<PAGE>
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 quarterly period ended September 30, 1997
--------------------------------------------------
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
--------------------- --------------------------
Commission file number 33-70992
USA Technologies, Inc.
----------------------
(Exact name of small business issuer as specified in its charter)
Pennsylvania 23-2679963
- ------------ ----------
(State or other jurisdiction (I.R.S. employer Identification No.)
of incorporation or organization)
200 Plant Avenue, Wayne, Pennsylvania 19087
- ------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, area code first. (610)-989-0340
--------------
Check whether the Registrant has (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
As of November 5, 1997, there were 35,953,787 shares of Common Stock, no par
value, and 711,065 shares of Series A Convertible Preferred Stock, no par
value, outstanding.
<PAGE>
USA TECHNOLOGIES, INC.
INDEX
PAGE NO.
Part I - Financial Information
Item 1. Financial Statements
Balance Sheets - September 30, 1997 and June 30, 1997 1
Statements of Operations - Three months ended
September 30, 1997 and 1996 2
Statement of Shareholders' Equity - September 30, 1997 3
Statements of Cash Flows - Three months ended
September 30, 1997 and 1996 4
Notes to Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Part II - Other Information
Item 2. Unregistered Equity Securities Sold by the Registrant 12
Item 5. Other Information 12
<PAGE>
USA Technologies, Inc.
(A Development Stage Corporation)
Balance Sheets
<TABLE>
<CAPTION>
September 30, June 30,
1997 1997
------------- -----------
(Unaudited)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents................................ $ 302,343 630,266
Accounts receivable less allowance for uncollectible
accounts of $19,155 at September 30, 1997 (unaudited)
and $19,345 at June 30, 1997......................... 213,420 127,318
Inventory................................................ 393,255 378,318
Stock subscriptions receivable........................... 60,000
Prepaid expenses and deposits............................ 22,260 15,670
------------- -----------
Total current assets........................................ 931,278 1,211,572
Property and equipment, at cost, net of accumulated
depreciation of $200,326 at September 30, 1997
(unaudited) and $174,829 at June 30, 1997................ 152,960 178,457
Other assets................................................ 23,950 20,250
------------- -----------
Total assets................................................ $ 1,108,188 1,410,279
============= ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable......................................... $ 412,885 474,646
Accrued expenses......................................... 134,797 46,742
Current obligations under capital leases................. 18,679 18,270
------------- -----------
Total current liabilities................................... 566,361 539,658
Obligations under capital leases, less current portion... 19,876 24,480
------------- -----------
Total liabilities............................................ 586,237 564,138
Shareholders' equity:
Preferred stock,no par value:
Authorized shares -1,200,000
Series A Convertible issued and outstanding shares -
729,985 at September 30,1997 (unaudited) and 861,205 at
June 30, 1997 (Liquidation preference of $10,254,083
at September 30, 1997 - unaudited)........................ 5,954,463 7,024,811
Common stock, no par value:
Authorized shares - 55,000,000
Issued and outstanding shares - 33,503,701 at September
30, 1997 (unaudited) and 29,969,934 at June 30, 1997...... 6,290,023 4,355,334
Deficit accumulated during the development stage............. (11,722,535) (10,534,004)
------------- -----------
Total shareholders' equity.................................. 521,951 846,141
------------- -----------
Total liabilities and shareholders' equity.................. $ 1,108,188 1,410,279
============= ===========
</TABLE>
(See accompanying notes)
1
<PAGE>
USA Technologies, Inc.
