<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended
December 31, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE EXCHANGE ACT
For the Transition Period From
____________ to ____________
Commission file number 0-19688
DESTRON FEARING CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 84-1079037
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
490 Villaume Avenue
South St. Paul, MN 55075
(612) 455-1621
(Address of principal executive offices)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the 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
As of February 12, 1997, there were 13,293,982 outstanding shares of Common
Stock.
<PAGE>
DESTRON FEARING CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 31, 1996
INDEX
Page
----
PART I -- FINANCIAL INFORMATION
Item 1 -- Financial Statements 3
Item 2 -- Management's Discussion and Analysis of
Financial Condition and Result of Operations 8
PART II -- OTHER INFORMATION
Item 1 -- Legal Proceedings 11
Item 6 -- Exhibits and Reports on Form 8-K 12
Signatures 12
<PAGE>
- --------------------------------------------------------------------------------
PART 1. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
DESTRON FEARING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
DECEMBER 31, 1996 AND SEPTEMBER 30, 1996
(in thousands, except share and per share amounts)
- --------------------------------------------------------------------------------
ASSETS December 31, September 30,
1996 1996
------------ -------------
CURRENT ASSETS:
Cash $56 $39
Accounts receivable, net 2,068 1,016
Inventories, net 6,800 7,219
Prepaid expenses and other current assets 32 28
------------ -------------
Total current assets 8,956 8,302
PROPERTY AND EQUIPMENT, net 2,042 2,104
INVESTMENT IN JOINT VENTURE 225 225
GOODWILL, net 2,064 2,085
OTHER ASSETS, net 277 306
------------ -------------
$13,564 $13,022
------------ -------------
------------ -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Line of credit $1,276 $866
Accounts payable 5,504 5,597
Accrued liabilities 674 528
Current portion of long-term obligations 948 47
------------ -------------
Total current liabilities 8,402 7,038
LONG-TERM OBLIGATIONS,
net of current portion 780 1,688
------------ -------------
Total liabilities 9,182 8,726
------------ -------------
SHAREHOLDERS' EQUITY:
Common stock, $.01 par value;
20,000,000 shares authorized;
11,644,000 and 11,641,000 shares
issued and outstanding, respectively 116 116
Additional paid-in capital 16,697 16,692
Accumulated deficit (12,431) (12,512)
------------ -------------
Total shareholders' equity 4,382 4,296
------------ -------------
$13,564 $13,022
------------ -------------
------------ -------------
The accompanying notes are an integral part
of these consolidated balance sheets.
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<PAGE>
DESTRON FEARING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995
(in thousands, except per share amounts)
- --------------------------------------------------------------------------------
Three Months Ended December 31,
-------------------------------
1996 1995
----------- ------------
NET REVENUE $3,168 $2,477
----------- ------------
COSTS AND EXPENSES:
Cost of sales 1,957 1,632
Selling, general and administrative 705 989
Research and development 198 213
Interest expense and other 227 (55)
----------- ------------
Total costs and expenses 3,087 2,779
----------- ------------
INCOME (LOSS) BEFORE INCOME TAXES 81 (302)
PROVISION FOR INCOME TAXES -- --
----------- ------------
NET INCOME (LOSS) $81 ($302)
----------- ------------
NET INCOME (LOSS) PER COMMON AND
COMMON EQUIVALENT SHARE $0.01 ($0.03)
----------- ------------
----------- ------------
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING 11,946 11,186
----------- ------------
----------- ------------
The accompanying notes are an integral part
of these consolidated financial statements.
-4-
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DESTRON FEARING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995
(in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended December 31,
------------------------------------
1996 1995
----------- ---------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $81 ($302)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation and amortization 127 118
Equity in income of joint venture and other -- (18)
Changes in operating items:
Accounts receivable (1,052) 191
Inventories 419 (2,196)
Prepaid expenses and other current assets (4) (1)
Royalties receivable -- 402
Accounts payable and accrued liabilities 53 119
----------- ---------
Net cash used in operating activities (376) (1,687)
----------- ---------
INVESTING ACTIVITIES:
Purchases of fixed assets (15) (98)
Change in other assets -- (116)
----------- ---------
Net cash used in investing activities (15) (214)
----------- ---------
FINANCING ACTIVITIES:
Issuance of common stock, net 5 2,000
Repayments of long-term obligations (7) (626)
Net borrowings on bank line of credit 410 545
----------- ---------
Net cash provided by financing activities 408 1,919
----------- ---------
NET CHANGE IN CASH 17 18
CASH, beginning of period 39 62
----------- ---------
CASH, end of period $56 $80
----------- ---------
----------- ---------
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $216 $93
----------- ---------
----------- ---------
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
- 5 -
<PAGE>
DESTRON FEARING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
(unaudited)
- --------------------------------------------------------------------------------
1. GENERAL
The information included in the accompanying consolidated interim financial
statements is unaudited and should be read in conjunction with the audited
consolidated financial statements and notes thereto contained in the most recent
Annual Report on Form 10-KSB filed for Destron Fearing Corporation and its
subsidiaries (collectively, the "Company"). In the opinion of management, all
adjustments, consisting of normal recurring items, necessary for a fair
presentation of the financial position and results of operations for the interim
periods presented have been reflected herein. The results of operations for
interim periods are not necessarily indicative of the results to be expected for
the entire fiscal year.
