UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the quarterly period ended August 31, 1999
[ ] 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: 0-18105
VASOMEDICAL, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 11-2871434
- --------------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
180 Linden Ave., Westbury, New York 11590
- --------------------------------------------------------------------------------
(Address of principal executive offices)
Registrant's Telephone Number (516) 997-4600
--------------
Number of Shares Outstanding of Common Stock,
$.001 Par Value, at October 1, 1999 51,001,285
----------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the 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 [ ]
--- --
<PAGE>
Vasomedical, Inc. and Subsidiary
INDEX
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements: Page
----
Consolidated Condensed Balance Sheets as of
August 31, 1999 and May 31, 1999 (Unaudited) 3
Consolidated Condensed Statements of Operations for
the Three Months Ended
August 31, 1999 and 1998 (Unaudited) 4
Consolidated Condensed Statement of Changes in Stockholders'
Equity for the Three Months Ended
August 31, 1999 (Unaudited) 5
Consolidated Condensed Statements of Cash Flows for the
Three Months Ended August 31, 1999 and 1998 (Unaudited) 6
Notes to Consolidated Condensed Financial Statements 7
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
PART II - OTHER INFORMATION 11
<PAGE>
Vasomedical, Inc. and Subsidiary
CONSOLIDATED CONDENSED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
August 31, May 31,
1999 1999
---- ----
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $2,014,473 $1,678,175
Accounts receivable 1,672,362 1,585,432
Inventories 598,198 594,093
Other current assets 128,520 177,713
---------- ----------
Total current assets 4,413,553 4,035,413
PROPERTY AND EQUIPMENT, net 486,222 571,368
CAPITALIZED COST IN EXCESS OF FAIR
VALUE OF NET ASSETS ACQUIRED, net 515,003 568,277
OTHER ASSETS 23,114 23,114
---------- ----------
$5,437,892 $5,198,172
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $580,213 $705,640
Accrued warranty and customer support expenses 417,000 382,000
Accrued professional fees 180,466 271,438
Accrued commissions 358,670 307,951
Dividends payable 199,466 193,610
---------- ----------
Total current liabilities 1,735,815 1,860,639
ACCRUED WARRANTY COSTS 99,000 114,000
OTHER LONG-TERM LIABILITIES 38,000 70,000
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value; 1,000,000
shares authorized; 147,000 and 175,000 shares at
August 31, 1999 and May 31, 1999, respectively,
issued and outstanding (liquidation preference of
$2,940,000 and $3,500,000 at August 31, 1999 and
May 31, 1999, respectively) 1,470 1,750
Common stock, $.001 par value; 110,000,000 shares
authorized; 50,978,538 and 50,402,687 shares
at August 31, 1999 and May 31, 1999, respectively,
issued and outstanding 50,979 50,403
Additional paid-in capital 37,891,045 37,749,483
Accumulated deficit (34,378,417) (34,648,103)
---------- ----------
Total stockholders' equity 3,565,077 3,153,533
---------- ----------
$5,437,892 $5,198,172
---------- ----------
<FN>
The accompanying notes are an integral part of these condensed statements.
</FN>
</TABLE>
<PAGE>
Vasomedical, Inc. and Subsidiary
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Three months ended
------------------
August 31,
----------
1999 1998
---- ----
<S> <C> <C>
Revenues
Equipment sales $2,890,180 $ 350,000
Equipment rentals and services 129,300 78,100
---------- -----------
3,019,480 428,100
---------- -----------
Costs and expenses
Cost of sales and services 612,270 330,368
Selling, general and administrative 1,742,316 1,270,664
Research and development 253,148 189,664
Depreciation and amortization 121,607 93,083
Interest and financing costs 2,012 5,209
Interest and other income - net (20,022) (52,214)
---------- -----------
2,711,331 1,836,774
---------- -----------
NET EARNINGS (LOSS) 308,149 (1,408,674)
Deemed dividend on preferred stock - (661,000)
Preferred stock dividend requirement (38,463) (54,756)
---------- -----------
EARNINGS (LOSS) APPLICABLE TO
COMMON STOCK $269,686 $(2,124,430)
---------- -----------
Earnings (loss) per common share (basic and diluted) $.01 $(.04)
---- -----
Weighted average common shares outstanding
Basic 50,850,526 48,659,766
---------- -----------
Diluted 56,216,368 48,659,766
---------- -----------
<FN>
The accompanying notes are an integral part of these condensed statements.
