U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended March 31, 1999
OR
[ ] TRANSITON REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from _____________ to _________________
Commission file number: 0-9358
3Si Holdings, Inc.
(Exact Name of Registrant as specified in its charter)
Wyoming 83-0245581
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
6886 S. Yosemite Street
Englewood, Colorado 80112
(Address of principal executive offices) (Zip Code)
(303) 741-9123
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (l) 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 ___
At March 31, 1999, 33,898,298 shares of the Registrant's $.01 par value common
stock were outstanding.
1
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Attached.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Financial Condition
Subsequent to December 31, 1998 and again referenced in the December 31, 1998
SEC 10-Q report, the Company's revolving line of credit lender gave the Company
notice of its intent to terminate the Company's revolving line. The Company,
however, continued to obtain the necessary credit facilities to continue
operations beyond the anticipated termination date. The extensions granted by
the lender were due to the Company's pending sale of assets to the Technology
Integration Group (TIG) and are discussed further below in this report. The
company further terminated discussions with other financial institutions as a
result of this change.
As of March 31, 1999, the Company had a working capital deficit of approximately
$1,575,116 and a negative cash flow from operating activities of approximately
$133,013 for the quarter ended March 31, 1999.
Reduction of Bank Line
During the quarter ended March 31, 1999, the Company's lender reduced the
Company's line limit from $3.0 million to $2.5 million.
Acquisition of Substantially All Its Assets
On March 10, 1999, 3Si received a Letter of Intent from PC Specialists, Inc.
(also known as TIG) in San Diego, CA to purchase substantially all of the
Company's assets, excluding but not limited to its accounts receivables, its
software subsidiary (also known as KEWi.net), and the information management
software. The Board of Directors moved to present the sale to the shareholder in
a special meeting of shareholders April 30, 1999. On April 30, 1999, the
shareholders of 3Si Holdings voted to approve and ratify this acquisition. The
transaction is expected to close in the near future.
As part of the acquisition, Mr. Larry Valdez's position with 3Si will be
terminated. Mr. Valdez has been offered a position as Sales and Service Manager
with TIG. Mr. Valdez will continue to serve as Chairman and Board member of 3Si
Holdings.
Ratification and Approval to Separate the Software Division from 3Si Holdings,
Inc. In a special meeting of shareholders, the Board of Directors and management
of 3Si proposed and gained approval to separate the software division from 3Si
Holdings into a newly formed Colorado subsidiary, KEWi.net, Inc. ("KEWi.net"),
in exchange for the stock of KEWi.net. KEWi.net will be offering and issuing up
to 750,000 additional shares of stock in the company pursuant to a private
offering qualifying under Regulation D.
2
<PAGE>
KEWi.net, Inc. will focused on developing and marketing its Internet-based
customer support product (KEWi). Mr. Frank Backes has been appointed President
of this company in addition to accepting additional responsibilities with 3Si
Holdings, Inc.
Results of Operations
Quarter Ended March 31, 1999 Compared to Quarter Ended March 31, 1998
Overview
The Company realized a net loss from operations of ($995,782) versus a net loss
of ($137,502) during the quarters ended March 31, 1998. The net loss was created
by a decrease in sales, an increase in the company's bad debt reserve, and lower
gross profits on product sales.
The company sold its government division for $500,000 to Storage Area Networks,
Inc. (SAN). The value paid of $500,000 was primarily for the company's GSA
contract. The company also wrote off the amortized goodwill as of March 31,
1999.
Comparative Analysis
Sales were $5,443,472 and $6,568,890 during the quarters ended March 31, 1999
and 1998, respectively. Total sales decreased of approximately $1,125,528 or
17.1%. The decrease is primarily the result of an increase in competition,
restrictions on the company's revolving line of credit, diversion of the
Company's senior resources away from sales to focus on financing needs, and the
sale of the restructuring of the company (including sales of both the government
and commercial divisions).
The Company's gross margin declined overall between quarters, changing from
32.5% of sales in 1998 to 8.6% in 1998, due primarily to stiff competition and
extremely low margins related to government sales.
