SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
X ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
For the Fiscal Year Ended December 31, 1998
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
Commission File Number: 33-13058-C
SURGIDYNE, INC.
(Name of small business issuer in its charter)
Minnesota 58-1486040
(State or other jurisdiction (I.R.S. Employer Identification Number)
of incorporation or organization)
9909 South Shore Drive
Minneapolis, MN 55441
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (612) 595-0665
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, no par value
(Title of class)
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. X YES NO
Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B contained is not in this form, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. X
Issuer's revenues for the year ended December 31, 1998 were $573,054.
The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of December 31, 1998 was approximately $101,995 (based on a price
of $.02, the bid price of the local over-the-counter market.) For purposes
of this calculation, all Directors and Executive Officers of the Registrant have
been deemed affiliates.
7,017,085 shares of Common Stock, no par value, were outstanding at
December 31, 1998
DOCUMENTS INCORPORATED BY REFERENCE
NONE
This Form 10-KSB consists of 26 pages (including exhibits). The index to
exhibits is set forth on page 25.
<PAGE>
PART 1
ITEM 1. DESCRIPTION OF BUSINESS
General
Surgidyne, Inc. (the "Company"), a Minnesota corporation, designs, develops,
manufactures and markets specialty medical and surgical wound drainage products.
The Company was incorporated in Minnesota in March, 1984, and is successor by
merger to a corporation of the same name which was incorporated in Georgia in
September, 1982. The Company's executive offices are located at 9909 South
Shore Drive, Minneapolis, Minnesota 55441 (612-595-0665).
Products
The Company's current product lines are comprised of VariDyne microelectronic
A.C./D.C. battery powered suction systems with disposable drainage/collection
products for postoperative and other suction drainage applications, disposable
SABER and S-VAC 100 bulb evacuators for postoperative closed wound suction
drainage along with other related disposable products. The Company also sells
some of its disposable wound drainage components on an original equipment
manufacturer (OEM) basis. Additionally, the Company provides contract assembly
and packaging services for disposable medical and related products.
In 1999 the Company plans to expand its' line to include additional manual
evacuators and drains for closed wound suction drainage. During 1999 the
Company also would like to expand OEM and contract manufacturing.
Marketing and Distribution
The Company's basic products are sold through a network of independent dealers,
with eight domestic dealers and four international dealers. The Company sells
directly to hospital accounts in the United States in areas without dealer
representation. The Company does not employ an outside sales force and is
largely dependent upon its dealers for sales and service to hospital accounts.
Internationally, the Company's products are sold through four dealers located in
Canada, Puerto Rico, the United Kingdom and Italy.
The Company's business is not seasonal in nature. The Company typically does
not provide extended payment terms to customers and, has had satisfactory
collections of accounts receivable. Sales are usually made on a net 30 day
basis. Sales orders from the exclusive dealer in Italy are done by irrevocable
letter of credit in U.S. dollars or are prepaid by bank wire transfer.
Suppliers
The Company purchases all components for its products from outside suppliers and
has some components manufactured to its specification. The Company is dependent
upon such suppliers for a readily available supply of necessary components. The
Company has single sources of supply for some of its critical components.
Management has determined that developing and maintaining additional sources for
all critical components is not cost effective. The Company is unaware of any
difficulty experienced by its' suppliers in obtaining raw materials for
component manufacture. The Company has no written agreements with its suppliers,
other than purchase orders.
Most suppliers sell to the Company on standard credit terms, while some sell on
a collect-on-delivery basis.
Patents and Trademarks
The Company has patents covering its SABER Bulb Evacuator and its 3C System.
There can be no assurance that these patents will be of material benefit to the
Company.
Major Customers
Net sales to international customers for the years ended December 31, 1998 and
1997 totalled $227,320 and $143,806 respectively, representing approximately 40%
and 30% of the Company's sales. Chirmed, S.R.L., located in Sassari, Italy,
accounted for 28% and 17% of total net sales for 1998 and 1997, respectively.
Master Medical, Inc. accounted for 8% and 11% of total net sales in 1998 and
1997, respectively. The loss or material reduction of business from Italy could
adversely affect future net sales levels.
<PAGE>
Competition
The hospital market for disposable suction drainage products is highly price
competitive. One company, Stryker Corporation an orthopedic product company,
markets battery powered suction drainage systems, including both wound and
orthopedic drainage and autotransfusion products. A number of other companies
market disposable closed suction wound drainage products including Allegiance
Healthcare, Zimmer, Inc., Johnson and Johnson, C.R. Bard and DePuy. The
Company's products are designed to provide significant enhancements to existing
products in its specific market niches.
The Company's VariDyne system is the only battery powered system with variable
and controllable vacuum up to 350mm Hg and is the only system with a closed
infection control system for emptying. Such a system protects healthcare
providers from cross contamination resulting from infectious pathogens in wound
exudate.
The Company's Saber bulb evacuator is the only such infection control system
with an integral anti-reflux valve and closed system for simultaneous emptying
and reactivation.
Research and Development
For the fiscal year ended December 31, 1998 the Company incurred research and
development expenditures of $20,676. For the fiscal year ended December 31,
1997 the Company incurred research and development expenditures of $20,628. The
Company expects to maintain similar development expenditures in 1999.
Government Regulation
The Company's products are classified as Class I and II medical devices under
the Medical Device Amendment to the Federal Food, Drug and Cosmetic Act (the
"Act"). As such, they are subject to regulation by the United States Food and
Drug Administration (FDA), which has the power to approve medical devices before
sale, remove medical devices from the marketplace if found to be unsafe or
ineffective, and control plant conditions to assure product quality. No
government approval, other than FDA premarket approval, is required for sale and
use of the Company's products in the United States and Puerto Rico. The Company
has FDA 510(k) exemption for all marketed products, including VariDyne Vacuum
Controllers and collection systems, SABER and S-VAC 100 Bulb Evacuators. The
VariDyne Vacuum Controller Models 140 and 350, used in conjunction with the CSA
approved Model 2007 battery charger, have been approved by the Canadian
Standards Association.
