone number)
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 [ ].
As of February 24, 1997, The Hartcourt Companies, Inc. had 10,687,380 shares of
Common Stock Outstanding.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
<PAGE>
TABLE OF CONTENTS
THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
Report on Form 10-QSB
for quarter ended
June 30, 1997
Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets -- June 30, 1997 and
December 31, 1996 (audited) 3
Consolidated Statement of Operations -- Quarters
ended June 30, 1997 and 1996 and the six months
ended June 30, 1997 and 1996 5
Consolidated Statement of Shareholders' Equity -- Six
months ended June 30, 1997 6
Consolidated Statements of Cash Flows -- Six months ended
June 30, 1997 and 1996 7
Notes to the Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and results of Operations 12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 2. Charges in Securities 14
Item 3. Defaults upon Senior Securities 14
Item 4. Submission of Matters to Vote of Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
2
<PAGE>
Item 1.
THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS June 30, December 31,
1997 1996
CURRENT ASSETS (Unaudited)
----------- -----------
Cash $105,971 $822
Accounts receivable, net of
allowance for doubtful
accounts of $6,571 and
$19,034 in 1997 and 1996,
respectively 7,222 19,034
Trade dollar receivables 32,137 72,054
Inventory, net 128,759 311,424
Interest receivable 11,272 3,877
Note receivable, current portion 189,091 133,764
Prepaid expenses 318,042 -
Prepaid consulting fees 900,000 900,000
Due from related party 52,418 32,356
----------- -----------
TOTAL CURRENT ASSETS 1,744,912 1,473,331
PROPERTY AND EQUIPMENT, net 35,264 44,809
INVESTMENTS 17,906,520 17,906,520
NOTE RECEIVABLE, net of current portion 1,354,947 1,190,795
OTHER ASSETS 516,951 7,550
----------- -----------
$21,558,594 $20,623,005
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $44,103 $148,569
Trade dollar payables 148,641 -
Accrued expenses 5,902 133,747
Notes payable, current portion 51,926 56,396
Bank overdrafts - 5,691
Subscription deposits 89,000 45,000
Other current liabilities 100,000 -
----------- -----------
TOTAL CURRENT LIABILITIES 439,572 389,403
NOTES PAYABLE, net of current portion 576,615 524,369
----------- -----------
TOTAL LIABILITIES 1,016,187 913,772
3
<PAGE>
THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
June 30, December 31,
1997 1996
(Unaudited)
----------- -----------
SHAREHOLDERS' EQUITY
Original preferred stock, $0.01 par
value 1,000 shares authorized,
issued and outstanding 10 10
Common stock, $0.001 par value,
50,000,000 (10,000,000 in 1995)
shares authorized; 12,106,024
shares outstanding at June 30, 1997
and 10,560,352 at December 31, 1996 12,106 10,560
Treasury stock, at cost (279,928) (279,928)
Additional paid-in capital 24,095,558 23,204,260
Retained deficit (3,285,339) (3,225,669)
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 20,542,407 19,709,233
----------- -----------
$21,558,594 $20,623,005
=========== ===========
THE NOTES TO THE FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THIS STATEMENT
4
<PAGE>
THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Quarter ended Six months ended
June 30, June 30,
----------------------------- ----------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES
Product sales $267,394 $256,867 $271,500 $494,825
------------ ------------ ------------ ------------
TOTAL REVENUES 267,394 256,867 271,500 494,825
COST OF SALES 190,926 202,128 195,325 407,824
------------ ------------ ------------ ------------
Gross profit 76,468 54,739 76,175 87,001
OPERATING EXPENSES
General and administrative 41,633 248,037 144,290 458,216
Depreciation 420 250,773 5,145 487,574
------------ ------------ ------------ ------------
TOTAL OPERATING EXPENSES 42,053 498,810 149,435 945,790
------------ ------------ ------------ ------------
INCOME (LOSS) FROM OPERATIONS 34,415 (444,071) (73,260) (858,789)
OTHER INCOME (EXPENSES)
Minority interest - 300,429 - 600,858
Interest expense (24,159) (316,154) (26,400) (659,259)
Interest income 6,731 14,457 15,475 27,420
Other income 25,556 - 25,556 -
------------ ------------ ------------ ------------
TOTAL OTHER INCOME (EXPENSE) 8,128 (1,268) 14,631 (30,981)
------------ ------------ ------------ ------------
NET INCOME (LOSS) BEFORE INCOME TAXES 42,543 (445,339) (58,629) (889,770)
Income taxes 664 - 1,041 (218)
------------ ------------ ------------ ------------
