Securities and Exchange Commission
Washington, DC 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to ______________
Commission file number 0-20256
KURZWEIL APPLIED INTELLIGENCE, INC.
----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 04-2815079
- -------------------------------- ------------------------------------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
411 Waverley Oaks Road, Waltham, Massachusetts (02154)
------------------------------------------------------
(Address of principal executive offices)
(617) 893-5151
---------------------------
(Issuer's telephone number)
-----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
,
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes [ X ] No [ ]
On October 31, 1996, there were 9,059,448 shares of Common Stock outstanding.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
Exhibit index on Page 15
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<PAGE>
KURZWEIL APPLIED INTELLIGENCE, INC.
FORM 10-QSB
INDEX
Page
----
Part I - Financial Information
Item 1. Financial Statements
Balance Sheets as of October 31, 1996 and January 31, 1996 3
Statements of Operations for the Three and Nine Month Periods
Ended October 31, 1996 and 1995 4
Statements of Cash Flows for the Three and Nine Month Periods
Ended October 31, 1996 and 1995 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
Part II - Other Information
Item 1. Legal Proceedings 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
Exhibit Index 15
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<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
KURZWEIL APPLIED INTELLIGENCE, INC.
CONDENSED BALANCE SHEETS
Unaudited
(in thousands)
<TABLE>
<CAPTION>
October 31, January 31,
1996 1996
-------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $2,350 $2,084
Marketable securities available for sale 501
Trade accounts receivable, less allowances of $253,000
and $287,000 at October 31, 1996 and January 31, 1996,
respectively 2,328 1,221
Inventory 370 398
Other current assets 348 262
-------------- -------------
Total current assets 5,396 4,466
Property and equipment, net 785 924
Intangible assets 933 1,745
Capitalized software development costs, net 2,376 1,593
Other assets 115 136
-------------- -------------
Total assets $9,605 $8,864
============== =============
LIABILITIES
Current liabilities:
Accounts payable $898 $665
Accrued expenses 2,326 2,211
Capital lease obligations 29
Current portion of other long-term liabilities 1,019 902
-------------- -------------
Total current liabilities 4,243 3,807
Other long-term liabilities 1,152 2,169
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value, 1,000,000 shares
authorized; none issued and outstanding
Common stock, $.01 par value; 15,000,000 and 10,000,000 shares authorized at
October 31, 1996 and January 31, 1996,
respectively; 9,059,448 and 5,733,387 shares issued and
outstanding at October 31, 1996 and January 31, 1996,
respectively 91 57
Additional paid-in capital 66,725 57,647
Common stock to be issued 5,075
Accumulated deficit (62,606) (59,891)
-------------- -------------
Total stockholders' equity 4,210 2,888
-------------- -------------
Total liabilities and stockholders' equity $9,605 $8,864
============== =============
</TABLE>
The accompanying notes are an integral part of the condensed financial
statements.
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<PAGE>
KURZWEIL APPLIED INTELLIGENCE, INC.
CONDENSED STATEMENTS OF OPERATIONS
Unaudited
(in thousands, except for per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
October 31, October 31,
-------------------------------------------------------------
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Product and license revenue $1,963 $1,589 $4,936 $6,016
Maintenance revenue 484 452 1,418 1,248
------------- ------------- ------------- -------------
Total revenues 2,447 2,041 6,354 7,264
------------- ------------- ------------- -------------
Operating costs and expenses:
Cost of product, license and maintenance revenue 1,038 1,001 2,779 3,256
Sales and marketing 950 899 2,889 2,704
Research and development 816 646 2,248 1,762
General and administrative 344 310 1,240 1,049
------------- ------------- ------------- -------------
Total operating costs and expenses 3,148 2,856 9,156 8,771
------------- ------------- ------------- -------------
Operating loss (701) (815) (2,802) (1,507)
Interest expense 1 3 3 10
Interest income 19 37 77 150
Other income, net 1 12 13 63
============= ============= ============= =============
Net loss ($682) ($769) ($2,715) ($1,304)
============= ============= ============= =============
Net loss per common share ($0.07) ($0.11) ($0.33) ($0.19)
============= ============= ============= =============
Weighted average number of common
shares outstanding 9,058,595 6,766,466 8,100,946 6,752,178
============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of the condensed financial
statements.
