-7-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file Number 0-12965
NESTOR, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3163744
(State of incorporation) (I.R.S. Employer
Identification No.)
One Richmond Square, Providence, RI 02906
(Address of principal executive offices) (Zip Code)
401-331-9640
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15 (d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period than 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 _________
Common stock, par value .01 per share: 17,567,034 shares
outstanding as of March 31, 2000
NESTOR, INC.
FORM 10 Q
March 31, 2000
INDEX
PART 1 FINANCIAL INFORMATION
Item 1 Financial Statements:
Condensed Consolidated Balance Sheets
March 31, 2000 (Unaudited) and December 31, 1999
Condensed Consolidated Statements of Operations (Unaudited)
Quarters ended March 31, 2000 and 1999
Condensed Consolidated Statements of Cash Flows (Unaudited)
Quarters Ended March 31, 2000 and 1999
Notes to Condensed Consolidated Financial Statements
Item 2 Management's Discussion and Analysis of
Results of Operations and Financial Condition
Item 3 Quantitative and Qualitative Disclosure of Market Risk
PART 2 OTHER INFORMATION
<TABLE>
Nestor, Inc.
Condensed Consolidated Balance Sheets
<CAPTION>
March 31, 2000 December 31, 1999
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 476,910 $ 1,048,802
Accounts receivable, net of
allowance for doubtful accounts 1,384,495 984,318
Unbilled contract revenue 1,039,210 1,200,484
Due from affiliate 320,576 320,459
Other current assets 202,903 161,809
Total current assets 3,424,094 3,715,872
Noncurrent assets:
Long term unbilled contract revenue 2,071,225 1,965,532
Investment in affiliate 320,512 710,690
Property and equipment - net 245,738 269,917
Deferred development costs - net 50,000 56,000
Patent development costs 65,092 55,894
Total Assets $ 6,176,661 $ 6,773,905
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and
other current liabilities $ 1,266,619 $ 1,133,398
Deferred income 1,188,284 1,371,217
Total current liabilities 2,454,903 2,504,615
Noncurrent liabilities:
Long term deferred income 2,071,225 1,965,532
Total liabilities 4,526,128 4,470,147
Stockholders' equity:
Preferred Stock Series B,
$1.00 par value, authorized
10,000,000 shares; Issued and
outstanding 325,000 shares
at March 31, 2000 and 345,000
shares at December 31, 1999
(liquidation value $1.00
per share) 325,000 345,000
Common Stock, $.01 par value,
authorized 30,000,000 shares;
Issued and outstanding
17,567,034 shares at
March 31, 2000 and 17,499,327
shares at December 31, 1999 175,670 174,993
Warrants and options 763,572 736,951
Additional paid-in capital 26,651,204 26,574,123
Retained deficit (26,264,913) (25,527,309)
Total stockholders' equity 1,650,533 2,303,758
Total Liabilities and
Stockholders' Equity $ 6,176,661 $ 6,773,905
The Notes to the Condensed Consolidated Financial Statements are an
integral part of this statement.
</TABLE>
<TABLE>
Nestor, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
<CAPTION>
Quarter Ended March 31,
2000 1999
<S> <C> <C>
Revenues:
Software licensing $ 823,656 $ 1,198,526
Engineering services 375,643 175,362
Total revenues 1,199,299 1,373,888
Operating expenses:
Engineering services 288,382 208,333
Research and development 327,594 250,779
Selling and marketing expenses 376,189 321,669
General and administrative expenses 530,904 240,527
Total operating expenses 1,523,069 1,021,308
Income (loss) from operations (323,770) 352,580
Other expense (23,656) (23,056)
Income (loss) for the period before
income taxes (benefit) and
investment loss (347,426) 329,524
Income taxes (benefit) --- ---
Loss from investment in affiliate (390,178) (312,884)
Net income (loss) for the period $ (737,604) $ 16,640
Income (loss) per share,
basic and diluted $ (0.04) $ 0.00
Basic and diluted shares 17,863,031 17,844,327
The Notes to the Condensed Consolidated Financial Statements are
an integral part of this statement.
