<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-Q
---------------
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
OR
[ ] 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: 000-28909
GreyStone Digital Technology, Inc.
(Exact Name of Registrant as Specified in its Charter)
---------------
<TABLE>
<S> <C>
Delaware 84-1107140
--------------------------------- ----------------------------------
(State or other jurisdiction (IRS Employer
incorporated or organization) Identification No.)
</TABLE>
4950 Murphy Canyon Road, San Diego, CA 92123
(Address of Principal Executive Offices) (Zip Code)
(858) 874-7000
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 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 SEPTEMBER 30, 2000
------------------- ---------------------------------
<S> <C>
Common Stock, $.001 par value 16,293,706
Series A Convertible Preferred Stock, $.001 par value 5,000
</TABLE>
<PAGE> 2
INDEX
GreyStone Digital Technology, Inc.
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
PART I. FINANCIAL INFORMATION FOR GREYSTONE DIGITAL TECHNOLOGY
AND SUBSIDIARY 3
Item 1. FINANCIAL STATEMENTS 3
Condensed Consolidated Balance Sheets at September 30, 2000
(unaudited) and March 31, 2000 3
Condensed Consolidated Statements of Operations (unaudited) for the three
and six months ended September 30, 2000 and 1999 4
Condensed Consolidated Statements of Stockholders' Equity (unaudited)
for the six months ended September 30, 2000 5
Condensed Consolidated Statements of Cash Flows (unaudited)
for the six months ended September 30, 2000 and 1999 7
Notes to Condensed Consolidated Unaudited Financial Statements 9
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 15
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK 18
PART II. OTHER INFORMATION 18
Item 1. LEGAL PROCEEDINGS 18
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 18
Item 3. DEFAULTS UPON SENIOR SECURITIES 18
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 18
Item 5. OTHER INFORMATION 19
Item 6. EXHIBITS AND REPORTS ON FORM 8-K 19
EXHIBIT INDEX 21
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS AND NOTES
GREYSTONE DIGITAL TECHNOLOGY, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30,
2000 March 31,
(Unaudited) 2000
------------ ------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,306,352 $ 167,299
Accounts receivable, net of allowance for doubtful accounts
of $40,000 283,232 372,981
Other current assets 49,943 54,235
------------ ------------
Total current assets 1,639,527 594,515
Notes receivable, including accrued interest of $43,151
and $16,077 643,151 616,077
Forensic surveillance modules 330,000
Equipment and furniture, net of accumulated depreciation
and amortization of $2,379,698 and $2,302,999 405,896 278,075
Contract receivable for forensic equipment 135,000
Deposits 87,678 87,678
Related party notes receivable, including accrued interest
of $23,895 and $21,137 73,895 71,137
------------ ------------
Totals $ 3,315,147 $ 1,647,482
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 644,933 $ 970,092
Notes payable to principal stockholder 20,000
------------ ------------
Total current liabilities 644,933 990,092
------------ ------------
Stockholders' equity:
Series A Preferred stock, $.001 par value; $1000 liquidation
preference value per share; 3,000,000 shares authorized;
5,000 shares issued and outstanding 5
Additional paid in capital - Preferred stock 5,842,909
Common stock, $.001 par value; 30,000,000 shares authorized;
- 16,293,706 and 16,278,179 shares issued and outstanding 16,294 16,278
Additional paid in capital - Common stock 43,966,941 39,816,415
Subscriptions receivable from equity transactions (1,510,792) (1,510,792)
Accumulated deficit (45,645,143) (37,664,511)
------------ ------------
Total stockholders' equity 2,670,214 657,390
------------ ------------
Totals $ 3,315,147 $ 1,647,482
============ ============
</TABLE>
See Notes to Condensed Consolidated Unaudited Financial Statements
<PAGE> 4
GREYSTONE DIGITAL TECHNOLOGY, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
September 30 September 30
-------------------------------- --------------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ 655,993 $ 490,785 $ 1,196,037 $ 950,355
------------ ------------ ------------ ------------
Expenses:
Cost of revenues 494,414 292,945 917,916 519,789
Marketing and sales 269,957 191,529 528,689 358,040
Research and development 499,041 292,917 839,399 530,219
General and administrative 946,273 732,924 2,135,461 1,248,892
------------ ------------ ------------ ------------
Totals 2,209,685 1,510,315 4,421,465 2,656,940
------------ ------------ ------------ ------------
Loss from operations (1,553,692) (1,019,530) (3,225,428) (1,706,585)
Other income (expense):
Interest income, including $1,668 and $2,758
from related parties 48,450 75,857
Interest expense on loans from principal
stockholder (92) (7,274)
------------ ------------ ------------ ------------
Totals
48,450 (92) 75,857 (7,274)
------------ ------------ ------------ ------------
Net loss $ (1,505,242) $ (1,019,622) $ (3,149,571) $ (1,713,859)
Preferred stock dividends:
Imputed stock dividends related to
issuance of detachable warrants $ (3,437,500)
Imputed stock dividends for (1,250,000)
beneficial conversion feature
Imputed cumulative stock dividends at 8% (99,726) (143,561)
------------ ------------
Net loss applicable to common stock $ (1,604,968) $ (1,019,622) $ (7,980,632) $ (1,713,859)
============ ============ ============ ============
Basic net loss per common share $ (0.10) $ (0.07) $ (0.49) $ (0.11)
============ ============ ============ ============
Basic weighted average number of shares
outstanding 16,285,980 15,190,348 16,285,197 15,035,026
============ ============ ============ ============
</TABLE>
See Notes to Condensed Consolidated Unaudited Financial Statements.
