<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended May 4, 1996
Commission File Number 000-24328
RICHMAN GORDMAN 1/2 PRICE STORES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 47-0771211
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
12100 WEST CENTER ROAD, OMAHA, NEBRASKA 68144
(Address of principal executive offices) (zip code)
(402) 691-4000
(Registrant's telephone number, including area code)
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 X NO
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. YES X NO
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
Class of Common Stock Outstanding at May 4, 1996
--------------------- --------------------------
Common Stock:
Series A 17,640,000 shares
Series B Option 10,200,000 shares
Page 1 of 18
Exhibit Index Appears At Page 16
<PAGE> 2
RICHMAN GORDMAN 1/2 PRICE STORES, INC. AND SUBSIDIARY
INDEX TO QUARTERLY REPORT OF CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I- FINANCIAL INFORMATION
Item 1- Financial Statements (Unaudited)
Consolidated Balance Sheets as of
May 4, 1996 and February 3, 1996 3
Consolidated Statements of Operations -
Three Months Ended May 4, 1996
and April 29, 1995 4
Consolidated Statements of Cash Flows -
Three Months Ended May 4, 1996
and April 29, 1995 5 - 6
Notes to Consolidated Financial Statements 7 - 8
Item 2- Management's Discussion and Analysis 9 - 12
PART II- OTHER INFORMATION
Items 1-4- None 13
Item 5- Series B Option Stock 13
Item 6- Exhibits and Reports on Form 8-K 14
Signatures 15
Exhibit Index 16
</TABLE>
Page 2 of 18
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM I - FINANCIAL STATEMENTS
RICHMAN GORDMAN 1/2 PRICE STORES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
May 4, 1996 February 3, 1996
------------- -----------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 615,163 $ 488,012
Accounts receivable, less allowance for doubtful
accounts of $364,037 and $392,948 1,341,488 928,792
Merchandise inventories 35,102,654 30,786,359
Prepaid expenses and other current assets 2,067,077 2,145,237
------------- -----------------
Total current assets 39,126,382 34,348,400
PROPERTY, BUILDINGS AND EQUIPMENT, net 16,176,811 16,681,855
OTHER ASSETS 1,052,545 978,691
------------- -----------------
$ 56,355,738 $ 52,008,946
============= =================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Line of credit borrowings $ 16,984,000 $ 7,690,923
Accounts payable 6,516,995 7,953,024
Accrued expenses 4,775,920 5,118,000
Taxes accrued and withheld 2,638,648 2,252,451
Income taxes payable 206,104 206,104
Current portion of long-term debt 2,864,365 2,779,207
Current maturities of capital lease obligations 1,226,991 1,229,819
Total current liabilities -------------- -------------
35,213,024 27,229,528
LONG-TERM DEBT, net of current portion 4,000,143 4,201,143
CAPITAL LEASE OBLIGATIONS, net of current portion 10,275,823 10,594,328
OTHER LONG-TERM LIABILITIES 588,599 585,765
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock
Series A common stock, $.01 par value; 19,800,000
shares authorized; 17,640,000
shares issued and outstanding. 176,400 176,400
Series B common stock, $.01 par value; 10,200,000
shares authorized, issued and outstanding 102,000 102,000
Paid-in capital 4,436,526 4,436,526
Retained earnings 1,563,224 4,683,256
------------- -----------------
Total stockholders' equity
6,278,150 9,398,182
------------- -----------------
$ 56,355,738 $ 52,008,946
============= =================
</TABLE>
See notes to consolidated financial statements.
Page 3 of 18
<PAGE> 4
RICHMAN GORDMAN 1/2 PRICE STORES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
May 4, 1996 April 29, 1995
----------- --------------
<S> <C> <C>
NET SALES $41,694,873 $38,358,730
COST OF SALES 27,326,777 25,174,238
----------- -----------
Gross Profit 14,368,096 13,184,492
OPERATING AND ADMINISTRATIVE EXPENSES 16,785,590 15,102,863
----------- -----------
Loss from operations (2,417,494) (1,918,371)
OTHER INCOME (EXPENSE):
Interest expense (821,053) (976,461)
Interest income 118,515 20,040
----------- -----------
(702,538) (956,421)
----------- -----------
LOSS BEFORE PROVISION FOR
INCOME TAX (3,120,032) (2,874,792)
PROVISION FOR INCOME TAXES - -
----------- -----------
NET LOSS $(3,120,032) $(2,874,792)
=========== ===========
LOSS PER COMMON SHARE $ (0.10) $ (0.10)
=========== ===========
</TABLE>
See notes to consolifated financial statements.
