SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
FOR THE QUARTERLY PERIOD 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 0-28898
-------
Independence Brewing Company
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2763840
------------------------------ -------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1000 East Comly Street, Philadelphia, Pennsylvania 19149
--------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(215) 537-2337
--------------
(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 ___
---
Indicate the number of shares outstanding of each of the issued classes of
common equity, as of the latest practicable date: On August 14, 1998,
3,357,078 shares of the issuer's Common Stock, no par value, and 4,600,000
Redeemable Warrants were outstanding.
<PAGE>
Independence Brewing Company
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
PART I. FINANCIAL INFORMATION 2
Item 1. Financial Statements 2
Balance Sheet at December 31, 1997 and
June 30, 1998 (unaudited) 3
Statements of Operations for the Three Months Ended and Six
Months Ended June 30, 1998 and 1997 (unaudited) 4
Statements of Changes in Shareholders Equity for the Six
Months Ended June 30, 1998 (unaudited) and the Year
Ended December 31, 1997 5
Statements of Cash Flows for the Six Months Ended
June 30, 1998 and 1997 (unaudited) 6
Notes to Financial Statements 7
Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations 9
PART II. OTHER INFORMATION 12
Item 2. Changes in Securities and Use of Proceeds
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES
</TABLE>
-2-
<PAGE>
Independence Brewing Company
BALANCE SHEETS
<TABLE>
<CAPTION>
Period Ended
-------------------------------
June 30, Dec. 31,
ASSETS 1998 1997
----------- -----------
(unaudited)
<S> <C> <C>
Current assets
Cash and cash equivalents $ 394,058 $ 1,229,209
Accounts receivable 61,255 34,211
Inventory 210,662 164,787
----------- -----------
Total current assets 655,975 1,428,207
Equipment & leasehold improvements, net 2,141,901 2,154,541
Other assets 245,633 139,761
----------- -----------
Total assets $ 3,053,509 $ 3,722,509
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses $ 337,530 $ 295,571
Current portion of long-term debt 127,954 108,000
----------- -----------
Total current liabilities 465,484 403,571
Long-term liabilities
Deferred rent 51,853 46,579
Long-term debt 385,137 406,670
----------- -----------
Total liabilities 902,474 856,820
Shareholders' equity
Common stock, no par value - authorized, 19,000,000 shares
and 19,900,000 in 1996 and 1997 respectively; outstanding,
3,357,058 and 3,207,078 shares in 1998 and 1997, respectively; 9,069,748 8,976,634
Accumulated deficit (6,918,713) (6,110,945)
----------- -----------
Total shareholders' equity 2,151,035 2,865,689
----------- -----------
Total liabilities and shareholders' equity $ 3,053,509 $ 3,722,509
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
-3-
<PAGE>
Independence Brewing Company
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------------------------ ----------------------------
1998 1997 1998 1997
---------- ---------- ----------- ----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Sales $ 291,946 $ 151,177 $ 463,064 $ 252,727
Less excise taxes 11,903 7,320 21,288 14,616
---------- ---------- ---------- -----------
Net sales 280,043 143,857 441,776 238,111
Cost of goods sold 316,977 227,140 662,704 487,036
---------- ---------- ---------- -----------
Gross loss (36,934) (83,283) (180,928) (248,925)
Promotional and selling expenses 104,962 128,894 274,988 171,190
General and administrative expenses 156,613 250,858 344,585 482,171
---------- ---------- ---------- -----------
261,575 379,752 619,583 653,361
Operating loss (298,509) (463,035) (800,511) (902,286)
---------- ---------- ---------- -----------
Other income (expense)
Interest expense (9,457) (12,660) (19,814) (2,970,474)
Other income, net 6,514 51,552 12,957 58,821
---------- ---------- ---------- -----------
(2,943) 38,892 (7,257) (2,911,653)
Loss before income taxes (301,452) (424,143) (807,768) (3,813,939)
Income taxes 0 0 0 0
---------- ---------- ---------- -----------
