<PAGE>
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 [NO FEE REQUIRED]
FOR THE QUARTERLY PERIOD ENDED: JULY 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
COMMISSION FILE NUMBER: 2-99565
ARXA INTERNATIONAL ENERGY, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3784149
-------------------
(State or other jurisdiction) (IRS Employer
of incorporation or organization Identification No.)
530 Wells Fargo Drive, Suite 300
Houston, Texas 77090
---------------------
(Address of principal executive offices, including zip code)
(281) 444-1088
--------------
(Registrant's telephone number, including area code)
---------------
Securities registered under Section 12(b) of the Exchange Act:
Name of Each Exchange
Title of Each Class on which Registered
---------------------------------------
Common Stock, $.001 par value
OTC/ELECTRONIC BULLETIN BOARD
Indicate by check mark whether the registrant (i) has filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act during the past
12 months (or for such shorter period that the registrant was required to file
such reports), and (ii) has been subject to such filing requirements for the
past 90 days. Yes [X] No [ ]
As of September 11, 1998, there were 22,501,024 shares of
Common Stock outstanding.
<PAGE>
ARXA INTERNATIONAL ENERGY, INC. & SUBSIDIARY
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED JULY 31, 1998
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION PAGE
- ------------------------------ ----
<S> <C>
ITEM 1. Financial Statements
Consolidated Balance Sheets - July 31, 1998 (unaudited)
and October 31, 1997. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Consolidated Statements of Operations - For the Three months
Ended July 31, 1998 (unaudited) and July 31, 1997 (unaudited) . . . . . . 2
Consolidated Statements of Operations - For the Nine months
Ended July 31, 1998 (unaudited) and July 31, 1997 (unaudited) . . . . . . 3
Consolidated Statement of Stockholders' Equity - For the Nine months
Ended July 31, 1998 (unaudited) . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows - For the Nine months
Ended July 31, 1998 (unaudited) and July 31, 1997 (unaudited) . . . . . . 5
Notes to Unaudited Consolidated Financial Statements. . . . . . . . . . . . 6
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. . . . . . . . . . . 9
PART II - OTHER INFORMATION
- ---------------------------
ITEM 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
<PAGE>
ARXA INTERNATIONAL ENERGY, INC. & SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JULY 31, 1998 OCTOBER 31, 1997
------------- ----------------
(UNAUDITED)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash, including interest-bearing balances of $371,242 $ 410,390 $ 152,883
and $80,351, respectively
Accounts receivable, no allowance for doubtful accounts 4,615 251,333
Income tax receivable 70,831 70,831
Oil and gas property held for sale - 466,343
Other current assets 25,790 342
----------- -----------
Total current assets 511,626 941,732
PROPERTY AND EQUIPMENT, (full cost method for oil and gas
properties), net of accumulated depletion, depreciation,
amortization and provision for impairment 1,019,454 1,919,954
OTHER ASSETS 56,987 57,833
----------- -----------
Total assets $ 1,588,067 $ 2,919,519
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable to stockholders $ 157,055 $ 102,285
Accounts payable 22,400 16,054
Other current liabilities 173,898 210,675
----------- -----------
Total current liabilities 353,353 329,014
LONG-TERM DEBT - 79,770
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value; 100,000,000 shares authorized;
22,166,368 and 20,377,000 shares issued and outstanding,
respectively 22,166 20,377
Additional paid-in capital 4,683,002 3,937,075
Accumulated deficit (3,470,454) (1,446,717)
----------- -----------
Total stockholders' equity 1,234,714 2,510,735
----------- -----------
Total liabilities and stockholders' equity $ 1,588,067 $ 2,919,519
----------- -----------
----------- -----------
</TABLE>
SEE ACCOMPANYING NOTES TO THESE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
1
<PAGE>
ARXA INTERNATIONAL ENERGY, INC. & SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three months Ended
-----------------------------
July 31, 1998 July 31, 1997
------------- -------------
<S> <C> <C>
OIL AND GAS REVENUES $ 43,320 $ 142,270
COST AND EXPENSES:
Lease operating expenses 64,185 38,875
Severance taxes 817 3,206
Depletion, depreciation, amortization 290,983 80,044
and provision for impairment
General and administrative 613,992 251,825
------------ -----------
Total cost and expenses 969,977 373,950
------------ -----------
LOSS FROM OPERATIONS (926,657) (231,680)
OTHER INCOME (EXPENSE):
Interest income 82 4,434
Interest expense (242) -