Selling, general and administrative expenses decreased approximately $811,943
compared to March 31, 1998 due primarily to the reduction of expenses through
the reduction of the Company's workforce and cost reduction efforts.
Interest expense decreased from $57,355 in the third quarter of 1998 to $40,482
in the third quarter of 1999. The decrease was due to the Company's decreased
borrowings on its revolving line. Interest income decreased due to the Company's
decrease in its excess cash balances between quarters.
Cash flow provided by operating activities decreased from a negative cash flow
of ($389,729) to a negative cash flow of ($133,013) in third quarters of fiscal
years 1998 and 1999, respectively.
Cash used for investing activities in the third quarter of 1998 was lower
compared to the third quarter of 1999, as the company was no longer investing in
software development, since the KEWi product was completed and sales had begun.
Cash used for financing activities differs between the quarters ended March 31,
1999 and 1998, due primarily to lower usage on the Company's line of credit and
the conversion of some accounts receivable to short term debt.
3
<PAGE>
On March 31, 1999, the Company had 118 employees, including 79 servicing the
USPS sub-contract in Raleigh, North Carolina and 2 in Wyoming, versus having had
141 in total at September 30, 1997 including 80 servicing the USPS sub-contract.
Fiscal Nine Months Ended March 31, 1999 Compared to Nine Months Ended March 31,
1998.
The same dynamics which effected the quarter (and discussed above), impacted the
fiscal year-to-date.
Sales were approximately $19,045,132 and $21,737,146 during the nine months
ended March 31, 1999 and 1998, respectively. The decrease is primarily the
result of an increase in competition, restrictions on the company's revolving
line of credit, diversion of the company's senior resources away from sales to
focus on financing needs and the sale of the assets (including both the
government and commercial divisions).
The company's gross margin declined from 31.1% to 20.6% in the nine months
ending March 31, 1998 and 1999 respectively. The declining gross profit margin
was due to the low margins on sale of product, especially the government sales.
Selling, General and Administrative expenses decreased by $1,552,807 in the
third quarter of 1999, compared to the third quarter of 1999, due to lower
cutbacks in staffing and cost cutting measures. In addition, expenses were
further lowered due to the sale of the field service division at the end of the
FY1998.
Interest expense decreased from approximately $35,373 during the nine months
ended March 31, 1999, compared to the prior period, due primarily to higher
usage of the line of credit.
Cash flow provided by operating activities decreased from ($1,128,554) to
$1,416,281 in first nine months of FY1998 and FY1999, respectively. The increase
was primarily due to higher accounts payable.
Cash used for investing activities decreased in the first nine months of 1999
compared to same time in FY1998. The decrease was due primarily to the sale of
the government division, which was significantly offset by costs related to the
development of the company's preparatory software (KEWi). Development costs
related to this product ceased at the end of the second quarter in FY1998, when
the product was completed.
Cash provided for financing activities differs between the first nine months of
FY1999 and FY1998 due primarily to accounts payable converted to short term
debt.
Part II - OTHER INFORMATION
Item 1. Litigation
During the quarter ended September 30, 1997, the Company entered into a Federal
Master Assignment Agreement with a leasing company to effect the government's
leasing of certain equipment. Under the terms of the assignment agreement, if
the government terminated the lease for any reason other than "Termination for
Convenience or Non-appropriation," the Company would be liable for the present
value of the discounted cash flows then owed under the lease.
4
<PAGE>
On July 31, 1998, the Federal government terminated the lease for convenience.
The leasing company has filed suit to recover the present value of the
discounted cash flows under the lease from the Company, which are approximately
$385,000, plus attorneys fees and interest. The Company has documentation from
the Federal government indicating its "Termination for Convenience."
The Company intends to vigorously defend against this action. Although it is not
possible to predict with certainty the outcome of any litigation, management
believes it is unlikely that the ultimate disposition of the matter above will
have a material adverse effect on the Company's consolidated financial position,
liquidity, cash flows or results of operations for any year.
