<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1999
------------------------------------------------
Commission file number 0-10691
---------------------------------------------------------
CHECK TECHNOLOGY CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
MINNESOTA 41-1392000
- ---------------------------------- ------------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
12500 WHITEWATER DRIVE
MINNETONKA, MINNESOTA 55343-9420
- ------------------------------------------ -----------------
(Address of principal executive offices) (Zip Code)
(612) 939-9000
- --------------------------------------------------------------------------------
Registrant's telephone number, including area code
NOT APPLICABLE
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last report
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 periods
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 practical date.
COMMON STOCK, $.10 PAR VALUE SHARES 6,161,038 AS OF AUG 10, 1999.
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1
<PAGE>
INDEX
CHECK TECHNOLOGY CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
<C> <S>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets -- June 30, 1999 and
September 30, 1998.
Condensed consolidated statements of operations -- Three
months ended June 30, 1999 and 1998 and nine months ended June
30, 1999 and 1998.
Condensed consolidated statements of cash flows -- Nine
months ended June 30, 1999 and 1998.
Condensed notes to consolidated financial statements -- June
30, 1999.
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition
Item 3. Quantitative and Qualitative Disclosures about Market Risk
See Market Risk in Management's Discussion and Analysis.
PART II. OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K
SIGNATURES
</TABLE>
2
<PAGE>
Part I. FINANCIAL INFORMATION
CHECK TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
June 30, September 30,
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,337,489 $ 2,701,888
Short-term investments -- 2,582,475
Accounts receivable less allowance for doubtful accounts of $50,000 3,206,830 3,446,982
Inventories
Raw materials and component parts 6,168,210 6,038,828
Work-in-process 477,095 367,160
Finished Goods 4,670,386 3,819,433
------------ ------------
11,315,691 10,225,421
Deferred income taxes 1,736,120 1,309,448
Other current assets 825,117 1,085,379
------------ ------------
TOTAL CURRENT ASSETS 18,421,247 21,351,593
EQUIPMENT AND FIXTURES
Machinery and equipment 2,077,988 2,049,557
Furniture and fixtures 2,038,144 1,761,984
Leasehold improvements 313,989 293,906
------------ ------------
4,430,121 4,105,447
Less accumulated depreciation and amortization (3,396,008) (3,137,533)
------------ ------------
1,034,113 967,914
------------ ------------
TOTAL ASSETS $ 19,455,360 $ 22,319,507
------------ ------------
------------ ------------
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
June 30, September 30,
1999 1998
------------ ------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 2,036,261 $ 2,322,696
Employee compensation and related taxes 600,534 681,465
Income taxes payable 302,066 317,884
Deferred revenue 395,186 385,556
Current portion of capital lease obligations 13,013 11,721
------------ ------------
TOTAL CURRENT LIABILITIES 3,347,060 3,717,322
Capital lease obligations -- less current portion 29,281 35,059
------------ ------------
TOTAL LIABILITIES 3,376,341 3,752,381
STOCKHOLDERS' EQUITY
Capital Stock
Common Stock--par value $.10 per share--authorized
25,000,000 shares; issued and outstanding
June 30, 1999--6,151,038 shares; 615,104 617,812
September 30, 1998--6,178,120 shares
Additional paid in capital 16,858,330 16,938,385
Accumulated other comprehensive income (1,355,841) (917,856)
Retained earnings (38,574) 1,928,785
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 16,079,019 18,567,126
------------ ------------
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 19,455,360 $ 22,319,507
------------ ------------
------------ ------------
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
CHECK TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Month Period Nine Month Period
Ending June 30, Ending June 30,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sales:
