<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO __________
COMMISSION FILE NUMBER 333-25937
Crosswalk.com, Inc.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 54-1831588
------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
4100 Lafayette Center Dr. Suite 110
Chantilly, VA 20151
-------------------------------
(Address of principal executive offices)
(703) 968-4808
-------------------------------
(Registrant's telephone number, including area code)
Check whether the registrant: (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.
(1) Yes X No
As of May 3, 2000 there were 7,702,744 shares of the Registrant's common stock
outstanding.
<PAGE> 2
<TABLE>
<CAPTION>
PAGE
NUMBER
<S> <C>
PART I FINANCIAL INFORMATION
ITEM 1: Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of December 31, 1999
and March 31, 2000...................................................... 3
Condensed Consolidated Statements of Operations for the three
months ended March 31, 1999 and 2000.................................... 4
Condensed Consolidated Statements of Cash Flows for the three
months ended March 31, 1999 and 2000.................................... 5
Notes to Condensed Consolidated Financial Statements..................... 6
ITEM 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................. 10
ITEM 3: Quantitative and Qualitative Disclosures about Market Risk........ 14
PART II OTHER INFORMATION
ITEM 1: Legal Proceedings................................................. 15
ITEM 2: Changes in Securities and Use of Proceeds......................... 15
ITEM 3: Defaults Upon Senior Securities................................... 15
ITEM 4: Submission of Matters to a Vote of Security Shareholders.......... 15
ITEM 5: Other Information................................................. 16
ITEM 6: Exhibits and Reports on Form 8-K.................................. 16
SIGNATURES and EXHIBITS.................................................. 17
</TABLE>
<PAGE> 3
CROSSWALK.COM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, March 31,
1999 2000
------------ ------------
(unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $1,641,157 $1,315,584
Short-term investments 4,538,906 1,772,582
Accounts receivable, net including unbilled receivables of $566,515 and
$265,510 at December 31, 1999 and March 31, 2000, respectively 2,157,991 1,614,517
Deferred costs 142,910 553,127
Notes receivable from related party 37,500 37,500
Other current assets 27,750 29,438
------------ ------------
Total current assets 8,546,214 5,322,748
LONG TERM INVESTMENTS 2,774,747 1,819,848
PROPERTY AND EQUIPMENT, net 1,847,703 1,807,499
OTHER ASSETS:
Deposits 161,275 163,428
Deferred costs 18,216 253,386
Intangible assets, net 6,438,697 6,143,289
------------ ------------
Total other assets 6,618,188 6,560,103
------------ ------------
$19,786,852 $15,510,198
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $2,527,650 $703,638
Accrued liabilities 861,451 595,317
Deferred revenue 64,005 1,206,994
------------ ------------
Total current liabilities 3,453,106 2,505,949
OTHER LIABILITIES:
Accounts payable 72,210 83,313
Deferred revenue long-term -- 580,144
COMMITMENTS -- --
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value, 5,000,000 shares authorized, no shares issued -- --
and outstanding at December 31, 1999 and March 31, 2000
Common stock, $.01 par value, 20,000,000 shares authorized 7,592,972 and
7,638,352 shares issued and outstanding
at December 31, 1999 and at March 31, 2000, respectively 75,930 76,383
Common stock warrants 127,660 127,660
Additional paid-in capital 38,156,922 38,409,182
Accumulated deficit (22,044,497) (26,229,781)
Accumulated other comprehensive loss:
Net unrealized loss on available-for-sale securities (54,479) (42,652)
------------ ------------
Total stockholders' equity 16,261,536 12,340,792
------------ ------------
$19,786,852 $15,510,198
============ ============
</TABLE>
See accompanying notes.
<PAGE> 4
CROSSWALK.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
-------------------------------------------
1999 2000
------------------- -------------------
<S> <C> <C>
OPERATING REVENUES:
Advertising/Sponsorship sales $973,470 $1,499,695
Retail sales 48,188 135,997
Internet services 53,401 15,999
------------------- -------------------
Total operating revenues 1,075,059 1,651,691
OPERATING EXPENSES:
Cost of goods and services 653,490 808,721
Crosswalk operations 768,785 1,599,704
Sales and marketing 659,904 1,241,097
General and administrative 390,568 834,772
------------------- -------------------
Total operating expenses 2,472,747 4,484,294
------------------- -------------------
LOSS FROM OPERATIONS (1,397,688) (2,832,603)
OTHER INCOME (EXPENSE):
Interest income 137,455 54,908
Loss on sale of property and equipment (2,554) --
------------------- -------------------
Total other income (expense) 134,901 54,908
------------------- -------------------
Net loss before cumulative effect of a
change in accounting practice ($1,262,787) ($2,777,695)
Cumulative effect of a one-time adjustment to
reflect change in revenue and cost recognition -- ($1,407,589)
------------------- -------------------
Net loss ($1,262,787) ($4,185,284)
=================== ===================
Amounts per common share:
Net loss before cumulative effect of a
change in accounting practice ($0.23) ($0.36)
Cumulative effect of a one-time adjustment to
reflect change in revenue and cost recognition -- ($0.19)
------------------- -------------------
Net loss per common share (basic and diluted) ($0.23) ($0.55)
=================== ===================
Weighted average number of common
shares outstanding 5,439,853 7,623,572
=================== ===================
</TABLE>
See accompanying notes.
