<PAGE>
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period
ended June 30, 1996 Commission File Number 333-04879
CAMBRIDGE HEART, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 13-3679946
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1 Oak Park Drive
Bedford, Massachusetts 01730
(Address of principal executive offices) (Zip Code)
617-271-1200
(Registrant's telephone number, including area code)
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 No X
----- -----
Number of shares outstanding of the issuer's classes of common stock as of
September 12, 1996;
Class Number of Shares Outstanding
- --------------------------------------- ------------------------------------
Common Stock, par value $.001 per share 10,171,538
<PAGE>
CAMBRIDGE HEART, INC.
INDEX
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet at December 31,
1995 and June 30, 1996 4
Statement of Operations
for the Three-month and Six-month
periods ended June 30, 1995 and 1996
and the period from inception
(January 16, 1990) through June 30,
1996 5
Statement of Cash Flows
for the Six-month periods ended June 30,
1995 and 1996 and the period from
inception (January 16, 1990) through
June 30, 1996 6
Notes to Condensed Financial
Statements 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 9
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security
Holders 13
Item 6. Exhibits and Reports on Form 8-K 13
</TABLE>
SIGNATURE 14
This Quarterly Report on Form 10-Q contains forward-looking statements. For
this purpose, any statements contained herein that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
the foregoing, the words "believes," "anticipates," "plans," "expects," and
similar expressions are intended to identify forward-looking statements. The
important factors discussed
2
<PAGE>
below under the caption "Certain Factors That May Affect Future Operating
Results," among others, could cause actual results to differ materially from
those indicated by forward-looking statements made herein and presented
elsewhere by management from time to time.
3
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1
FIANCIAL STATEMENTS
CAMBRIDGE HEART, INC.
(a development stage enterprise)
BALANCE SHEET
<TABLE>
<CAPTION>
December 31, June 30,
1995 1996
------------ --------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents................................... $ 3,948,147 $ 1,929,127
Accounts receivable......................................... 0 223,218
Inventory................................................... 118,865 181,334
Prepaid expenses and other current assets................... 48,370 30,037
----------- -----------
Total current assets...................................... 4,115,382 2,363,716
Fixed assets, net........................................... 161,978 226,215
Other assets................................................ 0 144,061
----------- -----------
$ 4,277,360 $ 2,733,992
=========== ===========
Current liabilities:
Accounts payable............................................ $ 108,471 $ 158,316
Accrued expenses............................................ 126,738 147,945
License fees payable........................................ 31,212 31,212
----------- -----------
Total current liabilities................................. 266,421 337,473
----------- -----------
Series B convertible preferred stock, $.001 par value;
2,500,000 shares authorized; 2,333,333 shares issued
and outstanding (liquidating preference of $3,500,000).... 2,333 2,333
Series A convertible preferred stock, $.001 par value;
6,900,000 shares authorized; 6,578,083 shares issued
and outstanding (liquidating preference of $6,578,083).... 6,578 6,578
Common stock, $.001 par value; 20,000,000 shares
authorized; 3,163,163 and 3,276,580 shares issued and
outstanding at December 31, 1995 and June 30, 1996,
respectively.............................................. 3,163 3,277
Additional paid-in-capital.................................. 9,079,671 9,543,684
Accumulated deficit during the development stage............ (5,080,806) (6,733,040)
----------- -----------
4,010,939 2,822,832
Less: deferred compensation................................. 0 426,313
----------- -----------
Total stockholders' equity................................ 4,010,939 2,396,519
----------- -----------
$ 4,277,360 $ 2,733,992
=========== ===========
</TABLE>
See accompanying notes to condensed financial statements.
4
<PAGE>
CAMBRIDGE HEART, INC.
