<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 1996
-----------------------------------
OR
[ ] 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 0-16752
MEDSTONE INTERNATIONAL, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 66-0439440
- ------------------------------------------------ -------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 COLUMBIA, SUITE 100, ALISO VIEJO, CALIFORNIA 92656
- ------------------------------------------------ -------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (714) 448-7700
-------------------------
NOT APPLICABLE
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed, since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
The number of shares of the Common Stock of the registrant outstanding as of
May 2, 1996 was 5,573,594.
<PAGE> 2
MEDSTONE INTERNATIONAL, INC.
INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION
------------------------------
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets
March 31, 1996 (Unaudited) and December 31, 1995 3
Condensed Consolidated Statements of Income (Unaudited)
Three Months Ended March 31, 1996 and 1995 4
Condensed Consolidated Statement of Stockholders' Equity (Unaudited)
Three Months Ended March 31, 1996 5
Condensed Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended March 31, 1996 and 1995 6
Notes to Unaudited Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10
PART II. OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
</TABLE>
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<PAGE> 3
MEDSTONE INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
---------------------------
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
ASSETS 1995 1995
------ ----------- ------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and equivalents $ 1,668,443 $ 3,108,741
Short-term investments 14,678,534 14,494,717
Accounts receivable, less allowance for
doubtful accounts of $160,000 and
$257,000 in 1996 and 1995, respectively 1,948,354 1,509,407
Inventories 1,398,733 1,764,636
Deferred tax assets 698,000 698,000
Prepaid expenses and other current assets 421,370 519,542
----------- -----------
Total current assets 20,813,434 22,095,043
Property and equipment, at cost 6,893,925 6,528,930
Less accumulated depreciation and amortization (2,757,045) (3,129,955)
----------- -----------
Net property and equipment 4,136,880 3,398,975
Other assets, net 323,394 415,838
----------- -----------
$25,273,708 $25,909,856
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable $ 494,147 $ 393,542
Accrued expenses 293,463 235,265
Accrued income taxes 462,341 101,293
Accrued payroll expenses 233,212 206,120
Deferred revenue 834,883 726,260
Customer deposits -- 932
Dividends payable -- 1,966,216
----------- -----------
Total current liabilities 2,318,046 3,629,628
Deferred tax liabilities 123,000 123,000
Commitments and contingencies (Notes 3 and 8)
Stockholders' equity:
Common stock - $.004 par value, 20,000,000
shares authorized, 5,535,909 and 5,516,528
shares issued and outstanding at
March 31, 1996 and December 31, 1995, respectively 22,144 22,066
Additional paid-in capital 18,620,767 18,555,983
Accumulated earnings 4,327,750 3,710,436
Stock purchase notes receivable (134,800) (134,800)
Unrealized gain/(loss) on short-term investments (3,199) 3,543
----------- -----------
Total stockholders' equity 22,832,662 22,157,228
----------- -----------
$25,273,708 $25,909,856
=========== ===========
</TABLE>
See accompanying notes
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<PAGE> 4
MEDSTONE INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Revenues:
Net equipment sales . . . . . . . . . . . . . . . . . . $ 787,500 $1,395,165
Procedures and maintenance fees . . . . . . . . . . . . 3,090,780 2,872,125
Laser catheters . . . . . . . . . . . . . . . . . . . . -- 316,321
Interest income . . . . . . . . . . . . . . . . . . . . 224,054 230,241
---------- ----------
Total revenues . . . . . . . . . . . . . . . . . . . . 4,102,334 4,813,852
Costs and expenses:
Cost of equipment sales . . . . . . . . . . . . . . . . 416,524 586,817
Costs of procedures and maintenance fees . . . . . . . . 1,416,328 1,254,498
Cost of laser catheters . . . . . . . . . . . . . . . . -- 88,894
Research and development . . . . . . . . . . . . . . . . 122,863 215,914
Selling . . . . . . . . . . . . . . . . . . . . . . . . 495,114 516,922
General and administrative . . . . . . . . . . . . . . . 317,036 457,133
Legal expense . . . . . . . . . . . . . . . . . . . . . 367,155 996
---------- ----------
Total costs and expenses . . . . . . . . . . . . . . . 3,135,019 3,121,174
---------- ----------
Income before provision for income taxes . . . . . . . . 967,314 1,692,678
Provision for income taxes . . . . . . . . . . . . . . . . 350,000 600,000
---------- ----------
Net income . . . . . . . . . . . . . . . . . . . . . . . . $ 617,314 $1,092,678
========== ==========
Earnings per share . . . . . . . . . . . . . . . . . . . . $ .11 $ .20
========== ==========
Number of shares used in the computation of
earnings per share . . . . . . . . . . . . . . . . . . . 5,676,863 5,437,539
========== ==========
</TABLE>
See accompanying notes.
