US 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 March 31, 1998.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [No Fee Required]
For the transition period from __________________ to ____________________
Commission File Number 0-12365
-------
MEDICAL DEVICE TECHNOLOGIES, INC.
---------------------------------
(Name of small business issuer in its charter)
Utah 58-1475517
---------------- ---------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
9171 Towne Centre Drive, Suite 355, San Diego, California 92122
---------------------------------------------------------------
(Address of principal executive offices)
Issuer's telephone number: (619) 455-7127
--------------
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 ___
State issuer's revenues for its most recent fiscal year $62,750.
The aggregate market value of the voting stock held by non-affiliates computed
by reference to the price at which the stock was sold, or the average bid and
asked prices of such stock, as of April 30, 1998, was $563,422.
As of April 30, 1998, Registrant had outstanding 560,312 shares of common stock
and 56,363 redeemable common stock purchase warrants.
Transitional Small Business Disclosure Format (check one): Yes ___ No. X
<PAGE>
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
Consolidated Balance Sheets as of March 31, 1998 and
December 31, 1997............................................ F-1
Consolidated Statements of Operations for the Three Months
Ended March 31, 1998 and 1997................................ F-3
Consolidated Statement of Stockholders' Equity for the
Three Months Ended March 31, 1998............................ F-4
Consolidated Statements of Cash Flows for the Three Months Ended
March 31, 1998 and 1997...................................... F-5
Notes to Consolidated Financial Statements................... F-8
Item 2. Management's Discussion And Analysis And Plan Of Operation... 1
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............................................ 9
Item 6. Exhibits and Reports on Form 8-K............................. 9
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
See attached consolidated financial statements and notes thereto for the period
ended March 31, 1998.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION
The following discussion of the Company's financial condition and results of
operations 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.
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. The Company undertakes no obligation to revise any forward-looking
statements in order to reflect events or circumstances that may subsequently
arise. 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.
Description of Business
- -----------------------
Medical Device Technologies, Inc. (the "Company") was incorporated on February
6, 1980, under the laws of the State of Utah, initially under the name of Gold
Probe, Inc. In September 1981, the Company and the Hailey Oil Company, Inc., a
Mississippi corporation, entered into an Agreement and Plan of Reorganization
whereby the Company acquired Hailey Oil Company, Inc. and exchanged 4,500,000
shares of its Common Stock for all the issued and outstanding shares of Hailey
Oil Company, Inc. Also, pursuant to the reorganization in January 1982, the
Company changed its name to Hailey Energy Corporation, effected a one (1) for
five (5) reverse split of its Common Stock, and decreased its authorized number
of shares to 25,000,000. In October 1986, the number of authorized shares of the
Company was increased to 100,000,000. In November 1990, the Company effected a
one (1) for thirty (30) reverse split of its Common Stock and increased the par
value of its Common Stock to $0.15 per share. In November 1992, the Company
changed its name from "Hailey Energy Corporation" to "Cytoprobe Corporation". In
January 1994, the Company effected a one (1) for six (6) reverse split of its
Common Stock. In April 1995, the Company changed its name to Medical Device
Technologies, Inc. to reflect the Company's broadening base of medical products.
In June 1996, the Company effected a one (1) for two (2) reverse split of its
Common Stock. On March 6, 1998, the Company effected a one (1) for thirty-five
(35) reverse split of its Common Stock. The par value of the Company's Common
Stock remained at $0.15 per share and the number of authorized shares of Common
Stock (100,000,000) remained unchanged.
1
<PAGE>
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. As of March
31, 1998, the Company's Common Stock, par value $.15 per share (the "Common
Stock") is traded over-the-counter under the symbol "MEDD". The Company's
Redeemable Common Stock Purchase Warrants (the "Redeemable Warrants") and Common
Stock, which previously traded on the National Association of Securities Dealers
Automated Quotation (NASDAQ) SmallCap Market under the symbols MEDDW and MEDD
were delisted by NASDAQ on September 30, 1997 and March 26, 1998, respectively.
The Company has filed a formal objection to NASDAQ's delisting of its Common
Stock. The Company's 6% Cumulative Convertible Series A Preferred Stock, par
value $.01 per share (the "Preferred Stock"), which previously traded on the
NASDAQ SmallCap Market under the symbol "MEDDP", converted to Common Stock at a
ratio of 4 (four) shares of Common Stock to 1 (one) share of Preferred Stock on
July 24, 1997. There were no shares of Preferred Stock outstanding at March 31,
1998.
