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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 September 30, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
Commission file number 033-23138-D
HEARTSOFT, INC.
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(Exact name of small business issuer as specified in its charter)
DELAWARE 87-0456766
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
3101 NORTH HEMLOCK CIRCLE, BROKEN ARROW, OKLAHOMA 74012
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(Address of principal executive offices)
(918) 251-1066
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(Issuer's telephone number)
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(Former name, former address and former fiscal year, if changed since
last report)
As of September 30, 1999, 10,977,130 shares of Heartsoft, Inc. Common Stock,
$0.0005 par value, were outstanding.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
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HEARTSOFT, INC. - QUARTERLY REPORT
TABLE OF CONTENTS
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PART I. FINANCIAL INFORMATION PAGE
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Item 1: Balance Sheet as of September 30, 1999 3
Statement of Income as of September 30, 1999 4
Statement of Cash Flow - Three Months Ending 5
September 30, 1999
Item 2: Management's Discussion and Analysis 6
or Plan of Operations
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PART II. OTHER INFORMATION PAGE
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Item 1: Legal Proceedings 13
Item 2: Changes in Securities 14
Item 3: Defaults Upon Senior Securities 14
Item 4: Submission of Matters to a Vote of Security Holders 14
Item 5: Other Information 14
Item 6: Exhibits and Reports on Form 8-K 14
Signature Page 15
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PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
BALANCE SHEET
AS OF SEPTEMBER 30, 1999
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30-Sep-99 30-Jun-99
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Assets
Current Assets
Cash 378,482 63,947
Accounts Receivable 48,484 39,957
Inventories 5,232 12,955
Prepaid Expenses 40,224 13,035
Total Current Assets 472,422 129,894
Plant, Property and Equipment
Plant, Property and Equipment 168,775 148,432
Accumulated Depreciation -92,290 -97,081
Total Plant, Property and Equipment 76,485 51,351
Other Assets
Developed Software, net 693,903 652,318
Other 2,689 2,689
Total Other Assets 696,592 655,007
Total Assets 1,245,499 836,252
Liabilities
Current Liabilities
Accounts Payable 169,498 198,106
Accrued Liabilities 92,900 92,900
Current Portion - long-term Debt 198,876 281,376
Total Current Liabilities 461,274 572,382
Long Term Liabilities
Loans Payable - Long-term 213,146 213,146
Total Liabilities 674,420 785,528
Equity
Preferred Stock
Common Stock 5,489 4,968
Additional Paid in Capital 4,187,955 3,428,271
Retained Earnings -3,622,365 -3,382,515
Treasury Stock
Total Equity 571,079 50,724
Total Shareholders' Equity 571,079 50,724
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Total Liabilities and shareholders' Equity 1245499 836252
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STATEMENT OF INCOME
THREE MONTHS ENDED SEPTEMBER 30, 1999
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<CAPTION>
30-Sep-99 30-Sep-98
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Net Sales 47,885 139,579
Costs and expenses:
Costs of production 22,461 28,172
Sales and Marketing 44,296 43,863
General and administrative 172,252 105,470
Depreciation and amortization 44,883 47,667
Total operating expenses 283,892 225,172
Operating Loss -236,007 -85,593
Other income and expenses
Gain on sale of interest in software library 0 58,570
Interest expense 5,506 786
Other (net) -1,663 -588
Loss before income taxes -239,850 -27,221
Income taxes 0 0
Loss before unusual item -239,850 -27,221
Unusual item - costs associated with closing 0 8,435
Dallas sales office
Net loss -239,850 -35,656
Net loss per common share - basic and diluted 0.022 0.005
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STATEMENT OF CASH FLOW
THREE MONTHS ENDED SEPTEMBER 30
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CASH FLOW FROM OPERATING ACTIVITIES
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Net Income (Loss) (239,850)
Change in Current Assets
Net Receivables (8,527)
Inventory 7,723
Prepaid Expenses (27,189)
Change in Current Liabilities
Accounts Payable 38,190
Loan Payable 82,500
Other Current Liabilities -
Total Cash Flow from operating activities (147,153)
Cash Flow from investing activities
Developed Software (41,585)
Property, Plant & Equipment (15,552)
Depreciation on Disposed Assets (9,582)
Intangible Assets
Total Cash Flow from investing activities (66,719)
Cash Flow from financing activities
Long-Term Debt -
Paid-In Capital 768,257
Retained Earnings (239,850)
Total Cash Flow from financing activities 528,407
Net Increase (Decrease) in Cash 314,535
Beginning Cash Balance 63,947
Net Increase (Decrease) in Cash 314,535
Ending Cash Balance 378,482
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
FORWARD-LOOKING STATEMENTS AND RISK FACTORS
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This quarterly report on Form 10-QSB contains "forward-looking" statements
regarding potential future events and developments affecting the business of
Heartsoft, Inc., a Delaware corporation ("Heartsoft," or the "Company,"
including its subsidiary). Such statements relate to, among other things:
- - future operations of Heartsoft, including the impact of any year 2000
issues encountered by Heartsoft;
- - the development of new products, distribution channels and product
sales;
- - competition for customers for Heartsoft's products;
- - the uncertainty of developing or obtaining rights to new products that
will be accepted by the market;
- - the timing of the introduction of new products into the market;
- - the limited market life of Heartsoft's products; and
- - other statements about Heartsoft or the educational software market.
