US SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1997
Commission File Number: 0-27382.
SC&T International, Inc.
----------------------------
(Exact name of small business as specified in its charter)
Arizona 86-0737579
(State or other jurisdiction of (IRS Employer Identification)
incorporation or organization)
15695 North 83rd Way, Scottsdale, Arizona 85260
-----------------------------------------------
(Address of principal executive offices)
(602) 368-9490
------------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since
last report)
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 No X
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 23,135,263 shares of Common
Stock, par value $0.01 per share.
Transitional Small Business Disclosure Format (Check one): Yes No X
----- -----
1
<PAGE>
SC&T INTERNATIONAL, INC.
------------------------
AND SUBSIDIARY
--------------
Page
Part I Financial Information
Item 1 Financial Information
Consolidated Balance Sheet as of December 31, 1997 3
Consolidated Statements of Operations for the Three Months
Ended December 31, 1997 and December 31, 1996 5
Consolidated Statement of Shareholders' Equity for the Three
Months Ended December 31, 1997 6
Consolidated Statements of Cash Flows for the Three Months
Ended December 31, 1997 and December 31, 1996 7
Notes to Consolidated Financial Statements 8
Item 2 Management's Discussion and Analysis 10
Part II Other Information
Item 1 Litigation 14
Item 2 Change in Securities 14
Item 3 Defaults Upon Senior Securities 15
Item 4 Submission of Matters to a Vote of Security-Holders 15
Item 5 Other Information 15
Item 6 Exhibits & Reports on Form 8-K 15
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SC&T INTERNATIONAL, INC.
AND SUBSIDIARY
UNAUDITED CONSOLIDATED BALANCE SHEET
December 31, 1997
ASSETS
Current assets:
Cash $ 286,295
Receivables 1,160,649
Inventory 2,175,075
Other current assets 411,400
----------
Total current assets 4,033,419
Product development costs, less accumulated amortization of $70,804 77,276
Property and equipment, less accumulated depreciation of $477,206 377,832
Other assets 147,198
----------
Total Assets $4,635,725
==========
3
<PAGE>
SC&T INTERNATIONAL, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
December 31, 1997
UNAUDITED LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,185,904
Common stock payable 103,130
Accrued expenses 39,048
------------
Total current liabilities 1,328,082
------------
Commitments and contingencies --
Shareholders' equity:
Common stock, $0.01 par; authorized 25,000,000
shares; 23,135,263 shares issued and 22,940,823 shares outstanding 231,353
Series A preferred stock, $0.01 par; authorized
5,000,000 shares; 718 shares issued and outstanding 7
Additional paid-in capital 14,959,621
Treasury stock - at cost, 194,440 shares (29,166)
Currency translation (193,634)
Accumulated deficit (11,660,537)
------------
Total shareholders' equity 3,307,644
------------
$ 4,635,725
============
The accompanying notes are an integral part of these
consolidated financial statements.
4
<PAGE>
SC&T INTERNATIONAL, INC.
AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended December 31, 1997 and 1996
1997 1996
------------ ------------
Net sales $ 2,375,262 3,125,865
Cost of goods sold 1,519,916 2,099,993
------------ ------------
Gross profit 855,346 1,025,872
Selling, general and administrative expenses:
Payroll and payroll taxes 335,740 232,911
Selling and promotion 294,018 300,986
Office and administrative 364,779 262,051
Research and development 55,974 68,821
Consulting fees 33,828 51,165
Other 105,485 180,866
------------ ------------
1,189,824 1,096,800
Loss from operations (334,478) (70,928)
Other income (expense):
Interest income 864 86,555
Interest expense (4,690) (3,967)
------------ ------------
Loss before income tax (338,304) 11,660
Income tax expense -- --
------------ ------------
Net loss $ (338,304) $ 11,660
============ ============
Net loss from operations per common share $ (0.01) $ 0.00
============ ============
Net loss per common share $ (0.01) $ 0.00
============ ============
Common shares outstanding 23,135,263 9,022,062
============ ============
The accompany notes are an integral part of these financial statements.
5
<PAGE>
SC&T INTERNATIONAL, INC.
AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENT OF
SHAREHOLDERS' EQUITY
For the Three Months Ended December 31, 1997
<TABLE>
<CAPTION>
Common Stock Additional Treasury Stock
----------------- Preferred Stock paid-in ------------------ Currency Accumulated
Shares Amount Shares Amount capital Shares Amount translation deficit
------ ------ ------ ------ ------- ------ ------ ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1997 23,135,263 $ 231,353 718 $ 7 $14,959,621 (194,440) $ (29,166) $ (74,539) (11,322,233)
Preferred stock costs
Currency translation - - - - - - - (119,096) -
Net loss ( 338,304)
---------- --------- --- ----- ----------- -------- --------- ---------- -----------
Balance at December 31, 1997 23,135,263 $ 231,353 $ 718 $ 7 $14,959,621 (194,440) $ (29,166) $ (193,635) (11,660,537)
========== ========= ====== ===== =========== ======== ========= ========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
6
<PAGE>
SC&T INTERNATIONAL, INC.
AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (338,304) $ (189,864)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 55,655 50,534
Increase in accounts receivable (281,117) (531,423)
Increase in allowance for doubtful accounts (111,996) --
Decrease in inventories 320,269 (98,325)
Increase in advances on purchases of (160,536) (621,014)
inventory
Decrease in other current assets (73,981)
Loan amortization --
Increase in prepaid expenses (177,811) --
Decrease in other assets 11,069 (38,902)
Increase in accounts payable 910,195 (246,971)
Decrease in accrued expenses (157,531) (65,404)
----------- -----------
Net cash used in operating activities 69,893 (1,815,350)
----------- -----------
Cash flows from investing activities:
Purchase of property and equipment (110,522) (217,560)
Development costs (6,345) (122,113)
Loans to related parties (10,509) 9,374
----------- -----------
Net cash used in investing activities (127,376) (330,299)
----------- -----------
Cash flows from financing activities:
Currency translation (119,096) (12,430)
Net borrowings under line of credit agreement -- 7,885
Principal payments on short-term debt -- (5,556)
Principal payments on long-term debt -- (1,266)
Proceeds from note payable, related party -- --
Net repayments on related party loans -- (29,166)
Net borrowings on notes payable, bank -- --
Preferred stock issuance costs -- (20,570)
Repayments to factor -- (121,368)
Net cash (used in)provided by financing activities (119,096) (182,471)
----------- -----------
Net decrease in cash (176,579) (2,328,120)
Cash, beginning of period 462,874 9,962,511
----------- -----------
Cash, end of period $ 286,295 $ 7,634,391
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
7
<PAGE>
SC&T INTERNATIONAL, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited)
1. Interim financial reporting:
The accompanying unaudited Consolidated Financial Statements for SC&T
International, Inc. (the "Company") have been prepared in accordance with the
generally accepted accounting principles for interim financial information and
the instructions to Form 10-QSB. Under a 10-Q filing, it is not necessary to
include all of the information and footnotes required in a 10-K filing. In the
opinion of management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position, results of
operations, and cash flows for the periods presented have been made. The results
of operations for the three month period ended December 31, 1997 is not
necessarily indicative of the operating results that may be expected for the
entire fiscal year ending June 30, 1998.
Reclassification:
Certain prior period amounts have been reclassified to conform to the
current period presentation.
2. Common Stock:
On October 22, 1997, the Company's shares of common stock, which was
traded under the symbol SCTI, were delisted from the Nasdaq Small cap market.
This action was taken as a direct result of the Company's failure to meet the
filing requirement as stated in marketplace Rule 4310(c)(14). The failure to
meet the filing requirement was the result of the untimely resignation of the
Company's accounting firm, Toback & Company. This action by Toback & Company, as
noted by the Nasdaq, caused the delisting of the Company, and the Company will
pursue all legal options regarding Toback & Company's actions. The Company
followed the appropriate policy of Nasdaq by filing its form 8-K, began a search
for a new accounting firm, retaining Evers & Company. The Company has completed
and filed its 10-K.
The Company has entered into agreements with the holders of 94% of the Series A
Preferred Stock hereby all of their shares of Series A preferred Stock are
tendered for conversion at a fixed conversion price of $1.00 per share (the
"Fixed Conversion"). The holders of Series A Preferred Stock waive all other
conversion rights which they may have pursuant to any agreement.
In addition to Fixed Conversion, the holders of Series A Preferred Stock will
also receive warrants to purchase one third (1/3) of the number of shares which
they receive pursuant to Section I of the Fixed Conversion at a price of $1.25,
subject to ordinary anti-dilution provisions (the "Warrant Shares"). The Warrant
Shares will be subject to ordinary registration rights and a warrant agreement
and registration rights agreement will be forwarded as promptly as is possible.
All such documents shall contain ordinary and reasonable terms, conditions,
presentations and warranties.
