SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended 6/30/98
Commission file number 000-22775
NEWRIDERS, INC.
________________________________________________________________
(Exact name of small business issuer as specified in its charter)
Nevada 88-0361202
____________________________ ________________________________
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization
567 San Nicolas Drive, Suite 400
Newport Beach, California 92660
________________________________________
(Address of principal executive offices)
(949) 718-4630
________________________________________________
(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 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
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
As of August 11, 1998, the issuer had outstanding 18,498,316 shares of
its Common Stock, $0.001 par value.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The unaudited consolidated balance sheet of Newriders, Inc., a Nevada
corporation (the "Company"), as of June 30, 1998 and the related audited
consolidated balance sheet of the Company as of December 31, 1997, the
unaudited related consolidated statements of operations and cash flows for the
three and six month periods ended June 30, 1998 and June 30, 1997, and the
notes to the financial statements are attached hereto as Appendix "A" and
incorporated herein by reference.
The accompanying financial statements reflect all adjustments which are,
in the opinion of management, necessary to present fairly the financial
position of the Company consolidated with Newriders Limited, a California
corporation, the Company's wholly-owned subsidiary.
Newriders, Inc. was organized on July 13, 1995 under the name of American
Furniture Wholesale, Inc. Newriders Limited was formed on November 8, 1994 in
the State of California. Newriders, Inc. and Newriders Limited entered into a
Plan of Reorganization on June 28, 1996, whereby Newriders, Inc. acquired 100%
of the outstanding Common Stock of Newriders Limited in exchange for
13,250,000 shares of the common stock of Newriders, Inc. issued to the former
shareholders of Newriders Limited (the "Reorganization"). A total of
11,000,000 of the shares issued in the Reorganization were newly issued and
2,250,000 shares were concurrently reacquired from an existing stockholder and
reissued as part of the Reorganization. In connection with the
Reorganization, the Company amended its Articles of Incorporation effective
July 1, 1996 to change its name to Newriders, Inc. Throughout this document
the "Company" shall mean the combined entities of Newriders, Inc. and its
subsidiary, Newriders Limited.
The acquisition of Newriders Limited was recorded as a recapitalization
of Newriders Limited, whereby Newriders Limited is treated as the surviving
entity for accounting purposes.
Newriders Limited leases facilities in Fresno, California, which, until
January, 1998, were operated as an Easyriders Cafe Restaurant and Apparel and
Merchandise Store combination, and an Easyriders Motorcycle and Accessory
Shop. From May, 1997, until July 22, 1998, the Company also owned and
operated an Easyriders Cafe Restaurant and Apparel Store in Myrtle Beach,
South Carolina, which was sold to a related party on that date. The Fresno,
California location operated from approximately May, 1996 until being closed
in January, 1998. Management now expects to reopen the Fresno location in
late 1998 or early 1999, after proposed renovations are completed.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Proposed Reorganization.
As described in the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1997, the Company proposes to engage in a transaction (the
"Proposed Reorganization") which would result in the formation of a holding
company which would own the Company, and the acquisition by the holding
company of Paisano Publications, Inc., a California corporation engaged in a
specialty magazine publishing business, and certain of its affiliates
(collectively "Paisano Publications"), and M & B Restaurants, L.C., a Texas
limited liability company, doing business as El Paso Bar-B-Que ("El Paso Bar-
B-Que"), engaged in the operation of four barbecue restaurants. The Company
has caused the formation of Easyriders, Inc., a Delaware corporation, to be
the proposed holding company, and has caused Easyriders, Inc. to prepare and
file with the Securities and Exchange Commission a Registration Statement on
Form S-4 with respect to the Proposed Reorganization, and has included therein
a form of Prospectus/Proxy Statement pursuant to which the shareholders of
Newriders, Inc. will be asked to vote, among other things, to approve the
Proposed Reorganization. The solicitation proposed to be conducted through
the Prospectus/Proxy Statement included in the Registration Statement will not
be conducted until the Registration Statement has been declared effective.
Results of Operations.
