<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
[ X ] SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 26, 1997
---------------------------
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 0-16453
-------
HEARx LTD
- --------------------------------------------------------------------------------
EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER
DELAWARE 22-2748248
- --------------------------------------------------------------------------------
(STATE OF OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1250 NORTHPOINT PARKWAY, WEST PALM BEACH, FLORIDA 33407
- --------------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (561) 478-8770
-------------------------
- --------------------------------------------------------------------------------
FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT
INDICATE BY CHECK [X] 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
----- -----
ON NOVEMBER 3, 1997, 99,200,116 SHARES OF THE REGISTRANT'S COMMON STOCK WERE
OUTSTANDING.
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
<S> <C>
Consolidated Balance Sheets 3
September 26, 1997 and December 27, 1996
Consolidated Statements of Operations 4
Nine months ended September 26, 1997 and September 27, 1996
Consolidated Statements of Operations 5
Three months ended September 26, 1997 and September 27, 1996
Consolidated Statements of Cash Flows 6
Nine months ended September 26, 1997 and September 27,1996
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition 8 - 10
and Results of Operations
PART II. OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K 11
Signatures 12
</TABLE>
2
<PAGE> 3
HEARx LTD AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 26 December 27.
1997 1996
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents . ............................... $ 2,602,280 $ 1,811,437
Marketable securities ..................................... 14,286,513 11,936,025
Accounts and notes receivable ............................. 3,504,844 3,811,314
Allowance for doubtful accounts ........................... (688,047) (789,322)
Inventories ............................................... 419,744 363,978
Prepaid expenses .......................................... 160,166 245,000
------------ ------------
Total current assets .................................... 20,285,500 17,378,432
------------ ------------
PROPERTY AND EQUIPMENT:
Equipment, furniture and fixtures . ....................... 8,205,003 6,914,732
Leasehold improvements .................................... 4,500,299 3,823,205
Construction-in-progress .................................. 128,078 114,382
------------ ------------
12,833,380 10,852,319
Accumulated depreciation and amortization ................. (4,144,607) (2,783,619)
------------ ------------
Property and equipment - net .............................. 8,688,773 8,068,700
------------ ------------
OTHER ASSETS ................................................. 1,164,676 1,180,352
------------ ------------
$ 30,138,949 $ 26,627,484
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion - long-term debt .......................... $ 823,601 $ 751,673
Accounts payable and accrued expenses ..................... 2,523,137 3,357,422
Accrued salaries and other compensation ................... 354,336 812,946
------------ ------------
Total current liabilities ............................... 3,701,074 4,922,041
------------ ------------
LONG-TERM DEBT-NET OF CURRENT PORTION ........................ 182,999 230,258
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Non-redeemable preferred stock:
(Aggregate liquidation preference $7,443,903)
$1 par; 2,000,000 shares, authorized, issued
and outstanding:
1996 Convertible B-1 ...................................... - 3,500
1996 Convertible B-2 ...................................... - 1,450
1997 Convertible .......................................... 7,215 -
------------ ------------
Total preferred stock ................................... 7,215 4,950
Common stock. $.10 par; 130,000,000 shares authorized,
99,187,159 and 81,969,233 shares issued ................... 9,918,716 8,196,923
Additional paid-in capital ................................ 70,649,578 59,996,480
Accumulated deficit ....................................... (54,220,718) (46,130,289)
Unrealized gain on marketable securities .................. 22,976 32,121
Unamortized deferred compensation ......................... (122,891) -
Treasury stock, at cost - 250,000 common shares ........... - (625,000)
------------ ------------
Total stockholders' equity .............................. 26,254,876 21,475,185
------------ ------------
$ 30,138,949 $ 26,627,484
============ ============
</TABLE>
See notes to Consolidated Financial Statements
3
<PAGE> 4
HEARx LTD AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 26, 1997 AND SEPTEMBER 27, 1996
<TABLE>
<CAPTION>
1997 1996
----------- ------------
(Unaudited) (Unaudited)
<S> <C> <C>
NET SALES ...................................... $17,347,775 $ 13,564,269
----------- ------------
COSTS AND EXPENSES:
Cost of products sold ....................... 4,835,015 4,829,417
Center operating expenses ................... 12,694,323 8,442,034
General and administrative expenses ......... 4,558,854 3,766,987
Depreciation and amortization ............... 1,464,986 821,010
Interest expense - 159,957
----------- ------------
Total expenses ............................ 23,553,178 18,019,405
----------- ------------
LOSS BEFORE DIVIDENDS ON PREFERRED STOCK ....... (6,205,403) (4,455,136)
