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, 1998
|_| 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 333-26673
------------------------------------------------------------
EUROTECH, LTD.
---------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
District of Columbia 33-0662435
------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1101 30th Street, NW
Suite 500
Washington, DC 20007-3772
(Address of principal executive offices)
(202) 625-4382
(Issuer's telephone number)
---------------------------------------------------
(Former name, former address and former fiscal year
if changed since last report)
Check 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 |_|
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 19,614,836 shares of Common Stock,
$0.00025 par value, were outstanding as of June 30, 1998.
Transitional Small Business Disclosure Forms (check one):
Yes |_| No |X|
<PAGE>
EUROTECH, LTD.
(A Development Stage Company)
INDEX TO FORM 10Q
JUNE 30, 1998
Page Nos.
---------
PART I - FINANCIAL INFORMATION:
ITEM I - FINANCIAL STATEMENTS
BALANCE SHEETS F-1
At December 31, 1997 and June 30, 1998
STATEMENTS OF OPERATIONS F-2
For the Six Months Ended June 30, 1997
For the Six Months Ended June 30, 1998
For the Period from Inception (May 26, 1995)
to June 30, 1998
STATEMENTS OF OPERATIONS F-3
For the Three Months Ended June 30, 1997
For the Three Months Ended June 30, 1998
STATEMENTS OF STOCKHOLDERS' (DEFICIENCY) EQUITY F-4 - F-5
For the Period from Inception (May 26, 1995)
to December 31,
1997 For the Six Months Ended June 30, 1998
STATEMENTS OF CASH FLOWS F-6
For the Six Months Ended June 30, 1997
For the Six Months Ended June 30, 1998
For the Period from Inception (May 26, 1995)
to June 30, 1998
NOTES TO FINANCIAL STATEMENTS F-7 - F-15
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL F-16-F-19
CONDITION AND RESULTS OF OPERATIONS
PART II - OTHER INFORMATION F-20
<PAGE>
EUROTECH, LTD.
(A Development Stage Company)
BALANCE SHEETS
ASSETS
(Note 2)
<TABLE>
<CAPTION>
At December 31, At June 30, 1998
1997 (Unaudited)
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 617,756 $ 56,941
Receivable from related parties 5,918 5,918
Prepaid expenses and other current assets 21,539 26,992
------------ ------------
TOTAL CURRENT ASSETS 645,213 89,851
PROPERTY AND EQUIPMENT - net of accumulated depreciation 14,050 30,422
OTHER ASSETS:
Organization and patent costs - net of accumulated amortization 28,651 27,619
Deferred financing costs 261,178 69,194
Other assets 3,151 5,551
------------ ------------
TOTAL ASSETS $ 952,243 $ 222,637
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
Notes payable $ 2,000,000 $ --
Accrued liabilities 576,966 1,324,720
Deferred revenue 225,000 225,000
------------ ------------
TOTAL CURRENT LIABILITIES 2,801,966 1,549,720
CONVERTIBLE DEBENTURES 3,000,000 6,000,000
CONTINGENCIES AND OTHER MATTERS (Notes 1, 2, 5 and 6)
STOCKHOLDERS' DEFICIENCY:
Preferred stock - $0.01 par value; 1,000,000 shares
authorized; -0- shares issued and outstanding -- --
Common stock - $0.00025 par value; 50,000,000 shares authorized;
18,928,836 and 19,614,836 shares issued and outstanding at
December 31,1997 and June 30, 1998, respectively 4,732 4,903
Additional paid-in capital 12,892,313 14,850,262
Unearned financing costs (1,315,317) (323,889)
Deficit accumulated during the development stage (16,431,451) (21,858,359)
------------ ------------
TOTAL STOCKHOLDERS' DEFICIENCY (4,849,723) (7,327,083)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIENCY $ 952,243 $ 222,637
============ ============
</TABLE>
See notes to financial statements.
F-1
<PAGE>
EUROTECH, LTD.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Six Months Ended June 30, For the Period
--------------------------------- from Inception
1997 1998 (May 26, 1995) to
------------ ------------ June 30, 1998
------------
<S> <C> <C> <C>
REVENUES $ -- $ -- $ --
------------ ------------ ------------
OPERATING EXPENSES:
Research and development 270,615 560,511 2,951,025
Consulting fees 652,884 505,347 3,651,922
Other general and administrative expenses 591,455 881,669 2,725,448
------------ ------------ ------------
TOTAL OPERATING EXPENSES 1,514,954 1,947,527 9,328,395
------------ ------------ ------------
OPERATING LOSS (1,514,954) (1,947,527) (9,328,395)
------------ ------------ ------------
OTHER EXPENSES:
Interest expense 121,379 429,720 743,882
Amortization of deferred and unearned
financing costs 1,371,012 3,049,661 11,786,082
------------ ------------ ------------
TOTAL OTHER EXPENSES 1,492,391 3,479,381 12,529,964
------------ ------------ ------------
NET LOSS $ (3,007,345) $ (5,426,908) $(21,858,359)
============ ============ ============
NET LOSS PER COMMON SHARE $ (.17) $ (.28)
============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 17,275,000 19,248,919
============ ============
</TABLE>
See notes to financial statements.
F-2
<PAGE>
EUROTECH, LTD.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months Ended June 30,
-----------------------------------
1997 1998
------------ ------------
<S> <C> <C>
REVENUES $ -- $ --
------------ ------------
OPERATING EXPENSES:
Research and development 11,883 252,840
Consulting fees 326,968 284,365
Other general and administrative expenses 273,433 322,288
------------ ------------
TOTAL OPERATING EXPENSES 612,284 859,493
------------ ------------
OPERATING LOSS (612,284) (859,493)
------------ ------------
OTHER EXPENSES:
Interest expense 60,357 299,095
Amortization of deferred and unearned financing costs 685,506 1,803,433
------------ ------------
TOTAL OTHER EXPENSES 745,863 2,102,528
------------ ------------
NET LOSS $ (1,358,147) $ (2,962,021)
============ ============
NET LOSS PER COMMON SHARE $ (.08) $ (.15)
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING 17,307,000 19,554,670
============ ============
</TABLE>
See notes to financial statements.