During the three months ended June 30, 1998, the Company experienced a
net loss in the amount of $3,966,181 compared to the net loss of $452,772 for
the three months ended June 30, 1997. Net loss per share was $0.23 for the
three months ended June 30, 1998. The cumulative net loss for the six months
ended June 30, 1998, was $5,197,174 as compared to a net loss for the six
months ended June 30, 1997, of $760,302. Net loss per share was $0.30 for the
six months ended June 30, 1998.
The Company attributes the increased losses for the three and six month
periods ended June 30, 1998 primarily to an increase in expenses, although the
Company also reported a decrease in sales for the three and six month periods
ended June 30, 1998. The components of the increase in expenses of $3,009,294
for the three month period ended June 30, 1998, as compared to the three month
period ended June 30, 1997, were increases of $132,404 in restaurant and store
operating expenses, $356,037 in selling, general and administrative expenses,
$1,888,867 in stock issuance expense and $631,986 loss on sale of restaurant
and apparel store to a related party.
Increased restaurant and store operating expenses for the three and six
month periods ended June 30, 1998, are the result of the simultaneous
operation of the Myrtle Beach location in the periods, and the continuing
fixed costs associated with the Fresno location. Fixed costs for the Fresno
location continued despite the closing of that location for remodeling. For
the three months ended June 30, 1997, restaurant and store operating expenses
related primarily to the Fresno location; the Myrtle Beach location having
opened in May, 1997.
The Company attributes increased selling, general and administrative
expenses to increased overhead for accounting, legal and professional fees and
the addition of corporate staff related to the conduct of the Proposed
Reorganization and the anticipated administrative needs of the Company
following the Proposed Reorganization. General and administrative expenses
should generally be viewed as likely to recur in the normal course of
business, although the amounts of such expenditures will vary.
Stock issuance expense for the three and six month periods ended June 30,
1998 relates to the issuance of 1,000,000 shares of Newriders' common stock to
Joseph Teresi. The stock issuance expense represents the difference between
the fair market value of the shares issued and the forgiveness of $211,133 in
accounts payable by Mr. Teresi.
The loss on sale of restaurant to related party recorded as of June 30,
1998, relates to the sale of the Company's restaurant and apparel store in
Myrtle Beach, South Carolina to Easyriders of Myrtle Beach, Inc., and
represents the difference between the price at which such assets were sold and
the historical cost basis of the Company in such assets. Easyriders of Myrtle
Beach, Inc. is a South Carolina corporation, 50% of the outstanding common
stock is owned by Leon Hatcher, a director and beneficial owner of more than
5% of the outstanding common stock of the Company. The purchase price for the
assets was $607,420 plus the assumption of certain liabilities. The
consideration was paid in the form of a $100,000 cash down payment, and a
promissory note for the balance, bearing interest at the rate of twelve
percent (12%) per annum. Principal is due and payable forty-five (45) days
after the July 22, 1998 closing date, and interest accrues if the principal is
not paid in full on or before the due date. The promissory note is secured by
a first priority lien on 300,000 shares of the Company's common stock owned
and pledged by Leon Hatcher.
Easyriders of Myrtle Beach, Inc. has assumed and agreed to pay all of the
Company's duties, debts, covenants and obligations under certain equipment
leases, the Myrtle Beach, South Carolina premises lease and all of the
Company's accrued payroll obligations, accrued employer tax obligations,
accounts payable, debts and other obligations of the Company with respect to
the Myrtle Beach, South Carolina restaurant, bar and apparel shop. Buyer's
assumption of certain liabilities does not include a certain financing
obligation ("FMAC Obligation") with Franchise Mortgage Acceptance Corporation
("FMAC") secured by some of the equipment included in the sale. The Company
is to use its reasonable best efforts to obtain a release of such equipment
from the FMAC Obligation and cause marketable title to be delivered to Buyer.
Until that occurs, the Company will remain responsible to pay the remaining
payments under the FMAC Obligation.
