<PAGE> 1
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
-----------------------------------
Quarter Ended June 30, 1995 Commission File No. 0-10385
VOICE CONTROL SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 75-1707970
-------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
14140 MIDWAY ROAD, SUITE 100 (214) 386-0300
DALLAS, TEXAS 75244 --------------
------------------- (Registrant's telephone
(Address of principal number, including area code)
executive offices)
-----------------------------------
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 twelve months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
X Yes No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
3,898,778 SHARES of Common Stock, $.01 par value outstanding at June 30, 1995.
<PAGE> 2
VOICE CONTROL SYSTEMS, INC.
FORM 10-QSB QUARTERLY REPORT
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to S.E.C. rules and
regulations although the Company believes the disclosures made are adequate to
make the information presented not misleading, and in the opinion of
management, all adjustments have been reflected which are necessary for a fair
statement of the information shown.
2
<PAGE> 3
VOICE CONTROL SYSTEMS, INC.
BALANCE SHEET
(UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
JUNE 30, 1995
-------------------------------------------------------------------------------------------------------------
<S> <C>
A S S E T S
CURRENT:
Cash and cash equivalents $ 1,282,731
Accounts receivable (net of $33,800 allowance for doubtful accounts) (Note 5) 984,532
Inventory 635,452
Prepaid expenses 128,229
-------------
TOTAL CURRENT ASSETS 3,030,944
NET PROPERTY AND EQUIPMENT 460,832
OTHER ASSETS 20,001
-------------
$ 3,511,777
=============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT:
Convertible debentures - related party $ 200,000
Accounts payable and accrued expenses (Note 3) 573,873
Deferred revenue 156,490
Current portion of capital lease obligation 9,070
-------------
TOTAL CURRENT LIABILITIES 939,433
LONG TERM DEBT 1,161,799
-------------
TOTAL LIABILITIES 2,101,232
-------------
COMMITMENTS
STOCKHOLDERS' EQUITY
Preferred stock, $1.00 par value; 300,000 shares
authorized-none issued and outstanding -
Common stock, $.01 par value; 20,000,000 authorized
shares; 3,898,778 issued and outstanding 38,988
Paid-in capital 9,882,206
Receivable from shareholders (79,695)
Deficit (8,430,954)
-------------
TOTAL STOCKHOLDERS' EQUITY 1,410,545
-------------
$ 3,511,777
=============
</TABLE>
See accompanying notes to financial statements.
3
<PAGE> 4
VOICE CONTROL SYSTEMS, INC.
INCOME STATEMENTS
(UNAUDITED)
================================================================================
<TABLE>
Three Months Six Months
ended June 30, ended June 30,
---------------------------- ---------------------------
1995 1994 1995 1994
---------------------------- ---------------------------
<S> <C> <C> <C> <C>
REVENUES (NOTE 5) $ 2,789,450 $ 936,832 $ 4,937,449 $ 2,845,996
COST OF SALES 954,381 114,801 1,609,560 631,071
------------ ------------ ------------ ------------
GROSS PROFIT 1,835,069 822,031 3,327,889 2,214,925
COSTS AND EXPENSES:
Research and development 615,317 464,294 1,234,023 860,053
Selling, general and administrative 879,792 650,585 1,644,693 1,169,438
Interest, to affiliates 37,345 36,079 75,689 68,473
------------ ------------ ------------ ------------
Total Costs and Expenses 1,532,454 1,150,958 2,954,405 2,097,964
------------ ------------ ------------ ------------
NET INCOME BEFORE TAXES 302,615 (328,927) 373,484 116,961
INCOME TAXES (NOTE 4) - 3,057 - 26,000
------------ ------------ ------------ ------------
NET INCOME $ 302,615 $ (331,984) $ 373,484 $ 90,961
============ ============ ============ ============
EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE $ 0.05 $ (0.15) $ 0.06 $ 0.02
============ ============ ============ ============
WEIGHTED AVERAGE SHARES AND SHARE
EQUIVALENTS OUTSTANDING 6,590,348 2,196,392 6,564,274 4,201,563
============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE> 5
VOICE CONTROL SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1995 1994
------------------------------------------------------------------------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 373,484 $ 90,961
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 114,206 67,909
Change in operating assets and liabilities:
Accounts receivable (63,712) 815,841
Inventory (349,179) (595,015)
Prepaids (41,154) (123,244)
Other assets 5,769 (8,639)
Accounts payable and accrued expenses 92,073 (50,612)
Deferred revenue 100,240 2,000
---------- ----------
Net cash provided by operating activities 231,727 199,201
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of assets 150,200 -
Capital expenditures (90,941) (157,272)
---------- ----------
Net cash provided by investing activities 59,259 (157,272)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of principal on notes payable and
long-term debt (112,795) -
Proceeds from exercise of stock options 29,013 -
---------- ----------
Net cash used in financing activities (83,782) -
---------- ----------
Net increase in cash and cash equivalents 207,204 41,929
Cash and cash equivalents at beginning of year 1,075,527 996,772
---------- ----------
Cash and cash equivalents at end of quarter $1,282,731 $1,038,701
========== ==========
Supplemental disclosures of cash flow information-
Cash paid for interest $ 16,002 $ 19,421
========== ==========
</TABLE>
See accompanying notes to financial statements.
