SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarter Ended December 31, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT
For the transition period from ____________ to ____________
Commission file number: 0-15224
ADVANCE DISPLAY TECHNOLOGIES, INC.
-------------------------------------
(Exact name of small business issuer as
specified in its charter)
COLORADO 84-0969445
---------------------- ----------------------
(State of incorporation) (IRS Employer ID number)
1251 South Huron Street, Unit C, Denver, Colorado 80223
-------------------------------------------------------
(Address of principle executive offices) (Zip Code)
(303) 733-5339
----------------------------------------------
(Issuer's telephone number, including area code)
Check whether the issuer (1) has filed all reports required to be filed by
section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
YES X NO
----- -----
As of February 10, 1998, 25,176,432 shares of Common Stock, $.001 par value per
share were outstanding.
Transitional Small Business Disclosure Format (check one):
YES NO X
----- -----
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ADVANCE DISPLAY TECHNOLOGIES, INC.
INDEX
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Balance Sheets (unaudited) -
December 31,1997 and June 30,1997..................................3
Consolidated Statements of Operations (unaudited)
Three months and six months ended December 31,
1997 and December 31,1996 and for the period from
March 15, 1995, inception, to December 31, 1997....................4
Consolidated Statements of Cash Flows (unaudited)
Three months and six months ended December 31,
1997 and December 31, 1996 and for the period from
March 15, 1995, inception, to December 31, 1997..................5-6
Notes to Consolidated Financial Statements (unaudited)..............7
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition...........8-11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings..................................................11
Item 2. Changes in Securities..............................................11
Item 3. Defaults on Senior Securities......................................12
Item 4. Submission of Matters to a Vote of
Security Holders..........................................12
Item 5. Other Information..................................................12
Item 6. Exhibits and Reports on Form 8-K...................................12
Signatures.....................................................13
2
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<TABLE>
<CAPTION>
ADVANCE DISPLAY TECHNOLOGIES, INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
(Unaudited)
December 31, June 30,
1997 1997
------------- -------------
ASSETS
------
CURRENT ASSETS:
<S> <C> <C>
Cash $ 131,070 $ 235,731
Inventory 105,965 51,819
Other current assets 28,651 10,191
------------- -------------
Total current assets 265,686 297,741
PROPERTY AND EQUIPMENT 142,526 77,674
Less: Accumulated depreciation (17,196) (2,260)
------------- -------------
Net Property and Equipment 125,330 75,414
------------- -------------
INTANGIBLE ASSETS, net of accumulated
amortization of $81,812 and
$42,750, respectively 490,553 529,615
------------- -------------
TOTAL ASSETS $ 881,569 $ 902,770
============= =============
LIABILITIES AND SHAREHOLDERS' DEFICIT
-------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 521,442 $ 558,140
Convertible notes payable to shareholders -- 500,000
Other accrued liabilities 161,656 111,494
------------- -------------
Total current liabilities 683,098 1,169,634
CONVERTIBLE, REDEEMABLE PROMISSORY NOTES TO SHAREHOLDERS 573,725 --
SHAREHOLDERS' DEFICIT:
Preferred stock, $.001 par value, 100,000,000
shares authorized, 1,843,900 shares issued
and outstanding (liquidation preference of
$2,765,850) 1,844 1,844
Common stock, $.001 par value, 100,000,000 shares
authorized, 25,176,432 and 21,343,923 shares
issued and outstanding, respectively 25,176 21,344
Additional paid-in capital 2,999,670 2,453,503
Deficit accumulated during the development
stage (3,401,944) (2,743,555)
------------- -------------
Total shareholders' deficit (375,254) (266,864)
------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT $ 881,569 $ 902,770
============= =============
(See accompanying notes to unaudited consolidated financial statement)
3
</TABLE>
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<TABLE>
<CAPTION>
ADVANCE DISPLAY TECHNOLOGIES, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
March 15, 1995
(Inception)
Three Months Ended Six Months Ended Through
December 31, December 31, December 31,
------------------------------ ------------------------------ ------------
1997 1996 1997 1996 1997
------------ ------------ ------------ ------------ ------------
REVENUE:
<S> <C> <C> <C> <C> <C>
Consulting $ 15,000 $ -- $ 30,000 $ -- $ 30,000
Interest Income - related party -- 26,803 -- 52,962 162,761
------------ ------------ ------------ ------------ ------------
