<PAGE>
FORM 10-QSB
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1999
Commission file number 001-10647
------------------
PRECISION OPTICS CORPORATION, INC.
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
MASSACHUSETTS 04-2795294
- -------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
22 EAST BROADWAY, GARDNER, MASSACHUSETTS 01440-3338
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(978) 630-1800
- --------------------------------------------------------------------------------
(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes (X) No ( )
The number of shares outstanding of issuer's common stock, par value $.01 per
share, at December 31, 1999 was 8,064,460 shares.
Transitional Small Business Disclosure Format (check one):
Yes ( ) No (X)
<PAGE>
PRECISION OPTICS CORPORATION, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION:
ITEM 1 Consolidated Financial Statements
Consolidated Balance Sheets- 1
December 31, 1999
and June 30, 1999 (unaudited)
Consolidated Statements of Operations - 2
Quarter Ended December 31, 1999
and December 31, 1998 (unaudited)
Six Months Ended December 31, 1999
and December 31, 1998 (unaudited)
Consolidated Statements of Cash Flows - 3
Six Months Ended December 31, 1999
and December 31, 1998 (unaudited)
Notes to Consolidated Financial Statements 4-5
ITEM 2
Management's Discussion and Analysis of 6-10
Financial Condition and Results of Operations
PART II. OTHER INFORMATION 11
ITEMS 1-3 Not Applicable 11
ITEM 4 Submission of Matters to a Vote of Security Holders 11
ITEM 5 Not Applicable 11
ITEM 6 Exhibits and Reports on Form 8-K 11
(a) Exhibits - Exhibit 27
(b) Reports on Form 8-K - None
</TABLE>
<PAGE>
PRECISION OPTICS CORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
December 31, 1999 June 30, 1999
----------------- -------------
<S> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents $ 1,503,866 $ 480,732
Accounts Receivable, Net 208,875 210,079
Inventories 961,400 979,284
Prepaid Expenses 79,674 47,996
----------- -----------
Total Current Assets 2,753,815 1,718,091
----------- -----------
PROPERTY AND EQUIPMENT 4,010,529 3,750,473
Less: Accumulated Depreciation (2,689,944) (2,496,949)
----------- -----------
Net Property and Equipment 1,320,585 1,253,524
----------- -----------
OTHER ASSETS 279,371 282,880
----------- -----------
TOTAL ASSETS $ 4,353,771 $ 3,254,495
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 174,987 $ 194,619
Accrued Payroll 111,008 75,644
Accrued Professional Services 109,103 50,283
Accrued Profit Sharing and Bonuses 32,500 25,000
Accrued Income Taxes -- 912
Accrued Vacation 77,581 78,056
Accrued Warranty Expense 50,000 50,000
Current Portion of Capital Lease Obligation 146,503 105,542
Other Accrued Liabilities 132,320 35,392
----------- -----------
Total Current Liabilities 834,002 615,448
----------- -----------
CAPITAL LEASE OBLIGATION 118,146 166,312
----------- -----------
STOCKHOLDERS' EQUITY
Common Stock, $.01 par value-
Authorized -- 20,000,000 shares
Issued and Outstanding - 8,064,460 and
6,687,595 shares at December 31, 1999
June 30, 1999, respectively 80,645 66,876
Additional Paid-in Capital 8,272,415 6,206,411
Accumulated Deficit (4,951,437) (3,800,552)
----------- -----------
Total Stockholders' Equity 3,401,623 2,472,735
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,353,771 $ 3,254,495
----------- -----------
----------- -----------
</TABLE>
PAGE 1 OF 13
<PAGE>
PRECISION OPTICS CORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SECOND QUARTER AND SIX MONTHS ENDED
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
-- SECOND QUARTER -- -- SIX MONTHS --
1999 1998 1999 1998
-------- -------- ---------- ---------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES $587,403 $857,090 $1,304,288 $1,536,985
COST OF GOODS SOLD 393,737 505,457 777,423 1,021,586
-------- -------- ---------- ---------
GROSS PROFIT 193,666 351,633 526,865 515,399
-------- -------- ---------- ---------
RESEARCH and DEVELOPMENT 467,226 259,590 856,645 495,202
SELLING, GENERAL and
ADMINISTRATIVE EXPENSES 426,610 424,232 823,076 789,110
--------- --------- ---------- ----------
TOTAL OPERATING EXPENSES 893,836 683,822 1,679,721 1,284,302
-------- -------- ---------- ----------
OPERATING LOSS (700,170) (332,189) (1,152,856) (768,903)
INTEREST EXPENSE (7,053) (7,506) (12,877) (14,184)
INTEREST INCOME 8,640 10,271 14,848 29,579
--------- --------- ---------- -----------
LOSS BEFORE PROVISION
FOR INCOME TAXES (698,583) (329,424) (1,150,885) (753,508)
PROVISION FOR INCOME TAXES -- 8,655 -- 8,655
------------- ---------- ------------- ----------
NET LOSS $(698,583) $(338,079) $(1,150,885) $(762,163)
-------- -------- ---------- ---------
-------- -------- ---------- ---------
