U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(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
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 0-20701
COMPOSITECH LTD.
(Exact Name of Registrant as specified in its charter)
Delaware 11-2710467
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
120 Ricefield Lane, Hauppauge, New York 11788
(Address of principal executive offices)
Registrant's telephone number, including area code: (516) 436-5200
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
requirement 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 November 12, 1996:
Common Stock $.01 par value 6,123,939
--------------------------- ---------
Class Number of shares
<PAGE>
COMPOSITECH LTD.
(a development stage company)
Index
Part I - Financial Information Page
Item 1. Financial Statements
Balance Sheets as of September 30, 1996 (unaudited) and
December 31, 1995.................................................... 2
Statements of Operations (unaudited) for the three-month and
nine-month periods ended September 30, 1995 and 1996
and cumulative from June 13, 1984 (date of inception)
through September 30, 1996........................................... 3
Statements of Cash Flows (unaudited) for the nine-month
periods ended September 30, 1995 and 1996 and
cumulative from June 13, 1984 (date of inception)
through September 30, 1996........................................... 4
Notes to Financial Statements (unaudited)............................. 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................................... 7
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K................................... 11
Signature.................................................................. 11
-1-
<PAGE>
COMPOSITION LTD.
(a development stage company)
BALANCE SHEETS
September 30 December 31
1996 1995
------------ ------------
(unaudited)
ASSETS
Current assets:
Cash and temporary investments $ 5,382,382 $ 925,848
Notes receivable and accrued interest 762,500
Inventories 238,177 127,302
Accounts receivable - trade 34,735 25,866
Prepaid expenses and other 55,751 75,587
Advance payments on construction-in-progress 290,140
------------ ------------
Total current assets 6,001,185 1,917,103
Property and equipment at cost:
Production equipment 2,182,049 2,070,202
Laboratory equipment 138,702 135,045
Furniture, fixtures and equipment 313,171 270,657
Leasehold improvements 216,231 210,275
Construction-in-progress 672,493 53,994
Equipment under capital leases 120,770 120,770
------------ ------------
3,643,416 2,860,943
Less accumulated depreciation and amortization 997,332 805,171
------------ ------------
2,646,084 2,055,772
Deferred private placement fees and expenses, net 321,676
Other assets and deferred charges, net 58,440 78,096
------------ ------------
Total assets $ 8,705,709 $ 4,372,647
============ ============
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIENCY)
Current liabilities:
Accounts payable $ 465,102 $ 218,076
Deferred salaries 772,647 865,648
Accrued interest 88,393 188,039
Other accrued liabilities 481,595 275,245
Current maturities of long-term debt, all
(1996) and $112,500 (1995) to stockholders 1,595,000 182,500
------------ ------------
Total current liabilities 3,402,737 1,729,508
Long-term debt:
Notes payable to stockholders 750,000
10% secured notes, including $745,000
to stockholders 4,600,000
------------
Total long-term debt 5,350,000
Capital lease obligations 30,946 30,946
Other liabilities 37,500 37,500
Commitments
Stockholders' equity (deficiency):
Undesignated preferred stock; authorized
4,000,000 shares, none issued and
outstanding (1996)
Series A convertible preferred stock, par
value $3.00 per share; authorized, issued
and outstanding shares - 714,161 2,142,483 2,142,483
Convertible preferred stock, par value $5.00
per share; authorized, issued and
outstanding shares - 433,500 (1995) 2,167,500
Common stock, par value $.01 per share;
authorized shares - 25,000,000;
issued and outstanding shares;
6,103,939 (1996) and 3,014,189 (1995) 61,039 30,142
Additional paid-in capital 22,411,593 8,924,140
Deficit accumulated during the development stage (19,380,589) (16,039,572)
------------ ------------
Total stockholders' equity (deficiency) 5,234,526 (2,775,307)
------------ ------------
Total liabilities and stockholders' equity
(deficiency) $ 8,705,709 $ 4,372,647
============ ============
See accompanying notes.
-2-
<PAGE>
COMPOSITION LTD.