F-3
<PAGE>
EUROTECH, LTD.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
(UNAUDITED)
FOR THE PERIOD FROM INCEPTION (MAY 26, 1995) TO DECEMBER 31, 1997
AND THE SIX MONTHS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
Common Stock Additional Unearned
Date of ----------------- Paid-in Due from Financing
Period Ended December 31, 1998: Transaction Shares Amount Capital Stockholders Costs
- ------------------------------- ----------- --------- -------- ---------- ------------ ----------
(1)
<S> <C> <C> <C> <C> <C> <C>
Founder shares issued ($0.00025 per share) 05/26/95 4,380,800 $ 1,095 $ (1,095) $ - $ -
Issuance of stock for offering consulting fees
($0.0625 per share) 08/31/95 440,000 110 27,390 - -
Issuance of stock ($0.0625 and $0.25
per share) Various 4,080,000 1,020 523,980 (3,000) -
Issuance of stock for license ($0.0625 per
share) 08/31/95 600,000 150 37,350 - -
Issuance of stock options for offering legal
and consulting fees - - 75,000 - -
Offering expenses - - (105,398) - -
Net loss - - - - -
---------- -------- ---------- --------- -----------
Balance - December 31, 1995 9,500,800 2,375 557,227 (3,000) -
Year Ended December 31, 1996:
- -----------------------------
Issuance of stock ($0.25 per share) Various 1,278,000 320 319,180 - -
Exercise of stock options 01/18/96 600,000 150 - - -
Issuance of stock for consulting fees
($0.34375 per share) 03/22/96 160,000 40 54,960 - -
Issuance of stock for consulting fees
($0.0625 per share) 05/15/96 2,628,000 657 163,593 - -
Issuance of stock for consulting fees
($0.590625 per share) 06/19/96 1,500,000 375 885,563 - -
Issuance of stock for consulting fees
($1.82 per share) 11/12/96 57,036 14 104,275 - -
Issuance of stock pursuant to bridge financing
($1.81325 per share) 12/96 1,500,000 375 2,719,500 - (2,719,875)
Amortization of unearned financing costs - - - - 226,656
Repayment by stockholders - - - 3,000 -
Net loss - - - - -
---------- -------- ---------- --------- -----------
Balance - December 31, 1996 17,223,836 $ 4,306 $4,804,298 $ - $(2,493,219)
========== ======== ========== ========= ===========
</TABLE>
Deficit
Accumulated
During the
Development
Period Ended December 31, 1995: Stage Total
- ------------------------------- ------------ -----------
Founder shares issued ($0.00025 per share) $ - $ -
Issuance of stock for offering consulting fees
($0.0625 per share) - 27,500
Issuance of stock ($0.0625 and $0.25
per share) - 522,000
Issuance of stock for license ($0.0625 per
share) - 37,500
Issuance of stock options for offering legal
and consulting fees - 75,000
Offering expenses - (105,398)
Net loss (513,226) (513,226)
----------- -----------
Balance - December 31, 1995 (513,226) 43,376
Year Ended December 31, 1996:
- -----------------------------
Issuance of stock ($0.25 per share) - 319,500
Exercise of stock options - 150
Issuance of stock for consulting fees
($0.34375 per share) - 55,000
Issuance of stock for consulting fees
($0.0625 per share) - 164,250
Issuance of stock for consulting fees
($0.590625 per share) - 885,938
Issuance of stock for consulting fees
($1.82 per share) - 104,289
Issuance of stock pursuant to bridge financing
($1.81325 per share) - -
Amortization of unearned financing costs - 226,656
Repayment by stockholders - 3,000
Net loss (3,476,983) (3,476,983)
----------- -----------
Balance - December 31, 1996 $(3,990,209) $(1,674,824)
=========== ===========
(1) Share amounts have been restated to reflect the 4 for 1 stock split on
June 1, 1996.
See notes to financial statements.
