<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
( ) 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 1-9190
STARTRONIX INTERNATIONAL INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 91-1263272
- ------------------------------------ -----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2402 Michelson Drive, Suite 160, Irvine, CA 92612-1314
- ------------------------------------------- -----------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 714-474-1700
------------
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 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.
Class Outstanding at November 29, 1996
- ------------------------------ --------------------------------
Common stock, $.001 par value 23,625,690
Preferred stock, $.01 par value 395,500
<PAGE> 2
STARTRONIX INTERNATIONAL INC.
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
Part I Financial information
Condensed consolidated balance sheets (unaudited) -
September 30, 1996 and June 30, 1996 3
Condensed consolidated statements of loss (unaudited) -
three months ended September 30, 1996 and 1995 4
Condensed consolidated statements of cash flow (unaudited) -
three months ended September 30, 1996 and 1995 5
Notes to condensed consolidated financial statements 6
Management's discussion and analysis of financial conditions
and results of operations 8
Part II Other Information
Item 1 Legal Proceedings 10
Item 2 Changes in Securities 10
Item 3 Defaults Upon Senior Securities 10
Item 4 Submission of Matters to a Vote of Security holders 10
Item 5 Other Information 10
Item 6 Exhibits and Reports on Form 8-K 11
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
STARTRONIX INTERNATIONAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
SEPT. 30, 1996 JUNE 30, 1996
-------------- -------------
(UNAUDITED) *
<S> <C> <C>
ASSETS
CURRENT ASSETS
CASH $ 197,277 $ 2,355
ACCOUNTS RECEIVABLE, NET 22,013 1,628
INVENTORY 158,052 84,533
DEPOSITS, PURCHASE OF INVENTORY 1,777,445 293,065
INTEREST, RECEIVABLE AND OTHER ASSETS 179,617 197,149
------------ ------------
TOTAL CURRENT ASSETS 2,334,404 578,730
PROPERTY AND EQUIPMENT 832,673 411,854
LESS ACCUMULATED DEPRECIATION AND AMORTIZATION 62,739 35,802
------------ ------------
769,934 376,052
OTHER ASSETS
SUBORDINATED DEBENTURE RECEIVABLE 1,460,011 1,427,750
MINORITY INTEREST INVESTMENTS 645,000 900,000
PREPAID PRODUCTION COSTS 300,000 300,000
OTHER 76,269 12,855
------------ ------------
TOTAL OTHER ASSETS 2,481,280 2,640,605
------------ ------------
$ 5,585,618 $ 3,595,387
============ ============
LIABILITIES
CURRENT LIABILITIES
NOTES PAYABLE $ 400,000 $ 400,000
ACCOUNTS PAYABLE 719,775 443,292
DIVIDENDS PAYABLE 31,118
ACCRUED EXPENSES 781,940 604,425
CONTINGENCY RESERVE 424,582 424,582
------------ ------------
TOTAL CURRENT LIABILITIES 2,357,415 1,872,299
STOCKHOLDERS' EQUITY
PREFERRED STOCK, $.01 PAR, SERIES B 650 900
PREFERRED STOCK, $.01 PAR, SERIES C 3,208 150
COMMON STOCK, $.001 PAR 18,715 15,475
ADDITIONAL PAID IN CAPITAL 20,317,952 15,553,068
RETAINED EARNINGS (15,691,072) (12,680,255)
UNREALIZED HOLDING GAINS (LOSSES) (1,421,250) (1,166,250)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 3,228,203 1,723,088
------------ ------------
$ 5,585,618 $ 3,595,387
============ ============
</TABLE>
- -----------------------
* CONDENSED FROM AUDITED FINANCIAL STATEMENTS.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONDENSED FINANCIAL STATEMENTS.
