<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED
March 31, 2000
--------------
[ ] 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: 0-23279
Celerity Systems, Inc.
----------------------
(Exact name of Registrant as specified in its Charter)
Delaware 52-2050585
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
122 Perimeter Park Drive
Knoxville, Tennessee 37922
--------------------------
(Address of principal executive offices)
(865) 539-5300
--------------
(Registrant's telephone number)
(Former Name, Former Address and Former Fiscal Year,
if changed since last Report)
Check whether the registrant (1) has 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 / /
As of May 9, 2000, 9,394,808 shares of the issuer's common stock were
outstanding.
Transitional Small Business Disclosure Format (check one): Yes / / No /X/
<PAGE>
CELERITY SYSTEMS, INC.
FORM 10-QSB
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
INDEX
<TABLE>
<S> <C> <C>
Page
PART I FINANCIAL INFORMATION
Item 1. Financial Statements 3
Condensed Balance Sheets as of March 31, 2000 (unaudited) and 3
December 31, 1999
Condensed Statements of Operations (unaudited) for the three months ended 4
March 31, 2000 and 1999
Condensed Statement of Stockholders' Equity as of March 31, 2000 (unaudited) 5
Condensed Statements of Cash Flows (unaudited) for the three months ended 6
March 31, 2000 and 1999
Notes to Unaudited Financial Statements 7
Item 2. Management's Discussion and Analysis or Plan of Operation 9
PART II. OTHER INFORMATION 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
</TABLE>
2
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CELERITY SYSTEMS, INC.
Balance Sheets
<TABLE>
<CAPTION>
March 31,
December 31, 2000
1999 (unaudited) Difference
------------ ------------ ------------
<S> <C> <C> <C>
Assets
Cash $ 383 $ 256,273 $ 255,890
Accounts receivable 31,500 65,680 34,180
Other receivables 28,000 28,000 --
Inventory, net 854,353 919,215 64,862
Prepaid expenses 24,000 362,050 338,050
------------ ------------ ------------
Total current assets 938,236 1,631,218 692,982
Property and equipment, net 104,686 93,896 (10,790)
Debt offering costs, net of accumulated amortization of $134,894
and $71,180, respectively 76,629 145,298 68,669
Other assets 109,186 94,582 (14,604)
------------ ------------
Total assets $ 1,228,737 $ 1,964,994 $ 736,257
============ ============ ============
Liabilities and Stockholders' Deficit
Accounts payable $ 984,341 $ 846,560 $ (137,781)
Accrued wages and related taxes 1,209,639 751,552 (458,087)
Accrued interest 224,622 131,653 (92,969)
Other accrued liabilities 309,513 294,264 (15,249)
Notes payable 557,252 35,000 (522,252)
Current maturities of long-term debt and capital lease obligations 401,173 226,173 (175,000)
------------ ------------ ------------
Total current liabilities 3,686,540 2,285,202 (1,401,338)
Long-term debt and capital lease obligations, less current maturities 904,280 1,433,913 529,633
------------ ------------ ------------
Total liabilities 4,590,820 3,719,115 (871,705)
Common stock, $.001 par value, 15,000,000 shares authorized,
6,269,521 issued and 5,932,157 outstanding, and
8,664,288 issued and 8,326,924 outstanding at
December 31, 1999 and March 31, 2000, respectively 6,270 8,664 2,394
Additional paid-in capital 23,695,245 26,387,231 2,691,986
Treasury stock, at cost, 337,364 shares at December 31, 1999
and March 31, 2000 (227,500) (227,500) --
Accumulated deficit (26,836,098) (27,922,516) (1,086,418)
------------ ------------ ------------
Total stockholders' deficit (3,362,083) (1,754,121) 1,607,962
------------ ------------ ------------
Total liabilities and stockholders' deficit $ 1,228,737 $ 1,964,994 $ 736,257
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these unaudited condensed
financial statements.
3
<PAGE>
CELERITY SYSTEMS, INC.