<PAGE> 5
GREYSTONE DIGITAL TECHNOLOGY, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
Six months ended September 30, 2000
<TABLE>
<CAPTION>
Preferred Stock Common Stock
-------------------------------------------------- --------------------------------
Additional
Paid-In
Shares At Par Capital Shares At Par
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Balance, April 1, 2000 16,278,179 $ 16,278
Preferred stock sold for cash,
net of expenses of $550,647 5,000 $ 5 $ 4,449,348
Imputed preferred stock dividend related
to issuance of detachable warrants for
common stock in connection with the
sale of the preferred stock
Imputed preferred stock dividends
for beneficial conversion feature 1,250,000
Common stock issued upon
conversion of notes payable
to principal stockholder 4,444 5
Common stock issued to pay
accrued interest upon conversion
of notes payable to principal
stockholder 1,852 2
Warrants issued to purchase
common stock
Stock options to purchase
common stock granted to non-
employees
Common stock issued to
Board of Directors for annual
compensation 9,231 9
Imputed preferred stock dividend
at 8% 143,561
Net loss
-------------- -------------- -------------- -------------- --------------
Balance, September 30, 2000 5,000 $ 5 $ 5,842,909 16,293,706 $ 16,294
============== ============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
Common Stock
-------------- Subscriptions
Additional Receivable
Paid-In from Equity Accumulated
Capital Transactions Deficit Total
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Balance, April 1, 2000 $ 39,816,415 $ (1,510,792) $ (37,664,511) $ 657,390
Preferred stock sold for cash,
net of expenses of $550,647 4,449,353
Imputed preferred stock dividend related
to issuance of detachable warrants for
common stock in connection with the
sale of the preferred stock 3,437,500 (3,437,500)
Imputed preferred stock dividends
for beneficial conversion feature (1,250,000)
Common stock issued upon
conversion of notes payable
to principal stockholder 19,995 20,000
Common stock issued to pay
accrued interest upon conversion
of notes payable to principal
stockholder 8,327 8,329
Warrants issued to purchase
common stock 614,513 614,513
Stock options to purchase
common stock granted to non-
employees 25,200 25,200
Common stock issued to
Board of Directors for annual
compensation 44,991 45,000
Imputed cumulative preferred
stock dividend at 8% (143,561)
Net loss (3,149,571) (3,149,571)
-------------- -------------- -------------- --------------
Balance, September 30, 2000 $ 43,966,941 $ (1,510,792) $ (45,645,143) $ 2,670,214
============== ============== ============== ==============
</TABLE>
See Notes to Condensed Consolidated Unaudited Financial Statements.
<PAGE> 6
GREYSTONE DIGITAL TECHNOLOGY, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six months ended
September 30,
---------------------------
2000 1999
----------- -----------
<S> <C> <C>
Operating activities:
Net loss ($3,149,571) ($1,713,859)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 76,699 100,181
Compensation expense recorded upon issuance of annual stock
award for board of directors 45,000
Compensation expense recorded upon issuance of warrants
and compensatory stock options 639,713 114,000
Changes in operating assets and liabilities:
Notes receivable interest (29,832)
Accounts receivable 89,749 52,550
Other assets 4,292 (33,483)
Accounts payable and accrued expenses (316,830) (307,870)
----------- -----------
Net cash used in operating activities (2,640,780) (1,788,481)
----------- -----------
Investing activities
Issuances of related party notes receivable (30,000)
Purchase of forensic vehicle (330,000)
Purchase of contract receivable for forensic vehicle (135,000)
Additions of leasehold improvements (45,656)
Purchases of software licenses and equipment (158,864) (238,176)
----------- -----------
Net cash used in investing activities (669,520) (268,176)
----------- -----------
Financing activities:
Repayments of notes payable to principal stockholder (50,000)
Repayments of loans payable to officers (140,810)
Repayment of short-term notes payable (402,000)
Sale of common stock 3,250,470
Sale of preferred stock, net of selling expense 4,449,353
----------- -----------
Net cash provided by financing activities 4,449,353 2,657,660
----------- -----------
Net increase in cash and cash equivalents 1,139,053 601,003
----------- -----------
Cash and cash equivalents, beginning of year 167,299 795,480
----------- -----------
Cash and cash equivalents, end of period $ 4,831,061 $ 1,396,483
=========== ===========
Supplemental disclosure of cash flow data:
Interest paid $ 93,425
===========
Supplemental disclosure of noncash investing and financing activities:
Common stock issued as payment for:
Notes payable to principal stockholder $ 20,000 $ 50,000
=========== ===========
Accrued interest payable $ 8,329 $ 19,332
=========== ===========
Imputed preferred stock dividends $ 4,831,061
===========
</TABLE>
See Notes to Condensed Consolidated Unaudited Financial Statements.
<PAGE> 7
GREYSTONE DIGITAL TECHNOLOGY, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Unaudited interim financial statements:
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions
to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been
included. Operating results for the three and six month periods ended
September 30, 2000 are not necessarily indicative of the results that
may be expected for the year ended March 31, 2001. The unaudited
condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and footnotes
thereto included in the company's annual report on Form 10-K for the
year ended March 31, 2000.
The results of operations for the three and six month periods ended
September 30, 1999 and cash flows for the six month period ended
September 30, 1999 occurred before the merger and are for GreyStone
Technology, Inc. only.
Note 2 - The merger and other matters:
On December 27, 1999 a merger between a subsidiary of Express Capital
Concepts, Inc. and GreyStone Technology, Inc. was completed, whereupon
Express Capital Concepts also underwent a 1-for-41.66667 reverse stock
split (which reduced its issued and outstanding common stock to 480,000
shares), changed the par value of the stock from $0.0001 to $0.001 per
share, reduced the total authorized common stock from 500,000,000 shares
to 30,000,000 shares, and was renamed GreyStone Digital Technology, Inc.
