<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the
- ------ Securities Exchange Act of 1934 for the quarterly period ended
January 2, 1999 or
- ------ Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the transition
period from ___________________ to ________________________
Commission File Number: 0-8588
TECHNICAL COMMUNICATIONS CORPORATION
------------------------------------
(Exact name of registrant as specified in its charter)
Massachusetts 04-2295040
- ------------------------------- ------------------------------------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
100 Domino Drive, Concord, MA 01742-2892
- ---------------------------------------- ---------------------------------
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (978) 287-5100
--------------
N/A
---------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant: (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. Number of shares of Common
Stock, $.10 par value, outstanding as of February 5, 1999: 1,373,336.
<PAGE>
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I Financial Information
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets, as of
January 2, 1999 (unaudited) and October 3, 1998 1
Condensed Consolidated Statements of Operations
(unaudited), Three (3) months ended January 2, 1999
and December 27, 1997 2
Condensed Consolidated Statements of Cash Flows
(unaudited), Three (3) months ended January 2, 1999
and December 27, 1997 3
Notes to Condensed Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 5
PART II Other Information 8
Signatures 9
</TABLE>
<PAGE>
PART I. Financial Information -- Item 1. Financial Statements
TECHNICAL COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
January 2, 1999 October 3, 1998
(unaudited) ---------------
---------------
<S> <C> <C>
Assets
- ------
Current Assets:
Cash and cash equivalents $ 3,368,875 $ 740,049
Accounts receivable--trade, less allowance for doubtful
accounts of $70,000 793,409 8,196,296
Inventories 3,664,767 3,119,291
Other current assets 879,467 949,536
----------- -----------
Total current assets 8,706,518 13,005,172
Equipment and leasehold improvements 4,856,738 4,818,515
Less: accumulated depreciation and amortization 3,915,569 3,773,457
----------- -----------
Equipment and leasehold improvements--net 941,169 1,045,058
Goodwill 1,614,131 1,614,131
Less: accumulated amortization 770,170 716,443
----------- -----------
Goodwill--net 843,961 897,688
Other assets 1,526,847 1,224,811
----------- -----------
$12,018,495 $16,172,729
----------- -----------
----------- -----------
Liabilities and Stockholders' Equity
- ------------------------------------
Current Liabilities:
Accounts payable $ 220,784 $ 302,742
Revolving line of credit --- 2,250,000
Accrued liabilities
Compensation and related expenses 282,846 401,596
Other 1,258,069 2,241,434
----------- -----------
Total current liabilities 1,761,699 5,195,772
----------- -----------
Other long-term liabilities 456,580 456,356
Commitments and contingencies
Stockholders' Equity:
Common stock, par value $.10 per share; authorized
3,500,000 shares; issued and outstanding 1,294,541
shares at 1/2/99 and 1,283,238 shares at 10/3/98 129,454 128,324
Treasury stock at a cost, 30,678 shares (241,861) (241,861)
Additional paid-in capital 1,305,870 1,266,197
Unrealized gain on investment, net 649,200 422,000
Retained earnings 7,957,553 8,945,941
----------- -----------
Total stockholders' equity 9,800,216 10,520,601
----------- -----------
$12,018,495 $16,172,729
----------- -----------
----------- -----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
Page 1
<PAGE>
TECHNICAL COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Quarters Ended
--------------
January 2, 1999 December 27, 1997
--------------- -----------------
<S> <C> <C>
Net sales $ 1,071,356 $ 2,935,048
Cost of sales 381,550 1,571,086
------------ -----------
Gross profit 689,806 1,363,962
Operating expenses:
Selling, general and
administrative expenses 1,495,672 1,327,142
Product development costs 539,662 232,991
------------ ------------
Total operating expenses 2,035,334 1,560,133
------------ ------------
Operating loss (1,345,528) (196,171)
------------ ------------
Other income (expense):
Interest income 34,666 11,389
Interest expense (3,207) ---
Other (3,781) 13,158
------------ ------------
Total other income (expense): 27,678 24,547
------------ ------------
Loss before income taxes (1,317,850) (171,624)
Benefit for income taxes (329,462) (42,905)
------------ ------------
Net loss $ (988,388) $ (128,719)
Net loss per common share:
Basic $(.77) $(.10)
Diluted $(.77) $(.10)
Weighted average common shares outstanding
used in computation:
Basic 1,288,206 1,277,880
Diluted 1,288,206 1,277,880
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
Page 2
<PAGE>
TECHNICAL COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Quarters Ended
--------------