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<PAGE>
KURZWEIL APPLIED INTELLIGENCE, INC.
CONDENSED STATEMENTS OF CASH FLOWS
Unaudited
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended October 31,
-----------------------------
1996 1995
---------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss ($2,715) ($1,304)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Depreciation 381 398
Amortization 1,455 1,368
Provision for doubtful accounts 5
Change in operating assets and liabilities:
(Increase) in accounts receivable (1,107) (16)
Decrease in inventory 28 365
(Increase) in other assets (96) (236)
Increase in accounts payable 233 261
Increase (decrease) in accrued expenses
and other liabilities 113 (598)
--------- --------
Net cash (used in) provided by operating activities (1,708) 243
--------- --------
Cash flows from investing activities:
Sale of marketable securities available for sale 501
Payments for property and equipment, net (242) (578)
Capitalized software development costs (1,392) (973)
--------- --------
Net cash (used in) investing activities (1,133) (1,551)
--------- --------
Cash flows from financing activities:
Payments on capital lease obligations (29) (80)
Payments on licensing agreement (902) (798)
Proceeds from issuance of capital stock, net 4,038 56
--------- --------
Net cash provided by (used in) in financing activities 3,107 (822)
--------- --------
Net increase (decrease) in cash 266 (2,130)
Cash and cash equivalents, beginning of period 2,084 4,307
--------- --------
Cash and cash equivalents, end of period $2,350 $2,177
========= ========
</TABLE>
The accompanying notes are an integral part of the
condensed financial statements.
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<PAGE>
KURZWEIL APPLIED INTELLIGENCE
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
---------------------
For purposes of this Form 10-QSB, all references to "Fiscal 1997" mean the
fiscal year of Kurzweil Applied Intelligence, Inc. (the "Company") ending
January 31, 1997. All references to "Fiscal 1996" mean the Company's fiscal year
ended January 31, 1996.
The accompanying condensed unaudited financial statements of the Company have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB and Item
310 of Regulation S-B. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for the fair presentation
have been included. The results of operations of any interim period are not
necessarily indicative of the results of operations for the fiscal year. For
further information, refer to the financial statements and footnotes thereto
included in the Company's 1996 Annual Report for the fiscal year ended January
31, 1996.
2. LEGAL PROCEEDINGS
-----------------
Texas Litigation On September 11, 1995, one of the Company's shareholders who
opted out of the shareholder class action litigation against the Company, which
was subsequently settled in April of 1995, filed a complaint in Dallas County,
Texas against the Company and certain of its current and former directors and
officers. The complaint asserts that the defendants committed fraud and violated
Texas state law and unnamed federal securities laws. The shareholder seeks
$1,500,000 in damages as a result of his purchase of 1,000 shares of the
Company's Common Stock. Management believes that the damages being claimed are
excessive and intends to defend its position vigorously.
Nasdaq Regulatory Requirements
- ------------------------------
At April 30, 1996 the Company was not in compliance with the Nasdaq net worth
requirement for the listing of the Company's Common Stock on the Nasdaq National
Market. The Company's filing of the Form 10-QSB for the period of July 31, 1996
demonstrated compliance and the Company's listing continued. This filing of Form
10-QSB for the period ended October 31, 1996 also demonstrated compliance, but
there can be no assurance that the Company will be able to maintain its listing
in future filings. Suspension of the Company's common stock from trading on the
Nasdaq National Market may adversely affect the price of the Company's common
stock.