3
<PAGE> 4
STARTRONIX INTERNATIONAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
--------------------------------
1996 1995
----------- -----------
<S> <C> <C>
SALES, NET $ 703,341 $ 47,678
COST OF SALES 583,301 54,416
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 3,079,973 1,208,680
DEPRECIATION AND AMORTIZATION EXPENSE 26,937 13,125
INTEREST INCOME 32,261 74,597
INTEREST EXPENSE 7,500 41,733
----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES (2,962,109) (1,195,679)
INCOME TAXES 0 0
NET INCOME BEFORE DIVIDENDS ON PREFERRED STOCK (2,962,109) (1,195,679)
DIVIDENDS ON PREFERRED STOCK 48,708 0
----------- -----------
NET INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS $(3,010,817) $(1,195,679)
=========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
PRIMARY 16,543,231 9,313,171
NET INCOME PER SHARE
PRIMARY $ (0.18) $ (0.13)
=========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONDENSED FINANCIAL STATEMENTS.
4
<PAGE> 5
STARTRONIX INTERNATIONAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
---------------------------------
1996 1995
------------ ------------
<S> <C> <C>
CASH USED FOR OPERATIONS
NET INCOME $(3,010,817) $(1,195,679)
ADJUSTMENTS FOR NON CASH CHARGES (5,324) (16,472)
CHANGES IN CURRENT ASSETS AND LIABILITIES (1,075,636) (1,501,543)
NON CASH FINANCING 1,133,390 2,316,250
----------- -----------
NET CASH USED FOR OPERATIONS (2,958,387) (397,444)
CASH FLOWS FROM INVESTING ACTIVITIES
CAPITAL EXPENDITURES (420,819) (52,804)
DEPOSITS (63,414) 0
----------- -----------
CASH USED FOR INVESTING ACTIVITIES (484,233) (52,804)
CASH FLOWS FROM FINANCING ACTIVITIES
FUNDS RECEIVED FROM ISSUANCE OF CAPITAL STOCK 3,637,542 400,000
DIVIDENDS, PREFERRED STOCK 0 0
----------- -----------
CASH PROVIDED BY FINANCING ACTIVITIES 3,637,542 400,000
NET INCREASE (DECREASE) IN CASH 194,922 (50,248)
CASH, BEGINNING OF PERIOD 2,355 6,150
----------- -----------
CASH, END OF PERIOD $ 197,277 $ (44,098)
=========== ===========
CASH PAYMENTS FOR
INTEREST EXPENSE $ 0 $ 0
INCOME TAXES 0 0
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONDENSED FINANCIAL STATEMENTS.
5
<PAGE> 6
STARTRONIX INTERNATIONAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1: BASIS OF PRESENTATION
The financial information included herein is unaudited; however, such
information reflects all adjustments (consisting solely of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
statement of results for the interim periods.
The results of operations for the three month period ended September 30,
1996 are not necessarily indicative of the results to be expected for the full
year.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries: Eagle Claw Mining Company Inc., StarTronix
Inc. (formerly StarTronix USA), Global TelCom Inc., StarTronix TelCom Inc.
(formerly GoldTone Communications, Inc.) StarTronix Online, Inc. and
StarTronix Marketing N.A. Inc. All significant intercompany accounts and
transactions have been eliminated.
Property and Equipment
Equipment is stated at cost. Depreciation is provided over the estimated
useful lives of the respective assets, using the straight-line method.
Cash Equivalents
For the purpose of the consolidated balance sheets and statements of cash
flows, the Company considers a cash equivalent to be any highly liquid debt
instrument purchased with an original maturity of three months or less.
Inventory
As of June 30, 1996, the Company carried in inventory certain marketing
materials, referred to as "Starter Kits", and related items held for sale in
the normal course of business. During fiscal 1997, the Company began receiving
shipments of its principal products: the StarScreen telephone, StarVoice
telephone, StarVoice/Data Bank, and proprietary health, nutritional products,
and beauty aids. Inventories are stated at the lower of cost, determined under
the first-in, first-out (FIFO) method, or market.