Simultaneously, 15,211,627 shares of common stock of Greystone Digital
Technology, Inc. were issued to GreyStone Technology, Inc. common stock
holders. The transaction has been accounted for as a reverse
acquisition, wherein GreyStone Technology, Inc., the operating company,
is treated as the acquirer for reporting purposes. The balance sheets,
statements of operations, stockholders' equity and cash flows are
consolidated between GreyStone Digital Technology, Inc, and GreyStone
Technology, Inc. as of September 30, 2000. All significant inter-company
accounts and transactions are eliminated in consolidation.
Historically, the Company has funded its operations primarily through
sales of common stock to and borrowings from its principal stockholder
and sales of common stock and convertible notes payable to private
investors pursuant to private placement memorandums and exemptions from
registration under the Securities Act of 1933. Management plans to
obtain the additional funds needed to enable the Company to continue as
a going concern through the private placements of debt or equity
securities. However, management cannot provide any assurance that the
Company will be successful in consummating these private placements.
The accompanying condensed consolidated financial statements have been
prepared in conformity with generally accepted accounting principles
which contemplates that the Company will continue as a going concern and
continue operations, realization of assets and satisfaction of
liabilities in the ordinary course of business. If the Company is unable
to raise additional capital, it may be required to liquidate assets or
take actions which may not be favorable to the Company in order to
continue its operations. The consolidated condensed financial statements
do not include any adjustments that might result from the outcome of
these uncertainties.
On May 22, 2000, the Company completed a $5,000,000 private placement of
preferred stock. Management is actively pursuing additional investments
of capital through subsequent private placements.
<PAGE> 8
GREYSTONE DIGITAL TECHNOLOGY, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 2 - The merger and other matters (concluded):
The Company expects to generate new revenues from all business units.
Government revenues are expected from the introduction and sale of new
Government Products and associated engineering services. Commercial
revenues are expected from the sale of the Company's new motion-based
entertainment system. The Company's first Info-Space revenues are
anticipated from potential clients such as an entertainment company, an
airline, or a bank.
Note 3 - Notes receivable and accrued interest:
Notes receivable at September 30, 2000 consists of two notes from an
individual. The notes were originally due February 20, 2000, accrue
interest at 9% and are collateralized by common stock in a company owned
by the individual. The maturity date of the notes was extended to May
20, 2000, extended further to August 20, 2000 and subsequently extended
to November 18, 2000.
Note 4 - Earnings (loss) per share:
Effective March 31, 1998, the company adopted the provisions of
Statement of Financial Accounting Standards No. 128, Earnings per Share,
which requires the presentation of "basic" and "diluted" earnings (loss)
per common share, as further explained in Note 1 of the notes to the
audited financial statements of the company, included in Form 10-K for
the fiscal year ended March 31, 2000. Basic net loss per share
applicable to common stockholders includes imputed (non-cash) preferred
stock dividends totaling $(0.30) for the six months ended September 30,
2000. (See Note 10).
Since the company had losses applicable to common stock in the three and
six month periods ended September 30, 2000 and 1999, the assumed effects
of the exercise of outstanding stock options, warrants and convertible
preferred stock were anti-dilutive and, accordingly, dilutive per share
amounts have not been presented in the accompanying condensed
consolidated unaudited statements of operations. Such options, warrants
and convertible preferred stock could potentially dilute basic earnings
per share in the future.
<PAGE> 9
GREYSTONE DIGITAL TECHNOLOGY, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 5 - Segment reporting:
Effective March 31, 1999, the company adopted the provisions of
Statement of Financial Accounting Standards No. 131, Disclosures about
Segments of an Enterprise and Related Information ("SFAS 131"). SFAS 131
established standards for the way that public enterprises report
financial and descriptive information about reportable operating
segments in annual financial statements and interim financial statements
issued to stockholders. SFAS 131 supersedes SFAS 14, Financial Reporting
for Segments of a Business Enterprise, but retains the requirement to
report information about major customers.
Information on industry segments are scheduled below:
<TABLE>
<CAPTION>
Government Commercial Common/Corporate Total
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Three months ended September 30, 2000:
Revenue $ 655,993 $ 0 $ 0 $ 655,993
=========== =========== =========== ===========
Net Loss ($ 178,130) ($ 429,288) ($ 897,824) ($1,505,242)
=========== =========== =========== ===========
Three months ended September 30, 1999:
Revenue $ 416,791 $ 54,551 $ 19,443 $ 490,785
=========== =========== =========== ===========
Net Loss ($ 216,188) ($ 89,861) ($ 713,573) ($1,019,622)
=========== =========== =========== ===========
Six months ended September 30, 2000:
Revenue $ 1,196,037 $ 0 $ 0 $ 1,196,037
=========== =========== =========== ===========
Net Loss ($ 430,233) ($ 659,733) ($2,059,605) ($3,149,571)
=========== =========== =========== ===========
Six months ended September 30, 1999:
Revenue $ 865,332 $ 54,699 $ 30,324 $ 950,355
=========== =========== =========== ===========
Net Loss ($ 272,928) ($ 215,089) ($1,225,842) ($1,713,859)
=========== =========== =========== ===========
</TABLE>
<PAGE> 10
GREYSTONE DIGITAL TECHNOLOGY, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 6 - Warrants:
The company has issued warrants in conjunction with the sale of
convertible notes payable, assisting the company in acquiring capital,
the extending of loans, as an incentive to equity investors and as part
of the consideration paid to various consultants. Based on the
provisions of Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123") using the
Black-Scholes option pricing model and assuming a risk-free interest
rate of 6%, expected warrant lives of one to ten years, expected
volatility of 5% to 60% and dividends of 0%, the compensation expense
relating to the warrants issued was $614,513 and $88,800 for the six
months ended September 30, 2000 and 1999, respectively. Each warrant
entitles the holder to purchase one share of common stock upon exercise.
