UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 For the quarterly period ended JUNE 30, 1997 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 1-12977
APPLE ORTHODONTIX, INC.
(exact name of Registrant as specified in its charter)
Delaware 74-2795193
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2777 Allen Parkway, Suite 700, Houston, Texas 77019
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (281) 698-2500
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[ ] No[X] *
The Registrant became subject to the reporting requirements of Section 13
of the Securities Exchange Act of 1934 on May 22, 1997.
The number of shares of Class A Common Stock and Class B Common Stock of
the Registrant, par value $.001 per share, outstanding at August 13, 1997 was
7,902,274 and 3,347,084, respectively.
<PAGE>
FORM 10-Q REPORT INDEX
10-Q PART AND ITEM NO.
PAGE
PART I - FINANCIAL INFORMATION
Item 1 -- Financial Statements ........................................ 3
Item 2 -- Management's Discussion and
Analysis of Financial Condition and
Results of Operations ....................................... 10
PART II - OTHER INFORMATION
Item 1 -- Legal Proceedings ........................................... 12
Item 6 -- Exhibits and Reports on Form 8-K ............................ 12
Signature ............................................................. 13
2
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS
APPLE ORTHODONTIX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
---------- ----------
ASSETS (UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents ................................................................. $3,403,975 $ 21,254
Receivable from orthodontic practices, net of allowances of $17,031 and $0,
respectively .............................................................................. 186,455 --
Prepaid expenses .......................................................................... 167,297 --
Deferred income taxes ..................................................................... 409,594 --
Other current assets ...................................................................... 8,164 --
---------- ----------
Total current assets .................................................................. 4,175,485 21,254
Property and equipment, net of accumulated depreciation of $63,995 and $0,
respectively ................................................................................... 3,398,441 --
Receivable from orthodontic practices, net of current portion .................................. 1,000,742 --
Deferred issuance costs ........................................................................ 200,000 1,395,350
Intangibles, net ............................................................................... 490,755 44,687
Other assets ................................................................................... 305,792 --
---------- ----------
Total assets .......................................................................... $9,571,215 $1,461,291
========== ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term debt .................................................... $ 41,006 $ --
Accounts payable and accrued expenses ................................................... 2,918,779 1,830,009
Payable to orthodontic practices ........................................................ 740,833 --
Amounts due to venture capital investors ................................................ -- 515,000
---------- ----------
Total current liabilities ........................................................... 3,700,618 2,345,009
---------- ----------
Long-term debt, net of current maturities .................................................... 283,928 --
---------- ----------
Total liabilities ................................................................... 3,984,546 2,345,009
---------- ----------
Stockholders' equity (deficit)
Class A common stock , $0.001 par value, 25,000,000 shares authorized, 6,385,054 and 0
shares issued and outstanding ....................................................... 6,386 --
Class B common stock, $0.001 par value, 4,106,852 shares authorized, 3,347,084
and 3,347,084 shares issued and outstanding ......................................... 3,347 3,347
Additional paid-in capital .............................................................. 29,777,492 23,422,313
Warrant ................................................................................. 777,106 --
Retained deficit ........................................................................ (24,977,662) (24,309,378)
---------- ----------
Total stockholders' equity (deficit) ................................................ 5,586,669 (883,718)
---------- ----------
Total liabilities and stockholders' equity (deficit) ................................ $ 9,571,215 $ 1,461,291
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
APPLE ORTHODONTIX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS THREE MONTHS
ENDED ENDED
-------------------------------
JUNE 30, 1997 JUNE 30, 1997
------------- -------------
<S> <C> <C>
Management service fee revenues ................................................................ $ 1,685,957 $ 1,685,957
Costs and expenses:
Salaries and benefits ..................................................................... 1,450,385 1,216,315
Orthodontic supplies ...................................................................... 199,993 199,993
Rent ...................................................................................... 427,296 385,102
Advertising and marketing ................................................................. 7,705 7,705
General and administrative ................................................................ 615,115 422,104
Depreciation and amortization ............................................................. 70,306 65,671
----------- -----------
Total costs and expenses .............................................................. 2,770,800 2,296,890
----------- -----------
Operating loss ........................................................................ (1,084,843) (610,933)
Interest expense (income), net ................................................................. (6,909) (8,321)
Other income, net .............................................................................. (56) (56)
----------- -----------
Loss before income taxes .............................................................. (1,077,878) (602,556)
Income tax benefit ............................................................................. (409,594) (409,594)
----------- -----------
Net loss .............................................................................. $ (668,284) $ (192,962)
