================================================================================
United States
Securities and Exchange Commission
Washington, D.C. 20549
--------------
FORM 10-QSB
(X) QUARTERLY REPORT UNDER Section 13 or 15(d) of the
Securities Exchange Act of 1934.
For the Quarterly Period ended July 31, 1999
or
( ) Transition Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
Commission File Number: 1-12687
IFS International, Inc.
(Exact name of small business issuer as specified in its charter)
Delaware 13-3393646
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
Rensselaer Technology Park, 300 Jordan Road
Troy, NY 12180
(Address of principal executive offices)
(518) 283-7900
(Issuer's telephone number)
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 ___
State the number of shares outstanding of each of the issuer's classes of common
equities as of the latest practicable date.
Common Stock, $.001 par value, 2,780,485 shares outstanding as of September 10,
1999
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<PAGE>
IFS International, Inc. and Subsidiaries
QUARTERLY REPORT ON FORM 10-QSB
TABLE OF CONTENTS
Part I. Financial Information
Item 1. Consolidated Unaudited Financial Statements
Consolidated Balance Sheets
July 31, 1999 (unaudited) and April 30,1999..................................2-3
Consolidated Statements of Operations,
three months ended July 31, 1999 and 1998 (unaudited)..........................4
Consolidated Statements of Cash Flows,
three months ended July 31, 1999 and 1998 (unaudited)..........................5
Notes to Consolidated Financial Statements (unaudited).......................6-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations...............................8-10
Part II. Other Information
Item 1. Legal Proceedings....................................................11
Item 2. Changes in Securities................................................11
Item 3. Defaults Under Senior Securities ....................................11
Item 4. Submission of Matters to a Vote of Security Holders..................11
Item 5. Other Information....................................................11
Item 6. Exhibits and Reports on Form 8-K.....................................11
<PAGE>
Part I. Financial Information
Item 1. Consolidated Unaudited Financial Statements
IFS INTERNATIONAL, INC. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
July 31, April 30,
1999 1999
(unaudited)
----------------- -----------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $2,284,270 $1,326,708
Trade accounts receivable, net 1,575,508 2,225,665
Costs and estimated earnings
in excess of billings on
uncompleted contracts 888,984 751,616
Other current assets 680,015 553,597
Inventory 199,973 133,699
----------------- -----------------
Total current assets 5,628,751 4,991,285
----------------- -----------------
PROPERTY, EQUIPMENT AND IMPROVEMENTS, net 2,542,562 2,571,461
----------------- -----------------
OTHER ASSETS
Capitalized software costs, net 1,329,107 1,269,660
Excess of cost over fair value of
net assets of business acquired, net 311,560 324,260
Other 145,367 129,161
----------------- -----------------
Total other assets 1,786,034 1,723,081
================= =================
$9,957,347 $9,285,827
================= =================
See notes to consolidated financial statements.
<PAGE>
IFS INTERNATIONAL, INC. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
July 31, April 30,
1999 1999
(unaudited)
----------------- ---------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long
term debt 374,811 $362,174
Accounts payable 718,311 682,675
Accrued compensation and
related liabilities 497,174 478,635
Other accrued expenses 604,868 790,115
Billings in excess of costs
and estimated earnings on
uncompleted contracts 70,378 237,089
Deferred revenue and customer
deposits 720,248 774,146
----------------- ---------------------
Total current liabilities 2,985,790 3,324,834
----------------- ---------------------
LONG-TERM DEBT, less current maturities 2,951,078 2,133,392
----------------- ---------------------
SHAREHOLDERS' EQUITY
Preferred stock, $.001 par value;
25,000,000 shares authorized,
no shares issued and outstanding - -
Common Stock $.001 par value;
50,000,000 shares authorized,
2,770,485 and 2,780,485 shares
issued and outstanding 2,779 2,770
Additional paid-in capital 8,574,020 8,415,328
Accumulated deficit (4,543,688) (4,583,841)
Accumulated other comprehensive (loss) (12,634) (6,656)
----------------- ---------------------
Total shareholders' equity 4,020,477 3,827,601
----------------- ---------------------
$9,957,345 $9,285,827
================= =====================
See notes to consolidated financial statements.
