U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report pursuant Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 1997
[ ] Transition report pursuant Section 13 or 15(d) of the Exchange Act of
1934
For the transition period from _______________ to _______________
Commission file number 0-26344
Golf Technology Holding, Inc.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Idaho 59-3303066
(State or Other Jurisdiction of (I.R.S. Employer ID #)
Incorporation or Organization)
13000 Sawgrass Village Circle, #30, Ponte Vedra Beach, Florida 32082
(Address of Principal Executive Offices)
904/273-8772
(Issuer's Telephone Number, Including Area Code)
N/A
(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 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 ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to
be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court.
Yes ____ No ____
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's class of
common equity, as of the latest practicable date: $.001 par value Common
Stock - 5,373,808 as of November 14, 1997
Page 1 of 17
Exhibit Index begins on sequential Page 18
<PAGE>
GOLF TECHNOLOGY HOLDING, INC.
INDEX
Page
Number
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet as of September 30, 1997 . . . . . . . . . 3
Statements of Operations for the three month and nine
month periods ended September 30, 1997 and 1996 . . . . 4
Statements of Cash Flows for the nine-month periods
ended September 30, 1997 and 1996 . . . . . . . . . . . 5
Notes to Financial Statements . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . 8
PART II - OTHER INFORMATION AND SIGNATURES
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . . 13
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . 13
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
PART III INDEX TO EXHIBITS
Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1
GOLF TECHNOLOGY HOLDING, INC.
Balance Sheet
(Unaudited)
September 30,
Assets 1997
(Unaudited)
Current assets:
Cash ............................................... $ 75,420
Accounts receivable, net of allowance of $330,919... 806,451
Inventories......................................... 714,807
Prepaid Inventory................................... 102,284
Equipment for sale.................................. 0
Prepaid Expenses.................................... 210,609
Other current assets................................ 70,946
-----------
Total current assets.................... 1,980,517
-----------
Property and equipment, at cost:
Furniture and fixtures.............................. 72,334
Machinery and equipment............................. 462,425
Leasehold improvements.............................. 11,885
-----------
546,644
Less accumulated depreciation....................... (192,323)
-----------
354,321
Notes receivable from related parties................. 70,737
Certificates of deposits, restricted.................. 113,284
Deposits.............................................. 98,824
Other assets.......................................... 19,242
-----------
Total assets............................... $ 2,636,925
===========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable.................................... 1,422,322
Notes payable to related parties.................... 0
Accrued liabilities................................. 60,300
-----------
Total current liabilities.................. 1,482,622
-----------
Stockholders' equity:
Preferred stock, Series A 9% Cumulative Convertible,
$.001 par value per share; aggregate involuntary
liquidation preference of $2,362,927 ($6.07 share),
5,000,000 shares authorized, 389,600 shares issued
and outstanding................................... 390
Preferred stock, Series B Convertible,
$.001 par value per share; aggregate involuntary
liquidation preference of $7,369,000 ($1,000.00
share), 10,000 shares authorized, 7,369 shares
issued and outstanding............................ 7
Preferred stock, Series C Convertible,
$.001 par value per share; aggregate involuntary
liquidation preference of $4,500,000 ($1,000.00
share), 5,000 shares authorized, 4,500 shares
issued and outstanding............................ 5
Common stock, $.001 par value, 25,000,000 shares
authorized, 5,463,808 shares issued and
outstanding....................................... 5,464
Additional paid-in capital.......................... 13,164,481
Accumulated deficit................................. (12,016,044)
-----------
Total stockholders' equity................. 1,154,303
-----------
Total liabilities and stockholders' equity $ 2,636,925
===========
See accompanying notes to financial statements.
<PAGE>
ITEM 1 CONTINUED
GOLF TECHNOLOGY HOLDING, INC.
Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1997 1996 1997 1996
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net Sales........................... $ 491,966 767,158 $ 3,379,943 3,308,164
Cost of sales....................... 359,288 447,917 1,701,640 1,353,034
---------- ---------- ---------- ----------
Gross profit..................... 132,678 319,241 1,678,303 1,955,130
Selling and marketing expenses...... 835,601 1,493,439 2,303,878 2,798,616
General and administrative expenses. 756,395 644,903 1,714,547 1,616,265
Research and development costs...... 87,711 21,980 93,148 204,949
---------- ---------- ---------- ----------
Operating income (loss).......... (1,547,029) (1,841,081) (2,433,270) (2,664,700)
---------- ---------- ---------- ----------
Other income (expense):
Royalty Income................... 33,002 21,000 101,363 53,033
Other, net....................... 18,467 13,992 45,530 (9,713)
---------- ---------- ---------- ----------
51,469 34,992 146,893 43,320
Net income (loss) before
income taxes............... (1,495,560) (1,806,089) (2,286,377) (2,621,380)
Income taxes - - - -
---------- ---------- ---------- ----------
Net income (loss)............ (1,495,560) (1,806,089) (2,286,377) (2,621,380)
Preferred stock cumulative dividends (43,230) (43,710) (129,689) (130,882)
Deemed Dividend on preferred stock - - (2,250,000) -
---------- ---------- ---------- ----------
Net income (loss) for common
stockholders...................... $ (1,538,790) (1,849,799) $ (4,666,066) (2,752,262)
========== ========== ========== ==========
Net income (loss) per average
outstanding common share.......... (0.29) (0.44) (0.95) (0.68)
Weighted average shares outstanding 5,316,308 4,187,731 4,906,942 4,051,482
========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
ITEM 1 CONTINUED
GOLF TECHNOLOGY HOLDING, INC.
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended
September 30,
1997 1996
(unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net loss.......................................... $ (2,286,377) (2,621,380)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization............... 51,725 103,123
Changes in operating assets and liabilities:
Accounts receivable..................... (279,302) (1,223,644)
Inventories............................. 347,008 (1,116,133)
Equipment for sale...................... 275,000 -
Prepaid Inventory....................... 69,480 -
Prepaid and other assets................ (89,932) (104,995)
Deposits and other assets............... 44,914 (114,055)
Accounts payable and accrued liabilities (532,532) 205,747
---------- ----------
Net cash used in operating activities (2,400,016) (4,871,337)
---------- ----------
Cash flows from investing activities:
Investment in certificates of deposit, restricted 9,487 (135,388)
Notes receivable from related parties............. - (7,235)
Capital expenditures.............................. (168,880) (719,133)
---------- ----------
Net cash used in investing activities (159,393) (861,756)
---------- ----------
Cash flows from financing activities:
Repayment of notes payable........................ (737,500) (135,916)
Net proceeds from issuance of preferred and
common stock.................................... 3,312,223 5,956,427
---------- ----------
Net cash provided by financing
activities......................... 2,574,723 5,820,511
---------- ----------
Net increase (decrease) in cash...... 15,314 87,418
Cash balance, beginning of period................. 60,106 25,910
---------- ----------
Cash balance, end of period....................... $ 75,420 113,328
========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
1. The Company. Golf Technology Holding, Inc. (the "Company")
designs, manufactures and markets Snake Eyes/R/ golf clubs. Snake Eyes/R/
are pro-line brand golf equipment marketed to the premium buying segment
of the golf equipment retail market.
2. Basis of Presentation and Summary of Significant Accounting
Policies. The quarterly financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission for interim
financial information. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company believes that
the disclosures are adequate to make the information presented not
misleading. These condensed financial statements should be read in
conjunction with the Company's latest annual report on Form 10-KSB. In
the opinion of the management of the Company, all adjustments necessary,
consisting only of normal recurring adjustments, to present fairly (1) the
financial position of Golf Technology Holding Inc. as of September 30,
1997; (2) the results of its operations and its cash flows for the nine
months ended September 30, 1997 and 1996; and (3) the results of its
operations for the three months ended September 30, 1997 and 1996, have
been included. The results of operations for the interim periods are not
necessarily indicative of the results for the full year.
Reference is also made to the Company's annual report on Form 10-KSB for
the year ended December 31, 1996, for a discussion of the Company's
significant accounting policies.
3. Earnings Per Share. In February 1997, the FASB issued Statement No.
128, "Earnings Per Share" (SFAS 128)", which simplifies the standards for
computing Earnings Per Share (EPS). SFAS 128 replaces standards for
computing and presenting EPS found in Accounting Principles Board Opinion
No. 15, "Earnings Per Share" (APB. 15) SFAS 128 requires dual presentation
of Basic EPS (which replaces APB. 15 Primary EPS) and Diluted EPS on the
face of the income statement. SFAS 128 will be effective for the 1997
Annual Report, however, earlier application is not permitted. Due to the
losses sustained by the Company (which make common stock equivalents anti-
dilutive), SFAS 128 will not have any impact on current year or
retroactive EPS calculations.
The computation of the net loss per common share and common share
equivalent is based on the weighted average number of common shares
outstanding for the period. The convertible preferred stock, stock
options and warrants were not considered in the calculation since their
inclusion would be anti-dilutive.