January 2, 1999 December 27, 1997
--------------- -----------------
<S> <C> <C>
Operating Activities:
Net loss $ (988,388) $ (128,719)
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Depreciation and amortization 240,520 185,501
Changes in assets and liabilities:
Accounts receivable 7,402,887 (342,936)
Unbilled revenue -- (1,528,472)
Inventories (545,476) (730,647)
Refundable income taxes -- 233,426
Other current assets (51,931) (14,286)
Accounts payable and other accrued liabilities (1,183,849) 775,560
------------- ------------
Net cash (used) provided by operating activities 4,873,763 (1,550,573)
------------- ------------
Investing Activities:
Additions to equipment and leasehold improvements (38,223) (55,348)
Investment in capitalized software -- (77,604)
Other assets 2,483 (2,535)
------------- ------------
Net cash used by investing activities (35,740) (135,487)
------------- ------------
Financing Activities:
Proceeds from stock issuance 40,803 50,689
Borrowings under line of credit -- 1,000,000
Payment of line of credit (2,250,000) --
------------- ------------
Net cash provided (used) by financing activities (2,209,197) 1,050,689
Net increase (decrease) in cash and cash equivalents 2,628,826 (635,371)
Cash and cash equivalents at beginning of the period 740,049 1,876,748
------------- ------------
Cash and cash equivalents at the end of the period $ 3,368,875 $ 1,241,377
------------- ------------
------------- ------------
SUPPLEMENTAL DISCLOSURES:
Interest paid $ 19,541 $ --
Income taxes paid (refunds received), net 139,891 (233,426)
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
Page 3
<PAGE>
TECHNICAL COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FORWARD-LOOKING STATEMENTS
Note: The discussions in this Form 10-Q, including any discussions of or
impact, expressed or implied, on Technical Communications Corporation's (the
"Company") anticipated operating results and future earnings contain forward
looking statements within the meaning of Section 27A of the Securities Act of
1933, as amended. The Company's results may differ significantly from the
results indicated by such forward-looking statements. The Company's operating
results may be affected by many factors, including but not limited to the
following: future changes in export laws or regulations, changes in
technology, the effect of foreign political unrest, the ability to retain and
motivate technical, management and sales personnel, the risks associated
with the technical feasibility and market acceptance of new products, changes
in telecommunications protocols, the effects of changing costs, exchange
rates and interest rates, the Company's ability to renegotiate its line of
credit with its banks, the correctness of management judgement that certain
expenditures will benefit the Company in the future, and the accuracy of
management's estimates of the value of the Company's assets and the adequacy
of its reserves. These and other risks are detailed from time to time in the
Company's filings with the Securities & Exchange Commission, including this
Form 10-Q for the quarter ended January 2, 1999.
STATEMENT OF FAIR PRESENTATION
INTERIM FINANCIAL STATEMENTS. The accompanying unaudited condensed
consolidated financial statements include all adjustments (consisting only of
normal recurring accruals) which are, in the opinion of management,
necessary for fair presentation of the results of operations for the periods
presented. Interim results are not necessarily indicative of the results to
be expected for a full year.
Certain disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed
or omitted as allowed by Form 10-Q. The accompanying unaudited consolidated
financial statements should be read in conjunction with Company's consolidated
financial statements for the year ending October 3, 1998 as filed with the
Securities and Exchange Commission on Form 10-K.
NOTE 1. INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
January 2, 1999 October 3, 1998
--------------- ---------------
<S> <C> <C>
Finished Goods $ 69,739 173,141
Work in Process 1,126,539 776,047
Raw Materials 2,468,489 $2,170,103
---------- ----------
$3,664,767 $3,119,291
---------- ----------
---------- ----------
</TABLE>
NOTE 2. LONG-TERM DEBT
As of January 2, 1999, the Company had a $5,000,000 revolving line of credit
at a rate of plus 1/2 of 1% with Wainwright Bank and Trust Company. This line
of credit is secured by a pledge of substantially all the assets of the
Company, requires no compensating balances, and is due to mature on May 1,
1999. Under the terms of the line of credit agreement, the Company is
required to comply with certain loan covenants. As of January 2, 1999 the
Company is compliant with these covenants. Availability under the line of
credit had been reduced by $988,430, as of January 2, 1999, as a result of
standby letters of credit. No other borrowings are outstanding against the
line.
