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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _______ TO _______
COMMISSION FILE NUMBER 1-12694
SOLIGEN TECHNOLOGIES, INC.
(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
WYOMING 95-4440838
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
19408 LONDELIUS STREET
NORTHRIDGE, CALIFORNIA 91324
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
(818) 718-1221
(ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the issuer was required to file such reports), and (2) has been
subject to filing requirements for the past 90 days. Yes [X] No [ ]
Number of shares of issuer's common stock outstanding as of August 1, 1997:
32,599,115
Transitional Small Business Disclosure Format: Yes [ ] No [X]
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SOLIGEN TECHNOLOGIES, INC.
FORM 10-QSB
TABLE OF CONTENTS
Page
PART I FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets at June 30, 1997 and March 31, 1997. . 3
Consolidated Statements of Operations for the three months ended
June 30, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows for the three months ended
June 30, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Consolidated Financial Statements . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations. . . . . . . . . . . . . . . . . . . . . . . 8
PART II OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . 11
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . 12
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2
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PART I: FINANCIAL INFORMATION
ITEM 1: CONSOLIDATED FINANCIAL STATEMENTS
SOLIGEN TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
JUNE 30, MARCH 31,
1997 1997
----------- ---------
(UNAUDITED)
ASSETS
Current assets:
Cash $ 352,000 $ 506,000
Accounts receivable 880,000 723,000
Inventories 139,000 160,000
Prepaid expenses 142,000 49,000
----------- -----------
Total current assets 1,513,000 1,438,000
Property, plant and equipment 2,158,000 2,112,000
Less allowance for depreciation and amortization 1,097,000 1,004,000
----------- -----------
Net property, plant and equipment 1,061,000 1,108,000
Other assets 26,000 34,000
----------- -----------
TOTAL ASSETS $ 2,600,000 $ 2,580,000
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 365,000 $ 360,000
Trade accounts payable 423,000 251,000
Payroll and related expenses 97,000 146,000
Accrued expenses 138,000 105,000
Deferred revenue 99,000 131,000
----------- -----------
Total current liabilities 1,122,000 993,000
Notes payable, net of current portion 100,000 100,000
Stockholders' equity:
Common stock, no par value:
Authorized -- 50,000,000 shares;
Issued and outstanding: 32,369,115 at June 30
and 31,434,283 at March 31 9,966,000 9,776,000
Accumulated deficit (8,588,000) (8,289,000)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 1,378,000 1,487,000
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,600,000 $ 2,580,000
----------- -----------
----------- -----------
The accompanying notes are an integral part of these financial statements.
3
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SOLIGEN TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED
JUNE 30,
--------
1997 1996
---- ----
REVENUES $ 1,233,000 $ 543,000
COST OF REVENUES 880,000 467,000
----------- ---------
Gross profit 353,000 76,000
----------- ---------
OPERATING EXPENSES:
Research and development 263,000 284,000
Selling 136,000 179,000
General and administrative 210,000 261,000
Non-cash compensation 39,000 --
----------- ---------
Total operating expenses 648,000 724,000
----------- ---------
Loss from operations (295,000) (648,000)
OTHER INCOME (EXPENSE):
Interest income 1,000 11,000
Interest expense (4,000) (7,000)
Other income -- 90,000
----------- ---------
Total other income (expense) (3,000) 94,000
----------- ---------
LOSS BEFORE PROVISION FOR
INCOME TAXES (298,000) (554,000)
Provision for state income taxes 1,000 --
----------- ---------
NET LOSS $(299,000) $(554,000)
----------- ---------
NET LOSS PER SHARE $ (0.01) $ (0.02)
----------- ---------
----------- ---------
The accompanying notes are an integral part of these financial statements.