<PAGE>
IFS INTERNATIONAL, INC. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Three
Months Months
Ended Ended
July 31, 1999 July 31, 1998
------------------- -------------------
Revenues:
Software license and installation
contract fees $1,371,198 $1,957,932
Service and maintenance revenue 871,027 931,986
Hardware sales 589,551 191,586
------------------- -------------------
2,831,776 3,081,504
------------------- -------------------
Cost of Revenues:
Software license and installation
contract fees 356,962 228,459
Service and maintenance revenue 298,197 249,665
Hardware sales 82,192 50,852
------------------- -------------------
Gross profit 2,094,425 2,552,528
------------------- -------------------
Operating expenses:
Research and development 250,125 383,615
Salaries 798,339 733,074
Rent and occupancy 147,046 87,959
Selling, general and administrative 698,799 730,358
Other 102,298 88,423
------------------- -------------------
1,996,607 2,023,429
------------------- -------------------
Income from operations 97,818 529,099
Other income (expense):
Interest expense (75,710) (37,460)
Interest income 18,967 22,728
Other (922) 341
------------------- -------------------
Income before income taxes 40,153 514,708
Provision for income taxes - -
=================== ===================
Net income $40,153 $514,708
=================== ===================
------------------- -------------------
Basic income per common share .01 .45
------------------- -------------------
------------------- -------------------
Weighted average common
shares outstanding 2,778,818 1,151,900
------------------- -------------------
------------------- -------------------
Diluted income per common share .01 .19
------------------- -------------------
------------------- -------------------
Weighted average common and
common equivalent shares outstanding 3,078,740 2,675,333
------------------- -------------------
See notes to consolidated financial statements.
<PAGE>
IFS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three Months Three Months
Ended Ended
July 31, 1999 July 31, 1998
--------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $40,153 $514,708
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation and amortization 231,787 152,258
Amortization of discount on notes payable 10,050 -
Changes in assets and liabilities:
Inventory (66,275) (38,483)
Trade accounts receivable, net 650,157 120,609
Costs, estimated earnings and billings on
uncompleted contracts (304,079) (45,967)
Other current assets (133,525) 51,552
Accounts payable 35,636 (156,920)
Accrued expenses (139,208) (128,209)
Deferred revenue and customer deposits (53,898) (96,463)
--------------- --------------
Net cash provided by operating activities 270,798 373,085
--------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Equipment purchases (66,086) (37,616)
Acquisition of minority interest (34,540)
Capitalized software and license costs (192,648) (120,675)
--------------- --------------
Net cash used in investing activities (258,734) (192,831)
--------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on long term debt (13,526) (20,244)
Proceeds from notes payable 965,000 -
--------------- --------------
Net cash provided by (used in)
financing activities 951,474 (20,244)
--------------- --------------
Effect of exchange rate changes on cash (5,976) (1,568)
--------------- --------------
Increase in cash and cash equivalents 957,562 158,442
Cash and cash equivalents:
Beginning of year 1,326,708 2,102,807
--------------- --------------
End of period $2,284,270 $2,261,249
=============== ==============
See notes to consolidated financial statements.
<PAGE>
IFS INTERNATIONAL, Inc. and subsidiaries
Notes to Consolidated
Financial Statements (Unaudited)
Note 1
Presentation of Interim Financial Statements
The accompanying consolidated financial statements include the accounts of IFS
International, Inc., a Delaware Corporation (the "Company"), and its
wholly-owned operating subsidiaries, IFS International, Inc., a New York
Corporation ("IFS"), and Network Controls International a North Carolina
Corporation ("NCI"),. All significant intercompany accounts and transactions
have been eliminated. The consolidated balance sheet as of July 31, 1999, the
consolidated statements of operations for the three months ended July 31, 1999
and 1998 and the consolidated statements of cash flows for the three months
ended July 31, 1999 and 1998 have been prepared by the Company, without audit.
