<PAGE>
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT of 1934
For the quarterly period ended September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 000-24223
-----------------------------
Frontline Communications Corporation
-----------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 13-3950283
(State or other jurisdiction of (I.R.S. Employer)
Incorporation or organization) Identification number)
One Blue Hill Plaza
PO Box 1548
Pearl River, New York 10965
(Address of principal executive offices) (ZIP Code)
Issuer's telephone number, including area code:
(914) 623-8553
-----------------------------
Indicate by check mark whether the issuer (1) has filed all reports
required to be filed by section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding twelve 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 last 90 days.
YES _X_ NO ___
Indicate the number of shares outstanding of each of the issuer's classes
of stock, as of the latest practicable date:
Common stock $0.01 par value 3,016,480 shares
---------------------------- ----------------
Class Outstanding at September 30,1998
- --------------------------------------------------------------------------------
<PAGE>
Frontline Communications Corporation
Index
Part I. Financial Information Page Number
- ------- --------------------- -----------
Item 1
Balance Sheets. . . . . . . . . . . . . . . . . . 1
Statements of Operations (Unaudited). . . . . . . 2
Statements of Cash Flows (Unaudited). . . . . . . 4
Notes to Financial Statements . . . . . . . . . . 5
Item 2
Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . 8
Part II. Other Information
- -------- -----------------
Item 1
Legal Proceedings. . . . . . . . . . . . . . . . . 12
Item 2
Use of Proceeds . . . . . . . . . . . . . . . . . . 12
Item 6
Exhibits and Reports on Form 8-K . . . . . . . . . 12
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
- ----------
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
- ----------------------------
Frontline Communications Corporation
Balance Sheets
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
September 30, December 31,
1998 1997
------------- ------------
(Unaudited)
<S> <C> <C>
Assets
Current:
Cash and cash equivalents $ 4,268,796 $ 39,725
Accounts receivable, less allowance for doubtful accounts of
$13,477 and $16,666, respectively 11,889 10,404
Notes receivable from officers 103,895
Prepaid expenses and other current assets 41,569 8,527
Deferred registration costs -- 231,071
----------- -----------
Total current assets 4,426,149 289,727
Equipment, net 287,679 178,506
Other assets 49,062 17,967
----------- -----------
Total assets $ 4,762,890 $ 486,200
=========== ===========
Liabilities and Stockholders' Equity
Current:
Notes payable $ -- $ 329,537
Accounts payable and accrued expenses 65,838 359,174
Deferred revenue 35,692 24,385
----------- -----------
Total current liabilities 101,530 713,096
Notes payable-long term portion 168,600 218,052
----------- -----------
Total liabilities 270,130 931,148
----------- -----------
Stockholders' Equity:
Preferred stock, $.01 par value, 1,000,000 authorized, 0 issued and
outstanding -- --
Common stock, $0.01 par value, 10,000,000 shares authorized,
3,016,480 outstanding 32,480 14,080
Treasury stock, 231,520 shares, at cost (264,113) --
Additional paid-in capital 7,438,525 1,646,520
Accumulated deficit (2,709,632) (2,099,548)
Stock subscriptions receivable (4,500) (6,000)
----------- -----------
Total Stockholders' equity (deficit) 4,492,760 (444,948)
----------- -----------
$ 4,762,890 $ 486,200
=========== ===========
</TABLE>
See accompanying notes to financial statements. Page 1
<PAGE>
Frontline Communications Corporation
Statements of Operations
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
For the three months
ended September 30,
--------------------
(Unaudited)
1998 1997
----------- ----------
<S> <C> <C>
Revenues $ 123,799 $ 84,479
Cost of revenues 134,895 80,916
---------- ----------
Gross Profit (11,096) 3,563
Operating expenses:
Selling, general and administrative 302,157 350,019
---------- ----------
Loss from operations (313,253) (346,456)
Other income (expense):
Interest expense (3,738) (8,992)
Interest income 45,897 1,323
