<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
X Report pursuant to Section 13 or 15(d) of the Securities Exchange Act
- ---- of 1934. Quarterly for the period ended March 31, 1997.
Transition report pursuant to Section 13 or 15(d) of the Securities
- ---- Exchange Act of 1934.
COMMISSION FILE NO. 0-27104
YIELDUP INTERNATIONAL CORPORATION
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
DELAWARE 77-0341206
(State or other jurisdiction) (I.R.S. Employer ID #)
of incorporation
117 EASY STREET 94043
(Address of principal (Zip Code)
MOUNTAIN VIEW, CALIFORNIA
Address of principal
executive offices)
Issuer's telephone number, including
area code: (415) 964-0100
Securities registered under
Section 12(g) of the Act: COMMON STOCK, PAR VALUE $0.001
CLASS A WARRANTS, NO PAR VALUE
CLASS B WARRANTS, NO PAR VALUE
(Title of Class)
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 April 25, 1997, Registrant had 3,490,039 shares of Common Stock
outstanding, including shares of Class A Common Stock. All shares of Common and
Class A Common Stock have par value of $0.001 per share.
Transitional Small Business Disclosure Format (check one): YES NO X
--- ----
1
<PAGE> 2
YIELDUP INTERNATIONAL CORPORATION
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page
- ------------------------------ ----
<S> <C>
ITEM 1. FINANCIAL STATEMENTS
1) Balance Sheets - March 31, 1997 and December 31, 1996 3
2) Statements of Operations - Three Months ended March 31, 1997 and 1996 4
3) Statements of Cash Flows - Three Months ended March 31, 1997 and 1996 5
4) Notes to Financial Statements 6-8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 9-12
CONDITION AND RESULTS OF OPERATIONS
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES 13
ITEM 6. REPORTS ON FORM 8-K 13
SIGNATURES 14
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL STATEMENTS
ITEM 1. FINANCIAL STATEMENTS
YIELDUP INTERNATIONAL CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
------------------------------
1997 1996
------------ ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 121,763 $ 619,172
Restricted cash 255,902 509,878
Short-term investments 10,000 10,000
Accounts receivable 868,949 699,459
Inventories 822,252 677,383
Prepaid expenses and other current assets 222,680 109,822
------------ ------------
Total current assets 2,301,546 2,625,714
------------ ------------
Property, plant, and equipment 911,096 894,499
Other assets 215,698 440,511
------------ ------------
Total assets $ 3,428,340 $ 3,960,724
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,189,264 $ 643,089
Accrued liabilities 430,189 524,277
Customer deposits 4,000 43,000
Current portion of capital lease obligations and long-term debt 395,359 406,258
------------ ------------
Total current liabilities 2,018,812 1,616,624
Long-term debt, less current portion 240,000 330,000
Capital lease obligations, less current portion 48,863 48,863
------------ ------------
Total liabilities 2,307,675 1,995,487
------------ ------------
Stockholders' equity:
Preferred Stock -- --
Class A common stock 1,918 1,912
Common stock 1,513 1,495
Additional paid-in capital 7,701,859 7,571,550
Notes receivable from stockholders (6,935) (15,348)
Accumulated deficit (6,577,690) (5,594,372)
------------ ------------
Total stockholders' equity $ 1,120,665 $ 1,965,237
------------ ------------
Total liabilities and stockholders' equity $ 3,428,340 $ 3,960,724
------------ ------------
</TABLE>
See accompanying notes to financial statements
3
<PAGE> 4
YIELDUP INTERNATIONAL CORPORATION
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
------------------------------
1997 1996
------------ ------------
<S> <C> <C>
Revenues:
Equipment sales $ 913,000 $ 510,250
Cost of revenues 962,156 494,968
------------ ------------
Gross margin (49,156) 15,282
------------ ------------
Operating expenses:
Research and development 427,412 302,488
Selling, general, and administrative 500,742 448,198
------------ ------------
Total operating expenses 928,154 750,686
------------ ------------
Operating loss (977,310) (735,404)
Interest expense(income), net 6,008 (49,787)
------------ ------------
Net loss $ (983,318) $ (685,617)
------------ ------------
Net loss per share $ (0.29) $ (0.20)
------------ ------------
Shares used in per share computations 3,414,131 3,405,301
------------ ------------
</TABLE>
See accompanying notes to financial statements
4
<PAGE> 5
YIELDUP INTERNATIONAL CORPORATION
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS MARCH 31,
------------ ------------
1997 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (983,318) $ (685,617)
Adjustments to reconcile net loss to net cash used for operating activities
Depreciation and amortization 54,622 26,579