In the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial condition,
results of operations and cash flows at July 31, 1999 and for all periods
presented have been made.
The Company adopted Statement of Financial Accounting Standards No. 130,
Reporting Comprehensive Income ("SFAS No. 130") during 1999. Comprehensive
income (loss) of the Company includes net income (loss), adjusted for the change
in foreign currency translation adjustments. The net effect of income taxes on
comprehensive income (loss) is immaterial. Total comprehensive income (the sum
of net income and the change in foreign currency translation adjustment amounts)
was $34,175 and $513,140 for the three months ended July 31, 1999 and 1998,
respectively.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these consolidated
financial statements be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's annual report on Form
10-KSB for the fiscal year ended April 30, 1999. The results of operations for
the period ended July 31, 1999 are not necessarily indicative of the operating
results for the full year.
Note 2
Acquisition
On January 30, 1998, the merger of a wholly owned subsidiary of IFS with and
into NCI Holdings, Inc. ("Holdings") was consummated pursuant to a Plan and
Merger Agreement, dated January 30, 1998 (the "Merger Agreement"). Holdings
owned approximately 94% of the issued and outstanding shares of capital stock of
NCI, which develops and markets software products for bank automation. On June
1, 1998 NCI was merged into Holdings and Holdings subsequently changed its name
to Network Controls International, Inc.
The Company acquired all of the outstanding shares of capital stock of Holdings
in exchange for $1.11 million, consisting of $840,000 in cash and approximately
$238,000 representing the fair market value of 87,094 shares of preferred stock.
Costs incurred in connection with the acquisition approximated $102,000. In
accordance with provisions of the acquisition agreement, the Company initially
recorded the issuance of preferred shares at an amount which considered an
allowance for equity deficiencies of NCI. Pursuant to the acquisition agreement,
additional preferred shares may be issued if the consolidated pre-tax profits of
NCI exceeds certain levels during each of the three years ending April 30, 1999,
2000 and 2001 and during the three year period ending April 30, 2001. These
issuances, if any will be treated as additional purchase costs. The acquisition
was accounted for as a purchase and the operating results of NCI were included
in the consolidated financial statements commencing February 1, 1998.
In July 1998, the Company acquired the remaining outstanding shares of capital
stock of NCI for cash and stock valued at approximately $35,000.
In August 1998, the Board of Directors voted in favor of waiving the equity
deficiencies clause in the Merger Agreement and allowances for preferred shares
were reversed.
Note 3
Earnings Per Share
Effective April 30, 1998, the Company adopted Statement of Financial Accounting
Standards No. 128 ("SFAS 128"), Earnings Per Share ("EPS"). SFAS 128 establishes
standards for computing and presenting EPS. The statement replaced the
presentation of Primary EPS with a presentation of Basic EPS, and Fully Diluted
EPS with Diluted EPS. Primary EPS for January 31, 1998 has been restated in this
Form 10-QSB, using the new calculations for Basic EPS as established in SFAS
128. The calculation of Diluted EPS using SFAS 128 had no effect on the
Company's prior presentation of Fully Diluted EPS.
Note 4
Private Placement
On July 6, 1999, the Company sold $1,000,000 of convertible promissory notes
(the "Notes") to three purchasers. The Notes are due in July 2001 and accrue
interest at 10% per year. Interest does not accrue for the first three months
and does not accrue for a given month if the value weighted average stock price
for the previous month, was at or above $3 per share or 90% of the lowest daily
value weighted average stock prices over a specified period from 15 to 30 days
prior to conversion. The purchasers received warrants to purchase an aggregate
of 100,000 shares of the Company's Common Stock at an exercise price of $3.07
per share subject to dilution. One investor and another company received $75,000
of additional convertible promissory notes and additional warrants to purchase
an aggregate of 100,000 shares of the Company's common stock in return for their
assistance with the transaction. The proceeds of the note and warrant placement,
after placement fees, were $965,000.