5
<PAGE> 6
VOICE CONTROL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
================================================================================
1. BUSINESS
Voice Control Systems, Inc. (the "Company" or "VCS") engages in the
design of voice recognition systems which allow for the voice control of
electronic machines and/or devices. Operating results for the six months ending
June 30, 1995 are not necessarily indicative of the expected results for the
year. The unaudited financial statements include all adjustments, consisting
primarily of normal recurring accruals, which management considers necessary
for a fair presentation of such information.
2. PER SHARE INFORMATION
Earnings per share are computed based on the weighted average number
of shares and dilutive share equivalents outstanding during the respective
periods. Fully diluted earnings per share and share equivalents are not
presented because the result is not materially different.
3. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following at June
30, 1995:
<TABLE>
<S> <C>
Accounts payable $ 321,739
Accrued expenses 252,134
----------
$ 573,873
==========
</TABLE>
4. INCOME TAXES
Net operating loss ("NOL") carryforwards expiring from 1996 to 2010
totalling approximately $15,500,000 are available at June 30, 1995 to offset
future periods' taxable income. Effective August 11, 1994 an ownership change
as defined by Internal Revenue Code Section 382 occurred. The effect of such
change will be to limit the use of the Company's NOL in future years to
approximately $1,355,000 annually.
The following reconciles income tax expense at the federal statutory
rate to the actual tax expense at June 30:
<TABLE>
<CAPTION>
1995 1994
----------------- ------------
<S> <C> <C>
Income taxes at the statutory rate $ 142,000 $ 40,000
Effect on taxes resulting from:
Utilization on NOL carryforwards (142,000) (40,000)
Federal Alternative Minimum Taxes - 5,000
State Taxes - 21,000
----------------- ------------
$ - $ 26,000
================= ============
</TABLE>
6
<PAGE> 7
VOICE CONTROL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
================================================================================
The Company has provided an allowance for its entire deferred tax
asset, relating primarily to NOL carryforwards, of approximately $5,270,000 as
its realization is dependent upon future generation of taxable income. Until
such realization can be reasonably determined, management will continue to
provide an allowance for the entire deferred tax asset.
5. MAJOR CUSTOMERS
One customer accounted for 61% of total revenues for the six months
ended June 30, 1995. Four customers accounted for 43%, 15%, 13% and 11%
respectively of total revenues for the six months ended June 30, 1994.
The Company's largest customer is also the holder of its long term
convertible debt. Accounts receivable from the largest customer accounted for
10% of the total receivable balance at June 30, 1995.
7
<PAGE> 8
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
Six Months Ended June 30, 1995 vs. June 30, 1994
Total revenues increased 73% to $4,937,000 from $2,846,000, for an increase of
$2,091,000. One customer, Dialogic, accounted for 61% of total revenues for
the first six months of 1995. Four customers, Dialogic, Brite Voice Systems,
InterVoice, and Periphonics accounted for 43%, 15%, 13% and 11%, respectively,
of total revenues for the first six months of 1994. All four of these
companies remain customers of the Company but due to the increase in revenues
from Dialogic, they did not individually account for more than 10% of revenues.
Product revenues of $3,618,000 were 73% of revenues in the first six months of
1995. They increased 103% from $1,786,000 in the first six months of 1994,
accounting for $1,832,000 or 88% of the increase in total revenues. Virtually
all of the increase in product revenues resulted from an increase in telecom
voice recognition board sales to Dialogic during the first six months of 1995.
