SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from___________ to __________
Commission File No._____________
WHITEWING LABS, INC.
(Exact name of small business registrant as specified in its charter)
Delaware 95-4437350
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
15455 San Fernando Mission Blvd., #105, Mission Hills, CA 91345
(Address of principal executive office) (Zip Code)
Registrant's Telephone Number: (818) 898-2167
Check whether the issuer (1) filed all reports required to be filed by
Section 12 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 [ ]
The number of shares of Common Stock outstanding as of July 31, 1996,
was 2,883,890.
1
WHITEWING LABS, INC.
FORM 10-QSB FOR QUARTER ENDED JUNE 30, 1996
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
Balance Sheets at December 31, 1995 and June 30, 1996.........3
Statements of Operations for the Quarters and Six Months
Ended June 30, 1995 and 1996..............................5
Statements of Cash Flows for the Six Months Ended
June 30, 1995 and 1996....................................6
Notes to the Financial Statements.............................8
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition......................10
PART II. OTHER INFORMATION..............................................14
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Stockholders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(b) Reports on Form 8-K
SIGNATURE PAGE...........................................................15
2
<TABLE>
Whitewing Labs, Inc.
Balance Sheets
December 31, 1995 and June 30, 1996
<CAPTION>
ASSETS
Proforma
December 31, December 31, June 30,
1995 1995 1996
----------- ---------- ----------
(See Note 2) (Unaudited)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 423,622 $4,323,622 $3,737,276
Accounts receivable - other 17,115 17,115 28,089
Inventories 193,234 193,234 198,265
Prepaid advertising 355,932 355,932 61,157
Prepaid legal retainer 12,369 12,369 5,090
Prepaid other expenses 18,568 18,568 21,960
Deferred taxes 11,000 11,000 11,000
---------- ---------- ----------
Total current assets 1,031,840 4,931,840 4,062,837
---------- ---------- ----------
EQUIPMENT:
Furniture and fixtures 112,748 112,748 119,767
Less - accumulated depreciation (18,848) (18,848) (28,031)
---------- ---------- ----------
93,900 93,900 91,736
---------- ---------- ----------
OTHER ASSETS:
Deferred advertising 190,396 190,396 374,240
Deferred offering costs 152,071 0 0
Investment in related-party
partnership, at cost 100,000 100,000 100,000
Organization costs, net of
accumulated amortization 1,435 1,435 1,158
Deferred taxes 209,000 209,000 209,000
Deposits 4,777 4,777 10,020
---------- ---------- ----------
657,679 505,608 694,418
---------- ---------- ----------
TOTAL ASSETS $1,783,419 $5,531,348 $4,848,991
========== ========== ==========
</TABLE>
See accompanying notes
3
<TABLE>
Whitewing Labs, Inc.
Balance Sheets
December 31, 1995 and June 30, 1996
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
Proforma
December 31, December 31, June 30,
1995 1995 1996
---------- ---------- ----------
(See Note 2) (Unaudited)
<S> <C> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 97,134 $ 97,134 $ 78,906
Accrued liabilities 64,531 64,531 9,960
Dividends payable 22,688 22,688 0
Accrued interest payable 43,051 43,051 0
Deferred taxes 220,000 220,000 220,000
Due to shareholder 114,247 114,247 0
---------- ---------- ----------
Total current liabilities 561,651 561,651 308,866
---------- ---------- ----------
COMMITMENTS AND CONTINGENCIES:
SHAREHOLDERS' EQUITY:
Cumulative convertible preferred
stock, $.001 par value:
Authorized, 500,000 shares
Issued and outstanding, 272,500
at December 31, 1995 and none
at Proforma December 31, 1995
and June 30, 1996 732,149 0 0
Common stock, $.001 par value:
Authorized, 10,000,000 shares
Issued and outstanding, 1,125,000
shares at December 31, 1995,
2,606,876 at Proforma December
31, 1995 and 2,883,875 shares
at June 30, 1996 1,434 2,607 2,883
Paid-in capital 1,177,358 5,656,263 6,349,882
Deficit (689,173) (689,173) (1,812,640)
---------- ---------- ----------
Shareholders' equity 1,221,768 4,969,697 4,540,125
---------- ---------- ----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $1,783,419 $5,531,348 $4,848,991
========== ========== ==========
</TABLE>
See accompanying notes
4
<TABLE>
Whitewing Labs, Inc.