<PAGE>
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
The statements below and certain other statements contained in this quarterly
report on Form 10-QSB are based on current expectations. Such statements are
forward looking statements that involve a number of risks and uncertainties.
Factors that could cause actual results to differ materially include the
following (i) general economic conditions, (ii) competitive market influences,
(iii) the development of the capacity to accommodate additional and larger
contracts, (iv) adapting TPII software products to meet the demands of larger
EFT systems, (v) continued acceptance of the Company's software products by a
significant number of new customers, (vi) the Company's continued relationship
with computer manufacturers, (vii) acceptance of NCI Business Centre (TM) by a
significant number of new customers.
Introduction
The Company is engaged in the business of developing, marketing, automating and
supporting software for the EFT market. The Company's revenues have resulted
from the licensing of its family of TPII software products and from revenue from
NCI. The preparation of functional specifications, customization and
installation of TPII software products and the training by IFS of the financial
institution's personnel in the use of the TPII software products takes an
average of six to twelve months, depending upon the timing of installation and
final acceptance of the EFT System by the customer. Completion of an NCI license
agreement typically takes an average of two to six months. IFS' customers
generally pay 30% to 50% of the project costs including licensing fees upon
execution of the licensing agreement and also make progress payments prior to
acceptance. NCI customers typically pay the license fees upon installation of
the product. IFS recognizes revenue under the percentage of completion method
for software installation contracts. The percentage of completion method is
measured by estimates of the progress towards completion as determined by costs
incurred. NCI recognizes software license revenue upon installation and hardware
revenues upon shipment. The Company also derives recurrent revenues from
furnishing certain maintenance services to its customers for its products. The
Company may also receive additional revenues for additional training of customer
personnel and consulting services (collectively "service revenues"). With
respect to revenues for maintenance services, the Company generally receives
annual payments at the beginning of the contract year. Such payments are
reflected as deferred revenues and are recognized ratably during such year.
Results of Operations
Total revenues of $2,831,776 for the quarter ended July 31, 1999 represent an
decrease of $249,728 or 8.1%, over total revenues of $3,081,504 for the quarter
ended July 31, 1998. The decrease in total revenues is primarily a result of a
decrease in software license and installation contract fees generated by NCI.
Software license and installation contract fees decreased by $586,734 or 30.0%
to $1,371,198 during the three months ended July 31, 1999 as compared to
$1,957,932 for the three months ended July 31, 1998. Software license and
installation contract fees from NCI decreased in the quarter. This is a result
of a large one time enterprise license recorded in the first quarter of fiscal
year 1999.
Hardware revenues increased by $397,965 or 207.7% to $589,551 for the three
months ended July 31, 1999 as compared to $191,586 for the three months ended
July 31, 1998. The increase is primarily a result of an increase in hardware
revenues from NCI GmbH.
Revenues from licensing of software products and hardware sales in countries
outside the United States accounted for 96.2% of total revenues for the three
months ended July 31, 1999 as compared to 57.3% for the three months ended July
31, 1998. The increase as a percentage of total revenues resulted primarily from
the increase in revenues outside the United States generated by IFS. The Company
expects total revenues from foreign countries to be a significant portion of its
revenues in the future.
Gross profit, as expressed as a percentage of total revenues, decreased to 74.0%
for the quarter ended July 31, 1999, as compared to 82.8% for the quarter ended
July 31, 1998. Gross profit expressed as a percentage of total revenues
decreased primarily as a result of the large enterprise license that was
recorded during the quarter ended July 31, 1998 which typically carry a high
gross margin.