Other (847)
---------- ----------
Net Loss (271,094) (354,972)
========== ==========
Loss per share of common stock $ (.09) $ (.20)
========== ==========
Weighted average number of shares outstanding: 3,016,480 1,816,000
========== ==========
</TABLE>
See accompanying notes to financial statements. Page 2
<PAGE>
Frontline Communications Corporation
Statements of Operations
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
For the three months
ended September 30,
--------------------
(Unaudited)
1998 1997
---------- ----------
<S> <C> <C>
Revenues $ 369,972 $ 215,633
Cost of revenues 339,137 167,264
---------- ----------
Gross Profit 30,835 48,369
Operating expenses:
Selling, general and administrative 677,956 1,934,439
---------- ----------
Loss from operations (647,121) (1,886,070)
Other income (expense):
Interest expense (27,912) (16,229)
Interest income 64,949 1,323
Other (894)
---------- ----------
Net Loss (610,084) (1,901,870)
========== ==========
Loss per share of common stock $ (.27) $ (1.05)
========== ==========
Weighted average number of shares outstanding: 2,221,077 1,816,000
========== ==========
</TABLE>
See accompanying notes to financial statements. Page 3
<PAGE>
Frontline Communications Corporation
Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Nine month period
ended September 30,
(Unaudited)
1998 1997
-------------------- -------------------
<S> <C> <C>
Cash flow from operating activities:
Net loss $(610,084) $(1,901,870)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation and amortization 55,590 32,704
Allowance for doubtful accounts (3,189) 9,251
Officer salary contributed to capital -- 3,000
Stock options issued for services -- 8,000
Non-cash compensation charge -- 1,640,000
Changes in assets and liabilities:
Accounts receivable 1,704 (37,227)
Notes receivable (103,895) --
Prepaid expenses and other (33,042) (5,262)
Other assets (31,095) (16,354)
Accounts payable and accrued expenses (293,336) 204,393
Deferred revenue 11,307 26,911
---------------- -----------
Net cash used by operating activities (1,006,040) (36,454)
Cash flows from investing activities:
Acquisition of equipment (164,763) (167,705)
---------------- -----------
Net cash used by investing activities 164,763) (167,705)
Cash flows from financing activities:
Deferred registration costs -- (210,181)
Interest due on short term loans -- 10,617
Proceeds from stockholder loans -- 80,000
Collections from subscriptions receivable 1,500 --
Repayments of stockholder and bank loans (378,989) (15,266)
Purchase of treasury stock (264,113) --
Proceeds from sale of common stock and warrants 6,041,476 400,000
---------------- ------------
Net cash provided by financing activities 5,399,874 265,170
---------------- ------------
Net increase in cash and cash equivalents 4,229,071 61,011
Cash, beginning of period
39,725 2,303
---------------- -----------
Cash, end of period $ 4,268,796 $ 63,314
================ ===========
</TABLE>
See accompanying notes to financial statements Page 4
<PAGE>
Frontline Communications Corporation
Notes to Financial Statements
September 30, 1998
1. Basis of Presentation
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and the instructions to Form 10-QSB and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements.
In the opinion of management, the accompanying unaudited financial
statements include all adjustments, consisting of normal recurring accruals,
considered necessary for a fair presentation of the results for interim periods.
Operating results for the three and nine months ended September 30, 1998 are not
necessarily indicative of the results to be expected for the full year ending
December 31, 1998. For further information refer to the financial statements and
footnotes thereto contained in the Frontline Communications Corporation
Registration Statement on Form SB-2.
2. Summary of Significant Accounting Policies
Business
Frontline Communications Corporation ("Frontline" or the "Company") is an
internet service provider that provides subscribers with direct access to a wide
range of internet applications and resources including electronic mail, World
Wide Web sites, regional and local information and data services, and
electronic commerce services.