The warrants expire at various dates from 2002 through 2010. Additional
information regarding warrants outstanding at September 30, 2000 and
changes in outstanding warrants during the six months then ended
follows:
<TABLE>
<CAPTION>
Number of Exercise
Warrants Price
--------- -----------------
<S> <C> <C>
Outstanding at April 1, 2000 7,209,096 $4.95 to $12.00
Granted 1,550,000 $5.38 and $12.00
---------
Outstanding at September 30, 2000 8,759,096 $4.95 to $12.00
=========
Exercisable at September 30, 2000 7,741,097 $4.95 to $12.00
=========
Weighted average fair value of warrants
granted during the period $ 2.61
======
</TABLE>
Note 7 - Income taxes:
The company had net operating loss carry forwards at September 30, 2000
of approximately $35,500,000 available to reduce future Federal taxable
income and approximately $11,100,000 available to reduce state taxable
income, if any. The net operating loss carry forwards expire between
2006 and 2020 for Federal tax purposes and 2001 and 2005 for state tax
purposes. The related deferred tax assets were fully reserved through
valuation allowances at September 30, 2000 and March 31, 2000 and,
accordingly, there was no provision or credit for income taxes.
The expected Federal income tax benefit, computed based on the company's
pre-tax loss and the statutory Federal income tax rate, was
approximately $1,071,000 for the six months ended September 30, 2000.
The potential benefits were eliminated through equivalent increases in
the company's valuation allowance primarily for deferred tax assets
arising from net operating loss carry forwards (see Note 11 of the notes
to the audited financial statements of the company which are included in
the Form 10-K for the fiscal year ended March 31, 2000).
<PAGE> 11
GREYSTONE DIGITAL TECHNOLOGY, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 8 - Stock option plans:
As further explained in Note 13 of the notes to the audited financial
statements, which are included in the Form 10-K for the fiscal year
ended March 31, 2000, the company has two stock option plans, the "1991
Plan" and the "1994 Plan". In addition to incentive stock options (ISOs)
issued under the plans, the company issued nonqualified stock options
(NSOs) outside of the plans in 1994, 1995, 1997 and 1998. Information
related to the plans and other options granted follows:
<TABLE>
<CAPTION>
Options Outstanding at
Year Type Authorized 09/30/00
--------- ---- ---------- --------------
<S> <C> <C> <C>
1991 Plan ISO 1,000,000 550,000
1994 Plan ISO 2,000,000 1,772,851
1994 NSO 200,000 200,000
1995 NSO 200,000 200,000
1997 NSO 640,000 640,000
1998 NSO 750,000 750,000
--------- ---------
4,790,000 4,112,851
========= =========
</TABLE>
The amount of compensation expense recognized for the six months ended
September 30, 2000 and 1999 relating to the granting of NSO stock
options under the provisions of SFAS No. 123 was $25,200 for the six
months ended September 30, 2000 and 1999.
In the opinion of management, if compensation cost for the stock options
granted to employees had been determined based on the fair value of the
options at the grant date under the provisions of SFAS No. 123 using the
Black-Scholes option pricing model and assuming a risk-free interest
rate of 6%, expected option lives of one to ten years, expected
volatility of 5% to 60% and dividends of 0%, the company's pro forma net
loss arising from such computations would have been increased by
approximately $322,000 and $627,000 for the six months ended September
30, 2000 and 1999, respectively.
<PAGE> 12
GREYSTONE DIGITAL TECHNOLOGY, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 8 - Stock option plans (concluded):
Additional information regarding options outstanding under the company's
stock option plans at September 30, 2000 and changes in outstanding
options during the six months then ended follows:
<TABLE>
<CAPTION>
Weighted
Shares or Price Average
Per Share Exercise Price
--------------- --------------
<S> <C> <C>
Outstanding at April 1, 2000 4,106,762 $4.31
Granted 101,089 $4.95
Cancelled (95,000) $5.15
-------------- -----
Outstanding at September 30, 2000 4,112,851 $4.43
============== =====
Price Range at September 30, 2000 $.275 to $6.80
==============
Exercisable at September 30, 2000 3,706,612 $4.36
============== =====
Available for grant at September 30, 2000 677,149
==============
Weighted Average fair value
of options granted during period $3.64
=====
</TABLE>
The following table summarizes information about stock options
outstanding at September 30, 2000, all of which are at fixed prices:
<TABLE>
<CAPTION>
Weighted Average
Number of Remaining Contractual Number of
Exercise Options Life of Options Options
Price Outstanding Outstanding in Years Exercisable
-------------- ------------ -------------------- ------------
<S> <C> <C> <C>
$0.275 200,000 0.87 200,000
$1.000 200,000 3.76 200,000
$3.825 1,054,762 2.90 1,037,562
$4.875 42,089 9.96 0
$4.950 1,050,000 3.88 1,050,000
$5.000 59,000 9.84 0
$5.100 932,000 8.72 655,850
$6.000 553,000 9.42 550,000
$6.800 22,000 7.65 13,200
------------ ------------
4,112,851 3,706,612
============ ============
</TABLE>
<PAGE> 13
GREYSTONE DIGITAL TECHNOLOGY, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 9 - Related party transactions and balances:
In July 1999, a professional services agreement was made between the
company and The Pointe-Force company, Inc. ("Pointe-Force"), an entity
controlled by the spouse of a director of GreyStone. Pointe-Force
supports the company in the areas of mergers and acquisitions, strategic
planning, corporate financing and relations with the investment
community. Under this one-year advisory services agreement, Pointe-Force
is compensated in the amount of $11,000 per month, not including
expenses. Additionally, the company loaned $20,000 on August 6, 1999,
$10,000 on September 22, 1999 and $20,000 on November 17, 1999 to
Pointe-Force and GreyStone's director. All loans are for a one-year term
and bear interest at a rate of 8.75% per year. The maturity date of the
loan that was due on August 6, 2000, has been extended to August 6,
2001.