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<PAGE>
3. INTANGIBLE ASSETS AND OTHER LONG-TERM LIABILITIES
-------------------------------------------------
On September 23, 1993, the Company and Dragon Systems, Inc. "Dragon" settled
certain patent infringement litigation between the two companies. As part of
such settlement agreement, the Company licensed certain Dragon patents related
to continuous speech and other aspects of speech recognition technology. The
Company paid Dragon $1,331,250 in Fiscal 1994, $798,000 in Fiscal 1996 and
$901,810 in June 1996. Under the terms of this agreement, the Company was
committed to make aggregate payments of $5,202,000 including $625,000 in
settlement of amounts due for products sold during periods prior to September
23, 1993. The following mandatory payments remain outstanding as of October 31,
1996:
June 1, 1997 1,019,460
June 1, 1998 1,151,523
-----------
Total $2,170,983
==========
The Company expensed $1,107,600 during Fiscal year 1996, and
will amortize the remaining asset of $646,000 on a straight-line basis through
May 31, 1997. The Company expensed $830,700 relating to the Dragon agreement for
the nine months ended October 31, 1996. According to the agreement, the Company,
if it chooses not to extend the license, has use of the licensed technology
through May 31, 1997. The final payment will then be made in Fiscal 1999.
The Company, at its option, can annually extend the license of the technology
through Fiscal 2006, at which time the license would be fully paid. Total
additional annual payments increasing at a rate of 13% per year during the
extension period would approximate $13.5 million.
4. Capital Stock
-------------
On May 3, 1996, the Company's Board of Directors adopted an amendment to the
Company's Amended and Restated Certificate of Incorporation to increase the
number of shares of common stock that the Company is authorized to issue from 10
million to 15 million shares. The amendment was approved by stockholders at the
Annual Meeting on July 19, 1996.
On May 10, 1996, the Company received approximately $2,376,000 from the private
sale of 1,320,050 shares of common stock to an investment fund.
On July 31, 1996, the Company received approximately $1,669,500 from the private
sale of 927,500 shares of common stock to accredited investors.
In conn
ection with these private sales, the Company also issued 224,755 warrants
to purchase shares of the Company's common stock at a price of $2.00 per share
which are exercisable for a period of up to ten years.
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<PAGE>
Item 2. Management's Discussion And Analysis Of Financial Condition And
---------------------------------------------------------------
Results Of Operations
---------------------
RESULTS OF OPERATIONS
- ---------------------
Total Revenues. The Company's total revenues consist of revenue from the sale
and licensing of Company products and revenue from maintenance contracts.
Three months. Revenue for the three months ended October 31, 1996 totaled
$2,447,000, 20% higher than the $2,041,000 of revenue in the same period of
the prior year. The increase in revenue was largely a result of increased
product and license sales for Kurzweil Voice for Windows.
Nine Months. Revenue for the nine months ended October 31, 1996 totaled
$6,354,000, 12% lower than the $7,264,000 of revenue in the same period of
the prior year. Lower shipments of the Company's VoiceMED products ,
primarily in the first quarter of Fiscal 1997, were largely responsible for
the decline in sales for the nine month period.
On July 30, 1996, the Company released for shipment the Kurzweil Clinical
Reporter system, the Company's Windows(R) based medical reporting product.
Medical product revenues were $1,257,000 for the third quarter ended
October 31, 1996 as compared to $1,359,000 for the same period of the prior
year. The decrease was a result of lower medical orders received from the
government as compared to the prior year.
Product sales for Kurzweil Voice for Windows increased to $587,000 for the
three months ended October 31, 1996 as compared to $215,000 for the same
period of the prior year. License fees for the Kurzweil Voice for Windows
product for the quarter ended October 31, 1996 was $125,000 compared to
$15,000 for the same period of the prior year.
Maintenance revenue for the three month period ended October 31, 1996
increased to $484,000 from $452,000 in the same period of the prior year.
This increase was a result of the larger installed base of medical systems
as compared to the same period of the prior year.
