<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ...................... to ......................
Commission file number: 0-12365
MEDICAL DEVICE TECHNOLOGIES, INC.
--------------------------------
(exact name of small business issuer as specified in charter)
Utah 58-1475517
------------------------------- -----------------------------------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
9171 Towne Centre Drive - Suite 355 - San Diego, California - 92122
-------------------------------------------------------------------
(Address of principal executive offices)
(619) 455-7127
--------------
(Issuer's telephone number, including area code)
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 October 31, 1997 there were 14,490,760 shares of the company's common
stock issued and outstanding. The aggregate market value of such shares (based
on the average of the closing bid and offered price of $0.08 of these shares as
of November 12, 1997) held by non-affiliates, was approximately $1,117,000 .
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements:
Consolidated Balance Sheets as of September 30, 1997 and December 31, 1996.....................F-1
Consolidated Statements of Operations for the Three Months and Nine Months Ended
September 30, 1997 and September 30, 1996......................................................F-3
Consolidated Statements of Changes in Stockholders' Equity
for the Three Months and Nine Months Ended September 30, 1997..................................F-4
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 1997
and September 30, 1996.........................................................................F-6
Notes to Consolidated Financial Statements.....................................................F-9
ITEM 2. Management's Discussion And Analysis And Plan Of Operation ..............................3
PART II OTHER INFORMATION
Item 1. Legal Proceedings....................................................................... 9
Item 2. Changes in Securities................................................................... 9
Item 3. Defaults Upon Senior Securities......................................................... 9
Item 4. Submission of Matters to a Vote of Security Holders..................................... 9
Item 5. Other Information.......................................................................10
Item 6. Exhibits and Reports on Form 8-K........................................................10
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- -----------------------------
See attached consolidated financial statements and notes thereto for the
period ended September 30, 1997.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION
- ------------------------------------------------------------------
The following discussion of the financial condition of Medical Device
Technologies, Inc. (the "Company"), results of operations and plan of operation
should be read in conjunction with the consolidated financial statements and the
notes thereto appearing in Part I, Item 1 in this Form 10-QSB.
Forward-Looking Statements
- --------------------------
The following discussion contains forward-looking statements regarding the
Company, its business, prospects and results of operations that are subject to
certain risks and uncertainties posed by many factors and events that could
cause the Company's actual business, prospects and results of operations to
differ materially from those that may be anticipated by such forward-looking
statements. Factors that may affect such forward-looking statements include,
without limitation: the Company's ability to successfully develop new products
for new markets; the impact of competition on the Company's revenues; changes in
law or regulatory requirements that adversely affect or preclude customers from
using the Company's products for certain applications; delays in the Company's
introduction of new products; and failure by the Company to keep pace with
emerging technologies. These risks are discussed in the Company' Registration
Statement on Form S-3/A (File No. 333-31767) filed with the Securities and
Exchange Commission on August 6, 1997.
When used in this discussion, words such as "believes", "anticipates",
"expects", "intends" and similar expressions are intended to identify
forward-looking statements, but are not the exclusive means of identifying
forward-looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date of this
report. Readers are urged to carefully review and consider the various
disclosures made by the Company in this report and other reports filed with the
Securities and Exchange Commission that attempt to advise interested parties of
the risks and factors that may affect the Company's business.
3
<PAGE>
Description of Business
- -----------------------
Medical Device Technologies, Inc., was incorporated in Utah on February 6,
1980 and is headquartered in San Diego, California. Prior to 1992, the Company's
business was the exploration and production of hydrocarbons. As of June 1, 1992,
the Company re-entered the development stage. Effective January 1, 1994, the
Company completed the divestiture of all oil and gas properties and was no
longer in the hydrocarbon business. Since that time, the Company has been
exclusively a medical device company. The Company changed its name in April
1995, from Cytoprobe Corporation, to reflect the Company's change of focus. On
June 1, 1992, the Company was considered, for accounting purposes, to have
re-emerged as a development stage company.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy statements
and other information filed with the Commission can be inspected and copied at
the public reference facilities of the Commission at 450 Fifth Street NW,
Washington, DC 20549. Such material may also be accessed electronically by means
of the Commission's home page on the Internet at http://www.sec.gov.
The Company's common stock, par value $ .15 per share (the "Common Stock")
is traded on the National Association of Securities Dealers Automated Quotation
(Nasdaq) SmallCap Market under the symbol "MEDD". The Company's redeemable
common stock purchase warrants (the "Redeemable Warrants") are no longer traded
on the National Association of Securities Dealers Automated Quotation (Nasdaq)
SmallCap Market as of October 29, 1997. On July 24, 1997, each remaining issued
and outstanding share of the Company's 6% Cumulative Convertible Series A
Preferred Stock par value $.01 per share (the "Preferred Stock") converted
automatically, by its terms, into four (4) shares of Common Stock. As a result,
the Preferred Stock is no longer traded on Nasdaq.
The Company has developed three innovative medical device products. The
first product, the Fluid Alarm System (FAS), formerly called the Personal Alarm
System (PAS), is a device which monitors the integrity of infection control
barriers, such as surgical gloves and gowns worn during medical procedures. The
second product, the Cell Recovery System (CRS), is a cell "brushing" and
retrieval system using an automated biopsy brush for the collection of specimen
cells for diagnostic purposes, primarily (but not limited to) cancer detection.
The third product, the Intracranial Pressure Measuring System (ICP), is a
diagnostic device that measures pressure within the skull non-invasively. The
Company received FDA clearance for the FAS during the year ended December 31,
1995 and received FDA clearance for the CRS in March 1996. The FAS is currently
being marketed to physicians, distributors, and hospitals both in the US and
overseas. The CRS is currently in clinical trials at certain hospitals to
determine the comparability of the results of brushing the walls of the bladder
with the CRS as compared to simultaneous results achieved from biopsy in the
detection of bladder cancer.
