FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES ACT OF 1934
For the quarter ended December 31, 1997
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 01-18695
WORK RECOVERY, INC
(Exact name of registrant as specified in its charter)
Delaware 86-0848910
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2341 South Friebus Avenue, Suite 14, Tucson, Arizona 85713
(Address of principal executive offices) (Zip Code)
(520) 322-6634
Registrant's telephone number, including area code
Not applicable
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities 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 __
<PAGE>
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a
plan confirmed by a court.
Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Registrant has only one class of common stock outstanding. As of December 31,
1997, approximately 14,722,830 shares of common stock were issued or reserved
for issuance pursuant to the Amended Plan of Reorganization.
<PAGE>
FORM 10-Q
WORK RECOVERY, INC.
For the Quarter ended December 31, 1997
INDEX
Part I. Financial Information:
Item 1. Financial Statements:
Consolidated Balance Sheets at December 31, 1997 and June 30, 1997..........1
Consolidated Statements of Operations for the three-months and six-months
ended December 31, 1997 (Successor Company) and for the three-months
and six-months ended December 31, 1996 (Predecessor Company).................2
Consolidated Condensed Statements of Cash Flows for the six-months
ended December 31, 1997 (Successor Company) and the six-months
ended December 31, 1996 (Predecessor Company)................................3
Notes to Consolidated Financial Information................................. 4
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.......................................................7
Item 3. Quantitative and Qualitative Disclosures About Market Risk..........8
Part II. Other Information:
Item 5. Other Information.................................................9
Item 6. Exhibits and Reports on Form 8-K...................................9
Signatures...................................................................10
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
WORK RECOVERY, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
December 31, June 30,
1997 1997
____________ _________
<S> ASSETS <C> <C>
Current Assets:
Cash and Cash Equivalents $ 70,000 $ 460,000
Receivables, net 146,000 266,000
Inventories 629,000 682,000
Prepaid Expenses and Other Assets 31,000 109,000
---------- ---------
Total Current Assets 876,000 1,517,000
Property, Plant and Equipment, net 185,000 1,697,000
Intangible Assets 96,000 107,000
Other Assets 28,000 121,000
---------- ---------
Total Assets $ 1,185,000 $ 3,442,000
========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts Payable $ 374,000 $ 236,000
Claims Payable 1,756,000 1,756,000
Accrued Expenses 1,026,000 1,032,000
Notes Payable to Related Parties 2,000,000 1,887,000
Other Debt 90,000 1,269,000
--------- ---------
Total Liabilities 5,246,000 6,180,000
Commitments and Contingent Liabilities
Shareholders' Equity (Deficit):
Common Stock, $.01 par value:
Authorized 48,000,000 shares, issued and
outstanding 14,722,830 shares 147,000 147,000
Preferred Stock, $.01 par value,
2,000,000 shares authorized, no shares
issued and outstanding
Additional Paid-in Capital 37,454,000 37,353,000
Accumulated Deficit (41,662,000) (40,238,000)
---------- ----------
Total Shareholders' Deficit (4,061,000) (2,738,000)
----------- ----------
Total Liabilities and Shareholders'
Deficit $ 1,185,000 $ 3,442,000
========== ==========
</TABLE>
See Notes to Consolidated Financial Information
<PAGE>1
WORK RECOVERY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Successor Predecessor Successor Predecessor
Company Company Company Company
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
December 31, December 31, December 31, December 31,
1997 1996 1997 1996
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Net Revenues:
Sales and Related Services $ 215,000 $1,010,000 $ 421,000 $ 1,225,000
Clinic Services 15,000 73,000
--------- --------- -------- ---------
Total Net Revenues 215,000 1,025,000 421,000 1,298,000
Cost of Sales 125,000 441,000 270,000 761,000
--------- --------- -------- ---------
Gross Profit 90,000 584,000 151,000 537,000
Expenses:
Selling, General
and Administrative 625,000 875,000 1,292,000 1,928,000
--------- -------- --------- ---------
Loss From Operations (535,000) (291,000) (1,141,000) (1,391,000)
Other Income (Expense):
Interest Expense (79,000) (81,000) (158,000) (170,000)
Interest Income 2,000 3,000
Miscellaneous Expense (196,000) (82,000) (86,000) (77,000)
Miscellaneous Income 16,000 46,000