8
<PAGE>
SC&T INTERNATIONAL, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited)
3. Commitments and contingencies:
Operating leases:
In October 1996, the Company purchased approximately 1.24 acres of land
located at the Scottsdale Airpark in Scottsdale, Arizona. The Company completed
construction of approximately 12,000 square feet of warehouse space and
approximately 6,000 square feet of executive office space in April 1997. The
Company has subsequently sold the facility on June 30, 1997 and effective July
1, 1997 leased the facility back from the buyer. The facility was sold by the
Company for a profit exceeding 20% of cost.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The statements contained in this Report on Form 10QSB that are not
purely historical are forward-looking statements within the meaning of Section
27A of the securities Act of 1933 and Section 21E of the Securities Act of 1934,
including statements regarding the Company's "expectations," "anticipation,"
"intentions," "beliefs," or "strategies" regarding the future. Forward-looking
statements include statements regarding revenue, margins, expenses and earnings
analysis for the remainder of fiscal 1998 and thereafter; future products or
product development; future research and development spending and the Company's
product development strategy; and liquidity and anticipated cash needs and
availability. All forward looking statements included in this document are based
on information available to the Company on the date of this Report, and the
Company assumes no obligation to update any such forward-looking statement. It
is important to note that the Company's actual results could differ materially
from those in such forward-looking statements.
Overview
SC&T International, Inc. (the "Company") was formed in June 1993. The
Company develops and markets accessory and peripheral products for the computer
and video game industries under its PLATINUM SOUND and PER4MER registered
trademarks. The Company's products include sub-woofer, speaker and sound
enhancement systems (for PC's and PC gaming systems), a PC volume controller,
and a line of PC and Video Game arcade racing wheels for SEGA, Nintendo, Sony
Playstation and IBM-PC's. The Company's multimedia keyboards line has been
discontinued, in favor of a second generation product targeted at the corporate
market. This second generation, features an enhanced Voice Recognition product,
has been completed but at this time has not been introduced into the market.
On December 31, 1994, the Company purchased SC&T Europe, a marketing
and distribution company located in Antwerp, Belgium. The Company, in an effort
to reduce its European operating costs, has consolidated its European
distribution operations into one central facility located in the United Kingdom
in May 1997. The Company formed SC&T Europe Limited, located in Portsmouth
England. The Belgium office remains open at this time, solely as a sales office
for mainline Europe. All current marketing and distribution operations,
including a United Kingdom domestic sales force, is now being handled out of the
United Kingdom operations.
Despite the expansion in the number of customers and the corresponding
increase in revenue since commencing operations, the Company's total operating
expenses have exceeded revenues, resulting in a net loss of approximately $
338,000 for the three months ended December 31, 1997. The Company's primary
costs for are for research and development, tooling for new products, inventory,
trade shows, selling and promotion activities. The Company expects certain costs
to increase in connection with the anticipated expansion of sales. In addition,
operating results may be influenced by factors such as: the demand for the
Company's products, the timing of new product introductions by both the Company
and its competitors, pricing by both the Company and its competitors, inventory
levels, the Company's ability to develop and market new products, the Company's
ability to manufacture its products at high quality levels and at commercially
reasonable costs, the timing and levels of sales and marketing expenditures, and
general economic conditions.
10
<PAGE>
Results of Operations of the Company for the Three-Month Periods Ended December
31, 1997 and 1996
Net Sales
Net sales for the three months ended December 31, 1997 decreased to
approximately $2,375,000 or approximately $751,000 less than net sales for the
three months ended December 31, 1996. Net sales for the quarter ended December
31, 1997 were negatively impacted by a delay in the manufacture and release of
new products the Company is bringing to the market. The Company expects sales
revenues to be negatively impacted through March 1998 due to lagging product
deliveries. New manufacturing alliances under negotiations, will improve quality
on-time deliveries and increase production volumes to accommodate higher sales
volume.
Gross Profit
The Company's gross profit for the three month period ended December
31, 1997 increased to 36% compared to 32.8% for three month period ended
December 31, 1996. Gross margins are affected by the sales product mix. Gross
profit margins range from 20% to 40%. The Company anticipates new products will
initially sell at higher margins. However, there can be no assurance that such
margins can be maintained over the life of the product.
Payroll and Payroll Taxes
The Company's payroll and payroll tax expense increased from
approximately $233,000 in the three months ended December 31, 1996 to
approximately $336,000 in the three months ended December 31, 1997, or
approximately 42.2%. Payroll and payroll tax expense also increased as a
percentage of sales, from 8% for the three months ended December 31, 1996 to 14%
for the three months ended December 31,1997. This represents an increase in
sales and operations personnel. In addition, a significant portion of the
increase in payroll and payroll taxes is a result of additional employees due to
operations of SC&T Europe. The Company is required to employ a base staff of
qualified personnel to maintain its operations.