Equity in loss of oil and gas venture 8,462 (88,164)
Other (5,581) 98
------------ -----------
2,721 (83,632)
------------ -----------
LOSS BEFORE INCOME TAXES (923,936) (315,312)
INCOME TAX BENEFIT, net - 70,885
------------ -----------
NET LOSS $ (923,936) $ (244,427)
------------ -----------
------------ -----------
NET LOSS PER COMMON AND COMMON
EQUIVALENT SHARE $ (.042) $ (.025)
------------ -----------
------------ -----------
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES 22,166,368 9,808,913
------------ -----------
------------ -----------
</TABLE>
SEE ACCOMPANYING NOTES TO THESE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
2
<PAGE>
ARXA INTERNATIONAL ENERGY, INC. & SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Nine months Ended
July 31, 1998 July 31, 1997
------------- -------------
<S> <C> <C>
OIL AND GAS REVENUES $ 378,471 $ 519,574
COST AND EXPENSES:
Lease operating expenses 205,031 133,691
Severance taxes 5,907 14,505
Depletion, depreciation, amortization 836,439 244,053
and provision for impairment
General and administrative 1,309,598 572,452
----------- ---------
Total cost and expenses 2,356,975 964,701
----------- ---------
LOSS FROM OPERATIONS (1,978,504) (445,127)
OTHER INCOME (EXPENSE):
Interest income 1,244 11,723
Interest expense (6,650) (15,350)
Equity in loss of oil and gas venture (95,054) (228,903)
Other 55,227 (6,678)
----------- ---------
(45,233) (239,208)
----------- ---------
LOSS BEFORE INCOME TAXES (2,023,737) (684,335)
INCOME TAX BENEFIT, net - 153,845
----------- ---------
NET LOSS $(2,023,737) $(530,490)
----------- ---------
----------- ---------
NET LOSS PER COMMON AND COMMON
EQUIVALENT SHARE $ (.091) $ (.058)
----------- ---------
----------- ---------
WEIGHTED AVERAGE COMMON AND
COMMON EQUIVALENT SHARES 22,166,368 9,025,003
----------- ---------
----------- ---------
</TABLE>
SEE ACCOMPANYING NOTES TO THESE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE>
ARXA INTERNATIONAL ENERGY, INC. & SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED JULY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL STOCK-
-------------------------- PAID-IN ACCUMULATED HOLDERS'
SHARES AMOUNT CAPITAL DEFICIT EQUITY
---------- ------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCES, OCTOBER 31, 1997 20,377,000 $20,377 $3,937,075 $(1,446,717) $ 2,510,735
NET CANCELLATION OF SHARES (164,692) (166) 166 0 0
ISSUANCE OF STOCK FOR COMPENSATION 250,000 250 87,250 0 87,500
J. SCHOFIELD AGREEMENT CANCELLATION (25,000) (25) 25 0 0
ISSUANCE OF SHARES FOR COMPENSATION UNDER 661,866 662 423,527 0 424,189
CONSULTING AGREEMENTS
ISSUANCE OF SHARES FOR PROPERTY PURCHASE 102,000 102 101,898 0 102,000
CONVERSION OF NOTES PAYABLE TO STOCKHOLDERS INTO 965,000 965 133,059 0 134,024
COMMON SHARES
ROUNDING 194 1 2 0 3
NET LOSS 0 0 0 (2,023,737) (2,023,737)
---------- ------- ---------- ----------- -----------
BALANCES, JULY 31, 1998 22,166,368 $22,166 $4,683,002 $(3,470,454) $ 1,234,714
---------- ------- ---------- ----------- -----------
---------- ------- ---------- ----------- -----------
</TABLE>
SEE ACCOMPANYING NOTES TO THESE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
4
<PAGE>
ARXA INTERNATIONAL ENERGY, INC. & SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Nine months Ended
------------------------------
July 31, 1998 July 31, 1997
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (2,023,737) $ (530,490)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depletion, depreciation, amortization and
provision for impairment 836,439 244,053
Deferred tax benefit - (129,284)
Equity in loss of oil and gas venture 95,054 228,903
Consulting services paid with common stock 424,189
Interest Expense converted into common stock 8,500
Changes in operating assets and liabilities:
Accounts receivable 246,718 133,251
Oil and gas property held for sale 466,343 (448,038)
Other current assets (25,448) 10,791
Accounts payable 6,346 19,888
Other current liabilities 50,723 -
------------ ------------
Net cash provided by operating activities 76,627 (462,426)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to office equipment (22,331) (127,300)
Purchase of oil and gas property (687,804) (196,375)
Purchase of investment in oil and gas venture (95,054) (228,903)
Proceeds from sale of oil and gas property, net 877,042 -
Purchase price adjustments on oil and gas property
acquisition - 3,687
Purchase of other assets - (1,736)
------------ ------------
Net cash used in investing activities 71,853 (550,627)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stockholder notes 134,027 -
Payment of stockholder notes (25,000) (61,650)
Sales of common stock - 993,325
------------ ------------
Net cash provided by financing activities 109,027 931,675
------------ ------------
