<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 27, 1999
OR
[_] 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: 0-21892
Pinnacle Micro, Inc.
Delaware 33-0238563
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
Pinnacle Micro, Inc.
140 Technology Drive, Suite 500
Irvine, California 92618
(949) 789-3000
Indicate by check mark whether the registrant (1) has 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 __ No X.
---
As of July 20, 1999, there were outstanding 14,500,089 shares of Registrant's
Common Stock.
<PAGE>
PINNACLE MICRO, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
Part I. Financial information
<S> <C>
Financial statements 3
Condensed Balance Sheet at March 27, 1999 (Unaudited) and
December 26, 1998 (Unaudited) 3
Condensed Statements of Operations for the thirteen weeks ended
March 27, 1999 (Unaudited) and March 28, 1998 (Unaudited) 4
Condensed Statements of Cash Flows for the thirteen weeks ended
March 27, 1999 (Unaudited) and March 28, 1998 (Unaudited) 5
Notes to Unaudited Condensed Financial Statements 6
Management discussion and Analysis of Financial Condition
and Results of Operations 9
Part II Other Information
Submission of Matters to a Vote of Security Holders 13
Exhibits and Reports on Form 8-K 13
Signature(s) 14
</TABLE>
2
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PINNACLE MICRO, INC.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
March 27, December 26,
1999 1998
(Unaudited) (Unaudited)
------------ ------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 53,000 $ 322,000
Accounts receivable, net 593,000 742,000
Inventories 3,474,000 3,592,000
Prepaid expenses and other current assets 125,000 134,000
----------------- --------------
Total current assets 4,245,000 4,790,000
Furniture and equipment, net 3,000 46,000
Other assets 102,000 143,000
----------------- --------------
Total assets $ 4,350,000 $ 4,979,000
================= ==============
Current liabilities:
Note payable $ 5,171,000 $ 5,503,000
Accounts payable 17,767,000 17,366,000
Accrued expenses 2,068,000 2,036,000
Payroll related liabilities 119,000 99,000
----------------- --------------
Total current liabilities 25,125,000 25,004,000
Commitments and contingencies
Stockholders' equity (deficit):
Common stock 15,000 15,000
Additional paid-in capital 34,977,000 34,977,000
Accumulated deficit (55,767,000) (55,017,000)
----------------- --------------
Total stockholders' equity (deficit) (20,775,000) (20,025,000)
----------------- --------------
Total liabilities and stockholders' equity (deficit) $ 4,350,000 $ 4,979,000
================= ==============
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
3
<PAGE>
PINNACLE MICRO, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
13 Weeks Ended 13 Weeks Ended
Mar. 27, 1999 Mar. 28, 1998
-------------- -------------
<S> <C> <C>
Net sales $ 1,788,000 $ 4,006,000
Cost of sales 1,417,000 2,990,000
------------- --------------
Gross profit (loss) 371,000 1,016,000
Operating expenses:
Selling, general and administrative 966,000 1,815,000
Research and development - -
Nonrecurring charges - -
------------- --------------
Total operating expenses 966,000 1,815,000
Operating loss (595,000) (799,000)
Interest income/expense (157,000) (139,000)
Non-cash interest expense related
to convertible debentures - -
------------- --------------
Loss before income taxes (752,000) (938,000)
Income tax expense - -
------------- --------------
Net loss $ (752,000) $ (938,000)
============= ==============
Net loss per share $ (0.05) $ (0.06)
============= ==============
Weighted average
common shares outstanding 14,500,089 14,500,089
============= ==============
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
- ------------------------------------------------------------------------------
4
<PAGE>
PINNACLE MICRO, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
13 Weeks Ended 13 Weeks Ended
Mar. 27, 1999 Mar. 28, 1998
------------- --------------
<S> <C> <C>
Cash Flows from Operating Activities
Net loss $(752,000) $(938,000)
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation and amortization 44,000 126,000
Provision for product returns and price protection -
Provision for inventory obsolescence -
Interest on debentures paid in common stock -
Non-cash interest expense -
Changes in operating assets and liabilities:
Accounts receivable 149,000 1,553,000
Income taxes receivable -
Inventories 118,000 772,000
Prepaid expenses and other current assets 9,000 51,000
Other assets 41,000 5,000
Accounts payable and accrued expenses 433,000 (1,147,000)
Payroll related liabilities 20,000 49,000
Other liabilities -
---------- ----------
Net cash provided by (used in) operating activities 62,000 483,000
---------- ----------
Cash Flows from Investing Activities
Proceeds from disposal of furniture and equipment 1,000 -
Purchase of furniture and equipment - (5,000)
---------- ----------
Net cash used in investing activities 1,000 (5,000)