Net loss $ (301,452) $ (424,143) $ (807,768) $(3,813,939)
========== ========== ========== ===========
Per share data
Net loss per common share $ (0.09) $ (0.13) $ (0.25) $ (1.28)
========== ========== ========== ===========
Weighted average shares outstanding 3,354,281 3,207,078 3,281,235 2,984,550
========== ========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
-4-
<PAGE>
Independence Brewing Company
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Six Months ended June 30, 1998 (unaudited) and the
year ended December 31, 1997
<TABLE>
<CAPTION>
Common stock
--------------------------- Total
Number of Accumulated shareholders'
shares Amount deficit equity
--------- -------- ----------- -------------
<S> <C> <C> <C> <C>
Balance at January 1, 1997 2,307,078 3,691,428 (1,334,356) 2,357,072
Issuance of common stock 900,000 5,285,206 - 5,285,206
Net loss for the year ended
December 31, 1997 - - (4,776,589) (4,776,589)
----------- ----------- ----------- -----------
Balance at December 31, 1997 3,207,078 8,976,634 $(6,110,945) 2,865,689
Issuance of common stock 149,980 93,114 - 93,114
Net loss for the six months ended
June 30, 1998 - - (807,768) (867,768)
----------- ----------- ----------- -----------
Balance at June 30, 1998 $ 3,357,058 $ 9,069,748 $(6,918,713) $ 2,151,035
=========== =========== ========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
-5-
<PAGE>
Independence Brewing Company
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months ended
June 30,
------------------------------
1998 1997
------------ ----------
(unaudited)
<S> <C> <C>
Cash flows from operating activities
Net loss $ (807,768) $ (3,813,939)
Adjustments to reconcile net loss to net
cash used in operating activities
Depreciation and amortization 75,906 59,689
Amortization of original issue discount - 2,981,931
Increase (decrease) in accounts receivable (27,014) (24,957)
Increase (decrease) in inventory (45,875) (4,292)
Decrease (increase) in other assets 105,872 335,840
Increase in accounts payable,
accrued expenses and deferred rent 38,805 (423,390)
---------- ------------
Net cash used in operating
activities (660,074) (889,118)
Cash flows from investing activities
Purchases (Sale) of property and equipment (12,640) (652,624)
(Purchases) of intangible (trademark/goodwill) (115,234) (90,000)
---------- ------------
Net cash used in investing activities (127,474) (742,624)
Cash flows from financing activities
Proceeds from issuance of common stock 0 5,285,206
Proceeds (repayments) from subordinated convertible notes 0 (800,000)
Proceeds (repayments) from preferred stock 0 (700,000)
Payment of outstanding debt (47,603) (49,705)
Payments under capital lease obligations 0 (2,592)
Advances from/loans to officers, net 0 10,000
---------- ------------
Net cash provided by financing
activities (used in) (47,603) 3,742,909
Net increase (decrease)in cash and cash
equivalents (835,151) 2,111,167
Cash and cash equivalents balance at
beginning of period 1,229,209 363,484
---------- ------------
Cash and cash equivalents at balance
end of period $ 394,058 $ 2,474,651
========== ============
</TABLE>
The accompanying notes are an integral part of these statements.
-6-
<PAGE>
Independence Brewing Company
NOTES TO FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Independence Brewing Company (the Company) is a regional producer of fresh,
high-quality, preservative-free, craft brewed ales, lagers, porters and
seasonal beers. The Company competes with other beer and beverage companies
not only for consumer acceptance and loyalty but also for shelf and tap
space in retail establishments and for marketing focus by the Company's
third-party wholesale distributors and their customers, all of which also
distribute and sell other beers and alcoholic beverage products.
The manufacture and sale of alcoholic beverages is a business that is highly
regulated and taxed at the federal, state and local levels. The Company's
operations may be subject to more restrictive regulations and increased
taxation by federal, state and governmental agencies than are those of
non-alcohol related businesses.
