<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-------------
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
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: 0-12185
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DAUGHERTY RESOURCES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
PROVINCE OF BRITISH COLUMBIA NOT APPLICABLE
(State or other jurisdiction of incorporation (I.R.S. EMPLOYER
or organization) IDENTIFICATION NO.)
120 PROSPEROUS PLACE, SUITE 201
LEXINGTON, KENTUCKY 40509-1844
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (606) 263-3948
-------------
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 X No .
--- ---
THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT'S CLASSES OF
COMMON STOCK, AS OF JUNE 30, 1999, WAS 2,272,182.
Transitional Small Business Disclosure Format (check one): Yes No X .
--- ---
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<PAGE> 2
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
The information required by this Item 1 appears on pages 8 through 11
of this Report, and is incorporated herein by reference.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following is a discussion of the Company's financial condition and
results of operations. This discussion should be read in conjunction with the
Financial Statements of the Company described in Item 1 of this Report.
Statements contained in this "Management's Discussion and Analysis of Financial
Condition and Results of Operations," which are not historical facts may be
forward looking statements. Reliance upon such information involves risks and
uncertainties, including those created by general market conditions, competition
and the possibility that events may occur which could limit the ability of the
Company to maintain or improve its operating results or execute its primary
growth strategy. Although management believes that the assumptions underlying
the forward-looking statements are reasonable, any of the assumptions could be
inaccurate, and there can be no assurances that the forward-looking statements
included herein will prove to be accurate. The inclusion of such information
should not be regarded as a representation by management or any other person
that the objectives and plans of the Company will be achieved. Moreover, such
forward-looking statements are subject to certain risks and uncertainties that
could cause actual results to differ materially from those projected. Readers
are cautioned not to place undue reliance on these forward-looking statements
that speak only as of the date hereof.
Daugherty Resources, Inc., formerly Alaska Apollo Resources Inc., (the
"Company" or the "Registrant") is a diversified natural resources company with
assets in oil and gas, wood products manufacturing, and gold prospects.
Originally formed in 1979 to develop gold properties, the Company in the fourth
quarter of 1993, acquired its wholly owned subsidiary, Daugherty Petroleum, Inc.
The purchase of Daugherty Petroleum, Inc. and the subsequent purchase of 80% of
Red River Hardwoods, Inc. in the fourth quarter of 1996 have given the Company a
diversified revenue and asset base that is primarily located in Appalachia.
Since acquiring Daugherty Petroleum, Inc., the Company has increased
its reserves through the acquisition of oil and gas properties in the
Appalachian and Illinois Basins, and the drilling of wells through joint venture
and turnkey drilling programs, where Daugherty Petroleum, Inc. is the primary
decision maker. The Company continues to aggressively seek acquisitions and
drilling programs.
At the Annual General Meeting held on June 30, 1999, shareholders
approved special resolutions, effective June 30, 1999, authorizing the
following:
1. Increasing the Company's authorized common shares from
10,000,000 common shares without par value to 100,000,000 common shares without
par value;
2. Altering the Memorandum of the Company so that the
authorized capital will be increased by creating 5,000,000 preferred shares
without par value;
3. Attaching special rights and restrictions to the common
shares and preferred shares;
The creation of the preferred shares by the Company will allow the
planned acquisition of interests in certain oil and gas wells in Kentucky,
Louisiana and Tennessee. Management believes this acquisition will close in the
third quarter of 1999.
2
<PAGE> 3
The acquisition of Red River Hardwoods, Inc. diversified the Company by
adding lumber activities. The revenues of Red River have been reflected on the
Company's Consolidated Financial Statements. On June 30, 1999, a Letter of
Intent was signed to sell Red River to H & S Lumber, Inc., Clay City, KY. The
sale is expected to close during August, 1999 and has an effective date of
June 30, 1999. The sale of Red River will allow the Company's management to
concentrate on expanding its core oil and gas operations.
The Company continues its tradition of realizing revenues from its oil
and gas operations. For the six months ending June 30, 1999, the Company drilled
four natural gas wells. By comparison, for the same period of 1998, the Company
drilled seven natural gas wells. Drilling operations for the first six months of
1999 were primarily related to a joint venture on the Company's farmout acreage
acquired from Equitable Resources Energy Corporation.
