<PAGE>
<PAGE>
________________________________________________________________________________
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
FORM 10-KSB
[ ] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
FOR THE FISCAL YEAR ENDED:
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
FOR THE TRANSITION PERIOD FROM TO
[x] SPECIAL FINANCIAL REPORT UNDER RULE 15d-2 OF THE SECURITIES EXCHANGE ACT
OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
COMMISSION FILE NUMBER 0-22055
------------------------
TTR INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
------------------------
<TABLE>
<S> <C>
DELAWARE 11-3223672
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
2 HANAGAR STREET, KFAR SABA, ISRAEL 44425
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
011-972-9-766-2393
(ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE)
------------------------
SECURITIES REGISTERED UNDER SECTION 12(b) OF THE EXCHANGE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
------------------- ------------------------
<S> <C>
None None
</TABLE>
SECURITIES REGISTERED UNDER SECTION 12(g) OF THE EXCHANGE ACT:
COMMON STOCK, PAR VALUE $.001 PER SHARE
(TITLE OF CLASS)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the 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______ No __X__
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [x]
Issuer's revenue for its most recent fiscal year was $0.
The aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of a specified date within the past 60
days is $27,000,014.
The number of shares of Common Stock outstanding as of May 9, 1997 is
4,223,548.
Transitional Small Business Disclosure Format (check one) Yes No X
----- -----
________________________________________________________________________________
<PAGE>
<PAGE>
TTR INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
CONTENTS
<TABLE>
<CAPTION>
PAGE
------------
<S> <C>
Independent Auditors' Report.......................................................................... F-2
Report of Independent Public Accountants.............................................................. F-3
Consolidated Balance Sheet............................................................................ F-4
Consolidated Statement of Operations.................................................................. F-5
Consolidated Statement of Stockholders' Deficit....................................................... F-6
Consolidated Statement of Cash Flows.................................................................. F-7
Notes to Consolidated Financial Statements............................................................ F-8 - F-18
</TABLE>
F-1
<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and
Stockholders of TTR INC.
Kfar Saba, Israel
We have audited the accompanying consolidated balance sheet of TTR Inc. and
its Subsidiary (A Development Stage Company) as of December 31, 1996 and 1995,
and the related consolidated statements of operations, cash flows, and
stockholders' deficit for the years then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits. We did not audit the financial statements of TTR
Technologies, Ltd., a wholly owned subsidiary, which statements reflect total
assets of $692,102 and $218,392 as of December 31, 1996 and 1995, respectively,
and net losses of $790,536 and $571,924 for the years then ended, respectively.
Those statements were audited by other auditors whose reports have been
furnished to us, and our opinion, insofar as it relates to the amounts included
for TTR Technologies Ltd. is based solely on the reports of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits and the report of
other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of TTR Inc. and its Subsidiary as of
December 31, 1996 and 1995 and the results of their operations and their cash
flows for the years then ended in conformity with generally accepted accounting
principles.
The financial statements of TTR Technologies, Ltd., a wholly owned
subsidiary, have been prepared assuming the subsidiary will continue as a going
concern. As discussed in note 3 to the financial statements, the subsidiary has
incurred recurring losses since its inception in 1994, and has an accumulated
deficit at December 31, 1996 of $1,364,653. These conditions raise substantial
doubt about the subsidiary's ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 3. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
SCHNEIDER EHRLICH & WENGROVER LLP
Woodbury, New York
April 15, 1997, except for Note 18 (f), as to
which the date if May 6, 1997
F-2
<PAGE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of
T.T.R. TECHNOLOGIES LTD.
(A Development Stage Company)
We have audited the accompanying balance sheet of T.T.R. Technologies Ltd.
(a development stage company) (the 'Company') as of December 31, 1996 and 1995
and the related statements of operations, changes in shareholders' deficiency
and cash flows for each of the years then ended, for the period December 5, 1994
(date of inception) to December 31, 1994 and for the period December 5, 1994
(date of inception) to December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audit in accordance with generally accepted auditing
standards, including those prescribed by the Israeli Auditor's Regulations
(Auditors Mode of Performance), 1973. Such auditing standards are substantially
identical to generally accepted auditing standards in the United States. Those
standards require that we plan and perform the audit to obtain reasonable
assurance whether the financial statements are free of material misstatement. An
audit includes examining on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used, and significant estimates made by the management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the above financial statements present fairly in all
material respects, the financial position of the Company (a development stage
company) as of December 31, 1996 and 1995 and the results of its operations,
changes in shareholders' deficiency, and cash flows for each of the years then
ended, for the period December 5, 1994 (date of inception) to December 31, 1994
and for the period December 5, 1994 (date of inception) to December 31, 1996, in
conformity with accounting principles generally accepted in Israel and in the
United States. As applicable to these financial statements, such accounting
principles are substantially identical.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note 3 to the
financial statements, the Company has suffered recurring losses from operations
and has a net working capital deficiency and shareholders' deficiency that raise
substantial doubt about its ability to continue as a going concern. The
Company's plans are also referred to in Note 3. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
The financial statements have been translated into dollars for the purpose
of their inclusion in the financial statements of T.T.R. Inc.
BDO ALMAGOR & CO.
