<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
_X_ Quarterly Report Pursuant to Section13 or 15(d) of the Security
Exchange Act of 1934 For the Quarterly period ended June 30, 1997.
____ Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Transition Period from______ to ________.
Commission file number: 0-25334
-------
THE GREAT AMERICAN BACKRUB STORE, INC.
--------------------------------------
(Exact name of Small Business Issuer as specified in the charter)
-----------------------------------------------------------------
New York 13-3729043
-------- ----------
(State of Incorporation) (I.R.S. Employer Identification No.)
53 West 36th Street Room 1202 New York, New York 10018
------------------------------------------------------
(Address of principal executive offices)
----------------------------------------
Registrant's telephone number, including area code: (212) 750-7046
--------------
Check whether the issuer: (1) filed all reports required by Section 13
or 15 (d) of the Securities Exchange Act during the past 12 months ( or for such
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 _______
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date.
Class Outstanding at August 11, 1997
----- -------------------------------
Common Stock, $.001 par value 2,416,854
Transitional Small Business Disclosure Format(check one):
Yes _____ No __X__
<PAGE>
THE GREAT AMERICAN BACKRUB STORE, INC.
(A Development Stage Company)
PART 1
FINANCIAL INFORMATION
Item 1. Unaudited Financial Statements
------------------------------
Condensed Balance Sheet 3
Condensed Statements of Operations 4
Statements of Cash Flows 5
Notes to unaudited Financial Statements 6
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 9
---------------------------------------------
PART II
OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K 12
Signature Page 13
Exhibit Index 14
Exhibit 11: Statement re: Computation of per share earnings 15
Exhibit 27: Financial Data Schedule 16
Page 2
<PAGE>
THE GREAT AMERICAN BACKRUB STORE, INC.
(A Development Stage Company)
CONDENSED BALANCE SHEET
(UNAUDITED)
As of June 30, 1997
Part 1: Financial Information
Item 1: Financial Statements
ASSETS
Current assets:
Cash and cash equivalents $ 227,053
Receivables - other 144,960
Prepaid expenses 11,040
Inventory 281,244
--------------
Total current assets 664,297
--------------
Property and equipment:
Furniture and fixtures 463,560
Leasehold improvements 931,446
Purchased lease 120,000
Computer equipment 46,458
--------------
1,561,464
Less, Accumulated depreciation (285,008)
--------------
1,276,456
--------------
Other assets:
Note receivable 50,938
Lease and equipment deposits 290,616
--------------
Total other assets 341,554
--------------
Total assets $ 2,282,307
==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 626,501
Accrued expenses 193,278
Accrued payroll and related 79,604
Bridge notes 158,244
Deferred revenue 72,425
---------------
Total current liabilities 1,130,052
---------------
Deferred rent 363,991
---------------
Commitments and contingencies
Stockholders' equity:
Series B convertible preferred stock, $.001 par value
15,000,000 shares authorized, none issued -
Common stock, par value $0.001 per share,
20,000,000 shares authorized, 2,416,854
shares issued and outstanding 2,417
Additional paid in capital 8,865,331
Deficit accumulated during the development stage (8,079,484)
---------------
788,264
---------------
Total liabilities and stockholders' equity $ 2,282,307
===============
See accompanying notes to financial statements
Page 3
<PAGE>
<TABLE>
<CAPTION>
Three months ended Six months ended December 18, 1992
June 30, June 30, (Inception) to
-------- --------
1997 1996 1997 1996 June 30, 1997
---- ---- ---- ---- -------------
<S> <C> <C> <C> <C> <C>
Revenues:
Services $ 762,695 $ 542,419 $ 1,657,243 $ 929,596 $ 5,264,346
Products 163,072 138,947 365,527 267,287 1,735,696
Royalties, franchise fees and other 4,870 - 15,125 - 99,102
---------- ------------- ------------ -------------- ----------------
Total 930,637 681,366 2,037,895 1,196,883 7,099,144
---------- ------------- ------------ -------------- ----------------
Operating expenses:
Salaries and wages 482,585 321,208 1,001,157 617,591 4,244,560
Cost of products sold,buying and occupancy 139,491 107,956 292,731 218,476 1,282,966
