<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- ---
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998
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 0-13244
GATEFIELD CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 41-1404495
(State of incorporation) (I.R.S. Employer Identification No.)
47100 BAYSIDE PARKWAY, FREMONT, CALIFORNIA 94538
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (510) 623-4400
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 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 practicable date.
<TABLE>
<CAPTION>
Title of Each Class Outstanding at May 5, 1998,
------------------- ---------------------------
<S> <C>
Common stock, par value $0.10 per share 40,850,805
</TABLE>
<PAGE>
GATEFIELD CORPORATION
INDEX
Page
Number
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of March 31, 1998
and December 31, 1997 2
Condensed Consolidated Statements of Operations for the Three
Months Ended March 31, 1998 and March 31, 1997 3
Condensed Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 1998 and March 31, 1997 4
Notes to Condensed Consolidated Financial Statements, March 31,
1998 5
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURE 12
1
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GATEFIELD CORPORATION
(FORMERLY ZYCAD CORPORATION)
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
(IN THOUSANDS, EXCEPT SHARE AMOUNTS) 1998 1997
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 5,811 $ 4,189
Short-term investments 98 98
Accounts receivable, less allowance for doubtful
accounts of $527 in 1998 and $528 in 1997 2,841 2,763
Inventories 777 735
Other current assets 549 524
--------- --------
Total current assets 10,076 8,309
Property and equipment, net 2,448 2,660
Other assets 297 287
--------- ---------
Total assets $ 12,821 $ 11,256
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term obligations $ 473 $ 516
Accounts payable 3,476 3,741
Accrued expenses 2,964 3,118
Deferred revenues 1,254 981
--------- ---------
Total current liabilities 8,167 8,356
Other long-term liabilities 15 71
--------- ---------
Total liabilities 8,182 8,427
Stockholders' equity:
Preferred stock:
$0.10 par value; 2,000,000 shares authorized;
shares issued and outstanding: 1,000,000 in 1998 and 1997 100 100
Additional paid-in capital, preferred stock 4,528 4,494
Common stock:
$0.10 par value; 65,000,000 shares authorized; shares issued
and outstanding: 41,324,806 in 1998 and 36,222,326 in 1997 4,132 3,622
Additional paid-in capital, common stock 71,129 66,776
Accumulated translation adjustments (633) (544)
Accumulated deficit (74,617) (71,619)
--------- ---------
Total stockholders' equity 4,639 2,829
--------- ---------
Total liabilities and stockholders' equity $ 12,821 $ 11,256
--------- ---------
--------- ---------
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
2
<PAGE>
GATEFIELD CORPORATION
(FORMERLY ZYCAD CORPORATION)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1998 1997
- -------------------------------------------------------------------------------------
<S> <C> <C>
Revenues:
Product $ 640 $ 1,160
Service 1,209 2,924
--------- ---------
Total revenues 1,849 4,084
--------- ---------
Cost of revenues:
Product 1,050 1,383
Service 760 1,818
--------- ---------
Total cost of revenues 1,810 3,201
--------- ---------
Gross profit 39 883
--------- ---------
Operating expenses:
Sales and marketing 915 3,253
Research and development 1,298 2,666
General and administrative 765 507
--------- ---------
Total operating expenses 2,978 6,426
--------- ---------
Operating loss (2,939) (5,543)
Other income (expense), net (24) (67)
--------- ---------
Net loss $ (2,963) $ (5,610)
--------- ---------
--------- ---------
Basic and diluted net loss per share $ (0.07) $ (0.22)
--------- ---------
--------- ---------
Basic and diluted weighted average shares outstanding 41,325 25,258
--------- ---------
--------- ---------
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE>
GATEFIELD CORPORATION
(FORMERLY ZYCAD CORPORATION)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
(IN THOUSANDS) 1998 1997
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Operating activities:
Net loss $ (2,963) $ (5,610)
Reconciliation to net cash used in operating activities:
Depreciation and amortization 289 1,115
Subordinated convertible debt interest capitalized - 219
Collections under capital leases - 516
Changes in assets and liabilities:
Accounts receivable (77) 5,729
Inventories (41) 140
Other assets (41) (86)
Accounts payable and accrued expenses (395) (1,615)
Deferred revenues 236 (434)
--------- ---------
Net cash used in operating activities (2,992) (26)
-------- ---------
Investing activities:
Property and equipment purchases, net (77) (336)
Capitalized software - (150)
--------- ---------
Net cash used in investing activities (77) (486)
--------- ---------
Financing activities:
Proceeds from issuance of convertible debenture notes, net - 3,500
