SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 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 March 31, 1998
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: 0-25210
NEOPATH, INC.
(Exact name of registrant as specified in its charter)
Washington 91-1436093
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
8271 - 154th Avenue NE, Redmond, Washington 98052
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (425) 869-7284
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 [ ]
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Class Outstanding at April 30, 1998
(Common stock, $.01 par value) 14,468,220
<PAGE>
NEOPATH, INC.
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
Part I FINANCIAL INFORMATION
Page
____
Item 1. Financial Statements 1
Balance Sheets -- March 31, 1998 (unaudited) and
December 31, 1997
Statements of Operations (unaudited) -- for the three months
ended March 31, 1998 and 1997
Statements of Cash Flows (unaudited) -- for the three months
ended March 31, 1998 and 1997
Notes to Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 6
Item 3. Quantitative and Qualitative Disclosures About Market Risk 9
Part II OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
<PAGE>
Part 1 FINANCIAL INFORMATION
Item 1. Financial Statements
NEOPATH, INC.
BALANCE SHEETS
March 31, December 31,
1998 1997
_____________ ______________
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 4,270,025 $ 3,308,970
Securities available-for-sale 17,670,331 25,409,633
Accounts receivable, net 4,283,846 3,863,818
Inventories 8,880,753 7,514,001
Other current assets 348,146 187,147
_____________ _____________
Total current assets 35,453,101 40,283,569
Fee-per-use systems, net 7,506,822 8,564,189
Property and equipment, net 5,562,203 5,979,849
Intangible assets, net 3,195,930 3,383,925
Deposits and other assets 808,763 729,280
_____________ _____________
Total assets $ 52,526,819 $ 58,940,812
============= =============
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 1,867,351 $ 2,173,179
Salaries and wages payable 1,351,635 2,357,045
Customer deposits 400,609 431,877
Other accrued liabilities 988,120 567,759
Current portion of obligations under
capital leases 82,568 80,966
_____________ _____________
Total current liabilities 4,690,283 5,610,826
Obligations under capital leases,
less current portion 82,371 101,872
Shareholders' equity:
Common stock 141,199,048 141,057,881
Accumulated deficit (93,309,751) (87,633,118)
Accumulated other comprehensive loss (135,132) (196,649)
_____________ _____________
Total shareholders' equity 47,754,165 53,228,114
_____________ _____________
Total liabilities and shareholders'
equity $ 52,526,819 $ 58,940,812
============= =============
See accompanying notes.
Page 1
<PAGE>
NEOPATH, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended
March 31,
_____________________________
1998 1997
____________ ____________
Revenues $ 3,562,691 $ 2,234,552
Cost of revenues 2,040,760 1,077,512
____________ ____________
Gross margin 1,521,931 1,157,040
Operating expenses:
Research and development 3,045,816 4,386,856
Selling, general and administrative 4,506,243 3,695,671
____________ ____________
7,552,059 8,082,527
____________ ____________
Loss from operations (6,030,128) (6,925,487)
Interest income 365,774 745,666
Interest expense (9,279) (6,485)
____________ ___________
Net loss $ (5,673,633) (6,186,306)
============ ===========
Basic and diluted net loss per share $ (0.39) $ (0.45)
============ ===========
Weighted average common shares outstanding 14,415,851 13,771,635
============ ===========
See accompanying notes.
