UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
[x] QUARTERLY REPORT UNDER SECTION 13 0R 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the Quarterly Period Ended
September 30, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ______________ to ______________
Commission file number 010690
____________________
Science Dynamics Corporation
-------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware
------------------------------------------------------------
(State or other jurisdiction of incorporation or organization)
22-2011859
-------------------------------
(IRS Employer Identification No.)
1919 Springdale Road, Cherry Hill, New Jersey 08003
-----------------------------------------------------
(Address of principal executive offices)
( 609 ) 424-0068
-----------------------------------------------------
(Issuer's telephone number)
N/A
---------------------------------------------------------------
(Former name, former address, and former fiscal year, if changed
since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [x] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13, or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
09/30/97 14,535,649 shares of common stock were outstanding.
<PAGE>
S C I E N C E D Y N A M I C S C O R P O R A T I O N
INDEX
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PAGE NO.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance sheets as of September 30, 1997 1
(unaudited) and December 31, 1996 (audited)
Consolidated Statements of Income (loss) for nine 2
months and three months ended September 30, 1997
(unaudited) and nine months and three months ended
September 30, 1996 (unaudited)
Consolidated Statements of Cash Flows for nine 3
months and three months ended September 30, 1997
(unaudited) and nine months and three months ended
September 30, 1996 (unaudited)
Consolidated Statements of Shareholders' Equity 4
for the period ending December 31, 1996 (audited)
and the three months ending September 30, 1997
(unaudited)
Notes to Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 5 - 11
PART II. OTHER INFORMATION
Item 1. Legal Proceeding 11
Item 2. Changes in Securities 11
Item 3. Defaults upon Senior Securities 11
Item 4. Submission of Matters to Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits 12
Item 7. Signatures 12
<PAGE>
<TABLE>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements:
SCIENCE DYNAMICS CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<CAPTION>
ASSETS
September 30, December 31,
1997 1996
Unaudited Audited
--------- -------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 178,397 $ 830,229
Accounts receivable - trade 425,459 87,726
- other - 200,000
Inventories 325,550 581,277
Other current assets 36,853 42,095
--------------- --------------
Total current assets 966,259 1,741,327
--------------- --------------
Property and equipment, net 226,727 208,376
Software development costs, net of
accumulated amortization of $251,930
in 1997 and $173,745 in 1996 270,347 347,489
Deferred income taxes 308,000 308,000
Intangible Assets, net of accumulated
amortization of $225,000 1,275,000 1,500,000
Other assets 42,757 41,295
--------------- --------------
Total assets $ 3,089,090 $ 4,146,487
=============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 113,220 $ 372,913
Accrued expenses, principally
payroll related 53,324 184,703
--------------- --------------
Total current liabilities 166,544 557,616
--------------- --------------
Long term debt:
Long term debt payable - 500,000
--------------- --------------
Total liabilities 166,544 1,057,616
=============== ==============
Shareholders' equity -
Common stock - .01 par value,
25,000,000 shares authorized,
14,661,449 and 12,055,861 issued
14,535,649 and 11,930,061 outstanding
in 1997 and 1996 146,614 120,558
Additional paid-in capital 10,166,429 9,615,191
Retained earnings (deficit) (6,992,664) (6,249,045)
--------------- --------------
3,320,379 3,486,704
Common stock held in treasury,
at cost (397,833) (397,833)
Total shareholders' equity 2,922,546 3,088,871
--------------- --------------
Total liabilities and shareholders'
equity $ 3,089,090 $ 4,146,487
=============== ==============
- -4-
</TABLE>
<PAGE>
<TABLE>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements (Continued):
SCIENCE DYNAMICS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<CAPTION>
Nine Months Ended September 30, Three Months Ended September 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET SALES $ 3,366,792 $ 1,821,298 $ 548,280 $ 644,356
------------- ------------ -------------- -------------
Operating costs and expenses:
Cost of sales 1,626,411 1,339,965 303,373 391,923
Research and development 791,169 726,776 386,776 382,135
Selling, general
and administrative 1,678,863 1,471,370 488,870 248,747
------------- ------------ -------------- -------------
4,096,443 3,538,111 1,179,019 1,022,805
------------- ------------ -------------- -------------
Operating income (loss) (729,651) (1,716,813) (630,739) (378,449)
Other income (expenses):
Interest and other
investment income 15,434 - 3,660 -