<PAGE> 5
CROSSWALK.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
---------------------------------
1999 2000
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (1,262,787) $ (4,185,284)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 40,850 193,902
Amortization 2,499 295,408
Loss on disposal of property and equipment 2,554 -
Stock compensation expense - 7,693
Common stock issued in lieu of cash for advertising - 256,250
Changes in operating assets and liabilities:
Accounts receivable (522,892) 543,474
Deposits (795) (2,153)
Other current assets (18,669) (1,688)
Deferred costs (34,646) (138,615)
Accounts payable 395,512 (1,812,909)
Accrued liabilities (59,740) (266,134)
Deferred revenue 39,417 1,723,133
------------ ------------
Net cash used in operating activities (1,418,697) (3,386,923)
------------ ------------
INVESTING ACTIVITIES:
Purchases of property and equipment (125,495) (153,698)
Sales and maturities of investments - 3,226,277
Purchase of investments (8,200,593) -
------------ ------------
Net cash (used in) provided by investing activities (8,326,088) 3,072,579
------------ ------------
FINANCING ACTIVITIES:
Net proceeds from issuance of common stock and warrants 14,596,614 -
Cost of issuing common stock in lieu of cash - (11,229)
------------ ------------
Net cash (used in) provided by financing activities 14,596,614 (11,229)
------------ ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS 4,851,829 (325,573)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 1,234,451 1,641,157
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 6,086,280 $ 1,315,584
============ ============
</TABLE>
See accompanying notes.
<PAGE> 6
CROSSWALK.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 2000
A. THE COMPANY AND BASIS OF PRESENTATION
Crosswalk.com, Inc. (including its subsidiaries, "Crosswalk" or the "Company")
is the creator of its Web site www.crosswalk.com(TM) ("crosswalk.com"), which
the Company believes is the premier portal site for the online Christian
community, with a focus on "the intersection of faith and life", covering a
growing spectrum of everyday life within a Christian context. Crosswalk.com
offers to members and visitors channels targeting music, personal finance,
careers, sports, homeschooling, and health; lifestyle channels focusing on men,
women, families and spiritual life; and services ranging from free Web access
filtering, a full-Web filtered search engine, and "mycrosswalk" customized start
pages to online shopping, family-friendly movie reviews, bible study, greeting
cards, games, chat, forums, local events, news, free email and more.
The Company's business includes the development and aggregation of Internet
content and services; advertising and royalty sales; and the resale of products
specifically designed to meet the needs of Christian users of the Internet and
the World Wide Web. The Company intends to build traffic and membership to
crosswalk.com through efficient marketing and product development activities,
with the goal of building market awareness and acceptance of its product, which
it believes will result in revenue growth and profitability. The Company
operates in one business segment.
The accompanying unaudited financial statements as of March 31, 2000 and 1999
have been prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission (the "SEC"). In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. The balance sheet at December 31,
1999 has been derived from the audited financials statements at that date. These
financial statements should be read in conjunction with the Company's audited
financial statements and related notes included in the Company's Annual Report
on Form 10-K for the year ended December 31, 1999. The results of operations for
the quarter ended March 31, 2000 are not necessarily indicative of the results
to be expected for any subsequent quarter or for the entire fiscal year ending
December 31, 2000.
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation - The consolidated financial statements include the
financial statements of Crosswalk.com, Inc. and its wholly owned subsidiaries.
All significant intercompany balances and transactions have been eliminated in
consolidation.
Use of estimates - Management uses estimates and assumptions in preparing
financial statements in accordance with generally accepted accounting
principles. Those estimates and assumptions affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and liabilities, and
the reported revenues and expenses. Actual results could vary from the estimates
that were used.
Cash equivalents - Cash and cash equivalents include cash and investments with
initial maturities of three months or less.
Short and long-term investments - The Company invests in U.S. government bonds
and treasury notes, municipal bonds, and corporate bonds. Investments with
current maturities greater than three months but less than twelve months from
the balance sheet date are considered short-term investments. Those investments
with maturities greater than twelve months from the balance sheet date are
considered long-term investments.
The Company's marketable securities are classified as available-for-sale as of
the balance sheet dates and are reported at fair value, with unrealized gains
and losses, net of tax, recorded in shareholders' equity. Realized gains or
losses and permanent declines in value, if any, on available-for-sale securities
are reported in other income or expense as incurred.
Depreciation and amortization - Property and equipment are stated at cost.
Depreciation is determined using the straight-line method over estimated useful
lives ranging from three to seven years. Leasehold improvements are amortized
over the life of the related lease. Intangible assets are amortized over useful
lives of five to ten years using the straight-line method.
Revenue recognition - As of January 1, 2000, the Company's revenues are
primarily derived from the sale of banner advertising. The Company's revenue
model prior to January 1, 2000 included significant revenues from third party
sponsorships for prime Web site exposure in which the Company recognized
nonrefundable revenue upon completing the integration of a sponsor's web based
material onto the Crosswalk.com site.
6
<PAGE> 7
CROSSWALK.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 2000
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Advertising revenues are recognized in the period in which the advertisement is
displayed, provided that no significant Company obligations remain and
collection of the resulting receivable is probable. Company obligations
typically include guarantees of minimum number of "impressions", or number of
times that an advertisement appears in pages viewed by users of Crosswalk.com.
To the extent that minimum guaranteed impressions are not met, the Company
defers recognition of the corresponding revenues until the remaining guaranteed
impression levels are achieved.
The Company previously recognized nonrefundable content integration and
development fees as revenue upon completion of content integration. Effective
January 1, 2000, the Company changed its method of accounting for nonrefundable
fees for Web integration contracts entered into prior to January 1, 2000, to
recognize such fees over the term of the related agreement, which is generally a
one to two year period when the Company is maintaining the integrated content.
