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 year ended October 31, 1996
----------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [No Fee Required]
For the transition period from to
--------------
Commission File number 0-21019
-------
INNOVATIVE MEDICAL SERVICES
---------------------------
(Name of small business issuer in its charter)
California 84-110928
- ------------------------------- ---------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1725 Gillespie Way, El Cajon, California 92020
----------------------------------------------
(Address of principal executive offices)
619 596 8600
------------
Issuer's telephone number
Check whether the issuer (1) filed all reports 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
------ ------
State the number of shares outstanding of each of the issuer's classes
of common equity as of the latest practicable date. 3,220,851 as of
December 13, 1996.
<PAGE>
INNOVATIVE MEDICAL SERVICES
FORM 10-QSB
INDEX
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets as of July 31, 1996 and October 31, 1996
Statements of Operations for the three months ended October 31,
1995 and 1996
Statements of Cash Flows for the three months ended October 31,
1995 and 1996
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART 2. OTHER INFORMATION
Item 1. Legal Proceedings: None
Item 2. Changes in Securities: None
Item 3. Defaults Upon Senior Securities: None
Item 4. Submission of Matters to a Vote of Security Holders:
None
Item 5. Other information
Item 6. Exhibits and Reports on Form 8-K
Signatures
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INNOVATIVE MEDICAL SERVICES
BALANCE SHEETS
(Unaudited)
October 31, 1996 July 31, 1996
---------------- -------------
ASSETS
Current Assets
Cash and cash equivalents $3,980,760 $ 21,706
Accounts receivable, net of
allowance for doubtful
accounts of $9,000 80,469 81,963
Notes receivable (Note 2) 24,986 24,986
Due from employees 3,666 1,390
Due from shareholders and officers
(Note 3) 113,737 76,887
Inventories 11,365 55,660
Prepaid Expenses 16,694 7,868
---------- ----------
Total current assets 4,231,677 270,460
---------- ----------
Property, Plant and Equipment
Property, plant and equipment
(Note 4) 454,812 163,406
---------- ----------
Total property, plant
and equipment 454,812 163,406
---------- ----------
Noncurrent Assets
Deposits 4,742 5,649
Organizational costs, net (Note 1) 774 1,032
Deferred public offering costs (Note 1) - 376,695
---------- ----------
Total noncurrent assets 5,516 383,376
---------- ----------
Total assets $4,692,005 $ 817,242
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 41,163 $ 233,111
Accrued liabilities 344,003 307,092
Notes Payable (Note 5) 2,154 402,154
---------- ----------
Total current liabilities 387,320 942,357
---------- ----------
Long-Term Debt (Note 5) 2,362 2,978
---------- ----------
Stockholders' Equity
Class A common stock, no par value;
authorized 20,000,000 shares,
issued and outstanding 3,220,851
at October 31, 1996 and 1,833,851
shares at July 31, 1996 (Note 8) 5,182,671 663,181
Accumulated deficit (880,348) (791,274)
---------- ----------
Total stockholders' equity 4,302,323 (128,093)
---------- ----------
Total liabilities and stockholders' equity $4,692,005 $ 817,242
========== ==========
The accompanying notes are an integral part of the financial statements.
<PAGE>
INNOVATIVE MEDICAL SERVICES
STATEMENTS OF INCOME
(UNAUDITED)
For the Three Months Ended
October 31
--------------------------
1996 1995
--------------------------
Net sales $ 219,668 $ 334,941
Cost of sales 160,766 233,494
---------- ----------
Gross profit 58,902 101,447
---------- ----------
Selling expenses 33,297 30,340
General and administrative expenses 159,248 47,180
---------- ----------
Total operating costs 192,545 77,520
---------- ----------
Operating income (loss) (133,643) 23,927
---------- ----------
Other income and (expense):
Interest income 44,769 -
Miscellaneous income and (expense) - 1
---------- ----------
Total other income and (expense) 44,769 1
---------- ----------
Income (loss) before income taxes (88,874) 23,928
Federal and state income taxes 200 -
---------- ----------
Net income (loss) $ (89,074) $ 23,928
========== ==========
Net (loss) per common share $ (0.03) $ 0.01
========== ==========
The accompanying notes are an integral part of the financial statements.