F-4
<PAGE>
EUROTECH, LTD.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
(UNAUDITED)
FOR THE PERIOD FROM INCEPTION (MAY 26, 1995) TO DECEMBER 31, 1997
AND THE SIX MONTHS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
Common Stock Additional Unearned
Date of -------------------- Paid-in Due from Financing
Year Ended December 31, 1995: Transaction Shares Amount Capital Stockholders Costs
- ----------------------------- ----------- --------- -------- ---------- ------------ ----------
(1)
<S> <C> <C> <C> <C> <C> <C>
Balance - December 31, 1996 17,223,836 $ 4,306 $ 4,804,298 $ - $(2,493,219)
Issuance of stock for consulting fees
($2.50 per share) 03/97 64,000 16 159,984 - -
Issuance of stock for consulting fees
($5.45 per share) 06/97 39,000 9 212,540 - -
Issuance of stock for consulting fees
($5.00 per share) 09/97 59,000 15 294,986 - -
Issuance of stock pursuant to penalty
provision of bridge financing
($5.45 per share) 06/97 500,000 125 2,724,875 - (2,725,000)
Value assigned to conversion feature of
Convertible Debentures 11/97 - - 1,337,143 - (1,337,143)
Value assigned to issuance of 127,500 warrants
in consideration for interest and placement -
fees in connection with Convertible Debentures 11/97 - - 284,480 (284,480)
Value assigned to issuance of 35,000 warrants -
to shareholder for consulting services 11/97 - - 39,588 (39,588)
Value assigned to issuance of 364,000 warrants
to shareholder as additional consideration
for financing activities 11/97 - - 862,680 - (862,680)
Issuance of stock for consulting fees
($4.00 per share) 12/97 43,000 11 171,989 - -
Accrual of stock issued January 1998 pursuant
to penalty provision of bridge financing
($2.00 per share) 12/97 1,000,000 250 1,999,750 - (2,000,000)
Amortization of unearned financing costs - - - - 8,426,793
Net loss - - - - -
---------- -------- ----------- --------- -----------
Balance - December 31, 1997 18,928,836 $ 4,732 $12,892,313 $ - $(1,315,317)
========== ======== =========== ========= ===========
</TABLE>
Deficit
Accumulated
During the
Development
Year Ended December 31, 1995: Stage Total
- ----------------------------- ------------ -----------
Balance - December 31, 1996 $ (3,990,209) $(1,674,824)
Issuance of stock for consulting fees
($2.50 per share) - 160,000
Issuance of stock for consulting fees
($5.45 per share) - 212,549
Issuance of stock for consulting fees
($5.00 per share) - 295,001
Issuance of stock pursuant to penalty
provision of bridge financing
($5.45 per share) - -
Value assigned to conversion feature of
Convertible Debentures - -
Value assigned to issuance of 127,500 warrants
in consideration for interest and placement
fees in connection with Convertible Debentures -
Value assigned to issuance of 35,000 warrants -
to shareholder for consulting services -
Value assigned to issuance of 364,000 warrants -
to shareholder as additional consideration
for financing activities - -
Issuance of stock for consulting fees
($4.00 per share) - 172,000
Accrual of stock issued January 1998 pursuant
to penalty provision of bridge financing
($2.00 per share) - -
Amortization of unearned financing costs 8,426,793
Net loss (12,441,242) (12,441,242)
------------ -----------
Balance - December 31, 1997 $(16,431,451) $(4,849,723)
============ ===========
(1) Share amounts have been restated to reflect the 4 for 1 stock split on
June 1, 1996.
See notes to financial statements.
F-5
<PAGE>
EUROTECH, LTD.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
(UNAUDITED)
FOR THE PERIOD FROM INCEPTION (MAY 26, 1995) TO DECEMBER 31, 1997
AND THE SIX MONTHS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
Common Stock Additional Unearned
Date of -------------------- Paid-in Due from Financing
Six Months Ended December 31, 1998: Transaction Shares Amount Capital Stockholders Costs
- ----------------------------------- ----------- --------- -------- ---------- ------------ ----------
(1)
<S> <C> <C> <C> <C> <C> <C>
Balance - December 31, 1997 18,928,836 $ 4,732 $12,892,313 $ - $(1,315,317)
Issuance of stock for consulting fees
($2.58 per share) 03/98 43,000 11 110,930 - -
Value assigned to conversion feature of
Convertible Debentures and 60,000 warrants
issued as additional interest 02/98 - - 1,100,000 - (1,100,000)
Issuance of stock pursuant to penalty
provision of bridge financing
($1.0625 per share) 04/98 500,000 125 531,124 - (531,249)
Issuance of stock principally for consulting
fees ($1.51 per share) 06/98 143,000 35 215,895 - -
Amortization of unearned financing costs - - - - 2,622,677
Net loss - - - - -
---------- -------- ----------- ---------- -----------
Balance - June 30, 1998 19,614,836 $ 4,903 $14,850,262 $ - $ (323,889)
========== ======== =========== ========== ===========
</TABLE>
Deficit
Accumulated
During the
Development
Six Months Ended June 30, 1998: Stage Total
- ------------------------------- ----- -----
Balance - December 31, 1997 $(16,431,451) $(4,849,723)
Issuance of stock for consulting fees
($2.58 per share) - 110,941
Value assigned to conversion feature of
Convertible Debentures and 60,000 warrants
issued as additional interest - -
Issuance of stock pursuant to penalty
provision of bridge financing
($1.0625 per share) -
Issuance of stock principally for consulting -
fees ($1.51 per share) - 215,930
Amortization of unearned financing costs 2,622,677
Net loss (5,426,908) (5,426,908)
------------ -----------
Balance - June 30, 1998 $(21,858,359) $(7,327,083)
============ ===========
(1) Share amounts have been restated to reflect the 4 for 1 stock split on
June 1, 1996.
See notes to financial statements.
F-6
<PAGE>
EUROTECH, LTD.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Six Months Ended June 30, For the Period
--------------------------------- from Inception
1997 1998 (May 26, 1995) to
------------ ------------ June 30, 1998
------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (3,007,345) $ (5,426,908) $(21,858,359)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 2,293 4,698 10,699
Amortization of deferred and unearned financing
costs 1,371,012 3,049,661 11,786,082
Accrued interest 121,379 208,329 208,329
Stock issued for license -- -- 37,500
Consulting fees and other compensation satisfied by
stock issuances 372,550 326,871 2,375,898
Cash provided by (used in) the change in assets and liabilities:
(Decrease) increase in advances to related parties 84,000 -- (5,918)
Increase in prepaid expenses (9,574) (5,453) (26,992)
Increase in other assets -- (2,400) (5,551)
Increase in accrued liabilities 394,515 539,425 1,116,391
Increase in deferred revenue -- -- 225,000
------------ ------------ ------------
NET CASH USED IN OPERATING ACTIVITIES (671,170) (1,305,777) (6,136,921)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Organization and patent costs -- -- (31,358)
Capital expenditures (18,391) (20,038) (37,382)
------------ ------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (18,391) (20,038) (68,740)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of stock options -- -- 150
Proceeds from issuance of common stock -- -- 841,500
Offering costs -- -- (2,898)
Repayment by stockholders -- -- 3,000
Proceeds from convertible debentures -- 3,000,000 6,000,000
Proceeds from bridge notes -- -- 2,000,000
Repayment of bridge notes -- (2,000,000) (2,000,000)
Borrowings from stockholders 241,500 -- 561,140
Repayment to stockholders -- -- (561,140)
Deferred financing costs 75,000 (235,000) (579,150)
------------ ------------ ------------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 316,500 765,000 6,262,602
------------ ------------ ------------
(DECREASE) INCREASE IN CASH (373,061) (560,815) 56,941
CASH - BEGINNING 380,183 617,756 --
------------ ------------ ------------
CASH - ENDING $ 7,122 $ 56,941 $ 56,941
============ ============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ -- $ 36,630 $ 351,561
============ ============ ============
Income taxes $ -- $ -- $ --
============ ============ ============
</TABLE>
See notes to financial statements.
