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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 March 31, 1997
--------------
or
[ ] TRANSITION REPORT PURSUANT SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________________ to __________________
Commission file number: 001-12189
IMAGE GUIDED TECHNOLOGIES, INC.
(Exact name of small business issuer as
specified in its charter)
COLORADO 84-1139082
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
5710-B FLATIRON PARKWAY, BOULDER, CO 80301
(Address of principal executive offices) (Zip Code)
(303) 447-0248
(Registrant's telephone number including area code)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 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 / /
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 3,106,024 shares of common
stock, no par value, were outstanding on April 25, 1997.
Transitional Small Business Disclosure Format (check one); Yes / / No /X/
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Table of Contents
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Part Item Page
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I FINANCIAL INFORMATION
1. Financial Statements
Balance Sheet -- March 31, 1997 1
Statements of Operations -- Three Months Ended March 31, 1997 and 1996 2
Statements of Cash Flows -- Three Months Ended March 31, 1997 and 1996 3
Notes to Financial Statements 4
2. Management's Discussion and Analysis or Plan of Operation
Financial Condition and Results of Operations 4
Liquidity and Capital Resources 5
Forward-Looking Statements 5
Other Matters 8
II OTHER INFORMATION
1. Legal Proceedings 8
2. Changes in Securities 8
3. Defaults Upon Senior Securities 8
4. Submission of Matters to a Vote of Security Holders 8
5. Other Information 8
6. Exhibits and Reports on Form 8-K 8
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PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
IMAGE GUIDED TECHNOLOGIES, INC.
BALANCE SHEET
MARCH 31, 1997
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 4,719,000
Accounts receivable, net of allowance for doubtful
accounts of $61,000 at March 31, 1997 824,000
Inventories, net 436,000
Other current assets 121,000
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Total current assets 6,100,000
Property and equipment, net of accumulated depreciation of
$178,000 at March 31, 1997 299,000
Other assets 16,000
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Total assets $ 6,415,000
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-----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 224,000
Accrued liabilities 224,000
Current portion of capital lease obligation 32,000
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Total current liabilities 480,000
Capital lease obligation 88,000
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Total liabilities 568,000
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Commitments and contingencies
Shareholders' equity
Common Stock, no par value; 10,000,000 shares authorized;
3,106,024 shares issued and outstanding at March 31, 1997 8,798,000
Accumulated deficit (2,951,000)
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Total shareholders' equity 5,847,000
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Total liabilities and shareholders' equity $ 6,415,000
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The accompanying notes are an integral part of these financial statements.
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IMAGE GUIDED TECHNOLOGIES, INC.
STATEMENT OF OPERATIONS
(Unaudited)
Three Months Ended March 31,
----------------------------
1997 1996
---------- --------
Revenue $1,172,000 $736,000
Cost of goods sold 554,000 279,000
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Gross profit 618,000 457,000
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Operating expenses:
Research and development 191,000 153,000
Selling and marketing 161,000 116,000
General and administrative 255,000 119,000
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Total operating expenses 607,000 388,000
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Operating income 11,000 69,000
Other income (expense):
Interest and other expense (4,000) (24,000)
Interest and other income 68,000 2,000
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Net income $ 75,000 $ 47,000
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---------- --------
Earnings per share $ 0.02
Weighted average common shares
outstanding 3,609,054
Pro forma earnings per share $ 0.02
Pro forma weighted average common shares
outstanding 1,973,207
The accompanying notes are an integral part of these financial statements.
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IMAGE GUIDED TECHNOLOGIES, INC.
STATEMENT OF CASH FLOWS
(Unaudited)
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Three Months Ended March 31,
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1997 1996
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OPERATING ACTIVITIES:
Net income $ 75,000 $ 47,000
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation 33,000 16,000
Provision for doubtful accounts 4,000 10,000
Allowance for inventory obsolescence 19,000 7,000
Changes in operating assets and liabilities:
Accounts receivable (305,000) 158,000
Inventories (38,000) (197,000)
Other current assets (16,000) (25,000)
Other assets --- (12,000)
Accounts payable (170,000) 29,000
Accrued liabilities (67,000) (19,000)
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Net cash provided by (used in) operating activities (465,000) 14,000
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INVESTING ACTIVITIES:
Additions to property and equipment (51,000) (41,000)
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Net cash used in investing activities (51,000) (41,000)
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FINANCING ACTIVITIES:
Initial public offering expenses (1,000) ---
Principal payments on capital leases (4,000) ---
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Net cash used in financing activities (5,000) ---
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Net decrease in cash and cash equivalents (521,000) (27,000)
Cash and cash equivalents at beginning of period 5,240,000 32,000
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Cash and cash equivalents at end of period $4,719,000 $ 5,000
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SUPPLEMENTAL CASH FLOW DISCLOSURES
Interest paid $ 3,000 $ 2,000
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES
Equipment acquired under capital lease --- $ 126,000
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The accompanying notes are an integral part of these financial statements.
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Image Guided Technologies, Inc.
Notes to Financial Statements
(Unaudited)
1. Basis of Presentation
The accompanying financial statements of Image Guided Technologies, Inc.
(the "Company") are unaudited. However, in the opinion of management, such
statements reflect all adjustments, consisting of only normal recurring
adjustments, necessary for a fair presentation. Interim results of
operations are not necessarily indicative of results for the full year.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion of the results of operations and financial
condition should be read in conjunction with the financial statements and
notes thereto.
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
Revenue increased by $436,000, or approximately 59%, to $1,172,000 for
the three months ended March 31, 1997, as compared to $736,000 for the three
months ended March 31, 1996. This increase was primarily due to greater
demand for the Company's FlashPoint-Registered Trademark- 5000 and Pixsys-TM-
5000 products.
Cost of goods sold increased by $275,000, or approximately 99%, to
$554,000 for the three months ended March 31, 1997, compared to $279,000 for
the three months ended March 31, 1996. Cost of goods sold as a percentage of
revenue increased to 47% for the three months ended March 31, 1997, as
compared to 38% for the three months ended March 31, 1996. This increase in
cost of goods sold was attributable to increased sales volume and the
increase in cost of goods sold as a percentage of revenue was attributable to
increased costs associated with improvements in the reliability and
durability of certain components, as well as changes in the mix of products
sold.