</FN>
</TABLE>
<PAGE>
Vasomedical, Inc. and Subsidiary
CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(unaudited)
<TABLE>
<CAPTION>
Total
Additional Accum- stock-
Preferred Stock Common stock paid-in ulated holders'
Shares Amount Shares Amount capital deficit equity
------ ------ ------ ------ ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at June 1, 1999 175,000 $1,750 50,402,687 $50,403 $37,749,483 $(34,648,103) $3,153,533
Conversion of preferred
stock (28,000) (280) 477,912 478 (198) -
Preferred stock dividend
requirement (38,463) (38,463)
Common stock issued in
lieu of preferred stock
dividends 27,764 28 32,580 32,608
Exercise of options and
warrants 70,175 70 51,180 51,250
Stock options granted for
services 58,000 58,000
Net earnings 308,149 308,149
------- ------ ---------- ------- ----------- ------------ ----------
Balance at August 31,
1999 147,000 $1,470 50,978,538 $50,979 $37,891,045 $(34,378,417) $3,565,077
------- ------ ---------- ------- ----------- ------------ ----------
<FN>
The accompanying notes are an integral part of this condensed statement.
</FN>
</TABLE>
<PAGE>
Vasomedical, Inc. and Subsidiary
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Three months ended August 31,
-----------------------------
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities
Net earnings (loss) $ 308,149 $(1,408,674)
---------- -----------
Adjustments to reconcile net earnings (loss)
to net cash provided by (used in) operating activities
Depreciation and amortization 121,607 93,083
Stock options granted for services 58,000 -
Changes in operating assets and liabilities
Accounts receivable (86,930) 741,413
Inventories 29,676 (139,749)
Other current assets 49,193 (144,340)
Other assets - 402
Accounts payable, accrued expenses and other
current liabilities (130,680) (392,178)
Other liabilities (47,000) 42,500
---------- -----------
(6,134) 201,131
---------- -----------
Net cash provided by (used in) operating activities 302,015 (1,207,543)
---------- -----------
Cash flows from investing activities
Purchase of property and equipment (16,967) (8,796)
---------- -----------
Net cash used in investing activities (16,967) (8,796)
---------- -----------
Cash flows from financing activities
Proceeds from exercise of options and warrants 51,250 -
---------- -----------
Net cash provided by financing activities 51,250 -
---------- -----------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 336,298 (1,216,339)
Cash and cash equivalents - beginning of period 1,678,175 4,367,986
---------- -----------
Cash and cash equivalents - end of period $2,014,473 $3,151,647
---------- -----------
Non-cash investing and financing activities were as follows:
Deemed dividend on preferred stock $661,000
Issuance of common stock in lieu of preferred dividends $32,608 9,246
Inventories transferred to (from) property and equipment,
attributable to operating leases - net (57,334) 160,000
<FN>
The accompanying notes are an integral part of these condensed statements.
</FN>
</TABLE>
<PAGE>
Vasomedical, Inc. and Subsidiary
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
August 31, 1999
(unaudited)
NOTE A - BASIS OF PRESENTATION
The consolidated condensed balance sheet as of August 31, 1999 and the
related consolidated condensed statements of operations for the three-month
periods ended August 31, 1999 and 1998, changes in stockholders' equity for the
three-month period ended August 31, 1999 and cash flows for the three-month
periods ended August 31, 1999 and 1998 have been prepared by Vasomedical, Inc.
and Subsidiary (the "Company") without audit. In the opinion of management, all
adjustments (which include only normal, recurring accrual adjustments) necessary
to present fairly the financial position and results of operations as of August
31, 1999 and for all periods presented have been made.