Rental expense 290,890 146,209 576,999 285,185 1,978,136
Advertising and promotion 8,090 23,642 47,165 43,979 553,591
Non-cash financial advisory fees - 131,250 43,750 218,750 525,000
General and administrative 401,997 385,064 901,683 834,898 5,592,436
Depreciation 64,748 20,400 103,148 40,800 321,012
Waived salaries - - - - 350,000
---------- ------------- ------------ -------------- ---------------
Total 1,387,801 1,135,729 2,966,633 2,259,679 14,847,701
---------- ------------- ------------ ------------- ---------------
Net loss from operations (457,164) (454,363) (928,738) (1,062,796) (7,748,557)
---------- ------------- ------------ -------------- ---------------
Other income (expense):
Interest Income 3,600 6,822 9,638 16,030 252,995
Interest expense (2,362) - ( 154,877) - (583,922)
---------- ------------- ------------ -------------- ---------------
Total 1,238 6,822 (145,239) 16,030 (330,927)
---------- ------------- ------------ -------------- ---------------
Net loss ($455,926) ($447,541) ($1,073,977) ($ 1,046,766) ($8,079,484)
========== ============= ============ ============== ===============
Weighted average number of
shares outstanding during the period 2,405,354 1,825,782 2,401,437 1,790,553
========== ============= ============ ==============
Net loss per common share and equivalents $ (0.19) $ (0.25) $ (0.45) $ (0.58)
========== ============= ============ ==============
</TABLE>
See accompanying notes to financial statements
Page 4
<PAGE>
THE GREAT AMERICAN BACKRUB STORE, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six months ended Six months ended December 18, 1992
June 30, June 30, (Inception) to
-------- --------
1997 1996 June 30, 1997
------------- -------------- --------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss ($ 1,073,977) ($ 1,046,766 ($ 8,079,484
------------- -------------- --------------
Adjustments to reconcile net loss to net cash used
by operating activities:
Depreciation and amortization 103,148 40,800 321,012
Salaries waived by officers - - 350,000
Warrant financing costs 152,516 - 565,016
Options granted as compensation - 525,000 631,830
Common stock issued to former franchisee and
consultant - - 98,478
(Increase) decrease in:
Accounts receivable 70,100 9,05 ( 144,960)
Prepaid expenses 39,650 ( 343,554) ( 11,040)
Inventory 48,025 32,952 ( 281,244)
Other assets 66,395 ( 76,224) ( 341,554)
Increase (decrease) in:
Accounts payable and accrued expenses ( 290,068) ( 218,240) 916,566
Deferred revenues and rent ( 132,586) ( 62,526) 436,416
Accrued officer expenses - - -
-------------- -------------- --------------
Total adjustments 57,180 ( 92,738) 2,540,520
-------------- -------------- --------------
Net cash used in operating activities ( 1,016,797) ( 1,139,504) ( 5,538,964)
-------------- -------------- --------------
Cash flows from investing activities:
Purchase of certificate of deposit - - ( 1,000,000)
Maturity of certificate of deposit 1,000,000
Purchased lease - - ( 120,000)
Purchase of property and equipment - ( 179,173) ( 1,471,423)
-------------- -------------- --------------
Net cash used in investing activities - ( 179,173) ( 1,591,423)
-------------- -------------- --------------
Cash flows from financing activities:
Net proceeds from the issuance of common stock 55,812 445,750 7,182,516
Net proceeds from the issuance of bridge warrants - - 4,000
Proceeds from issuance of bridge notes and short-term debt - - 867,667
Payment of bridge notes and short-term debt - - ( 605,000)
Bridge financing costs - - ( 91,743)
Payment of officer loan payable - - -
-------------- -------------- --------------
Net cash provided by financing activities 55,812 445,750 7,357,440
-------------- -------------- --------------
Net increase (decrease) in cash and cash equivalents ( 960,985) ( 872,927) 227,053
Cash and cash equivalents, beginning of period 1,188,038 1,221,737 -
-------------- -------------- --------------
Cash and cash equivalents, end of period $ 227,053 $ 348,810 $ 227,053
Supplemental disclosures of cash flow information: ============== ============== ==============
Cash paid during the period for:
Interest $ - $ - $ 20,892
============== ============== ==============
Income taxes $ 2,500 $ 1,500 $ 10,875
============== ============== ==============
</TABLE>
See accompanying notes to financial statements
Page 5
<PAGE>
THE GREAT AMERICAN BACKRUB STORE, INC.