BASIC and DILUTED LOSS PER SHARE ($0.09) ($0.05) ($0.15) ($0.11)
-------- -------- ---------- ---------
-------- -------- ---------- ---------
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 7,751,239 6,677,595 7,469,417 6,661,204
-------- -------- ---------- ---------
-------- -------- ---------- ---------
</TABLE>
PAGE 2 OF 13
<PAGE>
PRECISION OPTICS CORPORATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED
DECEMBER 31, 1999 AND DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $(1,150,885) $ (762,163)
Adjustments to Reconcile Net Loss to Net Cash
(Used In) Provided by Operating Activities -
Depreciation and Amortization 216,703 183,061
Deferred Income Taxes -- 8,655
Non-Cash Royalty Expense 1,875 1,875
Changes in Assets and Liabilities-
Accounts Receivable 1,204 (80,431)
Inventories 17,884 (65,849)
Prepaid Expenses (33,553) (61,798)
Accounts Payable (19,632) 74,108
Customer Advances -- (116,841)
Accrued Expenses 197,225 (128,605)
----------- -----------
Net Cash Used In Operating Activities (769,179) (947,988)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of Property and Equipment (217,556) (247,547)
Increase in Other Assets (20,199) (17,262)
----------- -----------
Net Cash Used in Investing Activities (237,755) (264,809)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of Capital Lease Obligation (49,705) (62,391)
Net Proceeds (Costs) From Private Placement of
Common Stock 1,019,391 (54,418)
Proceeds from Exercise of Stock Options and 1,060,382 76,670
Warrants ----------- -----------
Net Cash Provided By (Used in)
Financing Activities 2,030,068 (40,139)
----------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 1,023,134 (1,252,936)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 480,732 2,060,146
----------- -----------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 1,503,866 $ 807,210
----------- -----------
----------- -----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash Paid for-
Interest $ 12,877 $ 14,184
----------- -----------
----------- -----------
Income Taxes $ -- $ --
----------- -----------
----------- -----------
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Capital Lease Obligation $ 42,500 $ 72,798
----------- -----------
----------- -----------
Common Stock Issued for Payment of Royalties $ -- $ 7,500
----------- -----------
----------- -----------
</TABLE>
PAGE 3 OF 13
<PAGE>
PRECISION OPTICS CORPORATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) BASIS OF PRESENTATION
The accompanying consolidated financial statements include the
accounts of Precision Optics Corporation, Inc. and its
wholly-owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated in consolidation.
These financial statements have been prepared by the Company,
without audit, and reflect normal recurring adjustments which, in
the opinion of management, are necessary for a fair statement of
the results of the second quarter and first half of the Company's
fiscal year 2000. These financial statements do not include all
disclosures associated with annual financial statements and,
accordingly, should be read in conjunction with footnotes
contained in the Company's financial statements for the period
ended June 30, 1999 together with the auditors' report filed under
cover of the Company's 1999 Annual Report on Form 10-KSB.
(b) (LOSS) EARNINGS PER SHARE
Basic loss per share is computed by dividing net loss by the
weighted average number of shares of common stock outstanding
during the period. For the six months ended December 31, 1999 and
1998, the effect of stock options and warrants was antidilutive;
therefore, they were not included in the computation of diluted
loss per share. The number of shares that were excluded from the
computation as their effect would be antidilutive were 2,409,635
for the six months ended December 31, 1999 and 1,596,500 for the
six months ended December 31, 1998.
(c) FINANCIAL INSTRUMENTS
SFAS No. 107, DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL
INSTRUMENTS, requires disclosures about the fair value of
financial instruments. Financial instruments consist principally
of cash equivalents, accounts receivable, accounts payable, and
capital lease obligations. The estimated fair value of these
financial instruments approximates their carrying value.
PAGE 4 OF 13
<PAGE>
(d) LONG-LIVED ASSETS
In accordance with the provisions of SFAS No. 121, ACCOUNTING FOR
IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE
DISPOSED OF, the Company evaluates the realizability of its
long-lived assets at each reporting period based on projected
future cash flows. As of December 31, 1999 and 1998, the Company
has determined that no material adjustment to the carrying value
of its long-lived assets was required.
