US 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 March 31, 1997
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
33-76422
(Commission file number)
Linda's Diversified Holdings Inc.
(Exact name of small business issuer as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
22-3280395
(Incorporation or organization identification number)
11 Commerce Drive, Cranford, NJ 07016
(Address of principal executive offices)
(908) 276-2080
(Issuer's telephone number)
Not Applicable
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities and Exchange Act during the past 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 ( )
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: May 15, 1997
Class A Common Stock, $.001 par value: 2,065,000 shares
Class B Common Stock, $.001 par value: 800,000 shares
Transitional Small Business Disclosure Format (Check one):Yes ( ) No (X)
<PAGE>
LINDA'S DIVERSIFIED HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
1997 1996
----------- ------------
(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 732,345 $ 1,331,582
Inventories 10,457 15,065
Retail loans receivable 89,489 42,691
Notes receivable, current portion - 10,000
Prepaid expenses and other current assets 115,370 84,049
------------ -----------
Total Current Assets 947,661 1,483,387
------------ -----------
PROPERTY AND EQUIPMENT 453,538 432,289
------------ -----------
OTHER ASSETS:
Restricted cash 162,500 162,500
Notes receivable, less current portion 150,155 150,155
Intangible assets 34,880 39,299
Deposits and other assets 22,415 19,923
------------ -----------
369,950 371,877
------------ -----------
$1,771,149 $ 2,287,553
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Long term debt, current portion $ 41,966 $ 51,926
Accounts payable and accrued expenses 225,196 295,119
Accrued payroll and payroll taxes 23,991 5,969
Sales tax payable 4,493 4,866
Deferred franchise fees 160,000 85,000
------------ ------------
Total Current Liabilities 455,646 442,880
------------ ------------
LONG TERM LIABILITIES:
Long term debt, less current portion 170 2,709
Deferred rent 42,009 42,519
------------ ------------
42,179 45,228
------------ ------------
COMMITMENTS
STOCKHOLDERS' EQUITY:
Preferred stock, Series A, $.001 par value;
2,500,000 shares authorized; 120,000
shares issued and outstanding 120 120
Common stock, Class A, $.001 par value;
15,000,000 shares authorized; 2,065,000
shares issued and outstanding 2,065 2,065
Common stock, Class B, $.001 par value;
800,000 shares authorized; 800,000
shares issued and outstanding 800 800
Capital in excess of par value 8,096,818 8,096,818
Accumulated deficit (6,826,479) (6,300,358)
----------- ------------
Total Stockholders' Equity 1,273,324 1,799,445
$ 1,771,149 $ 2,287,553
============ ============
See accompanying notes to consolidated financial statements.
- 2 -
<PAGE>
LINDA'S DIVERSIFIED HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
March 31,
-------------------------------
1997 1996
-------------- ---------------
REVENUES:
Restaurant sales, net $ 221,517 $291,360
Initial franchise fees 25,000 -
Franchise royalties 12,758 4,642
Contract fee income 10,841 -
Loan origination fees 680 -
Loan participation premiums 3,095 -
--------- --------
273,891 296,002
--------- --------
COSTS AND EXPENSES:
Restaurant Operations:
Food and paper costs 89,713 121,987
Restaurant labor and related expenses 73,566 119,592
Operating expenses 1O,146 20,764
Occupancy expenses 43,046 74,336
Depreciation and amortization 28,517 31,577
Loan Operations:
Payroll and related expenses 182,610 58,493
Media and advertising costs 53,693 -
Operating expenses 94,975 22,076
Corporate and Franchising:
General and administrative 205,641 241,986
--------- --------
781,907 690,811
--------- --------
LOSS FROM OPERATIONS (508,016) (394,809)
OTHER INCOME (EXPENSE):
Interest and other income 10,146 13,984
Interest expense (2,251) (4,318)
---------- ---------
7,895 9,666
---------- ---------
NET LOSS (500,121) (385,143)
PREFERRED STOCK DIVIDENDS 21,000 -
---------- ---------
NET LOSS APPLICABLE TO COMMON STOCK $ (521,121) $ (385,143)
========= ==========
NET LOSS PER COMMON SHARE $ (0.22) $ (0.24)
========= ==========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 2,415,000 1,615,000
========== ==========
See accompanying notes to consolidated financial statements.