Condensed Statements of Operations
Unaudited
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------------
1999 2000
----------- -----------
<S> <C> <C>
Revenues $ 79,798 $ --
Cost of revenues 19,647 --
----------- -----------
Gross margin 60,151 --
Operating expenses 1,061,344 951,778
----------- -----------
Loss from operations (1,001,193) (951,778)
Interest expense (164,616) (174,042)
Other income 362 1,654
----------- -----------
Loss from continuing operations (1,165,447) (1,124,166)
Discontinued operations:
Income on disposal of discontinued CD-ROM segment 60,082 37,748
----------- -----------
Net loss $(1,105,365) $(1,086,418)
=========== ===========
Basic and diluted loss per common share (Note 2):
Loss from continuing operations $ (0.27) $ (0.16)
Discontinued operations 0.02 0.01
----------- -----------
Net loss per share $ (0.25) $ (0.15)
=========== ===========
</TABLE>
The accompanying notes are an integral part of these unaudited condensed
financial statements.
4
<PAGE>
CELERITY SYSTEMS, INC.
Condensed Statement of Stockholders' Equity
Unaudited
<TABLE>
<CAPTION>
Additional
Common Paid-In Treasury Accumulated
Stock Capital Stock Deficit
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Balances, January 1, 2000 $ 6,270 $ 23,695,245 $ (227,500) $(26,836,098)
Issuance of common stock 200 39,800
Exercise of employee stock options 16 2,759
Exercise of common stock warrants 75 74,925
Issuance of convertible debentures with beneficial
conversion feature 110,394
Issuance of 624,275 shares of common stock as
payment of certain consulting fees (Note 5) 624 765,414
Conversion of notes, accounts, wages and related
payroll taxes to 1,426,827 shares of common stock and
warrants to purchase 333,176 shares of common
stock (Note 4) 1,427 1,668,747
Conversion of convertible debentures to 52,665 shares
of common stock 52 29,947
Net loss (1,086,418)
------------ ------------ ------------ ------------
Balances, March 31, 2000 8,664 26,387,231 (227,500) (27,922,516)
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these unaudited condensed
financial statements.
5
<PAGE>
CELERITY SYSTEMS, INC.
Condensed Statements of Cash Flows
Unaudited
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------------
1999 2000
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,105,365) $(1,086,418)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization 182,425 267,026
Noncash interest expense related to beneficial
conversion feature of debt 140,906 140,047
Noncash operating expense related to consulting fees -- 234,375
Changes in current assets and liabilities:
Accounts receivable (6,081) (34,180)
Prepaid expenses 6,192 5,700
Inventory (8,473) (64,862)
Accounts payable (34,926) 74,095
Other current liabilities 351,310 54,832
----------- -----------
Net cash used in operating activities (474,012) (409,385)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term borrowings -- 5,000
Proceeds from long-term debt 600,000 629,980
Principal payments on long-term debt and capital lease obligations (12,438) --
Proceeds from issuance of common stock 2,880 40,000
Proceeds from exercise of common stock warrants -- 75,000
Proceeds from exercise of common stock options -- 2,775
Financing and debt issue costs (79,500) (87,480)
----------- -----------
Net cash provided by financing activities 510,942 665,275
Net decrease in cash and cash equivalents 36,930 255,890
Cash and cash equivalents, beginning of year 18,273 383
----------- -----------
Cash and cash equivalents, end of year $ 55,203 $ 256,273
=========== ===========
</TABLE>
The accompanying notes are an integral part of these unaudited condensed
financial statements.
6
<PAGE>
CELERITY SYSTEMS, INC.
Notes to Unaudited Condensed Financial Statements
1. Presentation of Unaudited Interim Financial Statements
Information in the accompanying interim condensed financial statements and
notes to the financial statements for the interim periods as of and for
the three months ended March 31, 1999 and 2000, is unaudited. The
accompanying interim unaudited financial statements have been prepared by
the Company in accordance with generally accepted accounting principles
and Regulation S-B. Accordingly, they do not include all the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results for the
three month period ended March 31, 2000, are not necessarily indicative of
the results that may be expected for the year ending December 31, 2000.
