<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[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
Commission File Number: 0-22303
ILLINOIS SUPERCONDUCTOR CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 36-3688459
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
451 KINGSTON COURT, MOUNT PROSPECT, IL 60056
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (847) 391-9400
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 1, 1996 there were outstanding 4,667,130 shares of common
stock, par value $.001, of the registrant.
<PAGE> 2
ILLINOIS SUPERCONDUCTOR CORPORATION
QUARTER ENDED SEPTEMBER 30, 1996
INDEX
PAGE
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements ................................................ 3
Condensed Balance Sheets as of September 30, 1996 (unaudited) and
December 31, 1995 ................................................. 3
Condensed Statements of Operations (unaudited) for the three
months ended September 30, 1996 and 1995, and the nine months
ended September 30, 1996 and 1995 and the cumulative period
from October 18, 1989 (date of inception) to September 30,
1996 .............................................................. 4
Condensed Statements of Cash Flows (unaudited) for the nine months
ended September 30, 1996 and 1995 and the cumulative period
from October 18, 1989 (date of inception) to September 30,
1996 .............................................................. 5
Notes to Condensed Financial Statements ................................ 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations ........................................... 8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings ................................................. 10
Item 2. Changes in Securities ............................................. 10
Item 3. Default 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 ......................,........... 10
SIGNATURES ................................................................. 11
List of Exhibits:
Exhibit 27.1 - Financial Data Schedule .............................. 12
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ILLINOIS SUPERCONDUCTOR CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONDENSED BALANCE SHEETS
SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996 DECEMBER 31, 1995
------------------ -----------------
(UNAUDITED)
<S> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents $ 36,052 $ 953,093
Investments 5,319,321 5,083,809
Receivables 80,599 310,529
Inventory 664,239 -
Prepaid expenses and other 82,767 465,298
----------- -----------
Total current assets 6,182,978 6,812,729
Property and equipment:
Property and equipment 7,605,544 4,156,749
Less: accumulated depreciation 1,754,123 962,972
----------- -----------
Net property and equipment 5,851,421 3,193,777
Other assets:
Restricted certificates of deposit 400,000 862,500
Other assets 339,405 236,760
----------- -----------
739,405 1,099,260
----------- -----------
Total assets $12,773,804 $11,105,766
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Notes and accounts payable $ 873,344 $ 972,949
Other current liabilities 447,858 381,306
----------- -----------
Total current liabilities 1,321,202 1,354,255
Long term debt 111,160 509,079
Deferred occupancy costs 71,124 57,053
Stockholders' equity:
Common stock ($.001 par value);
15,000,000 shares authorized and
4,665,427 and 3,998,952 issued and
outstanding at September 30, 1996 and
December 31, 1995, respectively 4,665 3,999
Additional paid-in capital 34,415,927 24,670,560
Deferred compensation (19,583) (41,392)
Deficit accumulated during the
development stage (23,130,691) (15,447,788)
----------- -----------
Total stockholders' equity 11,270,318 9,185,379
----------- -----------
Total liabilities and stockholders' equity $12,773,804 $11,105,766
=========== ===========
</TABLE>
NOTE: The condensed balance sheet at December 31, 1995 has been derived from
the audited financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
See Accompanying Notes to Condensed Financial Statements.