Page 4 of 18
<PAGE> 5
RICHMAN GORDMAN 1/2 PRICE STORES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
May 4, 1996 April 29, 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 41,424,690 $ 38,073,764
Merchandise purchases (33,329,381) (35,142,238)
Cash paid for operating and administrative expenses (15,764,544) (17,059,365)
Interest paid on capital leases (359,517) (397,324)
Interest paid on other debt obligations (367,406) (151,793)
------------ ------------
Net cash used by operating activities (8,396,157) (14,676,956)
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, buildings and equipment (247,436) (611,716)
------------ ------------
Net cash used in investing activities (247,436) (611,716)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from line of credit borrowing 9,293,077 9,581,000
Payments on obligations under capitalized leases (321,333) (290,954)
Payments on secured term note (201,000) (201,000)
Payments made under plan of reorganization 0 (20,505)
------------ ------------
Net cash provided by financing activities 8,770,744 9,068,541
------------ ------------
NET INCREASE (DECREASE) IN CASH 127,151 (6,220,131)
CASH, Beginning of period 488,012 6,607,476
------------ ------------
CASH, End of period $ 615,163 $ 387,345
============ ============
</TABLE>
See notes to consolidated financial statements.
Page 5 of 18
<PAGE> 6
RICHMOND GORDMAN 1/2 PRICE STORES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
May 4, 1996 April 29, 1995
----------- --------------
<S> <C> <C>
RECONCILIATION OF NET LOSS TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net loss $(3,120,032) $ (2,874,792)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation and amortization 776,091 773,723
Net changes in assets and liabilities:
Accounts receivable (412,696) (534,100)
Merchandise inventory (4,316,295) (7,552,441)
Prepaid expenses and other current assets 78,160 (1,998,776)
Other assets (97,464) (41,450)
Accounts Payable (1,436,029) (1,957,342)
Other accrued expenses 132,108 (491,778)
----------- ------------
Net cash used by operating activities $(8,396,157) $(14,676,956)
=========== ============
</TABLE>
Page 6 of 18
<PAGE> 7
RICHMAN GORDMAN 1/2 PRICE STORES, INC. AND SUBSIDIARY
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. MANAGEMENT REPRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information. In the opinion of management, all
adjustments necessary for a fair presentation of the results of
operations for the interim periods have been included. All such
adjustments are of a normal recurring nature. Because of the seasonal
nature of the business, results for interim periods are not necessarily
indicative of a full year's operations. The accounting policies followed
by Richman Gordman 1/2 Price Stores, Inc. and subsidiary (the "Company")
and additional footnotes are reflected in the audited consolidated
financial statements contained in the Form 10-K Annual Report of the
Company for the fiscal year ended February 3, 1996.
2. DESCRIPTION OF BUSINESS
On October 20, 1993, the Company emerged from Chapter 11 of the United
States Bankruptcy Code pursuant to a confirmed Plan of Reorganization
(the "Plan"). The Company operated 32 1/2 Price Stores as of May 4, 1996
and 27 1/2 Price Stores as of April 29, 1995. The 1/2 Price concept is to
offer first quality, nationally branded merchandise at half of the
conventional department store prices or at half of manufacturers'
suggested retail prices.
3. MERCHANDISE INVENTORIES
Merchandise inventories are stated at the lower of cost (on a last-in,
first-out, or LIFO basis) or market. Total inventories would have been
higher at May 4, 1996 and February 3, 1996 by approximately $8,816,977
and $8,615,977, respectively, had the FIFO (first-in, first-out) method
been used to determine the cost of all inventories. Quarterly LIFO
inventory determinations reflect assumptions regarding fiscal year-end
inventory levels and the estimated impact of annual inflation.
Page 7 of 18
<PAGE> 8
4. INCOME TAXES
As of February 3, 1996 (the Company's most recent tax year-end), the
Company had net operating loss carryforwards of approximately
$15,053,000, which expire through 2010. A valuation allowance has been
provided against this net operating loss benefit until realization of
these benefits becomes more likely than not. No income tax benefit was
recorded for the first quarter of fiscal 1996 and 1995 because of the
uncertainty of the realization of such benefits in the future resulting
from recent losses.