The condensed financial statements should be read in conjunction with the
financial statements and notes thereto included in the audited financial
statements of the Company as of and for the period ended December 31,
1999.
2. Loss Per Share
Basic and diluted loss per share were computed by dividing the net loss by
the weighted average common shares outstanding during each period.
Potential common equivalent shares are not included in the computation of
per share amounts in the periods because the Company reported a loss and
inclusion of equivalents would be anti-dilutive.
Following is a reconciliation of the numerators and denominators of the
basic and diluted earnings per share:
<TABLE>
<CAPTION>
March 31,
-----------------------------
1999 2000
----------- -----------
<S> <C> <C>
Loss
Basic and diluted:
Loss available to common stockholders $(1,105,365) $(1,086,418)
Shares
Basic and diluted:
Weighted-average common shares outstanding 4,349,990 7,033,399
</TABLE>
3. Issuance of Convertible Debentures
The Company issued $629,980 aggregate principal amount of 8% convertible
debentures in the first quarter of 2000. The debentures have a term of
three years and are convertible into the Company's common stock at a
price, at the option of the holder, equal to either (i) 75% of the average
closing bid price of the common stock for the five trading days
immediately preceding conversion, or (ii) $1.50
7
<PAGE>
per share. Celerity may redeem the debentures at a redemption price of
125% of the principal amount, plus accrued interest. All outstanding
principal and interest is subject to mandatory conversion three years
after issuance. The Company recorded debt discount and additional paid in
capital for the $110,394 fair value of the beneficial conversion feature.
4. Accounts, Notes, Wages and Related Payroll Tax Conversion
In the first quarter of 2000 the Company converted $1,670,174 of
outstanding debt into common stock upon the initial closing of a private
offering. Investors in the private offering received 1,355,327 shares of
the Company's common stock , calculated at the average closing bid price
of the common stock for the five days immediately prior to acceptance of
the investor's subscription agreement less twenty percent. In addition,
investors received warrants to purchase common stock at the rate of one
warrant for each five dollars of debt converted. The warrants have an
exercise price of $1.44 and expire on April 9, 2003.
5. Supplemental Cash Flow Information
During the first quarter of 2000, the Company issued 624,275 shares of
common stock with a value of $766,038 as payment for certain consulting
fees.
In the first quarter of 2000, $30,000 of the convertible debentures were
converted into common stock.
6. Equity Line of Credit
In September, 1999 the Company entered into an equity line of credit
which became effective in April, 2000. Under the line of credit
arrangements, the Company may elect to draw down up to $5,000,000
aggregate principal amount of debentures with a maximum drawdown of up to
$500,000 per calendar month, through September 30, 2000, subject to the
satisfaction of certain conditions, including conditions relating to the
trading volume of the Company's common stock.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
GENERAL
The following discussion should be read in conjunction with the financial
statements and notes thereto and other financial information appearing elsewhere
in this Form 10-QSB. Statements in this Management's Discussion and Analysis or
Plan of Operations and elsewhere in this Form 10-QSB that are not statements of
historical or current fact constitute "forward-looking statements." Such
forward-looking statements involve known and unknown risks, uncertainties, and
other factors including those set forth herein and in the Company's Annual
Report on Form 10-KSB under the caption "Risk Factors" that could cause the
actual results of the Company to be materially different from the historical
results or from any future results expressed or implied by such forward-looking
statements. Such risks include, without limitation, the Company's history of
losses and accumulated deficit, need for additional financing, the lack of
assurance of the Company's technological success, competition and others. In
addition to statements which explicitly describe such risks and uncertainties,
prospective investors are urged to consider statements labeled with the terms
"believes," "belief," "expects," "intends," "anticipates," or "plans" to be
uncertain and forward-looking.
OVERVIEW
Prior to 1998, the Company's major activity was selling digital video
servers in the interactive video services market. All sales were in Korea,
Israel, Taiwan and China. However, beginning in 1998, the Company has focused
its sales efforts in North America, and developed and sold the first production
units of a new digital set top box, the T 6000.