Dialogic purchases hardware products incorporating licensed technologies
pursuant to various agreements between the Company and Dialogic. Those
agreements do not obligate Dialogic to purchase or use licensed technologies,
but the Company has no reason to believe Dialogic will cease to use the
Company's products and technologies. While the Company historically has sold
hardware products incorporating licensed technologies to Dialogic, Dialogic has
the right to manufacture the hardware products. If Dialogic chooses to
manufacture the hardware products incorporating licensed technologies, Dialogic
will pay royalties to the Company for each port of recognition incorporated and
sold by Dialogic. It is anticipated that future Dialogic products
incorporating licensed technologies will be manufactured by Dialogic and the
Company will receive royalties for VCS voice recognition technologies
incorporated and sold by Dialogic. While gross sales figures to Dialogic will
decrease with the transition from hardware sales to royalty revenue, cost of
goods sold will also decrease as the hardware cost component will be
eliminated.
Royalty, development and license fees of $1,070,000 were 22% of total revenues
for the first six months of 1995. These revenues increased 16% from $926,000
in the first six months of 1994. This increase resulted primarily from an
increase in revenues from custom software developed for several new and
existing customers.
Gross margin as a percent of sales decreased from 78% in the first six months
of 1994 to 67% in the first six months of 1995, principally as a result of the
revenue mix between hardware sales and royalty revenue.
Total expenses, excluding costs of sales, increased 41% from $2,098,000 in the
first six months of 1994 to $2,954,000 in the first six months of 1995.
Selling, general, and administrative expenses increased 41% from $1,169,000 in
the first six months of 1994 to $1,645,000 in the first six months of 1995,
research and development expenses increased 43% from $860,000 in the first six
months of 1994 to $1,234,000 in the first six months of 1995, and interest
expense increased 12% from $68,000 in the first six months of 1994 to $76,000
in the first six months of 1995.
The increase of $476,000 in selling, general, and administrative expenses from
the first six months of 1994 to the first six months of 1995 reflects increases
of $386,000 in payroll costs
8
<PAGE> 9
associated with the addition of nine sales, marketing and administrative
employees, $20,000 in facilities costs, $65,000 in public stock maintenance and
related expenses, $38,000 in legal and professional, $14,000 in general
insurance, and $9,000 in depreciation. Other selling, general and
administrative expenses decreased during the first six months of 1995 compared
to 1994 including decreases of $6,000 in travel and entertainment, $21,000 in
conferences and advertising primarily due to reassessing direct trade show
participation and supporting certain customers at their booths, and $29,000 in
miscellaneous expenses.
The increase in research and development expense of $374,000 from the first six
months of 1994 to the first six months of 1995 primarily reflects an increase
in payroll expenses of $276,000 associated with the addition of nine employees.
The remainder of the increase was accounted for primarily by a $22,000 increase
in facilities costs, $29,000 increase in depreciation expense, $31,000 in
supplies, equipment rental, repairs, and maintenance expenses, $11,000 in
travel expenses, and $5,000 in meetings/seminars.
The increase in interest expense of $8,000 from the first six months of 1994 to
the first six months of 1995 is due primarily to increases in the floating
interest rates on convertible debt which are tied to the prime interest rate.
The provision for federal and state taxes decreased by $26,000 from the first
six months of 1994 to the first six months of 1995. Revenue in the first six
months of 1994 triggered a federal alternative minimum tax liability and state
franchise tax based on net income. Federal income taxes were offset by net
operating loss carryforwards during 1994. During the first six months of 1995,
VCS utilized net operating loss carryforwards to offset taxable income.
Net income increased 311% from $91,000 in the first six months of 1994 to
$373,000 in the first six months of 1995, principally as a result of increased
revenues. Because of VCS's volatile history of earnings and losses, the
earnings in the first six months of 1995 and 1994 should not be relied upon as
an indicator of earnings in future quarters or for the year.
Three Months Ended June 30, 1995 vs. June 30, 1994
Total revenues increased 198% to $2,789,000 from $937,000, for an increase of
$1,852,000. Two customers, Dialogic and Brite Voice Systems, accounted for 64%
and 10%, respectively of total revenues for the quarter ended June 30, 1995.
Four customers, Brite Voice Systems, InterVoice, MCI Telecommunications, and
Periphonics accounted for 24%, 20%, 13% and 10%, respectively, of total
revenues for the quarter ended June 30, 1994.