Note 10 - Series A Convertible Preferred Stock
On May 22, 2000, the Company completed the sale of $5,000,000 in
convertible preferred stock to a group of private investors. The Company
issued 5,000 shares of Series A Preferred Stock, convertible,
immediately at the holders' discretion, into common stock at a rate of
the lower of (1) 250 shares of common stock per share of preferred stock
(equivalent to an investment of $4.00 per share of common stock issued)
or (2) 80% of the volume weighted average price for the previous 250,000
shares traded prior to submission by the preferred stockholder of a
conversion notice to the Company. Embedded in the preferred stock is a
mandatory conversion requirement effective three years after the date of
issuance. The Series A investors also received warrants to purchase
1,250,000 shares of common stock at an exercise price of $5.38 per
share, and registration rights on the conversion shares and the shares
issuable upon the exercise of the warrants. The preferred stock provides
for a cumulative dividend of 8% per year, payable in common stock or
cash. After payment of a 10% commission for introducing the investors to
the Company, and legal fees totaling approximately $50,000, the Company
received net proceeds of approximately $4,449,000 which it intends to
use for general corporate purposes. In accordance with the Emerging
Issues Task Force (EITF) Issue No 98-5, the Company recognized a
beneficial conversion feature in the amount of $1,250,000 as an one-time
non-cash preferred stock dividend. The amount represented the difference
between the fixed conversion price of $4 per share at the date of
issuance of the preferred shares and the $5 market price of the common
stock at that date. In addition, the Company recognized a one time,
imputed (non-cash) preferred stock dividend of $3,437,500 as a result of
allocating a portion of the proceeds received to the fair value of the
warrants issued, as determined by the Black-Sholes model. The
aforementioned imputed preferred stock dividends associated with issuing
the stock resulted in a one-time loss applicable to common stockholders
of $(0.29) per share. The Company also recorded a non-cash preferred
stock dividend of $99,726 and $143,561 for the three and six month
periods ended September 30, 2000, respectively due to the 8% cumulative
preferred stock dividend feature.
In connection with the above sale of convertible preferred stock, the
Company issued warrants to purchase 75,000 shares of common stock at an
exercise price of $5.38 per share to the party who introduced the
Company to the Series A private placement group.
Note 11 - Subsequent Events:
At the Annual Meeting of Stockholders held on September 15, 2000, the
stockholders ratified an amendment to the Company's certificate of
incorporation to increase the number of authorized shares of common
stock from 30,000,000 shares to 100,000,000 shares. Additionally, the
stockholders ratified an amendment to the Company's 1994 Stock Option
and Stock Bonus Plan to increase the number of shares issuable under the
plan from 2,000,000 to 4,000,000 shares and voted to adopt a new
GreyStone 2000 Stock Option Plan. All of these actions will be in effect
upon the filing of required documents with the appropriate federal and
state agencies.
<PAGE> 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD LOOKING STATEMENTS: NO ASSURANCES INTENDED
This report contains statements that are not purely historical, and as such are
forward-looking statements under the federal securities laws. These include
forward-looking statements regarding management's intentions, plans, hopes,
beliefs, expectations or projections of the future. These forward-looking
statements involve risks and uncertainties, including without limitation,
acceptance of the company's products and services: additional financing
requirements within the next 12 months; the ability to recover or collect from
its investment activities and loans; the impact of competitive products or
pricing; technological changes; the effect of economic conditions; the ability
to successfully commercialize the company's entertainment products; the
company's dependence on key engineering, technical, and other personnel skilled
in government contracting; the ability of the government to terminate contracts
and subcontracts at any time; and other risks and uncertainties detailed from
time to time in the company's reports filed with the Securities and Exchange
Commission. One or more of these factors could affect the company's business and
financial results in future periods, and could cause actual results to differ
materially from plans and projections. There can be no assurance that the
forward-looking statements in this report will prove to be accurate, and
issuance of such forward-looking statements should not be regarded as a
representation by the company, or any other person, that the objectives and
plans of the company will be achieved. All forward-looking statements made in
this report are based on information presently available to management, and the
company assumes no obligation to update any forward-looking statements.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
Revenues for the three months ended September 30, 2000 were $655,993 as compared
to $490,785 for the three months ended September 30, 1999, reflecting an
increase in revenue of $165,208 (or approximately 34%). During both these
reporting periods, the Government Strategic Business Unit (SBU) generated
essentially all the revenues, with the Commercial SBU generating $54,551 of
revenue in the three months ended September 30, 1999. The increase in revenue
was primarily the result of concentrated technical support to military
experimentation events; follow-on tasking from current customers and additional
subcontracting activities in the Government SBU. During this current reporting
period, the Government SBU completed a SPAWAR Battlefield Visualization delivery
order in support to a major Joint Forces experiment. A new contract was awarded
by General Atomics Aeronautical Systems' Predator UAV program for RAGE support,
and additional delivery orders were awarded by SPAWAR under the Battlefield
Visualization contract for engineering services work with the Marine Corps
Warfighting Laboratory. As of September 30, 2000, the company's backlog of
government contractual work was approximately $576,000. The entire backlog is
expected to be completed within the current fiscal year ended March 31, 2001. In
March 1999, GreyStone was awarded a $15.1 million delivery order contract from
SPARWARSYSCEN - San Diego. Approximately $2.7 million in delivery orders have
been authorized under this contract through September 30, 2000, leaving an
available ceiling of approximately $12.4 million during the remaining 40 months
of the contract.
