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 September 30, 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: August 8, 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
<TABLE>
<CAPTION>
September, 30 December 31,
ASSETS 1997 1996
---------------- ---------------
(unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $0 $ 1,331,582
Inventories 6,790 15,065
Retail loans receivable 114,566 42,691
Notes receivable, current portion 50,000 10,000
Prepaid expenses and other current assets 68,233 84,049
---------------- ---------------
Total Current Assets 239,589 1,483,387
---------------- ---------------
PROPERTY AND EQUIPMENT 330,077 432,289
---------------- ---------------
OTHER ASSETS:
Restricted cash 100,000 162,500
Notes receivable, less current portion - 150,155
Intangible assets 28,853 39,299
Deposits and other assets 14,792 19,923
---------------- ---------------
143,645 371,877
---------------- ---------------
$713,311 $ 2,287,553
================ ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
OTHER LIABILITIES:
Long term debt, current portion $28,224 $ 51,926
Accounts payable and accrued expenses 530,755 295,119
Accrued payroll and payroll taxes 15,591 5,969
Sales tax payable 3,379 4,866
Deferred franchise fees 160,000 85,000
---------------- ---------------
Total Current Liabilities 737,949 442,880
---------------- ---------------
LONG TERM LIABILITIES:
Long term debt, less current position - 2,709
Deferred rent 41,854 42,519
--------------- ---------------
41,854 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 (8,166,295) (6,300,358)
--------------- ---------------
(66,492) 1,799,445
$ 713,311 $ 2,287,553
--------------- ---------------
</TABLE>
See accompanying notes to consolidated financial statements.
-2-
<PAGE>
LINDA'S DIVERSIFIED HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
------------------------------------------------------------------------
1997 1996 1997 1996
--------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
REVENUES:
Restaurant sales, net $599,767 $886,308 $163,360 $275,271
Initial franchise fees 75,000 40,000 50,000 15,000
Franchise royalties 23,386 21,411 1,765 8,953
Contract fee income 41,152 13,841 5,800 10,680
Contractor lead fees 9,466 17,250 2,440 1,750
Loan originations fees 37,498 7,500 14,900 0
--------------- -------------- --------------- ---------------
786,269 986,310 238,265 311,654
--------------- -------------- --------------- ---------------
COSTS AND EXPENSES:
Restaurant Operations:
Food and paper costs 228,516 364,554 53,081 114,001
Restaurant labor and related expenses 158,992 307,155 16,936 80,158
Operating expenses 24,545 87,293 3,897 16,106
Occupancy expenses 109,777 185,560 22,390 40,097
Depreciation and amortization 61,659 98,439 9,008 31,749
Loan Operations:
Payroll and related expenses 479,161 344,748 41,326 129,202
Media and advertising costs 329,773 338,512 40,768 81,906
Operating expenses 397,566 219,209 200,235 74,618
Corporate and Franchising:
General and administrative 625,589 743,773 216,167 231,077
Bad debt expense 153,446 - 3,291 -
Restructuring charge 46,513 246,967 1,601 0
--------------- -------------- --------------- ---------------
2,615,537 2,936,210 608,700 798,914
--------------- -------------- --------------- ---------------
LOSS FROM OPERATIONS (1,829,268) (1,949,900) (370,435) (487,260)
OTHER INCOME (EXPENSE):
Interest and other income 31,062 54,360 1,667 19,048
Interest expense (4,733) (11,364) (873) (3,277)
--------------- -------------- --------------- ---------------
26,329 42,996 794 15,771
--------------- -------------- --------------- ---------------
NET LOSS (1,802,939) (1,906,904) (369,641) (471,489)
PREFERRED STOCK DIVIDENDS 63,000 - 21,000 -
--------------- -------------- --------------- ---------------
NET LOSS APPLICABLE TO COMMON STOCK (1,865,939) $ (1,906,904) (390,641) (471,489)
=============== ====================================== ===============
NET LOSS PER COMMON SHARE $ (0.77) $ (0.92) $ (0.17)$ $ (0.20)
==========================================================================
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 2,415,000 2,078,383 2,415,000 2,415,000
=============== ============== =============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
-3-
<PAGE>
LINDA'S DIVERSIFIED HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------------------
1997 1996
--------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss (1,865,939) (1,906,954)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 61,659 98,439
Restructuring charge 46,513 266,987
Bad debt expense 153,446 -
Changes in operating assets and liabilities:
Decrease in inventories 8,275 9,358