Reorganization
The financial statements include the accounts of Hobbes & Co., LLC
("Hobbes"), INET Communications Company, LLC ("INET") and Sara Girl & Co., LLC
("Sara Girl"), (collectively the "Predecessor Companies") and Frontline
Communications Corporation. As described more fully in Note 3, on May 30, 1997,
Frontline acquired the net assets of the Predecessor Companies. For accounting
purposes, the business combination has been accounted for as if the acquirer is
Hobbes. With respect to the acquisition of INET, the acquisition has been
accounted for as a combination of entities under common control in a manner
similar to a pooling of interests and reflects the combined financial position,
operating results and cash flows of Hobbes and INET as if they had been combined
for all periods presented. With respect to Sara Girl and Frontline, the business
combination has been accounted for using purchase accounting, which resulted in
the recording of a special non-cash charge of $1,230,000. This charge represents
the estimated fair market value of the Company's 820,000 shares of common stock
issued to certain founding shareholders in February 1997 for current and future
services. The Predecessor Companies were dissolved and Frontline is the
continuing legal entity. Intercompany accounts and transactions have been
eliminated.
Page 5
<PAGE>
3. Reorganization
On May 30, 1997, the Predecessor Companies were acquired by the Company by
issuing three notes aggregating $325,000 (excluding $47,137 of certain
advances). For accounting purposes Hobbes has been considered to be the
acquirer. As a result, the business combination of Hobbes and INET has been
accounted for as a combination of entities under common control in a manner
similar to a pooling of interests. The business combination with Sara Girl and
Frontline have been accounted for as purchases. The net assets and operations of
Sara Girl and Frontline are not material to the Company's financial statements,
and notes payable to the members of the Predecessor Companies were accounted for
as distributions.
4. Litigation Settlement
In June 1997, Michael Char, a former officer and director of the
Company, had disagreements with other members of management with respect to
various business matters.
In March 1998, the Company settled all disputes with Mr. Char (the
"Char Settlement"). In addition to payment of $65,000 in March,1998, the Company
made a payment to Mr. Char in the amount of $435,000 from the proceeds of the
initial public offering in exchange for all debts, notes and claims of Mr. Char,
which aggregated $240,000. The balance of $260,000 was charged against equity
for the repurchase of 231,520 shares owned by Mr. Char. Mr. Char will retain
24,480 shares, subject to a lock-up agreement with the underwriter.
5. Public Offering
In May 1998, the Company consummated a public offering of 1,840,000
shares of common stock at $4.00 per share, and 1,840,000 common stock purchase
warrants for $.10 per warrant, each exercisable at $4.80 per underlying common
share. Net proceeds to the Company after underwriter discounts and expenses were
$6,414,200.
6. Subsequent Events
Acquisition of WOWFactor, Inc.
On October 9, 1998, The Company acquired all of the issued and
outstanding capital stock of WOWFactor, Inc.("WOWFactor"), a New Jersey
corporation engaged in the business of promoting e-commerce through its web
sites primarily for women's businesses. The Company issued to the stockholders
of WOWFactor ten shares of newly created Series A Preferred Stock, which is
convertible on July 15, 1999 into Common Stock with a market value of
$1,000,000, subject to a maximum issuance of 250,000 shares. In addition, to the
extent that the Company's Common Stock has a market value on July 15, 1999 of
(i) less than $3.00 per share or (ii) greater than $3.00 per share but less than
$4.00 per share, the Company agreed to issue to the WOWFactor stockholders
options to purchase up to an aggregate of 100,000 or 50,000 shares,
respectively. The WOWFactor stockholders were granted certain "piggyback"
registration rights with respect to the shares issuable upon exercise of the
Series A Preferred Stock.
Page 6
<PAGE>
The Company also entered into a three-year employment agreement with
Margaret M. McGillin pursuant to which Ms. McGillin agreed to serve as Vice
President of Sales and Marketing for the Company.
