<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from ____________ to ____________
Commission file number 1-10446
LITHIUM TECHNOLOGY CORPORATION
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 13-3411148
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
5115 Campus Drive, Plymouth Meeting, PA 19462
(Address of Principal Executive Offices)
(610) 940-6090
(Issuer's Telephone Number, Including Area Code)
(Former Name, Former Address and Former Fiscal Year,
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 Exchange Act 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
----- -----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court.
Yes No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date: As of June 30,
1997: 17,601,418 shares of Common Stock
Transitional Small Business Disclosure Format (check one):
Yes No X
----- -----
<PAGE> 2
LITHIUM TECHNOLOGY CORPORATION AND SUBSIDIARY
FORM 10-QSB
FOR THE QUARTER ENDED JUNE 30, 1997
INDEX
<TABLE>
<CAPTION>
PAGE
----
PART 1 - FINANCIAL INFORMATION
<S> <C>
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
Consolidated Balance Sheets - June 30, 1997 and December 31, 1996 3
Consolidated Statements of Operations - Six Months Ended June 30,
1997 and 1996, and Period From July 21, 1989 (Date
of Inception) to June 30, 1997 4
Consolidated Statements of Changes in Stockholders' Equity
(Deficiency) - Six Months Ended June 30, 1997 5
Consolidated Statements of Cash Flows - Six Months Ended
June 30, 1997 and 1996, and Period from July 21, 1989 (Date
of Inception) to June 30, 1997 6-7
Notes to Consolidated Financial Statements - June 30, 1997 8-12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS 13-17
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 18
ITEM 2. CHANGES IN SECURITIES 18
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 18
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 18
ITEM 5. OTHER INFORMATION 19
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 19
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
LITHIUM TECHNOLOGY CORPORATION AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---- ----
(Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and equivalents $ 228,000 $ 1,388,000
Prepaid expenses and other current assets -- 10,000
------------ ------------
Total Current Assets 228,000 1,398,000
------------ ------------
PROPERTY AND EQUIPMENT, LESS ACCUMULATED DEPRECIATION
of $447,000 at June 30, 1997 and $363,000 at
December 31, 1996 541,000 624,000
------------ ------------
OTHER ASSETS:
Restricted cash -- 65,000
Debt issue costs, less accumulated amortization
of $438,000 at December 31, 1996 26,000 142,000
Security deposits 20,000 20,000
------------ ------------
46,000 227,000
------------ ------------
$ 815,000 $ 2,249,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES:
Accrued notes payable $ 1,750,000 $ 1,750,000
Accounts payable and accrued expenses 1,111,000 1,046,000
Accrued salaries 230,000 232,000
------------ ------------
Total Current Liabilities 3,091,000 3,028,000
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIENCY):
Undesignated preferred stock:
Authorized - 100,000 shares, issued and
outstanding - None -- --
Common Stock, par value $.01 per share:
Authorized - 50,000,000 shares
Issued and outstanding - 17,601,000 shares
at June 30, 1997 and
17,108,000 shares at December 31, 1996 176,000 171,000
Additional paid-in capital 17,222,000 16,772,000
Accumulated deficit (6,865,000) (6,865,000)
Deficit accumulated during development stage (12,809,000) (10,857,000)
------------ ------------
Total Stockholders' Equity (Deficiency) (2,276,000) (779,000)
------------ ------------
$ 815,000 $ 2,249,000
============ ============
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE> 4
LITHIUM TECHNOLOGY CORPORATION
AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
JULY 21, 1989
(DATE OF
THREE MONTHS ENDED SIX MONTHS ENDED INCEPTION) TO
JUNE 30, JUNE 30, JUNE 30,
------------------------------ ---------------------------- -------------
1997 1996 1997 1996 1997
---- ---- ---- ---- ----
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
COSTS AND EXPENSES:
Engineering,
research and
development $ 283,000 $ 318,000 $ 627,000 $ 574,000 $ 4,340,000
General and
administrative 270,000 723,000 841,000 1,378,000 7,800,000
Interest expense,
net of interest
income 37,000 (22,000) 484,000 34,000 669,000
------------ ------------ ------------ ------------ -----------
590,000 1,019,000 1,952,000 1,986,000 12,809,000
------------ ------------ ------------ ------------ -----------
NET LOSS $ (590,000) $ (1,019,000) $ (1,952,000) $ (1,986,000) $(12,809,000)
============ ============ ============ ============ ============
NUMBER OF
COMMON SHARES
OUTSTANDING 17,601,000 15,674,000 17,489,000 11,842,000
============ ============ ============ ============
NET LOSS PER SHARE $ (.03) $ (.07) $ (.11) $ (.17)
============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE> 5
LITHIUM TECHNOLOGY CORPORATION
AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(DEFICIENCY) - (UNAUDITED)
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Additional During
------------ Paid-In Accumulated Development
Shares Amount Capital Deficit Stage
------ ------ ------- ------- -----
<S> <C> <C> <C> <C> <C>
BALANCES AT
DECEMBER 31, 1996 17,108,000 $171,000 $16,772,000 $(6,865,000) $(10,857,000)
Six months ended June 30, 1997:
Issuance of
Common Stock:
In connection
with costs
relating to
the issuance
of 10%
convertible
notes 493,000 5,000 450,000
Net loss (1,952,000)
---------- -------- ----------- ----------- ------------
BALANCES AT
JUNE 30, 1997 17,601,000 $176,000 $17,222,000 $(6,865,000) $(12,809,000)
========== ======== =========== =========== ============
</TABLE>
See accompanying notes to consolidated financial statements
5
<PAGE> 6
LITHIUM TECHNOLOGY CORPORATION
AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
SIX MONTHS ENDED JULY 21, 1989
JUNE 30, (DATE OF
-------- INCEPTION) TO
1997 1996 JUNE 30, 1997
---- ---- ------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,952,000) $(1,986,000) $(12,809,000)
Adjustments to reconcile net loss to net
