SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-QSB
QUARTERLY REPORT
UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
COMMISSION FILE NUMBER 0-23251
------------------------
SFORZA ENTERPRISES INC.
(Exact name of small business issuer as specified in its charter)
FLORIDA 65-0705377
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
222 CLEMATIS STREET, SUITE 202 33401
WEST PALM BEACH, FLORIDA (Zip Code)
(Address of principal executive offices)
Issuer's telephone number, including area code: (561) 366-0027
------------------------
Check 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 12 months (or for such
shorter period that the registrant was required
to file such reports), and (2) has been subject
to such filing requirements for the past 90
days.
Yes __X__ No _____
As of September 30, 1998, 1,710,000 shares of
the issuer's Common Stock, $.01 par value, were
outstanding.
<PAGE>
SFORZA ENTERPRISES INC.
INDEX
<TABLE>
<CAPTION>
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Consolidated Balance Sheet 1
Consolidated Statements of Operations 2
Consolidated Statements of Cash Flows 3
Notes to Interim Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis or Plan of Operation 5 - 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 9
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SFORZA ENTERPRISES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
September 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Current assets:
Cash & cash equivalents $ 251,408
Inventories 60,809
Other current assets 122,521
Due from related party 21,417
------------
Total current assets 456,155
Investment in unconsolidated affiliates 2,805,869
Property plant & equipment 942,262
Other assets, net 36,905
------------
Total assets $ 4,241,191
============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 44,011
Accrued expenses 210,138
Current portion of long term debt 5,629
Current portion of obligations under capital leases 21,325
------------
Total current liabilities 281,103
Obligations under capital leases - net 26,399
------------
Total liabilities 307,502
------------
Shareholders' equity:
Common stock, $.01 par value 17,100
Additional paid in capital 5,097,064
Retained earnings (1,180,475)
------------
Total shareholders' equity 3,933,689
------------
Total liabilities & shareholders' equity $ 4,241,191
============
</TABLE>
See notes to interim consolidated financial statements.
1
<PAGE>
SFORZA ENTERPRISES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------------------- ------------------------------------
September September September September
30, 1998 30, 1997 30, 1998 30, 1997
------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
Net sales $ 739,940 $ 759,224 $ 2,879,549 $ 3,439,127
------------ ----------- ------------ -----------
Cost and expenses:
Cost of sales 393,920 449,193 1,434,587 1,973,898
Operating expenses 579,551 481,014 1,738,688 1,610,793
Interest expense, net 6,726 6,373 8,881 30,873
------------ ----------- ------------ -----------
Total cost & expenses 980,197 936,580 3,182,156 3,615,564
------------ ----------- ------------ -----------
Loss before other income
(expense) (240,257) (177,356) (302,607) (176,437)
Other income (expense):
Other income (12,611) (9,596) 16,085 (9,509)
Compensatory earnings
charge for stock
options granted - (206,250) - (206,250)
Equity in losses of
unconsolidated
affiliates (188,692) - (173,821) -
------------ ----------- ------------ -----------
Loss before
provision for
income taxes (441,560) (393,202) (460,343) (392,196)
Income tax benefit - (60,300) - (60,000)
------------ ----------- ------------ -----------
Net loss $ (441,560) $ (332,902) $ (460,343) $ (332,196)
============ =========== ============ ===========
Basic earnings (net
loss) per common share $(0.26) $(0.33) $(0.27) $(0.32)
Weighted average common
shares outstanding 1,710,000 1,008,859 1,710,000 1,034,544
</TABLE>
See notes to interim consolidated financial statements.