1. Interim Financial Information
The financial statements of the Company as of June 30, 1998 and for the
six months ended June 30, 1998 and 1997 and related footnote information
are unaudited. All adjustments (consisting only of normal recurring
adjustments) have been made which, in the opinion of management, are
necessary for a fair presentation. Results of operations for the six
months ended June 30, 1998 are not necessarily indicative of the results
that may be expected for any future period.
2. Loss Per Common Share
The Company adopted the provisions of SFAS No. 128, Earnings Per Share,
which eliminates primary and fully diluted earnings per share (EPS) and
requires presentation of basic and diluted EPS in conjunction with the
disclosure of the methodology used in computing such EPS. Basic EPS excludes
dilution and is computed by dividing income available to common shareholders
by the weighted average common shares outstanding during the period. Diluted
EPS takes into account the potential dilution that could occur if securities
or other contracts to issue common stock were exercised and converted into
common stock. Prior period EPS calculations have been restated to reflect
the adoption of SFAS No. 128. Options and warrants are not considered
because they are antidilutive.
NOTE B - INVENTORIES
Inventories consist of the following:
June 30, December 31,
1998 1997
--------- -----------
(unaudited)
Raw materials $159,135 $ 45,903
Work in process 36,096 32,469
Finished goods 12,431 20,272
Packaging 3,000 66,143
-------- --------
$210,662 $164,787
======== ========
Page 7 of 12
<PAGE>
NOTE C - LOSS PER SHARE
The Company's calculation of loss per share in accordance with SFAS No. 128
is as follows:
<TABLE>
<CAPTION>
Six months ended June 30, 1998
-------------------------------------------
Loss Shares Per share
(numerator) (denominator) amount
----------- ------------- ---------
<S> <C> <C> <C>
Basic loss per share
Net loss $ (807,768) 3,281,235 $(0.25)
Effect of dilutive securities
Options - - -
----------- --------- ------
Diluted loss per share
Net loss plus assumed conversions $ (807,768) 3,281,235 $(0.25)
=========== ========= ======
</TABLE>
Options to purchase 65,000 shares of common stock at a weighted average
exercise price of $1.96 per share were outstanding during the periord. They
were not included in the computation of diluted loss per share because the
option exercise price was greater than the average market price.
<TABLE>
<CAPTION>
Six months ended June 30, 1997
-----------------------------------------
Loss Shares Per share
(numerator) (denominator) amount
----------- ------------- ---------
<S> <C> <C> <C>
Basic loss per share
Net loss $(3,813,939) 2,984,550 $(1.28)
Effect of dilutive securities
Options - - -
----------- --------- ------
Diluted loss per share
Net loss plus assumed conversions $(3,813,939) 2,984,550 $(1.28)
=========== ========= ======
</TABLE>
NOTE D - ACQUISITIONS
1. On February 4, 1998, the Company executed a term sheet with Whitetail
Brewing, Inc. in which the parties agreed that the Company would
receive an exclusive license of the trademark and logo for "Nittany
Ale", a newly developed Whitetail Brewing product, for a five (5) year
term, in consideration for which the Company agreed to pay the
licensor a royalty for every case of Nittany Ale sold plus $10,000 in
cash to release the licensed property from certain liens. In addition,
the Company agreed to engage Wade E. Keech, President and founder of
Whitetail Brewing, as exclusive sales representative of the Company in
the central and western Pennsylvania regions for which Mr. Keech will
receive commissions from the sales of all of the Company's products,
including Nittany Ale. The Company has commenced sales of the Nittany
Ale products and expects to execute definitive agreements
incorporating the foregoing terms by the end of the third quarter
of 1998.
2. On March 25, 1998, the Company completed the acquisition of certain
assets of America U-Brew, Inc., and its affiliates used in connection
with the manufacture, sales and marketing of Gravity Ale, including
trademarks, trade names, logo, brand names, recipes and formulas,
packaging as well as equipment used in painting the glass bottles used
for the Gravity Ale products as well as certain finished goods
inventory. In connection with this Acquisition, the Company issued
100,000 shares of Common Stock and entered into three separate
Promissory Notes totalling approximately $61,000.