---------- ----------
Cash Flows from Financing Activities
Net cash provided by (used to) repay note payable (332,000) (548,000)
Proceeds from exercise of stock options - -
Tax benefit from exercise of stock options - -
Proceeds from issuance of stock through
the employee stock option plan -
---------- ----------
Net cash provided by (used in) financing activities (332,000) (548,000)
Effect of exchange rate changes on cash - -
---------- ----------
Decrease in cash and cash equivalents (269,000) (70,000)
Cash and cash equivalents at beginning of period 322,000 454,000
---------- ----------
Cash and cash equivalents at end of period $ 53,000 $ 384,000
========== ==========
Supplemental Cash Flow Information
Cash paid during the period for:
Interest $ 157,000 $ 139,000
========= ==========
Income taxes - -
========= ==========
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
<PAGE>
PINNACLE MICRO, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
March 27, 1999
(Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
THE COMPANY HAS BEEN UNABLE TO OBTAIN AN AUDIT OPINION ON THE FINANCIAL
-----------------------------------------------------------------------
STATEMENTS AND NOTES THERTO FOR THE YEARS 1997 AND 1998 FROM ITS INDEPENDENT
- ----------------------------------------------------------------------------
AUDITOR PRINCIPALLY AS A RESULT OF THE INDEPENDENT AUDITOR'S CONCERN OVER THE
- -----------------------------------------------------------------------------
ABILITY OF THE COMPANY TO CONTINUE AS A GOING CONCERN. THE READER OF THE
- -------------------------------------------------------------------------
FINANCIAL STATEMENTS, NOTES, AND MANAGEMENT'S DISCUSSION AND ANALYSIS OF
- -------------------------------------------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS SHOULD CAREFULLY CONSIDER THE LACK
- --------------------------------------------------------------------------------
OF AN INDEPENDENT AUDITORS ATTESTATION TO THE FINANCIAL CONDITION AND RESULTS OF
- --------------------------------------------------------------------------------
OPERATIONS OF THE COMPANY FOR DECEMBER 27, 1997 AND DECEMBER 26, 1998 PRESENTED
- -------------------------------------------------------------------------------
IN THE COMPANY'S FORM 10-K.
- ----------------------------
Interim Period Accounting Policies
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles.
Certain information normally included in annual financial statements
prepared in accordance with generally accepted accounting principles has
been condensed or omitted pursuant to the rules and regulations of the
Securities and Exchange Commission, and these financial statements should
be read in conjunction with the Company's unaudited Form 10-K for the year
ended December 26, 1998. In the opinion of management, the accompanying
condensed financial statements reflect all material adjustments, which are
necessary for a fair presentation of the financial position and results of
operations and cash flows as of and for the thirteen weeks ending March 27,
1999.
New Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, Earnings per Share (SFAS 128).
This pronouncement provides a different method of calculating earnings per
share than is currently used in accordance with APB 15, Earnings per Share.
SFAS 128 provides for the calculation of Basic and Diluted earnings per
share. Basic earnings per share includes no dilution and is computed by
dividing income available to common shareholders by the weighted average
number of common shares outstanding for the period. Diluted earnings per
share reflects the potential dilution of securities that could share in the
earnings of an entity, similar to fully diluted earnings per share. This
pronouncement is effective for fiscal years and interim periods ending
after December 15, 1997; early adoption is not permitted. The Company does
not believe that the adoption of this pronouncement will have a material
impact on the net loss per share presented in the accompanying condensed
statements of operations.
In February 1997 FAS-129, Disclosure of Information about Capital
Structure, was issued by the FASB and is effective for fiscal years
beginning after December 15, 1997. The new standard reinstates various
securities disclosure requirements previously in effect under Account
Principles Board ("APB") 15, which has been superseded by FAS-128. The
Company does not expect adoption of FAS-129 to have a material effect, if
any, on its financial condition or results of operations.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130 and 131, Reporting Comprehensive
Income (SFAS 130) and Disclosure About Segments of an Enterprise and
Related Information (SFAS 131), respectively (collectively, the
"Statements"). The statements are effective for fiscal years beginning
after December 15, 1997. SFAS 130 establishes standards for reporting of
comprehensive income and its components in annual financial statements.