Total Revenue 15,000 26,803 30,000 52,962 192,761
COSTS AND EXPENSES:
Cost of goods -- -- 11,427 -- 11,427
General and administrative 263,693 900 522,980 1,926 662,335
Research and development 92,284 -- 126,525 -- 2,671,465
Interest expense - related party 12,288 35,485 27,457 70,048 249,478
------------ ------------ ------------ ------------ ------------
Total costs and expenses $ 368,265 $ 36,385 $ 688,389 $ 71,974 $ 3,594,705
============ ============ ============ ============ ============
NET LOSS $ (353,265) $ (9,582) $ (658,389) $ (19,012) $ (3,401,944)
============ ============ ============ ============ ============
NET LOSS PER COMMON SHARE $ (.01) $ (.01) $ (.03) $ (.02)
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 24,829,347 784,236 23,086,635 784,236
============= ============ ============ ============
(See accompanying notes to unaudited consolidated financial statements)
4
</TABLE>
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<TABLE>
<CAPTION>
ADVANCE DISPLAY TECHNOLOGIES, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
March 15, 1995
(Inception)
Three Months Ended Six Months Ended Through
December 31, December 31, December 31,
---------------------------- ---------------------------- --------------
1997 1996 1997 1996 1997
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C> <C> <C>
Net Loss $ (353,265) $ (9,582) $ (658,389) $ (19,012) $(3,401,944)
Adjustments to reconcile net loss
to net cash used in
operating activities:
Acquired research and development
expense -- -- -- -- 2,536,494
Depreciation and amortization 30,260 -- 55,296 -- 105,145
(Increase)decrease in:
Inventory 3,846 -- (54,146) -- (99,917)
Interest receivable -- (19,800) -- (38,838) (141,863)
Other current assets 2,406 -- (18,460) -- (18,460)
(Decrease) increase in:
Accrued interest payable to
shareholders 11,183 28,482 25,829 55,923 228,953
Accounts payable (7,212) -- (36,698) -- 75,600
Other accrued liabilities (9,616) -- 48,057 -- 17,392
----------- ----------- ----------- ----------- -----------
Net cash used in operating activities (322,398) (900) (638,511) (1,927) (698,600)
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (68,316) -- (74,852) -- (89,951)
Dispositions of property and
equipment 8,702 -- 8,702 -- 8,702
Advances to affiliates -- -- -- (54,473) (932,925)
Purchase of notes receivable and
security interest -- -- -- -- (225,000)
Cash received in acquisition -- -- -- -- 303,812
----------- ----------- ----------- ----------- -----------
Net Cash used in
investing activities (59,614) -- (66,150) (54,473) (935,362)
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contributions -- -- -- -- 103,127
Proceeds from notes payable
to shareholders 95,000 -- 160,000 -- 160,000
Proceeds from convertible notes
payable to shareholders 390,000 -- 440,000 5,000 1,202,400
Proceeds from line-of-credit -- -- -- -- 299,505
----------- ----------- ----------- ----------- -----------
Net Cash provided by
financing activities 485,000 -- 600,000 5,000 1,765,032
----------- ----------- ----------- ----------- -----------
Increase (decrease) in cash 102,988 (900) (104,661) (51,400) 131,070
Cash & cash equivalents at
beginning of period 28,082 3,855 235,731 54,355 --
----------- ----------- ----------- ----------- -----------
Cash and cash equivalents at end
of period $ 131,070 $ 2,955 $ 131,070 $ 2,955 $ 131,070
=========== =========== =========== =========== ===========
(See accompanying notes to unaudited consolidated financial statements)
5
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<TABLE>
<CAPTION>
ADVANCE DISPLAY TECHNOLOGIES, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
March 15, 1995
(Inception)
Three Months Ended Six Months Ended Through
December 31, December 31, December 31,
----------------------------- ---------------------------- ------------
1997 1996 1997 1996 1997
------------- ------------- ------------ ------------- ----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for:
<S> <C> <C> <C> <C> <C>
Interest $ 746 $ -- $ 746 $ 7,122 $ 26,070
============= ============= ============ ============= ==========
Taxes $ -- $ -- $ -- $ -- $ --
============= ============= ============ ============= ==========
Issuance of common Stock for acquisition
of Display Group, LLC and Display
Optics, Ltd. and conversion of
Convertible debt $ -- $ -- $ -- $ -- $2,199,026
============= ============= ============ ============= ==========
Non-cash financing activities:
Effective October 14, 1997, $550,000 of 10% Convertible,
Redeemable Promissory Notes were converted into shares of the
Company's Common Stock at the rate of $0.1315 per share or
4,182,509 shares.
On November 5, 1997, $160,000 of short term notes and $23,575
of accrued interest were converted into Convertible,
Redeemable Promissory Notes.
(See accompanying notes to unaudited consolidated financial statements)
6
</TABLE>
<PAGE>
ADVANCE DISPLAY TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 1.
