UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the period ended June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
EXCHANGE ACT OF 1934
For the transition period from __ to __
Commission File No. 0-22744
VIKING CAPITAL GROUP, INC.
-------------------------------------------
(Exact name of small business issuer as specified in its charter)
Utah 87-0442090
---- ----------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
Two Lincoln Centre, Suite 300, 5420 LBJ FWY, Dallas, Texas 75240
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(Address of principal executive offices)
(972) 386-9996
--------------
(Issuer's telephone number)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 June 30, 1998, approximately 23,665,487 shares of Common Stock of the
issuer were outstanding. As of June 30, 1998, 100,000 shares of Class B Common
Stock of the issuer were outstanding.
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VIKING CAPITAL GROUP, INC.
INDEX
Page
Number
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<S> <C> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - June 30, 1998 and December 31, 1997 3
Consolidated Statements of Operations - For the three months ended June
30, 1998 and 1997, and for the period from inception
(November 12, 1986) to June 30, 1998 5
Consolidated Statements of Operations - For the six months ended June
30, 1998 and 1997, and for the period from inception
(November 12, 1986) to June 30, 1998 6
Consolidated Statements of Cash Flows - For the six months ended June
30, 1998 and 1997, and for the period from inception
(November 12, 1986) to June 30, 1998 7
Notes to Consolidated Condensed Financial Statements 9
Item 2. Management's Discussion and Analysis or Plan of Operations. 11
PART II - OTHER INFORMATION
Item 5. Other Information 12
Item 6. Exhibits 13
SIGNATURES 14
EXHIBITS 15
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2
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<CAPTION>
VIKING CAPITAL GROUP, INC.
(A Development Stage Enterprise)
CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
June 30, December 31,
1998 1997
-------- --------
<S> <C> <C>
CURRENT ASSETS
Cash $ 11,430 $123,454
Accounts receivable 8,298 65,372
Notes and other accounts receivable and accrued interest 131,315 104,338
Prepaid expense -- --
-------- --------
Total current assets 151,043 293,164
-------- --------
Office furniture, equipment, software and capitalized software
development costs, net 341,445 93,727
INVESTMENT IN SUBSIDIARY 34,800 34,800
OTHER ASSETS 85,027 86,377
-------- --------
TOTAL ASSETS $612,315 $508,068
======== ========
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3
The accompanying notes are an integral part of these financial statements.
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<CAPTION>
VIKING CAPITAL GROUP, INC.
(A Development Stage Enterprise)
CONSOLIDATED BALANCE SHEETS
(Unaudited)
LIABILITIES AND STOCKHOLDERS' DEFICIT
June 30, December 31,
1998 1997
----------- -----------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 325,756 $ 133,060
Accrued officer's payroll 401,963 416,367
Lease obligation, current portion 29,451 27,324
Note payable and accrued interest 118,131 254,135
----------- -----------
Total current liabilities 875,301 830,886
----------- -----------
LONG-TERM DEBT
Obligations under capital leases, less current portion 42,711 58,134
----------- -----------
Total liabilities 918,012 889,020
----------- -----------
STOCKHOLDERS' DEFICIT
Common stock $0.001 par value; 150,000,000 shares authorized;
23,665,487 and 21,555,161 issued and outstanding as of June
30, 1998 and December 31, 1997, respectively 23,665 21,555
Common stock Class B $0.001 par value; 100,000 shares
authorized and outstanding 100 100
Preferred stock $1.00 par value; 50,000,000 shares authorized;
no shares issued and outstanding -- --
Paid-in capital 6,280,622 5,447,351
Deficits accumulated in the development stage (6,227,622) (5,541,630)
----------- -----------
76,765 (72,624)
----------- -----------
Less treasury stock - 25,625 shares at cost (6,406) (6,406)
----------- -----------
Less stock issued for notes receivable (376,056) (301,922)
----------- -----------
Total stockholders' deficit (305,697) (380,952)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 612,315 $ 508,068
=========== ===========
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4
The accompanying notes are an integral part of these financial statements.
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<CAPTION>
VIKING CAPITAL GROUP, INC.