Printing equipment $ 814,680 $ 2,719,679 $ 3,778,318 $ 6,837,320
Maintenance, spares and supplies 3,405,071 3,613,927 11,008,176 10,978,174
------------ ------------ ------------ ------------
Net Sales 4,219,751 6,333,606 14,786,494 17,815,494
Costs and expenses:
Cost of sales 2,037,063 2,753,528 6,908,091 7,489,299
Selling, general and administrative 2,657,671 2,717,117 8,230,122 8,295,623
Research and Development 650,566 693,234 2,010,506 2,068,186
------------ ------------ ------------ ------------
5,345,300 6,163,879 17,148,719 17,853,108
------------ ------------ ------------ ------------
(Loss) income from system sales and (1,125,549) 169,727 (2,362,225) (37,614)
service
Interest (income) (13,190) (81,402) (98,688) (251,809)
Unrealized exchange loss (gain) 57,726 (38,960) 182,065 6,409
------------ ------------ ------------ ------------
(Loss) income before taxes (1,170,085) 290,089 (2,445,602) 207,786
Income taxes 45,000 102,000 (401,000) 80,000
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Net (loss) income $ (1,215,085) $ 188,089 $ (2,044,602) $ 127,786
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
(Loss) earnings per common share
Basic and diluted $ (.20) $ .03 $ (.33) $ .02
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Weighted average number of shares
and share equivalents outstanding 6,130,038 6,281,005 6,132,949 6,274,366
during the period
Weighted average number of shares and
share equivalents outstanding during 6,130,038 6,294,409 6,132,949 6,293,769
the period - assuming dilution
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
CHECK TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ending
June 30,
1999 1998
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net (loss) income $(2,044,602) $ 127,786
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 267,581 259,697
Other 71,152 164,373
Changes in operating assets and liabilities:
Accounts receivable 42,536 12,260
Inventories (1,317,379) (1,275,234)
Other current assets (177,270) (158,773)
Accounts payable and accrued expenses (288,402) (399,420)
Deferred revenue 10,219 825,818
----------- -----------
NET CASH (USED IN) OPERATING ACTIVITIES (3,436,165) (443,493)
INVESTING ACTIVITIES
Purchase of equipment and fixtures (333,370) (138,194)
Proceeds from sale of equipment -- 39,132
Purchase of short-term investments (1,765,828) (5,496,498)
Proceeds from sale of short-term investments 4,365,897 8,500,142
----------- -----------
NET CASH PROVIDED BY INVESTING ACTIVITIES 2,266,699 2,904,582
FINANCING ACTIVITIES
(Purchase) of common stock (143,043) (198,692)
Repayment of note receivable from stock sale 14,804 10,242
Repayment of capital leases (9,340) (55,626)
----------- -----------
NET CASH (USED IN) FINANCING ACTIVITIES (137,579) (244,076)
EFFECT OF EXCHANGE RATE CHANGES ON CASH (57,354) (28,198)
----------- -----------
(DECREASE) IN CASH & CASH EQUIVALENTS (1,364,399) 2,188,815
CASH & CASH EQUIVALENTS AT BEGINNING OF YEAR 2,701,888 3,165,601
----------- -----------
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,337,489 $ 5,354,416
----------- -----------
----------- -----------
</TABLE>
See notes to consolidated financial statements
6
<PAGE>
CHECK TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 1999
NOTE A - - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q 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, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's annual report on Form
10-K for the year ended September 30, 1998.
Reclassifications have been made in the prior year to conform with
classifications in the current year.
In 1997, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 128, Earnings per Share. Statement 128 replaced the
previously reported primary and diluted earnings per share with basic and
diluted earnings per share. Unlike primary earnings per share, basic earnings
per share excludes any dilutive effects of options, warrants, and convertible
securities. Diluted earnings per share is very similar to the previously
reported fully diluted earnings per share. All earnings per share amounts for
all periods have been presented, and where necessary, restated to conform to the
Statement 128 requirements.