INCREASE IN CASH AND CASH EQUIVALENTS 257,507 (81,378)
CASH AND CASH EQUIVALENTS, beginning of period 152,883 472,480
------------ ------------
CASH AND CASH EQUIVALENTS, end of period $ 410,390 $ 391,102
------------ ------------
------------ ------------
SUPPLEMENTAL CASH FLOW DISCLOSURES OF NONCASH TRANSACTIONS:
Issuance of stock for oil and gas properties $ 102,000
------------
------------
Conversion of stockholder notes and interest into common stock $ 134,027 $ 85,000
------------ ------------
------------ ------------
</TABLE>
SEE ACCOMPANYING NOTES TO THESE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
5
<PAGE>
ARXA INTERNATIONAL ENERGY, INC. & SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION - ARXA International Energy, Inc. ("ARXA" or "the Company"),
was incorporated in Delaware and is engaged in oil and gas exploration and
development in Utah, Louisiana and Texas. ARXA USA, Inc., a wholly owned
subsidiary, was incorporated in Delaware. All significant intercompany
accounts and transactions have been eliminated in consolidation. On October
27, 1997, the Company acquired substantially all of the assets and
liabilities of Phoenix Energy Group, Inc. (Phoenix). To consummate the
transaction, the Company exchanged 12,786,310 shares of the Company's
common stock, representing approximately 63% of the issued and outstanding
shares, plus warrants to purchase 3,297,000 shares at an exercise price of
$2.00 per share. The business combination was accounted for on the purchase
method of accounting. No goodwill arose from this transaction. As Phoenix
obtained a controlling interest in the Company, the transaction was
accounted for as a reverse acquisition. Therefore, for financial statement
purposes, Phoenix is considered the acquiror. The consolidated financial
statements reflect the historical operations and cost basis of Phoenix
since its inception; however, its stockholders' equity section has been
restated to reflect the capital structure of ARXA.
Phoenix Energy Group, Inc. was incorporated in Texas on March 14, 1996 and
was engaged in oil and gas exploration and development in south Texas.
Phoenix was formed by issuing notes and common stock to certain of the
larger oil and gas interest owners formerly associated with Prospector
Petroleum Inc. (Prospector). Phoenix, through a private placement, acquired
approximately 93% of the available working interests formerly associated
with Prospector at various times during the months of August 1996 through
August 1997. Revenues and related costs associated with these properties
were recognized beginning on the respective dates acquired. Phoenix issued
5,039,761 shares of common stock during 1996 and 82,866 shares of common
stock in 1997 to effectuate the acquisition of these working interests.
UNAUDITED INTERIM INFORMATION - The accompanying financial information for
the periods ended July 31, 1998 and 1997 has been prepared by the Company,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. The financial statements reflect all adjustments,
consisting of normal recurring accruals, which are, in the opinion of
management, necessary to fairly present such information in accordance with
generally accepted accounting principles.
6
<PAGE>
ARXA INTERNATIONAL ENERGY, INC. & SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
2. BUSINESS COMBINATION:
The Company acquired various oil and gas interests during 1996 and 1997
from certain oil and gas interest owners formerly associated with
Prospector. In addition on October 27, 1997, the Company acquired
substantially all of the assets and liabilities of Phoenix in exchange for
12,786,310 shares of the Company's common stock, representing 63% of the
issued and outstanding shares, plus warrants to purchase 3,297,000 shares
at an exercise price of $2.00 per share. The business combination was
accounted for under the purchase method of accounting. ARXA's oil and gas
revenues, net loss applicable to common stockholders, and net loss per
share on an unaudited pro forma basis, assuming the ARXA transaction had
occurred on November 1, 1996 and January 1, 1997, respectively, and the oil
and gas interests acquired during 1996 from the interest owners formerly
associated with Prospector had been acquired on November 1, 1996, would be
as follows:
<TABLE>
<CAPTION>
FOR THE THREE
MONTH PERIOD
ENDED JULY 31,
1997
--------------
(unaudited)
<S> <C>
Oil and Gas Revenues $ 142,270
Net Income (Loss) $ (244,427)
Net Income (Loss) per Share $ (.025)
</TABLE>
These pro forma amounts were prepared using assumptions which are based on
estimates and are subject to revision. The pro forma combined results are
not necessarily indicative of actual results that would have been achieved
had the acquisition occurred on the dates indicated, or of future results.