The accompanying unaudited interim consolidated financial statements have
been prepared in accordance with the instructions to Form 10-QSB and do not
include all the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. The results of operations
for any interim period are not necessarily indicative of results for the entire
fiscal year. These statements should be read in conjunction with the financial
statements and related notes included in Form 10-KSB for Advance Display
Technologies, Inc. ("ADTI" or "the Company")for the year ended June 30, 1997, as
the notes to these interim financial statements omit certain information
required for complete financial statements.
Note 2.
Financial statements for the periods through May 31, 1997 have been
restated - See Management's Discussion and Analysis of Results of Operations and
Financial Condition.
Note 3.
Subsequent Events
On February 4, 1998, the Company sold $300,000 of 10% Convertible,
Redeemable Promissory Notes pursuant to an additional private placement offered
to accredited investors. The notes are due October 15, 2000 and are convertible,
at the option of the noteholder, into shares of the Company's Common Stock at
the rate of $0.1615 per share. The Company has the right to call these notes
after one year and the noteholders have 30 days in which to convert if these
notes are called by the Company. The Company may elect to pay interest on any of
these notes converted in cash or by issuance of additional shares of the
Company's Common Stock.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Special Note Regarding Forward Looking Statements
Certain statements contained herein constitute "forward looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward looking statements include, without limitation, statements regarding the
Company's anticipated marketing and production, need for working capital, future
revenues and results of operations. Factors that could cause actual results to
differ materially include, among others, the ability of the Company to: obtain
sufficient capital, further develop and improve the manufacturing process for
its product, manufacture its product at a cost that would result in profitable
sales, sell a sufficient number of screens at a sufficient price to result in
positive operating margins, complete a marketing study and implement a marketing
plan, attract and retain qualified management and other personnel, and generally
to successfully execute a business plan that will take the Company from a
development stage entity to a profitable operating company. Many of these
factors are outside the control of the Company. Investors are cautioned not to
put undue reliance on forward looking statements. The Company disclaims any
intent or obligation to update publicly these forward looking statements,
whether as a result of new information, future events or otherwise.
General
In December 1993, Advance Display Technologies, Inc. ("ADTI" or "the
Company") and individual investors organized a limited partnership, Display
Optics, Ltd. (the "Partnership" or "DOL"), to obtain capital and to continue
development of the fiber optic video technology and other related display screen
technology. The Company acted as a general partner and the Partnership was
managed by Display Group, LLC. Display Group was formed by the limited partners
of the Partnership and other individuals and entities to manage and partially
fund operations of the Partnership.
The Company conducted substantially all of its business through the
Partnership until the completion of the exchange effective May 21,1997 (see
below). Based on an analysis of the Partnership Agreement and generally accepted
accounting principles, a research and development arrangement existed between
the Partnership and the Company which required ADTI to record the expenses
incurred by the Partnership as a liability.
Effective May 21, 1997, the Company entered into an exchange agreement (the
"Exchange") with Display Group, DOL and the owners of Display Group and DOL (the
"Investors"). Under the terms of the Exchange and previously existing
agreements, all member interests in Display Group, partnership interests in DOL,
convertible notes totaling $1,799,026, and Series B Preferred Common Stock held
by the Investors were exchanged for 17,509,868 shares of ADTI Common Stock and
1,843,900 shares of Series C Preferred Stock issued to the Investors. The
Exchange resulted in Display Group and DOL becoming wholly-owned subsidiaries of
ADTI whereby the operations of Display Group and DOL were consolidated with
those of the Company. The Exchange resulted in the Investors acquiring in the
aggregate a direct interest in Common Stock equal to approximately eighty two
percent (82%) of the Company's issued and outstanding Common Stock.
The Exchange was accounted for using the purchase method of accounting. As
the former members of Display Group acquired a majority of the Company's Common
Stock, for financial statement reporting purposes, the Exchange was treated as a
8
<PAGE>
reverse acquisition whereby Display Group was considered the acquiring entity.
Therefore, the financial statements for periods through May 31, 1997 have been
restated to reflect only the results of operations of Display Group. Subsequent
to May 31, 1997, the financial statements reflect the combined operations of the
Company, DOL and Display Group.
Results of Operations
For the fiscal quarter and six months ended December 31, 1997, the Company
reported net losses of ($353,265) and ($658,389), respectively, as compared to
($9,582) and ($19,012) for the same periods of the prior fiscal year. The
increases in 1997 from 1996 are primarily due to the restatement of the
financial statements reporting only Display Group activity through May 31, 1997
and the inclusion of operational activity of the combined entities for the first
six months of the current fiscal year.