Changes in operating assets and liabilities
Accounts receivable (169,490) (39,225)
Other receivables -- 6,110
Inventories (144,869) (188,147)
Prepaid expenses and other assets (112,858) 13,336
Other assets 224,813 --
Accounts payable 546,175 (591,580)
Accrued liabilities (94,088) 27,438
Customer deposits (39,000) (140,000)
------------ ------------
Net cash used for operating activities (718,013) (1,571,106)
------------ ------------
Cash flows from investing activities:
Purchase of equipment (71,219) (107,555)
Proceeds from sales of short-term investments -- 984,485
Purchases of short-term investments -- (2,008,432)
------------ ------------
Net cash used for investing activities (71,219) (1,131,502)
------------ ------------
Cash flows from financing activities
Principal payments under capital lease obligations (10,899) (9,851)
Principal payments of term loan (90,000) --
Proceeds of notes receivable from stockholders 8,413 17,842
Issuance of common stock from option exercise 3,450 --
Decrease in restricted cash 253,976 --
Issuance of common stock from warrant exercise 122,542 --
Issuances of Class A Common Stock from option exercise 4,341 --
------------ ------------
Net cash provided from financing activities 291,823 7,991
------------ ------------
Net decrease in cash and cash equivalents (497,409) (2,694,617)
Cash and cash equivalents at beginning of period 619,172 2,876,466
------------ ------------
Cash and cash equivalents at end of period 121,763 181,849
============ ============
Supplemental cash flow information:
Acquisition of equipment under capital lease -- 42,000
============ ============
</TABLE>
See accompanying notes to financial statements
5
<PAGE> 6
YIELDUP INTERNATIONAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1997
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
THE COMPANY
YieldUp International Corporation (the "Company" or "YieldUP")
develops, manufactures, and markets cleaning, rinsing, and drying equipment used
during several steps in the manufacturing process for semiconductors and other
defect sensitive substrates.
BASIS OF PRESENTATION
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. On April 30, 1997, the Company
completed the redemption of its Class A Warrants with greater than 99% of the
warrants being exercised prior to the redemption date. The net proceeds to the
Company from the exercise of the Class A warrants was approximately $14,500,000.
The Company believes that the net proceeds from the warrant exercise, together
with existing cash balances, will be sufficient to meet the Company's cash
requirements for at least the next twelve months.
For information as to the significant accounting policies followed by
the Company and other financial and operating information, see the Company's
Form 10-KSB as filed with the Securities and Exchange Commission for the year
ended December 31, 1996.
BALANCE SHEET COMPONENTS
RESTRICTED CASH
As of March 31, 1997, the Company had restricted cash in the form of
certificates of deposit, of $316,981 and $87,841 as collateral for long-term
debt and substantially all of the capital lease obligations, respectively.
Restricted cash aggregating $148,920 is classified as other non-current assets
in the accompanying balance sheet.
SHORT-TERM INVESTMENTS
The Company's short-term investments comprise a certificate of deposit
which is classified as "available-for-sale".
(continued)
6
<PAGE> 7
YIELDUP INTERNATIONAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
INVENTORIES
A summary of inventories follows:
<TABLE>
MARCH 31, DECEMBER 31,
------------ ------------
1997 1996
------------ ------------
<S> <C> <C>
Raw materials $ 604,445 $ 364,510
Work in process 54,022 56,063
Evaluation units 125,045 218,070
Finished goods 38,740 38,740
------------ ------------
$ 822,252 $ 677,383
============ ============
</TABLE>
Evaluation units are installed at potential customers' sites.
PROPERTY, PLANT AND EQUIPMENT
A summary of property, plant, and equipment follows:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Machinery and equipment $ 474,967 $ 404,438
Furniture and fixtures 47,624 47,624
Leasehold improvements 595,064 594,374
------------ ------------
1,117,655 1,046,436
Less accumulated depreciation
and amortization 206,559 151,937
------------ ------------
$ 911,096 $ 894,499
============ ============
</TABLE>
(continued)
7
<PAGE> 8
YIELDUP INTERNATIONAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
LONG-TERM DEBT
Long-term debt comprises a bank term loan which is 50% collateralized
by a certificate of deposit. The loan is payable in monthly installments of
$30,000, and bears interest at the bank's prime rate plus 2.25% (10.50% as of
March 31, 1997).
