\<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to ____________
Commission file number 0-23268
AMERICAN TECHNOLOGIES GROUP, INC.
(Name of small business issuer in its charter)
NEVADA 95-4307525
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1017 SOUTH MOUNTAIN AVENUE, MONROVIA, CA. 91016
(Address of principal executive offices) (zip code)
Issuer's telephone number: (626) 357-5000
Check whether the issuer (1) filed all reports 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
----- -----
As of March 13, 1998, the registrant had 22,653,368 shares of Common Stock
outstanding.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
PART I FINANCIAL INFORMATION
ITEM 1 Financial Statements
Consolidated Balance Sheets as of January 31, 1998 and
July 31, 1997 3
Consolidated Statements of Operations for the Six and
Three Month Periods ended January 31, 1998 and 1997 5
Consolidated Statements of Cash Flows for the Six Month Periods
ended January 31, 1998 and 1997 6
Notes to Consolidated Financial Statements 7
ITEM 2 Management's Discussion and Analysis 10
PART II OTHER INFORMATION
ITEM 2 Changes in Securities 11
ITEM 6 Exhibits and Reports on Form 8-K 11
Signatures 12
</TABLE>
FORWARD-LOOKING STATEMENTS
IN ADDITION TO HISTORICAL INFORMATION, THIS QUARTERLY REPORT CONTAINS
FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995, AND THE COMPANY DESIRES TO TAKE ADVANTAGE OF
THE "SAFE HARBOR" PROVISIONS THEREOF. THEREFORE THE COMPANY IS INCLUDING
THIS STATEMENT FOR THE EXPRESS PURPOSE OF SUCH SAFE HARBOR WITH RESPECT TO
ALL SUCH FORWARD-LOOKING STATEMENTS. THE FORWARD-LOOKING STATEMENTS IN THIS
REPORT REFLECT THE COMPANY'S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND
FINANCIAL PERFORMANCE. THESE FORWARD-LOOKING STATEMENTS ARE SUBJECT TO
CERTAIN RISKS AND UNCERTAINTIES, INCLUDING THOSE DISCUSSED HEREIN AND IN
OTHER REPORTS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, THAT COULD
CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM HISTORICAL RESULTS OR THOSE
ANTICIPATED. IN THIS REPORT, THE WORDS "ANTICIPATES", "BELIEVES", "INTENDS",
"FUTURE", AND SIMILAR EXPRESSIONS IDENTIFY FORWARD-LOOKING STATEMENTS
CONTAINED HEREIN, WHICH SPEAK ONLY AS OF THE DATE HEREOF. THE COMPANY
UNDERTAKES NO OBLIGATION TO PUBLICLY REVISE THESE FORWARD-LOOKING STATEMENTS
TO RELFECT EVENTS OR CIRCUMSTANCES THAT MAY ARISE AFTER THE DATE HEREOF.
Page 2
<PAGE>
American Technologies Group, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
January 31, July 31,
ASSETS 1998 1997
- -----------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 1,186,265 $ 1,033,108
Accounts receivable, net of allowance for doubtful accounts
of $97,103 and $134,772 at January 31,1998 and
July 31, 1997, respectively 75,935 445,230
Amounts due from officers/shareholders 222,223 148,375
Inventory 261,709 239,738
------------ -----------
Total current assets 1,746,132 1,866,451
------------ -----------
PROPERTY, EQUIPMENT AND MINERAL PROPERTIES 8,058,485 7,687,852
Less accumulated depreciation (354,062) (290,388)
------------ -----------
Net property, equipment and mineral properties 7,704,423 7,397,464
------------ -----------
OTHER ASSETS
Technology rights, net of accumulated
amortization of $200,000 at January 31, 1998 1,000,000 -
Other assets 509,515 298,518
------------ -----------
Total other assets 1,509,515 298,518
------------ -----------
TOTAL ASSETS $ 10,960,070 $ 9,562,433
------------ -----------
------------ -----------
The accompanying notes are an integral part of these condensed
consolidated balance sheets
3
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
American Technologies Group, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
January 31, July 31,
LIABILITIES AND SHAREHOLDERS' EQUITY 1998 1997
- -----------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
LIABILITIES
Accounts payable $ 525,512 $ 739,982
Related party payables - 71,410
Deferred subscription revenue 149,205 105,043
Current portion of notes payable and capital leases 709,716 605,569
Other accrued liabilities 119,043 254,638
---------- ----------
Total current liabilities 1,503,476 1,776,642
---------- ----------
Deferred tax liability 489,224 489,224
Deferred subscription revenue 47,188 101,260
Convertible debentures 2,725,000 -
Notes payable and capital leases 1,250,444 1,250,444
---------- ----------
4,511,856 1,840,928
---------- ----------
Total liabilities 6,015,332 3,617,570
---------- ----------
STOCKHOLDERS' EQUITY
Series A Preferred - $ .001 par value, 10,000,000 authorized, 378 378
Issued and outstanding 378,061 shares
Series B Preferred - $.001 par value, 500,000 authorized, - -
None issued and outstanding
Series C Preferred - $.001 par value, 2,000 authorized - -
None issued and outstanding
Common Stock: ATG - $.001 par value, 100,000,000 authorized, 21,770 20,722
20,721,789 issued and outstanding at July 31, 1997
21,770,035 issued and outstanding at January 31, 1998
Additional paid in capital 35,783,359 32,904,555
Stock subscriptions 123,569 135,518
Deficit (30,984,338) (27,116,310)