Effective as of January 1, 1994, the Company, (A Development Stage Company), has
been engaged full-time in identifying, developing and bringing to market medical
devices which the Company believes are innovative, represent improvements over
existing products, or are responsive to a presently unfulfilled need in the
marketplace. The Company's strategy consists of: (i) identifying patented
technologies in the medical device field that it believes have potential
commercial viability but still require refinement and regulatory clearance, (ii)
license or acquire the technologies, (iii) complete product development and
obtain the requisite regulatory clearance of such products, and (iv) attempt to
commercialize or sublicense such technologies by entering into agreements with
one or more entities for clinical development, manufacturing and marketing of
such products. Through this strategy, the Company believes that it can play a
role in bridging the gap between viable patented technologies and their
commercialization. The Company identified and acquired three licenses to develop
the following products, the Fluid Alarm System (FAS), formerly the Personal
Alarm System (PAS), the Cell Recovery System (CRS) and the Intracranial Pressure
Monitoring System (ICP). The Company believes the FAS and CRS have potential
commercial viability. The FAS is a device which monitors the integrity of
infection control barriers, such as surgical gloves and gowns worn during
medical procedures. The 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 Company's license
for the ICP was revoked by the licensor in January 1998 after the Company failed
to cure a default in the license agreement with the licensor for non-payment of
royalties. As a result, the Company recorded an impairment loss on the ICP
license in the amount of $487,784 in 1997. The Company deemed the ICP license to
have no future value.
In the immediate future, the primary focus of the Company's activities will be
to complete a corporate acquisition of or merger with another entity with
greater financial resources for the purpose of providing additional resources to
fund on-going business activities and provide access to new products and
markets, as well as funding its current negative working capital position.
In the longer term the Company needs to obtain additional financing for its
working capital requirements associated with the costs of development, marketing
and sales of its medical devices. The Company currently intends to continue
marketing the FAS, and completing the regulatory and development process
relative to the CRS so that the Company can also bring this product to market.
On an ongoing basis, the Company also receives opportunities from time to time
to license other patented technologies in the medical device field. Depending on
the specific device and other circumstances, such as the Company's then-current
financial and operating situation, the Company may pro-actively attempt, on a
limited basis, to identify and license additional patented technologies in the
medical device field.
On June 23, 1997 the Company announced that it had contracted to purchase
certain products and distribution rights from Boehringer Mannheim, Inc.
("Boehringer") for $1.35 million. On November 14, 1997, the Company announced
that it had canceled the contract with Boehringer.
On March 11, 1998, the Company announced it had entered into a letter of intent
to acquire Vision Diagnostics, Inc. for undisclosed consideration. Vision
Diagnostics, Inc. owns medical diagnostic imaging centers that provide
diagnostic imaging technology to the US medical marketplace.
2
<PAGE>
Acquisitions
- ------------
The Company also plans to seek, investigate and, if such investigation warrants,
to acquire controlling interest in business opportunities presented to it by
persons or firms who or which desire to seek the perceived advantages of an
Exchange Act registered corporation. The Company will not restrict its search to
any specific business, industry, or geographical location, although does plan to
concentrate its search in the medical business in general. However, the Company
may participate in a business venture of virtually any kind or nature.
The Company may seek a business opportunity in the form of firms which have
recently commenced operations, are developing companies in need of expansion
into new products or markets, are seeking to develop a new product or service or
established mature businesses.
In seeking business opportunities, the management decision of the Company will
be based upon the objectives of seeking long-term appreciation in the value of
the Company. Current income will only be a minor factor in such decisions.
Although it is unlikely that the Company will be able to participate in more
than one business opportunity concurrently, management may, in its sole
discretion, elect to enter into more than one acquisition if it believes these
transactions can be effected on terms favorable to the Company. This potential
lack of diversification may not permit the Company to offset potential losses
from one business opportunity against profits from another and should be
considered a substantial risk to shareholders of the Company.
The analysis of new business opportunities will be pursued under guidelines and
objectives established by the Company's officers and directors. The Company will
have unrestricted flexibility in seeking, analyzing and participating in
business opportunities. In these efforts, the Company will consider the
following, among other, factors:
(a) potential for growth in revenues and profits, as indicated by new
technology, anticipated market expansion or new products;
(b) competitive position compared to other firms of similar size and
experience within the industry segment, as well as within the
industry as a whole;
(c) strength and diversity of management, either in place or
scheduled for recruitment;
(d) capital requirements and anticipated availability of required
funds to be provided by the target company for operations,
through the sale of additional securities, the formation of joint
ventures or similar arrangements, or from other sources;
(e) the cost of participation by the Company as compared to the
perceived tangible and intangible values and potential;
(f) the value of existing and accessibility of required resources
other than capital including management expertise, personnel, raw
materials, services, professional assistance and other required
items; and
(g) such other relevant factors as may arise from time to time,
including investor and market makers, if any, interest.
In applying the foregoing criteria, no one of which is now known to be
controlling, management will attempt to analyze all relevant factors and make a
determination based upon reasonable investigative measures and available data.
