U.S. 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 September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
------------ -------------
Commission File Number 000-21909
PIRANHA INTERACTIVE PUBLISHING, INC.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Nevada 86-0779928
- ------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1839 West Drake, Suite B, Tempe, Arizona 85283
----------------------------------------------
(Address of principal executive offices)
602-491-0500
----------------------------------------------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: As of November 11, 1997, the
number of shares outstanding of the Registrant's Common Stock was 3,200,000.
<PAGE>
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) :
Balance Sheet as of September 30, 1997 3
Statements of Operations for the three month and
nine month periods ended September 30, 1997 and 1996 4
Statement of Stockholders' Equity (Deficit) for the
nine months ended September 30, 1997 5
Statements of Cash Flows for the three month and
nine month periods ended September 30, 1997 and 1996 6
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 13
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 6. Exhibits and Reports on Form 8-K 14
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
PIRANHA INTERACTIVE PUBLISHING, INC.
BALANCE SHEET
SEPTEMBER 30, 1997
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 4,400,655
Accounts receivable, net of allowance for returns
of $10,362 and doubtful accounts of $5,000 13,413
Inventories 178,891
Prepaid expenses 155,261
-----------
Total current assets 4,748,220
Property and equipment, net 65,066
Other assets 4,455
===========
Total assets $ 4,817,741
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 325,541
Accrued liabilities 361,876
Notes payable - officer 6,000
-----------
Total current liabilities 693,417
Notes payable - officers 39,227
Other liabilities 9,219
-----------
Total liabilities 741,863
Stockholders' equity:
Preferred stock, $.001 par value; 5,000,000 shares
authorized; no shares issued and outstanding
Common stock, $.001 par value; 20,000,000 shares
authorized; 3,200,000 shares issued and outstanding 3,200
Additional paid-in capital 5,912,407
Accumulated deficit (1,839,729)
-----------
Total stockholders' equity 4,075,878
===========
Total liabilities and stockholders' equity $ 4,817,741
===========
See accompanying notes.
3
<PAGE>
PIRANHA INTERACTIVE PUBLISHING, INC.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTH AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- -----------------------
1996 1997 1996 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 50,752 $ 8,896 $ 403,896 $ 76,553
Cost of goods sold 93,684 87,672 279,384 184,615
--------- --------- --------- -----------
Gross profit (loss) (42,932) (78,776) 124,512 (108,062)
Selling, general and administrative
expenses 170,147 429,332 676,054 1,126,360
--------- --------- --------- -----------
Loss from operations (213,079) (508,108) (551,542) (1,234,422)
Interest expense 5,239 167,255 9,239 392,788
--------- --------- --------- -----------
Net loss $(218,318) $(675,363) $(560,781) $(1,627,210)
========= ========= ========= ===========
Net loss per common share $ (1.16) $ (3.65)
========= ===========
Shares used in computing net loss
per common share 583,696 445,330
========= ===========
Pro forma net loss data:
Loss before income taxes $(218,318) $(560,781)
Pro forma income tax benefit 18,536 47,615
--------- ---------
Pro forma net loss $(199,782) $(513,166)
========= =========
Pro forma net loss per common share $ (0.53) $ (1.28)
========= =========
Shares used in computing pro forma
net loss per common share 375,000 402,395
========= =========
</TABLE>
See accompanying notes.
4
<PAGE>
PIRANHA INTERACTIVE PUBLISHING, INC.
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Common Stock Additional
------------------ Paid-in Accumulated
Shares Amount Capital Deficit Total
------ ------ ------- ------- -----
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1996 1,600,000 $1,600 $ (491,103) $ (212,519) $ (702,022)
Sale of 1,600,000 shares
of common stock 1,600,000 1,600 6,400,510 -- 6,402,110
Issuance of stock options -- -- 3,000 -- 3,000
Net loss -- -- -- (1,627,210) (1,627,210)
========= ====== ========== =========== ===========
Balance, September 30, 1997 3,200,000 $3,200 $5,912,407 $(1,839,729) $ 4,075,878
========= ====== ========== =========== ===========
</TABLE>
See accompanying notes.
5
<PAGE>
PIRANHA INTERACTIVE PUBLISHING, INC.