<PAGE>
INNOVATIVE MEDICAL SERVICES
STATEMENTS OF ACCUMULATED DEFICIT
(Unaudited)
Three Months Year Ended
Ended July 31, 1996
October 31, 1996
--------------------------------
1996 1995
--------------------------------
Balance, beginning of year $ (791,274) $ (361,226)
Net income (loss) (89,074) (430,048)
---------- ----------
Balance, end of quarter $ (880,348) $ (791,274)
========== ==========
The accompanying notes are an integral part of the financial statements.
<PAGE>
INNOVATIVE MEDICAL SERVICES
STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Three Months Ended
October 31
--------------------------
1996 1995
--------------------------
Cash flows from operating activities
Net income (loss) $ (89,074) $ 23,928
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 7,299 4,125
Amortization 258 258
Changes in assets and liabilities:
Decrease in accounts receivable 1,494 81,781
(Increase) decrease in due from
officers and shareholders (36,850) 10,000
(Increase) in due from employees (2,278) (643)
(Increase) in prepaid expense (8,826) (14,700)
(Increase) decrease in inventory 44,295 (810)
(Increase) in notes receivable - (22,500)
(Increase) decrease in deposits 907 (21,805)
(Decrease) in accounts payable (191,948) (81,993)
Increase in accrued liabilities 36,911 62
---------- ----------
Net cash provided (used) by
operating activities (237,812) (22,297)
---------- ----------
Cash flows from investing activities
Purchase of property, plant and equipment (291,406) (25,484)
---------- ----------
Net cash (used) in investing
activities (291,406) (25,484)
---------- ----------
Cash flows from financing activities
Increase (decrease) in notes payable (400,616) -
Proceeds from sale of common stock 4,888,888 21,000
---------- ----------
Net cash provided by financing
activities 4,488,272 21,000
---------- ----------
Net increase (decrease) in cash 3,959,054 (26,781)
Cash and cash equivalents, at beginning of year 21,706 47,180
---------- ----------
Cash and cash equivalents, at end of quarter $3,980,760 $ 20,399
========== ==========
The accompanying notes are an integral part of the financial statements.
<PAGE>
INNOVATIVE MEDICAL SERVICES
NOTES TO FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business Activity
Innovative Medical Services was incorporated in San Diego, California
on August 24, 1992. The Company was organized with the purpose of
manufacturing, marketing, and sales of the Fillmaster(R), a unique and
proprietary pharmaceutical water purification and dispensing product.
The Company is fully operational, with more than 4,500 customers in
all fifty states, Puerto Rico, The United Kingdom, Australia, Canada,
and Europe. The Company intends to expand research and development
efforts in order to further develop its product line to include an
additional 11 proprietary pharmacy-related efficiency tools.
Revenue Recognition
The company recognizes revenues when products are delivered.
Research and Development
Research and development costs are charged to operations when incurred
and are included in operating expenses. The total amount charged to
Research and Development in the three months ended October 31, 1996
was $11,617.
Depreciation Method
The cost of property, plant and equipment is depreciated on a straight
line basis over the estimated useful lives of the related assets. The
useful lives of property, plant, and equipment for purposes computing
depreciation are:
Computers and equipment 7.0 years
Furniture and fixtures 10.0 years
Property held under capital lease 10.0 years
Leasehold improvements are being depreciated over the life of the
lease which is equal to 29 or 149 months depending on the actual
lease.
Depreciation is computed on the Modified Accelerated Cost Recovery
System for tax purposes.
Amortization
The cost of organizational expenses are being amortized on a straight
line basis over their remaining lives of five (5) years. Amortization
expense charged to general and administrative expense for the quarters
ended October 31, 1996 and October 31, 1995 was $258 and $258,
respectively.
