<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
-
For the quarterly period ended March 31, 2000
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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 No. 0-25507
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iPARTY CORP.
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(Exact name of registrant as specified in its charter)
Delaware 13-4012236
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation of organization)
130 West 30th Street, 10th Floor, New York, New York 10001
- ---------------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 609-4300
------------------------------------------------------------------------------
(Former name or former address, if changed since last report.)
Check whether the Issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the 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 ___
Transitional small business disclosure format
Yes No X
<PAGE>
iPARTY CORP.
Quarterly Report on Form 10-QSB
Table of Contents
PAGE
PART I FINANCIAL INFORMATION
Item 1. Financial Statements 2
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis 7
PART II OTHER INFORMATION
Item 2. Changes in Securities 10
Item 5. Other Information 12
Item 6. Exhibits 12
SIGNATURES 13
<PAGE>
iPARTY CORP.
CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
------------ ------------
2000 1999
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 12,173,001 $ 18,673,304
Marketable securities 3,887,659 973,877
Cash, restricted - 51,012
Accounts receivable 25,180 99,476
Prepaid expenses and other current assets 303,532 428,645
------------ ------------
Total current assets 16,389,372 20,226,314
Property and equipment, net 812,056 860,457
Intangible Assets 5,605,978 6,119,734
Other assets 60,110 50,245
------------ ------------
Total assets $ 22,867,516 $ 27,256,750
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,388,019 $ 1,749,806
Accrued severance 149,175 213,987
Accrued expenses 193,820 238,889
------------ ------------
Total current liabilities 2,731,014 2,202,682
Commitments and contingencies
Stockholders' Equity:
Preferred stock - $.001 par value; 10,000,000 shares authorized;
Series A preferred stock - 1,000,000 authorized;
1,000,000 shares issued and outstanding 1,000 1,000
Series B preferred stock - 1,150,000 authorized;
1,044,952 shares issued and outstanding 1,045 1,045
Series C preferred stock - 100,000 authorized;
100,000 shares issued and outstanding 100 100
Series D preferred stock - 250,000 authorized;
250,000 shares issued and outstanding 250 250
Common stock - $.001 par value; 50,000,000 shares authorized;
11,136,107 shares issued and outstanding 11,137 11,006
Additional paid in capital 59,162,478 58,616,431
Accumulated deficit (39,039,508) (33,575,764)
------------ ------------
Total stockholders' equity 20,136,502 25,054,068
------------ ------------
Total liabilities and stockholders' equity $ 22,867,516 $ 27,256,750
============ ============
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of this Consolidated Balance Sheet.
2
<PAGE>
iPARTY CORP.
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended
March 31,
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2000 1999
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<S> <C> <C>
Revenues $ 146,834 $ -
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Operating costs:
Cost of products sold 117,357 -
Amortization of fulfillment partner warrant 377,744 -
Marketing and sales 2,405,456 -
Product and technology development 1,864,459 -
General and administrative 572,839 555,227
Loss resulting from abandonment of assets - 273,288
Non-cash compensation expense 546,178 134,134
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Operating loss (5,737,199) (962,649)
Interest income 273,455 814
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Net loss before income taxes (5,463,744) (961,835)
Provision for income taxes - -
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Net loss $ (5,463,744) $ (961,835)
============ ===========
Loss per share:
Basic and diluted $ (0.49) $ (0.09)
============ ===========
Weighted Average Shares Outstanding:
Basic and diluted 11,136,107 11,005,421
============ ===========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these Consolidated Statements.