Certified Public Accountants
Ramat-Gan, Israel,
April 13, 1997 (May 6, 1997 as to Note 19)
F-3
<PAGE>
<PAGE>
TTR INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1995 1996
---------- -----------
<S> <C> <C>
ASSETS
Current assets
Cash............................................................................ $ 87,866 $ 63,656
Accounts receivable............................................................. 1,680 507
Other current assets............................................................ 15,939 135,321
---------- -----------
Total current assets.................................................. 105,485 199,484
Property and equipment -- net........................................................ 175,619 373,444
Deferred financing costs, net of accumulated amortization of $76,175 and $181,310,
for 1995 and 1996, respectively.................................................... 77,256 62,101
Deferred stock offering costs........................................................ -- 515,664
Due from officer..................................................................... 26,000 26,000
Other assets......................................................................... 18,844 14,995
---------- -----------
Total assets.......................................................... $ 403,204 $ 1,191,688
---------- -----------
---------- -----------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Liabilities
Current liabilities
Current portion of long-term debt.......................................... $ 528,130 $ 1,065,365
Short-term borrowings...................................................... -- 849,602
Accounts payable........................................................... 34,958 170,323
Accrued expenses........................................................... 63,213 443,594
Interest payable........................................................... 96,023 234,508
---------- -----------
Total current liabilities............................................. 722,324 2,763,392
Long-term debt, less current portion............................................ 552,103 22,153
---------- -----------
Total liabilities..................................................... 1,274,427 2,785,545
Commitments and Contingencies -- See Notes
Stockholders' Deficit
Common Stock, $.001 par value; 20,000,000 shares authorized, 2,200,000 and
3,050,000 issued and outstanding, respectively, including 1,000,000 shares
placed in escrow............................................................... 2,200 3,050
Additional paid-in capital...................................................... 42,673 405,356
Cumulative translation adjustments.............................................. 22,652 57,696
Deficit accumulated during the development stage................................ (938,748) (2,059,959)
---------- -----------
Total stockholders' deficit........................................... (871,223) (1,593,857)
---------- -----------
Total liabilities and stockholders' deficit........................... $ 403,204 $ 1,191,688
---------- -----------
---------- -----------
</TABLE>
See Notes to Financial Statements
F-4
<PAGE>
<PAGE>
TTR INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FROM INCEPTION
YEAR ENDED DECEMBER 31, (JULY 14, 1994) TO
-------------------------- DECEMBER 31,
1995 1996 1996
----------- ----------- ------------------
<S> <C> <C> <C>
Revenue.......................................................... $ -- $ -- $ --
Expenses
Research and development.................................... 276,248 344,305 620,553
Sales and marketing......................................... 248,158 169,840 433,798
General and administrative.................................. 241,461 382,634 644,736
----------- ----------- ------------------
Total expenses......................................... 765,867 896,779 1,699,087
----------- ----------- ------------------
Operating loss................................................... (765,867) (896,779) (1,699,087)
Other (income) expense
Loss on investment.......................................... 17,000 -- 17,000
Interest income............................................. (12,324) -- (12,824)
Interest expense............................................ 126,120 224,432 356,696
----------- ----------- ------------------
Total other (income) expenses.......................... 130,796 224,432 360,872
----------- ----------- ------------------
Net loss......................................................... $(896,663) $(1,121,211) $ (2,059,959)
----------- ----------- ------------------
----------- ----------- ------------------
Net loss per share............................................... $(0.37) $(0.43) $(0.79)
------- ------- -------
------- ------- -------
Weighted average number of shares outstanding.................... 2,399,793 2,612,582 2,612,582
----------- ----------- ------------------
----------- ----------- ------------------
</TABLE>
See Notes to Financial Statements
F-5
<PAGE>
<PAGE>
TTR INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
DEFICIT
FOREIGN ACCUMULATED
COMMON STOCK ADDITIONAL CURRENCY DURING
------------------- PAID-IN TRANSLATION DEVELOPMENT
SHARES AMOUNT CAPITAL ADJUSTMENT STAGE TOTAL
--------- ------ ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balances at July 14, 1994 (date of
inception).................................. -- $-- $ -- $ -- $ -- $ --
Issuances of common stock, par value $.001
Services rendered at $.001 per share..... 1,200,000 1,200 1,200
Cash at $.0208 per share................. 1,200,000 1,200 23,800 25,000
Net loss...................................... (42,085) (42,085)
--------- ------ ---------- ---------- ----------- -----------
Balances at December 31, 1994................. 2,400,000 2,400 23,800 -- (42,085) (15,885)
Common stock contributed...................... (561,453) (561 ) 561
Issuances of common stock, par value $.001
Services rendered at $.05 per share...... 361,453 361 17,712 18,073
Issuance of common stock purchase warrants
Services rendered at $.04 per warrant.... 600 600
Foreign currency translation adjustment....... 22,652 22,652
Net loss...................................... (896,663) (896,663)
--------- ------ ---------- ---------- ----------- -----------
Balances at December 31, 1995................. 2,200,000 2,200 42,673 22,652 (938,748) (871,223)
Issuances of common stock, par value $.001
Cash at $.307 per share.................. 650,000 650 199,350 200,000
Cash at $.50 per share (net of stock
offering costs of $11,467)............. 150,000 150 63,383 63,533
Cash at $2.00 per share.................. 50,000 50 99,950 100,000
Foreign currency translation adjustment....... 35,044 35,044
Net loss...................................... (1,121,211) (1,121,211)
--------- ------ ---------- ---------- ----------- -----------
Balances at December 31, 1996................. 3,050,000 $3,050 $405,356 $ 57,696 $(2,059,959) $(1,593,857)
--------- ------ ---------- ---------- ----------- -----------