3. NOTES PAYABLE TO STOCKHOLDERS:
Notes payable to stockholders at October 31, 1997 includes an unsecured
note payable to a stockholder of $25,000, due December 30, 1997. The note
is non-interest bearing and interest is imputed at 8%. The note provided
for repayment in cash or common stock of the Company at a value of $1.00
per share, upon the option of the lender. On December 29, 1997, the Company
paid the note off in full, in cash.
Notes payable to stockholders at July 31, 1998 and October 31, 1997 also
includes an unsecured note payable to a stockholder and his affiliates of
$77,285. The note is non-interest bearing (imputed at 8%) and is payable at
7% of net proceeds of future offerings received through March 1999. If not
repaid by March 1999, the note automatically converts to the Company's
common stock at the average market price for the five days preceding March
13, 1999.
7
<PAGE>
ARXA INTERNATIONAL ENERGY, INC. & SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Notes payable to stockholders at July 31, 1998 and Long Term Debt at
October 31, 1997 includes unsecured notes payable of $79,770 to a company
affiliated with a stockholder of the Company. The note bears interest at 8%
and is payable in quarterly installments. To the extent that the interest
is paid at each quarter end, the due date is automatically extended until
March 12, 1999.
4. STOCK OPTION PLAN:
The Company has a stock option plan under which options to purchase a
maximum of 1,000,000 shares of common stock may be issued to employees,
consultants and non-employee directors of the Company. The stock option
plan provides both for the grant of options intended to qualify as
"incentive stock options" under the Internal Revenue Code of 1986, as
amended, as well as options that do not so qualify. As of July 31, 1998, no
options have been granted under the Plan.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
A. RESULTS OF OPERATIONS
Oil and gas revenues for the nine months ended July 31, 1998 were $378,471,
which is a $141,103 decrease from the $519,574 for the nine months ended
July 31, 1997 and is primarily attributed to normal production decline,
lower product prices in 1998 versus 1997 and the sale of the Flowella and
Colson Fields, effective June 1, 1998. Lease operating expense, which
includes workover costs, increased from $133,691 for the nine months ended
July 31, 1997 to $205,031 for the nine months ended July 31, 1998, an
increase of $71,340. The increase is primarily due to the Garcia #1 well,
located in Brooks County, Texas, which was re-worked so as to bring it back
on production after having been shut-in since December 1996.
General and administrative costs increased from $244,053 for the nine
months ended July 31, 1997 to $836,439 for the nine months ended July 31,
1998. The increase is solely attributable to the Company's efforts to
expand its capacity to evaluate numerous and larger oil and gas
acquisitions to present to equity and debt financing sources, so as to grow
the Company.
B. LIQUIDITY AND CAPITAL RESOURCES
Net cash flow provided by operating activities was $76,627 for the nine
months ended July 31, 1998 as compared to a deficit of $462,426 for the
nine months ended July 31, 1997.
The primary source of cash for the Company for the nine months ended July
31, 1998 was from the sale of the Sayre Ranch Prospect in Oklahoma to a
third party for $468,700 plus a commission of $18,750 and the sale of the
Flowella and Colson Fields to two separate third parties for a net of
$801,000. The Company's cash flow from financing activities during the
nine months ended July 31, 1998 also included proceeds of notes from three
stockholders of $134,027, that were subsequently converted into common
stock on July 14, 1998. The principle source of cash for the nine months
ended July 31, 1997 was $993,325 from the sale of common stock.
Net cash was used in investing activities in the nine months ended July 31,
1998 by 1) costs to drill and complete the Vesley #1 well for $270,000,
the Taylor #1 well for $73,350 and the Poole #4 well for $25,325, 2)
acquisition of the Naconiche Creek Prospect for $40,000, 3) acquisition
costs of the Lewis Ranch and London Gin properties for $213,000 and 4)
funding of the IPX oil and gas venture for $95,054 (the agreement has been
terminated March 1, 1998).