STATEMENT OF CASH FLOWS
FOR THE THREE MONTH AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- ----------------------
1996 1997 1996 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net cash used in operating activities $(37,939) $ (67,853) $(167,005) $ (693,875)
Net cash used in investing activities (265) -- (40,442) (10,749)
Net cash provided by financing activities 36,375 4,442,547 5,891 4,858,547
-------- ---------- --------- ----------
Net increase (decrease) in cash and
cash equivalents (1,829) 4,374,694 (201,556) 4,153,923
Cash and cash equivalents, beginning 2,489 25,961 202,216 246,732
-------- ---------- --------- ----------
Cash and cash equivalents, ending $ 660 $4,400,655 $ 660 $4,400,655
======== ========== ========= ==========
</TABLE>
See accompanying notes.
6
<PAGE>
PIRANHA INTERACTIVE PUBLISHING, INC.
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
BASIS OF PRESENTATION
Interim Financial Information
The unaudited interim financial statements include all adjustments, consisting
of only normal recurring adjustments which, in the opinion of management, are
necessary for their fair presentation. The results of operations for the interim
periods are not necessarily indicative of the operating results for the full
year. These financial statements have been prepared in accordance with the
instructions to Form 10-QSB and do not contain certain information required by
generally accepted accounting principles. These statements should be read in
conjunction with the financial statements and notes thereto for the year ended
December 31, 1996 included in the Company's Registration Statement on Form SB-2,
on file with the Securities and Exchange Commission.
Loss Per Share
The computation of loss per share is based on the weighted average number of
common shares outstanding for each period. As the conditions for release of the
1,225,000 escrow shares have not been met nor will they be met upon the mere
passage of time, the escrow shares have been considered contingently issuable
and, accordingly, have been excluded from the weighted average number of common
shares outstanding used for the calculation of the primary net loss per share.
All common stock equivalents are excluded from the computation of net loss per
share as their effect would be antidilutive.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This Report contains certain "forward-looking statements", including statements
regarding, among other items, the Company's growth strategy, future sales and
anticipated trends in the Company's business. Actual results could differ
materially from these forward-looking statements as a result of a number of
factors, including, but not limited to, the Company's early stage of
development, intense competition in various aspects of its business, the
seasonal nature of its business, its dependence on third party authors and key
personnel, risks associated with bringing its software titles to market and
other factors described in the Company's documents on file with the U.S.
Securities and Exchange Commission.
OVERVIEW
The Company publishes interactive multimedia software products providing
education and entertainment as well as reference and personal productivity
titles for the home personal computer ("PC") market. The Company's management
team has worked closely together for the past three to six years and all have
prior software publishing experience. Since inception in November 1994, the
Company's activities included assembling its management team, developing
infrastructure and obtaining titles for publication. As a result of its working
capital deficiency during 1996 and through the closing date of its initial
public offering on September 23, 1997, the Company's net sales were materially
hampered by its inability to ship quantities of products to satisfy customer
demand and to launch new products. Consequently, the Company believes that the
comparisons below in "Results of Operations" are neither meaningful nor
representative of future results.
On September 23, 1997, the Company completed a public offering of 1,600,000
units, each consisting of one share of common stock and one Class A warrant, at
a price to the public of $5.00 per unit. The net proceeds of the offering to the
Company, after deducting all associated costs, were approximately $6,400,000.
The home education and entertainment software business is highly seasonal.
Typically, revenues are highest during the third and fourth calendar quarters
(which includes the holiday buying season), decline in the first calendar
quarter and are lowest in the second calendar quarter. This seasonal pattern is
due primarily to the increased demand for home education and entertainment
software titles during the year-end holiday buying season.
The Company's initial public offering closed seven days prior to the end of the
third quarter of 1997, and as a result, the Company will not be positioned to
take full advantage of developing, marketing and shipping certain titles in time
for the holiday buying season. In addition, the Company's planned launch of the
3-D action game, DEAD RECKONING, has been delayed from the fourth quarter of
1997 to the first quarter of 1998 due to extended development requirements. The
Company has also terminated its plans to publish a second title, CRACKING THE
CONSPIRACY, due to extended development requirements and a shift in consumer
buying trends. Management expects these factors to have a material adverse
effect on fourth quarter revenues and profitability.
8
<PAGE>
Notwithstanding these developments, the Company has released two new titles,
REVENGE OF THE TOYS[tm] and AIR BLOCKS[tm], in the fourth quarter of 1997 which
had not been signed at the time of the initial public offering, and has just
executed a license agreement with Maris Multimedia to publish four educational
software titles, including the sequel to the best-selling REDSHIFT astronomy
series. These titles are scheduled for release in the first quarter of 1998
RESULTS OF OPERATIONS
Comparison of Three Month Periods Ended September 30, 1997 and 1996
Net Sales
The Company's net sales for the three month period ended September 30, 1997 were
$8,896, which represents a $41,856 or 82% decrease from the comparable 1996
period. Net sales for 1997 and 1996 were adversely affected by the Company's
working capital deficiency. This deficiency prevented the Company from shipping
existing products in a timely manner and in sufficient quantities to meet
customer demand and from acquiring and launching new products.