=========== ===========
Net loss per common and common equivalent share ................................................ $ (0.14) $ (0.03)
=========== ===========
Number of shares used in calculating net loss per common and common equivalent share 4,721,022 6,079,863
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
APPLE ORTHODONTIX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 1997
------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss .............................................................................................. $ (668,284)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization ..................................................................... 70,306
Deferred income tax benefit ....................................................................... (409,594)
Provision for doubtful accounts ................................................................... 17,031
Changes in assets and liabilities, excluding effects of acquisitions:
Receivable from orthodontic practices ............................................................. (194,458)
Prepaid expenses .................................................................................. (157,310)
Other assets ...................................................................................... 1,313,392
Payables and other accrued liabilities ............................................................ (898,639)
------------
Net cash used in operating activities .................................................... (927,556)
------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures .................................................................................. (1,349,222)
------------
Net cash used in investing activities .................................................... (1,349,222)
------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuances of common stock ............................................................... 17,593,277
Cash paid related to common stock issuance costs ...................................................... (4,102,443)
Special dividend to founders .......................................................................... (6,429,443)
Proceeds from borrowings .............................................................................. 2,082,400
Repayments of borrowings .............................................................................. (3,484,292)
------------
Net cash provided by financing activities ................................................ 5,659,499
------------
NET INCREASE IN CASH AND CASH EQUIVALENTS .................................................................. 3,382,721
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ........................................................... 21,254
------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ................................................................. $ 3,403,975
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
APPLE ORTHODONTIX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
(UNAUDITED)
<TABLE>
<CAPTION>
CLASS A AND B ADDITIONAL TOTAL
COMMON STOCK PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL WARRANTS DEFICIT EQUITY (DEFICIT)
--------- ------ ------------ -------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1996 ..................... 3,347,084 $3,347 $ 23,422,313 $ -- $(24,309,378) $ (883,718)
Issuance of common stock to public ........ 2,702,500 2,703 12,962,207 -- -- 12,964,910
Transfers of certain assets and
liabilities by founders ................ 3,682,554 3,683 599,521 -- -- 603,204
Special dividend to founders .............. -- -- (6,429,443) -- -- (6,429,443)
Issuance of warrant ....................... -- -- (777,106) 777,106 -- --
Net loss .................................. -- -- -- -- (668,284) (668,284)
--------- ------ ------------ -------- ------------ ------------
BALANCE, June 30, 1997 ......................... 9,732,138 $9,733 $ 29,777,492 $777,106 $(24,977,662) $ 5,586,669
========= ====== ============ ======== ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
APPLE ORTHODONTIX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION AND BASIS OF PRESENTATION
Apple Orthodontix, Inc. ("Apple" or the "Company") was founded in July 1996 to
provide practice management services to orthodontic practices in the United
States and Canada. On May 29, 1997, Apple acquired (the "Acquisitions")
simultaneously with the closing of its initial public offering (the "Offering"
or "IPO") of its class A common stock, par value $.001 per share (the "Common
Stock"), substantially all of the tangible and intangible assets, and assumed
the liabilities, of 31 orthodontic practices (collectively, the "Founding
Affiliated Practices") in exchange for 3.7 million shares of Common Stock and
$6.4 million. The net proceeds of the 2.7 million shares of Common Stock issued
in the IPO (after deducting the underwriting discounts and commissions) were
$17.6 million. Total related offering costs were $4.6 million. The acquisitions
of the Founding Affiliated Practices have been accounted for in accordance with
the Securities and Exchange Commission's Staff Accounting Bulletin No. 48.
The condensed consolidated financial statements included herein have been
prepared by the Company without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission (the "SEC"). Pursuant to such
regulations, certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. The Company believes the presentation
and disclosures herein are adequate to make the information not misleading. The
financial statements reflect all elimination entries and normal adjustments that
are necessary for a fair presentation of the results for the interim period
ended June 30, 1997.
Operating results for interim periods are not necessarily indicative of the
results for full years. It is suggested that these consolidated financial
statements be read in conjunction with the Financial Statements of Apple and
related notes thereto, and management's discussion and analysis related thereto,
all of which are included in the Company's Registration Statement on Form S-1
(No. 333-22785), as amended (the "Registration Statement"), filed with the SEC
in connection with the Offering.
2. SIGNIFICANT ACCOUNTING POLICIES
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Equipment under capital leases is
stated at the net present value of the future minimum lease payments at the
inception of the related leases. Depreciation of property and equipment is
calculated using the straight-line method over the estimated useful lives of the
assets. Routine maintenance and repairs are charged to expense as incurred,
while costs of betterment and renewals are capitalized.