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<PAGE> 5
MEDSTONE INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK UNREALIZED
------------------ ADDITIONAL ACCUMULATED LOSS ON
NUMBER OF PAID-IN EARNINGS STOCK PURCHASE SHORT-TERM
SHARES AMOUNT CAPITAL (DEFICIT) NOTE RECEIVABLE INVESTMENTS TOTAL
--------- ------- ----------- ---------- --------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 5,516,528 $22,066 $18,555,983 $3,710,436 $(134,800) $ 3,543 $22,157,228
Common stock options exercised 19,381 78 64,784 -- -- -- 64,862
Unrealized loss on short-term investments -- -- -- -- -- (6,742) (6,742)
Net income -- -- -- 617,314 -- -- 617,314
--------- ------- ----------- ---------- --------- ------- -----------
BALANCE AT MARCH 31, 1996 5,535,909 $22,144 $18,620,767 $4,327,750 $(134,800) $(3,199) $22,832,662
========= ======= =========== ========== ========= ======= ===========
</TABLE>
See accompanying notes
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<PAGE> 6
MEDSTONE INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1995 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . $ 617,314 $ 1,092,678
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization . . . . . . . . . . . 236,806 234,461
Provision for related party loan . . . . . . . . . -- 635
Changes in assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . (541,363) 212,001
Inventories . . . . . . . . . . . . . . . . . . . 146,605 (301,087)
Prepaid expenses and other current assets . . . . 90,837 (92,335)
Accounts payable and accrued expenses . . . . . . 148,420 (30,044)
Accrued payroll expenses . . . . . . . . . . . . . 27,092 (77,427)
Accrued income taxes . . . . . . . . . . . . . . 361,048 534,155
Deferred revenue . . . . . . . . . . . . . . . . . 110,251 (51,294)
Customer deposits . . . . . . . . . . . . . . . . -- 5,800
Other, net . . . . . . . . . . . . . . . . . . . . 496,584 --
----------- -----------
Net cash provided by (used in) operating activities . 700,426 1,527,543
----------- -----------
Cash flows from investing activities:
Purchase of investments available for sale . . . . . . (6,657,067) (8,009,036)
Sale of investments available for sale . . . . . . . . 6,466,508 5,139,508
Related party loan . . . . . . . . . . . . . . . . . . -- (636)
Purchase of property and equipment . . . . . . . . . . (1,015,027) (169,481)
Disposals of property and equipment . . . . . . . . . -- 212,248
----------- -----------
Net cash used in investing activities . . . . . . . . (1,205,586) (2,827,397)
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of common stock . . . . . . . 64,862 204,814
Dividends paid . . . . . . . . . . . . . . . . . . . . (1,000,000) --
----------- -----------
Net cash used in financing activities . . . . . . . . (935,138) 204,814
Net increase (decrease) in cash and equivalents . . . . . (1,440,298) (1,095,040)
Cash and equivalents at beginning of period . . . . . . 3,108,741 1,261,596
----------- -----------
Cash and equivalents at end of period . . . . . . . . . . $ 1,668,443 $ 166,556
=========== ===========
Supplemental cash flow disclosures:
Cash paid during the period for:
Income taxes . . . . . . . . . . . . . . . . . . . . $ 7,236 $ 65,490
Interest . . . . . . . . . . . . . . . . . . . . . . $ -- $ --
Supplemental schedule of noncash investing
and financing activities:
Dividends paid . . . . . . . . . . . . . . . . . . . $ 966,216 $ --
</TABLE>
See accompanying notes.