(e) WARRANTY COSTS
The Company does not incur future performance obligations in the normal
course of business other than providing a standard one-year warranty on
materials and workmanship to its customers. The Company provides for
estimated warranty costs at the time product revenue is recognized.
2. INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or
market and consist of the following:
<TABLE>
<CAPTION>
December 31, 1999 June 30, 1999
----------------- -------------
<S> <C> <C>
Raw Materials $605,826 $589,762
Work-In-Process 224,279 248,085
Finished Goods and Components 131,295 141,437
------- -------
Total Inventories $961,400 $979,284
------- -------
------- -------
</TABLE>
PAGE 5 OF 13
<PAGE>
PRECISION OPTICS CORPORATION, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
IMPORTANT FACTORS REGARDING FORWARD-LOOKING STATEMENTS
When used in this discussion, the words "believes", "anticipates",
"intends to", and similar expressions are intended to identify forward-looking
statements. Such statements are subject to certain risks and uncertainties which
could cause actual results to differ materially from those projected. These
risks and uncertainties, many of which are not within the Company's control,
include, but are not limited to, the uncertainty and timing of the successful
development of the Company's new products, particularly in the optical thin
films area; the risks associated with reliance on a few key customers; the
Company's ability to attract and retain personnel with the necessary scientific
and technical skills; the timing and completion of significant orders; the
timing and amount of the Company's research and development expenditures; the
timing and level of market acceptance of customers' products for which the
Company supplies components; the level of market acceptance of competitors'
products; the ability of the Company to control costs associated with
performance under fixed price contracts; and the continued availability to the
Company of essential supplies, materials and services. Readers are cautioned not
to place undue reliance on these forward-looking statements, which speak only as
of the date hereof. The Company undertakes no obligation to publicly release the
result of any revision to these forward-looking statements which may be made to
reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
LIQUIDITY AND CAPITAL RESOURCES
For the six months ended December 31, 1999, the Company's cash and cash
equivalents increased by approximately $1,023,000 to $1,504,000. The increase in
cash and cash equivalents was due to net proceeds received of approximately
$1,019,000 for a private placement of common stock, and exercise of stock
options and warrants of approximately $1,060,000, partially offset by cash used
by operating activities of approximately $769,000, purchases of property and
equipment of approximately $217,000, repayment of capital lease obligations of
approximately $50,000, and an increase in other assets (primarily patents) of
approximately $20,000.
The Company intends to continue devoting significant resources to
internally-funded research and development spending on both new products and the
improvement of existing products. The Company also intends to devote resources
to the marketing and product support of its medical and optical thin films
product lines, and the development of new methods of distribution. These
investments may temporarily result in negative cash flow, but the Company
anticipates that the results of these efforts will translate into increased
revenues and profits.
PAGE 6 OF 13
<PAGE>
Furthermore, depending upon the market acceptance of the Company's
products, the Company believes that it may need to acquire new facilities, add
additional manufacturing or research and development equipment, or acquire a
business that has complementary products or manufactures or sells to the Company
components, materials, supplies, or services used in the manufacture, marketing,
distribution, or servicing of the Company's new products, as well as the
Company's existing products.
As a potential source of liquidity, the Company has callable warrants
outstanding for 1,000,000 shares with an exercise price of $11/8 per share and
310,000 shares with an exercise price of $4 per share. If exercised in full,
these warrants would generate proceeds to the Company of approximately
$2,365,000.
The Company has no material unused sources of liquidity other than its
cash and cash equivalents, accounts receivable and callable warrants. If these
liquidity sources, along with revenues from operations, are not sufficient to
fund operations or growth, the Company will require additional financing. The
timing and amount of additional financing requirements depend on a number of
factors, including the status of development and commercialization efforts, the
cost of equipment and personnel to support manufacturing of new and existing
products, and the amount of working capital necessary to start up and maintain
operations supporting new products. The Company may seek additional funds
through public or private equity or debt financing. There can be no assurance
that such funds will be available on satisfactory terms, if at all. Lack of
necessary funds may require the Company to delay, scale back or eliminate some
or all of its development efforts and undertake other cost reduction measures.
RESULTS OF OPERATIONS
Total revenues for the quarter and six months ended December 31, 1999
decreased by $269,687 or 31.5% and $232,670 or 15.1%, respectively, from the
same periods in the prior year.