REVENUE RECOGNITION
The management service fees (the "Service Fees") payable to the Company by the
Founding Affiliated Practices under their Service Agreements with the Company
(the "Service Agreements") vary based on the fair market value, as determined in
arm's-length negotiations, for the nature and amount of services provided.
Except with respect to Service Agreements providing for the payment of flat
fees, the Service Fees earned by the Company are in accordance with the
Company's two general types of Service Agreements. The Standard Contract calls
for a calculation of the monthly Service Fee based on the total revenues earned
by the Founding Affiliated Practices, which is defined by the agreement to
represent 24% of the total contract value in the initial month of a patient's
treatment with the remainder of the contract balance earned evenly over the
balance of the contract term. From total revenues, the practices retain a
percentage of the Founding Affiliated Practices' cash collections. There are
adjustments to the service fee designed to both provide incentives for the
orthodontists to provide efficient patient treatment and to increase the number
of patients treated, as well as to ensure that the orthodontists retain a
minimum amount for payment of their compensation from their respective practices
on a monthly basis. The Alternative Contract is used in California. It is a cost
plus fee arrangement, whereby the service fee includes the reimbursement of
defined expenses incurred by Apple in the course of providing services to the
Founding Affiliated Practice plus a percentage of revenues.
7
<PAGE>
Combined operating data for the Founding Affiliated Practices for the period
from commencement of operations (June 1, 1997) through June 30, 1997 is as
follows:
PATIENT CASH
REVENUES COLLECTIONS
---------- ----------
Practices participating under the
Standard Contract ........................... $1,636,981 $1,417,830
Practices participating under the
Alternative Contract ........................ 466,928 428,963
Practices participating under
flat fee agreements ......................... 210,662 210,662
---------- ----------
$2,314,571 $2,057,455
========== ==========
INCOME TAXES
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes," which
requires recognition of deferred tax assets and liabilities for expected future
tax consequences of events that have been recognized in the financial statements
or tax returns. Under this method, deferred tax assets and liabilities are
determined based on the differences between the financial statement carrying
amounts and the tax bases of assets and liabilities using enacted tax rates and
laws in effect in the years in which the differences are expected to reverse.
The deferred tax asset at June 30, 1997 related to net operating losses of the
Company for the six months ended June 30, 1997.
NEW ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued SFAS No. 128,
"Earnings Per Share." This statement establishes new standards for computing and
presenting earnings per share requiring the presentation of "basic" and
"diluted" earnings per share as compared to "primary" and "fully diluted"
earnings per share. The Company is required to adopt SFAS No. 128 for all fiscal
periods ending after December 15, 1997. Earlier adoption is not permitted and
restatement of all prior period earnings per share data is required.
3. STOCK OPTION PLAN
As allowed by SFAS No. 123, "Accounting for Stock-Based Compensation," the
Company accounts for awards under its 1996 Stock Option Plan under Accounting
Principles Board Opinion No. 25, under which no compensation cost has been
recognized for stock options issued with exercise prices greater than or equal
to the fair market value at the date of grant. Had compensation cost for these
plans been determined consistent with SFAS No. 123, the Company's net loss and
loss per share would have been reduced to the following pro forma amounts:
SIX MONTHS THREE MONTHS
ENDED ENDED
JUNE 30, 1997 JUNE 30, 1997
----------- -------------
Net loss
As reported .................... $ (668,284) $ (192,962)
========== ===========
Pro forma ...................... $ (764,782) $ (289,460)
========== ===========
Loss per share
As reported .................... $ (0.14) $ (0.03)
========== ===========
Pro forma ...................... $ (0.16) $ (0.05)
========== ===========
8
<PAGE>
4. SUBSEQUENT EVENTS
NEW ORTHODONTIST AFFILIATIONS
Since the completion of the IPO, 20 additional orthodontists have affiliated
with the Company. Seventeen of these orthodontists had established practices,
and three agreed to join existing affiliated practices. The practices that
affiliated with the Company since the IPO operate 22 locations and generated
historical patient revenue over the prior twelve months of approximately $17.7
million. Prior patient revenue is not necessarily indicative of the level of
revenue that these practices may be expected to generate in the future.
Historical patient revenue for the Founding Affiliated Practices was $25.0
million for the twelve months ended December 31, 1997. Total consideration to
these new orthodontists consisted of approximately 1.5 million shares of common
stock and $7.1 million of cash, assumed debt and deferred purchase price. These
transactions closed after June 30, 1997.