--------- --------- ---------- ----------
Net Other Income (Expense) (259,000) (161,000) (198,000) (244,000)
Loss From Operations Before
Income Taxes and
Reorganization Items (794,000) (452,000) (1,339,000) (1,635,000)
Income Taxes
Reorganization Items 6,363,000 6,793,000
---------- --------- -------- -----------
Net Loss $ (794,000) $ (6,815,000) $ (1,339,000) $ (8,428,000)
========= ========= ========= ===========
Loss per Common and Common
Equivalent Share $ (.05) $ (.09)
========= =========
Weighted Average Number of Common
Shares Outstanding 14,722,830 14,721,944
========== ==========
</TABLE>
See Notes to Consolidated Financial Information
<PAGE>2
WORK RECOVERY, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Successor Predecessor
Company Company
Six-Months Six Months
Ended Ended
December 31, 1997 December 31, 1996
----------------- -----------------
<S> <C> <C>
Net Cash Used in Operating Activities $ (695,000) $ (1,238,000)
Cash Flows from Investing Activities:
Purchases of Property, Plant
and Equipment (50,000)
Sales of Property, Plant and Equipment 20,000
Sales of Clinical Centers 1,203,000
Sales of Investments 96,000
-------- ----------
Net Cash Provided by Investing Activities 116,000 1,153,000
-------- ----------
Cash Flows from Financing Activities:
Proceeds from Notes Payable 182,000 971,000
Proceeds from issuance of Common Shares 17,000
Repayment of Long-Term Debt and
Capital Leases (10,000) (968,000)
------- ---------
Net Cash Provided by Financing Activities 189,000 3,000
------- ---------
Net Decrease in Cash (390,000) (82,000)
Cash at Beginning of Year 460,000 189,000
-------- ---------
Cash at End of Period $ 70,000 $ 107,000
======== =========
</TABLE>
See Notes to Consolidated Financial Information
<PAGE>3
WORK RECOVERY, INC.
NOTES TO CONSOLIDATED FINANCIAL INFORMATION
(UNAUDITED)
1. Basis of Accounting
The accompanying unaudited financial statements of Work Recovery, Inc. ("WRI")
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q 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, the consolidated
financial statements include all adjustments which consist only of normal
recurring adjustments necessary for a fair presentation of operating results
for the interim period. Operating results for the six-month period ended
December 31, 1997 are not necessarily indicative of the results that may be
expected for the year ending June 30, 1998.
For further information, refer to the unaudited financial statements and
footnotes thereto included in the Company's annual report on Form 10-K for
the year ended June 30, 1997.
The accompanying unaudited financial statements have been prepared on a going
concern basis which assumes continuity of operations and realization of assets
and liquidation of liabilities in the ordinary course of business. The
appropriateness of using the going concern basis is dependent upon, among
other things, success of future operations and the ability to generate
sufficient cash from operations and financing sources to meet obligations.
2. Bankruptcy and Reorganization Events
On May 29, 1996 Work Recovery, Inc., a Colorado corporation and its wholly-owned
subsidiary Work Recovery Centers, Inc., an Arizona corporation (collectively
"Old WRI") filed voluntary petitions for reorganization under Chapter 11 of
the United States Bankruptcy Code in the United States Bankruptcy Court for
the District of Arizona (the "Bankruptcy Court"). The creditor and equity
holders subsequently approved Old WRI's Plan of Reorganization (the "Plan")
and on December 4, 1996 the Bankruptcy Court issued its order confirming the
Plan.
On February 1, 1997 (the "Effective Date"), all of the assets of Old WRI were
transferred to Work Recovery, Inc., a Delaware corporation, ("Work Recovery",
"WRI", the "Company" or the "Registrant") and the Company assumed all
liabilities of Old WRI as such liabilities were modified pursuant to the
terms of the Plan.
For more detailed information concerning the Plan, refer to the Company's
Form 8-K dated January 30, 1997 and its Form 10-Q for the quarter ended
December 31, 1996.
3. Fresh-Start Reporting
As of the Effective Date, the Company adopted fresh-start reporting in
accordance with AICPA Statement of Position 90-7, "Financial Reporting By
Entities in Reorganization Under the Bankruptcy Code" ("Fresh-Start Reporting").
In connection with the adoption of Fresh-Start Reporting a new entity has been
deemed created for financial reporting purposes. The periods presented prior
to the Effective Date have been designated "Predecessor Company" and the
periods subsequent to the Effective Date have been designated "Successor
Company". For financial reporting purposes, the Company accounted for the
consummation of the Plan effective February 1, 1997.