Page 4
<PAGE>
NOTE 3. COMMITMENTS AND CONTINGENCIES
The Company is the defendant in GERARD V. TECHNICAL COMMUNICATIONS
CORPORATION, ET AL., filed in the United States District Court for the
District of Massachusetts in 1998. This case arises from disputes concerning
the hiring and termination of Roland Gerard, former president of the Company.
According to the Complaint, the Company violated federal securities laws in
the hiring process for Mr. Gerard by making false statements about the
Company which induced him to accept employment, the compensation for which
included certain stock options. The Complaint also alleges breach of
contract, wrongful termination, and civil conspiracy. At present, the
Company's motion to dismiss is pending. Because of the early stage of the
litigation, it is impossible to determine the ultimate outcome. The Company
is determined to contest this suit vigorously.
NOTE 4. COMPREHENSIVE INCOME
During the first quarter of fiscal 1999 the company adopted Statement of
Financial Accounting Standards No. 130 (SFAS 130), "Reporting Comprehensive
Income". SFAS 130 established standards for the reporting and display of
comprehensive income and its components. In general, comprehensive income
combines net income and "other comprehensive income", which represents
unrealized gain on securities available for sale. During the first quarter of
fiscal 1999 the company's comprehensive income totaled ($761,188).
PART I, ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company is in the business of designing, manufacturing and marketing
communications security equipment. The Company receives orders for equipment
from customers, which may take several months or longer to manufacture and
ship. With the exception of long-term contracts where revenue is recognized
under the percentage of completion method, the Company generally recognizes
income on a unit-of-delivery basis. This latter method can cause revenues to
vary widely from quarter to quarter and therefore quarterly comparisons of
revenue may not be indicative of any trend.
Net sales for the quarter ended January 2, 1999 and December 27, 1997, were
$1,071,356 and $2,935,048, respectively. This decrease of 63% is attributed
to variability in revenue recognition as a result of the timing of shipments
and the receipt of anticipated orders.
Gross profit for the first quarter of fiscal 1999 was $689,806 as compared to
gross profit of $1,363,962 for the same period of fiscal year 1998. This
represented a 49% decrease in gross profit for the quarter. Gross profit
expressed as a percentage of sales was 64% in the first quarter of fiscal
1999 as compared to 46% for the same period in fiscal year 1998.
Selling, general and administrative expenses for the first quarter of fiscal
1999 and 1998 were $1,495,672 and $1,327,142, respectively. This increase of
13% was primarily attributable to approximately $475,000 in costs associated
with the settlement of litigation. These increased costs were partially
offset by a reduction of approximately $308,000 in commissions, travel
related costs and service contracts, associated with the lower sales volume
and a continued effort at general cost reductions.
Product development costs for the quarter ended January 2, 1999 were $539,662
compared to $232,991 for the same period in fiscal 1998. This increase of
132% was attributable to the continued commitment to new product development,
particularly the Cipher X7000 series product line.
The Company incurred a net loss of $988,388 for the first quarter of fiscal
1999 as compared to a net loss of $128,719 for the same period in fiscal
1998. The decrease in profitability is primarily attributable to the decrease
in gross profit and the increase in operating spending as described above.
Page 5
<PAGE>
YEAR 2000 COMPLIANCE UPDATE
Technical Communications Corporation has been actively addressing the Year
2000 (Y2K) problem since April 1998. Generally speaking, the Y2K problem
results from the use of two-digit, rather than four-digit date years in
computer systems and software applications. Today, many systems rely on two (or
one) digits to represent the year portion of a date. For example, 1997 is
usually stored as 97 (or 7). As a result, the year 2000, represented by 00
(or 0), could be interpreted as 1900. This type of error could cause problems
when systems display, calculate, store and print dates.
The Company understands the importance of identifying and solving the Y2K
problem. As a supplier of mission-critical encryption products, the Company
is committed to providing products that will function, without interruption,
into the year 2000. In addition, Technical Communications Corporation is
taking proactive steps to ensure that all critical systems, from both an
internal and external perspective, are reviewed and, if necessary, corrected.