Prepaid Production Costs (Infomercial)
In October 1994, the Company contracted with U.S. Corporate Development
Group Inc. (USCDG) to produce one half-hour infomercial related to its
StarScreen and direct sales marketing plan, issuing 500,000 shares of the
Company's common stock in satisfaction of the $300,000 contract price. In
September 1996, USCDG contracted with Harmony Media Communications, Inc. to
produce the infomercial. Film footage of sponsored events has begun, and the
infomercial is scheduled to air in January 1997. Under SOP 93-7, the costs of
the infomercial will be expensed when the infomercial airs for the first time.
The Company has determined that realizability of the benefit of the prepaid
cost can be reasonably assured.
Minority Interest Investments
During fiscal 1996, the Company made an investment in AmWest Environmental
Group, Inc. (a Nevada corporation). The value of this investment is determined
under the rules set forth in Statement of Financial Accounting Standards (FAS)
No. 115 for securities "available-for-sale".
Net Loss per Share
Net loss per share amounts are based on the weighted average number of
shares of common stock and common stock equivalents outstanding during each
period. Common stock equivalents, which include or included warrants,
convertible preferred stock, stock options and stock appreciation rights, have
been excluded from net loss per share calculations for all periods presented
because under Accounting Practice Bulletin (APB) No. 15 they would be
anti-dilutive.
Income Taxes
Income taxes are provided based on the liability method of accounting
pursuant to Statement of Financial Accounting Standards (SFAS) No. 109.
Accounting for Income Taxes. Under this approach, deferred income taxes are
recorded to reflect the tax consequences on future years of differences between
the tax basis of assets and liabilities and their financial reporting amounts
at each year end.
NOTE 2: INVENTORIES
Inventories at September 30, 1996, have been calculated at lower of cost
determined on a first-in, first-out (FIFO) method, or market. The composition
of actual inventories at September 30, 1996 and June 30, 1996 are as follows:
<TABLE>
<CAPTION>
September 30, 1996 June 30, 1996
------------------ -------------
<S> <C> <C>
Sales material $ 3,582 $84,533
Body products 87,279 -0-
Nutritional products 24,141 -0-
Finished goods 43,050 -0-
-------- -------
$158,052 $84,533
======== =======
</TABLE>
NOTE 3: DEPOSITS, PURCHASES OF INVENTORY
Since the Company is in the initial stages of establishing its product for
future sales, supplying vendors have requested deposits in advance of producing
and shipping of product. Upon physical receipt of products, amounts as
applicable, are reclassed from deposits to inventory. The Company made advance
payments on production commitments and prepaid the cost of certain inventory
items as follows:
<TABLE>
<CAPTION>
September 30, 1996 June 30, 1996
------------------ -------------
<S> <C> <C>
Voice telephone $ 141,414 $ 90,665
Voice data bank 16,031 23,800
Body products -0- 33,600
Nutritional products -0- 10,000
Screen telephone 1,620,000 135,000
---------- --------
$1,777,445 $293,065
========== ========
</TABLE>
NOTE 4: CAPITAL EXPENDITURES
Property and equipment consists of the following:
September 30, 1996 June 30, 1996
------------------ -------------
Office furniture and equipment $119,171 $241,524
Computer equipment and peripherals 624,165 118,521
Leasehold improvements 89,337 51,809
-------- --------
832,673 411,854
Less accumulated depreciation 62,739 35,802
-------- --------
Net property and equipment $769,934 $376,052
NOTE 5. DEPOSITS
Additional deposits were made for the quarter ended September 30, 1996
which include $56,500 to attorneys in Canada as a retainer fee to purchase
bonds to do business in Canada.