NET INCOME (LOSS) $41,879 $(445,339) $(59,670) $(889,552)
============ ============ ============ ============
NET INCOME (LOSS) PER COMMON SHARE $.00 $(.14) $(.00) $(.29)
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 12,029,029 3,070,634 12,029,024 3,070,634
============ ============ ============ ============
</TABLE>
THE NOTES TO THE FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THIS STATEMENT
5
<PAGE>
THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Additional Total
Common Stock Preferred Stock Treasury Stock Paid-in Retained Shareholders'
Shares Amounts Shares Amount Shares Amount Capital Deficit Equity
----------- --------- ------ ------ ------ --------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996 10,560,352 $10,560 1,000 $10 24,364 $(279,928) $23,204,260 $(3,225,669) $19,709,233
Shares issued for
settlement of payables 2,672 3 - - - - 5,341 - 5,344
Shares issued for consulting
agreement 100,000 100 - - - - 149,900 - 150,000
Shares issued to present and
former employees and Board
of Directors 289,000 289 - - - - 144,211 - 144,500
Sale of shares under
Regulation S 1,000,000 1,000 - - - - 499,000 - 500,000
Net loss - - - - - - - (101,549) (101,549)
---------- ------- ----- --- ------ --------- ----------- ----------- ------------
Balance, March 31, 1997 11,952,024 $11,952 1,000 $10 24,364 $(279,928) $24,002,712 $(3,327,218) $20,407,528
========== ======= ===== === ====== ========= =========== =========== ============
Sale of shares under
Regulation S 138,000 138 - - - - 68,862 - 69,000
Shares issued in settlement
of payables 16,000 16 - - - - 23,984 - 24,000
Net income - - - - - - - 41,879 41,879
---------- ------- ----- --- ------ --------- ----------- ----------- ------------
Balance, June 30, 1997 12,106,024 $12,106 1,000 $10 24,364 $(279,928) $24,095,558 $(3,285,339) $20,542,407
========== ======= ===== === ====== ========= =========== =========== =============
</TABLE>
THE NOTES TO THE FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THIS STATEMENT
6
<PAGE>
THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six months ended
June 30,
1997 1996
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(59,670) $(889,972)
Adjustments to reconcile net income to net cash
used in operating activities:
Stock issued for services 294,500 -
Minority interest in loss of joint venture - (36,647)
Write-off of bad debts (12,463) (116,490)
Accrued interest income (7,395) -
Depreciation and amortization 5,145 487,574
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable 64,192 93,443
Note receivable (219,479) (107,383)
Inventory 182,665 (13,042)
Prepaid expenses (318,042) 64
Other assets 22,955 28,763
Increase (decrease) in:
Accounts payable and accrued expenses (54,326) (33,323)
Due from related party (52,418) 130,054
--------- ---------
NET CASH USED IN OPERATING ACTIVITIES (154,336) (456,959)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment 4,400 (165,074)
Investments - (228,089)
Deposits (500,000) -
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (495,600) (393,163)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Bank overdraft (5,691) -
Borrowing from notes 47,776 -
Other loans 100,000 234,855
Issuance of common stock subscribed 44,000 -
Sale of common stock 569,000 488,033
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 755,085 722,888
--------- ---------
NET INCREASE IN CASH 105,149 (127,234)
CASH, BEGINNING OF PERIOD 822 142,047
--------- ---------
CASH, END OF PERIOD $105,971 $14,813
========= =========
THE NOTES TO THE FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THIS STATEMENT
7
<PAGE>
THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1. Organization and Nature of Operations:
Harcourt Investments (USA), Inc., (Harcourt Investments) was
incorporated on April 23, 1993. Principal business activities are the
design, manufacture and sale of writing instruments. During its first
two years of operations, Harcourt Nevada used foreign contract
manufacturers to produce various types of pens and markers which were
then imported for sale in the U.S. market. In August 1994, Harcourt
Investments acquired a 60% interest in the Xinhui Harchy Modern Pens,
Ltd. Joint Venture (Xinhui JV) owned by a Hong Kong corporation for
common stock valued at $2,149,200. The Xinhui JV is located in the
Guangdong Province of China. Pursuant to an amendment to the joint
venture agreement governing the Xinhui JV entered into in October
1995, the Company's interest was reduced to a 52% interest in the
Xinhui JV.