F-7
<PAGE>
EUROTECH, LTD.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1998
NOTE 1 - BASIS OF PRESENTATION
The accompanying financial statements are unaudited. These
statements have been prepared in accordance with the rules and
regulations of the Securities and Exchange Commission ( the
"SEC"). Certain information and footnote disclosures normally
included in the financial statements prepared in accordance
with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations.
In the opinion of management, the financial statements reflect
all adjustments (which include only normal recurring
adjustments) necessary to state fairly the financial position
and results of operations as of and for the periods indicated.
These financial statements should be read in conjunction with
the Company's financial statements and notes thereto for year
ended December 31, 1997, included in the Company's Form 10 and
Form S-1 as filed with the Securities and Exchange Commission.
The preparation of financial statements in conformity with
general accepted accounting principles requires management to
make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statement
and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
NOTE 2 - BUSINESS AND CONTINUED OPERATIONS
Eurotech, Ltd. (the "Company") was incorporated under the laws
of the District of Columbia on May 26, 1995. The Company is a
development-stage, technology transfer, holding and management
company, formed to commercialize new, existing but previously
unrecognized, and previously "classified" technologies, with a
particular current emphasis on technologies developed by
prominent research institutes and individual researchers in
the former Soviet Union and in Israel, and to license those
and other Western technologies for business and other
commercial applications principally in Western and Central
Europe, Ukraine, Russia and North America. Since the Company's
formation, it has acquired development and marketing rights to
a number of technologies by purchase, assignments, and
licensing arrangements. The Company intends to operate its
business by licensing its technologies to end-users and
through development and operating joint ventures and strategic
alliances. To date, the Company has not generated any revenues
from operations.
F-8
<PAGE>
EUROTECH, LTD.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1998
NOTE 2 - BUSINESS AND CONTINUED OPERATIONS (Continued)
The accompanying unaudited financial statements have been
prepared in conformity with generally accepted accounting
principles, which contemplate continuation of the Company as a
going concern. However, as shown in the accompanying financial
statements, the Company has incurred losses from operations
from inception. As of June 30, 1998, the Company has a
stockholders' deficiency of $7,327,083, a working capital
deficiency of $1,459,869 and an accumulated deficit since
inception of $21,858,359. The Company requires additional
funds to commercialize its technologies and continue research
and development efforts. Until the commencement of sales, the
Company will have no operating revenues, but will continue to
incur substantial expenses and operating losses. No assurances
can be given that the Company can complete development of any
technology, not yet completely developed, or that with respect
to any technology that is fully developed, it can be
manufactured on a large scale basis or at a feasible cost.
Further, no assurance can be given that any technology will
receive market acceptance. Being a start-up stage entity, the
Company is subject to all the risks inherent in the
establishment of a new enterprise and the marketing and
manufacturing of a new product, many of which risks are beyond
the control of the Company. These factors raise substantial
doubt about the Company's ability to continue as a going
concern.
Since inception, the Company has financed its operations
through sale of its securities, shareholder loans, a bridge
financing totalling $2,000,000 completed in December of 1996,
a Convertible Debenture financing of $3,000,000 completed in
November of 1997 and a Convertible Debenture financing of
$3,000,000 completed in February of 1998 and a Convertible
Debenture financing of $1,000,000 completed July 20, 1998, as
discussed further in Note 7. Proceeds from the February 1998
Convertible Debenture financing were used to retire the
$2,000,000 bridge notes. The Company is exploring additional
sources of working capital, which include a private offering
of common stock, private borrowings and joint ventures.
While no assurance can be given, management believes the
Company can raise adequate capital to keep the Company
functioning during 1998. No assurance can be given that the
Company can successfully obtain any working capital or
complete any proposed offerings or, if obtained, that such
funding will not cause substantial dilution to shareholders of
the Company. Further, no assurance can be given as to the
completion of research and development and the successful
marketing of the technologies.
These financial statements do not include any adjustments
relating to the recoverability of recorded asset amounts that
might be necessary as a result of the above uncertainty.
F-9
<PAGE>
EUROTECH, LTD.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1998
NOTE 3 - NOTES PAYABLE
Convertible Debenture Offering
On February 23, 1998, the Company sold through a private
placement $3,000,000, 8% Convertible Debenture notes, due
February 23, 2001. As additional consideration, the Company
issued separate warrants to purchase 60,000 shares of the
Company's common stock at $2.30 per share. The warrants are
exercisable over two
years.
The debenture agreements permit the holders of the debentures
to convert the debt into shares of common stock at beneficial
conversion rates based on the timing of the conversion. The
notes conversion feature commences at the earlier of: (I) the
date the underlying shares to the Convertible Debenture notes
are registered and declared effected by the SEC; (ii) 90 days
after February 23, 1998. Shares of common stock to be issued
at the conversion date shall be equal to the outstanding
principal and accrued interest at the conversion date, divided
by the conversion price. The conversion price is the lower of
$2.62 or the average bid price per share of the Company's
common stock for five trading days immediately preceding the
conversion date, multiplied by (I) 80% for any conversion
honored prior to the 180th day after February 23, 1998, (ii)
75% for any conversion honored on or after the 180th day after
February 23, 1998, and prior to the 360th after February 23,
1998, and (iii) 70% for any conversion honored after the 360th
day after February 23, 1998. Commencing on February 23, 2000,
all or any portion of the remaining debt due under this
financing at the option of Eurotech is convertible into shares
of common stock at the 70% conversion rate.