Statements of Operations
(Unaudited)
<CAPTION>
Quarter ended June 30, Six months ended June 30,
1995 1996 1995 1996
-------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
NET SALES $650,074 $ 927,415 $1,220,930 $ 1,923,442
COST OF GOODS SOLD 86,097 111,088 161,758 241,252
-------- ----------- ---------- -----------
Gross profit 563,977 816,327 1,059,172 1,682,190
OPERATING EXPENSES
Advertising 224,730 674,887 365,016 1,225,199
Selling 198,977 912,158 413,782 1,134,295
General and administrative 144,181 264,194 290,314 498,014
------- ----------- --------- ------------
567,888 1,851,239 1,069,112 2,857,508
-------- ----------- --------- ------------
Loss from operations (3,911) (1,034,912) (9,940) (1,175,318)
OTHER INCOME 11,202 46,068 18,611 69,844
INTEREST EXPENSE 4,227 0 15,511 4,259
-------- ----------- --------- -----------
Income (loss) before
provision for income taxes 3,064 (988,844) (6,840) (1,109,733)
PROVISION FOR INCOME TAXES 5,000 0 5,000 3,605
-------- ---------- --------- -----------
NET LOSS (1,936) (988,844) (11,840) (1,113,338)
PREFERRED STOCK DIVIDENDS
EARNED AND ACCRUED $ 22,688 $ 0 $ 22,688 $ 10,073
-------- ---------- ---------- -----------
Net loss attributable
to common stockholders $(24,624) $ (988,844) (34,528) $(1,123,411)
======== ========== ========== ===========
PROFORMA LOSS
PER COMMON SHARE $ (0.01) $ (0.01)
========= =========
LOSS PER COMMON SHARE $ (0.39) $ (0.44)
========== ===========
PROFORMA WEIGHTED AVERAGE
NUMBER OF COMMON SHARES
OUTSTANDING 1,576,361 1,568,402
========= =========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 2,540,057 2,527,370
========= =========
</TABLE>
See accompanying notes
5
<TABLE>
Whitewing Labs, Inc.
Statements of Cash Flows
For the Six Months Ended June 30, 1995 and 1996
(Unaudited)
<CAPTION>
1995 1996
--------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) $ (11,840) $(1,113,338)
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation and amortization 4,186 9,183
Changes in assets and liabilities:
Accounts receivable - other (7,532) (10,974)
Inventories (75,323) (5,031)
Prepaid advertising (125,109) 294,775
Prepaid legal retainers (24,528) 7,279
Other prepaid expenses (44,096) (3,392)
Deferred advertising (127,000) (183,844)
Deposits 372 (5,243)
Accounts payable (17,964) (18,228)
Accrued liabilities 4,133 (54,571)
Accrued interest payable 9,540 (43,051)
Unearned revenue 46,000 0
---------- ----------
Net cash used in operating activities (369,161) (1,126,158)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of furniture and fixtures (67,722) (7,019)
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Investment in related-party partnership (100,000) 0
Deferred offering costs (25,000) 152,071
Net proceeds from issuance of common stock 878,792 4,121,780
Net proceeds from issuance of common stock warrants 0 180,090
Net proceeds from issuance of common
stock upon exercise of options 0 139,954
Payments to shareholder (200,000) (114,247)
Payment of cash dividends (44,872) (32,817)
---------- ----------
Net cash provided by financing activities 508,920 4,446,831
---------- ----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 72,037 3,313,654
CASH AND CASH EQUIVALENTS, beginning of year 639,369 423,622
--------- ----------
CASH AND CASH EQUIVALENTS, end of period $ 711,406 $3,737,276
========== ==========
See accompanying notes
6
1995 1996
---------- ----------
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
Cash paid for income taxes $ 5,000 $ 3,605
========== ==========
Cash paid for interest $ 0 $ 47,310
========== ==========
SUPPLEMENTAL DISCLOSURES OF
NONCASH FINANCING ACTIVITIES:
Preferred dividends declared $ 22,688 $ 0
========== ==========
Cumulative convertible preferred stock
converted to common stock $ 0 $ 732,149
========== ==========
</TABLE>
See accompanying notes
7
WHITEWING LABS, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 1996
(Unaudited)
1. Summary of Significant Accounting Policies
a. Basis of presentation
In the opinion of management and subject to year-end audit, the
accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments considered necessary for a fair presentation
have been included. The results of operations for the periods presented
are not necessarily indicative of the results to be expected for the
full year. These condensed financial statements should be read in
conjunction with the financial statements and footnotes thereto contained in
the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1995.