During the second quarter of 1997 the Company entered into an agreement
with Boehringer Mannheim Corporation ("Boehringer") regarding the purchase of
the Biotrack product line from Boehringer. The Company has terminated this
purchase agreement with Boehringer and does not intend to pursue discussions
further.
4
<PAGE>
Risks
- -----
As development of each of its medical devices concludes, increased
marketing and sales costs will be incurred and the Company's working capital
requirements can be expected to grow accordingly. The Company's sales, general
and administrative costs include costs related to marketing, promotional and
sales activities, in addition to office, administration and overhead expenses.
The Company, which is still in the development stage with respect to its
current medical device operations, has not been profitable for the last 10 years
and expects to incur additional operating losses in the coming year. The
following management discussion and analysis and plan of operation should be
read in conjunction with the consolidated financial statements and notes thereto
appearing in Part I, Item 1 in this Form 10-QSB.
Although the Company plans on achieving sales during the next twelve months
from the FAS device and possibly from the CRS and other products it may develop
or acquire, the revenue from such sales, by itself, is not expected to be
sufficient for the Company to maintain its viability and current level of
operations, including its current product development and research and
development plans. Accordingly, the Company has been and will be required to
obtain additional sources of financing, strategic partnerships or mergers with
other companies which may provide the necessary financing, which cannot be
assured. In the event the Company cannot obtain additional financing, or combine
with other entities which can provide the necessary financial resources for the
Company to continue its planned operations, the Company would have to
substantially curtail product development as well as research and development
plans due to lack of funds. The long-term viability of the Company is dependent
on its ability to obtain the financing necessary to fund its operations and
anticipated growth and to profitably develop and market its current and new
products.
The Company's risks are further discussed in the Company's Registration
Statement on Form S-3/A (File No. 333-31767) filed with the Securities and
Exchange Commission on August 6, 1997.
5
<PAGE>
Results of Operations for the Three Months Ended September 30, 1997
- -------------------------------------------------------------------
Revenues
- --------
Revenues were a net negative $1,950 in the three months ended September 30,
1997 due to returns of $6,000 offsetting sales of $4,050 as compared to sales of
$13,142 during the same period in 1996. Revenues and returns were solely
obtained from and due to the FAS. In several cases the Company has replaced
returned FAS products with improved FAS devices. The Company anticipates that
future returns could diminish after the improved FAS product features have been
integrated into the Company's existing customer base and with its potential new
customers.
Gross Profit
- ------------
Gross profit was negative $24,586 in the three months ended September 30,
1997 as compared to a positive $8,708 during the same period in 1996 due to
returns, increased manufacturing overhead and allocated costs in the third
quarter 1997 as compared to 1996.
Operating Expenses
- ------------------
Research and Development
Research and development costs in the third quarter of 1997 were $130,635,
representing a decrease of 63.5% as compared to the third quarter of 1996. This
was principally due to reduction in FAS and ICP development costs and medical
advisory fees in the third quarter of 1997, as compared to 1996, which more than
offset the slightly increased costs on the Cell Recovery System (CRS) in 1997 as
compared to 1996.
Sales, General and Administrative
Sales, general and administrative costs were $897,827 in the third quarter
of 1997 representing an increase of $494,538 or 122.6% as compared to 1996. This
increase was principally the result of higher stockholder, employee benefits and
royalty expenses plus $315,511 costs in this period associated with the proposed
purchase of the Biotrack product line.
Losses
The Company's net loss for the third quarter of 1997 was $1,047,892
representing a $341,199 or 48.3% increased loss as compared to the same period
in 1996. This increased loss was primarily attributable to expenses associated
with anticipating the purchase of the Biotrack product line, in addition to a
reduction of FAS gross margin in 1997 as compared to the third quarter of 1996.
Loss per share after the payment of preferred dividends of $23,956 was $0.09 in
the third quarter of 1997 as compared to a loss per share of $0.17 in 1996, when
there was payment of $100,751 of preferred dividends. This represents a 23.5%
reduced loss per share as compared to 1996. This reduced loss per share was due
to the increased loss in the third quarter of 1997 as compared to 1996 being
more than offset by a 73.5% increase in the weighted average number of shares
outstanding in the second quarter of 1997 as compared to the same period in
1996. This increased number of shares was due to the subsequent conversions into
Common Stock of the Preferred Stock issued in the Company's public offering in
June 1996.
6
<PAGE>
Results of Operations for the Nine Months Ended September 30, 1997
- ------------------------------------------------------------------
Revenues
- --------
Revenues were $56,750 in the first nine months of 1997, or approximately
2.2 times the revenues during the first nine months of 1996, due to increased
sales of the FAS during this period.
Gross Profit
- ------------
Gross profit was negative $34,486 in the first nine months of 1997 as
compared to $12,354 in 1996, due to returns, increased manufacturing overhead
and allocated costs in 1997 as compared to the first nine months of 1996.
Operating Expenses
- ------------------
Research and Development
Research and development costs in the first nine months of 1997 were
$626,348 representing a decrease of 1% as compared to the first nine months of
1996. A decrease in medical advisor fees and ICP and FAS development costs were
offset by an increase in CRS development cost in the first nine months of 1997
as compared to the same period in 1996.
Sales, General and Administrative
Sales, general and administrative costs were $2,612,120 in the first nine
months of 1997, or $371,130 higher representing an increase of 16.6 % as
compared to 1996, principally due to substantially higher advertising and
promotion for the FAS in 1997 as compared to 1996 and expenses incurred in 1997
associated with the proposed purchase of the Biotrack product line.