</TABLE>
<TABLE>
Nestor, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<CAPTION>
Quarter Ended March 31,
2000 1999
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (737,604) $ 16,640
Adjustments to reconcile net income
(loss) to net cash used by operating
activities:
Depreciation and amortization 30,179 32,361
Loss from investment in affiliate 390,178 312,884
Expenses charged to operations
relating to warrants and
capital transactions 26,621 26,621
Changes in assets and liabilities:
(Increase) in accounts receivable (400,177) (259,493)
(Increase) decrease in unbilled
contract revenue 55,581 (257,138)
(Increase) in other assets (41,094) (237,224)
Increase in accounts payable
and other current liabilities 136,260 117,720
(Decrease) in deferred income (77,240) (128,813)
Net cash used by
operating activities (617,296) (376,442)
Cash flows from investing activities:
Advances to affiliate - net (117) (270,093)
Purchase of property and equipment --- (3,189)
Patent development costs (9,198) ---
Net cash used by
investing activities (9,315) (273,282)
Cash flows from financing activities:
Repayment of obligations under
capital leases (3,039) (12,797)
Proceeds from issuance of common stock 57,758 ---
Net cash provided (used)by
financing activities 54,719 (12,797)
Net change in cash and cash equivalents (571,892) (662,521)
Cash and cash equivalents -
beginning of period 1,048,802 1,175,183
Cash and cash equivalents -
end of period $ 476,910 $ 512,662
Supplemental cash flows information
Interest paid $ 2,116 $ 4,636
Income taxes paid $ --- $ ---
The Notes to the Condensed Consolidated Financial Statements are an
integral part of this statement.
</TABLE>
Nestor, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
March 31, 2000
Note 1 - Basis of Presentation:
The accompanying unaudited condensed 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. Operating results for the quarter ended
March 31, 2000 are not necessarily indicative of the results that
may be expected for the year ended December 31, 2000.
The balance sheet at December 31, 1999 has been derived from the
audited financial statements at that date but does not include
all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.
For further information, refer to the audited consolidated
financial statements and footnotes thereto included in the
Registrant Company and Subsidiaries' annual report on Form 10-K
for the year ended December 31, 1999.
Nestor, Inc. organized two wholly-owned subsidiaries, Nestor
Traffic Systems, Inc. ("NTS") and Nestor Interactive, Inc.
("Interactive") effective January 1, 1997. On March 25 and
November 30, 1999, NTS sold in the aggregate a 58.1% common-stock
interest to a private group of investors. As a result of these
transactions, the Company changed from consolidation to equity
accounting for its interest in NTS for the year ended December
31, 1999. Effective November 7, 1998, the Company ceased further
investment in the Interactive subsidiary. Any future marketing
or development of Interactive's product has been transferred to
Nestor, Inc. All intercompany transactions and balances have been
eliminated.
The following unaudited information presents summarized quarterly
results for the quarter ended March 31, 1999, as previously
reported and as presented in the accompanying condensed financial
statements to reflect the equity method of accounting for NTS.
As Previously
Reported Reclassified
Total revenues $ 1,441,168 $ 1,373,888
Income (loss) from
operations (148,035) 352,580
Minority interest 187,731 ---
Loss from investment
in affiliate --- (312,884)
Net income 16,640 16,640
Presented below is summarized NTS financial information at March
31, 2000, December 31, 1999 and for the quarters ended March 31,
2000 and 1999:
March 31, 2000 December 31, 1999
Current assets $ 1,180,211 $ 2,125,602
Noncurrent assets 270,845 295,958
Current liabilities 685,381 723,781
Stockholders' equity 765,676 1,697,779
Quarter Ended March 31,
2000 1999
Total revenues $ 176,238 $ 67,280
Operating expenses 1,122,060 567,895
Net loss 932,103 500,615
NTS is a development stage company, focusing activities primarily
on raising capital, research and development, establishing supply
and production processes, and sales and marketing. Accordingly,
NTS's continuation as a going concern is uncertain subject to
their ability to raise additional capital and generate sufficient
revenue to support future operations.