3
<PAGE>
iPARTY CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended
March 31,
-----------------------------
2000 1999
------------ ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (5,463,744) $ (961,835)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 735,120 9,466
Loss resulting from abandonment of assets - 273,288
Reserve for bad debt 14,607 -
Non-cash compensation expense 546,178 134,134
Decrease (increase) in:
Accounts receivable 74,296 -
Prepaid expenses and other current assets 125,113 (83,355)
Other assets (9,865) (23,086)
Increase (decrease) in:
Accounts payable 638,213 332,196
Accrued severance (64,812) -
Accrued expenses (45,069) -
------------ ----------
Net cash used in operating activities (3,449,963) (319,192)
------------ ----------
Cash flows from investing activities:
Purchase of property and equipment (172,963) (387,510)
Advances to officer (14,607) 1,896
Purchase of marketable securities (2,913,782) -
Increase in restricted cash 51,012 -
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Net cash used in investing activities (3,050,340) (385,614)
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Cash flows from financing activities:
Conversion of notes payable to stock - (250,000)
Proceeds from sale of stock, net of offering costs - 828,320
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Net cash provided by investing activities - 578,320
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Net increase in cash and cash equivalents (6,500,303) (126,486)
Cash and cash equivalents, beginning of period 18,673,304 346,751
------------ ----------
Cash and cash equivalents, end of period $ 12,173,001 $ 220,265
============ ==========
Cash paid for:
Interest expense $ - $ -
============ ==========
Income taxes $ - $ -
============ ==========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these Consolidated Statements.
4
<PAGE>
iPARTY CORP.
NOTES TO FINANCIAL STATEMENTS
March 31, 2000
(Unaudited)
1. THE COMPANY
iParty LLC, which was created on December 11, 1997 to launch an Internet-based
merchant of party goods and services, commenced operations in January 1998. On
March 12, 1998, iParty Corp. was organized as a wholly owned subsidiary of
iParty LLC and the net assets and operations of iParty LLC were transferred to
iParty Corp. On April 9, 1998, StarGreetings, Inc. ("Star") was incorporated as
a wholly owned subsidiary of iParty Corp. to develop and operate a personalized
celebrity greeting service.
Effective July 2, 1998, iParty Corp. ("iParty" or the "Company") merged into WSI
Acquisition Corp. ("WSI"), an inactive company. The merger was consummated
through an exchange of shares that resulted in iParty LLC receiving 6,000,000
common shares or 54.5% of the outstanding shares of WSI. In connection with the
merger and as a condition thereof, WSI sold, in two private placements, an
aggregate of 4,585,000 shares of common stock of which 3,624,043 shares were
sold for $.01 per share and 960,957 shares, together with warrants to purchase
1,000,000 shares of Series A preferred stock, were sold for $1.00 per share or
aggregate proceeds of $997,197 before related expenses. The merger has been
treated as a re-capitalization for accounting purposes and iParty's historic
capital accounts were retroactively adjusted to reflect the 6,000,000 shares
issued by WSI in the transaction. In addition, as WSI had no assets before the
merger and the private placements, the 420,421 outstanding common shares of WSI
have been recorded at par value with a corresponding charge to additional
paid-in capital. The statement of operations reflects the operations of iParty
from the commencement of its operations from March 12, 1998 and also reflects
the operations of iParty LLC, the predecessor company, from January 1998 through
March 12, 1998. In connection with the merger, WSI changed its name to iParty
Corp.
The Company's efforts are devoted to developing the Internet resources to
provide consumers a comprehensive web site where they can seek party planning
advice and information and locate and contract for party goods and services.
2. UNAUDITED INTERIM FINANCIAL INFORMATION
The interim consolidated financial statements as of March 31, 2000 have been
prepared by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission (the "SEC") for interim financial reporting. These
consolidated statements are unaudited and, in the opinion of management, include
all adjustments (consisting of normal recurring adjustments and accruals)
necessary to present fairly the consolidated balance sheets, consolidated
operating results, and consolidated cash flows for the periods presented in
accordance with generally accepted accounting principles. The consolidated
balance sheet at December 31,1999 has been derived from the audited consolidated
financial statements at that date. Operating results for the three months ended
March 31, 2000 may not be indicative of the results for the year ending December
31, 2000. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been omitted in accordance with the rules and regulations of the
SEC. These consolidated financial
5
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iPARTY CORP.