Gross profit increased by $161,000, or approximately 35%, to $618,000
for the three months ended March 31, 1997, as compared to $457,000 for the
three months ended March 31, 1996. This increase was primarily a result of
sales into a new market segment, motion tracking.
Research and development expenses increased by $38,000, or approximately
25%, to $191,000 for the three months ended March 31, 1997, compared to
$153,000 for the three months ended March 31, 1996. This increase was
principally due to the addition of engineering personnel and related expenses
and to increased testing of product to meet regulatory requirements.
Selling and marketing expenses increased by $45,000, or approximately
39%, to $161,000 for the three months ended March 31, 1997, as compared to
$116,000 for the three months ended March 31, 1996. This increase was
primarily attributable to the addition of personnel and related expenses, as
well as expanded marketing activities to facilitate increases in revenue.
General and administrative expenses increased by $136,000, or
approximately 114%, to $255,000 for the three months ended March 31, 1997, as
compared to $119,000 for the three months ended March 31, 1996. This
increase was primarily attributable to the additional expenses necessary for
a public company, increased salaries, and to additional personnel and
associated costs.
Operating income decreased by $58,000 to $11,000 for the three months
ended March 31, 1997 compared to operating income of $69,000 for the three
months ended March 31, 1996. This decrease was primarily attributable to
increased costs associated with improvements in the reliability and
durability of certain components used in manufacturing, the mix of products
sold, the addition of personnel and associated costs, and the additional
expenses necessary for a public company.
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Net other income (expense) increased by $86,000 to $64,000 for the three
months ended March 31, 1997 from $(22,000) for the three months ended March
31, 1996. This change was primarily due to interest income on net proceeds
from the initial public offering (the "IPO").
As a result of the foregoing, net income increased to $75,000 for the
three months ended March 31, 1997, compared to net income of $47,000 for the
three months ended March 31, 1996.
LIQUIDITY AND CAPITAL RESOURCES
During the three months ended March 31, 1997, $465,000 in cash was used
in operating activities, principally by increases in accounts receivable and
inventories, decreases in accounts payable and accrued liabilities, and
partially offset by increased net income. The Company used $51,000 in cash
for investing activities during the three month period ended March 31, 1997
to purchase property and equipment. Also during the three month period ended
March 31, 1997, $5,000 in cash was used in financing activities, principally
for payments on a capital lease.
As of March 31, 1997, the Company had working capital of $5,620,000,
compared to working capital of $5,571,000 at December 31, 1996. The
improvement in working capital was primarily the result of increases in
accounts receivable and decreases in accounts payable and accrued liabilities.
On October 24, 1996, Image Guided Technologies, Inc. closed on its IPO
of 1,437,500 shares of common stock, including a 187,500 share over-allotment
purchase by the IPO underwriter at the IPO price of $5.00 per share. The
offering resulted in gross proceeds of $7,187,500. Aggregate offering cost
was approximately $1,500,000. The shares were offered pursuant to a
Registration Statement on Form SB-2 filed with the Securities and Exchange
Commission. A portion of the proceeds was used to retire approximately
$889,000 of 11% secured notes and related interest.
FORWARD-LOOKING STATEMENTS
The Company may, in discussions of its future plans, objectives and
expected performance in periodic reports filed by the Company with the
Securities and Exchange Commission (or documents incorporated by reference
therein) and in written and oral presentations made by the Company, include
projections or other forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 or Section 21E of the Securities Exchange
Act of 1934, as amended. Such projections and forward-looking statements are
based on assumptions which the Company believes are reasonable, but are by
their nature inherently uncertain. In all cases, there can be no assurance
that such assumptions will prove correct or that projected events will occur,
and actual results could differ materially from those projected. Some of the
important factors that could cause actual results to differ from any such
projections or other forward-looking statements follow.
LIMITED HISTORY OF PROFITABILITY AND POTENTIAL FLUCTUATIONS IN OPERATING
RESULTS. Prior to its fiscal year ending December 31, 1996, the Company had
experienced significant operating losses. Its accumulated deficit was
$2,951,000 at March 31, 1997 and $3,026,000 at December 31, 1996. While the
Company was profitable for the quarter ended March 31, 1997, there can be no
assurance that the Company will consistently generate sufficient revenues to
attain profitability on an annual basis. In addition, because the Company
generally ships its products on the basis of purchase orders, operating
results in any quarter are highly dependent on orders booked and shipped in
that quarter and, accordingly, may fluctuate materially from quarter to
quarter. The Company's operating expense levels are based on the Company's
internal forecasts of future demand and not on firm customer orders. Failure
by the Company to achieve these internal forecasts could result in expense
levels which are inconsistent with actual revenues. Moreover, the Company's
quarterly results may also be affected by fluctuating demand for the
Company's products, declines in the average selling prices for its products,
and by increases in the costs of the components and subassemblies acquired by
the Company from vendors.
DEPENDENCE ON A FEW CUSTOMERS. The Company currently has six
significant customers: GE Medical Systems, Carl Zeiss, Elekta IGS, Radionics
Software Applications, Brewco and Spinex Medical Technologies. None of these
customers has entered into any long term minimum purchase agreements with the
Company. The loss of, or substantial diminution of purchases from the Company
by, any of these customers could have a material adverse effect on the
Company.
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THE COMPANY'S DEPENDENCE ON A SINGLE TYPE OF PRODUCT. All the Company's
revenues are derived from sales of its optical localizers. Although the
Company is currently seeking to expand the markets for its localizers, there
can be no assurance that it will be successful.
THE UNCERTAINTY OF MARKET ACCEPTANCE FOR THE COMPANY'S PRODUCT. The
market for optical localizers has only recently begun to develop. The market
for optical localizers may continue to develop or may develop more slowly
than the Company anticipates or cease altogether. Demand for optical
localizers could be affected by numerous factors outside the Company's
control, including, among others, market acceptance by medical and industrial
customers, changes in governmental regulation and the introduction of new or
superior competing technologies.
