U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from _____________ to ______________
Commission file number 0-23858
VIDEOLABS, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 47-1726281
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
5960 Golden Hills Drive
Golden Valley, MN 55416
(Address of principal executive offices)
(612) 542-0061
(Issuer's telephone number)
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 _____
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of November 9, 1999: 5,675,440
Transitional Small Business Disclosure Format (check one): Yes ___ No _X_
<PAGE>
PART 1 -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VIDEOLABS, INC.
INTERIM CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
UNAUDITED AUDITED
------------- -------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents .............................................................. $ 605,428 $ 1,514,561
Certificate of deposit-restricted (Note 3) ............................................. 158,000 158,000
Accounts Receivable, less allowance for doubtful accounts of $65,543 on September 30,
1999 and $30,000 on December 31, 1998 ............................................... 4,065,508 664,172
Interest Receivable .................................................................... 3,583 6,688
Inventories ............................................................................ 3,459,755 1,616,990
Deferred income taxes .................................................................. 150,000 125,000
Prepaid expenses ....................................................................... 108,074 50,457
------------- -------------
Total Current assets ................................................................ 8,550,348 4,135,868
Property and Equipment
Office and computer equipment .......................................................... 640,440 446,832
Machinery and equipment ................................................................ 324,218 127,391
Tooling ................................................................................ 653,651 488,225
Leasehold improvements ................................................................. 50,203 45,016
------------- -------------
Total equipment ........................................................................ 1,668,512 1,107,464
Less accumulated depreciation .................................................... 829,540 638,161
------------- -------------
Net equipment .................................................................... 838,972 469,303
Other Assets
Patents, net ........................................................................... 157,912 179,340
Goodwill, net (Note 8) ................................................................. 2,027,414 0
------------- -------------
Total assets ..................................................................... $ 11,574,646 $ 4,784,511
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable ....................................................................... $ 2,795,129 $ 658,089
Bank line of credit (Note 5) ........................................................... 810,217 0
Note Payable - Non Compete (Note 7) .................................................... 750,000 0
Unearned Maintenance Contracts ......................................................... 466,806 0
Current maturities of long-term debt ................................................... 51,622 22,071
Customer deposits and other liabilities ................................................ 19,217 6,114
Accrued compensation ................................................................... 221,580 28,358
Purchase commitments, reserves and other ............................................... 519,220 81,303
------------- -------------
Total current liabilities ........................................................... 5,633,791 795,935
Long-Term liabilities
Long-Term Debt, net of current maturities .............................................. 103,244 24,300
Bank Note Payable ...................................................................... 268,561 0
Stock holders' Equity
Common stock, $.01 par value; Authorized 20,000,000 shares issued and outstanding,
5,675,440 shares at September 30, 1999 and 4,457,471 shares at December 31, 1998 ....... 56,755 44,574
Additional paid in capital ............................................................. 7,494,437 6,398,176
Accumulated deficit .................................................................... (1,982,142) (2,478,474)
------------- -------------
Total stockholders' equity .......................................................... 5,569,050 3,964,276
------------- -------------
Total liabilities and stockholders' equity ....................................... $ 11,574,646 $ 4,784,511
============= =============
</TABLE>
Page 2
<PAGE>
INTERIM CONDENSED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
September 30 September 30
------------ ------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales ............................................. $ 4,276,564 $ 1,475,348 $ 8,011,764 $ 4,590,458
Cost of goods sold ................................ 2,376,764 924,328 4,686,600 2,746,485
------------ ------------ ------------ ------------
Gross profit ...................................... 1,899,800 551,020 3,325,164 1,843,973
Selling, general and administrative expenses ...... 1,534,690 685,250 2,877,856 1,926,571
------------ ------------ ------------ ------------
Operating Income (loss) ........................... 365,110 (134,230) 447,308 (82,598)
Other income (expense)
Interest income (expense) ......................... (9,015) 23,321 24,026 64,474
