SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended JUNE 30, 1996
HENG FAI CHINA INDUSTRIES, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 0-7619 93-063633
(State Or Other Jurisdiction (Commission (IRS Employeee
Of Incorporation) File Number) Identification No.)
650 West Georgia Street, Suite 588, P.O. Box 11586, Vancouver,
(Address Of Principal Executive Offices) B.C. CANADA V6B 4N8
(Postal Code)
Registrant's telephone number, including area code (604) 685-8318
-----------------------------
Indicate by check mark whether 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 Registrant was required
to file such reports) and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
----- -----
As of August 13, 1996, there were 10,954,542 shares of common stock of
Registrant outstanding.
<PAGE>
HENG FAI CHINA INDUSTRIES, INC.
FORM 10-Q
FOR THE
QUARTER ENDED JUNE 30, 1996
INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements............................................1
Condensed Consolidated Balance Sheets as at
June 30, 1996 and December 31, 1995.............................2
Condensed Consolidated Statements of Operations for the
six and three months ended June 30, 1996 and 1995...............3
Condensed Consolidated Statements of Cash Flows for the
six months ended June 30, 1996 and 1995.........................4
Notes to Condensed Consolidated Financial Statements............5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings..............................................13
Item 2. Changes in Securities..........................................13
Item 3. Defaults Upon Senior Securities................................13
Item 4. Submission of Matters to a Vote of Securityholders.............13
Item 5. Other Information..............................................13
Item 6. Exhibits and Reports on Form 8-K...............................13
Signature Page.........................................................Last Page
i
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
The following financial statements of Heng Fai China
Industries, Inc. (the "Company") are provided herewith:
(a) Condensed Consolidated Balance Sheets as at June 30,
1996 and December 31, 1995;
(b) Condensed Consolidated Statements of Operations for
each of six months ended June 30, 1996 and June 30,
1995 and each of the three months ended June 30, 1996
and 1995;
(c) Condensed Consolidated Statements of Cash Flows for
each of the six months ended June 30, 1996 and June
30, 1995; and
(d) Notes to the Condensed Consolidated Financial
Statements.
<PAGE>
HENG FAI CHINA INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(United States Dollars)
<TABLE>
<CAPTION>
Notes As at As at
----- ----- -----
June 30, 1996 December 31, 1995
------------- -----------------
<S> <C> <C> <C>
Cash and cash equivalents 22,240 $ 55,001
Available-for-sale securities 4 417,111 480,835
Accounts receivable 40,176 29,307
Prepaids and other current assets 111,701 31,365
Inventories 5 192,718 154,370
- ------- -------
783,946 750,878
PROPERTY, net 6 844,057 857,548
PREPAID RENTAL 101,002 115,430
------- -------
Total Assets $1,729,005 $1,723,856
========== ==========
CURRENT LIABILITIES
Accounts payable 187,500 165,652
Bank overdraft 14,382 ---
Short-term borrowings 8 96,033 60,120
Margin loan payable 9 264,262 274,420
Interest payable 37,770 32,983
Security deposits payable 10,269 10,095
Accrued expenses 104,010 116,718
Due to related parties 92,265 22,005
Current portion of mortgage 17,324 17,325
------ ------
823,815 699,318
LONG-TERM LIABILITIES
Mortgages payable 975,086 975,108
Long-term payable 91,415 91,415
------ ------
1,890,316 1,765,841
--------- ---------
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, $10 par value,
500,000 shares authorized,
none issued --- ---
Share capital, $.01 par value,
30,000,000 shares authorized,
10,959,542 and 10,859,542
shares issued and outstanding 10 109,595 108,595
Contributed surplus 3,392,546 2,812,546
Unrealized gain (loss) on available-for-sale
securities 4 (107,665) (43,941)
Cumulative exchange adjustments 6,968 6,968
Accumulated deficit (3,562,755) (2,222,586)
---------- ----------
(161,311) 661,582
Common stock issued for consulting services
to be received 7 --- (703,567)
---------- --------
Total stockholders' equity (161,311) (41,985)
-------- -------
Total liabilities and stockholders' equity (deficit) $1,729,005 $1,723,856
========== ==========
See accompanying notes to the Condensed Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
HENG FAI CHINA INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(United States Dollars)
Six Months Ended June 30, Three Months Ended June 30,
Notes 1996 1995 1996 1995
--------- --------------- --------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenues
