UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB/A-1
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1998
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: 001-12063
ROCKY MOUNTAIN INTERNET, INC
----------------------------------------------------------
Exact name of Registrant as specified in its charter
Delaware 84-1322326
- -------- ----------------
State or other jurisdiction of IRS Employer
incorporation or organization Identification
1099 18th Street, Suite 3000 Denver, Colorado 80202
- ---------------------------------------------- ----------------
Address of principal executive offices Zip Code
Registrant's telephone number, including area code: 303-672-0700
----------------
Former name, former address and former fiscal year, if changed
since last report: NA
Indicate by check mark whether the Registrant (1) has filed all annual,
quarterly and other 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 periods that the Registrant was required to file such reports) and (2)
has been subject to such filing requirements for the past 90 days.
YES X NO
----- -----
As of April 15, 1998, Rocky Mountain Internet, Inc. had 7,311,761 shares of
common stock, $.001 par value, outstanding.
Transitional Small Business Disclosure Format (check one) Yes [ ] No [X]
<PAGE>
PRELIMINARY NOTE
This amended Quarterly Report on Form 10-QSB/A-1 amends and updates the
information contained in Part I, Item 2 of the Quarterly Report on Form 10-QSB
filed on May 15, 1998 (the "Original Report") by Rocky Mountain Internet, Inc.
(the "Company"). The Original Report disclosed that on May 15, 1998, Douglas H.
Hanson exercised 421,053 warrants to purchase shares of common stock of the
Company for an aggregate exercise price of $800,000, which would enable the
Company to maintain the qualification of its common stock for trading on the
NASDAQ SmallCapTM Market. Upon further analysis, the Company has determined that
the investment by Mr. Hanson was not necessary for the continued qualification
of its common stock for trading on the NASDAQ SmallCapTM Market, as the
Company's market capitalization (i.e., number of shares of common stock
outstanding multiplied by the market price of those shares) on that date far
exceeded the minimum requirement of $35,000,000 for such continued
qualification. Accordingly, the Company and Mr. Hanson rescinded his exercise of
the warrants. Part I, Item 2 of this amended Quarterly Report on Form 10-QSB/A-1
amends the Original Report by (i) eliminating the discussion and pro forma
information in the Original Report relating to the exercise of the warrants and
(ii) amending the disclosure relating to the Company's projected cash needs for
1998.
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Certain information contained in this Form 10-QSB, including "Management's
Discussion and Analysis of Financial Condition and Results of Operations",
contain forward-looking statements. The forward-looking statements herein are
based on current expectations that involve a number of risks and uncertainties.
Such forward-looking statements are based on assumptions that the Company will
continue to design, market and provide successful new services, that competitive
conditions will not change materially, that demand for the Company's services
will continue to grow, that the Company will retain and add qualified personnel,
that the Company's forecasts will accurately anticipate revenue growth and the
costs of producing that growth, and that there will be no material adverse
change in the Company's business. In light of the significant uncertainties
inherent in the forward-looking information included in this Form 10-QSB, actual
results could differ materially from the forward-looking information contained
in this Form 10-QSB.
Year 2000 Risks. Currently, many computer systems, hardware, and software
products are coded to accept only two digit entries in the date code field and,
consequently, cannot distinguish 21st century dates from 20th century dates. As
a result, many companies' software and computer systems may need to be upgraded
or replaced in order to comply with such "Year 2000" requirements. The Company
and third parties with which the Company does business rely on numerous computer
programs in their day to day operations. The Company has begun the process of
identifying computer systems that could be affected by the Year 2000 issue but
has not estimated the costs of addressing the Year 2000 issue as it relates to
Company's internal hardware and software, as well as third party computer
<PAGE>
systems with which the Company interacts. In the event that the Company acquires
other assets or businesses, the software and hardware acquired by the Company in
connection with those business combinations may also be Year 2000 non-compliant.
There can be no assurance that the Year 2000 issues will be resolved in 1998 or
1999. The Company may incur significant costs in resolving its Year 2000 issues.
If not resolved, this issue could have a significant adverse impact on the
Company's business, operating results, financial condition, and cash flow.
The Company's common stock is traded on the Nasdaq SmallCap Market.