Interest expense (29,402) (62,979) - (35,981)
------------- ------------ -------------- -------------
Net Income (Loss) $ (743,619) $ (1,779,792) $ (627,079) $ (414,430)
============= ============ ============== =============
Net Income (Loss) per common share $ (0.06) $ (0.20) $ (0.05) $ (0.05)
============= ============ ============== =============
- -5-
</TABLE>
<PAGE>
<TABLE>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements (Continued):
SCIENCE DYNAMICS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Nine Months Ended September 30, Three Months Ended September 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income (loss) $ (743,619) $ (1,779,792) $ (627,079) $ (414,430)
------------ ------------- ------------- --------------
Adjustments to reconcile
net (loss) to net cash
provided by (used for)
operating activities:
Depreciation 49,387 42,648 17,967 13,110
Amortization of
capitalized software 78,185 131,444 26,062 40,012
Amortization of
Intangible assets 225,000 - 75,000 -
Other non-cash expense 29,402 - - -
Changes in operating assets
and liabilities:
(Increase) decrease in:
Accounts receivable (337,733) 155,189 215,299 (28,189)
Other Receivables 200,000 (500,000) 150,000 (500,000)
Inventories 255,727 142,671 130,672 (84,026)
Other current assets 5,242 57,219 (11,386) 10,571
Other assets (1,462) 1,550 (1,462) (2,365)
Increase (decrease) in:
Accounts payable and
accrued expenses (344,223) 407,211 (277,852) 129,113
------------ ------------- ------------- --------------
Total adjustments 159,525 437,932 324,300 (421,774)
------------ ------------- ------------- --------------
Net cash provided by
(used for) operating
activities (584,094) (1,341,860) (302,779) (836,204)
------------ ------------- ------------- --------------
Cash flows from investing
activities:
Purchase of property and
equipment - net (67,738) (15,698) (24,032) (4,829)
------------ ------------- ------------- --------------
Net cash (used) in
investing activities (67,738) (15,698) (24,032) (4,829)
------------ ------------- ------------- --------------
Cash flows from financing
activities:
Increase (decrease) in
notes payable - 490,000 - -
Increase (decrease) in
Loans Payable - 32,000 - 32,000
Issuance of common stock
and warrants - 863,499 - 852,000
------------ ------------- ------------- --------------
Net cash (used in) provided
by financing activities - 1,385,499 - 884,000
Net increase (decrease) in
cash and cash equivalents (651,832) 27,941 (326,811) 42,967
------------ ------------- ------------- --------------
Cash and cash equivalents -
beginning of period 830,229 22,626 505,208 7,600
------------ ------------- ------------- --------------
Cash and cash equivalents -
end of period $ 178,397 $ 50,567 $ 178,397 $ 50,567
============ ============= ============= ==============
- -6-
</TABLE>
<PAGE>
<TABLE>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements (Continued):
SCIENCE DYNAMICS CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
NINE MONTHS ENDED SEPTEMBER 31, 1997
------------------------------------
<CAPTION>
Common Stock Additional Retained
------------ Paid-In Earnings
Shares Amount Capital (Deficit) Shares Amount
------ ------ ------- --------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Balance
December
31, 1995 $8,048,778 $ 80,488 $ 6,955,899 $ (4,630,698) 125,800 $ 397,833
Issuance of common
stock and warrants 2,047,083 20,470 943,019 - - -
Issuance of common
stock for acquisition of
intellectual property 1,500,000 15,000 1,485,000 - - -
Issuance of common
stock to pay note
payable to investment
company 460,000 4,600 231,273 - - -
Net loss - - - (1,618,347) - -
---------- ------- --------- ----------- ------- -------
Balance
December
31, 1996 12,055,861 120,558 9,615,191 (6,249,045) 125,800 397,833
---------- ------- --------- ----------- ------- -------
Issuance of common
stock to pay
long term debt &
related interest 2,605,588 26,056 551,238 - - -
Net loss - - - (743,619) - -
---------- ------- --------- ----------- ------- -------
Balance
September
30, 1997 14,661,449 $ 146,614 $ 10,166,429 $ (6,992,664) 125,800 $ 397,833
---------- ------- --------- ----------- ------- -------
- -7-
</TABLE>
<PAGE>
SCIENCE DYNAMICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
PART I
Item 1. (continued)
Basis of Presentation
The financial statements included in this Form 10-QSB have been
prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures, normally included in financial
statements prepared in accordance with generally accepted accounting
principles, have been condensed, or omitted, pursuant to such rules
and regulations. These financial statements should be read in
conjunction with the financial statements and related notes included
in the Company's Fiscal Form 10-KSB.
The financial statements presented herein, as of September 30, 1997
reflect in the opinion of management, all adjustments necessary for
a fair presentation of financial position and the results of
operations for the periods presented. The results of operations for
any interim period are not necessarily indicative of the results for
the full year.