Certain information and footnote disclosures, normally included in
financial statements prepared in accordance with generally accepted accounting
principles, have been condensed or omitted. These financial statements should be
read in conjunction with the financial statements and notes thereto included in
the Annual Report on Form 10-K for the year ended May 31, 1999. Results of
operations for the periods ended August 31, 1999 and 1998 are not necessarily
indicative of the operating results expected or reported for the full year.
NOTE B - STOCKHOLDERS' EQUITY
In January 1999, the Company's Board of Directors granted stock options
under the 1997 Plan to a consultant to purchase 150,000 shares of common stock
at an exercise price of $.875 per share (which represented the fair market value
of the underlying common stock at the time of grant) contingent upon meeting
certain performance criteria. The stock options were fair-valued at $87,000. The
Company recorded a charge to operations of $58,000 in June 1999, commensurate
with the partial satisfaction of the performance criteria defined therein.
In July 1999, the Company's Board of Directors approved the 1999 Stock
Option Plan (the "1999 Plan"), for which the Company reserved an aggregate of
2,000,000 shares of common stock. In addition, the Board of Directors granted
stock options under its 1997 and 1999 Plans to certain officers and employees to
purchase an aggregate of 175,000 shares and 150,000 shares of common stock,
respectively, at an exercise price of $1.69 per share, and to an employee to
purchase 30,000 shares of common stock at an exercise price of $1.53 per share
(which represented the fair market value of the underlying common stock at the
time of the respective grants).
In the first quarter of fiscal 2000, 28,000 shares of preferred stock were
converted into 477,912 shares of common stock. In addition, options and warrants
to purchase 70,175 shares of common stock were exercised, aggregating $51,250 in
proceeds to the Company.
NOTE C - EARNINGS PER COMMON SHARE
Basic earnings per share are based on the weighted average number of common
shares outstanding without consideration of potential common stock. Diluted
earnings per share are based on the weighted number of common and potential
common shares outstanding. The calculation takes into account the shares that
may be issued upon the exercise of stock options and warrants, reduced by the
shares that may be repurchased with the funds received from the exercise, based
on the average price during the period, and convertible preferred stock,
assuming conversion at the beginning of the period. Potential common shares were
excluded from the diluted calculation for the three months ended August 31,
1998, as their effects were anti-dilutive.
The following table sets forth the computation of basic and diluted
earnings per share for the three months ended August 31, 1999:
<TABLE>
<CAPTION>
<S> <C>
Numerator:
Basic earnings per share $269,686
Preferred stock dividends 38,463
--------
Diluted earnings per share $308,149
--------
</TABLE>
<PAGE>
Vasomedical, Inc. and Subsidiary
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)
August 31, 1999
(unaudited)
NOTE C - EARNINGS PER COMMON SHARE (continued)
<TABLE>
<CAPTION>
<S> <C>
Denominator:
Basic weighted average shares 50,850,526
Stock options 853,100
Warrants 1,300,926
Convertible preferred stock 3,211,806
----------
Diluted weighted average shares 56,216,368
----------
Basic and diluted earnings per share $.01
----
</TABLE>
NOTE D - COMMITMENTS AND CONTINGENCIES
Employment Agreements
- ---------------------
Approximate aggregate minimum annual compensation obligations under active
employment agreements at August 31, 1999 are summarized as follows:
<TABLE>
<CAPTION>
Twelve months ended August 31, Amount
------------------------------ ------
<S> <C>
2000 $569,000
2001 283,000
2002 58,000
--------
$910,000
--------
</TABLE>
Litigation
- ----------
In May 1996, an action was commenced in the Supreme Court of the State of
New York, Nassau County, against the Company, its directors and certain of its
officers and employees for the alleged breach of an agreement to appoint a
non-affiliated party as its exclusive distributor of EECP systems. The complaint
sought damages in the approximate sum of $50,000,000, declaratory relief and
punitive damages. The Company denied the existence of any agreement, and
contended that the complaint was frivolous and without merit. The Company also
asserted substantial counterclaims. In August 1999, the motion for summary
judgment to dismiss the complaint in its entirety was granted. It is expected
that this decision will be appealed.
