U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 for the quarterly period ended September 30, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 for the transition period from _______ to _______
Commission file number 0-23505
INNOVACOM, INC.
(Exact name of small business issuer as specified in its charter)
Nevada 88-0308568
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
3400 Garrett Drive
Santa Clara, CA 94054
(Address of principal executive offices) (Zip Code)
(408) 727-2447
(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 [ ]
Number of shares of common stock outstanding as of September 30, 1999 was
25,181,796
Transitional Small Business disclosure format
Yes [ ] No [X]
<PAGE>2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
INNOVACOM, INC. AND SUBSIDIARIES
(A Development Stage Enterprise)
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands, except per share amounts)
(Unaudited)
SEPTEMBER 30,
1999
-------------
ASSETS
------
CURRENT ASSETS
Cash $ 146
Accounts receivable - trade, net of allowance for
doubtful accounts of $0 22
Other receivables 12
Inventory 357
Prepaid expenses and other 94
---------
Total current assets 631
Property and equipment, net 174
Deposits 37
---------
TOTAL ASSETS $ 842
=========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Note payable - related parties $ 105
Note payable 42
Demand notes 3,200
Convertible debentures 9,540
Accounts payable 1,296
Accrued liabilities 2,556
Liabilities in excess of assets of discontinued operations 63
---------
Total current liabilities 16,802
---------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $.001 par value, 150,000 shares authorized,
25,182 shares issued and outstanding 25
Warrants 2,297
Additional paid-in capital 23,239
Deficit accumulated during development stage (41,521)
---------
Total stockholders' equity (deficit) (15,960)
---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 842
=========
See accompanying notes to these condensed consolidated financial statements.
<PAGE>3
INNOVACOM, INC. AND SUBSIDIARIES
(A Development Stage Enterprise)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
MARCH 3, 1993
THREE MONTHS ENDED NINE MONTHS ENDED (INCEPTION) TO
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
------------------- ----------------- --------------
1998 1999 1998 1999 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
REVENUES $ 37 $ 75 $ 77 $ 172 $ 429
---------- --------- ----------- ---------- ----------
COSTS AND EXPENSES
Cost of goods sold 99 57 121 136 257
Research and development 421 359 3,186 1,095 11,594
Selling, general and administrative 888 780 5,514 2,409 18,658
Impairment loss on property and equipment - - 937 - 937
---------- --------- ----------- ---------- ----------
Total costs and expenses 1,408 1,196 9,758 3,640 31,446
---------- --------- ----------- ---------- ----------
OPERATING LOSS (1,371) (1,121) (9,681) (3,468) (31,017)
---------- --------- ----------- ---------- ----------
OTHER INCOME AND EXPENSE
Interest expense, net of interest income 612 655 4,061 2,531 8,499
Debt conversion expense - - 261 - 261
Other expense - - - - -
---------- --------- ----------- ---------- ----------
Total other expense 612 655 4,322 2,531 8,760
---------- --------- ----------- ---------- ----------
Loss from continuing operations before income tax
expense, discontinued operations, and
extraordinary item (1,983) (1,776) (14,003) (5,999) (39,777)
Income tax expense - - 2 2 8
---------- --------- ----------- ---------- ----------
Loss from continuing operations (1,983) (1,776) (14,005) (6,001) (39,785)
---------- --------- ----------- ---------- ----------
Loss on disposal of discontinued operation - - 1,155 - 1,155
Loss from operations of discontinued operation, net
of income tax expense - - 400 - 1,161
---------- --------- ----------- ---------- ----------
Loss from discontinued operations - - 1,555 - 2,316
---------- --------- ----------- ---------- ----------
Net loss before extraordinary item (1,983) (1,776) (15,560) (6,001) (42,101)
---------- --------- ----------- ---------- ----------
Extraordinary item: Gain on extinguishment of
Liabilities, net of income tax expense 373 27 373 207 580
---------- --------- ----------- ---------- ----------
Net Loss $ (1,610) $ (1,749) $ (15,187) $ (5,794) $ (41,521)
========== ========= =========== ========== ==========
Basic and diluted net loss per common share
Continuing operations $ (0.08) $ (0.07) $ (0.63) $ (0.24)
Discontinued operations (0.07) -
Extraordinary item 0.02 - 0.02 0.01
---------- --------- ----------- ----------
Basic and diluted net loss per common share $ (0.06) $ (0.07) $ (0.68) $ (0.23)
========== ========= =========== ==========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 24,894 25,181 22,335 25,063
========== ========= =========== ==========
</TABLE>
See accompanying notes to these condensed consolidated financial statements.
