<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[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 THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to ___________
COMMISSION FILE NUMBER 0-10966
NATIONAL TRANSACTION NETWORK, INC.
----------------------------------
(Exact name of registrant as specified in its charter)
Delaware No. 75-1535237
-------- --------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
117 Flanders Road
Westborough, Massachusetts 01581
-------------------------- -----
(Address of principal executive offices) (Zip Code)
(508) 870-3200
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (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
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: Common Stock, $.15
par value per share, outstanding as of November 9, 1998: 3,325,468 shares.
<PAGE> 2
NATIONAL TRANSACTION NETWORK, INC.
<TABLE>
<CAPTION>
PAGE
----
PART I FINANCIAL INFORMATION
<S> <C> <C>
Item 1 Financial Statements
Balance Sheets
September 30, 1998 and December 31, 1997 3
Statements of Operations
Three months ended September 30, 1998 and 1997 5
Nine months ended September 30, 1998 and 1997 6
Statements of Cash Flows
Nine months ended September 30, 1998 and 1997 7
Notes to Financial Statements 8
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II OTHER INFORMATION 14
SIGNATURES 15
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL STATEMENTS
ITEM I. FINANCIAL STATEMENTS
- ---------------------------------------------------
NATIONAL TRANSACTION NETWORK, INC.
BALANCE SHEETS
ASSETS
----------------------
<TABLE>
<CAPTION>
(Unaudited)
September 30, December 31,
1998 1997
---------- ----------
<S> <C> <C>
CURRENT ASSETS:
Cash and equivalents $304,753 $457,857
Accounts receivable
(Net of allowance for doubtful accounts
of $40,000 at September 30, 1998
and December 31, 1997) 631,468 785,597
Inventory 164,458 754,919
Prepaid expenses 39,905 50,482
---------- ----------
TOTAL CURRENT ASSETS 1,140,584 2,048,855
---------- ----------
PROPERTY AND EQUIPMENT 912,408 1,002,003
Less accumulated depreciation
and amortization (768,366) (712,981)
---------- ----------
PROPERTY AND
EQUIPMENT - NET 144,042 289,022
---------- ----------
OTHER ASSETS
Capitalized software development costs 43,120 286,228
Purchased technology, net 271,603 -
Deposits and other 16,363 14,663
---------- ----------
Total other assets 331,086 300,891
---------- ----------
TOTAL $1,615,712 $2,638,768
========== ==========
</TABLE>
See Notes to Financial Statements.
3
<PAGE> 4
NATIONAL TRANSACTION NETWORK, INC.
BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
-------------------------------------------------
<TABLE>
<CAPTION>
(Unaudited)
September 30, December 31,
1998 1997
---------- ----------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $130,135 $265,708
Accounts payable-stockholder 271,981 318,858
Accrued liabilities 552,649 223,457
Deferred revenue 280,720 49,067
Short term portion of capital lease 3,997 36,598
---------- ----------
TOTAL CURRENT LIABILITIES 1,239,482 893,688
---------- ----------
LONG TERM LIABILITIES:
Long term portion of capital lease - 24,384
Convertible notes payable to stockholder 1,642,687 1,524,208
---------- ----------
TOTAL LONG TERM LIABILITIES 1,642,687 1,548,592
---------- ----------
STOCKHOLDERS' EQUITY (DEFICIENCY):
Preferred stock, $.10 par value;
authorized, 5,000,000 shares;
none issued and outstanding
Common stock, $.15 par value;
authorized, 20,000,000 shares;
issued and outstanding, 3,325,438
and 3,248,606 shares at Sept. 30, 1998
and December 31, 1997, respectively 498,827 490,974
Additional paid-in capital 12,609,215 12,596,573
Accumulated deficit (14,374,499) (12,891,059)
---------- ----------
TOTAL STOCKHOLDERS'
EQUITY (DEFICIENCY) (1,266,457) 196,488
---------- ----------
TOTAL $1,615,712 $2,638,768
========== ==========
</TABLE>
See Notes to Financial Statements.
4
<PAGE> 5
NATIONAL TRANSACTION NETWORK, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
----------------------------------
1998 1997
---------- ----------
<S> <C> <C>
REVENUE:
Systems and equipment $858,830 $795,117
Software and services 518,195 603,030
---------- ----------
Total 1,377,025 1,398,147
---------- ----------
COST AND EXPENSES:
Cost of revenue 917,944 855,142
Research and development 286,477 201,452
Selling, general and administrative 446,119 412,787
Impairment of capitalized software asset 669,919 -
---------- ----------
Total 2,320,459 1,469,381
---------- ----------
LOSS FROM OPERATIONS (943,434) (71,234)
---------- ----------
OTHER INCOME (EXPENSE):
Interest income 34 22
Interest expense (39,569) (7,441)
---------- ----------
Total (39,535) (7,419)
---------- ----------
NET LOSS ($982,969) ($78,653)
========== ==========
BASIC AND DILUTED NET
LOSS PER COMMON SHARE ($0.30) ($0.02)
========== ==========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 3,325,438 3,250,671
========== ==========
</TABLE>
See Notes to Financial Statements.