Acquisition Of Roxy Systems, Inc., d/b/a Magic Carpet
On October 9, 1998, the Company acquired substantially all of the
assets used in the business of Roxy Systems, Inc. d/b/a Magic Carpet("Magic
Carpet") in consideration of $75,000 in cash and the assumption of approximately
$61,000 of liabilities at the time of closing. At the time of acquisition, Magic
Carpet was an internet service provider with approximately 1,000 individual and
business subscribers in Orange County, New York.
Acquisition of US Online, Inc.
Pursuant to an order of the United States Bankruptcy Court, District of
New Jersey, on October 23, 1998, the Company acquired substantially all of the
assets used in the business of US Online, Inc. ("US Online"), including a point
of presence in the Philadelphia area, and assumed two of US Online's executory
contracts for consideration of $566,000 in cash paid upon closing. At the time
of the acquisition, US Online was engaged in the business of providing internet
access, web hosting and leased communications lines to approximately 3,580
subscribers in New York, New Jersey and Pennsylvania.
The foregoing acquisitions will be accounted for as purchases and
accordingly, the results of operations of WOWFactor, Magic Carpet and US Online
will be included in the Company's consolidated financial statements as of the
respective dates of acquisition.
In connection with the above acquisitions, the Company has filed
Current Reports on Form 8-K and will amend such reports to include historical
and proforma financial information with respect to these acquisitions.
Page 7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
The statements contained herein which are not historical facts are
forward looking statements that involve risks and uncertainties, including but
not limited to, changes in market conditions, regulatory and economic factors,
increased competition, the nature of supplier and customer arrangements which
become available to the Company in the future, technological obsolescence,
unexpected technological advances and the Company's ability to successfully
integrate into its operations newly acquired businesses. The company's actual
results may differ materially from the results discussed in any forward looking
statements.
Results of Operations
The Company commenced operations in late 1995 and established four
points of presence ( "POPs") during 1996 and an additional six POPs in 1997 in
the metropolitan New York area. The Company had approximately 1,950 and 750
subscribers, respectively, at September 30, 1998 and 1997. Subsequent to
September 30, 1998, the Company added approximately 4,500 new subscribers
through acquisitions.
Three months ended September 30, 1998
Revenues for the three months ended September 30, 1998 were $123,799,
compared to $84,479 for the prior comparable period. The increase in revenue was
due to the increased subscriber base.
Cost of revenues for the three months ended September 30, 1998 was
$134,895, or approximately 108% of revenues. Cost of revenues for the three
months ended September 30, 1997 was $80,916, or approximately 96% of revenues.
The increase in cost of revenues was attributable to increased infrastructure
costs, including internet access lines, technical support personnel and
equipment, in anticipation of growth in subscriber base in subsequent periods.
Operating expenses for the three months ended September 30, 1998 were
$302,157, including $158,915 in payroll expenses. Operating expenses for the
three months ended September 30, 1997 were $350,019, including payroll expenses
of $93,508. The decrease in operating expenses was attributable to a decrease
in professional fees. Payroll increases were directly related to volume
increases in revenues.
Interest expense for the three months ended September 30, 1998 was
$3,738 or 3% of revenues, as compared to $8,992, or 11% of revenues for the
comparable period in 1997. Interest expense relates primarily to financing
the purchase of computer hardware and related equipment.
For the three months ended September 30, 1998 and 1997, the Company
incurred net losses of $271,094 and $354,972, respectively.
Nine months ended September 30, 1998
Revenues for the nine months ended September 30, 1998 were $369,972,
compared to $215,633 for the prior comparable period. The increase in revenue
was attributable to growth in the Company's customer base.
Cost of revenues for the nine months ended September 30, 1998 was
$339,137, or approximately 92% of revenues. Cost of revenues for the nine months
ended September 30, 1997 was $167,264, or approximately 78% of revenues. The
increase was attributable to infrastructure costs, including network equipment
and technical support personnel.