4. Liquidity and Capital Resources. On September 30, 1997 the Company
completed the first closing in connection with the offering of up to a
maximum of two million units of securities of the Company. Each unit is
comprised of one share of common stock, par value $.001 per share of the
Company and one warrant to purchase one share of the Common Stock. The
Warrant is exercisable for a period of five years after its issuance at
an exercise price of $2.00 per share. J. Robbins Securities, L.L.C., a
New York limited liability company and registered broker-dealer is acting
as the placement agent in conjunction with the Offering. The placement
agent will be granted five-year warrants to purchase units equal to 10%
of the units sold in the placement at an exercise price of $2.40 per unit.
As of September 30, 1997, the Company has closed on 295,000 units at $2.10
per unit, for proceeds of $455,846, net of broker's fees of $62,607. As of
November 14, 1997, the Company has closed on 455,000 units at $2.10 per
unit, for proceeds of $814,716, net of broker's fees of $140,784.
The Company has financed its operations and investment in assets
principally through the sale of equity securities. Current operating
losses cause concerns about the Company's liquidity and its ability to
continue operations at current levels and expand its product lines.
Management projects that the Company will improve its results of
operations during fourth quarter of 1997 based on current sales orders and
expense levels. In particular, management believes that the delivery of
new Snake Eyes iron sets will contribute to the realization of improved
results of operations. However, it is not certain that the Company will
be able to realize management's sales projections.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Statements used in this discussion that relate to future plans,
events, financial results or performance are forward-looking statements as
defined under the Private Securities Litigation Reform Act of 1995. Such
statements are subject to certain risks and uncertainties, which could
cause actual results to differ materially, from those anticipated.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof. The Company
undertakes no obligation to republish revised forward-looking statements
to reflect events or circumstances after the date hereof or to reflect
events or circumstances after the date hereof or to reflect the occurrence
of unanticipated events. Readers are also urged to carefully review and
consider the various disclosures made by the Company which describe
certain factors, which affect the Company's business.
Certain Factors Affecting Golf Technology Holding, Inc.
Growth in Sales: The Company believes the current growth rate in the golf
equipment industry will continue. No assurances can be given that the
demand for the Company's existing products or the introduction of new
products will permit the Company to experience historical growth or
realize profit margins.
Seasonality: In the golf equipment industry, sales to retailers tend to
be seasonal due to lower demand in cold weather months that occur during
the fourth and first quarters. Although the timing of new product
introductions may mitigate the impact of seasonality on the Company's
operating results, the Company continues to be impacted by seasonal buying
trends.
Discretionary Consumer Spending: Sales of golf equipment have
historically been dependent on discretionary consumer spending, which may
be affected by general economic conditions. A decrease in consumer
spending on golf equipment would have material adverse effect on the
Company's business and operating results.
Sources of Supply: The Company relies on a limited number of suppliers
for materials. While management believes that alternative sources of
supplies either exist or could be developed, in the event that it should
lose its present sources of supply for these materials and components, or
experience delays in receiving delivery from such sources, the Company
would sustain at least temporary shortages of materials and components,
which could have a material adverse effect on the Company's results of
operations.
The following management's discussion and analysis of financial
condition and results of operations addresses the performance of the
Company for the three and nine month periods ended September 30, 1997 and
1996 (unaudited) and should be read in conjunction with the Company's
Financial Statements (including the notes thereto) appearing elsewhere in
this document.
The Company has completed its first full set of irons, the MB-1 Series.
The internationally recognized company Smith & Wesson is forging these
muscle-backed forged irons. Smith & Wesson is widely recognized as a
forging and industrial metallurgy leader. Smith & Wesson has been in
business for over 145 years. Initial response from retailer buyers has
been favorable. The Company is in the process of delivering sales orders
in excess of $3,000,000 for sets of irons. A substantial portion of these
orders should be delivered by the end of fiscal year 1997. The Company
expects order levels to grow through the fourth quarter.
Sales of the Snake Eyes Driver have not, to date, met management's
expectations. The Company will continue to promote and market this
product including the implementation of various pricing and promotional
strategies intended to maximize the market potential of this product.
The Company is currently exploring through research and development
further expansion of its golf equipment product line.
Results of Operations
For the Nine Months Ended September 30, 1997
The Company's net sales (unaudited) for the nine month period ending
September 30, 1997 and 1996 were $3,379,943 and $3,308,164, respectively.
The Company's gross profit (and gross profit margin) for the nine months
ended September 30, 1997 was $1,678,303 (50%) compared to $1,955,130 (59%)
for the six months ended September 30, 1996. The decrease in reported
gross profit and gross profit percentage is due to reduced pricing on
limited sales of promotional inventory. Further, the Company is adopting
pricing strategies that will allow it to grow sales volume and overall
market share.