2
<PAGE>
SFORZA ENTERPRISES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (460,343) $ (332,196)
Adjustments to reconcile net loss to net cash
used in operating activities:
Equity in losses of unconsolidated affiliates 173,821 -
Depreciation and amortization 157,713 99,492
Compensatory earnings charge for stock
options granted - 206,250
Increase in accounts receivable - (11,487)
(Increase) decrease in inventories 9,353 (20,265)
(Increase) decrease in other current assets 40,326 (115,899)
Increase (decrease) in accounts payable (150,857) 131,209
Increase in accrued expenses 37,180 (1,784)
Decrease in unearned revenue - (61,759)
Decrease in income taxes payable - (15,387)
---------- -----------
Net cash used in operating activities (192,807) (121,826)
---------- -----------
Cash flows from investing activities:
Purchases of property and equipment (83,383) (499,075)
Advances to related party (21,417) -
Increase in other assets (3,142) (4,846)
---------- -----------
Net cash used in investing activities (107,942) (503,921)
---------- -----------
Cash flows from financing activities:
Proceeds from issuance of common stock - 156,250
Proceeds from issuance of preferred stock - 400,000
Other debt issuance proceeds - 133,250
Repayment of due to shareholders - (62,104)
Repayment of notes payable, shareholders - (99,103)
Principal payments on long-term debt (22,189) (19,863)
Principal payments on obligations under
capital leases (16,923) (14,225)
---------- -----------
Net cash provided by (used in) financing activities (39,112) 494,205
---------- -----------
Net decrease in cash and cash equivalents (339,861) (131,542)
Cash and cash equivalents, beginning of period 591,269 202,639
---------- -----------
Cash and cash equivalents, end of period $ 251,408 $ 71,097
========== ===========
Total interest paid during the period $ 8,882 $ 18,260
========== ===========
Total income taxes paid during the period $ - $ 15,387
========== ===========
</TABLE>
See notes to interim consolidated financial statements.
3
<PAGE>
SFORZA ENTERPRISES INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Basis of Presentation
- ---------------------
The consolidated statements as of September 30, 1998 and for the nine months
ended September 30, 1998 and 1997 are unaudited; however, in the opinion of
management, all adjustments (consisting of normal recurring adjustments)
necessary for a fair presentation of the consolidated financial statements for
these interim periods have been included. The results of the interim period
ended September 30, 1998 are not necessarily indicative of the results to be
obtained for the full fiscal year ending December 31, 1998.
Investments in Unconsolidated Affiliates
- ----------------------------------------
On December 30, 1997, the Company acquired 51% limited partnership interests in
each of four limited partnerships for an aggregate of $3,000,000. Each of the
limited partnerships operates or is planned to operate Max's Grille Restaurants
at a separate location. The business of the limited partnerships is governed by
identical limited partnership agreements which vest overall management and
control of the limited partnerships to Unique Restaurant Concepts, Inc. (URCI)
through management agreements with URCI executed by each of the limited
partnerships. The Company accounts for the investments in the limited
partnerships using the equity method.
Income Taxes
- ------------
No income tax benefit is recognized in the statement of operations for the nine
months ended September 30, 1998 for the Company's operating losses due to its
brief operating history. Management intends to recognize the loss carryforwards
when they are realized or it determines that it is more likely than not that
such loss carryforwards will be realized.
Earnings (Net Loss) per Common Share
- ------------------------------------
Earnings (net loss) per common share is computed in accordance with Financial
Accounting Standards Board Statement 128 (FAS 128) for all periods. All prior
period data have been restated to conform with the provisions of FAS 128. Basic
earnings (net loss) per common share excludes dilution and is computed by
dividing income available to common shareholders by the weighted average number
of common shares outstanding for the period.
Diluted earnings per share reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that then shared
in the Company's earnings. The effect of potentially dilutive securities
outstanding during the nine months ended September 30, 1998 and 1997 is
anti-dilutive. Therefore, diluted earnings per share are not presented for such
periods. Securities that could potentially dilute basic earnings per share in
future periods include outstanding options to purchase 75,000 shares at $5.00
per share, options to purchase 65,000 shares at $11.63 per share, and warrants
to purchase 650,000 shares at $9.50 per share.