During the next nine months, GreyStone's Commercial SBU expects to generate
revenues from the sale of its new entertainment system, the MercRacer 3000(TM)
motion platform, featuring a GreyStone game, which has been re-titled Canyon
Fighter(TM). The Commercial SBU may incur additional losses during the next nine
months as it introduces its new entertainment products to the market.
Cost of revenues increased to $494,414 during the current three-month period as
compared to $292,945 for the same three-month period in the previous year. As a
percentage of revenues, costs of revenues were 75% in the current period
compared to 60% in the previous period. Cost of revenues increased in the
current period due to an increase in purchased engineering services costs in
support of new contractual work, an increase in the use of subcontractors and an
increase in the Government SBU overhead rate and company fringe benefit rate
from the prior period. The Government SBU overhead rate increase was the result
of additional costs associated with recruiting and hiring qualified engineering
software personnel during the current three-month period in order to support
increased activities of the Government SBU. The fringe rate applied to the cost
of revenues for the prior three-month period was less than the current period
rate due to lower medical claims in the previous period. Additionally, direct
travel costs were higher in the current period as a result of GreyStone's
increased support of overseas and domestic military exercises and contracts.
<PAGE> 15
The components that make up the cost of revenues include burdened labor, direct
travel, other direct costs, direct material, subcontracts and applicable SBU
burden. These cost components can vary in amount from period to period and are
highly dependent on such factors as the nature of the work performed, location
and duration of the work (company vs. contractor site), who performed the work
(company personnel vs. subcontractors) and who provided any required equipment
(company vs. customer).
Marketing and sales expenses were $269,957 or 41% of revenues in the current
period compared to $191,529 or 39% of revenues for the previous period, an
increase of $78,428 in the current period. The Commercial SBU primarily caused
the increase in marketing and sales expenses by preparing for the product
release of the MercRacer 3000 at the upcoming IAAPA trade show in Atlanta,
Georgia in November 2000 with related product promotion, marketing, and sales
support activities. In general, marketing and sales expenses result from bid and
proposal activity as well as attendance at trade shows, company product
demonstrations and other marketing related activities such as new sales calls,
sales literature, product brochures and marketing software development. These
types of expenses vary from period to period and are highly dependent upon the
extent and manner in which the company focuses its efforts regarding potential
future opportunities during the reporting period.
Research and development expenses increased to $499,041 for the current period,
compared to $292,917 for the previous period, resulting in an increase of
$206,124. The majority of the increase occurred in the Commercial SBU due to
intensified development needed to complete a deliverable production version of
the new MercRacer 3000(TM) motion base entertainment platform, along with the
initial development of a new title for play on the MercRacer 3000(TM) system.
Development of a 3D virtual workspace environment "Virtual-Info-Space (TM)" for
the Info-Space SBU also contributed to increased research and development
expenses.
General and administrative expenses were $946,273 compared to $732,924 for the
previous period, resulting in an increase of $213,349. General and
administrative increases were primarily the result of increases in public
relations expenses and outside professional consulting fees.
Other income of $48,450 consisted of interest income, including $1,668 from
related parties' notes.
The net loss of $1,505,242 increased by $485,620 or 48% from the $1,019,622 net
loss reported in the previous reporting period. In summary, during the current
year, revenues were up by $165,208 or 34%, while total expenses, net of other
income, increased $650,828 or 43%.
The Company recorded a non-cash preferred stock dividend of $99,726 for the
three month period ended September 30, 2000, for the 8% preferred stock dividend
feature provided for in the Series A Convertible Preferred Stock.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
Revenues for the six months ended September 30, 2000 were $1,196,037 as compared
to $950,355 for the six months ended September 30, 1999, reflecting an increase
in revenue of $245,682 (or approximately 26%). During these periods, the
Government Strategic Business Unit (SBU) generated essentially all revenues,
with the exception of $54,699 of revenue generated by the Commercial SBU in the
six months ending September 30, 1999. The increase in revenue was primarily the
result of an expanded government customer base and increased funding to current
tasking with the SPARWARSYSCEN - San Diego. In March 1999, GreyStone was awarded
a $15.1 million delivery order contract from SPARWARSYSCEN - San Diego.
Approximately $2.7 million in delivery orders have been authorized under this
contract through September 30, 2000, leaving an available ceiling of
approximately $12.4 million during the remaining 40 months of the contract. The
broad scope and extended performance period of this prime contract allows
numerous government customers cost effective access to the Company's modeling
and simulation capabilities. For the six-month period ending September 30, 2000,
government customers other than SPARWARSYSCEN - San Diego, have funded seven
additional Delivery Orders. The Company anticipates that this trend will
continue. As of September 30, 2000, the company's backlog was approximately
$576,000. The entire backlog is expected to be completed within the current
fiscal year ended March 31, 2001.