2. RELATIONSHIP WITH SCHERING-PLOUGH
In January 1995, the Company entered into an agreement with Schering-Plough
Animal Health ("Schering-Plough"), under which Schering-Plough would market and
distribute a companion animal permanent identification product manufactured by
the Company.
In October 1995, Schering-Plough notified the Company that it would suspend
purchases for an indefinite period of time to allow for the sales of its
existing inventories. In response to this notification, the Company began to
curtail the purchase of materials required to manufacture and package the
product. However, as a result of previous commitments, the Company was unable
to discontinue certain purchases from its suppliers. As of December 31, 1996
and September 30, 1996, inventories included readers, transponders and other
components and packaging of $3,527,000 and $3,678,000, related to the Company's
agreement with Schering-Plough. The Company has the right to recover the costs
of certain of these inventories under this agreement.
Management believes that the cost of inventories on hand will be realized
through sales of the product to Schering-Plough or other customers, or through
enforcement of the Company's rights under the agreement to receive reimbursement
from Schering-Plough. However, it is also possible that the Company will be
required to dispose of these inventories through alternate means, which could
result in significant losses.
3. INVENTORIES
Inventories are valued at the lower of first in, first out cost or market, and
consist of the following (in thousands):
December 31, 1996 September 30, 1996
----------------- -----------------
Raw materials $3,171 $3,352
Finished goods 3,629 3,867
------- -------
Total inventories $6,800 $7,219
------- -------
------- -------
6
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4. PRIVATE PLACEMENTS OF COMMON STOCK
In December 1995, the Company completed a private placement of 625,000 shares of
common stock for proceeds of $2.0 million. A portion of these proceeds was used
to retire an outstanding $600,000 term loan, with the remaining proceeds
expected to be used to finance working capital needs and new product
development.
In January 1997, the Company completed private placements aggregating 1,650,000
shares of common stock for proceeds of $3.3 million. The proceeds will be used
to finance working capital needs and new product development.
5. LEGAL PROCEEDINGS
Destron is party to litigation in which it is asserting infringement by a
competitor of one of the Company's patents related to certain of its technology.
The defendants assert that the patent is not infringed, is invalid and is
unenforceable. The defendants also have asserted antitrust and unfair
competition claims against the Company and Hughes Aircraft Company (Hughes).
The trial in the litigation commenced on January 8, 1996. On January 29, 1996,
the jury in the trial returned a verdict in favor of the Company and found that
the defendants had willfully infringed on the Company's patent, awarding damages
of $444,000, including prejudgment interest. The defendants have appealed the
judgment against them, and the Company cross-appealed the failure of the court
to increase Destron's damages. While management and its legal counsel continue
to believe that the final outcome of this litigation will not have a significant
impact on the Company's future financial position, cash flows or results of
operations, there can be no assurance of the ultimate outcome of the litigation.
On December 17, 1996, three competitors filed a lawsuit against the Company and
its United States distributor, Schering-Plough Corporation, in the United States
District Court for the District of Minnesota. The plaintiffs alleged that the
defendants participated in unfair competition, breached an oral contract and
infringed on three of the plaintiffs' United States patents. On January 24,
1997, the plaintiffs withdrew this lawsuit in its entirety.
6. PRIVATE PLACEMENT OF DEBT
In March 1996, the Company borrowed a total of $875,000 (and an additional
$25,000 in April 1996) from private investors through the issuance of unsecured
notes due October 21, 1997 and bearing interest at the rate of 11% per annum.
As part of the transaction, the Company issued warrants to the noteholders to
purchase a total of 147,539 shares of the Company's common stock. The warrants
are exercisable at $4.8125 per share for a term of five (5) years beginning
March 21, 1996. The value of these warrants at the time of issuance was not
deemed to be significant. Funds received from these notes were used to retire
indebtedness that was due on March 21, 1996, and to provide additional working
capital for operations.