Potentially available business opportunities may occur in many different
industries and at various stages of development, all of which will make the task
of comparative investigation and analysis of such business opportunities
extremely difficult and complex. Because of the Company's lack of capital, the
Company may not discover or adequately evaluate adverse facts about an
opportunity to be acquired.
The Company is unable to predict when it may participate in a business
opportunity. It expects, however, that the analysis of specific proposals and
the selection of a business opportunity may take a substantial amount of time
during the coming fiscal year.
3
<PAGE>
Prior to making a decision to participate in a business opportunity, the Company
will generally request that it be provided with written materials regarding the
business opportunity and containing such items as: (I) a description of product,
service and company history; (ii) management resumes; (iii) financial
information (including projections and audited financial statements, if
available); (iv) evidence of existing patents, trademarks or service marks or
rights thereto; (v) an explanation of proprietary products and services; vi)
present and proposed forms of compensation to management; (vii) a description of
transactions between the target and its affiliates during relevant periods;
(viii) a description of present and required facilities; (ix) an analysis of
risks and competitive conditions; (x) a financial plan of operation and
estimated capital requirements; and (xi) other information deemed relevant under
the circumstances, including investor and market makers, but only after the
release of public information on the target.
As part of the Company's investigation, officers and directors will meet
personally with management and key personnel, visit and inspect material
facilities, obtain independent analysis or verification of certain information
provided, check references of management and key personnel and take other
reasonable investigative measures to the extent reasonably allowed by the
Company's limited financial resources. Management of the Company will utilize
the services of its present attorney and accountants in the investigation of
prospective acquisitions. The Company may also utilize the services of hired
consultants.
The Company anticipates that the selection of a business opportunity in which to
participate will be complex and extremely risky. Because of general economic
conditions, rapid technological advances being made in some industries and
shortages of available capital, management believes that there are numerous
firms seeking the perceived benefits of a publicly registered corporation. Such
perceived benefits may include facilitating or improving the terms on which
additional equity financing may be sought, providing liquidity for incentive
stock options or similar benefits to key employees, providing liquidity (subject
to restrictions of applicable statutes), for all shareholders and other factors.
Potentially available business opportunities may occur in many different
industries and at various stages of development, all of which will make the task
of comparative investigation and analysis of such business opportunities
extremely difficult and complex.
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 operations should be read in
conjunction with the consolidated financial statements and notes thereto
appearing in Part 1, Item 1 in this Form 10-QSB.
In the immediate future, in order to fund its current negative working capital
position and to continue to operate, the Company currently intends to seek a
corporate acquisition of or merger with another entity with greater financial
resources and to seek to complete additional private placements of debt and/or
equity. The Company's ability to complete an acquisition or merger or to obtain
additional sources of financing cannot be assured. The Company also seeks to
achieve certain minimum sales of the FAS device during the next twelve months,
but these would require the Company obtaining sufficient working capital to
support marketing operations and this cannot be assured. The long-term viability
of the Company is dependent on its ability to obtain additional funding to
profitably develop and market its current products and to obtain the financing
necessary to fund its operations.
General
- -------
The following management discussion and analysis and plan of operation should be
read in conjunction with the consolidated financial statements and notes thereto
referred to in Item 1.
4
<PAGE>
Results of Operations
- ---------------------
The three months ended March 31, 1998 compared to three months ended March 31,
1997.
Revenues
- --------
Operating revenues for the first three months of 1998 were $1,900 compared to
$45,500 for the same period in 1997. The decrease of 95.8% is a result of, among
other factors, a substantial decrease in promotional resources and distributor
recruiting activities compared to that in the same period of 1997 when the FAS
launch and public relations campaign was initiated. The Company is continuing,
although with greatly reduced capital resources and personnel, to recruit
distributors for the FAS worldwide. The FAS accounted for all sales revenue in
1998 and 1997.
Gross Profit
- ------------
Gross profit for the first three months of 1998 was $1,281 as compared to $6,280
for the first three months of 1997. The decrease is the result of greatly
reduced sales and production activities.
Operating Expenses
- ------------------
Research and Development
Research and development costs (gains) in the first quarter of 1998 were
$(3,394), as compared to $319,691 in 1997, representing a decrease of 101.1%.
This decrease was due to postponement of research and development expenditures
on all products in 1998 coupled with refunds on the CRS clinical trials
insurance and other services as compared to 1997.
Sales, General and Administrative
Sales, general and administrative costs were $291,689 in the first quarter of
1998 as compared to $835,161 in 1997, representing a decrease of 65.1%. This
decrease was primarily the result reduced FAS promotion and distributor
recruiting efforts and corporate downsizing of the sales, marketing, general and
administrative staff and management as compared to 1997.
