<PAGE> 1
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
|X| QUARTERLY REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
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: 0-21802
----------
N-VIRO INTERNATIONAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 34-1741211
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
3450 W. CENTRAL AVENUE, SUITE 328
TOLEDO, OHIO 43606
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (419) 535-6374
----------
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 the
filing requirements for at least the past 90 days. Yes X No .
-- --
As of May 8, 2000, 2,689,733 shares of N-Viro International Corporation
$ .01 par value common stock were outstanding.
================================================================================
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
N-VIRO INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31
------------------------------------
2000 1999
------------------------------------
<S> <C> <C>
Revenues $ 1,107,033 $ 978,124
Cost of revenues 636,005 486,089
------------------------------------
Gross profit 471,028 492,035
Selling, general & administrative expenses 529,533 462,442
------------------------------------
Operating income (loss) (58,505) 29,593
Nonoperating income (expense):
Interest income (expense), net (964) 2,552
Equity in losses of joint venture (45,000) (14,190)
Recovery of bad debts written off 275,000 -
Miscellaneous income (exp.) (7,497) -
------------------------------------
Income (loss) before income tax (credits) 163,034 17,955
Federal and state income tax (credits) - -
------------------------------------
Net income (loss) $ 163,034 $ 17,955
====================================
Basic and diluted earnings per Share $ 0.06 $ 0.01
====================================
Weighted average common Shares
outstanding 2,631,498 2,522,483
====================================
</TABLE>
See Notes to Consolidated Financial Statements
-2-
<PAGE> 3
N-VIRO INTERNATIONAL CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
ASSETS (Unaudited) (Audited)
------------ ------------
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 499,295 $ 552,846
Securities available-for-sale 1,660 1,401
Trade receivables 1,557,845 1,302,036
Notes and other receivables 96,210 258,590
Related party receivables 52,818 48,599
Prepaid expenses and other assets 143,077 72,260
------------ ------------
Total current assets 2,350,905 2,235,732
Property and Equipment 567,658 596,060
Investment in Florida N-Viro, L.P. 745,667 790,667
Deferred Tax Assets 312,000 312,000
Intangibles and Other Assets 965,785 837,414
------------ ------------
TOTAL ASSETS $ 4,942,015 $ 4,771,873
============ ============
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities
Current maturities of long-term debt $ 132,090 $ 111,856
Accounts payable 729,756 707,324
Accrued expenses 315,722 326,740
------------ ------------
Total current liabilities 1,177,568 1,145,920
Long-Term Debt, less current maturities 202,780 240,379
Stockholders' Equity
Common stock, $.01 par value; authorized
7,000,000 shares; issued 2,689,733 26,898 26,882
Additional paid-in capital 13,395,221 13,382,093
Retained earnings (deficit) (9,242,475) (9,405,424)
------------ ------------
4,179,644 4,003,551
Less treasury stock, at cost, 57,250 shares 617,977 617,977
------------ ------------
3,561,667 3,385,574
------------ ------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 4,942,015 $ 4,771,873
============ ============
</TABLE>
See Notes to Consolidated Financial Statements
-3-
<PAGE> 4
N-VIRO INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------
2000 1999
--------- ---------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 212,278 $ 102,765
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for intangibles and other assets (263,832) (171,390)
Expenditures for property and equipment -- --
--------- ---------
NET CASH USED BY INVESTING ACTIVITIES (263,832) (171,390)
CASH FLOWS FROM FINANCING ACTIVITIES
Net repayments on revolving credit agreement -- --
Borrowings under long-term obligations 40,000 135,000
Repayments of long-term debt (41,738) (29,692)
--------- ---------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES (1,738) 105,308
--------- ---------
NET INCREASE (DECREASE) IN CASH (53,292) 36,683
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 552,587 322,827
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 499,295 $ 359,510
========= =========
</TABLE>
See Notes to Consolidated Financial Statements
-4-
<PAGE> 5
N-VIRO INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. ORGANIZATION AND BASIS OF PRESENTATION
The accompanying consolidated financial statements of N-Viro
International Corporation (the "Company") are unaudited but, in management's
opinion, reflect all adjustments (including only normal recurring accruals)
necessary to present fairly such information for the period and at the dates
indicated. The results of operations for the three months ended March 31, 2000
may not be indicative of the results of operations for the year ended December
31, 2000. Since the accompanying consolidated financial statements have been
prepared in accordance with Article 10 of Regulation S-X, they do not contain
all information and footnotes normally contained in annual consolidated
financial statements; accordingly, they should be read in conjunction with the
consolidated and combined financial statements and notes thereto appearing in
the Company's Form 10-K for the period ending December 31, 1999.