Income per share
----------------
Income per common share is computed by dividing net income applicable
to common stock by the weighted average number of shares of common
stock and common share equivalents outstanding during each period.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS FOR THE
THREE MONTHS ENDED SEPTEMBER 30, 1997.
Business Overview
-----------------
Science Dynamics Corporation designs, develops and markets value-added
software and systems, which integrates the computer and telephone
(Computer Telephony Integration, CTI), which provides solutions to
various telcos and business telecommunications needs. The company
has focused on a product strategy to develop new applications that
will expand its product offerings and ultimately its customer base.
The methodology is to develop versatile, cost effective methods to
provide communications solutions with the integration of voice, data,
and video transmission over existing infrastructures for both local
and worldwide area networks.
- -5-
<PAGE>
The Company's initial product line resulting from the frame relay
technology acquired in November 1996, the VFX-250 was recently
introduced and has been successfully tested across a wide range of
Frame Relay and Codec manufacturers in the U.S., Canada and Taiwan.
The main application of the VFX product is to allow videoconferencing
over Frame Relay. The transmission of Video over any digital network
requires the use of Video Encoders/Decoders (often referred to as
Codecs). Most video Codecs, however, are designed to run on 'Leased
Line' or ISDN type services, which provide a transparent path for a
continuous bit-stream. The versatility of the VFX product allows
video to be incorporated into an existing network, providing an
instant upgrade to Frame Relay Networking facilities. The VFX-250
is being shipped in two forms, either as an OEM integrated VFX-250C
card for FRAD and Codec manufacturers, or a stand-alone product,
VFX-250S.
The next application for release is the Commander Inmate Call Control
System that will replace the Company's existing CCTD product in the
Inmate Call Control Arena. This is a software version of the CCTD
ported to Windows NT(TM) operating system. This product provides
advanced call control functions and feature capabilities, which will
carry the product into the next century. Additionally, the Company
is developing a Voice over IP (Internet Protocol) product that enables
the transmission of data or voice over intranet or internet networks
eliminating the expensive long distance toll charges. Several other
products are in various stages of development that are intended to
provide a continual roll out of product offerings which management
feels should provide the company with future revenue growth.
Results of Operations
---------------------
SCIENCE DYNAMICS CORPORATION AND SUBSIDIARIES
---------------------------------------------
The following table summarizes the basic results of operations for
the periods indicated in the Consolidated Statement of Operations.
Nine Months ended September 30, 1997 compared to the Nine Months
ended September 30, 1996 (unaudited).
Nine Months Ended
September 30,
1997 1996
---- ----
Sales $3,366,792 $1,821,298
Net Income (Loss) $ (743,619) $(1,779,792)
Net Income Per Share $(0.06) $(.20)
- -6-
<PAGE>
OPERATING EXPENSES PERCENT OF SALES
1997 1996 1997 1996
---- ---- ---- ----
Cost of Goods Sold $1,626,411 $1,339,965 48.3% 73.6%
Research & Development 791,169 726,776 23.5% 39.9%
Selling, General & Admin 1,678,863 1,471,370 49.9% 80.8%
Total Operating Costs and $4,096,443 $3,538,111 121.7% 194.3%
Expenses
For the first nine months of 1997, the sales increased 84.9% to
$3,366,792 from $1,821,298 in the comparable 1996 period. The
increase was attributable to the sales of the Commander Plus prison
inmate phone control system, which included the newly developed
automated operator services software.
Cost of Goods Sold increased to $1,626,411 in the first nine months
of 1997, a 21.4% increase from $1,339,965 in the first nine months
of 1996, due to the substantial increase in sales. As a percentage
of sales, the cost of goods decreased to 48.3% in the 1997 nine month
period as compared to 73.6% in the comparable period of 1996. The
Company continues to investigate areas to improve the profit margins
and believes expanding the market segments and introducing new
products and product enhancements will increase the volume purchased
maximizing purchasing power.
Research & Development expenses increased to $791,169 in the first
nine months of 1997, an 8.9% increase over the corresponding period
of 1996. As a percentage of sales, the expenses decreased to 23.5%
in the nine months period of 1997 compared to 39.9% in the nine month
period of 1996. The decrease is a direct result of the increased
sales level. The Company expects to continue expending funds in
research and development to facilitate the new development efforts.
