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 quarter ended March 31, 1999
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: 1-12536
STRATEGIC SOLUTIONS GROUP, INC.
(Exact name of Registrant as specified in its charter)
Delaware 11-2964894
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
326 First Street, Suite 100
Annapolis, Maryland 21403
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code: (410) 263-7761
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 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
----- -----
3,583,546 Common Shares, $.0001 par value were issued and outstanding at
March 31, 1999.
<PAGE>
STRATEGIC SOLUTIONS GROUP, INC.
TABLE OF CONTENTS
Page No.
--------
Part I - Financial Information
Consolidated Balance Sheets, March 31, 1999 and
December 31, 1998 (unaudited) 3
Consolidated Statements of Operations for the three
months ended March 31, 1999 and 1998 (unaudited) 4
Consolidated Statements of Cash Flows for the three
months ended March 31, 1999 and 1998 (unaudited) 5
Notes to Consolidated Financial Statements (unaudited) 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Part II - Other Information
Items 1-6 12
Signature 13
2
<PAGE>
STRATEGIC SOLUTIONS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
-------------- -------------
<S><C>
ASSETS
------
Current assets
Cash and cash equivalents $ 113,144 $ 67,991
Accounts receivable, net of allowance for doubtful
accounts of $45,000 for both periods 151,152 189,630
Prepaid expenses and other current assets 27,777 24,497
-------------- --------------
Total current assets 292,073 282,118
-------------- --------------
Property and equipment, at cost
Computers, furniture and equipment 410,972 410,972
Less accumulated depreciation 337,407 325,656
-------------- --------------
Net property and equipment 73,565 85,316
-------------- --------------
Other assets 81,537 112,543
-------------- --------------
$ 447,175 $ 479,977
============== ==============
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
Current liabilities
Accounts payable and accrued liabilities $ 420,408 $ 364,148
Deferred revenue 1,240 1,240
Other current liabilities 409,776 411,966
-------------- --------------
Total current liabilities 831,424 777,354
Convertible subordinated debenture 1,013,294 1,007,277
-------------- --------------
Total liabilities 1,844,718 1,784,631
-------------- --------------
Commitments and contingencies
Stockholders' deficit
Common stock, $.0001 par value. Authorized 5,000,000
shares; issued and outstanding 3,583,546 and 3,399,671
shares as of March 31, 1999 and December 31, 1998 359 340
Additional paid-in capital 15,238,801 15,230,243
Accumulated deficit (16,568,836) (16,457,675)
Deferred compensation (67,867) (77,562)
-------------- --------------
Total stockholders' deficit (1,397,543) (1,304,654)
-------------- --------------
$ 447,175 $ 479,977
============== ==============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
STRATEGIC SOLUTIONS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31,
-------------------------------
1999 1998
------------- -------------
<S><C>
Revenue
Service fees $ 271,211 $ 646,913
Product sales 0 73,328
Royalties 4,475 15,064
------------- -------------
Total revenue 275,686 735,305
------------- -------------
Expenses
Cost of service fees 128,229 368,803
Cost of product sales 0 44,493
Research and development 29,381 44,716
Selling, general and administrative 166,842 977,326
------------- -------------
Total operating expenses 324,452 1,435,338
------------- -------------
Loss from operations (48,766) (700,033)
Other expense, net 62,395 75,512
------------- -------------
Net loss $ (111,161) $ (775,545)
============= =============
Net loss per common share - basic and diluted $ (0.03) $ (0.44)
============= =============
Weighted average number of common shares outstanding 3,416,015 1,768,839
============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
STRATEGIC SOLUTIONS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended March 31, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31,
-------------------------------
1999 1998
------------- -------------
<S><C>
Cash flows from operating activities
Net loss $ (111,161) $ (775,545)
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation and amortization 68,469 121,954
Loss on disposal of assets -- 5,743
Noncash expense for services -- 70,000