cash flows from operating activities:
Depreciation 84,000 85,000 446,000
Amortization of debt issue costs 142,000 225,000 881,000
Common stock issued in lieu of interest 455,000 -- 567,000
Fair value of warrants and option granted
for services rendered -- -- 121,000
Common stock issued to certain persons for
services provided -- -- 206,000
Expenses paid by shareholder on behalf of
Company -- -- 79,000
Changes in operating assets and liabilities:
Prepaid expenses and other current assets 10,000 52,000 5,000
Security deposits -- -- (20,000)
Accounts payable and accrued expenses 63,000 347,000 2,075,000
Due to related parties -- (209,000) (118,000)
----------- ----------- ------------
Net cash provided by (used in)
operating activities (1,198,000) (1,486,000) (8,567,000)
----------- ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (1,000) (125,000) (737,000)
Restricted cash 65,000 (18,000) --
Other -- -- 94,000
----------- ----------- ------------
Net cash provided by (used in)
investing activities 64,000 (143,000) (643,000)
----------- ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net advances repayable only out of
proceeds of public offering -- -- 471,000
Proceeds received upon issuance of common stock -- 2,188,000 3,239,000
Proceeds received from issuance of
preferred stock, net of related costs -- -- 100,000
Proceeds received upon exercise of options
and warrants, net of costs -- 63,000 569,000
Net advances by former principal stockholder -- -- 321,000
Proceeds from sale of convertible debt -- 516,000 5,374,000
Debt issue costs (26,000) (51,000) (636,000)
----------- ----------- ------------
Net cash provided by financing activities (26,000) 2,716,000 9,438,000
----------- ----------- ------------
</TABLE>
6
<PAGE> 7
<TABLE>
<CAPTION>
PERIOD FROM
SIX MONTHS ENDED JULY 21, 1989
JUNE 30, (DATE OF
-------- INCEPTION) TO
1997 1996 JUNE 30, 1997
---- ---- ---------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
NET CHANGE IN CASH AND EQUIVALENTS (1,160,000) 1,087,000 228,000
CASH AND EQUIVALENTS, BEGINNING OF YEAR 1,388,000 217,000 --
------------ ------------ ----------
CASH AND EQUIVALENTS, END OF YEAR $ 228,000 $ 1,304,000 $ 228,000
============ ============ ==========
SUPPLEMENTAL CASH FLOW INFORMATION:
Contribution to capital by former
principal stockholder $ -- $ -- $3,659,000
============ ============ ==========
Related party debt exchanged for
convertible debt $ -- $ -- $ 321,000
============ ============ ==========
Exchange of indebtedness to former
principal stockholder for common stock $ -- $ -- $ 445,000
============ ============ ==========
Issuance of common stock for services
and accrued salaries $ $ -- $ 352,000
============ ============ ==========
Exchange of equipment and accrued rent
for common stock $ -- $ -- $ 271,000
============ ============ ==========
Subordinated notes and related accrued
interest exchanged for Series A
preferred stock $ -- $ -- $3,300,000
============ ============ ==========
Exchange of convertible debt for
convertible preferred stock $ -- $ -- $ 356,000
============ ============ ==========
Conversion of convertible debt and
accrued interest into common stock,
net of unamortized debt discount $ -- $ -- $3,268,000
============ ============ ==========
Exchange of advances repayable only
out of proceeds of public offering
for common stock $ -- $ -- $ 471,000
============ ============ ==========
Deferred offering costs on warrants
exercised $ -- $ -- $ 88,000
============ ============ ==========
Issuance of warrants in settlement of
litigation and for services rendered $ -- $ 68,000 $ 160,000
============ ============ ==========
Common stock issued for costs related
to 10% promissory notes $ -- $ -- $ 525,000
============ ============ ==========
</TABLE>
See accompanying notes to consolidated financial statements
7
<PAGE> 8
LITHIUM TECHNOLOGY CORPORATION
AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1997
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
applicable to interim periods. Accordingly, they do not include all of 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. These
financial statements should be read in conjunction with the Company's
audited financial statements included in the Company's Annual Report on
Form 10-KSB filed with the Securities and Exchange Commission for the year
ended December 31, 1996. Operating results for the three and six month
periods ended June 30, 1997 are not necessarily indicative of the results
that may be expected for the year ended December 31, 1997 or any interim
period.
2. DESCRIPTION OF BUSINESS
Lithium Technology Corporation ("LTC") together with its wholly-owned
subsidiary, Lithion Corporation ("Lithion"), collectively referred to as
the "Company", is an advanced development stage publicly held company in
the process of commercializing a unique, solid-state, lithium-polymer
rechargeable battery. The Company is engaged in research and development
activities to further develop and exploit this battery technology and also
hold various patents relating to such batteries. The Company believes that
its battery technology, which is currently in the prototype development
phase, is capable of providing up to four times the performance of current
rechargeable batteries. The Company's objective is the commercialization
of such technology, inclusive of moving from laboratory scale product
prototypes and related demonstration manufacturing processes to full scale
market introduction, achieving cost competitiveness, and constructing a
large scale manufacturing facility. The Company's commercialization focus
is on the rapidly growing portable electronics market segment (notebook
and palmtop computers and wireless communications devices). The Company
intends to pursue both chemistries for specific portable electronics
applications.
The Company has generated no revenues and has no commercial operations to
date. The Company has been unprofitable since inception and expects to
incur substantial additional operating losses over the next several years.
The Company does not expect to generate any sales in commercial quantities
in the near term.