<PAGE>4
INNOVACOM, INC. AND SUBSIDIARIES
(A Development Stage Enterprise)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
MARCH 3, 1993
NINE MONTHS ENDED (INCEPTION) TO
SEPTEMBER 30, SEPTEMBER 30,
----------------- --------------
1998 1999 1999
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss from continuing operations $ (14,005) $ (6,001) $ (39,785)
Adjustments to reconcile net loss from continuing
operations to net cash used in operating activities:
Depreciation and amortization 244 111 840
Provision for uncollectable account receivable - 4 4
Amortization of discount on long-term debt 2,346 - 2,346
Gain on extinguishment of liabilities 373 207 580
Impairment loss on property and equipment 937 - 937
Interest related to beneficial conversion features
of notes payable and long-term liabilities 832 1,234 3,532
Compensation recognized upon issuance of stock
and stock options 550 31 5,801
Shares canceled from default judgment - - (250)
Expense recognized upon issuance of stock for
conversion incentive 261 - 261
Contribution of product license - - 1,275
Purchased incomplete research and development - - 500
Write-off acquisition costs 68 - 68
Write-off related party receivable - - 140
Loss on disposal of assets - 28 28
Changes in operating assets and liabilities:
Cash - restricted 8 - -
Accounts receivable (31) (13) (22)
Other receivables - (12) (12)
Inventory - (357) (357)
Prepaid and other expenses 88 (13) (94)
Deposits 53 - (37)
Accounts payable 1,520 (537) 1,596
Accrued liabilities 841 1,402 3,253
------------ ------------ ------------
Net cash used in operating activities from
continuing operations (5,915) (3,916) (19,396)
------------ ------------ ------------
Net loss from discontinued operations (1,555) - (2,316)
Loss from disposal of assets 49 - 49
Write down of film rights and film cost inventory 277 - 250
Write down of goodwill 848 - 848
Change in liabilities in excess of assets of
discontinued operations 54 - 63
------------ ------------ ------------
Net cash used in operating activities from
discontinued operations (327) - (1,106)
------------ ------------ ------------
</TABLE>
(continued)
<PAGE>5
INNOVACOM, INC. AND SUBSIDIARIES
(A Development Stage Enterprise)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
(continued)
<TABLE>
<CAPTION>
MARCH 3, 1993
NINE MONTHS ENDED (INCEPTION) TO
SEPTEMBER 30, SEPTEMBER 30,
----------------- --------------
1998 1999 1999
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash received in acquisition of Sierra Vista - - 2,917
Advance to related party - (4) (144)
Cost incurred for organization of joint venture - - (68)
Purchases of property and equipment (1,015) (10) (2,200)
Proceeds from sale of asset - 1 4
------------ ------------ ------------
Net cash provided by (used in) investing activities (1,015) (13) 509
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of stock options - 1 1
Proceeds from sale of common stock - - 2,898
Proceeds from notes payable 778 3,315 8,181
Net proceeds from sale of debenture with detachable
detachable warrants 2,500 750 9,358
Principal payments on notes payable (145) (103) (377)
Proceeds from settlement of litigation regarding stock - 78 78
------------ ------------ ------------
Net cash provided by financing activities 3,133 4,041 20,139
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (4,124) 112 146
CASH AND CASH EQUIVALENTS, beginning of period 4,149 34 -
CASH AND CASH EQUIVALENTS, end of period $ 25 $ 146 $ 146
============ ============ ============
</TABLE>
See accompanying notes to these condensed consolidated financial statements.
<PAGE>6
INNOVACOM, INC. AND SUBSIDIARIES
(A Development Stage Enterprise)
Notes to Condensed Consolidated Financial Statements
September 30, 1999
(Unaudited)
Note 1 - Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and pursuant to the rules and regulations of the
Securities and Exchange Commission. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. For further information, refer to the
financial statements and footnotes thereto included in the Company's annual
report on Form 10-KSB for the fiscal year ended December 31, 1998.
In the opinion of management, the unaudited condensed consolidated financial
statements contain all adjustments considered necessary to present fairly the
Company's financial position at September 30, 1999, results of operations for
the three and nine months ended September 30, 1998 and 1999, and the period from
inception (March 3, 1993) to September 30, 1999, and the cash flows for the nine
months ended September 30, 1998 and 1999, and the period from inception (March
3, 1993) to September 30, 1999. The results for the period ended September 30,
1999, are not necessarily indicative of the results to be expected for the
entire fiscal year ending December 31, 1999.