Item 6. Exhibits and Reports on Form 8-K
(a) Not applicable.
(b) A Form 8-K was not required to be filed in the period covered by this
report.
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.
3Si Holdings, Inc.
(Registrant)
Date: May 17, 1999 By: /s/ Felipe L. Valdez,
-----------------------
Felipe L. Valdez,
Chief Executive Officer and
Chairman of the Board
Date: May 17, 1999
By: /s/ Frank W. Backes,
-----------------------
Frank W. Backes,
Assistant Secretary
5
<PAGE>
3Si Holdings, Inc.
Index to Financial Statements
Consolidated Balance Sheets, at March 31, 1999 (Unaudited)
and June 30, 1998 . . . . . . . . . . . . . . . . . . . . .F-1
Consolidated Statements of Operations for the quarter and
nine months ended March 31, 1999 and 1998 (Unaudited) . . .F-2
Consolidated Statements of Cash Flows for the quarter and
nine months ended March 31, 1999 and 1998 (Unaudited) . . F-3
Notes to Consolidated Interim Financial Statements (Unaudited).. . F-4
6
<PAGE>
Item 1
CONSOLIDATED FINANCIAL STATEMENTS
3Si Holdings, Inc.
March 31, 1999
<PAGE>
3Si Holdings, Inc.
<TABLE>
<CAPTION>
Consolidated Balance Sheets
March 31, 1999 (Unaudited) and June 30, 1998
March 31,1999 June 30,
(Unaudited) 1998
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents ........................ $ 253,564 13,843
Accounts receivable - trade ...................... 5,902,930 6,142,390
Inventory ........................................ 207,643 225,741
Deferred income taxes ............................ 171,000 171,000
Other current assets ............................. 373,996 193,029
----------- -----------
Total current assets ............................. 6,909,134 6,746,003
PROPERTY AND EQUIPMENT, AT COST
Computer systems (note 1) ........................ 837,153 674,118
Furniture and fixtures ........................... 170,178 169,178
Leasehold improvements ........................... 92,492 92,034
----------- -----------
Total property and equipment ..................... 1,099,823 935,330
Less accumulated depreciation and amortization ... (447,139) (366,319)
----------- -----------
Net property and equipment ....................... 652,685 569,011
OTHER ASSETS
Other assets ..................................... 31,330 31,330
Software Development Costs (Note 2) .............. 562,565 239,082
Goodwill (Note 3) ................................ -- 591,146
----------- -----------
Total other assets ............................... 593,896 861,558
Total assets ..................................... $ 8,155,714 8,176,572
----------- -----------
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Revolving line of credit (Note 4) ................ $ 1,063,483 2,858,337
Short-term debt (Note 5) ......................... 673,216 --
Current portion of capital lease ................. 25,253 25,340
Accounts payable - trade ......................... 6,329,760 3,742,603
Income taxes payable ............................. -- 15,000
Customer deposits ................................ -- 98,185
Accrued liabilities .............................. 392,537 203,756
----------- -----------
Total current liabilities ........................ 8,484,250 6,943,221
LONG-TERM DEBT ................................... 25,709 40,948
DEFERRED INCOME TAXES ............................ 102,000 102,000
STOCKHOLDERS' EQUITY (notes 5 and 6)
Common stock - authorized 50,000,000
shares of $.01 par value; issued
39,984,924; outstanding 39,984,924 .............. 399,849 399,849
Additional paid in capital ....................... 2,380,044 2,380,044
Retained earnings (deficit) ...................... (2,124,851) 167,863
Treasury stock, at cost, 6,050,626
shares (45,000 at June 30, 1997) ......... (1,857,353) (1,857,353)
----------- -----------
Total stockholders' equity ....................... (456,244) 1,090,403
Total liabilities and stockholders' equity ....... $ 8,155,714 $ 8,176,572
----------- -----------
</TABLE>
See accompanying notes to interim consolidated financial statements.
F-1
<PAGE>
3Si Holdings, Inc.