Effective June 29, 1998, the Company's stock was traded on The Nasdaq
Small Cap Market under the name Daugherty Resources, Inc. Effective March 15,
1999, the Company's symbol was changed to "NGAS".
LIQUIDITY
The Company continues to acquire natural gas and oil properties.
Daugherty Petroleum, Inc. has provided the Company with a diversified asset base
that includes natural resources other than its original gold and silver mining
properties. During the first six months of 1999, management continued to invest
in areas it deemed crucial in developing an infrastructure suitable to support
future growth. These areas included ongoing expenses in management, professional
and operational personnel, and other expenses deemed necessary to position the
Company for future acquisitions and financing.
Historically, the Company's revenues have been from its interests in
the producing natural gas and oil wells it operates and in which it owns
interests, from its activities as "turnkey driller" and operator for various
drilling programs in its geographic area, and sales of wood products. Daugherty
Petroleum, Inc. has reduced its dependence on activities as "turnkey driller"
for private investors and instead concentrated on joint ventures with industry
partners. During the first six months of 1999, approximately 15% of the
Company's revenues were derived from joint venture drilling. Natural gas and oil
operations and revenues accounted for 10% of the revenues. Manufacturing sales
related to Red River accounted for 75% of the revenues.
The Company plans to drill 15 wells during the last two quarters of
1999 and earn interests ranging from 12.5% to 50% interest in each well it
drills.
Working capital for the period ending June 30, 1999, was a negative
$3,679,472 compared to the same period in 1998, when working capital was a
negative $2,451,792.
During the first six months of 1999, and compared to the same period in
1998, the changes in the composition of the Company's current assets were: cash
balances increased $149,472 from $201,792 to $351,264 accounts receivable
balances decreased $282,482 from $557,807 to $275,325; and inventories decreased
$407,299 from $663,169 to $255,870. Other current assets such as prepaids and
notes receivable increased $7,131 from $9,073 to $16,204. Overall, current
assets decreased by $533,178 to $898,663.
Current liabilities for the period ended June 30, 1999 were $4,578,135
compared to $3,883,633 for the period ended June 30, 1998. A line of credit and
new short-term bank loans accounted for $972,177 of the increase.
While management believes that its cash flow resulting in operating
revenues will contribute significantly to its short-term financial commitments
and operating costs, it has continued to refine its long range strategy in 1999
to meet the Company's financial obligations. This strategy involves:
- ACQUISITION OF REVENUE-PRODUCING PROPERTIES: In November 1997,
Daugherty Petroleum signed a Letter of Intent to acquire producing
oil and gas properties in Kentucky, Louisiana and Tennessee.
Management believes that the addition of these properties will
favorably impact the Company's cash flow. Daugherty Petroleum is also
continually reviewing existing properties in its area of interest
that are for sale.
3
<PAGE> 4
- INCREASING THE LINE OF CREDIT: The Company obtained a $1,000,000 line
of credit from Compass Bank of Houston, Texas in 1998. The Company
expects to increase the line of credit in 1999.
- INSTALLATION OF ADDITIONAL NATURAL GAS GATHERING SYSTEM: The Company
plans to expand its natural gas pipeline by 45,000 feet in 1999. The
extension will allow for substantially more natural gas to be
transported to market from wells drilled in 1998 and 1999.
- CONVERTIBLE NOTE PRIVATE PLACEMENT: During the second and third
quarters of 1999, the Company conducted a private placement of its
10% convertible secured notes due 2004 (the "Notes) to raise funds
for its ongoing drilling activities. The Notes will be convertible
into the Company's common stock at 125% above the prevailing market
price prior to the closing and will be guaranteed by Daugherty
Petroleum. Daugherty Petroleum's guarantee will be secured by a lien
on its gold mining interests, which lien may ultimately be replaced
by a lien on wells drilled with Note proceeds. Each Note will be
redeemable at the option of the holder eighteen months after the
closing at 100% of the principal amount, payable in cash, plus a
premium equal to 25% of the principal amount, payable in common stock
of the Company based on its prevailing market price. The put rights
are exercisable only during a 10-day period commencing 14 months
after the closing. To date, the Company has received subscriptions
for Notes aggregating $800,000, which it intends to issue in
mid-August 1999, with the offering to continue until the end of
August 1999.