Maintenance revenue for the nine month period ended October 31, 1996
increased to $1,418,000 from $1,248,000 in the same period of the prior
year. The increase was a result of the larger installed base of customers
as well as the increased efforts by the Company to promote revenue from
maintenance contracts.
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<PAGE>
Cost of Product, License and Maintenance Revenue. Cost of product, license and
maintenance revenue includes hardware costs, manufacturing overhead, system
replacement parts associated with maintenance contracts, third party software
royalties and license fees, and amortization of capitalized software.
Three months. Cost of product, license and maintenance revenue for the
three months ended October 31, 1996 totaled $1,038,000 or 42% of total
revenues, compared to $1,001,000 or 49% of total revenues in the same
period of the prior year. The decrease in cost of product, license and
maintenance revenue as a percentage of total revenues was largely a result
of an increase in the higher margin, "software only" sales, as compared to
the same period of the prior year. The Company has been successful in its
efforts to reduce or eliminate certain hardware components from being
bundled in its sales transactions, resulting in revenue transactions that
have only a software component.
Nine Months. Cost of product, license and maintenance revenue for the nine
months ended October 31, 1996 totaled $2,779,000 or 43% of total revenues,
compared to $3,256,000 or 44% of total revenues in the same period of the
prior year. The decrease is a result of the increasing proportion of
software only revenue transactions.
Sales and Marketing Expenses. Sales and marketing expenses include the costs for
marketing, selling and supporting the Company's products.
Three Months. Sales and marketing expenses increased to $950,000 for the
three months ended October 31, 1996 from $899,000 in the same period of the
prior year, representing 39% and 44% of total revenues, respectively. The
increase in expenses was primarily the result of the continued spending to
market and sell the Kurzweil Clinical Reporter product line, which was
launched in the second quarter of Fiscal 1997. Those higher expenses
included an increased sales force, trade shows, promotion and collateral
marketing materials.
Nine Months. Sales and marketing expenses increased to $2,889,000 for the
nine months ended October 31, 1996 from $2,704,000 in the same period of
the prior year, representing 45% and 37% of total revenues, respectively.
The higher expenses were primarily the result of the increased spending to
market and sell the Kurzweil Clinical Reporter product line in the nine
months ended October 31, 1996.
Research and Development Expenses. Research and development expenditures consist
principally of personnel costs, allocated facility costs, and associated
equipment amortization and depreciation. A portion of the total research and
development expenditures are capitalized in accordance with Financial Accounting
Standards No. 86, "Accounting for the Costs of Computer Software to be Sold,
Leased or Otherwise Marketed," the amortization of which is included in cost of
product, license and maintenance revenue.
9 of 15
<PAGE>
Three Months. Total research and development expenses, net of
capitalization, for the three month period ended October 31, 1996 increased
to $816,000 or 33% of total revenues, compared to $646,000 or 32% of total
revenues in the same period of the prior year. The increase was primarily
the result of expenses related to the increased staffing of the research
and development group. The Company has continued its commitment to the
development and enhancement of new products and technology. The research
and development group including technical documentation totaled 66 people
at October 31, 1996 as compared to 52 at the end of October of the prior
year.
Nine Months. Total research and development expenses, net of
capitalization, increased to $2,248,000 for the nine months ended October
31, 1996 from $1,762,000 in the same period of the prior year, representing
35% and 24% of total revenues, respectively. The increased staffing and
related expenses were responsible for the increase in expenses over the
comparable periods.
The capitalized software development asset account has increased $783,000 since
January 31, 1996. This increase is largely attributable to the increased
development staffing required for new and enhanced products, including the
delivery of the new Clinical Reporter and Kurzweil Voice for Windows 2.0
products in Fiscal 1997.
General and Administrative Expenses. General and administrative expenses include
those costs associated with general corporate needs and administrative
functions.
Three months. General and administrative expenses increased to $344,000 for
the three months ended October 31, 1996 from $310,000 in the same period of
the prior year, representing 14% and 15% of total revenues, respectively.