Gross Loss
The Company experienced a gross loss of $(78,776) during the three month period
ended September 30, 1997 as compared to $(42,932) during the three month period
ended September 30, 1996. Cost of goods sold decreased from $93,684 during the
three month period ended September 30, 1996 to $87,672 during the corresponding
1997 period. The gross loss during both periods is primarily attributable to
insufficient sales to offset the up-front design and development costs
associated with the future release of three new products.
The Company anticipates improved gross profit margins in the future due to
higher sales volumes of new and future titles, which will offset up-front design
and development costs. The Company expects sales volume to increase as it
launches new products and expands its marketing efforts and distribution
channels. In addition, the Company intends to continue to focus on entertainment
and educational titles, which tend to have higher profit margins.
9
<PAGE>
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased to approximately $429,000
during the three month period ended September 30, 1997, compared with
approximately $170,000 during the corresponding 1996 period. The increase was
primarily attributable to the hiring of additional personnel and the Company's
expanded marketing efforts related to new and future products during the three
months ended September 30, 1997. Salaries and payroll taxes increased from
approximately $78,000 during the 1996 period to approximately $167,000 in the
1997 period as a result of such additional personnel. In addition, sales,
advertising and marketing costs increased from approximately $26,000 during the
1996 period to approximately $163,000 during the 1997 period. The Company
anticipates that future selling, general and administrative expenses will
increase in the aggregate as the Company adds personnel, launches new products
and expands its marketing efforts and distribution channels. Management expects,
however, that such expenses will decrease as a percentage of net sales as the
Company's revenues from product sales increase.
Interest Expense
Interest expense increased to approximately $167,000 during the three month
period ended September 30, 1997, compared to approximately $5,000 during the
corresponding 1996 period. The increase is due primarily to amortization expense
related to deferred financing costs and interest expense related to the bridge
notes issued in the fourth quarter of 1996, and interest expense related to
various notes payable issued during the second and third quarters of 1997. These
notes were repaid in September of 1997. Upon repayment of the bridge notes, the
Company recorded a charge of approximately $50,000, representing the unamortized
portion of the debt discount, interest, and deferred financing costs of the
bridge financing, which is included in interest expense for the three month
period ended September 30, 1997.
Due to the above, the Company had a net loss for the three month period ended
September 30, 1997 of $(675,363) or $(1.16) per share, compared to pro forma net
loss of $(199,782) or $(0.53) per share for the three month period ended
September 30, 1996.
Comparison of Nine Month Periods Ended September 30, 1997 and 1996
Net Sales
The Company's net sales for the nine month period ended September 30, 1997 were
$76,553, which represents a $327,343 or 81% decrease from the comparable 1996
period. Net sales for 1997 and 1996 were adversely affected by the Company's
working capital deficiency. This deficiency prevented the Company from shipping
existing products in a timely manner and in sufficient quantities to meet
customer demand and from acquiring and launching new products. In addition to
the limited ability to launch new titles in 1997, the Company's net sales were
adversely affected by the absence of continuing sales of products launched
10
<PAGE>
during the 1996 fourth quarter holiday buying season, as compared to the
existence of such sales during the comparable nine month period of 1996 from the
1995 holiday buying season.
Gross Profit (Loss)
The Company's gross profit of $124,512, or 31% of net sales, during the nine
month period ended September 30, 1996 decreased to a gross loss of $(108,062),
or (141%) of net sales, during the nine month period ended September 30, 1997.
Cost of goods sold decreased from $279,384 during the nine month period ended
September 30, 1996 to $184,615 during the corresponding 1997 period. The gross
loss during the 1997 period is primarily attributable to insufficient sales to
offset the up-front design and development costs associated with the launch of
two products and future release of three new products.