--------- ------ ---------- ---------- ----------- -----------
</TABLE>
See Notes to Financial Statements
F-6
<PAGE>
<PAGE>
TTR INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FROM
INCEPTION
(JULY 14,
YEAR ENDED DECEMBER 31, 1994) TO
------------------------ DECEMBER 31,
1995 1996 1996
--------- ----------- ------------
<S> <C> <C> <C>
Cash flows from operating activities
Net loss......................................................... $(896,663) $(1,121,211) $(2,059,959)
Adjustments to reconcile net loss to net cash used by operating
activities:
Depreciation and amortization............................... 95,298 155,273 256,041
Translation adjustment...................................... (561) (967) (1,528)
Stock and warrants issued for services...................... 18,673 -- 18,673
Increase (decrease) in cash attributable to changes in
assets and liabilities
Accounts receivable.................................... (1,422) 1,310 (315)
Escrow................................................. 14,572 -- --
Other current assets................................... (13,492) (105,222) (118,714)
Accounts payable....................................... 40,183 137,825 178,169
Accrued expenses....................................... 74,638 44,043 119,751
Interest payable....................................... 91,215 138,485 234,508
--------- ----------- ------------
Net cash used by operating activities....................... (577,559) (750,464) (1,373,374)
--------- ----------- ------------
Cash flows from investing activities
Loans receivable................................................. 125,500 -- --
Purchases of property and equipment.............................. (193,655) (240,836) (435,893)
Increase in organization costs................................... -- -- (7,680)
--------- ----------- ------------
Net cash used by investing activities....................... (68,155) (240,836) (443,573)
--------- ----------- ------------
Cash flows from financing activities
Proceeds from issuance of common stock........................... -- 363,533 389,733
Loans to officer................................................. (6,000) (26,000)
Deferred stock offering costs.................................... (166,099) (166,099)
Deferred financing costs......................................... (78,112) (89,980) (243,411)
Proceeds from short-term borrowings.............................. -- 849,602 849,602
Proceeds from long-term debt..................................... 605,764 25,096 1,114,137
Payments on long-term debt....................................... (21,613) (14,403) (36,016)
--------- ----------- ------------
Net cash provided by financing activities................... 500,039 967,749 1,881,946
--------- ----------- ------------
Effect of exchange rates on cash...................................... (350) (659) (1,343)
--------- ----------- ------------
Increase (decrease) in cash........................................... (146,025) (24,210) 63,656
Cash at beginning of period........................................... 233,891 87,866 --
--------- ----------- ------------
Cash at end of period................................................. $ 87,866 $ 63,656 $ 63,656
--------- ----------- ------------
--------- ----------- ------------
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest.................................................... $ 2,461 $ 15,788 $ 18,456
--------- ----------- ------------
--------- ----------- ------------
</TABLE>
See Notes to Financial Statements
F-7
<PAGE>
<PAGE>
TTR INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- DESCRIPTION OF BUSINESS
TTR Inc. (the 'Company') was incorporated on July 14, 1994 under the laws
of the State of Delaware. TTR Technologies Ltd., ('TTR Israel') was formed under
the laws of the State of Israel on December 5, 1994 as a wholly owned research
and development subsidiary of the Company.
The Company is engaged in the development and enhancement of computer
software products which it intends to market.
The Company is considered to be in the development stage and has earned no
revenues to date. Business activities to date have focused on product and
marketing research, product development, and raising capital.
The Company anticipates that it will continue to incur significant
operating costs and losses in connection with the development of its products
and increased marketing efforts and is subject to other risks affecting the
business of the Company. (See Note 3).
In February 1997 the Company closed on an initial public offering (IPO)
whereby it sold 860,000 shares of its Common Stock at a price of $7.00 per share
and realized net proceeds of approximately $4.7 million after stock offering
costs (See Note 18a).
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary, TTR Technologies Ltd. All significant
intercompany accounts and transactions have been eliminated in consolidation.
USE OF ESTIMATES
Management uses estimates and assumptions in preparing these financial
statements in accordance with generally accepted accounting principles. Those
estimates and assumptions affect the reported amounts of assets and liabilities,
the disclosure of contingent assets and liabilities and the reported revenues
and expenses. Actual results could vary from the estimates that were used.
REVENUE RECOGNITION
The Company anticipates that revenues from software will be recognized upon
delivery to the customer, provided that the Company's obligations, if any, are
insignificant and collectability is probable. Revenues from maintenance and
engineering services will be recognized over the term of the respective
contracts.
FOREIGN CURRENCY TRANSLATIONS
The financial statements of the Company's Israeli subsidiary have been
translated into U.S. dollars in accordance with Statement No. 52 of the
Financial Accounting Standards Board (FASB). Assets and liabilities have been
translated at year-end (period-end) exchange rates and statement of operations
have been translated at average rates prevailing during the year. The
translation adjustments have been recorded as a separate component of
shareholders' deficit (cumulative translation adjustment).
NET LOSS PER SHARE
Net loss per share of common stock is computed based on the weighted
average number of common stock and common stock equivalent shares outstanding
during the period. Pursuant to SEC rules, common stock and warrants issued for
consideration below the proposed public offering price
F-8
<PAGE>
<PAGE>
TTR INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
within the twelve months prior to filing a registration statement have been
included in the calculation of common stock equivalents, using the treasury
stock method, as if they had been outstanding for all periods presented. Shares
held in escrow are not treated as outstanding during any period (Note 13).
STATEMENT OF CASH FLOWS
For purposes of the Statement of Cash Flows, the Company considers all
highly liquid debt instruments with an original maturity of three months or less
to be cash equivalents.