---------- ----------
Total stockholders equity 4,944,738 5,944,863
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 10,960,070 $ 9,562,433
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated balance sheets
4
<PAGE>
<TABLE>
<CAPTION>
American Technologies Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
For the six months and three months ended January 31, 1998 and 1997 (unaudited)
Six Months Ended Three Months Ended
January 31, January 31,
-------------------------- -------------------------
1998 1997 1998 1997
- -----------------------------------------------------------------------------------------------------------------------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
REVENUES
Publishing $ 119,881 $ 164,838 $ 67,078 $ 74,812
Product sales 614,884 125,185 147,048 68,355
Other 123,326 50,008 67,764 24,269
----------- ----------- ---------- -----------
Total revenues 858,091 340,031 281,890 167,436
COSTS AND EXPENSES
Publishing operations 262,962 253,559 107,583 156,583
Product sales and marketing 596,994 720,462 234,810 205,183
Mining operations 122,969 668,082 27,108 341,481
Research and development 646,421 488,745 287,305 200,819
General and administrative 1,367,792 1,354,272 747,149 702,628
Amortization of intangible assets 200,000 260,000 200,000 130,000
----------- ----------- ---------- -----------
Total costs and expenses 3,197,138 3,745,120 1,603,955 1,736,694
INTEREST EXPENSE (INCOME), NET 1,527,381 1,172,979 419,860 1,114,777
----------- ----------- ---------- -----------
LOSS BEFORE PROVISION
FOR INCOME TAXES (3,866,428) (4,578,068) (1,741,925) (2,684,035)
PROVISION FOR INCOME TAXES (1,600) - - -
----------- ----------- ----------- -----------
NET LOSS $(3,868,028) $(4,578,068) $(1,741,925) $(2,684,035)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
BASIC AND FULLY DILUTED
NET LOSS PER SHARE $ (0.18) $ (0.26) $ (0.08) $ (0.15)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 21,100,134 17,473,335 21,317,082 18,273,852
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated balance sheets
5
<PAGE>
<TABLE>
<CAPTION>
American Technologies Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
Six Months Ended
January 31,
----------------------------
1998 1997
- ------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net Loss $ (3,868,028) $(4,578,068)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 282,121 325,684
Loss due to impairment of equipment 10,161 -
Stock issued as consideration for services 4,235 128,460
Imputed interest expense for notes payable - 95,068
Imputed interest on convertible debt and financing cost 1,471,771 1,053,715
Changes in assets and liabilities:
Accounts receivable 369,295 (54,640)
Advances to stockholders/officers - (82,885)
Inventories (21,971) (90,388)
Other assets (210,997) 412
Accounts payable and accrued liabilities (421,475) (115,549)
Deferred subscription revenue (9,910) (22,237)
Net cash used in operating activities (2,394,798) (3,340,428)
------------ -----------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of property and equipment (199,241) (256,502)
------------ -----------
Net cash used in investing activities (199,241) (256,502)
CASH FLOW FROM FINANCING ACTIVITIES:
Payments on notes payable and capital lease (95,853) (50,000)
Amounts due from stockholder/officer (73,848) (30,000)
Net proceeds from issuance of convertible debenture 2,834,880 1,823,500
Net proceeds from issuance of stock and stock subscription 82,017 323,962
------------ -----------
Net cash provided by financing activities 2,747,196 2,067,462
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 153,157 (1,529,468)
CASH AND CASH EQUIVALENTS, Beginning of Period 1,033,108 2,486,313
------------ -----------
CASH AND CASH EQUIVALENTS, End of Period $ 1,186,265 $ 956,845
------------ -----------
------------ -----------
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES:
Stock issued for technology rights $ 1,200,000 $ -
------------ -----------
------------ -----------
Convertible debenture issued for commission $ 225,000 $ -
------------ -----------
------------ -----------
Notes issued for mining properties $ 200,000 $ -
------------ -----------
------------ -----------
Conversion of debentures $ 500,000 $ 1,400,000
------------ -----------
------------ -----------
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated balance sheets
6
<PAGE>
AMERICAN TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Rule 10-01
of Regulation S-X. Accordingly, they do not include all of the information
and notes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered necessary for a
fair presentation have been included. Operating results for the six and
three month periods ended January 31, 1998 are not necessarily indicative
of the results that may be expected for the year ended July 31, 1998. For
further information, please refer to the consolidated financial statements
and notes thereto included in the Company's Annual Report on Form 10-KSB/A
for the year ended July 31, 1997.