The Company's products required the CE mark for European markets as of June 14,
1998. The Company received CE mark certification July 22, 1998 for products
marketed to dealers in Europe.
Employees
At December 31, 1998, 5 full-time persons were employed by the Company. None of
the Company's employees are represented by a labor union. The Company has
experienced no work stoppages and believes that its employee relations are good.
Year 2000 Compliance
Based on a review of the Year 2000 impact management believes that the only
significant issue regarding its internal compliance for the year 2000 is the
replacement of the Company's financial software package and the upgrade of
hardware systems. The Company is planning upgrading the required systems by
September 1999 at an estimated cost of $10,000 for the purchase or upgrade of
software and will obtain a new hardware system through a three year lease.
There are no critical issues regarding compliance for the year 2000 for products
manufactured by Surgidyne. At this time, the Company believes that its most
reasonably likely worst case scenario is that the Company could experience a
delay in receipt of needed inventory items and/or the Company could experience a
delay in the receipt of payment on its accounts receivable. Furthermore, Y2K
problems involving third parties may have a negative impact on our suppliers and
customers, the general economy or the ability of businesses to receive essential
services such as telecommunications, utilities and banking. Any such occurrence
could adversely affect our business.
In addition the Company does intend to prepare a contingency plan so that the
Company's critical business processes can be expected to continue to function on
January 1, 2000 and beyond. The plan is intended to mitigate both internal
risks as well as potential risks in the Company's supply chain. The Company
intends to begin working on a contingency plan in early 1999 and to have it
substantially finalized by September 1999.
<PAGE>
ITEM 2. DESCRIPTION OF PROPERTY
The Company's administrative headquarters, research and development, production
and warehousing operations are located in a single building in Minneapolis,
Minnesota. This facility comprises approximately 6,400 square feet, which the
Company leases for approximately $2,800 per month through November, 2001.
Management considers that this property is sufficient for its present
operations.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to, nor is any of its property subject to, any
material pending legal proceedings, nor any material legal proceedings known to
be contemplated by governmental authorities or others.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of shareholders during the fourth quarter
ended December 31, 1998.
<PAGE>
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The following table sets forth for the fiscal period indicated, the high and low
bid prices as reported in the local over-the-counter market in Minneapolis,
Minnesota, by RJ Steichen & Company. These quotations reflect inter-dealer
prices, without retail mark-up, mark-down or commission and may not represent
actual transactions.
Bid Price Range
1998 1997
Fiscal Period High Low High Low
First quarter $ .08 $ .03 $ .15 $ .05
Second quarter .10 .03 .28 .13
Third quarter .10 .03 .10 .04
Fourth quarter .10 .02 .09375 .03125
On December 31, 1998, the bid price for the common shares as reported in the
local over-the-counter market was $.02 and the Companyhad 396 holders of record
of its common shares. Although the shares are reported in the local
over-the-counter market, there was limited sales activity.
The Company has not paid cash dividends on its common shares and does not plan
to pay cash dividends to its shareholders in the immediate future. On December
1, 1993, the Company's debenture holders elected to convert the face value of
the debentures into 1,600,000 shares of unregistered Series A preferred stock at
$.25 per share. Commencing January 1, 1994, the preferred shareholders are
entitled to a dividend equal to 3% of net sales. The dividend in a given year
is limited to 50% of the Company's net income. Cumulative dividends cannot
exceed $210,000. As of December 31, 1998 cumulative dividends totalled $1,321.
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
Results of Operations - 1998 compared to 1997
Net Sales. Net sales for the year ended December 31, 1998 increased by $86,293
as compared to the same period in 1997. Sales to Europe increased $85,254
primarily due to the Company obtaining the CE mark its products marketed to
countries in the European community.
Gross Profit. Gross profit, expressed as a percentage of sales, increased from
23% in 1997 to 35% in 1998. This increase is due to increased production and a
lower absorption of overhead per unit manufactured.
Operating Expenses. Operating expenses increased from $180,379 in 1997 to
$197,786 in 1998. This increase is primarily due to the costs incurred by the
Company in connection with obtaining CE mark certification in July, 1998.
Results of Operations - 1997 compared to 1996
Net Sales. Net sales for the year ended December 31, 1997 decreased by $147,748
as compared to the same period in 1996 as a result of both decreased product
sales and OEM revenues. Sales to Italy decreased $57,000 due to new government
purchasing regulations mandating hospitals to purchase supplies on tender (bid).
Subsequently our dealer lost substantial business. Domestic product sales
decreased $58,000 due to loss of business to competitors with group purchasing
contracts requiring member compliance. OEM sales decreased $27,000 due to the
loss of one major customer.
Gross Profit. Gross profit, expressed as a percentage of sales, decreased from
32% in 1996 to 23% in 1997. This decrease is due to reduced production and a
higher absorption of overhead per unit manufactured.
Operating Expenses. Operating expenses decreased from $215,518 in 1996 to
$180,379 in 1997. This decrease is due to reductions in contracted temporary
labor costs, rent, utilities, property and liability insurance, and legal fees,
combined with a $19,365 write off of tooling in 1996 the Company determined
would not be used in future product manufacturing.
Liquidity and Capital Resources
At December 31, 1998 the Company had working capital of $143,453 compared to
working capital of $133,837 at December 31, 1997. In 1998, net cash used in
operating activities was $32,531 compared to $12,348 in 1997. The current year
amount resulted primarily from a $39,182 increase in accounts receivable offset
by noncash expenses of $8,732. The Company had capital expenditures of $4,704
in 1997 for tooling and leasehold improvements, compared to no capital
expenditures in 1998. Net cash used in financing activities was $3,129 in 1998
compared to $3,165 in 1997.