Effective February 1996, the Company's then majority stockholder approved
a merger agreement pursuant to which the Company, a Nevada Corporation,
merged with a newly formed Delaware corporation in order to reincorporate
the Company as a Delaware corporation and effectuate a recapitalization,
principally the reverse stock split.
8
<PAGE> 9
3. OPERATING AND LIQUIDITY DIFFICULTIES AND MANAGEMENT'S PLANS TO OVERCOME:
The Company has been unprofitable since inception and expects to incur
substantial additional operating losses over the next few years. The
Company has generated no revenues nor has it had any commercial operations
to date and does not expect to generate any significant revenues from
operations during 1997.
The Company has experienced liquidity difficulties since inception and in
order to continue the development of the Company's technology, needs
significant additional financing. The Company has financed its operations
since December 1993 with the proceeds from the sale of convertible debt
and private placements of common and preferred stock.
MANAGEMENT'S PLANS - During 1994, the Company recruited a new management
team and a core technical staff with needed commercialization and battery
technology expertise. The staff has expertise in technology,
commercialization, process development, battery engineering and strategic
alliance development. A modern research facility was leased and product
development commenced. The Company's operating results to date are solely
attributable to research and development activities and general and
administrative expenses.
Management's operating plan seeks to minimize the Company's capital
requirements, but commercialization of the Company's battery technology
will require substantial amounts of additional capital. The Company
expects that research and development expenses will increase significantly
as it continues to advance its battery technology and develop products for
commercial applications. The Company's working capital and capital
requirements will depend upon numerous factors, including, without
limitation, the progress of the Company's research and development
program, the levels and resources that the Company devotes to the
development of manufacturing and marketing capabilities, technological
advances, the status of competitors and the ability of the Company to
establish collaborative arrangements with other companies to provide
research and development funding to the Company and to manufacture and
market the Company's products.
The Company has raised approximately $9,460,000 since inception through
various sales of convertible debt and common and preferred stock. During
1996, the Company sold a then 4% equity position to a Japanese Consortium
for approximately $2,400,000 and also sold 10% convertible promissory
notes for $1,750,000 (see Note 6). In July-August 1997, the Company
borrowed $500,000 pursuant to the sale of convertible notes described
herein (see Note 8). The Company believes that it only has sufficient
capital resources to meet the Company's needs and satisfy the Company's
obligations through approximately October 1997, (See Note 8 - Subsequent
Events) based on the Company's current strategies, but excluding
repayment of the Company's existing $1.75 million bridge financing and
the $500,000 from the July-August 1997 sale of convertible notes.
There can be no assurance that the incremental capital needed to attain
commercial viability of the Company's battery technology and repay
existing indebtedness will be obtained, which the Company currently
estimates at approximately $22 million. If the Company is unable to raise
sufficient capital, it will be forced to curtail research and development
expenditures which, in turn, will delay, and could prevent, the completion
of the commercialization process.
Reference should be made to "Management's Discussion and Analysis or Plan
of Operation" included elsewhere herein for additional information.
9
<PAGE> 10
4. PROPERTY AND EQUIPMENT ARE SUMMARIZED AS FOLLOWS:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
---- ----
<S> <C> <C>
Laboratory equipment $855,000 $855,000
Furniture and fixtures 92,000 91,000
Leasehold improvements 41,000 41,000
-------- --------
988,000 987,000
Less: Accumulated depreciation
and amortization 447,000 363,000
-------- --------
$541,000 $624,000
======== ========
</TABLE>
5. COMMITMENTS AND CONTINGENCIES
LEASES - The Company leases its principal operating facility from an
unrelated party providing for annual rent of $122,400 through November
1999 and contains an option to renew for an additional five years.
EMPLOYMENT AGREEMENTS - The Company has a four year employment agreement
with its Director of Research providing for annual compensation of
$125,000 through January 1998.
In May 1996, the Company entered into a one year employment agreement with
its Chief Executive Officer at an annual salary of $185,000 and other
incentives, including performance bonuses and stock options. The officer
voluntarily elected to defer his compensation and at June 30, 1997 such
deferral ($211,208) has been included in accrued payroll in the
accompanying financial statements.
In July 1996, the Company entered into one year employment agreements with
its President/Chief Operating Officer and its Executive Vice-President of
Operations/Chief Technical Officer at annual salaries of $140,000 and
$130,000, respectively, plus other incentives, including performance
bonuses and stock options. In May 1997, these employment agreements were
extended for one year on the same terms and conditions except that no new
options were granted.
See Note 7 for information on certain stock options issued in connection
with the employment agreements.
LEGAL PROCEEDINGS - In August 1996, civil actions were commenced against
the Company by a former director of the Company, and by the Company's
former legal counsel. The former director's complaint seeks monetary
damages amounting to approximately $4,500,000 and specific performance of
registration rights of certain warrants of the Company that have not been
registered and to which he claims entitlement. The Company has declared
such warrants and related documents void. The complaint of the Company's
former counsel alleges non-payment of legal fees for services rendered.
The Company has included the unpaid legal fees in accounts payable,
however, it believes these actions to be without merit and intends to
vigorously defend both actions. Accordingly, the Company has filed its own
lawsuit against the former counsel alleging fraud, legal malpractice and
conflict of interest flowing from the fraudulent issuance of the
aforementioned warrants. In addition, the complaint alleges violations of
federal securities laws, the Racketeering Influenced and Corrupt
Organization Act ("RICO") and fiduciary duties owed by counsel to the
Company.
The complaint also includes similar allegations against the former
director, flowing from the fraudulent issuance of warrants to him.