TECHNOLOGICAL CHANGE IN THE MEDICAL INDUSTRY AND IN THE COMPANY'S
PRODUCT. There can be no assurance that the Company's competitors will not
succeed in developing or marketing products or technologies that are more
effective and/or less costly and which render the Company's products obsolete
or non-competitive. In addition, new technologies and procedures could be
developed for medical and other industries that replace or reduce the value
of the Company's products. The Company's success will depend in part on its
ability to respond quickly to technological changes through the development
and improvement of its products. The Company believes that a substantial
amount of capital will be required to be allocated to such activities in the
future.
THE RISK OF PATENT INFRINGEMENT CLAIMS BROUGHT AGAINST THE COMPANY'S
CUSTOMERS. There are a number of patents that utilize a localizer as part of
their claimed inventions, several of which relate to the medical industry.
One of the patents relating to the medical industry is the patent granted to
St. Louis University (the "SLU Patent"), and subsequently licensed to
Surgical Navigation Technologies, Inc. In general, the SLU Patent covers a
particular technique for determining the position of a surgical probe within
a patient's body on an historical image of that body. The Company is not in
a position to evaluate whether its customers may be infringing the SLU Patent
or any of the other patents. If any infringement claim is brought or
threatened against any of the Company's customers, it could have a material
adverse effect on orders of the Company's products from these customers.
THE COMPANY'S ABILITY TO PROTECT ITS INTELLECTUAL PROPERTY RIGHTS. The
Company does not have any patents covering its FlashPoint or Pixsys optical
localizers. The Company primarily relies on a combination of trade secret
and copyright laws, together with nondisclosure agreements to protect its
know-how and proprietary rights. There can be no assurance that such
measures will provide adequate protection for the Company's intellectual
property rights, that disputes with respect to the ownership of its
intellectual property rights will not arise, that the Company's trade secrets
or proprietary technology will not otherwise become known or be independently
developed by competitors or that the Company can otherwise meaningfully
protect its intellectual property rights. Furthermore, there can be no
assurance that others will not develop similar products or software,
duplicate the Company's products or software or that third parties will not
assert intellectual property infringement claims against the Company. The
Company believes that the manufacture and sale of its FlashPoint localizer
does not infringe the SLU Patent, since a localizer is only a component part
in the system patented by SLU and since the Company's FlashPoint localizer
has substantial non-infringing uses. Moreover, there can be no assurance
that any of the Company's pending or future patent applications will be
issued, that any patent owned by, or issued to, the Company will not be
invalidated, circumvented or challenged (including, without limitation, on
the basis of the SLU Patent or other patents), or that the rights granted
thereunder will provide meaningful competitive advantages to the Company.
Litigation may be necessary to protect the Company's intellectual
property rights and trade secrets, to determine the validity and scope of the
proprietary rights of others or to defend against claims of infringement or
invalidity (including, without limitation, claims brought by parties whose
technology, such as those which may be the basis of the SLU Patent, utilizes
a localizer). Such litigation could result in substantial costs and
diversion of resources, regardless of the outcome of the litigation. If any
claims are asserted against the Company, the Company may be required to
obtain a license under a third party's intellectual property rights.
However, such a license may not be available on reasonable terms or at all.
COMPETITION BY EXISTING COMPETITORS AND POTENTIAL NEW ENTRANTS INTO THE
MARKETPLACE. The Company's primary competitor in the medical market
currently is Northern Digital Inc. In addition, companies with substantially
greater financial, technical, marketing, manufacturing and human resources,
as well as name recognition, than the Company may also enter the market.
Competitors may be able to respond more quickly to new or emerging
technologies and changes in customer requirements and to devote
6
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substantially greater resources to the development, marketing and sale of
their products than the Company. The Company's customers may develop their
own localizers to ensure control over their localizer technology, to be able
to differentiate their product or for other reasons. Furthermore, such
competitors may develop technology other than that based on infrared optics
that is more effective or economical than the technology of the Company in
localizing a point in space.
REGULATION BY THE FDA. Noncompliance with applicable requirements of
the US Food and Drug Administration (the "FDA") can result in, among other
things, fines, injunctions, civil penalties, recall or seizure of products,
total or partial suspension of production, failure of the government to grant
premarket clearance or premarket approval for medical devices, withdrawal of
marketing approvals and criminal prosecution. The FDA also has the authority
to request repair, replacement or refund of the cost of any medical device.
There can be no assurance that the Company's customers have complied or
will be able to comply with all applicable FDA market clearance requirements,
including those which may arise from the incorporation of the Company's
FlashPoint product into the customer's product. Moreover, there can be no
assurance that the FDA will not require, or change its interpretations or
regulations so as to require, the Company to obtain 510(k) clearance for its
FlashPoint localizer apart from or in addition to any market clearances
obtained by its medical device customers.
In addition, international sales of medical devices are subject to
foreign regulatory requirements, which vary from country to country.
THE RISK OF PRODUCT LIABILITY CLAIMS. The Company faces an inherent
business risk of exposure to product liability claims in the event that the
use of its products is alleged to have resulted in adverse effects. To date,
no product liability claims have been asserted against the Company. The
Company maintains a product liability and commercial general liability
insurance policy with coverage of $1,000,000 per occurrence and an annual
aggregate maximum coverage of $2,000,000 ($1,000,000 for lawsuits outside the
United States, Canada and Puerto Rico). The Company's product liability and
general liability policy is provided on an occurrence basis and is subject to
annual renewal. There can be no assurance that liability claims will not
exceed the coverage limits of such policy or that such insurance will
continue to be available on commercially reasonable terms or at all. If the
Company does not or cannot maintain sufficient liability insurance, its
ability to market its products could be significantly impaired.