Selling and Promotion
The Company's selling and promotion expenses decreased from
approximately $301,000 in the three months ended December 31, 1996 to
approximately $294,000 in the three months ended December 31, 1997. This
represents an increase in selling and promotion expenses, as a percentage of
sales from 10% for the three months ended December 31,1996 to 12% for the three
months ended December 31, 1997. A portion of these expenses were utilized to
continue promoting and creating packaging for new products in addition to
exhibiting the Company's products at several trade shows. Approximately $125,000
of the increase was associated with the Company's sponsorship of a Formula
Atlantic Racing Team in the 1998 Kool Toyota Atlantic Racing Championship
Series. The Company has reduced its 1998 sponsorship to a co-sponsor associate
level.
11
<PAGE>
Office and Administration
The Company's office and administrative expenses increased from
approximately $262,000 in the three months ended December 31, 1996 to
approximately $365,000 in the three months ended December 31,1997, or
approximately 39%. As a percentage of net sales, office and administrative
expenses increased from 8% for the three months ended December 31, 1996 to 15%
for the three months ended December 31, 1997. Increased legal and audit fees of
approximately $ 100,00 were the major reasons for the increased expense
necessary to deal with the Company's ongoing legal, preferred shareholder issues
and accounting costs. The Company hopes these costs will be reduced over the
next 3-6 months.
Development Cost Amortization
Development cost amortization decreased from approximately $69,000 for
the three months ended December 31, 1996 to approximately $56,000 December 31,
1997. Development cost amortization represents amortization of costs associated
with development of new products. Such costs are amortized over a 12 month
period commencing with the first sale of the product.
Consulting Fees
Expenditure for consulting fees decreased from approximately $51,000
for the three months ended December 31, 1996 to $34,000 for the three months
ended December 30, 1997, or approximately 33%.
Net Loss
Primarily as a result of reduced sales, the Companies operating results
changed from a profit of approximately $12,000 for the three month period ended
December 31, 1996 to an operating loss of $ 338,000 for the three month period
ended December 31, 1997. Late introduction of the Company's new products during
the Christmas selling season attributed to the decrease in sales.
Liquidity and Capital Resources
The Companies working capital of $ 2,705,337 decreased $565,412 from
September 30,1997. The Company is required to pay the costs of stocking
inventory before the Company receives orders and payment from its customers.
Typically, the Company's customers do not pay the Company for its products until
approximately 60 days following delivery and billing. As a result, the receipt
of cash from operations typically lags substantially behind the payment of the
costs for purchase and delivery of the Company's products.
Currently the US Company has reverted to factoring its accounts
receivables in an effort to assist its cash flow.
12
<PAGE>
Business Outlook and Risk Factors
Management believes that there is growing acceptance in the global marketplace
for the Company's expanding product line. The Company's future success rests in
securing new manufacturing relationships that take advantage of lower
manufacturing costs and improved reliability for product deliveries. The
Company's total revenue and product mix could be materially and adversely
affected by many factors, some of which are beyond the control of the Company.
Those factors include, but are not limited to, turnover in the Company's sales
force, competition from existing or new products, production delays, the
Company's ability to penetrate new markets and attract new customers, unexpected
postponement or cancellation of significant orders, lack of market acceptance of
the Company's products, manufacturing defects and seasonality of sales and
general economic conditions.
Although the Company has focused on controlling administrative costs,
it recognizes the added costs associated with attracting and retaining key
personnel. The Company intends to continue to moderate general and
administrative costs so that revenue growth will begin to exceed operating
expenses. There can be no assurance, however, that the Company will be able to
predict or respond to a shortfall in sales during any given quarter in order to
reduce its fixed general and administrative expenses on a timely basis.
The Company believes that it has major untapped market opportunities.
The industry also has a strong outlook; with expanding markets characterized by
rapid technological change, coupled with the frequent introduction of product
upgrades and evolving industry standards. The Company strives to provide
market-leading solutions that address the PC user interested in upgrading
existing equipment. Due to the risk factors discussed and to other factors that
generally affect high technology companies, there can be no assurance that the
Company will be able to successfully penetrate these markets in the future. The
Company plans new product introductions during 1998 that it feels strongly that
coupled with existing products, will enhance future sales revenues.
The Company has been advised by it's independent certified public
accountants that the audit report for the year ended June 30, 1997 will include
a going concern qualification. The Company does not dispute this qualification.