10
<PAGE> 11
6. STOCKHOLDERS' EQUITY:
PREFERRED STOCK - The Company is authorized to issue up to 100,000 shares
of preferred stock, all of which is currently undesignated and may be
divided and issued from time to time in one or more series as may be
designated by the Board of Directors. In the event of liquidation,
dissolution or winding up of the Company, the holders of the preferred
stock will be entitled to a liquidation preference over the Common Stock.
The preferred stock may be entitled to such dividends, redemption rights,
liquidation rights, conversion rights and voting rights as the Board of
Directors, in its discretion, may determine, in a resolution or
resolutions providing for the issuance of any such stock. Rights granted
by the Board of Directors may be superior to those of existing
shareholders, (including the right to elect a controlling number of
directors as a class). Preferred Stock can be issued without the vote of
the holders of Common Stock. No shares of preferred stock are outstanding
at June 30, 1997.
BRIDGE FINANCING - In October 1996, the Company completed a bridge
financing pursuant to which the Company issued $1,750,000 of 10%
convertible notes due January 23, 1997 (the "Convertible Notes") and
267,176 shares of common stock in exchange for $1,750,000 in cash. The
Company also issued 66,794 shares of common stock, plus a warrant to
purchase an additional 87,500 shares (at an exercise price of $1.31), to
the placement agent and also paid a $122,500 commission. The 267,176
shares of common stock were issued in consideration of the advance of the
principal amount of the Convertible Notes, for other services to be
rendered and in payment of all interest expense through the anticipated
repayment date in January 1997. These shares and the shares issued to the
placement agent (total of 333,970 shares), were recorded at their then
fair value totaling $437,500. This cost, together with the commission of
$122,500 and other related legal costs have been recorded as debt issue
costs. The Company also agreed to issue additional shares of common stock
to the purchasers of the Convertible Notes (the "Convertible Note
Purchasers") in the event a registration statement relating to a certain
contemplated underwritten public offering is not filed within 30 days of
the effective date of the Convertible Note Agreement. As the proposed
registration statement was not filed, the Company was required to issue
additional shares of common stock to the Convertible Note Purchasers,
which issuances were recorded at the then current market value per share
with a corresponding charge to interest expense. The Company has issued
250,519 additional shares of common stock pursuant to such provision.
Pursuant to the terms of the Convertible Note Agreements, additional
shares were issued to the Convertible Note Purchasers because of certain
post-closing occurrences, including the Company's exercise of its right to
extend the maturity date for repayment of the Convertible Notes to March
24, 1997. The terms of such agreements allowed the Company two 30-day
extensions of the initial January 23, 1997 maturity date, provided the
Company issue the Convertible Note Purchasers $175,000 worth of the
Company's common stock (based on the value of the common stock at the time
of the extension less a discount factor), for each such extension. The
Company exercised both extensions and issued an additional 370,265 shares
of common stock.
The Company did not repay the $1.75 million principal of the Convertible
Notes on the March 24, 1997 maturity date and, accordingly, pursuant to
the terms of the Convertible Note Agreements, the Company and the
Convertible Note Purchasers have placed in escrow an additional 6,201,550
shares of the Company's common stock (the "Escrowed Shares"). The Escrowed
Shares are not considered to be issued and outstanding securities pending
actual payment for such shares. The Convertible Note Purchasers have not
taken any action to exercise any default remedies as of August 18, 1997.
As the result of the restructuring of the Convertible Notes entered into
on August 18, 1997, the Company and the Convertible Note Purchasers have
agreed to the following material terms: (i) the maturity date of the
Convertible Notes has been extended to November 2, 1998; (ii) the Company
pay to the Convertible Note Purchasers $100,000 toward the outstanding
principal balance of the Convertible Notes upon the closing of a private
placement of the Company's securities currently in the negotiation phase,
plus accrued interest since March 24, 1997; (iii) the Convertible Note
Purchasers will be permitted to sell certain quantities of the Escrowed
Shares, the proceeds of which will be deemed to reduce the outstanding
principal amount owed on the Convertible Notes; (iv) once the principal
amount of the Convertible Notes is repaid either through sales of the
Escrowed Shares, or by the Company's repayment of the Convertible Notes,
12.5% of any remaining Escrowed Shares will be delivered to the
Convertible Note Purchasers, and the remaining 87.5% will be retired by
the Company (subject to adjustment depending on the occurrence of certain
events); (v) the Convertible Notes may be prepaid by the Company,
provided that the Company issue 250,000 of the Escrowed Shares to the
Convertible Note Purchasers; and (vi) certain weekly issuances of shares
of the Company's Common Stock which were issued to the Convertible Note
Purchasers under the terms of the Convertible Note Agreements will be
deemed to have terminated on March 24, 1997. The amendments to the
Convertible Notes also provide that if the Convertible Note Purchasers'
resale exemption from registration is not available due to a change in the
law, then the Company must file a registration statement with the
Securities and Exchange Commission covering certain shares of the
Company's common stock held by the Convertible Note Purchasers. (See Note
8 -- Subsequent Events -- for details.)