Forward-looking statements may be indicated by the words "expects," "estimates,"
"anticipates," "intends," "predicts," "believes" or other similar expressions.
Forward-looking statements appear in a number of places in this Form 10-QSB and
may address the intent, belief or current expectations of Heartsoft and its
Board of Directors and Management with respect to Heartsoft and its business.
Heartsoft's ability to predict results or the effect of any future events on
Heartsoft's operating results is subject to various risks and uncertainties.
Some of these risks and uncertainties include competition for products and
customers, the Company's ability to develop or obtain rights to new products and
the limited market life of Heartsoft's current products.
RISK FACTORS
POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS; SEASONALITY
The Company's quarterly revenues and operating results have varied significantly
in the past and are likely to vary substantially in the future. Quarterly
revenues and operating results may fluctuate as a result of a variety of
factors, including:
- - changes in the level of operating expenses;
- - demand for the Company's products;
- - the introduction of new products and product enhancements by the
Company or its competitors;
- - changes in customer budgets;
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- - competitive conditions in the industry; and
- - general economic conditions.
Further, the Company's customers often experience delays associated with
internal authorization procedures when purchasing the Company's products. For
these and other reasons, the sales cycles for the Company's products are
typically lengthy and subject to a number of significant risks outside the
Company's control including customers' budgetary constraints and internal
authorization reviews. The Company historically has operated with little backlog
because its software products are generally shipped as orders are received. The
Company can not ensure that it will be profitable in future quarters.
RAPID TECHNOLOGICAL CHANGE
The educational software market is subject to rapid technological change, new
product introductions, evolving industry standards and changes in customer
demands. The introduction of new technologies and the emergence of new industry
standards can render existing products obsolete and unmarketable. The Company's
future success will depend in part on its ability to enhance existing products
and to develop new products that meet changing client requirements. The Company
is in the process of developing a secure Internet browser for children. The
development of any new products utilizing the Internet involves significant
technical risks. The Company may not be successful in developing and marketing
product enhancements or new products. The Company could experience difficulties
that delay or prevent the successful development and marketing of product
enhancements or new products. The Company cannot guarantee that any new products
and product enhancements it may introduce will achieve market acceptance.
INTENSE COMPETITION
The educational software market is highly competitive and rapidly changing. A
number of companies offer products similar to the Company's products and target
the same customers as the Company. The Company believes its ability to compete
depends upon many factors including:
- - the timely development and introduction of new products and product
enhancements;
- - product functionality;
- - product performance;
- - price;
- - product reliability;
- - customer service and support;
- - sales and marketing efforts; and
- - product distribution.