(a development stage company)
STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Cumulative from
June 13, 1984
(date of inception)
Three months ended Nine months ended through
September 30 September 30 September 30,
--------------------------- --------------------------- -------------------
1995 1996 1995 1996 1996
----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Income from patent immunity agreement $ 5,012,515
Sales $ 39,520 $ 63,100 $ 59,522 $ 158,152 293,323
----------- ----------- ----------- ----------- -----------
Total revenues 39,520 63,100 59,522 158,152 5,305,838
----------- ----------- ----------- ----------- -----------
Costs and expenses:
Research and development 540,557 27,418 1,702,556 82,900 14,884,171
Manufacturing expenses 671,757 2,011,119 2,011,119
Selling, general and administrative 218,827 313,693 559,936 821,552 6,753,360
----------- ----------- ----------- ----------- -----------
Total operating expenses 759,384 1,012,868 2,262,492 2,915,571 23,648,650
----------- ----------- ----------- ----------- -----------
(Loss) from operations (719,864) (949,768) (2,202,970) (2,757,419) (18,342,812)
Other income (expenses):
Interest income 5,486 73,167 8,679 97,258 670,066
Interest and amortization of debt expense
(net of interest capitalized) (78,871) (33,821) (162,114) (464,777) (1,417,798)
Write off of deferred private placement
fees and expenses (224,814) (224,814) (224,814)
Other 31 1,117 75,373 8,735 34,769
----------- ----------- ----------- ----------- -----------
(73,354) (184,351) (78,062) (583,598) (937,777)
(Loss) before provision
for income taxes (793,218) (1,134,119) (2,281,032) (3,341,017) (19,280,589)
Provision for income taxes 100,000
----------- ----------- ----------- ----------- -----------
Net (loss) ($ 793,218) ($1,134,119) ($2,281,032) ($3,341,017) ($19,380,589)
=========== =========== =========== =========== ===========
Net (loss) per share ($ 0.20) ($ 0.17) ($ 0.57) ($ 0.66) ($ 5.71)
=========== =========== =========== =========== ===========
Shares used in computing net (loss)
per share 3,995,769 6,632,544 3,995,769 5,034,134 3,391,970
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes.
-3-
<PAGE>
COMPOSITION LTD.
(a development stage company)
STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Cumulative from
June 13, 1984
(date of inception)
Nine months ended through
September 30, September 30,
----------------------------
1995 1996 1996
------------ ------------ ------------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net (loss) ($ 2,281,032) ($ 3,341,017) ($19,380,589)
Adjustments to reconcile net (loss) to net cash and
temporary investments used in operating activities:
Depreciation and amortization, including capital leases 204,468 192,161 2,016,338
Stockholder services credited to additional paid-in-capital 54,000 972,000
Loss on disposal of property and equipment 525,712
Private placement fee and expenses 86,046
Amortization of debt financing costs 20,168 155,920 324,453
Write off of deferred private placement fees and expenses 224,814 224,814
Non-recourse notes applied to patent immunity agreement (3,012,515)
Changes in operating assets and liabilities:
Accrued interest on notes receivable (12,500)
Inventories (10,673) (110,875) (238,177)
Prepaid expenses and other 8,109 19,836 (55,751)
Accounts receivable - trade (8,869) (34,735)
Other assets (23,130) 14,911 (7,370)
Accounts payable (70,894) 247,026 465,102
Deferred salaries 361,054 (93,001) 772,647
Accrued interest 43,518 (87,146) 100,893
Other accrued liabilities 81,604 206,350 466,260
Income taxes payable (100,000)
------------ ------------ ------------
Net cash and temporary investments used in
operating activities (1,712,808) (2,579,890) (16,787,370)
Cash Flows from Investing Activities
Purchase of property and equipment - net (143,995) (782,473) (5,068,618)
Advance payments on construction-in-progress (290,140) (290,140)
------------ ------------ ------------
Net cash and temporary investments used in
investing activities (143,995) (1,072,613) (5,358,758)
Cash Flows from Financing Activities
Net proceeds from issuance of common stock 11,350,850 19,394,280
Net proceeds from notes payable 2,604,800 145,687 7,603,233
Payment received on notes receivable 750,000
Payment of notes payable (4,137,500) (5,512,500)
Proceeds from non-recourse notes plus interest 3,012,515
Net proceeds from issuance of Series A convertible preferred stock 1,062,264
Net proceeds from issuance of convertible preferred stock 1,920,620
Contribution to capital from stockholders 221,461
Payment of capital lease obligations (68,245)
Expenses - proposed financings (51,070)
Private placement expenses - terminated financing (54,046)
------------ ------------ ------------
Net cash and temporary investments provided by
financing activities 2,604,800 8,109,037 27,528,512
------------ ------------ ------------
Increase in cash and temporary investments 747,997 4,456,534 5,382,382
Cash and temporary investments at beginning of period 253,546 925,848
------------ ------------ ------------
Cash and temporary investments at end of period $ 1,001,543 $ 5,382,382 $ 5,382,382
============ ============ ============
Supplemental disclosures of cash flow information Noncash financing activities:
Capital lease obligations for property and equipment acquisitions $ 120,770
============
Cash paid for:
Interest $ 167,516 $ 436,198 $ 940,131
============ ============ ============
Income taxes $ 100,000
============ ============ ============
</TABLE>
See accompanying notes.
