<PAGE> 1
U. S. 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 28, 1996 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: 1-8145
THORATEC LABORATORIES CORPORATION
(Exact Name of Small Business Issuer as Specified in Its Charter)
<TABLE>
<CAPTION>
California 94-2340464
<S> <C>
(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.)
2023 Eighth Street, Berkeley, California 94710
(Address of Principal Executive Offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (510) 841-1213
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
--- ---
As of November 4, 1996, registrant had 17,928,861 shares of
common stock outstanding.
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THORATEC LABORATORIES CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
September 28, December 30,
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 6,152,352 $ 1,645,523
Short-term investments available for sale 10,946,287
Receivables 1,190,903 581,298
Inventories (Note 5) 2,334,129 1,374,164
Prepaid expenses and other 234,053 249,048
------------ ------------
Total current assets 20,857,724 3,850,033
Equipment and leasehold improvements, at cost 2,312,803 2,119,085
Construction in progress 48,177
Accumulated depreciation and amortization (1,810,269) (1,725,726)
------------ ------------
Equipment and leasehold improvements - net 550,711 393,359
Other Assets (Note 8) 922,813 136,645
------------ ------------
TOTAL ASSETS $ 22,331,248 $ 4,380,037
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 1,077,727 $ 598,100
Accrued compensation 393,976 101,006
Other 542,582 343,260
------------ ------------
Total current liabilities 2,014,285 1,042,366
Long-term debt (Note 6) 1,675,000
Shareholders' Equity (Note 3)
Common shares, 100,000,000 authorized; issued and
outstanding 17,928,236 in 1996 and 14,933,136 in 1995 63,519,027 42,746,421
Additional capital 2,395,901 2,333,689
Net unrealized gain (loss) on investments (5,876)
Accumulated deficit (45,589,889) (43,416,454)
Cumulative translation adjustment (2,200) (985)
------------ ------------
Total shareholders' equity 20,316,963 1,662,671
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 22,331,248 $ 4,380,037
============ ============
</TABLE>
See notes to condensed consolidated financial statements.
- 2 -
<PAGE> 3
THORATEC LABORATORIES CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
--------------------------------- ----------------------------------
September 28, September 30, September 28, September 30,
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenue:
Product sales - net $ 2,002,117 $ 616,778 $ 5,491,356 $ 2,556,224
Interest and other income
(Note 3) 252,509 6,526 329,739 25,408
------------ ------------ ------------ ------------
Total revenue 2,254,626 623,304 5,821,095 2,581,632
------------ ------------ ------------ ------------
Costs and expenses:
Costs of products sold 747,229 308,922 2,387,049 1,331,961
Research and development 1,022,571 449,340 2,494,096 1,210,309
Selling, general and
administrative 1,157,053 329,488 2,689,279 955,148
Debt conversion expense
(Note 6) 378,295
Interest expense (Note 6) 46,441 45,811 138,445
------------ ------------ ------------ ------------
Total costs and expenses 2,926,853 1,134,191 7,994,530 3,635,863
------------ ------------ ------------ ------------
Net loss $ (672,227) $ (510,887) $ (2,173,435) $ (1,054,231)
============ ============ ============ ============
Net loss per common share $ (.04) $ (.04) $ (.13) $ (.07)
============ ============ ============ ============
Weighted average number of
common shares outstanding 17,874,666 14,301,637 16,279,521 14,266,999
</TABLE>
See notes to condensed consolidated financial statements.