Loss or Gain on sale of assets .................... 0 0 0 0
------------ ------------ ------------ ------------
Total other income (expense) ...................... (9,015) 23,321 24,026 64,474
Income Tax Benefit ................................ 0 0 25,000 25,000
------------ ------------ ------------ ------------
Net Income (loss) ................................. $ 356,095 $ (110,909) $ 496,334 $ 6,876
============ ============ ============ ============
Basic earnings per common share ................... $ 0.06 $ (0.03) $ 0.09 $ 0.00
Shares outstanding ................................ 5,675,440 4,352,124 5,675,440 4,352,124
Diluted earnings per common share ................. $ 0.06 $ (0.03) $ 0.09 $ 0.00
Diluted shares outstanding ........................ 5,753,735 4,401,670 5,753,735 4,401,670
</TABLE>
INTERIM CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
------------
1999 1998
---- ----
<S> <C> <C>
Cash Flows From Operations:
Net cash provided by operations .............................. $ 135,842 $ (79,255)
Cash Flows From Investing:
Capital expenditures ......................................... (379,166) (387,116)
Business Combinations ........................................ (1,057,103)
Cash included in Acquisition ................................. 304,847
Proceeds from maturities of certificates of deposit .......... 0 94,500
------------ ------------
Net cash from (used for) investing ........................... (1,131,422) (371,871)
Cash Flows From Financing:
Issuance of common stock and warrants ........................ 50,100 964,570
Bank Line of Credit .......................................... (6,032)
Capital Leases ............................................... 115,784
Term Note Payable ............................................ (9,014)
Repurchase of common stock and warrants ...................... (64,391) (126,231)
------------ ------------
Net cash from (used for) financing ........................ 86,447 838,339
------------ ------------
Net increase (decrease) in cash and cash equivalents ............... (909,133) 466,468
Cash and cash equivalents at beginning of period ................... 1,514,561 1,746,928
------------ ------------
Cash and cash equivalents at end of period ......................... $ 605,428 $ 2,213,396
============ ============
</TABLE>
Page 3
<PAGE>
FOOTNOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The results of operations for the interim periods shown in this report
are not necessarily indicative of results to be expected for the fiscal year. In
the opinion of management, the information contained herein reflects all
adjustments (consisting only of normally recurring adjustments) necessary to
make the results of operations for the interim periods a fair statement of such
operations.
NOTE 2. INCOME (LOSS) PER COMMON SHARE
During the quarter ended March 31, 1998 the Company adopted Statement
of Financial Accounting Standards (SFAS) No. 128, "Earnings per Share," which
established a new method for calculating earnings per share. Basic earnings per
share is computed by dividing net income by the weighted average number of
shares of common stock outstanding during the year. Diluted earnings per common
share is similar to the computation of basic earnings per share, except that the
denominator is increased for the assumed exercise of dilutive options using the
treasury stock method. All amounts presented have been restated to conform to
the new presentation. The components of the earnings per share are as follows:
SEPTEMBER 30,
1999 1998
---- ----
Weighted average common shares outstanding for
Basic earnings per share 5,675,440 4,352,124
Effect of dilutive securities:
Stock Options and Warrants 78,295 49,546
--------- ---------
Shares used in diluted earnings per share 5,753,735 4,401,670
========= =========
NOTE 3. CERTIFICATES OF DEPOSIT
At September 30, 1999 and December 31, 1998, restricted certificates of
deposit, served as collateral for one irrevocable letter of credit.
NOTE 4. INCOME TAXES
During 1998 and the second quarter of 1999, the Company recorded a net
deferred tax asset of $125,000 and $25,000 respectively, reflecting the benefit
of approximately $1,758,000 of net operating loss carryforward, reduced by a
deferred tax allowance valuation.
NOTE 5. BANK LINE OF CREDIT
On August 3, 1999 as part of the acquisition of Acoustic Communication
Systems, Inc. an $800,000 short-term, working capital, loan from the Franklin
National Bank was assumed by VideoLabs, Inc. The loan bore interest at the rate
of 9% and was due on September 9, 1999. The note was extended to October 1, 1999
and was paid in full, including interest, on that date.
On September 29, 1999 a $2,000,000 revolving note that expires on
September 28, 2001 was signed. Interest on the note is computed on the basis of
the actual number of days elapsed and a 360 day year, at an annual rate equal to
one and a half percent (1.5%) per annum in excess of the Prime Rate of Norwest
Bank of Minnesota, NA. The note requires a minimum interest rate of 9% per annum
but interest in any month may not
Page 4
<PAGE>
be less than $7,900. The lender may demand payment on the note at any time. The
note may be prepaid at any time with substantial penalties unless renewed with a
lending group entity in which case penalties do not apply.
NOTE 6. ACQUISITION - ACOUSTIC COMMUNICATION SYSTEMS, INC.
On August 3, 1999, the Company closed on the acquisition of Acoustic
Communication Systems, Inc. Mr. Sheeley, the owner of Acoustic Communication
Systems, Inc. was given merger consideration of $500,000 cash and 1,209,678
common shares which equals $1,500,000 in value based on an average share price
of $1.24 of the ten trading days immediately preceding the closing of the
merger.