DEPRECIATION AND AMORTIZATION
Equipment and leasehold improvements are stated at cost. Equipment is
depreciated over the estimated useful lives of the related assets, which range
from five to seven years. Leasehold improvements are amortized over the related
lease term. Depreciation is computed on the straight-line method.
RESEARCH AND DEVELOPMENT COSTS
Research and development expenditures are charged to operations as
incurred. Software development costs are required to be capitalized when a
product's technological feasibility has been established by completion of a
working model of the product and ending when a product is available for general
release to customers. To date, completion of a working model of the Company's
products and general release have substantially coincided. As a result, the
Company has not capitalized any software development costs since such costs have
not been significant.
INCOME TAXES
The Company accounts for its income taxes using the Financial Accounting
Standards Board Statement of Financial Accounting Standards No. 109, 'Accounting
for Income Taxes' (SFAS No. 109), which requires the establishment of a deferred
tax asset or liability for the recognition of future deductible or taxable
amounts and operating loss carryforwards. Deferred tax expense or benefit is
recognized as a result of the changes in the assets and liabilities during the
year. Valuation allowances are established when necessary, to reduce deferred
tax assets to amounts expected to be realized.
DEFERRED STOCK OFFERING COSTS
Costs incurred in connection with the Company's public offering of common
stock will be charged to capital in the period that the offering was completed.
LONG-LIVED ASSETS
In accordance with SFAS No. 121, 'Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of', the Company
records impairment losses on long-lived assets used in operations, including
goodwill and intangible assets, when events and circumstances indicate that the
assets might be impaired and the undiscounted cash flows estimated to be
generated by those assets are less than the carrying amounts of those assets.
RECENT ACCOUNTING PRONOUNCEMENT
In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, 'Accounting for Stock-based Compensation'. SFAS No. 123 is effective for
fiscal years beginning after December 15, 1995, and requires that the Company
either recognize in its financial statements costs related to its
F-9
<PAGE>
<PAGE>
TTR INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
employee stock-based compensation plans, such as stock option and stock purchase
plans, or make pro forma disclosures of such costs in a footnote to the
financial statements. The Company has elected to continue to use the intrinsic
value-based method of APB Opinion no. 25, as allowed under SFAS No. 123, to
account for all of its employee stock-based compensation plans. The adoption of
SFAS No. 123 did not have a material effect on the Company's financial position
or results of operations.
NOTE 3 -- GOING CONCERN
The financial statements of the Company's wholly owned subsidiary, TTR
Technologies, Ltd., have been prepared on a going concern basis which
contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business. TTR Israel has a limited operating history, has
sustained losses since its inception and has an accumulated deficit at December
31, 1996 of $1,364,653. It faces a number of risks, including uncertainties
regarding demand and market acceptance of its products, dependence on a single
product line, the effects of technological change, competition, and the
development of new products. Additionally, there are other risk factors such as
the nature of the it's distribution channels, ability to manage growth, loss of
key personnel and the effects of planned expansion of operations on the future
results of TTR Israel.
The Company anticipates that TTR Israel will continue to incur significant
operating costs and losses in connection with the development of its products
and increased marketing efforts and is subject to other risks affecting its
business, as discussed above. TTR Israel is not generating sufficient revenues
from its operations to fund its activities and is therefore dependent on
continued financing from its Parent company through loans. There is no assurance
that such financing will be available to TTR Israel. The inability to obtain
such financing would have a material adverse effect on the TTR Israel.
NOTE 4 -- OTHER CURRENT ASSETS
Included in other current assets is $98,432 due from the Office of the
Chief Scientist of the Government of Israel (OCS). In November 1996, TTR Israel
received an approval from the OCS according to which the OCS will fund certain
research and development of the Company by way of grants. The amount of the
approved budget is $195,000 and the amount of the approved grant is 50% of the
budget. In January 1997, the Company received an advance on account of the grant
in the amount of $88,000. On April 8, 1997, the OCS agreed to increase the
approved budget to $420,000.
The Company will be required to pay royalties to the OCS on proceeds from
the sale of products derived from the research and development in which the OCS
has participated by way of its grant. The royalties are computed at the rate of
3% of the proceeds from such sales, up to a maximum of 150% of the grant.
NOTE 5 -- PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1996
-------- --------
<S> <C> <C>
Leasehold improvements.......................................................... $ -- $ 80,085
Office equipment................................................................ 22,646 98,938
Computer equipment.............................................................. 112,941 168,103
Vehicles........................................................................ 59,470 94,358
-------- --------
195,057 441,484
Less: Accumulated depreciation.................................................. 19,438 68,040
-------- --------
$175,619 $373,444
-------- --------
-------- --------
</TABLE>
F-10
<PAGE>
<PAGE>
TTR INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Depreciation expense was $13,560 and $38,669 for the years ended December
31, 1995 and 1996, respectively.
NOTE 6 -- DUE FROM OFFICER
This amount represents non-interest bearing advances to an officer of the
Company.
NOTE 7 -- OTHER ASSETS
Other assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1995 1996
------- -------
<S> <C> <C>
Loan receivable, employee......................................................... $13,468 $11,155
Organization costs, net of accumulated amortization............................... 5,376 3,840
------- -------
Total........................................................................ $18,844 $14,995
------- -------
------- -------
</TABLE>
The loan receivable represents non-interest bearing advances to an employee
of the Company. The loan is to be repaid over a four-year period commencing in
1996.