Rental income $169,650 $171,496 $83,283 $88,139
Sales of cement 174,795 55,220 90,637 55,220
Investment income 26,276 --- 26,276 ---
Laundry and interest income 2,981 5,290 1,552 2,484
Foreign exchange gain 1,379 7,490 1,379 3,424
----- ----- ----- -----
Total Revenues 375,081 239,496 203,127 149,267
------- ------- ------- -------
Expenses
Cost of cement sales 154,338 49,362 70,636 49,362
Amortization and depreciation 24,072 23,611 13,401 13,487
Legal and professional expenses 26,651 41,581 10,654 41,581
Consulting fees 7 1,290,395 277,925 445,354 277,925
Interest expenses 67,037 46,030 33,386 23,804
Land lease 40,531 40,095 20,310 20,377
Real estate management fees 6,817 8,984 3,288 6,439
Other administrative expenses 105,409 85,748 52,243 44,756
------- ------ ------ ------
Total Expenses 1,715,250 573,336 649,272 477,731
--------- ------- ------- -------
Net income (loss) $ (1,340,169) $(333,840) $(446,145) $(328,464)
============ ========= ========= =========
Net income (loss) per share $ (0.12) $(.03) $(0.04) $(.03)
======= ===== ====== =====
Weighted average common
shares outstanding 10,927,344 10,445,207 10,953,388 10,505,896
========== ========== ========== ==========
See accompanying notes to Condensed Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
HENG FAI CHINA INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(United States Dollars)
Six Months Ended June 30,
Notes 1996 1995
------- ------------------ -------------------
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net income (loss) $ (1,340,169) $ (333,840)
Adjustments to reconcile loss to net cash
used for operating activities:
Depreciation and amortization 38,500 23,811
Consulting fees paid in common stock 1,290,395 277,925
Prepaid rental 14,428 ---
Changes in working capital components:
Accounts receivable (10,869) (61,764)
Prepaids (80,336) (49,871)
Inventories (38,348) (72,711)
Accounts payable 21,848 (95,888)
Interest payable 4,787 8,107
Security deposits payable 174 (1,302)
Accrued expenses (12,708) 14,680
Due to related parties 70,260 (18,043)
Exchange difference 7,068 ---
----- -------
Net cash used in operating activities (34,970) (99,327)
------- -------
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of fixed assets --- (83,775)
--- -------
Net cash used in investing activities --- (83,775)
--- -------
CASH FLOW FROM FINANCING ACTIVITIES
Issue of shares --- 300,000
New short-term borrowings 35,913 71,568
Repayment of mortgage (9,164) (13,305)
Repayment of margin loan payable (10,158) ---
-------
Net cash provided by financing activities 16,591 340,220
------ -------
Net (decrease) increase in cash and cash equivalents (18,379) 157,118
------- -------
Cash and cash equivalents:
Beginning of the period 55,001 191,731
------ -------
End of the period 36,622 348,849
====== =======
ANALYSIS OF THE BALANCES OF CASH AND
CASH EQUIVALENTS
Bank Balances and Cash 22,240 348,849
Bank overdraft 14,382 ---
------ -------
36,622 348,849
====== =======
Non-cash financing activities:
Issuance of common stock for consultancy services $581,000 ---
See accompanying notes to the Condensed Consolidated Financial Statements.
</TABLE>
<PAGE>
HENG FAI CHINA INDUSTRIES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(United States Dollars)
1. BASIS OF PRESENTATION
In June 1994, Heng Fai China Industries, Inc., then known as
Alpine International Corporation ("Alpine") entered into a business
combination with Vancouver Hong Kong Properties Limited ("Vancouver
Hong Kong"), which owns and operates a residential rental property in
North Vancouver, British Columbia. The business combination resulted in
the shareholders of Vancouver Hong Kong being issued 10,357,700 shares
of common stock (the "Common Stock") and 10,357,700 common stock
purchase warrants (the "Warrants") of Alpine. As a part of the business
combination, a company related to Vancouver Hong Kong agreed to
subscribe for 1,500,000 shares of Common Stock and 1,500,000 common
stock purchase warrants for an aggregate of US$120,000 in cash. The
foregoing share numbers are before the effects of the Company's
subsequent one-for-four reverse stock split and a one-for-ten reverse
stock split. The business combination was accounted for as a reverse
acquisition whereby the purchase method of accounting was used with
Vancouver Hong Kong being the accounting parent. Accordingly, results
of operations for periods prior to the reverse acquisition are those of
Vancouver Hong Kong, and the results of Alpine's operations are
included only from the date of such reverse acquisition. Subsequent to
the business combination, the name of the legal parent Alpine was
changed to Heng Fai China Industries Inc. (the "Company").