RECENT DEVELOPMENTS
The Company is implementing several new service offerings which will be
generating revenues subsequent to the period covered by this Form 10-QSB.
NATIONAL INTERNET PROVIDER Effective March 11, 1998, the Company entered
into an agreement with PSINet, Inc., (refer to Exhibit 10.13: PSINet Wholesale
Usage Agreement) whereby the Company obtains access to PSINet's network to
provide the Company's customers access to dialup and "switched" network access
in over 235 locations nationally. The agreement allows the Company to expand
service nationally to provide dial up and ISDN services in each of the locations
serviced by PSINet. Customers will receive technical support, e-mail services,
news services, etc., from the Company's servers, providing a "private label"
solution to the anticipated new customer base.
IP TELEPHONY The Company is expanding its communication services in order to
provide a more complete product offering to its customers. The Company has
announced its intent to provide long distance services using Internet Protocol
("IP") telephony at $0.07 per minute within the continental United States to
customers in Denver, Boulder, and Colorado Springs, Colorado areas.
COMPETITIVE LOCAL EXCHANGE CARRIER The Company filed an application in March,
1998 with the Colorado PUC to become a Competitive Local Exchange Carrier
("C-LEC"). A wholly owned subsidiary, Rocky Mountain Broadband, Inc., has been
formed for providing these services. On April 22, 1998, The Public Utilities
Commission of the State of Colorado granted the request by Rocky Mountain
Broadband, Inc. to become a C-LEC. Refer to Exhibit 10.15: "Order Granting a
Certificate to Provide Local Exchange Telecommunications Services."
RISK FACTORS
The Company may experience fluctuations in operating results in the future
caused by various factors, some of which are outside of the Company's control,
including general economic conditions, specific economic conditions in the
Internet access industry, user demand for the Internet, capital expenditures and
other costs relating to the expansion of operations, the timing and number of
customer subscriptions, the introduction of new services by the Company or its
competitors, the mix of services sold and the mix of distribution channels
through which those services are sold. In addition, the Company's expenses,
including but not limited to obligations under equipment leases, facilities
leases, telephone access lines, and Internet access are relatively fixed in the
short term, and therefore variations in the timing and amount of revenues could
have a material adverse effect on the Company's results of operations.
<PAGE>
TERMINATION OF THIRD PARTY AGREEMENT
The Company and Zero Error Networks ("ZEN"), a third party with which the
Company had contacted as described below under "Dial-Up Service," signed a
"TERMINATION AGREEMENT" effective July 3, 1997, which affects four points of
presence (POP) located in Pueblo, Hayden, Leadville, and Alamosa, Colorado.
These POPs have been operated under a revenue and expense sharing contract
between the two parties. The Termination Agreement calls for ZEN to operate the
Hayden, Leadville, and Alamosa, Colorado locations and receive the rights to the
customer base currently existing in those locations while the Company will
operate and maintain the customer base in Pueblo and surrounding areas. The
transition occurred during the months of July, August, and December of 1997. The
Termination Agreement includes a limited non-compete clause wherein neither
party may directly solicit the existing customer base of the other for a period
of one year. The net effect of the Termination Agreement on net income is
expected to be neutral in the short run and have a positive long term result.
The Pueblo revenues are expected to grow at a faster rate than the other three
POP's combined and the Company plans to focus additional effort to selling
dedicated access in the Pueblo market. However, there can be no assurance that
the Company's efforts will be successful or that the long-term effects of the
Termination Agreement on net income will be positive.
RESULTS OF OPERATIONS
Three Months Ended March 31, 1997 and 1998
The Company has a net loss applicable to common shareholders of $914,637 and
$1,314,350 for the first quarters of 1997 and 1998 respectively for an increase
in the loss of 58%. Based on earnings before interest, taxes, depreciation, and
amortization ("EBITDA") the loss was $637,427 for the first quarter of 1997 as
compared to $993,552 for the first quarter of 1998. During the first quarter of
1998, the Company recorded a non-cash compensation expense of $383,077 for
employee stock options, which is included in the EBITDA and net loss
calculations. If this non-cash compensation item is removed from the EBITDA
calculation then the loss decreased by 4% from $637,427 for the first quarter of
1997 to $610,470 for the first quarter of 1998. The resulting loss per share for
these items are presented in the following schedule.