Some of the Company's primary and potential competitors are substantially larger
than the Company and have significantly greater financial, technical and
marketing resources as well as established channels of distribution. As a
result, these competitors may be able to respond more quickly to emerging
technologies and changes in customer requirements and can devote greater
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resources to their businesses. The Company also expects that competition will
increase as a result of software industry consolidation. In addition, current
and potential competitors have established or may establish cooperative
relationships among themselves or prospective customers. Accordingly, new
competitors or alliances among competitors may emerge and rapidly acquire
significant market share. Increased competition may result in price reductions,
reduced gross margins and loss of market share, any of which would have a
material adverse effect on the Company's business, operating results and
financial condition. The Company can not ensure it will be able to compete
successfully against current or future competitors.
MANAGEMENT OF CHANGING BUSINESS; DEPENDENCE ON MANAGEMENT AND KEY EMPLOYEES
The Company has experienced significant changes in its business, including an
expansion in the Company's staff and customer base, and the expansion of its
product lines. Such changes have placed and may continue to place a significant
strain on the Company's management and operations. In order to manage such
change in the future, the Company must continue to enhance its operational,
financial and management information systems and to hire, train and manage
employees. If the Company is unable to implement these systems and manage such
changes effectively, the Company's business, operating results and financial
condition could be materially and adversely affected.
The Company believes that its future success will also depend in large part upon
its ability to attract and retain highly skilled technical, managerial and
marketing personnel. Competition for such personnel is intense. The Company
cannot ensure that it will be successful in attracting and retaining the
personnel it requires to continue growing. Because of the Broken Arrow, Oklahoma
(Tulsa Metropolitan area) location of the Company's headquarters, the Company
may have difficulty in attracting and retaining qualified management and
technical employees who may be required to move to become employed by the
Company.
The Company's success depends to a significant extent on the performance and
continued services of its senior management and certain other key employees. The
loss of one or more of senior management and key employees could have a material
adverse effect upon the Company. In October 1999, the Company began entering
into employment agreements with its key employees in order to reduce the risk
of loss of key employees.
PROTECTION OF INTELLECTUAL PROPERTY
The Company's success is heavily dependent upon its confidential and proprietary
intellectual property. The Company presently has no patents or patent
applications pending. Rather, the Company relies primarily on a combination of
copyright, trademark and trade secrets laws, confidentiality procedures and
contractual provisions to protect its proprietary rights. Trade secret and
copyright laws afford only limited protection. Despite the Company's efforts to
protect its proprietary rights, unauthorized parties may attempt to copy aspects
of the Company's products or to obtain and use information that the Company
regards as proprietary. In addition, the laws of some foreign countries do not
protect the Company's proprietary rights as well as the
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laws of the United States. The Company cannot guarantee that its means of
protecting its proprietary rights will be adequate or that the Company's
competitors will not independently develop similar technology.
The Company does not believe that any of its products infringe upon the
proprietary rights of third parties. However, third parties could claim
infringement by the Company with respect to current or future products. The
Company expects that software product developers such as itself will
increasingly be subject to infringement claims as the number of products in the
educational software market increase and the functionality of such products
overlap. Defense of any such claims, with or without merit, could be
time-consuming, result in costly litigation, cause product shipment delays or
require the Company to enter into royalty or licensing agreements. Such royalty
or licensing agreements, if required, may not be available on terms acceptable
to the Company or at all. Any dispute regarding the proprietary rights of third
parties could have a material adverse effect upon the Company's business,
operating results and financial condition.
MANAGEMENT OF GROWTH
The Company is experiencing a period of transition and product introductions
that has and may continue to place a significant strain on its resources.
Expansion of the Company's product lines, additional product development and
product introductions, or acquisitions of other technologies, will further
place a strain on the Company's resources and personnel when added to the
day-to-day activities of the Company. In particular, the Company is currently
developing a new secure Internet browser for children, INTERNET
SAFARI-Registered Trademark-, scheduled to be released during the first quarter
of the calendar year 2000.
RISK OF PRODUCT DEFECTS
Prior to release of new products or upgrades to existing products, the Company
conducts exhaustive testing of those products. However, despite testing, new
products or enhancements may contain undetected errors or "bugs" that are
discovered only after a product has been installed and used by customers. There
can be no assurance that such errors will not be discovered in the future. Such
errors can cause delays in shipments that materially and adversely affect the
Company's competitive position and operating results. Although the Company has
not experienced material adverse effects resulting from any such errors to date,
the Company cannot ensure that its new products or releases will be error free
even after commencement of commercial shipments. Discovery of errors in the
Company's products after the commencement of commercial shipping could result in
the following:
- - loss of revenues;
- - delays in market acceptance;
- - diversion of development resources;
- - damage to the Company's reputation; and
- - increased service and warranty costs.