Furthermore, the Company has agreed that if a Registration
Statement covering the underlying shares of the convertible
note is either not filed with the SEC on or prior to March 2,
1998 or, if filed, is not declared effective by the SEC on or
prior to March 15, 1998, the Company will be obligated to pay
to the debenture holders liquidated damages equal to 1% of the
aggregate principal amount of the then outstanding notes on
the first day of each month until such filing or effectiveness
deficiency is cured. The Company's Registration Statement was
declared effective by the SEC in July of 1998.
The Company has assigned a value to the debentures' beneficial
conversion feature and warrants amounting to $1,100,000, and
such amount is being amortized over 180 days commencing
February 23, 1998.
Proceeds from the sale of the 3,000,000, 8% Convertible
Debenture notes amounted to $2,765,000 net of costs which were
comprised of: (I) legal and professional fees amounting to
$10,000, (ii) a placement fee to an unrelated party amounting
to $225,000. The legal and placement fees of $235,000 has been
recorded as deferred financing costs and is being amortized
over 180 days commencing February 23, 1998.
F-10
<PAGE>
EUROTECH, LTD.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1998
NOTE 3 - NOTES PAYABLE (Continued)
Repayment of $2,000,000 Bridge Notes
On March 6, 1998, the Company repaid all of the $2,000,000
principal due to the holders of the bridge notes from proceeds
of the February 1998 Convertible Debenture offering.
NOTE 4 - STOCKHOLDERS' DEFICIENCY
Significant Common Stock Issuances During 1998
During the quarter ended June 30, 1998, the Company issued
500,000 shares of common stock to the unit holders of the
bridge financing in connection with the Company's failure to
have its S-1 Registration Statement declared effective by the
Securities and Exchange Commission by April 1, 1998. The value
assigned to the 500,000 shares was based on fair value and
amounted to $531,249, all of which was charged to operations
during the quarter ended June 30, 1998.
Earnings Per Share
Securities that could potentially dilute basic earnings per
share ("EPS") in the future that were not included in the
computation of diluted EPS because to do so would have been
anti-dilutive for the periods presented consist of the
following:
Warrants to purchase common stock 1,426,500
Convertible Debentures (assumed conversion at market value at
August 12, 1998 and at largest discount) 9,700,000
Options to purchase common stock 75,000
----------
Total as of June 30, 1998 11,201,500
==========
Substantial issuance after June 30, 1998:
Convertible Debentures issued July 1998 (assumed
conversion at market value at August 12, 1998 and
at largest discount) 1,624,000
==========
Warrants to purchase common stock 125,000
==========
F-11
<PAGE>
EUROTECH, LTD.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1998
NOTE 5 - TECHNOLOGY INVESTMENTS AND LICENSING AGREEMENT
Technologies Acquired
Pursuant to three Technology Purchase Agreements each dated
January 1, 1998, the Company has acquired from Oleg L.
Figovsky, Ph.D. , a consultant to the Company, all right,
title and interest in and to the following three unpatented
technologies developed by him, inclusive of future
improvements thereto: (I) a group of related technologies,
collectively known as "Interpenetrated Network Polymers"
("INPs"), (ii) "Liquid Ebonite Material" ("LEM") and (iii)
"Rubber Concrete" ("RubCon") for purchase prices of $75,000,
$15,000 and $35,000, respectively (each, a "Purchase Price").
Pursuant to each such Technology Purchase Agreement, during
15-year period commencing on January 1, 1998, the Company is
obligated to pay to Dr. Figovsky royalties equal to 49% of the
Company's net revenues from the sale or licensing of any
products incorporating the applicable technology, subject to
the Company's right to deduct from the first royalties payable
under each agreement an aggregate sum equal to the Purchase
Price paid thereunder. The Company has accounted for this
technology license fee as acquired research and development
and, in accordance with FASB Interpretation No. 4, has charged
the license fee of $125,000 to research and development
expenses during the three months ended March 31, 1998.
In the quarter ended June 30, 1998, the Company acquired the
rights to certain anticorrosive additives technology from
Israeli scientists for a purchase price of $40,000. The
Company has charged the $40,000 expenditure to research and
development expenses during the quarter ended June 30, 1998.
Investments in Israeli Technology Companies
During 1997, the Company acquired a 20% interest in four
separate Israeli technology, research and development
companies. The Company's share of losses incurred by these
companies has been accounted for on the equity basis and
included in research and development expenses. The amount
charged to research and development for 1997 approximated
$102,000, which reduced the carrying value of the Company's
investment in these four companies to $-0- at December 31,
1997.
During the six months ended June 30, 1998, an additional
$84,000 was invested in these four companies. The amount
charged to research and development expenses for the six
months ended June 30, 1998 approximated $84,000, which reduced
the carrying value of the Company's investment in these four
companies to $-0- at June 30, 1998.
F-12
<PAGE>
EUROTECH, LTD.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1998
NOTE 6 - CONTINGENCIES AND OTHER MATTERS
International Operations
The Company has strategic alliances, collaboration agreements
and licensing agreements with entities which are based in
Russia and Ukraine. Both of these countries have experienced
volatile and frequently unfavorable economic, political and
social conditions. The Russian economy and the Ukraine economy
are characterized by declining gross domestic production,
significant inflation, increasing rates of unemployment and
underemployment, unstable currencies, and high levels of
governmental debt as compared to gross domestic production.
The prospects of widespread insolvencies and the collapse of
various economic sectors exist in both countries.