The Company believes the change in accounting principle is preferable based on
guidance provided in SEC Staff Accounting Bulletin No. 101 - Revenue Recognition
in Financial Statements. The $1.4 million cumulative effect of the change in
accounting principle was reported as a charge in the quarter ended March 31,
2000, and represents the associated revenues and related direct and incremental
costs. The cumulative effect was initially recorded as deferred revenue that
will be recognized as revenue over the remaining contractual terms of the
agreements. During the quarter ended March 31, 2000, the impact of the change in
accounting was to increase net loss by $1.0 million, or $0.13 per share,
comprised of the $1.4 million cumulative effect of the change as described above
($0.19 per share), net of $.4 million of the related deferred revenue which was
recognized as revenue during the quarter ($0.06 per share). Had the change in
accounting been adopted as of January 1, 1999, net loss for the quarter ended
March 31, 1999 would have increased by $.2 million, or $0.04 per share.
Barter transactions, amounting to approximately twenty-five percent of revenues
for the quarter ended March 31, 2000, are recorded at the lower of estimated
fair value of the goods or services received or the estimated fair value of the
services given based on like-cash transactions. Barter transactions consist of
providing web development services in return for advertising space in the
customer's magazine, and website presence on crosswalk.com in exchange for
advertising space on the customer's website, other web related services,
magazine advertisements, promotions at conferences or other related marketing
services. The revenues and equivalent cost of sales from these barter
transactions are recorded in the month in which the services are provided and/or
received and are recorded in the revenue category commensurate with the product
or service rendered.
Net loss per common share - The Company reports basic and diluted earnings per
share ("EPS"). Basic EPS excludes dilution and is computed by dividing net
income (loss) available to common stockholders by the weighted average number of
common shares outstanding during the period. Diluted EPS is computed by dividing
net income (loss) available to common stockholders, adjusted by the assumed
conversion of any potential common share equivalents, by the weighted number of
common shares and common share equivalents (unless their effect is
anti-dilutive) outstanding.
Capital structure - The Company's outstanding stock is completely comprised of
voting common stock. The Company has issued 2,841,526 shares of common stock
upon the exercise of 2,841,526 Redeemable Common Stock Purchase Warrants,
166,500 shares of common stock upon the exercise of 166,500 Common Stock
Underwriter Warrants, 195,000 shares of common stock upon the exercise of
195,000 Common Stock Warrant Underwriter Warrants, and 514,845 shares of common
stock for the purchase of intangible assets.
Comprehensive income - Effective January 1, 1998, the Company adopted SFAS No.
130, "Reporting Comprehensive Income." This pronouncement established standards
for the reporting and display of comprehensive income and its components in the
financial statements. Comprehensive income is defined as the change in equity of
a business enterprise during a period from transactions and other events and
circumstances from non-owner sources. Accordingly, the Company presents the
elements of comprehensive income, which included net loss and unrealized losses
on available-for-sale securities. For the quarters ended March 31, 2000 and
1999, the Company's comprehensive loss was $4,227,936 and $1,279,223,
respectively.
Stock-based compensation - The Company has elected to continue to account for
its stock-based compensation in accordance with APB 25, "Accounting for Stock
Issued to Employees", which uses the intrinsic value method, however, as
required by SFAS No. 123, "Accounting for Stock-Based Compensation", the Company
has disclosed the pro forma impact on the consolidated financial statements
assuming the measurement provisions of SFAS No. 123 had been adopted in the
Company's Annual Report of Form 10-K. The Company accounts for all other
issuances of equity instruments in accordance with SFAS No. 123.
7
<PAGE> 8
CROSSWALK.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 2000
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Deferred costs - Deferred costs at March 31, 2000 consisted of content fees,
conference fees, insurance costs, software maintenance, investor relations and
license fees and deferred barter costs associated with revenue deferred pursuant
to compliance with SEC Staff Accounting Bulletin No. 101. The software
maintenance and license fees are ratably expensed over the life of the
maintenance and license agreements. The content, conference and investor
relations fees are charged to expense once the services associated with these
fees have been delivered to the Company. Insurance costs are ratably expensed
over the life of the policy for which premiums have been paid. The barter costs
are recognized as services are rendered.
Income taxes - Crosswalk accounts for income taxes using the liability method.
Under this method, deferred tax assets and liabilities are determined based on
differences between the financial reporting and tax basis of assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected.
Fair value of financial instruments - The carrying value of cash and cash
equivalents, investments, accounts receivable and notes payable approximate fair
value because of the relatively short maturity of these instruments.
Derivative instruments and hedging activities - In June 1998, the FASB issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities."
SFAS No. 133 is required to be adopted by the Company in the first quarter of
fiscal year 2001. It establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts and for hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities in the balance sheet and measure
those instruments at fair value. Management believes that the adoption of this
standard will not have a material effect on the Company's financial position or
results of operations.
Reclassifications - Certain balances have been reclassified to conform to the
current year presentation.
Advertising expense - All advertising costs are expensed when incurred.
C. CASH AND CASH EQUIVALENTS, SHORT AND LONG-TERM INVESTMENTS
The Company invests in U.S. government bonds and treasury notes and corporate
bonds. All highly liquid instruments with an original maturity of three months
or less are considered cash equivalents, those with original maturities greater
than three months and current maturities less than twelve months from the
balance sheet date are considered short-term investments, and those with
maturities greater than twelve months from the balance sheet date are considered
long-term investments.
The Company's marketable securities are classified as available-for-sale as of
the balance sheet date and are reported at fair value, with unrealized gains and
losses, net of tax, recorded in shareholders' equity. Realized gains or losses
and permanent declines in value, if any, on available-for-sale securities are
reported in other income or expense as incurred.
Securities available-for-sale in the accompanying balance sheet at March 31,
2000 with contractual maturities of one year of less are $1,977,622 which
includes $205,040 in Cash and Cash Equivalents since they have original
maturities of three months or less, and with contractual maturities of one
through five years are $1,819,848. Expected maturities may differ from
contractual maturities as a result of the Company's intent to sell these
securities prior to maturity. The Company has recorded an unrealized gain of
$1,041 and an unrealized loss of $43,693 as of March 31, 2000.