First Quarter 1997 First Quarter 1998
Type of Loss Loss Loss Per Loss Loss Per
Share Share
- ------------ ----------- -------- ------------- --------
Net Loss $ (914,637) $ (0.19) $ (1,314,350) $ (0.19)
Net Loss adjusted for non-cash
compensation
$ (914,637) $ (0.19) $ (931,273) $ (0.14)
EBITDA Loss $ (637,427) $ (0.13) $ (993,552) $ (0.15)
EBITDA Loss adjusted for
non-cash compensation $ (637,427) $ (0.13) $ (610,475) $ (0.09)
<PAGE>
Effective January 16, 1997, the Company acquired dial-up and dedicated access
subscribers from Online Network Enterprises, Inc. (ONE), a Boulder, Colorado,
based provider of Internet access and Web services for consideration consisting
of $150,000 of cash and 116,932 shares of the Company's common stock.
The Company's revenues grew 27% from $1,397,283 to $1,779,285 for the three
months ended March 31, 1998 as compared to the comparable period in 1997. Listed
below is a breakdown of the revenue billing categories.
Three Months Ended
March 31
Revenue 1997 1998 %Change
- ------- ---------- ---------- -------
Dial-Up Service $ 595,686 $ 565,263 (5%)
Dedicated Access Service 347,592 798,394 130%
Web Services 216,472 314,341 45%
Equipment Sales 83,244 54,969 (21%)
Other 153,963 35,318 (77%)
---------- ---------- ------
Total $1,396,957 $1,779,285 27%
DIAL-UP SERVICE
The Company's strategy is to provide an high quality service with few busy
signals. In the past the Company was not prepared to offer flat rate pricing for
unlimited access service, however, on November 4, 1997, the Company announced a
flat rate offering to the Denver, Colorado and Boulder Colorado markets. This
offering has become more economically attractive than in the past due to lower
costs for circuits and a lower cost per port for dial up access. The new
offering includes higher speed modem access using K 56 Flex technology.
The table below shows the composite weighted average billing rate for full
service Internet access by quarter for 1995, 1996, and 1997. The reduction in
the average rate for September 1997 is the result of a change in the average
rates resulting from the termination of Dial-Up Service contracts with third
parties in Alamosa and Leadville. The remaining contracts with other third
parties provide an higher percentage of lower rate services. Effective with the
December 1997 billings, most Denver and Boulder, Colorado area customers who
were on payment plans over $19.95 per month were converted to the new $19.95
flat rate service, resulting in a lower average billing rate. The full effect of
the conversions occurred during the last quarter of 1997 and the first quarter
of 1998. The Company expects the average revenue per dial-up customer to
stabilize contingent upon the current pricing remaining in effect.
<PAGE>
For the Three Months Ended
Mar Jun Sep Dec Mar Jun Sep Dec
1995 1995 1995 1996 1996 1996 1996 1996
- -------------------------------------------------------------------------------
$20.52 $20.42 $20.88 $21.02 $20.97 $20.33 $20.41 $20.50
Mar Jun Sep Dec Mar
1997 1997 1997 1997 1998
- -----------------------------------------------
$20.10 $20.04 $19.65 $18.62 $17.98
The Company experienced a 5% revenue reduction in Dial-Up Service from the first
quarter of 1997 as compared to the first quarter of 1998 from $595,360 to
$565,263. The decrease is the result of a combination of the reduction in
average customer revenues resulting from the new flat rate pricing offered and a
reduction in revenues from business alliances as explained in the following
paragraph.
Dial-up Services have been split approximately evenly between commercial and
residential customers throughout 1995, 1996, 1997, and 1998 based on customer
count. Based on revenue the split between commercial and residential customers
is 35% to 65% respectively.