(A Development Stage Company)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
Description of Business
The Great American Backrub Store, Inc. (the "Company"), formerly American
Pleasure, Inc., is an owner/operator of retail stores which provide seated,
fully clothed back rubs and sell back related products. The Company,
incorporated on December 28, 1992, began operations in August, 1993 and opened
its first store for business in October, 1993. As of June 30, 1997 the Company
has twelve retail stores in operation and two franchised store locations.
Management believes that the Company's planned principal operations, the
establishment of Company-owned stores and franchised stores throughout the
country, have not yet commenced. The initial nine stores have been used to
continue to develop and modify the Company's retail concept. Accordingly, the
accompanying financial statements have been presented as a development stage
company, in accordance with Statement of Financial Accounting Standards (SFAS)
No. 7.
Note 1 - Initial Public Offering
In an initial public offering completed on March 7, 1995, the Company sold
1,250,000 shares of common stock for approximately $6,250,000 which, after
commissions and fees, provided the Company with net proceeds of approximately
$5,127,732.
Note 2 - Condensed Financial Statements
The condensed balance sheet as of June 30, 1997 and the condensed statements of
operations and cash flows for the six month periods ended June 30, 1997 and
1996, and the period December 18, 1992 (inception) to June 30, 1997 have been
prepared by the Company without audit. In the opinion of management, all
adjustments (which include only normal recurring adjustments) necessary to
present fairly the financial position, results of operations, and changes in
cash flows at June 30, 1997 and for all periods presented have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. These condensed financial statements should be
read in conjunction with the financial statements and notes thereto of the
Company as of December 31, 1996.
The results of operations for the six month periods ending June 30, 1997 and
1996 are not necessarily indicative of the operating results for the full
year.
Cash and Cash Equivalents
Cash and cash equivalents represent all amounts held in banks and money market
accounts and short term investments such as United States Treasury Bills with
original maturities of three months or less.
Page 6
<PAGE>
THE GREAT AMERICAN BACKRUB STORE, INC.
(A Development Stage Company)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
Note 3 - Earnings per Share
Net loss per common share for the six month period ended June 30, 1997 and 1996
is computed by dividing net loss by the weighted average common shares
outstanding during the period. The assumed exercise of common share equivalents
was not utilized since the effect was anti-dilutive.
Note 4 - Options, Stock Plans and Management Compensation
At the Company's 1994 annual meeting of shareholders held on July 18, 1994, the
Company's shareholders approved the Employee Plan. The purpose of the Employee
Plan is to promote the success of the Company by providing a method whereby
eligible employees of the Company and its subsidiaries, as defined therein, may
be awarded additional remuneration for services rendered, thereby increasing
their personal interest in the Company. The Employee Plan is also intended to
aid in attracting persons of suitable ability to become employees of the Company
and its subsidiaries. The plan covers an aggregate of 75,000 shares of the
Company's Common Stock. As of June 30, 1997, options to purchase 8,500 shares of
Common Stock were outstanding under the plan.
In December 1994, the Company granted ten year options to purchase 360,000
shares of Common Stock to executive officers of the Company. Such options are
exercisable at a price of $3.75 per share. One-third of such options became
exercisable in March, 1995, one-third became exercisable in December 1995 and
one-third became exercisable in December 1996. In July 1995, the Company granted
five-year options to purchase 100,000 shares of Common Stock to executive
officers of the Company. Such options are exercisable at a price of $1.875 per
share. All such options have been exercised. In July 1995, the Company granted
options to purchase 10,000 shares of Common Stock to an executive officer of the
Company. Such options are exercisable at a price of $2.5625 per share. Options
to purchase 5,000 shares vest and became exercisable in July 1996 and options to
purchase an additional 5,000 shares vest and become exercisable in July 1997.
All options expire on the day before the 5-year anniversary of vesting. In March
1995, the Company granted ten year options to purchase 100,000 shares of Common
Stock to a consultant to the Company. Such options are exercisable at a price of
$5.00 per share. All such options are currently exercisable. In July 1995, the
Company granted five year options to purchase 25,000 and 40,000 shares of Common
Stock to consultants to the Company. Such options are exercisable at a price of
$4 per share. All options are currently exercisable. In August 1995, the Company
granted three year options to purchase 100,000 shares of Common Stock to a
consultant to the Company. Such options are exercisable at a price of $2.375 per
share. All such options have been exercised.
