SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended January 31, 2000; 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: 0-28010
MEDWAVE, INC.
(Exact name of registrant as specified in its charter)
Minnesota 41-1493458
(State or other jurisdiction of (IRS employer
incorporation or organization) identification number)
4382 Round Lake Road West
Arden Hills, Minnesota 55112
(Address of principal executive offices,
zip code)
(651) 639-1227
(Registrant's telephone number, including
area code)
Indicate by mark whether the issuer (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 as 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 [ ]
As of February 28, 2000, the issuer had 5,499,596 shares of Common Stock
outstanding.
<PAGE>
Medwave, Inc.
Form 10-Q
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - April 30, 2000 and January 31, 2000 2
Statements of Operations - Three Months Ended January 31, 2000 3
and 1999, Nine Months Ended January 31, 2000 and 1999, and Period
from June 27, 1984 (Inception) to January 31, 2000
Statements of Cash Flows - Three Months Ended January 31, 2000 4
and 1999, Nine Months Ended January 31, 2000 and 1999, and
Period from June 27, 1984 (Inception) to January 31, 2000
Notes to Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition 5
and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 2. Changes in Securities 9
Item 3. Defaults Upon Senior Securities 9
Item 4. Submission of Matters To A Vote of Security Holders 9
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 10
1
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Medwave, Inc.
(A Development Stage Company)
Balance Sheets
<TABLE>
<CAPTION>
April 30, January 31,
1999 2000
--------------------------------------
(see note 2) (unaudited)
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 1,175,756 $1,952,699
Short term investments 2,785,672 358,724
Accounts receivable 31,069 225,966
Inventories 137,938 151,852
Prepaid expenses 75,714 109,952
--------------------------------------
Total current assets 4,206,149 2,799,193
Investments 1,838,918 1,610,670
Property and equipment:
Research and development equipment 237,136 225,060
Office Equipment 111,745 115,757
Manufacturing and engineering equipment 65,259 129,021
Sales and marketing equipment 59,927 51,536
Leasehold improvements 31,613 31,613
--------------------------------------
505,680 552,987
Accumulated depreciation (435,274) (453,629)
--------------------------------------
70,406 99,358
Patents, net 28,018 12,663
======================================
Total Assets $ 6,143,491 $4,521,884
======================================
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 176,496 $ 242,185
Accrued payroll 64,040 58,055
--------------------------------------
Total current liabilities 240,536 300,240
Shareholders' equity:
Common Stock, no par value:
Authorized shares--50,000,000
Issued and outstanding shares -- 5,436,596 at 16,294,620 16,436,870
April 30, 1999 and 5,499,596 at Jan 31, 2000
Unrealized gain/(loss) on investments (17,842) (21,990)
Deficit accumulated during the development stage (10,373,822) (12,193,236)
--------------------------------------
Total shareholders' equity 5,902,956 4,221,644
--------------------------------------
Total liabilities and shareholders' equity $ 6,143,492 $4,521,884
======================================
The accompanying notes are an integral part of these financial statements.
</TABLE>
2
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Medwave, Inc.
(A Development Stage Company)
Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Period from
June 27, 1984
Three months ended January 31 Nine months ended January 31 (Inception)
----------------------------- ---------------------------- to
2000 1999 2000 1999 January 31, 2000
------------------------- -------------------------- ----------------
<S> <C> <C> <C> <C> <C>
Revenue:
Net Sales $250,824 $94,999 $371,023 $457,455 $1,546,507
Operating expenses:
Cost of sales and product development 278,678 92,148 444,838 396,415 1,615,749
Research and development 265,320 302,099 854,380 902,263 7,705,331
Sales and marketing 239,854 229,571 527,735 658,931 3,740,095
General and administrative 161,930 128,145 542,523 355,187 3,137,735
------------------------- -------------------------- ----------------
Operating loss (694,958) (656,964) (1,998,453) (1,855,341) (14,652,403)
Other income:
Interest income 75,994 104,079 179,039 292,335 1,585,923
Other income --- --- --- --- 1,500,000
========================= ========================== ================
Net Loss ($618,964) ($552,885) ($1,819,414) ($1,563,006) (11,566,480)
========================= ========================== ================
Net loss per share - basic and diluted $ (0.11) $ (0.10) $ (0.33) $ (0.29) $ (4.22)
========================= ========================== ================
Weighted average number of common and
common equivalent shares outstanding 5,499,596 5,400,350 5,468,127 5,390,572 2,738,122
========================= ========================== ================
The accompanying notes are an integral part of these financial statements.