4
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SOLIGEN TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED
JUNE 30,
--------
1997 1996
---- ----
Cash flows from operating activities
Net loss $(299,000) $(554,000)
Depreciation and amortization 93,000 99,000
Non-cash compensation expense 39,000 --
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (157,000) 64,000
(Increase) decrease in inventories 21,000 (13,000)
(Increase) decrease in prepaid expenses (65,000) 7,000
Increase (decrease) in trade accounts payable 172,000 (117,000)
Decease in payroll and related expenses (49,000) (18,000)
Increase (decrease) in accrued expenses 53,000 (26,000)
Increase (decrease) in deferred revenues (32,000) 7,000
(Increase) decrease in other assets 8,000 (14,000)
--------- ---------
Net cash used for operating activities (216,000) (565,000)
--------- ---------
Cash flows from investing activities:
Additions in property, plant and equipment (46,000) (46,000)
--------- ---------
Net cash used for investing activities (46,000) (46,000)
--------- ---------
Cash flows from financing activities:
Principal payments under capital lease obligations (23,000) (3,000)
Conversion of warrants, net of issuance costs 131,000 --
--------- ---------
Net cash provided by financing activities 108,000 (3,000)
--------- ---------
Net decrease in cash (154,000) (614,000)
Beginning of period 506,000 1,189,000
--------- ---------
End of period $ 352,000 $ 575,000
--------- ---------
--------- ---------
The accompanying notes are an integral part of these financial statements.
5
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SOLIGEN TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The financial information included herein for the three month periods ended June
30, 1997 and 1996 is unaudited; however, such information reflects all
adjustments consisting only of normal recurring adjustments which are, in the
opinion of management, necessary for a fair presentation of the financial
position, results of operations and cash flows for the interim periods. The
financial information as of March 31, 1997, is derived from Soligen
Technologies, Inc's 1997 Form 10-KSB. The interim consolidated financial
statements should be read in conjunction with the consolidated financial
statements and the notes thereto included in the Company's 1997 Form 10-KSB.
The results of operations for the interim periods presented are not necessarily
indicative of the results to be expected for the full year.
ACCOUNTING POLICIES
Reference is made to Note 1 of Notes to Financial Statements in the Company's
Annual Report on Form 10-KSB for the summary of significant accounting policies.
INVENTORIES
Inventories are stated at the lower of cost or market on a first-in, first-out
basis. Inventories consist of the following:
JUNE 30, 1997
-------------
Raw materials $ 101,000
Work in process 22,000
Finished goods 16,000
---------
Total inventory $ 139,000
---------
---------
DEFERRED REVENUE
Deferred revenue relates to the DSPC technology profit center. The deferred
revenue related to machine revenues results mainly from the Company's issuance
of licenses for the use of the machines, or to support the machines in the form
of maintenance, rather than the outright sale of machines.
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DEBT
NOTES PAYABLE AND CAPITAL LEASES
Notes payable and capital leases consist of the following at June 30, 1997:
Notes payable to former owners of A-RPM, collateralized $ 305,000
by equipment and furnishings, bearing interest at 8%,
interest payable quarterly, $85,000 currently due and
$220,000 due in 2000 (see Part II, Item 1).
Capital leases 132,000
Other notes to non-related parties, due through 1997 28,000
---------
Total capital leases and notes payable 465,000
Less current portion (365,000)
---------
Long term portion $ 100,000
---------
---------
7
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ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD-LOOKING STATEMENT AND ASSOCIATED RISKS
THIS QUARTERLY REPORT ON FORM 10-QSB CONTAINS CERTAIN FORWARD-LOOKING
STATEMENTS. THESE FORWARD-LOOKING STATEMENTS ARE BASED LARGELY ON THE
COMPANY'S CURRENT EXPECTATIONS AND ARE SUBJECT TO A NUMBER OF RISKS AND
UNCERTAINTIES. INCLUDING, AMONG OTHERS (I) CUSTOMER ACCEPTANCE OF THE
COMPANY'S "ONE STOP SHOP" PARTS NOW PROGRAM; AND (II) THE COMPANY'S ABILITY TO
OBTAIN ADDITIONAL FINANCING REQUIRED TO SUPPORT ITS PROJECTED REVENUE GROWTH.
ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THESE FORWARD-LOOKING STATEMENTS.
IN VIEW OF THESE RISKS AND UNCERTAINTIES, THERE CAN BE NO ASSURANCE THAT THE
FORWARD-LOOKING STATEMENTS CONTAINED IN THIS QUARTERLY REPORT ON FORM 10-QSB
WILL IN FACT TRANSPIRE.