b. Deferred Advertising
In December 1993, the American Institute of Certified Public Accountants
issued Statement of Position 93-7 (SOP 93-7) entitled "Reporting on
Advertising Costs". The Company adopted SOP 93-7 effective January 1,
1995. From 1995 forward, magazines, weekly publications, and newspaper
placements became an increasing component of the Company's
direct-response marketing efforts. The Company defers the cost of such
placements as their primary purpose is to elicit sales to customers.
Respondents are logged into a customer database which indicates the
source of each customer's response to the specific advertisement.
The costs of advertising placements are amortized, based upon
management's estimates, over the periods in which the related direct
responses are received. Newspaper and weekly publications are amortized
in the month of issue. Magazines and direct mailings which are available
prior to the middle of the month preceding the issue date are amortized
over a three month period. Magazines which are available subsequent to
the middle of the month preceding the issue date are amortized over a
four month period. The magazine amortization percentages used by the
Company amortize 90 to 100 percent of the deferred costs over three months
with 60 to 80 percent of the costs amortized over two months. Substantially
all of the deferred advertising costs will be fully amortized within four
months of December 31, 1995 and June 30, 1996.
c. Reclassifications
Certain reclassifications have been made to the accompanying condensed
financial statements to conform them with the current period presentation.
8
2. Reincorporation in Delaware
On February 9, 1996, Whitewing Labs, which had been incorporated under the
laws of California, merged with and into Whitewing Labs, Inc., its
wholly-owned subsidiary in order to reincorporate the Company in the State
of Delaware (the "Reincorporation"). Following the Reincorporation, the
business and operations of the Company have been conducted by the Company
as a Delaware corporation rather than as a California corporation. The
accompanying condensed financial statements give retroactive effect to the
Reincorporation.
3. Proforma Loss per Common Share
Proforma loss per common share for the quarter and six month period ended
June 30, 1995, is based upon the proforma weighted average number of common
shares outstanding assuming the public offering of shares of the Company's
common stock in February, 1996, had been completed as of January 1, 1995.
For the quarter and six month period ended June 30, 1996, loss per common
share is based on the historical weighted average number of shares
outstanding.
4. Product Return Reserve
An accrual for estimated sales returns is included in accrued liabilities
in the amounts of $17,000 and $5,000 at December 31, 1995 and June 30, 1996,
respectively.
5. Subsequent Event
In August 1996, the Company acquired 4,300 shares of its common stock for
approximately $14,000. The repurchase of these shares was in connection
with a stock repurchase program announced in July 1996 in which up to
200,000 shares or 7% of outstanding shares of the Company's common stock
may be acquired in the open market. The purpose of the stock repurchase
program is to enhance shareholder value.
9
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
General. The Company continued its plan of expanding its customer database
during the first half of 1996 by increasing its magazine advertisement
placements and developing a direct mail campaign which both tests new mailing
lists and identifies new names on lists used in the past.
The Company's recent public offering was to generate adequate funds to allow
for quicker growth of the Company's sales and database than would be achieved
if the Company relied only on internally generated funds. Payments for
advertising increased by over $860,000 for the first six months of 1996
compared to the same period last year. Advertising expense for the six months
ended June 30, 1995 was $365,016, or 29.9%, of net sales, while for the six
months ended June 30, 1996 it increased to $1,225,199, or 63.7%, of net sales.