3. On April 6, 1998, the Company completed the purchase of all of the
assets of Blue Hen Beer Company, Ltd., including trademarks, trade
names, logo, and brand names connected with the "Blue Hen" brand,
packaging and certain finished goods inventory. In connection with
this acquisition, the Company issued 50,000 shares of Common Stock and
entered into a Promissory Note totalling $10,000. The Note has
subsequently been paid in full.
Page 8 of 12
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Net sales for the quarter ended June 30, 1998 were $280,043 as compared to
$143,857 for the comparable year-ago quarter. Net sales for the six months ended
June 30, 1998 were $441,776 as compared with $238,111 for the comparable
year-ago period. The increase in net sales from the comparable periods last year
was mainly due to increased volumes, specifically the continuation of case sales
of Uncle ESB, the Company's spring seasonal product, and from the introduction
of both the Betsy's Kristall Wheat summer seasonal and the summer Sampler pack,
both of which were sold as a bottled product. Sales increases were also
attributed to the limited advertising and heavy promotional campaigns begun
earlier in the year.
Excise taxes for the quarter ended June 30, 1998 were $11,903 as
compared with $7,320 for the comparable year-ago quarter. Excise taxes for the
six months ended June 30, 1998 were $21,288 as compared with $14,616 for the
comparable year-ago period. Excise taxes as a percentage of sales for the
quarter ended June 30, 1998 were approximately 4% as compared with 5% for the
comparable year-ago quarter. Excise taxes as a percentage of sales for the six-
month period ended June 30, 1998 was approximately 5% as compared with 6% for
the comparable year-ago period. The company pays federal and certain local taxes
on sales volume. Accordingly, as sales increase, excise taxes paid by the
Company will increase unless the Company increases shipments to jurisdictions
where local excise taxes are paid by the third party wholesale distributor
rather than the brewer, as is the case in Maryland and the District of Columbia.
Costs of goods sold for the quarter ended June 30, 1998 were $316,977
or 109% of sales, as compared to $227,140 or 150% of sales for the comparable
year-ago quarter. Costs of goods sold for the six months ended June 30, 1998
were $622,704 or 134% of sales as compared to $487,036 or 193% of sales for the
comparable year-ago period. The decrease in costs of goods sold from the
comparable periods last year was primarily due to a decrease in the cost of
materials, outside services, and production salaries. The Company obtained
better pricing from vendors and used greater economies-of-scale buying.
Decreases in outside services and repairs and maintenance was mainly due to the
completion of the installation of the new fermenting tanks and bottling line.
Production salary expense decreased compared to net sales due to efficiencies
achieved with the introduction of the Company's new bottling equipment.
Advertising, promotional, and selling expenses for the quarter ended
June 30, 1998 were $104,962 or 36% of sales, as compared to $128,894 or 85% of
sales for the comparable year-ago quarter. Advertising, promotional and selling
expenses for the six months ended June 30, 1998 were $274,998 or 60% of sales,
as compared to $171,190 or 67% of sales for the same period last year. The
decrease in advertising expense from the comparable periods of a year ago was
primarily due to the completion last year of a major advertising campaign which
was not renewed in 1998, and included billboard, magazine and radio
advertisements. Decreases include general advertising and print, radio, and
billboard mediums.
<PAGE>
General and administrative expenses for the three months ended June 30,
1998 were $156,613 or 54% of net sales, as compared to $250,858 or 166% of sales
for the comparable year-ago quarter. General and administrative expenses for the
six months ended June 30, 1998 were $344,585 or 74% of sales, as compared to
$482,171 or 191% for same period last year. The decrease in G&A expense from the
comparable periods of a year ago were primarily due to decreased salary,
amortization, office expense, professional fees costs, and outside services. The
Company decreased salary expenses in connection with the departure of the Chief
Operating Officer. Amortization decreased as a result of decreased write-off of
financing fees. Professional fees were lowered due to less legal and accounting
costs associated with the completion of the Company's initial public offering.