Page 8
<PAGE>
Operating expenses for the nine months ended September 30, 1998 were
$677,956, including $345,811 in payroll expenses. Operating expenses for the
nine months ended September 30, 1997 were $1,934,439, including a non-cash,
non-recurring charge of $1,640,000, and payroll expenses of $136,465. The
increase in operating expenses (excluding the non-recurring charge in 1997) was
attributable to payroll, rent, advertising and professional fees. Payroll
increases were directly related to volume increases in revenues. Rent increases
were due to the addition of new POPs and the establishment of larger
administrative space. Management anticipates future increases in operating
expenses for advertising, rent, payroll, depreciation and professional fees.
Interest expense for the nine months ended September 30, 1998 was
$27,912 or 8% of revenues, as compared to $16,229, or 8% of revenues for the
prior period. Interest expense relates primarily to financing the purchase of
computer hardware and related equipment.
For the nine months ended September 30, 1998 and 1997, the Company
incurred net losses of $610,084 and $1,901,870,
respectively.
Liquidity and Capital Resources
The Company's primary capital requirements will be to fund the
acquisition of subscriber bases and related internet businesses, establish
additional POPs, install network equipment at existing POPs, lease space for
consolidated POPs, engage in strategic acquisitions, and working capital,
including the salaries of executive and other personnel. To date, the Company
has financed its capital requirements through the issuance of debt and equity
securities. At September 30, 1998, the Company had working capital of
$4,324,619.
In May 1997, the Company consummated a private placement pursuant to
which it issued 200,000 shares of Common Stock and received proceeds of
$400,000. The proceeds were used primarily for the purchase of network
equipment, salaries and expenses in connection with the public offering.
Page 9
<PAGE>
In May 1997, the Company effected the reorganization, pursuant to which
it issued promissory notes in the amounts of $141,800, $66,800, and $163,537
respectively, to Messrs. Feinberg and Cole-Hatchard, officers and Directors of
the Company, and Mr. Char, a former officer and Director. Included in such
indebtedness is $21,737 and $35,000, respectively, of advances made to the
Company by Messrs. Char and Cole-Hatchard to establish additional POPs. The
promissory notes were issued to Messrs. Feinberg, Char and Cole-Hatchard in
partial consideration of their effort in founding the Predecessor Companies.
In August 1997, the Company borrowed $60,000 from Mr. Cole-Hatchard
bearing interest at the rate of 9.25% per annum. The Company repaid $30,000 of
such indebtedness in December 1997. The balance was repaid in May, 1998,
directly to Mr. Cole-Hatchard's lender, Provident Savings Bank.
In December 1997, the Company consummated a private placement pursuant
to which it issued (i) $150,000 principal amount of promissory notes and (ii)
warrants to purchase 300,000 shares of Common Stock at an exercise price of
$5.00 per share. The notes bear interest at the rate of 9% per annum and were
repaid in May, 1998.
In March 1998, the Company entered into a settlement agreement with Mr.
Char pursuant to which Mr. Char discontinued a lawsuit and released the Company
from all claims (including for monies owed) in consideration of (i) an up-front
payment of $65,000 and (ii) a payment of $435,000 in May 1998, to satisfy an
aggregate of $240,000 of existing obligations due to Mr. Char (including $15,000
of legal fees), which has been expensed in the quarter ending June 30, 1998, and
(iii) the repurchase of 231,520 shares from Mr. Char for $260,000, which has
been recorded as a charge to stockholders' equity.
In May 1998, the Company repaid $20,000 of indebtedness to each of
Messrs. Cole-Hatchard and Feinberg. The balance of the indebtedness owed to
Messrs. Cole-Hatchard and Feinberg of $46,800 and $121,800, respectively
(aggregating $168,600) bears interest at the rate of 8% per annum and is
repayable at such time as the Company achieves $1.9 million in pre-tax earnings,
but in no event sooner than May, 2000.
In March 1998, the Company borrowed a total of $65,000 from Provident
Savings Bank. The loan bears interest at the rate of 9% per annum and was repaid
in May 1998.
In May 1998, the Company received net proceeds of $6,414,200 pursuant
to a public offering of its securities.