NOTE 7. NOTE PAYABLE - NON COMPETE
On August 3, 1999, as a part of the acquisition of Acoustic
Communication Systems, Inc., Mr. Sheeley, the owner of Acoustic Communication
Systems, Inc. was given a $750,000 note in consideration for his agreement to
not compete with the Company in any business competitive with the business of
Acoustic Communication Systems, Inc. or VideoLabs, Inc. for a period of twelve
years. The note is due on April 7, 2000. Mr. Sheeley, at his discretion may
defer payment of the note in whole, or in part for up to twelve one year periods
in which event the note shall accrue interest at the Company's short term cost
of borrowing. Should Mr. Sheeley leave the employment of the Company and violate
the non-compete the unamortized portion of the non-compete is immediately due
and payable back to the Company.
NOTE 8. GOODWILL
In connection with the Acquisition of Acoustic Communication Systems,
Inc. the Company recorded goodwill in the amount of $2,067,414. For book
purposes the Company discounted the $1,500,000 value of restricted shares to
$1,122,732 because of the lack of marketability. All goodwill except the
goodwill related to the non-compete is being amortized over a period of ten
years for both book and tax purposes. $750,000 of the goodwill related to the
non-compete is being amortized over a period of 12 years for both book and tax
purposes.
ITEM 2: MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
As provided under the Private Securities Reform Act of 1995, the
Company wishes to caution investors of the following factors which could affect
the Company's results of operations and cause such results to differ materially
from those anticipated in forward-looking statements made in this document or
elsewhere by or on behalf of the Company: sales projections, technology changes,
new competitors, reduced current cost for items in inventory, changes in
currency valuations, government regulations and ongoing litigation.
Sales for the quarter ended September 30, 1999 were $4,276,564 compared
to $1,475,348 for the third quarter of 1998, an increase of 190%. This increase
was primarily due to increased sales of the Company's video camera lines and two
months of operations of Acoustic Communication Systems, Inc. that was acquired
August 3, 1999. Sales for the nine months ended September 30, 1999 were
$8,011,764 compared to $4,590,458 for the nine months ended September 30, 1998,
an increase of 75%. This increase is attributed to an increase in new product
sales, increased private label sales, sales in the Internet and revenues derived
from the recently acquired Acoustic Communication Systems, Inc. Sales during the
two months ended September 30, 1999 by Acoustic Communication Systems, Inc. were
$2,155,553.
The Company closed on the acquisition of Acoustic Communication
Systems, Inc. located in Plymouth, Minnesota on August 3, 1999. Acoustic
Communication Systems, Inc. is the leading independent provider of collaboration
solutions involving data and video conferencing in the Midwest and one of the
largest value added resellers of Picturetel and Polycom communication equipment
in the country. Acoustic is also a manufacturer of several peripheral devices
(carts, speakers, furniture, microphones, etc.) for video based solutions and
recently
Page 5
<PAGE>
launched an E-commerce site, www.meetingroomtools.com. The Company continues to
pursue other synergistic acquisitions that can add to our core capabilities and
improve earnings per share.
During the first nine months of 1999, sales of the VideoLabs product
lines in North and South America, Europe and Asia/Pacific were 85%, 14% and 1%
compared to 75%, 23% and 2% for the same nine months in 1998. The decrease in
the European sales percentage is attributable to the increase in domestic sales
due to the acquisition of Acoustic Communication Systems, Inc., which is not
active in international markets. The stagnation of the Asia/Pacific sales is
attributable to the depressed Asian economy although the Company recently has
had renewed interest in new products from former Asia/Pacific customers.
Gross margins of the Company are determined by deducting from sales all
materials, labor, packaging, manuals and overhead costs which are directly
attributable to the cost of manufacture and shipment of the Company's products.
Royalty costs and commission costs related to the sales of products are not
included in cost of goods, but are included in selling expenses. The Company's
gross margin on sales during the third quarter of 1999 was $1,899,800 or 44% as
compared to $551,020 or 37% for the third quarter of 1998. This increase in
gross margin as a percentage of revenues is mainly attributable to the increased
sales of newly developed higher-margin products, increased volume of video
camera sales that absorb fixed costs and the addition of the favorable gross
margins of Acoustic Communication Systems. For the nine months ended September
30, 1999, the gross margin was $3,325,164 or 41% as compared to $1,843,973 or
40% attributable to sales of higher margin products, increased manufacturing
volume and favorable gross margin revenues of Acoustic Communication Systems.