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<PAGE> 7
MEDSTONE INTERNATIONAL, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
A. ORGANIZATION AND OPERATIONS OF THE COMPANY
Medstone International, Inc. ("Medstone") (formerly Cytocare, Inc.
prior to renaming on September 21, 1995) was incorporated in Delaware in
October 1984. The Company designs, manufactures and markets the Medstone
STS(TM) Shockwave Therapy System (the "System") for the noninvasive
disintegration of kidney stones in human patients. In addition to sales of the
System, Medstone generates recurring revenue from procedure fees and fee for
service arrangements for use of the System and from repairs and maintenance of
the Systems. The Company, as a manufacturer of capital medical devices, has
been vertically integrating by offering its medical devices directly to
providers on a fee-per-procedure basis. Medstone currently offers mobile
lithotripsy services using seven mobile systems in the Western United States on
a fee-per-procedure basis. Medstone intends to expand efforts to grow this
medical service side of its business.
On February 9, 1996, the Company distributed, as a dividend to its
shareholders of record on December 29, 1995, a stock dividend for each
outstanding share of the Company of one share of both Endocare, Inc. and UroGen
Corp., the Company's device and drug subsidiaries.
B. BASIS OF PRESENTATION
In the opinion of the Company's management, the accompanying unaudited
condensed consolidated financial statements include all adjustments (which
consist only of normal recurring adjustments) necessary for a fair presentation
of its consolidated financial position at March 31, 1996 and consolidated
results of operations and cash flows for the periods presented. Certain prior
period balances have been reclassified to conform with current period
presentation. Although the Company believes that the disclosures in these
financial statements are adequate to make the information presented not
misleading, certain information and disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted and should be read in conjunction with the
Company's audited financial statements included in the Company's 1995 Annual
Report on Form 10-K filed with the Securities and Exchange Commission on March
28, 1996. Results of operations for the three months ended March 31, 1996 are
not necessarily indicative of results to be expected for the full year.
C. PER SHARE INFORMATION
Per share information is presented in the accompanying consolidated
statements of operations based upon the weighted average number of common and
common equivalent shares outstanding. Common equivalent shares result from the
assumed exercise of
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<PAGE> 8
outstanding dilutive securities when applying the treasury stock method. Fully
diluted per share information is not presented for periods in which the effect
is antidilutive.
D. INVENTORIES
At March 31, 1996 and December 31, 1995, inventories consisted of the
following:
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
-------------- -----------------
<S> <C> <C>
Raw materials . . . . . . . . . . $ 905,980 $1,235,161
Work in process . . . . . . . . . 304,846 190,002
Finished goods . . . . . . . . . 187,907 339,473
---------- ----------
$1,398,733 $1,764,636
========== ==========
</TABLE>
E. SHORT-TERM INVESTMENTS
The Company adopted Financial Accounting Standards Board Statement No.
115 as of January 1, 1994. The effect of the adoption is that the Company
classifies its entire investment portfolio as available-for-sale. Accordingly,
unrealized holding gains and losses on short-term investments are carried as a
separate component of stockholder's equity.
F. CONTINGENCIES
The Company is a defendant in two related class action lawsuits filed
by two shareholders of the Company alleging that adverse material information
was not disclosed at the time of the initial public offering and in subsequent
periods. On May 4, 1992, the district court granted summary judgment in one of
the actions in favor of the Company on all claims. On July 9, 1992, the
district court granted the Company's motion to dismiss the second action. In
October 1994, the Company received the opinion of the Ninth Circuit of Appeals
affirming in part and reversing in part the United States District Court's
decision granting summary judgment in favor of the Company and several
officers. The complaints allege principally that adverse material information
was not disclosed at the time of the initial public offering in June 1988. In
October 1995, the Supreme Court declined to hear an appeal of the case and
returned the case to district court for scheduling, which was set for May 21,
1996 and has been moved to October 1, 1996. The Company intends to proceed to
trial on any remaining matters. The ultimate outcome of the litigation cannot
presently be determined. Accordingly, no provision for any liability that may
result has been made in the financial statements.
G. DISTRIBUTION TO SHAREHOLDERS
On December 19, 1995, the Company declared two stock dividends, payable
to stockholders of record on the close of trading on December 29, 1995. The two
dividends represent distribution of all the assets and operations of the
Endocare and Urogen divisions of the Company which were transferred to two
wholly-owned corporations, Endocare, Inc. and UroGen Corp. Effective with the
start of business on January 1, 1996 these two companies are no longer part of
the Medstone International operations, as Medstone distributed to its
shareholders almost all outstanding common stock of each company,
- 8 -
<PAGE> 9
retaining only 100,000 shares of each company. On February 9, 1996, the
Company distributed 5,516,528 shares of each company and these two companies
became separate publicly-held companies.