-4-
<PAGE>
COMPOSITECH LTD.
(a development stage company)
Notes to Financial Statements
(Unaudited)
September 30, 1996
Note 1 - Basis of Presentation
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-QSB. 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 (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the three- and
nine-month periods ended September 30, 1996 are not necessarily indicative of
the results that may be expected for the year ended December 31, 1996. For
further information, refer to the financial statements and footnotes thereto for
the year ended December 31, 1995 included in the Company's prospectus for its
initial public offering ("IPO") dated July 3, 1996.
The Company has developed an advanced laminate for printed circuit boards for
the electronics industry but has not as yet generated significant revenues from
this operation. Accordingly, the Company's activities have been accounted for as
those of a "Development Stage Enterprise". As discussed in Note 2, the Company
closed its IPO on July 9, 1996. Based upon the application of the net proceeds
of the IPO, the Company plans to increase its production capacity and estimates
achieving a positive cash flow within one year from the closing of the IPO. Such
estimate reflects important assumptions regarding a number of factors and future
events, some of which are beyond the Company's control. There can be no
assurance that management has identified and made appropriate assumptions
regarding all factors that may affect the Company's business in the future.
Beyond such 12-month period, the Company plans to obtain additional financing
for further expansion from the exercise of the warrants or commercial financing
sources.
Note 2 - Statement of Stockholders' Equity and IPO
On March 12, 1996, the Company raised $625,000 from the sale of 250,000 shares
of common stock at $2.50 per share in a private placement. Net proceeds after
commissions and expenses were $533,593.
On April 1, 1996 and June 26, 1996, the Company raised $760,000 and $240,000,
respectively in negotiated offshore investments and issued an aggregate of
208,000 shares ($5.00 per share) of common stock after giving effect to
commission shares and an agreed upon adjustment in the number of shares. Net
proceeds after cash commissions and expenses were $954,466.
-5-
<PAGE>
On June 26, 1996, the Company (i) increased the number of authorized shares of
common stock to 25,000,000 (ii) authorized 4,000,000 shares of undesignated
preferred stock and (iii) effected a one-for-two reverse split of the Company's
common stock. Retroactive effect has been given to the reverse split as if it
had occurred on the date of inception of the Company.
On July 9, 1996, the Company completed an IPO in which the Company sold
2,415,000 units at $5.00 each, each unit consisting of one share of common stock
and one redeemable common stock warrant. The aggregate price was $12,075,000
which resulted in net proceeds of approximately $9,900,000 net of discounts,
commissions and estimated expenses. Each warrant entitles the holder to purchase
one share of common stock at $6.25 per share through July 3, 2001. At any time
after July 9, 1997, the warrants may be redeemed by the Company at $.01 per
warrant if the closing bid quotation of the common stock has been at least 150%
of the then exercise price of the warrants on each of 20 consecutive trading
days ending on a day not more than three days prior to the date of the notice of
redemption.
As a result of the closing of the IPO, the Company offset the full amount of its
deferred public offering expenses against additional paid-in capital.