Inventory Cost Method
Inventories are stated at the lower of cost determined by the Average
Cost method and net realizable value.
Common Stock Public Offering
The Board of Directors authorized the Company to sell up to 1,250,000
shares of the Company's common stock and 1,250,000 Class A warrants in
a public offering pursuant to a Registration Statement on Form SB-2
under the Securities Act of 1933. The board of directors also
authorized obtaining bridge financing of up to $375,000 to facilitate
the public offering which was repaid after the offering.
<PAGE>
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Common Stock Public Offering (continued)
On August 13, 1996, the Company completed a public offering of its
common stock and Class A warrants. A registration statement covering
that offer was filed with the SEC on August 8, 1996. The IPO price to
the public was $4.00 per share of the common stock and $.10 per share
on the warrants. The total proceeds from the IPO was $5,125,000
(1,250,000 shares of common and 1,250,000 Class A warrants). The net
proceeds after deducting the underwriters fees and other costs was
$4,525,625. On September 13, 1996, the overallottment shares were sold
as per the underwriters agreement and the Company received $476,760
(137,000 shares of common at $4.00 per share and 137,000 Class A
warrants at $.10 per warrant less underwriters fees and costs).
Net Gain (Loss) Per Common Share
Pursuant to the requirements of the Securities and Exchange Commission
(SEC), common stock issued by the Company during the twelve months
immediately preceding an initial public offering, plus the number of
common equivalent shares which became issuable during the same period
pursuant to the grant of stock options and Bridge Financing have been
included in the calculation of the shares used in computing net loss
per common share as if these shares were outstanding for all periods
presented using the treasury stock method.
Following is a reconciliation of the weighted average number of shares
actually outstanding with the number of shares used in the
computations of loss per common share:
October 31, October 31,
1996 1995
---------- ----------
Weighted average number of shares
actually outstanding $1,821,792 $1,782,009
Stock options issued to
officer (Note 8) 31,250 31,250
Bridge financing warrants 1,187,500 1,187,500
---------- ----------
$3,040,542 $3,000,759
========== ==========
The number of shares that would be issued from the exercise of the
warrants has been reduced by the number of shares that could have been
purchased from the proceeds at the average market price of $9.00 per
share for Class A warrants and $15.00 per share for Class Z warrants,
which represents the redemption prices.
Income Taxes
At October 31, 1996, the Company has financial, federal, and
California tax net operating loss carryforwards of approximately
$880,000, $699,000, and $502,000, respectively. The difference
between the financial reporting and the federal tax loss carryforward
is primarily due to the capitalization of research and development
expenses and start-up expenses for tax purposes with an amortization
over five (5) years, but for financial reporting purposes these
expenses are charged to operations as incurred. The difference between
federal and California tax loss carryforwards is primarily due to the
fifty percent limitation on California loss carryforwards. The tax
loss carryforwards will begin expiring in fiscal year ended July 31,
2009, unless previously utilized.
The Company adopted Financial Accounting Standards Board Statement No.
109, Accounting for Income Taxes, beginning in fiscal year ended July
31, 1993. The adoption had no impact on 1993 results. In accordance
with this new standard, the Company has recorded total deferred tax
assets of $244,000 and a related valuation reserve of $244,000 as of
October 31, 1996. Realization of these deferred tax assets, which
relate to operating loss carryforwards and timing differences from the
amortization of research and development expenses and start-up
expenses, is dependent on future earnings. The timing and amount of
future earnings are uncertain and therefore, the valuation reserve has
been established.
<PAGE>
NOTE 2. NOTES RECEIVABLE
At October 31, 1996, notes receivable in the amount of $15,858
represents amounts due from an officer and $9,128 represents amounts
due from a shareholder. All notes receivable are due and payable
within one year.
NOTE 3. DUE FROM SHAREHOLDERS AND OFFICERS
At October 31, 1996, due from shareholder is $500 and due from
officers and shareholders is $113,237.
