<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 October 31, 1999
[ ] 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 December 13, 1999, the registrant had 35,559,102 shares of Common
Stock outstanding.
Page 1
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
PART I FINANCIAL INFORMATION
ITEM 1 Consolidated Financial Statements
Consolidated Balance Sheets
as of October 31, 1999 and July 31, 1999 3
Consolidated Statements of Operations
for the Three Months ended October 31, 1999 and 1998 5
Consolidated Statements of Cash Flows
for the Three Months ended October 31, 1999 and 1998 6
Notes to the Consolidated Financial Statements 7
ITEM 2 Management's Discussion and Analysis 10
PART II OTHER INFORMATION
ITEM 2 Changes in Securities 12
ITEM 6 Exhibits and Reports on Form 8-K 12
Signatures 13
</TABLE>
FORWARD-LOOKING STATEMENTS
IN ADDITION TO HISTORICAL INFORMATION, THIS QUARTERLY REPORT CONTAINS
FORWARD-LOOKING STATEMENTS WHICH WE BELIEVE ARE 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 REFLECT EVENTS OR CIRCUMSTANCES THAT MAY
ARISE AFTER THE DATE HEREOF.
Page 2
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AMERICAN TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
OCTOBER 31, 1999 AND JULY 31, 1999
<TABLE>
<CAPTION>
ASSETS October 31, July 31,
1999 1999
--------------------- ---------------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 352,511 $ 710,175
Accounts receivable, net of allowance for doubtful
accounts of $10,000 at October 31, 1999 and
July 31, 1999, respectively 52,484 47,130
Inventories, net 239,716 180,538
Other current assets 21,050 24,800
--------------------- ---------------------
Total current assets 665,761 962,643
--------------------- ---------------------
Property and equipment, net of accumulated
depreciation and amortization of $616,319 and $577,418
at October 31, 1999 and July 31, 1999, respectively 1,222,199 1,261,100
Notes receivable, net of imputed interest
of $795,950 and $824,000 at October 31, 1999
and July 31, 1999, respectively 1,704,049 1,676,000
Technology rights, net of accumulated
amortization of $900,000 and $800,000
at October 31, 1999 and July 31, 1999, respectively 300,000 400,000
Intangible assets, net of accumulated
amortization of $366,306 and $349,788
at October 31, 1999 and July 31, 1999, respectively 200,698 217,215
Other assets 173,343 176,609
Assets held for sale 103,150 107,885
--------------------- ---------------------
$ 4,369,200 $ 4,801,452
===================== =====================
</TABLE>
The accompanying notes are an integral part of these consolidated
balance sheets.
3
<PAGE>
AMERICAN TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS-CONTINUED
OCTOBER 31, 1999 AND JULY 31, 1999
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' DEFICIT October 31, July 31,
1999 1999
------------------ ------------------
(Unaudited)
<S> <C> <C>
Current liabilities:
Accounts payable $ 588,051 $ 602,728
Accrued interest payable 294,950 227,801
Accrued payroll and related liabilities 126,161 190,171
Accrued professional fees 176,136 162,382
Other accrued liabilities 168,016 162,387
Amounts due to related parties 488,459 556,358
Current portion of notes payable 1,670,087 1,675,894
Current portion of convertible debentures 75,000 75,000
------------------ ------------------
Total current liabilities 3,586,860 3,652,721
Convertible debentures, net of current portion 3,150,000 2,750,000
------------------ ------------------
Total liabilities 6,736,860 6,402,721
------------------ ------------------
Commitments and contingencies
Stockholders' deficit:
Series A convertible preferred stock, $.001 par value; 10,000,000 shares
authorized; 378,061 shares
Issued and outstanding 378 378
Series B convertible preferred stock, $.001 par value;
500,000 shares authorized; liquidation value at $8.00
per share; none issued and outstanding - -
Series C convertible preferred stock, $.001 par value;
2,000 shares authorized; liquidation value at $1,000
per share; none issued and outstanding - -
Common stock, $.001 par value; 100,000,000 shares
authorized; 30,585,123 and 29,373,523 shares issued
and outstanding at October 31, 1999 and July 31, 1999,
respectively 30,585 29,374
Additional paid in capital 46,845,905 46,122,777
Stock subscriptions 64,945 196,820
Prepaid consulting expenses (157,433) (590,233)
Accumulated deficit (49,152,040) (47,360,385)
------------------ ------------------
Total stockholders' deficit (2,367,660) (1,601,269)
------------------ ------------------
$ 4,369,200 $ 4,801,452
================== ==================
</TABLE>
The accompanying notes are an integral part of these consolidated
balance sheets.