(A Development Stage Corporation)
Statements of Operations
<TABLE>
<CAPTION>
Three months ended Date of Inception Through
September 30 ----------------------------
---------------------------- September 30, June 30,
1997 1996 1997 1997
------------ -------------- -------------- -------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues:
Equipment sales................... $310,311 $18,891 $800,925 $490,614
License fees...................... 44,102 20,244 224,918 180,816
Other ............................ 9,342 133 9,342 0
----------- ----------- ----------- -----------
Total revenues..................... 363,755 39,268 1,035,185 671,430
----------- ----------- ----------- -----------
Expenses:
Cost of sales..................... 292,640 13,751 817,730 525,090
General and administrative........ 401,137 446,671 5,659,825 5,258,688
Compensation...................... 307,217 238,104 3,853,451 3,546,234
Depreciation and amortization..... 25,497 23,261 221,141 195,644
Provision for losses on equipment - - 400,715 400,715
Costs incurred in connection with
abandoned private placement..... - - 50,000 50,000
Interest expense (income) ........ (2,212) (10,193) 56,518 58,730
----------- ----------- ----------- -----------
Total expenses..................... 1,024,279 711,594 11,059,380 10,035,101
----------- ----------- ----------- -----------
Net loss........................... (660,524) (672,326) (10,024,195) (9,363,671)
----------- ----------- =========== ===========
Cumulative preferred dividends .... (903,274) (597,019)
----------- -----------
Loss applicable to common shares... ($1,563,798) ($1,269,345)
=========== ===========
Loss per common share.............. ($0.06) ($0.07)
====== ======
Weighted average number of
common shares outstanding......... 27,287,669 18,658,976
============ ============
</TABLE>
(See accompanying notes)
2
<PAGE>
USA Technologies, Inc.
(A Development Stage Corporation)
Statement of Shareholders' Equity
(Unaudited)
<TABLE>
<CAPTION>
Deficit
Series A Accumulated
Convertible During the
Preferred Common Development
Stock Stock Stage Total
-----------------------------------------------------
<S> <C> <C> <C> <C>
Balance, June 30, 1997 $7,024,811 $4,355,334 ($10,534,004) $846,141
July 1997-issuance of 40,000 shares
of Common Stock in exchange for
consulting services.......................... 14,355 14,355
July 1997-conversion of 1,000 shares of
Convertible Preferred Stock to 12,000
shares of Common Stock....................... (8,157) 8,157 -
July 1997-conversion of $1,500 of
cumulative preferred dividends into 1,807
shares of Common Stock at $.83 per share .... 1,500 (1,500) -
July 1997- Common Stock warrants
exercised-21,200 at $.20 per warrant ........ 4,240 4,240
August 1997- Common Stock warrants
exercised-986,000 at $.20 per warrant,
net of offering costs 185,617 185,617
August 1997-conversion of 49,465 shares
of Convertible Preferred Stock to 593,580
shares of Common Stock....................... (403,480) 403,480 -
August 1997-conversion of $220,485 of
cumulative preferred dividends into 266,903
shares of Common Stock at $.83 per share .... 220,485 (220,485) -
September 1997- Common Stock warrants
exercised-40,000 at $.25 per warrant ........ 10,000 10,000
September 1997- Common Stock warrants
exercised-746,000 at $.20 per warrant, net
of offering costs ........................... 118,622 118,622
September 1997-Common Stock options exercised-
70,000 at $.05 .............................. 3,500 3,500
September 1997-conversion of 80,755 shares
of Convertible Preferred Stock to 969,060
shares of Common Stock....................... (658,711) 658,711 -
September 1997-conversion of $306,022 of
cumulative preferred dividends into 368,700
shares of Common Stock at $.83 per share .... 306,022 (306,022) -
Net loss...................................... (660,524) (660,524)
---------- ---------- ------------ --------
Balance, September 30, 1997 $5,954,463 $6,290,023 ($11,722,535) $521,951
========== ========== =========== ========
</TABLE>
(See accompanying notes)
3
<PAGE>
USA Technologies, Inc.