- 3 -
<PAGE>
LINDA'S DIVERSIFIED HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
-------------------------------
1997 1996
-------------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (500,121) $(385,143)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 28,517 31,577
Changes in operating assets and liabilities:
Decrease in inventories 4,608 3,983
(Increase) in prepaid expenses and other assets (31,321) (88,493)
(Increase) in deposits and other assets (2,492) (16,373)
Increase (decrease) in accounts payable and
accrued expenses (69,923) 17,852
Increase (decrease) in accrued payroll and
payroll taxes 18,022 (21,624)
Decrease in sales tax payable (373) (1,442)
Increase in deferred franchise fees 75,000 25,000
Increase (decrease) in deferred rent (510) 4,131
--------- --------
Net cash used in operating activities (478,593) (430,532)
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from redemption of cash investments - 571,000
Acquisition of cash investments - (88,000)
Funds advanced under notes receivable - (198,228)
Proceeds from notes receivable 10,000 1,737
Disbursements for retail loans receivable (145,035) -
Proceeds from sale of retail loans receivable 98,237 -
Acquisition of property and equipment (45,347) (55,513)
Acquisition of intangible assets - (3,580)
--------- ---------
Net cash provided by (used in)
investing activities (82,145) 227,416
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of preferred dividends (21,000) -
Payments of long-term debt (12,499) (10,935)
-------- --------
Net cash used in financing activities (33,499) (10,935)
--------- ---------
NET CHANGE IN CASH AND CASH EQUIVALENTS (594,237) (214,051)
CASH AND CASH EQUIVALENTS, Beginning of period 1,331,582 558,013
--------- --------
CASH AND CASH EQUIVALENTS, End of period $ 732,345 $ 343,962
========= =========
SUPPLEMENTAL INFORMATION:
Interest paid $ 2,251 $ 4,318
========= =========
Income taxes paid $ - $ -
========= =========
See accompanying notes to consolidated financial statements.
- 4-
<PAGE>
LINDA'S DIVERSIFIED HOLDINGS INC. AND SUBSIDIARIES
Notes to consolidated financial statements
(Unaudited)
(1) The consolidated balance sheet of Linda's Diversified Holdings Inc. (the
"Company") as of December 31, 1996 has been derived from the audited
consolidated balance sheet contained in the Company's Form 10-KSB as of
December 31, 1996 and is presented for comparative purposes. All other
financial statements are unaudited. All adjustments which are of a normal
and recurring nature and in the opinion of management necessary for a fair
presentation, have been included. The results of operations for interim
periods are not necessarily indicative of the operating results for the
full year. Footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have
been omitted in accordance with the published rules and regulations of the
Securities and Exchange Commission. These consolidated financial statements
should be read in conjunction with the financial statements and notes
thereto included in the Company's Form 10-KSB for the most recent fiscal
year.
(2) In March 1997, the Company signed a master license agreement with a
licensee and received a $120,000 license fee. Under this agreement, the
licensee has acquired territory rights to develop a minimum of 20
restaurants in the Philippines over a ten year term. These restaurants will
operate under the proprietary trademark, trade names and standard operating
procedures of the Company, and will utilize the Company's former operating
name, Linda's Flame Roasted Chicken. The Company will receive additional
fees upon the opening of each restaurant, and monthly royalties based upon
a percentage of each restaurant's net sales.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ------------------------------------------
Principles of Consolidation -
- ---------------------------
The consolidated financial statements include the accounts of Linda's
Diversified Holdings, Inc. and its wholly-owned subsidiaries. All significant
intercompany transactions and balances have been eliminated in consolidation.
