Learning to Have Fun.

AFTER ENCOUNTERING STUMBLING BLOCKS, NEUROSMITH FOUNDERS ARE ENJOYING TAKING THEIR EDUCATIONAL PRODUCTS TO A NEW LEVEL

BROOKE Abercrombie and John Sosoka discovered early on that being in the toy business is no game.

The founders of Neurosmith, which makes educational toys for infants and toddlers, had a disastrous Christmas their first year in business. The product they invented, Music Blocks, never made it to toy-store shelves in time for the critical holiday season.

They had hired a Chinese factory to manufacture 15,000 of the complicated electronic toys that allow toddlers to compose music using plastic blocks. But they soon discovered that the factory, which was used to making more simplistic toys, was not technically sophisticated enough to get the job done on time.

The blunder left the fledgling Neurosmith with no revenues in 1998, its first full year in business.

"It was a heart breaker," recalls Abercrombie, 34. "This is not what you want Santa to bring you for Christmas."

But Santa was better to Abercrombie and Sosoka the following year. Instead of using a U.S. sourcing agency to find a factory for the job, they hired a Hong Kong agency where the people spoke Cantonese and Mandarin and were more knowledgeable about each factory's capabilities in the industrial area just north of Hong Kong.

With a new factory, new knowledge and a director of manufacturing in 1999, Neurosmith was able to sell 100,000 Music Blocks, which retail for $69.99. each, to major toy chains such as FAO Schwartz, Learning Express, Toys R Us and Zany Brainy. Revenue that year totaled $5 million.

"Things have improved," Abercrombie said inside her comfortable office where the bookshelves are filled with documents on brain research and the windowsills are lined with colorful wooden art objects from Oaxaca, Mexico.

A gray-foam shark is perched atop her computer.

Since then, the Long-Beach based firm and its advisory board have developed three more educational toy products that are tested on children and scrutinized by mothers in focus groups. Additions to the line-up include Phonics Blocks, which let kids use blocks to explore the correlation between sounds and letters; The Babbler, which exposes infants to sounds in Spanish, French and Japanese to help them learn languages later on; and Little Linguist, which helps children learn another language by hearing a word and associating it with a familiar object and then using it in simple sentences.

"They are great," says customer Marilyn Koval, whose 3-year-old daughter as Music Blocks and the Little Linguist. "I like the fact that they are educational. My daughter uses the Little Linguist on her own. I can hear her in her room repeating words in Spanish. She gets a kick out of Music Blocks."

Company's origins

Before founding Neurosmith, Abercrombie and Sosoka, 46, had worked together at Davidson & Associates, an educational software company started by Jan Davidson, a Torrance teacher, and her husband, Bob. Abercrombie, who has her B.A. and MBA from Harvard University, was the vice president of product development for Davidson & Associates, which was best known for its Math Blaster software program. Sosoka, who is the parent of a 6-year-old and 10-year-old, was the chief technology officer who oversaw software development.

But when the Davidsons sold their company in 1996 for $1.2 billion to CUC International (now called Havas Interactive), Abercrombie and Sosoka decided to take their concept for educational toys and start Neurosmith. The Davidsons liked the idea so much they provided $5 million in start-up money.

The Neurosmith partners set up a small second-floor office in the Wells Fargo Bank building in the Belmont Shore area of Long Beach. They hired two people and started transforming their toy idea from a concept to a design to a prototype that would not melt in 120-degree temperature and would withstand heavy-duty banging by toddlers.

Little did the partners know that it typically takes five months to a year to bring a new toy product to market.

Looking ahead

But now that the learning process is behind them, the company is rapidly growing, thanks to some good publicity and award nominations. In 1999, Music Blocks were praised by the Oppenheim Family, which has established the Oppenheim Toy Portfolio. Joanne Oppenheim and her daughter, Stephanie, single out the most innovative toys of the year and then talk about them on major network TV morning talks shows. Music Blocks also made the list of Parents magazine Best Toys of the Year in 1999. The publicity provided a boost for a company that is still too small to afford a major advertising campaign.

And they are hard at work inventing new toys for Christmas 2002.

Spotlight

Neurosmith

Year Founded: 1997

Core Business: Educational toys for infants and toddlers

Revenue in 1999: $5 million

Revenue in 2000: $10 million (projected)

Employees in 1999: 18

Employees in 2000: 26

Goal: To produce products that will make a difference in children's lives and that marry technology with education

Driving Force: Parents' desire to provide their children with quality, fun, educational toys