N-Viro International Corporation was incorporated in April 1993 and is
the successor to N-Viro Energy Systems, Ltd. (the "Partnership") and five
Company agents (the "Company Agents").
On October 19, 1993, the Partnership contributed to the Company all of
its assets (except certain marketable securities and accounts receivable from
certain related parties), subject to all liabilities (except certain retained
liabilities), and the shareholders of the Company Agents contributed to the
Company all of the outstanding capital stock of such entities in exchange for a
total of six million shares of Common Stock of the Company and organization
notes totaling $5,221,709 (such transactions are collectively referred to as the
"Organization"). The Organization notes were repaid out of the proceeds from an
initial public offering of two million shares of Company Common Stock. A total
of 2,112,000 new shares were issued in the initial public offering including
shares issued in the partial exercise by the Underwriters of an over-allotment
option.
The financial statements are consolidated as of March 31, 2000 and
December 31, 1999 for the Company. Adjustments have been made to eliminate all
intercompany transactions.
2. RELATED PARTY TRANSACTIONS
The Company recognized an expense to Mr. Bobby B. Carroll, a Director of
the Company and a former shareholder of Tennessee-Carolina N-Viro, Inc., of
$15,000 for the three months ended March 31, 2000, and $15,000 for the three
months ended March 31, 1999 under a contract arrangement signed in 1993 and
amended in 1998 for consulting services. The Company granted Mr. Carroll a
security interest in all present and future receivables and contract rights from
licenses in the states of Tennessee, North Carolina and South Carolina pursuant
to the contract agreement.
3. CONTINGENCIES
The Company leases office space under an agreement which requires
monthly payments of $4,812. The lease expires in December 2002. The total
minimum rental commitment at March 31, 2000 is $158,364. The total rental
expense included in the statements of operations for the periods ended March 31,
2000 and 1999 is approximately $14,400 and $14,400, respectively.
-5-
<PAGE> 6
During 1994, the Company reacquired territory rights from a former
agent and issued 66,250 shares of unregistered common stock. The former
agreement stated that if the former agent elected to sell these shares, the
Company has guaranteed the former agent $6 per common share.
In 1999 the Company reached a settlement agreement to modify its
royalty agreement with the former agent and the stock price guarantee agreement.
As part of this agreement, the former agent is required to pay royalties owed
and shall not sell any common stock issued in connection with the original
agreement until September 2000 at which time the former agent may sell up to
10,000 shares per month. The former agent has the right to offset future
royalties owing against the difference between the $6 per share guarantee and
the fair market value of the stock at the time the shares are sold.
In 2000, this agreement was modified to remove the Company's $6 per
share guarantee, to permit sales of up to 15,000 shares per month (with the
Company's approval), and to waive the waiting period for sales of stock related
to this agreement.
During 1999, the Company entered into employment and consulting
agreements with two officers of the Company. One of the employment agreements
expires in July 2002 and called for payments totalling $144,000 annually,
through December 1999. The other agreement expires in June 2004 and calls for
payments totalling $144,000 annually through December 31, 2000. Future
compensation amounts are to be determined annually by the Board. In addition,
one of the agreements provides for payment of life insurance premiums and the
provision of health insurance coverage to the officer and his spouse for their
lives. The present value of estimated costs related to the provisions of this
agreement are expected to total $129,000, which will be recognized over the
remaining terms of the applicable employment agreement.
The consulting agreements begin upon termination of the respective
employment agreements and extend through July 2015 and June 2014, respectively.
The agreements require minimum future services to be provided to be eligible for
compensation. The effect of these agreements impacted the Company's operations
through March 31, 2000 as an expense of $12,100.
On February 25, 2000, the Company filed with the United States District
Court, Northern District of Ohio, Eastern Division, a Complaint for Patent
Infringement and Jury Demand against the City of Warren, Ohio. The Company
believes that the City of Warren has directly and willfully infringed on patents
the Company owns, and is seeking judgements, an injunction and a recovery of
damages asserted. On April 17, 2000, the City of Warren responded by filing The
City of Warren's Answer and Counterclaims and a Civil Case Information Statement
with the Court. In these documents the City of Warren admits to certain
allegations made by the Company and denies others, and assert counterclaims
against the Company. Legal fees incurred during the current fiscal year could
have a material effect on the net income of the Company.
