<PAGE>
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 Quarter Ended July 31, 1996
or
( ) Transition Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
Commission File Number 33-23460-LA
AQUASEARCH, INC.
(Exact name of Registrant as specified in its charter)
----------
Colorado 33-0034535
(State or other jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
----------
4350 EXECUTIVE DRIVE, SUITE 246
SAN DIEGO, CALIFORNIA 92128
(800) 471-0711
(Address, including zip code and telephone number, including area code, of
Registrant's principal executive offices)
----------
Not Applicable
(Former Name, Former Address and Former Fiscal Year, if Changes Since Last
Report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---- ----
The number of shares outstanding of Registrant's common stock, $0.0001 par value
at July 31, 1996 was 39,410,488 shares.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONTENTS
Page
BALANCE SHEETS F-2
STATEMENTS OF LOSS AND ACCUMULATED DEFICIT F-3
STATEMENTS OF CASH FLOWS F-4
NOTES TO FINANCIAL STATEMENTS F-5
<PAGE>
Aquasearch, Inc.
(a development stage enterprise)
BALANCE SHEETS
<TABLE>
<CAPTION>
JULY 31, OCTOBER 31,
1996 1995
(UNAUDITED) (AUDITED)
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 46,464 $ 27,208
Stock subscriptions receivable -- 35,000
Accounts receivable -- --
Prepaid expenses 10,013 9,177
Other current assets 4,348 2,535
----------- ------------
Total current assets 60,825 73,920
PLANT AND EQUIPMENT - AT COST
Plant 569,235 408,219
Other equipment 54,055 7,740
Less accumulated depreciation (21,343) (320)
Net plant equipment 601,947 415,639
OTHER ASSETS
Organization costs (net) -- --
----------- ------------
Total assets $ 662,772 $ 489,559
----------- ------------
----------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 239,862 $ 233,181
Accounts payable - related parties -- --
Deposits held -- --
Accrued expenses 46,755 --
Deposits payable -- --
----------- ------------
Total current liabilities 286,617 233,181
STOCKHOLDERS' EQUITY
Common Stock, $0.0001 par value, 50,000,000
shares authorized 5,063 4,379
Additional paid-in capital 2,617,202 1,704,785
Common stock subscribed -- --
Accumulated deficit (2,246,110) (1,452,786)
----------- ------------
Total stockholders' equity (deficit) 376,155 256,378
Total liabilities and stockholders' equity 662,772 $ 489,559
----------- ------------
----------- ------------
</TABLE>
F-2
<PAGE>
Aquasearch, Inc.
(a development stage enterprise)
STATEMENTS OF LOSS AND ACCUMULATED DEFICIT
<TABLE>
<CAPTION>
For the For the
For the three For the three For the
period From months nine months months nine months
inception to ended ended ended ended
July 31, 1996 July 31, 1996 July 31, 1996 July 31, 1995 July 31, 1995
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
------------- ------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
OPERATIONS
Revenues $ 10,000 $ 16 $ 10,000 $ -- $ --
Cost of sales 28,144 28,144 28,144 -- --
Research and development costs 939,048 184,973 494,883 17,057 17,057
------------ ------------ ------------ ------------ ------------
Total cost of sales and
research costs 967,192 213,117 523,027 17,057 17,057
------------ ------------ ------------ ------------ ------------
Gross profit (loss) (957,192) (213,101) (513,017) (17,057) (17,057)
General and administrative expenses 1,077,063 122,407 282,568 56,035 99,764
------------ ------------ ------------ ------------ ------------
Earnings (loss) from operations (2,034,255) (335,508) (795,595) (73,092) (116,821)
OTHER INCOME (EXPENSE)
Interest income 2,484 673 2,484 -- --
Interest expense (12,244) -- -- -- --
Other -- -- -- -- --
Investment in joint venture (147,096) -- -- -- --
------------ ------------ ------------ ------------ ------------
Total other income and (expense) (156,856) 673 2,484 -- --
------------ ------------ ------------ ------------ ------------
Earnings (loss) before income
taxes and extraordinary item (2,191,111) (334,835) (793,111) (73,092) (116,821)
Extraordinary item - loss on write
down of assets to liquidation basis (14,502) -- -- -- --
------------ ------------ ------------ ------------ ------------
Earnings (loss) before income
taxes (2,205,613) (334,835) (793,111) (73,092) (116,821)
Federal and state income taxes (6,229) (213) (213) -- --
------------ ------------ ------------ ------------ ------------
Net income (loss) (2,211,842) (335,048) (793,324) (73,092) (116,821)
ACCUMULATED DEFICIT
Balance, beginning of period (34,268) (1,911,062) (1,452,786) (1,207,702) (1,163,973)
------------ ------------ ------------ ------------ ------------
Balance, end of period $(2,246,110) $(2,246,110) $(2,246,110) $(1,280,794) $(1,280,794)
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Loss per share $ (0.10) $ (0.01) $ (0.02) Nil Nil
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Weighted average shares
outstanding 22,000,000 38,000,000 35,000,000 23,463,313 23,463,313
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
F-3
</TABLE>
<PAGE>
Aquasearch, Inc.