- 3 -
<PAGE> 4
THORATEC LABORATORIES CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
---------------------------------
September 28, September 30,
1996 1995
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (2,173,435) $ (1,054,231)
Adjustments to reconcile net loss to net cash used in
operating activities:
Debt conversion (Note 6) 378,295
Common stock options granted for services (Note 7) 62,212
Depreciation and amortization 93,918 81,926
Changes in assets and liabilities:
Receivables (609,605) 899
Prepaid expenses and other 14,995 (50,116)
Inventories (959,965) (40,499)
Other assets (796,758) (101,486)
Accounts payable and other liabilities 971,919 277,675
------------ ------------
Net cash used in operating activities (3,018,424) (885,832)
------------ ------------
Cash flows from investing activities:
Purchases of short-term investments available for sale (47,323,236)
Maturities of short-term investments available for sale 25,515,000
Sales of short-term investments available for sale 10,856,073
Capital expenditures (241,895) (88,253)
------------ ------------
Net cash used in investing activities (11,194,058) (88,253)
------------ ------------
Cash flows from financing activities:
Common stock issued in private placement - net 2,441,565
Common stock issued in public placement - net 17,591,204
Common stock issued upon exercise of warrants 961,739
Common stock issued upon exercise of options 166,368 20,029
------------ ------------
Net cash provided by financing activities 18,719,311 2,461,594
------------ ------------
Net increase in cash and cash equivalents 4,506,829 1,487,509
Cash and cash equivalents at beginning of period 1,645,523 1,026,229
------------ ------------
Cash and cash equivalents at end of period $ 6,152,352 $ 2,513,738
============ ============
Noncash Financing Transactions:
Conversion of notes into common stock (Note 6) $ 1,675,000
Other Cash Flow Information:
Interest paid $ 45,811 $ 138,445
</TABLE>
See notes to condensed consolidated financial statements
- 4 -
<PAGE> 5
THORATEC LABORATORIES CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The interim consolidated financial statements presented have been prepared
by Thoratec Laboratories Corporation (the Company) without audit and, in
the opinion of management, reflect all adjustments necessary (consisting
only of normal recurring adjustments) to present fairly the financial
position, results of operations and cash flows at September 28, 1996 and
for all periods presented. The results of operations for any interim period
are not necessarily indicative of results for a full year.
The consolidated balance sheet presented as of December 30, 1995, has been
derived from the consolidated financial statements that have been audited
by the Company's independent public accountants. The consolidated financial
statements and notes are presented as permitted by the Securities and
Exchange Commission and do not contain certain information included in the
annual consolidated financial statements and notes of the Company. It is
suggested that the accompanying condensed consolidated financial statements
be read in conjunction with the audited consolidated financial statements
and the notes thereto contained in the Company's Annual Report on Form 10-K
for the fiscal year ended December 30, 1995, filed with the Securities and
Exchange Commission.
The preparation of the Company's consolidated financial statements in
conformity with generally accepted accounting principles necessarily
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the consolidated balance sheet dates and the
reported amounts of revenues and expenses for the periods presented.
2. ADDITIONS TO SIGNIFICANT ACCOUNTING POLICIES
As a result of the public offering of the Company's shares of common stock
in July 1996 (See Note 3) and the related proceeds received, the following
new accounting policy is relevant to the current reporting period.
Investments
The Company's short-term investments are classified as available-for-sale
and reported at fair value. Net unrealized gains and losses are excluded
from earnings and reported as a separate component of stockholders' equity.
Funds provided by a public offering of the Company's common stock in July
1996 are currently being held for investment until such time that the funds
are needed by the
- 5 -
<PAGE> 6
Company for operations and capital expenditures. As of September 28, 1996,
short-term investments were comprised primarily of certificates of deposit,
commercial paper, corporate notes and U.S. government treasury and agency
notes with maturity dates within 12 months of the date of investment.
3. FINANCIAL POSITION AND LIQUIDITY
In July 1996 the Company sold, through an underwritten public offering,
1,644,000 shares of common stock at $12.00 per share. Included in the
1,644,000 shares are 144,000 shares sold pursuant to an underwriters'
over-allotment option. Also issued to the underwriters in connection with
the public offering were five-year warrants to purchase 164,400 shares of
the Company's common stock at $14.40 per share. The warrants are currently
exercisable and include a net exercise provision. Net cash proceeds
received by the Company related to this offering were approximately
$17,591,000. Underwriters' commissions, the fair value of warrants issued
to the underwriters, and approximately $1,050,000 of other estimated costs
have been recorded as an offset to common stock upon the closing of the
offering.
