<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
- --------------------------------------------------------------------------------
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
- --------------------------------------------------------------------------------
COMMISSION FILE NUMBER 0-23634
KFX INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 84-1079971
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
1999 BROADWAY, SUITE 3200, DENVER, COLORADO USA 80202
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(303) 293-2992
(REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE)
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 proceeding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
Yes [ X ] No [_]
On November 10, 1997 there were 23,926,040 shares of the Registrant's common
stock outstanding.
<PAGE>
KFX INC.
FORM 10-Q QUARTERLY REPORT
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
TABLE OF CONTENTS
PAGE NO.
--------
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets September 30, 1997 (Unaudited)
and December 31, 1996............................................. 3
Consolidated Statements of Operations Three Months Ended
September 30, 1997 and 1996 (Unaudited)........................... 4
Consolidated Statements of Operations Nine Months Ended
September 30, 1997 and 1996 (Unaudited)........................... 5
Consolidated Statements of Cash Flows Nine Months Ended
September 30, 1997 and 1996 (Unaudited)........................... 6
Notes to Consolidated Financial Statements (Unaudited)............... 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................ 11
PART II. OTHER INFORMATION................................................... 13
Signatures................................................................... 14
2
<PAGE>
KFX INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, DECEMBER 31,
1997 1996
<S> <C> <C>
(Unaudited)
--------------------------------------
ASSETS
------
Current:
Cash and cash equivalents........................................ $ 15,582,456 $ 1,403,625
Accounts receivable.............................................. 225,872 447,230
Interest receivable.............................................. 24,000 -
Prepaid expenses................................................. 76,870 106,150
------------ ------------
Total current assets.......................................... 15,909,198 1,957,005
------------ ------------
Property, plant and equipment, net of accumulated depreciation..... 4,707,854 5,458,801
Patents, net of accumulated amortization........................... 3,236,018 3,662,894
Investment in KFX Fuel Partners, L.P............................... 3,635,782 2,792,304
Investment in K-Fuel, L.L.C........................................ 233,306 157,180
Convertible debentures issuance costs,
net of accumulated amortization.................................. 2,344,749 -
Prepaid royalty.................................................... 500,000 500,000
Other assets....................................................... 210,584 395,383
------------ ------------
$ 30,777,491 $ 14,923,567
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current:
Accounts payable................................................. $ 912,249 $ 1,041,800
Accrued expenses................................................. 98,809 166,651
Due to related parties........................................... 575,864 707,756
Interest payable................................................. 230,642 92,319
Current maturities of long-term debt............................. 665,000 115,000
------------ ------------
Total current liabilities..................................... 2,482,564 2,123,526
------------ ------------
Long-term debt, less current maturities............................ 270,000 1,110,000
Convertible debentures............................................. 17,000,000 -
Mine reclamation liability......................................... 1,166,000 1,166,000
------------ ------------
Total liabilities............................................. 20,918,564 4,399,526
------------ ------------
Commitments and contingencies (Note 2)
Stockholders' equity:
Preferred stock, $.001 par value, 20,000,000 shares authorized;
None issued................................................... - -
Common stock, $.001 par value, 80,000,000 shares authorized;
23,926,040 and 22,676,040 shares issued and outstanding....... 23,926 22,676
Additional paid-in capital....................................... 47,758,843 44,693,093
Accumulated deficit.............................................. (37,923,842) (34,191,728)
------------ ------------
Total stockholders' equity.................................... 9,858,927 10,524,041
------------ ------------
$ 30,777,491 $ 14,923,567
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
KFX INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
UNAUDITED
THREE MONTHS
ENDED SEPTEMBER 30,
1997 1996
--------------------------
<S> <C> <C>
Contract revenue................................... $ 450,341 $ 310,370
Interest and other income.......................... 334,372 21,414
----------- -----------
Total revenue and other income................... 784,713 331,784
----------- -----------
Marketing, general and administrative expenses..... 902,231 510,043
Research and development........................... 184,529 109,333
Demonstration plant and laboratory operations...... 196,656 251,441
Depreciation and amortization...................... 523,331 490,058
Interest expense................................... 201,350 36,108