Franchise Related Income and Deferred Franchise Fees -
- ----------------------------------------------------
In connection with its franchising operations, the Company receives initial
franchise fees, royalties and advertising fees from its franchisees. Initial
fees are recognized when the franchisee commences operations. Royalties and
advertising fees, as defined in the underlying franchise agreements, are
recognized in the period that the related franchise store revenue is generated.
In March 1996, the Company signed a multi-unit franchise development agreement
under which the franchisee will open up to 18 Linda's Rotisserie & Kitchen
restaurants, the first of which opened in Flemington, New Jersey on September
28, 1996. Under this agreement, the Company receives initial franchise fees with
respect to each individual store, and recognizes such income as each such store
commences operations.
Cash Equivalents -
- -----------------
The Company considers highly liquid debt instruments with maturities of three
months or less to be cash equivalents.
Restricted Cash -
- ----------------
In connection with regulatory banking requirements in certain states, National
Home Guaranty,a wholly-owned subsidiary of the Company, is required to post
mortgage surety bonds which are collateralized by irrevocable letters of credit.
The collateralization underlying these letters of credit is shown as restricted
cash in the March 31, 1997 financial statements.
- 5 -
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
OVERVIEW
- --------
The Company is a holding corporation consisting of restaurant operations,
restaurant franchising, and home-equity loan operations. The restaurant
entities, operating under the name Linda's Rotisserie & Kitchen (formerly
Linda's Flame Roasted Chicken), consist of seven restaurants, two of which are
Company-owned and operated, and five of which are franchised. Additionally, the
Company has sold an additional two franchises, one in New Jersey and one in New
York, which are expected to open later in 1997. The loan operations are
conducted through National Home Guaranty ("NHG"), a wholly-owned subsidiary,
which commenced operations in April 1996, providing both conventional and
federally-guaranteed financing for homeowners and lead-generation services for
contractors with respect to home-improvement services in the low-to-moderate
income housing markets. NHG is approved by the US Department of Housing and
Urban Development to originate federally-guaranteed Title I loans, and is
currently a licensed lender in seven states including New Jersey, Massachusetts,
Rhode Island, Delaware, Maryland, New Hampshire and Connecticut. NHG also
operates on a limited-basis in Pennsylvania and New York which do not require a
special license for the services in which the NHG are currently providing in
those states.
In order to improve its liquidity and provide additional working capital during
the start-up phase of NHG's business, the Company requires and is actively
seeking additional financing through a private placement of debt or equity, or a
joint venture. However, there can be no assurance of success. The Company
believes that additional funding will be required for it to meet its cash
requirements for the next twelve months. If such financing is not secured, the
Company will be required to further curtail its activities (which the Company
does not believe will provide a solution to the problem), sell NHG or its
lending business, or in the absence of a viable alternative, discontinue
operations.
RESTAURANT OPERATIONS
- ---------------------
Gross restaurant sales for the quarter ended March 31, 1997 decreased $74,000
(24%) as compared to the quarter ended March 31, 1996. Comparable store gross
sales (for locations opened at least one year) decreased $14,000 (6%). The total
sales decreases were due to the Company having three Company-owned locations in
the first quarter of 1996 compared with two such locations in 1997. The Company
closed a restaurant in June 1996 to reduce its losses and preserve its working
capital. The same store sales decreases were due to the increased saturation of,
and intense competition from, similar restaurant concepts throughout New Jersey.
Food and paper costs collectively decreased as a percentage of gross sales for
the three months ended March 31, 1997 compared to 1996 to $90,000 (39% of gross
sales) from $122,000 (40% of gross sales), respectively, due to lower poultry
costs in 1997. These costs were at a ten-year high throughout 1996. Additional
cost reductions were a result of the continued shifting of the restaurants' menu
mix to gourmet sandwiches, which have lower food costs than other meals.