----------- ------------
DIVIDENDS ON PREFERRED STOCK:
Deemed dividends ............................ (1,500,000) (9,000,000)
Dividends ................................... (385,026) (626,048)
----------- ------------
Total dividends ........................... (1,885,026) (9,626,048)
----------- ------------
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS ..... $(8,090,429) $(14,081,184)
=========== ============
NET LOSS PER COMMON SHARE ...................... $ (0.09) $ (0.22)
=========== ============
WEIGHTED AVERAGE NUMBER OF SHARES OF
COMMON STOCK OUTSTANDING .................... 86,418,725 62,694,003
=========== ============
</TABLE>
See notes to Consolidated Financial Statements
4
<PAGE> 5
HEARx LTD AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 26, 1997 AND SEPTEMBER 27, 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
NET SALES ................................... $ 5,744,926 4,601,286
----------- -----------
COSTS AND EXPENSES:
Cost of products sold .................... 1,555,132 1,967,904
Center operating expenses ................ 4,634,194 2,966,012
General and administrative expenses ...... 1,542,919 1,323,630
Depreciation and amortization ............ 512,209 320,830
Interest expense ......................... - 34,626
----------- -----------
Total expenses ......................... 8,244,454 6,613,002
----------- -----------
LOSS BEFORE DIVIDENDS ON PREFERRED STOCK .... (2,499,528) (2,011,716)
DIVIDENDS ON PREFERRED STOCK ................ (148,969) (425,343)
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS .. $(2,648,497) $(2,160,685)
=========== ===========
NET LOSS PER COMMON SHARE ................... $ (0.03) $ (0.03)
=========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES OF
COMMON STOCK OUTSTANDING ................. 90,782,693 68,455,023
=========== ===========
</TABLE>
See notes to Consolidated Financial Statements
5
<PAGE> 6
HEARx LTD AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASHFLOWS
NINE MONTHS ENDED SEPTEMBER 26, 1997 AND SEPTEMBER 27, 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ................................................................... $(8,090,429) $(14,081,184)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization ...................................... 1,464,986 821,010
Allowance for doubtful accounts .................................... (101,275) (392,385)
Deferred compensation .............................................. (151,250) -
Unrealized gain on investments ..................................... (9,145) -
Loss on disposition of property .................................... 4,508
Non-cash expense for dividends on Convertible Preferred Stk ........ 1,885,026 9,626,048
Non-cash expense for advisors/consultants/public relations ......... - 101,500
Non-cash expense for customer list ................................. - 239,070
Non-cash expense for executive stock bonuses ....................... 10,124
Changes in operating assets and liabilities:
Accounts and notes receivable ...................................... 306,470 (831,388)
Inventories ........................................................ (55,766) 102,772
Prepaid expenses and other current assets .......................... 84,834 (760,960)
Deferred charges and other ......................................... (39,284) (1,143,829)
Accounts payable and accrued expenses .............................. (1,292,895) 1,976,453
----------- ------------
Net cash used by operating activities ...................................... (5,994,220) (4,332,769)
----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment ................................. (2,006,248) (4,923,053)
Proceeds from sale of property and equipment ....................... - 4,856
Purchase of investments ............................................ (2,350,488) -
----------- ------------
Net cash used by investing activities ...................................... (4,356,736) (4,918,197)
----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of:
Customer list purchase ........................................... - 213,515
Long-term debt-other ............................................. 171,560 759,994
Principal payments on borrowings:
Short-term debt . ................................................ (18,302) (61,558)
Long-term debt ................................................... (47,259) (4,185,383)
Forgiveness of long-term debt .................................... (81,330) (349,800)
Proceeds from issuance of capital stock, net of offering costs. .. 11,117,130 29,155,253
----------- ------------
Net cash provided by financing activities .................................. 11,141,799 25,532,021
----------- ------------
Net increase in cash and cash equivalents .................................. 790,843 16,281,055
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ........................... 1,811,437 933,539
----------- ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ................................. $ 2,602,280 $ 17,214,594
=========== ============
</TABLE>
See notes to Consolidated Financial Statements
6
<PAGE> 7
HEARX LTD AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The accompanying unaudited consolidated financial statements should be read in
conjunction with the Company's Annual Report on Form 10-K for the fiscal year
ended December 27, 1996. All adjustments, consisting of normal recurring
accruals, which are, in the opinion of management, necessary for a fair
statement of results for interim periods have been made.