On July 9, 1996, the outstanding convertible preferred stock automatically
converted into shares of common stock on the basis of one share of common stock
for each two shares of convertible preferred stock.
On July 10, 1996 through July 18, 1996, the Company repaid $4,055,000 of 10%
Secured Notes plus $286,244 of accrued interest which by their terms were to be
prepaid with the proceeds of the public offering. In this connection, the
Company wrote off $224,814 of deferred private placement fees and expenses
arising from this debt because of the acceleration of payment.
On July 19, 1996, the Company repaid $193,138 of deferred salaries to employees.
Note 3 - Net Loss Per Share
Net loss per share is based on the weighted average number of shares of common
stock outstanding assuming the conversion of the Series A convertible preferred
stock into common stock. However, in accordance with Staff Accounting Bulletin
Number 83 ("SAB No. 83") of the Securities and Exchange Commission, the common
stock equivalents that were issued during the 12 months preceding the IPO at
prices below the IPO price have been included in the Company's loss per share
computation using the treasury stock method and the IPO price, and treated as if
they had been issued at the Company's inception even though they were
antidilutive in the period with losses.
-6-
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This Quarterly Report on Form 10-QSB contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Actual results could differ materially from
those projected in the forward-looking statements as a result of a number of
important factors. For a discussion of important factors that could affect the
Company's results, please refer to the discussions below and in the Company's
prospectus for its initial public offering ("IPO") dated July 3, 1996.
Overview
The Company was founded in 1984 to develop copper-clad fiberglass epoxy
laminates used to manufacture printed circuit boards required by the electronics
industry. As part of its development program, the Company developed processes
and machinery to manufacture its unique laminates, designed and assembled
prototype equipment to produce 24" x 24" laminates, and designed, assembled and
debugged a production module to produce 36" x 48" laminates.
During 1995 and 1996, the Company has been producing and selling its laminates
in limited quantities for qualification and use in production by its customers.
The quantities produced have been limited because of working capital and
production constraints. The Company is in the development stage because it has
not earned significant revenues from its planned principal operations.
On July 9, 1996, the Company received net proceeds of approximately $9,900,000
from its IPO. Approximately $4,300,000 was used to reduce substantially debt and
accrued interest. The Company is using the remaining proceeds to add production
modules to its existing equipment and for working capital.
Results of Operations
Sales of laminates increased from $39,520 for the three months ended September
30, 1995 to $63,100 for the three months ended September 30, 1996 and from
$59,522 for the nine months ended September 30, 1995 to $158,152 for the nine
months ended September 30, 1996. These increases resulted from additional orders
of laminates by customers, but were limited by the Company's working capital (in
the period before the IPO) and production constraints. In addition, the 1995
periods included debugging of equipment and more intensive establishment of
specifications for the Company's manufacturing process.
Research and development expenses decreased from $540,557 for the three months
ended September 30, 1995 to $27,418 for the three months ended September 30,
1996 and from $1,702,556 for the nine months ended September 30, 1995 to $82,900
for the nine months ended September 30, 1996. The decreases were due to the
change in the focus of the Company's activities from research and development to
commercial production.
-7-
<PAGE>
Manufacturing expenses were $671,757 for the three months ended September 30,
1996 and $2,011,119 for the nine months ended September 30, 1996. There were no
manufacturing expenses in the 1995 periods. This was due to the transition of
the Company's activities from research and development to commercial production.
The increases in manufacturing expenses in 1996 compared with research and
development expenses in 1995 were due to added personnel, purchases of
materials, overhead and other expenses related to commercial production.
Selling, general and administrative expenses increased from $218,827 for the
three months ended September 30, 1995 to $313,693 for the three months ended
September 30, 1996 and from $559,936 for the nine months ended September 30,
1995 to $821,552 for the nine months ended September 30, 1996. Legal expenses in
the 1996 periods increased by approximately $32,000 due principally to increased
activity relative to being a public company. Patent expense for the nine months
ended September 30, 1996 increased by approximately $21,000, due principally to
increased activity in the further development of the Company's international
patent estate. Other increases were in personnel costs and travel as the Company
increased its sales development and international activities including
approximately $29,000 for the three months ended September 30, 1996 and
approximately $47,000 for the nine months ended September 30, 1996 related to a
proposed project in Canada.
