UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-QSB
(Mark One)
[X] Quarterly Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarter ended June 30, 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 0-27646
Gum Tech International, Inc.
--------------------------------------------------------------
(Exact name of small business issuer as specified in it charter)
Utah 87-0482806
---- ----------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
246 East Watkins Street
Phoenix, AZ 85004
--------------------------------------
(Address of principal executive offices)
(602) 252-1617
--------------
(Issuer's telephone number)
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 registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No __
There are 6,819,447 shares of the registrant's common stock, no par value
outstanding as of August 10, 1998.
<PAGE>
GUM TECH INTERNATIONAL, INC.
FORM 10-QSB
INDEX
Part I Financial Information Page
Item 1. Condensed Balance Sheet as of
June 30, 1998 1
Condensed Statements of Operations
for the three months ended June 30, 1998
and 1997 3
Condensed Statements of Operations
for the six months ended June 30, 1998
and 1997. 4
Condensed Statements of Cash Flows
for the six months ended June 30, 1998
and 1997 5
Notes to Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
Part II Other Information and Signatures 12
<PAGE>
GUM TECH INTERNATIONAL, INC.
CONDENSED BALANCE SHEET
June 30, 1998
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 2,641,651
Restricted cash 58,242
Accounts receivable, net of allowance for
doubtful accounts of $118 967,902
Inventories 1,230,385
Prepaid expenses and other 140,339
-----------
Total Current Assets 5,038,519
-----------
Property and Equipment, at cost:
Machinery and production equipment 3,677,453
Office furniture and equipment 166,595
Leasehold improvements 232,901
-----------
Total Property and Equipment 4,076,949
Less accumulated depreciation (1,128,817)
-----------
Net Property and Equipment 2,948,132
-----------
Other Assets:
Intangible assets, net of accumulated
amortization of $98,648 172,733
Deposits and other 205,360
-----------
Total Other Assets 378,093
-----------
Total Assets $ 8,364,744
===========
The accompanying notes are an integral part
of these condensed financial statements.
1
<PAGE>
GUM TECH INTERNATIONAL, INC.
CONDENSED BALANCE SHEET
June 30, 1998
(Continued)
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 475,976
Accrued interest 58,889
Customer deposits 47,515
Current portion of long-term debt 363,261
------------
Total Current Liabilities 945,641
------------
Long Term Debt, net of current portion above:
Financial institutions and other 3,534,031
Obligations under capital leases 28,986
Less current portion above (363,261)
------------
Total Long Term Debt 3,199,756
------------
Commitments and Contingencies --
------------
Stockholders' Equity:
Preferred stock: no par value, 1,000,000 shares
authorized, none issued or outstanding --
Common stock: no par value, 10,000,000 share
authorized, 6,669,960 shares issued and outstanding 13,971,547
Additional paid in capital 2,144,540
Accumulated deficit (11,896,740)
------------
Total Stockholders' Equity 4,219,347
------------
Total Liabilities and Stockholders' Equity $ 8,364,744
============
The accompanying ntoes are an integral part
of these condensed financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
GUM TECH INTERNATIONAL, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended June 30,
------------------------------------
1998 1997
------------------------------------
<S> <C> <C>
Net sales $ 1,213,086 $ 584,077
Cost of sales 1,025,272 961,896
----------- -----------
Gross Profit 187,814 (377,819)
Operating expenses 720,403 757,788
Research and development 27,401 21,247
----------- -----------
Income (Loss) From Operations (559,990) (1,156,854)
----------- -----------
Other Income (Expense):
Interest and other income 32,320 50,481
Interest expense (137,698) (120,507)
----------- -----------
Total Other Income (Expense) (105,378) (70,026)
----------- -----------
Income (Loss) Before Provision For Income Taxes (665,368) (1,226,880)
Provision (benefit) for income taxes 150 --
----------- -----------
Net Income (Loss) $ (665,518) $(1,226,880)
=========== ===========
Net Income (Loss) Per Share of Common Stock:
Basic:
Weighted Average Number of Common Shares Outstanding 6,441,724 4,948,740
=========== ===========
Net Income (Loss) Per Share of Common Stock $ (0.10) $ (0.25)
=========== ===========
Diluted:
Weighted Average Number of Common Shares Outstanding 6,441,724 4,948,740
=========== ===========
Net Income (Loss) Per Share of Common Stock $ (0.10) $ (0.25)
=========== ===========
These accompanying notes are an integral part of these condensed financial statements.