3
<PAGE> 4
ILLINOIS SUPERCONDUCTOR CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
OCTOBER 18, 1989
THREE MONTHS ENDED NINE MONTHS ENDED (DATE OF INCEPTION)
SEPTEMBER 30, SEPTEMBER 30, TO SEPTEMBER 30,
---------------------------- ------------------------------ -------------------
1996 1995 1996 1995 1996
----------- ----------- ----------- ----------- -------------------
<S> <C> <C> <C> <C> <C>
Net revenues $ 25,000 $ 4,665 $ 84,822 $ 5,648 $ 869,627
Cost of revenues 25,000 2,333 76,625 2,824 705,316
----------- ----------- ----------- ----------- -----------
Gross profit - 2,332 8,197 2,824 164,311
Expenses:
Research and
development 1,927,813 1,310,920 4,293,952 3,439,700 12,083,043
Selling and marketing 564,795 89,262 1,345,932 345,126 2,579,976
General and
administrative 843,738 618,175 2,457,158 2,063,979 10,106,753
----------- ----------- ----------- ----------- -----------
Total expenses 3,336,346 2,018,357 8,097,042 5,848,805 24,769,772
----------- ----------- ----------- ----------- -----------
3,336,346 2,016,025 8,088,845 5,845,981 24,605,461
Other income (expense):
Investment income 108,690 87,940 429,284 377,288 1,583,623
Interest expense (4,422) (9,667) (23,342) (27,212) (108,853)
----------- ----------- ----------- ----------- -----------
104,268 78,273 405,942 350,076 1,474,770
----------- ----------- ----------- ----------- -----------
Net loss $(3,232,078) $(1,937,752) $(7,682,903) $(5,495,905) $(23,130,691)
=========== =========== =========== =========== ============
Net loss per common
share $ (0.70) $ (0.54) $ (1.72) $ (1.53)
=========== =========== =========== ===========
Weighted average
number of common
shares outstanding 4,621,358 3,594,086 4,465,630 3,586,722
=========== =========== =========== ===========
</TABLE>
See Accompanying Notes to Condensed Financial Statements
4
<PAGE> 5
ILLINOIS SUPERCONDUCTOR CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED OCTOBER 18, 1989
SEPTEMBER 30, (DATE OF INCEPTION)
---------------------------------- TO SEPTEMBER 30,
1996 1995 1996
------------ ------------ -------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (7,682,903) $ (5,495,905) $ (23,130,691)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 795,753 475,983 1,918,911
Loss on disposal of property and equipment - - 15,569
Loss (gain) on available-for-sale securities (24,614) (25,412) 45,321
Net (amortization) of bond (premiums) discounts (19,418) (8,925) (38,835)
Payment of patent costs (107,246) (49,838) (355,291)
Note receivable from officer - - 179,400
Provision for interest on notes payable - - 17,398
Stock compensation expense 21,809 65,989 394,853
Cancellation of stock options (5,440) - (63,576)
Changes in operating assets and liabilities (55,801) (204,048) 483,100
------------ ------------ ------------
Net cash used in operating activities (7,077,860) (5,242,156) (20,533,841)
INVESTING ACTIVITIES:
Purchases of available-for-sale securities (29,541,563) (1,820,123) (53,293,517)
Sales of available-for-sale securities - 4,288,766 7,553,685
Maturities of available-for-sale securities 29,350,083 4,100,000 40,414,025
(Increase) decrease in certificates of deposit, net 462,500 - (400,000)
Acquisitions of property and equipment (3,448,795) (1,684,961) (7,494,133)
Decrease in notes receivable from officers - - (179,400)
------------ ------------ ------------
Net cash provided by (used in) investing activities (3,177,775) 4,883,682 (13,399,340)
FINANCING ACTIVITIES:
Payments of organization costs - - (64,495)
Proceeds from notes payable to stockholders - - 550,000
Proceeds from issuance of preferred stock - - 4,907,500
Proceeds from issuance of common stock - net of
offering costs 8,333,478 - 27,051,128
Exercise of stock options 217,946 2,978 323,657
Exercise of warrants 1,200,049 20,000 1,220,049
Proceeds from bank loan 92,182 500,000 742,700
Payments on long-term debt (505,061) (25,000) (549,920)
Payments under capital lease obligations - (36,636) (211,386)
------------ ------------ ------------
Net cash provided by financing activities 9,338,594 461,342 33,969,233
------------ ------------ ------------
Increase (decrease) in cash and cash equivalents (917,041) 102,868 36,052
Cash and cash equivalents at beginning of period 953,093 90,362 -
------------ ------------ ------------
Cash and cash equivalents at end of period $ 36,052 $ 193,230 $ 36,052
============ ============ ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 23,342 $ 27,212 $ 90,109
============ ============ ============
Equipment capitalized under lease agreements $ - $ 59,739 $ 211,386
============ ============ ============
Conversion of notes payable and accrued interest to
preferred and common stock $ - $ - $ 567,398
============ ============ ============
</TABLE>
See Accompanying Notes to Condensed Financial Statements
5
<PAGE> 6
ILLINOIS SUPERCONDUCTOR CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. 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 nine months
ended September 30, 1996 are not necessarily indicative of the results that may
be expected for the year ending December 31, 1996. For further information,
refer to the financial statements and footnotes thereto included in Illinois
Superconductor Corporation's annual report on Form 10-K for the year ended
December 31, 1995.
NOTE 2 - NET LOSS PER COMMON SHARE
Net loss per common share is computed based on the weighted average number
of common shares outstanding. Common equivalent shares are not included in the
net loss per share calculations since the effect of their inclusion would be
antidilutive.
