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 November 30, 1998
[ ] 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 January 13, 1999 49,466,754
----------
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
November 30, 1998 and May 31, 1998 (Unaudited) 3
Consolidated Condensed Statements of Operations for
the Six and Three Months Ended
November 30, 1998 and 1997 (Unaudited) 4
Consolidated Condensed Statement of Changes in Stockholders' Equity for
the Period from June 1, 1998 to November 30, 1998 (Unaudited) 5
Consolidated Condensed Statements of Cash Flows for the
Six Months Ended November 30, 1998 and 1997 (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 12
<PAGE>
Vasomedical, Inc. and Subsidiary
CONSOLIDATED CONDENSED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
November 30, May 31,
1998 1998
---- ----
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $1,509,002 $4,367,986
Accounts receivable 418,045 976,341
Inventories 965,655 678,302
Other current assets 100,579 164,826
---------- ----------
Total current assets 2,993,281 6,187,455
PROPERTY AND EQUIPMENT, net 506,536 352,902
CAPITALIZED COST IN EXCESS OF FAIR
VALUE OF NET ASSETS ACQUIRED, net 674,825 781,373
OTHER ASSETS 23,114 23,516
---------- ----------
$4,197,756 $7,345,246
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $457,137 $436,730
Accrued warranty and customer support expenses 264,000 240,000
Accrued professional fees 156,258 225,833
Accrued commissions 55,440 176,553
Dividends payable 150,298 62,137
---------- ----------
Total current liabilities 1,083,133 1,141,253
ACCRUED WARRANTY COSTS 232,500 334,000
OTHER LONG-TERM LIABILITIES 112,000 117,000
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value; 1,000,000
shares authorized; 208,500 and 225,750 shares at
November 30, 1998 and May 31, 1998, respectively,
issued and outstanding 2,085 2,258
Common stock, $.001 par value; 110,000,000 shares
authorized; 48,916,754 and 48,531,278 shares at
November 30, 1998 and May 31, 1998, respectively,
issued and outstanding 48,917 48,531
Additional paid-in capital 37,341,853 36,458,155
Accumulated deficit (34,622,732) (30,755,951)
---------- ----------
2,770,123 5,752,993
---------- ----------
$4,197,756 $7,345,246
---------- ----------
<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>
Six months ended Three months ended
---------------- ------------------
November 30, November 30,
------------ ------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues
Equipment sales $550,000 $2,024,416 $200,000 $1,071,879
Equipment rentals and services 242,100 152,732 164,000 63,513
-------- ---------- -------- ----------
792,100 2,177,148 364,000 1,135,392
-------- ---------- -------- ----------
Costs and expenses
Cost of sales and services 573,790 639,720 243,422 264,880
Selling, general and administrative 2,648,276 2,506,533 1,377,612 1,485,494
Research and development 339,763 948,865 150,099 350,141
Depreciation and amortization 201,709 182,316 108,626 91,549
Interest and financing costs 7,337 1,076 2,128 52
Interest and other income - net (84,065) (96,605) (31,851) (49,715)
--------- ---------- --------- ----------
3,686,810 4,181,905 1,850,036 2,142,401
--------- ---------- --------- ----------
NET LOSS (2,894,710) (2,004,757) (1,486,036) (1,007,009)
Deemed dividend on preferred stock (864,000) (857,000) (203,000) -
Preferred stock dividend requirement (108,071) (52,939) (53,315) (25,405)
--------- ---------- --------- ----------
LOSS APPLICABLE TO
COMMON STOCK $(3,866,781) $(2,914,696) $(1,742,351) $(1,032,414)
----------- ----------- ----------- -----------
Loss per common share (basic and
diluted) $(.08) $(.06) $(.04) $(.02)
----- ----- ----- -----
Weighted average common shares
outstanding (basic and diluted) 48,730,338 47,417,151 48,800,910 47,811,782
----------- ----------- ----------- -----------
The accompanying notes are an integral part of these condensed statements.
</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, 1998 225,750 $2,258 48,531,278 $48,531 $36,458,155 $(30,755,951) $5,752,993
Conversion of preferred
stock (17,250) (173) 364,028 364 (191) -
Deemed dividend on preferred
stock 864,000 (864,000) -
Preferred stock dividend
requirement (108,071) (108,071)
Common stock issued in lieu of
preferred stock dividends 21,448 22 19,889 19,911
Net loss (2,894,710) (2,894,710)
------- ------ ---------- -------- ----------- ------------ ----------
Balance at November 30, 1998 208,500 $2,085 48,916,754 $48,917 $37,341,853 $(34,622,732) $2,770,123
------- ------ ---------- -------- ----------- ------------ ----------
</TABLE>
The accompanying notes are an integral part of this condensed statement.