Net cash was used in investing activities in the nine months ended July 31,
1997 primarily on acquiring additional joint venture working interests
formerly associated with Prospector Petroleum for $196,375, the funding of
IPX for $228,903, investing in the Sayre Ranch Prospect for $448,038 and in
outfitting the Company's offices and equipment for newly hired employees in
the amount of $127,300.
At July 31, 1998, the Company's current assets of $511,626 exceed its
current liabilities of $353,353 by $158,273. In order to alleviate the
Company's marginal working capital position, management, instituted
personnel terminations, trimmed corporate overhead, eliminated
non-essential oil and gas property expenditures, terminated its agreement
in an oil and gas venture with IPX and sold its interest in the Flowella
and Colson Fields for a net of $801,000 cash.
9
<PAGE>
C. MANAGEMENT'S RESPONSE AND PLAN OF OPERATIONS
During the third quarter, the Company continued to implement the strategic
plan as set forth in its 10-KSB for the period ended October 31, 1997,
filed with the SEC on March 12, 1998. The Company sold a significant
portion of its low yield producing assets which were in Flowella and
Colson Fields, Brooks County, Texas, at prices considerably more than
their appraised value. The Company will continue to liquidate its
remaining low or non-yielding producing assets. The proceeds from the
Flowella and Colson Fields sale are largely committed to acquiring
producing reserves and participating in high return on investment
exploitation opportunities. In this regard, the Company acquired for
cash and common stock the Lewis Ranch and London Gin interests in
Matagorda and Nueces Counties, Texas. Besides adding good cash flow,
the Lewis Ranch interest has a Bcf of behind pipe gas reserves.
In the operations arena, the Company completed the Vesley #1 in Lavaca
County, Texas, adding both cash flow and significant offset oil potential
which can be exploited once crude prices improve significantly. Also in
Lavaca County, Texas, the Company announced it's sixteenth successful
shallow gas completion and a new deep gas discovery in the West Lavaca
River Prospect. Finally, the Company applied for and is now a licensed
operator in the state of Texas.
In the capitalization arena, management has actively communicated and
promoted the Company's future strategic plans to the investment community,
resulting in restored liquidity to the Company's stock during this quarter.
Additionally, the Company has been evaluating and will soon select a
respected investment banking/consulting group, who are experienced and
appropriate for our industry, size and stage of development. This group
will advise the Company on capital formation strategies and provide
assistance on specific executions of the plan.
Finally, the Company has retained consultants to seek merger partners and
acquisition targets.
PART II
ITEM 5. OTHER INFORMATION
On July 27, 1998 the Board of Directors approved the issuance of warrants
to management and non-employee directors to purchase 5,000,000 shares of
common stock at $.05 per share. Fifty percent (50%) of the warrants are
exercisable when the Company's stock price reaches $1.25 per share, 25%
when the price reaches $1.50 per share, and 25% when the stock price
reaches $1.75 per share. Should the Company declare a stock dividend the
number of shares will go up and the prices will go down proportionately.
Should the Company reverse split its stock the number of shares will
proportionately go down and the prices will proportionately go up.
10
<PAGE>
ARXA INTERNATIONAL ENERGY, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to signed on its behalf by the
undersigned thereunto duly authorized.
ARXA INTERNATIONAL ENERGY, INC.
(Registrant)
Date: 9-11-98 L. CRAIG FORD
/s/ L. Craig Ford
------------------------------
President
Date: 9-11-98 DENNIS P. McGRATH
/s/ Dennis P. McGrath
------------------------------
Vice President and Controller
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM JULY 31,
1998 FORM 10-Q FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> FEB-01-1998
<PERIOD-END> JUL-31-1998
<CASH> 410,390
<SECURITIES> 0
<RECEIVABLES> 4,615
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 511,626
<PP&E> 2,156,342
<DEPRECIATION> (1,136,888)
<TOTAL-ASSETS> 1,588,067
<CURRENT-LIABILITIES> 353,353
<BONDS> 0
0
0
<COMMON> 22,166
<OTHER-SE> 1,212,548
<TOTAL-LIABILITY-AND-EQUITY> 1,588,067
<SALES> 378,471
<TOTAL-REVENUES> 378,471
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,356,975
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,650
<INCOME-PRETAX> (2,023,737)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,023,737)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,023,737)
<EPS-PRIMARY> (0.091)
<EPS-DILUTED> (0.091)
</TABLE>