The revenue decrease from the prior year for the second quarter was due
to lower sales of medical products (down 34%), and lower sales of non-medical
products (down 7%). For the quarter ending December 31, 1999, medical sales were
lower due primarily to lower shipments of stereo endoscopes and cameras,
partially offset by higher sales of non-stereo endoscopes and endocouplers.
Non-medical sales were lower for the quarter due primarily to the phasing out of
night vision products and lower sales of industrial products, partially offset
by higher sales of DWDM filters.
Similarly, the revenue decrease from the prior year for the six months
ended December 31, 1999 was due to lower sales of medical products (down 10%),
and sales of non-medical products (down 49%). For the six months ended December
31, 1999, medical sales were lower due primarily to lower sales of non-stereo
endoscopes and couplers and lower customer-funded medical research and
development projects, partially offset by higher shipments of stereo endoscopes
and cameras. Non-medical sales were lower year to date due primarily to the
phasing out of night vision products and lower sales of industrial products,
partially offset by higher sales of DWDM filters.
PAGE 7 OF 13
<PAGE>
Included in total revenues are sales for customer-funded research and
development projects totaling approximately $8,000 and $18,000 for the quarter
ending December 31, 1999 and 1998, respectively, and approximately $8,000 and
$204,000 for the six months ended December 31, 1999 and 1998, respectively.
Levels of customer-funded research and development can fluctuate greatly in any
given period depending upon the level of customer demand during such period.
Revenues from the Company's two largest customers were approximately
51% and 10% of total revenues for the six months ended December 31, 1999, and
revenues from the Company's two largest customers were approximately 37% and 13%
of total revenues for the six months ended December 31, 1998. No other customers
accounted for more than 10% of the Company's revenues during those periods.
Gross profit expressed as a percentage of revenues decreased from
41.0% to 33.0% for the second quarter, and increased from 33.5% to 40.4% for
the six months ended December 31, 1999, compared to the corresponding periods
in the prior year. The fluctuations in the gross profit percentage are due
primarily to favorable and unfavorable changes in the product mix of
shipments in the current year periods, which result in proportionately lower
or higher manufacturing costs.
Research and development expenses increased by approximately $208,000,
or 80.0%, for the quarter ending December 31, 1999, and by approximately
$361,000, or 73.0%, for the six months ending December 31, 1999 compared to the
corresponding periods of the prior year. During both years, internal research
and development expenses consisted primarily of development efforts related to
Dense Wavelength Division Multiplexing (DWDM) filters used in telecommunications
systems. The increase was due to a higher level of technical staff resources
being devoted to the DWDM filter project in the current year.
Selling, general and administrative expenses increased by
approximately $2,000, or 0.5%, for the quarter ending December 31, 1999 and
by approximately $34,000, or 4.3%, for the six months ending December 31,
1999 compared to the corresponding periods of the prior year. The year to
date increase is due primarily to higher professional services expenses.
Interest expense relates primarily to capital lease obligations.
Interest income decreased by approximately $2,000 for the quarter
and by approximately $15,000 for the six months ending December 31, 1999
compared to the corresponding periods of the prior year due to the lower base
of cash equivalents.
No income tax provision was recorded in the first or second quarter of
fiscal year 2000 or 1999 because of the losses generated in those periods.
PAGE 8 OF 13
<PAGE>
YEAR 2000 READINESS
The Company was required to modify portions of its hardware and
software so that its computer systems and other date-sensitive equipment would
properly utilize data beyond December 31, 1999. The Company utilized primarily
external resources to test and/or replace hardware and software for Year 2000
compliance. The costs of becoming Year 2000 compliant were approximately $35,000
(which includes approximately $26,000 for capital equipment upgrades). These
costs do not include time spent by internal personnel, which was not material.
To date the Company has not experienced any problems or disruptions of its
operations due to Year 2000 issues, nor is the Company currently aware of any
material risks to its business and operations presented by the Year 2000
compliance status of its customers, suppliers or service providers. The Company
will continue to monitor its Year 2000 compliance status, and implement
contingency plans as necessary to address any residual Year 2000 risks.
TRENDS AND UNCERTAINTIES THAT MAY AFFECT FUTURE RESULTS
The Company continues to aggressively pursue sales, marketing, and
technology development efforts for optical thin films in the rapidly growing
telecommunications industry. The success of these products depends upon a number
of factors, including the Company's timely completion of development efforts,
ability to meet a set of rigorous customer specifications, and ability to
reliably manufacture such products in sufficient quantity at acceptable yields
to meet anticipated demand. The Company is currently supporting product
evaluation tests with several potential customers.