NOTE 3 - INVESTMENTS
Management determines the appropriate classification of debt securities at
the time of purchase and reevaluates such designation as of each balance sheet
date. All of the Company's investments are classified as available-for-sale.
Available-for-sale securities are carried at fair value, with unrealized gains
and losses, net of income taxes, reported in a separate component of
stockholders' equity. The amortized cost of debt securities in this category
is adjusted for amortization of premiums and accretion of discounts to
maturity. Such amortization is included in investment income. Realized gains
and losses and declines in value judged to be other-than-temporary on
available-for-sale securities are included in investment income. The cost of
securities sold is based on the specific identification method. Interest and
dividends on securities classified as available-for-sale are included in
investment income.
The following is a summary of available-for-sale securities at September
30, 1996:
<TABLE>
<CAPTION>
AVAILABLE-FOR-SALE SECURITIES
----------------------------------
AMORTIZED COST FAIR VALUE
------------- ----------
<S> <C> <C>
U. S. Treasury securities and
obligations of U.S. government agencies $ 500,313 $ 500,313
U. S. corporate debt securities 4,819,008 4,819,008
----------- -----------
$ 5,319,321 $ 5,319,321
</TABLE> =========== ===========
NOTE 4 - INVENTORIES
Inventories at September 30, 1996 consist of the following:
<TABLE>
<S> <C>
Raw materials............... $ 92,563
Work in process............. 171,676
Finished product ........... 400,000
--------
$664,239
========
</TABLE>
6
<PAGE> 7
ILLINOIS SUPERCONDUCTOR CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 5 - RESEARCH AND DEVELOPMENT EXPENSES
In March 1993, the Company entered into a cost-sharing cooperative
agreement with the United States Government under the Department of Commerce's
Advanced Technology Program. The three year agreement was funded in one year
increments and was subject to annual renewal by the United States Government.
The expenses reimbursed under this agreement have been offset against the
Company's related research and development expenses. The contract was
completed in March 1996. Total research and development expenses for the nine
month periods ended September 30, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------
1996 1995
-------- ---------
<S> <C> <C>
Total research and development expenses $4,494,397 $3,806,450
Less: reimbursements under
cost-sharing agreement (200,445) (366,750)
---------- ----------
Net research and development expenses $4,293,952 $3,439,700
========== ==========
</TABLE>
NOTE 6 - CAPITAL STOCK
On February 9, 1996, the Board of Directors of the Company adopted a
shareholder rights plan. Pursuant to such plan, a Series A Right is associated
with, and trades with, each share of common stock outstanding. The record date
for distribution of such Series A Rights was February 22, 1996, and for so long
as the Series A Rights are associated with the common stock, each new share of
common stock issued by the Company will include one Series A Right.
On February 23, 1996, the Company completed the private placement and
issuance of 408,526 shares of common stock at $21.80 per share. Proceeds, net
of related expenses, approximated $8,333,000.
In May 1996, the Securities and Exchange Commission declared effective the
Company's Form S-3 Registration Statement to register 2,994,048 shares of the
Company's common stock for potential future resale. Of those shares
registered, 1,843,397 shares were previously issued and 1,150,651 shares were
available for issuance on that date upon the exercise of certain outstanding
warrants.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Illinois Superconductor Corporation (the "Company") was founded in 1989 by
ARCH Development Corporation, an affiliate of The University of Chicago, to
commercialize superconducting technologies developed initially at Argonne
National Laboratory. Since its inception, the Company has been in the
development stage, primarily engaging in research and development activities,
both internally funded and under government funded contracts. To date, the
Company has received virtually all of its revenues from government research
contracts. The Company generated its first revenues in 1991 and has incurred
cumulative losses of $23,130,691 from inception to September 30, 1996.
Throughout its development stage, the Company's primary focus has been to
use its patented and proprietary high temperature superconducting ("HTS")
materials technologies to develop radio frequency ("RF") component products
designed to enhance the quality and capacity of cellular telephone and other
wireless telecommunications services. During the third quarter of 1996, the
Company received the first commercial orders for, as well as delivered and
installed the first commercial unit, of its SpectrumMasterTM product line.
After the end of the third quarter, the Company received an additional
commercial order from another leading cellular operator which is currently
scheduled for shipment later this year. The Company currently has a series of
field trials ongoing with a number of potential customers. These field trials
are considered a useful tool in a cellular operator's decision to purchase the
Company's products.