Note 5 - Leases
The Company leases retail stores and office equipment. All of the retail stores
are leased under noncancelable agreements which expire at various dates through
the year 2005. The agreements, which have been classified as operating leases,
require the Company to pay insurance, taxes and other maintenance costs.
Rent expense amounted to $290,000 and $146,209 for the three month periods ended
June 30, 1997 and 1996, respectively. Rent expense amounted to $576,999 and
$285,185 for the six month periods ended June 30, 1997 and 1996, respectively.
Rent expense from December 18, 1992(inception) to June 30, 1997 was $1,978,136.
Page 7
<PAGE>
THE GREAT AMERICAN BACKRUB STORE, INC.
(A Development Stage Company)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
Note 6 - Financial advisory and consulting agreement
In February 1996, the Company entered into a financial advisory and consulting
agreement with an investment banking firm to advise it on the possible sale of
additional equity securities, as well as to introduce and assist in the
evaluation of potential merger and partnering opportunities.
The agreement is for a period of one year commencing on February 1, 1996 and
included a $100,000 retainer paid on the execution of the agreement and warrants
to purchase 100,000 shares of the Company's common stock at an exercise price of
$1.00 per share exercisable from the date of the agreement to and including
January 31, 1997, all of which have been exercised and warrants to purchase
200,000 shares of common stock of the Company at an exercise price of $2.50 per
share exercisable from the date of the agreement to and including January 31,
1998, of which all have been exercised.
Such warrants resulted in a non-cash charge of $43,500 for the six month period
ended June 30, 1997.
Note 7 - Preferred Stock Offering
On February 5, 1997, the Company filed a registration statement to offer 270,000
shares of Series B convertible Preferred Stock for approximately $2,700,000,
which, if successful, after commissions and fees, would have provided the
Company with net proceeds of approximately $2,000,000. This offering was
canceled due to regulatory problems with the Company's former Investment Banker.
Page 8
<PAGE>
ITEM 2:
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
Company's unaudited financial statements and the related notes thereto included
elsewhere herein.
General
The Company's revenues are derived from the service of seated, fully clothed
back rubs and the sale of stress related products. The Company began operations
in August, 1993, and opened its first store for business in October, 1993. As of
June 30, 1997, the Company has twelve retail stores in operation and two
franchised store locations.
During the period ended June 30, 1997, the Company's registration statement to
offer 270,000 shares of Series B convertible Preferred Stock, which was filed on
February 5, 1997, was canceled due to regulatory problems with the Company's
Investment Banker. The cancellation of this Preferred Stock offering has
severely hampered the Company's ability to expand its business and will have a
significant affect on its future operating results if additional funds can not
be raised. Management is evaluating other financing possibilities, and is
seeking an Investment Banker to help raise additional funds through any one or a
combination of public or private debt or equity-related offerings, dependent
upon market conditions. However, no assurance can be given that the Company will
be successful in raising additional capital.
In addition, an important part of the Company's business plan was an aggressive
store and franchise growth strategy. The proposed offering of Preferred Stock
was an essential element to implement this business plan and, therefore, any
Company expansion has been canceled or put on hold until such time, if ever,
additional funds are raised. The failure to open new stores and franchised
operations could have a material adverse impact on the Company's future sales
and operations.
Management is also evaluating store level performance of its existing locations
to isolate and possibly close unprofitable locations. As of June 30, 1997, the
Company closed one location due to its poor performance and continued losses.
The Company is also evaluating the possibility of franchising some of its
existing locations to raise cash and is in preliminary discussions with several
parties. There can be no assurance that the Company will be successful in
identifying potential franchisees and selling existing locations.
Subsequent to June 30, 1997, the Company's Chief Financial Officer and Secretary
resigned but will remain as a consultant to the Company. William Zanker, the
Company's Chairman and President has assumed these duties until a replacement
can be found.
Results of Operations
The Company is in the development stage and has not had significant revenues
since the commencement of its retail store operations in October, 1993. From
this time through June 30, 1997, the Company has generated cumulative revenue of
$7,099,144 while incurring a cumulative loss of $8,079,484. The losses to date
have been primarily associated with the Company's establishment of a corporate
and administrative infrastructure to position itself to open additional retail
stores and expand its franchise operations. For the six month period ended June
30, 1997, retail store and franchise operations continue reflected losses
although overall stores opened more than one year have shown increased sales. In
addition, the Company expects to incur additional operating losses for the next
twelve months and possibly longer.