Restaurant labor and related expenses decreased to $74,000 (32% of gross
sales) for the quarter ended March 31, 1997 as compared to $122,000 (39% of
gross sales) for 1996. This decrease, as a percentage of gross sales, is due to
the closing, in June 1996, of the Company's Livingston, New Jersey location
which had its highest labor costs, as well as the Company's continued focus on
correlating hourly labor to projected sales.
- 6 -
<PAGE>
Operating expenses, including such items as local promotion, repairs and
maintenance and store supplies, totalled $10,000 (4% of gross sales) for the
first three months of 1997 compared to $21,000 (7% of gross sales) for the
comparable period in 1996.
Occupancy costs, including such fixed and recurring items as rent, common area
maintenance charges and utilities, totalled $43,000 (19% of gross sales) and
$74,000 (25% of gross sales) for the quarters ended March 31, 1997 and 1996,
respectively. This decrease as a percentage of gross sales is due to the closing
of the Company' Livingston, New Jersey location which had its highest occupancy
costs.
Depreciation and amortization decreased to $29,000 for the quarter ended March
31, 1997 from $32,000 for 1996. This decrease is attributable to the fact that
the Company had equipment and leasehold improvements at one additional location
in 1996 which was closed in June 1996.
RESTAURANT FRANCHISING
- ----------------------
The Company's franchising operations are administered through its subsidiary,
Linda's Chicken International. As of March 31, 1997, five franchises were
opened. The first in Colonia, New Jersey, began operations in December 1995. The
second, a free-standing prototype in Westwood, New Jersey, opened in April 1996.
The third location opened in Flemington, New Jersey in September 1996. The
fourth location opened in Oakland, New Jersey in November 1996. The fifth
location opened in South Orange, New Jersey in March 1997. Franchise royalty
income, amounted to $13,000 for the three months ended March 31, 1997 compared
with $5,000 for the comparable period in 1996. This increase is due to the
Company having five franchises opened at March 31, 1997 compared with one at
March 31, 1996.
The Company maintains an advertising fund to be used for regional advertising
expenditures which benefit all locations. Franchisees are required to contribute
a percentage of their net sales to this fund. The Company also contributes to
the fund promotional rebates received from suppliers. For the three months ended
March 31, 1997, this fund had an equal amount of revenues and expenditures.
Expenses related to the franchising operation, consisting of such items as
franchise support personnel, legal fees and advertising, are included in general
and administrative expenses in the Company's financial statements, and totalled
$30,000 and $42,000 for the quarters ended March 31, 1997 and 1996,
respectively.
LOAN OPERATIONS
- ---------------
The Company's loan operations are conducted through its subsidiary, NHG. These
operations include providing low-to-moderate income homeowners with a single
source for both home improvement loans (conventional and federally-guaranteed)
and qualified contractors. Initially, NHG intended to provide essentially
federally-guaranteed loans, but has expanded to now include both
federally-guaranteed and convential loans. NHG derives its revenue from
administrative fees received from participating contractors representing a
percentage of each completed contract. The Company additionally can derive
revenue from loan participation by means of receiving a premium from a
third-party buyer of such loans, or loan origination fees from a borrower.
NHG first began receiving revenue in May 1996 which resulted from the Company's
test marketing efforts. Gross revenue for the quarter ended March 31, 1997
totalled $15,000 including $11,000 in completed contract fee income, $1,000 in
loan origination fees and $3,000 in loan participation premiums. The Company
recognizes contract fee income when the related contract is completed by the
contractor.
- 7 -
<PAGE>
NHG experienced charges of $331,000 for the quarter ended March 31, 1997, as
described below, relating to the continued test marketing of its operations.
Payroll and related expenses, consisting of management, telemarketing
representatives, credit analysts and processors, totalled $183,000 (55% of total
expenses) for the three months ended March 31, 1997. While management labor is a
fixed expense, NHG has the ability to correlate the amount of its other
operations personnel to the loan request volume it receives. All telemarketing
representatives and field marketing employees are paid hourly, and most are
part-time employees.