4
<PAGE>
AMERICAN TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED OCTOBER 31, 1999 AND 1998
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended October 31,
1999 1998
-------------------- -------------------
<S> <C> <C>
Revenues:
Technology products $ 63,954 $ 40,932
Other 20,305 124,823
-------------------- -------------------
Total operating revenues 84,259 165,755
-------------------- -------------------
Operating expenses:
General and administrative 1,014,756 801,239
Marketing and product development 95,858 118,674
Research and development 109,263 169,218
Mining operations 23,340 27,550
Amortization of technology rights 100,000 100,000
-------------------- -------------------
Total operating expenses 1,343,217 1,216,681
-------------------- -------------------
Other (expense) income:
Interest expense, net (532,697) (173,956)
Loss on investment in a joint venture - (39,341)
-------------------- -------------------
Total other (expenses) income (532,697) (213,297)
-------------------- -------------------
Net loss from continuing operations before
discontinued operations (1,791,655) (1,264,223)
Discontinued operations - (76,745)
-------------------- -------------------
Net loss attributable to common stockholders $ (1,791,655) $ (1,340,968)
==================== ===================
Basic and fully diluted net loss per common share:
Continuing operations $ (0.06) $ (0.05)
Discontinued operations - (0.01)
-------------------- -------------------
Net Loss $ (0.06) $ (0.06)
==================== ===================
Weighted average number of
common shares outstanding 29,706,406 23,381,083
==================== ===================
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
5
<PAGE>
AMERICAN TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED OCTOBER 31, 1999 AND 1998
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended October 31,
1999 1998
----------------- -----------------
<S> <C> <C>
Cash flows from operating activities:
Net Loss $ (1,791,655) $ (1,340,968)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 143,636 139,312
Stock issued and subscribed as consideration for services 69,750 -
Amortization of prepaid consulting 432,800 214,062
Imputed interest for notes payable and capital leases - 18,427
Imputed interest income on notes receivable (28,049) -
Imputed interest expense on convertible debentures 467,864 110,667
Loss on investment in joint venture - 39,341
Changes in operating assets and liabilities:
Accounts receivable (5,354) 29,446
Inventories (59,178) 14,648
Other current assets 23,533 3,087
Accounts payable and accrued liabilities (37,305) 222,722
Amounts due to related parties (2,899) 33,385
----------------- -----------------
Net cash used in operating activities (786,857) (515,871)
----------------- -----------------
Cash flows from investing activities:
Other - (3,536)
----------------- -----------------
Net cash used in investing activities - (3,536)
----------------- -----------------
Cash flows from financing activities:
Advances from/to officers/shareholders, net (65,000) 139,500
Proceeds from issuance of convertible debentures 500,000 156,000
Payments on notes payable (5,807) (3,849)
Payments on capital lease obligation - (50,000)
Deposit on sale of discontinued operations - 200,000
----------------- -----------------
Net cash provided by financing activities 429,193 441,651
----------------- -----------------
Net cash flows from discontinued operations - 37,917
Net change in cash and cash equivalents (357,664) (39,839)
Cash and cash equivalents, beginning of period 710,175 60,563
----------------- -----------------
Cash and cash equivalents, end of period $ 352,511 $ 20,724
================= =================
Supplemental disclosure of non-cash investing and financing activities:
Conversion of debentures $ 100,000 $ -
================= =================
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
6
<PAGE>
AMERICAN TECHNOLOGIES GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited 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 three month period ended October 31, 1999 are not necessarily
indicative of the results that may be expected for the year ended July 31,
2000. For further information, please refer to the consolidated financial
statements and notes thereto included in the Company's Annual Report on
Form 10-KSB for the year ended July 31, 1999.