- SALE OF RED RIVER HARDWOODS, INC.: The Company has signed a Letter of
Intent to sell its 80% stake in Red River. The divestiture of Red
River will dramatically affect the Company's financial statement by
reducing outstanding debt by approximately $3.7 million.
RESULTS OF OPERATIONS
For the six month period ending June 30, 1999, the Company's gross
revenues decreased $768,512 to $2,188,217 from $2,956,729 for the same period in
1998. The Company experienced a net loss of $771,531 in this period compared to
a net loss of $538,960 in the same period of 1998.
The Company's gross revenues were derived from drilling contract
revenues of $326,834 (15%), from natural gas and oil operations and production
revenues of $212,777 (10%), and lumber sales and product manufacturing revenues
of $1,648,606 (75%).
The decrease in gross revenues of $768,512 was primarily attributable
to the decreased drilling activities and lumber sales during the period.
Contract revenues from drilling activities decreased by $461,212 from $788,046
in the first six months of 1998 to $326,834 in the first six months of 1999.
Manufacturing revenues related to Red River Hardwoods decreased by $239,744 from
$1,888,350 in the first six months of 1998 to $1,648,606 in the first three
months of 1999.
During the first six months of 1999, total direct costs decreased by
$519,198 to $2,079,501 compared to $2,598,699 in the first six months of 1998.
These direct costs included Red River Hardwoods' expenses and drilling costs for
four natural gas wells.
YEAR 2000 INFORMATION
The Company's field and administrative operations have been reviewed
for Year 2000 Compliance. Normal upgrades will result in essential operations
being Year 2000 compliant. Some remaining operations, such as non-essential
personal computers and non-financial software products, can be easily upgraded
at nominal cost and inconvenience. The Company has contacted its gas purchasers
and third party software and service vendors concerning Year 2000 compliance.
Those third parties not already compliant have indicated that they are working
to be compliant. The Company will be preparing contingency plans regarding those
third parties that do not currently meet Year 2000 compliance standards. Costs
incurred to date, future costs, implementation of contingency plans and
completion of modifications or replacements have not been and are not expected
to be material or pose a material risk.
4
<PAGE> 5
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 5. OTHER INFORMATION.
Not Applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) LIST OF DOCUMENTS FILED WITH THIS REPORT.
PAGE
-----
(1) Balance Sheet for the Period Ended June 30, 1999.............. 8
Income Statement for the Period Ended June 30, 1999........... 9-10
Computation of Per Share Earnings............................. 11
All schedules have been omitted since the information required to be
submitted has been included in the financial statements or notes or has been
omitted as not applicable or not required.
(2) Exhibits--
The exhibits indicated by an asterisk (*) are incorporated by
reference.
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
3(a)* Memorandum and Articles for Catalina Energy & Resources Ltd.,
a British Columbia corporation, dated January 31, 1979, filed
as an exhibit to Form 10 Registration Statement filed May 25,
1984. File No. 0-12185.
3(b)* Certificate for Catalina Energy & Resources Ltd., a British
Columbia corporation, dated November 27, 1981, changing the
name of Catalina Energy & Resources Ltd. to Alaska Apollo Gold
Mines Ltd., and further changing the authorized capital of the
Company from 5,000,000 shares of common stock, without par
value per share, to 20,000,000 shares of common stock, without
par value per share, filed as an exhibit to Form 10
Registration Statement filed May 25, 1984. File No. 0-12185.
3(c)* Certificate of Change of Name for Alaska Apollo Gold Mines
Ltd., a British Columbia corporation, dated October 14, 1992,
changing the name of Alaska Apollo Gold Mines Ltd. to Alaska
Apollo Resources Inc., and further changing the authorized
capital of the Company from 20,000,000 shares of common stock,
without par value per share, to 6,000,000 shares of common
stock, without par value per share.
3(d)* Altered Memorandum of Alaska Apollo Resources Inc., a British
Columbia corporation, dated September 9, 1994, changing the
authorized capital of the Company from 6,000,000 shares of
common stock, without par value per share, to 20,000,000
shares of common stock, without par value per share.