(A Development Stage Corporation)
Statements of Cash Flows
<TABLE>
<CAPTION>
Three months ended
September 30,
----------------------------
1997 1996
------------- -------------
(Unaudited) (Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net loss..................................... ($660,524) ($672,326)
Adjustments to reconcile net
loss to net cash used by
operating activities:
Depreciation/amortization........... 25,497 23,261
Compensation charges incurred
in connection with the issuance
of Common Stock..................... 14,355 -
Changes in operating assets and liabilities
Trade receivables................... (86,102) (17,517)
Inventory........................... (14,937) (121,868)
Prepaid expenses,deposits,
and other assets.................... (10,290) 37,645
Accounts payable.................... (61,761) (138,626)
Accrued expenses.................... 88,055 49,782
-------- ----------
Net cash used by operating
activities.......................... (705,707) (839,649)
INVESTING ACTIVITIES
Purchase of property and equipment........... - (2,722)
-------- ----------
Net cash used by investing activities ....... - (2,722)
FINANCING ACTIVITIES
Net proceeds from issuance of
common stock........................ 381,979 106,350
Net proceeds from issuance of
convertible preferred stock......... - -
Repayment of principal on
capital lease obligations........... (4,195) -
-------- ----------
Net cash provided by financing activities ... 377,784 106,350
Net (decrease) in cash and cash equivalents.. (327,923) (736,021)
Cash and cash equivalents at beginning of
period....................................... 630,266 1,773,356
-------- ----------
Cash and cash equivalents at end of period... $302,343 $1,037,335
======== ==========
SUPPLEMENTAL DISCLOSURE OF CASHFLOW INFORMATION:
Capital lease obligations ................... - $25,841
======== ==========
</TABLE>
(See accompanying notes)
4
<PAGE>
USA TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
(A Development Stage Corporation)
1. Business
--------
USA Technologies, Inc., a Pennsylvania corporation (the "Company")
was founded in January 1992. Substantially all of the Company's activities to
date have been devoted to raising capital, developing markets, and starting up
operations which commenced during July 1994. The Company is in the development
stage and intends to become a leading provider and licensor of unattended,
credit card activated control systems for the copying, debit card and personal
computer industries. The Company's devices make available credit card payment
technology in connection with the sale of a variety of products and services.
The Company generates its revenues from retaining a portion of the monies
generated from all credit card transactions conducted through its control
systems, as well as the direct sale of its control systems and the resale of
configured office products.
As of September 30, 1997, the Company had a total of 364 control
systems in the field, distributed as follows: 209 Business Express(TM) control
systems, 42 Copy Express(TM) control systems, 36 Debit Express(TM) control
systems, 20 Fax/Printer Express(TM) control systems, and 57 Public PC(TM)
control systems located at various hotels and libraries throughout the United
States and Canada.
2. Accounting Policies
-------------------
Interim Financial Information
The financial statements and disclosures included herein for the
three months ended September 30, 1997 and 1996, and for the date of inception
through September 30, 1997 are unaudited. These financial statements and
disclosures have been prepared by the Company in accordance with generally
accepted accounting principles and reflect all adjustments consisting of
adjustments of a normal and recurring nature which, in the opinion of
management, are necessary for a fair presentation of the Company's financial
position and the results of its operations and cash flows.
Basis of Presentation
Certain amounts in the 1996 financial statements have been
reclassified to conform with the current period presentation.
5
<PAGE>
Inventory
Inventory is stated at the lower of cost (first-in, first-out method)
or market.
Property and Equipment
Property and equipment are recorded at cost. Depreciation is computed
using the straight-line method over three to seven years for financial
statement purposes and accelerated methods for income tax reporting purposes.
Revenue Recognition
Revenue from the sale of equipment is recognized upon installation
and customer acceptance of the related equipment. License fee revenue is
recognized upon the usage of the Company's credit card activated control
systems.
Loss per Common Share
Loss per common share is calculated based on the weighted average
number of common shares outstanding during the periods. No exercise of stock
options, purchase rights, stock purchase warrants, or the conversion of
preferred stock and cumulative preferred dividends was assumed because the
exercise or conversion of these securities would be antidilutive. The
President's 4,365,000 common shares held in escrow (Note 4) are not considered
outstanding for purposes of calculating the loss per common share for all
periods presented.
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings per Share, which is required to be adopted on
December 31, 1997. Under the new requirements for calculating primary earnings
per share, the dilutive effect of stock options will be excluded. The impact
of Statement No, 128 on the calculation of the Company's primary and fully
diluted earnings per share is not expected to be material.