NOTES TO FINANCIAL STATEMENTS
March 31, 2000
(Unaudited)
statements should be read in conjunction with the audited consolidated financial
statements, and accompanying notes, included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1999. Certain prior period amounts
have been reclassified to conform to the current period presentation.
6
<PAGE>
Safe Harbor Statement
Certain statements in this Form 10-QSB, including information set forth
under Item 2 "Management's Discussion and Analysis" constitute or may constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 (the "Act"). iParty Corp. (the "Company") desires
to avail itself of certain "safe harbor" provisions of the Act and is therefore
including this special note to enable the Company to do so. Forward-looking
statements included in this Form 10-QSB or hereafter included in other publicly
available documents filed with the Securities and Exchange Commission, reports
to the Company's stockholders and other publicly available statements issued or
released by the Company involve known and unknown risks, uncertainties, and
other factors which could cause the Company's actual results, performance
(financial or operating) or achievements to differ from the future results,
performance (financial or operating) achievements expressed or implied by such
forward-looking statement. Such factors include, but are not limited to: (i) the
Company's insignificant historical revenues; (ii) the Company's reliance of
third-party suppliers; (iii) the Company's ability to expand its website; (iv)
the Company's ability to manage growth; (v) the Company's ability to develop its
brand; (vi) competition; (vii) the Company's ability to adapt evolving
technologies; and (viii) governmental regulation of the Internet Such future
results are based upon management's best estimates based upon current conditions
and the most recent results of operations
Item 2. Management's Discussion and Analysis
Overview
We intend to become the premier brand in the on-line party industry and
the leading resource on the Internet for consumers seeking party goods, party
services, party planning advice and information. Our web site was launched in
February 1999. On October 12, 1999, we launched the new iParty.com site, a
destination for party goods and party planning. From Pokemon costumes to
birthday party packs to fog machines, an online party magazine to party safety
tips, iParty.com presents consumers with what we believe to be a sophisticated,
yet fun and easy-to-navigate online party resource. Offering convenience and an
extensive assortment of merchandise, we believe iParty.com is refocusing the
party goods industry back to the needs of the consumer. At the click of a mouse,
party givers can enjoy one-stop shopping and easy-to-find pricing while
purchasing all their party needs for birthday bashes, Super Bowl parties,
Halloween festivals and more.
We expect that our initial revenues will be derived from retail sales
to consumers of party related goods. We anticipate that future revenues may be
derived from (i) commissions or royalties paid by strategic partners for orders
received through us; and (ii) advertising on our web site's pages, particularly
the content features such as the Party Planner and PartyTalk.
7
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Results of Operations
Three months ended March 31, 1999 compared to three months ended March 31, 2000
Revenue for the three months ended March 31, 2000, includes the selling
price of party goods sold by us, net of returns, as well as outbound shipping
and handling charges. Revenue for the three months ended March 31, 2000, was
approximately $147,000. There were no revenues for the three months ended March
31, 1999. Revenue is recognized at the time products are shipped to customers.
Cost of products sold consists of the cost of merchandise sold to
customers and outbound shipping and handling costs charged to us by our
fulfillment partner, Taymark. For the three months ended March 31, 2000, the
cost of products sold was approximately $117,000. Taymark began fulfilling
orders placed on our web site on October 1, 1999.
Amortization of fulfillment partner warrant expense consists of the
amortization of the estimated fair value of the warrant issued to Taymark to
provide inventory and fulfillment services to deliver merchandise ordered on the
site, or directly through a toll-free telephone number, directly to consumers.
On July 8, 1999, we entered into a product fulfillment agreement with Taymark.
The initial term of the agreement runs through December 31, 2002. The agreement
contains certain restrictions on competition by the direct marketer. As
additional consideration for such restrictions and services, we issued a warrant
to purchase 3,000,000 shares of common stock at an exercise price of $3.75. The
warrant expires on October 1, 2002. The estimated fair value of the warrant on
the date of issue was approximately $5.3 million as determined using the
Black-Scholes option pricing model. The value of the warrant is included in
intangible assets on the accompanying Balance Sheet as of March 31, 2000 and is
being amortized over the initial term of the fulfillment agreement. For the
three months ended March 31, 2000, amortization of fulfillment partner warrant
expense was approximately $378,000 resulting from the amortization of this
warrant.