Media and advertising costs, consisting of media time bought on television, as
well as the production and distribution of direct mail, totalled $54,000 (16% of
total expenses) for the quarter ended March 31, 1997. Due to initially
disappointing results from its test advertising campaign, NHG worked with media
consultants on redesigning and refocusing its commercials to better attract its
target markets. These new commercials continue to be tested in NHG's core
markets. Additionally, the Company has begun a field marketing program
consisting of information kiosks placed in high traffic shopping malls. Each
kiosk is staffed by trained representatives who assist homeowners in getting
information about a home improvement loan or debt consolidation. In March 1997,
NHG opened the first of such kiosks in Woodbridge, New Jersey. The Company
opened an additional kiosk in Staten Island, New York in April 1997, and a third
kiosk in southern New Jersey in May 1997. If successful, the Company expects to
continue to expand its field marketing program to additional markets since it
provides the Company with prospects at a lower cost than television advertising.
Television advertising costs were significantly reduced for the three months
ended March 31, 1997 due to the seasonal decreases of potential home-improvement
loan business during the winter in the northeast. The Company expects overall
media costs to be one of the largest expense items in future operations and to
have a significant impact on the generation of future revenues.
Operating expenses, consisting of expenses necessary to operate the Company's
main office in New Jersey and its branch office in Massachusetts, as well as
legal and consulting fees and expenses related to obtaining licenses and
permits, totalled $95,000 (29% of total expenses) for the quarter ended March
31, 1997. Typically, most of these expenses are of a fixed and recurring nature
and will decrease as a percentage of revenue as revenue increases.
CORPORATE
- ---------
General and administrative expenses decreased to $206,000 for the first three
months of 1997 from $242,000 in 1996. This is as a result of continued
reductions in overhead as a result of the elimination of several corporate
positions. While the Company anticipates that cost containment will continue to
take place in this expense category, general and administrative expenses will
continue to represent a large percentage of revenues until the Company's
subsidiaries can develop gross revenue volume sufficient to absorb these costs.
Interest income decreased to $10,000 from $14,000 for the quarters ended March
31, 1997 and 1996, respectively. Investment earnings are principally from the
Company's investments in short-term United States government-backed obligations.
This source of income has decreased as the Company has expended funds which were
invested in 1996 on the expansion of its operations. Additionally, the Company
receives interest income from loans that NHG sells to third-party buyers
representing the period from when NHG disburses funds to the time that the
related loan is sold.
- 8 -
<PAGE>
Liquidity and Capital Resources
- -------------------------------
Current assets at March 31, 1997 were $953,000 compared to $1,483,000 at
December 31, 1996 and current liabilities were $481,000 at March 31, 1997
compared to $443,000 at December 31, 1996. The Company's restaurants sell to
consumers in what are substantially all cash transactions. Any credit and debit
card business transacted is electronically credited to the Company's accounts
within 48 hours. The Company's debt at March 31, 1997, consisted of obligations
owed under capitalized leases for point-of-sale terminals at each of the
restaurants totalling $28,000. Additionally, the Company issued a note payable,
with a remaining balance of $14,000 at March 31, 1997, in conjunction with its
acquisition of the restaurant in Summit, NJ. The Company currently has no bank
borrowings. The Company is obligated to pay quarterly dividends on its Series A
preferred stock totalling $21,000 per quarter.
The Company requires capital principally to expand the operations of NHG. The
Company is not pursuing new franchisees for its restaurant business and does not
currently intend to open additional Company-owned restaurants. Funds will be
used primarily for NHG to continue to develop and refine its marketing programs,
buy media time, and expand its operations into other metropolitan areas. The
Company expects that its future results will be predominantly affected by the
success or failure of NHG.