In 1995, the Company converted an accounts payable balance of $35,546 into a
non-interest bearing unsecured note payable due in one installment on January 1,
1997. The Company did not pay-off the note on January 1, 1997 and as a result,
the note is currently due on demand.
The ability of the Company to continue as a going concern and its short-term
liquidity is dependent upon obtaining additional debt and/or equity financing to
fund future development and operations. The Company has made changes to it's
current product lines and plans to add additional products in order to offer a
more complete and competitive line. These products will be manufactured for the
Company on an OEM basis without incurring any capital or development costs on
the part of the Company.
Long-term liquidity is dependent upon the attainment of the short-term factors
discussed above and greater sales volumes that generate profitable operations.
Increased sales volumes in 1999 depend largely on increased business from
contract manufacturing and increased sales from existing and new products. The
Company's largest OEM customer projects significantly greater volume
requirements for 1999 compared to 1998. This customers orders to date for
fiscal 1999 are significantly larger than for the same period in 1998.
The Company has added a new line of lower cost silicone drains. A new bulb
evacuator with infection control feature has been prototyped for customer
evaluation. With favorable evaluations the Company plans to add this bulb
evacuator to its line by fourth quarter 1999.
Forward-looking Statements
Statements contained in this report regarding the Company's future operations,
performance and results, and anticipated liquidity are forward-looking and
therefore subject to certain risks and uncertainties.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
SURGIDYNE, INC.
CONTENTS PAGE
INDEPENDENT AUDITOR'S REPORT
ON THE FINANCIAL STATEMENTS 8
FINANCIAL STATEMENTS
Balance sheets 9
Statements of operations 11
Statements of stockholders' equity 12
Statements of cash flows 13
Notes to financial statements 14
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Surgidyne, Inc.
Plymouth, Minnesota
We have audited the accompanying balance sheets of Surgidyne, Inc. as of
December 31, 1998 and 1997, and the related statements of operations,
stockholders' equity, and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Surgidyne, Inc. as of December
31, 1998 and 1997, and the results of its operations and its cash flows for the
years then ended, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company is dependent upon obtaining additional debt or
equity financing to fund future development and operations, which raises
substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 2. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
McGLADREY & PULLEN, LLP
Minneapolis, Minnesota
March 1, 1999
<PAGE>
SURGIDYNE, INC.
BALANCE SHEETS
December 31, 1998 1997
ASSETS
Current Assets
Cash $ 11,064 $ 46,724
Accounts receivable, less allowance
for doubtful accounts of $4,200 (Note 10) 82,206 43,024
Inventories (Note 3) 172,286 170,359
Prepaid expenses 12,954 14,405
Total current assets 278,510 274,512
Furniture and Equipment, at cost (Note 4) 333,396 333,396
Less accumulated depreciation 321,806 315,441
11,590 17,955
Other Assets
Patents, trademarks, and other, net of
accumulated amortization of $17,046 in
1998 and $14,679 in 1997 4,794 7,161
Deposits 3,529 3,529
8,323 10,690
$ 298,423 $ 303,157
See Notes to Financial Statements.
<PAGE>
December 31, 1998 1997
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Note payable to officer and director
(Note 5) $ 10,000 $ 10,000
12% demand note payable 11,646 11,646
Non-interest bearing demand note payable
(Note 5) 35,546 35,546
Current maturities of long-term debt - 3,129
Accounts payable 42,412 42,111
Accrued expenses 35,453 38,243
Total current liabilities 135,057 140,675
Commitments and Contingencies (Note 9)
Stockholders' Equity (Notes 6 and 7)
Series A Preferred stock, 1,600,000 shares
authorized and issued, $400,000 liquidation
preference 400,000 400,000
Common stock, no par value; authorized
18,400,000 shares; issued and outstanding
7,017,085 shares 4,472,042 4,472,042
Accumulated deficit (4,708,676) (4,709,560)
163,366 162,482
$ 298,423 $ 303,157
See Notes to Financial Statements.
<PAGE>
SURGIDYNE, INC.
STATEMENTS OF OPERATIONS
Years Ended December 31, 1998 1997
Net sales (Note 10) $ 573,054 $ 486,761
Cost of goods sold 372,895 373,524
Gross profit 200,159 113,237
Operating expenses
Research and development 20,676 20,628
Sales and marketing 29,927 27,700
General and administrative 147,184 132,051
Total operating expenses 197,787 180,379
Operating income (loss) 2,372 (67,142)
Other income (expense)
Interest income 695 1,624
Interest expense (Note 5) (1,300) (4,409)
Net income (loss) $ 1,767 $ (69,927)
Net income (loss) attributable to
common shareholders:
Net income (loss) $ 1,767 $ (69,927)
Preferred stock dividend (883) -
$ 884 $ (69,927)
Basic and diluted income (loss) per
common share $ - $ (.01)
Weighted average common shares
outstanding - basic 7,017,085 7,017,085
Weighted average common shares
outstanding - diluted 7,817,085 7,017,085
See Notes to Financial Statements.
<PAGE>
SURGIDYNE, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended December 31, 1998 and 1997
Preferred Common Stock Accumulated
Stock Shares Amount Deficit Total
Balance,
December 31, 1996 $ 400,000 7,017,085 $ 4,472,042 $(4,639,633) $ 232,409
Net loss - - - (69,927) (69,927)
Balance,
December 31, 1997 $ 400,000 7,017,085 $ 4,472,042 $(4,709,560) $ 162,482
Dividends on
preferred stock - - - (883) (883)
Net income - - - 1,767 1,767
Balance,
December 31, 1998 $ 400,000 7,017,085 $ 4,472,042 $(4,708,676) $ 163,366
See Notes to Financial Statements.
<PAGE>
SURGIDYNE, INC.