Increase (decrease) in cash from changes in assets and liabilities
Accounts receivable 38,478 (127,492)
Prepaid expenses and other current assets (3,280) 32,035
Other assets (2,000) (39,120)
Accounts payable and accrued liabilities 56,837 41,728
Other liabilities (2,190) 12,771
------------- -------------
Net cash provided by (used in) operating activities 45,153 (657,926)
------------- -------------
Cash flows from investing activities
Capital expenditures -- (19,960)
------------- -------------
Net cash used in investing activities -- (19,960)
------------- -------------
Cash flows from financing activities
Net proceeds from exercise of options and warrants -- --
Payment for fee related to convertible subordinated debenture -- (7,500)
Payments on note payable to a bank -- (30,000)
------------- -------------
Net cash used in financing activities -- (37,500)
------------- -------------
Net increase (decrease) in cash and cash equivalents 45,153 (715,386)
Cash and cash equivalents, beginning of period 67,991 1,149,372
------------- -------------
Cash and cash equivalents, end of period $ 113,144 $ 433,986
============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
STRATEGIC SOLUTIONS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. GENERAL
The consolidated financial statements of Strategic Solutions Group,
Inc., formerly Pacific Animated Imaging Corporation, (the "Company") as of March
31, 1999 and for the three month periods ended March 31, 1999 and 1998 are
unaudited; however, in the opinion of management, these financial statements
include all adjustments, consisting of normal recurring adjustments necessary
for fair presentation of such financial information. These financial statements
should be read in conjunction with the audited financial statements and notes
thereto included in the consolidated financial statements for the year ended
December 31, 1998 included in the Company's Annual Report on Form 10-KSB
previously filed with the Securities and Exchange Commission.
2. LITIGATION
In January 1998, the Company issued a notice of redemption of its
Subordinated Convertible Debenture (the "Debenture") based on management's
interpretation of the contract and issued 1,052,624 shares of its common stock
in payment of the redemption amount. The holder of the Debenture refused to
accept the shares tendered, delivered a notice of partial conversion of the
Debenture, and filed suit against the Company in the Delaware Chancery Court
alleging that the terms of the Debenture permitted cash redemption only, that
the redemption was therefore invalid, and that the Company was required to honor
the holder's conversion notice. On April 23, 1998, the Court ruled in favor of
the Debenture holder, declaring the redemption invalid and imposing a penalty of
$106,000 against the Company for delay in delivering the shares issuable in
accordance with the holder's conversion notice. The $106,000 penalty was
expensed in the second quarter and included in other expenses on the statement
of operations. In addition, the Company executed a judgement note payable with
the Debenture holder to pay the $106,000 in monthly payments of $7,500 until
paid in full with interest at 10% per annum and acceleration upon SSGI's receipt
of payments from UST. Subsequently, the Debenture holder requested payment of an
additional penalty of $160,000, claiming that the Company did not register the
common stock issuable upon conversion of the Debenture under the Securities Act
of 1933 within the time required by a registration rights agreement between the
Company and the Debenture holder. No discovery has been taken and no prediction
can be made as to its outcome. The Company believes that it fully complied with
its obligations under the registration rights agreement and intends to
vigorously defend any action seeking to collect such penalty.
3. DIVESTITURE OF U.S. TECHNOLOGIES, INC.
During the first quarter of 1998, the Company made a strategic decision
to focus its business on its multimedia technology based software solutions and
as such divested itself of its computer systems integration division.
On April 8, 1998, the Company merged UST into SSGI-UST Acquisition
Corp., an existing Florida corporation formed on March 5, 1998 and owned by the
President of UST and other third parties. UST continued as the surviving
corporation; accordingly, SSGI-UST Acquisition Corp ceased to exist.