Four percent of the revenue from Brite Voice Systems was derived from a
Software Agreement between VCS and Brite dated August 31, 1992 (the
"Agreement") while non-Agreement sources accounted for 6%. The Agreement
grants Brite a license to use certain VCS technology, sets forth business
generation fees to be paid to VCS with respect to such uses, and sets forth
fees to be paid to VCS for enhanced technologies sold in Brite systems. While
Brite is under no obligation to utilize its license, the Agreement specifies
the fees and royalties to be paid if such use occurs. The Agreement will
expire by its terms on August 31, 1995. VCS is currently negotiating with
Brite to extend the term of the Agreement. The Company believes the Agreement
will be renewed as Brite continues to market systems incorporating the
technology licensed pursuant to the Agreement. While loss of the business
generation fees from Brite would negatively impact VCS, the Company is unaware
of any reason to believe that such revenues will not continue.
Product revenues of $2,157,000 were 77% of revenues in the second quarter of
1995. They increased 431% from $406,000 in the second quarter of 1994,
accounting for $1,751,000 or 95%
9
<PAGE> 10
of the increase in total revenues. Virtually all of the increase in product
revenues resulted from an increase in telecom voice recognition board sales to
Dialogic during the second quarter of 1995. Dialogic purchases hardware
products incorporating licensed technologies pursuant to various agreements
between the Company and Dialogic. Those agreements do not obligate Dialogic to
purchase or use licensed technologies, but the Company has no reason to believe
Dialogic will cease to use the Company's products and technologies. While the
Company historically has sold hardware products incorporating licensed
technologies to Dialogic, Dialogic has the right to manufacture the hardware
products. If Dialogic chooses to manufacture the hardware products
incorporating licensed technologies, Dialogic will pay royalties to the Company
for each port of recognition incorporated and sold by Dialogic. It is
anticipated that future Dialogic products incorporating licensed technologies
will be manufactured by Dialogic and the Company will receive royalties for VCS
voice recognition technologies incorporated and sold by Dialogic. While gross
sales figures to Dialogic will decrease with the transition from hardware sales
to royalty revenue, cost of goods sold will also decrease as the hardware cost
component will be eliminated.
Royalty, development and license fees of $542,000 were 19% of total revenues
for the second quarter of 1995. These revenues increased 18% from $461,000 in
the second quarter of 1994. This increase resulted primarily from an increase
in revenues from custom software developed for several new and existing
customers.
Gross margin as a percent of sales decreased from 88% in the second quarter of
1994 to 66% in the second quarter of 1995, principally as a result of the
revenue mix between hardware sales and royalty revenue.
Total expenses, excluding costs of sales, increased 33% from $1,151,000 in the
second quarter of 1994 to $1,532,000 in the second quarter of 1995. Selling,
general, and administrative expenses increased 35% from $651,000 in the second
quarter of 1994 to $880,000 in the second quarter of 1995, research and
development expenses increased 33% from $464,000 in the second quarter of 1994
to $615,000 in the second quarter of 1995, and interest expense increased 3%
from $36,000 in the second quarter of 1994 to $37,000 in the second quarter of
1995.
The increase of $229,000 in selling, general, and administrative expenses from
the second quarter of 1994 to the second quarter of 1995 reflects increases of
$216,000 in payroll costs associated with the addition of nine sales, marketing
and administrative employees, $3,000 in depreciation expense, $5,000 in
facilities costs, $42,000 in public stock maintenance and related expenses,
$30,000 in legal and professional, and $8,000 in general insurance offset by a
decrease of $10,000 in travel and entertainment, $43,000 in conferences and
advertising primarily due to reassessing direct trade show participation and
supporting certain customers at their booths, and $22,000 in miscellaneous
expenses.
The increase in research and development expense of $151,000 from the second
quarter of 1994 to the second quarter of 1995 primarily reflects an increase in
payroll expenses of $118,000 associated with the addition of nine employees.
The remainder of the increase was accounted for primarily by a $13,000 increase
in depreciation expense, $7,000 in supplies, equipment rental/repairs and
maintenance expenses, $9,000 in travel expenses, and $4,000 in miscellaneous
expenses.
The increase in interest expense of $1,000 from the second quarter of 1994 to
the second quarter of 1995 is due primarily to increases in the floating
interest rates of convertible debt which are tied to the prime interest rate
which was offset by a decrease in the outstanding debt.
The provision for federal and state taxes decreased by $3,000 from the second
quarter of 1994 to the second quarter of 1995. Revenue in the second quarter
of 1994 triggered a state franchise tax
10
<PAGE> 11
based on net income. Federal income taxes were offset by net operating loss
carryforwards during 1994. During the second quarter of 1995, VCS utilized net
operating loss carryforwards to offset taxable income.