On May 9, 2000, the Company filed Form S-8, registering the Company's
Amended and Restated Stock Option Plan's 600,000 shares of Common Stock. As of
the date hereof approximately 247,000 shares were eligible for exercise by
optionees. While the exercise of all eligible shares will not impact the
Company's Statement of Operations, dilution of a maximum of approximately 9%
would result with full participation on exercise.
The Company is involved in legal proceedings and subject to claims which
have arisen in the ordinary course of business. These actions, when concluded
and determined, will not, in the opinion of management, have a material adverse
effect upon the financial position of the Company.
-6-
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The Company was incorporated in April, 1993, and became a public company
on October 12, 1993. The Company's business strategy is to market the N-Viro
Process, which produces an "exceptional quality" sludge product as defined in
the Section 503 Sludge Regulations under the Clean Water Act of 1987, with
multiple commercial uses. To date, the Company's revenues primarily have been
derived from the licensing of the N-Viro Process to treat and recycle wastewater
sludge generated by municipal wastewater treatment plants and from the sale to
licensees of the alkaline admixture used in the N-Viro Process. The Company has
also operated N-Viro facilities for third parties on a start-up basis and
currently operates one N-Viro facility on a contract management basis.
Total revenues were $1,107,000 for the quarter ended March 31, 2000
compared to $978,000 for the same period of 1999. The net increase in revenue is
due primarily to an increase in alkaline admixture, site license and research
and development revenue, partially offset by a decrease in royalty and facility
management revenue. The Company increased its cost of revenues for the same
period of 2000. The increase in cost of revenues was due primarily to the
increase in costs for the alkaline admixture costs and expenses relating to the
research and development revenue. As a result, the gross profit percentage
decreased to 43% from 50% for the quarters ended March 31, 2000 and 1999.
Selling, general and administrative costs increased for the comparative period,
and losses in the equity of a joint venture increased for the same period of
2000. The Company did, however, record a gain on the recovery of a bad debt
previously written off. These changes collectively resulted in net income of
$163,000 for the quarter ended March 31, 2000 compared to a profit of $18,000
for the quarter ended March 31, 1999.
COMPARISON OF THREE MONTHS ENDED MARCH 31, 2000 WITH THREE MONTHS ENDED MARCH
31, 1999
Overall revenue increased $129,000, or 13%, to $1,107,000 for the three
months ended March 31, 2000 from $978,000 for the three months ended March 31,
1999. The net increase in revenue was due primarily to the following:
a) Licensing of the N-Viro Process, including territory fees, earned the
Company $25,000 for the quarter, an increase of $25,000 from the same period in
1999;
b) Research and development revenue increased $105,000 from the same
period ended in 1999;
c) The Company's processing revenue, including facility management
revenue, showed a net increase of $8,000 over the same period ended in 1999;
and,
d) Testing income decreased $9,000 from the same period ended in 1999.
Gross profit decreased $21,000, or 4%, to $471,000 for the three months
ended March 31, 2000 from $492,000 for the three months ended March 31, 1999.
This decrease in gross profit was primarily a result of the increase in research
and development revenue, which has a high associated cost of revenue as a
percentage than other types of revenue. The gross profit margin decreased to 43%
from 50% for the same three month comparison.
Selling, general and administrative expenses increased $67,000, or 14%,
to $530,000 for the three months ended March 31, 2000 from $463,000 for the
three months ended March 31, 1999. The increase
-7-
<PAGE> 8
was primarily due to an increase in personnel and related costs of $40,000 and
administrative overhead of $27,000.
As a result of the foregoing factors, the Company recorded an operating
loss of $59,000 for the three months ended March 31, 2000 compared to operating
income of $30,000 for the three months ended March 31, 1999.
Nonoperating income (expense) increased by $233,000 to income of
$222,000 for the quarter ended March 31, 2000 from an expense of $12,000 for the
quarter ended March 31, 1999. The increase was primarily due to the recovery of
$275,000 in a bad debt previously written off, partially offset by an increase
in the loss of the equity of a joint venture from $31,000 in 1999 to a loss of
$45,000 in 2000. The bad debt is a Note Receivable from a Canadian licensee,
which in previous years was fully reserved in allowance for bad debts.