Losses
The Company's net loss for the first nine months of 1997 was $3,197,254,
representing a $486,451 or 13.2% reduced loss as compared to the same period in
1996. This reduced loss was primarily attributable to the absence in 1997 of a
total of $879,224 of interest and amortization of discount expenses associated
with short term notes repaid in June 1996, which was only partially offset by
the lower gross margin and higher sales, general and administrative expenses in
1997 as compared to the same period in 1996.
Loss per share, after the payment of preferred dividends, was $0.37 in the
first nine months of 1997 as compared to a loss of $0.83 in the comparable
period of 1996. This represents a 55.4% reduced loss per share as compared to
1996, which was due to a reduced loss in the first nine months of 1997 as
compared to 1996, as well as an increase of 104.7% in the weighted average
number of shares outstanding in the first half of 1997 as compared to 1996. This
increased number of shares was due to the subsequent conversions into Common
Stock of the Preferred stock issued in the Company's public offering in June
1996.
7
<PAGE>
Liquidity and Capital Resources
- -------------------------------
To date, the Company has funded the capital requirements for its current
medical device operations from the private sales of debt and equity securities,
the issuance of common stock in exchange for services and from the public
offering of 6% cumulative convertible Series A preferred stock and redeemable
purchase warrants in June 1996.
The Company's cash and cash equivalents totalled $177,238 at September 30,
1997 compared to $2,889,233 at December 31, 1996. In the first nine months of
1997, $2,701,975 of net cash was used for operating activities plus a net of
$8,917 for purchased property and equipment after a sale and leaseback of
equipment resulting in net proceeds to the Company of $77,225. There were no
financing activities in the first nine months of 1997, other than a repayment of
a capital lease financing of $1,103. Net cash used in operating activities in
the first nine months of 1997 consisted principally of a net loss of $3,197,254,
which was reduced by $684,266 from cash provided from common stock paid for
services in lieu of cash, depreciation, amortization and non-cash compensation
accrual and recognition; and increased $188,987 by other net assets (excluding
cash).
The Company's current assets at September 30, 1997 were $601,284 compared
to $3,132,484 at December 31, 1996 primarily due to losses during the interim
period. Current liabilities were $574,802 as compared to $479,885 at December
31, 1996. As a result of the foregoing, net working capital decreased to $26,482
from $2,652,599 at year end 1996.
PLAN OF OPERATION
The Company's Capital Requirements
- ----------------------------------
The Company currently needs to raise additional funds to continue its
existing operations including marketing the FAS; completing comparative clinical
trials for the CRS; continued development, FDA filings and clinical testing of
the ICP, and sales, general and administrative expenses. These working capital
requirements are expected to be partially supplemented by sales from the FAS in
1997 and the FAS and the CRS in 1998 and issuances of S-8 stock for payment of
professional and supplier services. The Company is currently in the process of
seeking equity capital from and/or in partnership with various potential private
individual and corporate sources but has obtained minimal private and no
corporate commitments. There can be no assurance that the Company will be able
to obtain funds required to continue or that such funds will be sufficient in
the event such funds are obtained.
The long-term viability of the Company is dependent on its ability to to
obtain the financing necessary to continue its operations, profitably develop
and market its current products and to identify, develop and profitably market
additional products.
8
<PAGE>
New Accounting Standards
- ------------------------
On March 3, 1997, the FASB issued Statement of Financial Accounting
Standards No. 128, "Earnings per Share" ("SFAS No. 128"). This pronouncement
provides a different method of calculating earnings per share than is currently
used in accordance with APB 15, "Earnings per Share". SFAS No. 128 provides for
the calculation of Basic and Diluted earnings per share. Basic earnings per
share includes no dilution and is computed by dividing income available to
common shareholders by the weighted average number of common shares outstanding
for the period. Diluted earnings per share reflects the potential dilution of
securities that could share in the earnings of an entity, similar to fully
diluted earnings per share. This pronouncement is effective for fiscal years and
interim periods ending after December 15, 1997; early adoption is not permitted.
The Company has not determined the effect, if any, of adoption on its EPS
computations.
Statement of Financial Accounting Standards No. 129 "Disclosure of
Information about Capital Structure" ("SFAS No. 129") issued by the FASB is
effective for financial statements ending after December 15, 1997. The new
standard reinstates various securities disclosure requirements previously in
effect under Accounting Principles Board Opinion No. 15, which has been
superseded by SFAS No. 128. The Company does not expect adoption of SFAS No. 129
to have a material effect, if any, on its financial position or results of
operations.
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" ("SFAS No. 130") issued by the FASB is effective for
financial statements with fiscal years beginning after December 15, 1997.
Earlier application is permitted. SFAS No. 130 establishes standards for
reporting and display of comprehensive income and its components in a full set
of general purpose financial statements. The Company has not determined the
effect on its financial position or results of operations, if any, from the
adoption of this statement.
Statement of Financial Accounting Standards No. 131, "Disclosure about
Segments of an Enterprise and Related Information" ("SFAS No. 131") issued by
the FASB is effective for financial statements beginning after December 15,
1997. The new standard requires that public business enterprises report certain
information about operating segments in complete sets of financial statements of
the enterprise and in condensed financial statements of interim periods issued
to shareholders. It also requires that public business enterprises report
certain information about their products and services, the geographic areas in
which they operate and their major customers. The Company does not expect
adoption of SFAS No. 131 to have a material effect, if any, on its results of
operations.
9
<PAGE>
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
- --------------------------
Refer to the Company's Form 10-KSB for the period ended December 31, 1996.
There are no other legal proceedings to which the Company is a party which
could have a material adverse effect on the Company.
Item 2. CHANGES IN SECURITIES
- ------------------------------
Not Applicable.
Item 3. DEFAULTS UPON SENIOR SECURITIES
- ----------------------------------------
Not Applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
Not Applicable.