NOTE 4. PROPERTY, PLANT AND EQUIPMENT
The following is a summary of property, plant, and equipment - at
cost, less accumulated depreciation:
October 31, July 31,
1996 1996
---------- ----------
Computers and equipment $ 200,259 $ 132,715
Furniture and fixtures 75,190 47,993
Property held under capital lease 7,511 7,511
Construction in progress 88,752 -
Leasehold improvements 156,963 41,751
---------- ----------
528,675 229,970
Less: accumulated depreciation 73,863 66,564
---------- ----------
Total $ 454,812 $ 163,406
========== ==========
Depreciation expense charged to general and administrative expense for
the quarters ended October 31, 1996 and 1995 was $7,299 and $4,125,
respectively.
NOTE 5. DEBT
The details relating to debt are as follows:
October 31, July 31,
1996 1996
---------- ----------
Notes payable to a stockholder with
interest at 12% interest payable
in monthly installments of $247
and principal all due and payable
on January 1, 1997 $ - $ 25,000
Obligation under capital lease 4,516 5,132
Bridge financing - 375,000
---------- ----------
Total notes payable 4,516 405,132
Less: Current maturities of notes
payable included in current
liabilities 2,154 402,154
---------- ----------
Total long term debt $ 2,362 $ 2,978
========== ==========
<PAGE>
NOTE 6. CAPITAL LEASE
The company is the lessee of a display booth under a capital lease
expiring in August of 1998. The asset and liability under the capital
lease is recorded at the lower of the present values of the minimum
lease payments or the fair market value of the asset. The asset is
amortized over the estimated useful life of ten years. Depreciation of
the asset under capital lease charged to expense in the three months
ended October 31, 1996 was $376. The monthly lease payment which began
in September 1995 is $262.
Minimum future lease payments under the capital lease as of October
31, 1996 for each of the next five years and in the aggregate are:
Year ended October 31
---------------------
1997 $ 3,144
1998 2,620
---------
Total minimum lease payments 5,764
Less the amount representing interest 1,248
---------
Present value of net minimum lease payment $ 4,516
=========
The interest rate on the capital lease is approximately 23.6%.
NOTE 7. COMMITMENTS
The company leases office and warehouse facilities under an operating
lease expiring on December 31, 1996. The rental expense recorded in
general and administrative expenses for the three months ended October
31, 1996 and October 31, 1995 was $13,144 and $3,588, respectively.
On May 14, 1996, the Company entered into a new operating lease
agreement for sixty-five months commencing on July 1, 1996. The rent
payment portion of the lease will be for sixty-three months which
allows for an initial building improvement period of two months. The
monthly rental for the 7,000 square foot facility will be $ .61 per
square foot plus $ .08 per square foot for maintenance of common
areas. There is also a fixed yearly increase of 4%. The company has
also signed an amendment to the lease to allow for an option to lease
the building for an additional five years.
<PAGE>
NOTE 8. CAPITAL STOCK
The following schedule summarizes the change in capital stock:
Common Common
Stock Shares Stock $
---------- ----------
Balance, July 31, 1994 2,568,750 $ 482,171
Reverse stock split (856,233) -
Sale of stock 76,000 59,790
Stock issued for debt 3,334 5,000
Contribution of officers wages 0 45,000
Balance, July 31, 1995 1,791,851 591,961
Sale of stock 37,000 22,220
Stock issued for services 5,000 5,000
Contribution of officers wages 0 44,000
Balance, July 31, 1996 1,833,851 663,181
Public offering on August 8, 1996 1,387,000 4,519,490
Balance, October 31, 1996 3,220,851 $5,182,671
On May 4, 1994, the Shareholders voted to increase authorized common
stock from 100,000 to 5,000,000 shares. On November 22, 1993, the
Board of Directors authorized a stock split for shareholders of record
of September 30, 1993, thereby increasing the number of issued and
outstanding shares to 2,117,520.