(a development stage enterprise)
STATEMENT OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Period from
inception
Three months ended June 30, Six months ended June 30, (January 16,
--------------------------- ------------------------- 1990) through
1995 1996 1995 1996 June 30, 1996
-------- -------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C>
Product revenue.............................. $ 0 $ 184,482 $ 0 $ 239,702 $ 307,749
Revenue from research and option agreement... 0 25,000 0 25,000 50,000
---------- ----------- ----------- ----------- -----------
Total revenue............................... 0 209,482 0 264,702 357,749
Cost of goods sold........................... 0 258,294 0 307,331 448,643
---------- ----------- ----------- ----------- -----------
0 (48,812) 0 (42,629) (90,894)
Cost and expenses:
Research and development..................... 321,206 419,991 735,111 772,882 4,058,987
Selling, general and administrative.......... 291,665 550,725 482,398 917,037 3,100,730
---------- ----------- ----------- ----------- -----------
Loss from operations........................ (612,871) (1,019,528) (1,217,509) (1,732,548) (7,250,611)
Interest expense............................. 0 0 0 0 (5,620)
Interest income.............................. 61,770 33,760 105,354 80,314 523,191
---------- ----------- ----------- ----------- -----------
Net loss..................................... $ (551,101) $ (985,768) $(1,112,155) $(1,652,234) $(6,733,040)
========== =========== =========== =========== ===========
Pro forma net loss per share................. $ (0.12) $ (0.20)
=========== ===========
Pro forma weighted average common and common
equivalent shares outstanding................ 8,102,288 8,102,288
=========== ===========
</TABLE>
See accompanying notes to condensed financial statements.
<PAGE>
CAMBRIDGE HEART, INC.
(a development stage enterprise)
STATEMENT OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Period from
inception
Six months ended June 30, (January 16,
--------------------------- 1990) through
1995 1996 June 30, 1996
------------- ----------- --------------
<S> <C> <C> <C>
Cash flows from operaing activities:
Net loss.......................................... $(1,112,155) $(1,652,234) $(6,733,040)
Adjustments to reconcile net loss to net
cash used for operating activities:
Issuance of common stock purchase right
to licensor................................... - - 35,640
Depreciation.................................... 11,192 25,542 71,452
Amortization of deferred compensation........... - 22,437 22,437
Changes in assets and liabilities:
Increase in accounts receivable............... - (223,218) (223,218)
Increase in inventory......................... (77,068) (62,469) (181,334)
(Increase) decrease in prepaid expenses
and other current assets.................... (35,654) 18,333 (30,037)
Increase in other assets...................... (15,831) (12,791) (12,791)
Increase (decrease) in accounts payable
and accrued expenses........................ 78,457 (60,218) 174,991
Increase in license fees
payable..................................... - - 31,212
----------- ----------- -----------
Net cash used for operating activities...... (1,151,059) (1,944,618) (6,844,688)
----------- ----------- -----------
Cash flows from investing activities:
Purchases of fixed assets......................... (27,775) (89,779) (297,667)
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from issuance of notes payable........... - - 100,000
Proceeds from issuance of common stock............ 2,602 15,377 21,092
Proceeds from capital contribution................ - - 3,100
Proceeds from issuance of Series A preferred
stock, net of issuance costs.................... - - 5,596,777
Proceeds from issuance of Series B preferred
stock, net of issuance costs.................... 3,350,513 - 3,350,513
----------- ----------- -----------
Net cash provided by financing activities... 3,353,115 15,377 9,071,482
----------- ----------- -----------
Net increase (decrease) in cash and
cash equivalents................................ 2,174,281 (2,019,020) 1,929,127
Cash and cash equivalents at beginning
of period....................................... 3,329,490 3,948,147 0
----------- ----------- -----------
Cash and cash equivalents at end
of period....................................... $ 5,503,771 $ 1,929,127 $ 1,929,127
=========== =========== ===========
</TABLE>
Supplemental disclosure of Non-Cash Activities:
In connection with the initial public offering of Common Stock, the Company
incurred $131,270 of deferred financing costs during the six months ended June
30, 1996 which had not been paid as of this date.
See accompanying notes to condensed financial statements.
6
<PAGE>
CAMBRIDGE HEART, INC.
Notes to Condensed Financial Statements
(unaudited)
1. NATURE OF BUSINESS
Cambridge Heart, Inc. (the "Company"), was incorporated in Delaware on January
16, 1990 and is engaged in the research, development and commercialization of
products for the non-invasive diagnosis of cardiac disease.