7. REAL ESTATE LOAN
In April 1996, the Company borrowed $658,000 from a commercial bank through the
issuance of a promissory note collateralized by its real estate. The note bears
interest at 8.98% and is due on April 8, 2001. The terms of the note call for
59 monthly payments of $6,668 and a final balloon payment of $533,372. The
proceeds of the loan were used to retire a previous bank loan and industrial
development revenue bonds, both of which were collateralized by real estate.
The remaining proceeds were used to provide additional working capital for
operations.
7
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT
OF OPERATIONS
RELATIONSHIP WITH SCHERING-PLOUGH
In January 1995, the Company entered into an agreement with Schering-Plough
Animal Health ("Schering-Plough"), under which Schering-Plough would market and
distribute a companion animal permanent identification product manufactured by
the Company.
In October 1995, Schering-Plough notified the Company that it would suspend
purchases for an indefinite period of time to allow for the sales of its
existing inventories. In response to this notification, the Company began to
curtail the purchase of materials required to manufacture and package the
product. However, as a result of previous commitments, the Company was unable
to discontinue certain purchases from its suppliers. As a result, at December
31, 1996 the Company had an outstanding balance payable to a major vendor of
approximately $4.8 million that it has been unable to pay in the normal course
of business and inventories of approximately $3,678,000 on hand related to the
Schering-Plough agreement. Also see "Liquidity and Capital Resources". The
Company has the right to recover the costs of certain of these inventories under
this agreement.
Management believes that the cost of inventories on hand will be realized
through sales of the product to Schering-Plough or other customers, or through
enforcement of the Company's rights under the agreement to receive reimbursement
from Schering-Plough. However, it is also possible that the Company will be
required to dispose of these inventories through alternate means, which could
result in significant losses.
RESULTS OF OPERATIONS
Net revenue for the first quarter ended December 31, 1996 was $3,168,000 or 28%
greater than the $2,477,000 reported for the comparable period of fiscal 1996.
Revenue from the Radio Frequency Identification Device (RFID) electronic
products increased 42% in the quarter over last year's quarter principally
because of increased sales to the fisheries industries and sales into the newly
activated companion animal market in Japan. Revenue from the sale of visual
identification products increased 11% over the first quarter of fiscal 1996
because of larger shipments to existing customers and a general price increase
in December 1996.
Cost of sales of $1,957,000 for the first quarter of fiscal 1997 increased 20%
over the $1,632,000 reported in the first quarter of fiscal 1996 because of
increased net revenue. However, as a percentage of sales, the fiscal 1997 cost
of sales declined to 62% from last year's 66% primarily because of a more
profitable product mix and increased manufacturing efficiency of visual
identification products. Gross profit margins of the RFID products increased
nominally over the first quarter of last year. As a result of these factors,
the reported gross profit percentage for the first quarter of fiscal 1997
increased to 38% from 34% reported for the quarter ended December 31, 1995.
Selling, general and administrative expenses were $705,000 in the first quarter
which represents a 29% reduction from the $989,000 reported in the comparable
quarter of last year. This reduction was primarily the result of significantly
lower legal expenses ($183,000).
Research and development expenses were $198,000 in the first quarter of fiscal
1997 compared to $213,000 for the previous year. The decrease resulted
primarily from lower outside production development expenses.
Interest and other was $227,000 in the first quarter of fiscal 1997 compared to
[$55,000] for the same period of fiscal 1996. In the first quarter of fiscal
1996, the Company collected a $137,000 note that had been written off in a prior
fiscal year. Interest expense increased in the first quarter of fiscal 1997
because of higher
8
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average outstanding borrowings and recognition of imputed interest on an
outstanding balance payable to a vendor.
The Company derives a significant portion of its revenue from export sales. The
gross profit and cash requirements of these sales do not vary materially from
the requirements of its domestic sales.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has utilized financing sources such as public and
private equity offerings and borrowings from financial institutions and
individual investors to fund its operating activities. In addition, during
fiscal 1966 and in fiscal 1997 to date, the Company has been required to extend
the term on payments to a significant vendor. As of the date of this quarterly
report, the Company is engaged in discussions with this vendor regarding
settlement of the approximately $4.8 million balance payable. In order for the
Company to continue to fund its operations in fiscal 1997, it will be required
to negotiate an agreement with the vendor with payment terms that do not
severely restrict other cash flow requirements. The Company believes that funds
available under its existing credit agreement, or a credit agreement with an
alternative lending institution, together with funds generated by operations and
from private placements of common stock in January 1997, along with the
negotiation of an agreement with the above-discussed vendor, will be sufficient
to provide the Company with adequate liquidity and capital resources for working
capital and other cash requirements.