1. PRIVATE PLACEMENT
On March 17, 1997, the Company completed a private placement of 10,000 shares of
1997 Convertible Preferred Stock, a newly designated preferred stock, par value
$1.00 per share pursuant to Regulation D, under the Securities Act of 1933, as
amended. Net proceeds to the Company after payment of placement fees, legal and
accounting expense was $9,270,000. The additional capital was raised to enable
HEARx to expand its network of hearing centers, if required by current or
potential managed-care contracts. The 1997 Convertible Preferred Stock is
convertible into Common Stock at various rates depending upon the date of
conversion and the market price at the date of conversion. During the nine
months ended September 26, 1997 the Company recorded a deemed preferred stock
dividend of $1,500,000, for the discounted conversion price.
2. STOCKHOLDERS' EQUITY
Conversion of Series B-1 and B-2 Preferred Stock into shares of Common Stock
During May and August 1996, the Company completed an offering pursuant to
Regulation D, under the Securities Act of 1933, as amended. In the Regulation D
offering, the Company sold 15,000 shares of a convertible preferred stock (the
"Series B-1 Preferred Stock") and 9,900 shares of another convertible preferred
stock (the "Series B-2 Preferred Stock"), for net proceeds of $23,048,590.
During the nine months ended September 26, 1997, 3,500 shares of the Series B-1
Preferred Stock were converted into 2,349,611 shares of Common Stock and 1,450
shares of the Series B-2 Preferred Stock were converted into 1,125,600 shares of
Common Stock. All shares of the Series B-1 and of the Series B-2 Preferred Stock
have all been converted to Common Stock.
Common Stock
During the nine months ended September 26, 1997, 14,910,734 warrants were
exercised resulting in the issuance of 11,449,233 shares of Common Stock. Of
these warrants, 12,919,005 warrants were originally issued in connection with
the sale of 1996 Senior Preferred Stock in January 1996. All but 327,499 of such
warrants have now been exercised. In addition, during the nine months ended
September 26, 1997, employee stock options were exercised resulting in the
issuance of 191,850 shares of Common Stock.
During the nine months ended September 26, 1997, 50,000 shares of Common Stock
were issued to one of the Company's officers pursuant to a deferred compensation
stock plan.
3. RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board recently issued Standard Number 128,
Earnings Per Share. As required, the Company will adopt this standard at the end
of its current fiscal year. The adoption of this standard is not expected to
have a material impact on the Company's reported earnings per share.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Management believes the shift of patients from the Medicare population to
managed care, which has occurred in recent years, will continue and increase in
the future. To the extent the Company is successful in contracting with the
providers of Medicare managed care for the provision of hearing care goods and
services, the Company can enjoy the benefits of this shift.
To support the requirements of the Company's current and future participation in
such contracts, the Company made a strategic decision to enter the northeast
United States market in 1996 and now operates thirty nine centers in the
northeast in addition to thirty three centers in Florida.
The Company signed new or expanded contracts with a number of managed care
companies in the first nine months of 1997. There can be no certainty that the
executed contracts will either start up on a timely basis or produce the
revenues anticipated. These contracts call for the managed care or insurance
companies to reimburse the Company for all, or a portion, of the costs incurred
by their members for hearing care services provided by the Company. The balance
of the cost is borne by the member. The Company is reimbursed by the insurer on
either a "fee for service" basis, or through a "capitated" plan. Capitation
contracts are those contracts which provide for payments to the Company on a per
member per month basis. Under those contracts, a member is entitled to testing
services and a product credit with respect to a hearing aid purchase. These
credits (discounted from published retail prices) are then applied to the
member's purchase of hearing aids. As generally provided in those contracts, the
member can receive this credit once every three years. The price of the services
and products provided on the first visit, above the group discount, as well as
any additional services or products purchased, are the obligation of the member.
The Company believes that the loss of any single managed care contract would not
have a material adverse effect on the Company's financial condition or results
of operation. Each of the existing contracts is achieving expected gross profit
margins and contributing positively to the Company's results of operations.
8
<PAGE> 9
RESULTS OF OPERATIONS
For the nine months ended September 1997 compared to 1996
Net sales increased $3,783,506, or 27.9%, to $17,347,775, in 1997 from
$13,564,269 in 1996.