SFAS 131 establishes standards for reporting financial and descriptive
information about an enterprise's operating
6
<PAGE>
segments in its annual financial statements and selected segment
information in interim financial reports. Reclassification or restatement
of comparative financial statements for earlier periods is required upon
adoption of SFAS 130 and SFAS 131, respectively. Application of the
Statements' requirements is not expected to have a material impact on the
Company's financial position, results of operations or cash flow. In March
1998, the American Institute of Certified Public Accountants issued
Statement of Position ("SOP") No. 98-1, Software for Internal Use, which
provides guidance on accounting for the cost of computer software developed
or obtained for internal use. SOP No. 98-1 is effective for financial
statements for fiscal years beginning after December 15, 1998. The Company
does not expect that the adoption of SOP No. 98-1 will have a material
impact on its consolidated financial statements.
During October 1997, the Accounting Standards Executive Committee ("AcSEC")
of the American Institute of Certified Public Accountants issued State of
Position ("SOP") 07-2, Software Revenue Recognition. The SOP is effective
for transactions entered into in fiscal years beginning after December 15,
1997. Different informal and unauthoritative interpretations of certain
provisions of SOP 97-2 have arisen. AcSEC is already deliberating
amendments to SOP 97-2, including deferral of the effective date of certain
provisions of the SOP so AcSEC can develop and issue an interpretation
regarding the applicability and the method of application of those
provisions. Because of the uncertainties related to the outcome of these
amendments, the impact on the future financial results of the Company is
not currently determinable.
2. NET INVENTORIES
Inventories consist of the following:
March, 27, December, 26,
1999 1998
UNAUDITED UNAUDITED
Components and work in process $11,089,000 $11,204,000
Finished goods 751,000 845,000
Reserve for excess and obsolete (8,366,000) (8,457,000)
------------ ------------
$ 3,474,000 $ 3,592,000
============ ============
3. CONTINGENCIES
On March 15, 1996, a complaint was filed against the Company and certain of its
current and then directors and executive officers in a securities class action
lawsuit which alleges that Company management engaged in improper accounting
practices and made certain false and misleading statements. The complaint was
filed in the United States District Court for the Central District of California
under the case name Wills, Cohen, et al. v. William Blum et al., Case No.
SACV96-261GLT. On or about November 10, 1997, the Company reached an agreement
in principle with the plaintiffs to settle the lawsuit. Plaintiffs have agreed
to accept payment of $2,325,000 in exchange for a complete release of all claims
arising from the allegations set forth in the plaintiffs' complaint. All of the
terms of the settlement are not final, and the settlement is subject to
preliminary and final approval by Court as well as approval by the members of
the class. The Company's insurers agreed to advance all settlement and defense
costs, including the Company's attorneys' fees and expenses, subject to the
Company's agreement to reimburse the insurers for up to approximately $577,000
of those settlement and defense costs if the Company achieved certain positive
financial results prior to the Federal Court's final approval of the settlement.
Although the Company did not concede that any portion of the class action
settlement is allocable to the Company, the Company agreed to the terms of the
settlement to avoid further costs. The Company's portion of the settlement,
which totaled $232,000, was included in the results of operations for the fourth
quarter ended December 27, 1997.
The Company and certain members and former members of its senior management were
the subject of an investigation by the Securities and Exchange Commission (the
"SEC") relating principally to the restatement of the Company's previously
reported financial results for 1993 and 1994. During the fourth quarter of
1997, the investigation conducted by the SEC relating principally to the
restatement of the Company's previously reported financial results for 1993 and
1994 and for certain interim periods for 1995 involving the Company and certain
former members of its senior management was concluded. The Commission
instituted a cease and desist order
7
<PAGE>
against the Company and two former officers and a permanent injunction barring
future violations of certain accounting provisions against a third former
officer, who was also fined $25,000.
The resignation of the Company's prior independent public accountants on
February 20, 1996, led to additional inquiries by the SEC. These inquiries
related principally to the accounting matters discussed in the December 27, 1998
Form 10-K. The inquiries by the SEC were concluded as part of the resolution of
the SEC's investigation.
The Company is also subject to other legal proceedings and claims that arise in
the normal course of business. The outcome of these proceedings cannot be
predicted with certainty.