3(e)* Certificate of Change of Name for Alaska Apollo Resources
Inc., a British Columbia corporation, dated June 24, 1998,
changing the name of Alaska Apollo Resources Inc. to Daugherty
Resources, Inc. and further changing the authorized capital of
the Registrant from
5
<PAGE> 6
20,000,000 shares of common stock, without par value per
share, to 50,000,000 shares of common stock, without par
value, and authorizing the creation of 6,000,000 shares of
preferred stock, without par value per share. (File
No. 0-12185).
3(f)* Altered Memorandum of Daugherty Resources, Inc., a British
Columbia corporation, dated June 24, 1998, changing the
authorized common stock of the Registrant from 50,000,000
shares of common stock, without par value per share, to
10,000,000 shares of common stock, without par value. (File
No. 0-12185).
3(g)* Altered Memorandum of Daugherty Resources, Inc., a British
Columbia corporation, dated June 25, 1998, changing the
authorized preferred stock of the Registrant from 6,000,000
shares of preferred stock, without par value per share, to
1,200,000 shares of preferred stock, without par value. Filed
as an exhibit to Form 8-K, by the Company for reporting an
event on June 29, 1998. (File No. 0-12185).
4* See Exhibit No. 3(a), (b), (c), (d), (e), (f), and (g).
10(a)* Alaska Apollo Resources Inc. 1997 Stock Option Plan, filed as
Exhibit 10(a) to Form 10-K for the Company for the fiscal year
ended December 31, 1996. (File No. 0-12185).
10(b)* Incentive Stock Option Agreement by and between Alaska Apollo
Resources Inc. and William S. Daugherty dated March 7, 1997,
filed as Exhibit 10(b) to Form 10-K for the Company for the
fiscal year ended December 31, 1996. (File No. 0-12185).
10(c)* Warrant Agreement by and between Alaska Apollo Resources Inc.
and Jayhead Investments Limited dated March 7, 1997, filed as
Exhibit 10(c) to Form 10-K for the Company for the fiscal year
ended December 31, 1996. (File No. 0-12185).
10(d)* Warrant Agreement by and between Alaska Apollo Resources Inc.
and Trio Growth Trust dated March 7, 1997, filed as Exhibit
10(d) to Form 10-K for the Company for the fiscal year ended
December 31, 1996. (File No. 0-12185).
10(e)* Warrant Agreement by and between Alaska Apollo Resources Inc.
and Exergon Capital S.A. dated March 7, 1997, filed as Exhibit
10(e) to Form 10-K for the Company.
11 Computation of Per Share Earnings.
24 Powers of Attorney.
27 Financial Data Schedule.
(b) REPORTS ON FORM 8-K.
None
(c) FINANCIAL STATEMENT SCHEDULES.
No schedules are required, as all information required has
been presented in the audited financial statements.
6
<PAGE> 7
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf of the
undersigned hereunto duly authorized.
DAUGHERTY RESOURCES, INC.
By: /s/ William S. Daugherty
-------------------------------
William S. Daugherty, President
Dated: August 13, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ William S. Daugherty Chairman of the Board, President, August 13, 1999
- ------------------------ Director of the Registrant
WILLIAM S. DAUGHERTY
James K. Klyman*
- ------------------------ Director of the Registrant August 13, 1999
JAMES K. KLYMAN
Charles L. Cotterell*
- ------------------------ Director of the Registrant August 13, 1999
CHARLES L. COTTERELL
*By /s/ William S. Daugherty
------------------------
William S. Daugherty,
Attorney-in-Fact
7
<PAGE> 8
DAUGHERTY RESOURCES, INC.