The following discussion should be read in conjunction with the accompanying
Financial Statements of Soligen Technologies, Inc. ("STI") and its
wholly-owned subsidiaries Soligen, Inc. ("Soligen") and Altop, Inc. ("Altop")
(collectively referred to herein as the "Company") including the notes
thereto, included elsewhere in this Quarterly Report.
OVERVIEW
The Company has developed a proprietary technology known as Direct Shell
Production Casting ("DSPC-Registered Trademark-"). This technology is
embodied in the Company's DSPC 300 System (the "DSPC System"), which produces
ceramic casting molds directly from Computer Aided Design ("CAD") files.
These ceramic molds are used to cast metal parts which conform to the CAD
design. This unique capability distinguishes the DSPC System from rapid
prototyping technologies which are characterized by the ability to produce
non-functional, three-dimensional representations of parts from CAD files.
The Company's DSPC System is based upon proprietary technology developed by
the Company and certain patent and other proprietary rights licensed to
Soligen, Inc. ("Soligen"), a wholly-owned subsidiary of the Company, by the
Massachusetts Institute of Technology ("MIT") pursuant to a license agreement
(the "License") dated October 18, 1991, as amended. Pursuant to the License,
MIT granted Soligen an exclusive, world-wide license to develop, manufacture,
market and sell products utilizing certain technology and processes for the
production of ceramic casting molds for casting metal parts patented by MIT
until October 1, 2006, and on a non-exclusive basis thereafter until the
expiration of the last patent relating to the licensed technology. The
exclusive period may be extended by mutual agreement of both parties.
The Company believes that the rapid mold production capabilities of the DSPC
System provide a substantial competitive advantage over existing producers of
cast metal parts. Use of the DSPC System eliminates the need to produce
tooling (patterns and core boxes) for limited runs of metal parts, thereby
reducing both the time and the labor otherwise required to produce ceramic
casting molds for casting the metal parts. It provides for a paradigm shift
by enabling engineers to postpone the design or the fabrication of production
casting tooling until after the designed part
8
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has been functionally tested. This ability, in addition to expediting the
design verification and testing, enables manufacturers to save time and money
by designing the production casting tools, which are required for large
production runs, once and most likely correctly on the first attempt. The
DSPC System can be also used to produce the production tooling (usually made
of steel), required to cast the parts in larger production runs. To
capitalize on this advantage, the Company plans to form a network of rapid
response production facilities owned either by the Company or by licensed
third parties. This network will operate under the trade name Parts
Now-Registered Trademark-service. These facilities will include DSPC
production facilities and foundries with in-house machine shops. The Company
intends to establish itself as a leading manufacturer of cast metal parts by
providing a seamless transition from CAD file to finished part.
As of June 30, 1997, the Company is rapidly transitioning from a development
stage company towards its goal of being a manufacturing / service company
with continuing revenues from operations. The Company operates four major
revenue-generating profit centers:
1. PARTS NOW CENTER ("PARTS NOW"): Oversees the "one stop shop" production
services from receipt of the customer's CAD file through production. Parts
Now is responsible for any contract which requires a combination of the
DSPC production center and conventional casting and CNC machining
expertise. It consists of program managers who oversee the transition from
CAD to first article, to tooling, to conventional casting and later to mass
production. It acquires services from the DSPC Production Center and the
conventional casting center at cost.
2. DSPC PRODUCTION CENTER: Revenues result from the production and sale of
first article and short run quantities of cast metal parts made directly
from the customer's CAD file. This center also provides DSPC parts and
tool making services to the Parts Now Center. These services are charged
to Parts Now at cost. Revenues for this product line were initiated in the
quarter ended March 31, 1995.
3. CONVENTIONAL CASTING CENTER ("PRODUCTION PARTS"): Revenues result from the
production, and sale of production quantities of cast and machined aluminum
parts for industrial customers. The Company began generating revenues in
this area through Altop, its aluminum foundry and machine shop, in July
1994. This center is limited to conventional casting of aluminum parts
that do not utilize DSPC made tooling.
4. DSPC TECHNOLOGY CENTER: Revenues result from the sale, lease, license or
maintenance of DSPC machines and from participation in research and
development projects wherein Soligen provides technological expertise.