The Company has continued to focus most of its development and production
efforts during 1998 and, although on a much more limited basis, through 1999 and
into 2000 on the T 6000, while also seeking new projects for the Company's
digital video servers, which could be deployed with the T 6000 or other
compatible set top boxes. The Company has produced its initial trial run of the
T 6000 set top boxes, which were manufactured by Taylor-White, LLC, of
Greeneville, Tennessee (Taylor-White"). The Company sold 13 of these trial run
boxes to Northern Telecom ("Nortel") in September 1998 for use in their
demonstration facility in Ottawa, Canada. In addition, Nortel purchased a CTL
7000 digital video server. In December, 1999, the Company entered into a
manufacturing agreement with Global PMX Company, Limited, under which all T 6000
digital set top box manufacturing is now being done in Global PMX plants in
Taiwan and China.
In February 1999, the Company received a purchase order from Hopkinsville
Electric Service ("HES") which included one CTL 9000 digital video server and up
to 1,000 T 6000 digital set top boxes and associated hardware and software. The
software included 1,000 licenses for energy management software developed for
the Company by Battelle Laboratories under a joint marketing arrangement, which
was executed in January 1999. This software allows the T 6000 digital set top
box to remotely read the electric meter and to set and control electric
appliances throughout the home, potentially allowing savings on electric bills
for subscribers with such units in their homes. HES has purchased 25 T 6000
digital set top boxes and associated hardware and software, which was scheduled
to ship in the second quarter of 1999, along with the CTL 9000 digital video
server. However, HES's network was not yet ready, and there were further
refinements being made to the Battelle software; at this point, that order is
expected to ship in the third quarter or early in the fourth quarter of 2000.
The remainder of the units are expected to ship within six months of that date,
although there can be no assurance that this will be the case. The
9
<PAGE>
gross revenues for the Company of this purchase order in total is approximately
$1,024,000. This is the first deployment of the Company's systems for an
electric utility company, one of the Company's planned major market
opportunities.
Management has also focused on attempting to obtain the necessary capital
to maintain the Company's operations. The Company is continuing to seek to
arrange financing, including possible strategic investment or opportunities to
sell some or all of the Company's assets and business, while continuing to
pursue sales opportunities. The Company has narrowed its sales efforts to those
which, the Company believes, have the best chance of closing in the near term.
With the departure of the Company's Vice President of Sales and Marketing in
October 1998, and through 1999, the Company's sales efforts were supervised by
its President. In March 2000, the Company hired a Sales Manager for North
America. The Company continues to encounter a longer and more complex sales
cycle and to realize fewer sales than previously anticipated. Although the T
6000 is in production, the Company continues to add and improve functionality
and may be required to do so for certain deployments. However, management
believes that the Company is now better positioned to become an important
participant in many of its key market segments. There can be no assurance that
this will be the case. Because of the Company's long-term sales cycle,
period-to-period comparisons set forth below may not be meaningful and may not
necessarily be indicative of the results that may be expected for future
periods.
In connection with the Company's efforts to arrange financing, including
possible strategic investments, the Company, on April 27, 1999, entered into a
Letter of Intent to merge with FutureTrak International, Inc., a technology firm
based in Pompano Beach, Florida, which specializes in the multi-dwelling unit
marketplace. On August 10, 1999, the companies announced the execution of a
definitive merger agreement which contemplated the merger of FutureTrak into a
wholly-owned subsidiary of the Company. However, on December 7, 1999, the
companies terminated the merger agreement. The Company originally determined to
merge with FutureTrak primarily because FutureTrak planned to focus on the
business of providing satellite television and other services to multi housing
unit projects and Celerity believed that its technology was well suited for such
projects. The merger was terminated primarily because efforts to obtain
necessary funding for the planned activities of the merged companies had not
proven successful.