POSSIBLE CHANGES TO GOVERNMENT REGULATIONS GOVERNING HEALTH CARE. The
health care industry is undergoing fundamental changes as a result of
political, economic and regulatory influences. In the United States,
comprehensive programs have been proposed that seek to increase access to
health care for the uninsured, control the escalation of health care
expenditures within the economy and use health care reimbursement policies to
help control the federal deficit. The Company anticipates that Congress and
state legislatures will continue to review and assess alternative health care
delivery systems and methods of payment and public debate of these issues
will likely continue. Due to uncertainties regarding the outcome of reform
initiatives and their enactment and implementation, the Company cannot
predict which, if any, of such reform proposals will be adopted or when they
might be adopted. Other countries are also considering health care reform.
Significant changes in health care systems could have a substantial impact on
the manner in which the Company conducts its business.
THE COMPANY'S DEPENDENCE ON KEY MANAGEMENT AND TECHNICAL PERSONNEL AND ITS
ABILITY TO ATTRACT NEW PERSONNEL. The Company's success depends in significant
part on the continued contribution of certain key management and technical
personnel, including: Paul L. Ray, Chairman of the Board and Chief Executive
Officer; Robert E. Silligman, President and Chief Operating Officer; Waldean
Schulz, Vice President, Technology and Secretary; and Jeffrey J. Hiller, Vice
President, Finance and Chief Financial Officer. The loss of services of any of
these individuals could have a material adverse effect on the Company. The
Company's growth and profitability also depend on its ability to attract and
retain other management and technical personnel.
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OTHER MATTERS
A former significant customer of the Company, Sofamor Danek, has chosen to
utilize a localizer made by a competitor of the Company. In February 1997, the
Company entered into a two-year product sales agreement with Carl Zeiss of
Oberkochen, Germany, one of its current significant customers. Under the terms
of this agreement, Carl Zeiss must purchase a minimum number of units per year
to maintain its present pricing of the FlashPoint 5000 optical localizer. This
agreement does not guarantee any specific number of units to be purchased by
Carl Zeiss.
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number Description of Document
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10.10 Amendment dated March 7, 1997 to the Commercial Industrial
Lease dated January 11, 1996, between the Company and Life
Investors Insurance Company of America.
10.20 Terms and Conditions of Sale Between the Company and Carl
Zeiss dated 2/20/97.***
27.1 Financial Data Schedule.
- ---------------------
***The Company has applied for confidential treatment with respect to portions
of this exhibit.
(b) Form 8-K Reports
The Company filed no reports on Form 8-K during the quarter ended March 31,
1997.
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Signatures
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.
IMAGE GUIDED TECHNOLOGIES, INC.
(Registrant)
By: /s/ Paul L. Ray
May 12, 1997 --------------------------------
Paul L. Ray
Chairman of the Board and
Chief Executive Officer
By: /s/ Jeffrey J. Hiller
May 12, 1997 --------------------------------
Jeffrey J. Hiller
Vice President and Chief Financial Officer
(Principal Accounting Officer)
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FIRST LEASE AMENDMENT
THIS AGREEMENT is made and entered into this 7th day of March, 1997, by and
between Life Investors Insurance Company of America, hereinafter referred to as
"Lessor", by and through AEGON USA Realty Management, Inc., its duly authorized
agent, located at 4333 Edgewood Road, N.E., Cedar Rapids, IA 52499, and Image
Guided Technologies, Inc., a Colorado corporation, hereinafter referred to as
"Lessee", located at 5700 Flatiron Parkway, Suite 5710, Boulder, Colorado,
80301.
WHEREAS, Lessor and Lessee entered into a Lease, dated January 11, 1996,
for Premises known as Suite 5710 located in the Gemini Building, Boulder,
Colorado, which Lease is incorporated herein by reference; and
WHEREAS, the parties have agreed to expand the Premises through the addition
of 6,726 square feet; and
WHEREAS, the parties have also agreed to extend the term of the Lease; and
WHEREAS, Lessor and Lessee desire to set forth in writing the above
agreement as well as any other changes they have agreed upon as to the Lease.
NOW THEREFORE,
WITNESSETH:
That in consideration of the promises and covenants hereinafter contained
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties mutually agree to and hereby amend
the Lease as follows:
1. AS TO PARAGRAPH 2: Exhibits "A" and "B" to the Lease shall be deleted and
Exhibits "A", and "B" attached to this Agreement shall be inserted in lieu
thereof.
2. AS TO PARAGRAPH 2: The Premises, as described in Paragraph 2 of said
Lease, is hereby modified as of May 1, 1997 to include the area highlighted on
Exhibits "A" and "B" attached hereto and made a part hereof. Lessee shall
occupy such additional 6,726 square feet, which space is in addition to Lessee's
existing Premises in Suite 5710 and all Lease rents and charges shall be based
on 18,395 square feet through the end of the Lease term.
3. AS TO PARAGRAPH 3: The term of said Lease is hereby extended through
April 30, 2000.
4. AS TO PARAGRAPH 3.1; RENEWAL OPTION: Provided Lessee is: (i) open and
operating its business in the Premises; and (ii) not in default under the Lease,
Lessee shall have the right and option to renew and extend the term of this
Lease for an additional two (2) year period commencing May 1, 2000 and
continuing through April 30, 2002 upon the following terms and conditions:
(a) Lessee shall provide Lessor with written notice, by certified or
registered mail, of its exercise of such option no later than one hundred twenty
(120) days prior to the expiration of the term of this Lease as extended by this
Agreement.
(b) All terms, covenants, conditions and provisions contained in this
Lease shall continue in full force and effect during the renewal period with the
exception of monthly rental, which shall be as set forth below. Lessee's
obligation to pay all additional Lease rents and charges shall be calculated in
accordance with the terms of the Lease during such extended Lease term. Lessee
agrees to accept the Premises in their "as is" condition, subject to repair,
maintenance and replacement obligations under this Lease.
(c) If Lessee exercises its option to extend the term of this Lease
in the manner and within the time provided for herein, subject to adjustments as
otherwise provided in the Lease, the monthly rental shall be as follows:
Commencing May 1, 2000 and continuing through April 30, 2001, the sum of
$184,269.60 per annum payable monthly, in advance, at the rate of $15,355.80 per
month.
Commencing May 1, 2001 and continuing through April 30, 2002, the sum of
$193,483.08 per annum payable monthly, in advance, at the rate of $16,123.59 per
month.