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. The
resulting products are intended to offer cost-effective solutions to
reduce, and in some cases eliminate, hazardous chemical by-products or
emissions resulting from industrial and combustion processes. The
Company's proprietary catalyst technology may improve many commercial
products including detergents and cosmetics.
b. SIGNIFICANT BUSINESS RISKS
Since its inception, the Company has incurred significant operating
losses. The ability of the Company to operate as a going concern is
dependent upon its ability to (1) obtain sufficient additional capital and
(2) generate significant revenues through its existing assets and
operating business. The Company plans to raise additional working capital
through private offerings of debt and equity. 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
execute its business plans or generate positive operating results. These
issues, among others, raise substantial doubt about the ability of the
Company to continue as a going concern. The financial statements do not
include any adjustments relating to the recoverability and classification
of asset carrying amounts or the amount and classification of liabilities
that might result should the Company be unable to continue as a going
concern.
c. NET LOSS PER SHARE
Net loss per common share is based upon the weighted average number of
common shares outstanding during the fiscal year under 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 incremental shares of 20,000 and 31,111 for
the three months ended October 31, 1999 and 1998, respectively.
Page 7
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d. RECLASSIFICATIONS
Certain amounts in the October 31, 1998 consolidated financial statements
have been reclassified to conform to current year presentation.
3. DEBENTURES
In September 1999, the Company issued a $500,000 secured convertible
debenture bearing interest at prime rate plus 0.5% per year, (8.75% as of
the date of issuance), maturing December 31, 2003. The conversion price
is fixed at $0.25 per share and the conversion feature vests January 1,
2000. As part of the agreement, the Company may at its discretion redeem
the debentures at 135% of the principal amount owed plus accrued interest.
This convertible debentures are secured by the catalyst technology of the
Company. The debenture agreement also contains anti-dilution provisions
and certain non-financial covenants. In connection with the discount
conversion feature, the Company has recorded imputed interest expense of
$407,714 included in the interest expense in the accompanying Statements of
Operations.
In October 1999, a debenture holder converted $100,000 of a 6% convertible
debenture into 529,100 shares of common stock of the Company. The
conversion price was based on the average of the market price for the five
days prior to the conversion, discounted 25%, as stipulated in the
debenture agreements.
4. TECHNOLOGY RIGHTS
In fiscal year 1998, 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, to the Clean Air Pac which is used by the Company in The
Force-Registered Trademark- airborne fuel treatment. The technology
rights are amortized based on the straight-line basis over a period of
three years. The Consolidated Statements of Operations include $100,000
of amortization of technology rights for the three month period ended
October 31, 1999 and 1998, respectively.
5. CAPITAL STOCK
a. COMMON STOCK
During October 1999, the Company entered into a consulting agreement for
services. Under the terms of the agreement, the Company issued 100,000
shares of ATG's common stock valued at $31,000 based on the common stock
price on the date of the agreement.
During fiscal 1999, the Company entered into several consulting agreements
for services. Under the terms of the agreements, the Company issued
shares of common stock for services, the value of which was recorded to
prepaid consulting expenses and is being amortized on a straight-line
basis over the terms of the agreements. General and Administrative
expenses include prepaid consulting amortization expense of $432,800 and
$214,062 for the three months ended October 31, 1999 and 1998,
respectively, in the accompanying Consolidated Statements of Operations.