(Increase) decrease in prepaid expenses and other assets 15,816 (170,492)
(Increase) decrease in restricted cash 62,500 (162,500)
(Increase) decrease in deposits and other assets 5,131 (53,089)
Increase in accounts payable and accrued expenses 214,969 67,062
Increase in accrued payroll and payroll taxes 9,622 (14,336)
Decrease in sales tax payable (1,487) (2,042)
Increase in deferred franchise fees 75,000 15,000
Increase (decrease) in deferred rent (665) (20,090)
--------------- --------------
Net cash used in operating activities (1,215,160) (1,872,657)
--------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from redemption of cash investments - 721,000
Acquisition of cash investments - 0
Funds advanced under notes receivable - (240,525)
Proceeds from notes receivable 10,000 (506,459)
Disbursements for retail loans receivable (1,506,471) 383,277
Proceeds from sale of retail loans receivable 1,500,833 471,110
Acquisition of property and equipment (52,373) (118,940)
--------------- --------------
Net cash provided by (used in) investing activities (48,011) 709,463
--------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock, net of expenses - 1,654,311
Payments of preferred stock dividends (42,000) -
Payments of long-term debt (26,411) (33,417)
--------------- --------------
Net cash used in financing activities (68,411) 1,620,894
--------------- --------------
NET CHANGE IN CASH AND CASH EQUIVALENTS (1,331,582) 457,700
CASH AND CASH EQUIVALENTS, Beginning of period 1,331,582 558,013
--------------- --------------
CASH AND CASH EQUIVALENTS, End of period $ 0 1,015,713
==================================
SUPPLEMENTAL INFORMATION:
Interest paid $ 3,860 11,384
==================================
</TABLE>
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) On September 15, 1997, the Company sold its Master License Agreement to the
Licensee for $50,000 payable in five equal monthly payments. It also
terminated its franchise in Flemington, for a return of a security deposit
held for a second restaurant which did not open.
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 inter- company 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.
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 September 30, 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 formerly 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 four restaurants, one of
which is Company-owned and operated, three of which are franchised, and a master
license for the Philippines which has subsequently been sold back to the
licensor. The loan operations were conducted through National Home Guaranty
("NHG"), a wholly-owned subsidiary, which ceased operations in September 1997
due to lack of capital necessary to fund advertising to generate leads for its
loans.
In order to improve its liquidity and provide additional working capital, the
Company has been and is continuing to seek additional financing through a
private placement of debt or equity, joint venture or a sale. However, there can
be no assurance of success. The Company believes that additional funding is
required for it to meet its cash requirements for the next three months. Because
the Company has been unsuccessful in accomplishing such financing, it has had to
substantially curtail its activities and will continue to do so. Overhead has
been slashed, salaries reduced, and staff terminated in order to curtail losses.
Because of the Company's limited assets, the Company will likely be required to
discontinue operations entirely unless financing is accomplished shortly. If
such financing is not secured, the Company will be required to further curtail
its activities, sell remaining restaurant assets, sell NHG or its lending
business, or in the absence of a viable alternative, totally discontinue
operations.
RESTAURANT OPERATIONS
- ---------------------
In order to find a buyer or strategic partner, the Company has been trying to
sell its restaurant business and terminate its existing franchisees. To date,
the Master License in the Philippines and the Flemington franchise have been
terminated under mutually acceptable terms. Under the agreement with Master
Licensee, the Company is required to provide pre-opening support and training
until the first restaurant is opened in the Philippines, scheduled for November,
1997. The Company has initiated arbitrations against its Colonia, South Orange
and Westwood franchises for default under the franchise agreement. There can be
no assurance that these efforts will be successful.
Gross restaurant sales for the nine months ended September 30, 1997 decreased
$299,000 (32%) as compared to the nine months ended September 30, 1996.