5. AS TO PARAGRAPH 4: Subject to adjustments as otherwise provided in said
Lease, the monthly rental shall be as follows:
Commencing May 1, 1997 and continuing through April 30, 1998, the sum of
$180,551.04 per annum, payable monthly, in advance, at the rate of $15,045.92
per month.
Commencing May 1, 1998 and continuing through April 30, 1999, the sum of
$188,510.04 per annum, payable monthly, in advance, at the rate of $15,709.17
per month.
Commencing May 1, 1999 and continuing through April 30, 2000, the sum of
$196,866.84 per annum, payable monthly, in advance, at the rate of $16,405.57
per month.
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6. AS TO PARAGRAPH 7.3: Notwithstanding any of the terms and provisions of
Paragraph 7.3 to the contrary, Lessor shall, at Lessor's sole cost and expense,
provide the following improvements to the Premises:
(i) Insulate the walls of the electrical room located adjacent to the
Premises; and
(ii) Replace broken ceiling tiles and repair existing holes in
the walls of the Premises.
7. AS TO PARAGRAPH 7.3: Provided Lessee is not in default under the terms and
provisions of this Lease, Lessee shall, at Lessee's sole cost and expense,
except for a contribution of $55,185.00 which Lessor agrees to make, remodel the
office areas, install additional electrical work, re-carpet and re-paint the
Premises. Prior to commencement of any work in the Premises, Lessee shall
provide Lessor with one (1) full and completed set of plans and specifications,
drawings, a list of contractors and subcontractors and a construction contract
(collectively the "Plan") which shall be approved by Lessor. It shall be the
Lessee's sole responsibility and Lessee hereby represents and warrants that the
Plans and the Premises after completion of the improvements in accordance with
the Plans shall meet or exceed all applicable federal, state, city and county
ordinances, rules, codes and regulations including the Americans with
Disabilities Act. Lessor's $55,185.00 contribution shall be paid upon Lessee's
full compliance with the following:
(a) Receipt by Lessor of an affidavit of the general contractor or
contractors performing work in Lessee's Premises stating that such work has been
fully completed in compliance with the approved working drawings (plans) and
specifications and that all subcontractors, laborers and material suppliers who
supplied labor and/or material for such work (whose names and addresses shall be
recited in the affidavit) have been paid in full, and that all liens therefore
that have been filed have been discharged of record or waived; and
(b) Receipt by Lessor of a complete notarized release and waiver of
lien with respect to the Premises, executed by each of Lessee's general
contractor, subcontractors, or material suppliers supplying labor and/or
materials for Lessee's work or, in lieu thereof, an attorney's certification
that the lien period for the Lessee's work performed by Lessee in the Premises
has expired and no liens in connection therewith have been filed; and
(c) Receipt by Lessor of Lessee's written acceptance of the Premises
stating that Lessor has completed all of the work required to be performed by
Lessor pursuant to the terms of the approved plans and specifications and that
Lessee reserves no claims, offsets or back-charges or stating those claimed; and
(d) Receipt by Lessor of a completed indemnification by Lessee,
indemnifying Lessor as to any and all claims by contractors, subcontractors or
suppliers of material which may arise as a result of the work performed in the
Premises; and
(e) Receipt by Lessor of a Certificate of Occupancy issued by the
relevant governmental authority; and
(f) Receipt by Lessor of an executed tenant estoppel certificate
confirming the commencement and termination dates of the Lease term, certifying
that this Lease is in full force and effect, that all conditions under the Lease
to be performed have been satisfied and verifying the amount of the Security
Deposit, if any.
8. AS TO PARAGRAPH 8.1: Paragraph 8.1 is deleted in its entirety and the
following language inserted therefor:
"Notwithstanding anything to the contrary set forth in this Lease,
Lessee covenants and agrees that so long as this Lease remains in effect and
during such other times as Lessee occupies the Premises or any part thereof,
Lessee at its sole cost and expense, shall obtain, maintain and keep in full
force and effect as to the Premises:
(a) Commercial General Liability Insurance including Blanket
Contractual, Personal Injury, Fire Legal Liability, Broad Form Liability, Owned,
Non-Owned and Hired Automobile coverages naming Lessee as insured, and Lessor,
any mortgagee of the Building, any Lessee under the Lease of the property on
which the Building is located, and AEGON USA Realty Management, Inc. as Lessor's
agent, as additional insureds, with minimum limits of $1,000,000 combined single
limit for property damage and bodily injury per occurrence for any and all
claims for injury or damage to persons or property or for the loss of life or
damage to persons or property of for the loss of life or of property occurring
upon, in or about the Premises and the public portions of the Building arising
out of or in connection with any act or omission of Lessee, its employees,
agents, contractors, customers and invitees.
(b) All Risk Insurance including without limitation sprinkler
leakage and flood and earthquake. if flood and earthquake exposure exists,
acts of vandalism and malicious mischief on a 100% replacement cost basis
covering all contents, merchandise, inventory, equipment, floor coverings,
fixtures and improvements owned or installed by Lessee. Lessee shall apply
all insurance proceeds attributable to any of the foregoing items to the
repair and restoration thereof. In addition, Lessee shall obtain and keep in
full force and effect during the term of this lease Business Interruption
Insurance with All Risk Perils and such other insurance in such amounts as
Lessor shall reasonably require.
(c) Worker's Compensation Insurance as required by law and Employers'
Liability Coverage for a minimum of $100,000 per occurrence.
<PAGE>
(d) The limits of insurance coverages shall not limit the liability
of Lessee. If Lessee fails to procure or maintain insurance coverages as
provided above, Lessor may, but shall not be required to, procure and maintain
coverage at the expense of Lessee."
9. All other Lease charges, as set forth in the Lease, shall be computed and
based in accordance with the provisions of said Lease.
10. Except as amended above, all terms, provisions and covenants contained in
said Lease are in all respects hereby ratified and confirmed in their entirety.
IN WITNESS WHEREOF, the parties hereto have executed this First Lease Amendment
the day and year first above written.