Note 2 - Litigation:
On October 6, 1998, HNC Software Corp. ("HNC"), a significant
competitor of the Company's in the field of Financial Services,
obtained a patent titled "Fraud Detection Using Predictive
Modeling" and began advising prospective customers of the Company
of the patent. Upon review of the patent and consideration of
prior actions taken by HNC, the Company initiated a lawsuit
against HNC in the United States District Court in Providence, RI
on November 25, 1998 alleging violation of Sections 1 and 2 of
the Sherman Act (antitrust), violation of the Rhode Island
Antitrust Act, patent invalidity, and infringement of Nestor's
patents (infringement claims withdrawn January 10, 2000). The
suit seeks various damages, including lost profits and treble
damages.
On June 15, 1999, HNC answered the lawsuit denying the
allegations, bringing a counterclaim alleging infringement of the
above described patent by the Company, and seeking a declaration
of invalidity and unenforceability of one of the Company's
patents. On the same day, HNC brought suit in San Diego, CA
against the Company's marketing partner, Applied Communications,
Inc. (ACI) and ACI's parent alleging various causes of action
including patent infringement of the above described patent by
the Company's PRISM product which ACI markets. In April 2000,
HNC, ACI and its parent agreed to dismiss the lawsuit. ACI has
requested that the Company provide indemnification against some
of its legal counsel costs pursuant to the PRISM license agreement
between ACI and the Company.
Costs associated with the suit are being expensed as incurred.
Although the Company believes that it will prevail, there can be
no assurance as to the outcome of this suit, the counterclaim, or
the ACI indemnity claim. Any conclusion of this litigation in a
manner adverse to the Company may have an adverse effect on its
future financial condition and results of operations.
Management's Discussion and Analysis of Results of Operations
and Financial Condition
Prospective Statements
The following discussion contains prospective statements
regarding Nestor, Inc. and its subsidiaries, its business outlook
and results of operations that are subject to certain risks and
uncertainties and to events that could cause the Company's actual
business, prospects and results of operations to differ
materially from those that may be anticipated by, or inferred
from, such prospective statements. Factors that may affect the
Company's prospects include, without limitation: the Company's
ability to successfully develop new contracts for technology
development; the impact of competition on the Company's revenues
or market share; delays in the Company's introduction of new
products; and failure by the Company to keep pace with emerging
technologies.
The Company's quarterly revenues and operating results have
varied significantly in the past and may do so in the future. A
significant portion of the Company's business has been derived
from individually substantial licenses, and the timing of such
licenses has caused material fluctuations in the Company's
operating results. In addition, because the Company provides
certain of its products to customers under licenses with no
significant continuing obligations, it recognizes the majority of
its revenue upon the delivery of the software and acceptance by
the customer. Thus, revenues derived by the Company may be more
likely to be recognized in irregular patterns that may result in
quarterly variations in the Company's revenues.
The Company's expense levels are based in part on its product
development efforts and its expectations regarding future
revenues and in the short term are generally fixed. Therefore,
the Company may be unable to adjust its spending in a timely
manner to compensate for any unexpected revenue shortfall. As a
result, if anticipated revenues in any quarter do not occur or
are delayed, the Company's operating results for the quarter
would be disproportionately affected. Operating results also may
fluctuate due to factors such as the demand for the Company's
products, product life cycles, the development, introduction and
acceptance of new products and product enhancements by the
Company or its competitors, changes in the mix of distribution
channels through which the Company's products are offered,
changes in the level of operating expenses, customer order
deferrals in anticipation of new products, competitive conditions
in the industry and economic conditions generally or in various
industry segments.