With the proceeds of this offering, the Company believes that it has
sufficient funds to increase its marketing efforts, to increase
manufacturing efficiencies through construction of a new manufacturing
facility, and to develop new sources of revenue, including new products.
However, the Company expects that its operating expenses will increase in
future periods as the Company expends increased amounts on product
manufacturing and marketing and on research and development of new product
lines. As a result the Company expects to incur net losses for at least the
next year. There can be no assurance that the Company will achieve
profitability or positive cash flow.
4. REVERSE STOCK SPLIT
On April 26, 1996, the Board of Directors authorized a one-for-three
reverse split of the Company's common stock which was approved by the
shareholders on June 3, 1996. All references in the condensed consolidated
financial statements to number of shares, per share amounts and prices of
the Company's common stock have been retroactively restated to reflect the
decreased number of common shares outstanding.
5. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
September 28, December 30,
1996 1995
------------- ------------
<S> <C> <C>
Finished goods $ 951,095 $ 397,462
Work in process 738,799 540,673
Raw materials 644,235 436,029
---------- ----------
Total $2,334,129 $1,374,164
========== ==========
</TABLE>
- 6 -
<PAGE> 7
6. LONG-TERM DEBT
In the last quarter of 1994, the Company placed $1.675 million of
convertible secured debt with private lenders. The notes were convertible
into common stock at rates ranging from $4.92 to $6.38 per share, bore
interest at 11% and were due in three years. The debt was secured by the
royalties payable pursuant to the Licensing Agreement with COBE
Laboratories, Inc., all accounts receivable, equipment and inventory.
Five-year warrants to purchase 210,201 shares of Thoratec common stock at
$6.38 per share were also issued with the convertible notes.
In the first quarter of 1996, all $1.675 million of these notes were
converted into 342,537 shares of common stock, according to the terms of
the original transaction. In connection with this conversion, the Company
reduced the exercise price of the related five-year warrants to $4.50 per
share for a thirty day period. All warrants issued in connection with the
above noted convertible secured debt (representing 213,720 shares as
adjusted for antidilutive provisions) were exercised for total proceeds of
approximately $960,000. As all warrants were exchanged and the exercise
price reduced, $378,000 of noncash debt conversion expense was recorded.
7. OPTIONS AND WARRANTS
In the first quarter of 1996, the Directors adopted the 1996 Stock Option
Plan ("1996 SOP") and the 1996 Nonemployee Directors Stock Option Plan
("Directors Option Plan"). The 1996 SOP consists of two parts. Part One
permits the Company to grant options to purchase up to 500,000 shares of
common stock. During the first and third quarters of 1996, 38,333 and
130,000 options, respectively, were granted at fair market value under this
Part of the Plan. Part One of the 1996 SOP was approved by Shareholders at
the Annual Meeting of Shareholders held on June 3, 1996. Part Two relates
to the Chief Executive Officer (CEO) and permits the Company to grant
non-qualified options to the CEO to purchase up to 333,333 shares of common
stock. During the first quarter of 1996, 333,333 options were granted at
fair market value under this Part of the Plan. Part Two of the 1996 SOP
required Director approval only. The Directors Option Plan permits the
Company to grant options to purchase up to 150,000 shares of common stock.
The Company currently has five non-employee directors who are eligible to
participate in the Directors Option Plan. During the second quarter of
1996, 13,332 options were granted at fair market value. The Directors
Option Plan was approved by Shareholders at the Annual Meeting of
Shareholders held on June 3, 1996.
In the first quarter of 1996, agreements were made with selected
consultants whereby options to purchase the Company's common stock were
accepted by these consultants as partial payment for the services they
render to the Company. The fair market value of the consulting service is
the basis for recording the transaction in the Company's financial records
and will be recognized as the related services are performed. Options
issued under these agreements totaled 61,358.