Total sales for the three months ended June 30, 1998 were $609,992, down
$83,894 (12%) from the $693,886 reported for the three months ended June 30,
1997. Total sales for all reported periods were comprised of revenue from
sales of restaurant items, Easyriders apparel and merchandise, and motorcycle
accessories. The decrease in sales reflects the closure of the Company's
Fresno, California location for remodeling in January 1998, and different
levels of sales at the different locations.
Cost of sales for the three months ended June 30, 1998 was $322,172, or
approximately 53% of total sales. Cost of sales for the three months ended
June 30, 1997 was $479,481, or approximately 69% of total sales. Cost of
sales consists primarily of the cost of food, alcoholic and non-alcoholic
beverages, apparel, motorcycle parts and accessories and direct labor costs.
Gross margin for the three months ended June 30, 1998 was $287,820, up
$73,415 from the $214,405 reported for the three months ended June 30, 1997.
This increase is attributed by the Company to a more efficient operation of
the Myrtle Beach location as compared to the Fresno location.
Liquidity and Capital Resources
The Company's stockholders' equity decreased $1,529,117 in the six months
ended June 30, 1998, from $302,842 as of December 31, 1997 to a deficit of
$1,226,275 as of June 30, 1998. Cash and cash equivalents decreased $904,619
to $358,014 at June 30, 1998 from $1,262,633 at December 31, 1997 due
primarily to net cash used in operating activities of $2,107,736. Cash used
in operating activities reflects a net loss of $5,197,174, partially offset by
non-cash expenses of $1,888,867 for common stock issued for services, loss on
sale of restaurant of $631,986, $903,755 of non-cash interest expense and
$122,988 related to the depreciation and amortization of property and
equipment. Cash flows from changes in operating assets and liabilities
reflect a decrease in inventories of $98,260, increase in deferred acquisition
costs of $553,477, increased prepaid expenses of $217,921 and increased
deposits and other assets of $2,609. Also, accounts payable increased by
$195,305 and deferred rent increased by $22,284.
These decreases in cash and cash equivalents were partially offset by net
cash provided by financing activities through the issuance of $2,100,000 of
debt partially offset by $752,002 of payments on debt, capital lease
obligation and advances. The Company additionally utilized $144,881 of cash
for capital requirements for the remodeling of the Company's Fresno facility,
and for the purchase of property and equipment.
The Company's most significant cash needs in 1998 include working capital
to remodel the Company's facilities in Fresno, California, to investigate and
negotiate terms and conditions for additional sites for restaurants (if the
Proposed Reorganization does not occur) and to complete the Proposed
Reorganization. The Company's present cash resources are not adequate to
sustain operations through 1998 unless the Proposed Reorganization is
completed. If the Proposed Reorganization is completed, the Company should
have adequate cash resources to sustain operations for the foreseeable future.
If the Proposed Reorganization is not completed during 1998, the Company will
be required to raise additional capital through borrowing or additional sale
of equity. Even assuming the reopening of the Fresno location, revenues would
likely not be adequate to support the present headquarters executive staff,
and the Company would be required to substantially reduce its corporate
overhead.
ANY FORWARD-LOOKING STATEMENTS INCLUDED IN THIS FORM 10-QSB REFLECT
MANAGEMENT'S BEST JUDGMENT BASED ON FACTORS CURRENTLY KNOWN AND INVOLVE RISKS
AND UNCERTAINTIES. ACTUAL RESULTS MAY VARY MATERIALLY.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a)There are no exhibits included with this report.
(b)A Current Report on Form 8-K for an event which occurred July 22, 1998,
was filed by the Company on August 5, 1998.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
NEWRIDERS, INC.