In February 1998, following the unsuccessful conclusion of the Company's
efforts to retain a qualified general manager for its CD-ROM segment, the
Company decided to scale back the segment to a maintenance mode of operations.
The decision was also based on the continued decline in the segment's revenues,
and the Company's need to focus its efforts and resources on the interactive
video segment. The Company then developed a formal plan of disposal which became
effective in May 1998. The Company has not been successful in finding a buyer
for the segment which had revenues of $146,384 and $67,950 for the three months
ended March 31, 1999 and 2000, respectively. Accordingly, assets related to this
segment have been written down to zero and, except for filling any miscellaneous
customer orders which may be received, this segment is completely inactive.
The Company has indefinitely postponed any continued research and
development efforts related to the CTL 8500 digital baseband server, aimed at
the analog hospitality and cable market, and the CTL 10000, aimed at larger
system deployments. Future research and development efforts are being delayed
indefinitely. The Company has continued limited development on its CTL 7000 and
CTL 9000 digital video servers and software to add functionality and reduce
costs.
10
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The Company has one interactive video customer that represented 100% of
the Company's revenues in the first quarter of 1999 and 0% in the first
quarter of 2000. Export sales represented 37% of revenues for the first
quarter of 1999 and 0% for 2000, respectively.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999
REVENUES
The Company had revenues of $-0- for the quarter ended March 31, 2000, as
compared to $79,798 for the same period in 1999. The primary reason for this
decrease is due to the lack of interactive video sales in the first quarter of
2000. The low level of interactive video sales is a result of the constrained
sales and marketing activities caused by the Company's cash situation. Sales of
interactive video services in the first quarter of 1999 were to Hopkinsville
Electric Service (HES) and to Nortel.
COSTS OF REVENUES
Costs of revenues were $-0- in the first quarter of 2000, as compared to
$19,647 in 1999. The Company had a gross margin of $-0- in the first quarter of
2000, as compared to $60,151 for the same period in 1999. Costs of revenues in
1999 included parts, labor and contract activities related to the T 6000 digital
set top boxes sold to Hopkinsville Electric Service and Nortel.
OPERATING EXPENSES
Operating expenses for the three months ending March 31, 2000 were
$951,778 as compared to $1,061,344 for the same period in 1999, or a decrease of
$109,566. This decrease includes a reduction in payroll, facility and
depreciation expenses of approximately $615,000 in the first quarter of 2000
from the first quarter of 1999. These decreases reflect the Company's continuing
efforts to conserve cash and to minimize operating costs. Employment decreased
from an average of approximately 30 full time staff during the first quarter of
1999 to a current level of approximately 5 during the first quarter of 2000. In
January, 2000, the Company relocated to a significantly less costly facility.
This relocation resulted in the abandonment of certain leasehold improvements
and furniture recorded as part of a capitalized lease which was returned. The
decrease in property and equipment reduced depreciation expense from the first
quarter of 1999 by approximately $168,000. This decrease in expenses from the
first quarter of 1999 was offset by increased amortization and consulting
expenses in the first quarter of 2000. Amortization increased due to the initial
closing of a private offering in which $1,670,714 of outstanding debt was
converted into common stock and warrants (Note 4). Operating expenses
increased due to the engagement of consultants to assist the Company with
investor relations and investment banking. These increases of approximately
$540,000 are all non-cash expenses as payment was made in common stock.
INTEREST EXPENSE
Interest expense in the first quarter of 1999 was $164,616 as compared to
$174,042 in the first quarter of 2000. Of these amounts, $140,906 and $140,047
in 1999 and
11
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2000, respectively, are non-cash expenses related to the convertible features of
certain debentures issued in the first quarters of 1999 and 2000.
NET LOSS
As a result of the above factors, net loss for the quarter ended March 31,
2000, was $1,086,418 as compared to $1,105,365 for the same period in 1999.
LIQUIDITY AND CAPITAL RESOURCES
The primary source of financing for the Company since its inception has
been through the issuance of common and preferred stock and debt and related
accrued interest.