8
<PAGE>
THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANINGS OF
SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE SECURITIES
EXCHANGE ACT OF 1934. ACTUAL RESULTS AND EVENTS COULD DIFFER MATERIALLY
FROM THOSE PROJECTED AS A RESULT OF THE RISK FACTORS SET FORTH IN THIS
REPORT AS WELL AS IN THE COMPANY'S ANNUAL REPORT ON
FORM 10 - K.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THE COMPANY HAS BEEN UNABLE TO OBTAIN AN AUDIT OPINION ON THE
-------------------------------------------------------------
FINANCIAL STATEMENTS AND NOTES THERTO FOR THE YEARS 1997 AND 1998 FROM ITS
- --------------------------------------------------------------------------
INDEPENDENT AUDITOR PRINCIPALLY AS A RESULT OF THE INDEPENDENT AUDITOR'S CONCERN
- --------------------------------------------------------------------------------
OVER THE ABILITY OF THE COMPANY TO CONTINUE AS A GOING CONCERN. THE READER OF
- ------------------------------------------------------------------------------
THE FINANCIAL STATEMENTS, NOTES, AND MANAGEMENT'S DISCUSSION AND ANALYSIS OF
- -----------------------------------------------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS SHOULD CAREFULLY CONSIDER THE LACK
- --------------------------------------------------------------------------------
OF AN INDEPENDENT AUDITORS ATTESTATION TO THE FINANCIAL CONDITION AND RESULTS OF
- --------------------------------------------------------------------------------
OPERATIONS OF THE COMPANY FOR DECEMBER 27, 1997 AND DECEMBER 26, 1998 PRESENTED
- -------------------------------------------------------------------------------
IN THE COMPANY'S FORM 10-K.
- ----------------------------
Adverse operating results - at the date of this filing the Company has continued
to incur significant losses and has experienced severe cash constraints. Sales
have continually declined in light of significant competition, price pressures
and the uncertainty on the part of potential customers over the financial
condition of the Company. Further, the Company has been unable to raise
alternative sources of funding to fund operating losses. All of these factors
have had a material impact on the Company and its results of operation. Absent
an immediate infusion of capital or significantly increased sales the Company
will seek protection under the Federal bankruptcy laws.
The Company continues to incur significant losses with quarterly sales
significantly below historical levels and those levels required for
profitability. As of the date of this filing, the Company's liabilities
significantly exceed its assets. The Company's liquidity position continues to
be severely constrained. As a result of the Company's severe liquidity
problems, the Company is unable to pay its trade debt on a timely basis. The
Company has sought and has been unable to obtain a forbearance agreement with
its creditors. In the event the Company is unable to obtain some sort of
agreement with the secured and/or unsecured creditors and immediate funding, it
will be unable to operate as a going concern and will seek protection under the
Federal bankruptcy laws.
Net Sales
Net sales were $1,788,000 and $4,006,000 for the thirteen weeks ended March 28,
1998 and March 27, 1999, respectively, representing a year to year decrease of
55%. The decrease in sales is primarily attributable to decreased unit sales as
a result of increased competition, the Company's inability to acquire products
for sale because of the Company's lack of financial resources and the
discontinuance of certain of the Company's legacy products. Virtually all of the
Company's vendors will only sell to the Company on a prepay basis. The first
quarter of 1999 was adversely affected by significant declines in the prices of
disk drives, continued uncertainty among customers created by the news of the
Company's operational and financial difficulties, and the Company's inability to
purchase product because of its financial condition.
Gross Profit (Loss)
Gross loss decreased from $1,017,000 for the thirteen weeks ended March 28,
1998, to a gross profit of $371,000 for the thirteen weeks ended March, 27,
1999. The decrease in gross loss is primarily attributable to significant
inventory obsolescence and lower of cost or market adjustments that were taken
in the prior year. While the gross margin loss has decreased over the
comparable prior year period, the Company continues to experience price
degradation on its products as a result of increased competition in the
recordable CD market. The decline in prices is expected to continue placing
pressure on gross margins in future periods for existing products.
Selling, General and Administrative
9
<PAGE>
Selling, general and administrative expenses were $1,815,000 and $966,000 in the
thirteen weeks ended March 28, 1998 and March 27, 1999, respectively, and
represented 45.3% and 54.0% of net sales. The decreases in expenditures
resulted primarily from reduced advertising and promotional expenditures and the
continued reduction of Company personnel.
Research and Development
The Company did not incur any Research and Development expenses during the
thirteen weeks ending March 28, 1998 and March 27, 1999. In late 1997, the
Company was forced to abandon the research and development and manufacturing
facility located in Colorado Springs, CO due to increased financial problems and
decreased working capital. The Company began outsourcing all production to a
company in California.
10
<PAGE>
Liquidity and Capital Resources
Cash and cash equivalents of $53,000 at March, 27, 1999 were $269,000 lower than
the $322,000 balance at December 26, 1998.