As of October 31, 1999, the remaining unamortized cost of $157,433 is
included in prepaid consulting expenses in stockholders' equity section in
the accompanying Consolidated Balance Sheets.
b. STOCK SUBSCRIPTIONS
During the three months ended October 31, 1999, the Company issued 582,500
shares of common stock valued at $170,625 which was included within stock
subscriptions as of July 31, 1999 and recorded subscription for services
for 65,000 shares valued at $38,750 based on the common stock price on the
date of the agreement. As of October
Page 8
<PAGE>
31, 1999, the Company had not issued (i) 6,000 shares of Common Stock owed
for services rendered prior to July 31, 1999, valued at $11,820 and 65,000
shares of common stock owed for services rendered through October 31,
1999, valued at $38,750, and (ii) 57,500 shares of common stock sold under
private placement for an aggregate of $14,375 cash received prior to July
31, 1999. These amounts have been included within stock subscriptions in
the accompanying Consolidated Balance Sheets.
6. ASSETS HELD FOR SALE
Included in assets held for sale at October 31, 1999 in the accompanying
consolidated Balance Sheets is the mining property referred to as the
Tempiute property with a remaining book value of $70,000, net of
impairment of $324,847 recognized during fiscal year 1999 (based on the
estimated realizable value as indicated in non-binding offer to buy this
property), and one vehicle with a book value of $33,150.
During fiscal year 1999, the Company sold its interest in the Manhattan
mill and the remaining gold mines to Western Mine Development for a
non-interest-bearing note of $2,500,000 payable in installments from
January 2002 to January 2008. The accompanying Consolidated Balance
Sheets include a note receivable of $1,704,049 net of discount of
$795,951 as of October 31, 1999 and $1,676,000 net of discount of
$824,000 as of July 31, 1999. The amortization of the note discount of
$28,049 is included with interest expense in the accompanying Statements
of Operations.
7. RELATED PARTY TRANSACTIONS
During three months ended October 31, 1999, the Company made payment of
$65,000 due to an officer on a short term borrowing.
8. SUBSEQUENT EVENTS
Subsequent to the end of the quarter, certain debenture holders elected to
convert an additional $775,000 of a 6% convertible debenture into
5,104,516 shares of common stock of the Company. Conversion prices were
based on the average of the market price for the five days prior to the
conversion, discounted 25%, as stipulated in the debenture agreements.
Page 9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
Management continued its efforts to refocus the Company's activities on its
core technologies, along with new product development and commercialization.
Management anticipates these efforts will result in significant revenue
commencing in the second or third quarters of fiscal 2000, although there can
be no assurance to this effect.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED OCTOBER 31, 1999
Total operating revenue decreased by $81,500 from $165,800 to $84,300 for the
three months ended October 31, 1998 and October 31, 1999, respectively,
principally due to a decrease in lease income from Royal Gold, which
terminated the agreement with New Concept Mining in fiscal 1999. However,
revenue from technology products increased by $23,100 from $40,900 to $64,000
for the three months ended October 31, 1998 and October 31, 1999,
respectively.
The implementation of the strategic direction set by the Board of Directors
during the prior fiscal year is nearing completion and is anticipated to
result in significant revenue during the remainder of fiscal 2000, although
there can be no assurance to this effect. Substantial consulting expenses
were incurred in this effort. The amortization of prepaid consulting
expenses increased by $218,700, from $214,100 to $432,800 for the three
months ended October 31, 1999 and October 31, 1998, respectively. As a
result, operating expenses increased by $126,500 from $1,216,700 to
$1,343,200 for the three months ended October 31, 1998 and October 31, 1999,
respectively. The effect on operating expenses caused by the increase in
consulting expenses was partially offset by decreases of $22,800 in marketing
and product development, $60,000 in research and development and $4,200 in
mining operations.
ATG's net loss increased by $450,700 from $1,341,000 to $1,791,700 at October
31, 1998 and October 31, 1999, respectively, principally due to increased
operating expenses of $126,500, increased interest expense of $358,700 and
decreased revenue of $81,500, offset by decreased expense of a joint venture
of $39,300 and decreased expenses of discontinued operations of $76,700.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has incurred significant operating losses.
The ability of the Company to operate as a going concern is dependent upon
its ability to (1) obtain sufficient additional capital and (2) generate
significant revenues through its existing assets and operating business
significant product development issues. The Company plans to raise
additional working capital through private offerings of debt and equity. 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 execute its business plans or generate positive operating results.