In view of the foregoing, the Company's business, earnings,
asset values and prospects may be materially and adversely
affected by developments with respect to inflation, interest
rates, currency fluctuations, government policies, price and
wage controls, exchange control regulations, taxation,
expropriation, social instability, and other political,
economic or diplomatic developments in or affecting Russia and
Ukraine. The Company has no control over such conditions and
developments, and can provide no assurance that such
conditions and developments will not adversely affect the
Company's operations.
Risk of Environmental Liability; Present Lack of Environmental
Liability Insurance
The Company's radioactive contaminant technology is subject to
numerous national and local laws and regulations relating to
the storage, handling, emission, transportation and discharge
of such materials, and the use of specialized technical
equipment in the processing of such materials. There is always
the risk that such materials might be mishandled, or that
there might be equipment or technology failures, which could
result in significant claims for personal injury, property
damage, and clean-up or remediation. Any such claims against
the Company could have a material adverse effect on the
Company. The Company does not presently carry any
environmental liability insurance, and may be required to
obtain such insurance in the future in amounts that are not
presently predictable. There can be no assurance that such
insurance will provide coverage against all claims, and claims
may be made against the Company (even if covered by insurance
policies) for amounts substantially in excess of applicable
policy limits. Any such event could have a material adverse
effect on the Company.
F-13
<PAGE>
EUROTECH, LTD.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1998
NOTE 6 - CONTINGENCIES AND OTHER MATTERS (Continued)
Concentration of Credit Risk
Financial instruments which potentially subject the Company to
concentration of credit risk consist principally of cash which
is at one bank. Future concentration of credit risk may arise
from trade accounts receivable. Ongoing credit evaluations of
customers' financial condition will be performed and,
generally, no collateral will be required.
Litigation
In December 1997, Raymond Dirks, Jessy Dirks, Robert Brisotti
and David Morris filed an action in the Supreme Court for the
State of New York, County of New York, against Eurotech, Ltd.
for breach of contract, seeking injunctive relief, specific
performance and monetary damages of nearly $5 million (the
"Dirks Litigation"). The Dirks Litigation arises solely from
an agreement between Eurotech and National Securities
Corporation ("National") relating to financial advisory
services to be performed by National Securities Corporation, a
broker/dealer with which the plaintiffs were affiliated and of
which Raymond Dirks Research was a division. Eurotech granted
National a warrant certificate for 470,000 shares at $1.00 per
share as a retainer for general financial advisory services.
In conjunction with the separation of the plaintiffs and
Raymond Dirks Research from National Securities Corporation,
National assigned a significant portion of the warrant
certificate to the plaintiffs. It is Eurotech's position that
the warrant certificate is voidable.
The plaintiffs allege, among other things, that they are
entitled to damages composed of both the value of the stock on
the date of their purported exercise of an alleged assignment
of the warrant certificate, and the decrease in value of the
price of the stock since the date of their purported exercise.
Eurotech believes that the plaintiffs have significantly
overstated their monetary damage claim and that, having sought
monetary damages, the plaintiffs are not entitled to any type
of equitable relief.
Process was served upon Eurotech at its California office in
late January 1998. Based on the advice of its outside counsel,
Eurotech believes that the plaintiffs' claims will be resolved
favorably to the Company. However, it is possible that the
Company will be adjudged liable in the Dirks Litigation, and
if so, the resolution of the litigation could have a material
adverse effect on the Company.
F-14
<PAGE>
EUROTECH, LTD.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1998
NOTE 7 - SUBSEQUENT EVENT
Convertible Debenture Offering
On July 20, 1998, the Company sold through a private placement
$1,000,000, 8% Convertible Debenture notes, due July 20, 2001.
As additional consideration, the Company issued separate
warrants to purchase 125,000 shares of the Company's common
stock at $1.06 per share. The warrants are exercisable over
two years.
The debenture agreements permit the holders of the debentures
to convert the debt into shares of common stock at beneficial
conversion rates based on the timing of the conversion. The
notes conversion feature commences at the earlier of: (i) the
date the underlying shares to the Convertible Debenture notes
are registered and declared effected by the SEC; (ii) 90 days
after July 20, 1998. Shares of common stock to be issued at
the conversion date shall be equal to the outstanding
principal and accrued interest at the conversion date, divided
by the conversion price. The conversion price is the lower of
$1.06, or the average bid price per share of the Company's
common stock for five trading days immediately preceding the
conversion date, multiplied by (i) 75% for any conversion
honored prior to the 180th day after July 20, 1998 and (ii)
70% for any conversion honored after the 180th day after July
20, 1998. Commencing on July 20, 2001, all or any portion of
the remaining debt due under this financing at the option of
Eurotech is convertible into shares of common stock at the 70%
conversion rate.
The Company has assigned a value to the debentures' beneficial
conversion feature and warrants amounting to $475,000, and
such amount will be amortized over 180 days commencing July
20, 1998.
Proceeds from the sale of the 1,000,000, 8% Convertible
Debenture notes, amounted to $975,000, net of legal and
professional fees amounting to $25,000. The legal and
professional fees of $25,000 have been recorded as deferred
financing costs and will be amortized over 180 days commencing
July 20, 1998.
As part of this agreement, the Company modified its two prior
Convertible Debenture agreements to eliminate the moving floor
conversion prices.
F-15
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
General
The following is a discussion and analysis of the results of operations of the
Company and should be read in conjunction with the financial statements and
related notes contained in this Form 10-Q.
Certain information contained in this Form 10-Q may contain forward-looking
statements. The forward-looking statements are subject to certain risks and
uncertainties. Actual results could differ materially from current expectations.
Among the factors that could affect the Company's actual results and could cause
results to differ from those contained in the forward-looking statements
contained herein is the Company's ability to commercialize its technologies
successfully, which will be dependent on business, financial and other factors
beyond the Company's control, including, amoung others, market acceptance,
ability to manufacture on a large scale basis and at feasible costs, together
with all the risks inherent in the establishment of a new enterprise and the
marketing and manufacturing of new products.