In accordance with Fresh-Start Reporting, the Company valued its assets and
liabilities at fair values and eliminated its accumulated deficit at the
Effective Date. The reorganization value of the Company was determined on the
basis of pro forma discounted cash flows of the new entity for a period of ten
years. The total reorganization value as of the Effective Date was $36,766,000
which was approximately $40,336,000 in excess of the aggregate fair value of
the Company's tangible and identified intangible assets. Such excess, and other
eliminations related to the Plan, was included in Intangible Assets as of the
Effective Date and was to be amortized over a period of ten years. It has since
been determined that the asset is impaired. The financial condition of the
Company is perilous and it is very doubtful it will achieve the ten year cash
flow projections reviewed and agreed upon by the Company's creditors and the
Bankruptcy Court. At June 30, 1997, the unamortized excess was reclassified to
Impairment Losses.
<PAGE>4
4. Inventories
Inventories consist of the following:
December 31, 1997 June 30, 1997
----------------- -------------
<TABLE>
<CAPTION>
<S> <C> <C>
Raw Material $ 420,000 $ 446,000
Finished Goods 288,000 288,000
Work-in-Progress 92,000 118,000
Reserve for Excess and Obsolete Inventory (171,000) (170,000)
-------- -------
Total $ 629,000 $ 682,000
======== =======
</TABLE>
5. Property, Plant and Equipment
Property, Plant and Equipment consist of the following:
December 31, 1997 June 30, 1997
----------------- -------------
<TABLE>
<CAPTION>
<S> <C> <C>
Land $ 0 $ 300,000
Furniture and Equipment 1,087,000 1,122,000
Leasehold Improvements 0 18,000
Vehicles 70,000 70,000
Buildings 0 1,608,000
--------- ---------
Total at Cost 1,157,000 3,118,000
Less Accumulated Depreciation and
Amortization (972,000) (1,421,000)
--------- ---------
Net Property, Plant and Equipment $ 185,000 $ 1,697,000
========= =========
</TABLE>
Work Recovery signed a Warranty Deed in Lieu of Foreclosure effective December
31, 1997 (the "Deed"). The Deed, in effect, granted the land and building at
2341 S. Friebus Avenue, Tucson, AZ. to the mortgage holder. In exchange, Work
Recovery was released from the $1,169,000 mortgage payable and other contingent
liabilities relating to the mortgage.
6. Loan Agreements
In January 1997, WRI entered into a Loan Agreement with Allsup Inc. and Quest
Trading, Inc. (collectively, "the Lenders") pursuant to which the Lenders agreed
to loan WRI up to $2,000,000 in one or more advances (the "Loan"), subject to
the satisfaction of certain conditions set forth in the Loan Agreement. At
December 30, 1997, WRI had borrowed $2,000,000. The Loan will revolve and,
provided applicable conditions are satisfied, repaid principal may be re-
borrowed until the extended maturity date of the Loan, April 16, 1998. The
Loan was used to support the working capital needs of the Company and to make
payments due under the Bankruptcy Plan. The Loan is secured by a security
interest in all of the Company's personal property including its intellectual
property.
On February 3, 1997, pursuant to the Loan Agreement the Lenders were granted
options to purchase 100,00 shares of New Common Stock of the Company at an
exercise price of $1.56 per share. These options have since expired. On
April 30, 1997 225,000 options were granted at an exercise price of $0.42
per share and on December 31, 1997 75,000 options were granted at an exercise
price of $0.06 per share. These options will expire twelve months from date
of delivery to the Lenders.
<PAGE>5
7. Sale of Joint Venture in Lexington, Kentucky
Effective August 1, 1997 Work Recovery, Inc. sold its 50% equity interest in
Return to Work Center, Lexington, Kentucky to American Rehabilitation Group,
P.S.C. for $80,000 subject to certain adjustments.
8. Earning per Share
Earnings per share for the three months ended December 31, 1997 have been
calculated on the basis of 14,722,830 shares outstanding. Earnings per share
for the six months ended December 31, 1997 have been calculated on the basis of
14,721,944 shares outstanding. Common stock equivalents, including stock
options, are excluded from the computation because their inclusion would be
anti-dilutive. Loss per common and common equivalent share data is not
meaningful for periods prior to February 1, 1997 due to the significant
change in the capital structure of the Company.
9. Other
On November 4, 1997, the Company signed a three year sales and marketing
consulting agreement with Functional Capacity Evaluation Technologies, Inc.
("FCET"). Pursuant to the agreement, FCET will provide worldwide sales and
marketing, service support, and engineering management services to Work
Recovery. See Part II Other Information, Item 5.