The excess of cost over fair value of assets acquired in the NCI acquisition is
approximately $312,000 at July 31, 1999. This amount is being amortized on a
straight line basis over eight years. Amortization expense for the three month
periods ended July 31, 1999 and 1998 was $12,700 and $10,700 respectively.
Software costs capitalized for the quarter ended July 31, 1999 were $192,636 as
compared to $120,675 for the quarter ended July 31, 1998. Capitalized software
costs relate to costs incurred with respect to TPII smart card software
technology and the NCI Business Centre(TM). Such capitalized costs are being
amortized on a straight line basis over the estimated five year marketing lives
of the software.
Net income was $40,153 for the quarter ended July 31, 1999, as compared to net
income of $514,708 for the quarter ended July 31, 1998.
The Company has net operating loss carryforwards of approximately $3,800,000 as
of April 30, 1999. Pursuant to the Tax Reform Act of 1986 and subsequent
legislation, utilization of these carryforwards may be limited due to the
ownership change provisions as enacted by the Tax Reform Act of 1986 and
subsequent legislation.
TP-CMS is IFS' newest addition to the Company's product portfolio. TP-CMS is
currently in closed release and is due for global release during the second half
of fiscal year 2000. The product is an open architecture payment card management
solution for credit, debit, electronic purse and biometric cards. Incorporating
the latest technologies available for information management, TP-CMS enables IFS
to provide a complete migration of a banks payment card systems to
state-of-the-art solutions. Presently, two financial institutions have already
contracted to have TP-CMS implemented in conjunction with TPII. The Company
believes that if the product is accepted by the EFT industry it could contribute
significantly to the results of operations. However, the Company can not provide
any assurance that the product will be successful and can not estimate the
impact, if any, on earnings.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary source of funds has historically been its operating
revenue. The Company's working capital increased from $1,666,451, at April 30,
1999 to $2,642,959 at July 31, 1999, primarily due to the private placement.
The Company believes that anticipated cash flow from operations, proceeds from
the recent private placement financing and the availability of a $600,000 line
of credit will be sufficient to finance the Company's working capital
requirements for the foreseeable future. The Company's estimate is based upon
its ability to obtain licensing agreements through our IFS subsidiary as
currently projected. The Company may need additional financing if these revenues
are not received. However, since a portion of TPII software contracts are not
paid until acceptance by the customer and, as a result, the Company is required
to fund a portion of the costs of configuration and installation of such
products from available capital, any substantial increase in the number of
installations or delay in payment could create a need for additional financing.
In such event, there can be no assurance that additional financing will be
available on terms acceptable to the Company, or at all.
QUARTER TO QUARTER SALES AND EARNING VOLATILITY
Quarterly revenues and operating results have fluctuated and will fluctuate as a
result of a variety of factors. The Company can experience long delays (i.e.,
between three to twelve months) before a customer executes a software licensing
agreement. These delays are primarily due to extended periods of software
evaluation, contract review and the selection of the computer system. In
addition following execution of the agreement, the preparation of functional
specifications, customization and installation of software products and the
training by the Company of the financial institution's personnel in the use of
the TPII software products take an average of six to twelve months, depending
upon the timing of installation and final acceptance of the EFT System by the
customer. Accordingly, the Company's revenues may fluctuate dramatically from
one quarter to another, making quarterly comparisons extremely difficult and not
necessarily indicative of any trend or pattern for the year as a whole.
Additional factors effecting quarterly results include the timing of revenue
recognition of advance payments of license fees, the timing of the hiring or
loss of personnel, capital expenditures, operating expenses and other costs
relating to the expansion of operations, general economic conditions and
acceptance and use of EFT.
INFLATION
The Company has not experienced any meaningful impact on its sales or costs as
the result of inflation.