3. Stock Options and Purchase Rights
---------------------------------
As of September 30, 1997, there was a total of 157,300 Common Stock
purchase rights outstanding at a price of $1.00 per share. As of September 30,
1997 there was a total of 3,951,000 options outstanding to purchase Common
Stock at exercise prices ranging from $.25 to $.50 per share, of which
3,338,500 were vested. All of the options and purchase rights granted were
issued at or above fair market value on the date of grant.
During September, 1997, 70,000 Common Stock options were exercised at
$.05 per option and, accordingly, the Company received $3,500 in gross proceeds.
6
<PAGE>
4. Escrow and Cancellation Arrangements
------------------------------------
At the request of the Pennsylvania Securities Commission, the
President agreed to place in escrow 7,593,000 shares, as adjusted. The
President's shares may be held in escrow through June 30, 1998. Additionally,
the President of the Company has agreed that 4,365,000 escrowed common shares
would be canceled by the Company and would no longer be issued and outstanding
unless certain performance measures, as specified by the Commission, are
achieved by June 30, 1998. If the performance measures are achieved, the
common shares released from escrow will result in a compensatory charge to the
Company's operations. The charge will be based on the fair value of the
Company's common shares on the date the shares are released from escrow.
During the quarters ended September 30, 1997 and 1996, there was no such
charge to operations. The 4,365,000 shares of Common Stock owned by the
President and subject to cancellation are not considered outstanding for
purposes of calculating the loss per common share for all periods presented.
5. Joint Venture
-------------
On September 24, 1997, the Company entered into a Joint Venture
Agreement with Mail Boxes Etc. ("MBE"), the leading franchisor of postal,
business, and communications retail service centers, with approximately 3,000
locations in North America. The joint venture shall exclusively sell and
market unattended, credit card activated business centers under the name MBE
Business Express(TM) to the hospitality industry, travel industry, convention
centers, colleges, universities, supermarkets, banks, military, convenience
stores, and mass merchandisers located in the United States. The gross profits
from any sales of the MBE Business Express(TM) are to be shared by the Company
and MBE. In addition, other revenues resulting from activities relating to the
MBE Business Express(TM), such as electronic commerce, licensing, marketing and
advertising, are to be split equally between MBE and the Company. MBE has
agreed not to sell, use, endorse, approve, or purchase any unattended, credit
card activated technology or terminals other than those offered by the
Company for use in connection with the equipment included in the MBE Business
Express(TM). The Company and MBE will agree from time to time on an
advertising and marketing budget which would cover anticipated expenses for
trade shows, trade advertising, direct mail, telemarketing, national account
coverage, merchandising, market research and lead generation. All such
expenses would be split equally between the Company and MBE. The Company is
to act as the merchant for all MBE Business Express(TM) business centers and
will receive a monthly service fee for each terminal. The initial term of the
joint venture is five years. If certain sales goals are not met by the joint
venture, the Company may terminate the exclusivity provisions of the
agreement after the second year.
The MBE Business Express(TM) bundles together the same components as
the Business Express(TM): Public PC(TM), Copy Express(TM), and Fax Express(TM),
but under the MBE brand name. In addition, the MBE Business Express(TM) would
include a dial-through service to a nearby MBE store making available the
products and services of the store.
7
<PAGE>
MBE has ordered 195 TransAct(TM) control boxes from the Company to
be used by MBE franchisees for their in-store computer workstations (computer
and printer). The Company will act as the merchant in connection with credit
card sales and will receive a monthly service fee for each terminal. Through
September 30, 1997, none of these control boxes have been shipped. Through
November 5, 1997, 39 of these control boxes have been shipped, and the Company
anticipates that the remainder of the 195 control boxes will be shipped prior
to the end of November, 1997.