(a development stage enterprise)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the period For the nine For the nine
From inception months ended months ended
to July 31, 1996 July 31, 1996 July 31, 1995
(unaudited) (unaudited) (unaudited)
---------------- ------------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $ (2,211,842) $ (793,324) $ (116,821)
Adjustments to reconcile net loss to net cash
cash provided by operating activities:
Amortization 3,527 -- --
Depreciation 27,050 21,023 --
Expenses paid with stock and additional paid
in capital 183,365 -- --
Loss on write down of assets to liquidation basis 5,392 -- --
Changes in:
Accounts receivable -- --
Stock subscriptions receivable 35,000 35,000 --
Prepaid expenses (10,013) (836) --
Other current assets (4,348) (1,813) 1,207
Accounts payable and accrued expenses 239,174 53,436 8,072
------------ ------------ ------------
Cash used by operating activities (1,732,695) (686,514) (107,542)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (569,128) (207,331) (69,604)
------------ ------------ ------------
Cash used by investing activities (569,128) (207,331) (69,604)
CASH FLOWS FORM FINANCING ACTIVITIES
Issuance of common stock 2,438,641 954,048 281,000
Increase in notes payable -- -- --
Offering costs (90,409) (40,947) (4,421)
------------ ------------ ------------
Cash provided by financing activities 2,348,232 913,101 276,579
------------ ------------ ------------
Net increase in cash 46,409 19,256 99,433
Cash - beginning of period 55 27,208 1,213
------------ ------------ ------------
Cash - end of period $ 46,464 $ 46,464 $ 100,646
------------ ------------ ------------
------------ ------------ ------------
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest $ 4,400 $ -- $ 500
------------ ------------ ------------
------------ ------------ ------------
Income taxes $ 12,457 $ 213 $ 800
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
F-4
<PAGE>
Aquasearch, Inc.
(A development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
July 31, 1996 (Unaudited)
1. RELATED PARTY TRANSACTIONS
The Company uses office space provided by an officer of the Company.
Monthly rent expense for this space is $380.
2. COMMON STOCK AND STOCK PURCHASE WARRANTS
As of July 31, 1996, there were 3,348,000 Class B warrants issued and
outstanding. No Class B warrants were exercised during the three months
ended July 31, 1996. The Class B warrants are exercisable at $1 per
share. The exercise period for the Class B warrants will expire on
September 15, 1996 unless extended by the Board of Directors.
An analysis of the changes in stockholders' equity is as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
TOTAL
SHARES OF ADDITIONAL STOCK-
COMMON COMMON PAID-IN ACCUMULATED COMMON STOCK HOLDERS'
DESCRIPTION STOCK STOCK CAPITAL DEFICIT SUBSCRIBED EQUITY
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, April 30, 1996 39,410,488 $5,063 $2,639,202 $(1,911,062) -- $ 733,203
(unaudited)
Offering costs (22,000) (22,000)
Loss for the three
months ended
July 31, 1996 -- -- -- (335,048) -- (335,048)
---------- ------ ---------- ----------- ------- ---------
- ---------------------------------------------------------------------------------------------------------------
Balance, July 31, 1996 39,410,488 $5,063 $2,617,202 $(2,246,110) -- $ 376,155
---------- ------ ---------- ----------- ------- ---------
---------- ------ ---------- ----------- ------- ---------
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
3. MANAGEMENT'S REPRESENTATIONS OF INTERIM FINANCIAL INFORMATION
These financial statements reflect all adjustments which are, in the
opinion of management, necessary to a fair statement of the results of
operations for the interim period presented. These adjustments are of a
normal and recurring nature.
4. RECLASSIFICATIONS
During the quarter the Company reevaluated the progress of its research
and development program and determined that further research and
development was needed before it could emerge from development stage
activities. Accordingly, various expenses have been reclassified to
reflect this determination.