Endocare develops, manufacturers and markets devices to treat
urological diseases. Endocare began as a department and was later formed as a
division of Medstone International, Inc. to continue the research and
development efforts of Medstone in the treatment of urological disorders and to
focus on new product development. In addition to enhancing Medstone's existing
lithotripsy products, the research and development conducted by Endocare has
produced several products outside of Medstone's core business of lithotripsy.
Products include its Prolase(R) side firing laser catheter and electrosurgical
devices designed to treat urological tissue and its CryoCare(TM) System, which
is currently in clinical trials.
Urogen was formed from the medical biology and small molecule
pharmaceuticals division of Medstone to continue the effort, started in 1991,
to develop pharmaceuticals to treat diseases in urology, with a particular
interest in prostate cancer.
Medstone, as part of the distribution of Endocare, forgave
intercompany debt of $2,831,364 and contributed $500,000 in cash and net other
assets of $803,133 to Endocare. As part of the distribution of Urogen,
Medstone forgave intercompany debt of $3,888,875 and contributed $500,000 in
cash and net other assets of $163,082 to UroGen.
- 9 -
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following discussion and analysis should be read in conjunction
with the Company's audited financial statements and Management's Discussion and
Analysis of Financial Condition and Results of Operations included in the
Company's 1995 Annual Report on Form 10-K filed with the Securities and
Exchange Commission on March 28, 1996.
RESULTS OF CONSOLIDATED OPERATIONS
- ----------------------------------
GENERAL
Medstone manufactures, markets and maintains lithotripters, and is
expanding its Fee-for-Service Program to supply lithotripsy equipment to
providers on a per procedure basis. To date, the Company's consolidated
revenues have come primarily from Medstone's lithotripsy business. On February
9, 1996, the Company distributed two stock dividends of 5,516,528 shares of
Endocare, Inc. and UroGen Corp. to its stockholders of record on December 29,
1995. The two dividends represent distribution of all the assets and
operations of the Endocare and Urogen divisions of the Company which were
transferred to the two corporations. Effective with the start of business on
January 1, 1996 these two companies are no longer a part of the Medstone
International operations, but are separate, publicly-held companies. Medstone
retained only 100,000 shares of each company.
RESULTS OF OPERATIONS
Three Months Ended March 31, 1996 Compared to Three Months Ended March 31, 1995
- -------------------------------------------------------------------------------
The Company recognized revenue of $4.1 million for the first quarter of
1996, or a 15% decrease, compared to $4.8 million during the first quarter of
1995. Equipment revenues decreased by 40% due to shipment of two systems in
the first quarter of 1996 compared to three systems shipped in the first
quarter of 1995. The recurring revenue stream from laser catheters decreased
by $316,000 as the Company spun off the Endocare, Inc. subsidiary effective
January 1, 1996 and no longer records any revenues from the laser catheter
business line. Partially offsetting these declines are a 16% increase in the
revenues from the Company's maintenance, procedure and fee-for-service
activities as the number of patients treated on the Medstone lithotripters in
the United States increased by 14% in the current period from the comparable
period in the prior year.
Interest income decreased by 3% in the three months ended March 31,
1996 compared to the same period in 1995 due to a slight decrease in market
rates with comparable invested balances.
- 10 -
<PAGE> 11
Cost of sales on equipment sales and equipment upgrades increased to
53% of sales in the first quarter of 1996 compared to 42% of sales in the
comparable quarter in 1995 due to the mix of lithotripter units and average
unit selling prices. The cost of sales related to recurring revenue increased
to 46% of revenues in the first quarter of 1996 from 42% of revenues in the
first quarter of 1995 due to increased expenses to support the expansion of
mobile lithotripsy routes outside of the west coast. As a percentage of sales
revenue (excluding interest), the cost of equipment, procedures and maintenance
increased to 47% for the first quarter of 1996 compared to 42% for the first
quarter of 1995.
Research and development expenses decreased by 43% during the three
months ended March 31, 1996 compared to the corresponding period of 1995,
primarily due to a reduction in headcount due to the spin out of Endocare, Inc.
engineering group.
Selling expenses decreased by 4% in the first quarter of 1996 when
compared to 1995 primarily due to lower commission expenses only partially
offset by higher payroll and travel expenses due to an expanded mobile sales
force.
As a result of the Company's spin outs, general and administrative
expenses decreased by 31% in the first quarter of 1996 compared to the same
quarter in the prior year due to lower headcount and lower legal costs.