Proceeds from issuance of common stock 4,864 65
Bank financing, net - (1,804)
Repayments of debt obligations (91) (1,233)
--------- ---------
Net cash provided by financing activities 4,773 528
--------- ---------
Effect of exchange rate changes on cash and cash equivalents (82) 109
--------- ---------
Net change in cash and cash equivalents 1,622 125
Cash and cash equivalents, beginning of period 4,189 1,703
--------- ---------
Cash and cash equivalents, end of period $ 5,811 $ 1,828
--------- ---------
--------- ---------
Supplemental disclosure of cash flow information:
Noncash activities -
Common stock issued for convertible debentures $ - $ 4,042
Cash activities -
Cash paid during the period for interest $ 103 $ 201
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
4
<PAGE>
GATEFIELD CORPORATION
(FORMERLY ZYCAD CORPORATION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1998
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
contain all adjustments of a normal recurring nature that are, in the
opinion of management, necessary to present fairly the financial position
and results of operations of GateField Corporation, formerly known as Zycad
Corporation, (the Company). Interim results of operations are not
necessarily indicative of the results to be expected for the full year.
The Company's interim fiscal quarter ended on March 31, 1998 and 1997,
respectively. The condensed consolidated financial statements should be
read in conjunction with the financial statements and the notes thereto for
the year ended December 31, 1997, included in the Company's 1997 Annual
Report on Form 10-K.
2. COMPREHENSIVE INCOME
In January 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, REPORTING COMPREHENSIVE INCOME, which requires reporting
by major components and as a single total, the change in its net assets
during the period from nonowner sources. For the three months ended March
31, 1998 and 1997, the change in net assets from nonowner sources was
$89,000 and $63,000, respectively, for the change in the accumulated
translation adjustment, and comprehensive loss was $3,052,000 and
$5,673,000, respectively.
3. NET INCOME (LOSS) PER SHARE
In 1997, the Company adopted SFAS No. 128, "Earnings Per Share" which
requires a dual presentation of basic and diluted earnings per share
("EPS"). Basic EPS excludes dilution and is computed by dividing net
income attributable to common stockholders by the weighted average of
common shares outstanding for the period. Diluted EPS reflects the
potential dilution that could occur if securities or other contracts to
issue common stock (convertible preferred stock, warrants to purchase
convertible preferred stock and common stock options using the treasury
stock method) were exercised or converted into common stock. Potential
common shares in the diluted EPS computation are excluded in net loss
periods, as their effect would be antidilutive. EPS for all periods have
been computed in accordance with SFAS No. 128.
4. INVENTORIES
Inventories consisted of:
<TABLE>
<CAPTION>
March 31, December 31,
(IN THOUSANDS) 1998 1997
---------------------------------------------------------
<S> <C> <C>
Raw materials and supplies $ 332 $ 306
Finished goods 445 429
------- --------
$ 777 $ 735
------- --------
------- --------
</TABLE>
5. SALE OF COMMON STOCK
In January 1998, the Company issued 4,582,500 shares of Common Stock to an
outside investor for an aggregate purchase price of $4,583,000 pursuant to
a Stock Purchase Agreement entered into in November 1997. The issuance of
Common Stock completes the second and final phase of the private placement
of securities contemplated by the Agreement.
5
<PAGE>
6. SUBSEQUENT EVENT
Included in accounts payable at March 31, 1998 and December 31, 1997 is
$1,667,000 due to a supplier which is in dispute. In April and May, 1998,
the Company has resolved and paid $737,000 of the outstanding balance.
The remaining amount is subject to renegotiation.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The discussion in this Report contains forward-looking statements that involve
risks and uncertainties. The statements contained in this Report that are not
purely historical are forward looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended including statements regarding the Company's
expectations, beliefs, intentions or strategies regarding the future. All
forward looking statements included in this document are based on information
available to the Company on the date hereof, and the Company assumes no
obligation to update any such forward-looking statements. The Company's actual
results could differ materially from those discussed herein. Factors that could
cause or contribute to such differences include, but are not limited to, those
discussed in "Factors Affecting Future Results" as well as those discussed in
this section and elsewhere in this Report, and the risks discussed in the
Company's Securities and Exchange Commission filings.