3
</TABLE>
<PAGE>
GUM TECH INTERNATIONAL, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Six months ended June 30,
---------------------------
1998 1997
---------------------------
Net sales $ 2,317,517 $ 1,307,688
Cost of sales 1,815,100 2,128,349
----------- -----------
Gross Profit 502,417 (820,661)
Operating expenses 3,989,672 1,385,181
Research and development 141,872 71,217
----------- -----------
Income (Loss) From Operations (3,629,127) (2,277,059)
----------- -----------
Other Income (Expense):
Interest and other income 75,128 81,703
Interest expense (261,624) (859,950)
----------- -----------
Total Other Income (Expense) (186,496) (778,247)
----------- -----------
Income (Loss) Before Provision For Income Taxes (3,815,623) (3,055,306)
Provision (benefit) for income taxes 150 --
----------- -----------
Net Income (Loss) $(3,815,773) $(3,055,306)
=========== ===========
Net Income (Loss) Per Share of Common Stock:
Basic:
Weighted Average Number of
Common Shares Outstanding 6,151,259 4,948,740
=========== ===========
Net Income (Loss) Per Share of Common Stock $ (0.62) $ (0.62)
=========== ===========
Diluted:
Weighted Average Number of
Common Shares Outstanding 6,151,259 4,948,740
=========== ===========
Net Income (Loss) Per Share
of Common Stock $ (0.62) $ (0.62)
=========== ===========
The accompanying notes are an integral part
of these condensed financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
GUM TECH INTERNATIONAL, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Six months ended June 30,
------------------------------
1998 1997
------------------------------
Cash Flows From Operating Activities:
<S> <C> <C>
Net income (loss) $(3,815,772) $(3,055,306)
Adjustments to reconcile net income (loss
to net cash (used) by operating activities:
Depreciation 126,063 285,984
Amortization 50,938 21,299
Compensation from forgiveness of notes receivable 114,012 --
Compensation from extension of stock options 1,478,750 --
Interest expense from beneficial conversion
feature of notes payable -- 665,790
Accrued interest on notes receivable 60,164 (44,697)
Changes in assets and liabilities:
Decrease in accounts receivable 114,332 324,050
Decrease in employee receivable 61,054 --
Decrease in income tax receivable -- 234,440
(Increase) decrease in inventories (197,003) 445,165
(Increase) in prepaid expenses and other (24,134) (78,525)
(Increase) decrease in deposits and other (59,489) 158,715
Increase (decrease) in accounts payable and accrued expenses (265,593) 102,701
Increase (decrease) in customer deposits 32,515 (55,330)
----------- -----------
Net Cash (Used) By Operating Activities (2,324,163) (995,714)
----------- -----------
Cash Flows From Investing Activities:
Capital expenditures (198,825) (147,585)
Receipt of principal on notes receivable 250,000 --
Increase in notes receivable -- (164,130)
----------- -----------
Net Cash Provided (Used) By Investing Activities 51,175 (311,715)
----------- -----------
Cash Flows From Financing Activities:
Proceeds from borrowing -- 2,530,000
Principal payments on notes payable (165,938) (109,207)
Issuance of common stock upon exercise of options and warrants 1,484,397 --
Debt issuance costs incurred (11,733) (259,648)
----------- -----------
Net Cash Provided By Financing Activities 1,306,726 2,161,145
----------- -----------
Net Increase (Decrease) in Cash and Cash Equivalents (966,262) 853,716
Cash and Cash Equivalents at Beginning of Period 3,607,913 1,116,751
----------- -----------
Cash and Cash Equivalents at End of Period $ 2,641,651 $ 1,970,467
=========== ===========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest $ 221,944 $ 103,477
Income taxes -- --
Supplemental Disclosure of Non Cash Investing and Financing Activities:
Conversion of notes payable into common stock $ 399,000 $ --
The accompanying notes are an integral part of these condensed financial statements.