However, the information set forth in the preceding paragraph is forward-looking
information. Therefore, if, for any reason (including, without limitation,
those described below), the Company's operations require more capital than
anticipated, revenues do not reach anticipated levels, or cash flow needs are
greater than planned, the Company may need additional financing prior to the end
of fiscal 1997 in order to maintain its operations. There can be no assurance
that the Company would be able to obtain any required additional financing when
needed or that such financing, if obtained, would be on terms favorable or
acceptable to the Company. If the Company was unable to obtain additional
financing when needed and under acceptable conditions, it would be required to
significantly scale back plans for growth and perhaps reduce the scope of its
operations. Factors that may affect the Company's revenues, use of capital,
expenses and/or cash flow, and that would cause actual results to differ
materially from those anticipated include, but are not limited to, the
introduction of competing products with performance equivalent to or exceeding
that of the Company's products, a claim (whether or not successfully made) that
the Company's products infringe a patent held by another company or individual,
any performance problems involving the Company's products, changes in technology
that could cause the Company's products to become obsolete, the departure of key
members of management and/or key employees, regulatory requirements that would
make the Company's products difficult or uneconomical to produce, and general
economic conditions.
The Company's operating activities used $376,000 during the three month period
ended December 31, 1996. Funds were generated from net income for the period of
$81,000, depreciation and amortization of $127,000, a decrease in inventories of
$419,000 and increases in accounts payable and accrued liabilities of $53,000.
The funds were used principally to finance an increase in accounts receivable of
$1,052,000.
The Company's financing activities provided net cash of $408,000 during the
three months ended December 31, 1996, principally through an increase in its net
borrowings on a bank line of credit of $410,000.
As of December 31, 1996, the Company had net working capital of $554,000 with a
current ratio of 1.1 to 1, which represents a $710,000 decrease in working
capital from September 30, 1996.
In June 1993, the Company entered into a $750,000 revolving credit agreement
with private investors (the "Lenders") that was amended in November 1993 to
reduce the principal to $600,000 and convert the indebtedness to a term loan.
One of the Lenders was a director of the Company through November 1995.
9
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This term was repaid in November 1995 from the proceeds of the private placement
of common stock discussed below.
The Company has a discretionary revolving credit facility with a financial
institution, under which borrowings are limited based upon eligible accounts
receivable and inventories, as defined in the agreement. The credit facility is
collateralized by an interest in the Company's accounts receivable, inventories,
equipment and intangibles. The agreement expired on January 24, 1997, and was
replaced by a forbearance agreement which is effective through July 31, 1997.
The new agreement establishes a $2,300,000 borrowing capacity through March 31,
1997, with a reduction to $2,000,000 through June 30, 1997 and further reduction
to $500,000 through July 31, 1997. Interest on the credit facility will be paid
monthly at a rate of prime plus one and one-half of one percent ( 1/2%); At
December 31, 1996, the Company had borrowings of $1,276,000 with maximum
availability under the facility at that date of $1,819,000.
In September 1994, the Company borrowed a total of $610,000 from private
investors (including certain executive officers and directors) through the
issuance of unsecured notes bearing interest at the rate of 12% per annum, due
March 21, 1996. Funds received on these notes were used to reduce outstanding
borrowings under the Company's bank line of credit and to provide additional
working capital for operations. These notes were repaid in March 1996 from the
proceeds of the 11% unsecured notes discussed below.
In March 1995, a warrant holder exercised a warrant for the purchase of 300,000
shares of the Company's common stock. The transaction was settled through a
cash payment of $3,000 and execution of a 15% promissory note for $297,000 due
May 3, 1995 (and subsequently extended to July 3, 1995). The note was paid in
full on May 30, 1995.
In December 1995, the Company completed a private placement of 625,000 shares of
common stock for proceeds of $2.0 million. A portion of these proceeds was used
to retire the outstanding $600,000 term loan with the Lenders, with the
remaining proceeds used to finance working capital needs and new product
development.
In March and April 1996, the Company borrowed a total of $900,000 from private
investors through the issuance of unsecured notes due October 21, 1997 and
bearing interest at the rate of 11% per annum. Funds received from these notes
were used to retire the $610,000 indebtedness that was due on March 21, 1996,
and to provide additional working capital for operations.