In December 1999, the Company announced that its 200-GHz filters for
use in Dense Wavelength Division Multiplexing (DWDM) applications by the
telecommunications industry had passed all qualification and test criteria of
a major customer. Production and shipments of 200-GHz filters to this
customer on a remaining order balance of approximately $1.6 million resumed
in late December 1999 and are expected to accelerate over the next several
months. The Company has also received several smaller orders for 200-GHz
filters from other customers. The level of future shipments will depend, to a
large extent, upon the ability to achieve satisfactory production rates and
yields during start-up phases and into mature production.
In January 2000, the Company announced the appointment of Dr. James D.
Rancourt as Senior Vice President, Optical Thin Film Technology. Dr. Rancourt
was affiliated with Optical Coating Labs, Inc. (OCLI) for many years, where his
management and technical responsibilities included optical thin film design,
development, manufacturing, process automation and project management. From 1995
through 1997 Dr. Rancourt was Chief Scientist at OCLI. For the past two years he
directed new thin film coated product development at Guardian Industries
Corporation, a large international manufacturer of
PAGE 9 OF 13
<PAGE>
commercial flat glass. Dr. Rancourt is a recognized expert in all facets of
optical thin film filter design, development and manufacturing, and the holder
of numerous optical thin film patents. His in-depth expertise in the
understanding, design and development of narrow bandpass filters is directly
applicable to Dense Wavelength Division Multiplexing (DWDM) optical filters used
by the fiber optics telecommunications industry.
During fiscal year 1999, the Company commenced deliveries of stereo
endoscopes and cameras to a customer who has developed a computer-enhanced
surgery system. Revenues from this customer were approximately 51% of total
revenues for the six months ended December 31, 1999. In October 1999, the
Company received an additional follow-on order of $184,000, with deliveries
scheduled from January 2000 to December 2000. The Company anticipates additional
follow-on orders from this customer, but the magnitude of such future business
depends upon a number of factors, such as the customer's own success in
marketing its computer-enhanced surgery system and the customer's continued
acceptance of the Company's pricing, performance and product reliability.
PAGE 10 OF 13
<PAGE>
PART II. OTHER INFORMATION
ITEMS 1-3 Not Applicable.
ITEM 4 Submission of Matters to a Vote of Security Holders
At the annual meeting of stockholders of the Company held
on November 9, 1999, 7,327,294 (or 95.3%) of the 7,687,595
then-outstanding shares of common stock of the Company were
present and voted by proxy. H. Angus Macleod and Robert R.
Shannon were reelected as Class II directors of the
Company, in the case of Dr. Macleod, by a vote of 7,224,246
shares for and 0 shares against with 103,048 shares
abstaining and, in the case of Mr. Shannon, by a vote of
7,230,446 shares for and 0 shares against with 96,848
shares abstaining. In addition, a proposal to increase the
authorized number of shares of common stock of the Company
from 10,000,000 to 20,000,000 was approved by a vote of
7,205,181 shares for and 96,313 shares against with 25,800
shares abstaining.
ITEM 5 Not Applicable.
ITEM 6 Exhibits and Reports on Form 8-K
(a) Exhibits - Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K - There were no reports on
Form 8-K filed during the period covered by this
report.
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.
PRECISION OPTICS CORPORATION, INC.
DATE: February 9, 2000 BY: /s/ Jack P. Dreimiller
- ------------------------ --------------------------------
Jack P. Dreimiller
Senior Vice President, Finance,
Chief Financial Officer and Clerk
PAGE 11 OF 13
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
<S> <C>
27 Financial Data Schedule
</TABLE>
PAGE 12 OF 13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> DEC-31-1999
<CASH> 1,503,866
<SECURITIES> 0
<RECEIVABLES> 208,875
<ALLOWANCES> 0
<INVENTORY> 961,400
<CURRENT-ASSETS> 2,753,815
<PP&E> 4,010,529
<DEPRECIATION> 2,689,944
<TOTAL-ASSETS> 4,353,771
<CURRENT-LIABILITIES> 834,002
<BONDS> 118,146
0
0
<COMMON> 80,645
<OTHER-SE> 3,320,978
<TOTAL-LIABILITY-AND-EQUITY> 4,353,771
<SALES> 1,304,288
<TOTAL-REVENUES> 1,304,288
<CGS> 777,423
<TOTAL-COSTS> 777,423
<OTHER-EXPENSES> 1,679,721
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,877
<INCOME-PRETAX> (1,150,885)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,150,885)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,150,885)
<EPS-BASIC> (.15)
<EPS-DILUTED> (.15)
</TABLE>