5
</TABLE>
<PAGE>
GUM TECH INTERNATIONAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. The accompanying financial information of the Company is prepared in
accordance with the rules prescribed for filing condensed interim financial
statements and, accordingly, does not include all disclosures that may be
necessary for complete financial statements prepared in accordance with
generally accepted accounting principles. The disclosures presented are
sufficient, in management's opinion, to make the interim information
presented not misleading. All adjustments, consisting of normal recurring
adjustments, which are necessary so as to make the interim information not
misleading, have been made. Results of operations for the six months ended
June 30, 1998 are not necessarily indicative of results of operations that
may be expected for the year ending December 31, 1998. It is recommended
that this financial information be read with the complete financial
statements included in the Company's Annual Report on Form 10-KSB for the
year ended December 31, 1997 previously filed with the Securities and
Exchange Commission.
2. As of December 31, 1997, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 128, "Earnings Per Share", which specifies
the method of computation, presentation and disclosure of earnings per
share. SFAS No. 128 requires the presentation of two earnings per share
amounts, basic and diluted. Basic earnings per share is calculated using
the average number of common shares outstanding. Diluted earnings per share
is computed on the basis of the average number of common shares outstanding
plus the dilutive effect of outstanding stock options using the "treasury
stock" method. The basic and diluted earnings per share are the same since
the Company had a net loss in 1998 and 1997 and the inclusion of stock
options and other incremental shares would be antidilutive. Consequently,
options, warrants and other incremental shares to purchase 1,533,680 and
3,055,500 shares of common stock at June 30, 1998 and 1997, were excluded
from the computation of diluted earnings per share.
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
The Company was organized in 1991 to develop, market and distribute
specialty chewing gum products. The Company's first chewing gum product included
a natural caffeine substance marketed to runners and other exercise enthusiasts
as a source of energy and carbohydrates. In 1994 and 1995, the Company raised
funds through debt and equity financings which were used to establish a new
management team, develop additional chewing gum products, build inventories and
purchase manufacturing equipment for the Company's 28,000 square foot
manufacturing facility, which commenced operations in late March, 1996. All of
the Company's chewing gum products are researched, developed, manufactured and
packaged at the facility. In April 1998, the Company relocated its corporate
offices to the manufacturing facility.
Gum Tech International, Inc. develops and manufactures specialty chewing
gum products for branded and private label customers, as well as products
marketed under the Gum Tech brand. The products contain vitamins, herbals and/or
active drugs ingredients. Gum Tech currently targets four market segments: oral
care, smoking cessation, dietary supplement, and over-the-counter (OTC) drug.
The Company's current strategy is to offer its research and the use of its
formulations in exchange for co-manufacturing agreements with major branded and
private label customers who possess the capital resources to promote functional
chewing gum on a large scale. The Company currently employs approximately 40
people, but also utilizes additional contract workers to meet regular and peak
production requirements.
7
<PAGE>
Results of Operations for the Three Months Ended June 30, 1998 Compared to the
Three Months Ended June 30, 1997
The following table sets forth certain Statement of Operations information
expressed both in dollars and as a percentage of net sales for the periods
indicated:
<TABLE>
<CAPTION>
Three Months Ended June 30,
---------------------------
1998 1997
---- ----
<S> <C> <C> <C> <C>
Net sales $ 1,213,086 100% $ 584,077 100%
Cost of sales 1,025,272 85 961,896 165
----------- --- ----------- ---
Gross profit 187,814 15 (377,819) (65)
Operating expenses 720,403 59 757,788 130
Research and development 27,401 2 21,247 3
----------- --- ----------- ---
Income (Loss) from operations (559,990) (46) (1,156,854) (198)
Interest and other income 32,320 2 50,481 9
Interest expense 137,698 11 120,507 21
Provision (benefit) for income taxes 150 -- -- --
----------- --- ----------- ---
Net income (loss) $ (665,518) (55)% $(1,226,880) (210)%
</TABLE>
Net Sales. Net sales for the three months ended June 30, 1998 were
$1,213,086, an increase of $629,009 or 107% from the same period in 1997.