Consideration payable to the Company for the merger consists of (i) 100,000
shares of UST's Common Stock valued at $500,000, or $5.00 per share; (ii) a
promissory note from UST in the principal amount of $600,000 with 6% interest
due the earlier of the closing of a $2,000,000 private placement of UST's equity
securities or 60 days after the closing of the
6
<PAGE>
merger; and (iii) a 6% subordinated convertible debenture in the principal
amount of $1,027,808 due the earlier of a public offering of UST's common stock
or the 545th day after the closing of the merger. The promissory note is secured
by all of the assets of UST and the pledge of all of the outstanding stock of
UST. The Company has the option to convert the $1,027,808 debenture upon the
occurrence of the first public offering into shares of Common Stock of UST at a
conversion price for each share of Common Stock equal to the public offering
price of the Common Stock less twenty (20%) percent. As a result of this
transaction, the Company's direct ownership in UST was reduced from 100% to
approximately 14%.
In accordance with Staff Accounting Bulletin 5-E "Accounting for
Divestiture of a Subsidiary or Other Business Operation" ("SAB 5-E), the
transaction was accounted for as a divestiture. Accordingly, the consideration
received was recorded as assets in the Company's consolidated balance sheet and
the related gain was deferred until the Company ultimately collects the cash as
prescribed under SAB 5-U, "Gain Recognition on the Sale of a Business or
Operating Assets to a Highly Leveraged Entity."
At December 31, 1998, the promissory note from UST in the principal
amount of $600,000 had not been paid. In addition, the Company was in the
process of renegotiating all of the terms of its agreement with UST. However, to
date an agreement has not yet been reached. As a result of the uncertainty of
the ongoing negotiations with UST and the inability of UST to meet its
obligations due the Company, management believes that the assets recorded at the
time of the divestiture have been impaired. Accordingly, the Company has
reserved the entire promissory note receivable balance and has written down its
investment of 100,000 shares in UST to zero at December 31, 1998. In addition,
the related deferred gain was written down to its net realizable value at
December 31, 1998.
If the divestiture of UST had occurred on January 1, 1998, management
estimates that on an unaudited proforma consolidated basis, revenues, total
operating expenses, net loss, and net loss per common share would have been as
follows:
Three months ended
March 31, 1998
--------------
Total revenue $ 300,273
Total operating expenses 624,185
--------------
Net loss $ (380,694)
==============
Net loss per common share $ (0.22)
==============
These estimates are based on assumptions that management deems
appropriate, but the results are not necessarily indicative of those that might
have occurred had the divestititure taken place on January 1, 1998.
7
<PAGE>
4. SEGMENT INFORMATION
From July 1996 through March 1998, the Company was a full service
provider of technology based software solutions and computer systems integration
and support services. To achieve these objectives, the Company had two
reportable segments during that timeframe: a systems integration division and a
multimedia division. As discussed in Note 3, in April 1998 the Company divested
itself of its systems integrations division. As such, during the first quarter
1999 the Company operated under one segment only, the mulimedia division.
Segment information for March 31, 1998 is as follows:
Systems
For the Quarter Ended Integration Multimedia
March 31, 1998 Division Division Total
---------------------- ------------ ----------- ---------
Revenues: $ 435,032 $ 300,273 $735,305
Loss from operations: $ 376,121 $ 323,912 $700,033
8
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Overview
The Company's revenues are comprised of service fees, product sales,
and royalties. Service fees are generated from the development of custom
multimedia software and from systems integration services provided by UST, the
Company's subsidiary acquired in July 1996 and divested in April 1998. Product
sales related to software and hardware products sold by UST as part of their
systems integration services. In April 1998, UST was merged into a separate
operating entity and accordingly, its revenues and results of operations are not
included in the Company's results of operations after that date. Royalties are
paid to the Company by customers who resell copies of software developed by the
Company for such customers.