Cost of products sold increased only $5,598, or .1%, to $4,835,015 in 1997 from
$4,829,417 in 1996. Cost of products sold, as a percentage of net sales, has
decreased significantly in 1997 due to improved pricing from the Company's
hearing aid suppliers and a change in the Company's product mix.
Center operating expenses increased $4,252,289, or 50.4%, to $12,694,323 in 1997
from $8,442,034 in 1996. This increase is partially due to an increase in
advertising expense of $1,227,338. Advertising expenditures are expected to
remain at these levels throughout 1997. The remaining increase of $3,024,951 is
attributable to the 28.1% increase in the number of centers operating in the
first nine months of 1997 (73) compared to the first nine months of 1996 (57),
plus the completion of staffing of the Northeast Regional Offices required to
support the Northeast centers.
General and administrative expenses increased $791,867, or 21%, to $4,558,854 in
1997 from $3,766,987 in 1996. Substantially all of the increase was attributable
to wages and fringe benefits associated with the expansion of personnel for
corporate administrative functions. This increase occurred primarily in the
first quarter of 1997.
Depreciation and amortization expense increased $643,976, or 78.4%, to
$1,464,986 in 1997 from $821,010 in 1996. The increase was attributable to the
depreciation and amortization of the leasehold improvements, medical and
computer equipment, and furniture associated with the new centers opened in 1996
and 1997, the installation of computer systems in existing centers in South
Florida and the corporate office computer systems installed in 1996.
For the three months ended September 1997 compared to 1996
Net sales increased $1,143,640, or 24.9%, to $5,744,926, in 1997 from $4,601,286
in 1996.
Cost of products sold decreased $412,772, to $1,555,132 in 1997 from $1,967,904
in 1996. Cost of products sold, as a percentage of net sales, decreased
significantly in 1997 due to improved pricing from the Company's hearing aid
suppliers and a change in the Company's product mix.
Center operating expenses increased $1,668,182, or 56.2%, to $4,634,194 in 1997
from $2,966,012 in 1996. This increase is partially due to an increase in
advertising expense of $565,600 over 1996 expenses. The remaining increase of
$1,102,582 is attributable to the 28.1% increase in the number of centers
operating in the third quarter of 1997 (73) compared to the third quarter of
1996 (57).
General and administrative expenses increased $219,289, or 16.6%, to $1,542,919
in 1997 from $1,323,630 in 1996, reflecting the increase in wages and fringe
benefits associated with the expansion of personnel for corporate administrative
functions.
Depreciation and amortization expense increased $191,379, or 59.7%, to $512,209
in 1997 from $320,830 in 1996.
9
<PAGE> 10
LIQUIDITY AND CAPITAL RESOURCES
Working capital increased $4,128,035 to $16,584,426 as of September 26, 1997
from $12,456,391 as of December 27, 1996. During the first quarter of 1997, the
Company completed a private placement (see Note 1. Private Placement) providing
the Company net proceeds of $9,270,000. The Company also received net proceeds
of $3,732,156 from the exercise of warrants and stock options during the nine
months. The Company purchased $2,006,248 in property and equipment in the nine
months. The sale of the Company's securities in 1997 did not individually, or in
the aggregate, cause a "change in control" which would result in an annual
limitation of the Company's net operating loss carry-forward under Section 382
of the Internal Revenue Code of 1986, as amended.
The Company believes that its current working capital and revenues from
operations are sufficient to support the Company's foreseeable capital
requirements and operating needs through 1997 in accordance with its strategic
plan, although there can be no assurance that other cash needs will not arise.
Net cash used by operating activities increased from $4,332,769, in the first
nine months of 1996, to $ 5,994,220 in 1997. The cash used by operating
activities in 1997 and 1996 was primarily the result of operating losses
stemming from the Company's decision to expand its operations to accommodate the
new contracts and the accompanying expansion into the northeast U.S. market in
advance of patient usage.
Net cash used in investing activities decreased from $4,918,197, in the first
nine months of 1996, to $4,356,736 in 1997. This net decrease includes a
$2,916,805 decrease in cash used to fund the construction of leasehold
improvements and the related purchase of property and equipment, offset by
$2,350,488 increase for the purchase of investments.