The Company anticipates improved gross profit margins in the future due to
higher sales volumes of new and future titles, which will offset up-front design
and development costs. The Company expects sales volume to increase as it
launches new products and expands its marketing efforts and distribution
channels. In addition, the Company intends to continue to focus on entertainment
and educational titles, which tend to have higher profit margins.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased to approximately
$1,126,000 during the nine month period ended September 30, 1997, compared with
approximately $676,000 during the corresponding 1996 period. The increase was
primarily attributable to the hiring of additional personnel and the Company's
expanded marketing efforts related to new and future products during the nine
months ended September 30, 1997. Salaries and payroll taxes increased from
approximately $254,000 during the 1996 period to approximately $458,000 in the
1997 period as a result of such additional personnel. In addition, sales,
advertising and marketing costs increased from approximately $225,000 during
1996 to approximately $423,000 during the 1997 period. The Company anticipates
that future selling, general and administrative expenses will increase in the
aggregate as the Company adds personnel, launches new products and expands its
marketing efforts and distribution channels. Management expects, however, that
such expenses will decrease as a percentage of net sales as the Company's
revenues from product sales increase.
Interest Expense
Interest expense increased to approximately $393,000 during the nine month
period ended September 30, 1997, compared to approximately $9,000 during the
corresponding 1996 period. The increase is due primarily to amortization expense
related to deferred financing costs and interest expense related to the bridge
notes issued in the fourth quarter of 1996, and interest expense related to
various notes payable issued during the second and third quarters of 1997. These
notes were repaid in September 1997 from a portion of the proceeds from the
11
<PAGE>
Company's initial public offering. Upon repayment of the bridge notes, the
Company recorded a charge of approximately $50,000, representing the unamortized
portion of the debt discount, interest, and deferred financing costs of the
bridge financing, which is included in interest expense for the nine month
period ended September 30, 1997.
Due to the above, the Company had a net loss for the nine month period ended
September 30, 1997 of $(1,627,210) or $(3.65) per share, compared to pro forma
net loss of $(513,166) or $(1.28) per share for the nine month period ended
September 30, 1996.
FINANCIAL CONDITION
The Company's cash and cash equivalent balance totaling $4,400,655 as of
September 30, 1997, is invested primarily in an investment grade money market
fund in order to minimize investment risk and facilitate instant access in the
event of immediate cash needs.
The Company long-term debt consists primarily of notes payable to officers in
the aggregate amount of $39,227, including interest, which are due August 1,
1999.
In recent periods, the Company's expenditures have exceeded its revenues. The
Company's operating activities used cash for operations of $693,875 during the
nine month period ended September 30, 1997, while revenues for the same period
were $76,553. The Company anticipates that its expenses will increase as it
attempts to expand its business by acquiring new products and increasing sales
and marketing efforts and other operations. The Company expects to continue to
incur losses until such time as it is able to sell a sufficient volume of
products at prices that provide adequate gross profit to cover operating costs.
The Company's working capital requirements will depend upon numerous factors,
including payment cycles for its shipped products, credit arrangements with
suppliers, the scale-up of its sales and marketing resources, acquisition of new
products and the terms upon which such products are acquired, competitive
factors including costs associated with obtaining adequate levels of retail
shelf space, and marketing activities.
The Company does not currently have a credit facility or other commitment for
additional financing. The Company may be required to seek additional financing
in the event of delays, cost overruns or unanticipated expenses associated with
a company in an early stage of development, or in the event the Company does not
realize anticipated revenues. In addition, the Company may require additional
financing in the future to further expand its product offerings or to make
strategic acquisitions. There can be no assurance that such additional financing
will be available, or that, if available, such financing will be obtainable on
terms favorable to the Company or its stockholders.
12
<PAGE>
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On September 18, 1997, the Company's Registration Statement on Form SB-2 (File
No. 333-18605) (the "Form SB-2"), was declared effective by the U.S. Securities
and Exchange Commission. The Form SB-2 was prepared in connection with an
initial public offering by the Company of 1,600,000 units, each consisting of
one share of common stock and one Class A Warrant. The units and the components
thereof were each separately tradable upon issuance. Each Class A Warrant
entitles the holder to purchase one share of the Company's Common Stock at an
exercise price of $6.50 at any time prior to September 18, 2002. The offering of
units pursuant to the Form SB-2 commenced on September 18, 1997 and terminated
September 23, 1997, the date on which all of the units were sold. The offering
was underwritten by D.H. Blair Investment Banking Corp. on a firm commitment
basis. The units were offered to the public at a price of $5.00 per unit, or
$8,000,000 in the aggregate for all 1,600,000 units offered, all of which were
sold as of the date the offering terminated.