Organization costs are being amortized over a five-year period using the
straight-line method.
NOTE 8 -- ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1995 1996
------- --------
<S> <C> <C>
Accrued payroll and payroll taxes................................................ $20,128 $ 14,513
Deferred stock offering costs.................................................... -- 349,565
Other............................................................................ 43,085 79,516
------- --------
$63,213 $443,594
------- --------
------- --------
</TABLE>
NOTE 9 -- SHORT-TERM BORROWINGS
(a) TTR Israel borrowed a total of $50,000 from a bank. Interest on the
loan was calculated at the rate of 8% per annum and was repaid in full in
December 1996.
(b) In June 1996, the Company realized net proceeds of $423,552 from a
private placement of 10 units of its securities at a purchase price of $50,000
per unit. Each unit consisted of $50,000 principal amount 10% promissory notes
and 15,000 shares of its common stock. The Company has allocated $7,500 per unit
to the Common Stock sold in the private placement, and the balance to promissory
note principal. The difference between the face value of the notes ($50,000) and
the amount allocated to note principal represents a discount which is being
amortized over the term of the note based upon the interest method. In January
1997, certain of these investors returned a total of 135,000 shares of the
Company's Common Stock to treasury. The principal and accrued interest on these
notes became due upon the completion of the Company's IPO and was paid in
February 1997.
In connection with this offering a placement agent received a commission of
10% of the gross proceeds and an additional 3% of such proceeds as a
non-accountable expense allowance. Certain of the investors in the private
placement have an ownership interest in the placement agent.
F-11
<PAGE>
<PAGE>
TTR INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(c) In 1996, the Company borrowed a total of $133,400 in unsecured funds
from a private lender. Interest is calculated at the rate of 22% per annum on
outstanding financings. The principal and accrued interest became due upon the
completion of the Company's IPO and was paid in full in February 1997.
(d) In December 1996 and January 1997, the Company issued short-term
promissory notes aggregating $450,000. Interest is calculated at the rate of 15%
per annum. The notes and accrued interest thereon became due upon the completion
of the Company's IPO and was paid in full in February 1997.
Fees totaling $45,000 which have been incurred in connection with this
financing are being amortized over the life of the loan using the straight-line
method.
NOTE 10 -- LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1995 1996
---------- ----------
<S> <C> <C>
Bank loans(1)............................................................... $ 39,153 $ 46,438
Promissory notes(2)......................................................... 1,041,080 1,041,080
---------- ----------
1,080,233 1,087,518
Current portion............................................................. 528,130 1,065,365
---------- ----------
Non-current portion......................................................... $ 552,103 $ 22,153
---------- ----------
---------- ----------
</TABLE>
- ------------
(1) These loans are denominated in 'NEW ISRAELI Shekel' (NIS), bear interest at
the rate of prime plus 2.4%-3% per annum and are secured by substantially
all the assets of TTR Israel. Principal payments are due in various
installments through 1998.
(2) The Company issued two-year promissory notes aggregating $1,041,080 in a
private placement. The notes bear interest at the rate of 10% per annum
payable at the maturity date. In connection with this offering the Company
issued warrants to the noteholders to purchase up to a total of 174,548
shares of the Company's common stock for $.01 per share. The warrants are
exercisable during the period between the effective date and the closing
date of the Company's IPO. The Company paid the placement agent, Shane,
Alexander, Unterburgher Securities, Inc. (SAU) a commission of 10% of the
gross proceeds and an additional 4% of such proceeds as a non-accountable
expense. These fees, totaling approximately $145,000, have been capitalized
as deferred financing costs and are being amortized over a two-year period
using the straight-line method. Amortization was $71,530 and $68,337 for the
years ended December 31, 1995 and 1996. In February 1997, the entire
principal balance plus accrued interest on these notes was repaid.
The aggregate maturities of long-term debt for the next three years ending
December 31, are as follows: 1997 -- $1,065,365; 1998 -- $16,102 and
1999 -- $6,051.
NOTE 11 -- LOSS ON INVESTMENT
In August 1994, the Company's president contributed to the Company his 22%
interest in the common stock of TBR, Inc. (TBR), a Florida corporation. TBR's
only asset is a software product developed by its shareholders. TBR has no other
assets or liabilities and has had no significant business operations to date.
During fiscal 1995, the Company purchased an additional 4.8% of TBR common stock
for $17,000, which funds were used in a marketing effort for TBR's software
product. As of December 31, 1995, the Company elected to write off its
investment in TBR in full.
F-12
<PAGE>
<PAGE>
TTR INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 12 -- INCOME TAXES
At December 31, 1996, the Company had available $695,000 of net operating
loss carryforwards for U.S. federal income tax purposes which expire in the
years 2009 through 2012, and $939,000 of foreign net operating loss
carryforwards with no expiration date. Due to the uncertainty of their
realization, no income tax benefit has been recorded by the Company for these
net operating loss carryforwards as valuation allowances have been established
for any such benefits. The use of the U.S. federal net operating loss
carryforwards is subject to limitations under section 382 of the Internal
Revenue code pertaining to changes in stock ownership.
Significant components of the Company's deferred tax assets and liabilities
for U.S. federal and Israel income taxes are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1995 1996
--------- ---------
<S> <C> <C>
Net operating loss carryforwards.............................................. $ 225,000 $ 548,000
Research and developments costs............................................... 65,000 89,000
Accrued vacation and severance................................................ 13,000 25,000
--------- ---------
Total deferred tax assets................................................ 303,000 662,000
Valuation allowance...................................................... (303,000) (662,000)
--------- ---------
Net deferred tax assets.................................................. $ -- $ --
--------- ---------
--------- ---------
</TABLE>
Pre-tax losses from foreign (Israeli) operations were $571,924 and $790,536
for the years ended December 31, 1995 and 1996, respectively.