4
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
CERTAIN STATEMENTS IN THIS FORM 10-QSB UNDER ITEM 2, "MANAGEMENT'S DISCUSSION
AND ANALYSIS OR PLAN OF OPERATION", WHICH ARE NOT HISTORICAL FACTS CONSTITUTE
"FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995 AND ARE INTENDED TO BE COVERED BY THE SAFE HARBORS
CREATED THEREBY. FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS,
UNCERTAINTIES, AND OTHER FACTORS WHICH MAY CAUSE THE ACTUAL RESULTS,
PERFORMANCE, OR ACHIEVEMENTS OF SFORZA ENTERPRISES INC. AND ITS SUBSIDIARIES TO
BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE, OR ACHIEVEMENTS
EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. SUCH RISKS,
UNCERTAINTIES, AND OTHER FACTORS INCLUDE, BUT ARE NOT NECESSARILY LIMITED TO,
THE FOLLOWING: CHANGES IN GENERAL ECONOMIC CONDITIONS WHICH AFFECT CONSUMER
SPENDING PATTERNS FOR RESTAURANT DINING OCCASIONS; INCREASING COMPETITION IN THE
UPSCALE CASUAL DINING SEGMENT OF THE RESTAURANT INDUSTRY; ADVERSE WEATHER
CONDITIONS WHICH CAUSE THE TEMPORARY UNDERUTILIZATION OF OUTDOOR PATIO SEATING
AVAILABLE AT SEVERAL OF THE COMPANY'S RESTAURANTS; EVENTS WHICH INCREASE THE
COST TO DEVELOP AND/OR DELAY THE DEVELOPMENT AND OPENING OF NEW RESTAURANTS;
CHANGES IN THE AVAILABILITY AND/OR COST OF RAW MATERIALS, LABOR, AND OTHER
RESOURCES NECESSARY TO OPERATE THE COMPANY'S RESTAURANTS; THE SUCCESS OF
OPERATING INITIATIVES; DEPTH OF MANAGEMENT; ADVERSE PUBLICITY; TECHNOLOGICAL
DIFFICULTIES ASSOCIATED WITH THE COMPANY'S MANAGEMENT INFORMATION SYSTEMS; THE
RATE OF GROWTH OF GENERAL AND ADMINISTRATIVE EXPENSES ASSOCIATED WITH BUILDING A
STRENGTHENED CORPORATE INFRASTRUCTURE TO SUPPORT THE COMPANY'S EXPANDED
RESTAURANT OPERATIONS; THE AVAILABILITY, AMOUNT, TYPE, AND COST OF CAPITAL FOR
THE COMPANY AND THE DEPLOYMENT OF SUCH CAPITAL; CHANGES IN, OR ANY FAILURE TO
COMPLY WITH, GOVERNMENTAL REGULATIONS; THE REVALUATION OF ANY OF THE COMPANY'S
ASSETS; THE AMOUNT OF, AND ANY CHANGES TO, TAX RATES; AND OTHER FACTORS
REFERENCED IN THIS FORM 10-QSB AND THE COMPANY'S FORM 10-QSB FOR THE FISCAL YEAR
ENDED DECEMBER 31, 1997.
GENERAL COMMENTS
As of September 30, 1998, the Company owns and operates two restaurants which
are owned 100% and four additional restaurants which are 51% owned. Of the four
restaurants that are 51% owned, two are open and two are in development. Of the
two restaurants in development, one is scheduled to open in the current year and
one is intended to open in 1999.
The restaurants currently open are:
<TABLE>
<CAPTION>
Restaurant Location Date Opened
- ---------- -------- -----------
<S> <C> <C>
Sforza's Ristorante West Palm Beach, FL February, 1996
My Martini Grille West Palm Beach, FL February, 1997
Max's Beach Place Fort Lauderdale, FL April 29, 1997
Max's Grille @ Las Olas Riverfront Fort Lauderdale, FL June 17, 1998
Max's Grille Weston, FL October 10, 1998
</TABLE>
The restaurants currently in development are:
<TABLE>
<CAPTION>
Restaurant Location Scheduled Opening
- ---------- -------- -----------------
<S> <C> <C>
TBA TBA 1999
</TABLE>
Each restaurant is an upscale, high volume, casual dining operation.
The Company's revenue consists primarily of sales from its West Palm Beach
restaurants. The Company's costs and expenses relate to restaurant sales (cost
of food, beverages and supplies), the management to run the operations and
overhead (operating expenses including labor and occupancy, general and
administrative expenses, depreciation and amortization expenses, and preopening
amortization expense).
5
<PAGE>
EQUITY METHOD OF ACCOUNTING
The Company has 51% limited partnership interests in each of four limited
partnerships which operate or plan to operate Max's Grille restaurants at
separate locations. Because the Company does not exercise control over the
limited partnerships, the Company's investments are accounted for using the
equity method of accounting. As a result, the revenue and expenses of these
restaurants are not incorporated into the consolidated revenue and expenses for
Sforza Enterprises Inc. Instead, 51% of the profit or losses from the limited
partnerships is recognized in results of operations as "equity in losses of
unconsolidated affiliates."
RESULTS OF OPERATIONS
The following table presents, for the periods indicated, the Consolidated
Statements of Operations of the Company expressed as percentages of total
revenue. The results of operations for the nine months ended September 30, 1998
are not necessarily indicative of the results to be expected for the year ending
December 31, 1998.