----------- -----------
Total expenses................................... 2,008,097 1,396,983
----------- -----------
Net loss........................................... $(1,223,384) $(1,065,199)
=========== ===========
Net loss per common share.......................... $ (.05) $ (.05)
=========== ===========
Weighted average shares outstanding................ 23,926,000 22,531,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
KFX INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
UNAUDITED
NINE MONTHS
ENDED SEPTEMBER 30,
1997 1996
--------------------------
<S> <C> <C>
Contract revenue.................................... $ 859,097 $ 318,781
K-Fuel, LLC joint venture fee....................... - 1,000,000
Interest and other income........................... 419,235 149,651
----------- -----------
Total revenue and other income.................... 1,278,332 1,468,432
----------- -----------
Marketing, general and administrative expenses...... 2,326,408 2,434,839
Research and development............................ 421,487 309,333
Demonstration plant and laboratory operations....... 586,901 588,964
Depreciation and amortization....................... 1,408,129 1,420,423
Interest expense.................................... 267,521 122,249
----------- -----------
Total expenses.................................... 5,010,446 4,875,808
----------- -----------
Net loss............................................ $(3,732,114) $(3,407,376)
=========== ===========
Net loss per common share........................... $ (.16) $ (.15)
=========== ===========
Weighted average shares outstanding................. 23,784,000 22,427,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
KFX INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
UNAUDITED
NINE MONTHS
ENDED SEPTEMBER 30,
1997 1996
-------------------------------
OPERATING ACTIVITIES:
<S> <C> <C>
Net income (loss)............................................. $(3,732,114) $(3,407,376)
Adjustments to reconcile net income (loss) to cash
Used in operating activities:
Depreciation and amortization........................... 1,408,129 1,420,423
Write-off of project development costs.................. 163,445 -
Equity in net loss of K-Fuel, L.L.C..................... 248,996 51,715
Other, net.............................................. (103,678) (32,432)
Changes in operating assets and liabilities:
Increase in accounts receivable and prepaid expenses.... (87,686) (632,788)
Increase in interest receivable......................... (24,000) -
Decrease in reclamation deposit......................... - 1,503,032
Decrease in accounts payable............................ (54,973) 119,059
Decrease in accrued expenses............................ (67,842) -
Decrease in due to related parties...................... (55,462) -
Increase in interest payable............................ 138,323 -
Decrease in other assets................................ 451 -
----------- -----------
Cash used in operating activities................................ (2,166,411) (978,367)
----------- -----------
INVESTING ACTIVITIES:
Purchases of equipment........................................ (16,175) (127,549)
Advance royalty payment....................................... - (300,000)
Pending patent applications................................... (48,724) (26,110)
Investments in KFX Fuel Partners, L. P........................ (581,764) -
Investments in K-Fuel, L.L.C.................................. (325,122) (245,762)
Other......................................................... (33,224) -
----------- -----------
Cash used in investing activities................................ (1,005,009) (699,421)
----------- -----------
FINANCING ACTIVITIES:
Payments on notes payable..................................... (290,000) (563,851)
Convertible debentures issuance costs......................... (1,859,749) -
Gross proceeds from convertible debentures.................... 17,000,000 -
Proceeds from sale of common stock, net of placement fees..... 2,500,000 852,380
----------- -----------
Cash provided by financing activities............................ 17,350,251 288,529
----------- -----------
Increase (decrease) in cash and cash equivalents................. 14,178,831 (1,389,259)
Cash and cash equivalents, beginning of period................... 1,403,625 2,870,039
----------- -----------
Cash and cash equivalents, end of period......................... $15,582,456 $ 1,480,780
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest........................................ $ 128,858 $ 154,849
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
6
<PAGE>
KFX INC.
CONSOLIDATED STATEMENT OF CASH FLOWS - (CONTINUED)
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Nine Months Ended September 30, 1997
- ------------------------------------
During July 1997, the Company issued a warrant to purchase 453,333
shares of common stock as part of the convertible debenture financing. Using
the Black-Scholes option-pricing model, the warrant was valued at $567,000; this
amount is included in the total of convertible debentures issuance costs. See
Note 4.
In September 1997, the Company reclassed prior year receivables from
KFx Fuel Partners, L. P. of $261,714 into Investment in KFx Fuel Partners, L.P.
Nine months Ended September 30, 1996
- -------------------------------------
During January 1996, the Company issued 41,426 shares of common stock
under its Restricted Stock Plan in payment of 1995 board of director fees
totaling $209,780 that were included in amounts due to related parties at
December 31, 1995.
