<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
Amendment No. 1
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
- ----- EXCHANGE ACT OF 1934
For quarterly period ended June 30, 1995
Commission File Number 0-20734
NORRIS COMMUNICATIONS CORP.
(Exact name of registrant as specified in its charter)
Yukon Territory, Canada None
----------------------- ----
(State or other jurisdiction of (I.R.S. Empl. Ident. No.)
incorporation or organization)
12725 Stowe Drive, Poway, California 92064
------------------------------------ -----
(Address of principal executive offices) (Zip Code)
(619) 679-1504
--------------
(Registrant's telephone number, including area code)
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
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Common Stock, without par value 11,631,814
- ------------------------------- ----------
(Class) (Outstanding at August 11, 1995)
================================================================================
<PAGE> 2
NORRIS COMMUNICATIONS CORP.
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets as of June 30, 1995 and
and March 31, 1995 (unaudited) 3
Consolidated Statements of Operations for the three
months ended June 30, 1995 and 1994 (unaudited) 4
Consolidated Statements of Cash Flows for the three months
ended June 30, 1995 and 1994 (unaudited) 5
Notes to Interim Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION 11
Item 1. Legal Proceedings *
Item 2. Changes in Securities *
Item 3. Defaults upon Senior Securities *
Item 4. Submission of Matters to a Vote of Security Holders *
Item 5. Other Information *
Item 6. Exhibits and Reports on Form 8-K *
SIGNATURES 11
</TABLE>
* No information provided due to inapplicability of the item.
2
<PAGE> 3
NORRIS COMMUNICATIONS CORP.
CONSOLIDATED BALANCE SHEETS
(EXPRESSED IN U.S. DOLLARS)
UNAUDITED
<TABLE>
<CAPTION>
JUNE 30, 1995 MARCH 31, 1995
$ $
--------------------------------
<S> <C> <C>
ASSETS
CURRENT
Cash 309,661 3,291,203
Accounts receivable, less allowance for doubtful
accounts of $150,000 and $210,000, respectively 381,209 152,673
Inventory (note 3) 4,185,325 2,663,403
Prepaid expenses and other 349,967 396,644
--------------------------------
TOTAL CURRENT ASSETS 5,226,162 6,503,923
Property and equipment, net 1,600,354 1,742,796
Purchased goodwill, net of accumulated amortization of
$331,831 and $309,646, respectively 332,770 354,955
Other intangible assets, net of accumulated amortization of
$19,440 and $17,451 respectively 58,935 56,958
--------------------------------
TOTAL ASSETS 7,218,221 8,658,632
================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT
Line of credit 3,000,000 3,000,000
Accounts payable, trade 2,015,287 1,234,574
Other accounts payable and accrued liabilities 530,417 410,539
Current portion of capital lease obligations 179,701 193,229
--------------------------------
TOTAL CURRENT LIABILITIES 5,725,405 4,838,342
--------------------------------
TOTAL LIABILITIES 5,725,405 4,838,342
--------------------------------
STOCKHOLDERS' EQUITY
Common stock, no par value, authorized 20,000,000
shares; 11,631,814 and 11,616,814 shares
outstanding, respectively (note 4) 17,880,054 17,849,751
Contributed surplus 1,592,316 1,592,316
Deficit (17,979,554) (15,621,777)
--------------------------------
TOTAL STOCKHOLDERS' EQUITY 1,492,816 3,820,290
--------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 7,218,221 8,658,632
================================
</TABLE>
See notes to interim consolidated financial statements
3
<PAGE> 4
NORRIS COMMUNICATIONS CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(EXPRESSED IN U.S. DOLLARS)
UNAUDITED
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30
1995 1994
$ $
--------------------------------
<S> <C> <C>
Revenues 478,732 1,216,533
Cost of sales 1,466,965 1,487,299
--------------------------------
Gross profit (loss) (988,233) (270,766)
--------------------------------
OPERATING EXPENSE (INCOME)
Selling and administrative 783,469 1,178,988
Research and related expenditures 477,727 163,477
Interest expense 124,534 8,961
Interest income (16,185) (126)