STATEMENTS OF CASH FLOWS
Years Ended December 31, 1998 1997
Cash Flows from Operating Activities
Net income (loss) $ 1,767 $ (69,927)
Adjustments to reconcile net income
(loss) to net cash used in operating
activities:
Depreciation and amortization 8,732 10,882
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable (39,182) 43,315
Inventories (1,927) 28,102
Prepaid expenses 1,451 2,060
Increase (decrease) in:
Accounts payable and accrued expenses (3,372) (26,780)
Net cash used in operating
activities (32,531) (12,348)
Cash Flows from Investing Activities
Capital expenditures - (4,704)
Cash Flows from Financing Activities
Principal payments on long-term debt (3,129) (3,165)
Decrease in cash (35,660) (20,217)
Cash:
Beginning 46,724 66,941
Ending $ 11,064 $ 46,724
Supplemental Disclosures of Cash Flow Information
Cash payments for interest $ 832 $ 930
Noncash Financing Activity
Accrual of preferred stock dividends $ 883 -
See Notes to Financial Statements.
<PAGE>
Note 1. Nature of Business and Significant Accounting Policies
Nature of business: Surgidyne, Inc. (Company) designs, develops,
manufactures and markets specialty medical and surgical wound
drainage products. The Company sells its products primarily on
a credit basis throughout the United States and Europe.
A summary of the Company's significant accounting policies
follows:
Revenue recognition: The Company recognizes revenue, including
revenue from contract manufacturing, upon shipment to the
customer.
Inventories: Inventories are stated at the lower of cost (first-
in, first-out method) or market.
Patents and trademarks: Patent and trademark costs have been
capitalized and are being amortized over 17 years using the
straight-line method.
Furniture and equipment: Depreciation is provided for on the
straight-line method over estimated useful lives of three to five
years.
Research and development costs: Expenditures for research and
development activities, whether performed by the Company or
performed by outside parties under contract, are charged to
operations as incurred.
Accounting for long-lived assets: The Company reviews its
furniture and equipment and other assets periodically to
determine potential impairment by comparing the carrying value
of the long-lived assets with the estimated future net
undiscounted cash flows expected to result from the use of the
assets, including cash flows from disposition. Should the sum
of the expected future net cash flows be less than the carrying
value, the Company would recognize an impairment loss at that
date. An impairment loss would be measured by comparing the
amount by which the carrying value exceeds the fair value
(estimated discounted future cash flows) of the long-lived
assets.
Income taxes: Deferred taxes are provided on a liability method
whereby deferred tax assets are recognized for deductible
temporary differences and operating loss and tax credit carry-
forwards and deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the differences
between the reported amounts of assets and liabilities and their
tax bases. Deferred tax assets are reduced by a valuation allow-
ance when, in the opinion of management, it is more likely than
not that some portion or all or the deferred tax assets will
not be realized. Deferred tax assets and liabilities are
adjusted for the effects of changes in tax laws and rates on
the date of enactment.
Fair value of financial instruments: The fair value of the
notes payable are estimated based on interest rates for the
same or similar debt offered to the Company having the same or
similar remaining maturities and collateral requirements. The
carrying amount of these obligations approximates fair value.
Management estimates: The preparation of financial statements
in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results
could differ from those estimates.
Basic and diluted income (loss) per share: Basic per-share
amounts are computed, generally, by dividing net income or
loss by the weighted-average number of common shares outstand-
ing. Diluted per-share amounts assume the conversion,
exercise or issuance of all potential common stock instruments
unless the effect is anti-dilutive thereby reducing the loss
or increasing the income per common share.
The weighted-average number of shares of common stock used to
compute the basic income (loss) per share was increased by
800,000 shares for the year ended December 31, 1998 for the
assumed conversion of the preferred stock in computing the
diluted per share data.
The Company has outstanding warrants to purchase 345,000
shares of common stock at a weighted average exercise price of
$.19 per share at December 31, 1998. These warrants were not
included in the computation of 1998 diluted income per share
because the exercise price of those warrants exceeded the
average market price of the common shares during 1998.
Because the Company incurred a loss in 1997, the inclusion of
potential common shares (See Note 7) in the calculation of
diluted loss per-share would have an anti-dilutive effect.
Therefore, Basic and Diluted loss per-share amounts are the
same in 1997.
Note 2. Going Concern
The ability of the Company to continue as a going concern and
its short-term liquidity is dependent upon obtaining addition-
al debt and/or equity financing to fund future development and
operations. The Company has made changes to its current
product lines and plans to add additional products in order to
offer a more complete and competitive line. These products will
be manufactured for the Company on an OEM basis without incurring
any capital or development costs on the part of the Company.
Long-term liquidity is dependent upon the attainment of the
short-term factors discussed above and greater sales volumes that
generate profitable operations. Increased sales volumes in 1999
depend largely on increased business from contract manufacturing
and increased sales from existing and new products. The financial
statements do not reflect any adjustments which might be
necessary should the Company not remain a going concern.
Note 3. Inventories
Inventories consisted of the following:
1998 1997
Component parts and
subassemblies $ 96,097 $ 97,767
Work-in-process 17,454 18,561
Finished goods 68,735 64,031
Less obsolescence reserve (10,000) (10,000)
$ 172,286 $ 170,359
Note 4. Furniture and Equipment
Furniture and equipment consisted of the following:
1998 1997
Furniture, fixtures
and equipment $ 232,244 $ 232,244
Tooling and molds 101,152 101,152
$ 333,396 $ 333,396
Note 5. Notes Payable
Notes payable to related parties: The Company has short-term
notes payable outstanding with a certain officer and director
which bears interest at 10%. The balance of $10,000 is due in
annual installments limited to 50% of the audited net income each
year until paid in full. Related party interest expense was
approximately $1,025 for both 1998 and 1997.
Other notes payable: In 1995, the Company converted an accounts
payable balance of $35,546 into a non-interest bearing unsecured
note payable due in a single installment on January 1, 1997. The
Company did not pay-off the note on January 1, 1997 and as a
result the note is due on demand. The Company also has a 12%
demand note payable for $11,646. This interest bearing note
is the remaining principal for a $50,000 promissory note.