Results of Operations
Three Months Ended March 31, 1999 Compared to Three Months Ended March 31, 1998
Total revenues for the three month period ended March 31, 1999 were
$275,686 as compared to $735,305 for the same period of 1998, a decrease of
approximately $460,000. This decrease was primarily attributable to the
inclusion of UST revenues of approximately $435,000 in the three month period
ended March 31, 1998. The net loss and net loss per share were $111,161 and
$0.03 per share, respectively, for the three month period ended March 31, 1999,
as compared to a net loss and net loss per share of $775,545 and $0.44 per
share, respectively, for the same period of the prior year. The reduced net loss
to primarily due to the divestiture of UST and the Company's cost trimming
actions that have been instituted.
During the three month period ended March 31, 1999, revenue from custom
multimedia software development services was $271,211 as compared to $285,209
for the same period of the prior year, a decrease of approximately $14,000 or
5%. The Company's strategy to increase revenues prospectively includes targeting
its sales and marketing efforts of technology-based training solutions to the
manufacturing and transportation industries.
The Company has entered into agreements that allow certain customers to
resell copies of the Company's software products in exchange for royalty
payments. Royalties were $4,475 during the three month period ended March 31,
1999, as compared to $15,064 for the same period of the prior year, a decrease
of approximately $9,400. The Company generally expects royalty revenue to remain
constant with current levels due to the aging shelf life of products for which
the Company currently receives royalties. However, the Company continually
explores additional marketing and development partners to increase revenues
generated from royalty arrangements.
For the three month period ended March 31, 1999, the cost of service
fees for custom multimedia software was $128,299 as compared to $129,772, for
the same period of the prior year, resulting in gross margins of approximately
53% and 54%, respectively. Management expects gross margins to be consistent in
future periods when revenues are consistent.
During the three month period ended March 31, 1999, total operating
expenses were $324,452 as compared to $1,435,338 in the same period of the prior
year, a decrease of approximately $1,111,000. This decrease was primarily
attributable to the inclusion of UST operating expenses of approximately
$811,000 during the three month period ended March 31, 1998 as well as the
Company's general cost cutting efforts.
9
<PAGE>
During the three month period ended March 31, 1999, research and
development expenses were $29,380 as compared to $44,716 for the same period of
the prior year. Research and development expenses include improvements on
existing tools and development of software tools and applications to be sold.
The decrease of approximately $15,000 is primarily attributed to less time
devoted to research and development as compared to contract work.
During the three month period ended March 31, 1999, selling, general
and administrative expenses were $166,842 as compared to $977,326 in the same
period of the prior year, a decrease of approximately $810,484, or 83%.
Approximately $484,000 of the decrease is due to the divestiture of UST. The
remaining decrease is primarily the result of professional fees incurred in the
period ended March 31, 1998 related to the debenture litigation and the merger
and divestiture of UST.
During the three month period ended March 31, 1999, total other expense
decreased by approximately $13,000 from the same period of the prior year
primarily due to a decrease in interest expense in connection with the Company's
convertible subordinated debenture.
Cash Flow, Liquidity and Capital Resources
The Report of Independent Accountants on the 1998 consolidated
financial statements of the Company includes an explanatory paragraph stating
that the recurring losses from operations and the existing cash resources may be
insufficient to fund planned operations and that these conditions raise
substantial doubt about the Company's ability to continue as a going concern.
The Company incurred a net loss of $2,891,360 for the year ended December 31,
1998, and as of December 31, 1998 had an accumulated deficit of $16,457,675. For
the three month period ended March 31, 1999, the Company incurred a net loss of
$111,161. In addition, during 1998, the Company's securities were delisted from
the Nasdaq as they were not in compliance with Nasdaq's new net tangible asset
requirements. See Strategy to Achieve Profitable Operations below for a
discussion regarding the Company's plans to address the losses and liquidity
matters.
For the three month period ended March 31, 1999, the Company provided
cash of approximately $45,153 from operations. In addition to the net loss, the
Company experienced a net increase in accounts receivable and other assets. The
Company did not receive or use any cash for investing or financing activities.