Losses
The Company's net loss for the first quarter of 1998 was $296,610 as compared to
$1,119,444 in 1997, representing a 73.5% decline in the net loss. This reduced
loss was primarily attributable to the postponement of research and development
expenditures, the reduction of FAS promotion and the sales, marketing, general
and administrative personnel downsizing in 1998 as compared to 1997. Loss per
common share for the first quarter of 1998 was $0.64 as compared to $5.17
representing a reduction in loss per share of 87.6%. This reduction in loss per
common share was primarily attributable to the reduced net loss in the first
quarter of 1998 compared to 1997 and secondarily attributable to the increase in
the weighted average number of common shares outstanding in 1998 as compared to
1997.
5
<PAGE>
Liquidity and Capital Resources
- -------------------------------
To date, the Company has funded its capital requirements for its current medical
device operations from the public and private sale of debt and equity securities
and the issuance of Common Stock in exchange for services. The Company's cash
position at March 31, 1998 was $26,468 as compared to $45,505 at December 31,
1997, representing a 41.8% decrease. In the first three months of 1998, $119,037
of net cash was used for operating activities and $0 was invested in property
and equipment. The Company received $100,000 from the proceeds of a private
placement of a convertible note in the first quarter of 1998. Net cash used in
operating activities in 1998 consisted principally of a net loss of $296,610.
This net loss was partially offset by a decrease in other net assets (excluding
cash) of $21,843, $87,915 in common stock paid for services in lieu of cash,
plus depreciation and accrued compensation expense of $67,815.
Changes in current assets and current liabilities resulted in a deficit in the
Company's working capital position of $616,076 at March 31, 1998 as compared to
a negative working capital of $475,196 at December 31, 1997. The Company's
current deficit in working capital requires the Company to obtain funds in the
short-term to be able to continue in business, and in the longer term to
continue to market its products and to fund research and development on products
not yet ready for market. The Company is seeking to fund these and other
operating needs in the next 12 months from funds to be obtained through a
corporate acquisition of or merger with another entity with greater financial
resources, or from the proceeds of additional private placements or public
offerings of debt or equity securities, or both.
In the immediate future, in order to fund its current negative working capital
position and to continue to operate, the Company currently intends to seek a
corporate acquisition of or merger with another entity with greater financial
resources and to seek to complete additional private placements of debt and/or
equity. The Company's ability to complete an acquisition or merger or to obtain
additional sources of financing cannot be assured. The Company also seeks to
achieve certain minimum sales of the FAS device during the next twelve months,
but these would require the Company obtaining sufficient working capital to
support marketing operations and this cannot be assured. The long-term viability
of the Company is dependent on its ability to obtain additional funding to
profitably develop and market its current products and to obtain the financing
necessary to fund its operations.
During the fourth quarter of 1997, the Company issued $100,000 ($50,000 to three
of the Company's directors) in principal amount of 36% short-term convertible
notes payable, due May 18, 1998, to five individuals to finance operations until
a corporate acquisition could be completed. Until payment in full, the unpaid
principal amount of these notes, or any portion may, at the election of the
noteholder at any time before the due date, be converted at the conversion price
of $2.35 per share of Common Stock. Interest paid to these individuals and
to the directors was $0 at December 31, 1997 and March 31, 1998. Accrued
interest amounted to $4,400 for the year ended December 31, 1997 to $13,400 as
of March 31, 1998. As additional consideration for these loans, the individual
lenders, including the directors, were awarded an aggregate of warrants to
purchase 1,429 shares of Common Stock for every $12,500 loaned to the Company at
an exercise price of $4.20 per share (see Note 4). In connection with the
issuance of the warrants to the individuals, the Company did not recognize
additional interest expense, as the value of the warrants was deemed to be
immaterial. The interest rate and terms of these notes were made at arms length.
During the first quarter of 1998, the Company issued $100,000 in principal
amount of a short-term convertible notes payable, due March, 6 1999 or the date
the Company receives funding from any offering or merger with another
corporation, to one individual to finance operations until a corporate
acquisition could be completed. Until payment in full, the unpaid principal and
accrued interest amounts of this note, may be converted, at the option of the
noteholder, into common shares of the Company at any time prior to repayment
thereof at a conversion price per share of fifty (50%) percent of the previous
thirty day average trading bid price as of the date of conversion. This note
accrues interest at a rate per annum equal to one (1%) percent over the
referenced prime lending rate announced from time to time by Bank of America in
San Francisco, California. Accrued interest amounted to $660 as of March 31,
1998.
The Company is seeking to fund its immediate and longer-term working capital
needs from funds to be obtained through a corporate acquisition or merger with
another entity with greater financial resources or from the proceeds of
additional private placements or public offerings of debt or equity securities.
These funds could be partially supplemented by certain minimum anticipated sales
of the FAS in 1998.