Comparative Operational Percentages
Stated as a Percentage of Total Revenue
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------------------- --------------------------------
September September September September
30, 1998 30, 1997 30, 1998 30, 1997
----------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales 100.0 % 100.0 % 100.0 % 100.0 %
------ ------ ------ ------
Cost & expenses:
Cost of sales 53.2 % 59.2 % 49.8 % 57.4 %
Operating expenses 78.2 % 63.3 % 60.4 % 46.8 %
Interest expense, net 0.9 % 0.8 % 0.3 % 0.9 %
------ ------ ------ ------
Total cost &
expenses 132.4 % 123.3 % 110.5 % 105.1 %
------ ------ ------ ------
Loss before
other income
(expense) (32.4)% (23.3)% (10.5)% (5.1)%
Other income (expense):
Other income (1.7)% (1.3)% (0.6)% (0.3)%
Compensatory earnings
charge for stock
options granted - % (27.1)% - % (6.0)%
Equity in losses of
unconsolidated
affiliates (25.5)% - % (6.0)% - %
------ ------ ------ ------
Loss before income
tax benefit (59.2)% (51.7)% (15.9)% (11.4)%
Income tax benefit - % (7.9)% - % (1.7)%
------ ------ ------ ------
Net loss (59.2)% (43.8)% (15.9)% (9.7)%
====== ====== ====== ======
</TABLE>
6
<PAGE>
SEASONALITY
The operating restaurants are located in the coastal communities of southeast
Florida. As a result, seasonality has an impact on revenue and subsequently the
quarterly profitability. High season generally runs from mid-November through
April. In the third quarter, revenue has historically equaled 20% of the total
annual revenue.
NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1997
REVENUE
For the nine months ended September 30, 1998, the Company's net sales decreased
16.3% to $2,879,549. The sales decrease is the result of increased competition
in the West Palm Beach area resulting from the continued development of the
Clematis Street area.
COST OF SALES
During the nine months ended September 30, 1998, cost of sales was $1,434,587
versus $1,973,898 for the comparable prior period. The related decrease of
$539,311 is primarily attributable to the decrease in sales volume. Cost of
sales, as a percentage of net sales, improved to 49.8% for the nine months ended
September 30, 1998 from 57.4% for the comparable period in 1997. This
improvement is due to the menu redesign and increased management control. The
menu at the Company's restaurants is a diverse menu and is not overly dependent
on a single commodity. The Company's food production principles dictate that all
items be prepared from the highest quality, fresh food. As a result, the Company
is more dependent upon spot market prices as opposed to longer-term commodity
pricing.
With respect to newly opened restaurants, these costs will typically be higher
than normal during the first 90-120 days of operations until the restaurant
staffs become more accustomed to optimally managing and servicing the high sales
volumes typically experienced by the Company's restaurants.
OPERATING EXPENSES
Operating expenses include occupancy expenses, advertising, repairs and
maintenance, general supplies, depreciation and amortization of property and
equipment, and amortization of start-up costs. Operating expenses increased by
17.9% from $1,610,793 for the nine months ended September 30, 1997 to $1,738,688
for the nine months ended September 30, 1998. This increase is primarily due to
costs associated with developing the Company's corporate infrastructure.
As a result of the highly customized and operationally complex nature of the
Company's restaurants, the restaurant preopening process is extensive and costly
relative to that of most chain restaurant operations. Start-up costs, which
often exceed $200,000 per restaurant, include recruiting, training, relocation
and related costs for developing management and hourly staff for new
restaurants, as well as other costs directly related to the opening of new
restaurants. Such costs will vary from location to location depending on a
number of factors including, among others, the proximity of other established
Company restaurants, the size and layout of each location, and the relative
difficulty of the restaurant staffing and training process. As is currently the
practice for many upscale, highly customized and "theme" restaurant entities,
the Company defers its restaurant start-up costs and then amortizes the costs
over a 12-month period immediately following the opening of the respective
restaurant. Total restaurant preopening amortization will vary from quarter to
quarter depending on the timing of restaurant openings. Currently, the Company
is evaluating its restaurant
7
<PAGE>
OPERATING EXPENSES, CONTINUED
preopening process with the objective of reducing its timeframe, intensiveness,
and overall cost. However, there can be no assurance that preopening costs will
be minimized for future restaurants.