Item 5. OTHER INFORMATION
- --------------------------
During the second quarter of 1997 the Company entered into an agreement
with Boehringer Mannheim Corporation ("Boehringer") regarding the purchase of
the Biotrack product line from Boehringer. The Company has terminated this
purchase agreement with Boehringer and does not intend to pursue discussions
further.
10
<PAGE>
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
a) Exhibits
2.0 Asset Purchase Agreement associated with a purchase of the Biotrack product
line from Boehringer Mannheim Corporation (1)
3.1 Articles of Incorporation of Gold Probe, Inc. a Utah corporation, filed
February 6, 1980 (3)
3.2 Certificate of Amendment to the Articles of Incorporation of Gold Probe,
Inc. filed January 27, 1982 (3)
3.3 Certificate of Amendment to the Articles of Incorporation of Hailey Energy
Corporation filed October 26, 1986 (3)
3.4 Certificate of Amendment to the Articles of Incorporation of Hailey Energy
Corporation filed November 2, 1990 (3)
3.5 Certificate of Amendment to the Articles of Incorporation of Hailey Energy
Corporation filed November 17, 1992 (3)
3.6 Certificate of Amendment to the Articles of Incorporation of Cytoprobe
Corporation filed May 18, 1995 (3)
3.7 Certificate of Amendment to the Articles of Incorporation of Medical Device
Technologies, Inc. filed December 14, 1995 (4)
3.8 Certificate of Amendment to the Articles of Incorporation of Medical Device
Technologies, Inc. filed January 17, 1996 (5)
3.9 Certificate of Amendment to the Articles of Incorporation of Medical Device
Technologies, Inc. filed January 19, 1996 (3)
3.10 By-Laws of Medical Device Technologies, Inc. (3)
11
<PAGE>
Item 6. EXHIBITS AND REPORTS ON FORM 8-K (continued)
- -----------------------------------------------------
4.1 Form of Representative's Warrant Agreement, including form of Specimen
Certificate for Representative's Warrant. (2
27 Financial Data Schedule
(1) Previously filed as an exhibit to Form 8-K, dated June 24, 1997.
(2) Previously filed as an exhibit to Registration Statement on Form S-1,
dated June 24, 1996, registration no. 333-02727.
(3) Previously filed as an exhibit to Registration Form S-3, dated May 15,
1996, Registration no. 333-1150.
(4) Incorporated by reference from the Company's Form 8-K Report dated
January 15, 1996.
(5) Incorporated by reference from the Company's Form 8-K Report dated
January 31, 1996
b) Reports on Form 8-K
None
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
MEDICAL DEVICE TECHNOLOGIES, INC.
Date: November 14, 1997
By: /s/ Edward C. Hall
- -----------------------------
Edward C. Hall
Chief Financial Officer and
Principal Accounting Officer
12
<PAGE>
MEDICAL DEVICE TECHNOLOGIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30,
1997 December 31,
(unaudited) 1996
--------------- ------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 177,238 $ 2,889,233
Accounts receivable 56,730 8,563
Inventory (Note 2) 263,988 100,379
Prepaid royalties 25,000 -
Prepaid expenses and other assets 78,328 134,309
- -------------------------------------------------------------------------------------------------
Total current assets 601,284 3,132,484
- -------------------------------------------------------------------------------------------------
Property and equipment:
Furniture and fixtures 105,188 101,854
Machinery and equipment 199,374 190,179
Equipment under capital lease 5,349 5,349
- -------------------------------------------------------------------------------------------------
309,911 297,382
Less accumulated depreciation (121,410) (76,046)
- -------------------------------------------------------------------------------------------------
Net property and equipment 188,501 221,336
- -------------------------------------------------------------------------------------------------
License agreements
(net of accumulated amortization of $1,126,005 and $903,149) 1,641,311 1,864,168
Other assets 17,870 15,003
- -------------------------------------------------------------------------------------------------
$ 2,448,966 $ 5,232,991
- -------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-1
<PAGE>
MEDICAL DEVICE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30,
1997 December 31,
(unaudited) 1996
----------------- --------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 309,919 $ 185,046
Accrued expenses 116,883 145,736
Current obligation under termination agreement 148,000 148,000
Current obligation under capital lease - 1,103
- ---------------------------------------------------------------------------------------------------
Total current liabilities 574,802 479,885
Termination agreement obligation - 98,667
- ---------------------------------------------------------------------------------------------------
Total liabilities 574,802 578,552
Stockholders' Equity (Note 5)
Series I convertible preferred stock (247,500 shares
authorized, 0 shares issued and outstanding) - -
6% cumulative convertible Series A preferred stock,
$.01 par value (1,872,500 shares authorized, 0
and 1,343,500 shares issued and outstanding) - 13,435
Preferred stock, $.01 par value (10,000,000 shares authorized,
0 shares issued and outstanding) - -
Common stock, $.15 par value (100,000,000 shares
authorized, 13,856,155 and 6,897,963 outstanding) 2,078,423 1,034,694
Stock dividend distributable, $.15 par value (0 and 111,534 shares) - 16,730
Common stock to be issued (25,000 shares) 23,440 23,440
Additional paid-in capital 20,488,071 20,650,306
Deferred stock compensation 19,612 247,500
Accumulated deficit ($16,587,626 and $13,390,372 accumulated (20,735,382) (17,331,666)
lossess during the development stage through September 30,
1997 and December 31, 1996)
- ---------------------------------------------------------------------------------------------------
Total stockholders' equity 1,874,164 4,654,439
- ---------------------------------------------------------------------------------------------------
$ 2,448,966 $ 5,232,991
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE>
MEDICAL DEVICE TECHNOLOGIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
June 1,1992 to
Three Months Ended September 30 Nine Months Ended September 30, September 30,1997
------------------------------- ------------------------------- -----------------