Page 9
<PAGE>
Results of Operations- cont'd
The Company presently sells services in the form of its back rubs, and products,
in the form of a variety of massage and stress reduction products, in its retail
stores. Since inception, sales of services have accounted for 74% of total
revenue, products for 24% and the remaining 2% from other sources. Since the
Company is still a development stage enterprise, it is not clear whether these
percentages are indicative of future ratios in a larger operation.
Three month period ended June 30, 1997 compared to three month period ended June
30, 1996 and six month period ended June 30, 1997 compared to the six month
period ended June 30, 1996
For the three months ended June 30, 1997, revenues from services and products at
the company's stores increased 37% to $930,637 from the corresponding 1996
period. This increase was mainly attributed to increased traffic and the opening
of additional stores as compared to the corresponding 1996 period. Operating
expenses were $1,387,801 for the three month period ended June 30, 1997 as
compared to $1,135,729 for the same period in the prior year, an increase of
22%. This increase was primarily due to the development of a management team,
operational systems, marketing and design plans in the implementation of the
Company's expansion plans. Of these amounts, approximately $401,997 was related
to corporate overhead expenses and $985,804 to store and franchise level
operations for the three month period ended June 30, 1997. No provision for
income taxes was required during either period due to the Company's incurrence
of net operating losses.
For the six months ended June 30, 1997, revenues from services and products at
the company's stores increased 70% to $930,637 from the corresponding 1996
period. This increase was mainly attributed to increased traffic and the opening
of additional stores as compared to the corresponding 1996 period. Operating
expenses were $2,966,633 for the six month period ended June 30, 1997 as
compared to $2,259,679 for the same period in the prior year, an increase of
31%. This increase was primarily due to the development of a management team,
operational systems, marketing and design plans in the implementation of the
Company's expansion plans. Of these amounts, approximately $901,683 was related
to corporate overhead expenses and $2,064,950 to store and franchise level
operations for the six month period ended June 30, 1997. No provision for income
taxes was required during either period due to the Company's incurrence of net
operating losses.
While general and administrative expenses where expected to increase due to the
need for additional management and administrative support for the Company's
expanding operations in the past, these expenses are due to decrease since the
cancellation of the Company's Preferred Stock offering has put any expansion on
hold and forced the Company to reorganize its operations. Other expense items,
such as advertising and promotion, salaries and wages, cost of products,
however, are related to retail operations themselves and their relative
percentages to total revenues are likely to remain fairly constant in the near
term but should decrease as the Company streamlines it operations. However, no
assurance can be given that the Company will be able decrease its expense levels
to support existing operations. In addition, the Company's expense levels have
been based in part on expectations of future sales levels, and a shortfall in
expected sales could have a significant adverse affect on the Company's
operations.
Page 10
<PAGE>
Liquidity and Capital Resources
The Company had negative working capital of $465,755 as of June 30, 1997,
compared with working capital of $1,498,816 as of June 30, 1996. The decrease is
primarily due to amounts spent on property, equipment and leasehold improvements
to fund the Company's initial thirteen stores and amounts spent on operations in
the development of a corporate infrastructure in anticipation of the Company's
growth strategy.
From inception to June 30, 1997, the Company has used cash for operating
activities of $5,538,964 and spent an additional $1,591,423 for the purchase of
property, equipment, purchased leases, leasehold improvements and investments.
These expenditures have been offset by the net cash provided by financing
activities, principally from the Company's October, 1993 private placement of
common stock, aggregating $870,000, Bridge notes and short-term financing in the
principal amount of $867,667, the Company's March 1995 public offering of common
stock resulting in the net proceeds of approximately $5,127,732 and the issuance
of common stock to warrant and option holders of approximately $1,184,784. See
"Statement of Cash Flows" included in the Company's unaudited financial
statements.
Inasmuch as the Company continues to have a high level of operating expenses,
the Company anticipates that losses will continue for at least the next 12
months and until such time, if ever, as the Company is able to generate
significant revenues or achieve profitable operations. As a result, in their
report of the Company's Financial Statements as of December 31, 1996, the
Company's independent certified public accountants have included an explanatory
paragraph that describes factors raising substantial doubt about the Company's
ability to continue as a going concern.