NEW CREDIT FACILITY
On July 28, 1997, the Company entered into a three-year, $15 million revolving
credit facility with Chase Manhattan Bank. Advances under this facility bear
interest, at the Company's option, at prime rate or LIBOR, in each case plus a
margin which is calculated based upon the Company's ratio of indebtedness to
cashflow.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis contains certain forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. These statements are based on current plans and expectations of the
Company and involve risks and uncertainties that could cause actual future
activities and results of operations to be materially different from those set
forth in the forward-looking statements. Important factors that could cause
actual results to differ include, among others, risks associated with
affiliations, fluctuations in operating results because of affiliations and
variations in stock price, changes in government regulations, competition, risks
of operations and growth of existing and new affiliated orthodontic practices,
and risks detailed in the Company's SEC filings.
OVERVIEW
The Company was founded in July 1996, to provide practice management services to
orthodontic practices in the United States and Canada. On May 29, 1997, the
Company acquired simultaneously with the closing of its IPO, substantially all
of the tangible and intangible assets, and assumed the liabilities, of 31
orthodontic practices. The Company also began to provide practice management
services to each of the Founding Affiliated Practices pursuant to long-term
Service Agreements entered into at the time of the Acquisitions. The Company
expects that its future growth will come from (i) implementing a comprehensive
operating strategy designed to drive internal growth of the Affiliated Practices
and (ii) entering into Service Agreements with new Affiliated Practices and
developing new orthodontic centers (including satellite offices) with existing
and future Affiliated Practices.
Through its Service Agreements, the Company provides a full complement of
practice management services to Affiliated Practices in return for management
service fees. Except with respect to two Service Agreements providing for the
payment of flat fees, the management service fees earned by the Company are in
accordance with two general types of Service Agreements -- the standard form of
the Service Agreement ("Standard Contract") and the alternative form of the
Service Agreement ("Alternative Contract"). The Standard Contract calls for a
calculation of the monthly service fee based on the total patient revenues
earned by the Affiliated Practices, which is defined by the agreement to
represent 24% of the total contract value in the initial month of a patient's
treatment with the remainder of the contract balance earned evenly over the
balance of the contract term. From total patient revenues, the practices retain
a percentage of the Affiliated Practices' cash collections.
The Alternative Contract is used in California. It is a cost-plus fee
arrangement, whereby the service fee includes the reimbursement of defined
expenses incurred by Apple in the course of providing services to the Affiliated
Practice plus a percentage of revenues. The Company believes the fees generated
by each of these formulas are reflective of the fair market value of the
services provided and are comparable to the fees earned by other management
service companies in the respective jurisdictions where these arrangements
exist. In addition, with respect to two of the Founding Affiliated Practices,
the service fees are based on flat fees that are subject to adjustment on an
annual basis.
The expenses incurred by the Company in fulfilling its obligations under the
Service Agreements are generally of the same nature as the operating costs and
expenses that would have otherwise been incurred by the Affiliated Practices,
including salaries, wages and benefits of practice personnel (excluding
orthodontists and, in some cases, orthodontic assistants and other professional
personnel), orthodontic supplies and office supplies used in administering their
clinic practices, the office (general and administrative) expenses of the
practices and depreciation and amortization of assets acquired from the Founding
Affiliated Practices. In addition to the operating costs and expenses discussed
above, the Company incurs personnel and administrative expenses in connection
with establishing and maintaining a corporate office, which provides management,
administrative, marketing and business development services.
In accordance with Staff Accounting Bulletin ("SAB") No. 48, "Transfers of
Nonmonetary Assets by Promoters or Shareholders," published by the Securities
and Exchange Commission (the "Commission"), the acquisition of the assets and
assumption of certain liabilities for all of the Founding Affiliated Practices
pursuant to the Acquisitions has been accounted for by the Company at the
transferors' historical cost basis, with the shares of common stock issued in
those transactions being valued at the historical cost of the nonmonetary assets
acquired net of liabilities assumed. The cash consideration paid at closing on
May 29, 1997 is reflected as a dividend by Apple to the owners of the Founding
Affiliated Practices in the quarter ended June 30, 1997. SAB No. 48 is not
applicable to any acquisitions made by the Company subsequent to the IPO. It is
currently anticipated that the Company's future acquisitions of certain of the
assets and liabilities of Affiliated Practices may result in substantial annual
noncash amortization charges for intangible assets in the Company's statements
of operations.