For the quarters ended March 31, 2000 and 1999, the Company has not
fully recognized the tax benefit of the losses incurred in prior periods.
Accordingly, the effective tax rate for each period was zero.
LIQUIDITY AND CAPITAL RESOURCES
The Company had working capital of $1,173,000 at March 31, 2000,
compared to working capital of $1,090,000 at December 31, 1999, an increase of
$83,000. Current assets at March 31, 2000 included cash and investments of
$501,000, which is a decrease of $53,000 from December 31, 1999. The increase in
working capital was principally due to the maturity of certain receivables to
short-term and net income for the three months ended March 31, 2000.
The Company maintains a $400,000 certificate of deposit with a bank and
held as collateral on the Company's working capital line of credit.
In April 2000, the Company renewed its agreement for a line of credit of
$1 million (an increase of $500,000 from $500,000 as of December 31, 1999),
secured by a certificate of deposit with the lender of $400,000, and borrowings
up to $400,000 (up from $250,000 as of December 31, 1999) bear interest at prime
minus .5% and borrowings above $400,000 (up from $250,000 as of December 31,
1999) bear interest at prime plus 1%. The balance owed on the line of credit at
March 31, 2000 was $-0-, and the Company has not borrowed on the line of credit
since April, 1999.
The Company believes that its working capital together with the line of
credit will provide sufficient cash to meet the Company's cash requirements
through 2000.
SEGMENT INFORMATION
EARNINGS VARIATION DUE TO BUSINESS CYCLES AND SEASONAL FACTORS. Our
operating results can experience quarterly or annual variations due to business
cycles, seasonality and other factors. The market price for our common stock may
decrease if our operating results do not meet the expectations of the market.
Sales of the N-Viro technology are affected by general fluctuations in the
business cycles in the United States and worldwide, instability of economic
conditions and interest rates, as well as other factors. In addition, operating
results of some of our business segments are influenced, along with other
factors such as interest rates, by particular business cycles and seasonality.
-8-
<PAGE> 9
COMPETITION. We compete against companies in a highly competitive
market and we have fewer resources than most of those companies. Our business
competes within and outside the United States principally on the basis of price,
product quality, custom design, technical support, reputation, equipment
financing assistance and reliability. Competitive pressures and other factors
could cause us to lose market share or could result in decreases in prices,
either of which could have a material adverse effect on our financial position
and results of operations.
RISKS OF DOING BUSINESS IN OTHER COUNTRIES. We conduct business in
markets outside the United States, and we expect to continue to do so. In
addition to the risk of currency fluctuations, the risks associated with
conducting business outside the United States include: social, political and
economic instability; slower payment of invoices; underdeveloped infrastructure;
underdeveloped legal systems; and nationalization. The Company has not entered
into any currency swap agreements which may reduce these risks. The Company may
enter into such agreements in the future if it is deemed necessary to do so.
The Company has determined that its reportable segments are those that
are based on the Company's method of internal reporting, which segregates its
business by product category and service lines. Fixed assets generating specific
revenue are identified with their respective segments as they are accounted for
as such in the internal accounting records. All other assets, including cash and
other current assets and all long-term assets, other than fixed assets, are
identified with the Corporate segment. The Company does not allocate any
selling, general, and administrative expenses to any specific segments. All of
the other income (expense) costs or income are non-apportionable and not
allocated to a specific segment. The Company accounts and analyzes the operating
data for its segments generally by geographic location, with the exception of
the Management segment, as this revenue accounts for over 10% of the total
revenue of the Company. This segment represents both a significant amount of
business generated as well as a specific location and unique type of revenue.
The other two segments are divided between domestic and foreign sources, as
these segments differ in terms of environment and municipal legal issues, nature
of the waste disposal infrastructure, political climate, and availability of
funds for investing in the Company's technology. These factors have not changed
significantly over the past two years and are not expected to do so in the near
term.
The table below presents information about the segment profits and
segment identifiable assets used by the chief operating decision makers of the
Company for the quarters ended March 31, 2000 and 1999 (dollars in thousands).