--------------------------------
1,369,545 1,351,300
--------------------------------
Net loss (2,357,778) (1,622,066)
================================
Net loss per share (0.20) (0.23)
================================
Weighted average shares 11,624,314 6,978,272
================================
</TABLE>
See notes to interim consolidated financial statements
4
<PAGE> 5
NORRIS COMMUNICATIONS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(EXPRESSED IN U.S. DOLLARS)
UNAUDITED
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
JUNE 30
1995 1994
OPERATING ACTIVITIES $ $
---------- ----------
<S> <C> <C>
Net loss (2,357,778) (1,622,066)
Adjustments to reconcile net loss to net cash
used by operating activites:
Depreciation and amortization 129,853 125,366
Loss from sale of assets 38,550 --
Changes in assets and liabilities:
Accounts receivable (228,536) 121,015
Inventory (1,521,922) 106,757
Prepaid expenses and other 46,677 (397,995)
Accounts payable, trade 780,713 482,101
Other accounts payable and accrued liabilities 119,878 (52,824)
---------- ----------
Cash used in operating activities (2,992,565) (1,237,646)
---------- ----------
INVESTING ACTIVITIES
Purchase of property and equipment (27,937) (141,187)
Proceeds on sale of assets 26,150 --
Investment in patents and intangibles (3,965) --
---------- ----------
Cash used in investing activities (5,752) (141,187)
---------- ----------
FINANCING ACTIVITIES
Advances under operating line of credit -- 20,000
Principal payments on capital lease obligations (13,528) (21,720)
Repayment of note payable -- (39,250)
Proceeds from issuance of shares 30,303 10,271
---------- ----------
Cash provided by (used in) financing activities 16,775 (30,699)
---------- ----------
Net decrease in cash (2,981,542) (1,409,532)
Cash, beginning of period 3,291,203 1,459,526
---------- ----------
Cash, end of period 309,661 49,994
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH INFORMATION:
Cash paid during the year for:
Interest 124,534 8,961
========== ==========
</TABLE>
See notes to interim consolidated financial statements
5
<PAGE> 6
NORRIS COMMUNICATIONS CORP.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
JUNE 30, 1995
1. OPERATIONS
Norris Communications Corp. (the "Company") was incorporated in the Province of
British Columbia, Canada on February 11, 1988 and on November 22, 1994, changed
its jurisdiction of incorporation from British Columbia to the Yukon Territory,
Canada. The Company is engaged through its subsidiary in the development,
manufacture and marketing of electronic products.
2. BASIS OF PRESENTATION
The accompanying interim consolidated financial statements include the accounts
of the Company and its wholly owned subsidiary, Norris Communications, Inc.
("NCI"), based in San Diego County, California.
The interim consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the discharge of
liabilities in the normal course of business for the foreseeable future. The
Company has incurred significant losses and negative cash flows from operations
in six of its past seven fiscal years and for the quarterly period ended June
30, 1995. The Company's ability to continue as a going concern is in substantial
doubt and is dependent upon obtaining additional financing and achieving a
profitable level of operations.
These interim consolidated financial statements do not give effect to any
adjustments which would be necessary should the Company be unable to continue as
a going concern and therefore be required to realize its assets and discharge
its liabilities in other than the normal course of business and at amounts
different from those reflected in the accompanying interim consolidated
financial statements.
These interim consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States for interim
financial information. They do not include all information and footnotes
required by generally accepted accounting principles. The interim consolidated
financial statements and notes thereto should be read in conjunction with the
Company's audited consolidated financial statements and notes thereto for the
year ended March 31, 1995.