NOTE 6. MINORITY INTEREST INVESTMENTS
During fiscal 1996, the Company exchanged 1,500,000 shares of its
restricted Rule 144 common stock for 1,500,000 shares of the restricted Rule
144 stock of AmWest Environmental Group, Inc (AmWest). The Company made the
investment as a vehicle to facilitate entry into foreign markets, particularly
Hong Kong. The market value of the AmWest common stock at the date of the
transaction was $1.45 per share. The Company recorded the investment at
$2,066,250, after discounting for restriction. Under Statement of Financial
Accounting Standards (FAS) 115 for securities "available for sale", the
investment is carried at fair value and net unrealized holding gains or losses
are excluded from earnings and reported separately in shareholders' equity. At
June 30, 1996, the Company valued this investment at $900,000, based on a $0.75
per share quoted market price at June 28, 1996 and 20% discount for the
restriction. The net unrealized holding loss carried in shareholders' equity is
$1,166,250. The restriction on the AmWest common stock lapsed in September
1996. At September 30, 1996, this investment is valued at $645,000, the current
quoted market price. The net unrealized holding loss carried in shareholders'
equity at September 30, 1996 is 1,421,250.
NOTE 7. SUBORDINATED DEBENTURE RECEIVABLE
The subordinated zero coupon debenture carries a $4,000,000 redemption
price, matures in June 2008, and is presented in the consolidated balance sheet
net of an unamortized discount based on an imputed interest rate of 8.75%.
6
<PAGE> 7
FORM 10-Q
STARTRONIX INTERNATIONAL INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain
significant factors which have affected the Company's financial position and
operating results during the periods included in the accompanying condensed
consolidated financial statements.
THREE MONTHS 1996 VS. 1995
Sales and cost of sales for the three month period ended September 30, 1995
were from sales of prepaid telephone calling cards and related long distance
activity of the company's subsidiary, Global TelCom Inc. This business has
been discontinued.
All sales and cost of sales for the three month period ended September 30,
1996, resulted from activity of the Company's subsidiary, StarTronix Inc.,
which provides a home-based business opportunity to independent distributors
thereby enabling them to become both users and marketers of the Company's
product.
The majority of the sales for this period were realized from the sale of
the company's "starter kit" which sells for $59.95 plus shipping and handling,
and provides the recipient with an introduction to the Company and sets forth
the requirements to become an independent distributor. Sales of all other
products were minor with initial activity in the other products not starting
until the latter part of August, 1996. Approximately 11.4% of the total sales
of $703,341 were to distributors in the providence's of Canada. An analysis of
sales, by mix, for the three months ended September 30, 1996 are as follows:
<TABLE>
<CAPTION>
September 30, 1996 %
------------------ ------
<S> <C> <C>
Voice telephone $ 9,657 1.37
Voice data bank 7,143 1.02
Body products 5,324 0.76
Nutritional products 764 0.11
Sales material and
Starter kit 680,453 96.74
-------- ------
$703,341 100.00
======== ======
</TABLE>
Consolidated selling, general and administrative expense for all entities
was $3,079,973 through the third quarter ended September 30, 1996 and included
$1,122,800 for financial marketing services, $306,740 for consulting services,
$188,807 for professional fees, $150,000 for executive recruitment, $141,007
for product development costs and $493,278 to promote and introduce the product
to potential distributors through meetings held in major cities throughout the
United States and Canada. These meetings were well attended and are primarily
responsible for the Company's ability to attract in excess of 18,000
independent distributors to date.
Consolidated selling, general and administrative expense for all entities
was $1,208,680 for the quarter ended September 30, 1995 which included
$309,952 for professional fees and $250,000 for promotion of common stock.
The net loss through the first quarter ended September 30, 1996, was
$3,010,817 compared to a $1,195,679 loss for the comparable quarter ended
September 30, 1995.
7
<PAGE> 8
LIQUIDITY AND CAPITAL RESOURCES AT SEPTEMBER 30, 1996
The Company has reported net operating losses since inception. These
losses have been funded by the issuance of capital stock and borrowings.
Continuation of the Company is contingent upon the Company establishing
markets for its products and services and achieving profitable operations.
Such operations will also require management to secure additional financing for
the Company in the form of debt or equity, which management plans to partially
satisfy through the issuance of shares of its capital stock.