1997 1996 1997 1996 (Cumulative)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET SALES $ (1,950) $ 13,142 $ 56,750 25,442 $ 82,943
COST OF SALES 22,636 4,434 91,236 13,088 106,729
- -------------------------------------------------------------------------------------------------------------------------------
GROSS PROFIT (24,586) 8,708 (34,486) 12,354 (23,786)
OPERATING EXPENSES:
Research and development 130,635 357,648 626,348 $ 622,171 3,576,623
Sales, general and administrative 897,827 403,289 2,612,120 2,240,990 11,153,407
- -------------------------------------------------------------------------------------------------------------------------------
LOSS FROM CONTINUING OPERATIONS (1,053,048) (752,229) (3,272,954) (2,850,807) (14,753,816)
OTHER INCOME (EXPENSE):
Other income - - 25,000 - 25,000
Interest income 5,156 46,449 50,700 47,239 149,140
Interest expense - (913) - (880,137) (1,030,890)
Loss on sale of marketable securities - - - - (20,790)
Net unrealized loss on marketable securities - - - - (64,500)
- -------------------------------------------------------------------------------------------------------------------------------
LOSS BEFORE DISCONTINUED OPERATIONS
AND DISPOSAL OF OIL AND GAS OPERATIONS (1,047,892) (706,693) (3,197,254) (3,683,705) (15,695,856)
DISCONTINUED OPERATIONS - - - - (520,396)
LOSS FROM DISPOSAL OF OIL AND GAS OPERATIONS - - - - (371,374)
- -------------------------------------------------------------------------------------------------------------------------------
NET LOSS $(1,047,892) $ (706,693) $ (3,197,254) $ (3,683,705) $ (16,587,626)
- -------------------------------------------------------------------------------------------------------------------------------
LOSS PER SHARE:
LESS: CUMULATIVE PREFERRED STOCK DIVIDENDS (Note 5) 23,956 100,751 206,462 100,751
- -------------------------------------------------------------------------------------------------------------
NET LOSS ATTRIBUTABLE TO COMMON STOCK $(1,071,848) $ (807,444) $ (3,403,716) $ (3,784,456)
- -------------------------------------------------------------------------------------------------------------
NET LOSS PER COMMON SHARE $ (0.09) $ (0.17) $ (0.37) $ (0.83)
- -------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE OF COMMON SHARES OUTSTANDING 12,193,928 4,774,252 9,282,797 4,534,141
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes consolidated financial statements.
F-3
<PAGE>
MEDICAL DEVICE TECHNOLOGIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1997
(unaudited)
<TABLE>
<CAPTION>
Common
Preferred Stock Common Stock Additional Stock
----------------- --------------- Paid-In To Be Deferred Accumulated
Shares Amount Shares Amount Capital Issued Compensation Deficit Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances, January 1, 1997 1,343,500 $13,435 6,897,963 $1,034,694 $20,650,306 $40,170 $247,500 $(17,331,666) $4,654,439
Common stock issued for
research and development,
compensation, and other
services (Note 5) - - 206,455 30,969 90,995 - - - 121,964
Common stock issued for
conversion of 6% cumulative
convertible Series A
preferred stock (Note 5) (94,920) (949) 379,680 56,952 (56,003) - - - -
Issuance of common stock
dividend distributable to
6% cumulative convertible
Series A preferred
stockholders (Note 5) - - 111,534 16,730 - (16,730) - - -
Accrued stock issuance
(Note 5) - - 275,000 41,250 206,250 - (217,155) - 30,345
Net loss for the three months
ended March 31, 1997 - - - - - - - (1,119,444)(1,119,444)
- ------------------------------------------------------------------------------------------------------------------------------------
Balances, March 31, 1997 1,248,580 $12,486 7,870,632 $1,180,595 $20,891,548 $23,440 $30,345 $(18,451,110)$3,687,304
- ------------------------------------------------------------------------------------------------------------------------------------
Common stock issued for
research and development,
compensation, and other
services (Note 5) - - 177,587 26,638 74,837 - - - 101,475
Common stock issued for
conversion of 6% cumulative
convertible Series A
preferred stock (Note 5) (31,927) (319) 127,708 19,156 (18,837) - - - -
Issuance of the June 30,1997
common stock dividend
distributable as of the July
common stock dividend to 6%
cumulative convertible
Series A preferred
stockholders (Note 5) - - - - 159,693 22,813 - (182,506) -
Accrued stock issuance
(Note 5) - - - - - - 11,531 - 11,531
Net loss for the three months
ended June 30, 1997 - - - - - - - (1,029,918)(1,029,918)
- ------------------------------------------------------------------------------------------------------------------------------------
Balances, June 30, 1997 1,216,653 $12,167 8,175,927 $1,226,389 $21,107,241 $46,253 $41,876 $(19,663,534)$2,770,392
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes consolidated financial statements.
F-4
<PAGE>
MEDICAL DEVICE TECHNOLOGIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1997
(unaudited)
<TABLE>
<CAPTION>
Common
Preferred Stock Common Stock Additional Stock
----------------- --------------- Paid-In To Be Deferred Accumulated
Shares Amount Shares Amount Capital Issued Compensation Deficit Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances, June 30, 1997 1,216,653 $12,167 8,175,927 $1,226,389 $21,107,241 $46,253 $ 41,876 $(19,663,534) $2,770,392
Common stock issued for
research and development,
compensation, and other
services (Note 5) - - 622,815 93,422 55,062 - - - 148,484
Common stock issued for
conversion of 6% cumulative
convertible Series A
preferred stock (Note 5) (1,216,653) (12,167) 4,866,612 729,992 (717,825) - - - -
Common stock dividend
distributable to
6% cumulative convertible
Series A preferred
stockholders (Note 5) - - 172,051 25,808 20,961 (22,813) - (23,956) -
Accrued stock issuance
(Note 5) - - 18,750 2,812 22,632 - (22,264) - 3,180
Net loss for the three months
ended September 30, 1997 - - - - - - - (1,047,892)(1,047,892)
- ------------------------------------------------------------------------------------------------------------------------------------
Balances, September,30 1997 0 $0 13,856,155 $2,078,423 $20,488,071 $23,440 $19,612 $(20,735,382)$1,874,164
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes consolidated financial statements.