11
<PAGE> 12
7. STOCK INCENTIVE PLAN -- Options under the 1994 Stock Incentive Plan are
summarized as follows:
<TABLE>
<S> <C>
Options outstanding January 1, 1997 1,744,000
Options granted ($.78125 per share) 12,000
Options exercised --
Options canceled (97,000)
----------
Options outstanding, June 30, 1997
($.501-$2.55 per share) 1,659,000
==========
Options available for grant, June 30, 1997 1,008,000
==========
Options exercisable, June 30, 1997 1,194,000
==========
DIRECTORS STOCK OPTION PLAN -- Options under the Directors Plan are summarized
as follows:
Options outstanding, January 1, 1997 107,000
Options granted --
Options canceled (40,000)
----------
Options outstanding, June 30, 1997
($.90 per share) 67,000
==========
Options available for grant, June 30, 1997 266,000
==========
Options exercisable, June 30, 1997 23,000
==========
WARRANTS -- Warrants are summarized as follows:
Warrants outstanding, January 1, 1997 2,360,000
Warrants granted --
Warrants exercised --
Warrants expired --
----------
Warrants outstanding, June 30, 1997
($.51 to $2.56 per share) 2,360,000
==========
Warrants exercisable, June 30, 1997 2,253,000
==========
</TABLE>
8. SUBSEQUENT EVENTS --
As discussed in Note 6 - Stockholders' Equity, in October 1996 the
Company sold $1.75 million principal amount Convertible Notes. The Convertible
Notes had a maturity date of March 24, 1997. The Convertible Notes have not yet
been repaid. The Convertible Note Purchasers have not taken any action to
exercise any default remedies as of August 18, 1997. As the result of the
restructuring of the Convertible Notes entered into on August 18, 1997, the
Company and the Convertible Note Purchasers have agreed to the following
material terms: (i) the maturity date of the Convertible Notes has been
extended to November 2, 1998; (ii) the Company will pay to the Convertible Note
Purchasers $100,000 toward the outstanding principal balance of the Convertible
Notes upon the closing of a private placement of the Company's securities
currently in the negotiation phase, plus accrued interest since March 24, 1997;
(iii) the Convertible Note Purchasers will be permitted to sell certain
quantities of the Escrowed Shares, the proceeds of which will be deemed to
reduce the outstanding principal amount owed on the Convertible Notes; (iv)
once the principal amount of the Convertible Notes is repaid either through
sales of the Escrowed Shares, or by the Company's repayment of the Convertible
Notes, 12.5% of any remaining Escrowed Shares will be delivered to the
Convertible Note Purchasers, and the remaining 87.5% will be retired by the
Company (subject to adjustment depending on the occurrence of certain events);
(v) the Convertible Notes may be prepaid by the Company, provided that the
Company issue 250,000 of the Escrowed Shares to the Convertible Note
Purchasers; and (vi) certain weekly issuances of shares of the Company's Common
Stock which were issued to the Convertible Note Purchasers under the terms of
the Convertible Note Agreements will be deemed to have terminated as of March
24, 1997. The amendments to the Convertible Notes also provide that if the
Convertible Note Purchasers' resale exemption from registration is not
available due to a change in the law, then the Company must file a registration
statement with the Securities and Exchange Commission covering certain shares
of the Company's common stock held by the Convertible Note Purchasers.
In July and August 1997 the Company obtained bridge financing for an
aggregate $500,000 by issuing convertible notes to five lenders and an aggregate
of 100,000 warrants to these lenders. The terms of this bridge financing, which
are based on the terms of the June Letter of Intent (as defined below), include
interest of 8% on the bridge notes, maturity of the bridge notes on September
15, 1997, the convertibility of the bridge notes into the Company's common stock
at $.28 per share, and an exercise price of $.14 per share for the bridge
lenders' warrants.
In June, 1997, the Company issued to The Mitsubishi Trust and Banking
Corporation ("MTBC") a warrant to purchase 100,000 shares of the Company's
common stock at an exercise price of $3.60 per share. This warrant expires on
January 18, 2005. The warrant was issued in consideration for consulting
services and the cancellation of a Non-Qualified Stock Option Agreement, dated
January 19, 1995 by and between the Company and MTBC.
12
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion and analysis should be read in conjunction with
the financial statements and notes thereto appearing elsewhere in this report.
GENERAL
The Company is a development stage company engaged in the business of
developing and seeking to commercialize a unique, solid state, lithium polymer
rechargeable battery. The Company has generated no revenues and has no
commercial operations to date. The Company has been unprofitable since inception
and expects to incur substantial additional operating losses over the next few
years. The Company does not expect to generate any significant revenues from
operations during the fiscal year ending December 31, 1997. The Company believes
that its battery technology, which is currently in the prototype development
phase, is capable of providing up to four times the performance of current
rechargeable batteries. The Company's objective is the commercialization of such
technology, inclusive of moving from current laboratory-scale product prototypes
and related demonstration manufacturing processes to full scale market
introduction, achieving cost-competitiveness, and constructing a large scale
manufacturing facility. The Company's product focus is on the rapidly growing
portable electronics market segment (notebook and palmtop computers and wireless
communications devices). The Company intends to pursue both chemistries for
specific portable electronics applications.
LIQUIDITY, CAPITAL RESOURCES, AND FINANCIAL CONDITION
The Company has financed its operations from December 10, 1993 with
convertible debt and private placements of common and preferred stock and has
raised approximately $9.46 million, including most recently, $1.75 million from
the October 1996 sale of convertible notes described herein and $500,000 from
the July-August 1997 sale of convertible notes described herein.
AS OF JUNE 30, 1997
At June 30, 1997, the Company had cash of $228,000, fixed assets of
$541,000 and other assets of $46,000. The Company's total liabilities were
$3,091,000 consisting of accounts payable and accrued expenses in the amount of
$1,341,000 and convertible notes due March 24, 1997 in the amount of $1,750,000.
The Company had a net working capital deficit of $2,863,000 on June 30, 1997.
The Company's net working capital deficit was increased by approximately
$1,233,000 from December 31, 1996 to June 30, 1997. The Company's cash and
equivalents decreased by approximately $1,160,000 from December 31, 1996 to June
30, 1997. This increase in net working capital deficit and decrease in cash is
attributable primarily to the expenditure of cash to pay operating expenses,
which have decreased during the six months ended June 30, 1997 as compared to
corresponding period in 1996 primarily for the reasons discussed below in
"Results of Operations".