WITNESS: LESSOR: LIFE INVESTORS INSURANCE COMPANY
of AMERICA, by AEGON USA Realty Management, Inc.
its duly authorized agent
/s/ illegible signature /s/ Bill Sindlinger
- ----------------------- -----------------------------------------------
Bill Sindlinger, Vice President
WITNESS: LESSEE: IMAGE GUIDED
TECHNOLOGIES, INC.,
a Colorado corporation
/s/ Robert E. Silligman /s/ Jeffrey J. Hiller V.P.
- ----------------------- -----------------------------------------------
Jeffrey J. Hiller, Vice President
<PAGE>
[Graphical representation of the first floor plan of the premises indicating
space leased by Image Guided Technologies, Inc.]
EXHIBIT A
<PAGE>
[Graphical representation of the first floor plan of the premises]
EXHIBIT B
<PAGE>
TERMS AND CONDITIONS OF SALE
BETWEEN IMAGE GUIDED TECHNOLOGIES, INC. AND CARL ZEISS
Carl Zeiss, D-73446, Oberkochen, Germany ("CZO"), and Image Guided
Technologies, Inc., 5710 B Flatiron Parkway, Boulder, CO 80301, USA ("IGT"),
agree to the following terms and conditions:
1. TERM.
The term of this agreement shall be from February 20, 1997 through February 19,
1999. This Agreement may be terminated at any time by either party by giving at
least 180 days prior written notice of termination to the other.
2. PRICES; DISCOUNT; TAXES; PAYMENT.
The prices CZO shall pay to IGT for systems and other products provided by IGT
are IGT's list prices (current list prices are listed on Schedule D) at the time
CZO places an order, less any applicable discount as set forth on the attached
Schedule C. Such discount structure is based upon IGT's receipt of a blanket
purchase order from CZO for IGT systems to be shipped over the twelve months
following the date of this agreement The discounts from list price for IGT
products other than systems shall reflect the discount indicated on Schedule C
for the number of systems ordered year to date. Services, such as maintenance
agreements, provided by IGT are not discounted.
If CZO requests delay in delivery or cancellation of any units (other than by
reason of the commencement of a patent infringement action as discussed below)
and IGT agrees to such request, the price of delivered units is subject to
recalculation in accordance with Schedule C. It is understood that CZO shall
have no obligation to accept delivery of any undelivered units, or to refund any
"unearned" discount, in the event of the commencement of any action claiming
infringement of any third-party patent as a result of the marketing or sale of
IGT's products, and/or their use, by CZO or any of its customers, whether such
action alleges infringement by reason of the sale or use of IGT's manufactured
products alone or in conjunction with other equipment manufactured by CZO. It
is further understood that, in the event of delivery arrears by IGT on any
purchase order accepted by IGT in excess of thirty (30) days, CZO shall have the
option to immediately cancel this Agreement. CZO and IGT may mutually amend the
terms of this paragraph 2. in writing at any time.
CZO shall pay all sales, use, value added and similar taxes or duties assessed
by any governmental entity upon IGT products shipped by IGT or with respect to
payments made hereunder.
Shipment shall be F.O.B. IGT's plant in Boulder, Colorado and title and risk of
loss or damage shall pass to CZO at such F.O.B. point.
CZO agrees to provide IGT with monthly non-binding 90 day rolling forecasts of
items expected to be purchased during that 90 day period.
<PAGE>
3. SOFTWARE LICENSE. The software included with an IGT localizer system is
licensed to CZO on the terms and conditions set forth on Schedule A, to which
CZO hereby agrees.
4. WARRANTY. IGT's warranty is set forth on Schedule B. THIS WARRANTY IS
IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING THOSE OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
5. PATENT AND COPYRIGHT INDEMNIFICATION.
(a) IGT shall defend any suit or proceeding brought against CZO to the
extent it is based on a claim that the IGT manufactured product directly
infringes a patent or copyright issued by the United States; provided IGT is
notified promptly in writing and given authority, information and assistance (at
IGT's expense) for the defense of the suit or proceeding. IGT shall pay all
damages and costs awarded against CZO in such suit or proceeding or settlement,
if IGT has been given full control of the defense and the negotiations for
settlement, if any, of the suit or proceeding (any settlement shall require the
consent of CZO which shall not be unreasonably withheld). If any IGT
manufactured product is held in such suit or proceeding directly to infringe a
patent or copyright of the United States, or is, in IGT's opinion, likely to be
held directly to infringe such a patent or copyright, IGT may, at its option and
expense, in the following order (a) procure for CZO the right to continue using
said product, (b) replace the product with non-infringing product, (c) modify
the product so that it becomes a non-infringing product, or (d) require return
of the product and refund the purchase price for the product (less a deduction
for depreciation equal to one and two-thirds percent (1.67%) of the purchase
price for each full month since the date of shipment of the product). IGT shall
have no liability to CZO if the infringement or claim thereof is based upon (a)
the use of the product in combination with other products, devices or software
which are not furnished to CZO by IGT, (b) modification of the product by other
than IGT or (c) use of the product as part of any infringing process, apparatus
or product. THIS SECTION STATES THE ENTIRE LIABILITY OF IGT FOR PATENT OR
COPYRIGHT INFRINGEMENT.
(b) CZO shall indemnify IGT and defend any suit or proceeding brought
against IGT to the extent it is based on a claim that the making or selling of
CZO's product infringes a patent or copyright; provided that CZO is notified
promptly in writing and given authority, information and assistance (at CZO's
expense) for the defense of the suit or proceeding. CZO shall pay all damages
and costs awarded against IGT in such suit or proceeding or settlement, if CZO
has been given full control of the defense and of the negotiations for the
settlement, if any, of the suit or proceeding (any settlement shall require the
consent of IGT which shall not be unreasonably withheld).
6. MISCELLANEOUS. This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado, USA.
CARL ZEISS IMAGE GUIDED TECHNOLOGIES, INC.
By: /s/ By: /s/ Robert E. Silligman
--------------------------- ------------------------------
President/ COO
-2-
<PAGE>
EXHIBIT 10.20
The brackets ("[ ]") which appear in various places in the following exhibit
indicate areas where confidential information has been redacted by the Company.