2. ORGANIZATION, LINE OF BUSINESS AND SIGNIFICANT BUSINESS RISKS
a. ORGANIZATION AND LINE OF BUSINESS
American Technologies Group, Inc. (the Company or ATG), a Nevada
corporation, is engaged in the development, commercialization and sale of
products and systems using its patented and proprietary technologies. ATG
is also involved in research and development, through research or
acquisition of proprietary energy and environmental systems and services
which offer cost-effective solutions to reduce, and in some cases
eliminate, hazardous chemical by-products or emissions resulting from
industrial production and combustion processes.
b. SIGNIFICANT BUSINESS RISKS
Since its inception, the Company has incurred significant operating losses.
The ability of the Company to successfully carry out its business plan is
dependent upon (1) its ability to obtain sufficient additional capital
and/or (2) generate significant revenues through its existing assets and
operating business.
The Company is seeking to retain an investment banking firm to assist in
the obtaining of additional working capital, if needed. The successful
outcome of future activities cannot be determined at this time and there
are no assurances that if achieved, the Company will have sufficient funds
to further develop its business plans or generate positive operating
results.
c. LOSS PER SHARE
Effective December 15, 1997, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 128, "Earnings per Share".
Common share equivalents were not considered as they would be anti-dilutive
and had no impact on earnings per share for any periods presented.
However, the impact under the treasury method of dilutive stock options
would have been 1,435,793 and 501,314 shares for the six months ended
January 31, 1998 and 1997, respectively.
Page 7
<PAGE>
3. DEBENTURES
In October 1997, the Company issued $3,225,000 of 7.5 percent Convertible
Debentures (Debentures), maturing October 15, 1999. Accrued interest on
these convertible debentures is due on the earlier of conversion or
maturity and both the accrued interest and the principal are payable in
cash or the Company's Common Stock at the Company's discretion. The
conversion price is equal to the lower of the average closing bid price of
the Common Stock for the five trading days prior to the closing or 75
percent of the average closing bid price of the Common Stock for the five
trading days prior to conversion. In December 1997 and January 1998, an
aggregate of $500,000 of Debentures plus accrued interest of $6,771 were
converted into 495,343 shares of Common Stock.
Subsequent to January 31, 1998, the Company and the holder of $2,650,000 of
Debentures entered into an agreement pursuant to which the $2,650,000 of
Debentures was converted into 883,333 shares of Common Stock at a
conversion price of $3.00 per share. This negotiated conversion price was
significantly higher than the conversion price if the holder converted at
the 25% discount to market originally permitted in the Debenture. In
connection with that anticipated discount, in accordance with generally
accepted accounting principles (GAAP), the Company recorded in its
income statement for the three months ended October 31, 1997 the
amortization of imputed interest expense of $1,075,000. This imputed
interest expense is a non-cash charge. As a result of favorable
negotiations regarding the conversion ratio, $2,650,000 of Debentures
were not converted at the 25% discount resulting in the Company not
incurring $883,333 in imputed interest expense. However, pursuant to
GAAP, this imputed interest expense will not be reversed in the
Company's financial statements.