In the second quarter of 1996 the Company amended the terms of an
outstanding warrant to purchase 666,667 shares of the Company's common
stock at $.003 per share to add a net exercise provision. Subsequently, the
warrant was exercised using this provision and the Company issued 666,584
shares of stock to the warrant holder and withheld 83 shares to effect the
exercise.
- 7 -
<PAGE> 8
8. MATERIAL CONTRACT
In July 1996, the Company entered into a lease agreement on a new
manufacturing facility to be located within 50 miles of its current
facility. This building, when completed, will accommodate all of the
Company's manufacturing, engineering and administrative activities. The
building is scheduled to be completed and ready for occupancy in mid 1997.
The Company will invest approximately $5 million in equipment and leasehold
improvements to the building prior to occupancy. Annual lease payments will
initially be approximately $612,000 for a lease term of 15 years and will
commence four months after the landlord has delivered the completed
building shell to the Company. The lease includes provisions, among others,
for annual cost of living adjustments to the lease payments, two five-year
renewal options, a purchase option, and a security deposit of $885,600. A
significant portion ($750,000) of the security deposit can be reduced or
eliminated and returned to the Company before the end of the initial lease
term if the Company meets certain criteria as specified by the contract.
- 8 -
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
Liquidity and Capital Resources
At the end of the third quarter of 1996 the Company had working capital of
$18,843,000 compared with $2,808,000 at the end of 1995. The increase in working
capital was due to proceeds received from the public offering of the Company's
common stock discussed below, proceeds received upon the exercise of warrants to
purchase common stock in the first quarter of 1996 (see Note 6 of Notes to the
Condensed Consolidated Financial Statements) and proceeds received from option
exercises. The preceding items increasing working capital were partially offset
by increased loss from operations, and increases in accrued corporate and
research and development expenses. Concurrent with the above noted warrant
exercise, all outstanding secured notes payable were converted into common
stock. Receivables increased principally due to increasing sales. Inventory
increased in preparation for planned increases in sales activity. Accounts
payable and accrued liabilities increased due to capital asset purchases made
near quarter end and costs associated with increased research and development
activity, increased personnel costs, increased patent, FDA and legal costs and
costs associated with the public offering of the Company' common stock discussed
below.
In July 1996, the Company sold, through an underwritten public offering,
1,644,000 shares of common stock at $12.00 per share. Included in the 1,644,000,
are 144,000 shares sold pursuant to an underwriters' over-allotment option. Net
proceeds received by the Company related to this offering were approximately
$17,591,000 after underwriters' commissions and approximately $1,050,000 of
other costs.
Also in July, the Company entered into a lease agreement on a new manufacturing
facility to be located within 50 miles of its current facility. This building,
when completed, will accommodate all of the Company's manufacturing, engineering
and administrative activities. The building is scheduled to be completed and
ready for occupancy in mid 1997. The Company will invest approximately $5
million in equipment and leasehold improvements to the building prior to
occupancy. Annual lease payments will initially be approximately $612,000 for a
lease term of 15 years and will commence four months after the landlord has
delivered the completed building shell to the Company. The lease includes
provisions, among others, for annual cost of living adjustments to the lease
payments, two five-year renewal options, a purchase option, and a security
deposit of $885,600, which the Company paid in July 1996. A significant portion
($750,000) of the security deposit can be reduced or eliminated and returned to
the Company before the end of the initial lease term if the Company meets
certain criteria as specified by the contract. See Note 8 of Notes to the
Condensed Consolidated Financial Statements.
With the proceeds of the above noted public offering, the Company believes that
it has sufficient funds to increase its marketing efforts, to increase
manufacturing efficiencies through construction of its new manufacturing
facility and to develop new sources of revenue, including new products. However,
the Company expects that its operating expenses will increase in future periods
as the Company expends increased amounts on product manufacturing and marketing
and on research and development of new product lines. As a result, the Company
expects to incur net losses for at least the next year. There can be no
assurance that the Company will achieve profitability or positive cash flow.