F-5
<PAGE>
MEDICAL DEVICE TECHNOLOGIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
June 1, 1992 to
Increase (Decrease) in Cash and Cash Equivalents Nine Months Ended September 30, September 30, 1997
------------------------------------------
1997 1996 (Cumulative)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities
Net loss $ (3,197,254)$ (3,683,705)$ (16,587,626)
Adjustments to reconcile net loss
to net cash used in operations:
Loss from discontinued operations from
January 1 through May 31,1992 - - (100,599)
Stock paid for services 370,960 573,571 4,498,996
Compensation recognized relating to
accrued employee stock grants and warrants 45,056 62,999 445,556
Bad debt expense - - 394,720
Depreciation and amortization 268,250 233,190 1,871,808
Amortization of loan origination fees and
original issue discount - 798,750 942,620
Loss (gain) on disposal of fixed assets (2,678) 7,373 107,290
Reversal of litigation outstanding at end of prior year - - (286,996)
Loss on sale of marketable securities - - 48,290
Net unrealized loss on marketable securities - - 37,000
Loss on disposal of oil and gas operations - - 368,894
Increase (decrease) from changes in:
Accounts receivable (48,168) (10,093) (54,216)
Interest receivable - - 8,053
Amounts due from related party - - 1,682
Inventory (163,609) 16,377 (263,988)
Prepaid royalties (25,000) 15,000 (185,000)
Prepaid expenses and other assets 55,981 (47,111) (254,670)
Other assets (2,866) (6,662) (53,869)
Accounts payable 124,872 62,790 222,836
Termination agreement liability (98,667) 276,052 148,000
Accrued expenses and taxes (28,852) 29,628 119,784
- -------------------------------------------------------------------------------------------------------------------------------
Net cash used in operating activities (2,701,975) (1,671,841) (8,571,435)
- -------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities
Patent and marketing licensing costs - (380,703) (906,298)
Purchase of property and equipment (86,142) (104,382) (368,788)
Proceeds from sale of property and equipment 77,225 - 77,225
Other (proceeds from sale of marketable
securities and loan repayments) - - 175,188
- -------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (8,917) (485,085) (1,022,673)
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
MEDICAL DEVICE TECHNOLOGIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
June 1, 1992 to
Increase (Decrease) in Cash and Cash Equivalents Nine Months Ended September 30, September 30, 1997
------------------------------------------
1997 1996 (Cumulative)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from financing activities
Net borrowings from related party - - 22,608
Proceeds from preferred stock and warrant
issuance (net of offering costs) - 6,437,738 6,431,079
Proceeds from notes payable - 912,500 2,195,000
Principal payments on notes payable - (2,000,000) (2,050,000)
Proceeds from common stock to be issued - - 1,237,167
Proceeds from issuing common stock - - 1,364,052
Proceeds from warrant exercise - 275,000 275,000
Capital lease financing (1,103) (1,784) -
Advances on private common stock placement - - 296,440
- -------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (1,103) 5,623,454 9,771,346
- -------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (2,711,995) 3,466,528 177,238
Cash and cash equivalents, beginning of period 2,889,233 306,851 -
- -------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 177,238 $ 3,773,379 $ 177,238
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
MEDICAL DEVICE TECHNOLOGIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1997 1996
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES:
Payments for:
Interest $ - $91,559
Income taxes 800 1,600
Stock issued for:
Research and development $160,461 $319,808
Public relations and marketing services 50,046 86,252
Legal, professional, and employee services 119,400 124,270
Directors' fees 31,177 43,241
Manufacturing costs 9,876 -
------------------------------
$370,960 $573,571
------------------------------
Common stock dividends distributable and issued to 6% cumulative
convertible Series A preferred stockholders (Note 5) $206,462 $100,751
Non-cash investing activities:
Application of deposit to the purchase of property and equipment: $ - $36,000
Application of prepaid royalties to the purchase of license agreements: $ - $160,000
Reclassification of inventory to property and equipment: $ - $36,313
</TABLE>
Non-cash financing activities:
Short-term private placement notes in the amount of $625,000 were issued in
January 1996 along with preferred stock stated at $234,375, which was added to
the 1995 year end original issue discount.
During the second quarter of 1996, additional short-term notes in the
amount of $350,000 were issued along with common stock warrants valued at
$143,870, which was added to the 1995 year end original issue discount for a
total of $762,620.
During the first nine months of 1997 and 1996, deferred compensation
expense of $45,056 and $0 were recorded relating to accrued employee stock
grants in order to value such shares at the estimated fair market value at the
date of grant.
Pursuant to certain employee agreements in January and September 1997,
275,000 and 18,750 shares, respectively, of accrued employee common stock grants
were issued. According, deferred stock compensation of $247,500 and $25,444 were
reclassified to common stock and additional paid-in capital in the first and
third quarters, respectively (Note 5).
See accompanying notes to consolidated financial statements.
F-8
<PAGE>
MEDICAL DEVICE TECHNOLOGIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Statement of Information Furnished
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting only of normal and
recurring accruals) necessary to present fairly the Company's financial position
for the interim reporting period as of September 30, 1997, and the results of
operations for the three and nine month periods and cash flows for the nine
month periods ended September 30, 1997 and 1996. These results have been
determined on the basis of generally accepted accounting principles and
practices applied consistently with those used in the preparation of the
Company's 1996 Annual Report on Form 10-KSB.
