<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE
SECURITIES ACT OF 1934.
For the quarterly period ended March 31, 1998.
--------------
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT.
For the transition period from to
---------------- -----------------
Commission file number: 0-16919
-------
WAVEMAT INC.
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
DELAWARE 38-2512387
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
44191 PLYMOUTH OAKS BLVD, STE. 100, PLYMOUTH, MICHIGAN 48170
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(313) 454-0020
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
---------- ----------
As of April 29, 1998, the registrant had 13,482,125 shares of its
Common Stock, $.01 par value outstanding.
<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
WAVEMAT INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
1998 1997
------------- ------------
<S> <C> <C>
OPERATING REVENUE:
Microwave processing system sales $ 1,416 $ 68,417
Microwave processing system sales
- affiliate 124,400 --
------------ ------------
Total operating revenue 125,816 68,417
------------ ------------
OPERATING COSTS AND EXPENSES:
Cost of sales 25,439 35,344
Research and development 90,097 13,116
Selling, general, and, administrative 91,140 151,775
Royalty expense - affiliate -- 3,033
------------ ------------
Total operating costs and expenses 206,676 203,268
------------ ------------
Operating loss (80,860) (134,851)
OTHER INCOME (EXPENSE):
Miscellaneous Income 2,100 1,260
Interest income 16 30
Interest expense (937) (756)
Interest expense - affiliate (29,588) (45,498)
------------ ------------
Other expense, net (28,409) (44,964)
------------ ------------
NET LOSS ($109,269) ($179,815)
============ ============
NET LOSS PER SHARE OF
COMMON STOCK ($0.01) ($0.02)
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 10,218,792 10,182,125
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
2
<PAGE> 3
WAVEMAT INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
------------------------
1998 1997
----------- ----------
<S> <C> <C>
CASH, BEGINNING OF PERIOD $ -- $ --
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss (109,269) (179,815)
Adjustments to reconcile net loss
to net cash provided by (used in) operating
activities:
Depreciation and amortization 12,259 13,573
Changes in current assets and liabilities:
Accounts receivable 50,973 716
Inventory (12,777) (11,277)
Prepaid expenses 602 263
Bank overdraft 7,500 (58,283)
Accounts payable 11,793 54,177
Accounts payable - affiliate -- 2,412
Accrued liabilities (107,562) 57,039
Customer deposits (17,330)
Customer deposits - affiliate (74,400) --
--------- ---------
Net cash (used)provided by operating activities (220,881) (138,525)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment and leasehold
improvements 761 1,425
--------- ---------
Net cash provided (used) in investing activities 761 1,425
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term borrowings 32,070 137,100
Short-term borrowings-affiliate 21,400 --
Issuance of common stock-affilate 166,650 --
--------- ---------
Net cash provided by financing activities 220,120 137,100
--------- ---------
INCREASE (DECREASE)IN CASH -- --
--------- ---------
CASH, END OF PERIOD $ -- $ --
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest payments $ -- $ --
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 4
WAVEMAT INC.
STATEMENT OF FINANCIAL POSITION
(Unaudited)
<TABLE>
<CAPTION>
ASSETS MARCH 31,
1998
CURRENT ASSETS: -------------
<S> <C>
Accounts receivable $ 59,106
Inventory 53,458
Prepaid expenses 4,081
-----------
Total current assets 116,645
EQUIPMENT AND LEASEHOLD IMPROVEMENTS, net of accumulated
depreciation and amortization of $580,244 96,539
LICENSE AGREEMENT, net of accumulated amortization
of $21,692 14,580
PURCHASED TECHNOLOGY, net of accumulated amortization
of $115,104 209,896
DEFERRED PATENT COSTS -affiliate 192,209
OTHER ASSETS 18,504
-----------
Total assets $ 648,373
===========
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
Bank overdraft $ 18,206
Short-term borrowings 32,070
Short-term borrowings - affiliate 1,124,450
Accounts payable 377,614
Accrued liabilities 400,042
Customer deposits 8,813
Customer deposits - affiliate 3,243
-----------
Total current liabilities 1,964,438
SHAREHOLDERS' DEFICIT:
Preferred stock, $.10 par value, 1,000,000 shares authorized and 4,000 shares
($399,600 aggregate liquidation preference)
issued and outstanding 400,000
Common stock, $.01 par value, 20,000,000 shares authorized and
13,482,125 shares issued and outstanding 134,821
Additional paid-in capital 5,415,000
Accumulated deficit (7,265,886)
-----------
Shareholders' deficit (1,316,065)
-----------
Total liabilities and shareholders' deficit $ 648,373
===========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
WAVEMAT, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) GENERAL
Except as the context otherwise indicates the term the "Company" refers to
Wavemat Inc.