5
<PAGE> 6
NATIONAL TRANSACTION NETWORK, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------------------
1998 1997
---------- ----------
<S> <C> <C>
REVENUE:
Systems and equipment $2,214,307 $1,759,457
Software and services 1,832,199 1,801,256
---------- ----------
Total 4,046,506 3,560,713
---------- ----------
COST AND EXPENSES:
Cost of revenue 2,469,163 1,941,621
Research and development 799,572 722,336
Selling, general and administrative 1,470,927 1,339,740
Impairment of capitalized software asset 669,919 -
---------- ----------
Total 5,409,581 4,003,697
---------- ----------
LOSS FROM OPERATIONS (1,363,075) (442,984)
---------- ----------
OTHER INCOME (EXPENSE):
Interest income 100 1,801
Interest expense (120,465) (12,034)
---------- ----------
Total (120,365) (10,233)
---------- ----------
NET LOSS ($1,483,440) ($453,217)
========== ==========
BASIC AND DILUTED NET
LOSS PER COMMON SHARE ($0.45) ($0.14)
========== ==========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 3,308,107 3,249,302
========== ==========
</TABLE>
See Notes to Financial Statements.
6
<PAGE> 7
NATIONAL TRANSACTION NETWORK, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------------------
1998 1997
---------- ----------
<S> <C> <C>
Cash Flows From Operating Activities:
Net loss ($1,483,440) ($453,217)
---------- ----------
Adjustments to reconcile net loss to
net cash provided by (used for) operating activities:
Depreciation and amortization 121,164 95,545
Interest on conv. subordinated note payable to stockholder 118,479 -
Loss on sale of property and equipment 13,905 -
Impairment of capitalized software development costs 669,919 -
Increase (decrease) in cash from:
Accounts receivable 154,129 314,054
Inventory 590,461 (865,573)
Prepaid expenses 10,577 (2,634)
Other assets (1,700) (2,732)
Accounts payable-stockholder (46,877) 984,647
Accounts payable and accrued
liabilities 236,119 (40,496)
Deferred revenue 231,653 (327,554)
---------- ----------
Total adjustments 2,097,829 155,267
---------- ----------
Net cash provided by (used for) operating activities 614,389 (297,950)
---------- ----------
Cash Flows From Investing Activities:
Purchases of property and equipment (47,379) (87,406)
Proceeds from the sale of equipment 11,898 -
Acquisition of purchased technology (313,555) -
Capitalization of software development costs (426,811) (127,478)
---------- ----------
Net cash used for investing activities (775,847) (214,884)
---------- ----------
Cash Flows From Financing Activities:
Proceeds from stock issued under stock option plan 20,495 4,350
Proceed from issuance of convertible subordinated debt 400,000
Proceeds from bank line of credit 100,000 400,000
Repayment to bank line of credit (100,000) (400,000)
Repayment of capital lease (12,141) (13,642)
---------- ----------
Net cash provided by financing
activities 8,354 390,708
---------- ----------
Net decrease in cash and equivalents (153,104) (122,126)
Cash and Equivalents, Beginning of Period 457,857 266,045
---------- ----------
Cash and Equivalents, End of Period $304,753 $143,919
========== ==========
Supplemental Information:
Cash Paid for Interest $1,986 $10,751
---------- ----------
Non-Cash Transactions:
Transfer of Capital Lease in conjunction
with the sale of software license $44,844 -
Return of purchased software $42,500 -
Capital lease additions - $63,389
</TABLE>
See Notes to the Financial Statements
7
<PAGE> 8
NATIONAL TRANSACTION NETWORK, INC.
NOTES TO FINANCIAL STATEMENTS
1. The accompanying financial statements and notes do not include all of
the disclosures made in National Transaction Network, Inc.'s ("NTN" or
the "Company") Form 10-K for the year ended December 31, 1997 which
should be read in conjunction with these statements. In the opinion of
the Company, the financial statements include all adjustments necessary
for a fair presentation of the interim results.