COMPANY'S STATE OF READINESS
Technical Communications Corporation has divided its Y2K efforts into three
major areas: (i) products and customers, (ii) enterprise business systems and
information technology and (iii) external systems and suppliers. The review
of each area will consist of an inventory of potentially affected systems,
an assessment of Y2K readiness and corrective action deployment. As
indicated, the Company has been actively working on Y2K related issues for
ten months, and is prioritizing its efforts based on how severe an effect a
potential noncompliance would have on customer service and core business
functions. It is anticipated that the entire Y2K initiative will be complete
by June 1999. Product testing and internal/external system evaluations are
now complete. To facilitate the plan, the Company has appointed a program
manager to oversee all Y2K initiatives.
Technical Communications Corporation has tested all of its current products
for Y2K problems. A product is deemed Y2K compliant if the product, when used
in accordance with its associated documentation, is capable of processing,
receiving, and/or providing data within or between the 20(th) and 21(st)
centuries, provided that all other products used in conjunction with the
product in question properly exchange date data with that product. It should
be noted that certain TCC products deemed to be Y2K compliant may require a
service update in order to achieve Y2K compliant status.
Although no assurances can be given, the Company believes that all current
products are either Y2K compliant, or can be made Y2K compliant with minor
adjustments or software upgrades. This product assessment has identified
date-related issues with certain older products that TCC no longer
manufactures or sells. It is the Company's intent to offer upgrades or
alternative products where reasonably practicable. In some cases the Company
sells encryption systems that interact with third party products or operate
with computer systems not under the Company's control. There can be no
assurances that such third party equipment will function correctly into the
year 2000.
TCC's internal Y2K initiative includes a review of all computer hardware and
software related systems including: internal LAN, product development tools,
facility operations, interfaces with third parties via EDI links and desktop
systems. The inventory and assessment phase of this review is approximately
90% complete. The Company's enterprise information system, which includes
manufacturing, financial accounting and sales administration is now Y2K
compliant. Supporting systems will continue to be tested and evaluated. At
this time, the Company does not anticipate that any internal system will
create a substantive disruption in the Company's operation into the year 2000.
The Y2K external systems review process consists of identifying and
contacting suppliers and service providers that are believed to be
significant to the Company's business operations. The Company will access
each supplier's Y2K readiness based on its formal response to a TCC Y2K
status request. The Company intends to monitor the Y2K compliant process of
key suppliers that either indicate they are not yet Y2K compliant or do not
respond to the Company's requests. This process is ongoing and is expected to
continue in 1999.
Page 6
<PAGE>
COSTS TO ADDRESS THE COMPANY'S YEAR 2000 ISSUES
As of January 2, 1999, the Company has incurred expenses related to the Y2K
problem of approximately $35,000. The main portion of these costs relates to
the evaluation and testing of products for Y2K compliance. The Company
anticipates additional costs ranging from $35,000-$100,000 in order to
complete the Y2K process and to upgrade a small number of older products
currently still in use. The preceding numbers represent TCC's best estimate
of remediation costs pertaining to Y2K issues. There can be no assurances
that the Company will not encounter unexpected costs or delays in achieving
year 2000 compliance.
RISKS OF THE COMPANY'S YEAR 2000 ISSUES
Based on current information, the Company believes that the year 2000 problem
will not have a material adverse effect on the Company's overall business and
financial condition. Since all current products are either Y2K compliant or
can be made Y2K compliant, future sales of all such products do not
represent a Y2K risk to the Company. Even though TCC is adopting a proactive
strategy, there can be no assurances that Y2K problems will not have any
impact on the business. Despite efforts to ensure that products will function
correctly into the Y2K, The Company may see an increase in warranty and other
claims, especially those related to older products or products that
incorporate third party software or hardware. If any of the Company's
material suppliers or service providers experience unforeseen Y2K issues, the
Company's production, product development, and operations may also be
materially adversely effected.
COMPANY'S CONTINGENCY PLAN
TCC is working diligently to minimize the risks associated with Y2K issues.
The Company plans to dedicate appropriate resources to address all known Y2K
related issues in an expeditious manner. In addition, the Company is prepared
to take immediate action on unforeseen problems as they arise. Such action may
include the use of alternative sources of supply to support manufacturing and
product development.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities". The Statement establishes accounting and
reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in
the balance sheet as either an asset or liability measured at its fair value.
FAS No. 133 is effective for fiscal years beginning after June 15, 1999.
Management does not expect the adoption of this statement to have a material
impact on its financial condition or results of operations.