For the three month period ended March 31, 1998, the Company used cash
of approximately $658,000 in operations. In addition to the net loss, the
Company experienced increases in accounts receivable and and other assets. Net
cash of approximately $20,000 was used for investing activities for the purchase
of equipment. Net cash of approximately $37,500 was used to make payments on
UST's obligations to a bank and pay a fee in connection with the Company's
convertible subordinated debenture.
Current funds are not expected to provide sufficient liquidity to meet
anticipated cash needs on either a short-term or long-term basis. Management
recognizes that the Company will require additional financing until such time
that revenues are of sufficient volume to generate positive cash flows from
operations. Although the Company will be seeking financing from placements of
equity or debt securities, there can be no assurances that such financing will
be available, or if available, will be under terms and conditions suitable to
the Company.
In addition, in February 1998, the Company was notified by NASDAQ that
it was not in compliance with NASDAQ's new net tangible assets requirement and
that the Company's securities were scheduled for delisting. Although the Company
formally requested a temporary exemption, NASDAQ effected delisting on September
1, 1998, after which SSGI's shares have traded on the NASDAQ "bulletin board".
SSGI would prefer that they be listed among the small cap companies, and the
Company will apply for such listing when its corporate profile again
10
<PAGE>
meets the requirements. Meanwhile, there is an efficient market for the sale and
purchase of our shares.
Strategy to Achieve Profitable Operations
Subsequent to the merger and resulting divestiture of UST in April
1998, the Company's strategy to increase revenue, which solely comprises the
multimedia division, includes the implementation of an operating plan built
around the division's mission statement - "We optimize human performance using
leading edge technology-based training solutions to eliminate the barriers of
time and space."
The plan also includes the implementation of a more focused sales and
marketing strategy which targets the division's sales and marketing efforts of
technology-based training solutions to the manufacturing and transportation
industries. Existing clients are also an important component of the Company's
marketing strategy. The Company believes that follow-on projects leverage sales
and marketing resources and strengthen the Company's client relationships. The
Company believes that it has good relationships with its existing customer base
and expects that these contacts will enable it to successfully pursue this
strategy.
In the normal course of business, the Company evaluates the acquisition
of businesses, products and technologies that complement the Company's business.
In addition, the Company may also evaluate other strategic alliances and joint
ventures that can provide the Company with additional complementary capabilities
or further broaden its base of customers requiring the products and services
currently provided. The Company has no present commitments or agreements with
respect to any such transaction. However, the Company may acquire businesses,
products, or technologies in the future.
There can be no assurance that the strategies addressed above and
elsewhere herein will generate sufficient revenues and cash flow for the Company
to reach profitability or to ensure the continued existence of the Company.
Impact of Year 2000 Issue
The Company is aware of and is addressing the issues associated with
the programming code in existing computer systems as the year 2000 approaches.
The "Year 2000" problem is complex, as many computer systems will be affected in
some way by the rollover of the two-digit year value to 00. Systems that do not
properly recognize such information could generate erroneous data or cause a
system to fail. The "Year 2000" issue creates risk for the Company from
unforeseen problems in its own computer and embedded systems and from third
parties with whom the Company deals on financial and other transactions
worldwide. Failure of the Company's and/or third parties' computer systems could
have a material impact on the Company's ability to conduct its business.
The Company's payroll information system includes an ADP system which
was upgraded to the most recent version in 1998. The system is believed to be
"Year 2000" complaint.
For the year 2000 non-compliance issues identified to date, the cost of
remediation is currently not expected to be material to the Company's operating
results. The Company currently expects to substantially complete remediation and
validation of its internal systems, as well as develop contingency plans for
certain internal systems by mid-1999. However, if implementation of replacement
upgraded systems or software is delayed, if significant new non-compliance
issues are identified, or if contingency plans fail, the Company's results of
operations or financial condition could be materially adversely affected.
Where practicable, the Company will attempt to mitigate its risks with
respect to the failure of third parties to be Year 2000 ready, including
developing contingency plans where practicable.