PATENT MATTERS
CFM Technologies, Inc. and CFMT, Inc. (collectively "CFM") filed a
complaint against the Company in United States District Court for the District
of Delaware in September 1995. The complaint alleges that the drying process
incorporated in certain of the Company's products infringes a patent held by
CFM. The Company believes that its drying process does not infringe the CFM
patent. However, there can be no assurance that the Company will not, as a
result of this litigation, suffer a material adverse effect on its business or
financial condition. The trial for this matter is scheduled to begin in July
1997. A decision adverse to the Company in such litigation could result in
substantial damages payable by the Company and could support the issuance of an
injunction prohibiting further sales by the Company of some or all of its
products. A loss, if any, resulting from an unfavorable adjudication, cannot
presently be estimated. Accordingly, no provision for any liability that may
result upon adjudication has been made in the accompanying financial statements.
EARNINGS PER SHARE
The Financial Accounting Standards Board recently issued Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share." SFAS No.
128 requires the presentation of basic earnings per share ("EPS") and, for
companies with complex capital structures, diluted EPS. SFAS No. 128 is
effective for annual and interim periods ending after December 31, 1997. The
Company expects that basic EPS, for profitable periods, will be higher than
primary earnings per share as presented in the accompanying financial statements
and that diluted EPS will not differ materially from primary earnings per share
as presented in the accompanying financial statements.
Computations for loss periods should not change significantly.
SUBSEQUENT EVENT
On April 30, 1997 the Company completed the redemption of its Class A
Warrants. Greater than 99% of the 2,215,000 Class A Warrants outstanding were
exercised prior to the redemption date. The net proceeds to the Company from the
warrant exercise were approximately $14,500,000.
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The discussions in this Report contain forward-looking statements that
involve risks and uncertainties. The Company's actual results could differ
materially from those discussed herein. Factors that could cause or contribute
to such differences include, but are not limited to, those discussed in
"Business Risks" and elsewhere in this Report as well as in the Company's other
periodic reports filed with the Securities and Exchange Commission.
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
REVENUES
Revenues increased to $913,000 in the first quarter of 1997 from
$510,250 for the same period in 1996. The increase in revenues in 1997 was due
to an increase in the level of shipments for the Company's cleaning, rinsing,
and drying systems.
Backlog at March 31, 1997 totaled approximately $787,000 compared to
approximately $848,000 at March 31, 1996 and approximately $493,000 at December
31, 1996. The continuing slowdown in the semiconductor equipment industry may
negatively impact the Company's ability to book new orders in the future until
there is a change in the conditions that are reducing capital equipment spending
by semiconductor manufacturers.
GROSS MARGIN
The Company's gross margin declined during the first quarter of 1997
compared to the same period a year ago. The Company's cost of revenue remained
high during the first quarter of 1997 due to manufacturing expenses being
allocated over relatively few units, the high material cost of initial new
product shipments and lower average selling prices on some shipments. The
Company expects that future gross margins should improve to the extent that unit
shipments and revenue increase and the Company is able to transition to
increased shipments of standardized products and lower unit material costs.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses increased to $427,412 in the first
quarter of 1997 from $302,488 for the same period in 1996. The increase in
research and development expenses was due mainly to an increase in engineering
personnel and an increase in expenses for prototype development of the Company's
new products compared to the same period a year ago. In addition, in the first
quarter of 1997, the Company continued to invest in enhancement of its existing
product line. The Company expects to continue to invest in new product research
and development and enhancement of existing products, although these expenses
may decline as a percentage of revenues, to the extent revenues increase.
9
<PAGE> 10
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES
Selling, general, and administrative expenses increased to $500,742 in
the first quarter of 1997 from $448,198 for the same period in 1996. The
increase in selling, general, and administrative expenses reflected the
Company's increased expenses for representative sales commissions due to higher
shipment levels and increased legal expense for litigation and patent activity
compared to the first quarter of 1996. The Company expects that selling,
general, and administrative expenses may decline as a percentage of revenues, to
the extent revenues increase.
NET INTEREST EXPENSE
Net interest expense was $6,008 for first quarter of 1997 compared to
net interest income of $49,787 for the same period in 1996. The increase in net
interest expense was the result of increased interest expense for a bank term
loan and lower interest income on short term investments.
NET LOSS
Net loss for the first quarter of 1997 increased to $983,318 compared
to $685,617 for the same period in 1996. The increase in net loss was due
primarily to negative gross margins on revenue and an increase of $124,924 in
research and development expenses. In addition, there was also an increase of
$52,544 in selling, general and administrative expenses.
The Company has never operated at a profit and expects that it will
incur operating losses through at least the first three quarters of 1997. Such
losses have been and will continue to be principally the result of the various
costs associated with the Company's product development and manufacturing
activities as the Company seeks to gain acceptance of its products in the
marketplace. There can be no assurance that the Company will be successful in
penetrating the market for wet processing semiconductor manufacturing equipment
or in generating future revenues and profits from the sales of its products.