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended June 30, 1998 and 1997 and
Period from November 12, 1986 (inception) to June 30, 1998
Three months ended Period from
June 30, November 12, 1986
1998 1997 to June 30, 1998
------------ ------------ -----------------
<S> <C>
Revenue $ -- $ -- $ 441,382
Cost of Revenue -- -- 68,119
------------ ------------ ------------
Gross Profit -- -- 373,263
------------ ------------ ------------
Cost and expenses
Depreciation and amortization 8,336 7,653 59,913
General and administrative expenses 327,344 258,394 6,326,271
------------ ------------ ------------
Total cost and expenses 335,680 266,047 6,386,184
------------ ------------ ------------
Loss from operations (335,680) (266,047) (6,012,921)
Other income(expenses)
Interest income 12,206 2,568 50,003
Interest and penalty expense (5,367) (23,809) (196,222)
Other -- -- (37,260)
------------ ------------ ------------
Total other income(expense) 6,839 (21,241) (183,479)
------------ ------------ ------------
Loss before income taxes (328,841) (287,288) (6,196,400)
Income tax provision -- -- (32)
------------ ------------ ------------
Net loss $ (328,841) $ (287,288) $ (6,196,432)
============ ============ ============
Loss per common share attributable to
common stockholders
Basic and Fully Diluted $(.014) $(.020)
Weighted average common shares outstanding 23,017,450
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5
The accompanying notes are an integral part of these financial statements.
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<CAPTION>
VIKING CAPITAL GROUP, INC.
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Six months ended June 30, 1998 and 1997 and
Period from November 12, 1986 (inception) to June 30, 1998
Six months ended Period from
June 30, November 12, 1986
1998 1997 to June 30, 1998
----------- ----------- ----------------
<S> <C>
Revenue $ -- $ -- $ 441,382
Cost of Revenue -- -- 68,119
----------- ----------- -----------
Gross Profit -- -- 373,263
----------- ----------- -----------
Cost and expenses
Depreciation and amortization 15,989 14,783 59,913
General and administrative expenses 675,039 543,221 6,326,271
----------- ----------- -----------
Total cost and expenses 691,028 558,004 6,386,184
----------- ----------- -----------
Loss from operations (691,028) (558,004) (6,012,921)
Other income(expenses)
Interest income 21,977 5,168 50,003
Interest and penalty expense (16,941) (41,189) (196,222)
Other -- -- (37,260)
----------- ----------- -----------
Total other income(expense) 5,036 (36,021) (183,479)
----------- ----------- -----------
Loss before income taxes (685,992) (594,025) (6,196,400)
Income tax provision -- -- (32)
----------- ----------- -----------
Net loss $ (685,992) $ (594,025) $(6,196,432)
=========== =========== ===========
Loss per common share attributable to
common stockholders
Basic and Fully Diluted $(.030) $(.041)
Weighted average common shares
outstanding 23,017,450
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6
The accompanying notes are an integral part of these financial statements.
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VIKING CAPITAL GROUP, INC.