RMI has established business alliances through contracts with three,
locally-based unrelated parties for the purpose of providing Internet services
in secondary markets in the State of Colorado. The services are provided under a
written contract that provides for the locally-based party to provide equipment
and marketing services while RMI provides Internet access and administrative
services. Dial-up revenues based on these contracts generated $127,534 in
revenues for the first quarter of 1997 and $59,937 in revenues for the first
quarter of 1998 for a decrease of 53%. The POPs established pursuant to these
contracts began in the second quarter of 1995 and grew to six locations by the
end of 1995 and nine locations by the end of 1996. Effective July 3, 1997, the
contract with Zero Error Networks was terminated. Under the termination
agreement, the Company will operate the Pueblo POP as a Company only location
and ZEN will operate Alamosa, Leadville, and Hayden locations. A similar
contract in Grand Junction, Colorado was terminated by the Company effective
April 30, 1997. The marketing efforts by the locally-based third party in this
location were minimal and sales were less than $1,000 per month. The Company is
operating this facility as a Company only location at this time.
DEDICATED ACCESS SERVICE
Dedicated access services are primarily provided to commercial customers and
include a wide range of connectivity options tailored to the requirements of the
customer. These services include private port (dedicated modem), Integrated
Services Digital Network (ISDN) connections, 56 Kbps frame relay connections,
T-1 (1.54 Mbps) frame relay connections, point to point connections, and T-3 (45
Mbps) or fractional T-3 connections. The Company also offers a colocation
service in which the customer's equipment is located in the RMI data center,
thereby providing access to the Internet directly through the Company's
connection.
<PAGE>
Dedicated business has grown based principally on ISDN and high speed circuits
(56K, DS-1, and DS-3) growth. ISDN sales have grown from $107,404 to $209,061
from first quarter 1997 to first quarter 1998 for an increase of 95%, while high
speed circuits have increased from $208,027 to $531,509 for the same periods for
an increase of 156%.
The table below shows the quarterly customer count by each of the component
services offered for dedicated access as of the dates indicated:
Service Mar 31 Jun 30 Sep 30 Dec 31 Mar 31 Jun 30 Sep 30 Dec 31
1995 1995 1995 1995 1996 1996 1996 1996
- ------------------------------------------------------------------------------
Private Port 29 30 36 35 42 47 46 54
56 Kbps 18 27 27 34 47 69 71 72
ISDN 0 0 0 2 3 13 46 80
T-1 7 10 10 11 16 25 29 30
Colocation 0 1 4 4 6 4 5 6
Service Mar 31 Jun 30 Sep 30 Dec 31 Mar 31
1997 1997 1997 1997 1998
- ------------------------------------------------------
Private Port 50 41 36 31 23
56 Kbps 78 72 65 60 57
ISDN 168 193 211 233 256
T-1 65 84 99 123 151
Colocation 11 12 11 21 30
Web Services
Web services revenues are composed of Web page hosting and Web page production
and Web page marketing. Web page hosting provides ongoing revenue from customers
for whom RMI hosts a Web site on Web servers in the RMI data center. All access
made to these Web Sites by the customer and the Internet community as a whole
are processed on the RMI servers. The advantage to customers is high speed
access to sites by their targeted audiences. The following is a summary of the
number of Web hosting customers as of the dates indicated:
Mar Jun Sep Dec Mar Jun Sep Dec
1995 1995 1995 1995 1996 1996 1996 1996
- ----------------------------------------------------------------------------
1 21 45 90 157 217 242 341
Mar Jun Sep Dec Mar
1997 1997 1997 1997 1998
- ----------------------------------------------
418 424 417 428 448
Web page hosting accounted for $104,693 of revenue in the first quarter of 1997
and $138,201 in the first quarter of 1998 for an increase of 32%.
<PAGE>
Web page production increased from $113,914 for the first quarter 1997 to
$144,585 for the first quarter 1998 for an increase of 27%.
The Company added a new service, Web page marketing, to customers in late 1997.
For the first quarter of 1998, revenues of $22,006 were recognized for this
service. Web page marketing offers the customer a service wherein the Company
optimizes the position in Web search engines for a customer's site based on
queries by selected key words. This service results in a significant increase in
the level of traffic for a Web site.