During fiscal 1996, the Company made a private placement offering of
200,000 shares of its Series "B" $0.01 par value convertible preferred stock.
As of June 30, 1996, 90,000 shares had been issued for $900,000, less $90,000
issue costs and $45,000 in finder's fees. The Series "B" preferred stock is
convertible into common stock at any time 45 days after the issuance date. The
conversion rate is $10.00 divided by the conversion price, which is based on a
predetermined formula. As of September 30, 1996, 25,000 shares had been
converted into 259,352 shares of common stock at an average price of $0.97 per
share. In addition 3,420 shares of common stock with a value of $3,301 were
issued to pay dividends due on the Series "B" preferred stock at date of
conversion.
During fiscal 1996, the Company made a private placement offering of 650,000
shares of its Series "C" $0.01 par value convertible preferred stock. As of June
30, 1996 the Company had issued 15,000 shares for $150,000, less $24,017 in
issue costs and $7,500 in finder's fees. The Series "C" preferred stock is
convertible into common stock at any time 41 days after the issuance date. The
conversion rate is $10.00 divided by the conversion price, which is based on a
predetermined formula. During the three month period ended September 30, 1996,
the company issued an additional 433,250 shares of Series "C" preferred stock,
realizing gross proceeds of $4,332,500 less $694,958 in issuance costs. As of
September 30, 1996, 127,500 shares had been converted into 2,138,296 shares of
common stock at an average price of $0.60 per share. In addition 24,001 shares
of common stock with a value of $14,289 were issued to pay dividends due on the
Series "C" preferred stock at date of conversion. See Item 1 for suspension of
conversion feature and resulting litigation.
Both series of preferred stock pay dividends at a rate of $0.60 per share
per year. These dividends are cumulative and accrue day by day whether or not
declared. All dividends are payable in common stock of the Company and paid
only upon conversion. Cash dividends may be paid at the discretion of the
Company's Board of Directors, however no common stock dividends may be declared
or paid to the common stock holders until the preferred stock holders have been
paid their dividends in full. Dividends on the preferred stock of $48,708
were paid ($17,590) or accrued ($31,188) for the three months ended September
30, 1996.
In addition to common shares issued for conversion of the Series "B" and
Series "C" preferred stock and payment of applicable dividends on the preferred
stock, additional shares were issued for the following:
<TABLE>
<CAPTION>
Value Total Account
Recipient Shares Per Share Amount Charged
--------- ------- --------- -------- -----------------------
<S> <C> <C> <C> <C>
T. Davis Capital 600,000 $1.50 $900,000 Promotion, common stock
MDC Marketing 215,800 1.00 215,800 Financial marketing
</TABLE>
8
<PAGE> 9
Part II - Other Information
Item 1 Legal Proceedings
In November 1996 the Company suspended the conversion of its Series "C"
Convertible Preferred Stock as a result of the concerted market irregularities
in the trading of the Company's common stock, which management believes is
related to the conversion terms contained in the private placement offering of
the Series "C" Preferred Stock. The suspension of the conversion provisions of
the private placement offering is more fully described in the Company's 8-K
filed with the SEC on October 25, 1996.
Subsequent to the Company suspending the conversion of the Series "C"
Preferred Stock, a shareholder group filed a lawsuit against the Company in the
United States District Court in New York. The action seeks to compel the
Company to resume conversion of the Class "C" Preferred Stock or, in the
alternative, to rescind the subscription agreement and recover the shareholders'
original investment in the amount of $1,337,500. Discovery has not started as
of the date of the audit report. Management intends to vigorously defend its
position, however the ultimate outcome of any litigation on this matter cannot
be determined at this time.
In December 1996, a second action was filed by a shareholder group in the
Superior Court of the State of California in Los Angeles County related to the
suspension of the conversion feature of the Series "C" Preferred Stock. The
action seeks to compel the Company to resume conversion of the Series "C"
Preferred Stock or, in the alternative, to rescind subscription agreement and
recover the shareholders' original investment in the amount of $2,367,500, plus
interest and punitive damages. As discovery has not commenced, the ultimate
outcome of any litigation on this matter cannot be determined at this time;
however, management intends to vigorously defend its position.