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six months ended June 30, 1998 and 1997 and
Period from November 12, 1986 (inception) to June 30, 1998
Six months ended Period from
June 30, November 12, 1986
1998 1997 to June 30, 1998
----------- ----------- ----------------
<S> <C> <C>
Cash flows from operating activities
Net loss $ (685,992) $ (594,025) $(6,196,432)
Non-cash charges included in operations
Depreciation and amortization 15,989 14,783 59,913
Common stock issued for services and interest 232,048 28,696 1,889,323
Common B stock issued for services -- 100
Note payable issued for services -- -- 6,860
Common stock issued for services and
accrued expenses -- -- 30,434
Provision for doubtful notes receivable -- -- 52,754
Common stock issued for interest payable -- -- --
Loss on assets -- -- 15,000
Advances to stockholder expensed to consulting -- -- 57,706
Changes in assets and liabilities
(Increase)Decrease in accounts receivable 57,074 99,703 (8,298)
Prepaid expenses -- (21,487) --
Accrued interest receivable (21,977) -- (41,253)
(Increase) in deposits -- -- (31,767)
(Increase) in other assets 3,477 -- (50,548)
Accounts payable and accrued expenses 169,097 (29,452) 340,241
Accrued payroll and payroll taxes (2,974) 42,435 411,603
----------- ----------- -----------
Net cash used for operating activities (233,258) (459,347) (3,464,364)
Cash flows from investing activities
Capital expenditures (238,707) -- (260,121)
Loans made (5,000) (4,756) (229,708)
Loan repayments -- -- 15,500
Other -- -- (15,050)
----------- ----------- -----------
Net cash used for investing activities (243,707) (4,756) (489,379)
Cash flows from financing activities
Stock sale expenses -- -- (11,716)
Proceeds from sale of common stock 276,699 7,500 2,522,119
Proceeds from notes payable 120,315 573,900 2,056,201
Principal repayments of notes payable (16,650) (115,385) (566,682)
Principal payments on capital lease obligations (15,423) -- (37,596)
Proceeds from preferred stock sale -- -- 20,000
Repurchase of preferred stock -- -- (11,319)
Preferred dividends paid -- -- (5,834)
----------- ----------- -----------
Net cash provided by financing activities 364,941 466,015 3,965,173
Increase (decrease) in cash (112,024) 1,912 11,430
</TABLE>
- continued -
7
The accompanying notes are an integral part of these financial statements.
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VIKING CAPITAL GROUP, INC.
(A Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
(Unaudited)
Six months ended June 30, 1998 and 1997
and Period from November 12, 1986 (inception) to June 30, 1998
Six months ended Period from
June 30, November 12, 1986
1998 1997 to June 30, 1998
---------- ---------- ----------------
<S> <C>
Cash at beginning of period 123,454 9,920 --
---------- ---------- ----------
Cash at end of period $ 11,430 $ 11,832 $ 11,430
========== ========== ==========
Cash flow information:
Interest paid $ -- $ -- $ 55,309
Income taxes paid $ -- $ -- $ 32
Non-cash investing activities:
Common stock issued for:
Acquisition of Triple A $ -- $ -- $ 34,800
Acquisition of NIAI $ -- $ -- $ 10,000
Acquisition of VISI $ -- $ -- $ 434
Oil lease $ -- $ -- $ 40,000
Non-cash financing activities:
Preferred stock issued for:
Note payable-related party $ -- $ -- $ 60,000
Accrued interest-related party $ -- $ -- $ 4,500
Accrued expenses-related party $ -- $ -- $ 25,500
Common stock issued for:
Services and fees $ 209,185 $ 28,696 $1,614,331
Repayment of notes payable $ 227,500 $ 11,207 1,189,617
Payment of interest $ 22,864 $ -- 124,726
Payment of accounts payable and exp reimbursement $ -- $ -- 27,055
Conversion of preferred stock $ -- $ -- 100,000
Payment of preferred stock dividend $ -- $ -- 25,556
Notes Receivable $ 74,134 $ -- 376,056
Equipment $ 25,000 $ -- 25,000
Note payable issued for services $ -- $ -- $ 6,860
Assignment of oil lease in payment of note payable $ -- $ -- $ 40,000
Common stock acquired for conversion of
note receivable $ -- $ -- $ 6,406
Common stock canceled for conversion of
note receivable $ -- $ -- $ 5,600
Additions to equipment under capital leases $ -- $ 10,378 $ 107,631
</TABLE>
8
The accompanying notes are an integral part of these financial statements.
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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The consolidated interim financial statements include the accounts of Viking
Capital Group, Inc. and its wholly owned subsidiaries (collectively the
"Company").
The consolidated interim financial statements included herein have been prepared
by the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission (the "SEC"). Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principals ("GAAP") have been condensed or
omitted pursuant to such rules and regulations, although the Company believes
that the disclosures are adequate to make the information presented not
misleading. It is suggested that these financial statements be read in
conjunction with the consolidated financial statements and related notes
included in the Company's Form 10-KSB as of and for the year ended December 31,
1997.
In the opinion of management, the unaudited interim consolidated financial
statements of the Company contains all adjustments, consisting only of those of
a normal recurring nature, necessary to present fairly the Company's financial
position and the results of its operations and cash flows for the periods
presented. The preparation of financial statements in accordance with GAAP
requires management to make estimates and assumptions. Such estimates and
assumptions affect the reported amounts of assets and liabilities, as well as
the disclosures of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.