In the opinion of management, the interim consolidated financial statements
reflect all adjustments of a normal recurring nature necessary for a fair
statement of the results for interim periods. Operating results for the three
month period ended June 30, 1995 are not necessarily indicative of the results
that may be expected for the year ending March 31, 1996. The interim
consolidated financial statements and notes thereto are stated in U.S. dollars.
3. INVENTORY
Inventory is valued at the lower of cost or market, but not in excess of net
realizable value. Cost is determined on a first-in, first-out basis. Inventories
consist of the following:
<TABLE>
<CAPTION>
June 30, 1995 March 31, 1995
------------- --------------
<S> <C> <C>
Raw materials $2,274,454 $1,396,112
Work in process 463,673 444,192
Finished goods 1,447,198 823,099
- ------------------------------------------------------------------------------
$4,185,325 $2,663,403
==============================================================================
</TABLE>
6
<PAGE> 7
NORRIS COMMUNICATIONS CORP.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
JUNE 30, 1995
4. COMMON STOCK
The following table summarizes shares issued and outstanding:
<TABLE>
<CAPTION>
Shares Amount
------ ------
<S> <C> <C>
Balance March 31, 1995 11,616,814 $17,849,751
Stock options exercised 15,000 30,303
- -------------------------------------------------------------------------------
Balance June 30, 1995 11,631,814 $17,880,054
===============================================================================
</TABLE>
5. OPTIONS AND WARRANTS
At June 30, 1995 warrants and stock options were outstanding/exercisable into
the following listed shares:
<TABLE>
<CAPTION>
Number of Exercise Price
Description Shares U.S.$ Cdn. $ Expiration Date
<S> <C> <C> <C> <C>
Warrants 115,000 $3.76 * February 1996
Warrants 300,000 $3.75 * June 1999
Warrants 33,750 $4.00 * June 1999
Warrants 82,100 $4.00 * August 1999
Warrants 106,986 $2.25 * February 2000
Warrants 88,014 $2.25 * March 2000
Stock options 56,000 $3.65 * August 1996
Stock options 2,000 $4.37 $6.01 January 1997
Stock options 60,000 $3.38 * April 1997
Stock options 287,818 $2.07 $2.84 August 1997
Stock options 181,000 $2.07 $2.84 November 1998
Stock options 129,840 $3.65 * August 1999
Stock options 518,000 $3.38 * April 2000
</TABLE>
* These warrants and options are denominated in U.S. dollars. All other
options are denominated in Canadian dollars with the U.S. dollar
equivalent computed at the exchange rate in effect on June 30, 1995.
6. INCOME TAXES
The Company and NCI have not provided a tax provision for the current period,
due to current losses. Also, any federal and state taxes would be offset by tax
loss carry forwards.
7. INVESTMENT IN JABRA CORPORATION
The Company owns 1,800,000 common shares of JABRA or 33.5% of JABRA's common
shares. Management is of the opinion that the Company no longer controls JABRA,
formerly a wholly-owned subsidiary, and the loss of control is permanent.
Accordingly, effective July 15, 1993, JABRA has been accounted for under the
cost method and at June 30, 1995 the carrying value was nil.
8. NET LOSS PER SHARE
The net loss per share is calculated using a weighted average number of common
shares and common stock equivalents outstanding for the period. At June 30,
1995, the weighted average number of shares outstanding was 11,624,314. At June
30, 1994, the weighted average number of shares outstanding was 6,978,272.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
General
Prior to the introduction of the FLASHBACK recorder in December 1994, the
revenues of the Company were generated by contract manufacturing. Contract
manufacturing accounted for over 90% of total revenues in fiscal 1995. However,
as a result of the termination of certain contract manufacturing services, the
reconfiguration of manufacturing to accommodate FLASHBACK production and other
changes described in this report, the Company anticipates that proprietary
products, i.e. FLASHBACK, will account for the majority of revenues in fiscal
1996. As a result of these changes and the introduction of FLASHBACK prior
operating results are not indicative of future results.