NOTE 13 -- CAPITAL TRANSACTIONS
CONTRIBUTED SHARES
In January 1995, the Company's President contributed a total of 561,453
shares of common stock held by him. The Company subsequently cancelled these
shares.
WARRANTS
On May 15, 1995, the Company issued warrants as compensation to a
consultant to purchase up to a total of 15,000 shares of the Company's common
stock for $.01 per share. The warrants are exercisable until January 15, 2001.
PRIVATE PLACEMENT
In April 1996, the Company completed a private placement of 650,000 shares
of its Common Stock and warrants for an additional 1,000,000 shares, for an
aggregate purchase price of $200,000. The warrants are exercisable for a period
of three years commencing after the IPO at an exercise price equal to $7.00 per
share.
ESCROW SHARES
An aggregate of 1,000,000 shares of the Company's common stock, owned
beneficially by its President, have been designated as escrow shares. The escrow
shares are not assignable nor transferable until certain earnings or market
price criteria have been met. If the conditions have not been met, such shares
will be cancelled and contributed to the Company's capital.
F-13
<PAGE>
<PAGE>
TTR INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The escrow shares will be released from escrow on a pro-rata basis, if and
only if, one or more of the following conditions are met:
1. 250,000 shares will be released if the Company's pre-tax income,
exclusive of extraordinary items amounts to at least $1,800,000 for the
year ended December 31, 1997 or the average bid price of the Common Stock
averages in excess of $15 per share for 30 consecutive days during the 12
month period commencing on the date of a proposed public offering.
2. 300,000 shares will be released if the Company's pre-tax income,
exclusive of extraordinary items amounts to at least $4,000,000 for the
year ended December 31, 1998 or the average bid price of the Common Stock
averages in excess of $20 per share for 30 consecutive days during the 12
month period commencing 12 months from the date of a proposed public
offering.
3. 450,000 shares will be released if the Company's pre-tax income,
exclusive of extraordinary items amounts to at least $6,000,000 for the
year ended December 31, 1999 or the average bid price of the Common Stock
averages in excess of $25 per share for 30 consecutive days during the 12
month period commencing 24 months from the date of a proposed public
offering.
The shares will also be released under certain circumstances of the Company
is acquired or merged.
As shares are released from escrow, they will be accounted for as reissued
for services rendered and the fair value of such shares will be charged to
operations as compensation expense with an offset to permanent capital. These
charges will not be deductible for income tax purposes.
NOTE 14 -- FAIR VALUE OF FINANCIAL INSTRUMENTS
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 107, Disclosures About Fair Value of Financial
Instruments, which requires that all entities disclose the fair value of
financial instruments, as defined, for both assets and liabilities recognized
and not recognized in the statement of financial condition. Substantially all of
the Company's financial instruments, consisting primarily of short-term
Borrowings and promissory notes payable, are carried at, or approximate, fair
value because of their short-term nature or because they carry market rates of
interest.
NOTE 15 -- RELATED PARTY TRANSACTIONS
In November 1994, the Company entered into a fourteen-month agreement with
SAU to assist in the establishment of a U.S. based sales office and to provide
marketing consulting services to the Company. Pursuant to the contract SAU
received a fee of $7,900 per month and was issued Warrants to purchase up to
185,000 shares of the Company's Common Stock under the same terms as the
promissory note holders. SAU subsequently assigned its rights to the Warrants to
certain of the promissory note holders.
The Company loaned a total of $256,000 to SAU under a short term loan
agreement. The loan was repaid in 1995 with interest at the rate of 8% per
annum.
NOTE 16 -- COMMITMENTS AND CONTINGENCIES
CONSULTING AND EMPLOYMENT AGREEMENT
(a) In August 1994, TTR Israel entered into an employment agreement with
one of its officers. The agreement has a three-year term which provides for
annual compensation of $60,000, subject to adjustment. The agreement may
terminate with 60 days prior notice. In the event the termination is without
cause then the officer will be entitled to continue to receive his salary for an
additional twelve
F-14
<PAGE>
<PAGE>
TTR INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
month period. At the end of the initial three-year term, the agreement
automatically renews for one-year periods.
(b) In October 1995, the Company entered into a three-year marketing
consulting agreement, pursuant to which the consultant receives a monthly fee of
$4,800 per month. On April 15, 1997, the Board of Directors approved the grant
of 15,000 shares of its Common Stock to the consultant for consulting services
rendered. The Company will record a charge to operations of $223,125 upon the
issuance of these shares.
(c) In December 1995, TTR Israel entered into an employment agreement with
its director of product research and development. The agreement has a one-year
term, renewable for additional one-year terms. In consideration of eliminating
the provision for royalty payments, the agreement was amended to increase the
annual base compensation to $96,000 plus fringe benefits. The Company has also
agreed to pay a one time bonus of $50,000, subject to completion of the IPO.
(d) In September 1996, TTR Israel entered into a three-year employment
agreement with its Chief Executive Officer. The agreement provides for annual
compensation of approximately $100,000, subject to adjustment and is renewable
for additional one-year periods at the end of the initial term. Within the
initial term the employee may terminate the agreement with 60 days prior notice
and with 90 days notice thereafter.