Such redacted information is the subject of a request for confidential treatment
and is therefore being filed separately with the Commission.
<PAGE>
SCHEDULE A
SOFTWARE LICENSE
FROM
IMAGE GUIDED TECHNOLOGIES, INC.
TO
CARL ZEISS
The software ("Software") included with each localizer system ("IGT
System") being sold by Image Guided Technologies, Inc. ("IGT") to Carl Zeiss
("CZO") is licensed to CZO upon the following terms and conditions:
1. LICENSE. IGT hereby grants to CZO a non-exclusive, personal
and non-transferable license to use the Software solely for CZO's own use and
solely with the IGT System. CZO may not sell, sublicense, transfer or
otherwise make available to others all or any part of the Software, except
for the right to grant sublicenses to its customers as specifically provided
herein. CZO shall not reverse engineer, reverse compile or reverse assemble
the Software in whole or in part.
2. OWNERSHIP. IGT owns all rights, title and interest in and to
the Software, including, without limitation, patents, copyrights, trade
secrets, and know-how. Except for the purpose of incorporating the Software
into CZO's own product, CZO shall not modify or revise the Software in whole
or in part.
3. COPIES. CZO may make copies of the Software for archival
purposes only. All copies of the Software (including permissible
modifications and revisions hereunder) and IGT's documentation are the sole
property of IGT and shall contain IGT's copyright notices. CZO shall not
remove or modify any copyright notices encoded on the Software or displayed
on any documentation.
4. SUBLICENSE TO CUSTOMERS. Before delivery to any of its
customers of any product which includes the IGT System (or the software
included therein), CZO shall take adequate steps to ensure that the customer
only receives a customary sublicense which shall include provisions that
provide (i) the Software remains the property of IGT, (ii) the customer only
receives a personal, nonexclusive, nontransferable sublicense to use the
Software for customer's own use with the IGT System, (iii) the Software may
not be copied, modified, reverse engineered or dissembled in whole or in part
by customer, (iv) the customer may not sell, sublicense, transfer or
otherwise make available the Software to any third party, and (v) the
sublicense shall expire when the customer discontinues use of the Software or
the IGT System and upon expiration all Software media and materials shall be
returned to CZO by customer. Any such sublicense shall survive expiration of
the license granted to CZO hereby.
5. CUSTOMER SERVICE AND SUPPORT; UPGRADES. CZO shall be solely
responsible for all installation, use, support and support questions of its
customers. IGT shall provide upgrades and enhancements to the Software to CZO
at no cost during the warranty period; upgrades and enhancements to the Software
after the warranty period shall be provided to
<PAGE>
CZO at IGT's standard discounted license fee. The term "Software" as used in
this license includes all upgrades and enhancements provided hereunder.
6. CONFIDENTIALITY. The Software contains trade secrets, know-how
and other proprietary information belonging to IGT. CZO shall keep all such
information confidential, shall not publish or disclose such information to
others, and shall handle, maintain, and protect all such information with at
least the same degree of care used by CZO to protect and safeguard its own
trade secrets, know-how and proprietary information.
7. COPYRIGHT. The Software and its related documentation are
copyrighted. IGT retains the sole and exclusive right, but not the
obligation, to utilize legal and judicial proceedings to protect and enforce
its copyright, trade secret and other proprietary rights. CZO shall
cooperate with IGT in any proceeding brought by IGT against any third party
in connection with the foregoing (including, without limitation, on IGT's
request assigning any rights under its sublicense with its customer).
8. EXPIRATION. The license herein granted shall expire in the
event that CZO fails to comply with any term or condition of this license or
in the event that CZO permanently discontinues the sale of the IGT System on
which the Software is licensed for use, whereupon CZO shall, promptly upon
IGT's request, return to IGT all Software and related documentation in its
possession (except for one archive copy), provided, however, that this
provision shall not affect the continuing validity of any sublicense granted
with respect to the Software by CZO to any of its customers pursuant to
paragraph 4 above.
9. CZO COMPLIANCE. This license is subject to all laws,
regulations, orders and other restrictions on the export from the United
States of computer software which may be imposed from time to time by the
government of the United States. CZO shall not export or transfer the
Software to any country for which the United States government or any agency
thereof requires an export license or other governmental approval without
first obtaining (i) the consent of IGT, and (ii) such license or approval.
10. WARRANTY. IGT warrants the Software as set forth on the
warranty enclosed herewith. THIS WARRANTY IS IN LIEU OF ALL OTHER
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING THOSE OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE.
11. ESCROW. IGT agrees to enter into a customary escrow
arrangement for its source code and source code documentation. The escrow
agent shall be chosen by IGT and the escrow agent fee split between IGT and
CZO.
-2-
<PAGE>
12. MISCELLANEOUS. The validity and performance of this license
shall be governed by Colorado law, except as to copyright matters which are
governed by United States laws and international treaties. This license is
deemed entered into in Boulder, Colorado. CZO may not assign this license or
any of its rights or obligations hereunder. This license shall inure to the
benefit, and be binding upon, IGT and its successors and assigns.
Should you have any questions concerning this license, please contact in
writing: Image Guided Technologies, Inc., Customer Sales and Service, 5710-B
Flatiron Parkway, Boulder, CO 80301.
-3-
<PAGE>
SCHEDULE B
ZEISS WARRANTY
For purchases made under the terms of the Agreement between Carl Zeiss and
Image Guided Technologies, Inc. Dated February 20, 1997
1. IGT'S PRODUCT WARRANTY. Image Guided Technologies, Inc.
("IGT") warrants that the IGT product will be free from defects in materials,
parts and workmanship for a period of two (2) years from date of delivery to
Carl Zeiss ("CZO"), and conform to IGT's specifications applicable to such
IGT product (at the time of CZO's purchase thereof). IGT DOES NOT WARRANT
THE ACCURACY OF ANY SYSTEM UNLESS LIGHT EMMITING DIODES ("LEDS") INSPECTED
AND APPROVED BY IGT ARE USED IN ALL COMPONENTS REQUIRING LEDS IN THE SYSTEM.