The aggregate market value, cost basis, and unrealized gains and losses of
securities available for sale, by major security type, as of March 31, 2000, are
as follows:
<TABLE>
<CAPTION>
Gross Unrealized Gross Unrealized
Market Value Cost Basis Gains (Losses)
------------ ---------- ----- --------
<S> <C> <C> <C> <C>
U.S. Govt. Debt Securities $ 1,384,614 $ 1,400,488 $ 1,041 $ (16,915)
Municipal Debt Securities 408,228 409,544 --- (1,316)
Corporate Debt Securities 2,004,628 2,030,090 --- (25,462)
----------- ----------- ---------- ----------
Total at March 31, 2000 $ 3,797,470 $ 3,840,122 $ 1,041 $ (43,693)
=========== =========== ========== ==========
</TABLE>
8
<PAGE> 9
CROSSWALK.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 2000
The Company recorded a net realized loss of $21,512 in the three months ended
March 31, 2000 that is included in interest expense.
D. RELATED PARTY TRANSACTIONS
At March 31, 2000, the Company had a Note receivable from a director of the
Company. The Company is charging interest on this Note at the minimum federal
statutory rate at the time of issuance of 5.7%. This Note is due to be repaid on
September 8, 2000.
E. NET LOSS PER COMMON SHARE
As required by SFAS No. 128, the following is a reconciliation of the basic and
diluted EPS calculations for the periods presented:
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
---------------
1999 2000
---- ----
<S> <C> <C>
Net loss (numerator) $(1,262,787) $(4,185,284)
Weighted average shares (denominator) 5,439,853 7,623,572
Basic net loss per share $ (0.23) $ (0.55)
--------- ---------
Dilutive shares (denominator) 5,439,853 7,623,572
Diluted net loss per share $ (0.23) $ (0.55)
========= =========
</TABLE>
As required by Securities and Exchange Commission (SEC) Staff Accounting
Bulletin No. 98, the above calculation of EPS is based on SFAS No. 128 "Earnings
Per Share." Thus, 55,414 and 47,409 stock options and purchase warrants granted
at below market prices outstanding in the three months ended March 31, 1999 and
March 31, 2000, respectively, are not included in the calculation of diluted EPS
as their inclusion would be anti-dilutive.
F. COMMITMENTS
In September 1999, the Company entered into a one-year Network Title Sponsorship
Agreement ("Agreement") with The Christian Network, Inc., which includes "Praise
on Pax" and "Worship on Pax." Under this Agreement, the Company is entitled to a
national title sponsorship on "Praise on Pax" telecasts and a national corporate
sponsorship on "Worship on Pax" telecasts. The Company also receives advertising
and promotional rights. The total cost for these sponsorship and advertising
rights is $1,025,000, payable quarterly in cash or, at the Company's option, in
shares of the Company's common stock having a fair market value equal to the
required payment. The Company is also obligated to issue additional shares of
common stock for each new member generated for Crosswalk.com as a result of
these sponsorship and advertising arrangements, based on a valuation of $1.00
for each member generated. The Agreement is renewable for an additional one-year
term upon the agreement of the parties. If the agreement is renewed, the
Company's payment obligation will increase to $1,127,500. In February 2000 and
April 2000, respectively, 39,018 and 46,196 shares of Crosswalk common stock
were issued for services rendered under this Agreement.
G. SUBSEQUENT EVENTS
Effective May 1, 2000, Crosswalk has subleased 2,945 square feet of unused prime
office space in Chantilly, Virginia, thereby reducing future rent costs by
approximately $60,000 per annum.
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
BACKGROUND
Crosswalk.com, Inc. ("the Company") is primarily known as the creator of
crosswalk.com(TM), an interactive Web site, which provides information and
resources that the Company believes generally appeals to the Christian
community. The information and resources are developed and made available both
by the Company and by Christian and secular retailers, publishers, charities and
ministries. The Company generates revenues through the sale of banner
advertising and sponsorship contracts (the "Advertising/sponsorship sales"); the
online retailing of Christian and family-friendly products manufactured or
developed by others (music, books, apparel, gifts, etc.) and referral fees from
co-marketing relationships ("Retail sales"); and to a lesser extent, the
continuing provision of Internet services, including services related to Web
site development and hosting to Christian organizations (the "Internet
services").
The vast majority of the Company's revenue has been generated through the sale
of advertising and sponsorship opportunities on crosswalk.com; followed by
direct retail sales and royalties/fees from the sale of Christian interest
products manufactured or developed by others (primarily CDs, tapes, books, and
other articles generally appealing to the Christian marketplace). The Company's
strategy going forward is one of making crosswalk.com a community portal with
deep Channel content and a breadth of information for Christians, not just
Christian information. It is the Company's belief that this strategy, coupled
with cost-effective multimedia marketing and promotional activities, will
accelerate traffic and thus revenue growth over time. The Company plans to
continue enhancing crosswalk.com in order to maintain its leadership position as
the preferred online resource for Christians in search of information,
interaction and involvement opportunities that help them apply a Christian world
view across the breadth of their life and interests.
The Company's change in revenue composition over the years presented is evidence
that the Web site traffic generated at crosswalk.com is increasing in value to
advertisers and sponsors. Advertisers are organizations who place ads on
crosswalk.com, for which Crosswalk.com is paid a flat fee or a fee per ad
impression delivered. Sponsors are organizations which are given premiere
positioning for their content on various areas of crosswalk.com and in effect
become a "sponsor" of those areas, a service for which Crosswalk.com receives a
fee. The Company's first quarter 2000 revenue generated from
Advertising/sponsorship sales was 91% of total operating revenue and increased
by 54% over the first quarter 1999 revenue generated from
Advertising/sponsorship sales which was also 91% of total operating revenue.