6
<PAGE>
During the next twelve months, the Company will be required to seek additional
sources of financing through private placement of debt and/or equity securities,
which cannot be assured. In the event the Company cannot complete a corporate
acquisition or merger with another entity with greater financial resources or
obtain additional financing, the Company would have to further curtail its
operations due to lack of funds. The long-term viability of the Company is
dependent upon obtaining the financing necessary to fund its current working
capital deficit, funding the operating requirements associated with marketing
and developing its current products and to profitably develop and market new
products.
Net Operating Loss Carryforward
- -------------------------------
At March 31, 1998, the Company had approximately $20,957,000 in net operating
loss carryovers to offset future taxable income. These carryovers will expire in
various years through 2012. As a result of a change in ownership, federal tax
rules impose limitations on the use of net operating losses. The limitations
will reduce the amount of these benefits that will be available to offset future
taxable income each year, starting with the year of an ownership change, for
which the issuance of the Preferred Stock in the Company's June 1996 public
offering was deemed to be. The dollar amount of these limitations is
indeterminable at this time. In addition, the Company provides a valuation
allowance for deferred tax assets when it is more likely than not, based on
available evidence, that some portion or all of the deferred tax assets will not
be realized. In management's opinion, it cannot determine if it is more likely
than not that the Company will generate sufficient future taxable income before
2012, the year after which all current available net operating loss
carryforwards expire, to utilize all of the Company's deferred assets. A
valuation allowance has been recognized for the full amount of the deferred tax
assets of $7,810,298.
New Accounting Pronouncements
- -----------------------------
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 adopted SFAS No. 130 on January 1,
1998 and it had no effect on its financial position or results of operations.
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 with fiscal years 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
adopted SFAS No. 131 on January 1, 1998 and it had no effect on its financial
position or results of operations.
7
<PAGE>
PLAN OF OPERATION
Emergence from a Development Stage Company
- ------------------------------------------
The Company is seeking to emerge in 1998 from a development stage to an
operating company through a corporate acquisition or merger with another
operating entity with greater financial resources or from the proceeds of
additional private placements or public offerings of debt or equity securities.
Such proceeds would be used to fund marketing for the FAS and additional
clinical testing, continued development, FDA filing, and marketing of the CRS.
The Company's Capital Requirements
- ----------------------------------
The Company's greatest cash requirements during 1998 will be for funding, in the
immediate future, its deficit in working capital, and in the longer term,
obtaining the working capital necessary for marketing the FAS, and additional
clinical testing, continued development, FDA filings of the CRS, and selling,
general and administrative expenses. The funding for costs and build-up of
working capital necessary for the marketing of the FAS could be partially
supplemented by certain minimum anticipated sales of the FAS in 1998.
The Company is seeking to fund these and other operating needs in the next 12
months from funds to be obtained through a corporate acquisition or merger with
another entity with greater financial resources or from the proceeds of
additional private placements or public offerings of debt or equity securities.
If a corporate acquisition or merger with another entity or private placement is
not completed, the Company will be required to further reduce costs and seek
alternative financing sources which cannot be assured. Consequently, the
Company's operating outlook is not assured.
Subsequent to the next 12 months, the Company currently plans to finance its
long-term operations and capital requirements with the profits and funds
generated from the sales of its products as well as through new private
financings and public offerings of debt and equity securities.
Year 2000
- ---------
The Company's management has been assured by its current accounting software
manufacturer and independent consultants that all necessary modifications for
the year 2000 have been or will be made and tested on a timely basis. The
Company may choose to acquire different accounting software prior to the year
2000 and base its decision on the ability to provide uninterrupted performance
in and beyond the year 2000.
Should the Company undertake any product enhancement or new product development
projects which require either internal or external use of a yearly calendar, its
product development documentation will explicitly address accommodation of the
year 2000.
8
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Refer to the Company's Form 10-KSB for the year ended December 31, 1997.
In January 1998, the Company was sued for payment of work allegedly performed
for the Company by a third party in the amount of approximately $93,000. The
Company is currently negotiating with the third party, but it is uncertain
whether a mutually agreeable settlement can be reached and litigation avoided.
The Company has accrued the $93,000 in accounts payable as of March 31, 1998. If
the Company can not reach such a settlement with the third party, accelerated
payments of amounts due, if any, and/or litigation expense could have a material
adverse effect on the Company if it is not able to raise additional capital
through an acquisition or merger, or through the placement of debt or equity
securities, or both.
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
Effective March 6, 1998, the directors of the Company approved a one (1) for
thirty-five (35) reverse split of the common stock in order to meet NASDAQ
listing requirements. There were no changes in the common stock voting rights,
par value or authorized shares.
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
Not Applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit 27 Financial Data Schedule.
The Company filed a Current Report on Form 8-K which was issued April 16, 1998.