Any of these occurrences could have a material adverse effect upon the
Company's business, financial condition and results of operations.
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DEPENDENCE ON PRINCIPAL PRODUCTS
To date, the Company has derived substantially all of its revenue from the sale
of its 40 educational products. Accordingly, the Company's results will depend
on continued market acceptance of these existing products and acceptance of its
new products, including INTERNET SAFARI-Registered Trademark-. Failure to
achieve such acceptance could have a material adverse effect on the Company's
financial condition and results of operations.
DEVELOPMENT OF NEW PRODUCTS AND ENHANCEMENT OF EXISTING PRODUCTS
In order to remain competitive in the educational software market, the Company
must develop and introduce new products and product enhancements on a timely
basis. If the Company fails to develop and introduce new products and
enhancements on a timely basis, it could have a material adverse effect on the
Company's financial condition and results of operations.
YEAR 2000 ISSUES
Many existing computer systems and software products do not properly recognize
dates after December 31, 1999. This "Year 2000" problem could result in
miscalculations, data corruption, system failures or disruptions of operations.
The Company has reviewed its internal systems and believes that such systems are
Year 2000 compliant. However, the Company can not ensure that Year 2000 errors
or defects will not be discovered in the Company's internal software systems. If
such errors or defects are discovered, the costs of making the Company's
internal systems Year 2000 compliant could be material.
The Company is subject to potential Year 2000 problems affecting the systems of
its customers and the systems of its vendors. Additionally, changing purchasing
patterns of customers impacted by Year 2000 issues may result in reduced
resources available for purchases of educational software. These problems could
also have a material adverse effect on the Company's financial condition and
results of operations.
Year 2000 errors or defects in the internal systems maintained by the Company's
vendors could require the Company to incur significant unanticipated expenses to
remedy any problems or replace affected vendors. In order to limit its exposure
to potential Year 2000 inventory problems, the Company has established
relationships with various different sources of raw materials. The Company is
also prepared to increase its inventory of critical raw materials to offset any
unexpected delays in receiving such inventories.
LIMITED RESOURCES
Although the Company believes that its current cash reserves and cash flows from
operations will be adequate to fund its operations for at least the next twelve
months, such resources may be inadequate. Consequently, the Company may require
additional operating funds during or after such period. Additional financing may
not be available on favorable terms or at all. The
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Company is currently planning a private placement of equity to be completed by
the first calendar quarter of 2000. If the Company raises additional funds by
selling stock, the percentage ownership of the Company's current shareholders
will be reduced. If the Company cannot raise adequate funds to satisfy its
capital requirements, the Company may have to limit its operations
significantly. The Company's future capital requirements depend upon many
factors, including:
- - the rate at which the Company expands its sales and marketing
operations;
- - the extent to which the Company develops its products;
- - the rate at which the Company updates its technology;
- - the Company's ability to complete its planned private placement;
- - the rate at which the Company expands; and
- - the response of competitors to the Company's product and service
offerings.
OVERVIEW
Heartsoft, Inc. is a publicly held Delaware Corporation, incorporated January
15, 1988, and traded OTC (Symbol: HTSF). Presently, 30,000,000 shares of common
stock are authorized, with 10,977,130 shares issued and outstanding. During
the period from July, 1999 to September, 1999, the high and low bids for the
Company's stock, as reported by the National Association of Securities
Dealers, Inc, were $1.7813 and $1.2188 respectively.
Heartsoft is engaged in the design and publishing of its own proprietary
educational software products for distribution to the education market and
consumer market. To date, Heartsoft's Core Products Division has designed and
published more than 40 educational software titles. One of the Company's best
selling proprietary titles is THINKOLOGY-Registered Trademark-, a software
series that teaches young children the skills of critical thinking and higher
order reasoning skills. Released in late 1998, THINKOLOGY-Registered Trademark-
has garnered the prestigious Media & Methods Portfolio Award for 1999.
