<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
---- Exchange Act of 1934 for the quarterly period ended June 30, 1995.
____ 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 O-8092
OXIS INTERNATIONAL, INC.
A Delaware corporation
I.R.S. Employer Identification No. 94-1620407
6040 N. Cutter Circle, Suite 317
Portland, OR 97217
Telephone: (503) 283-3911
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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
------- -------
At July 31, 1995, the issuer had outstanding the indicated number of
shares of common stock: 12,124,423
1
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30 June 30
-------------------------- --------------------------------
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Revenues:
Product sales $ 1,065,000 $ 275,000 $ 3,140,000 $1,209,000
Royalties 21,000 35,000 72,000 85,000
----------- ---------- ----------- ----------
Total revenues 1,086,000 310,000 3,212,000 1,294,000
Cost and expenses:
Cost of sales 681,000 159,000 1,858,000 783,000
Research and development 990,000 204,000 2,019,000 420,000
Selling, general and administrative 846,000 179,000 1,491,000 521,000
----------- ---------- ----------- ----------
Total costs and expenses 2,517,000 542,000 5,368,000 1,724,000
----------- ---------- ----------- ----------
Operating loss (1,431,000) (232,000) (2,156,000) (430,000)
Interest income 14,000 29,000 20,000 40,000
Interest expense (45,000) -- (83,000) --
----------- ---------- ----------- ----------
Net loss $(1,462,000) $ (203,000) $(2,219,000) $ (390,000)
=========== ========== =========== ==========
Net loss per share $(.15) $(.04) $(.23) $(.08)
=========== ========== =========== ==========
Weighted average number of
shares used in computation 10,015,050 4,982,670 9,698,138 4,982,670
=========== ========== =========== ==========
</TABLE>
2
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,069,000 $ 936,000
Certificates of deposit 99,000 496,000
Accounts receivable 888,000 740,000
Inventories 820,000 673,000
Prepaid and other 259,000 228,000
----------- -----------
Total current assets 3,135,000 3,073,000
Property and equipment, net 1,181,000 1,298,000
Assets under capital leases, net 1,346,000 1,340,000
Technology for developed products
and custom assays, net 4,857,000 5,215,000
Other assets 93,000 268,000
----------- -----------
Total assets $10,612,000 $11,194,000
=========== ===========
</TABLE>
3
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
(unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable to bank $ -- $ 340,000
Other notes payable 1,366,000 --
Accounts payable 1,062,000 1,562,000
Customer deposits 250,000 1,116,000
Accrued liabilities 780,000 628,000
Current portion of long-term
debt and capital lease obligations 399,000 473,000
------------ ------------
Total current liabilities 3,857,000 4,119,000
Long-term debt and
capital lease obligations 500,000 356,000
Other liabilities 20,000 20,000
Shareholders' equity:
Preferred stock - $.01 par value; 5,000,000 shares
authorized; none outstanding -- --
Common stock - $.50 par value; 25,000,000 shares
authorized; 10,683,687 shares outstanding 5,342,000 4,661,000
Additional paid in capital 21,181,000 20,230,000
Accumulated deficit (20,358,000) (18,139,000)
Accumulated translation adjustments 70,000 (53,000)
------------ ------------
Total shareholders' equity 6,235,000 6,699,000
------------ ------------
Total liabilities and shareholders' equity $ 10,612,000 $ 11,194,000
============ ============
</TABLE>
4
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------------
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net loss $(2,219,000) $ (390,000)
Adjustments to reconcile net loss to cash provided
by (used for) operating activities:
Depreciation and amortization 690,000 29,000
Changes in assets and liabilities:
Accounts receivable (148,000) 370,000
Inventories 103,000 34,000
Other current assets 124,000 (171,000)
Accounts payable (500,000) (77,000)
Customer deposits (866,000) 500,000
Accrued liabilities 152,000 35,000
----------- ----------
Net cash provided by (used for) operating activities (2,664,000) 330,000
Cash flows from investing activities:
Redemption of certificates of deposit 397,000 198,000
Purchases of equipment (4,000) (7,000)
Deferred acquisition costs paid -- (185,000)
Other, net (118,000) --
----------- ----------
Net cash provided by investing activities 275,000 6,000
Cash flows from financing activities:
Proceeds from issuance of short-term notes 1,366,000 --
Proceeds from issuance of common stock 2,038,000 --
Stock issuance costs (362,000) --
Repayment of short-term bank borrowings (340,000) --
Repayment of long-term debt and capital lease obligations (180,000) --
----------- ----------
Net cash provided by financing activities 2,522,000 --
----------- ----------
Net increase in cash and cash equivalents 133,000 336,000
Cash and cash equivalents - beginning of period 936,000 758,000
----------- ----------
Cash and cash equivalents - end of period $ 1,069,000 $1,094,000
=========== ==========
</TABLE>
5
<PAGE>
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. FINANCIAL STATEMENTS AND CONDENSED NOTES
The unaudited consolidated financial statements, which have been prepared in
accordance with the instructions to Form 10-Q, do not include all of the
information and notes required by generally accepted accounting principles for
complete financial statements. All adjustments considered necessary by
management for a fair presentation have been included. Operating results for
interim periods are not necessarily indicative of the results that may be
expected for the full year.