The Company has a goal to maintain gross margins in the 40% range, but there is
no assurance that it will be able to do so.
Selling, general and administrative expenses include all costs of the
Company except those related directly to the manufacture of products described
above and other income and expense items below. These expenses increased from
$685,250 in the third quarter of 1998 to $1,534,690 in the third quarter of
1999. For nine months expenses have increased from $1,926,571 to $2,877,856.
This increase is related to the Company's efforts to initiate an Internet
division, invest in new product development and sales and marketing expenses
related to new product launches and the additional selling, general and
administrative expenses of the newly acquired Acoustic Communication Systems,
Inc.
Operating income for the third quarter of 1999 was $365,110 compared to
operating loss of $134,230 for the same period in 1998. For the nine months
ended September 30, 1999 operating income increased from a loss of $82,598 to a
profit of $447,308 primarily a result of increased sales of higher margin
products and the margins generated by the newly acquired Acoustic Communication
systems, Inc. Earnings before interest, taxes, depreciation and amortization
(EBITDA) was $492,994 in the quarter.
Other income and expenses consist of interest income on the investment
of cash and interest expense.
As of September 30, 1999, the Company had an estimated net deferred tax
asset of $150,000, reflecting the benefit of approximately $1,758,000 of net
operating loss carryforward, reduced by a deferred tax allowance valuation. If
the Company continues to be profitable, additional tax benefit may be recorded.
Net income for the third quarter of 1999 was $356,095 compared to a net
loss of $110,909 for the third quarter of 1998. Net income for the nine months
ended September 30, 1999 increased from $6,876 in 1998 to $496,334 in 1999.
Basic and fully diluted earnings per share for the quarter ended
September 30, 1999 were computed based on the weighted average number of shares
outstanding, plus the shares that would be outstanding assuming exercise of
options and warrants which are considered to be common stock equivalents, less
the shares assumed to be acquired by the Company using the proceeds from the
assumed exercise of options and warrants based on market prices. Basic and fully
diluted shares considered outstanding were 5,675,440 and 5,753,735, respectively
Page 6
<PAGE>
for the quarter ended September 30, 1999. Basic and fully diluted shares
considered outstanding were 4,352,124 and 4,401,670, respectively for the
quarter ended September 30, 1998.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided from operating activities totaled $135,842 for the
nine months ended September 30, 1999 compared to cash used for operating
activities of $79,255 for the nine months ended September 30, 1998. The
approximately $215,000 improvement in cash from operations is due primarily to
cash provided by increases in net income.
Net cash used for investing activities totaled $1,131,422 for the nine
months of 1999 compared to cash used for investing activities of $371,871 for
the nine months of 1998. The cash used in the first nine months of 1998 and 1999
was for capital equipment and tooling purchases in addition to the cash used to
purchase Acoustic Communication Systems, Inc. in August of 1999.
Net cash provided from financing activities in the first nine months of
1999 was $86,447. The cash provided from financing in the first nine months of
1998 was $964,570 from the proceeds of the issuance of common stock from the
exercising of warrants. Net cash used from financing activities for the first
nine months of 1998 was $126,231 for the purchase of the Company's common stock.
During the first nine months of 1999 certain warrant and option-holders
have exercised a total of 71,091 warrants or options. The Company received a
total of $50,100 in proceeds from the exercise of these warrants and options
into the Company's common stock.
The board of directors of the Company approved in March of 1997 a stock
buy back of 100,000 shares and in May of 1998 a stock buy back of another
100,000 shares. In November 1998, the Company's Board of Directors approved a
third stock buy back of up to 1,000,000 shares of the Company's common stock.
The Company has repurchased approximately 400,000 shares of the Company's common
stock in private and public transactions and retired all shares repurchased.
Working capital and liquidity, which consists principally of cash,
receivables and inventories, was $2,916,555 at September 30, 1999 and $3,339,933
at December 31, 1998. The ratio of current assets to current liabilities was 2:1
at September 30, 1999 and 5:1 at December 31, 1998.
YEAR 2000 ISSUES
The Company is currently in the process of assessing Year 2000 issues
relative to its business. The following information outlines the current status
of the Company's understanding and plans regarding the Year 2000 problem.