Orders from magazine advertisements and direct mailings are received over a
period of time after the magazines containing the advertisements go on sale
or the direct mail pieces are delivered to the Post Office. The funds from
the public offering were available as of February 20,1996, which allowed for
the expanded advertising placements to be made but not enough time to realize
additional revenues in the first half of the year. These timing differences
were a primary cause of the net loss for the first half of 1996, which
increased to $1,113,338, compared to a net loss of $11,840 for the same period
last year. The Company's business plans continue to stress growth of the
customer database over short-term profits; the Company's management believes
net earnings will be driven by continued growth of the customer database.
As of June 30, 1996, the Company had an accumulated deficit of $1,812,640.
It can be expected that future operating results will continue to be subject
to many of the problems, expenses, delays and risks inherent in the
establishment of a new business enterprise, many of which the Company cannot
control. There can be no assurance, therefore, that the Company will be able
to achieve or sustain profitability. Even if the Company's operations prove
to be marginally profitable, the value of the Company's common stock, and the
potential return to investors, could be substantially diminished.
Consequently, an investment in the Company is highly speculative and no
assurance can be given that purchasers of the shares of common stock will
realize any return on their investment or that purchasers will not lose their
entire investment.
The Company has formulated its business plans and strategies based on
certain assumptions of the Company's management regarding the size of the
market for nutritional supplements, the products which the Company will be
able to offer to the over age forty market, the Company's anticipated share of
the market, and the estimated prices for and acceptance of the Company's
products. The Company continues to believe its business plans and the
assumptions upon which they are based are valid. Although these plans and
assumptions are based on the best estimates of management, there can be no
assurance that these assessments will prove to be correct. No independent
marketing studies have been conducted on behalf of or otherwise obtained by
the Company, nor are any such studies planned. Any future success that the
10
Company might enjoy will depend upon many factors, including factors which may
be beyond the control of the Company or which cannot be predicted at this
time. These factors may include product obsolescence, increased levels of
competition, including the entry of additional competitors and increased
success by existing competitors, changes in general economic conditions,
increases in operating costs including costs of supplies, personnel and
equipment, reduced margins caused by competitive pressures and other factors,
and changes in governmental regulation imposed under federal, state or local
laws.
Like other distributors of consumer products, the Company encounters the
risk of product returns from its customers. The Company's products are sold
with an unconditional, money-back guarantee. Any customer who is not
satisfied with a Company product for any reason may return it or any unused
portion for a full refund of the purchase price. Although product returns to
date have been approximately 3% of sales, which is substantially less than the
national average of 5%, there can be no assurance that actual levels of
returns will not significantly exceed amounts anticipated by the Company.
The Company's operating results may vary significantly due to a variety of
factors including changing customer profiles, the availability and cost of raw
materials, the introduction of new products by the Company or its competitors,
the timing of the Company's advertising and promotional campaigns, pricing
pressures, general economic and industry conditions that affect customer
demand, and other factors.
Results of Operations.
Net Sales. The Company realized net sales during the six months ended June 30,
1996 of $1,923,442, an increase of approximately 57.5% over net sales of
$1,220,930 generated during the six months ended June 30, 1995. At June 30,
1996, the Company's customer base had grown to approximately 70,000, up from
approximately 22,000 customers at June 30, 1995.
The average orders from new and existing customers were approximately
$58 and $78 respectively, for the six months ended June 30, 1996, compared
to average orders of approximately $50 from new customers and $74 from
existing customers respectively for the first six months of the prior year.