Marketing and sales expenses consist primarily of advertising, public
relations and promotional expenditures, and all related payroll and related
expenses for personnel engaged in marketing and selling activities. Marketing
and sales expenses for the three months ended March 31, 2000, were approximately
$2,405,000. Included in this expense was approximately $135,000 resulting from
the amortization of the Margaritaville warrant. We intend to pursue a marketing
campaign and will incur significant incremental costs in the future.
Product and technology development expenses consist principally of
payroll and related expenses for product development, editorial, systems and
operations personnel and consultants, and systems infrastructure. Operating and
development expenses for the three months ended March 31, 2000, were
approximately $1,864,000. We believe that continued investment in product
development is critical to attaining its strategic objectives. In addition to
ongoing investments in our web site and infrastructure, we intend to increase
investments in product and services.
8
<PAGE>
General and administrative ("G&A") expenses consist of payroll and
related expenses for executive, finance and administrative personnel,
professional fees and other general corporate expenses. G&A expenses for the
three months ended March 31, 1999 and 2000 were approximately $555,000 and
$573,000, respectively. We expect G&A costs to continue to increase commensurate
with our expansion plans.
We incurred approximately $273,000 for the three months ended March 31,
1999, in losses resulting from abandonment of assets due to a write-off of web
site development costs incurred during 1998 and 1999. It was determined that the
costs, which had been capitalized as property and equipment, were abandoned when
we selected new vendors for support of our web site, necessitating the creation
of a new web site and integration components.
We incurred approximately $134,000 and $546,000 for the three months
ended March 31, 1999 and 2000, respectively, in non-cash compensation expenses.
The non-cash compensation expenses resulted from stock options granted to
consultants, stock options granted to celebrities who provided services to
StarGreetings and the compensation expense associated with the cash-less
exercise of stock options.
Interest income on cash and cash equivalents for the three months ended
March 31, 1999 and 2000, was approximately $1,000 and $273,000, respectively.
The increase in income was due to higher cash and investment balances resulting
from our financing activities, principally the private placement of Series B, C
and D Preferred Stock completed in 1999.
We expect to hire between ten and fifteen additional employees in the
next six months as our needs may require to sustain growth and to remain
competitive and creative.
Liquidity and Capital Resources
We used cash in operating activities for the three months ended March
31, 1999 and 2000 totaling $319,000 and $3,450,000, respectively. In addition,
we invested cash in property and equipment, including web site development
expenditures for the three months ended March 31, 1999 and 2000 totaling
$388,000 and $173,000, respectively. During 1999, we raised $27.0 million, net
of offering expenses, in financing with the proceeds being used for working
capital and capital expenditures.
In 1999, we raised an aggregate of $28.5 million in equity financing.
In January and February of 1999, we received net proceeds of $650,000 from the
exercise of warrants for Series A convertible preferred stock. In August,
September and December of 1999, we sold an aggregate of $27.9 million of
convertible preferred stock and redeemable common stock purchase warrants in
private offerings. The financings included the conversion of our $2.0 million of
outstanding senior debt. Net proceeds to us from the financings were
approximately $26.3 million (including the conversion of the $2.0 million in
debt and interest thereon). We believe, based on currently proposed plans and
assumptions relating to its operations, that the net proceeds from the
financings and related interest income, together with anticipated revenues from
operations, will be sufficient to fund our operations and working capital
requirements for at
9
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least twelve months. In the event that our plans or assumptions change or prove
inaccurate (due to unanticipated expenses, increased competition, unfavorable
economic conditions, or other unforeseen circumstances) we could be required to
seek additional financing sooner than currently expected. There can be no
assurance that such additional funding will be available to us, or if available,
that the terms of such additional financing will be acceptable to us.