These issues, among others, raise substantial doubt about the ability of the
Company to continue as a going concern.
Total assets decreased by $432,300 from $4,801,500 to $4,369,200 at July 31,
1999 and October 31, 1999, respectively. This decrease was the principal
result of a decrease in cash of $357,700 and an increase in accumulated
depreciation and amortization of $138,900, offset by an increase in inventory
of $59,200.
Total liabilities increased by $334,100 from $6,402,700 to $6,736,800 at July
31, 1999 and October 31, 1999, respectively. This increase was principally
due to a net increase in convertible debentures of $400,000, offset by a
decrease in current liabilities of $65,900.
Page 10
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The Company increased the cash used in operations by $271,000 from $515,900
to $786,900 for the three months ended October 31, 1998 and October 31, 1999,
respectively. The principal source of working capital during the three
months ended October 31, 1999 was the issuance of $500,000 of principal
amount of secured convertible debentures. During the comparable period in
1998, the principal source of working capital was the issuance of $200,000 of
principal amount of convertible debentures, deposit of $200,000 on the sale
of ATG Media, Inc. and loans from related parties of $142,500.
Statements included in this Management's Discussion and Analysis and
elsewhere in this Form 10-QSB, in future filings by the Registrant with the
Securities and Exchange Commission and in the Registrant's press releases and
oral statements made with the approval of authorized executive officers, if
the statements are not historical or current facts, should be considered
"forward-looking statements" made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. These statements are
subject to certain risks and uncertainties that could cause actual results to
differ materially from historical earnings and those presently anticipated or
projected. Registrant wishes to caution the reader not to place undue
reliance on any such forward-looking statements, which speak only as of the
date made.
Page 11
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PART II
OTHER INFORMATION
ITEM 2 CHANGES IN SECURITIES
(a) Not applicable.
(b) Not applicable.
(c) In September, 1999, one hundred thousand (100,000) shares were issued to
a consultant as partial consideration under a one year consulting agreement.
The consultant is to act generally as financial public relations counsel to
the Company, essentially acting as an advisor with respect to communications
and information as well as planning, designing, developing, organizing,
writing and assisting in the distribution of such communications and
information.
Also during September, 1999, the Company sold $500,000 principal amount of a
convertible debenture to an existing debenture holder. The debenture is
convertible after December 31, 1999 at the rate of $0.25 per share.
The foregoing transactions are claimed to be exempt from registration under
the Securities Act of 1933, as amended, pursuant to Section 4(2) thereof, as
a transaction not involving a public offering, in that the purchasers had
full access to all material information concerning the Company and were
acquiring the securities for investment and not with a view to distribution.
There were no underwriting discounts or commissions paid in connection with
the transactions 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.
The Company filed one Report on Form 8-K dated August 30, 1999 reporting
under Item 4.
Page 12
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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: December 15, 1999
By: /s/ Yan Lin
------------------------------
Yan Lin
Acting Chief Financial Officer
Date: December 15, 1999
Page 13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-2000
<PERIOD-START> AUG-01-1999
<PERIOD-END> OCT-31-1999
<CASH> 352,511
<SECURITIES> 0
<RECEIVABLES> 52,484
<ALLOWANCES> 0
<INVENTORY> 239,716
<CURRENT-ASSETS> 665,761
<PP&E> 1,222,199<F2>
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,369,200
<CURRENT-LIABILITIES> 3,586,860
<BONDS> 3,150,000
0
378
<COMMON> 30,585
<OTHER-SE> (2,398,623)
<TOTAL-LIABILITY-AND-EQUITY> 4,369,200
<SALES> 63,954
<TOTAL-REVENUES> 84,259
<CGS> 0<F1>
<TOTAL-COSTS> 1,343,217
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 532,697
<INCOME-PRETAX> (1,791,655)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,791,655)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,791,655)
<EPS-BASIC> (0.06)
<EPS-DILUTED> (0.06)
<FN>
<F1>Not calculated
<F2>Net of depreciation and amortization
</FN>
</TABLE>