</TABLE>
3
<PAGE>
Medwave, Inc.
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Period from
June 27, 1984
Three months ended Jan 31 Nine months ended Jan 31 (Inception)
------------------------------------------------------------ to
2000 1999 2000 1999 January 31, 2000
------------------------------------------------------------ ------------------
<S> <C> <C> <C> <C> <C>
Operating activities
Net loss $ (618,964) $ (552,885) $(1,819,414) $(1,563,006) $ (11,566,480)
Adjustments to reconcile net loss to
net cash provided (used) in operating activities:
Depreciation 18,398 15,089 41,465 50,621 662,200
Amortization 2,655 6,350 15,355 19,050 123,353
Loss on sale of equipment --- --- --- --- 7,375
Issuance of Common Stock for consulting services --- --- --- --- 3,413
Changes in operating assets and liabilities:
Accounts receivable (179,993) 93,274 (194,897) (23,487) (225,966)
Inventories 53,082 35,959 (13,914) 41,188 (151,852)
Prepaid expenses (93,211) (73,931) (34,238) (31,168) (109,952)
Accounts payable and accrued expenses 114,711 38,614 65,689 17,591 242,185
Accrued payroll and related taxes 3,925 (12,869) (5,984) 9,807 58,055
Deferred income --- --- --- 1,500,000 ---
------------------------------------------------------------ --------------
Net cash used in operating activities (699,397) (450,399) (1,945,938) 20,596 (10,957,669)
Investing activities
Patent expenditures --- --- --- --- (136,017)
Purchase of investments (422,493) (873,954) (1,291,457) (3,106,751) (38,385,546)
Sales and maturity of investments 1,632,511 1,763,874 3,945,272 2,645,797 36,398,775
Purchase of property and equipment (5,567) 3,576 (73,214) (6,882) (792,589)
Proceeds from sale of equipment --- --- --- 3,463 21,663
------------------------------------------------------------ --------------
Net cash provided (used) in investing activities 1,204,451 893,496 2,580,601 (464,373) (2,893,714)
Financing activities
Net proceeds from issuance of Convertible
Preferred Stock --- --- --- --- 4,848,258
Net proceeds from issuance of Common Stock --- 26,250 142,250 37,750 10,955,794
------------------------------------------------------------ --------------
Net cash provided by financing activities --- 26,250 142,250 37,750 15,804,052
------------------------------------------------------------ --------------
(Decrease) increase in cash and cash equivalents 505,054 469,347 776,913 (406,027) 1,952,669
Cash and cash equivalents at beginning of period 1,447,615 1,051,323 1,175,756 1,926,697 ---
============================================================ ==============
Cash and cash equivalents at end of period $1,952,669 $1,520,670 $1,952,669 $1,520,670 $ 1,952,669
============================================================ ==============
The accompanying notes are an integral part of these financial statements.
4
</TABLE>
<PAGE>
Medwave, Inc.
(A Development Stage Company)
Notes To Financial Statements
January 31, 2000
1. Organization and Description of Business
Medwave, Inc. (the Company) is a development stage enterprise engaged
exclusively in the development, manufacturing and marketing of a
proprietary, non-invasive system that continually monitors arterial blood
pressure of adults and in the development of related technology and
products.
2. Basis of Presentation
The financial information presented as of January 31, 2000 has been
prepared from the books and records without audit. Financial information
as of April 30, 1999 is based on audited financial statements of the
Company but does not include all disclosures required by generally
accepted accounting principles. In the opinion of management, all
adjustments, consisting only of normal recurring adjustments necessary for
a fair presentation of the financial information for the periods
indicated, have been included. For further information regarding the
Company's accounting policies, refer to the financial statements and
related notes included in the Company's Annual Report on Form 10-K for the
fiscal year ended April 30, 1999.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
The following discussion should be read in conjunction with, and is qualified
by, the Company's financial statements set forth in Item 1 of this Form 10-Q.