<TABLE>
<CAPTION>
Consolidated Statement of Operations
For the Quarters and Nine Months March 31, 1999
(Unaudited)
Quarter Ended Nine Months Ended
March 31, March 31,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Product sales ................ $ 3,932,025 4,510,300 13,935,304 15,360,578
Consulting and other
service revenue ............. 1,511,447 2,058,590 5,109,828 6,376,568
------------ ------------ ------------ ------------
Net sales ................. 5,443,472 6,568,890 19,045,132 21,737,146
Cost of products sold ........ 4,886,001 4,104,541 14,307,598 13,952,006
Costs of contract labor ...... 91,262 327,917 813,327 1,033,510
------------ ------------ ------------ ------------
Total cost of sales .......... 4,977,263 4,432,458 15,120,925 14,985,516
Gross profit ............... 466,209 2,136,432 3,924,207 6,751,630
Selling and administrative
expenses ............. 1,461,991 2,273,934 5,244,457 6,797,264
------------ ------------ ------------ ------------
Earnings (loss) from
operations ........... (995,782) (137,502) (1,320,250) (45,634)
Other income (expense):
Interest income .............. 500 2,473 4,756 60,790
Interest expense ............. (40,482) (64,887) (160,009) (124,636)
Write-off of Prepaid Royalties (575,522) -- (575,522) --
Sale of Government Division .. 500,000 -- 500,000 --
Misc. Income ................. -- 310 4,378 6,881
------------ ------------ ------------ ------------
Loss before income
taxes ................ (1,111,286) (199,606) (1,546,648) (102,599)
Income taxes ................. -- -- -- --
------------ ------------ ------------ ------------
Net loss ..................... (1,111,286) (199,606) (1,546,648) (102,599)
------------ ------------ ------------ ------------
Loss per common share ........ (0.01) (0.01) (0.0) (0.00)
------------ ------------ ------------ ------------
Shares outstanding(note 8) ... 39,984,924 39,984,924 39,984,924 35,054,921
------------ ------------ ------------ ------------
</TABLE>
See accompanying notes to interim consolidated financial statements.
F-2
<PAGE>
3Si Holdings, Inc.
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows
For the Quarters and Nine Months Ended March 31, 1999 and 1998
(Unaudited)
Quarter Ended Nine Months Ended
March 31, March 31,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Operating activities:
Net loss ....................................... $(1,611,286) (199,606) (2,046,648) (102,599)
Reconciling adjustments:
Depreciation and amortization ................... 29,940 34,753 96,445 104,258
Gain on sale of equipment ....................... -- -- -- 2,665
Change in operating assets and liabilities:
Accounts receivable ............................ (759,438) 749,793 64,261 (1,598,350)
Inventory ...................................... 32,509 397,050 18,098 342,072
Other assets ................................... 622,374 9,483 622,871 (25,994)
Accounts payable .............................. 1,413,956 (952,200) 2,587,157 470,370
Other liabilities .............................. 177,932 (425,759) 74,097 (320,976)
Total adjustments ............................. 1,451,332 (81,649) 3,366,483 (1,132,878)
Net cash provided by operating ___________ __________ ___________ __________
activities ............................... (133,013) (389,729) 1,416,281 (1,128,554)
Investing activities:
Purchases of equipment .......................... 3,029 (16,199) (164,494) (93,815)
Software development costs ...................... -- (65,450) (323,483) (65,450)
Merger costs .................................... -- -- (53,118) (8,279)
Sale of Government Division ..................... 500,000 -- 500,000 --
Net cash used in investing ___________ __________ ___________ __________
activities ............................... (503,029) (81,649) (41,095) (167,544)
Financing activities:
Payments on notes payable ....................... 673,216 (102,206) 673,216 (1,258,628)
Payments on capital lease ....................... (1,500) (7,149) (13,826) (21,843)
Proceeds (payment) on revolving line ............ (958,885) (3,243) (1,794,854) 2,353,655
Proceeds from exercise of
options (note 3) ........................ -- -- -- 65,660
Payments on self-tender ......................... -- -- -- (1,851,366)
Dividends paid, prior to merger ................. -- -- -- --
Net cash used by financing ________ _______ _________ ________
activities ............................... (287,169) (109,355) (1,135,465) (712,522)
Net change in cash and cash equivalents .......... 82,846 (580,733) 239,721 (2,008,620)
Cash and cash equivalents, beginning ............. 170,718 791,258 13,843 2,219,145
Cash and cash equivalents, ending ................ $ 253,564 10,525 253,564 210,525
----------- ----------- ----------- -----------
Supplemental disclosures of cash flow information:
Interest paid ................................... $ 40,482 57,355 96,855 114,799
----------- ----------- ----------- -----------
</TABLE>
See accompanying notes to interim consolidated financial statements.