Page 2
<PAGE>
NEOPATH, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
Three months ended
March 31,
____________________________
1998 1997
____________ ____________
Operating activities
Net loss $ (5,673,633) $ (6,186,306)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 1,408,059 758,877
Deferred compensation -- 74,246
Accrued interest on securities
available-for-sale 191,903 458,950
Net change in operating accounts:
Accounts receivable (420,028) (1,097,546)
Inventories and fee-per-use systems (840,016) (2,715,121)
Accounts payable and accrued liabilities (851,663) 494,056
Other (240,250) (372,473)
____________ ____________
Net cash used in operating activities (6,425,628) (8,585,317)
Investing activities
Purchases of securities available-for-sale -- (1,101,093)
Maturities of securities available-for-sale 7,608,916 11,500,000
Additions to property and equipment (274,616) (305,796)
Other (403) (1,040)
____________ ____________
Net cash provided by investing activities 7,333,897 10,092,071
Financing activities
Exercise of options and warrants 70,685 3,623,425
Principal payments on obligations under
capital leases (17,899) (21,956)
____________ ____________
Net cash provided by financing activities 52,786 3,601,469
____________ ____________
Net increase in cash and cash equivalents 961,055 5,108,223
Cash and cash equivalents:
Beginning of period 3,308,970 7,871,401
____________ ____________
End of period $ 4,270,025 $ 12,979,624
============ ============
Noncash transactions and supplemental disclosures
Inventories reclassified to fee-per-use
systems, net $ (520,831) $ 802,834
Inventories reclassified to property
and equipment -- 330,174
See accompanying notes.
Page 3
<PAGE>
NEOPATH, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Basis of Presentation
The accompanying unaudited financial statements have been
prepared by NeoPath, Inc. ("NeoPath" or the "Company") in
accordance with generally accepted accounting principles for
interim financial information and according to the rules and
regulations of the Securities and Exchange Commission.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management,
all adjustments (which include only normal recurring adjustments)
considered necessary for a fair presentation have been included.
The balance sheet at December 31, 1997 has been derived from the
audited financial statements at that date, but does not include
all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.
The results of operations for the three-month period ended March
31, 1998, are not necessarily indicative of results to be
expected for the entire year ending December 31, 1998 or for any
other fiscal period. For further information, refer to the
financial statements and footnotes thereto incorporated by
reference in the Company's Form 10-K for the year ended December
31, 1997.
Note 2 - Revenue Recognition
The Company recognizes AutoPap(R) System fee-per-use
revenues based on the number of customer slides processed,
subject to agreed-upon minimum processing levels or minimum
rental payments, beginning in the month an AutoPap System is
initially placed in commercial use at the customer site. Sales
of AutoPap Systems and Pathfinder Systems are recognized at date
of shipment.
Note 3 - Recently Issued Accounting Standards
As of January 1, 1998, NeoPath adopted Financial Accounting
Standards Board ("FASB") Statement No. 130, "Reporting
Comprehensive Income." Statement 130 establishes new rules for
the reporting and display of comprehensive income or loss and its
components; however, the adoption of this Statement had no impact
on the Company's operating results or shareholders' equity.
Statement 130 requires unrealized gains or losses on the
Company's securities available-for-sale, which prior to
adoption were reported within shareholders' equity, to be
included in other comprehensive income or loss. Statement
130 also requires presentation of accumulated other
comprehensive income or loss separately in shareholders'
equity; accordingly, prior year financial statements have
been reclassified to conform to these requirements.
Components of comprehensive net loss are as follows:
Three months ended March 31,
_____________________________________
1998 1997
_____________________________________
Net loss $ (5,673,633) $ (6,186,306)
Unrealized gain (loss) on
securities available-for-sale 61,517 (200,164)
_____________________________________
Comprehensive net loss $ (5,612,116) $ (6,386,470)
=====================================
Page 4
<PAGE>
In 1997, the FASB issued Statement No. 131, "Disclosures
about Segments of an Enterprise and Related Information," which
is required to be adopted for periods beginning after December
15, 1997. The new Statement supersedes FASB Statement No. 14,
"Financial Reporting for Segments of a Business Enterprise."
Companies will be required to report each operating segment and
related information, as defined in Statement 131, in the
notes to financial statements. NeoPath plans to adopt the new
Statement in 1998. Statement 131 is not required to be applied
to interim financial statements in the initial year of adoption.