In May 1998, an action was commenced in the New York Supreme Court, Suffolk
County, against the Company and other parties. The action seeks damages in the
sum of $5,000,000 based upon alleged injuries resulting from the alleged
negligence of the defendants in the use of the Company's product. The Company
and its insurer believe that the complaint is frivolous and without merit and
are vigorously defending the claims. Furthermore, management believes that the
damages sought under the complaint are fully covered by insurance. This matter
is in its preliminary stages and the Company is unable to establish the
likelihood of an unfavorable outcome or the existence or amount of any potential
loss.
In February 1999, an action was commenced in the Massachusetts Superior
Court, Essex County, against the Company. The action seeks damages in the sum of
$1,000,000 based upon an alleged breach of a sales contract. The Company
believes that the complaint is frivolous and without merit and is vigorously
defending the claims. This matter is in its preliminary stages and the Company
is unable to establish the likelihood of an unfavorable outcome or the existence
or amount of any potential loss.
Agreement with VAMED
- --------------------
In connection with an acquisition in 1995, the Company assumed commitments
under an agreement, expiring November 2008, with VAMED Medical Instrument
Company Ltd. ("VAMED"), a Chinese company, for the contract manufacture of its
current EECP system, subject to certain performance standards, as defined. At
August 31, 1999, the Company had outstanding purchase commitments of $486,000.
The Company believes that VAMED will be able to meet the Company's needs for
EECP systems.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
- --------------------------------------------------------------------------
OPERATIONS
- ----------
Results of Operations
- ---------------------
Three Months Ended August 31, 1999 and 1998
- -------------------------------------------
The Company generated revenues from the sale and lease of EECP systems of
$3,019,000 and $428,000 for the three-month periods ended August 31, 1999 and
1998, respectively. The Company generated earnings of $308,000 (before deducting
$38,000 in preferred stock dividend requirements) for the three months ended
August 31, 1999. For the comparable prior-year period, the Company incurred a
net loss of $1,409,000 (before deducting $661,000 in deemed dividends on
preferred stock, which represented the discount resulting from the allocation of
proceeds to the beneficial conversion feature and the fair value of the
underlying warrants, and $55, 000 in preferred stock dividend requirements, in
connection with the Company's April 1998 and June 1997 financings).
The number of cardiology practices and hospitals interested in becoming
providers of enhanced external counterpulsation (EECP) has increased following
the announcement by the Health Care Financing Administration (HCFA) in February
1999 of its decision to extend Medicare coverage nationally to the Company's
noninvasive, outpatient treatment for coronary artery disease. HCFA is the
federal agency that administers the Medicare program for 38 million
beneficiaries. In addition, the results of the Company's multicenter,
prospective, randomized, blinded, controlled clinical study of EECP
("MUST-EECP") was published in the June 1999 issue of the Journal of the
American College of Cardiology. Interest in EECP therapy has also been spurred
by the announcement of the results of the Company's one-year follow-up
quality-of-life outcomes study at the American Heart Association (AHA) annual
meeting in November 1998, at the American College of Cardiology (ACC) annual
meeting in March 1999 and subsequent scientific meetings. Management expects
these events to provide a strong foundation for accelerated growth in fiscal
2000, if Medicare contractors establish appropriate payment levels that take
into account the value of the resources health care providers must deploy to
deliver EECP therapy.