In April 1996, the Company borrowed $658,000 from a commercial bank through the
issuance of a promissory note collateralized by its real estate. The note bears
interest at 8.98% and is due on April 8, 2001. The terms of the note call for
59 monthly payments of $6,668 and a final balloon payment of $533,372. The
proceeds of the loan were used to retire a previous bank loan and industrial
development revenue bonds, both of which were collateralized by real estate.
The remaining proceeds were used to provide additional working capital for
operations.
In January 1997, the Company completed private placements aggregating 1,650,000
shares of common stock for proceeds of $3.3 million. These proceeds will be
used to finance working capital needs and new product development.
10
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
In November 1993, the Company initiated a lawsuit for patent
infringement against three competitors in the U.S. District Court in
Colorado. (The patent involved is No. 5,211,129, which relates to the
Company's injectable transponder technology.) At a hearing on
November 12, 1993, the Court found that it did not have jurisdiction
in Colorado over two of the competitors and dismissed the Colorado
case against them without prejudice. The Court suggested that the
third competitor may be an infringer on the patent, but did not order
the temporary injunction requested by the Company.
On December 1, 1993, the two dismissed competitors commenced an action
against the Company in U.S. District Court for Southern Illinois
requesting actual damages of $20,000,000 This action was subsequently
transferred to the U.S. District Court of Colorado. In the suit, the
plaintiffs sought to invalidate the above-described patent of the
Company and alleged unfair competition, violation of U.S. antitrust
laws, interference with business relationships and abuse of process
due to the actions the Company had allegedly taken in obtaining,
announcing and enforcing its patent rights against the plaintiffs.
The trial in the litigation commenced on January 8, 1996. On January
29, 1996, the jury in the trial returned a verdict in favor of the
Company and found that the defendants had willfully infringed on the
Company's patent and awarded damages of $445,000, including
prejudgment interest. The defendants have appealed the judgment
against them, and the Company cross-appealed the failure of the court
to increase Destron's damages. While management and its legal counsel
continue to believe that the ultimate outcome of this litigation will
not have a significant impact on the Company's future financial
position, cash flows or results of operations, there can be no
assurance of the ultimate outcome or effect of the litigation.
On December 17, 1996, three competitors filed a lawsuit against the
Company and its United States distributor, Schering-Plough
Corporation, in the United States District Court for the District of
Minnesota. The plaintiffs alleged that the defendants participated in
unfair competition, breached an oral contract and infringed on three
of the plaintiffs' United States patents. On January 24, 1997, the
plaintiffs withdrew this lawsuit in its entirety.
11
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Item 6. Exhibits and Reports on Form 8-K
a. Exhibits:
Exhibit 11.1 Calculation of Net Income (Loss) Per
Common and Common Equivalent Share
b. Reports on Form 8-K
No current reports on Form 8-K were filed during the quarter
ended December 31, 1996.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DESTRON FEARING CORPORATION
(Registrant)
/s/ Thomas J. Ahmann
--------------------------------
By Thomas J. Ahmann
Vice President Finance,
Chief Financial Officer
and Principal Accounting Officer
12
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Exhibit 11.1
DESTRON FEARING CORPORATION
Calculation of Net Income (Loss) Per Common and Common Equivalent Share
(in thousands, except per share amounts)
Quarter Ended December 31,
--------------------------
1996 1995
---- ----
Net income (loss) $81 ($302)
-------- -------
-------- -------
Weighted average number of common
and common equivalent shares
outstanding:
Weighted average number of
common shares outstanding 11,644 11,186
Dilutive effect of stock options after
application of the treasury stock
method 302 --
-------- -------
11,946 11,186
-------- -------
-------- -------
Net income (loss) per common
and common equivalent share $0.01 ($0.03)
-------- -------
-------- -------
- 13 -
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> DEC-31-1996
<CASH> 56
<SECURITIES> 0
<RECEIVABLES> 2,150
<ALLOWANCES> (82)
<INVENTORY> 6,800
<CURRENT-ASSETS> 8,956
<PP&E> 2,804
<DEPRECIATION> (762)
<TOTAL-ASSETS> 13,564
<CURRENT-LIABILITIES> 8,403
<BONDS> 0
0
0
<COMMON> 16,813
<OTHER-SE> (12,432)
<TOTAL-LIABILITY-AND-EQUITY> 13,564
<SALES> 3,168
<TOTAL-REVENUES> 3,168
<CGS> 1,957
<TOTAL-COSTS> 1,957
<OTHER-EXPENSES> 914
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 216
<INCOME-PRETAX> 81
<INCOME-TAX> 0
<INCOME-CONTINUING> 81
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 81
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
</TABLE>