7
<PAGE>
CHECK TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 1999
NOTE B - - Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
Three Month Period Nine Month Period
Ended June 30, Ended June 30,
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Numerator:
Net Income (Loss) $(1,215,085) $ 188,089 $(2,044,602) $ 127,786
----------- ----------- ----------- -----------
Numerator for basic and
diluted earnings per share -
income(loss) to
common stockholders (1,215,085) 188,089 (2,044,602) 127,786
Denominator:
Denominator for basic
earnings per share -
Weighted-average shares 6,130,038 6,281,005 6,132,949 1,274,366
Effect of dilutive securites:
Employee stock options -- 13,404 -- 13,570
Employee stock grants -- -- -- 5,833
----------- ----------- ----------- -----------
Dilutive potential common
shares -- a 13,404 -- a 19,403
Denominator for diluted
earnings per share -
Adjusted weighted- 6,130,038 6,294,409 6,132,949 6,293,769
average shares
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Earnings (loss) per common share
basic and diluted $ (.20) $ .03 $ (.33) $ .02
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
a--No incremental shares related to options are included because the impact
would be antidilutive.
8
<PAGE>
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 1999
NOTE C - - Comprehensive Income
As of October 1, 1998, the Company adopted Statement of Financial Accounting
Standards Number 130 (Statement No. 130) "Reporting Comprehensive Income."
Statement No. 130 establishes standards for the reporting and display of
comprehensive income and its components; however, the adoption of this statement
had no impact on the Company's net income or stockholders' equity. Statement No.
130 requires foreign currency translation adjustments, which prior to adoption
were reported separately in stockholders' equity, to be included in "other
comprehensive income." Amounts in prior year financial statements have been
reclassified to conform to Statement No. 130.
The components of comprehensive income, net of related tax, for the three and
nine month periods ended June 30, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
Three Month Period Nine Month Period
Ending June 30, Ending June 30,
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net (loss) income $(1,215,085) $ 188,089 (2,044,602) $ 127,786
Foreign currency translation adjustments (92,985) (134,730) (437,985) (329,866)
----------- ----------- ----------- -----------
Comprehensive income $(1,308,070) $ 53,359 $(2,482,587) $ (202,080)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
9
<PAGE>
Item 2
Management's Discussion and Analysis of Results
of Operations and Financial Condition
Results of Operations
The Company's revenues consist of (i) sales of document production systems and
related equipment and (ii) maintenance contracts, spare parts, supplies and
consumable items. For the three and nine month periods ended June 30, 1999,
revenues from the sale of document production equipment declined 70% and 45%
respectively, with those of the same period in fiscal 1998. The decline is
primarily because the Company did not sell any Imaggia system's in this quarter
and because of reduced sales of the Checktronic and Foliotronic in Latin
America. The Company has orders for its Imaggia system, which it expects to ship
in the fourth quarter. With respect to the Checktronic equipment, the Company
has held for some time a dominant position in many of the international markets
in which it is sold. Demand for the Checktronic product line has softened in
these international markets and revenues from this product line are now largely
dependent on sales to emerging markets such as Latin America, Asia and Africa.
The present recessionary environments in Asia, South America and other emerging
countries has limited the Company's current opportunities to sell high-end
capital equipment into those regions.
For the three month period ended June 30, 1999, revenues from maintenance
contracts, spare parts, supplies and consumable items decreased 6% and remained
flat for the nine month period ended June 30, 1999, primarily due to the timing
of purchase of supplies and consumables by certain major customers.
The gross margin percentage for the three and nine month periods ended June 30,
1999, was 52% and 53% respectively, compared to 57% and 58% in the comparable
prior year. The decrease was primarily due to the increased component in the
revenue mix of the Imaggia product line as compared to the Checktronic product
line. The Company anticipates that its gross margin percentage for fiscal 1999
will be somewhat lower than fiscal 1998 as the system and supplies and
consumable sales mix of the Company's various product lines constitutes the
Company's total revenues.
Operating expenses during the three and nine month periods ended June 30, 1999,
declined 3% and 1% respectively with those of the comparable quarters a year
ago. Net interest income for the three and nine month periods ended June 30,
1999, was $13,000 and $99,000 respectively, compared to $81,000 and $252,000 for
the comparable prior quarter. The decrease was due to lower cash balances
available for investment.
For the three and nine month periods ended June 30, 1999, the Company reported a
net loss of ($0.20) and ($0.33) per share as compared to a net earnings of $0.03
and $0.02 per share in the comparable periods last year. The decrease was
primarily attributable to the reduction in revenue.