The Company does not expect that inflation will have a material impact on its
operations.
- 9 -
<PAGE> 10
Results of Operations
Fiscal Quarters Ended September 28, 1996 and September 30, 1995
Product sales in the third quarter of 1996 were $2,002,117 compared to $616,778
in the third quarter of 1995. The $1,385,339, or 225%, increase is primarily the
result of increased sales of the VAD System in the United States following FDA
approval of the System in late 1995 and efforts of a direct sales organization
established in late 1995 and early 1996. Domestic sales increased $1,229,186, or
389%, in the third quarter of 1996 compared to the third quarter of 1995.
Interest and other income increased $245,983 to $252,509 in 1996 due principally
to higher cash balances primarily as a result of proceeds received from the
Company's public stock offering in July 1996. Cost of sales increased $438,307,
or 142%, in the third quarter of 1996 compared to the third quarter of 1995 as a
result of the higher sales volume in 1996. Gross margin increased from 50% in
1995 to 63% in 1996 due to the ability of the Company to raise selling prices of
its VAD pumps in the second quarter of 1996, after receiving FDA approval in
late 1995. Research and development expenses for the third quarter of 1996
increased $573,231, or 128%, compared to the third quarter of 1995 due to
increased costs associated with the development of the Company's portable VAD
driver, the TLC-II, and its graft products and preparation for a PMA Supplement
for a new indication for use for its existing VAD System. Selling, general and
administrative expenses in the third quarter of 1996 increased $827,074, or
251%, compared to the second quarter of 1995 principally as a result of
establishing the domestic sales and marketing organization, corporate and legal
expenses associated with trademark and patent submissions and general support
needed for expected growth. There was no interest expense in the third quarter
of 1996, compared to $46,441 in 1995, because all $1,675,000 of convertible
notes issued in 1994 were converted into common stock in the first quarter of
1996.
Nine Months Ended September 28, 1996 and September 30, 1995
Product sales in the first nine months of 1996 were $5,491,356 compared to
$2,556,224 in the first nine months of 1995. The 115% increase is primarily the
result of increased sales of the VAD System in the United States following FDA
approval of the System in late 1995 and efforts of a direct sales organization
established in late 1995 and early 1996. Domestic sales increased $2,894,850, or
275%, in the first nine months of 1996. Interest and other income increased
$304,331 to $329,739 in 1996 due principally to higher cash balances primarily
as a result of proceeds received from the Company's public stock offering in
July 1996. Cost of sales increased $1,055,088, or 79%, in the first nine months
of 1996 compared to the first nine months of 1995 as a result of the higher
sales volume in 1996 and approximately $100,000 incurred to upgrade existing
investigational center equipment. Gross margins increased from 48% in 1995 to
57% in 1996 due to the ability of the Company to raise selling prices of its VAD
pumps beginning in the second quarter of 1996, offset by the previously
mentioned $100,000 upgrade charge. Research and development expenses for the
first nine months of 1996 increased $1,283,787, or 106%, compared to the first
nine months of 1995 due to increased costs associated with the development of
the Company's portable VAD driver, the TLC-II, and its graft products and
preparation for a PMA supplement for a new indication for use for its existing
VAD System. Selling, general and administrative expenses in the first nine
months of 1996 increased $1,733,640, or 181%, compared to the first nine months
of 1995 principally as a result of establishing the domestic sales and marketing
organization, increased recruiting costs for both marketing and administrative
personnel, corporate and legal expenses associated with
- 10 -
<PAGE> 11
trademark and patent submissions and general support needed for expected growth.
Interest expense for the first nine months of 1996 was $45,811 compared to
$138,445 for the first nine months of 1995 due to conversion of $1,675,000 of
convertible notes in the first quarter of 1996 into 342,537 shares of common
stock. In addition, the Company recorded a $378,000 noncash debt conversion
expense in the first quarter of 1996, representing the amount of value given up
by the Company in order to induce early exercise of the related warrants.