RESULTS OF OPERATIONS
Three Months Ended March 31, 1998 and 1997
REVENUES
Total revenues for the quarter ended March 31, 1998 were $1.8 million compared
to $4.1 million for the quarter ended March 31, 1997, a decrease of 55%.
Product revenues for the quarter ended March 31, 1998 were $640,000 compared to
$1.2 million for the quarter ended March 31, 1997, a decrease of 45%. Service
revenues for the quarter ended March 31, 1998 were $1.2 million compared to $2.9
million for the quarter ended March 31, 1997, a decrease of 59%. The decrease in
revenue was primarily due to the disposition of several product families in
1997. These dispositions included the sale of the LightSpeed product family,
the sale of the Company's ownership interest in QSS Inc., the sale of the
Company's XP and PXP hardware fault simulation business, and the sale of the
Company's software fault and test products known as the TDX product line. The
Company is currently focused on growing revenue from its reprogrammable
ASIC products and related design services, which the Company began marketing in
1997.
GROSS PROFIT
Total gross profit was $39,000 or 2% of total revenue compared to $883,000 or
22% of total revenue for the three months ended March 31, 1998 and 1997,
respectively. The loss from product revenues at the gross margin level was
$410,000 for the three months ended March 31, 1998 as compared to a loss of
$223,000 for the three months ended March 31, 1997. Gross profit from
service revenues was $449,000, or 37%, for the three months ended March 31,
1998 compared to $1.1 million, or 38%, for the three months ended March 31,
1997. This decrease in gross profit from product revenues in 1998 as compared
to 1997 was primarily due to the dispositions mentioned above and the
start-up nature of the Company's current production processes.
OPERATING EXPENSES
SALES AND MARKETING Sales and marketing expenses were $915,000 for the
quarter ended March 31, 1998 and $3.3 million for the quarter ended March 31,
1997, which represents 49% of total revenues in 1998 and 80% of total
revenues in 1997. The decrease in sales and marketing expenses is largely
the result of reduced staffing levels resulting from the sale of the
verification, test and maintenance businesses. The decrease in sales and
marketing expenses as a percentage of total revenues in 1998 as compared to
1997 is primarily due to management's efforts to control expenses in 1998.
RESEARCH AND DEVELOPMENT
Research and development expenses decreased to $1.3 million for the three months
ended March 31, 1998 compared to $2.7 million for the three months ended March
31, 1997. This decrease in 1998 as compared to 1997 is mainly due to the
disposition of the businesses in 1997.
7
<PAGE>
GENERAL AND ADMINISTRATIVE
General and administrative expenses for the three months ended March 31, 1998
and 1997 were $765,000 and $507,000, respectively. The increase in expenses for
the first quarter of 1998 was primarily related to a change in the way the
Company allocated facilities expenses between departments.
OTHER INCOME AND EXPENSES
Interest expense was $90,000 for the first quarter of 1998 compared to
$444,000 for the first quarter of 1997. The decrease in 1998 as compared to
1997 was primarily due to the conversion to Common Stock of the Company's
outstanding debentures in 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically used internally generated funds, public and private
offerings of common and preferred stock, sale and leaseback arrangements, bank
financing and credit lines to finance its business. Cash used in operations was
$3.0 million in the first three months of 1998 compared to cash used in
operations of $26,000 for the first three months of 1997. This increase in cash
used in operations in 1998 compared to 1997 was primarily due to a large
reduction in accounts receivable in the first three months of 1997. Net cash
used in investing activities was $77,000 at March 31, 1998 compared to $486,000
at March 31, 1997. This decrease in net cash used for investment is primarily
due to reduced levels of capital equipment purchases as well as the absence of
internally capitalized software. Net cash provided by financing activities was
$4.8 million in the first three months of 1998, compared to $528,000 for the
same three-month period in 1997. This increase in 1998 as compared to 1997 is
primarily due to the sale of the Company's common stock in the first quarter of
1998.