In the opinion of management, all adjustments (consisting primarily of
normal recurring accruals) considered necessary for a fair presentation
have been included. For further information, refer to the financial
statements and footnotes thereto included in the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1997.
(2) DETAILS TO STATEMENTS OF FINANCIAL POSITION
Inventory consisted of the following:
<TABLE>
<CAPTION>
March 31, 1998
--------------
<S> <C>
Raw materials 38,584
Work-in-process 14,874
----------
$ 53,458
----------
</TABLE>
A summary of Accrued Liabilities follows:
<TABLE>
<CAPTION>
March 31, 1998
--------------
<S> <C>
Accrued legal & audit $ 39,013
Royalties - affiliate 33,415
Commissions 79,391
Accrued Payroll 125,085
Deferred compensation 56,354
Other 66,784
----------
$ 400,094
----------
</TABLE>
(3) RESEARCH AND DEVELOPMENT
During the first quarter of 1998, the Company entered into a research and
development agreement with Michigan State University ("MSU"). As of March
31, 1998, the Company recognized $124,400 in revenue and $76,514 in related
research and development expense.
(4) SHORT TERM BORROWINGS
On February 19, 1998, the Company entered into a $32,070 personal line of
credit arrangement with Monis Schuster (Chairman of the Board and Chief
Executive of Wavemat, and Vice President and Secretary of Venture Funding,
Ltd., an affiliate of the Company), with such credit line carrying an
interest rate on outstanding balances of ten percent. This line of credit
is secured pursuant to a guarantee agreement between Monis Schuster, a
shareholder of the Company, and the assignment of a Wavemat Inc. account
receivable from Michigan State University. The Company has
5
<PAGE> 6
WAVEMAT, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
drawn $32,070 against this line of credit and has accrued $365 of interest
pertaining to this obligation as of March 31, 1998.
(5) SHORT TERM BORROWINGS - AFFILIATE
On January 29, 1992, the Company entered into a $125,000 line of credit
arrangement evidenced by a promissory note with Venture Funding, Ltd.,
("Venture"), an affiliate of the Company. The amounts borrowed pursuant to
this line of credit are payable by the Company upon demand. The Company had
utilized the entire line of credit during 1992. The applicable interest
rate was at two percentage points above the prime rate of a major bank with
such interest rate ranging from 8.0 percent per annum to 9.25 percent per
annum for the period of January 29, 1992 through August 17, 1994. This
obligation with related interest was extinguished by inclusion in a
Convertible Debenture issued by the Company to Growth Funding Ltd.,
("Growth"), a wholly owned subsidiary of Venture, and affiliate of the
Company, on August 18, 1994. On March 31, 1998, $1,542 of remaining accrued
interest was included in a contribution of capital to the Company. (See
note 6 to the financial statements).
On April 7, 1994, the Company finalized a $350,000 revolving line of credit
Promissory Note with Growth, a wholly-owned subsidiary of Venture, a
significant shareholder of the Company, with such credit line carrying an
interest rate on outstanding balances of 2 percent above the prevailing
prime rate of a major bank with such interest rate ranging from 8.25
percent per annum to 10.75 percent per annum for the period of April 7,
1994 through March 31, 1998. The Company had utilized this entire line of
credit during 1994. Amounts borrowed pursuant to this line of credit are
payable by the Company on demand. The Company made payments of $12,000 in
1995, reducing the line of credit Promissory Note to $338,000. In addition,
this Promissory Note is to be repaid, pursuant to an Agreement between the
Company and Norton, dated August 3, 1994, in which Norton agreed to waive
their standard 20% discount from the prevailing list price for its
purchases from the Company provided this 20% discount is used to first
repay accrued interest and then principal owing on the outstanding balance
to Venture until the balance is repaid in full. In December, 1997 this
revolving line of credit obligation was written off of Wavemat's books by
Growth because of the company's continuing inability to extinguish this
debt. On March 31, 1998, accrued interest of $126,063 relating to the above
6
<PAGE> 7
WAVEMAT, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
note was included in a contribution of capital to the Company. (See note 6
to the financial statements).