Revenues for fiscal 1999, particularly for the first two fiscal quarters,
were adversely affected by the nature of the commercial arrangements under which
those units were placed. The Company expects, especially as a result of HCFA's
recent coverage decision and effective payment date of July 1, 1999, that the
conversion of several placements made in the past under rental or fee-for-use
arrangements to financed leases or outright sales will continue in the second
quarter of fiscal 2000, although there can be no assurance that this will occur.
Gross margins are dependent on a number of factors, particularly the mix of
EECP units sold and rented during the period, the ongoing costs of servicing
such units, and certain fixed period costs, including facilities, payroll and
insurance. Gross margins are furthermore affected by the location of the
Company's customers and the amount and nature of training and other initial
costs required to place the EECP system in service for customer use.
Consequently, the gross margin realized during the current period may not be
indicative of future margins.
Selling, general and administrative (SGA) expenses for the three months
ended August 31, 1999 and 1998 were approximately $1,742,000 and $1,271,000,
respectively. The $471,000 increase in SGA expenses for the comparable fiscal
year resulted primarily from an increase in sales and marketing personnel,
commissions and other selling expenses related to increased revenues.
Research and development (R&D) expenses in the three months ended August
31, 1999 increased by $63,000 from the comparable prior-year period. Current
period expenses relate to the long-term follow-up phase of the multicenter
clinical study, i.e., a quality-of-life outcomes study, the expansion of the
International EECP Patient Registry at the University of Pittsburgh, the
development of an upgraded model of the EECP system, and the ongoing feasibility
study in congestive heart failure, all of which, to some extent, are expected to
further affect operating results in fiscal 2000.
Liquidity and Capital Resources
- -------------------------------
The Company has financed its fiscal 2000 operations primarily from
internally generated proceeds. For the past two fiscal years, the Company's
operations were primarily funded from the proceeds of equity financings in
fiscal 1998 (described below). At August 31, 1999, the Company had a cash
balance of $2,014,000 and working capital of $2,678,000, compared to a cash
balance of $1,678,000 and working capital of $2,175,000 at May 31, 1999. The
Company's operating activities provided (used) cash of $302,000 and $(1,208,000)
for the three months ended August 31, 1999 and 1998, respectively. Net cash
provided during the three months ended August 31, 1999 consisted primarily of
earnings from operations, decreases in inventories and other current assets,
offset by increases in accounts receivable and decreases in accounts payable and
accrued expenses.
<PAGE>
Investing activities used net cash of $17,000 and $9,000 during the three
months ended August 31, 1999 and 1998, respectively. The principal uses were for
the purchase of property and equipment. At August 31, 1999, the Company did not
have any material commitments for capital expenditures.
Financing activities provided cash of $51,000 during the three months ended
August 31, 1999. Financing activities during fiscal 2000 consisted primarily of
cash proceeds from the exercise of Company common stock warrants by officers and
directors.
In fiscal 1998, the Company issued an aggregate of 325,000 shares of newly
created 5% Series B and Series C Convertible Preferred Stock to one accredited
investor at a price of $20 per share, realizing net cash proceeds of $6,112,000.
Dividends due on such preferred stock have been, and are expected to be, paid in
shares of the Company's common stock. By February 1999, all of the Series B
preferred stock (150,000 shares) had been converted into 2,135,946 shares of the
Company's common stock. As of August 31, 1999, 28,000 shares of Series C
preferred stock, representing 16% of the total outstanding, were converted into
approximately 478,000 shares of the Company's common stock.
Management believes that its working capital position at August 31, 1999,
along with the ongoing commercialization of the EECP system (including, but not
limited to, the conversion of current units under rental or use arrangements to
outright sales or financed leases), and possible further proceeds from the
exercise of options and warrants, will make it possible for the Company to
support its internal overhead expenses and to implement its business plans for
the next twelve months.