(Registrant)
Date: August 13, 1998 By: /s/ William R. Nordstrom
------------------------
William R. Nordstrom,
Principal Financial Officer
and Chief Accounting Officer
<PAGE>
APPENDIX "A"
NEWRIDERS, INC. AND SUBSIDIARY
Consolidated Balance Sheets
ASSETS
June 30, December 31,
1998 1997
------------- -------------
(unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 358,014 $ 1,262,633
Inventories 187,362 285,622
Deferred acquisition costs 553,477 0
Prepaid expenses 233,659 15,738
------------ -------------
Total Current Assets 1,332,512 1,563,993
------------ -------------
PROPERTY AND EQUIPMENT, net 852,413 1,487,598
------------ -------------
ORGANIZATION COSTS, net 121,736 142,158
DEPOSITS AND OTHER ASSETS 110,112 107,503
DEFERRED FINANCING COSTS, net 129,121 161,103
-------------- -------------
$ 2,545,894 $ 3,462,355
============== =============
The accompanying notes are an integral part of these consolidated financial
statements
<PAGE>
NEWRIDERS, INC. AND SUBSIDIARY
Consolidated Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
June 30, December 31,
1998 1997
-------------- ---------------
(unaudited)
CURRENT LIABILITIES:
Accounts payable $ 752,196 $ 517,904
Accrued expenses 97,272 54,567
Accrued compensation and benefits 57,219 340,940
Advances from stockholders 34,350 201,350
Other Advances 55,000 50,000
Current obligation under capital lease 17,766 21,184
Current portion of long-term debt 768,645 157,694
-------------- ---------------
Total Current Liabilities 1,782,448 1,343,639
-------------- ---------------
DEFERRED RENT 95,669 128,003
OBLIGATION UNDER CAPITAL LEASE,
Less Current Obligation 0 10,382
CONVERTIBLE DEBENTURES, net 1,088,899 785,183
LONG-TERM DEBT 805,153 892,306
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock; 25,000,000 shares
authorized of $0.001 par value;
18,498,316 and 17,181,425 shares
issued and outstanding at 1998 and
1997, respectively 18,498 17,181
Additional paid-in capital 10,551,417 6,884,677
Common stock subscription receivable (750,000) (750,000)
Accumulated deficit (11,046,190) (5,849,016)
------------ ------------
Total Stockholders' Equity (Deficit) (1,226,275) 302,842
------------ ------------
$ 2,545,894 $ 3,462,355
============ ============
The accompanying notes are an integral part of these consolidated financial
statements
<PAGE>
NEWRIDERS, INC. AND SUBSIDIARY
Consolidated Statements of Operations
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
June 30, June 30,
1998 1997 1998 1997
------------- ------------- ------------ -------------
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
SALES $ 609,992 $ 693,886 $ 824,155 $ 1,149,111
COST OF SALES $ 322,172 479,481 $ 386,964 718,957
------------- ------------- ------------ -------------
GROSS MARGIN 287,820 214,405 437,191 430,154
------------- ------------- ------------ -------------
EXPENSES
Restaurant and store operating
expenses 542,356 409,952 898,885 771,706
Selling, general and
administrative 610,670 254,633 1,271,126 413,389
Stock issuance expense 1,888,867 0 1,888,867 0
Loss on sale of restaurant to
related party 631,986 0 631,986 0
------------- ------------- ------------ -------------
Total Expenses 3,673,879 664,585 4,690,864 1,185,095
------------- ------------- ------------ -------------
Loss from Operations (3,386,059) (450,180) (4,253,673) (754,941)
------------- ------------- ------------ -------------
OTHER EXPENSE
Interest expense $ 17,769 (2,592) $ (39,746) (5,361)
Interest expense - noncash $ (597,891) 0 $ (903,755) 0
------------- ------------- ------------ -------------
Total Other Expense (580,122) (2,592) (943,501) (5,361)
------------- ------------- ------------ -------------
NET LOSS $ (3,966,181) $ (452,772) $(5,197,174) $ (760,302)
============= ============= ============ =============
NET LOSS PER SHARE $ (0.23) $ (0.03) $ (0.30) $ (0.05)
============= ============= ============ =============
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING - BASIC 17,545,283 16,168,000 17,401,846 16,168,000
============= ============= ============ =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
<PAGE>
NEWRIDERS, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
For the Six Months Ended
June 30,
1998 1997
-------------- -------------
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (5,197,174) $ (885,303)
Adjustments to reconcile net loss to
net cash used by operating activities:
Common stock issued for services 1,888,867 250,000
Services rendered in satisfaction of
common stock receivable 125,000
Depreciation and amortization 122,988 64,638
Loss on sale of restaurant to related party 631,986