F-5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THIS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS CONCERNING THE COMPANY'S
BUSINESS AND OPERATIONS, INCLUDING STATEMENTS ABOUT FUTURE PRODUCTION OF ITS
NATURAL ASTAXANTHIN AND OTHER PIGMENTS FROM MICROALGAE. SUCH STATEMENTS INVOLVE
RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER DUE TO A
VARIETY OF FACTORS SET FORTH HEREIN AND FROM TIME TO TIME IN THE COMPANY'S
FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION.
PLAN OF OPERATION:
General
Aquasearch has been engaged, since its inception in 1989, in the development of
proprietary, cost-effective, photobioreactor technology for the industrial
cultivation of microalgae, and in research and development of products derived
from microalgae. In 1994, the Company initiated discussions with Cultor Ltd, a
Helsinki-based foods conglomerate that is the second largest producer of salmon
and trout feed in the world, regarding the purchase of microalgae rich in
astaxanthin - the primary pigment used in salmon and trout feed. In early 1995,
Cultor completed a series of feeding trials with farmed salmon, using the
Company's microalgae product. In July 1995, the Company entered into an
agreement with Svenska Foder AB, a subsidiary of Cultor, pursuant to which
Svenska Foder agreed to act as exclusive distributor of the Company's natural
astaxanthin product for animal feed applications in Sweden, Norway and Finland
for poultry, pigs, cattle and horses. The Svenska Foder agreement has a term of
three years, and target production of five kilograms of natural astaxanthin per
month. In October 1995, the Company completed construction of a one-acre
research and development/production facility. In the preceding quarter, ending
April 30, 1996, the Company realized its first revenue from the sale of its
natural astaxanthin to Svenska Foder.
In the current quarter, ending July 31, 1996, the Company experienced two
significant developments.
First, on May 14, 1996 the Company entered into a three-year Distribution and
Development Agreement with Cultor, pursuant to which the Company will act as
the exclusive worldwide supplier of natural astaxanthin derived from
microalgae to Cultor in the field of animal feed and animal nutrition, and
Cultor will act, on an exclusive worldwide basis, to market, sell, and
distribute Aquasearch's natural astaxanthin for the same purpose. Production
targets under the Cultor Distribution and Development Agreement are 40
kilograms per month at the end of the first year and 120 kilograms per month
at the end of the second year. The world price for astaxanthin is presently
approximately $2,500 per kilogram. In order to meet the agreed production
targets, the Company must significantly expand and improve its production
facilities within the next eighteen months, which will involve certain risks
and uncertainties.
2
<PAGE>
Under the Cultor Distribution and Development Agreement, Cultor and
Aquasearch may, at Cultor's option, mutually develop a new joint venture
company for the sole purpose of producing and selling astaxanthin derived
from microalgae in the field of animal feed and animal nutrition. Pursuant
to this arrangement, Aquasearch would contribute a ten-acre natural
astaxanthin production facility currently scheduled to be constructed in 1997
in return for its 50% stake in the new company and Cultor would contribute
cash equivalent to the replacement value of the ten-acre facility in return
for its 50% stake. Under the Agreement, Cultor also has the option to
increase its stake in the new company by purchasing from Aquasearch a further
25% of the new company (thus increasing its stake to 75%) for cash based
either on a pro-rata share of the assets contributed by Aquasearch or on a
formula that may have greater value to Aquasearch, whichever is greatest.
Aquasearch will license certain technology to the new company to make, use
and sell natural astaxanthin derived from microalgae for use in the field of
animal feed and animal nutrition; Aquasearch will retain the right to make,
use and sell astaxanthin derived from microalgae for all other applications.
On July 30, 1996, the Company was awarded U.S. patent Number 5,541,056 for a
"Method of control of microorganism growth process," which claims in particular
certain processes that operate in its proprietary, closed-system photobioreactor
system, the Aquasearch Growth Module. The Company's U.S. filing was made under
provisions of the Patent Cooperation Treaty, and the Company intends to pursue
international patents accordingly.
The Company believes that strategic alliances, patent applications, and
licenses for the use of its patents will continue to be important parts of
its business strategy. There can be no assurance that the Company will be
able to maintain existing corporate partner relationships, enter into future
relationships, or develop additional proprietary technology, or that any such
relationships or patent applications will be successful.
Aquasearch has incurred net losses in each year since its inception. At July
31, 1996, the Company's accumulated deficit was $2,211,842. Aquasearch
expects its annual losses to continue, and possibly increase for at least the
next two years as it expands and develops the physical plant facilities
required to increase its production capacity for microalgae rich in
astaxanthin, and initiates research and development on additional products
from microalgae. In addition, the Company anticipates quarter-to-quarter and
year-to-year fluctuations in revenues, expenses and losses, some of which
could be significant. The timing and extent of such fluctuations will
depend, in part, on the timing and receipt of astaxanthin-related revenues,
the costs of developing additional products from microalgae, and the time
required for the introduction of any new products to certain markets.