On April 17, 1996, the Board of Directors approved a 2 for 3 reverse
stock split of the common stock of the founding shareholders of the
corporation, thus reducing the outstanding shares. Also, the board
authorized the issuance of two classes of shares, to be designated
respectively as "Common shares" and "Preferred shares". The total
number of authorized common shares of the corporation was increased
from 5,000,000 shares to 20,000,000 shares, with no par value. The
total number of authorized preferred shares of the corporation was
increased from 1,000,000 shares to 5,000,000 shares, with no par
value. All references in the accompanying financial statements to the
number of common shares and per-share amounts have been restated to
reflect the stock splits.
<PAGE>
NOTE 9. RELATED PARTY TRANSACTIONS
On April 1, 1996, the Company entered into an employment agreement
with the President and Chief Executive Officer. The term of the
agreement is for five years with an automatic renewal of another five
years. The following are the major provisions of the agreement:
1. Salary of $108,000 per year, and
2. Additional compensation equal to 3% of the net income before
taxes earned by the corporation during each full fiscal
year, and
3. A monthly amount of not more than $500 per month for a auto
lease, and
4. A five year option to purchase as many shares of the
corporation's common stock as equals one hundred thousand
dollars at 80% of the initial public offering price of the
Company's common stock, approximately 31,250 shares at $3.20
per share, which are exercisable in April, 1997.
NOTE 10. STOCK OPTION PLANS
On April 17, 1996, the Board of Directors and the shareholders
approved a stock option plan for the key employees of the Company and
non-employee Directors of the Company. Under the plan the number of
shares of stock which may be issued and sold shall not exceed
1,000,000 shares, with 900,000 shares reserved for issuance to key
employees pursuant to their Incentive Stock Options and 100,000 shares
reserved for issuance to non-employee Directors pursuant to their
non-statutory options. The per share option shall be determined by
committee, but the per share exercise price shall not be less than the
fair market value of the stock on the date the option is granted. No
person shall receive options, first exercisable during any single
calendar year for stock, the fair market value of which exceeds
$100,000.
On April 17, 1996, the Board of Directors approved a stock option plan
for the executive officers and Directors of the Company. Under the
plan the maximum number of shares of stock which may be issued and
sold shall not exceed 1,000,000 shares, with the maximum number of
shares for which an option may be granted to any one Director or
officer shall be 100,000. The per share option price for the stock
subject to each option shall be $1.00 per share or such other price as
the Board of Directors may determine.
Also, on April 17, 1996, the Board of Directors approved the issuance
of 2,500 shares to each of two retiring board members for past
services.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the audited and unaudited financial statements of the Company and related
notes included therein.
OVERVIEW
Innovative Medical Services is engaged principally in the business of
manufacturing and marketing the Fillmaster(R), a unique water purification,
measuring and dispensing apparatus used in pharmacies to reconstitute oral
antibiotic suspensions. In addition, the Company intends to develop and
market other pharmacy-related efficiency products worldwide.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED OCTOBER 31, 1996 VERSUS
THREE MONTHS ENDED OCTOBER 31, 1995
Revenues of $220,000 in the quarter ended October 31, 1996 were 34% less
than the $335,000 in revenues reported for the quarter ended October 31,
1995. This revenue decrease resulted because the 1995 quarter contained an
atypically large order from a major chain customer which distorted the
results of the quarter. Had this sale been spread over the entire year,
the 1996 quarter would actually show an increase of 17% over the same
period in 1995. Fillmaster(R) Purification System sales in the 1996
quarter were $197,000, and replacement filter sales were $23,000. In the
1995 quarter, Fillmaster(R) Purification System sales were $315,000 and
replacement filter sales were $19,000. The revenue generated from filter
sales in the 1995 quarter was atypically high because replacement filters
were sold with systems included in the extraordinary order as mentioned
above. In spite of the high filter sales in 1995, sales of filters rose in
1996 as expected due to the continually increasing number of Fillmaster(R)
Purification Systems in use. The Company expects such non-regular,
periodic bulk orders to occur in the future as Fillmaster(R) sales to major
chain customers continue to grow.