The Company has incurred operating losses in four of its past five years and
these losses have been material. The Company incurred an operating loss of $7.1
million in fiscal 1995. This resulted from the development and launch of the
FLASHBACK and losses incurred in contract manufacturing operations. Since future
results are primarily dependent on FLASHBACK results, the Company's losses are
expected to continue until such time as the Company is able to manufacture and
sell quantities at sufficient margins to cover fixed costs of operations. The
Company's inability to accomplish the foregoing would have a material adverse
effect on the Company's ability to operate profitably and without sufficient
financial resources in the future, the Company may be forced to reduce or
curtail operations. The Company continues to be subject to the risks normally
associated with any new business activity, including unforeseeable expenses,
delays and complications. Accordingly, there is no assurance the Company can or
will report operating profits in the future.
Since the Company utilizes its own facility and equipment for the manufacture of
FLASHBACK products, gross margins are especially dependent upon sales volumes as
a result of a substantial fixed manufacturing overhead. The Company estimates
that its monthly fixed operating costs approximate $300,000 per month. At low
sales volumes it is unlikely that positive gross margins from FLASHBACK can be
achieved, however at higher volumes the allocation of fixed costs over more
sales can result in increasing gross margins. Accordingly, the Company
anticipates variances in gross margins from quarter to quarter in fiscal 1996 as
production is still in the early stages and product sales volumes can vary as
the various distribution channels are launched and as a result of seasonal and
other factors associated with the sale of consumer electronic products.
Demand for the Company's FLASHBACK recorder is uncertain as the Company is in
the early stages of entering various marketing channels. Sales are expected to
be subject to significant month to month variability resulting from the limited
market penetration achieved to date and the seasonal nature of demand for
consumer electronic products. The markets for consumer electronic products are
subject to rapidly changing customer tastes and a high level of competition.
Demand for FLASHBACK is expected to be influenced by marketing and advertising
expenditures, product positioning in retail outlets, technological developments
and general economic conditions. Because these factors can change rapidly,
customer demand can also shift quickly. The Company may not be able to respond
to changes in customer demand because of the time required to change or
introduce products, production limitations and limited financial resources.
Results of Operations
Revenues of $479,000 for the first quarter of fiscal 1996 decreased by 60% from
revenues of $1.2 million for the first quarter of fiscal 1995. Fiscal 1996
revenues were primarily from the operations and sales of the FLASHBACK. Fiscal
1995 revenues were primarily from the operations of the contract manufacturing
business. A substantial portion of the Company's revenues have been derived
primarily from a limited number of customers. The loss of certain large
customers or a decline in the economic prospects of such customers would have a
material adverse effect on the Company.
Gross loss was $1.0 million in the first quarter of fiscal 1996, compared to a
gross loss of $0.3 million in the first quarter of fiscal 1995. The increase in
gross loss was due to limited sales of the FLASHBACK product, with insufficient
margins to cover manufacturing overhead. During the first quarter of fiscal
1995, sales were from contract manufacturing, in which high costs resulted from
accepting lower margin turnkey and
8
<PAGE> 9
consignment orders and a change in the mix of through-hole printed circuit
boards which required more hand placement of components (which increased labor
costs with no corresponding increase in revenues).
Included in the cost of sales for the three months ended June 30, 1995, and
contributing to the large gross loss, was $980,000 representing the cost of
7,000 discontinued FLASHBACK units sold to Active Media Services, Inc., an
independent media trading firm. These units were sold in exchange for $1,172,500
of media trade credits. The Company has recognized no prepaid asset nor any
revenue in connection with the trade credits since their use requires certain
matching cash payments and the Company's ability to continue as a going concern
is in substantial doubt. Management believes the credits have very limited
future value in planned operations and intends to recognized future revenue from
the trade credits only when ascertainable economic value is realized from their
use.