The Company has also agreed to grant, on the date on which the Company's
IPO is declared effective, warrants to purchase up to 217,473 shares of Common
Stock, at an exercise price of $.01 per share. The company expects to record
deferred compensation expense amounting to $1,522,300 and will amortize this
amount over the period that services are provided. The options will vest over
a four year period commencing with the date of grant.
(e) In December 1996, TTR Israel entered into a two-year consulting
agreement. The agreement provides for monthly fees of $6,100 and is renewable
for one additional year. The agreement may be terminated by either party with 30
days' prior notice. Subsequently the consultant was also granted options to
purchase 15,000 shares of the Company's Common Stock at $7.00. The options will
vest over a four-year period commencing with the date of grant.
OPERATING LEASES
On June 1, 1996, the TTR Israel entered into a lease agreement for office
space. Future minimum rentals on this lease as of December 31, 1996 are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
- ------------
<S> <C>
1997....................................................................... $ 48,624
1998....................................................................... 48,624
1999....................................................................... 48,624
2000....................................................................... 48,624
2001....................................................................... 20,260
--------
$214,746
--------
--------
</TABLE>
LEGAL MATTER
In October and November 1996, a claim was made against TTR Israel alleging
intellectual property rights infringement. The claim threatens to seek
injunctive relief as well as damages in the amount of $1,000,000. The Company
has denied any liability and its legal advisors believe the claim is totally
without merit.
F-15
<PAGE>
<PAGE>
TTR INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 17 -- STOCK OPTION PLAN
In July 1996, the Board of Directors adopted the Company's Incentive and
Non-qualified Stock Option Plan (the 'Plan') and has reserved up to 450,000
shares of Common Stock for issuance thereunder . The Plan provides for the
granting of options to officers, directors, employees and advisors of the
Company. The exercise of incentive stock options ('ISOs') issued to employees
who are less than 10% stockholders shall not be less than the fair market value
of the underlying shares on the date of grant or not less than 100% of the fair
market value of the shares in the case of an employee who is a 10% stockholder.
The exercise price of restricted stock options shall not be less than the par
value of the shares to which the option relates. Options are not exercisable for
a period of one year from the date of grant. Thereafter, options may be
exercised as determined by the Board of Directors, with maximum terms of ten and
five years, respectively, for ISOs issued to employees who are less than 10%
stockholders and employees who are 10% stockholders. In addition, under the
plan, no individual will be given the opportunity to exercise ISO's valued in
excess of $100,000, in any calendar year, unless and to the extent the options
have first become exercisable in the preceding year. The Plan will terminate in
2006.
A summary of the status of the Company's stock option plan as of December
31, 1996 and changes during the year ending on that date is presented below:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE
SHARES PRICE
------ --------
<S> <C> <C>
Options outstanding, January 1, 1996...................................... -- --
Granted................................................................... 5,000 6.00
Canceled.................................................................. -- --
Exercised................................................................. -- --
------ --------
Options outstanding, December 31, 1996.................................... 5,000 6.00
------ --------
------ --------
</TABLE>
Additional information for 1996 with respect to options under the Plan is
as follows:
<TABLE>
<S> <C>
Option price range at end of year.................................................. $6.00
Options exercisable at end of year................................................. 0
Shares of common stock available for future grant.................................. 445,000
Weighted-average grant date fair value of options granted during year under the
minimum value method............................................................. $1.661
Weighted-average exercise price of options exercisable at end of year.............. 0
Weighted-average remaining contractual life of outstanding options at end of
year............................................................................. 5 years
</TABLE>
In the first quarter of 1997, the Company granted an additional 55,000
incentive stock options exercisable at $7.00-$10.00 per share and 75,000
non-qualified options exercisable at $5.00-$7.00 per share under the Plan.
On January 1, 1996, the Company adopted SFAS No. 123, 'Accounting for
Stock-Based Compensation'. The statement encourages but does not require
companies to use the fair value-based method of accounting for stock-based
employee compensation plans. Under this method, compensation expense is measured
as of the date the awards are granted based on the estimated fair value of the
awards, and the expense generally recognized over the vesting period. If a
company elects to continue using the intrinsic value-based method under APB
Opinion No. 25, pro forma disclosures of net income and earnings per share are
required as if the fair value-based method had been applied. Under the intrinsic
method, compensation expense is the excess, if any, of the market price as of
the grant date over the exercise price of the option. Under the Company's
current compensation plan, there is no such excess on the date of grant and
therefore, no compensation expense is recorded, except for stock and
F-16
<PAGE>
<PAGE>
TTR INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
warrants granted in 1995 on which the Company has recorded stock compensation of
$18,673, as determined by the Company's Board of Directors.
The Company has elected to continue to apply APB Opinion No. 25 and related
interpretations in accounting for its stock option plan. Accordingly, no
compensation expense has been recognized in the Consolidated Statements of
Operations related to options issued to employees under the stock option plan.
Had compensation expense been determined based on the estimated fair value of
the awards at grant dates, the Company's net loss and loss per share would have
been increased to the pro forma amounts indicated below:
<TABLE>
<S> <C>
Net loss
As reported..................................................... $(1,121,211)
Proforma........................................................ $(1,122,249)
Loss per share
As reported..................................................... $(.43)
Proforma........................................................ $(.43)
</TABLE>
In computing pro forma net loss the full impact of calculating compensation
expense for stock options under SFAS No. 123 is not reflected in pro forma net
loss, since such expense is apportioned over the vesting period of those options
as they vest.