Retail sales increased to 8% of total revenue in the first quarter 2000 versus
4% for the first quarter 1999, and increased in volume by 182% totaling $135,997
in the first quarter 2000 versus $48,188 in the first quarter 1999. The
Company's continued emphasis on the higher margin Advertising/sponsorship sales
has led to a 70% decline from 1999 to 2000 in the labor-intensive revenue
derived from providing Internet services. Overall, the Company experienced a 54%
increase in operating revenue in the first quarter 2000 as compared to the same
quarter of 1999. However in 1999, the Company generated most of its revenues
from selling channel sponsorships, often on an exclusive basis, and often to
Christian organizations that also agreed to provide content. This type of
relationship requires certain labor-intensive efforts on the part of the
Company. The Company believes that, with the current combination of
extraordinarily deep content and achievement of the benchmark one million
membership status, it can shift emphasis to selling advertising, which it
believes will ultimately generate more revenue at lower cost. In the first
quarter of 2000, the Company made great progress in this regard as advertising
revenue was $508,096 or 31% of total revenue compared to $12,741 or 1% in the
same quarter a year ago.
The Company's progress in developing crosswalk.com is also evidenced by the
growth in membership and average monthly page views on crosswalk.com. Membership
is free and represents the number of registered users of the Company's content
or services. At March 31, 2000, the company had 1,322,371 members as compared to
187,500 members at March 31, 1999, representing an annual growth rate of 605%.
Page views are a measure of total pages viewed by visitors to crosswalk.com in a
month. Average monthly page views tallied in the first quarter of 2000 reached
approximately 18,300,000, up from 4,150,000 for the comparable first quarter a
year earlier. This represents an annual growth rate of 341%. The opportunity for
the Company to generate additional advertising and retail revenues is largely
predicated upon increasing membership and traffic in the form of page views on
crosswalk.com.
10
<PAGE> 11
The Company has a limited operating history upon which an evaluation of the
Company and its business can be based. The Company's business must be considered
in light of the risks, expenses and problems frequently encountered by companies
in their early stage of development, particularly companies in new and rapidly
evolving markets, such as the Internet. The market for the Company's services
and products has only very recently begun to develop, is rapidly evolving and is
characterized by an increasing number of market entrants who have introduced or
developed services and products for use on the Internet. As a result, the
Company's mix of services and products may undergo substantial changes as the
Company reacts to competitive and other developments in the overall Internet
market. The Company has incurred net losses since inception and expects to
continue to operate at a loss until sufficient revenues are generated to cover
expenses. As of March 31, 2000, the Company had an accumulated deficit of
$26,229,781.
The Company's expense levels are based in part on possible future revenues, of
which there can be no assurance. The Company's ability to generate revenue from
the commercial sale of advertising space on crosswalk.com is tied to its ability
to generate traffic on the Web site, and the effectiveness of its sale staff.
The Company plans to significantly increase its sales efforts, however a
shortfall in revenues without commensurate reductions in cost, could have an
immediate adverse impact on the Company's business, results of operations and
financial condition. The Company expects to experience significant fluctuations
in future quarterly operating results and believes that period-to-period
comparisons of its results of operations are not necessarily meaningful and
should not be relied upon as any indication of future performance.
RESULTS OF OPERATIONS
THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
NET LOSS
For the quarter ended March 31, 2000, the Company incurred a net loss before
cumulative effect of a change in accounting practice of $2,777,695, and a total
net loss after the cumulative effect of a change in accounting practice of
$4,185,284, as compared to a net loss of $1,262,787 for the same quarter in
1999. This one-time adjustment was previously disclosed in the Company's 1999
Form 10K. In response to the Securities and Exchange Commission Staff Accounting
Bulletin 101 issued in December 1999, the Company has chosen to change its
revenue and applicable cost recognition on the integration and development fee
portion of prior year sponsorship deals, to a more preferable method of deferral
ratably over the term of the contract. If this accounting change had been
implemented January 1, 1999, the net loss for the first quarter of 1999 would
have been $1,500,870.
The increased loss before cumulative effect of a change in accounting practice
for the first quarter of 2000 was $1,514,908 (120%). It was due primarily to an
increase in operating expenses, offset in part by increases in revenues. The
increased loss consisted of a $1,856,316 (102%) increase in operating expenses
excluding cost of goods sold for the three months ended March 31, 2000 as
compared to the three months ended March 31, 1999, a $79,993 (59%) decrease in
other income, offset to an extent by $421,401 (100%) increase in gross margin.
REVENUES
The Company generated $576,632 or 54% more revenue in the three months ended
March 31, 2000 than in the same period in 1999. The $1,651,691 of revenue earned
in the first quarter of 2000 consisted of $1,499,695 from
Advertising/sponsorships sales, $135,997 from Retail sales, and $15,999 from
Internet services, while the $1,075,059 of revenue earned in the first quarter
of 1999 consisted of $973,470 from Advertising/sponsorships sales, $48,188 from
Retail sales, and $53,401 from Internet services. The quarter on quarter change
in revenue mix is a 54% ($526,225) increase in Advertising/sponsorship sales, a
182% ($87,809) increase in Retail sales, and a 70% ($37,402) decrease in
Internet services revenue. Barter agreements which allow for the exchange of
goods and services such as advertising, marketing, and content services on the
Company's and the customer's Internet websites, amounted to less than
twenty-five percent of the revenue earned in the first quarter of 2000. This
compared to forty-nine percent in the first quarter of 1999.