Net income increased to $303,000 in the second quarter of 1995 from a $332,000
loss in the second quarter of 1994, principally as a result of an increase in
revenues. Because of VCS's volatile history of earnings and losses, the
earnings in the second quarter of 1995 and 1994 should not be relied upon as an
indicator of earnings in future quarters or for the year.
LIQUIDITY AND CAPITAL RESOURCES
Net working capital was $2,092,000 and $1,907,000 at June 30, 1995 and 1994,
respectively. Net cash flows provided by operating activities were $232,000 in
the first six months of 1995 as compared to cash flows provided by operating
activities of $199,000 in the first six months of 1994. In addition to the
activities described in "Results of Operations", cash flows were impacted by a
$349,000 increase in inventory partially offset by a $100,000 increase in
deferred revenue and a $92,000 increase in accounts payable and accrued
expenses.
VCS's primary source of liquidity is the timely collection of its accounts
receivable. At June 30, 1995, 10% of accounts receivable are due from a major
customer and holder of a long term convertible debt. Such amounts are
generally paid within 30 days.
As of June 30, 1995, VCS had $1,283,000 in cash and cash equivalents, compared
to $1,039,000 at June 30, 1994. VCS's only debt consists of the $1,162,000
convertible promissory note due to a major customer in 1997 and $200,000 in
convertible debentures due to an officer. On October 7, 1994, the note was
extended to August 1, 1995. VCS paid $12,800 in interest to officers and
affiliates in the first six months of 1995. VCS is prepared to repay the
convertible note due in August 1995 in the event it is not converted.
VCS believes that its existing sources of liquidity and future funds generated
by operations will be sufficient to provide the capital resources necessary to
support increased operating needs and to finance continued growth in the
foreseeable future.
CAPITAL EXPENDITURES
Capital expenditures amounted to $91,000 and $157,000, respectively, in each of
the first six months of 1995 and 1994. The capital expenditures are
principally related to the expansion and upgrading of VCS's research and
development capabilities. VCS currently rents, on a short term basis, any
additional equipment required to enhance its research and development
capabilities. VCS believes that this approach is and will be sufficient for
the Company's future needs. Capital expenditures include purchased software
and computer equipment. As of the date of this filing, VCS had no material
commitments for additional capital expenditures.
11
<PAGE> 12
PART II - OTHER INFORMATION
ITEM 2. LEGAL PROCEEDINGS
On September 21, 1994 Voice Control Systems, Inc. began legal
proceedings against Dr. Brian L. Scott in the 298th Judicial
District Court of Dallas County, Texas. The Company's suit against
Brian L. Scott was based on actions of Scott indicating a present
and future intent to misappropriate VCS's trade secrets, usurp a
corporate opportunity of VCS, and tortiously interfere with VCS's
customers and employees. VCS would have suffered immediate and
irreparable harm if such conduct were not enjoined.
VCS was granted a temporary restraining order preventing Brian
Scott from misappropriating VCS's trade secrets, usurping VCS's
corporate opportunities, and tortiously interfering with VCS's
customers and employees. By agreement, that temporary restraining
order remained in effect throughout the first half of 1995 while
additional hearings were held in the case. On June 5, 1995, the
Company filed a non-suit, dismissing the action without prejudice
towards its refiling.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit - 27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the
quarter covered by this report.
12
<PAGE> 13
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.
VOICE CONTROL SYSTEMS, INC.
Dated: August 7, 1995 By: /s/ Peter J. Foster
-------------------
Peter J. Foster
Chief Executive Officer
and President
/s/ Kim S. Terry
----------------
Kim S. Terry
Principal Financial and
Accounting Officer
13
<PAGE> 14
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
27 Financial Data Schedule.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 1,282,731
<SECURITIES> 0
<RECEIVABLES> 1,018,332
<ALLOWANCES> 33,800
<INVENTORY> 635,452
<CURRENT-ASSETS> 3,030,944
<PP&E> 1,417,793
<DEPRECIATION> 956,961
<TOTAL-ASSETS> 3,511,777
<CURRENT-LIABILITIES> 939,433
<BONDS> 0
<COMMON> 38,988
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 3,511,777
<SALES> 4,937,449
<TOTAL-REVENUES> 4,937,449
<CGS> 1,609,560
<TOTAL-COSTS> 1,609,560
<OTHER-EXPENSES> 2,878,716
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 75,689
<INCOME-PRETAX> 373,484
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 373,484
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