Sales of the Company's Prostsafe[R] accounted for substantially all
of the Company's sales for the six months ended June 30, 1995, and for
approximately 77.0% of net sales for the six months ended June 30,
1996. The Company anticipates that sales of Prostsafe TM will continue to
contribute a substantial but continually decreasing percentage of total revenues
to subsequent periods. A decline in the demand for this product, whether as a
result of competition or other factors, could have a material adverse effect
on the Company's results of operations and financial condition. The markets
for the Company's products are characterized by changing customer demand,
short product life cycles, and frequent new product introductions. The
performance of the Company will depend on the ability of the Company to
develop and market new products that will gain customer acceptance and
loyalty, as well as its ability to adapt its product offering to meet changing
pricing considerations and other market factors. The Company's operating
performance would be adversely affected if the Company were to incur delays in
11
developing new products or if such products did not gain market acceptance.
Therefore, there can be no assurance that the Company's existing or future
products will be sufficiently successful to enable the Company to effectively
compete in its prospective markets or, should the Company's product offerings
meet with significant customer acceptance, that one or more current or future
competitors will not introduce products which render the Company's products
noncompetitive.
Gross Profit. Cost of goods sold for the Company's products represents a
small percentage of net sales. During the six months ended June 30, 1995
and 1996, the Company recognized gross profits of $1,059,172 and $1,682,190, or
86.8% and 87.5%, respectively.
Advertising Expense. During the six months ended June 30, 1996, advertising
expense increased to $1,225,199, compared to $365,016 for the same period last
year. The increase includes the cost of advertising three new products and
increasing the number of advertisements placed for existing products. Not
only did advertising increase in absolute dollars during the six months ended
June 30, 1996, it increased as a percentage of net sales to 63.7% compared to
29.9% of net sales for the same period last year. The Company's management
believes its commitment to aggressively expanding its advertising budget will
result in more rapid growth and profitability than if advertising expenses
were maintained at approximately the same percentage of net sales as in the
past. For the year ended December 31, 1995, advertising expense was 37.5% of
net sales.
Selling Expense. During the six months ended June 30, 1996, selling
expenses increased to $1,134,295, compared to $413,782 for the same period in
1995, and increased as a percentage of net sales to 59.0%, compared to 33.9%
of net sales for the six months ended June 30, 1995. The increase reflects
the increased costs of marketing to an expanded customer base and the Company's
marketing of Prostsafe via direct mail.
General and Administrative Expense. General and administrative expenses have
increased as a function of the increasing volume of sales, as the Company has
been required to expand its office facilities, purchase additional computers
and other office equipment, and pay for increased postage and supplies. In
August, 1995, The Company developed a Customer Service Department which is
staffed with the Company's own employees located in its offices. This
function did not exist during the first half of 1995. Also included in
general and administrative expenses are legal expenses relating to trademark
research on new products and review of all advertising copy. For the six
months ended June 30, 1995, general and administrative expenses represented
23.8% of net sales, increasing as a percentage of net sales to 25.9% for the
six months ended June 30, 1996.
Loss From Operations. The Company incurred losses from operations for the
six months ended June 30, 1995 of $9,940, compared to $1,175,318 during the
six months ended June 30, 1996. Most of these losses during the first
half of 1996 were attributable to increases in advertising and selling costs.
12
Interest Expense. For the six months ended June 30, 1995, interest expense of
$15,511, representing 1.3% of sales, was related to loans from Acacia
Research Corporation, a principal investor in the Company, and a convertible
note payable.
The amounts remaining due and payable to Acacia Research Corporation,
including interest expense of $4,259, were paid out of the net proceeds to
the Company from the public offering. For the six months ended June 30, 1996,
interest expense represented 0.2% of sales.
Liquidity and Capital Resources
During the first six months of 1995, the Company privately sold an
aggregate of 166,417 shares of its Common Stock to a total of eight "accredited
investors" (as the term is defined in the rules and regulations of the
Securities and Exchange Commission under the Securities Act of 1933, as
amended), raising gross proceeds totaling $1,029,000.
On June 30, 1995, the Company had cash on hand of $711,406. However, from
inception through June 30, 1995, the Company had operated at a loss, as its
efforts had been focused on the development of a customer base. Management
anticipated that additional capital would be required by the end of the year to
finance the Company's operations at an increased level.