5. STOCKHOLDERS EQUITY
Should the Company fulfill its minimum obligation to the unsecured
creditors under the Plan, the Company and the former preferred
shareholder's designee have the option to purchase all or a portion of
the 10,200,000 shares of Series B Option Common Stock issued to the
unsecured creditors at a price equal to the fair value of the stock on
February 2, 1998, less the amount of any Excess Cash Balance paid to the
unsecured creditors during the term of the Plan. As of May 4, 1996 there
is no excess cash paid to the unsecured creditors. During fiscal 1995,
previous excess cash payments totaling $3,277,224 were used to fulfill
the Company's minimum obligation to the unsecured creditors.
6. EARNINGS PER SHARE
Earnings per common share were calculated using weighted average common
shares outstanding of 30,000,000 for all periods presented. For purposes
of the weighted average shares outstanding, all shares to be issued to
certain members of management or to the unsecured creditors during the
term of the Plan are considered outstanding.
7. SUBSEQUENT EVENT
On May 15, 1996, the Company's chief executive officer resigned. In
connection with this resignation, the executive was entitled to severance
related payments totaling approximately $409,000, which will be expensed
in the second quarter of fiscal 1996. In addition, approximately
$806,000 of prepaid compensation to the executive paid during fiscal 1995
will not have to be repaid to the Company and will also be expensed in
the second quarter of fiscal 1996.
Page 8 of 18
<PAGE> 9
PART I - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth an analysis of various components of the
Consolidated Statements of Operations as a percentage of sales:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MAY 4, 1996 APRIL 29, 1995
----------- --------------
<S> <C> <C>
Net Sales 100.0% 100.0%
Cost of Sales 65.5 65.6
----- -----
Gross Profit 34.5 34.4
Operating and Administrative Expenses 40.3 39.4
----- -----
Loss From Operations (5.8) (5.0)
Interest Expense - Net (1.7) (2.5)
----- -----
Loss Before Provision For Taxes (7.5) (7.5)
Provision For Income Taxes - -
----- -----
Net Loss (7.5)% (7.5)%
----- -----
</TABLE>
Net Sales for the first quarter of fiscal 1996 increased approximately
$3,336,000, or 8.7%, compared to net sales for the first quarter of fiscal 1995
due to sales from five new stores opened subsequent to April 29, 1995. These
stores produced net sales of approximately $7,081,000.
Page 9 of 18
<PAGE> 10
Comparable store sales in the first quarter of fiscal 1996 were approximately
$34,610,000 compared to approximately $38,355,000 in the first quarter of
fiscal 1995, a decrease of $3,745,000, or 9.8%. The decrease in comparable
store sales was primarily due to weaknesses in the major apparel and
apparel-related categories such as juniors, misses, childrens, mens and shoes.
Management believes that these categories have been adversely impacted by the
unseasonably cold and wet Spring weather experienced in the Company's markets
as well as by depressed market conditions that have affected many apparel
retailers for the past two to three years.
In the fourth quarter of fiscal 1995, the Company announced that it was
addressing the comparable store sales trend by expanding its merchandise
offering and modifying its pricing structure, by implementing a three-tier
pricing structure. Recently, the Company determined that this strategy was not
an effective method to address the comparable store sales trend. Instead, the
Company will intensify its overall offering of department store and specialty
store branded merchandise. In conjunction with this brand intensification
focus, a new market positioning and allocation strategy has been developed to
specifically address the need to increase market share. Management believes
that the implementation of these merchandising and marketing strategies will
translate into a wider customer base, thus increasing sales.
Gross profit increased by approximately $1,184,000 or 9.0%, for the first
quarter of fiscal 1996 compared to the first quarter of fiscal 1995. As a
percentage of net sales, gross margins were 0.1% higher in the first quarter of
fiscal 1996 compared to the first quarter of fiscal 1995. The gross margin
rate increase of 0.1% was due to slightly higher initial markups and slightly
lower markdowns relative to the prior year period.
Operating and administrative expenses increased approximately $1,683,000, or
11.1%, for the first quarter of fiscal 1996 compared to the first quarter of
fiscal 1995. As a percentage of net sales, operating and administrative
expenses increased by 0.9%. All of the increase was attributable to costs
associated with the five new stores opened subsequent to April 29, 1995.
Interest expense (net) decreased by approximately $254,000 for the first
quarter of fiscal 1996 compared to the first quarter of fiscal 1995.
Approximately $99,000 of the decrease was due to increased interest income
primarily generated by the prepayment for merchandise inventory. Most of the
balance of the decrease, or $155,000, was due to decreased interest on the
pre-petition debt to the Company's unsecured creditors due to principal
payments.