THINKOLOGY-Registered Trademark- has also received several favorable reviews in
top educational and consumer magazines, including FamilyPC and Multimedia
Schools.
Other popular Heartsoft titles include:
- - TOMMY THE TIME TURTLE, an animated turtle that teaches children ages
5-7 how to tell time;
- - COIN CHANGER, which introduces children ages 5-7 to the denominations
of coins; and
- - the HEARTSOFT BESTSELLER SITE LICENSE, which consists of 12 of the
Company's top selling titles under a license allowing the teacher to
copy the software for every computer in the school.
Three of the Company's best selling products, HEARTSOFT BESTSELLER SITE LICENSE
(covering 12 software titles) and HEARTSOFT K-8 LIBRARY (containing all 38
titles in the current product line) and its most recent release,
THINKOLOGY-Registered Trademark-, sell from prices ranging from approximately
$400 to $1,400, depending on the configuration. Further, each product license
allows multiple use of the software throughout the school. Within the consumer,
or home
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market, the Company's products sell in the price range from approximately $10
to over $100 depending on configuration and educational support materials.
During the first calendar quarter of 1999, the Company began development of
INTERNET SAFARI-Registered Trademark-, a secure Internet browser for children.
This proprietary product has been under in-house development and is expected to
be available during the first calendar quarter of 2000. INTERNET
SAFARI-Registered Trademark- is designed for children ages 4 through 12 years
to help simplify their use of the Internet. INTERNET SAFARI-Registered
Trademark- will offer its young users access to the Internet with an exciting
cartoon interface built around a safari theme with jungle sounds, music and
animation. The new browser will also utilize artificial intelligence combined
with advanced image detection and analysis software to protect users from
inappropriate Internet content such as adult content, pornography, violence,
hate crimes, etc. INTERNET SAFARI-Registered Trademark- will be distributed to
both the consumer and educational markets.
NET REVENUES
Net Sales of the Company's educational computer software for the 3 months ending
September 30, 1999, were $47,885 compared to $139,579 for the same period one
year ago, a decrease of 66%. During the 3 months ended September 30, 1999, the
Company substantially discontinued its selling efforts and completely
reorganized its sales organization in preparation for the addition of Nita Seng
as the company's new Vice President of Sales and Marketing. Ms. Seng was
formerly with The Learning Company where she acted as National Director of
Education Sales.
Ms. Seng officially began rebuilding the Company's sales organization in
October. Ms. Seng will refocus the Company's selling efforts using sales and
distribution models tailored more specifically for the Company's newest products
and will hire and train sales professionals experienced in selling to the
education market. The Company anticipates that it will accelerate hiring in its
sales and marketing division under Ms. Seng's guidance through the end of
calendar year 1999.
INDUSTRY TRENDS AFFECT SALES
The educational technology industry is composed of both hardware and software
sales to schools. Sales in these categories tend to run counter to one another
and in any given year will be proportionally much higher in one than the other.
It is management's opinion that the industry is currently favoring the sales of
hardware and products related to the building of the Internet infrastructure.
Consequently, software sales have not been as strong as in years past.
Management believes that cyclical forces will move customer buying habits back
to historical growth trends.
COST OF GOODS SOLD
Cost of goods sold account for all costs associated with the acquisition of
components, assembly of the finished products, warehousing, shipping and payroll
for all personnel associated with the production and shipping of the finished
product. Cost of goods sold was 47% of net sales for the
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quarter ended September 30, 1999. This is a 27% increase when compared to the
same quarter ending September 30, 1998. The unforeseen decline in revenue
accounts for the increase in cost of goods sold.
OPERATING EXPENSES
General operating expenses increased 48% for the quarter ended September 30,
1999 when compared to the quarter ended September 30, 1998. This rise in
operating expenses can be attributed to the addition of Ms. Nita Seng, the
Company's new Vice President in Sales and Marketing and to the expenses of
expanding the Company's new sales division. Costs associated with Sales and
Marketing for already existing product lines rose 24% compared to the quarter
ended September 30, 1998. Again this increase is attributed to the necessary
expenditures to fully realize the potential of bringing in Ms. Nita Seng. The
implementation of Phase II of the growth strategy of the Company has provided
sufficient capital to fund the expansion of the Company's sales division.