During January 1996, the Company issued 93,240 shares of common stock,
and issued a common stock purchase warrant for 100,000 shares of common stock
for $4.00 per share, in exchange for professional service fee obligations
totaling $477,894 that were included in accrued expenses at December 31, 1995.
In June 1996, the Company entered into a royalty amendment agreement
whereby the Company issued a promissory note in the amount of $200,000, payable
in June 1998.
The accompanying notes are an integral part of these consolidated financial
statements.
7
<PAGE>
KFX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include
the accounts of KFX Inc. ("KFX" or the "Company") and its wholly-owned
subsidiary, KFX Wyoming Inc., and its majority-owned subsidiaries, KFX
Technology Inc., Atlantic Partners Ltd., and Heartland Fuels Corporation. The
Company's 67 percent interest in KSA Partnership, its 51 percent interest in K-
Fuel, L.L.C. ("K-Fuel, LLC"), and its 5 percent interest in KFX Fuel Partners,
L.P. ("KFP") are accounted for as equity investments as the Company does not
have the authority or ability to independently control or manage these entities.
All significant intercompany transactions have been eliminated in consolidation.
The consolidated financial statements at September 30, 1997, and for
the three and nine months ended September 30, 1997 and 1996 are unaudited. In
the opinion of the Company's management, all adjustments, consisting of only
normal recurring adjustments necessary for a fair statement of the results for
the interim periods, have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. These financial statements should be
read in conjunction with the audited financial statements and notes to financial
statements for the year ended December 31, 1996 included in the Company's Form
10-K. The accounting policies used in the preparation of these unaudited
quarterly financial statements are the same as those policies used in the
preparation of the audited annual financial statements except as modified for
appropriate interim accounting policies. The results of operations for the
three and nine months ended September 30, 1997 are not necessarily indicative
of the results of operations expected for the year ended December 31, 1997.
Net loss per common share for the three and nine months ended
September 30, 1997 and 1996 are based on the weighted average number of shares
of common stock outstanding during the period, and excludes common equivalent
shares (common stock options and warrants) as the effect would be anti-dilutive.
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128 "Earnings Per Share," which simplified and added certain
earnings per share calculations and disclosures to be included in financial
statements prepared in accordance with generally accepted accounting principles.
The Company will adopt Statement No. 128 in the fourth quarter of 1997 and,
based on current circumstances, does not believe the effect of adoption will be
material.
8
<PAGE>
KFX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (UNAUDITED)
(CONTINUED)
NOTE 2. COMMITMENTS AND CONTINGENT LIABILITIES
In November 1995, the Company filed a lawsuit against Fru-Con
Construction Corporation and Fru-Con Engineering, Inc. (collectively, "Fru-Con")
in the Wyoming State Court, 6th Judicial District. The action has been moved to
the United States District Court for the District of Wyoming. The Company's
lawsuit requests that the court enter a declaratory judgment that Fru-Con has no
interest or claim in or against the Company or any of the Company's property or
interests, or that Fru-Con is barred from such claims. Fru-Con had asserted
claims for approximately $1.8 million for engineering services and an interest
in K-Fuel plants built in North America by virtue of contractual arrangements
with a limited partnership sponsored by corporations in which a predecessor
entity to the Company had a partnership interest. The Company believes that the
ultimate resolution of this action will not have a material adverse impact on
the Company's financial position or results of operations.
NOTE 3. KFX FUEL PARTNERS, L.P.
In August 1995, the Company acquired a 5 percent general and limited
partnership interest in KFP. The remaining 95 percent general and limited
partnership interest in KFP is held by Thermo Ecotek Corporation ("TCK"). In
September 1995, KFP began construction of a 500,000 tons-per-year K-Fuel
facility near Gillette, Wyoming. Towards the completion of the construction of
the facility in the fourth quarter of 1996, a fire occurred at the facility.
Damage from the fire was restricted to an oil heater and auxiliary oil storage
tank and was unrelated to the facility's four coal processors and the K-Fuel
Technology. Substantially all fire damage repairs have been completed and
substantially all repair costs are expected to be covered by insurance proceeds.