Interest expense for the quarter ended June 30, 1998 was $9,457 as
compared to $12,660 for the comparable year-ago quarter. Interest expense for
the six months ended June 30, 1998 was $19,814 as compared to $2,970,474 for
the comparable year-ago period. Interest expense was substantially higher during
the first half of 1997 when compared to the same period in 1998 due to the
write-off of unamortized original issue discount and financing costs aggregating
approximately $2,916,000 that arose as a result of the Company's debentures and
series B preferred stock from the net proceeds of the Company's initial public
offering in the first quarter of 1997. The interest incurred for the first six
months of 1998 was associated with the Company's promissory note in favor of
CoreStates Bank, N.A. in connection with a Small Business Administration loan
(the "SBA Loan") and Philadelphia Industrial Development Corporation notes
("PIDC Note").
Other income, net for the three and six months ended June 30, 1998 was
$6,514 and $12,557 respectively, compared to $51,552 and $58,821 for the same
periods of a year ago. The decrease in other income, net from comparable
year-ago periods was primarily due to a decline in interest income as the
Company's cash balance declines due to operating losses and equipment purchases.
<PAGE>
Liquidity and Capital Resources
To date, the company has funded its operations and capital reserve
requirements through the issuance of Common Stock, the SBA loan, the PIDC notes,
and the issuance of certain subordinated convertible notes in 1995 and during
1996. In February 1997, the Company completed its initial public offering. The
Company received approximately $5,285,000 of proceeds, net of underwriting
discounts and underwriting expenses (including the purchase of 600,000
redeemable warrants upon partial exercise of the Underwriter's discount and
offering expenses) from the initial public offering.
Cash flows used in operating activities for the six months ended June
30, 1998 totaled $660,074 as compared to $889,118 for the comparable year-ago
period. The decrease in use of cash is primarily due to the company's decreased
operating loss and a decrease in the purchase of other assets.
Cash used in investing activities for the six months ended June 30,
1998 totaled $127,474 as compared to $742,624 for the same period last year. The
decrease in the use of cash was the result of the sale of a glycol chiller and a
delivery truck, in addition to the acquisition and purchase of the Gravity
trademark.
Cash provided by financing activities for the six months ended June 30,
1998 totaled $47,603 as compared to $3,742,909 for the same period last year.
This decline from the same period of a year ago reflects the net proceeds of
$5,285,206 from the Company's initial public offering during the first quarter
of 1997. The decline also reflects the repayment of certain debentures and
Series B Preferred Stock and other outstanding debt to CoreStates Bank and PIDC.
The Company had cash and cash equivalents at June 30, 1998 and December
31, 1997 of $394,058 and $1,229,209, respectively.
<PAGE>
Part II - Other Information
Item 2. Changes in Securities and Use of Proceeds
Changes in Securities
On March 30, 1998, the Company issued 100,000 shares of its common
stock and on April 6, 1998, the Company issued 50,000 shares of its Common
Stock to certain corporations as described below.
There were no underwriters retained by the Company in connection with
the issuance of the securities described in this Part II.
The Company relied on Section 4(2) of the Securities Act of 1993 in
connection with the issuance of its securities as described in this Part II.
The securities as described in this Part II were issued by the Company
in connection with certain acquisitions as follows:
On March 25, 1998, the Company completed the acquisition of certain
assets of America U-Brew, Inc., and its affiliates used in connection with the
manufacture, sales and marketing of Gravity Ale, including trademarks, trade
names, logo, brand names, recipes and formulas, packaging as well as equipment
used in painting the glass bottles used for the Gravity Ale products as well as
certain finished goods inventory. In addition to an undertaking to pay America
U-Brew up to the sum of $61,000 under certain conditions, the Company also
issued 100,000 shares of its common stock to America U-Brew in consideration for
the assets on March 30, 1998.