At March 31, 1998 the Company had $5.8 million of cash and cash equivalents and
$1.9 million of working capital. The Company has a $5.0 million revolving
credit facility, which expires on January 31, 1999, and bears interest at the
Bank's prime rate plus 2.25%. Under the Agreement the Company may borrow up to
80% of its outstanding eligible accounts receivable, there is no outstanding
balance under the Agreement as of March 31, 1998. The Company is not currently
in compliance with certain covenants in the Agreement, however the Company has
received a waiver of those covenants from the Bank through March 31, 1998. The
Company continues to work with certain vendors to facilitate extended trade
terms, thus reducing the Company's immediate cash requirements to meet
established payments and other normal, recurring period expenses.
At March 31, 1998, the Company was in compliance with the requirement of the
Nasdaq Stock Market (NASD) for listing on the Nasdaq National Market (a distinct
tier of the Nasdaq Stock Market) to maintain minimum net tangible assets (as
defined) of $4.0 million. Although the Company believes that it can continue to
comply with the NASD listing requirements, there can be no assurance that the
Company will be successful in doing so. However, even if its stock were
delisted from the Nasdaq National Market, the Company believes it would be
eligible for listing in the Nasdaq SmallCap Market, which is another tier of the
Nasdaq Stock Market. However, there can be no assurance that the Company will
remain eligible for listing on either the Nasdaq National Market or the Nasdaq
SmallCap Market.
The Company expects to meet its short-term liquidity needs by attaining its
revenue projections for 1998 and by relying on other sources of additional
financing such as private or public offerings of debt and equity, its revolving
credit facility and equipment lease lines. Should additional funding be
required, however, there can be no assurance that such funding will be available
on acceptable terms as and when required by the Company.
FACTORS AFFECTING FUTURE RESULTS
The Company operates in a rapidly changing environment that involves a number of
risks, many of which are beyond the Company's control. The following discussion
highlights some of these risks. The Company's actual results could differ
materially from those discussed herein. Factors that could cause or contribute
to such differences include, but are not limited to, those discussed in this
section and elsewhere in this Report, and the risks discussed in the Company's
other United States Securities and Exchange Commission Filings.
FUTURE OPERATING RESULTS UNCERTAIN
The Company's quarterly operating results have varied significantly in the past
and are likely to vary significantly in the future. For example, the Company
has recently experienced quarterly losses and experienced a loss for fiscal
1997. The Company continues to seek improvement in operating results primarily
through the introduction of new products and
8
<PAGE>
marketing and sales efforts to increase revenue from existing FPGA products. In
addition, the Company is continuing its efforts to control the costs of
operations and administration. However, there can be no assurance that the
Company will be successful in its efforts. In the future, the Company's
operating results may be impacted by a number of factors, including cancellation
or delays in new product introductions, lack of market acceptance of new or
existing products, cancellation or delays of customer orders, interruption or
delays in the supply of key components, changes in yields from manufacturing
processes, changes in customer base or product mix, seasonal patterns of capital
spending by customers, new product announcements by the Company or its
competitors, pricing pressures and changes in general economic conditions in
domestic or international markets. Historically, a significant portion of the
Company's shipments have been made in the last month of each quarter. As a
result, a shortfall in revenue compared to expectation may not evidence itself
until late in the quarter. Additionally, the timing of expenditures for research
and development activities and sales and marketing programs, as well as the
timing of orders by major customers, may cause operating results to fluctuate
substantially between quarters and between years.
MANAGEMENT OF CHANGING BUSINESS
The Company recently shifted its business strategy from a provider of high
performance verification products to a provider of high density, high
performance programmable logic solutions, related development system software,
and design services. This transition represents a significant challenge for the
Company and its administrative, operational and financial resources, and places
increased demand on its systems and controls. The Company's ability to manage
the continuing development of its programmable logic solutions business will
require the Company to continue to change, expand and improve its operational,
management and financial systems and controls and to expand its third party
manufacturing capabilities. There can be no assurance that the Company will be
successful in its efforts to accomplish these changes and effect these
improvements.