An annual report (Form 10-K) has been filed with the Securities and Exchange
Commission ("Commission") for the year ended December 31, 1994. That report
contains, among other information, a description of OXIS International, Inc.'s
("OXIS" or the "Company") business, audited financial statements, notes to the
financial statements, the report of the independent auditors and management's
discussion and analysis of results of operations and financial condition.
Readers of this report are presumed to be familiar with that annual report.
The functional currency of OXIS International S.A. ("OXIS S.A."), formerly
Bioxytech S.A., the Company's foreign subsidiary, is the French franc. OXIS
S.A.'s assets and liabilities are translated using the exchange rate at the
end of the period. Its statement of operations is translated at the average
exchange rate during the period that OXIS S.A.'s revenues and expenses are
included in the consolidated statement of operations. Gains or losses
resulting from foreign currency translation are accumulated as a separate
component of shareholders' equity.
2. BASIS OF PRESENTATION
These financial statements have been prepared on a going concern basis which
contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business. The Company has incurred losses in each of the
last three years, and for the six months ended June 30, 1995. As of June 30,
1995, the Company's current liabilities exceeded its current assets by
$722,000. The Company's continuation as a going concern is contingent upon its
ability to obtain additional financing, and to generate revenue and cash flow
to meet its obligations on a timely basis. These financial statements do not
include any adjustments relating to the recoverability and classification of
recorded asset amounts or the amounts and classification of liabilities that
may be necessary should the Company be unable to continue as a going concern.
Since December 31, 1994, the Company has improved its financial position
through issuance of both debt and equity securities. In May 1995 the Company
issued 1,227,625 shares in a private placement of its common stock for gross
proceeds for $2,038,000. In connection with this sale of stock, the Company
also issued a warrant to purchase 122,763 shares of its
6
<PAGE>
common stock at a price of $2.82 per share. In February and May a total of
$1,366,000 was advanced to the Company pursuant to notes described in Note 4.
In addition, in June, the Company purchased inventory in the amount of
$250,000. Payment for the inventory is due in two years.
As further described in Note 5, subsequent to June 30, 1995, the Company has
raised an additional $1,500,000 through a further private placement of equity
securities.
The Company is currently seeking additional capital through another private
placement of equity securities. If the Company is unable to raise additional
capital during the remainder of 1995, it intends to curtail its operations
through the reduction of personnel and facility costs and by slowing its
research and development efforts. If the Company were unable to sufficiently
curtail its costs in such a situation, it might be forced to seek protection
of the courts through reorganization, bankruptcy or insolvency proceedings.
3. INVENTORIES
Inventories are stated at the lower of cost or market. Cost has been
determined by using the first-in, first-out and specific identification
methods. Inventories at June 30, 1995 and December 31, 1994, consisted of the
following:
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
<S> <C> <C>
Raw materials $178,000 $179,000
Work in process 477,000 357,000
Finished goods 165,000 137,000
-------- --------
Total $820,000 $673,000
======== ========
</TABLE>
4. NOTES PAYABLE
In February 1995 certain of the Company's shareholders, who were former OXIS
S.A. shareholders, advanced $766,000 to the Company pursuant to promissory
notes. The notes are due in February 1996 and bear interest at 8% per year.
The notes are secured by certain of the Company's products and related assets
and are subordinated to the major customer advance as discussed below.
As additional consideration for the loans, the Company has issued 93,300
shares of its common stock to the lenders, the value of which has been
recorded as a cost of debt issuance and is being amortized over one year, the
life of the notes. Further, the Company has agreed to issue warrants
entitling the lenders to purchase equity securities. The terms
7
<PAGE>
and number of warrants to be issued will be determined based on the terms of
the private placement of equity securities referred to in Note 2 that the
Company is pursuing.
In May 1995 a major customer advanced the Company $600,000 under a promissory
note that is secured by the Company's assets and is due in May 1996. The note
bears no interest for the first six months and, thereafter, bears interest at
prime plus 2%.