The condensed consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries. The
condensed consolidated financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. 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 such rules and
regulations, although the Company believes that the disclosures are
adequate to make the information presented not misleading. The
condensed consolidated financial statements and the notes thereto
should be read in conjunction with the consolidated financial
statements included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1995.
In the opinion of the management of the Company, the
accompanying condensed consolidated financial statements contain all
necessary adjustments to present fairly the financial position, the
results of operations and cash flows for the periods reported. All
adjustments are a normal recurring nature.
The results of operations for the three months periods are not
necessarily indicative of the results to be expected for the full year.
<PAGE>
HENG FAI CHINA INDUSTRIES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(United States Dollars)
2. CONTINUING OPERATIONS
These consolidated financial statements have been prepared on
the going concern basis of accounting which assumes the Company will
realize its assets and discharge its liabilities in the normal course
of business. The Company is currently operating at a loss and has a
deficiency in net tangible assets. Should the Company be unable to
continue as a going concern it may be required to realize its assets
and settle its liabilities at amounts substantially different from the
current carrying values.
The Company's ability to continue as a going concern is
dependent on continued financial support from its principal shareholder
was has signed a letter of financial support to the Company.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in
the United States. The following sets forth the significant accounting
principles utilized in the preparation of the consolidated financial
statements:
Use of estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, and the disclosures of contingent
assets and liabilities at the date of the financial statements, and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates.
The Company holds certain investments in marketable equity
securities, which are carried at fair value. Future changes in the
market value of these securities could materially affect the Company's
financial position.
Principles of consolidation - The consolidated financial
statements include the accounts of Heng Fai China Industries, Inc. and
all significant subsidiaries. All significant intercompany transactions
and balances have been eliminated.
Cash and cash equivalents - Cash and cash equivalents include
cash on hand and short-term bank deposits.
Inventories - Inventories relating to the Company's cement
operations are stated at the lower of cost (determined on the first-in,
first-out method) or market. Cost includes material and conversion
cost.
<PAGE>
HENG FAI CHINA INDUSTRIES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(United States Dollars)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Trading-securities - Equity securities purchased principally
for the purpose of resale in the near term are classified as trading
securities and are measured at fair value, with unrealized gains and
losses included in earnings. Fair values are determined based on quoted
prices.
Investment securities - The Company has classified the
marketable equity securities it holds as available-for-sale.
Accordingly, pursuant to Statement of Financial Accounting Standard No.
115 the securities are measured at fair value, with unrealized gains
and losses, net of applicable taxes, reported as a separate component
of equity.
Depreciation and amortization of building and leasehold
improvements - Building and leasehold improvements are recorded at cost
and deprecation is provided as follows:
Building 5% declining balance
Leasehold improvements amortized over the term of the lease which
expires May 31, 2032 using the straight line
method
Foreign currency translation - Financial statements of
international subsidiaries are translated into U.S. dollars using the
exchange rate at each balance sheet date for assets and liabilities and
a weighted average exchange rate for each period for revenue and
expenses. Where the local currency is the functional currency,
translation adjustments are recorded as a separate component of
shareholders' equity. Where the U.S. dollar is the functional currency,
the financial statements of international subsidiaries are translated
at historical rates and translation adjustments are recorded in income.
4. AVAILABLE-FOR-SALE SECURITIES
The cost and approximate market value of investment securities
at June 30, 1996 were as follows:
<TABLE>
<CAPTION>
Gross Estimated Carrying
----- --------- --------
Cost Unrealized Loss Fair Value Value
---- --------------- ---------- -----
<S> <C> <C> <C> <C> <C>
Corporate equity
securities $524,776 107,665 417,111 417,111
======== ======= ======= =======
</TABLE>
<PAGE>
HENG FAI CHINA INDUSTRIES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(United States Dollars)
4. AVAILABLE-FOR-SALE SECURITIES - Continued
The Company acquired the investment securities for cash
financed partially by the Company's internal resources and partially by
a margin loan (See Note 9).