Gross profits in first quarter of fiscal year 1996 were $59,000 versus
$101,000 in the same period in 1995. Gross profit percentages in 1996
(27%) were lower versus 1995 (30%) because the Company offered more
penetration (lower) pricing of the product for the initial installations of
the systems in the 1996 quarter.
Net loss for the quarter ended October 31 was $89,000 versus a net profit
of $24,000 for the same quarter in 1995. This decrease was due in part to
the decrease in gross profit as outlined above. In addition, Selling
Expenses and General and Administrative Expenses increased approximately
$115,000 from 1995 to 1996 due to costs incurred to position the Company
for growth which included facilities expansion to provide increased
production and office space for increased marketing, sales, customer
service and administration requirements for anticipated increased
Fillmaster(R) product sales.
LIQUIDITY AND CAPITAL RESOURCES
During the three months ended October 31, 1996, the Company's current asset
to liabilities ratio rose from .29 to 10.93. Current assets grew by
$3,961,000 which was mainly due to the increase in cash and cash
equivalents resulting from the proceeds of the Company's initial public
offering in August of 1996. Current liabilities decreased by $555,000
because a portion of the offering proceeds were used to pay down accounts
payable and to retire substantially all of the Company's short term debt
including the IPO bridge financing of $375,000. Historically, the Company
has operated without incurring significant long term debt. Management
expects to continue this policy into the foreseeable future.
Cash flows used from operations were $238,000 in the first quarter of
fiscal year 1996 and $22,000 in 1995. For those quarters, cash flows used
in investing activities were, respectively, $291,000 and $25,000 for the
purchase of machinery and equipment and leasehold improvements. The
Company generated $4,489,000 from the public offering during the quarter
resulting in a net increase in cash equivalents of $3,959,000.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
EXHIBITS DESCRIPTION
11 Statement re: computation of per share earnings
27 Financial data schedule
(B) REPORTS ON FORM 8-K
None.
<PAGE>
SIGNATURES
Pursuant to the requirement 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.
INNOVATIVE MEDICAL SERVICES
(Registrant)
By: /s/ MICHAEL L. KRALL
-----------------------------------
Michael L. Krall, President/CEO
BY: /s/ GARY BROWNELL
-----------------------------------
Gary Brownell, Chief Financial Officer
EXHIBIT 11
INNOVATIVE MEDICAL SERVICES
COMPUTATION OF EARNINGS PER COMMON SHARE
FOR THE THREE MONTHS ENDED
OCTOBER 31, 1995 AND 1996
For the Three Months Ended
October 31
--------------------------
1995 1996
--------------------------
Shares outstanding 1,833,851 3,220,851
========== ==========
Weighted average shares outstanding 1,782,009 1,821,792
Stock Options 31,250 31,250
Warrants 1,187,500 1,187,500
---------- ----------
Total weighted average
shares outstanding 3,000,759 3,040,542
========== ==========
Net Income (Loss) $ 23,928 $ (89,074)
========== ==========
Net Earnings (Loss) per share $ 0.01 $ (0.03)
========== ==========
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> AUG-01-1996
<PERIOD-END> OCT-31-1996
<CASH> 3,980,760
<SECURITIES> 0
<RECEIVABLES> 89,469
<ALLOWANCES> 9,000
<INVENTORY> 11,365
<CURRENT-ASSETS> 4,231,677
<PP&E> 528,675
<DEPRECIATION> 73,863
<TOTAL-ASSETS> 4,231,677
<CURRENT-LIABILITIES> 387,320
<BONDS> 0
0
0
<COMMON> 5,182,671
<OTHER-SE> (880,348)
<TOTAL-LIABILITY-AND-EQUITY> 4,231,677
<SALES> 219,668
<TOTAL-REVENUES> 219,668
<CGS> 160,766
<TOTAL-COSTS> 192,545
<OTHER-EXPENSES> 159,248
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (133,643)
<INCOME-TAX> 200
<INCOME-CONTINUING> (133,843)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (89,074)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> 0
</TABLE>