8
<PAGE>
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Introduction
Since its inception in January 1992, the Company, a development stage
corporation, has been engaged largely in research and development activities
focused on designing, developing, and marketing its credit card activated
control systems. From inception through September 30, 1997, the Company has
had operating revenues of approximately $1 million and has generated funds
primarily through the sale of its securities. As of September 30, 1997, the
Company has received, net of expenses of such sales, the amount of $5,487,636
in connection with private placements, $2,063,887 from the exercise of Common
Stock purchase warrants, and $2,345,104 in connection with its initial public
offering. The Company has incurred operating losses since its inception
through September 30, 1997 of $10,024,195 and such losses are expected to
continue at least through June 30, 1998.
Results of Operations
The fiscal quarter ended September 30, 1997 resulted in a net
operating loss of $660,524 compared to a net loss of $672,326 for the
comparable fiscal quarter ended September 30, 1996. On an overall basis these
continuing losses reflect the development stage nature of the Company. Losses
are projected to continue until sufficient revenue is generated from various
applications of the Company's proprietary technology.
Revenue from operations was $363,755 compared to $39,268 from the
previous year's fiscal quarter. This $324,487 improvement reflects the
Company's revised strategy during fiscal year 1997 of selling its proprietary
equipment as opposed to relying primarily on licensing and transaction
processing revenues. Of the total revenues, equipment sales totaled $310,311,
an increase of $291,420 over the same period last year. Licensing and
processing revenue increased to $44,102 from $20,244 for the same period
during the prior year, an increase of 118%. Despite this modest increase and
change in approach to marketing its products, revenue is still well below the
level required for the Company to be profitable.
Cost of Sales for the period included labor and equipment of $292,640
which represented an increase of $278,889 over the same period during the
prior year, and is directly attributable to the increase in equipment sales.
General and administrative expenses of $401,137 decreased by $45,534
or 10.2% from the first quarter last year. Reduced travel and entertainment
and rent contributed to the decrease.
9
<PAGE>
Compensation expense of $307,217 increased by 29% due to permanent
and higher staffing levels in Sales and Operations. Depreciation and
amortization expense increased from $23,261 to $25,497 reflecting the
increased depreciable capital asset base.
Plan of Operations
As of September 30, 1997 the Company had a total of 364 credit card
activated control systems installed in the field as follows: Business
Express(TM) 209, Copy Express(TM) 42, Debit Express(TM) 36, Public PC (formerly
Credit Card Computer Express(TM)) 57,Fax/Printer Express(TM) 20. The total gross
license fee revenues received by the Company from these systems has been
increasing but is still well below the level required to achieve profitability.
During the past year the Company has refined its direction on new
product development. It has shifted its emphasis toward the sale of equipment
utilizing the company's control systems rather than the revenue sharing
arrangements previously employed. The Company still retains all rights to
software and proprietary technology which it licenses to location operators
for their exclusive use. This shift in approach reduces the Company's
dependency on licensing revenues and simultaneously reduces the Company's
capital asset requirements.
The Company completed development of the Business Express(TM) in
August 1996 and as of September 30, 1997 had 63 sites in operation containing
209 of the Company's control systems. The Company is marketing its products
through its full-time sales staff consisting of four persons, either directly
to customer locations or through facility management companies servicing these
locations.
On September 24, 1997, the Company entered into a Joint Venture
Agreement with Mail Boxes Etc. ("MBE"), the leading franchisor of postal,
business, and communications retail service centers, with approximately 3,000
locations in North America. The joint venture shall exclusively sell and
market unattended, credit card activated business centers under the name MBE
Business Express(TM) to the hospitality industry, travel industry, convention
centers, colleges, universities, supermarkets, banks, military, convenience
stores, and mass merchandisers located in the United States. In addition, MBE
has ordered 195 TransAct(TM) control boxes from the Company to be used by MBE
franchises for their in-store computer workstations. As of November 5, 1997, 39
of these control boxes have been shipped.
Liquidity and Capital Resources
For the three month period ended September 30, 1997, there was a net
decrease in cash of $327,923. This was attributable to using $705,707 for
operating activities, partially offset by $381,979 net proceeds raised through
the issuance of Common Stock. As of September 30, 1997, total cash on hand was
$302,343; working capital was approximately $357,541 of which $393,255 was
invested in inventory.