<PAGE>6
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
THE COMPANY'S PRESENT FINANCIAL CONDITION IS EXTREMELY SERIOUS AND ITS CASH
RESOURCES ARE SEVERELY LIMITED. AS A RESULT, THE FINANCIAL STATEMENTS FOR THE
YEAR ENDED JUNE 30, 1997 WERE NOT AUDITED OR REVIEWED BY THE COMPANY'S
INDEPENDENT PUBLIC ACCOUNTANTS.
The Company's Ability to Continue as a Going Concern
The Company has suffered recurring losses from operations and there is
substantial doubt about its ability to continue as a going concern. The
Company continues to have substantial obligations to certain bankruptcy
creditors and continues to experience slow sales of ERGOS( Systems, its only
product. As a result, the Company will need additional capital to continue
as a going concern, the source of which is unknown at this time. See
Liquidity and Capital Resources.
Results of Operations
The following discussion of the results of operations for the six-months ended
December 31, 1997, as compared to the six-months ended December 31, 1996, and
financial condition of the Company as of December 31, 1997, as compared to the
fiscal year ended June 30, 1997, should be read in conjunction with the
financial statements and related notes appearing under Part I. - Item 1.
Net Revenues for the three-months and six-months ended December 31, 1997
decreased by 79.0% and 67.6%, respectively, as compared to the corresponding
periods of fiscal 1997. The decrease in sales and related services is primarily
due to minimal sales of new ERGOS( systems during fiscal 1998. Clinic services
decreased due to the selling of the Company's remaining clinic services centers
during 1997.
Gross profit decreased 84.6% from $584,000 for the quarter ended December 31,
1996 to $90,000 for the quarter ended December 31, 1997. The decrease is due
to minimal sales of new ERGOS( systems during the quarter ended December 31,
1997. Cost of sales as a percentage of total revenues for the three-months
and six-months ended December 31, 1997 increased by 15.4% and 5.5%,
respectively, as compared to the corresponding periods of fiscal 1997. The
increases are mostly due to lower profit margins for ERGOS( upgrades which
comprised the majority of sales in fiscal 1998 .
Selling, general and administrative expenses ("SG&A") decreased approximately
28.6% and 33.0% during the three-months and six-months period ended December
31, 1997 compared to the comparable periods of the prior fiscal year.
Decreased SG&A costs resulted from continued cost reduction efforts
implemented by management including staff and cost reductions in all
departments, and reductions in legal and consulting fees.
Net Other Expense for the quarter ended December 31, 1997 increased 61% from
$161,000 for the quarter ended December 31, 1996 to $259,000 for the quarter
ended December 31, 1997. The increase is due mostly to a net loss of
approximately $196,000 recognized from the transfer of the Company's
building and land to the mortgage holder. See Note 5 to Consolidated
Financial Information.
Reorganization items totaling $6,363,000 were recorded in the quarter ended
December 31, 1996 as a result of the Company's Chapter 11 bankruptcy
proceedings. The Company emerged from bankruptcy on February 1, 1997 and,
accordingly, has no continuing reorganization costs.
Cash decreased from approximately $460,000 at June 30, 1997 to approximately
$70,000 at December 31, 1997. The principal use of cash for the quarter was
$695,000 for operating activities. The principal sources of cash were
$182,000 received in proceeds from notes payable and $80,000 received from
the sale of the Kentucky center.
<PAGE>7
The $120,000 decrease in net receivables from the end of fiscal 1997 is due
primarily to aggressive collection efforts for past due receivables.
Property, plant and equipment decreased by $1,512,000 from $1,697,000 at June
30, 1997 to approximately $185,000 at December 31, 1997. The decrease is due
primarily to the transfer of the Company's building and land to the mortgage
holder. See Note 5 to Consolidated Financial Information.
Other assets decreased by approximately $96,000 during the first six months
of the fiscal year mostly due to the sale of the Kentucky center and the
netting of a former officer's accounts receivable balance against the same
former officers' accounts payable balance.
Accounts Payable increased $138,000 from $236,000 at December 31,1996 to
$374,000 at December 31, 1997. The increase is due to insufficient cash
resources to pay vendors.
Other debt decreased by $1,179,000 to approximately $90,000 at December 31, 1997
from approximately $1,269,000 at June 30, 1997. A mortgage balance of
approximately $1,169,000 was released following a Warranty Deed in Lieu of
Foreclosure that was signed effective December 31, 1997. See Note 5 to
Consolidated Financial Information.
Additional paid-in capital decreased by $101,000 from approximately $37,353,000
at June 30, 1997 to approximately $37,454,000 at December 31, 1997. The
decrease resulted from an $85,000 reclassification of dividends paid from
the accumulated deficit at the fiscal year ended June 30, 1997 and $16,000
in exercised warrants.