COMPANY'S STATE OF READINESS
The Company has implemented a widely used PC based information system
to process financial transactions and generate financial information. The
Company also uses various other PC based software packages to support its
business. The systems are networked at the Company's headquarters in Golden
Valley, Minnesota. No significant information systems are located outside the
Company's headquarters, other than individual stand alone PC software packages
used by sales personnel. The Company's product lines do not perform any
calculations or manipulations of dates, and hence do not have year 2000
compliance issues. While the Company is in the process of assessing Year 2000
issues relative to its vendors, products and related components used in the
product, the Company knows that its products do not utilize time or dates to
operate.
The Company has established the following phases for becoming ready for
the Year 2000:
Page 7
<PAGE>
Awareness Phase - The Company has researched the Year 2000 issue and is
communicating both internally and with outside parties including its independent
auditors, its bank, key suppliers and certain customers. The Company is aware of
the potential issues surrounding the Year 2000 problem and will continue
communicating the issues at hand.
Assessment Phase - This phase includes establishing a Year 2000 team
and investigating how Year 2000 issues may impact the Company, both in terms of
the specific aspects of the business which could be affected, and the
consequences to the Company if it is not prepared. The Company has completed the
internal systems assessment phase and has identified the systems that the
Company believes to be critical to the continued operations of the Company. The
Company has completed its survey of external suppliers.
Renovation Phase - The renovation phase covers all Company actions to
correct systems which are not Year 2000 compliant, or develop alternate systems
in all areas which are determined to have a significant impact on the Company if
not corrected. The Company has updated its internal accounting system, local
area network and other non-critical systems to be year 2000 compliant.
Validation Phase - This phase will include all Company activities
performed to test any new or alternate systems for conducting its business, and
taking corrective actions in situations where new systems do not properly handle
year 2000 problems.
Implementation Phase - In this phase, the Company has begun utilizing
all newly developed systems that are installed to correct Year 2000 problems as
they relate to the Company.
The Company has relationships with key suppliers to support its
business. The Company believes alternate vendors could be utilized to provide
comparable products and services currently provided by its key vendors. The
Company currently relies on its relationships with its key vendors to conduct
its business, and changes in sources of key products and services could have a
material impact on the Company. The Company has completed its assessment on the
impact of these third party risks and has not identified any issues that would
negatively impact the Company.
COSTS TO ADDRESS COMPANY'S YEAR 2000 ISSUES
To date, the costs of assessing the year 2000 problem have been
insignificant, and based on its assessment so far, the Company does not believe
remediation costs will be material to the Company's financial condition or
operating results.
RISKS OF THE COMPANY'S YEAR 2000 ISSUES
A worst case scenario relative to the Year 2000 issue would be that the
Company needs to replace both its information technology and non-information
technology systems, and develop alternate sources of supply for its critical
components, third party software, and third party manufacturing. Because of its
current size, the Company believes replacement of its current information
systems would not result in costs material to the Company's financial condition
or results of operations. In the event the Company was forced to develop
alternate sources of supply in any key areas, significant costs could result,
but amounts have not yet been estimated. The Company expects to analyze these
uncertainties as part of its Year 2000 assessment phase, and develop a plan of
action to minimize the uncertainties and mitigate the potential costs involved,
should the worst case scenario occur.
CONTINGENCY PLANS
The Company is in the process of developing a contingency plan to
handle the worst case scenario above and expects to have it completed soon.
Page 8
<PAGE>
PART II--OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
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 required by Item 601.
None
(b) Reports on Form 8-K
On August 13, 1999 the Company filed an 8-K stating that the Company
had closed its acquisition of AcousticCommunication Systems, Inc. ("ACS") via a
merger of ACS into a wholly-owned subsidiary of the Company, for a total
purchase price of $500,000 and common stock of the registrant having an
aggregate market value of $1,500,000.
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.
VIDEOLABS, INC.
Date: November 15, 1999 By: /s/ James Hansen
-------------------- ----------------
James W. Hansen
President, CEO, Treasurer and Chairman
Page 9
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000892020
<NAME> VIDEOLABS INC
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 605,428
<SECURITIES> 158,000
<RECEIVABLES> 4,065,508
<ALLOWANCES> 65,543
<INVENTORY> 3,459,755
<CURRENT-ASSETS> 8,550,348
<PP&E> 1,668,512
<DEPRECIATION> 829,540
<TOTAL-ASSETS> 11,574,646
<CURRENT-LIABILITIES> 5,633,791
<BONDS> 0
0
0
<COMMON> 56,755
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 11,574,646
<SALES> 4,276,564
<TOTAL-REVENUES> 4,276,564
<CGS> 2,376,764
<TOTAL-COSTS> 1,534,690
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,015
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 356,095
<EPS-BASIC> .06
<EPS-DILUTED> .06
</TABLE>