The Company generates revenues from government research and development
contracts and from product sales. While government research and development
contracts have historically provided the Company's primary source of revenue,
the Company believes that they will not be a significant source of revenue in
the future. Product revenues have been derived from sales of the Company's
SpectrumMasterTM filter products and HTS instrumentation products. The
Company expects sales of its filter products to increase and sales of its
instrumentation products to decrease.
RESULTS OF OPERATIONS
The Company's revenues increased to $25,000 and $84,822 for the three
months and nine months ended September 30, 1996, respectively, from $4,665 and
$5,648 for the same periods in 1995. Revenues for the three months ended
September 30, 1996 resulted from the first sale of the Company's
SpectrumMasterTM RF filters. Revenues for the nine months of 1996 consisted
primarily of work performed under a government research and development
contract which was completed in March 1996 and SpectrumMasterTM product
revenues. Prior period revenues resulted from sales of HTS instrumentation
products.
Cost of revenues increased to $25,000 and $76,625 for the three months and
nine months ended September 30, 1996, respectively, from $2,333 and $2,824 for
the same periods in 1995. Cost of revenues for the three months ended
September 30, 1996 consisted primarily of material and labor costs associated
with the products sold. Cost of revenues for the nine months ended September
30, 1996 consisted primarily of research and development expenses associated
with the government contract and material and labor costs associated with the
products sold. Prior period cost of revenues consisted of research and
development expenditures attributable to the HTS instrumentation products.
The Company's net research and development expenses for the three months
and nine months ended September 30, 1996 were $1,927,813 and $4,293,952,
respectively, compared to $1,310,920 and $3,439,700 for the same periods in
1995. The Company incurred increased expenditures to expand its
SpectrumMasterTM product line, develop and implement its manufacturing
processes and also to conduct advanced research and development activities.
These expenditures consisted primarily of increased personnel costs and
increases in materials and supplies expenses. Under the terms of the
three-year government cooperative agreement entered into in March 1993, the
United States Government agreed to share costs of certain of the Company's
research efforts. The contract was completed in March 1996. Funding of $0 and
$200,445 for the three months and nine months ended September 30, 1996,
respectively, has been offset against the related research and development
costs. This compares to an offset of $146,497 and $366,750 for the same
periods in 1995. All research and development costs expended to date for
development of new products and enhancements to existing products have been
expensed as incurred.
Selling and marketing expenses increased to $564,795 and $1,345,932 for
the three months and nine months ended September 30, 1996, respectively, from
$89,262 and $345,126 for the same periods in 1995. The increases were
attributable to the addition of sales, marketing and field service personnel,
increased expenditures to conduct customer field trials and expanded product
marketing and advertising efforts. Selling and marketing expenses are expected
to continue to increase over the next several quarters due to broadened product
sales efforts for the Company's RF filter products.
General and administrative expenses increased to $843,738 and $2,457,158
for the three months and nine months ended September 30, 1996, respectively,
from $618,175 and $2,063,979 for the same periods in 1995. The increases were
attributable to increased occupancy costs as a result of the Company's move to
its new facility and increased legal and other financial services expenses.
8
<PAGE> 9
Other income for the three months and nine months ended September 30, 1996
increased to $104,268 and $405,942, respectively, from $78,273 and $350,076 for
the same periods in 1995. The increase was primarily due to the larger fixed
income portfolio which resulted from the Company's private placement completed
in February 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations since inception primarily through
public and private equity financings which raised approximately $34 million.
In November 1995 and February 1996, the Company completed private placements
which raised approximately $3.6 million and $8.3 million, respectively, net of
expenses. At September 30, 1996, the Company's cash, cash equivalents and
investments, including certain restricted investments was approximately
$5,755,000, reflecting a decrease of approximately $1,144,000, from $6,899,000
at December 31, 1995.
During 1995 and 1996, the Company financed a portion of its leasehold
improvements and capital equipment through various borrowings approximating
$650,000. The remaining balance of $193,000 outstanding at September 30, 1996
is secured by capital equipment.
The Company to date has generated limited revenues from product sales.