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.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ M. Lee Hulsebus Chief Executive Officer, President, May 14, 1998
- ------------------------ Chief Financial Officer,
M. Lee Hulsebus, Chairman Principal Accounting Officer
and Secretary
9
<PAGE>
<TABLE>
MEDICAL DEVICE TECHNOLOGIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
(unaudited)
------------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 26,468 $ 45,505
Accounts receivable (net of allowance of $46,473 and $46,473 15,162 15,162
Inventory (net of reserve of $6,275 and $5,711) 189,074 189,638
Prepaid expenses and other assets 10,877 44,391
- ---------------------------------------------------------------------------------------------------------
Total current assets 241,581 294,696
- ---------------------------------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT:
Furniture and fixtures 105,188 105,188
Machinery and equipment 199,373 199,373
Equipment under capital lease 5,349 5,349
- ---------------------------------------------------------------------------------------------------------
309,910 309,910
Less accumulated depreciation (151,420) (136,979)
- ---------------------------------------------------------------------------------------------------------
NET PROPERTY AND EQUIPMENT 158,490 172,931
- ---------------------------------------------------------------------------------------------------------
LICENSE AGREEMENTS
(net of accumulated amortization of $796,293 and $745,570) 1,028,519 1,079,242
OTHER ASSETS 16,834 16,834
- ---------------------------------------------------------------------------------------------------------
$ 1,445,424 $ 1,563,703
=========================================================================================================
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-1
<PAGE>
<TABLE>
MEDICAL DEVICE TECHNOLOGIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
(unaudited)
------------- -------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 468,647 $ 454,977
Accrued expenses 74,427 100,332
Current obligation under termination agreement 114,583 114,583
Current convertible notes payable (Note 4) 200,000 100,000
- ---------------------------------------------------------------------------------------------------------
Total current liabilities 857,657 769,892
Commitments and Contingencies
STOCKHOLDERS' EQUITY (NOTE 5)
Series I convertible preferred stock (247,500 shares
authorized; 0 issued and outstanding) 0 0
6% cumulative convertible Series A preferred stock,
$.01 par value (1,972,500 shares authorized; 0
and 0 shares issued and outstanding) 0 0
Preferred stock, $.01 par value (10,000,000 shares authorized;
0 shares issued and outstanding) 0 0
Common stock, $.15 par value (100,000,000 shares
authorized; 516,643 and 436,262 outstanding) 77,496 65,439
Common stock to be issued (715 shares) 23,440 23,440
Additional paid-in capital 22,678,911 22,603,053
Deferred stock compensation 25,443 22,792
Accumulated deficit ($18,069,767 and $17,773,157 accumulated
losses during the development stage through March 31, 1998
and December 31, 1997 (22,217,523) (21,920,913)
- ---------------------------------------------------------------------------------------------------------
Total stockholders' equity 587,767 793,811
- ---------------------------------------------------------------------------------------------------------
$ 1,445,424 $ 1,563,703
==========================================================================================================
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-2
<PAGE>
<TABLE>
MEDICAL DEVICE TECHNOLOGIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<CAPTION>
June 1,1992 to
Three Months Ended March 31, March 31, 1998
---------------------------------
1998 1997 (Cumulative)
===============================================================================================================
<S> <C> <C> <C>
NET SALES $ 1,900 $ 45,500 $ 90,843
COST OF SALES 619 39,220 191,102
- ---------------------------------------------------------------------------------------------------------------
GROSS PROFIT (LOSS) 1,281 6,280 (100,259)
OPERATING EXPENSES:
Research and development (3,394) 319,691 3,654,932
Sales, general and administrative 291,689 835,161 11,978,437
Loss on impairment of license agreement 487,784
- ---------------------------------------------------------------------------------------------------------------
LOSS FROM CONTINUING OPERATIONS (287,014) (1,148,572) (16,221,412)
OTHER INCOME (EXPENSE):
Other income 25,000
Interest income 29,128 150,127
Interest expense (9,596) (1,046,422)
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 (296,610) (1,119,444) (17,177,997)
DISCONTINUED OPERATIONS (520,396)
LOSS FROM DISPOSAL OF OIL AND GAS OPERATIONS (371,374)
- ---------------------------------------------------------------------------------------------------------------
NET LOSS $ (296,610) $ (1,119,444) $ (18,069,767)
===============================================================================================================
LOSS PER SHARE:
BASIC AND DILUTED LOSS PER COMMON SHARE $ (0.64) $ (5.17)
===========================================================================================
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 465,937 216,400
===========================================================================================
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-3
<PAGE>
<TABLE>
MEDICAL DEVICE TECHNOLOGIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(Unaudited)
<CAPTION>
PREFERRED STOCK COMMON STOCK ADDITIONAL