The Company reported total revenue of $15,000 and $30,000 for the fiscal
quarter and six months ended December 31, 1997, respectively, which consisted
entirely of consulting fees pursuant to an agreement with Toshiba Lighting and
Technology Corporation ("TLT") effective July 1, 1997. The agreement called for
the Company to provide market research information for consideration of $5,000
per month. This agreement expired on December 31, 1997. The Company reported
total revenue of $26,803 and $52,962 for the fiscal quarter and six months ended
December 31, 1996, respectively, which consisted entirely of interest income
from loans made by Display Group to the Partnership. These loans were converted
to equity of the Company effective May 21, 1997 pursuant to the Exchange
described above. Therefore, there was no interest income reported for the fiscal
quarter and six months ended December 31, 1997. There were no sales of the
Company's products to report for the six month periods ended December 31, 1996
and 1997.
During the six month period ended December 31, 1997, the Company
manufactured one 7' x 9' fiber optic screen which it now holds in inventory.
Actual costs incurred to build the screen exceeded projections due to various
difficulties experienced during the manufacturing process which also affected
the overall quality of the screen. Therefore, the cost of the screen exceeded
the anticipated proceeds from the sale of the screen and the inventory value of
this screen was reduced by approximately $11,400 which was reported as cost of
goods.
The Company reported general and administrative ("G&A")expenses of $263,693
and $522,980, respectively for the quarter and six months ended December 31,
1997, respectively, and $900 and $1,926 for the quarter and six months ended
December 31, 1996, respectively. The Company also reported research and
development ("R&D") expenses of $92,284 and $126,525 for the quarter and six
months ended December 31, 1997, respectively. There were no research and
development expenses reported for the quarter and six months ended December 31,
1996. These increases in the current fiscal periods from amounts reported for
the same periods of the prior fiscal year were primarily due to the restatement
of the financial statements reporting only Display Group activity through May
31, 1997 and the inclusion of operational activity of the combined entities for
the first six months of the current fiscal year. G&A expenses for the fiscal
quarter and six months ended December 31, 1997, respectively, included: 1)
depreciation and amortization of approximately $29,000 and $53,000; 2)
promotional and travel expenses of approximately $18,000 and $29,000; 3) general
office expense of approximately $38,000 and $64,000; 4) employee salaries and
expenses of approximately $125,000 and $198,000; and 6) professional and
consulting fees of approximately $54,000 and $179,000 (primarily due to legal
fees incurred in connection with the Exchange transaction and ongoing
litigation, and accounting fees in connection with the audit of the Company's
financial statements for the fiscal year ended June 30, 1997 and the audit of
financial statements of DOL and Display Group in connection with the Exchange).
9
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Interest expense decreased from $35,485 and $70,048 for the fiscal quarter
and six months ended December 31, 1996, respectively, to $12,288 and $27,457 for
the same periods of the current fiscal year, respectively. This change was
primarily due to the elimination of funds advanced from outside investors to
Display Group as a result of the Exchange which was partially offset by the
interest expense on loans received by ADTI after the Exchange.
Liquidity and Capital Resources
Due to significant costs associated with development and marketing of the
Company's products and the lack of material sales to date, the Company has
experienced a continuing need for financing since the 1980's. This need became
particularly acute beginning in 1989, following protracted litigation over the
Company's technology. The Company's operations were essentially dormant from
approximately 1990 to 1993. In fiscal 1994, ADTI formed the Partnership to
obtain capital to continue development of its technology. (See General, above)
The Company and its subsidiaries have been totally dependent on financing
from outside sources to fund operations for more than four years. At December
31, 1997, the Company reported negative net worth of $375,254 and negative
working capital of $417,412. The Company will require additional capital for
administrative expenses, continued development of the product, further
automation of the manufacturing process, marketing costs and other costs.
Management believes that the Company's continued existence is dependent upon its
ability to: 1) improve and further automate the manufacturing process; 2)
successfully market the product; 3) obtain additional sources of funding through
outside sources; and 4) achieve and maintain profitable operations. Although
management is attempting to achieve these objectives, there can be no assurance
that the Company will be able to obtain sufficient additional capital or
manufacture or sell its products on terms and conditions satisfactory to the
Company.
Cash flows from financing activities for the fiscal quarter and six months
ended December 31, 1997 consisted entirely of loans to the Company from two
shareholders totaling $95,000 and $160,000 respectively, and cash received from
the issuance of convertible, redeemable promissory notes totaling $390,000 and
$440,000, respectively. The original loans from the two shareholders, of
$160,000, were converted into new Convertible, Redeemable Promissory Notes on
November 5, 1997, pursuant to an additional private placement as described
below.