In June 1998, International Verifact Inc., the Company's parent
company, and Checkmate Electronics, Inc. merged to form IVI Checkmate
Corp.("IVI Checkmate"), the third largest electronic payment solutions
provider in North America. IVI Checkmate acquired Plourde Computing
Services, Inc. ("Plourde"), an independent software vendor, on
September 29, 1998.
2. The results of operations for the nine month period ended September 30,
1998 are not necessarily indicative of the results to be expected for
the full year.
3. In October 1997, the Accounting Standards Executive Committee issued
Statement of Position ("SOP") 97-2, "Software Revenue Recognition." SOP
97-2 provides guidance on when revenue should be recognized and in what
amounts for licensing, selling, leasing, or other marketing computer
software. SOP 97-2 supersedes SOP 91-1, "Software Revenue Recognition,"
and was adopted by the Company for transactions entered into after
December 31, 1997. Adoption of SOP 97-2 did not have a material effect
on the Company's revenue recognition.
4. The Company adopted the provisions of Statement of Financial Accounting
Standards No. 128, "Earning per Share," and has restated all periods
presented to conform with the new presentation. Basic net loss per
common share is computed using the weighted average number of common
shares outstanding during each period. In determining the denominator
for dilutive loss per common share, no shares resulting from the
assumed exercise of options using the treasury stock method or
resulting from the conversion of the convertible subordinated notes
payable to stockholder are added to the denominator because the
inclusion of such shares would be antidilutive due to the net loss for
each of the periods presented. Accordingly, diluted loss per common
share is equal to basic loss per common share and is not separately
disclosed.
5. For the quarters ended September 30, 1998 and 1997, the Company made
inventory purchases from IVI Checkmate totaling approximately $260,000
and $1,300,000 respectively. Accrued interest for the Company's
Convertible Subordinated Notes Payable to IVI Checkmate totaled $39,292
and $118,479 for the quarter and nine months ended September 30, 1998.
8
<PAGE> 9
6. In January 1998, the Company purchased certain intellectual property,
related software maintenance contracts and tangible assets used to
support such contracts. The purchase price is based on 75% of the
revenues derived from the software maintenance contracts for the twelve
month period following the date of purchase. This purchase price is
estimated to be approximately $316,000 and is payable 30 days from the
receipt of the applicable software maintenance revenue. The final
allocation of the purchase price is contingent on this revenue and the
purchase price will be adjusted when the underlying revenues are known.
7. The Company's working capital line of credit with its bank which was to
expire on January 4, 1999 has been terminated without penalty. Future
working capital advances will be provided by IVI Checkmate.
8. The Company accounts for certain software development costs in
accordance with Statement of Financial Accounting Standards (SFAS) No.
86, "Accounting for the Costs of Computer Software to be Sold, Leased,
or Otherwise Marketed." It is the Company's policy to capitalize costs
relating to the development of its products once technological
feasibility has been achieved until the products are available for
general release to customers, provided that the recoverability of such
costs is reasonably assured through expected sales revenue less related
selling expenses. Upon availability of products for general release to
customers, all related capitalized development costs are amortized over
a suitable period based on the products' estimated economic life. Due
to IVI Checkmate's acquisition of Plourde, management has determined
that the costs capitalized for the PINnacle NT product, totaling
$669,919, are not recoverable and therefore impaired. Accordingly,
these costs were written off in the current period. The Company is
continuing to capitalize costs for its Mainsail product, which totaled
$43,120 at September 30, 1998.
9. On October 26, 1998, the Company issued a Convertible Subordinated Note
to IVI Checkmate in the amount of $200,000 according to the terms of
the August 18, 1997 Convertible Subordinated Note Purchase Agreement.
9
<PAGE> 10
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
The Company's business strategy focuses on development and marketing of
software products and professional services designed to address the electronic
payment system needs of multi-lane retailers. In keeping with this strategy, the
Company has purchased and sold technology in a effort to maximize its
opportunities in the market place.
In January 1998, the Company purchased the rights to certain software
products from BancTec USA, Inc. ("BancTec"). Also included in the purchase were
certain customer software maintenance contracts and tangible assets used to
support such contracts. The software products acquired by the Company complement
it's existing software products and services. The Mainsail software product
acquired from BancTec enables retailers to centralize processing of their check
and EFT transactions reducing the retailers' costs of handling electronic
payments by reducing their reliance on costly third party transaction
processors.
In June 1998, International Verifact Inc., the Company's parent company, and
Checkmate Electronics, Inc. merged to form IVI Checkmate Corp. ("IVI
Checkmate"), the third largest electronic payment solutions provider in North
America. IVI Checkmate acquired Plourde Computing Services, Inc. ("Plourde"), an
independent software vendor, on September 29, 1998. Plourde's flagship product
is a Windows/NT based application which has been installed and has reached
market acceptance.