Contract manufacturing sales increased to more than 90% of the total compared to
less than 20 % in 1997, which reflects the Company's change in strategic focus.
Significant deliveries during the period were diet and energy gums to Herbalife
and initial deliveries of Aspergum (an analgesic gum)and Chooz (an antacid gum)
to Schering-Plough.
Cost of Sales. Cost of sales increased to $1,025,272 for the three months
ended June 30, 1998 or $63,376 above the prior year period. The cost of sales
for the three months ended June 30, 1997 includes $308,140 associated with sales
under the Company's Barter Agreements for which corresponding revenues are not
recorded. The cost of sales for the second quarter of 1998 represents
approximately 85% of Net Sales. The costs for this period were negatively
impacted by start-up and production scale-up costs associated with the initial
manufacturing of new products.
Gross Profit. Gross profit for the quarter increased by $565,633 to
$188,814 for 1998 compared with the same period in 1997.
Operating Expenses. Operating expenses decreased to $720,403 for the
quarter compared to $757,788 the prior year. Decreases in advertising
($124,000), other marketing expenses ($90,000) and travel expenses ($70,000)
reflect the Company's decreased emphasis on direct marketing of its own branded
products. These reductions were offset in part by increases in Contract Services
($139,000) and other outside services. Contract Services increased due to
initial testing of raw materials for the initial production of OTC gum products.
8
<PAGE>
Depreciation expense decreased $75,000 due to the refinancing/restructuring of a
capital lease debt obligation into a term loan facility, which allowed for
depreciating the equipment over its estimated useful life instead of the term of
the lease. The amount of operating expenses allocated to Cost of Goods was
$225,000 in 1998 versus $387,497 in 1997.
Interest Expense. Interest expense for the second quarter of 1998 was
$137,698 , an increase of $17,191 from 1997. The increase is due to the
accelerated amortization of debt issuance costs associated with the conversion
of approximately $399,000 of the Company's Convertible Subordinated Debt into
common stock.
Net Income (Loss). Net loss improved to $665,518 for the three months ended
June 30, 1998, which was a reduction of $561,362 from the prior year's loss.
Results of Operations for the Six Months Ended June 30, 1998 Compared to the Six
Months Ended June 30, 1997.
The following table sets forth certain Statement of Operations information
expressed both in dollars and as a percentage of net sales for the periods
indicated:
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
1998 1997
---- ----
<S> <C> <C> <C> <C>
Net sales $ 2,317,517 100% $ 1,307,688 100%
Cost of sales 1,815,100 78 2,128,349 163
----------- -------- ----------- --------
Gross profit 502,417 22 (820,661) (63)
Operating expenses 3,989,672 173 1,385,181 106
Research and development 141,872 6 71,217 5
----------- -------- ----------- --------
Income (Loss) from operations (3,629,127) (157) (2,277,059) (174)
Interest and other income 75,128 3 81,703 6
Interest expense 261,624 11 859,950 66
Provision (benefit) for income taxes 150 -- -- --
----------- -------- ----------- --------
Net income (loss) $(3,815,773) (165)% $(3,055,306) (234)%
</TABLE>
Net Sales. Net sales for the six months ended June 30,1998 were $2,317,517,
an increase of $1,009,829, or 77%, above the year earlier period. Major product
deliveries during the six months of 1998 were Cigarest's smoking cessation gum,
Herbalife's diet and energy gums and Schering-Plough's Aspergum and Chooz.