During the period from inception (January 16, 1990) through June 30, 1996, the
Company devoted substantially all of its efforts to business planning, raising
financing, recruiting personnel, research and development and obtaining
regulatory approval for its products. Although the Company commenced its planned
principal activities and began selling its product in 1995, it has not generated
significant revenue therefrom. Accordingly, the Company is considered to be in
the development stage, as defined by Statement of Financial Accounting Standards
No. 7, at June 30, 1996.
2. BASIS OF PRESENTATION
The condensed financial statements have been prepared by the Company without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. These condensed financial statements should be read in conjunction
with the financial statements and the notes thereto included in the Company's
registration statement on Form S-1, originally filed with the Securities and
Exchange Commission on May 31, 1996, amended thereafter, and declared effective
on August 2, 1996. In the opinion of managment, all adjustments, consisting only
of normal recurring adjustments necessary to present fairly the financial
position of Cambridge Heart, Inc. as of June 30, 1996, and the results of its
operations for the three and six month periods ending June 30, 1996 and 1995,
and cash flows for the six months ending June 30, 1996 and 1995, have been
included. The results of operations for such interim periods are not necessarily
indicative of the results for the full year.
3. INVENTORIES
Inventories, consisting primarily of purchased components, are stated at the
lower of cost or market. Cost is determined using the first in, first out (FIFO)
method.
4. DEFERRED ISSUANCE COSTS
As of June 30, 1996, $131,270 of costs related to the initial public offering of
the Company's common stock have been deferred, to be offset against the proceeds
of the offering. These costs are reflected on the balance sheet as other assets.
<PAGE>
5. PRO FORMA NET LOSS PER SHARE
Pro forma net loss per share is determined by dividing net loss by the weighted
average number of common shares and common share equivalents outstanding during
the period. Common share equivalents, comprised of common stock options and
warrants and convertible preferred stock, have been excluded from the
calculation as their effect is anti-dilutive, except that, pursuant to
Securities and Exchange Commission Staff Accounting Bulletin No. 83, common
share equivalents issued and common stock sold at prices below the initial
public offering price in the twelve month periods preceding the initial filing
of the Company's Registration Statement and through the effective date of the
initial public offering have been included in the calculation as if outstanding
for all periods presented.
Conversion of all preferred stock into common stock occurred upon the closing of
the Company's initial public offering on August 2, 1996. The unaudited pro forma
net loss per share information included in the accompanying statement of
operations for the three and six months ended June 30, 1996 reflect the impact
on unaudited pro forma net loss per share of such conversion as of the beginning
of each period or date of issuance, if later, using the if-converted method.
Historical net loss per share has not been presented on the basis that it is
irrelevant due to the significant change in the Company's capital structure and
resultant earnings or loss per share which resulted upon conversion of the
convertible preferred stock.
6. SUBSEQUENT EVENT
On August 2, 1996, the Company completed its initial public offering, selling
2,437,750 shares of common stock for net proceeds of approximately $19,750,000.
In conjunction with the initial public offering, all of the Company's
outstanding preferred stock was converted into 4,455,708 shares of common
stock.
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
Cambridge Heart, Inc., a Delaware corporation (the "Company") is engaged in
the research, development and commercialization of products for the non-invasive
diagnosis of cardiac disease. The Company's first product, the CH 2000 System,
is a cardiac stress test system that can also measure extremely low levels of T-
wave alternans. T-wave alternans are a beat to beat alternation in a portion of
the electrocardiogram ("ECG"). Clinical research published to date has
demonstrated that T-wave alternans are associated with vulnerability to
ventricular arrhythmias, which are responsible for sudden cardiac death. The
Company has generated limited revenues from the shipment of demonstration units
and customer units of its first product and has experienced substantial net
losses since its inception, and expects to incur substantial and increasing net
losses for the foreseeable future. The Company believes that its research and
development expenses will increase in the future as it develops additional
products and funds clinical trials of its products. The Company's research and
development expenses may also increase in the future as it supplements its
internal research and development with third party technology licenses and
potential product acquisitions. The Company also expects that its selling,
general and administrative expenses will continue to increase in connection with
the Company's continued expansion of its sales and marketing activities.