YEAR 2000
State of Readiness
In March 1998 the Company assigned project teams to insure that its base code
for TPII would be year 2000 and beyond ("Y2K") ready. The project teams were
also dedicated to prepare the Company's computer systems, applications, current
installed customers and future products for the year 2000. In October 1998 IFS
completed Y2K testing of its base code. All of the Company's customers have
either received Y2K ready systems, currently have a Y2K ready system being
developed, or have conducted enterprise wide re-certifications to conform to the
standards set by the regulatory bodies of the banking industry such as the FFIEC
(Federal Financial Institutions Examination Council) and the OCC (Office of the
Comptroller of the Currency).
The Company's Y2K state of readiness has been evaluated by an independent firm.
Results of the evaluation have been received and several recommendations were
given. These recommendations have either been satisfied or have a project plan
assigned to resolve them.
Costs
Management expects to incur internal costs to prepare its computer systems,
applications and customers for Y2K. Management also expects to incur external
costs associated with the Y2K state of readiness evaluation to be provided by an
independent firm. These costs are being expensed and are not expected to have a
material impact on the future results of operations. As of July 31, 1999 the
Company has incurred approximately $88,000 of internal costs, primarily in the
form of employee compensation, associated with Y2K readiness.
Risks
There could be a material adverse effect on the results of operations if the
system enhancements and modifications for Y2K prove not to be effective. In this
event, installed customers would have non-working systems and could possibly
seek out other Y2K ready systems. This would eliminate future maintenance
revenues from these customers. A system that is not Y2K ready would impact new
sales until such time that a Y2K ready system is completed. There are also many
external environments that are associated with the operation of the Company's
systems. The operations of installed systems are dependent upon software and
infrastructure provided by third parties, such as networks, host systems, phone
lines, hardware and other software. The Company has no responsibility to insure
that the third party software and infrastructure Y2K ready. However, failure by
the customer to make sure that these are Y2K ready may effect the operations of
the Company's products and the customer.
Contingency Plans
If the system enhancements, modifications or patches for Y2K prove not to be
effective, the Company is prepared to correct the situation via dial up
communications to the customer location. If this were to occur, the Company
currently believes that it would not be significant enough to cause an adverse
effect on operations.
IFS INTERNATIONAL, Inc. AND SUBSIDIARIES
Part II - Other Information
Item 1 - Legal Proceedings
The Company is not a party to any pending material legal proceedings.
Item 2 - Changes in Securities
In July 1999 the Company issued an aggregate of $1,075,000 principal amount of
convertible notes and 200,000 warrants in a private transaction to four persons.
The Company believes the issuance of these securities is exempt from the
registration requirements of the Securities Act of 1933 pursuant to Section 4
(2) thereof.
Item 3 - Defaults Under Senior Securities
None
Item 4 - Submission of Matters to a Vote of Security Holders
None
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
None
<PAGE>
Signature
In accordance with 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.
Date: September 14, 1999 IFS International, Inc.
By:
/s/ David L. Hodge
-----------------------------
David L. Hodge
President and Chief Executive Officer
/s/ John Singleton
-----------------------------
John Singleton
Chairman
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
Exhibit 27
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-2000
<PERIOD-START> MAY-1-1999
<PERIOD-END> JUL-31-1999
<CASH> 2,284,270
<SECURITIES> 0
<RECEIVABLES> 1,617,518
<ALLOWANCES> 42,010
<INVENTORY> 199,974
<CURRENT-ASSETS> 5,628,751
<PP&E> 4,365,869
<DEPRECIATION> 1,823,307
<TOTAL-ASSETS> 9,957,347
<CURRENT-LIABILITIES> 2,985,790
<BONDS> 0
0
0
<COMMON> 2,779
<OTHER-SE> 4,017,698
<TOTAL-LIABILITY-AND-EQUITY> 9,957,345
<SALES> 2,831,776
<TOTAL-REVENUES> 2,842,250
<CGS> 737,351
<TOTAL-COSTS> 2,733,958
<OTHER-EXPENSES> 57,665
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 75,710
<INCOME-PRETAX> 40,153
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 40,153
<EPS-BASIC> .01
<EPS-DILUTED> .01
</TABLE>