The Company expects quarterly fluctuations to continue for the
foreseeable future. Accordingly, the Company believes that
period-to-period comparisons of its financial results should not
be relied upon as an indication of the Company's future
performance. No assurance can be given that the Company will be
able to achieve or maintain profitability on a quarterly or
annual basis in the future.
Readers are cautioned not to place undue reliance on these
prospective statements, which speak only as of the date of this
report. The Company undertakes no obligation to revise any
forward-looking statements in order to reflect events or
circumstances that may subsequently arise. Readers are urged to
carefully review and consider the various disclosures made by the
Company in this report and in the Company's reports filed with
the Securities and Exchange Commission, including Exhibit 99.1 to
the Company's December 31, 1999 Form 10-K.
Results of Operations
For the quarter ended March 31, 2000, the Company realized
consolidated revenues totaling $1,199,000 and expenses of
$1,523,000, which resulted in a consolidated operating loss for
the quarter of $324,000 before taxes and loss from investment in
affiliate. The Company reported a consolidated net loss of
$738,000 for the current quarter after allowance for loss from
investment in affiliate (Nestor Traffic Systems, Inc., a 42%
owned affiliate) of $390,000. In the corresponding quarter of
the prior year, consolidated revenues and expenses totaled
$1,374,000 and $1,021,000, respectively, producing income from
operations of $353,000, and after loss from investment in
affiliate in the amount of $313,000, the Company reported net
income of $17,000.
Revenues
The Company's revenues arise from licensing of the Company's
products and technology, and from contract engineering and
modeling services. During the quarter ended March 31, 2000,
consolidated revenues decreased 13% to $1,199,000 from $1,374,000
in the quarter ended March 31, 1999. The decrease results
primarily from a reduction in new licenses realized in the
quarter offset in part by increased billable engineering
services.
Software Licensing
Total product-licensing revenues were $824,000 in the quarter
ended March 31, 2000, a 31% decrease from $1,199,000 reported in
the same quarter of the prior year.
The decrease in revenues from the prior-year is attributable to
two new PRISM licenses delivered in the prior year to CSK, our
marketing partner in Japan. These licenses, totaling
approximately $580,000, were not replicated by CSK in 2000. This
decrease was partially offset by five new licenses realized from
direct sales and through our worldwide marketing partner, Applied
Communications, Inc., as compared to two new licenses in 1999.
In addition, monthly license fees that are generally based upon
volume levels decreased 7% to $271,000 in the current quarter
versus 1999 as three licenses transferred or terminated in late
1999 and were not fully offset by new licenses contributing
monthly license fees or growth in current customer volumes. As
of March 31, 2000, the Company has eleven customers that are
expected to begin producing monthly license fees in the coming
year.
Engineering Services
During the quarter ended March 31, 2000, revenues from
engineering contracts increased 114% to $375,000 from $175,000 in
the corresponding quarter of the prior year.
The increase in engineering revenues is primarily the result of
additional project management, customization and modeling fees
associated with the increase in new licenses during 1999 and 2000
which generally are not yet producing monthly license fees, as
discussed above.
Operating Expenses
Total operating expenses amounted to $1,523,000 in the quarter
ended March 31, 2000, an increase of $502,000 (49%) from total
operating costs of $1,021,000 in the corresponding quarter of the
prior year. The primary reasons for the increase include
increased legal fees and reserve for uncollectable accounts and
increases in engineering and sales headcount.
Engineering Services
Costs related to engineering services totaled $288,000 in the
quarter ended March 31, 2000, as compared to $208,000 in the
corresponding quarter of the prior year and reflect the
associated increase in revenues in the respective periods. As a
percentage of related engineering revenues, these costs decreased
from 118% last year to 77% this year reflecting a higher
chargeable efficiency rate in 2000 resulting from the increase in
new licenses discussed above.