RESULTS OF OPERATIONS (UNAUDITED)
The Company conducted no significant operations through the date of the
Offering. Following completion of the IPO and the Acquisitions on May 29, 1997,
the Company began operations effective June 1, 1997. General and administrative
expenses were incurred during the period from inception (July 15, 1996) through
May 29, 1997 in connection with the Offering. The unaudited financial statements
of the Company for the three and six month periods ended June 30, 1997 reflect
10
<PAGE>
a net loss of $192,962 and $668,284, respectively, on management service fee
revenues of $1.69 million for both periods. These results only reflect the
impact of the Company's Service Agreements for the month of June 1997, the
period subsequent to the IPO. The Company was not in existence during the second
quarter of 1996; therefore, comparative results have not been presented.
The Company's retained deficit at December 31, 1996 is primarily attributable to
special compensation and consulting charges totaling $23.4 million related to
valuing stock issued to founders, management and advisors of the Company, in
October and December of 1996, at the initial public offering price. The overall
impact of these charges was to increase additional paid-in capital by a total of
$23.4 million and to increase the retained deficit by $23.4 million. There was
no net effect on stockholders' equity.
LIQUIDITY AND CAPITAL RESOURCES
A part of the Company's business strategy is to encourage Affiliated Practices
to offer more affordable payment plans to patients. The Company does not expect
the affordable payment plans, or any potential increase in bad debt expense
resulting from these plans, to have any significant negative impact on the
working capital or liquidity of the Affiliated Practices. Moreover, the Company
believes the Founding Affiliated Practices have the financial wherewithal to
sustain any negative impact that may result from these payment plans. Therefore,
Apple does not anticipate that the offering by the Affiliated Practices of more
affordable payment plans will impair the Company's ability to collect management
service revenues from the Affiliated Practices.
The Company anticipates making routine capital expenditures for the Founding
Affiliated Practices during the remainder of 1997 of approximately $2.0 million
to fund, among other things, the development of satellite offices. The average
cost of developing a satellite office (which may vary by geographic market) is
estimated to be approximately $250,000, including initial working capital
requirements. The Service Agreements provide for advances by the Company to the
Founding Affiliated Practices for working capital requirements (including any
deficits in cash flows of Founding Affiliated Practices resulting from, among
other things, development of satellite offices) and other purposes. Such loans
will generally bear interest at prime plus one percent and will be repayable
over varying periods of time not to exceed five years. It is anticipated that
the foregoing capital expenditures will be funded from the Company's cash flow
from operations and borrowings under its revolving credit facility. The Company
also expects to make acquisitions of additional orthodontic practices during
1997 that will involve the use of cash and Common Stock.
On July 28, 1997, the Company entered into a three-year, $15 million revolving
credit facility with Chase Manhattan Bank. Advances under this facility bear
interest, at the Company's option, at prime rate or LIBOR, in each case plus a
margin which is calculated based upon the Company's ratio of indebtedness to
cash flow.
11
<PAGE>
PART II
ITEM 1. LEGAL PROCEEDINGS
For a discussion of legal proceedings of the Company, see Form 10-Q filed with
the SEC for the quarterly period ended March 31, 1997.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
None
(b) Reports on Form 8-K
None
12
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant, Apple Orthodontix, Inc., has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
APPLE ORTHODONTIX, INC.
Dated: August 13, 1997 /s/ MICHAEL W. HARLAN
----------------------
By: Michael W. Harlan
Vice President - Chief Financial Officer
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED
FROM THE COMPANY'S FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 1997 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 3,403,975
<SECURITIES> 0
<RECEIVABLES> 203,486
<ALLOWANCES> (17,031)
<INVENTORY> 0
<CURRENT-ASSETS> 4,175,485
<PP&E> 3,462,436
<DEPRECIATION> (63,995)
<TOTAL-ASSETS> 9,571,215
<CURRENT-LIABILITIES> 3,700,618
<BONDS> 0
0
0
<COMMON> 9,733
<OTHER-SE> 5,576,936
<TOTAL-LIABILITY-AND-EQUITY> 9,571,215
<SALES> 0
<TOTAL-REVENUES> 1,685,957
<CGS> 0
<TOTAL-COSTS> (2,770,800)
<OTHER-EXPENSES> 56
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,909
<INCOME-PRETAX> (1,077,878)
<INCOME-TAX> (409,594)
<INCOME-CONTINUING> (668,284)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (668,284)
<EPS-PRIMARY> (0.14)
<EPS-DILUTED> (0.14)
</TABLE>