Overview
The Company, incorporated in May 1995, is a development stage, technology
transfer, holding and management company formed to commercialize new, existing
but previously unrecognized, and previously "classified" technologies, with a
particular current emphasis on technologies developed by prominent research
institutes and individual researchers in the former Soviet Union and in Israel,
and to commercialize those and other Western technologies for business and other
commercial applications principally in Central Europe, Ukraine, Russia and North
America.
Until recently, the Company had been principally engaged in identifying,
monitoring, reviewing and assessing technologies for their commercial
applicability and potential, and in acquiring selected technologies by equity
investment, purchase, assignment and licensing arrangements. Although the
Company intends to continue identifying, monitoring, reviewing and assessing new
technolgoies, its primary emphasis will be focused on commercializing four of
its present technologies ("Principal Technologies").
The Company's Principal Technologies include: (I) Silicon-organic compound
technology ("EKOR") (a silicon-based elastomer which may be used to contain
radioactive dust and waste materials); (ii) Non-isocyanate Polyurethane ("NIPU")
(a modified polyurethane that does not contain the toxic isocyanates used in the
production of conventional polyurethane); (iii) Liquid Ebonite Material ("LEM")
(a synthetic liquid rubber); and (iv) Rubcon (a rubber based concrete).
The Company believes that the Principal Technologies are presently ready for
commercialization and marketing. To that end, the Company has decided to devote
its business activities and resources principally to the marketing and sale of
the Principal Technologies. The Company recently has initiated a marketing and
sales program for the Principal Technologies, and also has initiated discussions
with a number of prominent, potential users of the technologies, with a view
towards the future negotiation and execution of licensing and/or joint venture
marketing and sales agreements. The Company is proceeding with the marketing and
potential application of its EKOR technology in connection with nuclear
contamination projects at Reactor 4 of the Chernobyl Nuclear Power Plan
("ChNPP") (which experienced a catastrophic near-meltdown in 1986), and in the
U.S., Russia and Germany. The Company intends to operate its business by
licensing its technologies to end-users and through development and operating
joint-ventures and strategic alliances. To date, the Company has not generated
any revenues from operations.
F-16
<PAGE>
The Company has not been profitable since inception and expects to incur
substantial operating losses over the next twelve months. For the period from
inception to June 30, 1998, the Company incurred a cumulative net loss of
approximately $21,858,000. The Company expects that it will generate losses
until at least such time as it can commercialize its technologies, if ever. No
assurance can be given that any of the Company's technologies can be
manufactured on a large scale basis or at a feasible cost. Further, no assurance
can be given that any technology will receive market acceptance. Being a
start-up stage entity, the Company is subject to all the risks inherent in the
establishment of a new enterprise and the marketing and manufacturing of a new
product, many of which risks are beyond the control of the Company.
Results of Operations
For the Six months Ended June 30, 1998 vs. the Six Months Ended June 30, 1997
The Company has had no revenues since inception. Consulting and other general
and administrative expenses increased from $1,244,000 for the six months ended
June 30, 1997 to $1,387,000 for the six months ended June 30, 1998. The increase
is principally a result of a provision of $330,000 for penalties to holders of
its 8% Convertible Debentures due November 27, 2000 and February 23, 2001 for
failure by the Company to have the Registration Statement declared effective by
the SEC by February 16, 1998. Further, the Company has incurred professional
expenses related to developing the Company's Principal Technologies. This
overall increase was partially offset by a decrease in consulting expenses
attributable to a reduction in the number of consultants engaged by the Company
during the period.
Research and development expenses increased in the six months ended June 30,
1998 to $561,000, from $271,000, for the six months ended June 30, 1997,
principally attributable to $125,000 paid by Company to Professor Oleg L.
Figovsky, Ph.D. in connection with the three technology purchase agreements,
each dated January 1, 1998, between the Company and Professor Figovsky, and the
purchase of technology from Israeli scientists in April of 1998 for $40,000, all
of which were charged to research and development expenses during the six months
ended June 30, 1998 (see Note 5 to the June 30, 1998 financial statements).
For the six months ended June 30, 1998 and the six months ended June 30, 1997,
the Company incurred operating losses of $1,948,000 and $1,515,000,
respectively. The losses are principally due to expenses incurred in the
acquisition and development of its technologies, including an overall increase
in general and administrative expenses.
Interest expenses and amortization of deferred and unearned finance costs
increased from $1,492,000 for the six months ended June 30, 1997 to $3,479,000
for the six months ended June 30, 1998. This increase was attributable to an
increase in the amount of debt outstanding and the amortization of the
conversion discounts on the Convertible Debentures of $2,091,000 for the six
months ended June 30, 1998. Furthermore, during the quarter ended June 30, 1998,
the Company issued 500,000 shares of common stock to the unit holders of the
bridge financing in connection with the Company's failure to have its S-1
Registration Statement declared effective by the Securities and Exchange
Commission by April 1, 1998. The value assigned to the 500,000 shares was based
on fair value and amounted to $531,249, all of which was charged to operations
during the quarter ended June 30, 1998.
The Company expects to incur significant losses during 1998. The Company
anticipates that any revenue recognized in 1998 will be substantially offset by
expenses incurred by the Company in its efforts to commercialize, sell and
market its Principal Technologies.
F-17
<PAGE>
For the Three Months Ended June 30, 1998 Vs. the Three Months Ended June 30,
1997
Consulting and other general and administrative expenses increased from $600,000
for the three months ended June 30, 1997 to $606,000 for the three months ended
June 30, 1998. The increase is principally a result of a provision of $180,000
for penalties to holders of its 8% Convertible Debentures due November 27, 2000
and February 23, 2001 for failure by the Company to have the Registration
Statement declared effective by the SEC by February 16, 1998. Further, the
Company has incurred increased professional expenses related to developing the
Company's Principal Technologies. This overall increase was partially offset by
a decrease in consulting expenses attributable to a reduction in the number of
consultants engaged by the Company during the period.