Item 2 Change in Securities
The Series "C" Preferred Stock authorized the issuance of 400,000 shares at
$10.00 per share. This was subsequently increased to 650,000 shares. The
registered holders of outstanding hares of Series "C" Preferred Stock are also
entitled to a number of privileges and rights including the right to receive
cumulative dividends at the annual rate of $0.60 per share payable in common
stock, conversion rights according to a predetermined formula and liquidation
rights in the event of a liquidation, dissolution or winding up of the Company.
On November 7, 1996 a suspension of conversion of the Series "C"
Convertible Preferred stock was announced to preferred stockholders as a result
of irregularities in the trading of StarTronixs' Common Stock which management
believes is related to the conversion terms of the Regulation S private
placement. A shareholder has filed a lawsuit against the Company to compel the
conversion of certain class "C" Preferred Stock to Common stock.
Item 3 Defaults Upon Senior Securities
Not Applicable
Item 4 Submission of Matters to a Vote of Security holders
Not Applicable
Item 5 Other Information
9
<PAGE> 10
At June 30, 1996, the Company had 90,000 warrants outstanding to various
entities for the purchase of 90,000 shares of the Company's common stock. For
the quarter ended September 30, 1996, no additional warrants were issued and
none were exercised.
In December 1996, a related party transaction occurred where Greg Gilbert,
Chairman and CEO, transferred 2,331,360 shares of common stock to Degerstrom,
Inc., Neal Degerstrom, Robert E. Sterling and Dale D. Popp pursuant to their
rights under certain agreements which required the specific performance of
Mr. Gilbert thereunder.
Item 6 Exhibits and Reports on Form 8-K
Exhibit 27 Financial Data Schedule
Form 8-K, dated September 20, 1996 and filed with the Commission on
September 27, 1996 reporting on the resignation of BDO Seidman LLP as the
Company's independent auditors.
Form 8 K/A, dated September 20, 1996 and filed with the Commission on
October 4, 1996 reporting on BDO Seidman's agreement on content of the
Company's Form 8-K dated September 20, 1996.
Form 8-K, dated October 24, 1996 and filed with the Commission on
October 29, 1996 reporting on the appointment of Strabala Ramirez & Associates
as the Company's independent auditors.
Form 8-K, dated October 25, 1996 and filed with the Commission on
November 7, 1996 reporting on the suspension of the conversion of the
Company's Series "C" Convertible Preferred Stock.
10
<PAGE> 11
SIGNATURES
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 authorized.
STARTRONIX INTERNATIONAL INC.
(Registrant)
Date: December 13, 1996
By: /s/ GREG GILBERT
-----------------------------
Greg Gilbert
President
Date: December 13, 1996
By: /s/ JAMES VALLE
------------------------------
James Valle
Chief Financial Officer
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEPTEMBER
30, 1996 FINANCIAL STATEMENTS (UNAUDITED) AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 197,277
<SECURITIES> 0
<RECEIVABLES> 359,506
<ALLOWANCES> 337,493
<INVENTORY> 158,052
<CURRENT-ASSETS> 2,334,404
<PP&E> 832,673
<DEPRECIATION> 62,739
<TOTAL-ASSETS> 5,585,618
<CURRENT-LIABILITIES> 2,357,415
<BONDS> 0
0
3,858
<COMMON> 18,715
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 5,585,618
<SALES> 703,341
<TOTAL-REVENUES> 703,341
<CGS> 583,301
<TOTAL-COSTS> 583,301
<OTHER-EXPENSES> 3,130,857
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (3,010,817)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,010,817)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,010,817)
<EPS-PRIMARY> (.18)
<EPS-DILUTED> (.18)
</TABLE>