These unaudited condensed consolidated financial statements reflect
reclassifications of certain amounts in prior periods to be consistent with the
presentation of the current period. Such reclassifications had no effect on net
loss.
Note 2 - Discontinued Operation
On June 15, 1998 (measurement date), the Company's Board of Directors decided to
discontinue the operations of Sierra Vista Entertainment, Inc. ("Sierra Vista"),
its wholly-owned subsidiary and entertainment segment of the business.
Accordingly, Sierra Vista is accounted for as a discontinued operation in the
accompanying condensed consolidated financial statements.
The liabilities in excess of net assets of Sierra Vista included in the
accompanying consolidated balance sheet as of September 30, 1999, consisted of
accounts payable and accrued expenses of approximately $63,000.
Sierra Vista has never generated any revenues.
Note 3 - Subsequent Events
On October 1, 1999, the Company borrowed $375,000 from an investor in the form
of a note. The note bears interest at 13% and is due on demand. In conjunction
with this note, the Company issued five year warrants to purchase up to 187,500
shares of Common Stock at $.30 per share to the note holder, and five year
warrants to purchase up to 75,000 shares of Common Stock at $.17 per share to
two brokers.
<PAGE>7
On November 12, 1999 the Company settled its litigation with its former stock
transfer agency. Under the terms of the settlement, the Company will receive
$175,000 in December 1999 and up to an additional $400,000 over the next eight
years, subject to certain reductions or charges.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
With the exception of historical facts stated herein, the matters discussed in
this report are "forward looking" statements that involve risks and
uncertainties that could cause actual results to differ materially from
projected results. Such "forward looking" statements include, but are not
necessarily limited to, statements regarding anticipated levels of future
revenues and earnings from operations of the Company. Factors that could cause
actual results to differ materially include, in addition to other factors
identified in this report, lack of revenues, substantial losses, need for
additional capital and limited operating history, and other risk factors
detailed in the Company's Securities and Exchange Commission ("SEC") filings
including the risk factors set forth in the Company's Registration Statement on
Form SB-2, SEC File No. 333-45875 and "Certain Consideration" section in the
Company's Form 10-KSB for the year ended December 31, 1998. Readers of this
report are cautioned not to put undue reliance on "forward looking" statements
which are, by their nature, uncertain as reliable indicators of future
performance. The Company disclaims any intent or obligation to publicly update
these "forward looking" statements, whether as a result of new information,
future events, or otherwise.
Revenues
Revenues for the three months ended September 30, 1998 were approximately
$37,000 as compared to approximately $75,000 for the same period in 1999.
Revenues for the nine months ended September 30, 1998 were approximately $77,000
as compared to approximately $172,000 for the same period in 1999. The revenue
in both periods in 1999 reflects the completion of the Company's development of
certain of its TransPeg transmission products, and the first shipments of these
products to customers. Revenue increased in both periods in 1999 relative to
1998 as the Company's products began to win initial market acceptance.
Cost of goods sold
Cost of sales decreased from approximately $99,000 in the third quarter of 1998
to approximately $57,000 in the same period of 1999. Cost of sales in the three
months ended September 30, 1998, included significant expense for reserves taken
against materials purchased, but not yet shipped or removed from inventory. Cost
of goods sales in 1999 does not include comparable expense. Cost of goods sold
was approximately $121,000 in the first nine months of 1998 as compared to
approximately $136,000 in the same period of 1999. This increase is due to the
increased volume of shipments in 1999 relative to 1998 partially offset by a
reduction in expense for inventory reserves taken in 1998. The costs of sales as
a proportion of sales experienced in the periods shown in 1998 and 1999 do not
necessarily predict the costs of sales that the Company might experience at such
time, if any, that production level products begin to ship in normal production
volumes.
Research and development
Research and development expense declined from approximately $421,000 in the
three-month period ended September 30, 1998 to approximately $359,000 for the
same period in 1999. This decline was due primarily to reduced consulting and
payroll costs in 1999 relative to 1998. Research and development expense in the
nine-month period ended September 30, 1998 was approximately $3,186,000 as
compared to approximately $1,095,000 for the same period of 1999. This
difference in most part reflects the actions taken by management in June 1998 to
<PAGE>8
terminate development work on the single chip encoder, and to focus development
work on a relatively few products that management believed were close to market.
Management's actions decreased essentially all aspects of research and
development expense including payroll, outside consultants, and purchases of
materials and supplies.