Market Risk:
The Company presently has three foreign subsidiaries, located in England, France
and Australia, does business in 49 countries, and generates approximately 80% of
its revenues from outside North America. The Company's ability to sell its
products in these foreign markets may be affected by changes in economic,
political or market conditions in the foreign markets in which it does business.
The Company experiences foreign currency gains and losses, which are reflected
on the Company's income statement, due to the strengthening and weakening of the
U.S. dollar against the currencies of the
10
<PAGE>
Company's three foreign subsidiaries and the resulting effect on the
valuation of the intercompany accounts and certain assets of the
subsidiaries, which are denominated in U.S. dollars. The net exchange loss
for the three and nine month periods ended June 30, 1999, was $58,000 and
$182,000 respectively, compared to a gain of $39,000 and a loss of $6,000 in
the comparable periods last year. The Company anticipates that it will
continue to have exchange gains or losses from foreign operations in the
future.
The Company's net investment in its foreign subsidiaries was $8,342,000 and
$8,681,000 at June 30, 1999, and September 30, 1998, translated into U.S.
dollars at the closing exchange rates. The potential loss in value resulting
from a hypothetical 10% change in foreign exchange rates is not material. The
impact of the stronger U.S. dollar on the translation of foreign currency
denominated sales and related gross profit thereon was not material in 1998 or
in the first nine months of fiscal 1999.
Factors Affecting Results of Operations:
The Company is continuing development of the Imaggia system, including improving
its overall reliability and performance. The Company is using the Gemini digital
print technology, which has been developed by Delphax Systems, as the print
engine for the Imaggia system. Over the course of the development, the Company
has experienced delays due in part to development delays associated with the
Gemini print engine and finalization of the engine's toner formulation, which
are outside of the Company's control. No assurance can be given that further
delays will not occur, that Imaggia will gain market acceptance or that product
development or warranty expenses will not be higher than anticipated.
Achievement of the Company's future revenue plans depends upon the successful
market acceptance of the Imaggia system. The Company's revenues and operating
results may also fluctuate from quarter to quarter because (i) the Company's
sales cycle is relatively long, (ii) the size of orders may vary significantly,
(iii) the availability of financing for customers in some countries is variable,
(iv) customers may postpone or cancel orders, and (v) economic, political and
market conditions in some markets change with minimal notice and effect the
timing and size of orders. Because the Company's operating expenses are based on
anticipated revenue levels and a high percentage of the Company's operating
costs are relatively fixed, variations in the timing of revenue recognition
could result in significant fluctuations in operating results from period to
period.
Year 2000:
The Company began evaluating the potential impact of the Year 2000 date
conversion on its operations in 1997. This evaluation included three major
elements: (i) information technology (IT) systems, (ii) non-IT, or embedded
technology systems, and (iii) relationships with its key business suppliers.
For its IT systems, the Company has assessed its hardware and applications
(software and operating systems) and has substantially finalized its plans to
address all assessed risks. The Company is in the process of completing an
upgrade to its IT systems, which among other benefits is intended to ensure that
the Company's IT systems are Year 2000 compliant. The Company presently expects
this upgrade to be complete by fall of 1999.
As a result of its internal evaluation the Company believes that its embedded
technology systems are currently Year 2000 compliant. The Company has identified
its key business partners and has been advised by them that they have programs
in place to ensure that their operations will be Year 2000 compliant in an
appropriate timeframe.
11
<PAGE>
The Company believes that it has planned for the most reasonably likely worst
case scenarios. It anticipates that its IT systems will be ready for the Year
2000, although it may experience isolated incidences of non-compliance. During
1999 it will continue to follow up with critical business partners to assess
their readiness and establish appropriate contingency plans if necessary.
The Company's cost for achieving Year 2000 compliance is part of the cost of an
overall upgrade of its information technology systems. The Company estimates
that the approximate cost of this upgrade will be $300,000, of which
approximately $200,000 was incurred prior to fiscal 1999.