Revenues generated from the sale of the Company's products will depend upon
numerous factors, including the timing of regulatory actions, progress of
product development, the extent to which the Company's products gain market
acceptance, varying pricing promotions and volume discounts to customers,
competition and the availability of third party reimbursement. The Company has
incurred cumulative net losses since inception through June 30, 1996 of
approximately $6,733,000.
Results of Operations
The Company's first product is the CH 2000 System. The system received
510(k) clearance from the U.S. Food and Drug Administration ("FDA") in February
1996 and the Company's proprietary HiRes disposable electrode received 510(k)
clearance in August of 1996. This electrode enables the CH 2000 System to
measure T-wave alternans.
Three and Six Month Periods Ended June 30, 1996 and 1995
Revenues for the three months ended June 30, 1996 were $209,482. This
consisted of $184,482 of revenues from product shipments and $25,000 of revenues
from contract R & D services. The corresponding period in 1995 had no revenues.
Revenues for the six month period ended June 30, 1996 were $264,702. The same
period in 1995 had no revenue. This increase of product revenue reflects the
introduction of the CH 2000 System after June 30, 1995 and shipments to domestic
and European clinical sites, and demonstration units sold to an international
partner.
9
<PAGE>
Revenues from product shipments resulted in the generation of accounts
receivable at June 30, 1996. The cost of goods sold for the quarter ended June
30, 1996 was $258,294. The same period for the previous year had no shipments
and no cost of goods sold. The cost of goods sold for the six month period ended
June 30, 1996 was $307,331. The same period for 1995 had no cost of goods sold.
These costs exceeded the product revenue because of fixed overhead costs. As
the volume of production increases the Company expects that the cost of goods
sold will decrease as a percentage of revenue.
Research and Development expenses increased to $419,991 in the quarter
ended June 30, 1996 from $321,206 in the same period a year earlier. Research
and Development expenses increased to $772,882 in the six month period ended
June 30, 1996 from $735,111 in the same period in 1995. This increase was
principally due to increased staffing in engineering and software development,
as well as higher clinical trial expenses. The Company expects to continue to
selectively increase personnel in this area and expand clinical trials.
General and Administrative expenses increased to $550,725 in the quarter
ended June 30, 1996 from $291,665 in the same period in 1995. General and
Administrative expenses increased to $917,037 in the six month period ended
June 30, 1996 from $482,398 for the same period in 1995. Most of this increase
was due to increases in staffing in management, marketing and regulatory
affairs. In addition, the Company moved into larger facilities after June 30,
1995 and there are increased costs associated with the new space. The Company
expects General and Administrative expenses to increase as the Company expands
its sales and marketing efforts and enters the public reporting environment.
Interest income was $33,760 for the three months ended June 30, 1996
compared to $61,770 for the same period in 1995. For the six months ended June
30, 1996, interest income was $80,314 compared to $105,354 from the same period
in 1995. The Company completed a round of private financing in the second
quarter of 1995. The invested cash was used to fund operating losses and the
interest realized declined as well. The Company expects interest income to
increase since the proceeds of the initial public stock offering, completed
August 2, 1996, have now been invested.
Liquidity and Capital Resources
Since inception, the Company has financed operations primarily from the
sale of convertible preferred stock. As of June 30, 1996, the Company had raised
$9,065,000 (net of stock issuance costs) from the sales of equity securities,
with net proceeds of $5,697,000 received in 1993 and $3,353,000 received in
1995. On August 2, 1996, the Company raised approximately $19,750,000 (net of
stock issuance costs) from the sale of 2,437,750 shares of Common Stock in the
Company's initial public offering. In conjunction with the initial public
offering, all outstanding shares of preferred stock were converted to 4,455,708
shares of Common Stock.
As of June 30, 1996, the Company had cash and cash equivalents of
$1,929,000. The proceeds of the equity offerings have been used primarily to
fund operating losses of $6,733,000, reflecting expenditures made primarily to
support research and development activities, to form a marketing and sales
organization, to support an administrative infrastructure and the investment of
approximately $298,000 in property and equipment as of June 30, 1996. In 1995,
the Company used $2,615,000 to fund operating activities.