2. UNCONSOLIDATED SUBSIDIARY
Pursuant to a reorganization agreement dated September 4, 1997, the Company
acquired all of the outstanding stock of Triple A Annuity Marketing, Inc.. Due
to provisions in the agreement, the subsidiary is accounted for as an
unconsolidated subsidiary under the equity method. Revenues and net income for
the period ended June 30, 1998 for Triple A Annuity Marketing, Inc. were
approximately $35,437 and zero respectively.
3. SOFTWARE DEVELOPMENT COSTS
During January of 1998, the Company formed a strategic joint venture with
Transaction Information Systems, Inc. (TIS) for the building of a technical
robust architecture capable of supporting the Company's long term strategic
initiatives of creating an interactive enterprise insurance and retirement
services website. During the period ended June 30, 1998, the Company had
incurred $235,919 of costs associated with such initiatives. Subsequent to June
30, 1998, the Company incurred $71,700 in cost. The Company has capitalized such
costs as software development costs. Amortization of the asset will begin when
placed in to service which is expected to be in the fourth quarter of 1998.
Financial Accounting Standard No. 86, "Accounting for the Cost of Computer
Software to be Sold, Leased, or Otherwise Marketed", provides for the
capitalization of certain costs related to development of computer software
products. Capitalized computer software costs include direct labor,
labor-related overhead costs and interest. The software will be amortized over
its expected useful life of 3 years after it is placed in service. Management
periodically evaluates the recoverability, valuation and amortization of
capitalized software cost. As part of this review, management considers the
undiscounted projected future net earnings. If the undiscounted future net
earnings is less than the stated value, software costs will be written down to
fair value.
9
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VIKING CAPITAL GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
5. OPTIONS ISSUED
During the current quarter, the Company granted 995,500 options exercisable at
rates from $0.50 to $1.00 per share. This includes options for five years for
410,000 shares of common restricted stock exercisable at 25% per year at $1.00
per share and for 585,500 shares exercisable and expiring within one year at a
weighted average exercise price of $0.64 per share.
6. OTHER
The financial statements have been prepared on the assumption that the Company
will continue as a going concern. Its continued existence depends upon the
success of management's efforts to raise additional capital necessary to meet
the Company's obligations as they come due and to obtain sufficient capital to
execute its business plan.
There can be no degree of assurance given that the Company will be successful in
completing additional financing transactions. Should the Company be unsuccessful
in its efforts to obtain adequate financing, it's current financial condition
may be affected adversely, and such affects may be material.
7. EVENTS SUBSEQUENT TO JUNE 30, 1998
Subsequent to June 30, 1998, the Company incurred $71,700 in software
development cost (see footnote 3).
10
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Item 2. Management's Discussion and Analysis or Plan of Operations.
Material Changes in Results of Operations
During the three month period ended June 30, 1998, the Company
(website: www.vcgi.com) continued in its efforts to secure capital and implement
its proposed plan of business. In the course of its efforts to fulfill its
strategic plan of operation it concluded the negotiations of a Joint Network
Services Agreement with New-York-based IXNET (website: www.ixnet.com), a
subsidiary of IPC Information Systems, Inc. (NASDAQ:IPCX). The two companies
will create a high-performance, private ATM (asynchronous transfer mode) network
to launch its eCommerce insurance system, Universal IP(TM). The Company has also
continued in its efforts to build the robust technical architecture required for
Universal IP (TM) with its strategic partner Transaction Information Systems,
Inc. (TIS) (website www.tisny.com) of New York. The Company refers to these
strategic relationships as the "Viking Systems Business Enterprise". During the
quarter ended June 30, 1998, the Company had incurred costs of $135,919 in
efforts to build the technical robust architecture required for the Universal
IP(TM) system. Additional costs of similar or greater size are anticipated in
this effort.
In connection with its efforts to attract capital and implement its
plan of business, the Company incurred general and administrative expenses of
$675,039 and reported net losses of $685,992 for the six month period ended June
30, 1998.