The Company's stockholder's deficiency was $2,276,000 at June 30, 1997,
after giving effect to an accumulated deficit of $19,674,000 which consisted of
$12,809,000 accumulated deficit during the development stage from July 21, 1989
through June 30, 1997 and $6,865,000 accumulated deficit from prior periods. The
Company expects to incur substantial operating losses as it continues its
commercialization efforts.
In October 1996, the Company sold $1,750,000 principal amount convertible
notes ("Convertible Notes"). The Company did not repay the $1.75 million
principal of the Convertible Notes on the March 24, 1997 maturity date and,
accordingly, pursuant to the terms of the Convertible Note Agreements, the
Company and the Convertible Note Purchasers have placed in escrow an additional
6,201,550 shares of the Company's common stock (the "Escrowed Shares"). The
Escrowed Shares are not considered to be issued and outstanding securities
pending actual payment for such shares. The Convertible Note Purchasers have not
taken any action to exercise any default remedies as of August 18, 1997. As the
result of the restructuring of the Convertible Notes entered into on August 18,
1997, the Company and the Convertible Note Purchasers have agreed to the
following material terms: (i) the maturity date of the Convertible Notes has
been extended to November 2, 1998; (ii) the Company will pay to the Convertible
Note Purchasers $100,000 toward the outstanding principal balance of the
Convertible Notes upon the closing of a private placement of the Company's
securities currently in the negotiation phase, plus accrued interest since
March 24, 1997; (iii) the Convertible Note Purchasers will be permitted to sell
certain quantities of the Escrowed Shares, the proceeds of which will be deemed
to reduce the outstanding principal amount owed on the Convertible Notes; (iv)
once the principal amount of the Convertible Notes is repaid either through
sales of the Escrowed Shares, or by the Company's repayment of the Convertible
Notes, 12.5% of any remaining Escrowed Shares will be delivered to the
Convertible Note Purchasers, and the remaining 87.5% will be retired by the
Company (subject to adjustment depending on the occurrence of certain events);
(v) the Convertible Notes may be prepaid by the Company, provided that the
Company issue 250,000 of the Escrowed Shares to the Convertible Note
Purchasers; and (vi) certain weekly issuances of shares of the Company's Common
Stock which were issued to the Convertible Note Purchasers under the terms of
the Convertible Note Agreements will be deemed to have terminated on March 24,
1997. The amendments to the Convertible Notes also provide that if the
Convertible Note Purchasers' resale exemption from registration is not
available due to a change in the law, then the Company must file a registration
statement with the Securities and Exchange Commission covering certain shares
of the Company's common stock held by the Convertible Note Purchasers. (See
Note 8 -- Subsequent Events -- for details.)
13
<PAGE> 14
While the Company's operating plan seeks to minimize the Company's capital
requirements, commercialization of the Company's battery technology and
repayment of the Company's Convertible Notes and July/August 1997 Bridge Notes
(See Note 8-Subsequent Events) will require substantial amounts of additional
capital. Subject to the availability of necessary capital, the Company expects
that research and development and production expenses will increase
significantly as it continues to advance its battery technology and develop
products for commercial applications. The Company's working capital and capital
requirements will depend upon numerous factors, including, without limitation,
the progress of the Company's research and development program, the levels and
resources that the Company devotes to the development of manufacturing and
marketing capability, technological advances, the status of competitors and the
ability of the Company to establish collaborative arrangements with other
companies to provide research and development funding to the Company and to
manufacture and market the Company's products.
The Company believes that as of June 30, 1997 it has sufficient capital
resources to meet the Company's needs and satisfy the Company's obligations
through approximately October 1997 (See Note 8 - Subsequent Event) based on
the Company's current strategies and subject to the uncertainties discussed in
this report. The Company does not currently have sufficient cash to achieve all
its development and production objectives, including the 1998 installation of
the pilot manufacturing line and the repayment of the Convertible Notes. In
order to raise sufficient capital for its future growth and repayment of the
Convertible Notes, the Company will be required to sell additional debt or
equity securities.
There can be no assurances that the capital needed for attaining
commercial viability of the Company's battery technology, which the Company
currently estimates at $22 million, and repayment of the Company's Convertible
Notes and July/August 1997 Bridge Notes (See Note 8-Subsequent Events) can be
obtained. If the Company is unable to raise sufficient capital, it will be
forced to curtail research and development expenditures which, in turn, will
delay, and could prevent, the completion of the commercialization process.
RESULTS OF OPERATIONS
Six Months ended June 30, 1997 and 1996.
The Company had no revenues for the six months ended June 30, 1997 and
1996. Engineering, research and development expenses were $627,000 for the six
months ended June 30, 1997 compared to $574,000 in 1996. The increase of $53,000
results from increased contract research activities and lab supplies as the
Company continues to accelerate its commercialization efforts.
General and administrative expenses were $841,000 for the six months ended
June 30, 1997 compared to $1,378,000 in 1996. The decrease of $537,000 was due
to decreased legal costs and decreased amortization of debt issue costs and
increased consulting expenses and accrued but unpaid wages to the Company's
chief executive officer.
Interest expense increased to $484,000 (net of interest income of $18,000)
for the six months ended June 30, 1997 compared to $34,000 (net of interest
income of $26,000) in 1996. The increase in interest expense for the comparable
periods is attributable to the Company's convertible term notes and the issuance
of certain additional shares in connection with the Company's exercise of its
right to extend the maturity date for repayment of the Convertible Notes.
14
<PAGE> 15
Three Months ended June 30, 1997 and 1996.