<PAGE>
Vasomedical, Inc. and Subsidiary
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Six months ended November 30,
-----------------------------
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities
Net loss $(2,894,710) $(2,004,757)
----------- -----------
Adjustments to reconcile net loss
to net cash used in operating activities
Depreciation and amortization 201,709 182,316
Changes in operating assets and liabilities
Accounts receivable 558,296 (360,366)
Inventories (511,353) 120,144
Other current assets 64,247 (48,792)
Other assets 402
Accounts payable, accrued expenses and other current liabilities (146,280) 358,827
Other liabilities (106,500) 56,370
----------- -----------
60,521 308,499
----------- -----------
Net cash used in operating activities (2,834,189) (1,696,258)
----------- -----------
Cash flows from investing activities
Purchases of property and equipment (24,795) (13,204)
----------- -----------
Net cash used in investing activities (24,795) (13,204)
----------- -----------
Cash flows from financing activities
Proceeds from exercise of options and warrants 409,463
Proceeds from issuance of preferred stock, net 2,817,900
----------- -----------
Net cash provided by financing activities -- 3,227,363
----------- -----------
NET (DECREASE) INCREASE IN
CASH AND CASH EQUIVALENTS (2,858,984) 1,517,901
Cash and cash equivalents - beginning of period 4,367,986 1,753,004
----------- -----------
Cash and cash equivalents - end of period $ 1,509,002 $ 3,270,905
----------- -----------
Non-cash investing and financing activities were as follows:
Deemed dividend on preferred stock $ 864,000 $ 857,000
Issuance of common stock in lieu of preferred dividends 19,911 18,282
Inventories transferred to property and equipment,
attributable to operating leases 224,000 30,000
</TABLE>
The accompanying notes are an integral part of these condensed statements.
<PAGE>
Vasomedical, Inc. and Subsidiary
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
November 30, 1998
(unaudited)
NOTE A - BASIS OF PRESENTATION
The consolidated condensed balance sheet as of November 30, 1998 and the
related consolidated condensed statements of operations for the six- and
three-month periods ended November 30, 1998 and 1997, changes in stockholders'
equity for the six-month period ended November 30, 1998 and cash flows for the
six-month periods ended November 30, 1998 and 1997 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 as of November
30, 1998 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, 1998. Results of
operations for the periods ended November 30, 1998 and 1997 are not necessarily
indicative of the operating results expected for the full year.
NOTE B - STOCKHOLDERS' EQUITY
On April 30, 1998, the Company completed a second tranche of financing with
an accredited investor and issued 175,000 shares of newly created 5% Series C
Cumulative Convertible Preferred Stock ("Series C Preferred"), $.01 par value,
pursuant to Regulation D under the Securities Act of 1933 at a price of $20 per
share, for net cash proceeds of $3,294,000. The Series C Preferred has no voting
rights and was convertible into common stock of the Company at an effective
conversion price of the lower of (i) $2.08 or (ii) 85% of the average closing
bid price of the Company's common stock for the five (5) trading days
immediately preceding the conversion date (the "Average Closing Price"), as
defined in the Certificate of Designation of the Series C Preferred. In
addition, the investor was granted five-year warrants to purchase 413,712 shares
of common stock at an exercise price of $2.08 per share. The Company has
estimated the value of the deemed dividend, representing the discount resulting
from the allocation of proceeds to the beneficial conversion feature and the
fair value of the underlying warrants, to approximate $936,000. Such deemed
dividend has been recognized from the date of issuance through the date such
preferred stock was first convertible (on or about August 15, 1998).
Accordingly, the Company recognized a deemed dividend of $275,000 in the fourth
quarter of fiscal 1998 and recognized the remaining portion of the deemed
dividend of $661,000 in the first quarter of fiscal 1999.
Based upon negotiations between the Company and the holder of the Series C
Preferred in December 1998 relating to the delayed effectiveness of a
registration statement covering the underlying shares of common stock, the
conversion price with respect to the Series C Preferred has been reduced to the
lower of (i) $2.00 per share, or (ii) 81% of the Average Closing Price. The
Company has estimated the incremental value of the deemed dividend, representing
the additional discount resulting from the allocation of proceeds to the
beneficial conversion feature, to approximate $203,000. Accordingly, the Company
recognized this incremental deemed dividend in the second quarter of fiscal
1999.