9
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RESULTS OF OPERATIONS
Revenues for the three months ended March 31, 1997 and three months ended June
30, 1997 and 1996 were as follows:
Three Months Three Months Ended
Ended JUNE 30,
March 31, --------
1997 1997 1996
---- ---- ----
Parts Now-Registered Trademark- $ 691,000 $ 368,000 $ 88,000
DSPC-Registered Trademark- production 214,000 550,000 128,000
Production parts 325,000 218,000 291,000
DSPC-Registered Trademark- technology 346,000 97,000 36,000
----------- ----------- ---------
Total revenues $ 1,576,000 $ 1,233,000 $ 543,000
----------- ----------- ---------
----------- ----------- ---------
Revenues for the quarter ended June 30, 1997, were $1,233,000, an increase of
127% compared to $543,000 in the quarter ended June 30, 1996. Compared to the
comparable period a year ago, combined revenues for Parts Now and DSPC increased
$702,000, or 325% reflecting increased acceptance of the Company's core business
in the market place. The combined revenues for Parts Now and DSPC for the
quarter ended June 30, 1997, were relatively flat compared to the quarter ended
March 31, 1997. The Company continues to de-emphasize conventional castings, a
low, marginal profit margin business segment unrelated to Parts Now profit
objectives. As a result, production parts (Altop) revenues decreased from
$325,000 for the three months ended March 31, 1997, to $218,000 for the quarter
ended June 30, 1997. DSPC technologies revenues decreased from $346,000 for the
quarter ended March 31, 1997, to $97,000 for the quarter ended June 30, 1997.
This decrease was the result of a $275,000 machine sale to a customer overseas
in the fourth quarter of last year.
Cost of revenues as a percentage of total revenues for the quarter ended June
30, 1997, was 71% compared to 86% for the quarter ended June 30, 1996. The
decrease in cost of revenues as a percentage of total revenues was due to a
reduction in per unit costs associated with increased production.
Research and development costs were $263,000 in the quarter ended June 30, 1997,
compared to $284,000 for the similar period last year. The Company continues to
invest in research and development of the DSPC technology and its applications
as a key to its future growth and prosperity.
Selling expenses decreased $43,000 to $136,000 for the quarter ended June 30,
1997, from $179,000 for the quarter ended June 30, 1996. The decrease was the
result of consolidating Altop's and Soligen's sales departments.
10
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General and administrative expenses were $210,000 in the first quarter of fiscal
1998 compared to $261,000 in the first quarter of fiscal 1997, a decrease of
$51,000. The decrease was primarily the result of certain general and
administrative expenses assigned to the production function.
The Company issued stock options to non-employees in fiscal 1996 and, according
to SFAS 123, non-cash compensation expense is to be recognized over the expected
period of benefit. As a result, the Company recognized $39,000 non-cash
compensation expense in the quarter ended June 30, 1997, and expects to
recognize approximately $156,000 non-cash compensation expense during fiscal
1998.
CASH AND SOURCES OF LIQUIDITY
The Company requires significant funds to continue operations. As of June 30,
1997, the Company had $1,232,000 in cash and accounts receivable, virtually
unchanged from $1,229,000 at March 31, 1997. At June 30, 1997, the Company
reported working capital of $391,000 compared to working capital of $445,000 at
March 31, 1997. The decrease in working capital from March 31, 1997 to June 30,
1997, was due primarily to the $216,000 in net cash used for operations that
was partially offset by $131,000 conversion of warrants. Working capital from
June 30, 1996 to March 31, 1997, increased from $161,000 to $445,000 due
primarily to the convertible debenture offering in September 1996 that provided
$666,000.
In August 1997, the Company entered into an agreement with a commercial lender
for an up to $1,000,000 revolving line of credit, collateralized by receivable,
inventory and fixed assets. The credit facility provides for the advance rate
of 75% of eligible accounts receivable.
The Company believes that the current cash, asset based line of credit and
internally generated cash flow will be sufficient to meet its working capital
and capital expenditures requirements through fiscal year ended March 31, 1998.
To the extent that the Company's resources, together with future earnings are
insufficient to fund the Company's future activities, the Company may need to
raise additional funds through public or private financing.