LIQUIDITY AND CAPITAL RESOURCES
Cash, cash equivalents, and short term investment balances at March 31,
1997 totaled $131,763 compared to $629,172 at December 31, 1996. The decrease of
$497,409 was due primarily to net losses generated during the first quarter of
1997.
At March 31, 1997 the Company had accounts receivable of $868,949
compared to $699,459 at December 31, 1996. Inventories at March 31, 1997 were
$822,252 compared to $677,383 at December 31, 1996. Net property, plant, and
equipment was $911,096 at March 31, 1997 compared to $894,499 at December 31,
1996. The increase in net property and equipment was primarily the result of
expenditures of $50,000 for engineering and manufacturing computer and other
equipment.
The accounts payable balance at March 31, 1997 was $1,189,264 compared
to $643,089 at December 31, 1996. The increase in accounts payable was due
primarily to an increase in purchases for inventory and longer payment terms on
purchases made during the first quarter 1997.
On April 30, 1997, the Company completed the redemption of its Class A
Warrants. Greater than 99% of the outstanding Class A Warrants were exercised
prior to the redemption date, providing net proceeds to the Company of
approximately $14,500,000. The Company believes that the net proceeds from the
warrant exercise, together with existing cash balances, will be sufficient to
meet the Company's cash requirements for at least the next twelve months.
10
<PAGE> 11
BUSINESS RISKS
GENERAL
The Company's operations are subject to numerous risks associated with
establishing any new business, including unforeseeable expenses, delays and
complications, as well as specific risks of the semiconductor equipment
industry. The Company has incurred significant losses from its operations, and
there can be no assurance that the Company will achieve profitable operations.
The Company's lack of resources and proven products makes it extremely
vulnerable to competition from larger companies. Because the Company's
technology has not been widely deployed, it presents potential customers with
uncertainty not associated with existing equipment marketed by competitors. In
addition, many semiconductor manufacturers are reluctant to choose small
companies as key suppliers due to concerns about long-term viability and product
support. Because the Company's products also compete with the offerings from a
large number of small companies making less expensive equipment, the Company may
not be able to compete effectively against those products without lowering its
prices. Given the anticipated increasing focus on yield management in the
semiconductor manufacturing industry, equipment manufacturers are likely to put
an increased emphasis on contaminant reduction and competitive technologies or
new manufacturing technologies may be developed which could make the Company's
products obsolete. Since the Company expects to derive substantially all of its
future revenues from sales of cleaning, rinsing, and drying systems, the
Company's business, financial condition and results of operations would be
materially adversely affected by declining demand for the Company's products or
decreasing prices and margins for those products.
The Company anticipates that it will devote significant management time
and financial resources to obtaining protection of, and defending against
infringement claims with respect to, its intellectual property rights. The
Company is involved in patent litigation and is attempting to obtain patent
protection on various aspects of its proprietary technology. These rights under
any patents issued may not provide competitive advantages to the Company or
prevent others from developing competitive products or technologies similar to
or more advanced than the Company.
The Company expects to derive a substantial portion of its revenues
from the sale of a relatively small number of systems. As a result, a small
reduction in the number of systems shipped in a quarter could have a material
adverse effect on the Company's revenues and results of operations for the
quarter. If the Company's anticipated level of revenues is not achieved for a
particular period, the Company's operating results would be adversely affected
by its inability to reduce costs. Sales of the Company's products have been, and
are expected to continue to be, characterized by a relatively long sales cycle
and may also depend upon the decision of a prospective customer to upgrade the
equipment in its existing semiconductor fabrication facilities or to open new
facilities, which typically involves a significant capital commitment.
Finally, the semiconductor equipment industry is highly cyclical and
has historically experienced periodic and often prolonged downturns. Recent
announcements by semiconductor and semiconductor equipment manufacturers
indicate there has been such a downturn, and there can be no assurance that such
downturn will not continue to materially adversely affect the Company's backlog
level, business, financial condition, and results of operations. Any further
downturn in the market demand for integrated circuits would likely reduce to an
even greater extent the willingness of the manufacturers of semiconductor
devices to make substantial capital expenditures and would adversely affect the
Company's business, financial condition, and results of operations.
(continued)
11
<PAGE> 12
INTENSE COMPETITION; UNCERTAIN MARKET ACCEPTANCE
There is intense competition in the markets for the Company's products.