In November 1994, Stardust, Inc., Production-Recording-Promotion
(Stardust) acquired 100% of the outstanding shares of Harcourt
Investments for 8,280,000 shares of its common stock in a transaction
accounted for as a recapitalization of Harcourt Investments with
Harcourt Investments as the acquirer (reverse acquisition).
Therefore, the historic cost of assets and liabilities were carried
forward to the consolidated entity. In 1996, a reverse stock split
changed the number of shares issued and outstanding to 2,735,952. The
consolidated financial statements were restated to reflect this
capital stock transaction.
Stardust's name was changed to the "Hartcourt Companies, Inc."
Hartcourt Pen Factory, Inc. (Hartcourt Pen) was incorporated in
October 1993. Principal business activities are the sale of writing
instruments. In December 1994, Harcourt Investments acquired 100% of
the outstanding shares of the common stock of Hartcourt Pen for
52,500 shares of its common stock and 1,000 shares of its original
preferred stock in a transaction accounted for similar to a pooling
of interests. In 1995, stock dividends and a reverse stock split
changed the number of shares issued to 38,625 to acquire Hartcourt
Pen. The consolidated financial statements were restated to reflect
these capital stock transactions.
Note 2. Basis of Presentation:
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete
financial statements. These financial statements should be read in
conjunction with the financial statements and related notes included
in the Company's 1996 Form 10-KSB.
8
<PAGE>
THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
In the opinion of management, the accompanying unaudited financial
statements contain all adjustments (which include only normal
recurring adjustments) necessary to present fairly the balance sheet
of The Hartcourt Companies, Inc. and Subsidiaries as of June 30, 1997
and the results of their operations and their cash flows for the six
months ended June 30, 1997 and 1996, respectively. The financial
statements are consolidated to include the accounts of The Hartcourt
Companies and its subsidiary Hartcourt Pen (together "the Company").
Certain 1996 amounts have been reclassified to conform to current
period presentation. These reclassifications have no effect on
previously reported net income.
The accounting policies followed by the Company are set forth in Note
1 to the Company's financial statements as stated in its report on
Form 10-K for the fiscal year ended December 31, 1996.
Note 3. Material Events:
Sale of Harcourt Investments, Inc.
In September 1996 the Company sold its wholly-owned subsidiary,
Harcourt Investments (USA), Inc., (Harcourt Investments) to CKES,
Inc. located in Sunnyvale, California. Harcourt Investments owned a
52% interest in Xinhui Harcy Modern Pens, Ltd., a joint venture in
the Peoples Republic of China. All of the outstanding shares of
Harcourt Investments were sold for a $3 million dollar note
receivable which is payable in 60 equal monthly installments of
$50,000 each, beginning October 1, 1998. Interest accrues at 6% per
annum and is payable in full at the end of the loan period. The note
receivable is secured by a security agreement. This agreement allows
the Company to have a security interest in all assets of CKES, Inc.
Investment in Peony Gardens
In August 1996 the Company purchased an apartment complex located
near Beijing, China for $22 million from NuOasis International, Inc.
The purchase price included the issuance of 4 million shares of
common stock, valued at $10 million, and a promissory note to NuOasis
for $12 million. The note is due and payable on August 17, 1997 or,
if construction is not complete, then the note is extended to the
date that the certificate of occupancy is received. Under the deposit
method of accounting in accordance with Financial Accounting
Standards No. 66 the promissory note for $12 million is currently
being deferred until the complete consummation of the Peony Gardens
sale. Also, the value of the 4 million shares of common stock is
recorded as a deposit at December 31, 1996.