On December 1, 1994, the Company entered into a $100,000 line of credit
arrangement evidenced by a promissory note with Growth. The amounts
borrowed pursuant to this line of credit are payable by the Company on
demand. The Company has utilized $100,000 of the line of credit by December
31, 1995. The applicable interest rate is at 2 percentage points above the
prime rate of a major bank with such interest rates ranging from 9.75
percent per annum to 10.5 percent per annum for the period ending March 31,
1998. In December, 1997, this revolving line of credit obligation was
written off of Wavemat's book by Growth because of the Company's continuing
inability to extinguish this debt. On March 31, 1998, accrued interest of
$33,250 relating to the above note was included in a contribution of
capital to the Company. (See note 6 to the financial statements).
On January 4, 1995, the Company entered into a line of credit arrangement
evidenced by a promissory note with Growth. The amounts borrowed pursuant
to this line of credit are payable on demand. The Company has drawn
$967,875 on this line of credit as of March 31, 1998. The applicable
interest rate is 2 percentage points above the prime rate of a major bank
with such interest rates ranging from 10.25 percent per annum to 11.00
percent per annum for the period from January 4, 1995 through March 31,
1998. In December, 1997, $578,745 of this revolving line of credit
obligation was written off of Wavemat's book by Growth because of the
Company's continuing inability to extinguish this debt. On March 31, 1998,
$166,650 of accrued interest relating to the above note was extinguished as
a result of the exercise of a 1,300,000 and 2,000,000 stock warrant(s) to
purchase common stock by Growth. (See note 6 to the financial statements).
In addition, on March 31, 1998 $127,098 of the remaining accrued interest
relating to the above note was included in a contribution of capital to the
Company. (See note 6 to the financial statements).
On December 3, 1996, the Company entered into a $25,000 line of credit
arrangement evidenced by a promissory note with Growth. The amounts
borrowed pursuant to the line of credit are payable by the Company on
demand. The Company had drawn $25,000 on this line of credit in 1996. The
applicable interest rate is at 2 percentage points above the prime rate
rate of a major bank with such interest rate ranging from 10.25 percent per
annum to 10.50 percent per annum for the
7
<PAGE> 8
WAVEMAT, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
period from December 3, 1996 through March 31, 1998. On March 31, 1998
$3,528 of accrued interest relating to the above note was included in a
contribution of capital to the Company. (See note 6 to the financial
statements).
On December 20, 1996, the Company entered into $3,500 line of credit
arrangement evidenced by a promissory note with Growth. The amounts
borrowed pursuant to the line of credit are payable by the Company on
demand. The Company had utilized $3,500 of the line of credit in 1996. The
applicable interest rate is at 2 percentage points above the prime rate of
a major bank with such interest rate ranging from 10.25 percent per annum
to 10.50 percent per annum for the period from December 20, 1996 through
March 31, 1998. On March 31, 1998 accrued interest of $474 relating to the
above note was included in a contribution of capital to the Company. (See
note 6 to the financial statements).
On January 9, 1997, the Company entered into a $3,500 line Of credit
arrangement evidenced by a promissory note with Growth. The amounts
borrowed pursuant to the line of credit are payable by the Company on
demand. The Company had utilized $3,500 of the line of credit by March 31,
1997. The applicable interest rate is at 2 percentage points above the
prime rate of a major bank with such interest rate ranging from 10.25
percent per annum to 10.50 percent per annum for the period from January 9,
1997 through March 31, 1998. On March 31, 1998, accrued interest of $455
relating to the above note was included in a contribution of capital to the
Company. (See note 6 to the financial statements).
In addition, on March 31, 1998 deferred compensation of $192,139 and
$67,374 of other miscellaneous liabilities owed by the Company to Growth
were incorporated into the contribution of capital to the Company. (See
note 5 to the financial statements).
On August 18, 1994, the Company issued a Convertible Debenture
("Debenture") to Growth, for the principal amount of $724,575 with the
interest accruing on the outstanding balance at a rate of 2 percent above
the prime rate of a major bank with such rate ranging from 9.75 percent per
annum to 11.00 percent per annum for the period from August 18, 1994
through March 31,1998. The Debenture amount of $724,575 represents amounts
owed by the Company to Venture in relation to a promissory note($125,000),
plus related accrued interest ($23,603), deferred compensation ($261,139),
accrued royalties ($212,591), and other
8
<PAGE> 9
WAVEMAT, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
miscellaneous liabilities ($102,242). The Debenture has an exercise price
of $.5630 per share of common stock.