General
The Company, which was formed in 1984, is a development stage company that
currently employs eighteen full-time employees and one part-time employee. Since
its inception, the Company has been engaged exclusively in the development of a
non-invasive, blood pressure measurement and monitoring system. Utilizing
proprietary technology, the Company's Vasotrac(R) system monitors blood
pressure, providing new readings approximately every fifteen heartbeats. The
Company believes that continual blood pressure readings and non-invasive
features of the Vasotrac system make it the most advanced approach to blood
pressure monitoring. In 1997, the Company began development of a hand-held blood
pressure measurement device. This hand-held unit is based on the technology used
in the Vasotrac system.
The Company has incurred an accumulated deficit of $(12,193,236) from its
inception through January 31, 2000. Additional losses from development, testing,
regulatory compliance, sales, and other expenses are expected to be incurred by
the Company at least until it emerges from the development stage.
The Company's success is dependent upon the successful implementation of its
strategic and operating plans. However, there can be no assurance that the
Vasotrac(R) system or other related products in development can be successfully
marketed or sold in sufficient quantities and at margins necessary to achieve or
maintain profitability.
5
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In January of 2000, the Company entered into a US based nationwide distribution
agreement with Critical Care Concepts, a hospital based medical device and
supplies sales and marketing Company. Critical Care Concepts (3Ci) has
approximately 100 sales people in most major geographic regions of the United
States. Medwave's Vasotrac APM205A becomes one of only a few products
represented by 3Ci having a "premier status" associated with it, which means
3Ci's sales people are compensated higher for the sale of a Vasotrac than they
are for other products. In addition, as this is a mutually exclusive agreement,
3Ci will not represent any other non-invasive blood pressure product, and
Medwave will only use 3Ci for distribution of its Vasotrac product to the US
hospital based market. In addition, Medwave completed the restructuring of its
own sales organization by forming three regional business units. Three managers
with a history of success in the medical device industry have been hired for
these positions, in an attempt to drive a sales channel model focused on
hospitals, doctor's offices, non-traditional health care settings, and
eventually the homecare segment. The Company also secured an agreement with
E-Wha International, a medical device distribution company in Seoul, South
Korea. This agreement also focuses in the hospital based segment. Medwave
expects sales to commence in the South Korean market as soon as local regulatory
approvals are received, which are expected to take approximately 6 months, from
the end of the Company's third quarter, to complete. In the future, the Company
expects to enter into similar agreements in a variety of European and Pacific
countries.
As a part of its strategic plan, the Company has defined three distinct phases
it will enter to address these various segments. Presently the Company is
focused in phase one, the hospital based segment. The Company expects to enter
phase two of its plan later this year by entering the physician market and the
outside-the-hospital market. Phase three is the homecare and consumer market.
Considered a critical success factor, the Company has started and expects to
release the first in a series of extensive training aids for users of its
products. The Company will release a clinical reference guide later in the year,
designed to educate the healthcare provider about blood pressure issues,
including optimal ways to monitor using the Vasotrac System. Later this year,
plans are in place to further develop the Company's web site to include
educational material and other reference material.
A comprehensive training program was completed with the entire 3Ci sales
organization during January and February. As noted in the past, proper placement
of a medical sensor is critical to proper performance. This was stressed during
the sales training. Most sales people appear to have been able to successfully
handle the issue of proper placement without great difficulty.
The Company is working on a revised handheld blood pressure measurement product.
The specified performance of this product will allow it to store patient data
over the duration of a traditional nursing shift for numerous patients. It will
then allow the care giver to download the data which has been collected into a
PC based system already in use at a central location. The Company will be
required to re-submit a 510K application for pre-market approval for this
revised product to the US Food and Drug Administration prior to market release.