Our Web Site
We are launching our web site in two stages, as follows:
First Stage. Currently, our web site contains the PartyMarket,
PartyTalk and an Invitation Channel. In this first stage, we offer party related
products, costumes, music, and editorial content. On-site shopping is currently
limited to party goods, favors, gift wrap, cards and invitations. During this
stage an outside vendor, Taymark, is responsible for consumer fulfillment and
customer service.
Second Stage. By the end of the third quarter of 2000, we expect to
continue to introduce additional features to our web site, such as the Party
Planner, the Party Resource, Gift Registry, Party Web Page, Birthday Club, and
interactive party planning tools.
PART II OTHER INFORMATION
Item 2. Changes in Securities
On December 23, 1999, we issued an aggregate of 2,500,000 Series D
Convertible Preferred Stock and 1,250,000 Common Stock Warrant to Hicks, Muse,
Tate & Furst Incorporated ("Hicks Muse") in a private placement, Hicks Muse is
an "accredited investor" (as such term is defined under Regulation D promulgated
under the Securities Act) for $5,000,000 in cash. Each share of Series D
Convertible Preferred Stock is convertible at any time into ten (10) shares of
common stock at an initial conversion price of $2.00 per share. Each common
stock warrant is convertible into one share of common stock at an exercise price
of $2.00 per share. The sale of the securities was exempt from registration
pursuant to Section 4(2) of the Securities Act and Rule 506 promulgated
thereunder, which generally provides an exemption for certain private sales of
securities.
The following is a summary of the terms of the Series D Convertible
Preferred Stock:
Rank. The Series D Convertible Preferred Stock ranks junior to any
classes of stock we have designated as "Senior Securities," prior to all of our
common stock and any class or series of our capital stock created thereafter not
specifically ranking by its terms senior to, or on parity with, the Series D
Convertible Preferred Stock, and on parity with our Series A and Series B
Convertible Preferred Stock, as to distribution of our assets upon liquidation,
dissolution or winding up of us, whether voluntary or involuntary.
10
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Dividends. The Series D Convertible Preferred Stock bears no dividend
provided that the holders will be entitled to dividends ratably with any payment
to holders of common stock if declared by the Board of Directors.
Conversion. Subject to certain adjustments, each share of Series D
Convertible Preferred Stock is convertible at any time, and from time to time,
at the option of the holder thereof, into a number of shares of common stock
equal to the quotient derived by dividing (1) $20.00 by (2) the conversion price
in effect at the time of the conversion. The initial conversion price is $2.00,
reflecting an initial conversion rate of 10 shares of common stock for each
share of Series D Convertible Preferred Stock. In addition, the Series D
Convertible Preferred Stock will automatically convert into common stock, at the
conversion rate then in effect, in the event that we consummate a secondary
public offering of it common stock resulting in gross proceeds to us of at least
$10,000,000.
Anti-Dilution Provisions. Subject to certain exceptions (including the
exercise of currently outstanding options or warrants, the exercise of future
options issued under our stock option plan, and the conversion of our Series A
or Series B Convertible Preferred Stock), if we issue common stock at a price
less than the Series D Convertible Preferred Stock conversion price then in
effect or the then current market price of the common stock, then the Series D
Convertible Preferred Stock conversion rate will be adjusted on a
weighted-average formula basis. In addition, if the number of outstanding shares
of common stock is increased by a stock split, stock dividend or other similar
event, the Series D Convertible Preferred Stock conversion rate is to be
proportionately reduced, or if the number of outstanding shares of common stock
is decreased by a combination or reclassification of shares, or other similar
event, the Series D Convertible Preferred Stock conversion rate is to be
proportionately increased. In addition, if, prior to the conversion of all the
Series D Convertible Preferred Stock, there is any merger, consolidation,
exchange of shares, recapitalization, reorganization or other similar event, as
a result of which our shares of common stock are to be changed into the same or
a different number of shares of the same or another class or classes of our
stock or securities or another entity, that the holders of then outstanding
shares Series D Convertible Preferred Stock would have the right to receive upon
conversion of Series D Convertible Preferred Stock, upon the basis and upon the
terms and conditions specified in the certificate of designation and in lieu of
the shares of common stock immediately issuable upon conversion, such stock,
securities and/or other assets which the holders would have been entitled to
receive in such transaction had the Series D Convertible Preferred Stock been
converted immediately prior to such transaction.