Note 6. Series A Preferred Stock
On December 1, 1993, certain debenture holders elected to
convert the face value of the debentures into 1,600,000 shares
of unregistered Series A preferred stock at $.25 per share.
The preferred shareholders are entitled to a dividend equal to
3% of net sales. The dividend in a given year is limited to
50% of the Company's net income. Cumulative dividends cannot
exceed $210,000. In 1998 and 1995, the Company accrued $884
and $437 respectively for dividends on net income.
The preferred stock is convertible into common stock on a one
for one basis, subject to certain anti-dilutive adjustments.
The preferred stock is automatically convertible into common
stock upon the occurrence of any of the following:
* The Company's common stock price is traded at a bid price of
$.50 or more for thirty consecutive trading days;
* The preferred shareholders have received the cumulative
dividends specified above.
* Two-thirds of the preferred shareholders elect to convert
their preferred stock.
<PAGE>
Note 7. Stock Options and Warrants
Incentive stock options: The Company maintains a 1986 Incentive
Stock Option Plan. The plan provides for issuance of up to
195,000 shares of common stock to selected management and other
key employees of the Company.
Under the Plan, the exercise price cannot be less than 100% of
the fair market value of the common stock on the date the option
is granted. Options are fully vested upon issuance and are
exercisable over a five year period from date of grant. Informa-
tion with respect to incentive stock option activity is summa-
rized as follows:
Weighted
Average
Exercise
Shares Price
Outstanding at
December 31, 1997 and 1996 20,000 $0.19
Cancelled in 1998 (20,000) $0.19
Outstanding at
December 31, 1998 - $ -
Warrants: The Company has granted warrants for the purchase of
shares of the Company's common stock to directors, medical
advisors, employees and certain debt and equity holders. The
warrants are fully vested upon issuance and expire in varying
amounts through 2002. Information with respect to warrant
activity is summarized as follows:
Weighted
Average
Exercise
Shares Price
Outstanding at
December 31, 1996 890,000 $.19
Granted 20,000 $.07
Outstanding at
December 31, 1997 910,000 $.19
Granted 10,000 $.07
Cancelled (575,000) $.18
Outstanding at
December 31, 1998 345,000 $.19
Option and warrant grants to employees are accounted for
following APB Opinion No. 25 and related interpretations. For
1998 and 1997, there was no compensation expense recorded on the
issuance of warrants as they were issued at or above quoted
market prices. Compensation costs as determined using the
fair value method required by FASB Statement No. 123 did not
vary significantly from the cost under APB Opinion No. 25,
and, accordingly, the pro forma information required by
Statement No. 123 has not been presented.
Option and warrant grants to nonemployees are accounted for
under FASB Statement No. 123 based on the grant date fair
values.
The following table summarizes information about warrants
outstanding as of December 31, 1998:
Weighted
Average Weighted
Range of Number Remaining Average
Exercise of Units Contractual Exercise
Price Outstanding Life (Years) Price
$.07 - .11 160,000 1.8 $.08
$.19 - .25 85,000 0.4 $.19
$.38 100,000 0.5 $.38
345,000 1.1 $.19
All warrants are exercisable as of December 31, 1998. At
December 31, 1997 there were 930,000 options and warrants
exercisable with a weighted average exercise price of $.19.
<PAGE>
Note 8. Income Taxes
Deferred tax assets consisted of the following:
1998 1997
Allowance for inventory
obsolescence $ 2,000 $ 2,000
Other 2,000 2,000
Net operating loss
carryforwards 675,000 675,000
Tax credit carryforwards 42,000 42,000
Gross deferred tax assets 721,000 721,000
Less valuation allowance 721,000 721,000
Net deferred tax assets $ - $ -
During the year ended December 31, 1998 the Company had a
valuation allowance of $721,000 on deferred tax assets to reduce
the total to an amount that management believes will ultimately
be realized.
The Company's income tax benefit differed from the statutory
federal rate as follows:
1998 1997
Statutory rate applied to income
(loss) before tax $ 600 $ (24,000)
Change in valuation
allowance - 10,000
Effect of graduated tax rates - 14,000
Other (600) -
$ - $ -
The Company has federal net operating loss and credit carry-
forwards at December 31, 1998 which are available to reduce
income taxes payable in future years, subject to potential
limitations due to changes in ownership. These carryforwards
and credits will expire as follows:
Net
Operating Tax Credit
Loss Carry- Carry-
Year forwards forwards
1999 $ 324,000 $ 22,600
2000 226,000 13,700
2001 819,000 4,600
2002 1,128,000 -
2003 995,000 -
2004 407,000 -
2005 144,000 -
2006 4,000 -
2007 - -
2008 164,000 -
2009 187,000 -
2010 21,000 -
2011 3,000 -
2012 72,000 -
$ 4,494,000 $ 40,900
<PAGE>
Note 9. Lease
The Company leases its office and warehouse facilities under a
noncancellable operating lease. The lease requires monthly
payments of $2,818 through November, 2001. Rent expense was ap-
proximately $32,000 in 1998 and 1997, net of sub-lease rental
income of $3,300 and $4,000 in 1998 and 1997, respectively.
The Company also leases certain equipment under operating leases.
Equipment rental expense was approximately $5,600 and $6,000 in
1998 and 1997, respectively.
Minimum rental commitments under noncancelable operating leases
as of December 31, 1998:
Noncancelable
Operating
Year Lease
1999 $ 33,800
2000 33,800
2001 31,000
$ 98,600
Note 10. Major Customers, Suppliers and Export Sales
Major customers: Net sales for the year ended December 31, 1998
and 1997 include sales to major customers as follows:
Sales Percentage
Company 1998 1997
A* 28% 17%
B 8% 11%
Year End Receivable Balances
Company 1998
A* $ -
B 3,851
* International customer, representing 70% and 57% of export sales in
1998 and 1997, respectively.