Results of Operations
- ---------------------
Revenue for the quarter ended September 30, 1998 decreased by 1.5% to
$1,377,025 compared to $1,398,147 for the quarter ended September 30, 1997. The
decrease in revenue was the result of decreased software and services sales
between quarters. For the nine months ended September 30, 1998, revenue
increased by 13.6% to $4,046,506 compared to $3,560,713 for the nine months
ended September 30, 1997. The increase in revenue was primarily due to one
customer's decision to replace its lane equipment in several divisions in the
first three quarters of 1998. This customer accounted for 62.4% of revenue in
the first nine months of 1998 versus 46.9% during the same period in 1997. In
addition, maintenance revenue increased as a result of the acquisition of the
Mainsail product line.
Gross margins as a percent of revenue were 33.3% and 39.0%, respectively,
for the quarter and nine months ended September 30, 1998 compared to 38.8% and
45.5%, for the quarter and nine months ended September 30, 1997. The decreases
in gross margin percentages were primarily due to a shift in mix between
hardware, software, and professional services revenue. Lower margin hardware
revenue accounted for
10
<PAGE> 11
approximately 62% and 55%, respectively, of total revenue for the quarter and
nine months ended September 30, 1998 compared to approximately 57% and 49%,
respectively, for the quarter and nine months ended September 30, 1997.
Total operating expenses for the quarter and nine months ended September
30, 1998 increased by 128.3% and 42.6%, respectively, compared to the quarter
and nine months ended September 30, 1997. The significant component of the
increase in operating expense was the impairment of the capitalized software
development costs of the PINnacle NT product. Management has determined that the
costs capitalized for the PINnacle NT product, totaling approximately $670,000,
are not recoverable as the software was made redundant by the acquisition of
Plourde by IVI Checkmate. Accordingly, the Company will be redirecting its
marketing and development resources toward the NT platform product, developed by
Plourde mentioned above, as part of its complete payment solution with the
Mainsail switch. The Company is continuing to capitalize costs for Mainsail
development and those costs were $32,340and $43,120 for the quarter and nine
months ended September 30, 1998.
Research and development expenses totaled $286,477 for the quarter ended
September 30, 1998 compared to $201,452, for the quarter ended September 30,
1997. For the nine months ended September 30, 1998, research and development
expenses increased by 10.7% to $799,572 compared to $722,336 for the nine months
ended September 30, 1997. Increases in outside consulting expenses due to the
utilization of contract software development engineers and quality assurance
engineers and compensation and fringe benefit expense related to additional
research and development staff were primarily responsible for the increases in
research and development expenses for the quarter and nine months ended
September 30, 1998 compared to the quarter and nine months ended September 30,
1997.
Selling, general and administrative expenses increased by 8.1% to $446,119
for the quarter ended September 30, 1998 compared to $412,787 for the quarter
ended September 30, 1997. For the nine months ended September 30, 1998, selling,
general and administrative expenses increased by 9.8% to $1,470,927 compared to
$1,339,740 for the nine months ended September 30, 1997. For both the quarter
and nine months ended September 30, 1998, the increases in selling, general and
administrative expenses were due primarily to the addition of staff positions
necessitated by the acquisition of the Mainsail product from BancTec and higher
sales travel.
The decrease in interest income for the nine months ended September 30,
1998 compared to the nine months ended September 30, 1997 was due to a decrease
in the amount of funds available for investment. The increase in interest
expense for the quarter and nine months ended September 30, 1998 was primarily
due to the issuance of convertible notes payable to International Verifact Inc.,
now IVI Checkmate, during the third and fourth quarters of 1997.
11
<PAGE> 12
Liquidity and Capital Resources
- -------------------------------
Cash balances at September 30, 1998 were $304,753 compared to $457,857 at
December 31, 1997. Net cash provided by operating activities was $614,389 for
the nine months ended September 30, 1998. The adjustment resulting from the
impairment of capitalized software development costs, decreases in inventory and
account receivables coupled with increases in accrued liabilities and deferred
revenue partially offset by the net loss from operations, accounted for the cash
provided by operations during the period. Net cash used in investing activities
for the nine months ended September 30, 1998 totaled $775,847 and represented
the capitalization of certain software development costs which were discussed
above and the purchase of technology from BancTec.
Management believes that sources of liquidity for future needs can be
generated from existing cash balances, cash generated from operations, and
borrowings available to the Company under its Convertible Subordinated Note
Agreement with IVI Checkmate.