Selling, general and administrative
Selling, general and administrative expenses were approximately $888,000 in the
third quarter of 1998 as compared to approximately $780,000 for the same period
in 1999. This reduction was a result of modest reductions in a variety of
expenses in response to management's continuing efforts to reduce costs.
Selling, general and administrative expenses decreased from approximately
$5,514,000 in the first three quarters of 1998 to approximately $2,409,000 in
the same period of 1999. This decrease is due primarily to the substantial cuts
made in the Company's operations in June of 1998.
Interest expense, net of interest income
Interest expense, net of interest income increased from approximately $612,000
in the quarter ended September 30, 1998 to approximately 655,000 in the same
quarter in 1999. Interest expense attributed to beneficial conversion features
of newly issued debt declined from 1998 to 1999, but this was more than offset
by increases in stated interest on outstanding debt, and by penalties attributed
for failure to register the stock underlying the convertible debt outstanding.
Interest expense, net of interest income decreased from approximately $4,061,000
in the nine-month period ended September 30, 1998 to approximately $2,531,000 in
the same period in 1999. Most of this decrease relates to a decline in interest
expense attributed to beneficial conversion features in newly issued debt.
Loss from continuing operations before income tax expense, discontinued
operations, and extraordinary item
Loss from continuing operations decreased from approximately $1,983,000 in the
third quarter of 1998 to approximately $1,776,000 in the third quarter of 1999
and from approximately $14,003,000 in the nine months ended September 30, 1998,
to approximately $5,999,000 for the same period in 1999. The decrease in loss
from in the third quarter of 1998 to 1999 is related principally to Management's
continuing efforts to control and reduce costs. The decrease in the loss between
the nine-months periods ended September 30, 1998 and 1999 reflects the steps
taken in June 1998 to reduce headcount and other expenses, and to focus the
Company on a limited number of specific products or projects that management
deemed closest to market.
Extraordinary item
Starting in the third quarter of 1998 the Company has been able to negotiate
settlements of some of its liabilities at discounted rates. The amounts shown
are the discounts realized by the Company in the settlements reached in the
various periods shown.
Liquidity and Capital Resources
Through September 30, 1999, the Company funded its operations primarily through
the sale of stock and placement of debt. On September 30, 1999, the Company had
a cash balance of approximately $146,000 and a working capital deficit of
<PAGE>9
of approximately $16,171,000. This compares with cash of approximately $34,000
and a working capital deficit of approximately $11,851,000 at December 31, 1998.
The increase in working capital deficit is primarily due to the operating losses
of the Company, partially offset by imputed interest charged to warrants and
additional paid-in capital in the equity section of the balance sheet.
On January 15, 1999, the Company issued Convertible Debentures in the aggregate
principal amount of $750,000. The Debentures accrue interest at the rate of 7%
per annum and are convertible into shares of the Company's Common Stock at a
conversion price equal to the lesser of (i) 125% of the five-day average share
price at the time of issuance and (ii) 80% for conversions prior to 120 days
after issuance, 77.5% for conversions 120-150 days after issuance, and 75%
thereafter. The Debentures have a term of five years, expiring January 15, 2004,
and are secured by all of the assets of the Company. As part of the issuance of
the Debentures, the Company issued to the Debenture holders five-year warrants
to purchase up to 187,500 shares of Common Stock at $.50 per share.
From March through October 1999, the Company borrowed a total of $3,575,000 from
the investor who had purchased the majority of the Debentures evidenced in the
form of eight notes. The notes bear interest at 13% and are due on demand. In
conjunction with this funding, the Company issued the holder of the notes five
year warrants to purchase up to 1,000,000 shares of Common Stock at $.60 per
share, 250,000 shares at $.55 per share, and 562,500 shares at $.30 per share.
In conjunction with the sale of the Debentures in January 1999 and of the notes
in March through October 1999, the Company issued warrants to purchase up to
865,000 shares of the Company's common stock at prices ranging from $0.11 to
$0.84 per share to two finders.
Management projects that the Company will not be able to internally generate the
cash that will be required to fund the its operations and to pay off the
liabilities incurred in prior periods for at least the balance of 1999.
Accordingly, the Company will require additional funding to finance its
operations. Since December 1997, the Company has financed its operations through
the issuance of convertible debentures and demand notes to two investment funds
that are affiliated with each other, but no assurance can be given that these
investors will continue to provide funds to the Company. In this event, the
Company will need to secure additional financing from alternative sources. The
Company is already actively pursuing alternative funding sources. There can be
no assurance that additional funding will be available on terms favorable to the
Company.