The capital costs associated with the start up of a new center vary depending on
the size of the center and its location. Typically, new centers are leased under
operating leases and range from 1,500 to 2,000 square feet in size. New center
property and equipment costs include leasehold build-out costs, furniture and
costs of equipment, including diagnostic and computer equipment. Pre-opening
costs, such as training wages, recruiting, advertising, travel, etc. are
expensed as incurred. The Company believes it has the funds to support planned
center expansion through 1997 and the first quarter of fiscal 1998.
Cash from financing activities decreased from $25,532,021, in the first nine
months of 1996, to $11,141,799 in 1997. This decrease was the result of a
reduction in the proceeds from equity offerings in 1997 versus 1996.
10
<PAGE> 11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
3.1 (a) Restated Certificate of Incorporation of HEARx Ltd., including
certain certificates of designations, preferential and rights of certain
preferred stock of the Company. Filed as an exhibit to the Company's
Current Report of Form 8-K, filed on May 17, 1996, and incorporated
herein by reference.
3.1 A-1 Amendments to Restated Certificate of Incorporation. Filed as an
exhibit to the Company's Current Report of Form 10-Q for the period ended
June 28, 1996, as the exhibit number indicated in brackets and
incorporated herein by reference. [3.1A]
3.2 A-2 Certificate of designation, preferences and rights of the 1997
Convertible Preferred Stock of the Company. Filed as an exhibit to the
Company's Current Report on Form 8-K, filed on March 26, 1997, as the
exhibit number indicated in brackets and incorporated herein by
reference. [3]
3.2 By-Laws of HEARx Ltd. Filed as an exhibit to the Company's Registration
Statement on Form S-18 (Registration No. 33-17041-NY) as the exhibit
number indicated in brackets and incorporated herein by reference. [3.2]
4.1 Securities Purchase Agreement, dated March 17, 1997 between HEARx Ltd.
and each of the purchasers set forth on the signature pages. Filed as an
exhibit to the Company's Current Report of Form 8-K, filed on March 26,
1997, as the exhibit number indicated in brackets and incorporated herein
by reference. [4.1]
4.2 Registration Rights Agreement, dated March 17, 1997 between HEARx Ltd.
and each of the purchasers set forth on the signature pages. Filed as an
exhibit to the Company's Current Report of Form 8-K, filed on March 26,
1997, as the exhibit number indicated in brackets and incorporated herein
by reference. [4.2]
4.3 Form of Placement Agent Warrant (to purchase up to 850,000 shares of
Common Stock at an exercise price equal to $5.00 per share). Filed as an
exhibit to the Company's Current Report of Form 8-K, filed on March 26,
1997, as the exhibit number indicated in brackets and incorporated herein
by reference.
27 Financial Data Schedule (provided for the information of the Securities
and Exchange Commission only).
(b) Reports on Form 8-K:
None
11
<PAGE> 12
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, thereunto duly authorized.
HEARx Ltd.
(Registrant)
Date: November 7, 1997 By: /s/ STEPHEN J. HANSBROUGH
-------------------------------
Stephen J. Hansbrough
President
Chief Operating Officer
Date: November 7, 1997 By: /s/ JAMES W. PEKLENK
-------------------------------
James W. Peklenk
Vice President and
Chief Financial Officer
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains financial information extracted from the financial
statements of HEARx LTD and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-26-1997
<PERIOD-START> DEC-28-1996
<PERIOD-END> SEP-26-1997
<CASH> 2,602,280
<SECURITIES> 14,286,513
<RECEIVABLES> 3,504,844
<ALLOWANCES> (688,047)
<INVENTORY> 419,744
<CURRENT-ASSETS> 20,285,500
<PP&E> 12,833,380
<DEPRECIATION> (4,144,607)
<TOTAL-ASSETS> 30,138,949
<CURRENT-LIABILITIES> 3,701,074
<BONDS> 182,999
0
7,215
<COMMON> 9,918,716
<OTHER-SE> 16,328,945
<TOTAL-LIABILITY-AND-EQUITY> 30,138,949
<SALES> 17,347,775
<TOTAL-REVENUES> 17,345,775
<CGS> 4,835,015
<TOTAL-COSTS> 25,553,178
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (6,205,403)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,205,403)
<DISCONTINUED> 0
<EXTRAORDINARY> 1,885,026
<CHANGES> 0
<NET-INCOME> (8,090,429)
<EPS-PRIMARY> (.09)
<EPS-DILUTED> (.09)
</TABLE>