--------------- ------------ PAID-IN
SHARES AMOUNT SHARES AMOUNT CAPITAL
------ ------ ------ ------ -------
(Note 5)
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1998 0 0 436,262 $65,439 $22,603,053
Stock issued for:
Research and development, compensation
and services - - 80,381 12,057 75,858
Accrued stock issuance - -
Net loss for three months ended March 31, 1998 -
- -
---------------------------------------------------------
BALANCE, MARCH 31, 1998 0 0 516,643 77,496 22,678,911
=========================================================
</TABLE>
<TABLE>
<CAPTION>
COMMON DEFERRED
STOCK COMPEN- ACCUMULATED
TO BE ISSUED SATION DEFICIT TOTAL
------------ ------ ------- -----
(Note 5)
<S> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1998 $23,440 $22,792 ($21,920,913) 793,811
Stock issued for:
Research and development, compensation
and services - - - 87,915
Accrued stock issuance - (2,651) - 2,651
Net loss for three months ended March 31, 1998 - - (296,610) (296,610)
---------------------------------------------------------
BALANCE, MARCH 31, 1998 $23,440 $25,443 ($22,217,523) $587,767
====================================================================================================================
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-4
<PAGE>
<TABLE>
MEDICAL DEVICE TECHNOLOGIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<CAPTION>
JUNE 1, 1992 TO
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS THREE MONTHS ENDED MARCH 31, MARCH 31, 1998
1998 1997 (CUMULATIVE)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss ($296,610) ($1,119,444) ($18,069,767)
Adjustments to reconcile net loss
to net cash used in operating activities:
Loss from discontinued operations from
January 1 through May 31,1992 - (100,599)
Stock paid for services 87,915 121,964 4,688,908
Compensation recognized relating to
accrued employee stock grants and warrants 2,651 30,345 451,387
Bad debt expense 441,193
Depreciation and amortization 65,164 88,805 2,026,828
Amortization of loan origination fees and
original issue discount 942,620
Loss (gain) on disposal of fixed assets 222 107,290
Loss on Impairment of license agreement 487,784
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 (44,249) (59,120)
Interest receivable 8,053
Amounts due from related party 1,682
Inventory 564 (122,231) (189,074)
Prepaid royalties (160,000)
Prepaid expenses and other assets 33,514 61,452 (187,219)
Other assets (52,834)
Accounts payable 13,670 10,792 381,565
Termination obligation (37,000) 114,583
Accrued expenses (25,905) (43,798) 77,327
- -------------------------------------------------------------------------------------------------------------
Net cash used in operating activities ($119,037) ($1,053,142) ($8,922,206)
- -------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Patent and marketing licensing costs (906,298)
Purchase of property and equipment (32,888) (368,788)
Proceeds from sale of property and equipment 77,226
Other (proceeds from sale of marketable
securities and loan repayments) 175,188
- -------------------------------------------------------------------------------------------------------------
Net cash used in investing activities 0 ($32,888) ($1,022,672)
- -------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-5
<PAGE>
<TABLE>
MEDICAL DEVICE TECHNOLOGIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
JUNE 1, 1992 TO
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS THREE MONTHS ENDED MARCH 31, MARCH 31, 1998
1998 1997 (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) 6,431,079
Proceeds from notes payable $100,000 2,395,000
Principal payments on notes payable (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
Capital lease financing (596) 0
Advances on private common stock placement 296,440
- -----------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities $100,000 ($596) $9,971,346
- -----------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (19,037) (1,086,626) 26,468
Cash and cash equivalents, beginning of period 45,505 2,889,233 0
- -----------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $26,468 $1,802,607 $26,468
- -----------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-6
<PAGE>
<TABLE>
MEDICAL DEVICE TECHNOLOGIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
THREE MONTHS ENDED MARCH 31,
1998 1997
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES:
PAYMENTS FOR:
Interest $ - $ -
Income taxes $ - $ -
STOCK ISSUED FOR:
Research and development $2,597 $ 52,266
Legal, professional and employee services 82,974 61,958
Directors' fees 469 7,740
Termination agreement 1,875 -
--------------------------------
$ 87,915 $121,964
--------------------------------
Common stock dividends distributable and issued to 6% cumulative
convertible Series A preferred stockholders $ - $ 16,730
</TABLE>
NON-CASH FINANCING ACTIVITY:
During the first quarter of 1998 and 1997, deferred compensation expense of
$2,651 and $30,345 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 the first quarter of 1997, 7,857
shares of accrued employee common stock grants were issued. Accordingly,
deferred stock compensation of $247,500 was reclassified to common stock and
additional paid-in capital.
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-7
<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 March 31, 1998, and the results of
operations and cash flows for the three month periods ended March 31, 1998 and
1997. 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 1997 Annual Report on Form 10-KSB.
The results of operations for the three month period ended March 31, 1998
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, 1997.