There can be no assurance that approval will be received or when it will be
received. The Company hopes to launch this product to the hospital based market
segment later this year. After release to the hospital market, and in
conjunction and as a part of entry into the professional market, the Company
will enter the outside-the-hospital market (excluding homecare) with the
handheld product. In order to facilitate the above activity and strict product
release timelines with the handheld product, the Company has retained the
services of an industrial design firm specializing in medical and handheld
devices and instruments.
As a part of the design criteria of the handheld project, the product must be
compatible with standard communication means. Therefore, successful entry into
phase three, the consumer/homecare market, is dependent on a successful final
design. The intent is to allow homecare based patients to take their own blood
pressure using the Medwave handheld product. Once they take their blood
pressure, they will cradle the unit, and download data directly to a physicians
6
<PAGE>
web site, or database, for professional analysis. Therefore, the handheld
product must be able to communicate via the internet, from virtually any
location. The Company does not expect to enter this phase until at least the
middle of calendar year 2001.
Several other product development projects have been initiated using the core
technology of the Vasotrac System to drive product expansion. Some of these
solutions will include: sensor options, mobile blood pressure capability, and
enhanced signal processing capabilities specific to blood pressure monitoring.
For the Company to emerge from the development stage, its success will also
depend on its ability to hire additional employees for key operating positions.
Competition for such employees is intense and there can be no assurance that the
Company will be successful in hiring such employees on acceptable terms or when
required, or in maintaining the services of its present employees. The Company
preliminarily estimates that these employees will increase employee-related
expenses in excess of $500,000 during the next twelve months. However, such
requirements are subject to change and are highly dependent on the development
process for the products, including the manufacturing scale-up process, market
acceptance, and the Company's distribution methods.
Cash and cash equivalents, and short and long-term investments are being used
primarily to finance continued clinical testing of the Vasotrac system, for
manufacturing and marketing, to conduct additional research and product
development efforts that may be necessary, and to provide working capital. Over
the next twelve months, the Company expects to spend in excess of $1,300,000 for
research and development. Specifically, the funds are expected to be used to
develop the handheld product, to sustain engineering support for manufacturing,
and for continued development of the Vasotrac System. No significant amount of
equipment is expected to be required. Even assuming limited sales, the Company
believes that its cash, cash equivalents, and short and long-term investments
will allow the Company to meet its cash requirements for approximately one year
from January 31, 2000. If the development process for the system does not
proceed as expected because significant product design changes are required to
achieve market acceptance or unexpected difficulties are encountered in
attaining cost-effective manufacturability, the Company may require additional
capital at an earlier date. Such capital may be sought through bank borrowing,
equipment financing, equity financing, and other methods. The Company's
financing needs are subject to change depending on, among other things, market
conditions and opportunities, equipment or other asset-based financing that may
be available, and cash flow from operations. Any material favorable or
unfavorable deviation from its anticipated expenses could significantly affect
the timing and amount of additional financing that may be required. However,
additional financing may not be available when needed or, if available, may not
be on terms that are favorable to the Company or its security holders. In
addition, any such financing could result in substantial dilution to then
existing security holders.
Results of Operations
The results of operations compares the three months and nine months ended
January 31, 2000 and 1999, respectively. The analysis of liquidity and capital
resources compares January 31, 2000 to April 30, 1999.
Operating revenue was $250,800 and $95,000 for the quarter ended January 31,
2000 and 1999, respectively. Operating revenue was $371,000 and $457,500 for the
nine months ended January 31, 2000 and 1999, respectively. The operating revenue
increase for the quarter was due to an increase in per unit revenue as the
Company switched from an employee sales force to a dealer network. The dealer
sales have been primarily dealer demonstration units to be used by the dealer's
employees in the sales process. The operating revenue decrease for the nine
months was primarily due to the Company's decreased sales effort in the first
and second quarters as the Company focused on the development of the enhanced
Vasotrac system which was released in October 1999.
7
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Cost of sales and product development was $278,700 and $92,100 for the quarter
ended January 31, 2000 and 1999, respectively. Cost of sales and product
development was $444,800 and $396,400 for the nine months ended January 31, 2000
and 1999, respectively. The cost of sales and product development increase for
the quarter was attributable to an increase in the number of units sold. The
costs of sales and product development increase for the nine months was also
attributed to the increase in total number of units sold during the third
quarter and the costs of starting the manufacturing of the enhanced version of
the Vasotrac. Costs associated with the Company's development of the handheld
product and enhanced Vasotrac system are reflected in the Company's research and
development expense.