Voting Rights. The Series D Convertible Preferred Stock will vote
together as a single class with the holders of common stock, with each share of
Series D Convertible Preferred Stock being entitled to cast a number of votes
equal to the number of shares of common stock into which each share is then
convertible (initially 10). In addition, so long as 50% of the initially issued
shares of Series D Convertible Preferred Stock remain outstanding, the holders
of the Series D Convertible Preferred Stock, voting as a class, will have the
right to elect one director. In addition, consent of 50% of the shares of Series
D Convertible Preferred Stock then outstanding is required before we can take
certain actions which adversely affect the rights, preferences or privileges of
the Series D Convertible Preferred Stock.
11
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Item 5. Other Information
On February 10, 2000, our Board of Directors elected Robert Jevon and
Michael Levitt to the Board. Mr. Jevon is a partner of Boston Millennia
Partners, a venture capital firm. Mr. Jevon's primary investment focus is
business services, information technology and life sciences. Mr. Jevon serves on
the Board of Directors of Proteome, Inc., an Internet-based provider of
biological knowledge databases to pharmaceutical and biotechnology researchers,
and TeleCommute Solutions, Inc., a provider of telecommunication services.
Mr. Levitt is a partner of Hicks Muse, a global investment firm. He is
responsible for originating, structuring and monitoring Hicks Muse's investments
and is involved in building relationships with investment banks and commercial
banking firms worldwide. Mr. Levitt serves on the Board of Directors of AMFM
Corp., El Sitio, Inc., Globix Corporation, International Home Foods, Inc., RCN
Corporation, Metrocall, Inc., Regal Cinema, Inc., Rhythms NetConnection, Inc.
and STC Broadcasting, Inc., among others.
Item 6. Exhibits.
Exhibit 4.1 Certificate of Designation of Series D Convertible
Preferred Stock **
Exhibit 27.1 Financial Data Schedule
** Incorporated by reference from our Annual Report on Form 10-KSB
as filed with the Securities and Exchange Commission on April 14, 2000.
12
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SIGNATURES
In accordance with requirements of the Securities Exchange Act, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
iPARTY CORP.
Dated: May 15, 2000 By: /s/ Sal Perisano
----------------
Sal Perisano
Chief Executive Officer
May 15, 2000 By: /s/ Patrick Farrell
----------------
Patrick Farrell
Chief Financial Officer
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains financial information extracted from the Balance Sheet,
Statement of Operations, Statement of Cash Flows and notes thereto incorporated
in Part 1 of the 10-QSB and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> Year 3-MOS
<FISCAL-YEAR-END> Dec-31-1999 Dec-31-2000
<PERIOD-END> Dec-31-1999 Mar-31-2000
<CASH> 18,673,304 12,173,001
<SECURITIES> 973,877 3,887,659
<RECEIVABLES> 99,476 25,180
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 20,226,314 16,389,372
<PP&E> 1,271,420 1,444,355
<DEPRECIATION> (410,963) (632,299)
<TOTAL-ASSETS> 27,256,750 22,867,516
<CURRENT-LIABILITIES> 2,202,682 2,731,014
<BONDS> 0 0
0 0
2,395 2,395
<COMMON> 11,006 11,137
<OTHER-SE> 25,040,668 20,136,502
<TOTAL-LIABILITY-AND-EQUITY> 27,256,750 22,867,516
<SALES> 138,545 146,834
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 10,679,630 5,884,033
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 714,330 273,455
<INCOME-PRETAX> (11,255,415) (5,463,744)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (11,255,415) (5,463,744)
<EPS-BASIC> (2.97) (0.49)
<EPS-DILUTED> (2.97) (0.49)
</TABLE>