Research and Development
Research and development expenses totaled $328,000 in the quarter
ended March 31, 2000, as compared with $251,000 in the year-
earlier period. Increases in 2000 relate primarily to efforts in
three areas, (i) PRISM 5.0 release modifications including work
to enable internet fraud detection application, (ii) modification
of PRISM code for Money Laundering applications, and (iii) the
update and integration of the Company's CampaignOne and InterSite
products into eCLIPSE for enterprise-wide customer relationship
management applications.
Selling and Marketing
Selling and marketing costs totaled $376,000 in the quarter ended
March 31, 2000, as compared with $322,000 in the corresponding
quarter of the prior year, an increase of 17%. The increase
reflects additional marketing efforts by the Company including a
net addition of two salesmen to the sales and marketing staff.
General and Administrative
General and administrative expenses totaled $531,000 in the
quarter ended March 31, 2000, as compared with $240,000 in the
corresponding quarter of the prior year, representing an increase
of 121%. The increase reflects a $210,000 increase in legal
expenses primarily related to the Nestor vs. HNC Software
lawsuit. Other increases include three additional administrative
staff and increased public relations fees.
Loss from Investment in Affiliate
During March and November 1999, the Company's subsidiary NTS
sold, in the aggregate, common stock interests totaling 58% of
its equity. As a result, the Company's interests in NTS are
accounted for under the equity method of accounting. The
Company reported a loss from investment in affiliate of $390,000
in the quarter ended March 31, 2000, representing 42% of NTS's
actual net loss in the quarter of $932,000. In the quarter ended
March 31, 1999, the Company reported a loss from investment in
affiliate of $313,000 representing 62% of NTS's actual net loss
in the prior year quarter of $501,000.
Net Loss Per Share
During the quarter ended March 31, 2000, the Company experienced
a net loss of $738,000, or $.04 per share as compared with net
income of $17,000, or $.00 per share in the corresponding period
of the prior year. During the quarter ended March 31, 2000, there
were outstanding basic and diluted 17,863,000 shares of common
stock as compared with 17,844,000 shares during the corresponding
quarter of the previous year.
Liquidity and Capital Resources
Cash Position and Working Capital
The Company had consolidated cash and cash equivalents of
approximately $477,000 at March 31, 2000, as compared with
$1,049,000 at December 31, 1999. At March 31, 2000, the Company
had working capital of $969,000 as compared with working capital
of $1,211,000 at December 31, 1999.
The Company's net worth at March 31, 2000 was $1,651,000, as
compared with a net worth of $2,304,000 at December 31, 1999.
The decrease in net worth results primarily from net loss
reported in the current period.
On March 24, 1999, the Company entered into a $1,000,000 Line of
Credit agreement with Transaction Systems Architects, Inc.
("TSAI"). The loan is secured by the royalty streams and other
fees produced by the Company's license agreements with Financial
Solutions Division customers. Principal payments are due in
twelve equal monthly installments beginning March 1, 2001.
Interest on the loan is equal to the effective prime interest
rate plus 1%. The line may be reduced to $500,000 if the
Company's equity becomes negative or increased up to $4,000,000
if certain financial requirements are attained. There have been
no borrowings against this line of credit as of March 31, 2000.
Management believes that the Company's liquid assets, backlog and
available line of credit at March 31, 2000 are sufficient to meet
the Company's anticipated cash requirements through the year
ending December 31, 2000.
Backlog
As of March 31, 2000, December 31, 1999 and March 31, 1999, the
Company had revenue backlogs of $2,833,000, $2,751,000, and
$2,642,000, respectively, in software license, engineering fees,
and other product and service fees. The Company includes in its
revenue backlog all fees specified in contracts that have been
executed by the Company to the extent that the Company
contemplates recognition of the related revenue within one year.
There can be no assurance that the contracts included in revenue
backlog will actually generate the specified revenues or that the
actual revenues will be generated within the one-year period.