Note 4 - Inventories
Inventories consist of the following:
March 31, 1998 December 31, 1997
______________________________________
Raw materials $ 2,933,182 $ 3,819,830
Work-in-process 1,773,674 1,061,900
Finished goods 4,173,897 2,632,271
______________________________________
$ 8,880,753 $ 7,514,001
======================================
Note 5 - Purchase of Pathfinder System Product Line
NeoPath acquired the Pathfinder System product line in June
1997 for an initial purchase price of $4.1 million. The initial
purchase price included cash of $2.7 million (including
transaction-related expenses), a $500,000 short-term note paid in
October 1997, and 48,564 shares of NeoPath common stock. In
addition, certain shares of NeoPath common stock were issued and
were held in escrow contingent upon certain specific technology
decisions to be made within one year of closing. In April 1998
the Company released the remaining shares held in escrow,
consisting of approximately 42,000 shares of NeoPath common
stock, resulting in recognition of an additional $550,000 in
intangible assets that will be amortized over the remaining five-
year amortization term established in June 1997.
Note 6 - Litigation
On July 15, 1996, Neuromedical Systems, Inc.
("Neuromedical") filed a lawsuit against NeoPath, Inc. in the
United States District Court for the Southern District of New
York. The complaint alleges patent infringement, unfair
competition, false advertising, and related claims. On September
5, 1996, the Company filed its answer and counter claims. In
September 1997, a motion for preliminary injunction against the
Company was heard by a judge in the United States District Court
for the Southern District of New York. No decision has yet been
rendered. The Company believes it has a strong position in this
action and continues to defend itself vigorously.
On March 31, 1997, the Company filed a patent infringement
lawsuit against Neuromedical in the United States District Court
for the Western District of Washington. The complaint alleges
patent infringement and seeks permanent injunctions against
Neuromedical. In March and April 1998 this lawsuit was amended,
and NeoPath filed an additional related lawsuit against
Neuromedical. Neuromedical filed a motion for summary judgment,
which motion was denied by the court in April 1998. Both
lawsuits are currently in the discovery stage.
Page 5
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Overview
NeoPath, Inc. ("NeoPath" or the "Company") develops and
markets visual intelligence technology to increase accuracy in
medical testing. NeoPath's initial products include (i) two
automated screening systems that integrate proprietary high-speed
image processing computers, video imaging technology and
sophisticated image interpretation software to capture and
analyze thousands of microscopic images from a Papanicolaou
("Pap") smear slide for the early detection of cervical cancer
and (ii) the Pathfinder(R) System product line acquired in 1997.
In 1995, the United States Food and Drug Administration (the
"FDA") cleared for commercial use the Company's first product,
the AutoPap(R) 300 QC Automatic Pap Screener System (the "AutoPap
QC"). In early 1996, the Health Care Financing Administration
officially allowed clinical laboratories to use the AutoPap QC in
the quality control review of Pap smear slides that have been
initially screened by cytologists and classified as normal. The
decision allows AutoPap QCs to be used in determining which
slides will be rescreened under the federally mandated
rescreening requirement.
NeoPath's second product is the AutoPap Primary Screening
System (the "AutoPap Screener" and, in combination with the
AutoPap QC, the "AutoPap System"). The AutoPap Screener utilizes
the same hardware components as the AutoPap QC; however, it uses
enhanced software, including additional cell-classification
algorithms. During 1997, NeoPath completed a prospective
intended-use clinical study to evaluate the performance of the
AutoPap Screener as a primary screening system. This study
included analysis of more than 25,000 Pap smear slides at five
clinical laboratories in the United States and Canada. In August
1997, NeoPath submitted the results of the study in an amendment
to its pending PreMarket Approval ("PMA") Supplement to the FDA,
for use of the AutoPap Screener as a primary screener of Pap
smear slides. In January 1998, the Hematology and Pathology
Devices Advisory Panel of the FDA (the "Panel") unanimously
recommended that the FDA approve, with conditions, the supplement
to NeoPath's PMA submission for use of the AutoPap Screener as a
primary Pap smear screener. On May 5, 1998, the FDA followed the
Panel's recommendation and approved the AutoPap Screener for use
as a combined primary screener and quality control rescreener of
Pap smear slides. As approved by the FDA, the AutoPap Screener
demonstrates a statistically significant increase in identifying
disease when compared to current practice.
NeoPath's Pathfinder System provides improved productivity
and quality assurance in the clinical cytology laboratory by
computerizing the cytotechnologists' microscopes, thereby helping
to eliminate screening errors and facilitating critical cell
identification in applications such as Pap smear screening.