F-3
<PAGE>
3Si Holding, Inc.
Notes to Interim Consolidated Financial Statements
(Unaudited)
The unaudited historical interim consolidated financial statements
reflect, in the opinion of management, all adjustments (consisting of normal
recurring accruals) necessary for a fair presentation. The accounting policies
followed by the Company are set forth in Note 1 to the Company's financial
statements in the Company's report on Form 10-K.
Operating results for the quarter and nine months ended March 31, 1999
are not necessarily indicative of the results that may be expected for the year
ending June 30, 1999.
Presentation
- ------------
On June 18, 1998, the stockholders approved a change to the Company's name.
Effective September 15, 1998, the Company's name changed from Tyrex Oil Company
to 3Si Holdings, Inc. ("3SiH" or "the Company").
On May 28, 1997, Tyrex Oil Company ("Tyrex") acquired 100% of the common stock
of 3Si Inc. ("3Si"). Under the terms of the merger, 3Si is a wholly owned
subsidiary of Tyrex (now 3SiH). The merger has been accounted for as a purchase
of Tyrex by 3Si, since the merger resulted in 84% of the outstanding stock of
Tyrex being held by the 3Si stockholders.
All intercompany balances and transactions have been eliminated in the financial
statements.
The principal markets for 3Si's sales and services have been the U.S. Postal
Service and large corporations located in Colorado and New Mexico. 3Si is
concentrating on expanding its sales base throughout the United States. The
corporate offices are located in Englewood, Colorado. 3Si also maintains offices
in Albuquerque, New Mexico; Raleigh, North Carolina; and Colorado Springs,
Colorado.
Note 1 - Computer Software Costs
- --------------------------------
Expenditures related to the Company's acquisition and implementation of new
information management software have been capitalized as computer systems. For
the nine months ended March 31, 1999, capitalized costs include $94,566 of costs
paid to outside consultants and $52,398 of internal costs. With the sale of
significantly all of the company's assets, the Company has decided not to
implement the system and is attempting to sell the Oracle system.
Note 2 - Software Development Costs
- -----------------------------------
During the fiscal year ended June 30, 1998, the Company completed research and
development on its first two proprietary software products -- a contact
management database program and a help desk management and call avoidance system
(called "KEWi"). Both programs operate via the Internet. During the nine months
ended March 31, 1999, the Company capitalized $323,483 as software development
costs relative to its proprietary products.
Note 3 - Reduction in Goodwill
- ------------------------------
The remaining goodwill of approximately $575,500, which was created in FYE June
30 ,1997 as result as a payment to former 3Si stockholders to satisfy a License
and Royalty Agreement, was written off in the third quarter. This write-off of
the asset was made due to the anticipated sale of the business operations
related to the royalty payments.
F-4
<PAGE>
Note 4 - Revolving Line of Credit
- ---------------------------------
Subsequent to December 31, 1998, and again referenced in the December 31, 1998
SEC 10-Q report, the Company's revolving line of credit lender gave the Company
notice of its intent to terminate the Company's revolving line. The Company,
however, continued to obtain the necessary credit facilities to continue
operations beyond the anticipated termination date. The extensions granted by
the lender were due to the Company's pending sale of assets to the Technology
Integration Group (TIG) and are discussed below in this report. The company
further terminated discussions with other financial institutions as a result of
this change.