Selling, General and Administrative expenses in the first nine months
of 1997 increased 14.1% to $1,678,863 as compared to $1,471,370 in
the corresponding nine month period ending September 30, 1996. As a
percentage of sales, the SG&A decreased to 49.9% in the nine months
period as compared to 80.8% in the comparable period of 1996.This
decrease in the percentage is attributable to the increase in sales
for the nine months ended September 30, 1997. The increase in
absolute dollars has several contributing factors. A significant
portion of the increase is associated with the establishment of the
international sales office in the U.K.Other contributing factors were
the additional expenses such as rent and utilities which were
incorporated into SG&A as a result of the elimination of the
manufacturing facility and increases in consulting, investor
relations and professional fees necessary to improve the Company's
financial and shareholder relations program.
- -7-
<PAGE>
Three Months ended September 30, 1997 compared to the Three Months
ended September 30, 1996 (unaudited).
Three Months Ended
September 30,
1997 1996
---- ----
Sales $ 548,280 $ 644,356
Net Income (Loss) $ (627,079) $( 414,430)
Net Income Per Share $(0.05) $(.05)
OPERATING EXPENSES PERCENT OF SALES
1997 1996 1997 1996
---- ---- ---- ----
Cost of Goods Sold $ 303,373 $ 391,923 55.3% 60.8%
Research & Development 386,776 382,135 70.5% 59.3%
Selling, General & Admin 488,870 248,747 89.2% 38.6%
Total Operating Costs and $1,179,019 $1,022,805 215.0% 158.7%
Expenses
Sales for the three months ended September 30, 1997 were $548,280
compared to $644,356 for the three months ended September 30, 1996.
The sales results were substantially below original expectations.
The Company continues to be subject to period to period fluctuations
due primarily to the inability to control timing of orders in its
existing market segment. Management has concentrated on extensive
analysis to identify other target markets, since the Company's
technology is adaptable to additional applications. Development of
additional products utilizing SDC's proprietary technology is
progressing to expand these product offerings. The Company believes
the deployment of these products will greatly improve the period
fluctuations and provide for a continual growth pattern.
While the Company's VFX-250 products have been well received by the
FRAD and Codec Manufacturers, the distributors, and system integrators,
the sales cycle is elongated as resellers must build upon their
potential customers. Sales are expected to be generated from this
product line commencing in 1998.
- -8-
<PAGE>
The Company believes through the penetration of new markets and by
increasing its customer base, the Company may be positioned to capture
significant business opportunities in the CTI arena resulting in a
positive growth trend in 1998 and in subsequent years. Management
anticipates that the Company will not generate historical levels of
revenues in the remainder of 1997 as the Company focuses on developing
strategic products for the CTI industry.
Cost of Goods Sold for the quarter amounted to $303,373 or 55.3% of
sales revenue versus $391,923 or 60.8% for the comparable quarter of
the prior year. The decrease in cost of goods sold is due to the
corresponding decrease in sales revenue.
Since the Company has adopted outsourcing of manufactured items, it
has focused on reducing its supplier base by developing and nurturing
long-term partnerships with high quality and reliable suppliers
enhancing the delivery times and improving cost.
Research & Development costs for the three months ended
September 30, 1997, amounted to $386,776, 70.5% of sales revenue
compared to $382,135, 59.3% of sales revenue for the comparable three
months of 1996. Since the dollar expenditures are almost equaled
year-to-year, the percentages are askew due to the low sales results
of the quarter.
The Company is continuing to invest in the development of new
technology and products, which the Company believes is essential for
the survival and growth strategy of the Company. The Company
anticipates new product introductions and enhancements on its current
products on a charted schedule, which will expand its current product
lines into new markets.
Selling, General and Administrative expenses increased to $488,870
for the three months ended September 30, 1997 as compared to $248,747
for the three months ended September 30, 1996. A portion of this
increase is due to a reclassification of certain expenses into
Research and Development in the 1996 period. Another significant
portion of the increase was attributable to the establishment of the
international sales office in the U.K. Other contributing factors
are increases in consulting, investor relations and professional fees
to explore various business opportunities and arrangements and expand
its financial and shareholder relations program.
The sales team and the managing director have aggressively marketed
the VFX-250 product line to Original Equipment Manufacturers (OEM's),
Value Added Resellers (VAR's), system integrators and distributors
whose markets and market presence will provide significant sales
channels for the VFX product family and the future product
initiatives. The Company plans to market its products in the United
States and Internationally in Canada, Europe, Asia, and the Middle
East direct and through the above mentioned distribution channels.
- -9-
<PAGE>
Liquidity and Capital Resources
-------------------------------
Cash and cash equivalents for the period ending September 30, 1997
amounted to $178,397 and working capital of $799,715. The ratio of
current assets to current liabilities at September 30, 1997 was 5.8
to 1.0 compared to 3.1 to 1.0 at December 31, 1996.
Cash used in operations during the nine months period ended
September 30, 1997 was $584,094 compared to $1,341,860 in the nine
months period ended September 30, 1996. The change was primarily the
result of the reduction in accounts payable and accrued expenses.