Major suppliers: The Company purchases all components for its
products from outside suppliers and has some components manufac-
tured to its specification. The Company is dependent upon such
suppliers for a readily available supply of necessary components.
The Company has single sources of supply for some of its
critical components. Management has determined that develop-
ing and maintaining additional sources for critical components
is not cost effective.
Export sales: Net export sales to international customers
were $227,320, and $143,806 in 1998 and 1997, respectively.
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
NONE
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Directors
The following seven persons serve as directors of the Company:
Director
Name Age Position Since Term*
Charles B. McNeil Director, Executive
3115 Maplewood Road Vice President and
Wayzata, MN 55391 69 Treasurer 1982
Theodore A. Johnson
825 Southgate Plaza
5001 West 80th Street Chief Executive
Bloomington, MN 55437 58 Officer and Chairman 1985
David B. Kaysen
9909 South Shore Drive
Plymouth, MN 55441 49 Director 1988
William F. Gearhart
9909 South Shore Drive Director and
Plymouth, MN 55441 51 Secretary 1984
Arthur W. Schwalm
9909 South Shore Drive
Plymouth, MN 55441 66 Director 1984
Vance D. Fiegel
2460 South Highway 100 President and
St. Louis Park, MN 55416 45 Director 1994
David R. Knighton, M.D.
2460 South Highway 100
St. Louis Park, MN 55416 50 Director 1995
* These directors will serve until the next annual meeting of the shareholders.
Charles B. McNeil, founder of the Company, has over 30 years experience in the
health care industry. He has served as Executive Vice President of the Company
for the past ten years and served as President of the Company from its
incorporation in 1982 until 1988. He previously served as Vice President and
General Manager of the Inmed and Bittner Medical and Home Health Division of
Inmed Corporation, Norcross, Georgia. Prior to joining Inmed, he was employed
for 16 years by Davol, Inc., Providence, Rhode Island, where he directed
product development for seven years. New products he successfully developed at
Davol include numerous disposable surgical devices such as the Reliavac Closed
Wound Suction Device, surgical drains and disposable surgical suction devices.
<PAGE>
Theodore A. Johnson, Chairman of the Board and Chief Executive Officer since
January, 1995 is also President, CEO and Director of the Minnesota Cooperation
Office for Small Business and Job Creation, Inc. (MCO), a non-profit corporation
formed in 1979 to foster job creation through assisting the start-up and growth
of innovative, technological ventures in Minnesota. Prior to joining MCO,
Mr. Johnson spent eight years at Control Data Corporation and twelve years at
DATA 100 Corporation in a number of different technical, marketing and
management positions. He currently serves as Chairman of the Board of
International Lottery and Totalizator Systems, Inc., a NASDAQ listed company in
California. In addition, he serves on the boards of directors of three private
companies and two venture capital funds and is also an active investor and
advisor to a number of emerging companies around the United States.
Vance D. Fiegel, President and Director since January 1995, is also Chief
Operating Officer and the Director of Research at Embro Corporation, a bio-
medical research and development company specializing in wound healing products
and vascular devices. At Embro, he directs corporate operations and new product
development. He is a founder of Embro as well as the National Reparative
Medicine Foundation where he serves as Director and Executive Vice President.
Prior to founding Embro, Mr. Fiegel held various positions at the University of
Minnesota, ultimately directing research in the field of wound healing where he
has published over fifty papers in national and international journals.
David B. Kaysen, Director, is an experienced healthcare executive with over 20
years involvement in medical products sales and marketing. He is currently
President, CEO of Rehabilicare, Inc.. From 1991 to 1992 he served as Vice
President of Emeritus Corporation. From 1989 to 1991 he served as Vice
President of Sales and Marketing for HDM Corporation. From 1988 to 1989, he
served as the President and CEO and Director of Surgidyne, Inc. From 1986 to
1988, Mr. Kaysen was Vice President of Marketing for Red Line/XVIIIB Medi Mart,
Minneapolis, Minnesota.
William F. Gearhart, Director and Secretary, is Vice President Sales and
Marketing for Schneider (USA), Inc. He was previously Director of Marketing for
St. Jude Medical, and Director of Sales and Marketing for the clinical division
of Sandoz Nutrition Corporation. Mr. Gearhart was President and COO of
MedVentures, Inc. from 1987 to 1990, and from 1985 to 1987 was Chairman and
President of Competitive Business Strategies, a developer of strategic planning
software, and Vice President of Alpha Business Group, Inc., a business
consulting service to start-up medical companies.
Arthur W. Schwalm, Director, was founder of Cardiac Pacemakers, Inc. (CPI) in
1972 and served as President and Chief Executive Officer for 10 years. CPI was
sold to Eli Lilly in 1978. Mr. Schwalm served as Chairman of the Board until
1983. Mr. Schwalm also serves on the board of directors of Orthofix. He is an
active investor in a number of new ventures, primarily in the medical device
area.
David R.Knighton, M.D., Director and Chairman of the Company's
Medical/Scientific Advisory Board. He is currently a practicing vascular
surgeon in the Twin Cities, Medical Director of the Institute for Reparative
Medicine, and President and CEO of Embro, Inc. Dr. Knighton founded Curative
Technologies, Inc., an international wound healing company which specializes in
formation and management of Wound Care Centers. In addition to his recognized
expertise in clinical wound care, Dr. Knighton is an experienced basic science
researcher in the field of wound repair and wound healing angiogenesis.
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth the cash compensation paid or accrued by the
Company for services rendered during the years indicated to its executive
officer serving in the capacity as the CEO.