Deferred Income
Operations of the Company have been partly funded by prepayments
under engineering contracts and licenses of the Company's
technology. Such prepayments are recognized as revenue under the
percentage-of-completion method as engineering is completed or
delivery obligations are fulfilled. The Company bases its
estimate of the percentage of completion on the amount of labor
applied to a given project compared with the estimated total
amount of labor required. The remainder of such prepaid revenue
is reflected on the Company's balance sheet as deferred income,
and is treated as a liability. Additionally, most of the
Company's licenses provide for a minimum monthly license fee over
the term of the respective license. The Company defers
recognition of theses license fees over the license term. Total
deferred income was $3,260,000 at March 31, 2000 as compared with
$3,337,000 at December 31, 1999.
Future commitments
The Company has no material commitments for capital expenditures
although management expects that the Company may make future
commitments for the purchase of additional computing and related
equipment, for consulting and for promotional and marketing
expenses.
ITEM 3: Quantitative and Qualitative Disclosure of Market Risk
Management assesses their exposure to these risks as immaterial.
NESTOR, INC.
FORM 10 Q
March 31, 2000
Item 1: Legal Proceedings.
On October 6, 1998, HNC Software Corp. ("HNC"), a significant
competitor of the Company's in the field of Financial Services,
obtained a patent titled "Fraud Detection Using Predictive
Modeling" and began advising prospective customers of the Company
of the patent. Upon review of the patent and consideration of
prior actions taken by HNC, the Company initiated a lawsuit
against HNC in the United States District Court in Providence, RI
on November 25, 1998 alleging violation of Sections 1 and 2 of
the Sherman Act (antitrust), violation of the Rhode Island
Antitrust Act, patent invalidity, and infringement of Nestor's
patents (infringement claims withdrawn January 10, 2000). The
suit seeks various damages, including lost profits and treble
damages.
On June 15, 1999, HNC answered the lawsuit denying the
allegations, bringing a counterclaim alleging infringement of the
above described patent by the Company, and seeking a declaration
of invalidity and unenforceability of one of the Company's
patents. On the same day, HNC brought suit in San Diego, CA
against the Company's marketing partner, Applied Communications,
Inc. (ACI) and ACI's parent alleging various causes of action
including patent infringement of the above described patent by
the Company's PRISM product which ACI markets. In April 2000,
HNC, ACI and its parent agreed to dismiss the lawsuit. ACI has
requested that the Company provide indemnification against some
of its legal counsel costs pursuant to the PRISM license agreement
between ACI and the Company.
Costs associated with the suit are being expensed as incurred.
Although the Company believes that it will prevail, there can be
no assurance as to the outcome of this suit, the counterclaim, or
the ACI indemnity claim. Any conclusion of this litigation in a
manner adverse to the Company may have an adverse effect on its
future financial condition and results of operations.
Item 2: Changes in Securities
Item 3: Defaults on Senior Securities
Item 4: Submission of Matters to a Vote of Security Holders
Item 5: Other Information
Item 6: Exhibits and reports on Form 8-K
(a) Exhibits - None
(b) The Company did not file any reports on Form 8-K
during the quarter ended March 31, 2000.
FORM 10-Q
NESTOR, INC.
SIGNATURE
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.
NESTOR, INC.
(REGISTRANT)
DATE: May 15, 2000 By: /s/Nigel P. Hebborn
Chief Financial Officer
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-1999
<CASH> 476,910
<SECURITIES> 0
<RECEIVABLES> 1,384,495
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,424,094
<PP&E> 245,738
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,176,661
<CURRENT-LIABILITIES> 2,454,903
<BONDS> 0
0
325,000
<COMMON> 175,670
<OTHER-SE> 1,149,863
<TOTAL-LIABILITY-AND-EQUITY> 6,176,661
<SALES> 0
<TOTAL-REVENUES> 1,199,299
<CGS> 0
<TOTAL-COSTS> 1,523,069
<OTHER-EXPENSES> (23,656)
<LOSS-PROVISION> (390,178)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (737,604)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (737,604)
<EPS-BASIC> (.04)
<EPS-DILUTED> (.04)
</TABLE>