Interest and amortization of debt expense decreased from $78,871 for the three
months ended September 30, 1995 to $33,821 for the three months ended September
30, 1996 and increased from $162,114 for the nine months ended September 30,
1995 to $464,777 for the nine months ended September 30, 1996. The increase in
the nine month period was due to the borrowing under the 10% Secured Notes in
1995 and 1996 and the decrease in the three month period was due to the
repayment of $4,055,000 of such notes in July 1996 with the proceeds of the IPO.
The write off of deferred private placement fees and expenses in the 1996
periods of $224,814 resulted from the repayment of the debt.
The foregoing resulted in the Company having a net loss of $793,218 for the
three months ended September 30, 1995 compared with $1,134,119 for the three
months ended September 30, 1996 and a net loss of $2,281,032 for the nine months
ended September 30, 1995 compared with $3,341,017 for the nine months ended
September 30, 1996. The increased losses were principally the result of interest
and debt expense related items and greater expenses incurred in preparation for
anticipated increases in manufacturing volume. The loss for the three months
ended September 30, 1996 was approximately $64,000 more than for the second
quarter of 1996 which had already reflected increased activity over 1995.
Liquidity and Capital Resources
Prior to its IPO, the Company had financed its operations through private
placements of debt and equity securities and from income from a patent immunity
agreement. Some of this financing had come from officers and directors of the
Company.
-8-
<PAGE>
At September 30, 1996, the Company had cash and temporary investments of
$5,382,382 and had accrued expenses of approximately $300,000 related to the
IPO. This leaves funds of approximately $5,100,000 available to fund currently
anticipated capital expenditures and current operations (which require
approximately $300,000 a month based upon current production rates). As the
Company increases its production rates, it will have increased operating cash
requirements through at least the end of 1996 before the effects of expanded
production capacity are realized. Based upon the application of the net proceeds
of the IPO, the Company plans to increase its production capacity and estimates
achieving a positive cash flow within one year from the closing of the IPO. Such
estimate reflects important assumptions regarding a number of factors and future
events, some of which are beyond the Company's control. There can be no
assurance that management has identified and made appropriate assumptions
regarding all factors that may affect the Company's business in the future.
Beyond such 12-month period, the Company plans to obtain additional financing
for further expansion from the exercise of the warrants issued as part of the
IPO or commercial financing sources.
The Company is a development stage enterprise and has had limited revenues from
the sale of laminates, has incurred significant losses and has had substantial
negative cash flow since its inception. The Company expects significant
operating losses and negative cash flow to continue through 1996. The Company
will use a portion of the proceeds of the IPO to expand its production capacity
and plans to achieve significant revenues so as to conclude its development
stage. There can be no assurance that the Company will successfully complete
expansion of its production equipment, achieve broad commercial acceptance of
its product or generate sufficient revenues to achieve profitable operations.
On March 29, 1996, the Company signed a Memorandum of Understanding with three
Quebec institutional investors, providing for the initiation of certain studies
and procedures which may lead to an investment in the Company for the purpose of
forming a joint venture for the establishment of a plant in the greater Montreal
area to manufacture Compositech's laminates. The studies are in progress.
The Company has incurred losses since its inception and, therefore, has not been
subject to federal income taxes except for the alternative minimum tax in 1994.
As of December 31, 1995, the Company had net operating loss ("NOL") and tax
credit carryforwards for income tax purposes of approximately $13,800,000 and
$950,000, respectively, which may be available to reduce future taxable income
and future tax liabilities. These carryforwards begin to expire in 2003. The
Internal Revenue Code ("IRC") includes provisions which significantly limit
potential use of net operating losses in situations where there is a change in
ownership, as defined, of more than 50% during a three-year period. Accordingly,
if a change in ownership occurs, the ultimate benefit realized from these
carryovers may be significantly reduced in total, and the amount that may be
utilized in any given year may be significantly limited. The limitation is
computed based upon the fair market value of the Company at the time of the
ownership change multiplied by the federal long-term tax-exempt borrowing rate.