The results of operations for the three month and nine month periods ended
September 30, 1997 are not necessarily indicative of the results to be expected
for any other period or for the full year.
Certain information and footnote disclosures normally included in financial
statements presented in accordance with generally accepted accounting principles
have been condensed or omitted. The accompanying consolidated financial
statements should be read in conjunction with the Company's audited consolidated
financial statements and notes thereto included in the Company's Annual Report
on Form 10-KSB for the year ended December 31, 1996.
Certain reclassifications have been made to the September 30, 1996
financial statements to conform to the September 30, 1997 presentation.
2. Inventory
The inventory balance shown at September 30, 1997 consisted of $123,502 of
finished goods, net of reserve of $14,387, $18,790 of work in process and
$121,696 of parts and materials. The inventory balance shown at December 31,
1996 consisted of $20,685 of finished goods, net of reserve of $7,900, $20,643
of work in process and $59,051 of parts and materials. Inventory is valued at
the lower of cost or market, on a first-in, first-out basis.
3. Loss Per Common Share
Loss per common share data is computed by dividing net loss (less any
preferred stock dividends) by the weighted average number of common shares
outstanding during each period. Warrants outstanding have not been considered in
the average number of common shares since the effect would be anti-dilutive.
Weighted average common shares outstanding includes the common stock to be
issued.
F-9
<PAGE>
4. Short-Term Notes Payable
On January 24, 1996, the Company completed its 1995 private placement (the
"1995 Private Placement") and issued additional short-term notes and an
additional 93,750 shares of Series I convertible preferred stock. Of the
additional $625,000 gross proceeds, $234,375 was allocated to the preferred
stock and represented additional original issue discount on the notes. The
Company utilized these proceeds for working capital.
All notes sold in the 1995 Private Placement bore interest at 10% per annum
and matured at the earlier of (i) the expiration of twelve months after their
issuance, (ii) receipt by the Company of at least $3,000,000 in gross proceeds
from (a) a public or private sale of its securities, (b) a joint venture, or (c)
a licensing agreement. The original issue discount was fully amortized and
recorded as interest expense as of December 31, 1996. Subsequent to the public
offering of 6% cumulative convertible Series A preferred stock and redeemable
common stock purchase warrants in June 1996, the Company repaid these private
placement notes in full.
During the second quarter of 1996, the Company issued $350,000 in principal
amount of 12% short-term notes payable to four individuals and two of the
Company's directors to finance its operations until its public offering could be
completed. Subsequent to the public offering in June 1996, the Company repaid
these short-term notes in full. Total interest paid related to these notes
amounted to $10,500, which was paid in the year ended December 31, 1996. In
connection with the issuance of these short-term notes, the Company also issued
137,180 warrants to purchase 137,180 shares of common stock to the six
individuals at exercise prices from $1.26 to $1.38, which vested immediately and
expire three years from issuance. In connection with the issuance of these
warrants the Company recognized, based on a valuation of these warrants,
$143,870 as additional interest expense during the year ended December 31, 1996.
F-10
<PAGE>
5. Stockholders' Equity
Preferred Stock
In April 1995, the Company amended its Articles of Incorporation to
authorize 10,000,000 shares of $.01 par value preferred stock. In December 1995,
the Company further amended its Articles of Incorporation to authorize 187,500
of Series I convertible preferred stock in conjunction with its private
placement of short-term notes payable (Note 4). As a result of this private
placement offering, the Company issued 153,750 shares of Series I convertible
preferred stock with an assigned value of $384,375. On January 19, 1996, the
Company again amended its Articles of Incorporation to increase the authorized
shares of Series I convertible preferred stock from 187,500 to 247,500. On
January 24, 1996, the Company issued an additional 93,750 shares of Series I
convertible preferred stock. These preferred shares were considered an original
issue discount associated with the notes payable and were amortized over
approximately the first five months of 1996.
On June 24, 1996, the Company completed a public offering of 1,500,000
shares of 6% cumulative convertible Series A preferred stock (the "Preferred
Stock") and 1,500,000 redeemable common stock purchase warrants (the "Redeemable
Warrants") resulting in gross proceeds of $7.65 million. The Company received a
net of approximately $4 million after repayment of short-term debt and costs
associated with the offering. The Preferred Stock was convertible into four (4)
shares of common stock at $1.25 per share and each Redeemable Warrant enables
the holder to purchase two shares for a total of $3.75. As part of the terms of
this offering, all of the holders of the Series I convertible preferred stock
exchanged their shares of preferred stock for the Preferred Stock on a one for
one basis at no cost. The holders of the Series I convertible preferred stock
agreed to hold their the Preferred Stock for thirteen (13) months until July 24,
1997.
In August 1996, the Company received net proceeds of $459,800 as the result
of the underwriter's partial exercise of its over-allotment option under the
June 24, 1996 public offering. These proceeds were offset by additional offering
costs of $93,203 related to the June 1996 public offering that were recorded in
the third quarter.
During the fourth quarter of 1996, 504,000 shares of the Preferred Stock
were converted into 2,016,000 shares of common stock, during the first quarter
of 1997, 94,920 shares of Preferred Stock were converted into 379,680 shares of
common stock, and during the second quarter of 1997, 31,927 shares of Preferred
Stock were converted into 127,708 shares of common stock. On July 24, 1997, each
of the then outstanding shares of Preferred Stock by their terms automatically
converted into four (4) shares of common stock.
F-11
<PAGE>
Common Stock
In June 1996, the Company effected a one-for-two reverse split of its
common stock. All share balances have been retroactively adjusted to reflect the
reverse stock split.
On September 9, 1996, the company issued 71,658 shares of common stock as a
dividend for the period through August 31, 1996 for the Preferred Stockholders
of record as of August 12, 1996.