The Company's liquidity position continues to be severely constrained. The
Company currently has a revolving line of credit agreement with a lender,
collateralized by substantially all assets of the Company, which expires on
September 30, 1999. Although the Company has a maximum availability of
$10,000,000 under the line of credit based on a percentage of eligible accounts
receivables and inventories, its ability to borrow against the revolving line of
credit is largely dependent upon its level of eligible accounts receivable.
Because of its lower than expected level of shipments, the Company's eligible
account receivables are also lower than expected and the Company frequently has
exceeded the maximum available under the line of credit. Borrowings under the
line of credit totaled $5,503,000 at December 26, 1998 and $5,171,000 at March
27, 1999. The Company's inability to increase sales and find alternative
sources of funding have severely impacted the Company.
In the event that the Company is unable to locate a financial partner or other
sources of immediate funding to meet its current cash needs, it will be unable
to continue to operate as a going concern and will be required to seek
protection under the Federal Bankruptcy Laws.
General and Risk Factors
Sales and Marketing
The Company's sales continue to decline as a result of intense competition,
reduced prices, the inability to market the product as a result of cash
constraints, and the lack of resources to pursue alternative products.
Consequently, a continued decline in sales and the inability to find alternative
sources of cash will require the Company to seek creditor protection under the
Federal bankruptcy laws.
11
<PAGE>
Background Risks
The Company's quarterly operating results fluctuate significantly depending on
factors such as timing of product introductions by the Company and its
competitors, market acceptance of new products and enhanced versions of the
Company's existing products, changes in pricing policies by the Company and its
competitors, and the timing of expenditures on advertising, promotion and
research and development.
The Company's component purchases, production and spending levels are made based
upon forecasted demand for the Company's products. Accordingly, any inaccuracy
in forecasting will adversely affect the Company's results of operations. As is
common in many high technology companies, the Company's shipments tend to be
disproportionately higher in the latter part of each quarter. Past results are
not necessarily indicative of future performance for any particular period.
The computer industry in general, and the market for the Company's products in
particular, is characterized by rapidly changing technology, evolving industry
standards, frequent new product introductions and significant price competition,
resulting in short product life cycles and reductions in unit selling prices
over the life of a specific product. The Company faces competition from much
larger magnetic and optical storage device developers, including Fujitsu, Sony
and Philips. These competitors have engineering and manufacturing experience
greater than the Company, and may be able to bring comparable or superior
products to market, which will negatively impact the results of the Company.
The Company faces increasing competition in the "3R" or removable, rewritable
and random access storage market from companies such as Iomega and Sony.
There can be no assurance that there will be acceptance of the Company's
existing products or that the Company's future products will achieve market
acceptance at acceptable margins. The absence of either will require the
Company to seek creditor protection under Federal bankruptcy law.
In the event that the Company is unable to locate other sources of immediate
funding to meet its current cash needs, it will be unable to continue to operate
as a going concern and will seek protection under the Federal bankruptcy laws.
12
<PAGE>
SUBMISSION OF MATTERS OF VOTE OF SECURITY HOLDERS
NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit Number Description
- -------------- -----------
27 Financial Data Schedule
(b) Reports on Form 8-K:
December 31, 1998 Resignation of Hans Imhoff and James Roszack
from the Company's board of Directors.
13
<PAGE>
SIGNATURES
PINNACLE MICRO, INC.
Pursuant to 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.
Date: August 3, 1999 By: /s/ William F. Blum
---------------------------------------
William F. Blum
Director, Chairman, President, Chief Executive
Officer and Chief Financial Officer and Chief
Accounting Officer
(Duly Authorized Officer)
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-25-1999
<PERIOD-START> DEC-27-1998
<PERIOD-END> MAR-27-1999
<CASH> 53,000
<SECURITIES> 0
<RECEIVABLES> 1,279,000
<ALLOWANCES> 686,347
<INVENTORY> 3,474,000
<CURRENT-ASSETS> 4,245,000
<PP&E> 3,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,350,000
<CURRENT-LIABILITIES> 25,125,000
<BONDS> 0
0
0
<COMMON> 34,922,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 4,350,000
<SALES> 1,788,000
<TOTAL-REVENUES> 1,788,000
<CGS> 1,417,000
<TOTAL-COSTS> 766,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 157,000
<INCOME-PRETAX> (752,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (752,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (752,000)
<EPS-BASIC> (0.05)
<EPS-DILUTED> (0.05)
</TABLE>