The Company had no revenues for the three months ended June 30,1997 and
1996. Engineering, research and development expenses were $283,000 for the three
months ended June 30, 1997 compared to $318,000 in 1996. The decrease of $35,000
results from decreased contract research activities as the Company restricted
cash expenditures during the three months ending June 30, 1997.
General and administrative expenses were $270,000 for the three months
ended June 30, 1997 compared to $723,000 in 1996. The decrease of $453,000 was
due to decreased legal costs and accrued but unpaid wages to the Company's chief
executive officer.
Interest expenses increased to $37,000 (net of interest income of $14,000)
for the three months ended June 30, 1997 compared to ($22,000) (net of interest
income of $22,000) in 1996. The increase in interest expense for the comparable
periods is attributable to the Company's convertible term notes and the issuance
of certain additional shares in connection with the Company's exercise of its
right to extend the maturity date for repayment of the Convertible Notes.
15
<PAGE> 16
PLAN OF OPERATIONS FOR THE COMPANY
The Company's strategy is to commercialize its solid-state,
lithium-polymer, rechargeable battery with primary focus on high performance
portable electronic products (notebook computers, and wireless communications
devices). These market segments are large, growing rapidly, and demand high
performance batteries with a thin, flat form factor and long run times. There
can be no assurance, however, that the Company will be able to achieve the
technological breakthroughs that will be necessary in order to ultimately
achieve commercialization and/or obtain financings or generate revenues in order
to sustain the Company's on-going research and development phase or to undertake
the design and construction of the Demonstration Manufacturing Facility
discussed herein and other manufacturing-related facilities.
During 1994, the Company recruited a new management team and a core
technical staff with commercialization and battery technology expertise. A
modern research facility was leased in late 1994 and product development has
continued at an accelerated pace. At June 30, 1997, the management team and
technical staff consisted of twelve full-time employees. The staff has the
required expertise in technology, commercialization, process development,
battery engineering, electrochemistry and strategic alliance development. During
1996 the Company entered into employment agreements with Thomas R. Thomsen as
the Company's Chief Executive Officer, David J. Cade as the Company's President
and Chief Operating Officer, and Dr. George R. Ferment as the Company's
Executive Vice President and Chief Technical Officer. In May 1997, these
employment agreements were extended for one year.
The Company's development and commercialization plan currently has the
following milestones:
(i) hand-made cell samples tested by potential strategic partners in 1995
(accomplished);
(ii) installation of a Demonstration Manufacturing Facility (DMF)
continuous flow coating and laminating unit in first quarter of 1996
(accomplished);
(iii) upgrade of the DMF and distribution of DMF-made lithium-ion polymer
cell samples to selected Original Equipment Manufacturers (OEMs) customers in
early 1997 (accomplished);
(iv) distribution of prototype battery packs to selected OEMs in late
1997;
(v) initial commercial production of hand assembled battery packs using
DMF-made cells for OEMs in early 1998, ramping up to 20,000 notebook computer
batteries per month and generating sales of $12M in 1998;
(vi) installation of a pilot manufacturing facility in early 1998;
(vii) expansion of the pilot manufacturing facility in late 1998 by
automating the backend assembly; and
(viii) construction of a second tier manufacturing capability once market
demand exceeds initial manufacturing capacity.
The Company estimates that completion of phases (iv) through (vii) through the
end of 1998 will cost approximately $22 million in capital expenditures and
operating costs. There can be no assurances that the Company will meet these
development milestones on the time schedule outlined above.
16
<PAGE> 17
During March 1996, a continuous flow coating/laminating line -- referred
to previously in this "Plan of Operation" as the Demonstration Manufacturing
Facility ("DMF") -- was installed by the Company. This line is being used to
further define the Company's manufacturing technology, to sharpen manufacturing
cost estimates, and then serve as the initial production facility for battery
cells which will be manually assembled into battery packs for Original Equipment
Manufacturer ("OEM") customers. Thereafter, based on design data obtained from
the DMF, the Company must successfully construct a larger pilot manufacturing
line reflecting the cost, quality, reliability, and performance required for the
various target market applications. It is anticipated that the pilot
manufacturing line and associated equipment will cost approximately $7.5 million
to construct in the 1998 time frame. The pilot manufacturing line, according to
the Company's current strategy, will be located within the Company's existing
facility in Plymouth Meeting, Pennsylvania. Construction of the pilot
manufacturing line will require approximately 12 months. Ultimately, the pilot
manufacturing line would be replaced with a larger scale second tier
manufacturing line housed in the Company's existing facility, which could be
expanded if necessary. During the next twelve months after the date of this
report, the Company expects to incur expenses of approximately $2,000,000 for
the purchase of equipment based on the Company's current strategies and subject
to the uncertainties discussed in this report and the availability of capital.
The Company intends to finance the overall estimated $22 million total capital
equipment and operating expense required to bring the Company to the initial
commercial production stage at approximately the end of 1998 (which $22 million
includes the aforementioned estimated $7.5 million cost of the pilot
manufacturing facility and $2 million for equipment purchases) by means of
private and/or public equity or debt financings during the next two years.