<TABLE>
<CAPTION>
Management Domestic Foreign
Operations Operations Operations Total
---------------- ------------- --------------- -----------------
2000
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 368 $ 702 $ 37 $ 1,107
Cost of revenues 236 400 -0- 636
Segment profits 139 302 37 471
Identifiable assets 182 131 -0- 312
Depreciation 6 12 -0- 18
1999
---------------------------------------------------------------------
Revenues $ 420 $ 521 $ 37 $ 978
Cost of revenues 229 257 -0- 486
Segment profits 191 264 37 492
Identifiable assets 75 261 -0- 336
Depreciation 3 12 -0- 15
</TABLE>
-9-
<PAGE> 10
A reconciliation of total segment revenues, cost of revenues, and segment
profits sales to consolidated revenues, cost of revenues, and segment
information to the consolidated financial statements for the quarters ended
March 31, 2000 and 1999 is as follows (dollars in thousands):
<TABLE>
<CAPTION>
2000 1999
---------------------------------------------------
<S> <C> <C>
Revenues
Total revenues for reportable segments $ 1,107 $ 978
================== ==============
Cost of revenues:
Total cost of revenues for reportable segments $ 636 $ 486
Other -0- -0-
------------------ --------------
Consolidated cost of revenues $ 636 $ 486
================== ==============
Segment profits:
Segment profits for reportable segments $ 471 $ 492
Corporate selling, general, and adminis-
trative expenses (530) (462)
Other income (expense) 222 (12)
------------------ --------------
Consolidated EBIT $ 163 $ 18
================== ==============
Depreciation and amortization:
Depreciation for reportable segments $ 18 $ 15
Corporate depreciation and amortization 27 29
------------------ --------------
Consolidated depreciation and amortization $ 45 $ 44
================== ==============
</TABLE>
The Company cautions that words used in this document such as "expects,"
"anticipates," "believes," "may," and "optimistic," as well as similar words and
expressions used herein, identify and refer to statements describing events that
may or may not occur in the future. These forward-looking statements and the
matters to which they refer are subject to considerable uncertainty that may
cause actual results to be materially different from those described herein.
Some, but not all, of the factors that could cause actual results to be
different than those anticipated or predicted by the Company include: (i) a
deterioration in economic conditions in general; (ii) a decrease in demand for
the Company's products or services in particular; (iii) the Company's loss of a
key employee or employees; (iv) regulatory changes, including changes in
environmental regulations, that may have an adverse affect on the demand for the
Company's products or services; (v) increases in the Company's operating
expenses resulting from increased costs of labor and/or consulting services; and
(vi) a failure to collect upon or otherwise secure the benefits of existing
contractual commitments with third parties, including customers of the Company.
-10-
<PAGE> 11
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On February 25, 2000, the Company filed with the United States District
Court, Northern District of Ohio, Eastern Division, a Complaint for
Patent Infringement and Jury Demand against the City of Warren, Ohio.
The Company believes that the City of Warren has directly and willfully
infringed on patents the Company owns, and is seeking judgements, an
injunction and a recovery of damages asserted. On April 17, 2000, the
City of Warren responded by filing The City of Warren's Answer and
Counterclaims and a Civil Case Information Statement with the Court. In
these documents the City of Warren admits to certain allegations made
by the Company and denies others, and assert counterclaims against the
Company.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
27 Financial Data Schedule
(b) Reports on Form 8-K:
A Form 8-K was filed on March 13, 2000, regarding the
filing of a lawsuit by the Company against the City of
Warren, Ohio.
A Form 8-K was filed on March 23, 2000, regarding the
execution of an Employment Agreement with J. Patrick
Nicholson, Chairman of the Board and Chief Executive
Officer.
-11-
<PAGE> 12
N-VIRO INTERNATIONAL CORPORATION
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.
N-VIRO INTERNATIONAL CORPORATION
Date: May 15, 2000 /s/ J. Patrick Nicholson
----------------- -------------------------
J. Patrick Nicholson
Chairman, President and Chief Executive Officer
(Principal Executive Officer)
Date: May 15, 2000 /s/ James K. McHugh
----------------- --------------------
James K. McHugh
Chief Financial Officer
(Principal Financial & Accounting Officer)
-12-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 499,295
<SECURITIES> 1,660
<RECEIVABLES> 1,557,845
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,350,905
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,942,015
<CURRENT-LIABILITIES> 1,177,568
<BONDS> 0
0
0
<COMMON> 26,898
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 4,942,015
<SALES> 0
<TOTAL-REVENUES> 1,107,033
<CGS> 0
<TOTAL-COSTS> 636,005
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 163,034
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 163,034
<EPS-BASIC> 0
<EPS-DILUTED> 0.06
</TABLE>