In the first and second quarters of fiscal 1999, 9,250 shares and 8,000
shares of preferred stock were converted into 167,636 shares and 196,392 shares
of common stock, respectively.
In January 1999, the Company's Board of Directors increased the number of
shares authorized for issuance under the Company's 1997 Stock Option Plan by
1,000,000 shares to 2,800,000 shares. In addition, the Board of Directors
granted stock options under the plan to directors, officers, employees and
consultants to purchase an aggregate of 830,000 shares, 470,000 shares, 313,500
shares, and 150,000 shares of common stock, respectively, at an exercise price
of $.875 per share (which represented the fair market value of the underlying
common stock at the time of grant).
In January 1999, warrants to purchase 550,000 shares of common stock were
exercised, aggregating $247,500.
<PAGE>
Vasomedical, Inc. and Subsidiary
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)
November 30, 1998
(unaudited)
NOTE C - COMMITMENTS AND CONTINGENCIES
Employment Agreements
- ---------------------
Approximate aggregate minimum annual compensation obligations under active
employment agreements at November 30, 1998 are summarized as follows:
<TABLE>
<CAPTION>
Twelve months ended November 30, Amount
-------------------------------- ------
<S> <C>
1999 $569,000
2000 569,000
2001 176,000
2002 23,000
----------
$1,337,000
----------
</TABLE>
SEC Investigation
- -----------------
In February 1995, the Company received a subpoena duces tecum by the
broker-dealer branch of the Northeast Regional Office of the Securities and
Exchange Commission ("SEC") requesting certain documents from the Company
pursuant to a formal order of private investigation in connection with possible
registration and reporting violations. The Company complied with the request for
such documents. Whatever the ultimate objectives of the SEC's fact-finding
inquiry may be, the Company intends to cooperate as the investigation proceeds.
As stated in the subpoena, the "investigation is confidential and should not be
construed as an indication by the SEC or its staff that any violations of law
have occurred, nor should it be interpreted as an adverse reflection on any
person, entity or security." This investigation is in its early stages and the
Company is unable to determine the likelihood of an unfavorable outcome or the
existence or amount of any potential loss.
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 . The complaint seeks
damages in the approximate sum of $50,000,000, declaratory relief and punitive
damages. The Company denies the existence of any agreement, believes that the
complaint is frivolous and without merit and is vigorously defending the claims
as well as asserting substantial counterclaims. This matter is in its
preliminary stages and the Company is unable to determine the likelihood of an
unfavorable outcome or the existence or amount of any potential loss.
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 this
action is fully covered by insurance. This matter is in its preliminary stages
and the Company is unable to determine the likelihood of an unfavorable outcome
or the existence or amount of any potential loss.
Purchase Commitments
- --------------------
At November 30, 1998, the Company had outstanding purchase commitments of
$168,000 for the purchase of EECP systems from its contract manufacturer.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- -----------------------------------------------------------------------
OF OPERATIONS
- -------------
Results of Operations
- ---------------------
Six and Three Months Ended November 30, 1998 and 1997
- -----------------------------------------------------
The Company generated revenues from the sale and lease of EECP systems of
$792,000 and $2,177,000 and $364,000 and $1,135,000 for the six- and three-month
periods ended November 30, 1998 and 1997, respectively. The Company incurred net
losses of $2,895,000 and $2,005,000 for the six months ended November 30, 1998
and 1997, respectively (before deducting $864,000 and $857,000, respectively, 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 $108, 000 and $53,000, respectively,
in dividend requirements, in connection with the Company's April 1998 and June
1997 financings). The Company incurred net losses of $1,486,000 and $1,007,000
for the three months ended November 30, 1998 and 1997, respectively (before
deducting $203,000 in fiscal 1999 in incremental deemed dividends on preferred
stock which represented the additional discount resulting from the allocation of
proceeds to the beneficial conversion feature and $53,000 and $25,000,
respectively, in dividend requirements in connection with the Company's April
1998 and June 1997 financings).
Management believes that the number of cardiology practices and hospitals
interested in becoming providers of EECP therapy has increased following the
announcement of the results of the Company's multicenter clinical study at the
American Heart Association (AHA) meeting in November 1997, additional reports
presented at the American College of Cardiology meeting in March 1998, and the
one-year follow-up quality-of-life outcomes study presented at the AHA in
November 1998. The number of units placed in the first two quarters of fiscal
1999 has exceeded that of the comparable prior-year period, however, revenues in
the current fiscal year have been adversely affected by the nature of the
commercial arrangements under which those units were placed, including the
decline in outright sales. The Company expects that many of the placements
currently under rental or use arrangements will become outright sales or
financed leases in the latter part of fiscal 1999, although there can be no
assurance that this will occur.