11
<PAGE>
However such failures, including failures of any contingency plans, remain a
possibly and could have a material adverse impact on the company's results of
financial condition.
In addition, the "Year 2000" issue could affect the products that the
Company sells. The Company believes that the current versions of its products
are "Year 2000" compliant. However, there can be no assurance that the Company's
current products do not contain undetected errors or defects associated with
Year 2000 that may result in material costs to the Company. Some commentators
have stated that a significant amount of litigation will arise out of Year 2000
compliance issues, and the Company is aware of a growing number of lawsuits
against other software vendors. Because of the unprecedented nature of such
litigation, it is uncertain whether and to what extent the Company may be
affected by it.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995: The statements contained in this document and other statements which are
not historical facts are forward looking statements that involve risks and
uncertainties, including, the success of newly implemented sales strategies; the
continued existence of agreements with product providers; market acceptance of
the Company's products and services; the ability to obtain a larger number and
size of contracts; the timing of contract awards; work performance and customer
response; the impact of competitive products and pricing; technological
developments by the Company's competitors or difficulties in the Company's
research and development efforts; and other risks as detailed in the Company's
Securities and Exchange Commission filings.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings:
In January 1998, the Company issued a notice of redemption of its
Subordinated Convertible Debenture (the "Debenture") and issued 1,052,624 shares
of its common stock in payment of the redemption amount. The holder of the
Debenture refused to accept the shares tendered, delivered a notice of partial
conversion of the Debetnure, and filed suit against the Company in the Delaware
Chancery Court alleging that the terms of the Debenture permitted cash
redemption only, that the redemption was therefore invalid, and that the Company
was required to honor the holder's conversion notice. On April 23, 1998, the
Court ruled in favor of the Debenture holder, declaring the redemption invalid
and imposing a penalty of $106,000 against the Company for delay in delivering
the shares issuable in accordance with the holder's conversion notice.
Subsequently, the Debenture holder requested payment of an additional penalty of
$160,000, claiming that the Company did not register under the Securities Act of
1933 the common stock issuable upon conversion of the Debenture within the time
required by a registration rights agreement between the Company and the
Debenture holder. No discovery has been taken and no prediction can be made as
to its outcome. The Company believes that it fully complied with its obligations
under the registration rights agreement and intends to vigorously defend any
action seeking to collect such penalty.
The Company is not subject to any other legal proceedings other than
claims that arise in the ordinary course of its business.
Item 2. Changes in Securities: None
12
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Item 3. Defaults Upon Senior Securities: None
Item 4. Submission of Matters to a Vote of Security Holders: None
Item 5. Other Information: None
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits: None
(b) No reports on Form 8-K were required to be filed for the three
months ended March 31, 1998.
The following report on Form 8-K was filed subsequent to March 31,
1998:
April 8, 1998 - Disposition of U.S. Technologies
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
STRATEGIC SOLUTIONS GROUP, INC.
_______________________________
(Registrant)
Dated: May 17, 1999
BY: /s/ John J. Cadigan
______________________________
John J. Cadigan
President and Chief Executive Officer
13
<TABLE> <S> <C>
<ARTICLE> 5
<CURRENCY> US$
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 113,144
<SECURITIES> 0
<RECEIVABLES> 196,152
<ALLOWANCES> 45,000
<INVENTORY> 0
<CURRENT-ASSETS> 292,073
<PP&E> 410,972
<DEPRECIATION> 337,407
<TOTAL-ASSETS> 447,175
<CURRENT-LIABILITIES> 831,424
<BONDS> 0
0
0
<COMMON> 359
<OTHER-SE> (1,397,902)
<TOTAL-LIABILITY-AND-EQUITY> 447,175
<SALES> 271,211
<TOTAL-REVENUES> 275,686
<CGS> 128,229
<TOTAL-COSTS> 324,452
<OTHER-EXPENSES> 62,395
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (111,161)
<INCOME-TAX> 0
<INCOME-CONTINUING> (111,161)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (111,161)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