The Company's franchising operation currently has seven franchisees, five of
which have stores which are currently open, and two of which are expected to
open later in 1997. Additionally, in March 1997, the Company signed a master
license agreement with a licensee for territory rights to develop a minimum of
20 restaurants in the Philippines over a ten year term.
The Company has been exploring the possibility of selling its restaurant
business or entering into a strategic alliance with respect to its restaurant
business. There can be no assurance that these efforts will be successful.
For the three months ended March 31, 1997, NHG closed loans totalling $145,000,
of which $56,000 had been sold to a third-party lender. Thus, retail loans
receivable amounted to $89,000 at March 31, 1997. The Company sold all such
retail loans in April 1997.
The Company anticipates that its current trend of losses will continue. NHG,
whose business is based upon the home improvement industry, experiences a
decrease in potential revenues during the winter months due to a significant
slowdown in home improvement requests and contractor ability to complete
projects during adverse winter weather in the Northeast, the primary area where
NHG currently lends. In order to offset the seasonal decreases expected in its
business in the future, the Company is attempting to initiate lending activities
in southeastern states to improve its ability to generate loan volume during the
winter. License application processes are lengthy, however, and there is no
assurace as to when the Company will actually obtain the requisite licenses in
any state. In order to improve its liquidity and provide additional working
capital during the start-up phase of NHG's business, the Company requires, and
is actively seeking additional financing through a private placement of debt or
equity. However, there can be no assurance of success. The Company believes that
additional funding will be required for it to meet its cash requirements for the
next twelve months. If such financing is not secured, the Company will be
required to further curtail its activities (which the Company does not believe
will provide a solution to the problem), sell NHG or its lending business, or in
the absence of a viable alternative, discontinue operations.
- 9 -
<PAGE>
Forward-Looking Information May Prove Inaccurate
- ------------------------------------------------
This report contains forward-looking statements and information that are based
on management's beliefs as well as assumptions made by, and information
currently available to, management. When used in this document, the words
"anticipate", "believe", "estimate", "expect" and similar expressions are
intended to identify forward-looking statements. Such statements involve a
number of risks and uncertainties. Among the factors that could cause actual
results to differ materially are the following: business conditions and growth
in the industry, general economic conditions, product development, competition,
government regulations, rising costs for food and paper supplies, the risk of
franchising, and all the risks associated with start-up businesses as it relates
to the activities of NHG, and the risk factors listed from time to time in the
Company's SEC reports, including, but not limited to, the Company's annual
report on Form 10-KSB for the year fiscal year ended December 31, 1996.
Part II. OTHER INFORMATION
- ---------------------------
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits: Exhibit 27 (Financial Data Schedule for First Quarter of 1997)
b) Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter for which
this report is filed.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Linda's Diversified Holdings Inc.
(Registrant)
May 15, 1997 /s/ Peter Weissbrod, President
------------------------------
(Principal Executive and Financial Officer)
- 10 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND THE
BALANCE SHEET FOR THE PERIOD THEN ENDED, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 732,345
<SECURITIES> 0
<RECEIVABLES> 89,489
<ALLOWANCES> 0
<INVENTORY> 10,457
<CURRENT-ASSETS> 947,661
<PP&E> 652,576
<DEPRECIATION> (199,038)
<TOTAL-ASSETS> 1,771,149
<CURRENT-LIABILITIES> 455,646
<BONDS> 0
0
120
<COMMON> 2,865
<OTHER-SE> 1,270,339
<TOTAL-LIABILITY-AND-EQUITY> 1,771,149
<SALES> 221,517
<TOTAL-REVENUES> 273,891
<CGS> 89,713
<TOTAL-COSTS> 781,907
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,251
<INCOME-PRETAX> (521,121)
<INCOME-TAX> 0
<INCOME-CONTINUING> (521,121)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (521,121)
<EPS-PRIMARY> (0.22)
<EPS-DILUTED> (0.22)
</TABLE>