Legal expense increased during the first quarter of 1996 due to the
increase in legal costs incurred in preparation for trial of the class action
lawsuit filed against the Company.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
At March 31, 1996, the Company had cash and short-term investments of
approximately $16.3 million. These funds were generated from operating
activities and from the Company's initial public offering in June 1988, in
which 1,150,000 shares of common stock were issued for net proceeds of
approximately $12.9 million. Cash generated from the offering and from
operations financed substantial increases in levels of inventory and capital
assets and was used to retire debt.
The Company's long-term capital expenditure requirements will depend
upon numerous factors, including the progress of the Company's research and
development programs, the time required to obtain regulatory approvals, the
resources that the Company devotes to the development of self-funded products,
proprietary manufacturing methods and advanced technologies, the length and
outcome of its existing securities litigation, the ability of the Company to
obtain additional licensing arrangements and to manufacture products under
those arrangements, the demand for its products if and when approved and
possible acquisitions of products, technologies and companies.
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<PAGE> 12
The Company believes that its existing working capital and funds
anticipated to be generated from operations will be sufficient to meet the cash
needs for continuation of its present operations during 1996.
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<PAGE> 13
MEDSTONE INTERNATIONAL, INC.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
Previously reported.
Item 2. Changes in Securities
---------------------
None
Item 3. Defaults upon Senior Securities
-------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None
Item 5. Other Information
-----------------
None
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) The following exhibits are included herein:
11.1 Statements re: Computation of Per Share Information
27 Financial Data Schedule
(b) Reports on Form 8-K.
During the quarterly period ended March 31, 1996, the
Company filed the following Current Reports on Form 8-K:
1. A report dated February 9, 1996 whereby the Company
completed distribution of the stock dividends of the
Endocare, Inc. and UroGen Corp. subsidiaries.
- 13 -
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
MEDSTONE INTERNATIONAL, INC.
-------------------------------
A Delaware corporation
Date: May 8, 1996 MARK SELAWSKI
-------------------------------
Mark Selawski
Chief Financial Officer
(Principal financial and
accounting officer)
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<PAGE> 1
EXHIBIT 11.1
MEDSTONE INTERNATIONAL, INC.
COMPUTATION OF PER SHARE INFORMATION
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
1996 1995
---------- ----------
<S> <C> <C>
Earnings:
Net income . . . . . . . . . . . . . . $ 617,314 $1,092,678
========== ==========
Computation of primary per share
information:
Shares:
Weighted average number of
shares outstanding . . . . . . . 5,534,173 5,156,982
Add effect of outstanding
options and warrants (a) . . . . . 142,690 280,557
---------- ----------
Number of shares outstanding, as
adjusted . . . . . . . . . . . . 5,676,863 5,437,539
========== ==========
Primary earnings per share:
Net income . . . . . . . . . . . . $ .11 $ .20
========== ==========
Computation of fully diluted per
share information:
Shares:
Weighted average number of
shares outstanding . . . . . . . 5,534,173 5,156,982
Add effect of outstanding
options and warrants (a) . . . . 147,772 283,201
---------- ----------
Number of shares outstanding as
adjusted . . . . . . . . . . . . 5,681,945 5,440,183
========== ==========
Fully diluted earnings per share:
Net income . . . . . . . . . . . . $ .11 $ .20
========== ==========
</TABLE>
- -----------
(a) As determined by the application of the treasury stock method.
- 15 -
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,668,443
<SECURITIES> 14,678,534
<RECEIVABLES> 1,948,354
<ALLOWANCES> 160,000
<INVENTORY> 1,398,733
<CURRENT-ASSETS> 20,813,434
<PP&E> 6,893,925
<DEPRECIATION> 2,757,045
<TOTAL-ASSETS> 25,273,708
<CURRENT-LIABILITIES> 2,318,046
<BONDS> 0
0
0
<COMMON> 22,144
<OTHER-SE> 20,810,518
<TOTAL-LIABILITY-AND-EQUITY> 25,273,708
<SALES> 3,878,280
<TOTAL-REVENUES> 4,102,334
<CGS> 1,832,852
<TOTAL-COSTS> 935,013
<OTHER-EXPENSES> 367,155
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 967,314
<INCOME-TAX> 350,000
<INCOME-CONTINUING> 617,314
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 617,314
<EPS-PRIMARY> .11
<EPS-DILUTED> .11
</TABLE>