These investment securities are not subject to any contractual
or statutory resale restrictions and any portion of these stock can be
reasonably expected to qualify for sale within one year.
5. INVENTORIES
Inventories by major categories are summarized as follows:
June 30, 1996 December 31, 1995
------------- -----------------
Raw materials and supplies $ 45,434 $67,253
Work-in-progress 105,819 67,591
Finished goods 41,465 19,526
------ ------
Total inventories 192,718 154,370
======= =======
6. PROPERTY
The components of property are as follows:
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
------------- -----------------
<S> <C> <C>
Building $722,538 $722,538
Leasehold improvements 548,333 548,333
------- -------
Total 1,270,871 1,270,871
Less : accumulated depreciation and amortization 426,814 413,323
------- -------
844,057 857,548
======= =======
All premises and equipment are pledged to secure banking facilities extended to the Company.
</TABLE>
<PAGE>
HENG FAI CHINA INDUSTRIES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(United States Dollars)
7. DEFERRED EXPENDITURE
In June 1995, the Company entered into a consulting agreement
with previously unaffiliated parties pursuant to which it receives
various investor relations and financial advisory services. The
consulting agreement has a term of 12 months, subject to earlier
termination thereof or renewal for subsequent periods. Pursuant to the
terms of the agreement, the Company: (a) in June 1995, issued to the
consultant an aggregate of 260,000 shares of its common stock and (b)
is obligated to issue to the consultant 20,000 shares of its common
stock each month during the term of the agreement.
The value attributable to the 260,000 shares issued to the
consultant pursuant to the consulting agreement, $1,510,600, has been
capitalized and is being amortized over the 12 month term of the
consulting agreement. The value attributable to the shares of common
stock being issued on a monthly basis is being charged to expenses as
such shares of common stock are issued.
8. SHORT-TERM BORROWINGS
Short-term borrowings at June 30, 1996 represent bank
overdrafts on which the Company pays interest based on the "best
lending" rate in the PRC. The effective interest rate at June 30, 1996
was 14.42%.
9. MARGIN LOAN PAYABLE
The margin loan payable is to a third party and is
collateralized by the Company's investment securities with a carrying
value of US$417,111. The loan is repayable on demand and bears interest
at Hong Kong best lending rate (18.75% at June 30, 1996) plus 3.5 per
cent per annum.
<PAGE>
HENG FAI CHINA INDUSTRIES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(United States Dollars)
10. SHARE CAPITAL
The changes in share capital during the three months ended
June 30, 1996 were as follows:
<TABLE>
<CAPTION>
Common Shares
----------------------------------------------
Number of Contributed
Shares Amount Surplus
--------------------- --------------------- ---------------------
<S> <C> <C> <C>
Balance, December 31, 1995 10,859,542 $108,595 $2,812,546
Consulting Agreement (Note 5) 100,000 1,000 580,000
------- ----- -------
Balance, June 30, 1996 10,959,542 109,595 3,392,546
========== ======= =========
As of June 30, 1996, there were outstanding warrants exercisable to purchase 296,443 shares of common
stock, at an exercise price of $3.20 per share through September 2, 1999.
</TABLE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Introduction
The Company was originally incorporated in 1958 and until June 1994 had
been engaged in business other than those it presently operates, or, since its
Alpine 1992 emergence from reorganization under Chapter 11 of the U.S.
Bankruptcy code, had been inactive.
Vancouver Hong Kong owns and operates an apartment building in North
Vancouver, British Columbia, and until June 1995 the Company's operations were
comprised of that single segment. In January 1995, the Company acquired from Fai
Chan (an officer, director and principal stockholder of the Company) the
ownership of 100% of the common stock of Heng Fai China and Asia Industries
Limited ("Asia") and Asia's wholly-owned subsidiaries, Heng Fai China Industries
Limited ("China") and Heng Fai Light Products Limited ("Light"). Light, through
its subsidiary Cangzhou Min You Cement Company Limited ("Min You"), obtained the
right to acquire the use, for a period of five years commencing January 1,
11995, of a production line at Min You in the PRC. Min You was entitled to lease
the production line for five years by expending Renmibi ("RMB"), the currency of
the PRC, RMB1.2 million on the expansion and modernization of Min You. The
option was exercised and the required RMB1.2 million was expended in fiscal
1995, and beginning in June 1995 the Company's operations included a second
business segment, the production and sale of cement.