The common stock issuance in the IPO combined with the other stock issuances
completed by the Company during the past three years have initiated a change in
ownership as defined in the IRC. Accordingly, the Company is currently subject
to an annual limitation of NOL carryforwards of approximately $1,170,000.
-9-
<PAGE>
Nine Months Ended September 30, 1996 Compared with Nine Months Ended September
30, 1995.
Net cash and temporary investments used in operating activities increased from
$1,712,808 for the nine months ended September 30, 1995 to $2,870,030 for the
nine months ended September 30, 1996. The principal reason for the difference
was the increased activity in 1996 referred to above mitigated by increases in
accounts payable and the effect of the amortization of debt financing costs.
Net cash and temporary investments used in investing activities, representing
capital expenditures for equipment increased from $143,995 for the nine months
ended September 30, 1995 to $782,473 for the nine months ended September 30,
1996. The increase resulted from design, engineering and construction of
additional production modules as part of the expansion program and the upgrading
of existing equipment.
Cash flows from financing activities increased from $2,604,800 for the nine
months ended September 30, 1995 to $8,109,037 for the nine months ended
September 30, 1996. The only financing activity in the 1995 period was the
private placement of 10% Secured Notes which netted $2,604,800. The principal
financing activities in the 1996 period were (i) the receipt of net proceeds
from the issuance of common stock in the IPO of $9,862,791 and in private
placements of $1,488,059, (ii) the collection of $750,000 of notes receivable
received in connection with the 10% Secured Note financing in 1995, (iii) the
receipt of net proceeds from the issuance of additional 10% Secured Notes of
$2,604,800 and (iv) the payment of notes payable of $4,137,500, of which
$4,055,000 was from the proceeds of the IPO.
-10-
<PAGE>
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
11 - Computation of Loss per Common Share
(b) Reports in Form 8-K
None
All other items required in Part II have been filed previously or are not
applicable for the quarter ended September 30, 1996.
Signature
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.
COMPOSITECH LTD.
Dated: November 14, 1996 /s/ Samuel S. Gross
-------------------
Executive Vice President
and Treasurer (Principal
Accounting Officer and
officer duly authorized to
sign this report on behalf
of the registrant)
-11-
COMPOSITECH LTD.
(a development stage company)
COMPUTATION OF LOSS PER COMMON SHARE
(unaudited)
<TABLE>
<CAPTION>
Cumulative from
June 13, 1984
(date of inception)
For the three months ended For the nine months ended through
September 30 September 30 September 30
-------------------------- ------------------------- ------------
1995 1996 1995 1996 1996
--------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Weighted average shares outstanding (1) 3,995,769 6,632,544 3,995,769 5,034,134 3,391,970
========= =========== =========== =========== ============
Net (loss) ($793,218) ($1,134,119) ($2,281,032) ($3,341,017) ($19,380,559)
========= =========== =========== =========== ============
Net (loss) per share ($ 0.20) ($ 0.17) ($ 0.57) ($ 0.66) ($ 5.71)
========= =========== =========== =========== ============
</TABLE>
(1) Includes common stock equivalents of 407,754 shares based on the
application of SAB No. 83 on common stock equivalents that were issued
during the 12 months preceding an IPO at a price lower than the IPO price
and assumes the conversion of all preferred stock to common stock.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from 10-QSB for
the period ended September 30, 1996 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1996
<CASH> 735,308
<SECURITIES> 4,647,074
<RECEIVABLES> 324,875
<ALLOWANCES> 0
<INVENTORY> 238,177
<CURRENT-ASSETS> 6,001,185
<PP&E> 3,643,416
<DEPRECIATION> 997,332
<TOTAL-ASSETS> 8,705,709
<CURRENT-LIABILITIES> 3,402,737
<BONDS> 0
0
2,142,483
<COMMON> 61,039
<OTHER-SE> 3,031,004
<TOTAL-LIABILITY-AND-EQUITY> 8,705,709
<SALES> 158,152
<TOTAL-REVENUES> 158,152
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,915,571
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 689,591
<INCOME-PRETAX> (3,341,017)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
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