During the first quarter of fiscal 1999 the company adopted Statement of
Financial Accounting Standards No. 131 (SFAS 131), "Disclosures About
Segments of an Enterprise and Related Information''. SFAS 131 established
standards for the way that public companies report information about
operating segments in financial statements. This Statement supercedes
Statement of Financial Accounting Standards No. 14, "Financial Reporting for
Segments of a Business Enterprise", but retains the requirement to report
information about major customers. The adoption of this Statement did not
have a material effect on the Company's financial statements.
Page 7
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Cash and short-term investments increased by $2,628,826 or 355% to $3,368,875
as of January 2, 1999, from a balance of $740,049 at October 31, 1998. This
increase was primarily due to the reduction of accounts receivable and
partially offset by an increase in inventory and a reduction in current
liabilities. The current ratio increased to 4.9:1 at January 2, 1999 compared
to 2.5:1 as of October 3, 1998, primarily as a result of the cash received on
accounts receivable during the quarter.
As of January 2, 1999, the Company had a $5,000,000 revolving line of credit
at a rate of prime plus 1/2 of 1% with Wainwright Bank and Trust Company.
This line of credit is secured by a pledge of substantially all the assets of
the Company, requires no compensating balances, and is due to mature on May
1, 1999. Under the terms of the line of credit agreement, the Company is
required to comply with certain loan covenants. As of January 2, 1999 the
Company is compliant with these covenants. Availability under the line of
credit had been reduced by $988,430 as of January 2, 1999, as a result of
standby letters of credit. No other borrowings are outstanding against the
line. In the prior year during the three months ended December 27, 1997, the
Company borrowed $1,000,000 under its line of credit.
Management anticipates no unusual capital expenditures during the remainder
of fiscal 1999. Management is currently working to renew its existing line of
credit, if it is unable to do so, its operations may be substantially
adversely affected.
Page 8
<PAGE>
PART II. Other Information
ITEM 1. LEGAL PROCEEDINGS:
The Company is the defendant in GERARD V. TECHNICAL COMMUNICATIONS
CORPORATION, ET AL., filed in United States Court for the District of
Massachusetts in 1998. This case arises from disputes concerning the hiring
and termination of Roland Gerard, former president of the Company. According
to the Complaint, the Company violated federal securities laws in the hiring
process for Mr. Gerard by making false statements about the Company which
induced him to accept employment, the compensation for which included certain
stock options. The Complaint also alleges breach of contract, wrongful
termination, and civil conspiracy. At present, the Company's motion to
dismiss is pending. Because of the early stage of the litigation, it is
impossible to determine the ultimate outcome. The Company is determined to
contest this suit vigorously.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS:
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES:
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
None.
ITEM 5. OTHER INFORMATION:
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
a. Exhibits:
Exhibit 27: Financial Data Schedule
b. Reports on Form 8-K:
None.
Page 9
<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.
TECHNICAL COMMUNICATIONS CORPORATION
------------------------------------
(Registrant)
February 12, 1999 By: /s/ Carl H. Guild, Jr.
- ----------------- ------------------------------
Date Carl H. Guild, Jr., President
and Chief Executive Officer
February 12, 1999 By: /s/ Michael P. Malone
- ----------------- ------------------------------
Date Michael P. Malone, Director of
Finance and Principal
Financial Officer
Page 10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-02-1999
<PERIOD-START> OCT-04-1998
<PERIOD-END> JAN-02-1999
<CASH> 3,368,875
<SECURITIES> 0
<RECEIVABLES> 863,409
<ALLOWANCES> 70,000
<INVENTORY> 3,664,767
<CURRENT-ASSETS> 8,706,518
<PP&E> 4,856,738
<DEPRECIATION> 3,915,569
<TOTAL-ASSETS> 12,018,495
<CURRENT-LIABILITIES> 1,761,699
<BONDS> 0
0
0
<COMMON> 129,454
<OTHER-SE> 9,670,762
<TOTAL-LIABILITY-AND-EQUITY> 12,018,495
<SALES> 1,071,356
<TOTAL-REVENUES> 1,106,022
<CGS> 381,550
<TOTAL-COSTS> 2,416,884
<OTHER-EXPENSES> 3,780
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,207
<INCOME-PRETAX> (1,317,850)
<INCOME-TAX> (329,462)
<INCOME-CONTINUING> (988,388)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (988,388)
<EPS-PRIMARY> (.77)
<EPS-DILUTED> (.77)
</TABLE>