The fire has caused certain delays with the commencement of commercial
operations of the facility. In addition, KFP is currently experiencing certain
construction completion problems, including issues relating to the design and
operation of certain venting equipment which will further delay the facility's
start-up operations, which had been underway when the venting problems were
identified. KFP expects to complete repairs and resolve these construction
completion items in time to continue operations of the facility during the
fourth quarter of 1997. However, because the technology being developed at the
facility is new and untested, no assurance can be given regarding specific
timing and production levels, or that KFP will be able to correct these
construction problems and be in full commercial operations in the fourth quarter
of 1997, if at all.
NOTE 4. CONVERTIBLE DEBENTURES
On July 31, 1997, the Company completed a private placement of
convertible debentures (the "Debentures") totaling $17.0 million. The
Debentures mature in July 2002, and have an annual interest rate of 6.0 percent,
payable semi-annually on January 31 and July 31, commencing on January 31, 1998.
The Debentures are initially convertible into shares of the Company's common
stock at a conversion price of $3.75 per share, beginning on October 30, 1997.
On November 1, 1999, the conversion price will change to be 90 percent of the
average closing price of the Company's common stock (on the American Stock
Exchange or other exchange, if applicable) for the 15 days immediately preceding
November 1, 1999. The conversion price on November 1, 1999 cannot be less than
$3.65 per share, subject to certain adjustments.
9
<PAGE>
KFX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (UNAUDITED)
(CONTINUED)
The Debentures were offered, sold and delivered only to non-United
States persons outside of the United States. Application has been made to list
the Debentures on the Luxembourg Stock Exchange.
In connection with the sale of the Debentures, the Company issued to
the placement agents warrants to purchase 453,333 shares of common stock at an
exercise price of $5.00 per share, expiring in July 2002. The warrants were
valued at $567,000 using the Black-Scholes option-pricing model and are included
in total debenture offering costs, before amortization, of $2,426,749.
The net cash proceeds from the sale of the Debentures (approximately
$15.1 million) will be used for additional investments in the KFP facility,
continued project development efforts for proposed K-Fuel projects in Indonesia
and Turkey, continued project development efforts for a proposed activated
carbon production facility, and for general corporate purposes.
10
<PAGE>
KFX INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The discussion to follow is based on forward-looking statements that
include risks and uncertainties, and should be read in conjunction with the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" at Item 7 of the Company's Form 10-K for the year ended December 31,
1996. Actual results may differ materially from those anticipated in the
forward-looking information.
Excluding a $1 million joint venture fee from K-Fuel, LLC in 1996, to
date the Company has not generated any material revenues from the licensing of
the K-Fuel Technology to third party licensees or the direct manufacturing of
beneficiated fuel products. Substantially all revenues have been derived from
ancillary sources not directly related to the Company's efforts to commercialize
the K-Fuel Technology. Until the Company successfully negotiates additional
third-party licensing and royalty agreements and/or independently constructs and
operates its own production facilities, net operating losses will continue. As
such, the Company may be dependent on non-operating funding sources to sustain
its operations in the near term (twelve to eighteen months).
RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 1997 VS. THREE MONTHS
ENDED SEPTEMBER 30, 1996
Contract revenue increased approximately $140,000 primarily as a
result of an increased level of technical subcontract work the Company performed
for K-Fuel, LLC and KFP in the 1997 period. The Company will continue to
perform additional technical subcontract work for K-Fuel, LLC and KFP for the
remainder of 1997, with an emphasis on KFP. Interest and other income increased
by approximately $313,000 in the 1997 period as a result of overall higher cash
balances (resulting from the convertible debentures financing) and certain one-
time negotiated payables settlements reached in September 1997.
The increase in marketing, general and administrative expenses of
approximately $392,000 in the 1997 period as compared to the 1996 period is
primarily attributable to (1) an increase in the equity in loss of K-Fuel, LLC
in the 1997 period (increase of approximately $94,000) resulting from a
significant increase in project development activity of K-Fuel, LLC in the 1997
period as compared to 1996; (2) a one-time charge of approximately $163,000 to
write-off capitalized project development expenses associated with a previously
planned fifth-processor expansion of the KFP facility; (3) approximately $50,000
in travel and other internal costs associated with the convertible debentures
financing completed in July 1997; and (4) approximately $50,000 in permitting
costs in the 1997 period related to the Company's coal mining property adjacent
to the KFP facility. The increase in permitting activity is related to the
potential sales of coal by the Company to the KFP facility during a portion of
1998.