The Company expects its capital expenditures to increase as it continues to
commercialize its products, particularly in connection with the manufacture of
its proprietary Hi-Res electrodes. The Company does not expect capital
expenditures to exceed an aggregate $3,000,000 over the next two years.
10
<PAGE>
Under the terms of various license, consulting and technology agreements,
the Company is required to pay royalties on sales of its products. Minimum
license maintenance fees under these license agreements, which are creditable
against royalties otherwise payable for each year, range from $20,000 to $45,000
per year in total through 2008. The Company is committed to pay an aggregate of
$470,000 of such minimum license maintenance fees subsequent to June 30, 1996.
As part of these agreements, the Company is also committed to meet certain
development and sales milestones, including a requirement to spend a minimum of
$200,000 in any two-year period for research and development, clinical trials,
marketing, sales and/or manufacturing of products related to certain technology
covered by the consulting and technology agreements.
The Company anticipates that its existing capital resources, including the
amounts raised in the initial public offering, will be adequate to satisfy its
capital requirements for at least the next two years. There may be
circumstances, however, that would accelerate the Company's use of this capital.
If this occurs, the Company may from time to time incur additional indebtedness
or issue, in public or private transactions, equity or debt securities. However,
there can be no assurance that suitable debt or equity financing will be
available to the Company on acceptable terms, if at all.
Certain Factors that may Affect Future Operating Results
The foregoing forward-looking statements involve risks and uncertainties.
As a direct or indirect result of any or a combination of any of the following
factors, the Company's actual results may differ significantly from the results
discussed in such forward-looking statements: The Company is a development stage
company with a history of operating losses and there is no assurance of market
acceptance of the Company's primary product, the CH 2000 System. The Company's
products, product development activities, manufacturing processes and sales and
marketing are subject to extensive and rigorous regulation by the FDA and
comparable agencies in foreign countries. The process of obtaining marketing
clearance or approval for new medical devices from the FDA can be costly and
time consuming, and there can be no assurance that such clearance or approval
will be granted for the Company's future products on a timely basis, if at all,
or that the FDA review will not involve delays that will adversely affect the
Company's ability to commercialize additional products or expand permitted uses
of existing products. The medical device market is characterized by intensive
development efforts and rapidly advancing technology and is highly competitive,
and there can be no assurance that the Company will keep pace with advancing
technology and competitive innovations. The Company's future success will
depend, in part, on its ability to continue to develop patentable products,
enforce its patents and obtain patent protection for its products both in the
United States and in other countries. However, patent positions of medical
device companies, including the Company, are generally uncertain and involve
complex legal and factual questions. No assurance can be given that patents will
issue from any patent applications owned by or licensed to the Company or that,
if patents do issue, the claims allowed will be sufficiently broad to protect
the Company's technology. In addition, no assurance can be given that any issued
patents owned by or licensed to the Company will not be challenged, invalidated
or circumvented, or that the rights granted thereunder will provide competitive
advantages to the Company. The Company has limited manufacturing and marketing
experience and is dependent upon certain key suppliers. The Company is also
dependent upon certain key management personnel and consultants. The Company has
limited international sales and operations experience. The manufacture and sale
of medical devices entails significant risk of product liability claims in the
event that the use of such devices is alleged to have resulted in adverse
effects to a patient. The Company's product liability insurance coverage is
limited. For additional and more comprehensive discussion of the risks
associated with ownership of Common Stock of the Company, please see the Risk
Factors section of the Company's Registration Statement originally filed on Form
S-1 with the Securities and Exchange Commission on May 31, 1996, amended
thereafter, and declared effective on August 2, 1996. As a result of these and
other factors,
11
<PAGE>
there can be no assurance that the Company will not experience material
fluctuations in future operating results on a quarterly or annual basis.
12
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
On or about June 18, 1996, the Company's Stockholders, through written
consents pursuant to Section 228 of the Delaware General Corporation Law, (i)
elected Jeffrey M. Arnold, M. Fazle Husain, Marlene Krauss, M.D., David F.