SUMMARY CONSOLIDATED BALANCE SHEETS
(United States Dollars)
Unaudited
6/30/98 6/30/99
----------- -----------
ASSETS
CURRENT ASSETS
Cash $ 201,792 $ 351,264
Accounts receivable 557,807 275,325
Inventory 663,169 255,870
Other current assets 9,073 16,204
----------- -----------
TOTAL CURRENT ASSETS 1,431,841 898,663
OIL & GAS PROPERTIES (NET) 4,284,367 4,614,703
MINING PROPERTY (NET) 11,227,733 11,232,229
PROPERTY & EQUIPMENT (NET) 1,863,741 1,692,374
OTHER ASSETS
Related party loans 83,066 96,055
Bonds & deposits 54,224 54,224
Other assets 293,884 251,918
Goodwill, net of amortization of $1,110,925 1,204,209 974,741
----------- -----------
1,635,383 1,376,938
----------- -----------
TOTAL ASSETS $20,443,065 $19,814,907
=========== ===========
LIABILITIES & STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Short-term loans & notes $ 32,000 $ 1,029,177
Current portion of LT debt 1,011,195 635,494
Accounts payable 1,179,082 1,378,823
Accrued liabilities 541,202 705,720
Drilling prepayments 1,120,154 828,921
----------- -----------
TOTAL CURRENT LIABILITIES 3,883,633 4,578,135
LONG-TERM LIABILITIES 2,942,360 3,173,299
PAYABLE TO RELATED PARTIES 37,612 20,848
----------- -----------
6,863,605 7,772,282
MINORITY INTEREST 757 -
STOCKHOLDER'S EQUITY
Common stock 21,054,304 21,319,145
Common stock subscribed - -
Additional paid in capital - -
Retained earnings (deficit) (6,936,641) (8,504,989)
Current income (loss) (538,960) (771,531)
----------- -----------
13,578,703 12,042,625
----------- -----------
TOTAL LIABILITIES &
STOCKHOLDER'S EQUITY $20,443,065 $19,814,907
=========== ===========
Unaudited-Internally prepared by Company management
8
<PAGE> 9
DAUGHERTY RESOURCES, INC.
SUMMARY CONSOLIDATED STATEMENTS OF INCOME
(United States Dollars)
Unaudited
<TABLE>
<CAPTION>
For the six month period ended
6/30/98 6/30/99
------------------------------- ---------------------------
<S> <C> <C> <C> <C>
GROSS REVENUE $ 2,956,729 100.00% $ 2,188,217 100.00%
- -------------
DIRECT EXPENSES 2,598,699 87.89% 2,079,501 95.03%
- --------------- ----------- ------- ----------- -------
GROSS PROFIT 358,030 12.11% 108,716 4.97%
GENERAL & ADMINISTRATIVE EXPENSES
- ---------------------------------
Salaries & wages 181,867 6.15% 250,660 11.45%
Accounting & audit 73,546 2.49% 54,709 2.50%
Advertising & promotion 5,658 0.19% 844 0.04%
Amortization 105,234 3.56% 105,232 4.81%
Bad debts - 0.00% 6,157 0.28%
Depreciation 34,911 1.18% 23,028 1.05%
General consulting 90,753 3.07% 41,224 1.88%
Insurance 18,673 0.63% 26,254 1.20%
Legal 50,288 1.70% 79,498 3.63%
Office & general 107,962 3.65% 69,941 3.20%
Payroll & property tax 16,095 0.54% 26,284 1.20%
Rent 23,397 0.79% 28,444 1.30%
Repairs & maintenance 2,809 0.10% 4,412 0.20%
Shareholder & investor information 28,738 0.97% 8,340 0.38%
Travel & entertainment 30,715 1.04% 31,123 1.42%
----------- ------- ----------- -------
TOTAL G & A EXPENSES 770,646 26.06% 756,150 34.56%
OTHER INCOME (EXPENSE)
- ----------------------
Interest & dividend income 14,277 0.48% 11,569 0.53%
Miscellaneous 28,727 0.97% 42,507 1.94%
Gain (loss) on sale of equipment - 0.00% - 0.00%
Interest expense (169,348) -5.73% (178,173) -8.14%
----------- ------- ----------- -------
INCOME BEFORE INCOME TAX & OTHER (538,960) -18.23% (771,531) -35.26%
- --------------------------------
Income tax expense (benefit) - 0.00% - 0.00%
MINORITY PORTION - 0.00% - 0.00%
- ---------------- -- ----- -- -----
----------- ------- ----------- -------
NET INCOME (LOSS) $ (538,960) -18.23% $ (771,531) -35.26%
=========== ======= =========== =======
DEFICIT, beginning of period (6,936,641) $ (8,504,989)
DEFICIT, end of period (7,475,601) $ (9,276,520)
Shares outstanding 1,964,351 2,272,182
EARNINGS PER SHARE ($0.27) ($0.34)
</TABLE>
Unaudited-Internally prepared by Company management
9
<PAGE> 10
DAUGHERTY RESOURCES, INC.