On February 20 and March 18, 1996, the Company closed its stock offering of
1,035,000 shares of common stock, raising net proceeds of approximately
$4,129,000. Additional net proceeds of approximately $180,000 were also raised
from the sale of stock warrants during this offering. The proceeds are being
used to finance accelerated marketing, advertising and promotional
activities, and the increased levels of inventories necessary to fulfill
orders generated by the increased promotional activity.
At June 30, 1996, the Company had cash on hand of $3,737,276.
The loan balance of $114,247 due to a major stockholder of the Company was
repaid with accrued interest of approximately $47,310 on February 21, 1996,
from proceeds of the offering. The balance was used primarily for magazine and
direct mail advertising The Company believes that expected cash flow plus the
proceeds of the offering will finance the Company's operations at currently
anticipated levels for a period of at least 12 months. However, there can be
no assurance that the Company will not encounter unforeseen difficulties that
may deplete its capital resources more rapidly than anticipated.
13
PART II OTHER INFORMATION
Item 1. Legal proceedings
In February 1995, a lawsuit was filed against the Company alleging
infringement, unfair competition and other claims. On January 19, 1996,
the parties entered into a mutual general release and settlement
agreement pursuant to which the Company agree that future advertisements
for Prostsafe(R) would not employ certain wording and format used in
advertisements by the plaintiff for its competing products, and the
lawsuit was dismissed with prejudice with each party paying all of its own
costs and expenses.
The Company was notified by letter dated January 12, 1996, that the
Federal Trade Commission (FTC) is conducting a preliminary, non-public
investigation regarding the advertising and sale of Prostsafe. The
Company does not believe that this advertisement makes any false or
unsubstantiated claims and has submitted a formal written response to
the FTC inquiry. If the FTC is satisfied with the substantiation
provided, it is anticipated that the investigation will be closed
without further action. Otherwise the Company could be required to
modify and discontinue certain of its advertising. The FTC also has
the power to seek financial restitution in cases where the FTC believes
that the advertising was materially false. The Company could contest
any adverse determination it believes is inappropriate before an
administrative law judge or in federal court.
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 on Form 8-K
(a) Exhibits
Exhibit 27, Financial Data Schedule Page 16
(b) Reports on Form 8-K
None
14
SIGNATURE PAGE
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
WHITEWING LABS, INC.
Date: August 13, 1996 /s/ Cynthia Kolke
---------------------------
Cynthia Kolke,
President
/s/ Elizabeth M. Meisler
---------------------------
Elizabeth M. Meisler,
Chief Financial Officer
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Financial Data Schedule
This schedule contains summary financial information extracted from the
Company's unaudited financial statements at June 30, 1995 and 1996, and is
qualified in its entirety by reference to such financial statements.
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-END> JUN-30-1995 JUN-30-1996
<CASH> 711,406 3,737,276
<SECURITIES> 0 0
<RECEIVABLES> 20,604 28,089
<ALLOWANCES> 0 0
<INVENTORY> 103,620 198,265
<CURRENT-ASSETS> 1,293,462 4,238,575
<PP&E> 89,586 119,767
<DEPRECIATION> 8,956 28,031
<TOTAL-ASSETS> 1,479,168 4,848,991
<CURRENT-LIABILITIES> 244,558 308,866
<BONDS> 0 0
0 0
0 0
<COMMON> 1,434 2,883
<OTHER-SE> 1,909,985 6,349,882
<TOTAL-LIABILITY-AND-EQUITY> 1,479,168 4,848,991
<SALES> 1,220,930 1,923,442
<TOTAL-REVENUES> 1,239,541 1,993,286
<CGS> 161,758 241,252
<TOTAL-COSTS> 1,230,870 3,098,760
<OTHER-EXPENSES> 290,314 498,014
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 15,511 4,259
<INCOME-PRETAX> (6,840) (1,109,733)
<INCOME-TAX> 5,000 3,605
<INCOME-CONTINUING> (11,840) (1,113,338)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (11,840) (1,113,338)
<EPS-PRIMARY> (0.01) (0.44)
<EPS-DILUTED> (0.01) (0.44)
</TABLE>