On October 27, 1995, by resolution of the Board of Directors, the exercise
price of the Debenture issued to Growth on August 18, 1994 was reduced from
$.5630 to $.1563 per share of common stock, the average of the bid-ask
price of the Company's common stock on that date in consideration for
financing and contributions of capital provided to the Company during 1995.
On the same date, $600,000 of the debt owed Growth under the Debenture was
converted to 3,838,772 shares of the Company's common stock. There remains
a balance due of $124,574 under the Convertible Debenture.
On March 31, 1998 by resolution of the Board of Directors, the exercise
price was reduced from $.1563 per share of common stock, to $.0505 per
share of common stock, the average of the bid-ask price of the Company's
common stock on that date in consideration for additional financings and
contribution of capital provided to the Company.
On March 31, 1998, accrued interest of $52,254 related to the above was
included in a contribution of capital to the Company. (See note 5 to the
financial statements).
(6) SHAREHOLDER'S DEFICIT
On August 9, 1994, pursuant to a resolution of the Company's Board of
Directors, a warrant was issued by the Company to Venture, a significant
shareholder of the Company, for the purchase of 1,300,000 shares of the
Company's common stock at an exercise price of $.5313 per share. This
warrant could be exercised at any time and from time to time during the
five year period from August 9, 1994 to August 9, 1999. On October 27,
1995, the Company's Board of Directors, by resolution, reduced the exercise
price of the warrant to $.1563 per share of common stock, the average of
the bid-ask price of the Company's common stock on that date. The issuance
of the warrant and reduction in the exercise price were in consideration
for providing financing to the Company. On March 31, 1998, pursuant to a
resolution of the Company's Board of Director's, the exercise price of the
warrant was reduced to $.0505 per share of stock, the average of the
bid-ask price of the Company's common stock on that date. On March 31, 1998
this warrant was exercised by Venture in consideration of financing and
contributions of capital made to the Company. On the same date, $65,650 of
accrued interest related to a line of credit entered into
9
<PAGE> 10
WAVEMAT, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
on January 4, 1985 with Growth was extinguished.
On October 27, 1995, a warrant was issued by the Company to Growth
Funding,Ltd., a wholly owned subsidiary of Venture Funding, Ltd., for the
purchase of 2,000,000 shares of the Company's common stock at an exercise
price of $.1563 per share. This warrant may be exercised at any time, and
from time to time during the five year period from October 27, 1995 to
October 27, 2000. This warrant was issued in consideration for Growth
providing financing to the Company.
On March 31, 1998, pursuant to a resolution of the Company's Board of
Director's, the exercise price of the warrant was reduced to $.0505 per
share of stock, the average of the bid-ask price of the Company's common
stock on that date. On March 31, 1998 this warrant was exercised by Growth
in consideration of financing and contributions of capital made to the
Company. On the same date, $101,000 of accrued interest related to a line
of credit entered into on January 4, 1985 with Growth was extinguished.
On March 31, 1998, Growth agreed to make a contribution of capital to the
Company amounting to $604,176. This $604,176 represented amounts owed by
the Company to Growth, in relation to accumulated interest due of $344,663
on promissory notes entered into with Growth (see note 4), amounts payable
due to Growth on March 31, 1998 of $67,374 and deferred management wages
owed to Growth of $192,139 on March 31, 1997. (See note 4 to the financial
statements).
(7) COMMITMENTS AND CONTINGENCIES
GOING CONCERN
The Company has incurred operating losses and generated cash flow deficits
from operating activities since inception, therefore, the Company's ability
to continue as a going concern is contingent upon its ability to raise
additional funds to support its activities.
The Company is relying on sales of its microwave processing systems to
provide additional working capital. The Company is also continuously
evaluating acquisitions of technologies and/or entities owning such
technologies which are compatible to the Company's business strategies with
the intention of increasing the Company's revenue generating capabilities.
In addition, the Company is continuing to seek capital from various sources
of funding such as
10
<PAGE> 11
WAVEMAT, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
additional term loans, lines of credit, corporate partners and sales of
equity securities. However, there is no assurance that the required amount
of additional funds can be raised.
11
<PAGE> 12
WAVEMAT, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
THE THREE MONTHS AND MARCH 31, 1998 COMPARED TO THE THREE MONTHS ENDED
MARCH 31, 1997
Operating loss declined significantly during the 1998 quarter as a result of a
significant increase in operating revenue, more than off-setting a slight
increase in operating expenses.