In accordance with management's plans, the Company is seeking to retain
investment banking counsel to advise it on the possible sale of equity
securities, as well to as introduce and assist in the evaluation of potential
merger and partnership opportunities. Management expects that these efforts will
result in either an additional equity infusion or an introduction to other
parties with interests and resources which may be compatible with that of the
Company. However, no assurances can be given that the Company will be successful
in raising additional capital or entering into a business alliance. Further,
there is no assurance, assuming the Company successfully raises additional funds
or enters into a business alliance, that the Company will achieve profitability
or positive cash flow. On February 5, 1997, the Company filed a registration
statement to offer 270,000 shares of preferred stock for approximately
$2,700,000. This offering was canceled due to regulatory problems with the
Company's investment banking counsel at that time.
Page 11
<PAGE>
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
---------------------------------
(a) Exhibits:
Exhibit 11: Statement re: Computation of per share earnings
Exhibit 27: Financial Data Schedule
(b) Reports on Form 8-K
None
Page 12
<PAGE>
Signature
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
THE GREAT AMERICAN BACKRUB STORE, INC.
--------------------------------------
Registrant
Date: August 14, 1997
William Zanker, Chairman of the Board, President
and acting Chief Financial Officer (duly
authorized officer and principal financial
officer and principal accounting officer) and
Secretary
Page 13
<PAGE>
EXHIBIT INDEX
-------------
Exhibits Description
- -------- -----------
11 Statement re: Computation of per share earnings
27 Financial Data Schedule
Page 14
<PAGE>
EXHIBIT 11
THE GREAT AMERICAN BACKRUB STORE, INC.
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Six Months Ended Three Months ended
June 30, June 30,
------------------------- -----------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Issuance of common stock, June 1993 375,000 375,000 375,000 375,000
Sale of common stock, October 1993 125,000 125,000 125,000 125,000
Sale of common stock, March 1995
1,250,000 shares 1,250,000 1,250,000 1,250,000 1,250,000
Sale of common stock through the issuance of options and
warrants in prior periods 631,854 40,553 631,854 75,782
Shares issued upon exercise of options and warrants 19,583 - 23,500
--------- --------- --------- ---------
Common stock and equivalents 2,401,437 1,790,553 2,405,354 1,825,782
--------- --------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
Six months' Three months'
weighting factor weighting factor
(in months) (in months)
----------- -----------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Issuance of common stock, June 1993 6 6 3 3
Sale of common stock, October 1993 6 6 3 3
Sale of common stock, March 1995
1,250,000 shares 6 6 3 3
Sale of common stock through the issuance of options and
warrants in prior periods 6 see below 3 see below
Shares issued upon exercise of options and warrants see below see below
Common stock and equivalents
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Computation of weighted average number of shares issued upon exercise of
- ------------------------------------------------------------------------
options and warrants:
- ---------------------
Period ended June 30, 1996 Six months' Three months' Period ended June 30, Six months' Three months'
weighting factor weighting factor 1997 weighting factor weighting factor
Shares (in days) (in days) Shares (in days) (in days)
Date Issued 1996 1996 Date Issued 1997 1997
---- ------ ---- ---- ---- ------ ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
5/1/96 12,500 4,167 8,333 1/31/97 23,500 19,583 23,500
------ ------ ------
6/1/96 200,000 33,333 66,667
6/3/96 12,500 1,875 563
6/7/96 4,000 511 131
6/18/96 4,000 267 36
6/18/96 6,000 400 53
------ ------
Total 40,553 75,782
------ ------
</TABLE>
Page 15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
company's form 10-QSB for the six month period ended June 30, 1997 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> APR-01-1997
<CASH> 227,053
<SECURITIES> 0
<RECEIVABLES> 144,960
<ALLOWANCES> 0
<INVENTORY> 281,244
<CURRENT-ASSETS> 664,297
<PP&E> 1,561,464
<DEPRECIATION> 285,008
<TOTAL-ASSETS> 2,282,307
<CURRENT-LIABILITIES> 1,130,052
<BONDS> 0
0
0
<COMMON> 2,417
<OTHER-SE> 8,865,331
<TOTAL-LIABILITY-AND-EQUITY> 2,282,307
<SALES> 2,037,895
<TOTAL-REVENUES> 2,037,895
<CGS> 292,731
<TOTAL-COSTS> 2,966,633
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
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