Liquidity and Capital Resources
The Company has continued to sustain significant losses and as of December 31,
1997 had a working capital deficit of approximately $4,370,000. The financial
condition of the Company is perilous. The Company is in need of additional
funds for ongoing operations and it will need substantial additional funds
in order to fulfill its remaining obligations under the Plan.
Subsequent to emerging from bankruptcy, the Company has received a total of
$2,000,000 from a $2,000,000 line of credit from Allsup Inc. and Quest
Trading, Inc. (see Note 6 to Consolidated Financial Information). On
February 3, 1998, Allsup Inc. and Quest Trading, Inc. signed an agreement
with the Company to extend the loan maturity to April 16, 1998.
In addition, the Company is continuing in its attempts to obtain additional
investment capital. However, the Company cannot guarantee that such efforts
will be successful considering the tenuous financial condition of the Company.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable
<PAGE>8
PART II. OTHER INFORMATION
Item 5. Other Information
On November 4, 1997, the Company entered into a binding Memorandum of Agreement
(the "Marketing Agreement") with Functional Capacity Evaluation Technologies,
Inc., ("FCET") pursuant to which FCET will provide worldwide sales and marketing
service support and engineering management services to the Company. The
Marketing Agreement is for a term of three years (commencing October 22,
1997) and is cancelable on six months prior written notice by FCET and for
other reasons as set forth in the Marketing Agreement. FCET will receive a
fee of $30,000 per month plus an amount equal to 10% of the Company's net
book revenues generated from the sale of its products and services. FCET
will receive an additional fee of $10,000 per month for manufacturing
management services if the assembly of the Company ERGOS( Systems has not been
subcontracted to an outside third party. FCET will be entitled to receive a
$1,000,000 cash bonus if the Company generates, during the term of the
Marketing Agreement, a cumulative total of $5,000,000 in earnings calculated
before interest, taxes, depreciation and amortization and all restructuring
costs. FCET will also be entitled to receive a royalty fee at a declining
basis upon termination of the Marketing Agreement. It is anticipated that a
more definitive agreement will be entered into with FCET setting forth more
specifically the terms of its agreements with the Company ("Definitive
Agreement"). The Marketing Agreement provides that the Company shall grant
to FCET immediately exercisable stock options for a number of shares of the
Company's Common Stock equal to 20% of the amount thereof currently
outstanding (calculated on a fully diluted basis to give effect to the
exercise of warrants and options held by certain creditors of the Company).
The exercise price of the FCET options will be equal to the lesser of $.16
per share or the closing price of the Common Stock on the date of execution
of the Definitive Agreement. The FCET options will have protection against
dilution and certain other conditions as set forth in the Marketing Agreement.
These options expire on October 22, 2000. FCET is a recently formed corporation
whose principals have extensive experience in marketing and sales in high-end
medical equipment. A copy of the Marketing Agreement was attached as an exhibit
to the Company's Form 10-Q/A for the quarter ended September 30, 1997.
Item 6. Exhibits and Reports on Form 8-K
(a) Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter for which this
report is filed.
<PAGE>9
SIGNATURES
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.
WORK RECOVERY, INC.
(Registrant)
/s/ DORCAS R. HARDY
Dorcas R. Hardy, Chief Executive Officer
Date: February 9, 1998
/s/ VERNON S. SCHWEIGERT
Vernon S. Schweigert
President and Chief Operating Officer
Date: February 9, 1998
<PAGE>10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEET AS OF DECEMBER 31, 1997 AND STATEMENT OF OPERATIONS FOR THE
SIX MONTHS ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CAPTION>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> DEC-31-1997
<CASH> 70
<SECURITIES> 0
<RECEIVABLES> 387
<ALLOWANCES> (241)
<INVENTORY> 629
<CURRENT-ASSETS> 876
<PP&E> 1,157
<DEPRECIATION> (972)
<TOTAL-ASSETS> 1,185
<CURRENT-LIABILITIES> 5,246
<BONDS> 0
0
0
<COMMON> 147
<OTHER-SE> (4,208)
<TOTAL-LIABILITY-AND-EQUITY> 1,185
<SALES> 421
<TOTAL-REVENUES> 421
<CGS> 270
<TOTAL-COSTS> 270
<OTHER-EXPENSES> 1,332
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 158
<INCOME-PRETAX> (1,339)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,339)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,339)
<EPS-PRIMARY> (.09)
<EPS-DILUTED> (.09)
</TABLE>