Non-cash interest expense 903,755
Changes in operating assets and liabilities:
(Increase) decrease in inventories 98,260 (5,651)
(Increase) decrease in deferred acquisition costs (553,477)
(Increase) decrease in prepaid expenses (217,921) 2,035
(Increase) decrease in deposits and other assets (2,609) 35,462
Increase (decrease) in accounts
payable and accrued expenses 195,305 645,634
Increase (decrease) in deferred rent 22,284
------------- -----------
Net Cash Used by Operating Activities (2,107,736) 231,815
------------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (144,881) (1,032,772)
------------- -----------
Net Cash (Used by) provided by
Investing Activities (144,881) (1,032,772)
------------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on capital lease obligation (13,800) (2,696)
Issuance of debt and convertible debentures 2,100,000
Payment of long-term debt and convertible
debentures (576,202)
Cash contributions to capital 303,653
Common stock issued for cash 500,000
Payment of stockholders' and other advances (162,000)
------------- ------------
Net Cash Provided by Financing Activities 1,347,998 800,957
------------- ------------
NET INCREASE (DECREASE) IN CASH (904,619) 0
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 1,262,633 0
------------- ------------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 358,014 $ 0
The accompanying notes are an integral part of these consolidated financial
statements
<PAGE>
NEWRIDERS, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows (Continued)
For the Six Months Ended
June 30,
1998 1997
-------------- -------------
(Unaudited) (Unaudited)
SUPPLEMENTAL CASH FLOW INFORMATION -
Cash paid for interest $ 60,451 $ 5,833
NON CASH FINANCING ACTIVITIES:
Common stock issued in settlement of
accounts payable $ 211,133
Common stock issued in settlement of debt $ 691,864
Issuance of warrants in connection with debt
issuance $ 542,858
Convertible debentures issued with conversion
discount $ 333,335
The accompanying notes are an integral part of these consolidated financial
statements
<PAGE>
NEWRIDERS, INC. AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements
June 30, 1998 (Unaudited) and December 31, 1997
NOTE 1 - CONDENSED FINANCIAL STATEMENTS
The accompanying consolidated financial statements have been prepared by the
Company without audit. In the opinion of management, all adjustments (which
include only normal recurring adjustments) necessary to present fairly the
financial position, results of operations and cash flows at June 30,
1998 and for all periods presented have been made.
Certain information and footnote disclosures normally included in consolidated
financial statements prepared in accordance with general accepted accounting
principles have been condensed or omitted. It is suggested that these
condensed consolidated financial statements be read in conjunction with the
financial statements and notes thereto included in the Company's December 31,
1997 audited consolidated financial statements. The results of operations for
the periods ended June 30, 1998 and 1997 are not necessarily indicative of the
operating results for the full year.
NOTE 2-DEBT
On March 17, 1998, the Company borrowed $500,000 under a securities purchase
agreement. Borrowings under the agreement bear interest at 12% per annum, and
are due on demand. Borrowings under this agreement are included in the current
portion of long-term debt in the accompanying financial statements.
Additionally, the agreement requires the issuance of 20,000 warrants to
purchase common stock of the Company at $1.50 per share for the period ended
March 31, 1998 and an additional 160,000 warrants to purchase common stock of
the Company at $1.50 per share be issued for the period ending June 30, 1998.
The fair value of the warrants for the periods ended March 31, 1998 and June
30, 1998 have been recorded as debt issuance costs and were amortized during
the periods ended March 31, 1998 and June 30, 1998, respectively.
On May 11, 1998, the Company issued convertible debentures with a face value
of $500,000 due May 11, 2000 in a private placement transaction. The
debentures accrue interest at 8% per year. The debentures were fully repaid in
cash on June 12, 1998. Additionally, in conjunction with the issuance of the
convertible debentures, the Company issued warrants for the purchase of
25,000 shares of the Company's common stock with an exercise price of $2.82
per share during the next three years. The fair value of the warrants,
aggregating $40,901, has been recorded as debt issuance costs and was
amortized over the term that the debentures were outstanding.