On November 11, 1996, the Company declared a common stock dividend of
111,534 shares to Preferred Stockholders of record as of December 10, 1996. On
June 12, 1997 the Company declared a common stock dividend of 152,088 shares to
Preferred Stockholders of record as of June 27, 1997 and on July 24, 1997
declared a common stock dividend of 19,963 shares to Preferred Stockholders of
record as of July 24, 1997. The shares for the November 1996 dividend and for
the June 1997 dividend were issued in January 1997 and July 1997, respectively
and, accordingly, were recorded as common stock dividend distributable and
additional paid-in capital at December 31, 1996 and at June 30, 1997,
respectively. The number of shares paid on the Preferred Stock as a dividend was
calculated based on the 10 day moving average price of the common stock during
the 30 days prior to the declaration date, subject to a maximum price of $3.00
and minimum price of $1.20 per share. Fractional shares were rounded up.
During the year ended December 31, 1996, as a result of individuals
exercising 162,500 private warrants, the Company issued 162,500 shares of common
stock for $275,000. No warrants were exercised to date in 1997.
Pursuant to certain employment agreements in January and September 1997,
275,000 and 18,750 shares of accrued employee common stock grants were issued,
respectively. Accordingly, deferred stock compensation of $247,500 and $25,444
was reclassified to common stock and additional paid-in capital in the first and
third quarters of 1997, respectively.
In each of the four most current years, the Company's board of directors
have annually approved a stock compensation plan, the most recent which
registered 1,500,000 shares of common stock under Form S-8 on August 6, 1997,
whereby services are obtained in exchange for issuance of free trading stock of
the Company. Shares may be awarded under this plan until January 10, 1999.
During the nine months ended September 30, 1997 and 1996, 1,175,607 and 405,030
shares, respectively, of common stock under Form S-8 registrations were issued
for directors fees, research and development, advertising and public relations,
compensation and legal and professional services provided to the Company.
Warrants
The Company has issued warrants in connection with various private
placements, the secondary public offering in 1996, and certain other agreements
with compensation to employees and consultants. The Company's private warrants
allow the holder to purchase one share of the Company's common stock at various
specified prices and the public warrants each allow the holder to purchase two
shares at $1.875 per share.
F-12
<PAGE>
6. New Accounting Standards
On March 3, 1997, the FASB issued Statement of Financial Accounting
Standards No. 128, "Earnings per Share" ("SFAS No. 128"). This pronouncement
provides a different method of calculating earnings per share than is currently
used in accordance with APB 15, "Earnings per Share". SFAS No. 128 provides for
the calculation of Basic and Diluted earnings per share. Basic earnings per
share includes no dilution and is computed by dividing income available to
common shareholders by the weighted average number of common shares outstanding
for the period. Diluted earnings per share reflects the potential dilution of
securities that could share in the earnings of an entity, similar to fully
diluted earnings per share. This pronouncement is effective for fiscal years and
interim periods ending after December 15, 1997; early adoption is not permitted.
The Company has not determined the effect, if any, of adoption on its EPS
computations.
Statement of Financial Accounting Standards No. 129 "Disclosure of
Information about Capital Structure" ("SFAS No. 129") issued by the FASB is
effective for financial statements ending after December 15, 1997. The new
standard reinstates various securities disclosure requirements previously in
effect under Accounting Principles Board Opinion No. 15, which has been
superseded by SFAS No. 128. The Company does not expect adoption of SFAS No. 129
to have a material effect, if any, on its financial position or results of
operations.
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" ("SFAS No. 130") issued by the FASB is effective for
financial statements with fiscal years beginning after December 15, 1997.
Earlier application is permitted. SFAS No. 130 establishes standards for
reporting and display of comprehensive income and its components in a full set
of general purpose financial statements. The Company has not determined the
effect on its financial position or results of operations, if any, from the
adoption of this statement.
Statement of Financial Accounting Standards No. 131, "Disclosure about
Segments of an Enterprise and Related Information" ("SFAS No. 131") issued by
the FASB is effective for financial statements beginning after December 15,
1997. The new standard requires that public business enterprises report certain
information about operating segments in complete sets of financial statements of
the enterprise and in condensed financial statements of interim periods issued
to shareholders. It also requires that public business enterprises report
certain information about their products and services, the geographic areas in
which they operate and their major customers. The Company does not expect
adoption of SFAS No. 131 to have a material effect, if any, on its results of
operations.
F-13
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 10QSB
9/30/97 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-START> JAN-01-1997 JAN-01-1997
<PERIOD-END> SEP-30-1997 SEP-30-1997
<CASH> 177,238 177,238
<SECURITIES> 0 0
<RECEIVABLES> 56,730 56,730
<ALLOWANCES> 0 0
<INVENTORY> 263,988 263,988
<CURRENT-ASSETS> 601,284 601,284
<PP&E> 309,911 309,911
<DEPRECIATION> 121,410 121,410
<TOTAL-ASSETS> 2,448,966 2,448,966
<CURRENT-LIABILITIES> 574,802 574,802
<BONDS> 0 0
0 0
0 0
<COMMON> 1,226,389 1,226,389
<OTHER-SE> 1,531,836 1,531,836
<TOTAL-LIABILITY-AND-EQUITY> 2,448,966 2,448,966
<SALES> 56,750 (1,950)
<TOTAL-REVENUES> 56,750 (1,950)
<CGS> 91,236 22,636
<TOTAL-COSTS> 91,236 22,636
<OTHER-EXPENSES> 3,238,468 1,028,462
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (50,700) (5,156)
<INCOME-PRETAX> (3,197,254) (1,047,892)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (3,197,254) (1,047,892)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (3,197,254) (1,047,892)
<EPS-PRIMARY> (.37) (.09)
<EPS-DILUTED> 0 0
</TABLE>