4. TECHNOLOGY RIGHTS
On August 5, 1997, in exchange for 500,000 shares of Common Stock valued at
$1,200,000, the Company acquired all remaining interests and royalty rights
of Robert W. Carroll and BWN Oil Investments Corporation, a Nevada
corporation (together BWN), to the "clean air pac" which is used by the
Company in The Force-Registered Trademark- airborne fuel treatment. Under
the 1992 agreement pursuant to which the Company acquired the right to use
the clean air pac, the Company was required to pay a 1.25% cash royalty
plus up to one million shares of Series A Convertible Preferred Stock to
BWN based upon sales of The Force. The technology rights are amortized
based on the straight line basis over a period of three years.
5. CAPITAL STOCK
a. COMMON STOCK
During the three months ended October 31, 1997, the Company issued 120
shares of Common Stock for services rendered, valued at estimated market
value at the date of issuance of $360 and 30,000 shares of Common Stock
upon exercise of stock options and payment of $63,600.
During the three months ended January 31, 1998, the Company issued 1,250
shares of Common Stock for services rendered, valued at estimated market
value at the date of issuance of $3,875 and 20,000 shares of Common Stock
upon exercise of stock options and payment of $26,600.
In December 1997 and January 1998, an aggregate of $500,000 of Debentures
plus accrued interest of $6,771 were converted into 495,343 shares of
Common Stock.
Subsequent to January 31, 1998, the Company and the holder of $2,650,000 of
Debentures entered into an agreement pursuant to which the $2,650,000 of
Debentures was converted into 883,333 shares of Common Stock at a
conversion price of $3.00 per share.
Page 8
<PAGE>
b. Stock Subscriptions
During the six months ended January 31, 1998, the Company issued 1,533
shares of Common Stock valued at $4,600 which were included within stock
subscriptions as of July 31, 1997. As of January 31, 1998, the Company had
not issued (i) 31,533 shares of Common Stock owed for services rendered
prior to October 31, 1997, valued at $65,049 and (ii) 36,957 shares of
Common Stock sold under private placements during fiscal 1997 for an
aggregate of $65,870 in cash received prior to July 31, 1997. These
amounts have been included within stock subscriptions in the accompanying
consolidated balance sheets.
6. MINING LEASE
In November, 1997, New Concept Mining Inc., a wholly-owned subsidiary of
the Company, entered into a Mining Lease and Option to Purchase Agreement
with Royal Gold, Inc. (Royal Gold) pursuant to which Royal Gold was granted
an option to purchase three patented and 115 unpatented mining claims in
the Manhattan Mining District of Nevada for $3,475,000 prior to November
20, 2001. Subject to the exercise of the option, Royal Gold has an
exclusive mining lease for twenty years and so long thereafter as minerals
are produced in commercial quantities. In exchange, Royal Gold will assume
landowner payments totaling $875,000 over a four year period ($50,000 of
which has been paid to a landowner by Royal Gold and accounted for as other
income) and incur a minimum of $250,000 yearly for exploration and
development costs on the property. Furthermore, ATG will receive a 4% net
royalty on all smelted gold produced by Royal Gold from the property.
Page 9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
Total assets increased by $1,397,637 from $9,562,433 to $10,960,070 at
January 31, 1997 and January 31, 1998, respectively. This increase was the
net result of a decrease in current assets of $120,319 primarily consisting
of a decrease in accounts receivable, an increase in net property and
equipment ($306,959) and an increase in other assets of $1,210,997 primarily
consisting of the newly acquired technology rights ($1,000,000) net of
amortization.
Total liabilities increased by $2,397,762 from $3,617,570 to $6,015,332 at July
31, 1997 and January 31, 1998, respectively. This increase was principally the
result of the issuance of the convertible debenture ($2,725,000) offset by the
reduction of accounts payable ($214,470) and other accrued liabilities
($135,595).
The Company's consolidated revenue increased by $114,454 from $167,436 to
$281,890 for the three month periods ended January 31, 1997 and 1998,
respectively. The Company's consolidated revenue increased by $518,060 from
$340,031 to $858,091 for the six month periods ended January 31, 1997 and 1998,
respectively. These increases in revenues were primarily attributable to an
increase in product sales and the rental income from the newly acquired lease
purchase of New Concept Mining properties of $50,000.
Operating expenses decreased by $132,739 from $1,736,694 to $1,603,955 for the
three month periods ended January 31, 1997 and 1998, respectively. This decrease
was primarily attributable to decreases of expenses for mining operations
($314,373) offset by slightly higher expenses in most other categories
($181,634). Operating expenses decreased by $547,982 from $3,745,120 to
$3,197,138 for the six month periods ended January 31, 1997 and 1998,
respectively. This decrease was primarily attributable to decreases of expenses
for product sales and marketing ($123,468) and mining operations ($545,113)
offset by slightly higher expenses in most other categories ($120,599).