The Company invested approximately $3 million during the nine months ended
September 30, 1996 in manufacturing plant and equipment. The development and
expansion of the Company's SpectrumMasterTM product line will require continued
commitment of substantial funds to conduct product development and field test
activities to establish commercial-scale manufacturing of and to market the
product line. The actual amount of the Company's future funding requirements
will depend on many factors, including: the amount and timing of future
revenues, the level of product marketing and sales efforts to support the
Company's commercialization efforts, the magnitude of its research and product
development programs, the cost of additional plant and equipment for
manufacturing, and the costs involved in protecting the Company's patents and
other intellectual property. As a result of these requirements, the Company
will require and is currently seeking additional financing, including the
possible issuance of additional equity securities. Although the Company
believes that it will have access to the funding required for at least the next
12 months of operations, there can be no assurance that such funding will be
available on acceptable terms, or at all.
Statements contained in this Form 10-Q that are not historical facts are
forward looking statements that are made pursuant to the Safe Harbor Provisions
of the Private Securities Litigation Reform Act of 1995. See the Company's
Current Report on Form 8-K, dated March 29, 1996 and its other filings with the
Securities and Exchange Commission for the important factors which could cause
the Company's actual results for 1996 and beyond to differ materially from
those expressed in any forward looking statements made by, or on behalf of, the
Company.
9
<PAGE> 10
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On June 5, 1996, Craig M. Siegler filed a complaint against the
Company in the Circuit Court of Cook County, Illinois, County
Department, Chancery Division. The complaint alleged that, in
connection with the Company's private placement of securities in
November 1995, the Company breached and repudiated an oral contract
with Mr. Siegler for the issuance and sale by the Company to Mr.
Siegler of 370,370.37 shares of the Company's common stock, plus
warrants (immediately exercisable at $12.96 per share) to purchase an
additional 370,370.37 shares of the Company's common stock, for a
total price of $4,000,000. The remedy sought by Mr. Siegler was a
sale to him of such securities on the terms of the November 1995
private placement.
On August 16, 1996, the Company's motion to dismiss Mr.
Siegler's complaint was granted with leave to amend. On September
19, 1996, Mr. Siegler's motion for reconsideration was denied. On
October 9, 1996, Mr. Siegler filed his First Amended Verified
Complaint and Jury Demand, seeking a jury trial and money damages
equal to the difference between $8,800,000 (370,370.37 shares at
$10.80 per share and 370,370.37 shares at $12.96 per share) and
740,740.74 shares multiplied by the highest price at which the
Company's stock traded on Nasdaq National Market between November 20,
1995 and the date of judgment. Mr. Siegler also preserved his claim
for specific performance for purposes of appeal. On November 1,
1996, the case was transferred to the Circuit Court of Cook County,
Illinois, County Department, Law Division. The Company's answer to
the complaint is due November 21, 1996 and discovery has begun. The
Company believes that the suit is without merit and intends to
continue to defend itself vigorously in this litigation. However, if
Mr. Siegler prevails in this litigation and is awarded damages in
accordance with the formula described above, such judgment would have
a material adverse effect on the financial condition and operations
of the Company.
ITEM 2. CHANGES IN SECURITIES - Not Applicable
ITEM 3. DEFAULT UPON SENIOR SECURITIES - Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - Not Applicable
ITEM 5. OTHER INFORMATION - Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. EXHIBITS
Exhibit 27.1 - Financial Data Schedule
B. REPORTS ON FORM 8-K - Not Applicable
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 duly authorized.
ILLINOIS SUPERCONDUCTOR CORPORATION
Registrant
Date: November 14, 1996 By: /s/ Ora E. Smith
------------------------------------------
Ora E. Smith
President and Chief Executive Officer
Date: November 14, 1996 By: /s/ Stephen G. Wasko
------------------------------------------
Stephen G. Wasko
Vice President and Chief Financial Officer
11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 36,052
<SECURITIES> 5,319,321
<RECEIVABLES> 80,599
<ALLOWANCES> 0
<INVENTORY> 664,239
<CURRENT-ASSETS> 6,182,978
<PP&E> 7,605,544
<DEPRECIATION> 1,754,123
<TOTAL-ASSETS> 12,773,804
<CURRENT-LIABILITIES> 1,321,202
<BONDS> 0
<COMMON> 4,665
0
0
<OTHER-SE> 11,265,653
<TOTAL-LIABILITY-AND-EQUITY> 12,773,804
<SALES> 84,822
<TOTAL-REVENUES> 84,822
<CGS> 76,625
<TOTAL-COSTS> 76,625
<OTHER-EXPENSES> 8,097,042
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23,342
<INCOME-PRETAX> (7,682,903)
<INCOME-TAX> 0
<INCOME-CONTINUING> (7,682,903)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,682,903)
<EPS-PRIMARY> (1.72)
<EPS-DILUTED> (1.72)
</TABLE>