On June 11, 1998, the Company issued convertible debentures with a face value
of $1,000,000 due June 30, 2000 in a private placement transaction. The
debentures accrue interest at 8% per year with interest payable quarterly. The
debentures are convertible at the option of the holder into shares of the
Company's common stock at the lesser of the five-day average closing bid price
on the closing date or 75% of the five-day average closing bid price on the
conversion date, as defined. The debentures are convertible at the holder's
option anytime after August 10, 1998. The discount available at conversion
results in the debentures being issued at a discount. The conversion discount,
which was $333,335 at the date of issuance, is being recognized by the Company
as noncash interest expense over the shortest expected term to anticipated
conversion of the debentures with a corresponding increase to the original
principal amount of the debentures. During the quarter ended June 30, 1998,
$105,567 of noncash interest expense was recorded relating to the debentures.
Additionally, in conjunction with the issuance of the convertible debentures,
the Company issued warrants for the purchase of 25,000 shares of the Company's
common stock with an exercise price of $2.98 per share during the next three
years. The fair value of the warrants, aggregating $41,518, has been recorded
as debt issuance costs and is being amortized over the term of the debentures.
NOTE 3 - SALE OF RESTAURANT TO RELATED PARTY
On July 22,1998, the Company sold its Myrtle Beach Restaurant to a stockholder
and director of the Company. As a result, the Company recorded a write-down of
$596,986 with respect to leasehold improvements and store fixtures to reflect
the net realizable value of the Myrtle Beach location.
NOTE 4 - COMMON STOCK ISSUANCE
During June 1998, the Company issued 1,000,000 shares of the Company's Common
Stock to a stockholder of Paisano Publication, Inc. for services to the
Company and the forgiveness of certain trade payables. The fair value of the
shares, net of the forgiven trade payables, was recorded as stock issuance
expense in the accompanying financial statements.
NOTE 5 - NET LOSS PER COMMON SHARE
The Company computes earnings per share in accordance with Statement of
Financial Accounting Standards (SFAS) No. 128, Earnings Per Share. Earnings
per share is computed using the weighted average number of common shares
outstanding during the period. Earnings per share assuming dilution is
computed using the weighted average number of shares outstanding and dilutive
effect of potential shares outstanding. Diluted earnings per share is not
presented at June 30, 1998 due to the antidilutive effect on earnings per
share.
NOTE 6 - CHANGE IN ACCOUNTING PRINCIPLES
Effective January 1, 1998, the Company adopted SFAS No. 130, Reporting
Comprehensive Income. This statement requires that all items recognized under
accounting standards as components of comprehensive earnings be reported in an
annual financial statement that is displayed with the same prominence as other
annual financial statements. This statement also requires that an entity
classify items of other comprehensive earnings by their nature in an annual
financial statement. For example, other comprehensive earnings may include
foreign currency translation adjustments and unrealized gains and losses on
marketable securities classified as available-for-sale. Annual financial
statements for prior periods will be reclassified, as required. The Company's
total comprehensive loss for the three months ended June 30, 1998 and 1997
equaled the reported net loss on the Company's statements of operations.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 358,014
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 187,362
<CURRENT-ASSETS> 1,332,512
<PP&E> 1,098,271
<DEPRECIATION> 245,858
<TOTAL-ASSETS> 2,545,894
<CURRENT-LIABILITIES> 1,782,448
<BONDS> 0
0
0
<COMMON> 18,498
<OTHER-SE> (1,244,773)
<TOTAL-LIABILITY-AND-EQUITY> 2,545,894
<SALES> 824,155
<TOTAL-REVENUES> 824,155
<CGS> 386,964
<TOTAL-COSTS> 5,077,828
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 943,501
<INCOME-PRETAX> (5,197,174)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,197,174)
<EPS-PRIMARY> (0.30)
<EPS-DILUTED> (0.30)
</TABLE>