Operations resulted in net losses of $2,433,270 and $2,664,700 for the
nine months ended September 30, 1997 and September 30, 1996, respectively.
The operating loss incurred during the nine months ended September 30,
1997 was attributed to a combination of research and development for new
products and substantial advertising and promotional expenses related to
driver sales coupled with driver sales, to date, not meeting expectations.
Selling and marketing expenses of $2,303,878 reported for the nine months
ended September 30, 1997 reflect a marketing plan that includes media and
print advertising primarily to support wedge sales, driver sales, targeted
marketing promotions and professional tour player promotions. Included in
the amount reported above is $455,000 relative to professional tour player
related costs. These costs include professional tour players' contract
expenses for approximately thirteen PGA, Senior PGA, and NIKE Tours
Players.
For the Three Months Ended September 30, 1997
The Company's net sales (unaudited) for the three month period ending
September 30, 1997 and 1996 were $491,966 and $767,158, respectively.
Management attributes the decrease in sales for the three months ended
September 30, 1997 compared to the same period in 1996 to the timing of
the Company's production capabilities and related delivery of open sales
orders.
The Company's gross profit (and gross profit margin) for the three months
ended September 30, 1997 was $132,678 (27%) compared to $319,241 (42%) for
the three months ended September 30, 1996. The decrease in reported gross
profit is relative to the decrease in sales as discussed above. The
decrease in gross profit percentage is due to recognition of allocated
overhead to cost of sales relative to level of sales during the period.
Operations resulted in net losses of $1,547,029 and $1,841,081 for the
three months ended September 30, 1997 and September 30, 1996,
respectively. The operating loss incurred during the three months ended
September 30, 1997 was attributed to a combination of advertising and
promotional expenses related to wedge and driver sales coupled with driver
sales, to date, not meeting expectations. Additionally, the Company
incurred general and administrative expenses to support the Company's
capacity to grow.
Selling and marketing expenses of $835,601 reported for the three months
ended September 30, 1997 reflect a marketing plan that includes
substantial media and print advertising related primarily to support sales
of the Snake Eyes Driver, targeted marketing promotions including industry
trade shows and professional tour player promotions. Included in the
amount reported above is $170,500 relative to professional tour player
related costs. These costs include professional tour players' contract
expenses for approximately thirteen PGA, Senior PGA, and NIKE Tours
Players.
General and administrative expenses of $756,395 reported for the three
months ended September 30, 1997 reflect spending incurred to support the
Company's capacity to grow. Included in the total general and
administrative expenses were salaries and related expenses of $263,000 and
bad debts expense of $200,000, a substantial portion of which relates to
an allowance for an uncollectible account of a foreign distributor.
Liquidity and Capital Resources
On September 30, 1997 the Company completed the first closing in
connection with the offering of up to a maximum of two million units of
securities of the Company. Each unit is comprised of one share of common
stock, par value $.001 per share of the Company and one warrant to
purchase one share of the Common Stock. The Warrant is exercisable for a
period of five years after its issuance at an exercise price of $2.00 per
share. J. Robbins Securities, L.L.C., a New York limited liability
company and registered broker-dealer is acting as the placement agent in
conjunction with the Offering. The placement agent will be granted
five-year warrants to purchase units equal to 10% of the units sold in the
placement at an exercise price of $2.40 per unit. As of September 30,
1997, the Company has closed on 295,000 units at $2.10 per unit, for
proceeds of $455,846, net of broker's fees of $62,607. As of November 14,
1997, the Company has closed on 455,000 units at $2.10 per unit, for
proceeds of $814,716, net of broker's fees of $140,784.
The Company has financed its operations and investment in assets
principally through the sale of equity securities. Current operating
losses cause concerns about the Company's liquidity and its ability to
continue operations at current levels and expand its product lines.
Management projects that the Company will improve its results of
operations during fourth quarter of 1997 based on current sales orders and
expense levels. In particular, management believes that the delivery of
new Snake Eyes iron sets will contribute to the realization of improved
results of operations. However, it is not certain that the Company will
be able to realize management's sales projections.
Based on communications with current and prospective investors, the
Company believes that it will be able to raise sufficient capital, which
together with projected cash flows from operations, will be sufficient to
meet the Company's working capital needs for at least the next two years.
However, the Company's ability to raise further capital is uncertain.