OTHER REVENUE
Other revenue includes training revenue ($7,812 decreased to $4,595), consulting
($109,286 decreased to $4,001)and sales from the Information Exchange, a voice
messaging subsidiary ($36,866 decreased to $26,722). The Information Exchange
was acquired in a stock transaction in late 1996. The reduction in consulting
revenue occurred due to a large consulting contract in the first quarter of 1997
which was concluded and no similar consulting arrangement occurred in the first
quarter of 1998.
GROSS PROFIT
Gross profit consists of total revenue less the cost of delivering services and
equipment. The gross profit from Internet access and services was 67% of
revenues from that segment for the three months ended March 31, 1997 and 65% for
the same period in 1998. The reduction in gross profit is principally the result
of offering a flat rate dial-up product which required a decrease in customers
to modem ratios, resulting in higher circuit and equipment costs. Gross profits
on equipment sales were approximately equal at 23% for both comparative periods.
Sale of equipment is provided as an accommodation to the Company's customers and
gross profit margin may vary considerably based on the mix of products sold.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES
General selling and administrative expenses ("G S & A") increased from
approximately $1,708,306 in the first quarter of 1997 to approximately
$2,473,421 in the first quarter of 1998 or 45%. Exclusive of option compensation
expense, discussed in the following paragraph, G S & A increased 16% from the
first quarter 1997 to the first quarter of 1998. Significant items are discussed
below.
Payroll costs and benefits increased 53% from $957,911 to $1,465,806 for the
periods ended March 31, 1997 and 1998 respectively. Payroll costs included a
non-cash charge to compensation for the first quarter of 1998 in the amount of
$383,077 for the exercise of employee stock options. Exclusive of this amount
payroll costs and related benefits increased 12%.
Sales and marketing expenses consisting of advertising, promotion, attendance at
trade shows, printing, and finders fees increased from $47,675 for three months
ending March 31, 1997 to $49,291 for the same period in 1998 for an increase of
3.4%.
<PAGE>
Facilities rent expense increased by 3% from $109,544 to $112,891 for the first
quarter of 1997 to the first quarter 1998. The Company has headquarters in
downtown Denver, Colorado with additional office facilities in Colorado Springs,
Colorado.
The Company experienced a decrease in communications expense from $74,229 for
the quarter ended March 31, 1997 to $61,176 for the quarter ended March 31,1998
or 18%. These expenses included local telephone service, cellular phones and
pager costs and long distance telephone expenses. The Company uses multiple
"800" phone numbers to provide technical support, customer support, and sales
order processing to its growing base of customers.
Legal and accounting expenses increased from $68,603 in the first quarter of
1997 to $216,773 in the first quarter of 1998 or an increase of 216%. This
increase resulted from legal and accounting work required in preparation of the
Company's proxy statement for the Shareholder meeting held on March 12, 1998,
legal work in the preparation of a registration statement on Form S-1 which is
discussed elsewhere in this document, and legal expense incurred in relation to
the lawsuit referenced in Part II, Item 1 of this document, and due diligence
work performed in regards to potential acquisitions.
Outside services, which includes temporary to hire staff and professional
services, decreased 11% from $98,544 to $88,061 from the first quarter of 1997
to the same period in 1998. The Company hires many of the technical support call
center staff and the Web production staff on a "temp to hire" program wherein
the new employee remains on the temporary employment agency's payroll for
approximately ninety days. This allows the staff to be fully evaluated prior to
becoming a full time Company employee.
During the first quarter of 1998, the Company realized a gain of $74,987
relating to the decision by the former President and CEO and another former
officer to forego the remainder of severance payments in exchange for a release
from non-compete agreements. The non-competes were released effective March 6,
1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company has had a series of financings to provide the funds during the
initial growth phases when earning have been negative. These financings are: a
convertible debenture offering in late 1995 and early 1996 that brought in
$490,000 (the debentures were converted to common stock in October, 1996), a
preferred stock offering in mid-1996 that netted $406,000, an initial public
offering in September, 1996, with proceeds of $3,775,900, and a private
placement (with one unit consisting of two common shares and a warrant to
purchase an additional common share at a set price) from June to September, 1997
which raised $1,117,900. Effective October 1, 1997, Mr. Douglas H. Hanson
invested $2,398,577 in common stock and became the President, Chief Executive
Officer and Chairman of the Board of the Company. Mr. Hanson invested $503,615
in March, 1998 by exercising purchased warrants and options that were granted in
October, 1997, at the time of his initial investment. Mr. Hanson has the right
to exercise 3,950,000 common stock purchase warrants at an exercise price of
$1.90 per share of common stock purchased and 191,385 options to purchase shares
of common stock for a price of $2.6125 per share of common stock purchased.