Page 10 of 18
<PAGE> 11
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary ongoing cash requirements are for operating expenses,
inventory and the minimum payments to the Company's creditors (pursuant to
the Plan). The Company's primary sources of funds for its business activities
are cash from operations and borrowings under its revolving credit facility
with Congress Financial Corporation (Central). In addition, short term trade
credit (normally for 30-day periods) represents a significant source of interim
financing for merchandise inventories. Trade creditors representing
approximately two thirds of all merchandise purchases are extending normal
credit terms. During the first quarter of fiscal 1996 approximately one third
of the Company's purchases, primarily from those vendors that factor their
invoices, had to be prepaid because the factor would not extend normal credit
terms to the Company. Management believes that if its operating plans are met,
the percentage of prepayments will not increase over the next few months.
The Company has a financing agreement with a financial institution which
provides for revolving credit borrowings and letters of credit of up to $25
million (subject to a borrowing base limitation) with a maturity date in
October, 1997. The rate of interest on borrowings is prime plus 1.5% payable
monthly in arrears. A non-use fee of .5% per annum is payable monthly in
arrears on the unused portion of the facility. The agreement contains certain
restrictions and a covenant limiting annual cumulative capital expenditures.
At the end of the first quarter of fiscal 1996, the Company was in compliance
with all such restrictions and the covenant.
As of May 4, 1996, the Company had $16,984,000 outstanding under the credit
facility, as compared with $7,690,000 at February 3, 1996.
During the first quarters of fiscal 1996 and 1995, capital expenditures were
approximately $247,000 and $612,000, respectively. The following table sets
forth the major categories of capital expenditures for both periods.
<TABLE>
<CAPTION>
TOTAL CAPITAL EXPENDITURES
(IN THOUSANDS)
FISCAL FIRST QUARTER
--------------------------
1996 1995
---- ----
<S> <C> <C>
New Stores $119 $558
Distribution Center 62 -
Computer Operations 66 20
All Other - 34
---- ----
TOTAL $247 $612
==== ====
</TABLE>
Page 11 of 18
<PAGE> 12
The Company plans to spend approximately $1.0 million for capital expenditures
in fiscal year 1996, an amount within the Company's cumulative capital
expenditure covenant under the Company's financing agreement. Of this amount,
$0.5 million has been allocated for one new store (opened during March, 1996)
with the balance relating to existing stores, the Distribution Center and the
computer operations. The Company's policy is to negotiate leases wherein the
landlord makes the leasehold improvements. Accordingly, the Company's capital
expenditures to open a store are composed primarily of fixturing at a cost of
approximately $350,000. In addition, new stores typically require an inventory
investment of approximately $1,400,000 which is largely financed by accounts
payable.
The Company had long-term debt and obligations under capital leases of
approximately $14,276,000 at May 4, 1996 and $14,795,000 at February 3, 1996.
The Company's ability to satisfy scheduled principal and interest payments
under such obligations is dependent on its cash flow and existing credit
facility.
The Company recognizes that it has a high level of indebtedness, primarily in
the form of line of credit borrowings, creditor debt and capital lease
obligations. Its projections take this fact into account, and the Company
believes that future cash flows will be sufficient to cover this level of
indebtedness. Management is closely monitoring liquidity in light of the
decrease in comparable store sales and higher outstanding borrowings on its
line of credit at this time than for comparable periods in prior years. Sales,
inventory purchases, expenses and other items impacting liquidity are being
closely managed to assure that adequate liquidity for operations is maintained.
Management believes that with its present operating plan and continued focus on
liquidity, cash flow from operations and the existing credit facility will be
sufficient to fund capital expenditures, working capital requirements
(including prepayments to vendors not extending terms), creditor and long-term
debt payments.
Management does not believe that its agreement to keep its property free of
certain liens and not to make certain prohibited investments will adversely
affect its liquidity or capital resources.
SEASONALITY AND INFLATION
The company's business is seasonal, with the back-to-school season (July and
August) historically contributing approximately 17% of annual sales and the
Christmas season (November and December) accounting for approximately 28% of
annual sales. Sales and income are also affected by the timing of new store
openings. Although the Company's operations are influenced by general economic
conditions and inflationary pressures, the Company does not believe that
inflation has had a material effect on operations during the past 3 - 5 years.
Page 12 of 18
<PAGE> 13
PART II - OTHER INFORMATION
Items 1 - 4.