During the next twelve months, GreyStone's Commercial SBU expects to generate
revenues from the sale of its new Commercial entertainment system, the MercRacer
3000(TM) motion platform, featuring a GreyStone game, Canyon Fighter(TM). The
Commercial SBU may incur additional losses during the next nine months as it
promotes, markets, and introduces its new entertainment products to the market.
<PAGE> 16
Cost of revenues increased to $917,916 during the current six-month period as
compared to $519,789 for the same six-month period in the previous year. As a
percentage of revenues, costs of revenues were 77% in the current period
compared to 55% in the previous period. Cost of revenues increased in the
current period due to an increase in purchased engineering services costs in
support of new contractual work, an increase in the use of subcontractors and an
increase in the Government SBU overhead rate and company fringe benefit rate
from the prior period. The Government SBU overhead rate increase was the result
of additional costs associated with recruiting and hiring qualified engineering
software personnel during the current six-month period in order to support
increased activities of the Government SBU. The fringe rate applied to the cost
of revenues for the prior six-month period was less due than the current period
rate due to lower medical claims in the previous period. Additionally, direct
travel costs were higher in the current period as a result of GreyStone's
increased support of overseas and domestic military exercises and contracts.
The components that make up the cost of revenues include burdened labor, direct
travel, other direct costs, direct material, subcontracts and applicable SBU
burden. These cost components can vary in amount from period to period and are
highly dependent on such factors as the nature of the work performed, location
and duration of the work (company vs. contractor site), who performed the work
(company personnel vs. subcontractors) and who provided any required equipment
(company vs. customer).
Marketing and sales expenses were $528,689 or 44% of revenues in the current
period compared to $358,040 or 38% of revenues for the previous period, an
increase of $170,649 in the current period. The increase in marketing and sales
expenses was in both the Government and Commercial SBU. In the Government SBU,
the increase reflects the development of a promotional CD that details the
products, services and accomplishments of GreyStone's Government SBU and a
greater level of marketing effort in support of the company's UAV Toolkit(TM)
and Rage(TM) software products. The Commercial SBU primarily caused its increase
in marketing and sales expenses from preparing for the product release of the
MercRacer 3000 at the upcoming IAAPA trade show in Atlanta, Georgia in November
2000 with related product promotion, marketing, and sales support activities. In
general, marketing and sales expenses result from bid and proposal activity as
well as attendance at trade shows, company product demonstrations and other
marketing related activities such as new sales calls, sales literature, product
brochures and marketing software development. These types of expenses vary from
period to period and are highly dependent upon the extent and manner in which
the company focuses its efforts regarding potential future opportunities during
the reporting period.
Research and development expenses increased to $839,399 for the current period,
compared to $530,219 for the previous period, resulting in an increase of
$309,180. The majority of the increase occurred in the Commercial SBU due to
intensified development needed to complete a deliverable production version of
the new MercRacer 3000(TM) motion base entertainment platform, along with the
initial development of a new title for play on the MercRacer 3000(TM) system.
Development of a 3D virtual workspace environment "Virtual-Info-Space (TM)" for
the Info-Space SBU also contributed to increased research and development
expenses.
General and administrative expenses were $2,135,461 compared to $1,248,892 for
the previous period, resulting in an increase of $886,569. $570,713 of this
increase was the result of non-cash compensation associated with the granting of
stock awards, warrants and compensatory stock options. The remainder of the
increase was for public relations expenses and outside professional services.
Other income of $75,857 consisted of interest income, including $2,758 of
interest income from related parties notes.
The net loss of $3,149,571 increased by $1,435,712 from the $1,713,859 net loss
reported in the previous reporting period. In summary, during the current
period, revenues were up by $245,682 or 26%, while total expenses, net of other
income, increased by $1,681,394 or 63%.
Series A Convertible Preferred Stock - On May 22, 2000, the Company completed
the sale of $5,000,000 in convertible preferred stock to a group of private
investors. The Company issued 5,000 shares of Series A Preferred Stock with a
$1,000 liquidation preference value, convertible immediately into common stock
at a rate of the lower of (1) 250 shares of common stock per share of preferred
stock (equivalent to an investment of $4.00 per share of common stock issued) or
(2) 80% of the volume weighted average price for the previous 250,000 shares
traded prior to submission by the preferred stockholder of a conversion notice
to the Company. Embedded in the preferred stock is a mandatory conversion
requirement effective three years after the date of issuance. The Series A
investors also received warrants to purchase 1,250,000 shares of common stock at
an exercise price of
<PAGE> 17
$5.38 per share, and registration rights on the conversion shares and the
shares issuable upon the exercise of the warrants. The preferred stock provides
for a cumulative dividend of 8% per year, payable in common stock or cash. After
payment of a 10% commission for introducing the investors to the Company, and
legal fees totaling approximately $50,000, the Company received net proceeds of
approximately $4,449,000 which it intends to use for general corporate purposes.
In accordance with the AICPA's Emerging Issues Task Force (EITF) Issue No 98-5,
the Company recognized a beneficial conversion feature in the amount of
$1,250,000 as a one-time non-cash preferred stock dividend. The amount
represented the difference between the fixed conversion price of $4 per share at
the date of issuance of the preferred shares and the $5 market price of the
common stock at that date. In addition, also in accordance with EITF Issue No.