The increase in operating revenue resulted primarily from a research and
development agreement the Company entered into with an affiliate during the
first quarter of 1998.
The slight increase in operating expenses was attributed to higher research and
development expenses although off-set by lower cost of sales and selling,
general and administrative and royalty expense. The decline in cost of sales was
attributed to lower microwave processing systems sales. In addition, cost of
sales continues to reflect under-utilized capacity as a result of lower
microwave processing system sales. Research and development activities increased
due to higher sponsored research and development activities in relation to an
affiliate research and development agreement mentioned above. Decreased selling,
general and administrative expenses reflect a cost containment program which
involved significant contracted and consulting reductions and related expenses.
Decreased royalty expense during the quarter ended March 31, 1998 reflects lower
microwave system sales.
Net loss decreased for the 1998 quarter resulting from significantly lower
interest expense-affiliate, attributable to a prior debt extinguishment by
Growth on December 31, 1997, which resulted in significantly lower borrowing
cost for the quarter.
FINANCIAL CONDITION
MARCH 31, 1998 COMPARED TO DECEMBER 31, 1997
The Company continued to have difficulty meeting its cash requirements and
obligations during the three months of 1998.
12
<PAGE> 13
WAVEMAT, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
Deferred compensation costs of the Company amounted to $56,354 as of March 31,
1998. The Company was also in arrears pertaining to other obligations in the
amount of $222,639 as of March 31, 1998.
Obligations which the Company met during the three months of 1998 were satisfied
through sales of the Company's microwave processing systems and contracted
research and development activities, customer deposits, lines of credit and
short-term borrowings.
As indicated in Note 6 to the Financial Statements, the Company has incurred
operating losses and generated cash flow deficits from operating activities
since its inception, therefore, the Company's ability to continue as a going
concern is contingent upon its ability to raise additional funds to support its
activities. At March 31, 1998, the Company had a negative working capital
position of $1,847,793 compared to a negative working capital position of
$2,496,450 at December 31, 1997.
The Company is attempting to generate working capital through the sale of its
microwave processing systems and through its contract research and development
activities. As of March 31, 1998, the Company had a backlog of open sales
orders, net, of customer deposits, amounting to $6,607. Subject to various
qualifications and assuming no change in delivery dates or in the shipment of
orders in the normal course of business, management expects, although there can
be no assurance, to ship all of the above mentioned backlog and collect the
applicable cash proceeds during 1998.
The Company must increase its backlog of open sales orders substantially and
obtain additional product development assistance to adequately support its
activities. The Company is continuously evaluating acquisitions of technologies
and/or entities owning such technologies which are compatible to the Company's
business strategies with the intention of increasing the Company's revenue
generating capabilities. In addition, the Company is continuing to seek funding
from various other sources such as additional term loans, lines of credit,
corporate partners and equity financing. However, there is no assurance that the
required amount of additional funds can be raised.
ITEM 5. OTHER INFORMATION
13
<PAGE> 14
WAVEMAT, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - Ex. 27 Financial Data Schedule
(b) Reports on Form 8-K:
No reports on Form 8-K have been filed during the Quarter ended
March 31, 1998.
14
<PAGE> 15
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
WAVEMAT INC.
REGISTRANT
Date: May 20, 1998 BY: /s/ Monis Schuster
-------------------------------------
Monis Schuster, Chairman of the
Board and Chief Executive Officer
(Principal Operating Officer)
Date: May 20, 1998 BY: /s/ Sharon K. Zitnik
-------------------------------------
Sharon K. Zitnik, Vice President
Treasurer, Secretary and Chief Financial
Officer (Principal Financial Officer)
15
<PAGE> 16
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
- ----------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 59,106
<ALLOWANCES> 0
<INVENTORY> 53,458
<CURRENT-ASSETS> 116,645
<PP&E> 676,783
<DEPRECIATION> 580,244
<TOTAL-ASSETS> 648,373
<CURRENT-LIABILITIES> 1,964,438
<BONDS> 0
0
400,000
<COMMON> 134,821
<OTHER-SE> (1,850,886)
<TOTAL-LIABILITY-AND-EQUITY> 648,373
<SALES> 125,816
<TOTAL-REVENUES> 125,816
<CGS> 25,439
<TOTAL-COSTS> 206,676
<OTHER-EXPENSES> 28,409
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30,525
<INCOME-PRETAX> (109,269)
<INCOME-TAX> 0
<INCOME-CONTINUING> (109,269)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (109,269)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> 0
</TABLE>