Results of Operations - Period Ended June 30, 1996 as Compared to the Period
Ended June 30, 1995
The Company generates revenue through the leasing of the apartment
building in North Vancouver, Canada and the sale of cement products. For the six
month's period ended June 30, 1996, approximately 45.23% of the Company's total
revenue was derived from the leasing of the apartment building while 46.60% was
contributed by the sale of cement products. Out of the total revenue about 7%
was generated through securities investment for the six month period ended June
30, 1996.
Revenues for the period ended June 30, 1996 increased to US$375,081
from US$239,496 for the period ended June 30, 1995, principally the result of
the revenues derived from the Company's cement operation which commenced in
June, 1995.
There were no significant changes in the expenses attributable to the
operation of Vancouver Hong Kong's real estate between the first half of fiscal
1996 and fiscal 1995.
The Company's net loss for the period ended June 30, 1996 was
$1,340,169, a change of US$1,006,329 compared to net loss of US$333,840 for the
corresponding period in 1995. The increases in the net loss was due to (i) the
operating loss for the cement segment; and (ii) higher general corporate
expenses, the consulting expenses in particular.
<PAGE>
General corporate expenses increased to US$1,715,250 for the period
ended June 30, 1996 from US$573,336 for the corresponding period in 1995 as the
result of consulting fees of US$1,290,395 and an increase of US$104,976 for the
production of cement. The consulting fees relate to an agreement the Company
entered into June 1995 for investor relations and financial advisory services
(see Note 7 of the Notes to the Condensed Consolidated Financial Statements).
Legal and professional fees increased for the period ended June 30, 1996 for the
expenses related to the Company's corporate exercises.
As at June 30, 1996, the Company held shares of common stock of three
companies traded on the Stock Exchange of Hong Kong Limited. As of June 30,
1996, the quoted market price of the shares are, in the aggregate, US$107,665
less than their initial costs. The securities are classified as available for
sale and, accordingly, the decrease in their market value has been debited
directly to stockholders' equity as a separate component thereof.
Liquidity and Capital Resources
The Company did not generate net profits from operations on an
accounting basis for the six months period ended June 30, 1996.
Operating cashflows for the three months period ended June 30, 1996
were a negative US$34,970. The Company met its working capital requirements by
(i) utilizing cash on hand at the end of the period ended June 30, 1996 of
US$22,240, and (ii) proceeds of US$50,295 obtained from bank overdraft and other
short-term borrowings.
As discussed in Note 2 of the Notes to the Condensed Consolidated
Financial Statements, the Company's operating losses and net asset deficiency
raise substantial doubts concerning the Company's ability to continue as a going
concern. However, the Company's principal shareholder has agreed to continue to
provide the Company with necessary financial support.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not a party to any pending or ongoing
litigation.
Item 2. Changes in Securities
There have been no changes in the securities of the Company
required to be disclosed pursuant to this item.
Item 3. Defaults upon Senior Securities
There has been no material default with respect to any
indebtedness of the Company required to be disclosed pursuant
to this item.
Item 4. Submission of Matters to a Vote of Securityholders
There have been no matters submitted to a vote of
securityholders during the six months ended June 30, 1996.
Item 5. Other Information
Not Applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: None.
(b) Reports on Form 8-K: None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HENG FAI CHINA INDUSTRIES, INC.
Dated: By:
--------------------------
Robert H. Trapp
Secretary and Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000004165
<NAME> Heng Fai China Industries, Inc.
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 22,240
<SECURITIES> 417,111
<RECEIVABLES> 40,176
<ALLOWANCES> 0
<INVENTORY> 192,718
<CURRENT-ASSETS> 783,946
<PP&E> 1,270,871
<DEPRECIATION> 426,814
<TOTAL-ASSETS> 1,729,005
<CURRENT-LIABILITIES> 823,815
<BONDS> 975,086
0
0
<COMMON> 109,595
<OTHER-SE> 3,392,546
<TOTAL-LIABILITY-AND-EQUITY> 1,729,005
<SALES> 174,795
<TOTAL-REVENUES> 375,081
<CGS> 154,338
<TOTAL-COSTS> 1,715,250
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,340,169)
<EPS-PRIMARY> (0.12)
<EPS-DILUTED> 0
</TABLE>