Impact of the Year 2000 Issue
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Company's, or
its suppliers' and customers' computer programs that have date-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in system failures or miscalculations causing
disruptions of operations including, among other things, a temporary inability
to process transactions, send invoices, or engage in similar normal business
activities.
The Company's operations are now based on software applications that the Company
believes to be Year 2000 compliant. This included recent purchase of Year 2000
compliant versions of software for its computer, security, and communications
systems, as necessary. The Company has not yet identified any Year 2000 problem
but will continue to monitor the issues. No assurances can be given that the
Year 2000 problem will not occur with respect to the Company's computer systems.
<PAGE>10
The Company believes that its products are Year 2000 compliant. The Company has
initiated communications with significant suppliers to determine the extent to
which those third parties' failure to remedy Year 2000 issues in their own
operation or in their products might materially effect the Company's operations
or products. The Company has not received any indication from its suppliers that
the Year 2000 Issue may materially effect their ability to conduct business or
supply Year 2000 compliant products to the Company. In addition, the Company
continues to test its products and the third party software it purchases for
Year 2000 compliance.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
The Company has a number of overdue accounts payable to vendors. A number of
these vendors have filed suit against the Company to enforce collection. To date
the Company has been able to reach accommodation with the creditors on most of
these collection actions, but as of October 31, 1999, two of these collection
actions seeking to collect a total of approximately $40,000 had not been
settled. There can be no assurance that the suits that have been or will be
filed, or the terms that might be reached for settlement will not create
material hardship to the Company in the future. Management anticipates that the
number of such suits might increase over time as the Company's unpaid
obligations age further if more vendors conclude that legal action is the
prudent course to pursue for collection.
Item 2. Changes in Securities and Use of Proceeds. - Not Applicable
Item 3. Defaults Upon Senior Securities.
The Company was not in compliance with certain covenants of the December 1997,
June 1998, August 1998, and January 1999 Debenture and Warrant agreements
including, but not limited to, payment of interest, timely registration of
common stock underlying debt conversion rights, and common stock trading volume.
Consequently, these debentures have been classified as current debt in the
Company's financial statements.
Item 4. Submission of Matters to a Vote of Security Holders. - Not Applicable
Item 5. Other Information.
To provide for working capital since December 1997, the Company has issued an
aggregate face value of $9,750,000 of convertible debentures to two investor
funds that are affiliated with each other. At September 30, 1999 the average
price at which these convertible debentures could be converted into the
Company's Common Stock was approximately $.13 per share. If these two investors
had exercised their conversion rights at that time they would have owned
approximately 75% of the outstanding Common Stock of the Company, giving them
effective control of the Company. Because the price at which most of these
convertible debentures can be converted into common stock changes in concert
with movements in the market price of the Company's common stock, the actual
percentage of control that these two funds might acquire at any given time could
be greater or less than the figure determined as of September 30, 1999.
Effective on November 15, 1999, Stanton Creasey, the Company's CFO and a
director of the Company, resigned his positions with the Company. Also effective
on that date, the Company engaged James Casey as its new CFO. Mr. Creasey
remains available to assist in the transition.
<PAGE>11
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
<PAGE>12
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
INNOVACOM, INC.
(Registrant)
Date: November 15, 1999 FRANK J. ALIOTO
--------------------------------------
Frank J. Alioto, President and
Chief Executive Officer
Date: November 15, 1999 STANTON CREASEY
--------------------------------------
Stanton Creasey, Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED BY THE 10-QSB FOR
THE PERIOD ENDED SEPTEMBER 30, 1999 FOR INNOVACOM, INC. AND IS QUALIFIED BY ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 146,000
<SECURITIES> 0
<RECEIVABLES> 22,000
<ALLOWANCES> 0
<INVENTORY> 357,000
<CURRENT-ASSETS> 631,000
<PP&E> 440,000
<DEPRECIATION> 226,000
<TOTAL-ASSETS> 842,000
<CURRENT-LIABILITIES> 16,800,000
<BONDS> 0
0
0
<COMMON> 25,000
<OTHER-SE> (15,985,000)
<TOTAL-LIABILITY-AND-EQUITY> 842,000
<SALES> 172,000
<TOTAL-REVENUES> 172,000
<CGS> 136,000
<TOTAL-COSTS> 3,640,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,531,000
<INCOME-PRETAX> (6,001,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,001,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 207,000
<CHANGES> 0
<NET-INCOME> (5,794,000)
<EPS-BASIC> (.23)
<EPS-DILUTED> (.23)
</TABLE>