On April 6, 1998, the Company completed the purchase of all of the
assets of Blue Hen Beer Company, Ltd., including trademarks, trade names, logo,
and brand names connected with the "Blue Hen" brand, packaging and certain
finished goods inventory. In addition to an undertaking to pay Blue Hen Beer
Company, Ltd., the sum of $10,000, the Company also issued 50,000 shares of its
common stock to Blue Hen Beer Company, Ltd. in consideration for the assets on
April 6, 1998.
Use of Proceeds
On February 14, 1997, the Company sold 900,000 shares of Common Stock
at a price of $5 per share and sold 4,000,000 Redeemable Warrants at a price of
$.50 per share aggregating $6,500,000. In connection with the Offering, the
Company granted to the underwriters a 45-day option to purchase up to an
additional 135,000 shares of Common Stock at a price of $5 per share and/or
purchase an additional 600,000 Redeemable Warrants at a price of $.50 per share.
On March 13, 1997, the underwriters exercised its option to purchase the
additional 600,000 Redeemable Warrants aggregating $300,000. The underwriting
discounts and commissions and expenses of the Offering were approximately
$1,515,000 and the net proceeds to the Company was $5,285,000.
As of June 30, 1998, the Company has utilized $4,578,000 of the net
proceeds from the Offering. The funds were utilized as follows: 1) the repayment
of indebtedness of $1,550,000; 2) purchase and install machinery and equipment
of $731,000 and 3) working capital purposes of $2,297,000. As of June 30, 1998,
the Company had the remaining $707,000 of net proceeds invested in interest
bearing accounts.
Item 6. Exhibits and Reports on Form 8-K
None
(a) Exhibits
27.1 Financial Data Schedule at June 30, 1998
27.2 Financial Data Schedule at June 30, 1997
(b) Reports filed on Form 8-K.
None
Page 11 of 12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Independence Brewing Company
By: /s/ Robert W. Connor, Jr.
------------------------------------
Robert W. Connor, Jr.
President, Chief Executive Officer
(and principal accounting officer)
Date: , 1998
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1.000
<CASH> 394,058
<SECURITIES> 0
<RECEIVABLES> 61,255
<ALLOWANCES> 0
<INVENTORY> 210,662
<CURRENT-ASSETS> 665,975
<PP&E> 2,495,384
<DEPRECIATION> 311,672
<TOTAL-ASSETS> 3,053,509
<CURRENT-LIABILITIES> 465,484
<BONDS> 0
0
0
<COMMON> 9,069,748
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 3,053,509
<SALES> 463,064
<TOTAL-REVENUES> 441,776
<CGS> 662,704
<TOTAL-COSTS> 619,583
<OTHER-EXPENSES> 12,557
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,814
<INCOME-PRETAX> (807,768)
<INCOME-TAX> 0
<INCOME-CONTINUING> (807,768)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (807,768)
<EPS-PRIMARY> (0.25)
<EPS-DILUTED> (0.25)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1.000
<CASH> 2,474,651
<SECURITIES> 0
<RECEIVABLES> 42,083
<ALLOWANCES> 0
<INVENTORY> 139,108
<CURRENT-ASSETS> 2,655,842
<PP&E> 1,998,499
<DEPRECIATION> 225,344
<TOTAL-ASSETS> 4,763,624
<CURRENT-LIABILITIES> 434,728
<BONDS> 460,056
0
0
<COMMON> 8,976,634
<OTHER-SE> (5,148,295)
<TOTAL-LIABILITY-AND-EQUITY> 4,763,624
<SALES> 252,727
<TOTAL-REVENUES> 238,111
<CGS> 487,036
<TOTAL-COSTS> 653,361
<OTHER-EXPENSES> 58,821
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,970,474
<INCOME-PRETAX> (3,813,939)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,813,939)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,813,939)
<EPS-PRIMARY> (1.28)
<EPS-DILUTED> (1.28)
</TABLE>