9
<PAGE>
THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Investment in Alaskan Gold Claims
In September 1996 the Company purchased several gold mining claims
encompassing 320 acres of land in the state of Alaska for $6 million.
The purchase was made by issuing 1,298,700 shares of the Company's
common stock. Under the deposit method of accounting in accordance
with Financial Accounting Standards No. 66, the value of the
1,298,700 shares of common stock is recorded as a deposit at December
31, 1996.
Agreement to Acquire Pego Systems, Inc.
On April 8, 1997 the Company entered into a preliminary stock
purchase agreement with Michael V. Caruana, officer and owner of Pego
Systems, Inc. The Company intends to acquire all outstanding shares
of Pego Systems, Inc. The parties are negotiating final terms of this
agreement and estimates completion of the transaction in the third
quarter of 1997.
Agreement to Acquire Electronic Components and Systems, Inc. and
Pruzin Technologies, Inc.
On July 24, 1997 the Company entered into a preliminary stock
purchase agreement with James Pruzin, officer and owner of Electronic
Components and Systems, Inc. and Pruzin Technologies, Inc.
(collectively ECS). The Company intends to acquire all outstanding
shares of ECS. The parties are negotiating final terms of this
agreement and estimates completion of the transaction in the third
quarter of 1997.
Escrow Opened to Acquire Shopping Center
In July 1997 the Company opened escrow to purchase a multi-tenant
shopping center in Perris, California. Estimated purchase price is
approximately $6,750,000.
Note 4. Supplemental Disclosure of Non-cash Financing Activities:
On January 29, 1997 the Company issued 2,672 shares valued at $2.00
per share ($5,344) for services rendered in 1996.
On February 12, 1997 the Company issued 100,000 shares valued at
$1.50 per share ($150,000) in connection with an investment banking
services agreement.
10
<PAGE>
THE HARTCOURT COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
On March 31, 1997 the Company issued 289,000 shares valued at $0.50
per share ($144,500) for present and former employees and directors
as bonuses.
On May 7, 1997 the Company issued 16,000 shares valued at $1.50 per
share ($24,000) for business operations.
Note 5. Income (Loss) Per Common Share:
Income (loss) per common share is based on the weighted average
number of common shares outstanding during the period. No material
dilution of earnings per share would result for the periods if it
were assumed that all outstanding warrants were exercised.
11
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations:
As discussed in the Company's annual report, the Company sold its
interest in the Xinhui Joint Venture during 1996 and, therefore,
comparability of assets, liabilities, income and expenses between the
first and second quarters of 1997 and the first and second quarters
of 1996 are not meaningful.
Liquidity and capital resources.
The Company continues its plan to divest itself of unprofitable
operations and seek new opportunities. During the second quarter we
sold our California Awards business for $33,000 which resulted in
non-operating income of $15,000. We also sold the cosmetics inventory
for $200,000 which resulted in a gross profit of approximately
$38,000. In both of these transactions the Company received
promissory notes for the sales price and will collect the notes over
3 to 5 years.
During the quarter the Company borrowed $50,000 repayable in twelve
months. The lender has the option to convert the loan into common
stock of the Company at $3.00 per share. The funds were used for
working capital. The Company received $100,000 in June 1997 from a
Hong Kong investor to participate with the Company in future real
estate projects. A portion of the funds will be used to cover
expenses of acquisition and financing of future projects and the
remainder will be used for the equity portion of investments. The
Company is still negotiating with the Hong Kong investor to work out
the details of future joint venture projects.
In connection with the Company's stock subscription agreement we
received $58,000 in additional subscriptions during the second
quarter and issued 138,000 shares of common stock for $69,000. At
June 30, 1997 the Company held $89,000 in common stock subscription
deposits. These funds are being used for working capital.
We also issued 16,000 shares of common stock during the quarter for
$24,000 in settlement of outstanding accounts payable at amounts less
than the original carrying amounts. This resulted in cancellation of
indebtedness income of almost $11,000.