98-5, the Company recognized a one-time imputed (non-cash) preferred stock
dividend of $3,437,500 representing the fair value of the warrants issued in
connection with the sale of the preferred stock, as determined by the
Black-Sholes model. The aforementioned imputed dividends associated with issuing
the stock resulted in an one-time non-cash loss applicable to common
stockholders of $(0.29) per share. The Company also recorded a non-cash
preferred stock dividend of $99,726 and $143,561 for the three and six month
periods ended September 30, 2000, respectively for the 8% cumulative preferred
stock dividend feature.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities for the six months ended September 30,
2000 was $2,640,780, whereas cash used for operating activities in the six
months ended September 30, 1999 was $1,788,481. Although the net loss for the
current six month period was $3,149,571, an increase of $1,435,712 from the
previous reporting period net loss amount of $1,713,859, non cash outlays for
depreciation and compensation expense in the current period were $761,412, as
compared to $214,181 in the previous reporting period, an increase of $547,231.
Additionally, cash was used to reduce accounts payable and accrued expenses in
the current period by $316,830, and other assets decreased by $4,292, accounts
receivable decreased by $89,749 and accrued interest on the notes receivable
increased by $29,832.
Net cash used in investing activities was $669,520 during the current six-month
reporting period compared to $268,176 for the previous reporting period. Current
period investing activities included purchases of software licenses and
equipment of $158,864, leasehold improvements of $45,656 and the purchase of
finished goods inventory in the amount of $330,000 from a target company that
GreyStone entered into a letter of intent to acquire. Additionally, the Company
purchased the right to receive $135,000 for future payments on invoices
generated by the target company upon award from the target company of a proposed
contract.
Net cash provided by financing activities was $4,449,353 in the current period
compared to $2,657,660 for the previous comparable period. The $4,449,353 was
the net result of the sale on May 22,2000 of $5,000,000 in convertible preferred
stock to a group of private investors and is net of a 10% commission and legal
fees. The Company will use the net proceeds for general corporate purposes.
At September 30, 2000, the Company had $1,306,352 in cash and cash equivalents,
as compared to $167,299 for the fiscal year ended March 31, 2000.
Historically, the Company has funded its operations primarily through sales of
common stock to and borrowings from its principal stockholder and sales of
common stock and convertible notes payable to private investors pursuant to
private placement memorandums and exemptions from registration under the
Securities Act of 1933. Management plans to obtain the additional funds needed
to enable the Company to continue as a going concern through the private
placements of debt or equity securities. However, management cannot provide any
assurance that the Company will be successful in consummating these private
placements.
<PAGE> 18
The accompanying condensed consolidated financial statements have been prepared
in conformity with generally accepted accounting principles which contemplates
that the Company will continue as a going concern and continue operations,
realization of assets and satisfaction of liabilities in the ordinary course of
business. If the Company is unable to raise additional capital, it may be
required to liquidate assets or take actions which may not be favorable to the
Company in order to continue its operations. The consolidated condensed
financial statements do not include any adjustments that might result from the
outcome of these uncertainties.
The Company expects to generate new revenues from all business units. Government
revenues are expected from the introduction and sale of new Government Products
and associated engineering services. Commercial revenues are expected from the
sale of the Company's new motion-based entertainment system. The Company's first
Info-Space revenues are anticipated from potential clients such as an
entertainment company, an airline, or a bank.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As of the date of this report, we are not a party to any claims or legal
proceedings.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Changes in securities that occurred during the reporting period have been
previously reported on Registrant's Annual Report on Form 10-K for the year
ended March 31, 2000, filed on June 29, 2000.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
At the Annual Meeting of Stockholders held on September 15, 2000, the
Stockholders elected the following individuals for one-year terms to the board
of directors: Richard A. Smith, Thomas D. Aldern, Jon M. Reynolds, James W.
Johnston, Alan D. Stone, and Dr. Malcolm R. Currie. These individuals have
received a plurality of the votes eligible to vote, voting either in person or
by proxy.
<PAGE> 19
In addition, the Stockholders voted upon the following matters:
Ratification of an amendment to the Company's certificate of incorporation to
increase the number of authorized shares of common stock from 30,000,000 shares
to 100,000,000 shares.
<TABLE>
<S> <C>
Affirmative votes ................................. 14,424,845
Negative votes .................................... 66,710
Abstaining and broker non-votes ................... 11,995
</TABLE>
Ratification of the 1994 Stock Option Plan and authorization of an increase of
shares issuable under the plan from 2,000,000 to 4,000,000
<TABLE>
<S> <C>
Affirmative votes ................................. 10,905,814
Negative votes .................................... 75,960
Abstaining and broker non-votes ................... 20,284
</TABLE>
Adoption of GreyStone 2000 Stock Option Plan
<TABLE>
<S> <C>
Affirmative votes ................................. 10,908,197
Negative votes .................................... 77,877
Abstaining and broker non-votes ................... 15.984
</TABLE>
Ratification of selection of J. H. Cohn LLP as the Company's auditors.
<TABLE>
<S> <C>
Affirmative votes ................................. 14,487,699
Negative votes .................................... 9,771
Abstaining ........................................ 6,080
</TABLE>
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Exhibit
----------- -------
<S> <C>
27.0 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
During the three months ended September 30, 2000, the company filed one current
report on Form 8-K dated July 12, 2000 to report the completion of the sale of
$5,000,000 in convertible preferred stock, which included the stock purchase
agreement, form of a warrant, registration rights agreement, certificate of
designation, and the press release dated May 22, 2000 relating to the
transaction. The current report also announced the addition of Dr. Malcolm R.
Currie to the board of directors, and the related press release dated June 15,
2000.
<PAGE> 20
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GreyStone Digital Technology, Inc.
/s/ MARSHALL GELLER
----------------------------------
Marshall Geller
Chief Financial Officer
Dated: November 14, 2000
<PAGE> 21
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Exhibit
----------- -------
<S> <C>
27.0 Financial Data Schedule
</TABLE>