Comparable store gross sales (for locations opened at least one year) decreased
$36,000 (9%). The total sales decreases were due to the Company having three
Company-owned locations in the nine months of 1996 compared with two such
locations in 1997 (one at September 30, 1997). The Company closed restaurants in
July 1997 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. Gross sales for the
quarter ended September 30, 1997 decreased $105,000 (32%) as compared to the
quarter ended September 30, 1996. Comparable store gross sales for this period
decreased $26,000 (12%).
Food and paper costs collectively decreased as a percentage of gross sales for
the nine months ended September 30, 1997 compared to 1996 to $136,000 (36% of
gross sales) from $364,000 (40% of gross sales), respectively, due to lower
poultry costs in 1997. Additional cost reductions were a result of the continued
shifting of the restaurant's menu mix to gourmet sandwiches, which have lower
food costs than other meals.
- 6 -
<PAGE>
Restaurant labor and related expenses decreased to $159,000 (26% of gross sales)
for the nine months ended September 30, 1997 as compared to $307,000 (33% 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.
Operating expenses, including such items as local promotion, repairs and
maintenance and store supplies, totaled $24,000 (4% of gross sales) for the
first nine months of 1997 compared to $87,000 (9% 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, totaled $110,000 (18% of gross sales) and
$186,000 (20% of gross sales) for the nine months ended September 30, 1997 and
1996, respectively. This decrease as a percentage of gross sales is due to the
closing of the Company's Summit, New Jersey location.
Depreciation and amortization decreased to $62,000 for the nine months ended
September 30, 1997 from $98,000 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
- ----------------------
In order to obtain additional funds, the Company has been trying to sell its
restaurant business and terminate its franchise agreements. There can be no
assurance that these efforts will be successful.
The Company's franchising operations are administered through its subsidiary,
Linda's Chicken International. As of September 30, 1997, three franchises were
open. Franchise royalty income, amounted to $23,000 for the nine months ended
September 30, 1997 compared with $21,000 for the comparable period in 1996. This
increase is due to the Company having three franchises opened during the period
ending September 30, 1997 compared with two for the same period in the prior
year.
The Company did maintain an advertising fund used for regional advertising
expenditures to benefit all locations, but since the current franchises are no
longer contributing, it has a zero balance in this fund. The Company also
contributes to the fund for promotional rebates received from suppliers. For the
nine months ended September 30, 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 totaled
$63,000 and $156,000 for the nine months ended September 30, 1997 and 1996,
respectively. This decrease is due, in part, to the discontinuation of selling
expenses to sell more franchises.
LOAN OPERATIONS
- ---------------
The Company's loan operations had been conducted through its subsidiary,
NHG, which ceased operations on September 30, 1997 due to lack of capital to
continue marketing. These operations included providing single-family
homeowners, primarily in the subprime market, with a single source for both home
improvement loans (conventional and federally-guaranteed) and qualified
contractors. NHG derived its revenue on contractor loans from marketing fees
received from participating contractors representing a percentage of each
completed contract, and on direct loans from loan origination fees charged to
borrowers. The Company additionally derived revenue on each type of loan from
loan participation premiums paid by third-party end investors which bought its
loans.
- 7 -
<PAGE>
Gross revenue for the nine months ended September 30, 1997 totaled $65,000
including $41,000 in completed contract fee income, $9,000 in loan origination
fees and $37,000 in loan participation premiums. For the quarter ended September
30, 1997, gross revenue totaled $23,000 including $26,000 in completed contract
fee income, $2,000 in loan origination fees and $15,000 in loan participation
premiums. The Company recognizes contract fee income when the related contract
is completed by the contractor. Loan origination fees and loan participation
premiums are recognized when the related loan is disbursed.
NHG had expenses of $1,206,500 for the nine months ended September 30, 1997, as
described below, relating to its operations.
Payroll and related expenses, consisting of management, telemarketing and field
marketing representatives, credit analysts and processors, totaled $479,000 (40%
of total expenses) for the nine months ended September 30, 1997. While
management labor is a fixed expense, NHG's operations personnel, telemarketing
representatives and field marketing employees have been laid off until
additional financing or a purchaser is found.
Media and advertising costs, consisting of media time bought on television,
production and distribution of direct mail and mall kiosk operating costs,
totaled $330,000 (27% of total expenses) for the nine months ended September 30,
1997. The Company discontinued its field marketing program in Woodbridge and
Cherry Hill at the end of the third quarter due to lack of capital and closed
its Staten Island kiosk on October 30, 1997. Advertising has been discontinued
until additional financing is secured.