The Company is currently in negotiations for the following
investments:
1. The Company has an agreement to purchase all of the outstanding
stock of Pego Systems, Inc. for a combination of cash and common
stock of the Company. Pego Systems, Inc. manufactures industrial
processing equipment and has been in business over thirty-five
years. Pego Systems, Inc. is currently being audited and we
anticipate that the transaction will be completed by the end of
September 1997. The total purchase price is approximately
$2,250,000.
12
<PAGE>
2. The Company signed a letter of intent to acquire Electronic
Components and Systems, Inc. and Pruzin Technologies, Inc.
(collectively referred to as ECS). Both are Arizona corporations
with headquarters in Nogales, Arizona. ECS is a contract
manufacturer for the high-tech industry specializing in
electromechanical assembly of printed circuit boards, cable and
wire, and other related electronics. ECS has three factories
located in Arizona and Mexico. In addition, they have a
warehouse distribution center in Nogales, Arizona with a total
workforce of approximately 1,000 people. Existing customers
include: Intel, General Instruments, and Motorola. The total
value of this transaction is $8,977,000 and will be paid with
$5,000,000 worth of voting common stock and $3,400,000 of
restricted, convertible preferred stock of the Company. This
transaction is expected to close by the end of the third quarter
of 1997.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations: (continued)
3. In July 1997 the Company opened escrow to purchase a
multi-tenant shopping center in Perris, California for a total
purchase price of $6,750,000.
Results of operations.
The Company's statement of consolidated income for six months ended
June 30, 1997 reflects the sale of the cosmetic inventory for
$200,000 which produced a gross profit of $38,750. We also sold the
California Awards business for $33,000 and recognized non-operating
income of $15,000 from the sale. The sale included inventory, store
fixtures and equipment. Additional non-operating income of $10,880
was recognized during the quarter from the renegotiation of
outstanding accounts payable and the resultant cancellation of debt.
In addition to the sale of the cosmetics inventory, Hartcourt Pen
Factory had other sales of approximately $67,000 during the quarter
and gross profit of approximately $38,000.
Interest expense increased during the quarter due to finance charges
relating to trade dollar payables as well as interest on the $50,000
of short-term debt.
13
<PAGE>
PART II OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
There have been no changes since the Company's last report in Item 3, "Legal
Proceedings" of Form 10-KSB for the fiscal year ended December 31, 1996.
Item 2. CHANGES IN SECURITIES
Not applicable.
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
Item 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS.
None.
Item 5. OTHER INFORMATION
None.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits - None.
(b) Reports on Form 8-K - None.
14
<PAGE>
PART II OTHER INFORMATION
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
THE HARTCOURT COMPANIES, INC.
Date: August 14, 1997 By: /s/ Alan V. Phan
--------------------
Dr. Alan V. Phan,
President
15
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-START> APR-01-1997 JAN-01-1997
<PERIOD-END> JUN-30-1997 JUN-30-1997
<CASH> 0 105,971
<SECURITIES> 0 0
<RECEIVABLES> 0 45,930
<ALLOWANCES> 0 6,571
<INVENTORY> 0 128,759
<CURRENT-ASSETS> 0 1,744,912
<PP&E> 0 66,823
<DEPRECIATION> 0 31,559
<TOTAL-ASSETS> 0 21,558,594
<CURRENT-LIABILITIES> 0 439,572
<BONDS> 0 0
0 0
0 10
<COMMON> 0 12,106
<OTHER-SE> 0 20,530,291
<TOTAL-LIABILITY-AND-EQUITY> 0 21,558,594
<SALES> 267,394 271,500
<TOTAL-REVENUES> 267,394 271,500
<CGS> 190,926 195,325
<TOTAL-COSTS> 42,053 149,435
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 24,159 26,400
<INCOME-PRETAX> 42,543 (58,629)
<INCOME-TAX> 664 1,041
<INCOME-CONTINUING> 41,879 (59,670)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 41,879 (59,670)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
<FN>
<F1> Options and warrants outstanding as of June 30, 1997 are antidilutive for
purposes of calculating primary and filly diluted earnings per share and are,
therefore, ignored.
</FN>
</TABLE>