PART II: OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
A-RPM LAWSUIT AND COUNTERCLAIM
On June 30, 1994, Altop, Inc., a wholly-owned subsidiary of the Company,
acquired substantially all of the assets of A-RPM Corporation, an aluminum
foundry and machine shop located in Santa Ana, California. The assets were
acquired pursuant to an Asset Purchase Agreement between Altop, A-RPM, the
Company and Leland K. and Nancy B. Lowry, the sole shareholders of A-RPM. As
payment for the assets, Altop delivered an initial cash payment in the amount of
$100,000 and three promissory notes in the total principal amount of $220,000.
11
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Altop also assumed certain liabilities of A-RPM and agreed to deliver an
additional payment of up to $100,000 contingent upon determination of certain
net asset values according to a formula set forth in the Asset Purchase
Agreement. Altop also entered into an Employment Agreement with Leland K.
Lowry.
On March 22, 1995, the Company and Altop commenced an action against A-RPM and
the Lowrys in the Superior Court for Orange County, California. The complaint
in this action seeks damages for breach of the Asset Purchase Agreement, fraud,
and negligent misrepresentation. In addition, the Company and Altop are
requesting declaratory relief confirming that the Company and Altop have no
further obligation to A-RPM and the Lowrys under the Asset Purchase Agreement,
the promissory notes and related transactions. The complaint also seeks an
award of attorneys' fees and costs.
A-RPM and the Lowrys have filed an answer to the complaint generally denying the
allegations of the complaint. In addition, they have filed a cross-complaint
stating actions against the Company and Altop for recovery of the entire
principal amount and accrued interest on the three promissory notes delivered in
connection with the Asset Purchase Agreement. The cross-complaint also seeks
foreclosure on the assets of Altop securing the promissory notes, recovery of
$85,000 alleged to be due and payable pursuant to the contingent payment
provisions of the Asset Purchase Agreement, and attorneys' fees and costs.
The Company and Altop intend to vigorously defend against the allegations of the
cross-complaint and to vigorously pursue recovery against A-RPM and the Lowrys.
Pending resolution of this dispute, the Company has provided for a $305,000
liability in its consolidated financial statements. A trial date has been set
for October 27, 1997.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11.1 Computation of Net Loss Per Share
(b) Reports on Form 8-K
Form 8-K filed May 16, 1997
Form 8-K filed June 26, 1997
12
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed by the undersigned thereunto
duly authorized.
SOLIGEN TECHNOLOGIES, INC.
Date: August 13, 1997 By: /s/ YEHORAM UZIEL
----------------------------------------
Yehoram Uziel
President, CEO and Chairman of the Board
(Principal executive officer)
Date: August 13, 1997 By: /s/ ROBERT KASSEL
-----------------------------
Robert Kassel
Chief Financial Officer
(Principal financial officer)
13
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EXHIBIT 11.1
SOLIGEN TECHNOLOGIES, INC.
COMPUTATION OF NET LOSS PER SHARE
THREE MONTHS ENDED
JUNE 30,
--------
1997 1996
---- ----
Weighted average common
shares outstanding 31,440,950 29,738,330
Net loss $ (299,000) $ (554,000)
Net loss per share $ (0.01) $ (0.02)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE INCLUDES SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENTS OF OPERATIONS FOUND ON
PAGES 3 AND 4 OF THE COMPANY'S FORM 10-QSB FOR THE QUARTER AND YEAR TO DATE AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 352
<SECURITIES> 0
<RECEIVABLES> 929
<ALLOWANCES> 49
<INVENTORY> 139
<CURRENT-ASSETS> 1,513
<PP&E> 2,158
<DEPRECIATION> 1,097
<TOTAL-ASSETS> 2,600
<CURRENT-LIABILITIES> 1,122
<BONDS> 0
0
0
<COMMON> 9,966
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 2,600
<SALES> 1,233
<TOTAL-REVENUES> 1,233
<CGS> 880
<TOTAL-COSTS> 880
<OTHER-EXPENSES> 648
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4
<INCOME-PRETAX> (298)
<INCOME-TAX> 1
<INCOME-CONTINUING> (299)
<DISCONTINUED> 0
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<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>