NOTWITHSTANDING THE FOREGOING, IGT MAKES NO WARRANTIES AS TO ACCESSORIES
MANUFACTURED BY THIRD PARTIES OR DISPOSABLE OR STERILIZABLE ITEMS, SUCH ITEMS
BEING SOLD "AS IS." THIS WARRANTY IS IN LIEU OF ALL OTHER WARRANTIES, EXPRESS
OR IMPLIED, INCLUDING THOSE OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE.
2. WARRANTY REPAIR; MISUSE. IGT's sole obligation under the
foregoing warranty shall be to repair or replace, at IGT's option, at IGT's
plant, without charge, defective IGT products returned for inspection within
the applicable warranty period, and which have been determined by IGT to be
defective. Transportation charges for shipment from IGT's plant after the
repair or replacement of the defective IGT product shall be paid for by CZO.
IGT shall not be responsible for any modifications or changes to the IGT
product (and CZO shall pay IGT for any services necessitated by any such
modifications or changes) nor shall IGT be liable for any defects arising out
of misuse, neglect, failure of electric power, cause other than ordinary use
or other causes beyond IGT's control.
3. LIMITATION OF IGT LIABILITY. IN NO EVENT SHALL IGT'S LIABILITY
INCLUDE ANY SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES OR CLAIMS
FOR LOSS OF BUSINESS OR PROFITS, EVEN IF IGT SHALL HAVE BEEN ADVISED OF THE
POSSIBILITY OF SUCH POTENTIAL LOSS OR DAMAGE. NOTWITHSTANDING ANY FAILURE OF
THE CENTRAL PURPOSE OF ANY LIMITED REMEDY, IGT'S LIABILITY FOR BREACH OF
WARRANTY SHALL NOT EXCEED THE PURCHASE PRICE FOR SUCH PRODUCT.
4. NO WARRANTIES BY IGT TO END USERS. IGT is not making any
warranties of the IGT product to end users. CZO may, in its discretion,
extend warranties to end users of CZO's product. However, it is understood
and agreed that IGT is not a party to, and does not bear any responsibility
or liability for, such warranties by CZO to end users.
5. SERVICE OF WARRANTIES TO END USERS. CZO has the sole
responsibility and obligation to provide service and support on CZO's product
to end users under warranties or otherwise.
<PAGE>
SCHEDULE C
ATTACHMENT TO SALES AGREEMENT BETWEEN
CARL ZEISS AND IMAGE GUIDED TECHNOLOGIES
FEBRUARY 20 1997
DISCOUNT SCHEDULE BASED ON PURCHASE OF [ ] SYSTEMS PER TWELVE MONTH PERIOD:
# OF UNITS DISCOUNT DISCOUNT PRICE PER UNIT
---------- -------- -----------------------
[ ] [ ] [ ]
DISCOUNT SCHEDULE ONLY FOR PURPOSES OF RECALCULATING PRICE FOR PURCHASE OF LESS
THAN [ ] UNITS OVER THE LIFETIME OF THIS AGREEMENT:
# OF UNITS DISCOUNT DISCOUNT PRICE PER UNIT
---------- -------- -----------------------
[ ] [ ] [ ]
[ ] [ ] [ ]
[ ] [ ] [ ]
[ ] [ ] [ ]
[ ] [ ] [ ]
<PAGE>
SCHEDULE D
IMAGE GUIDED TECHNOLOGIES, INC.
COMPONENT AND ACCESSORY ITEMS
FOR CARL ZEISS
EFFECTIVE JANUARY 1, 1997
<TABLE>
- ------------------------------------------------------------------------------------
ITEM PART LIST
DESCRIPTION NUMBER PRICE ($ U.S.)
- ------------------------------------------------------------------------------------
<S> <C> <C>
FLASHPOINT-Registered Trademark- 5000M SYSTEM (230V) 500021 [ ]
- ------------------------------------------------------------------------------------
CONTROL UNIT, 5000Z (230V) 121306 [ ]
- ------------------------------------------------------------------------------------
DYNAMIC REFERENCE FRAME, 120MM 115106 [ ]
- ------------------------------------------------------------------------------------
SENSOR ASSEMBLY, 500MM 130556 [ ]
- ------------------------------------------------------------------------------------
FOOTSWITCH 110238 [ ]
- ------------------------------------------------------------------------------------
INSTRUMENT BREAKOUT BOX, 4 CONN/8 PIN LEMO 116649 [ ]
- ------------------------------------------------------------------------------------
LED 10 PACK, ISOLATED, AUTOCLAVABLE, 5T, 2 LEAD 123930 [ ]
- ------------------------------------------------------------------------------------
LED WIRING KIT 127433 [ ]
- ------------------------------------------------------------------------------------
LED SOCKETS, TETRA-ETCHED (10 PACK) 116155 [ ]
- ------------------------------------------------------------------------------------
135MM PROBE, 2E 125714 [ ]
- ------------------------------------------------------------------------------------
SENSOR ASSEMBLY, 1 METER 125095 [ ]
- ------------------------------------------------------------------------------------
DRF UNIVERSAL MOUNTING KIT 115189 [ ]
- ------------------------------------------------------------------------------------
CABLE, 4 METER, LEMO/LEMO 110439 [ ]
- ------------------------------------------------------------------------------------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 4719
<SECURITIES> 0
<RECEIVABLES> 885
<ALLOWANCES> 61
<INVENTORY> 436
<CURRENT-ASSETS> 6100
<PP&E> 477
<DEPRECIATION> 178
<TOTAL-ASSETS> 6415
<CURRENT-LIABILITIES> 480
<BONDS> 88
0
0
<COMMON> 8798
<OTHER-SE> (2951)
<TOTAL-LIABILITY-AND-EQUITY> 6415
<SALES> 1172
<TOTAL-REVENUES> 1240
<CGS> 554
<TOTAL-COSTS> 715
<OTHER-EXPENSES> 450
<LOSS-PROVISION> 4
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 75
<INCOME-TAX> 0
<INCOME-CONTINUING> 75
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 75
<EPS-PRIMARY> .02
<EPS-DILUTED> 0
</TABLE>