SUMMARY COMPENSATION TABLE
Long-Term Compensation
Annual Compensation Awards Payouts
Other Securities All
Name and Annual Restricted Underlying Other
Principal Compen- Stock Options/ LTIP Compen-
Position Year Salary Bonus sation Award(s) SARs (#) Payouts sation
*Charles B. McNeil (Exec. Vice Pres.)
1998 $35,000 $ - $4,800 $ - - $ - $ -
1997 35,000 - 4,800 - - - -
1996 35,000 - 4,000 - - - -
* Vance D. Fiegel is employed by the Company part-time and although Theodore A.
Johnson, who is a non-employee of the Company, has the title of CEO,
Charles B. McNeil has served in that capacity. Mr. Johnson does not
receive compensation from the Company.
The following table provides information with respect to option/SAR grants for
the year ended December 31, 1998:
Number of Secu- % of Total Options/
rities Underly- SARS Granted to Em- Expir-
ing Options/ ployees in Fiscal Exercise or Base ation
Name SARs Granted (#) Year Price ($/Sh) Date
Charles B. McNeil - - $ - -
The following table provides information with respect to stock option exercises
in fiscal 1998 by the named executive officers and the value of such officers'
unexercised options at December 31, 1998.
Aggregate Option Exercises in Last Fiscal Year and Year-End Option Values
Shares Number of Value of Unexercised
Acquired Unexercised Options In-the-Money Options
on Value at Year-End at Year-End
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
Charles B. McNeil
- $ - - - $ - $ -
Compensation of Directors
The Company does not provide cash remuneration to its directors.
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table presents certain information with respect to each share-
holder known by the Company to own beneficially 5% or more of its outstanding
common shares (which includes the assumed conversion of the Series A preferred
stock) and for each Director and Officer as of December 31, 1998. Each share-
holder has sole voting and investment power with respect to the shares shown as
beneficially owned, except as otherwise indicated in a footnote.
Amount and Nature of Percent
Name and Address of Beneficial Owner Beneficial Owner of Class
All Directors and Officers as a group
(7 people in group) 2,182,354 1 24.6%
Charity, Inc.
6187 Heather Circle
Fridley, MN 55432 1,126,016 2 12.5%
Theodore A. Johnson
825 Southgate Office Plaza
5001 West 80th Street
Bloomington, MN 55437 786,875 3 9.1%
Charles B. McNeil
9909 South Shore Drive
Plymouth, MN 55441 632,839 7.3%
Arthur W. Schwalm
9909 South Shore Drive
Plymouth, MN 55441 356,640 4.1%
David R. Knighton, M.D.
2460 South Highway 100
St. Louis Park, MN 55416 356,000 4 4.1%
Vance D. Fiegel
2460 South Highway 100
St. Louis Park, MN 55416 50,000 5 0.6%
William F. Gearhart
9909 South Shore Drive
Plymouth, MN 55441 - 0.0%
David B. Kaysen
9909 South Shore Drive
Plymouth, MN 55441 - 0.0%
******************************
1 Includes 185,000 shares issuable pursuant to options and warrants which
are currently exercisable and 80,000 shares of Series A convertible
preferred stock. Also includes 200,000 shares held by EMBRO Corporation,
of which Dr. Knighton is an 80% shareholder.
2 Includes 400,000 shares of Series A convertible preferred stock.
3 Includes 60,000 shares of Series A convertible preferred stock. Does not
include 27,300 shares held by Minnesota Cooperation Office, of which Mr.
Johnson is President.
4 Includes 135,000 shares issuable pursuant to warrants which are currently
exercisable and 20,000 shares of Series A convertible preferred stock.
Also includes 200,000 shares of common stock held by EMBRO Corporation, of
which Dr. Knighton is an 80% shareholder.
5 Represents 50,000 shares issuable pursuant warrants which are currently
exercisable. Does not include any portion of the 200,000 shares stock
held by EMBRO Corporation, of which Mr. Fiegel is a 20% shareholder.
<PAGE>
The following table presents certain information with respect to each share-
holder known by the Company to own beneficially 5% or more of its outstanding
Series A Preferred Stock shares and for each Director and Officer as of December
31, 1998. Each shareholder has sole voting and investment power with respect to
the shares shown as beneficially owned, except as otherwise indicated in a
footnote.
Amount and Nature of Percent
Name and Address of Beneficial Owner Beneficial Owner of Class
Charity, Inc.
6187 Heather Circle
Fridley, MN 55432 400,000 25.0%
Samuel M. Joy
828 Ridge Place
Mendota Heights, MN 55118 140,000 8.8%
Dr. Demetre Nicoloff
c/o National City Bank
Account #50-1580-04
75 South Fifth Street
Minneapolis, MN 55402 120,000 7.5%
Eugene T. and Joan L. Plitt
S76 West 12816 Cambridge Court
Muskego, WI 53150 100,000 6.3%
John M. Metcalfe
6565 Word Parkway
Melbourne Village, FL 32904-3636 80,000 5.0%
Dr. Melvin P. Bubrick
5712 Long Brake Trail
Edina, MN 55345 80,000 1 5.0%
Theodore A. Johnson
825 Southgate Plaza Office
5001 West 80th Street
Bloomington, MN 55437 60,000 3.8%
David R. Knighton, M.D.
2460 South Highway 100
St. Louis Park, MN 55416 20,000 1.3%
All Directors and Officers as a group 80,000 5.0%
******************************
1 Includes 40,000 shares held in trust in the names of Dr. Bubrick's
children.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 1991, Theodore A. Johnson, Arthur W. Schwalm and Charles B. McNeil each
loaned the Company $25,000 in the form of short-term notes payable bearing
interest at 15%. The aggregate balance of these notes as of December 31, 1998
and December 31, 1997 was $10,000.