The Company believes that it has sufficient time to construct new production
facilities that will allow it to meet its target production of astaxanthin under
the Cultor Distribution and Development Agreement. As a result of a nationwide
bidding process, Aquasearch has retained the engineering firm, Harris Group, of
Seattle, Washington to design and engineer its expansion facilities. At July
31, 1996, Harris Group had completed a majority of its design work for the
Company's intermediate expansion from one acre to five acres. Construction of
expanded production facilities is anticipated to begin in late calendar 1996
and is expected to take approximately four to six months.
3
<PAGE>
The construction of these expanded facilities is dependent upon a broad variety
of contractors and subcontractors, availability of supplies, equipment, and the
availability of requisite capital. While the Company has plans to
address all these requirements, there can be no assurance that the Company will
be able to complete its expansion in a timely manner.
Aquasearch intends, during the coming year, to begin to focus its research
and development activities not only in the area of working jointly with
Cultor to further develop its natural astaxanthin product, but also to
initiate the development of new products from microalgae, particularly
natural pigments. The Company believes it has identified several markets in
which additional pigments from microalgae might be sold, and, based on
industry sources, the Company estimates that the value of these markets could
be significantly larger than the current market for astaxanthin. To finance
new product development, the Company intends not only to rely on whatever
internal resources may be at its disposal, but also to compete for state and
federal grants under such programs for which it may be eligible. Sources of
financing for product development are subject to variety of factors over
which the Company has no control, and no assurances can be made that such
funds will become available or that their application will necessarily
result in new products with accessible markets.
Following the execution of the Svenska Foder Supply Agreement, the Cultor
Distribution and Development Agreement, and the issuance of its recent U.S.
patent, the Company believes it has commenced the transition toward becoming a
full-scale commercial producer of microalgae products. These changes in its
business have placed and will continue to place significant demands on the
Company's management, working capital and financial and management control
systems.
RESULTS OF OPERATIONS - COMPARISON OF QUARTER AND 9 MONTHS ENDED JULY 31,
1995 AND 1996
Revenues for the nine-month period ended July 31, 1996 were $10,000, up over
no revenues for the 9 months ended for the same period in 1995. This
increase was due to the Company's first shipment of product under its Supply
Agreement to Svenska Foder. No revenues were generated during the quarter,
due to certain difficulties experienced in the Company's production process
that limited production to a rate insufficient to meet the full supply
targets for Svenska Foder. Svenska Foder requested the Company to resume
shipments after full production levels were attained. Furthermore, Cultor and
Aquasearch agreed to commit near-term production substantially to the purpose
of conducting product development trials; initial trials indicated the
Company's product to be equivalent in efficacy to competing sources of
astaxanthin, but the goal of these new trials is to render the Company's
astaxanthin product superior to competing products. The Aquasearch
Scientific Advisory Board convened in late May and again in late July to
review the Company's production procedures and to recommend actions that
would improve productivity. The Scientific Advisory Board, in conjunction
with the Company's engineers, have recommended certain improvements in
hardware and procedures that are designed to effect such increases in
production; it is the Company's intention to implement such improvements
within the next 2-4 months.
4
<PAGE>
The Company believes that revenues from its production of astaxanthin derived
from microalgae will increase slowly during the next year, and will attain in a
timely manner the production targets set under the Cultor Distribution and
Development Agreement. At the same time, Aquasearch believes that substantial
increases in productivity are not likely to occur within the first six months of
this period due to anticipated interruptions caused by construction of its
expansion facility and the retrofitting and upgrading of certain parts of its
current production system.
Consistent with the Company's efforts to implement improvements in its
production system, research and development costs increased by $177,826, or more
than ten-fold, during the nine month period ending July 31, 1996 compared to the
same period in 1995, with most of the increase ($167,916) occurring during the
third quarter.
General and administrative expenses increased $66,372, or 21.8%, in the third
quarter of 1996 and $1 82,799, or 28.3%, during the nine months ended July 31,
1996 over the third quarter and the nine months ended July 31, 1995,
respectively. These increases reflect the fact that, during a large part of
comparable periods in 1995 the Company had not yet even begun to construct its
current research and development/production facility, and had as yet hired no
full time administrative personnel. Additional parts of the increase in the
third quarter of 1996 reflect the hiring of additional administrative personnel,
including a Chief Financial Officer and an investor relations specialist, the
formation and convening of the Company's Scientific Advisory Board, increases in
the costs of maintaining patent applications, the retention of the engineering
firm of Harris Group to design and engineer the Company's expansion plant, and
other corporate overhead costs. Other income of $673 during the quarter, and
$2,484 during the nine months ended July 31, 1996 was up over zero, based on
interest income, for comparable periods in 1995.