Research and development expenses increased in the three months ended June 30,
1998 to $253,000, from $12,000, for the three months ended June 30, 1997,
principally attributable to the acquisition of technology from Israeli
scientists ($40,000) and continued research and development costs for its
Principal Technologies.
For the three months ended June 30, 1998 and the three months ended June 30,
1997, the Company incurred operating losses of $859,000 and $612,000,
respectively. The losses are principally due to expenses incurred in the
acquisition and development of its technologies, including an overall increase
in general and administrative expenses.
Interest expenses and amortization of deferred and unearned finance costs
increased from $745,000 for the three months ended June 30, 1997 to $2,103,000
for the three months ended June 30, 1998. This increase was attributable to an
increase in the amount of debt outstanding and the amortization of the
conversion discounts of the Convertible Debentures totalling $1,036,000 for the
three months ended June 30, 1998. Furthermore, during the quarter ended June 30,
1998, the Company issued 500,000 shares of common stock to the unit holders of
the bridge financing in connection with the Company's failure to have its S-1
Registration Statement declared effective by the Securities and Exchange
Commission by April 1, 1998. The value assigned to the 500,000 shares was based
on fair value and amounted to $531,249, all of which was charged to operations
during the quarter ended June 30, 1998.
Liquidity and Capital Resources
The Company's principal sources of working capital from inception have been net
proceeds of $842,000 from the offering of common stock under Rule 504 of
Regulation D, shareholder advances aggregating $761,440, the bridge financing
completed in December 1996 of $2,000,000, and from the private placement of
$3,000,000 principal amount of 8% Convertible Debentures completed in November
1997, $3,000,000 principal amount of 8% Convertible Debentures completed in
February 1998 and $1,000,000 principal amount of 8% Convertible Debentures
completed in July of 1998.
In November 1997 and February 1998, the Company completed two private
placements, each of $3,000,000 principal amount of its 8% Convertible Debentures
due November 27, 2000 and February 23, 2001, respectively (the "Debentures"). In
each such private placement, warrants (the "Warrants") to purchase up to 60,000
shares of common stock (the Debentures and Warrants, collectively, the
"Securities", each offering of the Securities, a "Debenture Offering", and the
offering of the Securities the "Debenture Offerings") were also issued. The
Securities were offered and sold only to accredited investors as defined by Rule
501 of Regulation D under the Act, in reliance on an exemption from registration
under Rule 506 of Regulation D.
F-18
<PAGE>
The terms and conditions under which the Debentures may be converted into shares
of the Company's common stock and the manner in which the Warrants may be
exercised are set forth in the Company's Annual Report on Form 10-K.
During the six months ended June 30, 1998, the Company's principal source of
cash was the February 1998 Debenture Offering from which it derived net proceeds
of approximately $2,750,000 of this amount $2,000,000 was used to satisfy the
Bridge Notes and $125,000 was applied to the acquisition of three technologies.
The remaining funds were used for working capital. On July 20, 1998, the Company
completed a private placement of $1,000,000 principal amount of 8% Convertible
Debentures due July 20, 2001. See Note 7 to the June 30, 1998 financial
statements for a further discussion of the terms of this financing.
The Company has agreed to fund the commercialization of certain technologies
developed in the former Soviet Union by scientists and researchers at Kurchatov,
other institutes associated therewith, and EAPS, collectively the "Scientists".
Kurchatov will provide the materials, facilities and personnel to complete the
necessary work to commercialize such technologies. The Company also has agreed
to provide funding in connection with the marketing and sale of three of its
Principal Technologies. Total planned expenditures under these programs,
including related general and administrative expenses, are expected to
approximate $1,000,000 during fiscal year 1998, of which $561,000 was incurred
through June 30, 1998. The Company's principal source of funding for these
expenditures during fiscal year 1998 will be the remaining proceeds of the
Debenture Offerings.
The Company will require additional financing to continue to fund research and
development efforts, operating costs and complete necessary work to
commercialize its technologies. The report of the Company's independent
certified public accountants contain an explanatory paragraph which expresses
substantial doubt as to the Company's ability to continue as a going concern.
No assurance can be given that the Company can successfully obtain any
additional financing or, if obtained, that such funding will not cause dilution
to shareholders of the Company. Further, no assurance can be given as to the
completion of research and development and the successful marketing of the
Company's technologies.
The Company had a working capital deficiency and stockholders' deficiency of
$1,460,000 and $7,327,000, respectively, as of June 30, 1998.
F-19
<PAGE>
27 Financial Data Schedule (2)
(b) Reports on Form 8-K
Executive changes.
Pursuant to 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.
Dated: August 14, 1998
EUROTECH, LTD.
(Registrant)
/s/ John McNeil Wilkie
-------------------------------------
President and Chief Financial Officer
- -----------------------------
(2) Filed herewith
F-20
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM EUROTECH,
LTD. BALANCE SHEET AS OF JUNE 30, 1998 AND STATEMENT OF OPERATIONS FOR THE SIX
MONTHS ENDED JUNE 30, 1998.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 57
<SECURITIES> 0
<RECEIVABLES> 6
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 90
<PP&E> 30
<DEPRECIATION> 0
<TOTAL-ASSETS> 223
<CURRENT-LIABILITIES> 1,550
<BONDS> 6,000
0
0
<COMMON> 5
<OTHER-SE> (7,327)
<TOTAL-LIABILITY-AND-EQUITY> 223
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 561
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,479
<INCOME-PRETAX> (5,427)
<INCOME-TAX> 0
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<NET-INCOME> (5,427)
<EPS-PRIMARY> (0.28)
<EPS-DILUTED> (0.28)
</TABLE>