SUMMARY CONSOLIDATED STATEMENTS OF CASH FLOWS
(United States Dollars)
Unaudited
For the six month period ended
6/30/98 6/30/99
----------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (538,960) $ (771,531)
Adjustments to reconcile net income
(loss) to net cash cash provided by
operating activities:
Depreciation, depletion, & amortization 287,577 300,382
Minority interest -
Changes in current assets & liabilities
(Increase) decrease in:
Accounts receivable (64,085) 136,171
Inventory 14,975 176,598
Other current assets 55,589 35,073
Increase (decrease) in:
Short-term loans & notes (34,100) 95,660
Accounts payable (293,630) 217,401
Accrued liabilities 180,806 (145,410)
Drilling prepayments (283,153) (93,589)
----------- ----------
Net cash provided by (used in)
operating activities (674,981) (49,245)
CASH FLOWS FROM INVESTING ACTIVITIES
Change in oil & gas properties (387,104) (59,600)
Change in mining properties 4,496 -
Change in property & equipment (39,422) 15,697
Change in other assets (90,189) (124,658)
----------- ----------
Net cash provided by (used in)
investing activities (512,219) (168,561)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock 99,868 109,324
Change in long-term liabilities 38,275 (95,220)
Change in payable to related party 11,289 26,300
----------- ----------
Net cash provided by (used in)
financing activities 149,432 40,404
----------- ----------
NET INCREASE (DECREASE) IN CASH (1,037,768) (177,402)
CASH AT BEGINNING OF PERIOD 1,239,560 528,666
----------- ----------
CASH AT END OF PERIOD $ 201,792 $ 351,264
=========== ==========
Unaudited-Internally prepared by Company management
10
<PAGE> 11
DAUGHERTY RESOURCES, INC.
COMPUTATION OF PER SHARE EARNINGS
(United States Dollars)
Unaudited
The table below presents information necessary for the computation of
loss per share of the common stock, on both a primary and fully diluted basis,
for the six months ended June 30, 1999 and 1998, and the years ended December
31, 1998, 1997 and 1996. The computations below reflect the 1 for 5 Reverse
Stock Split effective June 30, 1998.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30 YEAR ENDED DECEMBER 31
------- ----------------------
1999 1998 1998 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net loss applicable to share of
Common Stock and Common
Stock equivalents $ (771,531) $ (545,692) $(1,568,348) $(1,708,418) $ (733,973)
Average number of shares of
Common Stock Outstanding 2,272,782 1,907,050 2,035,188 1,831,926 1,610,168
Common Stock equivalents 1,514,134 1,455,404 1,448,355 1,353,244 283,293
Total shares of Common Stock
and Common Stock equivalents 3,786,916 3,362,458 3,483,543 3,185,170 1,893,461
Primary loss per share of
Common Stock $ (.34) $ (.29) $ (0.77) $ (.93) $ (.46)
Fully diluted loss per share of
Common Stock $ (.20) $ (.16) $ (0.45) $ (.54) $ (.39)
</TABLE>
- ------------------
Common Stock equivalents are considered anti-dilutive because of the
net losses incurred by the Company.
11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> 351,264
<SECURITIES> 0
<RECEIVABLES> 291,529
<ALLOWANCES> 0
<INVENTORY> 255,870
<CURRENT-ASSETS> 898,663
<PP&E> 18,916,244
<DEPRECIATION> 0
<TOTAL-ASSETS> 19,814,907
<CURRENT-LIABILITIES> 4,578,135
<BONDS> 3,194,147
0
0
<COMMON> 21,319,145
<OTHER-SE> (9,276,520)
<TOTAL-LIABILITY-AND-EQUITY> 19,814,907
<SALES> 2,188,217
<TOTAL-REVENUES> 2,188,217
<CGS> 2,079,501
<TOTAL-COSTS> 2,079,501
<OTHER-EXPENSES> 702,074
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 178,173
<INCOME-PRETAX> 0
<INCOME-TAX> (771,531)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (771,531)
<EPS-BASIC> ($0.34)
<EPS-DILUTED> ($0.20)
</TABLE>