Total operating expenses (including research and related expenditures, selling
and administrative and interest expense less interest income) remained at $1.4
million for the first quarter of fiscal 1996 as compared to $1.4 million for the
first quarter of fiscal 1995. The static nature of these expenses was primarily
due to a concerted effort to reduce selling and administrative expenses, while
manufacturing and selling the FLASHBACK, while increasing research and
development costs. The material changes and reasons for the changes from fiscal
1995 to fiscal 1996 were: a decrease in legal and settlements of $37,000 (the
decrease was due to a reduction of settlements being paid in the current fiscal
year), a decrease in public relations of $42,000 (the Company has primarily
focused on advertising and reduced public relations efforts), a decrease in
salaries of $49,000 (the Company is in continuing efforts to reduce salaries).
Research and development costs (associated with new product development) were
$314,000 higher in the first three months of fiscal 1996 than in the comparable
period in fiscal 1995. The increased levels in research and development
associated with FLASHBACK, although subject to quarterly variations, are
expected to continue at higher levels than the prior year.
The Company reported a net loss of $2.3 million for the first quarter of fiscal
1996, as opposed to an operating loss of $1.6 million for the first quarter of
fiscal 1995. The increase in the loss was primarily the result of the increased
gross loss from sales.
Liquidity and Capital Resources
At June 30, 1995, the Company had working capital deficit of $499,000, compared
to working capital of $1.7 million at March 31, 1995. The Company had
approximately $4.2 million of working capital invested in inventories at June
30, 1995, compared to approximately $2.7 million at March 31, 1995 with the
increase due to FLASHBACK components. The decrease in working capital is a
result of the Company's continuing losses, which have been funded by working
capital. During the 12 months ended June 30, 1995, the Company borrowed
approximately $3.0 million under its credit line and has exhausted its available
credit thereunder. Approximately $2.2 million in working capital was expended by
the Company in the quarter ended June 30, 1995 and management estimates that
approximately $1.0 million in working capital will be expended in the quarter
ended September 30, 1995. The Company's current cash position is insufficient to
enable the Company to meet either its obligations to creditors or its on-going
expenses.
The Company has a $3.0 million line of credit with CVD Financial Corporation
("CVD") of Pasadena, California and has exhausted its credit thereunder. The
Company's line of credit expired on July 31, 1995 and on August 10, 1995 the
parties agreed to a six month extension, subject to documentation. Substantially
all of the assets of the Company and its subsidiary (including JABRA shares) are
pledged to CVD as collateral for the amounts loaned and the Company is
prohibited from incurring additional indebtedness without CVD's prior consent.
There can be no assurance that CVD would not be able to call its loan prior to
the extended maturity, if consummated, however in any event, should the loan not
be extended, refinanced or repaid, then CVD could foreclose on the Company's
assets.
Accordingly, the Company will require additional capital (and a replacement or
refinancing of the CVD loan) during fiscal 1996 to meet its debts as they become
due and to continue as a going concern. The Company may also require additional
working capital to finance production and sales of FLASHBACK. Successful
commercialization of FLASHBACK could require additional working capital for
promotion and advertising. The Company estimates that planned expenditures and
projected working capital requirements will require a minimum of an additional
$3 million (in addition to the $3 million required to refinance the
9
<PAGE> 10
CVD loan) to continue operating for the next twelve months. Should FLASHBACK
sales take more time to develop then additional funds may be required as
substantial resources are currently invested in inventory in anticipation of
FLASHBACK sales. The existing business may be able to generate a portion of the
additional $3 million required depending on FLASHBACK results, however there can
be no assurance thereof. The Company is currently pursuing various alternatives
to meet its needs for additional capital or refinancing of existing debt. There
can be no assurance the Company will be successful and any such financing may be
dilutive to current shareholders. The failure to refinance existing debt or
raise additional funds could have a material adverse effect on the Company and
could force the Company to reduce or curtail operations. These events could
cause the Company to elect or be required to seek protection from creditors by
filing a voluntary petition in bankruptcy or become subject to an involuntary
petition in bankruptcy. To date, management has not considered this alternative,
nor does management view it as a likely occurrence.