Impact of the Year 2000 on Information Systems
The Year 2000 issue arises as the result of computer programs having been
written, and systems having been designed, using two digits rather than four to
define the applicable year. Consequently, such software has the potential to
recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices, or engage in similar normal business activities.
The Company's sole product is not expected to be affected by Year 2000 as
it does not rely on date-sensitive software or affected hardware. The Company's
current accounting and other systems were purchased "off-the-shelf". The Company
has or intends to timely update its accounting and other systems which are
determined to be affected by Year 2000 by purchasing Year 2000 compliant
software and hardware available from retail vendors at reasonable costs.
The Company has inquired of its major suppliers about their progress in
identifying and addressing problems related to the Year 2000. Certain of the
Company's major suppliers have informed the Company that they do not anticipate
problems in their business operations due to Year 2000 compliance issues. The
Company is unable to determine the extent to which Year 2000 issues will affect
its other suppliers or the extent to which it would be vulnerable to the
suppliers' failure to remediate any of their Year 2000 problems. Although no
assurance can be given that all of the Company's major suppliers' systems will
be Year 2000 compliant, the Company believes that the risk is not significant.
Except for historical information contained herein, the matters discussed
are forward-looking statements that involve risks and uncertainties. When used
in this report, words such as "anticipate", "believe", "estimate", "expect" and
"intend" and similar expressions, as they relate to the Company or its
management, identify forward-looking statements. Such forward-looking statements
are based on the beliefs of the Company's management, as well as assumptions
made by and information currently available to the Company's management. Among
the factors that could cause actual results to differ materially are the
following: the effect of the dramatic changes taking place in the healthcare
environment; the impact of competitive procedures and products and their
pricing; unexpected manufacturing problems in foreign supplier facilities;
unforeseen difficulties and delays in the conduct of clinical trials and other
product development programs; the actions of regulatory authorities and
third-party payers in the United States and overseas; uncertainties about the
acceptance of a novel therapeutic modality by the medical community; and the
risk factors reported from time to time in the Company's SEC reports. The
Company undertakes no obligation to update forward-looking statements as a
result of future events or developments.
<PAGE>
VASOMEDICAL, INC. AND SUBSIDIARY
--------------------------------
PART II - OTHER INFORMATION
---------------------------
ITEM 1 - LEGAL PROCEEDINGS:
Previously reported.
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS:
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:
Exhibits:
No. 27 Financial Data Schedule
Reports on Form 8-K:
None
<PAGE>
In accordance with to the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
VASOMEDICAL, INC.
By: /s/ Anthony Viscusi
-------------------
Anthony Viscusi
President, Chief Executive Officer and Director
(Principal Executive Officer)
/s/ Joseph A. Giacalone
-----------------------
Joseph A. Giacalone
Secretary and Treasurer (Principal Financial and
Accounting Officer)
Date: October 5, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
consolidated condensed financial statements for the three-months ended August
31, 1999 and is qualified in its entirety by reference to such statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-2000
<PERIOD-END> AUG-31-1999
<CASH> 2,014,473
<SECURITIES> 0
<RECEIVABLES> 1,672,362
<ALLOWANCES> 0
<INVENTORY> 598,198
<CURRENT-ASSETS> 4,413,553
<PP&E> 995,164
<DEPRECIATION> (508,942)
<TOTAL-ASSETS> 5,437,892
<CURRENT-LIABILITIES> 1,735,815
<BONDS> 0
0
1,470
<COMMON> 50,979
<OTHER-SE> 3,512,628
<TOTAL-LIABILITY-AND-EQUITY> 5,437,892
<SALES> 3,019,480
<TOTAL-REVENUES> 3,019,480
<CGS> 612,270
<TOTAL-COSTS> 612,270
<OTHER-EXPENSES> 2,097,049
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,012
<INCOME-PRETAX> 308,149
<INCOME-TAX> 0
<INCOME-CONTINUING> 308,149
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 308,149
<EPS-BASIC> .01
<EPS-DILUTED> .01
</TABLE>