During the period commencing September 18, 1997 and terminating September 30,
1997 (the "Post-Effective Period"), the Company's actual expenses incurred in
connection with the issuance and distribution of the units registered pursuant
to the Form SB-2 equaled approximately $1,600,000 in the aggregate, which
consisted of the following: (i) $760,000 in aggregate underwriting discounts and
commissions, (ii) $240,000 in expenses paid to or for the underwriter and (iii)
$600,000 in other expenses. None of the $600,000 in other expenses consisted of
direct or indirect payments to the Company's officers, directors, holders of at
least 10% of any class of the Company's outstanding securities or other
affiliates (collectively "Affiliates").
After deducting the foregoing expenses, the offering resulted in approximately
$6,400,000 in net proceeds to the Company. During the Post-Effective Period, the
Company used approximately $2,245,000 of the net proceeds for the repayment of
indebtedness, and approximately $60,000 was paid to affiliates for payment of
accrued salaries. The preceding discussion of the Company's use of net proceeds
reflects actual amounts paid by the Company. The Company's use of proceeds from
the offering, as described herein, does not represent a material change from
that described in the prospectus included in the Form SB-2.
13
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
As of August 15, 1997, the Company's stockholders adopted certain actions by
written consent in lieu of a combined annual meeting of the shareholders and
Board of Directors. Pursuant to such action, the following persons were elected
to serve as Directors of the Company for a term specified as set forth below:
Timothy M. Brannan Class III, expiring 2000
Keith P. Higginson Class II, expiring 1999
Michael Flink Class II, expiring 1999
J. Wade Stallings, II Class I, expiring 1998
Ian D. Berman Class I, expiring 1998
In addition to the election of Directors, the Company's stockholders unanimously
consented to the approval of each of the following matters: (i) appointment of
Coopers & Lybrand, LLP as the independent auditors of the Company for the 1998
fiscal year, (ii) purchase of key management employee life insurance and
director and officer liability indemnification insurance policies, (iii) an
amendment to the Company's 1996 Stock Option Plan to include "software
licensors" as eligible participants therein, and (iv) ratification of all acts
and proceedings of the Board of Directors and officers of the Company during the
period commencing November 22, 1996 through the date of such written action.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
EXHIBIT
NUMBER DESCRIPTION
11.1 -- Computation of Loss per Share
27.1 -- Financial Data Schedule
(b) Reports on Form 8-K.
None.
14
<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.
PIRANHA INTERACTIVE PUBLISHING, INC.
Date: November 14, 1997 /s/ Timothy M. Brannan
----------------- -----------------------
Timothy M. Brannan, Chief Executive Officer
Date: November 14, 1997 /s/ Keith P. Higginson
----------------- ------------------------
Keith P. Higginson, Chief Financial Officer
15
EXHIBIT 11.1
PIRANHA INTERACTIVE PUBLISHING, INC.
COMPUTATION OF LOSS PER COMMON SHARE
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- -------------------------
1996 1997 1996 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net loss for loss per
share calculation $ (675,363) $(1,627,210)
========== ===========
Pro forma net loss for loss
per share calculation $ (199,782) $ (513,166)
========== ==========
Shares:
Weighted average number of common
shares outstanding 1,600,000 1,808,696 1,627,395 1,670,330
---------- ---------- ---------- -----------
Less the weighted average number of
shares of common stock in escrow 1,225,000 1,225,000 1,225,000 1,225,000
---------- ---------- ---------- -----------
Weighted average number of common
shares outstanding 375,000 583,696 402,395 445,330
========== ========== ========== ===========
Net loss per common share $ (1.16) $ (3.65)
========== ===========
Pro forma net loss per common share $ (0.53) $ (1.28)
========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
ACCOMPANYING FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS AND NOTES.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 4400655
<SECURITIES> 0
<RECEIVABLES> 13413
<ALLOWANCES> 15362
<INVENTORY> 178891
<CURRENT-ASSETS> 4748220
<PP&E> 103030
<DEPRECIATION> 37964
<TOTAL-ASSETS> 4817741
<CURRENT-LIABILITIES> 693417
<BONDS> 0
0
0
<COMMON> 3200
<OTHER-SE> 4072678
<TOTAL-LIABILITY-AND-EQUITY> 4817741
<SALES> 76553
<TOTAL-REVENUES> 76553
<CGS> 184615
<TOTAL-COSTS> 184615
<OTHER-EXPENSES> 1126360
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 392788
<INCOME-PRETAX> (1627210)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1627210)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1627210)
<EPS-PRIMARY> (3.65)
<EPS-DILUTED> (3.65)
</TABLE>