In August 1998, Mr. Cole-Hatchard borrowed a total of $46,800 from the
Company evidenced by a demand promissory note bearing interest at the rate of 8%
per annum.
In September 1998, Mr. Feinberg borrowed $55,000 from the Company
evidenced by a demand promissory note bearing interest at the rate of 8% per
annum. In addition, in October 1998, Mr. Feinberg borrowed an additional $43,000
on the same terms and conditions.
The capital requirements relating to implementation of the Company's
business plan will be significant. The Company will seek to expand its operation
through internal growth and acquisitions, which will require the Company to
purchase computer equipment, establish additional POPs and upgrade its existing
POPs, and hire additional technical and support personnel. Other than as
described above, the Company has no material commitments for capital
expenditures.
Page 10
<PAGE>
Based on currently proposed plans and assumptions relating to the
implementation of its business plans, the Company believes that its cash
resources will be sufficient to satisfy its contemplated requirements for the
reasonably foreseeable future. There can be no assurance that the Company's cash
resources will be sufficient to permit the Company to implement its proposed
business plans or that any assumptions relating to the implementation of such
plans will prove to be accurate.
Year 2000
The Company utilizes software and related technologies throughout its
business that will be affected by the date change in year 2000. System
modifications or replacements are underway or planned which should make all
significant computer systems at the Company compliant with the year 2000
requirement. Anticipated spending for these modifications will be expensed as
incurred and are not expected to have a material impact on the Company's ongoing
results of operations. The Company has not yet determined whether its principal
suppliers are Year 2000 compliant. Failure by such suppliers to become Year 2000
compliant could have an adverse impact on the Company.
Page 11
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
- -------------------------
In March 1998, the Company entered into the Char settlement. In May
1998, the Company paid $435,000 to Mr. Char to retire indebtedness and
repurchase 231,520 shares of common stock (the "stock repurchase").
Item 2. Use of Proceeds
- -----------------------
In May, 1998, the Company consummated an initial public offering of
1,840,000 shares of common stock and warrants to purchase 1,840,000 shares of
common stock (including 240,000 shares and 240,000 warrants issued pursuant to
the exercise of an over-allotment option) and received net proceeds of
$6,414,200, after payment of underwriting discounts and commissions, fees, and
offering expenses of $1,129,800. Since May 19, 1998, (the date of the closing of
the initial public offering) through September 30, 1998, the company used
$59,642 of the net proceeds for acquisitions, $97,456 for additional POP's;
$80,086 for marketing and advertising; $700,765 for working capital; $260,000
for the stock repurchase; and $482,444 for the repayment of indebtedness
(including $185,848 to affiliates).
Item 6. Exhibits and Reports on Form 8-K
- ----------------------------------------
a. Exhibit 27
b. No reports on Form 8-K were filed during the three months ended
September 30, 1998.
Page 12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this Report to be signed in its behalf by the
undersigned, thereunto duly authorized.
FRONTLINE COMMUNICATIONS CORPORATION
By: /S/ Samuel Gilner November 12,1998
--------------------------------------------
Samuel Gilner Date
Vice President (Chief Accounting Officer)
Page 13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-QSB
AT SEPTEMBER 30, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENT.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 4,268,796
<SECURITIES> 0
<RECEIVABLES> 115,784
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,426,149
<PP&E> 397,791
<DEPRECIATION> 110,112
<TOTAL-ASSETS> 4,726,890
<CURRENT-LIABILITIES> 101,530
<BONDS> 0
0
0
<COMMON> 32,480
<OTHER-SE> 4,460,280
<TOTAL-LIABILITY-AND-EQUITY> 4,726,890
<SALES> 0
<TOTAL-REVENUES> 369,972
<CGS> 353,810
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 663,283
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 27,912
<INCOME-PRETAX> (610,084)
<INCOME-TAX> 0
<INCOME-CONTINUING> (610,084)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (610,084)
<EPS-PRIMARY> (.27)
<EPS-DILUTED> (.27)
</TABLE>