Advertising/sponsorship sales increased due to the Company's growing emphasis on
establishing more topical channels generally believed to be of interest to the
Christian market niche.
11
<PAGE> 12
According to the Company's business model, the Company plans to increase the
number of channels to cover all of life from the Christian perspective. Retail
sales increased in the first quarter of 2000 due to increased marketing efforts,
product offerings, and site enhancements. Internet Services revenues decreased
by $37,402, in the three months ended March 31, 2000, due to the emphasis being
placed on advertising and away from various Internet services for the Company's
clients.
In response to the Securities and Exchange Commission Staff Accounting Bulletin
101 issued in December 1999, the Company has chosen to change its revenue
recognition on the integration and development fee portion of prior year
sponsorship deals, to a more preferable method of deferral ratably over the term
of the contract. If this accounting change had been implemented January 1, 1999,
the revenue for the first quarter of 1999 would have been $447,203 versus the
$1,075,056 reported. Therefore, on a comparable basis, the first quarter 2000
revenue would have been up $1,204,485 or 269% versus the first quarter of 1999.
The Company's emphasis going forward will be on leveraging what the Company
believes is robust content important to its niche, and the great affinity of
crosswalk members and the Christian community by increasing the number of
advertisers, and focusing on high margin affiliate relations with less emphasis
on direct retail for commodity items. With continued growth in site traffic,
service enhancements, and successful viral marketing campaigns, the Company
hopes to achieve continued progress in these revenue streams.
COST OF GOODS AND SERVICES
Cost of goods and services, consisting of costs related to the development and
integration of client content on crosswalk.com; retailing Christian interest
products on crosswalk.com; and development, maintenance, and support of customer
services; was $808,721 and $653,490 for the quarters ended March 31, 2000 and
1999, respectively. The Company's gross margin for the quarter ended March 31,
2000 increased to 51% from 39% for the same period in 1999. This increase is due
primarily to the decrease in barter transactions, which accounted for less than
twenty-five percent of revenues in the three months ended March 31, 2000 versus
49% in the same period in 1999.
In response to the Securities and Exchange Commission Staff Accounting Bulletin
101 issued in December 1999, the Company has chosen to change its revenue and
applicable cost recognition on the integration and development fee portion of
prior year sponsorship deals, to a more preferable method of deferral ratably
over the term of the contract. If this accounting change had been implemented
January 1, 1999, the cost of goods and services for the first quarter of 1999
would have been $263,720 versus the $653,490 reported. Therefore, on a
comparable basis, the first quarter 1999 gross margin would have been 41% versus
the 39% reported.
CROSSWALK.COM OPERATIONS
Crosswalk.com operational expenses, consisting primarily of costs related to the
Company's development, maintenance, and enhancements for the Company's
interactive Web site (crosswalk.com), increased to $1,599,704 for the three
months ended March 31, 2000, as compared to $768,785 for the same period in
1999. The cost of Crosswalk.com operations increased by 108% ($830,919) due to
the growth in the Channel content on crosswalk.com. The largest portion of the
increase ($589,870 or 118%) is due to increases in staffing and related
expenses. The Company has greatly expanded its development staff in order to
provide continuous improvements of crosswalk.com's products and services. The
next largest increase in costs ($132,846 or 332%) was in depreciation expense
given the Company's investment in technology assets necessary to support the
growth of crosswalk.com. Crosswalk operations also experienced growth in content
expense of $74,881 or 179%. The Company purchases a larger amount of content
from a wider variety of sources and on many more topics due to the increased
number of channels and the depth of those channels on crosswalk.com. In
addition, there were increases in travel, supplies, and communications expense.
SALES AND MARKETING
In the first quarter of 2000, sales and marketing expenses were $1,241,097 as
compared to $659,904 for the first quarter of 1999. Sales and marketing expenses
increased 88% ($581,193) largely due to the Company's continued investment in
its cross-media marketing campaign to promote crosswalk.com. The marketing
campaign consisted of
12
<PAGE> 13
advertising and promotion on Christian radio, select network and cable
television, contests, online links from search engines, and ads in Christian
periodicals. The Company believes that it will continue to incur marketing
expenses as it seeks to increase market awareness of crosswalk.com.
GENERAL AND ADMINISTRATIVE
The Company increased its general & administrative costs in the first quarter of
2000, to $834,772 from $390,570 in the first quarter of 1999. This 113% increase
($444,202) is due largely to increases in office operating costs due to
increases in headcount, headquarter and satellite locations, and bandwidth
required to support traffic growth on crosswalk.com.
OTHER INCOME
Interest income decreased 59% to $54,908 from $137,455 for the quarters ended
March 31, 2000 and 1999, respectively. This $82,547 decrease is due to the use
of investments for business expansion and operations. In the quarter ended March
31, 2000, the Company also disposed of $2,554 of property and equipment.
LIQUIDITY AND CAPITAL RESOURCES
During the quarters ended March 31, 2000 and 1999, net cash used in operating
activities was $3,386,923 and $1,418,697 respectively. Net cash provided by
investing activities was $3,072,579 for the quarter ended March 31, 2000, and
net cash used in investment activities was $8,326,088 for the quarter ended
March 31, 1999. Net cash used in financing activities was $11,229 for the
quarter ended March 31, 2000. Net cash provided by financing activities was
$14,596,614 for the quarter ended March 31, 1999 and consisted of the receipt of
$14,596,614 from the exercise of 2,561,400 Common Stock Purchase Warrants and
24,948 Common Stock Options. In the three months ended March 31, 1999, the
Company invested the proceeds from the redemption of the warrants in U.S.
government bonds and treasury notes and Standard and Poors A-1 or AA rated
corporate bonds.