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits required to be filed by Item 601(a) of Regulation S-B are
included as Exhibits to this report as follows:
3.1 Articles of Incorporation of Surgidyne, Inc. (including Articles of
Merger).1
3.2 Bylaws of Surgidyne, Inc.1
4.1 Private Placement Offering Statement of Terms for Convertible
Subordinated Debenture Offering.2
4.2 Form of 12% Convertible Subordinated Debenture for Convertible
Subordinated Debenture Offering.2
4.3 Form of 10% Convertible Subordinated Debenture for Convertible
Subordinated Debenture Offering.2
4.4 Form of Convertible Subordinated Debenture Agreement for Convertible
Subordinated Debenture Offering.2
4.5 Form of Amendment to Convertible Subordinated Debenture Agreement
for Convertible Subordinated Debenture Offering, dated November
28, 1989.3
4.6 Common Stock Purchase Warrant dated December 22, 1988, issued to
Samuel M. Joy for the purchase of 21,600 shares at a price of $0.01
per share.2
4.7 Common Stock Purchase Warrant dated February 28, 1989, issued to
Samuel M. Joy for the purchase of 5,400 shares at a price of $0.01
per share.2
4.8 Form of Amendment to Convertible Subordinated Debenture Agreement
for Convertible Subordinated Debenture Offering, dated June 5,
1990.4
4.9 1990 Private Placement Offering Memorandum.4
10.1 Lease dated August 23, 1985 between Technology Park Associates and
Surgidyne, Inc. for the office and warehouse space located at 9600
West 76th Street, Eden Prairie, Minnesota, as amended.1
10.2 Lease dated January 30, 1989 between Medical Incorporated and
Surgidyne, Inc. for the office and warehouse space located at 9605
West Jefferson Trail, Inver Grove Heights, Minnesota.2
10.3 1984 Stock Option Plan.1
10.4 1986 Stock Option Plan.1
10.5 Selling Agency Agreement dated October 12, 1988 between Surgidyne,
Inc. and Samuel M. Joy.2
10.6 Employment Agreement dated September 11, 1989 between Surgidyne,
Inc. and Thomas J. McEvoy.3
10.7 Lease dated August 1, 1990 between Omnicor, Inc. and Surgidyne, Inc.
for the office and warehouse space located at 9605 West Jefferson
Trail, Inver Grove Heights, Minnesota.4
10.8 Development and license agreement and Manufacturing Agreement dated
October 9, 1990 with Baxter Healthcare Corporation.4
10.9 Lease dated August 1, 1991 between Omnicor, Inc. and Surgidyne, Inc.
for the office and warehouse space located at 9605 West Jefferson
Trail, Inver Grove Heights, Minnesota.5
10.10 Lease dated June 21, 1994 between Medicine Lake Properties of
Plymouth and Surgidyne, Inc. for office and warehouse space located
at 9909 South Shore Drive, Minneapolis, Minnesota.6
10.11 Purchase and sale of Assets and Restated Manufacturing Agreements
dated August 24, 1993 with Baxter Healthcare Corporation.7
10.12 Promissory note dated June 14, 1994 between Robert D. Furst, Jr. and
Surgidyne, Inc.8
1 Incorporated by reference to Exhibits filed with Registrants' 1987 Form
10-K under the Securities and Exchange Act of 1934, file #33-13058-C.
2 Incorporated by reference to Exhibits filed with Registrants' 1988 Form
10-K under the Securities and Exchange Act of 1934, file #33-13058-C.
3 Incorporated by reference to Exhibits filed with Registrants' 1989 Form
10-K under the Securities and Exchange Act of 1934, file #33-13058-C.
4 Incorporated by reference to Exhibits filed with Registrants' 1990 Form
10-K under the Securities and Exchange Act of 1934, file #33-13058-C.
5 Incorporated by reference to Exhibits filed with Registrants' 1991 Form
10-K under the Securities and Exchange Act of 1934, file #33-13058-C.
6 Incorporated by reference to Exhibits file with Registrant's Form
10-QSB for the quarter ended June 25, 1994 under the Securities and
Exchange Act of 1934, file #33-13058-C.
7 Incorporated by reference to Exhibits file with Registrant's Form
10-QSB for the quarter ended September 24, 1994 under the Securities
and Exchange Act of 1934, file #33-13058-C.
8 Incorporated by reference to Exhibits file with Registrant's Form
10-QSB for the quarter ended June 30, 1994 under the Securities and
Exchange Act of 1934, file #33-13058-C.
B. Reports on Form 8-K.
No reports on Form 8-K were filed during the last quarter of the fiscal
year covered by this report.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
SURGIDYNE, INC.
(Registrant)
/s/ Vance D. Fiegel March 30 , 1999
By: Vance D. Fiegel
President and Principal Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
/s/ Charles B. McNeil March 30 , 1999
By: Charles B. McNeil
Executive Vice President, Treasurer and Director.
/s/ Theodore A. Johnson March 30 , 1999
By: Theodore A. Johnson
Chief Executive Officer and Chairman of the Board of Directors
/s/ David B. Kaysen March 30 , 1999
By: David B. Kaysen
Director
/s/ Arthur W. Schwalm March 30 , 1999
By: Arthur W. Schwalm
Director
/s/ William F. Gearhart March 30 , 1999
By: William F. Gearhart
Secretary and Director
/s/ David R. Knighton March 30 , 1999
By: David R. Knighton
Director
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 11064
<SECURITIES> 0
<RECEIVABLES> 82206
<ALLOWANCES> 0
<INVENTORY> 172286
<CURRENT-ASSETS> 278510
<PP&E> 333396
<DEPRECIATION> 321806
<TOTAL-ASSETS> 298423
<CURRENT-LIABILITIES> 135057
<BONDS> 0
<COMMON> 4472042
0
400000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 298423
<SALES> 573054
<TOTAL-REVENUES> 573054
<CGS> 372895
<TOTAL-COSTS> 372895
<OTHER-EXPENSES> 197787
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1300
<INCOME-PRETAX> 1767
<INCOME-TAX> 0
<INCOME-CONTINUING> 1767
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1767
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