Results of Operations
Three months ended Three months ended
(in thousands) March 31, 1998 Change March 31, 1997
________________________________________________________________________________
Revenues $3,563 $1,328 $2,235
59%
The Company recognizes revenue on either a sale or fee-per-
use basis (subject to certain license agreements, lease
contracts, and minimum payments on fee-per-use contracts). Under
its fee-per-use program, the Company retains ownership of AutoPap
Systems placed at customer sites and assesses customers a charge
for each Pap smear slide analyzed.
NeoPath's AutoPap System placements to date have consisted
of fee-per-use contracts (and limited sale contracts) in the
United States and primarily sale contracts internationally.
Approximately two thirds of total revenues in the three months
ended March 31, 1998 and 1997, respectively, consisted of AutoPap
System sales worldwide. The remaining one third of total
revenues consisted of fee-per-use contract billings and, in 1998,
Pathfinder System sales. Pathfinder System sales accounted
for less than four percent of total first quarter 1998
revenues. The Company anticipates that future AutoPap
System placements will continue to consist of both fee-per-
Page 6
<PAGE>
use and sale contracts; however, the Company expects that
revenues for the next several quarters will continue to consist
of greater sales of AutoPap Systems than revenues generated from
NeoPath's fee-per-use program. The sales mix may vary as product
features and markets mature, and as third-part reimbursement
policies change.
NeoPath has placed AutoPap Systems at customer sites in
Japan, Korea, Hong Kong, Europe, and Australia. First quarter
1998 revenues included additional AutoPap System placements in
Hong Kong and Japan. All of the Company's international product
placements have been denominated in U.S. dollars; however, future
product revenues may include customer contracts subject to
foreign exchange rate changes. Approximately 23 percent of
NeoPath's revenues in the first quarter of 1998 represented sales
to customers outside of the United States, compared to
approximately 72 percent in the same period in 1997.
NeoPath believes that increased third-party reimbursement of
Pap smears in general, and increased reimbursement for screening
utilizing the AutoPap System in particular, will significantly
increase the Company's potential for revenues in 1998 and beyond.
In October 1997, the American Medical Association published its
revised Physicians' Current Procedural Terminology (CPT-4) codes
which included a code that applies to the AutoPap QC for
automated cervical cancer rescreening. CPT codes are a universal
system used by physicians and clinical laboratories to identify
specific procedures when billing insurers for their services. In
early 1998, NeoPath formed a five-person team to work with third-
party insurers and managed care organizations to establish and/or
improve third-party reimbursement levels for the AutoPap System.
These managed care specialists are working closely with NeoPath's
field sales personnel throughout the United States.
<TABLE>
<CAPTION>
Three months ended Percentage of Three months ended Percentage of
(in thousands) March 31, 1998 Revenues March 31, 1997 Revenues
____________________________________________________________________________________________
<S> <C> <C> <C> <C>
Cost of revenues $2,041 57% $1,078 48%
Gross margin 1,522 43% 1,157 52%
</TABLE>
The change in gross margin percentage from one year ago was
attributable to 1997 international sales under a distribution
agreement with higher initial AutoPap System pricing in
comparison to 1998 list prices, as well as certain sales
discounts offered to existing customers during the first quarter
of 1998.
Gross margin is expected to fluctuate depending on the mix
of fee-per-use revenues, AutoPap System sales, and other
revenues, as well as sales incentive programs that may be
offered. The continued development of the manufacturing, service
and support functions, as well as overall production levels, are
also expected to contribute to fluctuations in gross margin.
Therefore, the Company's historic gross margins are not
necessarily indicative of future gross margins.
Three months ended Three months ended
(in thousands) March 31, 1998 Change March 31, 1997
_______________________________________________________________________________
Research and development $3,046 $(1,341) $4,387
(31%)
The Company incurred higher research and development costs
in 1997 due primarily to NeoPath's AutoPap Screener clinical
study which was completed in 1997. The Company also incurred
lower regulatory expenses in the first quarter of 1998, even
though NeoPath presented to the FDA's Hematology and Pathology
Devices Advisory Panel on January 28, 1998.