The fair value of each option is estimated on the date of grant using the
minimum value method with the following weighted average assumptions: No
dividends, an expected life of five years, and a risk-free interest rate of
6.05% for the year ended December 31, 1996.
NOTE 18 -- SUBSEQUENT EVENTS
(A) INITIAL PUBLIC OFFERING
In February 1997, the Company completed an initial public offering of
860,000 shares of its Common Stock and realized net proceeds of approximately
$4,700,000 after stock offering costs. In connection with this offering, the
Company sold to the underwriter, for $80, warrants to purchase up to an
additional 80,000 shares of the Company's Common Stock at an excersice price
equal to $11.20 per share. The Company has also agreed to retain the Underwriter
as management and financial consultants for a two-year period at an annual rate
of $60,000 per annum, payable in advance. In connection with the IPO, certain
securityholders have agreed not to sell their shares for up to two years from
the offering date, without the prior written consent of the Underwriter.
(B) CONSULTING AGREEMENT
In February 1997, TTR Israel entered into an agreement with the University
of Arizona ('the University'), to become a sponsor of the Optical Data Storage
Center ('ODSC') at the University. Funding for the ODSC is provided by
industrial organizations, including TTR Israel. TTR Israel has undertaken to
contribute $50,000 to the ODSC each year for a period of three years, payable
quarterly. In consideration of this sponsorship, TTR Israel will receive voting
power in the decision-making body of the ODSC, proportional to its contribution.
The agreement may be terminated by TTR Israel with six months prior notice.
(C) EMPLOYMENT AGREEMENT
On March 11, 1997, the Company entered into a one-year employment agreement
with an officer of the Company. The agreement provides for monthly compensation
of $5,000 and is automatically renewable for additional one-year terms. The
agreement may be terminated by either party with 30 or 60 days' prior notice
during the first and second anniversary, respectively, and with 90 day's notice
F-17
<PAGE>
<PAGE>
TTR INC. AND ITS SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
thereafter. The Company has also agreed, subject to underwriters approval, to
issue to the employee 50,000 shares of its Common Stock. Pursuant to an escrow
agreement, 25,000 shares will be released from escrow on July 31, 1997 and
25,000 on January 31, 1998. The grant of these shares will result in a charge to
deferred compensation in the amount of $500,000 which will be amortized over one
year.
The officer was also granted 40,000 qualified and 60,000 nonqualified
options to purchase shares of the Company's Common Stock, at an exercise price
of $10.00 and $5.00 per share, respectively. The options will vest over a
four-year period commencing with the date of grant. The issuance of the
nonqualified options will result in a charge to deferred compensation in the
amount of $300,000. This amount will be amortized over the vesting period.
(D) CONSULTING AGREEMENT
On March 1, 1997, the Company entered into a one year consulting agreement
which provided for a lump-sum payment of $100,000 to be paid upon signing.
(E) STOCK GRANTS
On March 11, 1997, the Company issued 5,000 shares of its Common Stock to a
consultant. The Company will record compensation in the amount of $50,000 due to
the issuance of these shares.
On April 15, 1997, the Company granted 4,000 shares of its Common Stock to
a non-profit entity as a charitable contribution.
(F) LEGAL MATTER
On March 31, 1997, the Company and TTR Israel were served with claims by
and individual demanding, among other things, royalties at the rate of 5% of the
proceeds from the sales of products in which the plaintiff claims to have
provided consulting services towards its development.
On May 6, 1997, the Company entered into a settlement agreement whereby the
Company will issue the plaintiff 15,000 shares of its Common Stock, subject to
the following: (a) If the Company registers any additional shares for sale it
will include these shares in its registration statement; (b) Following the
registration of these shares and continuing for a 180 day period, if the share
price averages in excess $15.50 per share over two consecutive days the
Company's obligation to the consultant terminates. If the share price is not
met, then during the three days commencing after 180 days the Company will remit
to the consultant the difference between $15.50 per share and the actual
consideration received. The Company will record an expense of $232,500 due to
the issuance of these shares.
F-18
<PAGE>
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act of 1934, the
registrant duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized on May 12, 1997.
TTR INC.
By: /S/ MARC D. TOKAYER
.................................
MARC D. TOKAYER
CHAIRMAN AND PRESIDENT
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities
indicated on May 12, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------------------ ---------------------------------------------------------------------
<C> <S>
/s/ MARC D. TOKAYER Chairman of the Board, President (Principal Executive Officer)
.........................................
MARC D. TOKAYER
/s/ ROBERT FRIEDMAN Chief Financial Officer (Principal Accounting Officer)
.........................................
ROBERT FRIEDMAN
/s/ ARIK SHAVIT Vice-President; Director
.........................................
ARIK SHAVIT
/s/ BARUCH SOLLISH Vice-President; Director
.........................................
BARUCH SOLLISH
</TABLE>
<PAGE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated statements accompanying the filing of Form 10-KSB and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> DEC-31-1996
<CASH> 63,656
<SECURITIES> 0
<RECEIVABLES> 507
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 199,484
<PP&E> 373,444
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,191,688
<CURRENT-LIABILITIES> 2,763,392
<BONDS> 0
0
0
<COMMON> 3,050
<OTHER-SE> (1,596,907)
<TOTAL-LIABILITY-AND-EQUITY> 1,191,688
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 896,779
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 224,432
<INCOME-PRETAX> (1,121,211)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,121,211)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,121,211)
<EPS-PRIMARY> (0.43)
<EPS-DILUTED> 0
<PAGE>