Proceeds from financing activities received during the six months ended
December 31, 1997 were primarily used for manufacturing a 7'x9' screen, ongoing
product development, operating expenses and investments in capital equipment
(net of dispositions) of approximately $66,150.
Effective October 14, 1997, $550,000 of 10% convertible promissory notes
were converted into shares of the Company's Common Stock at the rate of $0.1315
per share or 4,182,509 shares. The interest due on these notes of $23,695 was
converted into a Convertible, Redeemable Promissory Note on November 5, 1997
pursuant to an additional private placement as described below.
10
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On October 10, 1997, the Company initiated an additional private placement
offered to qualified investors. The private placement provided for the issuance
of a minimum of $550,000 and a maximum of $1,000,000 of 10% due October 15, 2000
and are convertible, at the option of the noteholder, into shares of the
Company's Common Stock at the rate of $0.1615 per share. The Company has the
right to call these Notes after one year and the noteholders have 30 days in
which to convert if these Notes are called by the Company. The Company may elect
to pay interest on any of these Notes converted in cash or by issuance of
additional shares of the Company's Common Stock. On November 5, 1997, the
Company closed the offering with the sale of $573,695 of the Notes. Proceeds
included the conversion of $160,000 of demand loans previously outstanding (as
discussed above), cash received of $390,000 and conversion of interest payable
of $23,695 (as discussed above).
On February 4, 1998, the Company completed an additional offering whereby
it sold $300,000 of 10% convertible, redeemable promissory notes under the same
terms as the offering initiated on October 10, 1997 (see above).
ADTI reported a working capital deficit position at December 31, 1997.
Current liabilities exceeded current assets by $417,412. At December 31,1997,
current liabilities consisted entirely of trade payables and accrued expenses
which were incurred due to litigation costs, costs of the Exchange, costs
associated with the various private offerings and operating costs.
The Company's working capital position improved at December 31, 1997 from
June 30, 1997 by approximately $454,000 due to the conversion of short-term
convertible debt on October 14, 1997 and the subsequent issuance of new
convertible debt with terms in excess of one year as discussed above.
The Company's efforts will continue to be focused on further development of
the FiberVision Screen and on the design and development of a further automated
manufacturing system. The Company is also currently completing a marketing study
and planning to create a detailed marketing plan. In addition, the Company will
continue efforts on raising additional capital through private placements or
other sources. There can be no assurances that the Company will be able to
acquire the capital needed or be successful in achieving these objectives.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGES IN SECURITIES.
On November 5, 1997 and February 4, 1998, the Company completed additional
private placements of its securities in a series of transactions exempt from the
registration requirements of the 1933 Act. The Company sold 10% Convertible,
Redeemable Promissory Notes in the aggregate principal amount of $573,695 and
$300,000, respectively, to accredited investors pursuant to the provisions of
Regulation D, Rule 506 of the 1933 Act. Proceeds from the November 5, 1997
offering included the conversion of $160,000 of loans previously outstanding,
cash of $390,000 and conversion of interest of $23,695 due to an investor. The
Company received all cash from the February 4, 1998 offering. The notes issued
from both offerings will be due October 15, 2000 and will be convertible, at the
option of the noteholder, into shares of the Company's Common Stock at the rate
of $0.1615 per share. The Company will have the right to call these notes after
approximately one year from the date of issuance and the noteholders will have
30 days in which to convert if these notes are called by the Company. The
Company may elect to pay interest on any of these notes converted in cash or by
issuance of additional shares of the Company's Common Stock.
11
<PAGE>
ITEM 3. DEFAULTS ON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
None.
12
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report on Form 10-QSB to be signed on its behalf by the undersigned,
thereunto duly authorized.
ADVANCE DISPLAY TECHNOLOGIES, INC.
(Registrant)
Date: February 13, 1998 /S/ Kenneth P. Warner
----------------- ---------------------------------------
Kenneth P. Warner
President and Chief Executive Officer
(Chief Executive and Financial Officer)
13
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> DEC-31-1997
<CASH> 131,070
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 105,965
<CURRENT-ASSETS> 265,686
<PP&E> 142,526
<DEPRECIATION> 17,196
<TOTAL-ASSETS> 881,569
<CURRENT-LIABILITIES> 683,098
<BONDS> 0
0
1,844
<COMMON> 25,176
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 881,569
<SALES> 0
<TOTAL-REVENUES> 30,000
<CGS> 0
<TOTAL-COSTS> 688,389
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 27,457
<INCOME-PRETAX> (658,389)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (658,389)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