Page 7
<PAGE>
Three months ended Three months ended
(in thousands) March 31, 1998 Change March 31, 1997
__________________________________________________________________________
Selling, general and
administrative $4,506 $810 $3,696
22%
Selling, general and administrative expenses increased from
the first quarter of 1997 due primarily to continued investment
in significant new sales and marketing initiatives, expansion of
the sales and reimbursement team, and costs related to the
purchase and integration of the Pathfinder System product line
acquired in June 1997.
Three months ended Three months ended
(in thousands) March 31, 1998 Change March 31, 1997
____________________________________________________________________________
Interest income $366 $(380) $746
(51%)
The decrease in interest income in 1998 is due to decreased
cash equivalents and securities available-for-sale resulting from
NeoPath's negative operating cash flow. The Company expects that
its interest income will decline further in 1998 as a result of
declining cash available for investment purposes.
Liquidity and Capital Resources
As of March 31, 1998, the Company had $21.9 million in cash,
cash equivalents, and securities available-for-sale, compared to
$28.7 million as of December 31, 1997. The decrease is a result
of cash used in the Company's operations for the three months
ended March 31, 1998. The Company's cash used in operating
activities was $6.4 million and $8.6 million in the three months
ended March 31, 1998 and 1997, respectively. The Company
expended cash for property and equipment, excluding AutoPap
Systems reclassified to either fee-per-use systems or
reclassified to property and equipment, of $275,000 and $306,000
in the quarters ended March 31, 1998 and 1997, respectively.
The Company expects negative cash flow from operations to
continue at least through the majority of 1998 as it manufactures
AutoPap Systems to support fee-per-use product placements,
continues to expand its marketing, sales, and customer service
and support capabilities, continues its research and development
activities and conducts and analyzes data from clinical trials.
The Company has obtained a bank financing facility to borrow up
to $10 million based on current and future fee-per-use AutoPap
Systems placed at customer sites. The Company currently
estimates that its existing cash resources and established bank
financing will enable it to sustain operations for at least the
next twelve months. There can be no assurance, however, that the
Company will not be required to seek additional cash in the form
of either debt or equity at an earlier date. The Company's
future capital requirements will depend on many factors,
including the extent and rate of adoption of use of the AutoPap
QC and the AutoPap Screener; the increased market acceptance of
the Company's fee-per-use program; the mix of fee-per-use and
sale placements; the market acceptance of the Pathfinder System;
the extent and rate of development of the Company's marketing,
sales, and customer service and support capabilities; and the
status of competing products. The Company may, from time to
time, seek additional funding through public or private
financing, including equity financing. There can be no assurance
that adequate funding will be available as needed or on terms
acceptable to the Company. If additional funds are raised by
issuing equity securities, existing shareholders will experience
dilution. Insufficient funds may require the Company to delay,
scale back or eliminate some or all of its manufacturing,
research and development or clinical programs.
Impact of Year 2000
Some of the Company's internal and product software
programs were written using two digits rather than four
to define the applicable year. As a result, those
computer programs have time-sensitive software that recognize
a date using "00" as the year 1900 rather than the year
2000. The Company has completed a preliminary assessment
and will have to modify or replace portions of its
internal and product software so that its computer systems will
Page 8
<PAGE>
function properly with respect to dates in the year 2000 and
thereafter. The project is estimated to be completed in early
1999, and the total Year 2000 project cost is not expected to be
material.
The Company believes that with modifications to existing
software and conversions to new software, the Year 2000 Issue
will not pose significant operational problems for its computer
systems. However, if such modifications and conversions are not
made, or are not completed timely, the Year 2000 Issue could
have a material impact on NeoPath's operations.
Forward-Looking Statements
The preceding Management's Discussion and Analysis of
Financial Condition and Results of Operations contains "forward-
looking statements" which reflect the Company's current views
with respect to future events and financial performance.