ATG's consolidated loss decreased by $942,110 from $2,684,035 to $1,741,925
for the three month periods ended January 31, 1997 and 1998, respectively.
This decrease in loss was principally the result of increased revenues,
decreased mining expenses and interest expense partially offset by increased
research and development expense. For the six month periods ended January 31,
1997 and 1998, respectively, the Company's consolidated loss decreased by
$710,040 from $4,578,068 to $3,868,028. This decrease in loss was principally
the result of increased revenues and decreased mining and product sales and
marketing expenses partially offset by increases in research and development
and interest expenses.
Loss from New Concept Mining Inc. (New Concept) decreased by $314,373 from
$341,481 to $27,108 and by $545,113 from $668,082 to $122,969 for the three and
six month periods ended January 31, 1997 and 1998, respectively. This decrease
is the result of suspension of mining and milling activities at New Concept's
gold properties in the Manhattan mining district. It is anticipated that the
future expenses related to operation of New Concept will be significantly less
than prior periods due to the suspension of mining activities and the agreement
with Royal Gold (see financial statement note 6, Mining Lease).
The primary source of working capital during the six month period ended January
31, 1998 was the issuance of $3,225,000 of 7.5 percent Convertible Debentures
for net proceeds of $2,834,900. In the comparable period ended January 31,
1997, the primary source of working capital was the sale of $2,100,000 of 8
percent Convertibles for net proceeds of $1,823,500 and net proceeds from the
sale of stock and stock subscriptions of $324,000. The Company anticipates that
it will be able to continue its operations at the current level for the
remainder of the fiscal year without the sale of additional securities, however,
there can be no assurance to this effect.
Page 10
<PAGE>
PART II
OTHER INFORMATION
ITEM 2 CHANGES IN SECURITIES
(a) Not applicable.
(b) Not applicable.
(c) During the three months ended January 31, 1998, an aggregate of twenty
thousand (20,000) shares of Common Stock were issued to two individuals upon
exercise of stock options with total payment of Twenty-Six Thousand, Six Hundred
Dollars ($26,600). In addition, One Thousand, Two Hundred Fifty (1,250) shares
of Common Stock were issued in consideration of services rendered, valued at
Three Thousand, Eight Hundred Seventy-Five Dollars ($3,875). These transactions
are claimed to be exempt from registration under the Securities Act of 1933, as
amended (the "Act"), pursuant to Section 4(2) thereof, as transactions not
involving a public offering, in that the purchasers had full access to all
material information concerning the Company and were acquiring the shares for
investment and not with a view to distribution. There were no underwriting
discounts or commissions paid in connection with the issuance of the Common
Stock nor was any advertising or other form of general solicitation used by the
Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS.
27 Financial Data Schedule
(b) REPORTS ON FORM 8-K.
None
Page 11
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
AMERICAN TECHNOLOGIES GROUP, INC.
By: /s/ Lawrence J. Brady
---------------------
Lawrence J. Brady
Chairman of the Board and
Chief Executive Officer
Date: March 16, 1998
By: /s/ Harold Rapp
---------------
Harold Rapp
Chief Financial Officer
Date: March 16, 1998
Page 12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CONDENSED CONSOLIDATED BALANCE SHEETS AND CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> AUG-01-1997
<PERIOD-END> JAN-31-1998
<CASH> 1,186,265
<SECURITIES> 0
<RECEIVABLES> 75,935
<ALLOWANCES> 0
<INVENTORY> 261,709
<CURRENT-ASSETS> 1,746,132
<PP&E> 8,058,485
<DEPRECIATION> 354,062
<TOTAL-ASSETS> 10,960,070
<CURRENT-LIABILITIES> 1,503,476
<BONDS> 3,975,444
0
378
<COMMON> 21,770
<OTHER-SE> 4,922,590
<TOTAL-LIABILITY-AND-EQUITY> 10,960,070
<SALES> 734,765
<TOTAL-REVENUES> 858,091
<CGS> 0
<TOTAL-COSTS> 3,197,138
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,527,381
<INCOME-PRETAX> (3,866,428)
<INCOME-TAX> 1,600
<INCOME-CONTINUING> (3,868,028)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,868,028)
<EPS-PRIMARY> (0.18)
<EPS-DILUTED> (0.18)
</TABLE>