<PAGE>
On May 15, 1998, the Company submitted to the U. S. Securities and Exchange
Commission a registration statement on Form S-1 in order to register the shares
underlying the warrants issued during the Company's initial public offering on
September 5, 1996 along with other securities for which the Company has
committed to register under various agreements. The Warrants are currently
traded on the Nasdaq SmallCap Market under the symbol "RMIIW". Upon the
successful completion of this registration, the Company will have the right to
call these 1,365,000 warrants for $0.25 each, and the warrant holder will have a
thirty day period to exercise the warrant at an exercise price of $3.14 per
underlying share. 1,900,566 common shares are underlying the warrants. If all of
the shares underlying these Warrants are exercised the Company would realize
proceeds of approximately $5,670,000. The Company has not announced plans to
call these Warrants, but may elect to do so upon completion of the registration
statement and as funds are needed.
The Company has received a loan commitment from Phoenix Leasing Incorporated
wherein the Company will have available a financing line available for
acquisition of fixed assets in the amount of $352,000 to be used in four
increments of $88,000. The financing will be secured by the assets purchased and
by an Equipment Loan Bond provided by Amwest Surety Insurance Company. The
Company expects to complete this agreement and initiate the first draw around
the end of May 1998.
The Company believes, based on cash flow projections, that sufficient funds are
available for operations in the short term, and funding alternatives such as
those described above will be considered if additional funds are required.
RMI is an Internet Service Provider ("ISP") with an high growth rate (as
discussed elsewhere in this document). The Company's growth is dependent on
continuing to build a strong infrastructure and hiring high quality sales,
technical, and administrative personnel. In order to build the infrastructure
and acquire the human resources needed to maintain an high growth rate, the
Company has operated with a negative cash flow from operations during 1996 and
1997. The Company's cash requirements are relatively fixed for the near term and
the Company expects to generate positive monthly operating cash flows prior to
the end of 1998 if revenues continue to increase according to expectations
without any significant cost increases. Should revenues not continue to increase
according to expectations, the Company may have to seek additional financing to
fund operating losses or implement reductions in operating expenses. Reductions
in operating expenses, if effected, could adversely affect revenues and
therefore not result in the expected increase in cash flow. The Company does not
currently have access to additional bank financing and therefore additional
financing would have to result from additional issuances of equity or debt
securities.
<PAGE>
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, hereunto duly
authorized.
Date: May 28, 1998
By: /s/ Peter J. Kushar
----------------------------------
Peter J. Kushar
Chief Financial Officer
/s/ Douglas H. Hanson
----------------------------------
Douglas H. Hanson
Chairman, Chief Executive Officer,
and President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET DATED MARCH 31, 1998 AND THE CONSOLIDATED STATEMENT
OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 1998 FOR ROCKY MOUNTAIN INTERNET,
INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<CASH> 1,152,420
<SECURITIES> 0
<RECEIVABLES> 843,671
<ALLOWANCES> 226,857
<INVENTORY> 67,019
<CURRENT-ASSETS> 1,989,689
<PP&E> 3,970,573
<DEPRECIATION> 1,329,005
<TOTAL-ASSETS> 5,152,424
<CURRENT-LIABILITIES> 2,711,519
<BONDS> 0
0
0
<COMMON> 7,286
<OTHER-SE> 1,738,317
<TOTAL-LIABILITY-AND-EQUITY> 5,152,424
<SALES> 65,969
<TOTAL-REVENUES> 1,779,285
<CGS> 50,956
<TOTAL-COSTS> 652,086
<OTHER-EXPENSES> 2,379,343
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 80,826
<INCOME-PRETAX> (1,314,350)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,314,350)
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<NET-INCOME> (1,314,350)
<EPS-PRIMARY> (.19)
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</TABLE>