Cost of Sales. Cost of Sales for the six month periods decreased $313,249
to $1,815,100 from the $2,128,349 in 1997. The cost of sales for the six months
ended June 30, 1997 include costs of approximately $617,143 associated with
sales under the Company's Barter Agreements for which corresponding revenues are
not reflected.
9
<PAGE>
Gross Profit. Gross Profit for the six months ended June 30, 1998 was
$502,417 or 22% of Net Sales. This represents an increase of more than $1.3
million from the year earlier period, or $706,000 after adjusting for the cost
of the Barter Credits in 1997.
Operating Expenses. Operating expenses for the six months ended June 30,
1998 were $3,989,672 compared to $1,385,181 for the same period 1997. The
increase in expenses is attributable to an extension of stock options to a
former officer of the Company ($1,478,750) and severance compensation expenses
($618,230). The remaining increase is largely attributable to fees associated
with the testing of raw materials for the Company's full scale production of OTC
gum products and higher legal fees.
Research and Development. Research and Development expenses increased by
$70,655 to $141,872 for the six months ended June 30, 1998 versus the prior
year. The increase reflects costs associated with several new products including
Aspergum, Chooz and various dental gum products.
Interest Expense. Interest expense was $261,624 for the six months ended
June 30, 1998, a decrease of $598,326 from the year earlier period. Interest
expense in the 1997 period was impacted by a non-cash charge of $665,790 related
to a beneficial conversion feature received by investors in the Company's
convertible debentures issued in March, 1997.
Net Income (Loss). Net loss for the six months ended June 30, 1998 was
$3,815,773 compared to a net loss of $3,055,306 for the same period in 1997.
Liquidity and Capital Resources
As of June 30, 1998, the Company's working capital was $4.09 million
compared to $5.09 million at December 31, 1997. For the six month period ended
June 30, 1998, the Company experienced a decrease in cash used by operating
activities of $2.3 million primarily as a result of the net loss incurred.
Investing activities provided $51,175 of cash for the six months ended June
30, 1998 compared to $311,715 of cash used in the same period of 1997. The
amount for 1998 reflects the repayment of two outstanding notes from former
officers of the Company which offset the cost of acquiring additional
manufacturing equipment in the period. In addition to the acquisition of
additional manufacturing equipment in 1997, investing activities in 1997 also
reflect a note receivable from a former officer.
Financing activities provided $1.31 million in cash for the six months
ended June 30, 1998 compared to $2.16 million for the same period in 1997. The
1998 amount reflects cash received form the exercise of common stock options and
warrants, while the 1997 reflects the issuance of the Company's convertible
notes in March 1997.
10
<PAGE>
Outlook
The company recently announced agreements to manufacture dental gums for
Breath Asure, Inc. and Ranir/DCP Corp. Initial sales under these agreements are
anticipated in the third quarter of 1998. In order to meet production
requirements under these agreements and other anticipated sales, the Company is
currently evaluating leasing additional manufacturing space in the vicinity of
its existing facility.
The Company's future results of operations and other forward looking
statements contained in this section, in particular the statement(s) concerning
plant efficiencies and capacities, capital spending, research and development
and other expenses involve a number of risks and uncertainties. In addition to
the factors discussed above, among the other factors that could cause actual
results to differ materially are the following: business conditions and the
general economy; competitive factors, such as rival gum manufacturers' pricing
and marketing efforts; availability of third-party material products at
reasonable prices; unused barter credits, if any; risk of nonpayment of accounts
receivable; risks of inventory obsolescence due to shifts in market demand;
timing of product introductions; and litigation involving product liabilities
and consumer issues.
11
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings
-----------------
On October 16, 1996, a lawsuit was filed against the Company in the United
States District Court for the Central District of California, CV-95-9784. The
action is entitled GCN Products, Inc. vs. Roy Kelly, et al. The complaint, as it
relates to the Company, principally alleges that the Company engaged in unlawful
rebates, appropriations and overcharges, commercial bribery, fraud and unjust
enrichment. Plaintiff seeks compensatory and punitive damages. The Company
denies all allegations and intends to vigorously defend the suit.