NET INCOME
The Company realized a loss in the quarter ending September 30, 1999 of $239,850
compared to a profit of $36,656 for the quarter ending September 30, 1998. The
net loss was primarily the result of decreased product sales through the quarter
as the Company substantially discontinued its selling efforts and completely
reorganized its sales organization. Also, the Company saw increased costs
associated with the development of its new secure Internet browser for children,
INTERNET SAFARI-Registered Trademark-.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1999, the Company's principal sources of liquidity included
cash and accounts receivables of $426,966. During the quarter ending September
30, 1999, the Company was well into Phase II of a structured growth plan.
Interim capital was acquired through equity as well as funding by private
sources. Management believes that although current liquidity will sustain the
Company at its present growth rate, additional funding will be required in order
to compete in the Internet industry. Management shall continue to seek
additional capital through equity and debt instruments to fund Phase III of the
Company's growth plan.
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
On June 29, 1999, the Franklin Group, Inc. ("Franklin") filed a petition against
Heartsoft in the District Court of Tulsa County, the State of Oklahoma. Franklin
alleges that Heartsoft failed to tender common stock of the Company owed to
Franklin due to services Franklin provided pursuant to a Business Consulting and
Public Relations Agreement ("Consulting Agreement").
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Fanklin claims that it fully performed under the terms of the Consulting
Agreement and it is entitled to 25,000 free trading shares and 150,000
restricted shares of Heartsoft's common stock. Franklin has requested a
judgement against Heartsoft for these shares or, in the alternative, the cash
equivalent of such shares plus reasonable attorney's fees and costs.
On August 27, 1999, Heartsoft answered Fanklin's petition by denying that
Franklin was entitled to any compensation under the Consulting Agreement.
Heartsoft also counterclaimed alleging that Franklin had failed to perform under
a separate Marketing Agreement. Heartsoft further alleges that it paid, in
advance, for Fanklin's services under the Marketing Agreement by transferring
75,000 shares of the Company to Franklin. Through its counterclaim, Heartsoft is
seeking the return of these 75,000 shares or, in the alternative, the cash
equivalent of such shares plus reasonable attorney's fees and costs. This matter
is still in the early stages of discovery.
ITEM 2. CHANGES IN SECURITIES.
None.
ITEM 3. DEFAULTS UPON 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:
27.1 Financial Data Schedule.
B. Reports on Form 8-K:
There were no reports on Form 8-K filed by the Company during the
fiscal quarter ended September 30, 1999.
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SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
HEARTSOFT, INC.
(Registrant)
Date: 11/17/99 /s/ Benjamin P. Shell
------------- --------------------------------------------------------
Benjamin P. Shell, Chairman of the Board, President, and
Chief Executive Officer
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
Date: 11/17/99 /s/ Benjamin P. Shell
------------- --------------------------------------------------------
Benjamin P. Shell, Chairman of the Board, President, and
Chief Executive Officer
(Principal Executive Officer and Principal Financial
Officer)
Date: 11/17/99 /s/ Kathy David
------------- --------------------------------------------------------
Kathy David, Controller
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 378,482
<SECURITIES> 0
<RECEIVABLES> 48,484
<ALLOWANCES> 0
<INVENTORY> 5,232
<CURRENT-ASSETS> 472,422
<PP&E> 168,775
<DEPRECIATION> (92,290)
<TOTAL-ASSETS> 1,245,499
<CURRENT-LIABILITIES> 461,274
<BONDS> 0
0
0
<COMMON> 5,489
<OTHER-SE> 565,590
<TOTAL-LIABILITY-AND-EQUITY> 1,245,499
<SALES> 47,885
<TOTAL-REVENUES> 70,346
<CGS> 22,461
<TOTAL-COSTS> 283,892
<OTHER-EXPENSES> (1,663)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,506
<INCOME-PRETAX> (239,850)
<INCOME-TAX> 0
<INCOME-CONTINUING> (239,850)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (239,850)
<EPS-BASIC> (0.022)
<EPS-DILUTED> (0.022)
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