The Company's lack of resources and proven products makes it extremely
vulnerable to competition from larger companies, many of which have
significantly greater financial, employee, product development and marketing
resources. Leading competitors have a larger installed base of products which
can provide them a significant advantage over the Company because the Company's
technology has not been widely deployed and therefore presents potential
customers with uncertainty not associated with existing equipment. In addition,
many semiconductor manufacturers are reluctant to choose small companies as key
suppliers due to concerns about long term viability and product support. There
can be no assurance that the Company will overcome these disadvantages.
Competition for the Company's products currently comes from makers of
traditional and new cleaning, rinsing, and drying equipment. There can be no
assurance that these competitors will not develop new products or improve their
existing products which, when combined with their existing market presence,
would make the Company's products obsolete or unmarketable. Any such development
would have a material adverse effect on the Company. There also can be no
assurance that the Company will be able to penetrate the wet processing
equipment market and convince semiconductor or other manufacturers to install
the Company's systems either directly or through retrofitting in place of
existing equipment. Additional competition for the Company's products also
currently comes from a large number of small companies making cleaning, rinsing,
and drying equipment which is less expensive than the Company's products.
Because the Company's products sell for significantly higher prices than such
products, the Company may not be able to compete effectively against them
without lowering its prices.
The Company also expects that competition may arise from new
competitors and from new technological approaches adopted by new and existing
competitors. Because of the increasing focus on yield management in the
semiconductor manufacturing industry, equipment manufacturers are likely to put
an increased emphasis on contaminant reduction. Thus, competitive technologies
or new manufacturing techniques may be developed which could make the Company's
products obsolete, thereby materially adversely affecting the Company. If the
Company is unable to respond to the challenges of competition, including changes
in cleaning, rinsing, and drying or semiconductor or other manufacturing
processes, there can be no assurance that the Company would be able to achieve
or maintain profitability at a level required to support its survival or growth.
RELIANCE ON SINGLE PRODUCT FAMILY
The Company anticipates that the substantial majority of its future
revenues will come from sales of its cleaning, rinsing, and drying systems.
Should the demand for, or pricing of, the Company's products decline due to
increased competitive pressure, the introduction of superior systems or
processes, changes in the semiconductor, magnetic or optical disk, flat panel
display or photomask industries or other factors, the Company's business,
financial condition and results of operations would be materially adversely
affected. The ability of the Company to diversify its operations through the
introduction and sale of new products and broader acceptance of its cleaning,
rinsing, and drying systems is dependent on the success of the Company's
continuing research, product development and engineering activities, as well as
its marketing efforts. No assurance can be given that the Company will be able
to develop, acquire, introduce or market new products in a timely or
cost-effective manner or that any new products or improvements will achieve
market acceptance or result in acceptable margins. Accordingly, the Company will
be dependent on overall market acceptance of its products.
12
<PAGE> 13
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
On March 12, 1997, the Company delivered notice to the holders of its
outstanding Class A Warrants that such warrants would be redeemed in accordance
with the terms of a Warrant Agreement relating to such warrants. To the extent
that outstanding Class A Warrants were not exercised on or before April 29,
1997, such warrants expired and all rights thereunder except the right to
receive the redemption price of $0.05 per warrant terminated.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(1) Exhibits
Exhibit 27 -Financial Data Schedule
(2) Reports on Form 8-K
None.
13
<PAGE> 14
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.
YIELDUP INTERNATIONAL CORPORATION
(Registrant)
Raj Hohindra
Date: May 12, 1997 By: _______________________________
Raj Mohindra, President,
Chief Executive Officer and
Chief Financial Officer
14
<PAGE> 15
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description
- -------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 377,665
<SECURITIES> 10,000
<RECEIVABLES> 868,949
<ALLOWANCES> 0
<INVENTORY> 822,252
<CURRENT-ASSETS> 2,301,546
<PP&E> 1,117,655
<DEPRECIATION> 206,559
<TOTAL-ASSETS> 3,428,340
<CURRENT-LIABILITIES> 2,018,812
<BONDS> 288,863
0
0
<COMMON> 3,431
<OTHER-SE> 1,117,234
<TOTAL-LIABILITY-AND-EQUITY> 3,428,340
<SALES> 913,000
<TOTAL-REVENUES> 913,000
<CGS> 962,156
<TOTAL-COSTS> 962,156
<OTHER-EXPENSES> 928,154
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,008
<INCOME-PRETAX> (983,318)
<INCOME-TAX> 0
<INCOME-CONTINUING> (983,318)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (983,318)
<EPS-PRIMARY> (0.29)
<EPS-DILUTED> (0.29)
</TABLE>