Management believes that the publication of the results of a multicenter,
controlled clinical study in a major peer-review journal and decisions by the
Health Care Financing Administration (which administers the Medicare program)
and other third-party payers to provide coverage for EECP treatment are
essential to the commercial success of the Company. The Company expects
publication of the multicenter clinical study and determination of positive
coverage policies to occur during the course of the current fiscal year.
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 by 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.
Accordingly, the gross margin realized during the current period may not be
indicative of future margins.
Selling, general and administrative (SGA) expenses for the six- and
three-month periods ended November 30, 1998 and 1997 were approximately
$2,648,000 and $2,507,000, and $1,378,000 and $1,485,000, respectively. The
$141,000 increase in SGA expenses for the comparable six-month period resulted
primarily from the expansion of the Company's direct sales force and customer
services personnel and marketing expenses related to customer support activities
and programs, offset by a decrease in commissions and other related selling
expenses as a result of decreased revenues. The $107,000 decrease in SGA
expenses for the comparable three-month period resulted primarily from
substantial expenditures in the prior period for public relations programs
related to the announcement of the aforementioned multicenter study's results
and for new promotional and educational materials and a decrease in commissions
and other related selling expenses as a result of decreased revenues, offset by
expenses in connection with the expansion of the Company's direct sales force
and customer services personnel.
<PAGE>
Research and development (R&D) expenses decreased $609,000 and $200,000 for
the six and three months ended November 30, 1998 compared to the prior periods.
The decreases were the result of significant prior period expenses related to
the completion of the Company's multicenter clinical study of EECP (completed in
July 1997) and the front-loaded expenses for the development of a new model of
the EECP system. Current period expenses relate to the long-term follow-up phase
of the multicenter clinical study, i.e., a quality-of-life outcomes study
(completed in July 1998), the expansion of the International EECP Patient
Registry at the University of Pittsburgh, and the ongoing feasibility study in
congestive heart failure, all of which, to some extent, are expected to further
affect operating results in fiscal 1999.
Liquidity and Capital Resources
- -------------------------------
Working capital decreased by $3,136,000 from $5,046,000 at May 31, 1998 to
$1,910,000 at November 30, 1998, principally as a result of continuing operating
losses. In January 1999, the Company received proceeds of $247,500 from the
exercise of warrants.
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. At November 30, 1998, approximately 78% of
Series B preferred stock and no Series C preferred stock had been converted into
common stock.
Management believes that its present working capital position at November
30, 1998, 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 proceeds
from the exercise of options and warrants ($247,500 received subsequent to the
end of the second fiscal quarter), will make it possible for the Company to
support its internal overhead expenses and to implement its business plans for
the next twelve months. Management will revise its business plans in the event
actual revenues deviate from current projections. If the Company's future cash
requirements are not adequately generated from the sale and lease of EECP
systems, the Company may require infusions of additional capital from equity or
debt issuances.
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.
<PAGE>
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
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 not yet contacted other companies on whose services the
Company depends to determine whether such companies' systems are Year 2000
compliant. If the systems of the Company or other companies on whose services
the Company depends, including the Company's customers, are not Year 2000
compliant, there could be a material adverse effect on the Company's financial
condition or results of operations.
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.
<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
President, Chief
Executive Officer and Director
(Principal Executive Officer)
/s/ Joseph A. Giacalone
Secretary and Treasurer
(Principal Financial and Accounting Officer)
Date: January 14, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
consolidated condensed financial statements for the six-months ended November
30, 1998 and is qualified in its entirety by reference to such statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-END> NOV-30-1998
<CASH> 1,509,002
<SECURITIES> 0
<RECEIVABLES> 418,045
<ALLOWANCES> 0
<INVENTORY> 965,655
<CURRENT-ASSETS> 2,993,281
<PP&E> 868,050
<DEPRECIATION> (361,514)
<TOTAL-ASSETS> 4,197,756
<CURRENT-LIABILITIES> 1,083,133
<BONDS> 0
0
2,085
<COMMON> 48,917
<OTHER-SE> 2,719,121
<TOTAL-LIABILITY-AND-EQUITY> 4,197,756
<SALES> 792,100
<TOTAL-REVENUES> 792,100
<CGS> 573,790
<TOTAL-COSTS> 573,790
<OTHER-EXPENSES> 3,105,683
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,337
<INCOME-PRETAX> (2,894,710)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,894,710)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,894,710)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> (.08)
</TABLE>