10
<PAGE>
On September 11, 1997, the Company's Board of Directors decided to
maintain the exercise price of the 1996-B and 1997 Common Stock Warrants at
$.20 through September 30, 1997 (rather than only through August 31, 1997 as
previously provided). During the quarter ended September 30, 1997, 224,000
1996-B and 1,529,200 1997 Common Stock purchase warrants were exercised for
gross proceeds to the Company of $350,640. On November 13, 1997, the Company's
Board of Directors decided to maintain the exercise price of the 1996-B and
1997 Common Stock Warrants at $.20 through October 31, 1997 (rather than
September 30, 1997 as revised above). Through October 31, 1997, exercise of
1996-B and 1997 Common Stock purchase warrants provided additional gross
proceeds of $39,960 to the Company.
On September 11, 1997, the Board of Directors approved a reduction in
the exercise price of the 1995 and 1996 Common Stock warrants from $.50 to
$.25 during the period of September 11, 1997 through October 31, 1997. This
resulted in the exercise of 40,000 1996 Common Stock purchase warrants for
gross proceeds to the Company of $10,000 during the quarter ended September
30, 1997. From October 1, 1997 to October 31, 1997, exercise of 1995 and 1996
Warrants provided additional gross proceeds of $214,938 to the Company.
The Company believes that the above warrant proceeds, together with
money available from the exercise of options and warrants, and increased
revenues from its business would be sufficient to fund operations through June
30, 1998. There can be no assurance that additional sales of securities could
be made by the Company or that increased revenues would result from its
business. In such event, the Company may cease to be a going concern or may
have to reduce its operations or operating procedures.
11
<PAGE>
Part II - Other information
Items 1, 3, 4, and 6 are not applicable.
Item 2. Unregistered Equity Securities Sold by the Registrant
During September 1997, the holder of options exercised such options
for 70,000 shares of Common Stock at $.05 per share for an aggregate purchase
price of $3,500. Such shares of Common Stock are restricted securities under
the Act and were issued under the exemption from registration set forth in
Section 4(2) of the Act.
Item 5. Other Information
During the quarter ended September 30, 1997, the holders of $430,000
of the $500,000 of Convertible Securities which were issued by the Company in
June 1997 converted their Convertible Securities into 1,568,517 shares of
Common Stock, and $70,000 of Convertible Securities remain outstanding.
In connection with the issuance of such Convertible Securities, the
Company had issued 2,500,000 shares of Common Stock in escrow so that such
shares would be available to the holders of the Convertible Securities upon
conversion thereof. Following the conversions referred to above, an aggregate
of 350,000 shares remain in escrow.
At June 30, 1997, all 2,500,000 shares held in escrow were considered
issued and outstanding as Common Stock.
12
<PAGE>
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.
USA TECHNOLOGIES, INC.
Date: November 14, 1997 /s/ George R. Jensen, Jr.
------------------------------------------
George R. Jensen, Jr., President,
Chief Executive Officer
Date: November 14, 1997 /s/ Leland P. Maxwell
------------------------------------------
Leland P. Maxwell, Senior Vice President,
Chief Financial Officer
13
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000896429
<NAME> USA TECHNOLOGIES, INC
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1.000
<CASH> 302,343
<SECURITIES> 0
<RECEIVABLES> 232,575
<ALLOWANCES> (19,155)
<INVENTORY> 393,255
<CURRENT-ASSETS> 931,278
<PP&E> 353,286
<DEPRECIATION> 200,326
<TOTAL-ASSETS> 1,108,188
<CURRENT-LIABILITIES> 566,361
<BONDS> 0
0
5,954,463
<COMMON> 6,290,023
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,108,188
<SALES> 354,413
<TOTAL-REVENUES> 363,755
<CGS> 292,640
<TOTAL-COSTS> 1,024,279
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,319
<INCOME-PRETAX> (660,524)
<INCOME-TAX> 0
<INCOME-CONTINUING> (660,524)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (660,524)
<EPS-PRIMARY> (0.06)
<EPS-DILUTED> (0.06)
</TABLE>