A new accounting standard was recently adopted by the American Institute of
Certified Public Accountants which will require a change in the Company's
accounting for preopening costs to an expense-as-incurred basis. The
pronouncement is required to be implemented by the Company in 1999; however, the
Company is considering whether to adopt, during the fourth quarter of 1998, the
provisions of this pronouncement. The Company's implementation of a new
accounting principle in this respect would require the recognition of the
cumulative effect of the change in accounting principle as a one-time charge
against earnings, net of any related income tax effect, retroactive to the
beginning of the fiscal year of adoption.
EQUITY IN LOSSES OF UNCONSOLIDATED AFFILIATES
On December 30, 1997, the Company consummated the acquisition of 51% of the
equity interests in each of four limited partnerships for an aggregate payment
of $3,000,000 pursuant to a partnership interest subscription agreement. Each of
the limited partnerships operates or is planned to operate a Max's Grill
Restaurant at separate locations. The investments in the limited partnerships
are accounted for under the equity method of accounting. Summarized total
combined balance sheet and combined results of operations information for the
limited partnerships including the 49% portion not owned by the Company as of
September 30, 1998 and for the nine months then ended follows:
<TABLE>
<CAPTION>
Combined Balance Sheet Information (Unaudited)
<S> <C>
Assets:
Current assets $ 1,277,933
Property and equipment, net 2,023,641
Other assets 108,290
--------------
Total assets $ 3,409,864
==============
Liabilities and equity:
Current liabilities $ 1,021,495
Partners' equity 2,388,369
--------------
Total liabilities and equity $ 3,409,864
==============
Combined Results of Operations Information (Unaudited)
Net sales $ 3,460,185
--------------
Cost and expenses:
Cost of sales 1,803,412
Operating expenses 1,992,417
Interest expense 30,023
--------------
Totals cost and expenses` 3,825,852
--------------
Loss before other income (365,667)
Other income 24,841
--------------
Net loss $ (340,826)
==============
</TABLE>
8
<PAGE>
EQUITY IN LOSSES OF UNCONSOLIDATED AFFILIATES, CONTINUED
During the nine months ended September 30, 1998, Max's Beach Place operated for
the entire period while Max's Grille @ Los Olas Riverfront opened in June 1998.
The partnerships' combined net loss for the nine months ended September 30, 1998
includes $173,400 of start-up cost amortization. The Company's proportionate
share of the net loss for the nine months ended September 30, 1998, totaling
$173,821, is reflected in the Company's results of operations as equity in
losses of unconsolidated affiliates.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operating restaurants are located in West Palm Beach, Florida and
are therefore subject to the seasonality of the tourist industry in South
Florida. Restaurant sales are expected to be brisk in the tourist season which
is generally from mid-fall to mid-spring and slower during the off-season. The
Company expects to use its cash reserves or working capital generated during its
busy season, as needed, to fund its operations during the off-season.
The Company's principal financing for the construction and opening of its
restaurants through September 30, 1998, was provided by its shareholders. The
Company does not have an existing arrangement for a credit facility with a
financial institution for short term financing. Management believes that cash
flow expected to be generated from operations, together with the remaining
proceeds from the initial public offering in 1997 will be sufficient to meet the
Company's working capital requirements and anticipated capital expenditures
through 1999.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K. None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SFORZA ENTERPRISES INC.
Date: November 14, 1998
By:/s/
-----------------------------
Dennis Max
PRESIDENT
By:/s/
-----------------------------
Jay Visconti
CHIEF FINANCIAL OFFICER
9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's unaudited consolidated financial statements for the nine months ended
September 30, 1998 and is qualified in its entirety by reference to such
financial statements and related matter, thereto as set forth in the Company's
filing on Form 10-QSB.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 251,408
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 60,809
<CURRENT-ASSETS> 456,155
<PP&E> 1,232,306
<DEPRECIATION> 290,044
<TOTAL-ASSETS> 4,241,191
<CURRENT-LIABILITIES> 281,103
<BONDS> 26,399
0
0
<COMMON> 17,100
<OTHER-SE> 3,916,589
<TOTAL-LIABILITY-AND-EQUITY> 4,241,191
<SALES> 2,879,549
<TOTAL-REVENUES> 2,879,549
<CGS> 1,434,587
<TOTAL-COSTS> 1,434,587
<OTHER-EXPENSES> 1,738,688
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,881
<INCOME-PRETAX> (460,343)
<INCOME-TAX> 0
<INCOME-CONTINUING> (460,343)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (460,343)
<EPS-PRIMARY> (.27)
<EPS-DILUTED> (.27)
</TABLE>