The Company had cash balances on hand as of March 2000 of approximately
$256,273. The Company's cash position continues to be uncertain. In efforts to
control cash outflow, the Company's officers had been deferring portions of
their salaries since August of 1998.
The Company raised $600,000 between January 1999 and March 1999 and
$314,980 between October 1999 and December 1999 in private placements of
interest bearing convertible debentures. In addition to the private placements
of convertible debentures issued in 1999, in September 1999, the Company entered
into a $5,000,000 Line of Credit Agreement. Advances against this Line of Credit
will be in the form of 4% Convertible Debentures and become effective with the
filing of the registration statement underlying the Convertible Debentures.
During April, 2000 the registration became effective and the Company drew
$315,000 against this Line of Credit Agreement. The Company may draw up to a
maximum of $500,000 per calendar month through September 30, 2000, subject to
conditions relating to the trading volume of the Company's stock.
In the first quarter of 2000, the Company received gross proceeds from a
private placement of convertible debt totaling $629,980 and $75,000 from the
exercise of 1999 common stock warrants. On March 31, 2000 the Company
converted $1,670,714 of outstanding debt into common stock and warrants (Note 4)
upon the initial closing of a private offering. Of such debt, $596,996 was
held by the Company's officers and directors and $348,317 was held by other
current and former employees. Investors in the private offering received
shares of the Company's common stock and warrants to purchase additional
common shares. The Company is looking at several other options in terms of
improving its cash situation. The Company is continuing to seek to arrange
financing, including possible strategic investment or opportunities to sell
some or all of the Company's assets and business, while continuing to pursue
sales opportunities. The Company has granted a security interest in its
property to its former landlord and has granted a security interest in its
personal property to one of its legal counsel. Such security interests may
hinder the Company's efforts to obtain financing. There can be no assurance
that the Company will be able to obtain any such required additional funds
from any source on a timely basis, on favorable terms, or at all. The lack of
sales or a significant financial commitment raises substantial doubt about
the Company's ability to continue as a going concern or to resume a
full-scale level of operations.
Since its inception in January 1993 and through March 31, 2000, the
Company has an accumulated deficit of $27,922,516. The Company expects to incur
operating losses for the indefinite future. The Company is also continuing to
pursue its sales efforts and endeavoring to offer attractive pricing to close
sales in a timely manner. Although the Company has received new interactive
service orders from Hopkinsville Electric Service and Optelecom after January 1,
1999, the Company has not received any material new orders for interactive video
projects since June 1997, other than an order in September 1998 for $96,000.
There can be no assurance, however, as to the receipt or timing of revenues from
operations, including revenues from products currently under
12
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development.
As of March 31, 2000 the Company had a negative net working capital of
approximately $654,000. The Company had no significant capital spending or
purchase commitments at March 31, 2000 other than certain facility leases and
inventory component purchase commitments required in the ordinary course of its
business.
The Company has no existing bank lines of credit.
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K
Form 8-K filed January 5, 2000 (Item 5)
Form 8-K filed March 23, 2000 (Item 5)
13
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SIGNATURE
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: May 11, 2000
CELERITY SYSTEMS, INC.
By: /s/ Kenneth D. Van Meter
-------------------------------------
Kenneth D. Van Meter
President and Chief Executive Officer
and Chairman of the Board
(Principal Executive Officer)
(Principal Financial Officer)
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 256
<SECURITIES> 0
<RECEIVABLES> 94
<ALLOWANCES> 0
<INVENTORY> 919
<CURRENT-ASSETS> 1,631
<PP&E> 224
<DEPRECIATION> 130
<TOTAL-ASSETS> 1,965
<CURRENT-LIABILITIES> 2,285
<BONDS> 0
0
0
<COMMON> 9
<OTHER-SE> (1,763)
<TOTAL-LIABILITY-AND-EQUITY> 1,965
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 952
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 174
<INCOME-PRETAX> (1,124)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,124)
<DISCONTINUED> 38
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,086)
<EPS-BASIC> (0.15)
<EPS-DILUTED> (0.15)
</TABLE>