Muller, Ph.D., Zachary C. Berk, David F. Rollo, M.D., Ph.D., Rolf S. Stutz,
Richard J. Cohen, M.D., Ph.D. and Laurence J. Blumberg, M.D. as Directors of the
Company, (ii) ratified the appointment of Price Waterhouse LLP as the
independent auditors of the Company for the year ending December 31, 1996, (iii)
approved the certificate of amendment to the Amended and Restated Certificate of
Incorporation, providing for a reverse stock split of the Company's Common
Stock, (iv) approved the Company's 1996 Equity Incentive Plan, (v) approved the
Company's 1996 Employee Stock Purchase Plan, (vi) approved the Company's 1996
Director Option Plan, (vii) approved the Company's Amended and Restated
Certificate of Incorporation, effective upon the closing of the initial public
offering of the Company's Common Stock, (viii) approved the Amended and Restated
By-laws of the Company, effective upon the closing of the initial public
offering of the Company's Common Stock, (ix) waived a certain Section of a
certain Stockholders' Agreement dated as of February 8, 1993, (x) approved the
classification of the Company's Directors, and (xi) ratified all actions taken
and things previously done by the incorporators, stockholders, directors and
officers of the Company.
Votes Cast For: 5,205,560
Votes Cast Against: 0
Votes Withheld 0
Abstentions: 0
Broker Nonvotes: 0
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
a. The exhibits listed in the Exhibit Index filed as part of this
report are filed as part of or are included in this report.
b. The Company filed no reports on Form 8-K during the quarter for
which this report is filed.
13
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
CAMBRIDGE HEART, INC.
Date: September 13, 1996 By: /s/ Thomas V. Hennessey, Jr.
----------------------------------
Thomas V. Hennessey, Jr.
Vice President of Operations,
Treasurer and Chief
Financial Officer
14
<PAGE>
EXHIBIT INDEX
Exhibit Number Description
-------------- -----------
11 Statement re Computation of Unaudited Pro Forma
Net Loss Per Share
27 Financial Data Schedule
<PAGE>
EXHIBIT 11
Cambridge Heart, Inc.
Computation of Unaudited Pro Forma Net Loss Per Share
<TABLE>
<CAPTION>
For the three months ended June 30, For the six months ended June 30,
----------------------------------- ---------------------------------
1996 1996
-------- --------
<S> <C> <C>
Net loss $ (985,768) $(1,652,234)
========== ===========
Weighted average shares outstanding:
a. Shares attributable to common stock
outstanding 3,219,716 3,191,934
b. Shares attributable to certain common
stock options (1) 426,864 454,646
c. Shares attributable to the assumed conversion
of Series A and B convertible preferred stock
outstanding upon closing of initial public
offering 4,455,708 4,455,708
---------- -----------
Unaudited pro forma weighted average common and
common equivalent shares outstanding 8,102,288 8,102,288
========== ===========
Unaudited pro forma net loss per share $ (0.12) $ (0.20)
========== ===========
</TABLE>
(1) Pursuant to Securities and Exchange Commission Staff Accounting Bulletin No.
83, stock options issued during the twelve months prior to the Company's
initial registration statement on Form S-1 have been included in the above
computation as if outstanding for the entire period, even if such impact is
anti-dilutive.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE JUNE 30,
1996 UNAUDITED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,929,127
<SECURITIES> 0
<RECEIVABLES> 223,218
<ALLOWANCES> 0
<INVENTORY> 181,334
<CURRENT-ASSETS> 2,363,716
<PP&E> 297,667
<DEPRECIATION> 71,452
<TOTAL-ASSETS> 2,733,992
<CURRENT-LIABILITIES> 337,473
<BONDS> 0
0
8,911
<COMMON> 3,277
<OTHER-SE> 2,384,331
<TOTAL-LIABILITY-AND-EQUITY> 2,733,992
<SALES> 239,702
<TOTAL-REVENUES> 264,702
<CGS> 307,331
<TOTAL-COSTS> 307,331
<OTHER-EXPENSES> 1,689,919
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,652,234)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,652,234)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,652,234)
<EPS-PRIMARY> 0<F1>
<EPS-DILUTED> 0<F1>
<FN>
<F1>HISTORICAL EARNINGS PER SHARE HAS NOT BEEN PRESENTED. SEE FOOTNOTE 5 OF THE
CONDENSED FINANCIAL STATEMENTS.
</FN>
</TABLE>