Net loss for the third quarter was $335,048, or $0.01 per share, compared to a
net loss of $73,092, or $0.004 per share, for the same period in 1995. This
increased loss resulted primarily from research and development and general and
administrative costs incurred as a result of the Company's expanded operations.
A net loss of $793,111, or $0.02 per share for the nine-month period ended
July 31, 1996, was an increase from a net loss of $116,821, or $0.006 per
share, for the same period in 1995. This increase reflects the same increase in
operating activities between the two years.
LIQUIDITY AND CAPITAL RESOURCES
Cash increased by $19,256 in the first nine months of 1996 resulting in a cash
balance of $46,464 at July 31, 1996. Purchase of fixed assets of $111,017 were
made in the third quarter, primarily to upgrade certain aspects of the Company's
equipment and production systems, bringing the Company's plant and equipment
assets to $601,947, and total assets to $662,772, which represents an increase
of $173,213, or 35.4%, during the nine months ended July 31, 1996.
Aquasearch expects additional capital expenditures as a result of its plans to
expand and upgrade its present production facility from a one-acre to a five-
acre production facility. Furthermore, the Company expects additional
expenditures as a result of its plans to undertake research and development of
new pigment products from microalgae. Aquasearch anticipates that the largest
5
<PAGE>
portion of its future capital needs will be dedicated to expanding production
capability in order to meet its contractual obligations under the Cultor
Distribution and Development Agreement. In addition, the Company anticipates
a requirement for additional capital, the exact amount of which will depend
upon a variety of factors that may include: the further optimization of
production processes; the time and costs related to construction of its
expanded production facilities, the availability of materials, supplies,
equipment and contractors with appropriate expertise, the costs involved in
research and development of additional products; the costs required for
filing, protecting and enforcing patents and other intellectual property
rights; the costs of commercializing its products; the time and costs
associated with the pursuit of state and federal research and development
grants; and the extent to which the Company is successful in forming other
strategic alliances, joint ventures or partnerships for the sales and
distribution of its products. The Company anticipates additional
modifications to its production hardware and processes both before and during
any expansion; the extent of such modifications cannot be predicted.
The Company believes that its existing capital resources, and an additional
infusion of $200,000 from Cultor to be transferred to Aquasearch upon
shareholder approval of the Cultor Distribution and Development Agreement,
anticipated in the fourth quarter of 1996, are sufficient for continued
operations through the next quarter. Aquasearch plans to secure the capital
necessary to expand and continue its operations throughout fiscal 1997 from
the following potential sources: government contracts and grants, product
sales, license agreements and equity or debt financing. Although the Company
believes that it will be able to raise the necessary capital from these
sources over the next six months, there can be no assurance that such funds
will be available to the Company on acceptable terms, if at all.
6
<PAGE>
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS.
None.
Item 2. CHANGES IN SECURITIES.
None.
Item 3. DEFAULTS UPON 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 OF FORM 8-K.
a) EXHIBITS. None.
b) REPORTS ON FORM 8-K. The Company filed a Report on Form 8-K during
the quarter ended July 31, 1996 that described the Cultor Distribution and
Development Agreement and the Cultor Stock Subscription Agreement.
7
<PAGE>
SIGNATURE
Pursuant to 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.
AQUASEARCH, INC.
Dated: SEPTEMBER 19, 1996 By: /S/ MARK E. HUNTLEY, PH.D.
----------------------- ------------------------------------
Mark E. Huntley, Ph.D.
President and Chief Executive Officer
8
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEETS AND STATEMENTS OF OPERATIONS OF THE COMPANY'S 10-QSB FOR THE NINE MONTHS
ENDED JULY 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> JUL-31-1996
<CASH> 46,464
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 60,825
<PP&E> 623,290
<DEPRECIATION> 21,343
<TOTAL-ASSETS> 662,772
<CURRENT-LIABILITIES> 286,617
<BONDS> 0
0
0
<COMMON> 5,063
<OTHER-SE> 371,092
<TOTAL-LIABILITY-AND-EQUITY> 662,772
<SALES> 10,000
<TOTAL-REVENUES> 10,000
<CGS> 28,144
<TOTAL-COSTS> 805,596
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 793,111
<INCOME-TAX> 213
<INCOME-CONTINUING> (793,324)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (793,324)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> 0
</TABLE>