2. Inventory
The inventory balance shown at March 31, 1998 consisted of $109,262 of
finished goods, net of reserve of $6,275, $0 of work in process and $79,812 of
parts and materials. The inventory balance shown at December 31, 1997 consisted
of $109,826 of finished goods, net of reserve of $5,711, $0 of work in process
and $79,812 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
In 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 No. 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. The Company has adopted this pronouncement and it had
no effect on its loss per share computations.
Loss per share is based on the weighted average number of common shares
outstanding during each period presented. For the three months ended March 31,
1998 and 1997, outstanding stock options and warrants of 97,850 and 89,421,
respectively, are not included in the diluted earnings per share calculation
since their effect would be anti-dilutive. Weighted average number of common
shares outstanding during the three months ended March 31, 1998 and 1997
includes stock to be issued; however, convertible notes payable were not
included as common stock equivalents as the effect would be anti-dilutive.
F-8
<PAGE>
4. Short-term Notes Payable
During the fourth quarter of 1997, the Company issued $100,000 ($50,000 to three
of the Company's directors) in principal amount of 36% short-term convertible
notes payable, due May 18, 1998, to five individuals to finance operations until
a corporate acquisition could be completed. Until payment in full, the unpaid
principal amount of these notes, or any portion may, at the election of the
noteholder at any time before the due date, be converted at the conversion price
of $2.35 per share of Common Stock. Interest paid to these individuals and
to the directors was $0 at December 31, 1997 and March 31, 1998. Accrued
interest amounted to $4,400 for the year ended December 31, 1997 to $13,400 as
of March 31, 1998. As additional consideration for these loans, the individual
lenders, including the directors, were awarded an aggregate of warrants to
purchase 1,429 shares of Common Stock for every $12,500 loaned to the Company at
an exercise price of $4.20 per share (see Note 5). In connection with the
issuance of the warrants, the Company did not recognize additional interest
expense, as the value of the warrants was deemed to be immaterial. The interest
rate and terms of these notes were made at arms length.
During the first quarter of 1998, the Company issued $100,000 principal amount
of a short-term convertible note payable, due March 6, 1999 or the date the
Company receives funding from any offering or merger with another corporation,
to one individual to finance operations until a corporate acquisition could be
completed. Until payment in full, the unpaid principal and accrued interest
amounts of this note, may be converted, at the option of the lender, into common
shares of the Company at any time prior to repayment thereof at a conversion
price per share of fifty (50%) percent of the previous thirty (30) day average
trading bid price as of the date of conversion. This note accrues interest at a
rate per annum equal to one (1%) percent over the referenced prime lending rate
announced from time to time by Bank of America in San Francisco, California.
Accrued interest amounted to $660 as of March 31, 1998.
F-9
<PAGE>
5. Stockholders' Equity
Common Stock
Pursuant to certain employment agreements in the first three months of 1997,
7,856 shares of accrued employee common stock grants were issued. Accordingly,
deferred stock compensation of $247,500 was reclassified to common stock and
additional paid-in capital in the first quarter of 1997.
Effective March 6, 1998, the Director's of the Company approved a one (1) for
thirty-five (35) reverse split of the common stock in order to meet NASDAQ
listing requirements. There was no change in the common stock voting rights, par
value or authorized shares. All share balances have been retroactively adjusted
to reflect the reverse stock split.
In each of the five most current years, the Company's board of directors have
annually approved a stock compensation plan, the most recent which registered
142,858 shares of common stock under Form S-8 on December 5, 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 three months ended March 31, 1998 and 1997, 80,381 and 181,455 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.
6. New Accounting Pronouncements
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 adopted SFAS No. 130 on January 1,
1998 and it had no effect on its financial position or results of operations.
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 with fiscal years 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
adopted SFAS No. 131 on January 1, 1998 and it had no effect on its financial
position or results of operations.
F-11
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 10QSB
03/31/98 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 26468
<SECURITIES> 0
<RECEIVABLES> 61635
<ALLOWANCES> 46473
<INVENTORY> 189074
<CURRENT-ASSETS> 241581
<PP&E> 309910
<DEPRECIATION> 151420
<TOTAL-ASSETS> 1445424
<CURRENT-LIABILITIES> 857657
<BONDS> 0
0
0
<COMMON> 77496
<OTHER-SE> 510271
<TOTAL-LIABILITY-AND-EQUITY> 1445424
<SALES> 1900
<TOTAL-REVENUES> 1900
<CGS> 619
<TOTAL-COSTS> 619
<OTHER-EXPENSES> 288,295
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (9596)
<INCOME-PRETAX> (296610)
<INCOME-TAX> 0
<INCOME-CONTINUING> (296610)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (296610)
<EPS-PRIMARY> (.64)
<EPS-DILUTED> (.64)
</TABLE>