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, totaled $397,000 (32% of total expenses) for the nine months ended
September 30, 1997.
CORPORATE
- ---------
General and administrative expenses decreased to $626,000 for the first nine
months of 1997 from $744,000 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 have
been greatly diminished due to the cessation in NHG's operations.
Interest income decreased to $31,000 from $54,000 for the nine months ended
September 30, 1997 and 1996, respectively. Investment earnings in 1996 were
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. Interest income in 1997 is substantially from the receipt of
interest income from loans that NHG has sold to third-party end investors
representing the period from when NHG disbursed funds to the time that the
related loans were sold.
Liquidity and Capital Resources
- -------------------------------
Current assets at September 30, 1997 were $240,000 compared to $1,483,000 at
December 31, 1996 and current liabilities were $738,000 at September 30, 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 September 30, 1997, consisted of
obligations owed under capitalized leases for point-of-sale terminals at each of
- 8 -
<PAGE>
the restaurants totaling $28,000 and accounts payable of $531,000. The Company
has no bank borrowings. The Company is obligated to pay quarterly dividends on
its Series A preferred stock totaling $21,000 per quarter and missed its
September 15, 1997 payment. The next payment is due December 15, 1997. If four
consecutive payments are missed, the bondholder has the right to take control of
the Board of Directors. Because of the Company's limited assets, the Company
will likely be required to continue to sell assets, reduce overhead expenses,
and/or discontinue operations entirely unless financing is accomplished shortly.
The Company requires capital principally to continue the operations of NHG. The
Company is not pursuing new franchisees for its restaurant business and does not
intend to open additional Company-owned restaurants. Due to the shortage of
working capital, the Company has been required to curtail NHG's operations
including returning state mortgage licenses, until additional financing is
secured.
The Company's franchising operation currently has four franchisees.
Additionally, the Company sold its Master License Agreement back to its licensee
for $50,000. The Licensee is no longer obligated to open restaurants on a
development schedule or pay any future royalties on restaurants it may open. In
order to minimize losses and provide some capital, the Company has been trying
to sell its restaurant business and terminate its existing franchise agreements.
There can be no assurance that these efforts will be successful.
For the nine months ended September 30, 1997, NHG disbursed loans totaling
$1,506,000, of which $1,392,000 had been sold to third-party end investors.
Thus, retail loans receivable amounted to $114,000 at September 30, 1997. The
Company sold all such retail loans in July 1997.
In order to improve its liquidity and provide additional working capital, the
Company requires, and is actively seeking additional financing through a private
placement of debt or equity or sale of the Company. However, there can be no
assurance of success. The Company believes that additional funding is required
for it to meet its cash requirements for the next three months. Since such
financing has not been secured, the Company will likely cease operations.
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
The Company has missed its September 15, 1997 Dividend payment on its Series A
Convertible Preferred Stock oustanding.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
The Company has been notified by Nasdaq that it no longer satisfies the
requirements for listing on the Nasdaq SmallCap Market and has been delisted and
has its securities traded on the OTC Bulletin Board.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits: Exhibit 27 (Financial Data Schedule for the nine months
ended September 30, 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)
November 15, 1997 /s/ Peter Weissbrod, President
-------------------------------------------
(Principal Executive and Financial Officer)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 114,566
<ALLOWANCES> 0
<INVENTORY> 6,790
<CURRENT-ASSETS> 239,589
<PP&E> 330,077
<DEPRECIATION> 277,153
<TOTAL-ASSETS> 713,311
<CURRENT-LIABILITIES> 737,949
<BONDS> 0
0
120
<COMMON> 2,865
<OTHER-SE> 8,096,818
<TOTAL-LIABILITY-AND-EQUITY> 713,311
<SALES> 786,269
<TOTAL-REVENUES> 786,269
<CGS> 228,516
<TOTAL-COSTS> 2,615,537
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,733
<INCOME-PRETAX> (1,865,939)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,865,939)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,865,939)
<EPS-PRIMARY> (.72)
<EPS-DILUTED> (.72)
</TABLE>