Material Changes in Financial Condition, Liquidity and Capital Resources
The Company had a cash balance of $11,430 at June 30, 1998. During the
second quarter of 1998, the Company raised $54,500 via short term loans from
unrelated parties, $12,315 via short term loans from related parties and an
additional $96,970 through the private sale of stock.
Even after the receipt of $163,785 from these sources, the Company
lacks adequate financing to implement its full plan of business or to sustain
its operations beyond the following twelve months. Management believes that to
support the first stage of the Company's plan of operations, involving the
supporting of the operations of its subsidiaries; Viking Insurance Services,
Inc., Viking Financial Services, Inc., Viking Administrator, Inc., NIAI
Insurance Administrators, Inc. and Viking Systems Inc., will require additional
capital over the next twelve months. Triple A Annuity Marketing, Inc. is self
sufficient and will not require specific additional funds in the foreseeable
future. The Company is currently evaluating various options to raise additional
capital, including possible placements of debt and equity. There is no
assurance, however, that the Company will be successful in securing additional
financing and, therefore, there is no assurance that the Company can implement
its full plan of operations. If the Company is successful in implementing its
plan of operations, the Company will be required to lease, acquire or construct
significant additional facilities and equipment and hire substantial additional
employees to carry out such operations.
11
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PART II - OTHER INFORMATION
Item 5. Other Information
The Company's common stock trades on the OTC Electronic Bulletin Board.
Its symbol is "VGCP".
Company information can be found on the World Wide Web. The address is
www.vcgi.com.
Attention is directed to the financial information related to the
efforts to build the technical robust architecture required by the Registrant's
Universal IP(TM) eCommerce insurance software systems as noted in Part I
Financial Statements and footnote 3 and, in Management's Discussion and Analysis
or Plan of Operations and such information is incorporated herein by reference.
Item 6. Exhibits and Reports
Exhibit 21.1 List of subsidiaries of the Registrant
Exhibit 27.1 Financial Data Schedule
12
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EXHIBIT INDEX
-------------
EXHIBIT
NUMBER DESCRIPTION
-----------
2.1
21.1 List of Subsidiaries of the Registrant
27.1 Financial Data Schedule
13
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
VIKING CAPITAL GROUP, INC.
Dated: August 11, 1998 By: \s\ William J. Fossen
-------------------------
William J. Fossen, President
Dated: August 11, 1998 By: \s\ Matthew W. Fossen
--------------------------
Matthew W. Fossen
Chief Financial Officer
14
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EX-21
Subsidiaries of the Registrant
EXHIBIT 21.1
Viking Capital Group, Inc. and Subsidiaries
List of subsidiaries of the registrant
The following are current subsidiaries of Registrant.
Subsidiary and Name Under Which Business is Done Where Organized
- ------------------------------------------------ ---------------
Viking Financial Services, Inc. Texas
Viking Insurance Services, Inc. Texas
Viking Systems, Inc. Texas
Viking Administrators, Inc. Texas
NIAI Insurance Administrators, Inc. California
Triple A Annuity Marketing, Inc. Arizona
15
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENT OF THE COMPANY AS OF JUNE 30, 1998 INCLUDED IN THE 10QSB AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 10QSB
</LEGEND>
<CIK> 0000886093
<NAME> VIKING CAPITAL GROUP, INC
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 11430
<SECURITIES> 0
<RECEIVABLES> 198773
<ALLOWANCES> 59160
<INVENTORY> 0
<CURRENT-ASSETS> 151043
<PP&E> 399358
<DEPRECIATION> 57913
<TOTAL-ASSETS> 612315
<CURRENT-LIABILITIES> 875301
<BONDS> 42711
0
0
<COMMON> 23665
<OTHER-SE> (329362)
<TOTAL-LIABILITY-AND-EQUITY> 612315
<SALES> 0
<TOTAL-REVENUES> 21977
<CGS> 0
<TOTAL-COSTS> 619028
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (16941)
<INCOME-PRETAX> (685992)
<INCOME-TAX> 0
<INCOME-CONTINUING> (685992)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (685992)
<EPS-PRIMARY> (0.030)
<EPS-DILUTED> (0.030)
</TABLE>