The increase was attributable to additional expenditures for general
corporate purposes relating largely to various stock holder and legal
expenses.
Nine months. General and administrative expenses increased to $1,240,000
for the nine months ended October 31, 1996 from $1,049,000 in the same
period of the prior year, representing 19% and 14% of total revenues,
respectively. The increase was primarily a result of reserves taken during
the first quarter of fiscal 1997 for litigation expenses.
Income Taxes. At January 31, 1996, the Company had federal net operating loss
carryforwards of approximately $49,000,000. In addition, at January 31, 1996,
the Company had federal tax credit carryforwards of approximately $900,000. The
net operating loss carryforwards and the tax credit carryforwards expire during
the years 1997 through 2009. Substantially all of the Company's net operating
loss and tax credit carryforwards are subject to limitation under the provisions
of Section 382 of the Internal Revenue Code. The limitation, and a change in
ownership resulting from various financing activities implemented by the
Company, would impact the amount of both the operating loss carry forwards and
the tax credit carry forwards available to offset future income and income tax
liabilities. There can be no assurance that any of these amounts will be
available for use by the Company.
10 of 15
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
At October 31, 1996, the Company's principal source of liquidity was cash and
cash equivalents of $2,350,000 as compared to cash and cash equivalents of
$2,084,000 at January 31, 1996.
The Company's operating activities used cash of $1,708,000 for the nine months
ended October 31, 1996. The Company will be required to pay $1,019,000 to Dragon
Systems Inc., on June 1, 1997 as part of the patent cross license agreement.
(See Note 3 "Intangible Assets and Other Long - Term Liabilities" of Notes to
Condensed Financial Statements.)
At October 31, 1996 the Company had working capital of $1,153,000 as compared to
working capital of $659,000 at January 31, 1996. This increase results primarily
from the private placement equity sales less amounts used to fund the Company's
losses and other commitments.
Accounts receivable has increased $1,107,000 since January 31, 1996 due largely
to an increase in revenues, and one receivable of $400,000 from one customer
that remains unpaid from the first quarter of Fiscal 1997. That one receivable
relates to a contract pursuant to which the Company has fulfilled all its
performance obligations. The Company is in negotiations with that customer in
order to resolve the delay in payment.
In order to fund its losses through the transition period of new product
introductions, on May 10, 1996 the Company raised approximately $2,376,000 from
the private placement of 1,320,050 shares of Common Stock to an investment fund.
On July 31, 1996 the Company received an additional $1,669,500 through the
private placement of 927,500 shares of Common Stock to accredited investors. The
Company believes it now has sufficient funds to sustain its operations through
at least mid Fiscal 1998, although the Company's ability to sustain its
operations will depend on, among other factors, the level and profitability of
its revenues.
The longer term financial stability of the Company is dependent on achieving
profitable operations and obtaining additional financing. The Company's future
capital requirements will depend on many factors, including the progress and
scope of its research and development programs and the level and profitability
of sales. To the extent that the Company is not able to fund its future
operations through the sale of its products, the Company will need to obtain
additional funds through private or public financing. There is no assurance that
the Company can obtain such additional financing. If the Company requires
additional financing or additional financing is not obtained, the Company will
likely be required to restructure its operations, curtail its spending in
research and development, or attempt a merger or other strategic alliance with
another company. Public financing would be subject to market conditions and
other uncertainties, and no assurance can be given that the Company could obtain
public financing at any time. Either public or private equity financing is
likely to result in dilution of the Company's existing stockholders.
11 of 15
<PAGE>
Certain Factors that May Affect Future Results
The Company's future results are subject to substantial risks and uncertainties.
The Company currently derives substantially all of its revenue from the sale of
software licenses that utilize speech recognition to create text documents.