The Common Stock Purchase Warrants were exercised after the Company exercised
its right to call them based on the terms of the Purchase Warrant Agreement. The
redemption date was February 12, 1999.
The Company currently anticipates that its $2,816,799 working capital balance at
March 31, 2000, consisting primarily of the proceeds from the exercise of the
Common Stock Purchase Warrants, as previously described, and the remaining
proceeds from the Company's initial public offering after the debt liquidation
and liquidation of accrued offering costs, will be sufficient to meet the
Company's anticipated working capital, lease commitments, and capital
expenditure requirements for the next twelve months. However, the Company may
seek to raise additional funds in order to expand its marketing campaign and
crosswalk.com Channel deployment, and to pursue potential leveraged joint
marketing opportunities, or in the event that the Company's estimates of
operating losses and capital requirements change or prove inaccurate or in order
that the Company may respond to increased demand or to take advantage of other
unanticipated opportunities. There can be no assurance that current working
capital will be sufficient to meet the Company's needs or that additional
financing will be available to the Company or that such financing will be
available on acceptable terms.
POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS
As a result of the Company's limited operating history and the rapid
technological change experienced in the Internet industry generally, the Company
has limited historical financial data upon which to base future operating
expenses. Accordingly, the Company's expense levels are based in part on its
expectations as to future revenues, of which there can be no assurance. There
can be no assurance that the Company will be able to accurately predict the
levels of future revenues, if any, and the failure to do so would have a
materially adverse effect on the Company's business, results of operations and
financial condition
The Company expects to experience significant fluctuations in future quarterly
operating results that may be caused by multiple factors. Causes of such
significant fluctuations may include, among other factors, demand for the
Company's services, the number, timing and significance of new service
announcements by the Company and its
13
<PAGE> 14
competitors, acceptance of its marketing initiatives, the ability of the Company
to develop, market and introduce new and enhanced versions of its services on a
timely basis, the level of product and price competition, changes in operating
expenses, changes in service mix, changes in the Company's sales incentive
strategy, and general economic factors.
The Company's operating expense levels are based, in significant part, on the
Company's expectations of future revenue on a quarterly basis. If actual revenue
levels on a quarterly basis are below management's expectations, both gross
margins and results of operations are likely to be adversely affected because a
relatively small amount of the Company's costs and expenses varies with its
revenue in the short term.
FORWARD LOOKING STATEMENTS
Certain information in this quarterly report on Form 10-Q may contain
forward-looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended. All statements other than statements of
historical fact are forward-looking statements for purposes of these provisions,
including any projections of earnings, revenues or other financial items, any
statements of the plans and objectives of management for future operations, any
statements concerning proposed new products or services, any statements
regarding future economic conditions or performance, and any statement of
assumptions underlying any of the foregoing. In some cases, forward-looking
statements can be identified by the use of terminology such as "may," "expects,"
"believes," "plans," "anticipates," "estimates," "potential," or "continue," or
the negative thereof or other comparable terminology. Although the Company
believes that the expectations reflected in its forward-looking statements are
reasonable, it can give no assurance that such expectations or any of its
forward-looking statements will prove to be correct, and actual results could
differ materially from those projected or assumed in the Company's
forward-looking statements.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None to report.
14
<PAGE> 15
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None to report.
ITEM 2. CHANGE IN SECURITIES
In September 1999, the Company entered into a one-year Network Title Sponsorship
Agreement ("Agreement") with The Christian Network, Inc., which includes "Praise
on Pax" and "Worship on Pax." Under this Agreement, the Company is entitled to a
national title sponsorship on "Praise on Pax" telecasts and a national corporate
sponsorship on "Worship on Pax" telecasts. The Company also receives advertising
and promotional rights. The total cost for these sponsorship and advertising
rights is $1,025,000, payable quarterly in cash or, at the Company's option, in
shares of the Company's common stock having a fair market value equal to the
required payment. The Company is also obligated to issue additional shares of
common stock for each new member generated for Crosswalk.com as a result of
these sponsorship and advertising arrangements, based on a valuation of $1.00
for each member generated. The Agreement is renewable for an additional one-year
term upon the agreement of the parties. If the agreement is renewed, the
Company's payment obligation will increase to $1,127,500. In February 2000 and
April 2000, respectively, 39,018 and 46,196 shares of Crosswalk common stock
were issued for services rendered under this Agreement.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None to report.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) On Wednesday, May 3, 2000, the Company held its Annual Meeting of
Stockholders. Proxies for the meeting were solicited pursuant to Regulation 14A
under the Exchange Act.
(b) The Company's shareholders of record, as of the close of business on March
17, 2000, approved the election of the following individuals to the Company's
Board of Directors, all of whom served as directors of the Company on the date
of the meeting and made up the entire Board of Directors. Each director will
hold office until the annual meeting of stockholders in the year 2001 or until
his successor is duly elected and qualified:
James G. Buick
William M. Parker
Stephen M. Wike
Dane B. West
Robert C. Varney, Ph.D.
Bruce E. Edgington
Clay T. Whitehead
Earl E. Gjelde
W.R. 'Max' Carey
(c) The results of the vote on the election of nominees to the Company's Board
of Directors was 6,970,011 shares for all members with 200,366 shares
withholding, and there were 466,744 Broker non-votes. Thus by plurality of the
votes cast, the Board stands elected.