VOLATILITY OF STOCK PRICE
The market price of the shares of the Company's Common Stock is highly volatile
and may be significantly affected by factors such as actual or anticipated
fluctuations in the Company's results of operations, manufacturing processes,
announcements of technological innovations, introduction of new products by the
Company or its competitors, developments with respect to patents, copyrights or
proprietary rights, conditions and trends in the ASIC industry and other
industries, changes in or failure by the Company to meet securities analysts'
expectations, general market conditions and other factors. In addition, the
stock market has from time to time experienced significant price and volume
fluctuations that have particularly affected the market prices for the common
stocks of technology companies. These broad market fluctuations may adversely
affect the market price of the Company's Common Stock. In the past, following
periods of volatility in the market price of a particular company's securities,
securities class action litigation has often been brought against that company.
There can be no assurance that such litigation will not occur in the future with
respect to the Company. Such litigation could result in substantial costs and a
diversion of management's attention and resources, which could have a material
adverse effect upon the Company's business, operating results and financial
condition.
CAPITAL RESOURCES
The Company has funded its operations to date primarily through cash flow from
operations, the private sale of equity securities and public offerings of the
Company's Common Stock. If its existing cash, cash equivalents and short-term
investments plus cash generated from operations are insufficient to satisfy the
Company's liquidity requirements, the Company may seek additional equity or
convertible debt securities or obtain additional credit facilities. The sale of
additional equity or convertible debt securities could result in additional
dilution to the Company's stockholders. There can be no assurance that the
Company would be successful in obtaining these funds on acceptable terms when
and if needed or that the sale of such equity or convertible debt securities
will not substantially dilute the Company's existing stockholders' interest.
YEAR 2000 ISSUES
The Company is in the process of conducting assessments of its computer
information systems and will take the necessary steps to determine the nature
and extent of the work required to make its systems Year 2000 compliant, where
necessary. These steps may require the Company to modify, upgrade or replace
some of its internal financial and operational systems. The cost of bringing
all internal systems, equipment and operations into Year 2000 compliance has not
yet been determined. While these efforts may involve additional costs, the
Company believes, based upon currently available information, that these costs
will not have a material adverse effect on the business, financial condition or
results of operations of the Company. However, if these efforts are not
completed on time, the Year 2000 issue could have a material adverse impact on
the business, financial condition or results of operations of the Company. To
address
9
<PAGE>
these issues the Company has enlisted the aid of outside consultants and has
evaluated, purchased, installed and implemented a year 2000 compliant financial
information system and discontinued operation of its non-compliant accounting
system.
The Company also intends to determine the extent to which it may be vulnerable
to any failures by its major partners, customers and service providers to remedy
their own Year 2000 issues, and is in the process of initiating formal
communications with these parties. At this time the Company is unable to
estimate the nature or extent of any potential adverse impact resulting from the
failure of third parties to achieve Year 2000 compliance; however, there can be
no assurance that these third parties will not experience Year 2000 problems or
that any problems would not have a material effect on the Company's business,
financial condition or results of operations.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 27.1 Article 5 of Regulation S-X, Financial Data Schedule for
GateField Corporation for the quarter ended March 31, 1998
(b) Reports on Form 8-K:
GateField Corporation's Current Report on Form 8-K filed January 23, 1998,
reporting on a Stock Purchase Agreement with Idanta Partners Ltd for
4,582,500 shares of Gatefield Corporation's Common Stock.
10
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
GATEFIELD CORPORATION
/s/ Stephen A. Flory
-----------------------
Stephen A. Flory
Vice President, Chief Financial Officer
and Treasurer
Dated: May 7, 1998
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 5,811
<SECURITIES> 98
<RECEIVABLES> 3,369
<ALLOWANCES> 527
<INVENTORY> 777
<CURRENT-ASSETS> 10,076
<PP&E> 2,448
<DEPRECIATION> 0
<TOTAL-ASSETS> 12,821
<CURRENT-LIABILITIES> 8,167
<BONDS> 0
0
100
<COMMON> 4,132
<OTHER-SE> 75,657
<TOTAL-LIABILITY-AND-EQUITY> 12,821
<SALES> 640
<TOTAL-REVENUES> 1,849
<CGS> 1,050
<TOTAL-COSTS> 1,810
<OTHER-EXPENSES> 2,978
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 90
<INCOME-PRETAX> (2,939)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,939)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,939)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> (.07)
</TABLE>