The Company believes that factors affecting the ability of the Company's
products to achieve general market acceptance include product performance,
price, ease of adoption and learning. To be successful in the future the Company
must respond promptly and effectively to the challenges of technological change
and its competitors' innovations by continually enhancing its current products
and developing new products on a timely basis. Certain current and potential
competitors of the Company are more established, benefit from greater market
recognition and have substantially greater financial, development and marketing
resources than the Company. Competitive pressures or other factors, including
entry into new markets, may result in significant price erosion that could have
a material adverse effect on the Company's results of operations.
The Company believes that its operating results could vary significantly from
quarter to quarter. The Company's revenues in any quarter are substantially
dependent on orders booked and shipped in that quarter. The timing of revenue
receipts is influenced by a number of factors, including; the timing of
individual orders and shipments of its products, customer buying patterns,
changes and delays in product development, and the amount and timing of sales
and marketing expenditures. Because the Company's operating expenses are based
on anticipated revenue levels and a high percentage of the Company's expenses
are relatively fixed in the short-term, variations in revenues can cause
significant fluctuations in operating results from quarter to quarter and may
result in anticipated quarterly earnings shortfalls or losses.
Cautionary Statement
From time to time, information provided by the Company or statements made by its
employees may contain "forward-looking" information which involves risk and
uncertainties. In particular, statements contained in Item 2. Management's
Discussion and Analysis of Financial Condition and Results of Operations, which
are not historical facts (including, but not limited to statements concerning
anticipated operating expense levels and such expense levels relative to the
Company's total revenues and expected losses) are "forward-looking statements."
The Company's actual future results may differ significantly from those stated
in any forward-looking statements. Factors that may cause such differences
include, but are not limited to the factors discussed above as well as the
accuracy of the Company's internal estimates of revenue and operating expense
levels. Each of these factors, and others, are discussed from time to time in
the Company's Securities and Exchange Commission filings.
12 of 15
<PAGE>
Part II - OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
Reference is made to Footnote 2 of Notes to the Condensed Financial Statements
for a description of certain litigation and other legal proceedings.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits.
Exhibit No. Description
----------- -----------
27 Financial Data Schedule (EDGAR Filing only)
(b) Reports on Form 8-K. During the third fiscal quarter of Fiscal 1997,
the following reports on Form 8-K were filed:
Date: July 31, 1996
Item Reported: Item 5 Other Events (Private Placement)
Date: September 27, 1996
Item Reported: Item 4. Changes In Registrant's Certifying
Accountant
No financial statements were filed with the foregoing reports.
13 of 15
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date December 12, 1996 KURZWEIL APPLIED INTELLIGENCE, INC.
By: /s/ Thomas E. Brew, Jr.
------------------------------------
Thomas E. Brew, Jr.
President and Chief Executive Officer
By: /s/ Thomas B. Doherty
------------------------------------
Thomas B. Doherty
Chief Financial Officer,
Vice President of Finance and
Treasurer
(principal financial and
accounting officer)
14 of 15
<PAGE>
EXHIBIT INDEX
Exhibit No. Description At Page
- ----------- ----------- -------
27 Financial Data Schedule (EDGAR Filing only)
15 of 15
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-START> AUG-01-1996
<PERIOD-END> OCT-31-1996
<EXCHANGE-RATE> 1
<CASH> 2,350
<SECURITIES> 0
<RECEIVABLES> 2,328
<ALLOWANCES> 0
<INVENTORY> 370
<CURRENT-ASSETS> 5,396
<PP&E> 785
<DEPRECIATION> 0
<TOTAL-ASSETS> 9,605
<CURRENT-LIABILITIES> 4,243
<BONDS> 0
0
0
<COMMON> 91
<OTHER-SE> 4,119
<TOTAL-LIABILITY-AND-EQUITY> 9,605
<SALES> 2,447
<TOTAL-REVENUES> 2,447
<CGS> 1,038
<TOTAL-COSTS> 3,148
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1
<INCOME-PRETAX> (682)
<INCOME-TAX> 0
<INCOME-CONTINUING> (682)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (682)
<EPS-PRIMARY> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