<PAGE>
PART II. OTHER INFORMATION AND SIGNATURES
Item 2. Changes in Securities and Use of Proceeds
On September 30, 1997 the Company completed the first closing in
connection with the private placement of up to a maximum of two million
units of securities of the Company. Each unit is comprised of one share
of common stock, par value $.001 per share of the Company and one warrant
to purchase one share of the Common Stock. The Warrant is exercisable for
a period of five years after its issuance at an exercise price of $2.00
per share. J. Robbins Securities, L.L.C., a New York limited liability
company and registered broker-dealer is acting as the placement agent in
conjunction with the Offering. The placement agent will be granted five-
year warrants to purchase units equal to 10% of the units sold in the
placement at an exercise price of $2.40 per unit. As of September 30,
1997, the Company has closed on 295,000 units at $2.10 per unit, for
proceeds of $455,846, net of broker's fees of $62,607. As of November 14,
1997, the Company has closed on 455,000 units at $2.10 per unit, for
proceeds of $814,716, net of broker's fees of $140,784. The offer and
sale of units was made in reliance on the exemption provided in Section
4(2) of the Securities Act of 1933 and Regulation D promulgated there-
under, and was restricted to accredited investors as defined in Regulation
D.
Item 3. Defaults Upon Senior Securities
The Company has Series A Cumulative Preferred Stock dividends in
arrears of $368,563 as of September 30, 1997. To date, the Company has
not paid dividends. The arrearage for Series A Cumulative Preferred Stock
dividends is $390,177 as of November 14, 1997.
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits:
11. Computation of Earnings Per Share
27. Financial Data Schedule
B. Reports on Form 8-K:
REPORT DATED AUGUST 28, 1997 FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION ON OCTOBER 1, 1997: Mr. Vadersen, in accordance with
his wishes to be relieved of the day to day responsibilities from
serving as Chief Executive Officer and President while continuing in
his capacity as Chairman of the Board and Treasurer of the Company,
has tendered his resignation as Chief Executive Officer and President
of the Company to the Board of Directors of the Company. The Board
of Directors accepted such resignation of Mr. Vadersen and elected
Mr. Hutchins President of the Company. Mr. Hutchins will also
continue in his other positions as Chief Operating Officer, Chief
Financial Officer, and Secretary of the Company.
REPORT DATED SEPTEMBER 30, 1997 FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION ON OCTOBER 10, 1997: On September 30, 1997 Golf
Technology Holding, Inc. (the Registrant) completed the first closing
in connection with the offering (the Offering) by Golf Technology
Holding, Inc., an Idaho Corporation (the Company) of up to a maximum
of two million (2,000,000) units (the Units) of securities of the
Company. Each unit (Unit) is comprised of one (1) share of common
stock, par value $.001 per share (the Common Stock), of the Company
and one (1) warrant (the Warrant) to purchase one (1) share of the
Common Stock. The Warrant is exercisable for a period of five (5)
years after its issuance at an exercise price of $2.00 per share. J.
Robbins Securities, L.L.C., a New York limited liability company and
registered broker-dealer is acting as the placement agent (the
Placement Agent) in conjunction with the Offering. The first closing
involved the sale of 295,000 Units sold at $2.10 per Unit and the
Company and Placement Agent will jointly determine when and if
additional closings will occur.
<PAGE>
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 hereunto duly authorized.
GOLF TECHNOLOGY HOLDING, INC.
DATE: November 14, 1997 By: /s/ Harold E. Hutchins
Harole E. Hutchins
President (Chief Financial Officer)
<PAGE>
PART III. INDEX TO EXHIBITS
Exhibit 11 Computation of Earnings Per Share
Exhibit 27 Financial Data Schedule
Exhibit 11
GOLF TECHNOLOGY HOLDING, INC.
COMPUTATION OF EARNINGS PER SHARE
See Note 4 of Part I, Item 1, which is incorporated herein by
reference.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF GOLF TECHNOLOGY HOLDING, INC. AS OF AND FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 188,704
<SECURITIES> 0
<RECEIVABLES> 877,188
<ALLOWANCES> 330,919
<INVENTORY> 714,807
<CURRENT-ASSETS> 1,980,517
<PP&E> 546,644
<DEPRECIATION> 192,323
<TOTAL-ASSETS> 2,636,925
<CURRENT-LIABILITIES> 1,482,633
<BONDS> 0
0
402
<COMMON> 5,464
<OTHER-SE> 1,148,437
<TOTAL-LIABILITY-AND-EQUITY> 2,636,925
<SALES> 491,966
<TOTAL-REVENUES> 543,435
<CGS> 359,288
<TOTAL-COSTS> 835,601
<OTHER-EXPENSES> 844,106
<LOSS-PROVISION> 199,702
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,495,560)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,495,560)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,495,560)
<EPS-PRIMARY> (.29)
<EPS-DILUTED> (.29)
</TABLE>