Year 2000 Readiness Disclosure Statements
- -----------------------------------------
The latest versions of the Company' PINnacle software products are designed
to be "Year 2000 Compliant." The Company defines "Year 2000 Compliant" as the
software product's ability to accurately process date and time data (including
calculating, comparing, and sequencing) from, into, and between the years 1999
and 2000 and later, including calculating date and time data for leap years. In
addition, a software product that is Year 2000 Compliant, when used in
combination with other software, hardware or firmware, will accurately process
date and time data if such other software, hardware or firmware properly
exchanges date and time data with it. While the software has been tested, there
can be no assurance, however, that the Company's software products that are
designed to be Year 2000 Compliant contain all the necessary code changes and
modifications to be compliant with all possible Year 2000 issues.
While the Company's Mainsail product was designed to be Year 2000
Compliant, the operating systems that are used to compile the product in several
customer locations are not compliant. The Company is currently working to port
the product onto several Year 2000 Compliant operating system platforms. Testing
of one release began in October, 1998 and compilation on other platforms is
scheduled for completion by December 31, 1998. This entire project is expected
to be completed no later than the second quarter of 1999.
The Company has undertaken various initiatives to ensure that its computer
hardware and certain computer software programs in its internal operations,
including applications used in product development, services, financial,
administrative and business systems will function into and beyond the Year 2000.
The Company has received responses from the majority of its vendors representing
Year 2000 Compliance and is continuing to assess the areas within its business
and operations which could be adversely affected by Year 2000
12
<PAGE> 13
issues and evaluating the costs which may be associated with modifying and
testing its systems for Year 2000 compliance. Although the Company is not yet
able to estimate any incremental cost for Year 2000 issues, based on its
preliminary review to date, management believes that all material systems will
be compliant by the Year 2000 and that the cost to address the issues is not
material. The Company believes that any Year 2000 issues relating to internal
systems will not have a material adverse effect on its business, financial
condition or results of operations.
As part of the Year 2000 assessment, the Company is reviewing its
relationships with certain key outside vendors and others with whom it has
significant business relationships. Although a comprehensive analysis has not
yet been completed, the Company is not presently aware of any exposure which
would have a material adverse effect arising from potential third party
failures. However, there can be no assurances that the failure of any such
material third party to be Year 2000 compliant would not have a material adverse
effect on the Company's results of operation.
A contingency plan has not been developed for dealing with the most
reasonably likely worst case scenario and such scenario has not yet been clearly
defined. However, the Company plans to develop a contingency plan by June 1999.
The Company cannot guarantee that its efforts will prevent all consequences and
there may be undetermined future costs due to business disruption that may be
caused by customers, suppliers or unforeseen circumstances.
13
<PAGE> 14
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
------------------
The Company has no material legal proceedings at this time.
Item 2. Changes in Securities and Use of Proceeds.
------------------------------------------
Not applicable.
Item 3. Defaults upon Senior Securities.
--------------------------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
There were not matters submitted to a vote of the security holders
in the quarter ended September 30, 1998.
Item 5. Other Information.
------------------
Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
(a) Exhibits.
---------
27. Financial Data Schedule
(b) Reports on Form 8-K.
--------------------
None
14
<PAGE> 15
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.
NATIONAL TRANSACTION NETWORK, INC.
DATE: November 12, 1998 By /s/Gregory A. Lewis
---------------------------
Gregory A. Lewis, President and
Chief Operating Officer
(Principal Executive Officer)
DATE: November 12, 1998 By_ /s/John J. Neubert
-------------------------------
John J. Neubert, Executive
Vice President and Chief
Financial Officer
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 304,753
<SECURITIES> 0
<RECEIVABLES> 671,468
<ALLOWANCES> 40,000
<INVENTORY> 164,458
<CURRENT-ASSETS> 1,140,584
<PP&E> 912,408
<DEPRECIATION> (768,366)
<TOTAL-ASSETS> 1,615,712
<CURRENT-LIABILITIES> 1,239,482
<BONDS> 1,642,687
0
0
<COMMON> 498,827
<OTHER-SE> (1,765,284)
<TOTAL-LIABILITY-AND-EQUITY> 1,615,712
<SALES> 4,046,506
<TOTAL-REVENUES> 4,046,506
<CGS> 2,469,163
<TOTAL-COSTS> 2,469,163
<OTHER-EXPENSES> 2,940,418
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (120,465)
<INCOME-PRETAX> (1,483,440)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,483,440)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,483,440)
<EPS-PRIMARY> (0.45)
<EPS-DILUTED> (0.45)
</TABLE>