Due to the large number of preferred shares outstanding, the Company was unable
to raise additional equity funds in the past year. It is currently anticipated
that the Company will require additional working capital to continue to fund its
operations. Management intends to actively explore both debt and equity
financing as well as holding discussions with potential merging partners in
order to obtain such debt or equity financing. There is no assurance that
management will be able to obtain any such financing.
13
<PAGE>
PART II - OTHER INFORMATION
ITEM I. LITIGATION
The Company has favorably resolved many of its past litigation issues. Current
Pending or Threatened litigation involves:
a. The Company v. Maxi Switch
On May 13, 1997 a Pima County jury awarded SC&T $ 3,000,000 against
Maxi-Switch, Inc. Silitek Corporation, and Lite-On Peripherals, Inc. For
defendants' breach of contract and misappropriation of trade secrets related to
SC&T's Multimedia keyboards. On June 30, 1997 a formal Judgment was signed by
the Judge for $ 3,160,885, which included attorney's fees and court costs. The
defendants posted a $3,200,000 bond pending post trial motions. Post trial
motions were denied. On January 5, 1998 the Court ordered defendants to add a
further $500,000. to the bond for additional appeal costs. It also ordered that
the 5.15% accruing interest. Resolution of the appeal should take about one
year.
b. Home Arcade v. the Company
In September of 1997, Home Arcade filed suit in San Jose, California,
against the Company re a license dispute. The Company has denied breaching the
contract and instructed counsel to vigorously defend the case. Due to the recent
filing of the case, counsel has not been able to develop an opinion with regard
to the timing or likely results of this litigation. However, management believes
it has committed no wrongdoing.
c. Lake Management v. the Company
In June of 1997, Lake Management filed suit against the Company in
Phoenix, Arizona, seeking specific performance requiring the Company to issue
common stock to Lake pursuant to a preferred shareholder conversion agreement.
The Company has resolved a similar problem with 94% of the entities in Lake's
class. The Company believes it will reach a suitable agreement with Lake. It is
anticipated that an agreement should be reached within a year.
d. Jack Of All Games v. the Company
In June of 1997, Jack Of All Games Entertainment, Inc. sued the Company
in Cincinnati, Ohio, for breach of contract regarding a purchase order of 5,000
racing wheels. Jack Of All Games is seeking $55,000, interest and attorneys
fees. The Company had previously agreed to a full product replacement, then
offered a full product exchange, then offered to repurchase the product at
current company selling value. Jack Of All Games has refused all offers.
Management has honored all obligations under the terms of this agreement and
firmly defends this action by Jack Of All Games as frivolous and without merit.
Unasserted Claims and Assessments
The Company has a new racing wheel product which includes
"force-feedback" technology. Atari expressed a desire to evaluate the Company's
force-feedback technology to determine whether it violates a patent possessed by
Atari. The Company is presumptively protected under the circumstances because
the Company obtained a license for its force-feedback technology from another
company, Immersion Corporation. Immersion Corporation has indemnified the
Company for patent infringement liability.
ITEM 2. CHANGES IN SECURITIES
None
14
<PAGE>
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY-HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The Company plans to change the fiscal year from June 30, to March 31,
effective March 31, 1998.
15
<PAGE>
SIGNATURES
In accordance with the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the registrant and in
the capacities and on the date indicated.
Signature Capacity Date
--------- -------- ----
SC&T INTERNATIONAL, INC.
/s/ James L. Copland Chairman of the Board March 11, 1998
- ------------------------ Chief Executive Officer
/s/ Richard W. Elwood Director of Finance March 11, 1998
- ------------------------ and Operations
16
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<CASH> 286,295
<SECURITIES> 0
<RECEIVABLES> 1,494,013
<ALLOWANCES> 67,000
<INVENTORY> 1,160,649
<CURRENT-ASSETS> 4,033,419
<PP&E> 855,038
<DEPRECIATION> (477,206)
<TOTAL-ASSETS> 4,635,725
<CURRENT-LIABILITIES> 1,328,082
<BONDS> 0
0
7
<COMMON> 231,353
<OTHER-SE> 14,736,821
<TOTAL-LIABILITY-AND-EQUITY> 4,635,725
<SALES> 2,375,262
<TOTAL-REVENUES> 2,375,262
<CGS> 1,519,916
<TOTAL-COSTS> 1,189,824
<OTHER-EXPENSES> (3826)
<LOSS-PROVISION> (68,004)
<INTEREST-EXPENSE> (4690)
<INCOME-PRETAX> (338,304)
<INCOME-TAX> 0
<INCOME-CONTINUING> (334,478)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (338,304)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