Note 5 - Short-Term Debt With Vendor
- ------------------------------------
As part of the agreement of the sale of the government division to SAN, which is
a related entity to Innovative Interfaces, Inc. (Innovative), a 3Si vendor, an
agreement was made to convert part of the accounts payables due to Innovative to
a short-term note.
Note 6 - Stock Options and Warrants
- -----------------------------------
On June 18, 1998, the Company's stockholders approved the Company's 1998 Stock
Option Plan (the "1998 Plan"). Under the terms of the 1998 Plan, the Company may
grant options to acquire up to 5,000,000 shares of the Company's $.01 par value
common stock to employees and directors of the Company. No options were granted
prior to June 30, 1998. Subsequent to June 30, 1998, the Company issued options
to acquire up to 1,866,300 shares of the Company's stock at prices ranging from
$.10 to $.133 per share to employees of the Company. The options vest over a
period of 4 years, except 1,345,000 shares which vested immediately upon grant
to two managers and one developer of 3Si, Inc.
No compensation expense was recognized related to these options in these
financial statements.
On May 28, 1997, Tyrex granted warrants to purchase 750,000 shares of the
Company's common stock at a price of $.30 per share. These warrants became
exercisable 90 days after May 28, 1997 and are effective until August 27, 1999.
On October 22, 1997, the Company granted warrants to purchase up to 350,000
shares of the Company's common stock at a price of $.16 per share. These
warrants became exercisable 90 days after October 22, 1997 and are effective
until June 30, 1999. The Company also extended the exercise date on warrants
previously issued to purchase up to 400,000 shares of the Company's common stock
at $.255 per share from December 31, 1998 to December 31, 1999.
Note 7 - Income Per Share
- -------------------------
Net income per share for the quarters ended March 31, 1999 and 1998 was computed
on the basis of the weighted average number of common stock shares only, as
shares subject to warrants and stock options would have an antidilutive effect.
Note 8 - Income Taxes
- ---------------------
At March 31, 1999, the Company had net operating loss carryforwards sufficient
to offset any tax liability arising during the period.
Note 9 - Litigation
- -------------------
During the quarter ended September 30, 1997, the Company entered into a Federal
Master Assignment Agreement with a leasing company to effect the government's
leasing of certain equipment. Under the terms of the assignment agreement, if
the government terminated the lease for any reason other than "Termination for
Convenience or Non-appropriation," the Company would be liable for the present
value of the discounted cash flows then owed under the lease.
F-5
<PAGE>
On July 31, 1998, the Federal government terminated the lease for convenience.
The leasing company has filed suit to recover the present value of the
discounted cash flows under the lease from the Company, which are approximately
$385,000, plus attorneys fees and interest. The Company has documentation from
the Federal government indicating its "Termination for Convenience."
The Company intends to vigorously defend against this action. Although it is not
possible to predict with certainty the outcome of any litigation, management
believes it is unlikely that the ultimate disposition of the matter will have a
material adverse effect on the Company's consolidated financial position,
liquidity, cash flows or results of operations for any year.
F-6
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 253,564
<SECURITIES> 0
<RECEIVABLES> 5,902,930
<ALLOWANCES> 0
<INVENTORY> 207,643
<CURRENT-ASSETS> 6,909,134
<PP&E> 1,099,823
<DEPRECIATION> (447,139)
<TOTAL-ASSETS> 8,155,714
<CURRENT-LIABILITIES> 8,484,250
<BONDS> 0
0
0
<COMMON> 39,984,924
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 8,155,714
<SALES> 3,932,025
<TOTAL-REVENUES> 5,443,472
<CGS> 4,977,263
<TOTAL-COSTS> 466,209
<OTHER-EXPENSES> 1,461,991
<LOSS-PROVISION> 995,782
<INTEREST-EXPENSE> 40,482
<INCOME-PRETAX> (1,111,286)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,111,286)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,111,286)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