Euro Conversion:
On January 1, 1999, certain member countries of the European Union established
fixed conversion rates between their existing currencies and the European
Union's common currency (Euro). The transition period for the introduction of
the Euro will be between January 1, 1999 and January 1, 2002. The Company has
prepared for the introduction of the Euro and has evaluated methods to address
the many issues involved with the introduction of the Euro, including the
conversion of information technology systems, recalculating currency risk,
strategies concerning continuity of contracts, and impacts on the processes for
preparing taxation and accounting records. The Company believes the Euro
conversion will not have a material impact on its financial statements.
Liquidity and Capital Resources:
Working capital was $15.0 million at June 30, 1999, compared to $17.6 million at
September 30, 1998. The decline is primarily due to changes in inventory levels
and cash balances. The Company's inventory levels increased from $10.2 million
at September 30, 1998, to $11.3 million at June 30, 1999, primarily due to an
increase in Imaggia related inventory. Cash and short-term investments amounted
to $1.3 million at June 30, 1999, compared to $5.3 million at September 30,
1998. The reduction in cash and short-term investments is due to the net loss
during the nine month period ended June 30, 1999 and the increase in the Imaggia
inventory.
Stockholders' equity was $16.1 million at June 30, 1999, compared to $18.6
million at September 30, 1998. In September 1998, the Company announced a stock
repurchase program of up to 500,000 shares. Through March 31, 1999, the Company
had repurchased 170,500 shares at a cost of $434,000, no shares were purchased
during the quarter ended June 30, 1999.
The Company's long-term debt to equity ratio was less than 0.01 at June 30,
1999, and September 30, 1998. The Company maintains a $2.5 million unsecured
bank line of credit which expires March 31, 2000. At June 30, 1999, the line was
unused. The Company believes that its current capital resources, unused
financing source, and anticipated level of internally generated funds will be
sufficient to fund its working capital requirements in fiscal 1999.
At June 30, 1999, the Company had no material commitments for capital
expenditures.
Cautionary Statement:
Statements included in this Management's Discussion and Analysis of Financial
Condition and Results of Operations, in the Company's Annual Report, in the
Company's Form 10-K, in other filings with the Securities and Exchange
Commission, in the Company's press releases and in oral statements made to
securities market analysts and stockholders, which are not historical or current
facts, are "forward-
12
<PAGE>
looking statements" made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Such statements are subject
to certain risks and uncertainties that could cause the Company's actual
results to differ materially from historical earnings and those presently
anticipated or projected.
The factors mentioned under the subheading "Factors Affecting Results of
Operations" are among those that in some cases have affected and in the future
could affect the Company's actual results and could cause the Company's actual
financial performance to differ materially from that expressed in any
forward-looking statement.
13
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
The Company did not file any reports on Form 8-K during the three months ended
June 30, 1999.
14
<PAGE>
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.
CHECK TECHNOLOGY CORPORATION
Registrant
Date Aug. 16, 1999 /s/ Jay A. Herman
-------------------------- -------------------------------------
Jay A. Herman
President and Chief Executive Officer
Date Aug. 16, 1999 /s/ Vicki J. Duncomb
-------------------------- -------------------------------------
Vicki J. Duncomb
Controller
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> JUN-30-1999
<CASH> 1,337,489
<SECURITIES> 0
<RECEIVABLES> 3,256,830
<ALLOWANCES> 50,000
<INVENTORY> 11,315,691
<CURRENT-ASSETS> 18,421,247
<PP&E> 4,430,121
<DEPRECIATION> 3,396,007
<TOTAL-ASSETS> 19,455,361
<CURRENT-LIABILITIES> 3,347,060
<BONDS> 0
0
0
<COMMON> 615,104
<OTHER-SE> 15,463,916
<TOTAL-LIABILITY-AND-EQUITY> 19,455,361
<SALES> 14,786,494
<TOTAL-REVENUES> 14,786,494
<CGS> 6,908,091
<TOTAL-COSTS> 17,148,719
<OTHER-EXPENSES> 83,377
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,445,602)
<INCOME-TAX> (401,000)
<INCOME-CONTINUING> (2,044,602)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,044,602)
<EPS-BASIC> (.33)
<EPS-DILUTED> (.33)
</TABLE>