5. SUBSEQUENT EVENTS
On July 19, 1995, the Company consummated the acquisition of Therox
Pharmaceuticals, Inc. ("Therox") pursuant to a transaction wherein Therox was
merged with and into a wholly-owned subsidiary of OXIS. Therox was a
Philadelphia-based start-up free radical therapeutics company with total
assets of $507,000 as of December 31, 1994. The Company issued 1,440,736
shares of its common stock to Therox stockholders in exchange for all of the
Therox capital stock. The per share closing price of OXIS common stock on
July 19, 1995 was $3-3/8. In addition, the acquisition agreement provides for
payment of up to $2,000,000 by OXIS to the Therox stockholders based on the
successful commercialization of the Therox technologies.
Management estimates that in excess of 90% of the purchase price represents
technology relating to research and development projects that are in process
and, accordingly, such amount will be charged to operations immediately when
the acquisition is recorded.
Simultaneously with the Therox acquisition, a Series B Preferred Stock
Purchase Agreement was entered into between OXIS and two venture capital firms
(S.R. One, Limited and Brantley Venture Partners II, L.P.) which were major
stockholders of Therox. Pursuant to this agreement, OXIS sold 642,583 shares
of its Series B Preferred Stock for an aggregate price of $1,500,000. The
Series B Preferred Stock is initially convertible into common stock on a one-
to-one basis and has voting rights equivalent to those of the common stock.
The holders of the Series B Preferred Stock also have the right to elect one
director. The Series B Preferred Stock has certain preferential rights with
respect to liquidation and dividends.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
ACQUISITIONS
In September 1994, the Company significantly increased its scientific and
technical staff, patent application portfolio, current product offerings,
research and development programs, research and manufacturing facilities
and its customer base by acquiring OXIS S.A. and International BioClinical,
Inc. ("IBC") (the "1994 acquired businesses"). Both acquisitions were
completed through the exchange of stock, and were accounted for as
purchases;
8
<PAGE>
accordingly, the acquired assets and liabilities were recorded at their
estimated fair values as of the date of acquisition. IBC was merged into
the Company. OXIS S.A. operates as a subsidiary of the Company.
Because the acquisitions have been accounted for as purchases, the
Company's consolidated results of operations include the operating results
of the acquired businesses from the date of acquisition only. Therefore,
the results of operations of the acquired businesses are included in the
consolidated statement of operations for the first six months of 1995, but
not for the first six months of 1994.
In July 1995, in a transaction which will also be accounted for as a
purchase, the Company acquired Therox Pharmaceuticals, Inc. Therox had
expenses of $537,000 in 1994; its revenue in 1994 was $16,000 of interest
income.
The increased research and development investments have placed significant
demand on the Company's limited financial resources. See "Financial
Condition, Liquidity and Capital Resources" below.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
During the first six months of 1995, the Company's working capital deficit
was reduced from $1,046,000 at December 31, 1994, to $722,000 at June 30,
1995. This reduction resulted primarily from the issuance of common stock
(gross proceeds of $2,038,000) and long-term debt ($250,000), offset by the
effect of the net loss for the period ($2,219,000 less depreciation and
amortization of $690,000) and repayment of long-term debt and capital lease
obligations ($180,000).
Cash and certificates of deposit declined from $1,432,000 at December 31,
1994, to $1,168,000 at June 30, 1995.
The Company expects to continue to report losses in the near term as the
level of expenses is expected to continue to exceed revenues. The Company
must raise additional capital resources during the remainder of 1995.
Failure to raise such additional capital would cause the Company to
severely curtail or cease operations. For more information concerning the
Company's ability to continue as a going concern, see Note 2 to the
consolidated financial statements.
While the Company believes that its new products and technologies show
considerable promise, its ability to realize significant revenues therefrom
is dependent upon the Company's success in developing business alliances
with biotechnology and/or pharmaceutical companies with greater resources
to develop and market these products. There is no assurance that the
Company's effort to develop such business alliances will be successful.
Further, there can be no assurances that the sales of recent years to
Sanofi Winthrop (35% of 1994 revenues) will continue. Sanofi Winthrop is
currently conducting a
9
<PAGE>
second Phase III trial on its drug, DISMUTEC(TM) (a coupled form of OXIS' bovine
superoxide dismutase) to treat head trauma; the Company cannot predict whether
this trial will conclude successfully. If this trial is not concluded
successfully, the Company expects that future sales of bSOD to Sanofi Winthrop
would decrease substantially or cease altogether. European sales and royalties
would decline further if bovine superoxide dismutase is withdrawn in Spain (see
"Results of Operations" below). Although the Company is currently seeking
additional funds through a private placement, it cannot predict the source,
terms, amount, form, and/or availability of additional capital to fund its
operations beyond the third quarter of 1995.