The Company does not currently have sufficient cash to achieve all its
development and production objectives, including the 1998 installation of the
pilot manufacturing line and repayment of the Convertible Notes and $2 million
for equipment purchases. As noted above (See "Liquidity, Capital Resources, and
Financial Condition") the Company believes that as of June 30, 1997 it has
sufficient capital resources to meet the Company's needs and satisfy the
Company's obligations through approximately October 1997 (See Note 8 -
Subsequent Event) based on the Company's current strategies and subject to the
uncertainties discussed in this report. In order to raise sufficient capital
for its future growth and repayment of the Convertible Notes discussed above,
the Company will be required to sell additional debt or equity securities. Such
new capital is planned to be sought from several sources, including strategic
partners, although the Company has no commitments for new capital as of the
date of this report. The Company is also seeking to raise additional capital
for its activities beyond 1997, which may result in further dilution to the
Company's existing stockholders. The Company will seek to expand its strategic
alliances which would provide capital from joint development programs, license
fees or an additional equity investment. Discussions are continuing with
companies in Japan, Korea, Taiwan, Europe and the United States. However, there
can be no assurances that additional capital will be available to the Company
on a timely basis or on acceptable terms. In addition, there can be no
assurance that the Company will be able to meet the technological objectives
and/or satisfy the capital requirements that the Company believes are necessary
to convert battery technology into successful commercial products. There can be
no assurance that the Company's products will generate any revenues, will not
encounter technical problems when used, will be successfully marketed, will be
produced at a competitive cost, or will achieve customer acceptance or, if
commercial products are developed and revenues produced, that the Company will
be profitable. The likelihood of the success of the Company must be weighed
against the problems, expenses, difficulties, complications and delays
frequently encountered in developing and marketing a new product.
In June 1997, the Company entered into a letter of intent (the "June
Letter of Intent") contemplating, among other things, a private placement of
between $3.25 million and $5.0 million of senior secured convertible notes. This
transaction is currently in the post-letter of intent negotiation, due
diligence, and legal documentation phase. The terms of the June Letter of
Intent, inclusive of subsequent negotiations to date, include the convertibility
of the notes at $.28 per share; a second phase of funding in the range of up to
$10.0 million priced at a 10% discount to the Company's average trading price at
closing but not less than $.80 nor more than $1.00 per share; and a strategic
technology commercialization partnership for the Company's lithium-ion polymer
rechargeable batteries. There is no assurance that the transactions contemplated
by the June Letter of Intent will be completed on terms or within time frames
acceptable to the Company.
In July and August 1997 the Company obtained bridge financing for an
aggregate $500,000 by issuing convertible notes to five lenders and an aggregate
of 100,000 warrants to these lenders. The terms of this bridge financing, which
are based on the terms of the June Letter of Intent, include interest of 8% on
the bridge notes, maturity of the bridge notes on September 15, 1997, the
convertibility of the bridge notes into the Company's common stock at $.28 per
share, and an exercise price of $.14 per share for the bridge lenders' warrants.
17
<PAGE> 18
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In August 1996 civil actions were commenced against the Company by Richard
Perlman, a former director of the Company, and Christy & Viener, former legal
counsel to the Company, respectively. The two suits were commenced in the United
States District Court for the Southern District of New York. The Company
subsequently filed its own lawsuit against Christy & Viener and Mr. Perlman in
United States District Court for the Eastern District of Pennsylvania. Mr.
Perlman's complaint alleges that he is entitled to monetary damages and specific
performance of registration rights relating to certain warrants of the Company
that have not been registered and to which he claims entitlement. The Company
has declared such warrants and related documents void. Christy & Viener's
complaint alleges non-payment of legal fees incurred in connection with the
rendering of legal services. The Company believes these actions to be meritless
and intends to vigorously defend both actions and to assert all available
defense and counterclaims.
The Company's lawsuit against Christy & Viener, a New York City law firm,
includes claims arising out of Christy & Viener's alleged fraud, legal
malpractice and conflicts of interest flowing from the fraudulent issuance of
the same warrants that form the basis of Perlman's action. The complaint asserts
claims for alleged violations of federal securities laws, the Racketeer
Influenced and Corrupt Organizations Act, and fiduciary duties owed by the law
firm and its partners to the Company. The complaint names as defendants: Christy
& Viener and William Gray, Steven Berger, and Franklin Viele, each a partner in
the firm. The complaint includes similar claims against a fifth defendant, Mr.
Perlman as noted above, a former financial adviser to the Company and former
member of its Board of Directors, flowing from the fraudulent issuance of
warrants to him.
ITEM 2. CHANGES IN SECURITIES
In June, 1997, the Company issued to The Mitsubishi Trust and Banking
Corporation ("MTBC") a warrant to purchase 100,000 shares of the Company's
common stock at an exercise price of $3.60 per share. This warrant expires on
January 18, 2005. The warrant was issued in consideration for consulting
services and the cancellation of a Non-Qualified Stock Option Agreement, dated
January 19, 1995 by and between the Company and MTBC.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
On August 18, 1997, the Company and the Convertible Note Purchasers
agreed, among other things, to extend the maturity date of the Convertible
Notes to November 2, 1998. (See Note 8 - Subsequent Events). Accordingly, as of
the date of this report the Convertible Notes are not in default.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
18
<PAGE> 19
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
None.
b) Form 8-K Reports during the Second Quarter and thereafter
The Company filed one Current Report on Form 8-K during the
quarter ended June 30, 1997 as follows:
1. Form 8-K Report dated April 8, 1997 with respect to Item 9
of such Report.
19
<PAGE> 20
SIGNATURE
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
LITHIUM TECHNOLOGY CORPORATION
By: /s/ Thomas R. Thomsen
------------------------------------
Thomas R. Thomsen
Chairman and Chief Executive Officer
/s/ William D. Walker
------------------------------------
William D. Walker
Treasurer and
Chief Financial Officer
(principal financial officer)
August 19, 1997
20
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 228
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 228
<PP&E> 988
<DEPRECIATION> 447
<TOTAL-ASSETS> 815
<CURRENT-LIABILITIES> 3,091
<BONDS> 0
0
0
<COMMON> 176
<OTHER-SE> (2,452)
<TOTAL-LIABILITY-AND-EQUITY> 815
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,468
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 484
<INCOME-PRETAX> (1,952)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,952)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,952)
<EPS-PRIMARY> (.11)
<EPS-DILUTED> (.11)
</TABLE>