The overall slight increase in research and development combined with
demonstration plant and laboratory operations is attributable to increased
efforts associated with overall project development activities, with particular
emphasis on the activated carbon research program, proposed K-Fuel projects in
Indonesia and Turkey, and the KFP facility currently under construction/start-up
adjacent to the demonstration plant and laboratory facility.
The increase in interest expense of approximately $165,000 is
attributable to the Debentures issued on July 31, 1997 totaling $17.0 million
(monthly interest of $85,000), partially offset by overall lower levels of other
debt in the 1997 period.
11
<PAGE>
KFX INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTSOF OPERATIONS
(CONTINUED)
RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 1997 VS. NINE MONTHS
ENDED SEPTEMBER 30, 1996
The increase in contract revenue and the increase in interest and
other income are for similar reasons as discussed previously for the three
months ended September 30, 1997 vs. September 30, 1996. The K-Fuel, LLC joint
venture fee was a one-time payment in April 1996.
The decrease in marketing, general and administrative expenses of
approximately $109,000 for the nine months ended September 30, 1997 as compared
to the similar period in 1996 is attributable to a substantial decrease in legal
and other professional fees, partially offset by the increases previously
discussed for the three months ended September 30, 1997. The decrease in legal
and other professional fees from the 1996 period is primarily attributable to
the K-Fuel, LLC joint venture agreement reached in the second quarter 1996.
The overall increase in research and development combined with
demonstration plant expenses, and the increase in interest expense are for
similar reasons as discussed previously for the three months ended September 30,
1997 vs. September 30, 1996.
LIQUIDITY AND CAPITAL RESOURCES
The current near term funding sources available to the Company are (1)
cash on hand, which as of November 10, 1997 was approximately $15.0 million; (2)
the expected start-up of the KFP production facility in the fourth quarter of
1997, resulting in certain royalty payments; (3) certain cost reimbursements
from K-Fuel, LLC, relating to a collective research and development program
conducted by the Company in conjunction with Kennecott Alternative Fuels, Inc.,
the Company's joint venture partner in K-Fuel, LLC, and (4) certain development
and license fees to be derived from anticipated K-Fuel projects in Indonesia and
Turkey and an anticipated activated carbon project. In January 1997, TCK
purchased 1.25 million shares of the Company's common stock for $2.5 million.
The Company's current cash balances are expected to fund the Company's
operations, capital and debt service requirements for the next twelve to
eighteen months based on current capital investment plans and operating budgets.
The Company does not expect to realize any significant net revenues from its
ownership interest in KFP during the remainder of 1997. The Company will need
to realize additional revenue sources to sustain operations beyond 1998. Such
potential sources of funding may include, but are not limited to (1) the
proposed sale of all or a portion of the Company's ownership interest in KFP;
(2) license fees to be derived from the proposed construction of Indonesia and
Turkey K-Fuel production facilities in 1998; and (3) certain development and
license fees to be derived from a proposed activated carbon project. There are
no assurances that any of these potential funding sources will materialize, and
the Company does not currently have any commitments with respect to any such
funding sources. If such events do not materialize, the Company may be forced
to seek debt and/or equity financing which may not be available on terms and
conditions favorable to the Company, if at all. The Company does not currently
have any commitments with respect to any debt or equity financing other than
those disclosed in the consolidated financial statements.
12
<PAGE>
KFX INC.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
Exhibit 27. Financial Data Schedule
(B) REPORTS ON FORM 8-K
Form 8-K dated August 15, 1997 filed under Item 9 Sales of Equity
Securities Pursuant to Regulation S.
13
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
KFX Inc.
/s/ Jeffrey A. Hansen
----------------------
Jeffrey A. Hansen
Chief Financial Officer
Date: November 10, 1997
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 15,582,456
<SECURITIES> 0
<RECEIVABLES> 225,872
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 15,909,198
<PP&E> 11,657,126
<DEPRECIATION> (6,949,271)
<TOTAL-ASSETS> 30,777,491
<CURRENT-LIABILITIES> 2,482,564
<BONDS> 17,270,000
0
0
<COMMON> 23,926
<OTHER-SE> 9,835,001
<TOTAL-LIABILITY-AND-EQUITY> 30,777,491
<SALES> 859,097
<TOTAL-REVENUES> 1,278,332
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,742,925
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 267,521
<INCOME-PRETAX> (3,732,114)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,732,114)
<EPS-PRIMARY> (0.16)
<EPS-DILUTED> 0
</TABLE>