An investment banking firm has been engaged by the Company to assist on a best-
efforts basis to raise up to $5,000,000. However, no assurances can be given
that the Company will successfully raise the needed capital. If the Company is
unable to raise additional capital during the remainder of 1995, it intends to
curtail its operations through the reduction of personnel and facility costs and
by slowing its research and development efforts. In such event, if the Company
is unable to sufficiently curtail its costs, it may be forced to seek protection
of the courts through reorganization, bankruptcy or insolvency proceedings.
RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 1995 COMPARED WITH THREE
MONTHS ENDED JUNE 30, 1994
REVENUES
The Company's product sales for the quarters ended June 30, 1995 and 1994
were as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Bovine superoxide dismutase (bSOD)
for research and human use $ 379,000 $181,000
Diagnostic and research assays 541,000 --
Palosein(R) (bSOD for veterinary use) 65,000 70,000
Other 80,000 24,000
---------- --------
$1,065,000 $275,000
========== ========
</TABLE>
Sales of bulk bSOD for research and human use increased by $198,000 in the
second quarter of 1995 as compared to the second quarter of 1994, almost
entirely due to increases in sales to the Company's Spanish licensee. Sales
of bulk bSOD to OXIS' Spanish licensee
10
<PAGE>
were $168,000 in the second quarter of 1994 and $361,000 in the second
quarter of 1995. Due to regulatory actions in four European countries in
1994, the Company's Spanish licensee has had informal discussions with the
Spanish regulatory authorities regarding the Company's bSOD product. Future
sales in Spain could be adversely affected by either regulatory action in
Spain, or safety concerns stemming from actions in other countries. In this
regard, the Company's German licensee has advised the Company that its
Spanish subsidiary will be voluntarily withdrawing its bSOD product from
the Spanish market. The impact of this withdrawal on sales to the Company's
Spanish licensee cannot be determined at this time.
Sales of diagnostic and research assays acquired through the September 7,
1994 business acquisitions totaled $541,000, and sales of other acquired
products further increased sales in the second quarter of 1995 as compared
to 1994.
COSTS AND EXPENSES
Cost of sales as a percentage of product sales increased from 58% in the
second quarter of 1994 to 64% in the second quarter of 1995. This increase
in cost was primarily the result of the amortization of acquired technology
which is included in the cost of sales of the products of the 1994 acquired
businesses.
Research and development expenses increased from $204,000 in the second
quarter of 1994 to $990,000 in the second quarter of 1995. The 1995
increase resulted primarily from the cost of the research and development
activities associated with acquired potential pharmaceutical technologies.
If the Company continues to obtain sufficient additional capital funding,
it expects its investment in research and development activities to
continue at a level substantially higher than historical amounts.
Selling, general and administrative expenses increased from $179,000 in the
second quarter of 1994 to $846,000 in the second quarter of 1995. This
increase is primarily due to the inclusion of the selling, general and
administrative costs of the 1994 acquired businesses.
The lease of the Company's Mountain View, California, facility has been
extended to the end of October 1995; management does not intend to extend
this lease further.
INTEREST INCOME AND EXPENSE
Interest income decreased in the second quarter of 1995 as compared with
the second quarter of 1994 due to a decline in certificates of deposit.
The funds from redeemed certificates of deposit have been primarily used to
support research and development programs.
11
<PAGE>
Interest expense in 1995 relates primarily to the capitalized lease
obligations of the Company's French subsidiary and short-term notes
payable.
NET LOSS
The Company continued to experience losses in the second quarter of 1995.
The second quarter 1995 loss of $1,462,000 ($.15 per share) was $1,259,000
greater than the $203,000 ($.04 per share) loss for the second quarter of
1994. The increase in the net loss is primarily due to increased research
and development expenditures and selling, general and administrative
expenses, particularly by the businesses acquired in the third quarter of
1994.
The Company expects to incur a substantial net loss for 1995. If
additional capital is raised through a private placement of securities (see
"Financial Condition, Liquidity and Capital Resources"), the Company plans
to continue to invest in research and development activities and incur
marketing, sales and administrative expenses in amounts greater than its
anticipated near-term product margins. If the Company is unable to raise
sufficient additional capital in a timely fashion, it will have to cease,
or severely curtail, its operations. In the event that operations are
severely curtailed, so that cash expenditures for operations are equal to
or less than receipts from product sales and royalties, the Company expects
to continue to report net losses due to the amortization and potential
write down of various assets.
RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 1995
COMPARED WITH SIX MONTHS ENDED JUNE 30, 1994
REVENUES
Product sales for the first six months of 1995 were $3,140,000, compared
to $1,209,000 for the corresponding period in 1994, an increase of
$1,931,000. The increase in product sales is primarily due to (1) the
inclusion in 1995 of $1,100,000 of sales of diagnostic and research assays
of the 1994 acquired businesses, (2) an increase of $537,000 in sales to
Sanofi Winthrop in 1995 and (3) an increase of $113,000 in Palosein sales
in 1995.
COSTS AND EXPENSES
Cost of sales as a percent of product sales decreased from 65% in the first
half of 1994 to 59% in the first half of 1995. Cost of sales in the first
half of 1994 was higher than historical levels due to a significant sale of
bulk bSOD at less than the Company's historic profit margin. Palosein
sales, which increased by 80% in 1995, have a lower cost of sales than bulk
bSOD sales, contributing to the reduction in cost of sales in 1995. These
factors were partially offset by higher costs of products of the 1994
acquired businesses, which costs include the amortization of acquired
technology.
12
<PAGE>
The increase of $1,599,000 in research and development costs for the first six
months of 1995 compared to 1994 is primarily due to the cost of the research
and development activities associated with acquired pharmaceutical
technologies.
Selling, general and administrative expenses increased from $521,000 for the
first six months of 1994 to $1,491,000 for the first six months of 1995, an
increase of $970,000. The three largest components of this increase are: (1)
selling, general and administrative expenses relating to the French subsidiary
of $370,000, (2) an increase of $200,000 in selling expenses relating to the
United States operations, primarily costs to market and sell the diagnostic
assays and Palosein, and (3) a foreign exchange loss of $41,000 in the first
six months of 1995 compared to a gain of $104,000 in 1994.
INTEREST INCOME AND EXPENSE
Interest income decreased in the first six months of 1995 as compared with
the same period in 1994 due to a decline in certificates of deposit. The
funds from redeemed certificates of deposit have been primarily used to
support research and development programs.
Interest expense in 1995 relates primarily to the capitalized lease
obligations of the Company's French subsidiary and short-term notes
payable.
NET LOSS
The Company's loss for the first six months of 1995 was $2,219,000 ($.23
per share) compared to a loss of $390,000 ($.08 per share) for the first
six months of 1994. The increase in the net loss is primarily due to
increased research and development expenditures and selling, general and
administrative expenses.
13
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits - See Exhibit Index on page 15.
(b) Reports on Form 8-K.
The Company has filed with the Commission a Report on Form 8-K dated May 17,
1995 (the "Form 8-K"). The Form 8-K reports the sale of 1,227,625 shares of
the Company's common stock.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OXIS International, Inc.
August 9, 1995 By s/Anna D. Barker
------------------
Anna D. Barker
President and Chief Executive Officer
August 9, 1995 By s/Jon S. Pitcher
------------------
Jon S. Pitcher
Chief Financial Officer
14
<PAGE>
EXHIBIT INDEX
Exhibit Page
Number Description of Document Number
10(a) Term Loan Agreement dated as of May 2, 1995,
between OXIS International, Inc., Bioxytech,
S.A. and Sanofi S.A. and related Promissory
Note in the principal amount of $600,000 (1)
27(A) Financial data schedule 16
__________
(1) Incorporated by reference to the Company's Form S-3 Registration
Statement filed with the Commission on July 17, 1995.
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1995
<PERIOD-START> APR-01-1995 JAN-01-1995
<PERIOD-END> JUN-30-1995 JUN-30-1995
<CASH> 1,069,000 0
<SECURITIES> 0 0
<RECEIVABLES> 888,000 0
<ALLOWANCES> 0 0
<INVENTORY> 820,000 0
<CURRENT-ASSETS> 3,135,000 0
<PP&E> 1,181,000 0
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 10,612,000 0
<CURRENT-LIABILITIES> 3,857,000 0
<BONDS> 0 0
<COMMON> 5,342,000 0
0 0
0 0
<OTHER-SE> 893,000 0
<TOTAL-LIABILITY-AND-EQUITY> 10,612,000 0
<SALES> 1,065,000 3,140,000
<TOTAL-REVENUES> 1,086,000 3,212,000
<CGS> 681,000 1,858,000
<TOTAL-COSTS> 681,000 1,858,000
<OTHER-EXPENSES> 990,000 2,019,000
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 45,000 83,000
<INCOME-PRETAX> (1,462,000) (2,219,000)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (1,462,000) (2,219,000)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,462,000) (2,219,000)
<EPS-PRIMARY> (.15) (.23)
<EPS-DILUTED> 0 0
</TABLE>