There are no items to report.
Item 5. - Other Information
The Series B Option Common Stock is subject to an option to purchase
exercisable by the Company or the Trustee of the R.G. Stock Trust in 1998
(the "Option"). The Option is noted upon the face of the Series B Option
Common Stock certificates. If the Option is exercised, the holder or
holders of shares must sell them for a price equal to the fair value of
the shares, as determined by an independent appraisal on February 2,
1998, less any payments of Excess Cash Balance (as defined in the Plan)
that have been made to creditors entitled to payment under the Plan
("Creditors"). Holders of the Series B Option Common Stock will not
have any rights of appraisal similar to dissenters' rights if they
dispute the market value as determined by the independent appraisal.
Payments of Excess Cash Balance would result in shareholders having to
sell their shares for less than fair market value. Holders of Series B
Option Common Stock should note that the Excess Cash Balance previously
paid to the Creditors shall be credited against, and shall reduce the
exercise price for, the option whether or not the holder of any shares of
Series B Option Common Stock with respect to which the option is
exercised received such Excess Cash Balance.
Although with respect to the Company's Fiscal Years ended January 29,
1994, and January 28, 1995, the Company made Excess Cash Balance payments
of $1,444,613 and $1,832,611, respectively, to Creditors, the Company's
cash position during Fiscal Year 1995 was such that all of the prior
Excess Cash Balance payments were utilized to make a portion of the $5.5
million minimum payment to creditors required for the Fiscal Year ended
February 3, 1996. Therefore, if the Option were exercised at this date,
the Excess Cash Balance payments would result in no reduction from fair
market value in the Option exercise price. Additional payments of Excess
Cash Balance may be created in the next two Fiscal Years which may reduce
the Option exercise price. For any given Fiscal Year, the Excess Cash
Balance is the excess of the Company's actual year-end cash balance over
the Cumulative Plan Cash Balance for that year. The cumulative total of
the Excess Cash Balance will be reported in the Company's annual and
quarterly financial reports.
Page 13 of 18
<PAGE> 14
Item 6. - Exhibits and Reports on Form 8-K
(a) Exhibit
(27) Financial Data Schedule
(b) Reports on Form 8-K
On May 17, 1996, the Registrant filed a Report on Form 8-K, dated May
15, 1996, with respect to Item 5 thereof. In the Form 8-K, the
Registrant disclosed the resignation of Dennis E. Reaves, former
Director, President and Chief Executive Officer of the Registrant.
(Remainder of this page intentionally left blank.)
Page 14 of 18
<PAGE> 15
PART II - OTHER INFORMATION
SIGNATURES
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.
RICHMAN GORDMAN 1/2 PRICE
STORES, INC.
Date: June 18, 1996 By: /s/ Jeffrey J. Gordman
-------------------------- -----------------------------
Jeffrey J. Gordman, President
Date: June 18, 1996 By: /s/ Roger R. Faust
-------------------------- -----------------------------
Roger R. Faust, Senior Vice President,
Chief Financial Officer, Secretary and
Treasurer
Page 15 of 18
<PAGE> 16
EXHIBIT INDEX
Exhibit Description Page
- ------- ----------------------- ----
(27) Financial Data Schedule 17
Page 16 of 18
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-1-1997
<PERIOD-START> FEB-4-1996
<PERIOD-END> MAY-4-1996
<CASH> 615,163
<SECURITIES> 0
<RECEIVABLES> 1,705,525
<ALLOWANCES> 364,037
<INVENTORY> 35,102,654
<CURRENT-ASSETS> 39,126,382
<PP&E> 48,000,614
<DEPRECIATION> 31,823,803
<TOTAL-ASSETS> 56,355,738
<CURRENT-LIABILITIES> 35,213,024
<BONDS> 14,275,966
<COMMON> 0
0
278,400
<OTHER-SE> 5,999,750
<TOTAL-LIABILITY-AND-EQUITY> 56,355,738
<SALES> 41,694,873
<TOTAL-REVENUES> 41,694,873
<CGS> 27,326,777
<TOTAL-COSTS> 27,326,777
<OTHER-EXPENSES> 16,785,590
<LOSS-PROVISION> 16,100
<INTEREST-EXPENSE> 702,538
<INCOME-PRETAX> (3,120,032)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,120,032)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,120,032)
<EPS-PRIMARY> (0.10)
<EPS-DILUTED> (0.10)
</TABLE>