Cash used in operations during the three months ended September 30,
1997 amounted to $302,779 compared to cash used in operations of
$836,204 for the comparable three months ended September 30, 1996.
The decrease in cash used in operations as compared to the prior year
period primarily reflects the decrease in accounts payable and accrued
expenses resulting from the collections of accounts receivable and
other receivables during the period.
Cash used in investing activities during the nine month period ended
September 30, 1997 was $67,738 compared to $15,698 in the
corresponding nine month period of 1996. This increase reflects the
purchase of test equipment and computer related equipment to
facilitate testing and product development.
Cash for the three months ended September 30, 1997 used in investing
activities amounted to $24,032 compared with $4,829 for the comparable
period of 1996. This increase from the prior period is attributable
to the purchase of computer related equipment to upgrade development
tools.
The Company believes that funds expected to be generated by operating
activities and existing cash and cash equivalents will be adequate to
cover operating expenses in the foreseeable future. The Company is
exploring various financing instruments to subsidize the execution of
its growth strategy.
Subsequent Event
----------------
A Board of Directors Meeting was held on November 5, 1997, to discuss
a business arrangement with WorldWave Communications, Inc. The board
unanimously approved further action in accordance with a Memorandum of
Understanding with WorldWave. Under the terms of the memorandum,
Science Dynamics would acquire 100% of WorldWave for 5.5 million
shares of Science Dynamics common stock. The acquisition is
predicated upon WorldWave obtaining contracts, in the near future,
for a minimum of 20,000 of its telephone units, at a purchase price
of approximately $10,000,000, with a provision for additional shares
if WorldWave receives a purchase order for an additional 10,000
telephone units. Other contingencies of the acquisition are the
performance of due diligence by Science Dynamics, a valuation of the
technology and shareholder approval from both parties. The
- -10-
<PAGE>
transaction is expected to be defined as a tax-free exchange for
WorldWave shareholders. Science Dynamics plans to operate WorldWave
as a wholly owned subsidiary of Science Dynamics.
Certain statements contained in the 10QSB concerning the Company's
business outlook on future performance and statements concerning
assumptions made or expectations as to any future events, conditions
or other matters are "forward-looking statements" as that term is
defined under the Federal Securities Laws. Forward-looking
statements are subject to risks, uncertainties and other factors,
which may cause actual results to differ materially from those set
forth in this report. The Company may encounter competitive,
technological, financial and business challenges making it more
difficult to market its products and services, the impact of which
may in turn affect the Company's results of operations and financial
position.
PART II. OTHER INFORMATION
SCIENCE DYNAMICS CORPORATION AND SUBSIDIARIES
---------------------------------------------
Item 1. Legal Proceedings
No material developments.
Item 2. Changes in Securities
There has been no change or modification in the constituent
instruments defining the rights of holders of neither the
corporation's sole class of registered security nor any modification
of the rights evidenced by such class by issuance or modification of
any other class of securities.
Item 3. Defaults Upon Senior Securities
There has been no default of any nature upon any form neither of
senior security nor in payment of interest or sinking or purchase
fund installment with respect to any indebtedness of the registrant,
nor any other form of default upon any financial obligation.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
- -11-
<PAGE>
Item 6. Exhibits and Reports
None.
Item 7. Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, registrant has duly caused this report to be
signed in its behalf by the undersigned thereunto duly authorized.
SCIENCE DYNAMICS CORPORATION
By: /s/ ALAN C. BASHFORTH
---------------------------------
Alan C. Bashforth
President, and CEO
By: /s/ JOY C. HARTMAN
---------------------------------
Joy C. Hartman
Executive Vice President,
Chief Financial Officer,
Treasurer and Corporate Secretary
Dated: November 14,1997
- -12-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-START> Jul-01-1997
<PERIOD-END> Sep-30-1997
<CASH> 178
<SECURITIES> 0
<RECEIVABLES> 425
<ALLOWANCES> 0
<INVENTORY> 326
<CURRENT-ASSETS> 966
<PP&E> 1224
<DEPRECIATION> 1017
<TOTAL-ASSETS> 3089
<CURRENT-LIABILITIES> 167
<BONDS> 0
<COMMON> 147
0
0
<OTHER-SE> 2923
<TOTAL-LIABILITY-AND-EQUITY> 3089
<SALES> 548
<TOTAL-REVENUES> 548
<CGS> 303
<TOTAL-COSTS> 303
<OTHER-EXPENSES> 876
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (627)
<INCOME-TAX> 0
<INCOME-CONTINUING> (627)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (627)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