These forward-looking statements are subject to certain risks
and uncertainties that could cause actual result to differ
materially from historical results or those anticipated. The
words "plan," "expect," "anticipate," and similar expressions
identify forward-looking statements. Readers are cautioned not
to place undue reliance on these forward-looking statements,
which speak only as of their dates. The Company undertakes no
obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future
events, or otherwise. Factors that could cause actual results to
differ materially from historical results or those anticipated
include, without limitation, the following: the Company's limited
operating history and history of losses; market acceptance of the
Company's products; the acceptance of the Company's fee-per-use
or sale programs; product and manufacturing regulatory approvals;
the Company's limited marketing, sales, customer service and
support capabilities; uncertainties relating to international
transactions; the Company's sole or limited source of supply of
certain components; the status of competing products; dependence
on reimbursement; dependence on single product line; product
liability; dependence on patents and property rights; the risk of
third-party claims of infringement; and dependence on key
personnel. For a more detailed discussion of these factors, see
"Factors Affecting Future Results and Forward-Looking Statements"
of the Company's Form 10-K for the fiscal year ended December 31,
1997.
Item 3. Quantitative and Qualitative Disclosures About Market
Risk
Not applicable.
Page 9
<PAGE>
Part II OTHER INFORMATION
Item 1. Legal Proceedings
On July 15, 1996, Neuromedical Systems, Inc.
("Neuromedical") filed a lawsuit against NeoPath, Inc. in the
United States District Court for the Southern District of New
York. The complaint alleges patent infringement, unfair
competition, false advertising, and related claims. On September
5, 1996, the Company filed its answer and counter claims. In
September 1997, a motion for preliminary injunction against the
Company was heard by a judge in the United States District Court
for the Southern District of New York. No decision has yet been
rendered. The Company believes it has a strong position in this
action and continues to defend itself vigorously.
On March 31, 1997, the Company filed a patent infringement
lawsuit against Neuromedical in the United States District Court
for the Western District of Washington. The complaint alleges
patent infringement and seeks permanent injunctions against
Neuromedical. In March and April 1998 this lawsuit was amended,
and NeoPath filed an additional related lawsuit against
Neuromedical. Neuromedical filed a motion for summary judgment,
which motion was denied by the court in April 1998. Both
lawsuits are currently in the discovery stage.
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed as part of this report.
Exhibit No. Description
___________ ___________
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
March 31, 1998.
Page 10
<PAGE>
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.
NeoPath, Inc.
Date: May 11, 1998 By: /s/ ALAN C. NELSON
__________________
Alan C. Nelson
President and Chief Executive Officer
By: /s/ WILLIAM L. SCOTT
____________________
William L. Scott
Vice President and Chief Financial Officer
By: /s/ ROBERT C. BATEMAN
_____________________
Robert C. Bateman
Corporate Controller and Treasurer
Page 11
<PAGE>
NEOPATH, INC.
INDEX TO EXHIBITS
Exhibit No. Description
___________ ___________
27 Financial Data Schedule
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Form
10-Q as of March 31, 1998 and for the three months then ended, and is qualified
in its entirety by reference to such financial statements and footnotes.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-30-1998
<CASH> 4,270,025
<SECURITIES> 17,670,331
<RECEIVABLES> 4,283,846
<ALLOWANCES> 0
<INVENTORY> 8,880,753
<CURRENT-ASSETS> 35,453,101
<PP&E> 5,562,203
<DEPRECIATION> 0
<TOTAL-ASSETS> 52,526,819
<CURRENT-LIABILITIES> 4,690,283
<BONDS> 0
0
0
<COMMON> 141,199,048
<OTHER-SE> (93,444,883)
<TOTAL-LIABILITY-AND-EQUITY> 52,526,819
<SALES> 0
<TOTAL-REVENUES> 3,562,691
<CGS> 0
<TOTAL-COSTS> 2,040,760
<OTHER-EXPENSES> 7,552,059
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,279
<INCOME-PRETAX> (5,673,633)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,673,633)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,673,633)
<EPS-PRIMARY> (0.39)<F1>
<EPS-DILUTED> 0.00
<FN>
<F1>Basic and diluted net loss per share are the same amount.
</FN>
</TABLE>