Forward-Looking Statements
The portions of this report that relate to future plans, events or performance
are forward-looking statements. Investors are cautioned that all such statements
involve risks and uncertainties, including announcements by the Company's
competitors, risks related to the government regulatory approval processes,
delays in facility construction, delays in product development and new product
introductions, rapidly changing technology, an intensely competitive market,
market acceptance of new products, relationships with foreign distributors,
reimbursement policies and general economic conditions. These factors, and
others, are discussed more fully in the Company's prospectus dated June 27, 1996
and the Company's other filings with the Securities and Exchange Commission.
Actual results, events or performance may differ materially. Readers are
cautioned not to place undue reliance on these forward- looking statements,
which speak only as of the date hereof. The Company undertakes no obligation to
publicly release the result of any revisions to these forward-looking statements
that may be made to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events.
- 11 -
<PAGE> 12
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by Item 601 of Regulation S-K
See Exhibit Index on the page immediately preceding exhibits.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter.
- 12 -
<PAGE> 13
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.
THORATEC LABORATORIES CORPORATION
Date: November 6, 1996 /s/ D. Keith Grossman
----------------- -------------------------------------------
D. Keith Grossman, Chief Executive Officer
Date: November 6, 1996 /s/ Cheryl D. Hess
----------------- -------------------------------------------
Cheryl D. Hess, Chief Financial Officer
- 13 -
<PAGE> 14
EXHIBIT INDEX
Exhibit Number Document
11 Statement Re: Computation of Per-Share Earnings
27 Financial Data Schedule
- 14 -
<PAGE> 1
Exhibit 11
STATEMENT RE: COMPUTATION OF PER-SHARE EARNINGS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
-------------------------------------- -------------------------------------
September 28, September 30, September 28, September 30,
1996 1995 1996 1995
----------------- ----------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Number of common shares
outstanding for entire period 16,274,146 14,253,107 14,933,136 14,243,610
Weighted average number of
shares issued in public
placement 1,592,044 530,681
Weighted average number of
shares issued in private
placement 42,266 14,089
Weighted average number
of shares issued upon
conversion of convertible
notes and exercise of warrants 734,735
Weighted average number of
shares issued upon exercise of
options 8,476 6,264 80,969 9,300
------------ ----------------- ----------------- ----------------
Weighted average number of
common shares outstanding 17,874,666 14,301,637 16,279,521 14,266,999
============ ================= ================= ================
Net loss $ (672,227) $ (510,887) $ (2,173,435) $ (1,054,231)
============ ================= ================= ================
Net loss per common share $ (.04) $ (.04) $ (.13) $ (.07)
============ ================= ================= ================
</TABLE>
- 15 -
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
[TEXT]
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEETS AND THE CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH QUARTERLY
REPORT (FORM 10-Q) PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 28, 1996.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-START> DEC-31-1995
<PERIOD-END> SEP-28-1996
<EXCHANGE-RATE> 1
<CASH> 6,152,352
<SECURITIES> 10,946,287
<RECEIVABLES> 1,190,903
<ALLOWANCES> 0
<INVENTORY> 2,334,129
<CURRENT-ASSETS> 20,857,724
<PP&E> 2,360,980
<DEPRECIATION> 1,810,269
<TOTAL-ASSETS> 22,331,248
<CURRENT-LIABILITIES> 2,014,285
<BONDS> 0
0
0
<COMMON> 63,519,027
<OTHER-SE> (43,202,064)
<TOTAL-LIABILITY-AND-EQUITY> 22,331,248
<SALES> 5,491,356
<TOTAL-REVENUES> 5,821,095
<CGS> 2,387,049
<TOTAL-COSTS> 2,387,049
<OTHER-EXPENSES> 5,561,670
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 45,811
<INCOME-PRETAX> (2,173,435)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,173,435)
<EPS-PRIMARY> (.13)
<EPS-DILUTED> (.13)
</TABLE>