The second matter voted upon was an amendment to the 1998 Stock Option Plan (the
"1998 Plan") to add 400,000 shares to the 1998 Plan. The Common Stock (the
"shares") subject to the 1998 Plan that may be purchased (through the exercise
of options) shall not exceed in the aggregate 1,200,000 shares. If any stock
options granted under the 1998 Plan shall terminate, expire or be canceled as to
any shares, new stock options may thereafter be granted
15
<PAGE> 16
covering such shares. In addition, any shares purchased under this 1998 Plan
subsequently repurchased by the Company pursuant to the terms hereof may again
be granted under the 1998 Plan. The shares issued upon exercise of stock options
under the 1998 Plan may, in whole or in part, be either authorized but unissued
shares or issued shares reacquired by the Company. The 1998 Plan is administered
by the Board of Directors or by the Compensation Committee, at the directive of
the Board of Directors. The result of the election was 2,849,952 shares voting
for the proposal, 338,190 shares voted against, 29,645 shares voted to abstain
and 4,419,344 Broker non-votes. Thus by majority of the votes cast, the
amendment to the 1998 Stock Option Plan to add 400,000 shares to the 1998 Plan
was approved.
Lastly, the Stockholders approved the ratification of the selection of Ernst and
Young LLP as the Company's independent accountants. The result of the election
was 7,145,871 shares voting for the proposal, 14,535 shares voted against, 9,971
shares voted to abstain, and there were. 466,744 Broker non-votes. Thus by
majority of the votes cast, the selection of independent auditor was ratified.
(d) There were no settlements to report.
ITEM 5. OTHER INFORMATION
None to report.
ITEM 6. EXHIBITS, LIST AND REPORTS ON FORM 8-K
(a) EXHIBITS:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
11 Computation of Earnings Per Share For the Three Months ended March 31, 2000
27.1 Financial Data Schedules - For the Three Months Ended March 31, 2000
27.2 Financial Data Schedules - For the Three Months Ended March 31, 1999 restated
</TABLE>
(b) Reports on Form 8-K
None to report.
16
<PAGE> 17
SIGNATURES
In accordance with the requirements of Securities Act of 1934,
Crosswalk.com, Inc., the registrant, has caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
<TABLE>
<S> <C>
CROSSWALK.COM, INC.
May 12, 2000 By: /s/ William M. Parker
---------------------
William M. Parker
Chief Executive Officer and President
May 12, 2000 By: /s/ Gary A. Struzik
-------------------
Gary A. Struzik, Chief Financial Officer and
Secretary, Chief Accounting Officer
</TABLE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------ ----------- ----
<S> <C> <C>
11 Computation of Earnings Per Share For the Three Months ended March 31, 2000 1
27.1 Financial Data Schedule - For Three Months Ended March 31, 2000 2-4
27.2 Financial Data Schedule - For Three Months Ended March 31, 1999 restated 5
</TABLE>
17
<PAGE> 1
<TABLE>
<CAPTION>
CROSSWALK.COM, INC.
COMPUTATION OF EARNINGS PER SHARE
31-MAR-00 THREE MONTHS ENDED MARCH 31, 2000
Diluted Basic
BASIC EARNINGS PER SHARE: Net Shares Total Grant/Purch. Days Weighted Weighted
Added Shares Date Outstanding Shares Shares
----- ------ ---- ----------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Beginning balance 7,592,972 01/01/00 91 690,960,452 690,960,452
Grant/Exercise of warrants:
Assumed issued and outstanding - beginning of period 47,409 01/01/98 91 4,314,219 -
- -
Stock issued during the quarter:
Employee Compensation 706 706 01/10/00 82 57,892 57,892
Employee Compensation 656 656 01/21/00 71 46,576 46,576
Asset Purchase Agreement 5,000 5,000 02/01/00 60 300,000 300,000
Compensation for advertising 33,165 33,165 01/28/00 64 2,122,560 2,122,560
Compensation for advertising 5,853 5,853 02/17/00 44 257,532 257,532
- ---------------------------------------------------- ----------- -----------
End of period 7,638,352 698,059,231 693,745,012
Days Outstanding from Beginning of Period 91 91
- ---------------------------------------------------- ----------- -----------
7,670,981 7,623,572
Net Loss (4,185,284) (4,185,284)
- ---------------------------------------------------- ----------- -----------
Net Loss per Share: Diluted and Basic (0.55) (0.55)
==================================================== =========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 1,315,584
<SECURITIES> 1,772,582
<RECEIVABLES> 1,968,565
<ALLOWANCES> (354,048)
<INVENTORY> 0
<CURRENT-ASSETS> 5,322,748
<PP&E> 2,717,915
<DEPRECIATION> (910,416)
<TOTAL-ASSETS> 15,510,198
<CURRENT-LIABILITIES> 2,505,949
<BONDS> 0
0
0
<COMMON> 38,485,565
<OTHER-SE> 127,660
<TOTAL-LIABILITY-AND-EQUITY> 15,510,198
<SALES> 135,997
<TOTAL-REVENUES> 1,651,691
<CGS> 808,721
<TOTAL-COSTS> 3,675,573
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,777,695)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,777,695)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (1,407,589)
<NET-INCOME> (4,185,284)
<EPS-BASIC> (.55)
<EPS-DILUTED> (.55)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 6,086,280
<SECURITIES> 4,562,076
<RECEIVABLES> 875,300
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 11,695,689
<PP&E> 711,469
<DEPRECIATION> (307,496)
<TOTAL-ASSETS> 18,587,152
<CURRENT-LIABILITIES> 1,042,544
<BONDS> 0
0
0
<COMMON> 29,495,592
<OTHER-SE> 666,722
<TOTAL-LIABILITY-AND-EQUITY> 18,587,152
<SALES> 48,188
<TOTAL-REVENUES> 1,075,059
<CGS> 653,490
<TOTAL-COSTS> 1,819,257
<OTHER-EXPENSES> 2,554
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,262,787)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,262,787)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,262,787)
<EPS-BASIC> (.23)
<EPS-DILUTED> (.23)
</TABLE>