The Company may, from time to time, seek additional funds through additional
lines of credit, public or private debt or equity financing. The Company might
require additional capital to finance future developments, new products,
production, marketing, acquisitions or extraordinary expansion of facilities in
accordance with its business strategy. There can be no assurances that
additional capital will be available when needed.
Changes in Cash
For the three months ended June 30, 1995, net cash decreased $3.0 million. Cash
used in operating activities was $3.0 million. Major components using cash were
a net loss of $2.4 million, increase in inventory of $1.5 million, and an
increase in accounts receivable of $0.2 million. Major components providing cash
were an increase in accounts payable of $0.8 million, depreciation and
amortization of $0.1 million and an increase in other accounts payable and
accrued liabilities of $0.1 million.
Possible Inability to Continue as a Going Concern.
The Company has suffered recurring losses from operations and has a minimal
working capital surplus. This factor, in combination with (i) the Company's
exhaustion of it's presently existing line of credit, (ii) the Company's
substantial reliance upon such lines of credit to fund the continuing,
increasing losses from operations and cash flow deficits, (iii) substantial
inventory buildup during fiscal 1995 and fiscal 1996 consisting of raw
materials, components and finished product to be utilized in the manufacture and
sale of its FLASHBACK product and material decline in inventory turnover, (iv)
materially increased net losses and cash flow deficits from operations during
fiscal 1995 and first quarter 1996 and (v) the likelihood that the Company may
be unable to meet its debts as they come due, raise substantial doubt about the
Company's ability to continue as a going concern. The Company's ability to
continue as a going concern is dependent upon its ability to obtain adequate
financing and achieve a level of revenues adequate to support the Company's
capital requirements, as to which no assurance can be given. In the event the
Company is unable to continue as a going concern, it may elect or be required to
seek protection from its creditors by filing a voluntary petition in bankruptcy
or may be subject to an involuntary petition in bankruptcy. To date, management
has not considered this alternative, nor does management view it as a likely
occurrence.
10
<PAGE> 11
PART II. OTHER INFORMATION
Item 6. Exhibits or Reports on Form 8-K
(b) Reports on Form 8-K
The Company filed the following reports on Form 8-K during the fiscal quarter
ended June 30, 1995:
<TABLE>
<CAPTION>
Date of Report Items Reported
-------------- --------------
<S> <C>
April 10, 1995 Item 5 - Other Events
April 10, 1995 Item 5 - Other Events
</TABLE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
NORRIS COMMUNICATIONS CORP.
Date: June 11,1996 By: /s/ Katleen E. Terry
------------------------------
Kathleen E. Terry
(Principal Financial and Accounting
Officer and duly authorized to sign on
behalf of the Registrant)
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A)
Unaudited Restated Interim Statements for the three months ended June 30, 1995
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B) Quarterly Report on
Form 10-QSB/A for the quarterly period ended June 30, 1995.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 309661
<SECURITIES> 0
<RECEIVABLES> 531209
<ALLOWANCES> 150000
<INVENTORY> 4185325
<CURRENT-ASSETS> 5226162
<PP&E> 1600354
<DEPRECIATION> 0
<TOTAL-ASSETS> 7218221
<CURRENT-LIABILITIES> 5725405
<BONDS> 0
0
0
<COMMON> 17880054
<OTHER-SE> 1592316
<TOTAL-LIABILITY-AND-EQUITY> 7218221
<SALES> 478732
<TOTAL-REVENUES> 478732
<CGS> 1466965
<TOTAL-COSTS> 1261196
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 124534
<INCOME-PRETAX> (2357778)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2357778)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2357778)
<EPS-PRIMARY> (0.20)
<EPS-DILUTED> (0.20)
</TABLE>