On August 27, 1997, a lawsuit was filed by Paul R. Janssens-Lens against
Gum Tech International, Inc., in the case of Janssens-Lens v. Gum Tech
International, Inc., Kensington Securities, Inc., Kirtis Wyatt and Jane Doe
Wyatt in the Superior Court of Arizona, in and for the County of Maricopa, case
number CV97-15896. The Jansenns-Lens lawsuit alleges both breach of contract and
tort actions, including intentional interference with prospective economic
advantage, misrepresentation, securities fraud and consumer fraud and seeks
compensatory damages in an amount of no less than $1,680,000, together with an
award of punitive damages in an amount to be determined at trial. The lawsuit
settled in the early stages between plaintiff Paul R. Janssens-Lens and
defendants Kensington Securities, Inc. and Kirtis Wyatt. The Company did not
participate in this settlement agreement. The plaintiff is now in the process of
determining whether he believes he still has a viable cause of action against
the Company. In the event the plaintiff elects to proceed against the Company,
the Company intends to vigorously defend the lawsuit. The Company believes it is
insured for its costs in this matter.
On March 26, 1998, Roy Kaplan filed a charge of discrimination with the
California Department of Fair Employment and Housing and the Equal Employment
Opportunity Commission alleging discrimination based on age and religion.
Specifically, he alleges that he was terminated from his position as Executive
Vice President of Sales because of his age (63) and religion (Jewish). The
Company denies Mr. Kaplan's allegations and anticipates that the resolution of
this matter will not have a material impact on the Company.
Item 2. Changes in Securities
---------------------
None
Item 3. Defaults Upon Senior Securities
-------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
At the 1998 Annual Meeting of Stockholders, held on July 17, 1998, the
Stockholders approved the following items:
12
<PAGE>
(1) Election of five directors to serve for the following year or until their
successors are elected.
Name For Abstain
---- --- -------
Bruce Jorgenson 5,651,753 55,383
Gary Kehoe 5,652,353 54,783
William D. Boone 5,652,353 54,783
W. Brown Russell 5,652,353 54,783
William A. Yuan 5,651,953 55,183
(2) Proposal to approve an amendment to the Articles of Incorporation of the
Company increasing the number of authorized shares of the Company's Common
Stock from 10 million shares to 20 million shares.
For 5,343,040
Against 317,861
Abstain 46,235
---------
Total 5,707,136
Item 5. Other
-----
None
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
A. Exhibits
None
B. Reports on Form 8-K
None
13
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Gum Tech International, Inc.
/s/ Gary S. Kehoe
- ----------------------
Gary S. Kehoe
President and
Chief Operating Officer
/s/ William J. Hemelt
- ----------------------
William J. Hemelt
Chief Financial Officer
August 14, 1998
14
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 2,641,651
<SECURITIES> 0
<RECEIVABLES> 968,020
<ALLOWANCES> 118
<INVENTORY> 1,230,385
<CURRENT-ASSETS> 5,038,519
<PP&E> 4,076,949
<DEPRECIATION> 1,128,817
<TOTAL-ASSETS> 8,364,744
<CURRENT-LIABILITIES> 945,641
<BONDS> 3,199,756
0
0
<COMMON> 13,971,547
<OTHER-SE> (9,752,200)
<TOTAL-LIABILITY-AND-EQUITY> 8,364,744
<SALES> 2,317,517
<TOTAL-REVENUES> 2,317,517
<CGS> 1,815,100
<TOTAL-COSTS> 4,131,544
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 261,624
<INCOME-PRETAX> (3,815,623)
<INCOME-TAX> 150
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,815,773)
<EPS-PRIMARY> (0.62)
<EPS-DILUTED> (0.62)
</TABLE>