The Company incurred $265,300 and $302,100 for research and development expenses
for the quarter ended January 31, 2000 and 1999, respectively. The Company
incurred $854,400 and $902,300 for research and development expenses for the
nine months ended January 31, 2000 and 1999, respectively. The research and
development expense decrease was primarily attributed to the completion of a
multi-center study for the Vasotrac system in January 1999.
The Company incurred $239,900 and $229,600 for sales and marketing expenses for
the quarter ended January 31, 2000 and 1999, respectively. The Company incurred
$527,800 and $658,900 for sales and marketing expenses for the nine months ended
January 31, 2000 and 1999, respectively. The sales and marketing expense
increase for the quarter was primarily attributed to the hiring of additional
sales and marketing personal as discussed previously. The sales and marketing
expense decrease for the nine months was attributable to the decrease in the
number of sales representatives employed by the Company during the first six
months of the year, as the Company focused on the development of the enhanced
Vasotrac.
The Company incurred $161,900 and $128,100 for general and administrative
expenses for the quarter ended January 31, 2000 and 1999, respectively. The
Company incurred $542,500 and $355,200 for the nine months ended January 31,
2000 and 1999, respectively. The general and administrative expense increase was
attributable to the hiring of a new president and a general increase in
expenses.
Interest income was $76,000 and $104,100 for the quarter ended January 31, 2000
and January 31, 1999, respectively. Interest income was $179,000 and $292,300
for the nine months ended January 31, 2000 and 1999, respectively. The decrease
reflects lower cash, cash equivalents, and short and long-term investments as
the result of the Company use of its investments to fund operations.
Liquidity and Capital Resources
The Company's cash, cash equivalents, and short- and long-term investments were
$3,922,100 and $5,773,300 at January 31, 2000 and April 30, 1999, respectively.
With the cash and cash equivalents, and short- and long-term investments, the
Company believes that sufficient liquidity is available to satisfy its working
capital needs for approximately one year from January 31, 2000.
The Company has no significant capital expenditure commitments.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
8
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES
Not applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
a) On January 13, 2000, the Company held its annual meeting of
shareholders. The Company's shareholders elected the following five
persons as directors, each to serve until the next annual meeting of
shareholders or until their successor is elected and qualified:
Election of Directors Votes For Votes Withheld
- -------------------------------------------------------------------------------
G. Kent Archibald 4,600,293 48,050
William Corneliuson 4,600,443 47,900
Norman Dann 4,600,443 47,900
Keith Libbey 4,600,443 47,900
Timothy O'Malley 4,600,443 47,900
b) A proposal to set the number of directors at five was adopted by a
vote of 4,606,693 shares in favor, with 36,400 shares against, 5,250
shares abstaining and no broker non-votes.
ITEM 5. OTHER INFORMATION
Statements made in this report that are stated as expectations, plans,
anticipations, prospects or future estimates or which otherwise look forward in
time are considered "forward-looking statements" and involve a variety of risks
and uncertainties, known and unknown, which are likely to affect the actual
results. The following factors, among others, as well as factors discussed in
the Company's other filings with the SEC, have affected, and in the future,
could affect the Company's actual results: resistance to the acceptance of new
medical products, the market acceptance of the Vasotrac system or other products
of the Company, hospital budgeting cycles, the possibility of adverse or
negative commentary from clinical researchers or other users of the Company's
products, the Company's success in creating effective distribution channels for
its products, the Company's ability to scale up its manufacturing process, and
delays in product development or enhancement or regulatory approval.
Consequently, no forward-looking statement can be guaranteed and actual results
may vary materially.
9
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS:
See Exhibit Index on Page Following Signatures
(B) REPORTS ON FORM 8K:
A report on Form 8-K was filed by the Company on
November 5, 1999, reporting under Item 5 the dates by
which shareholder proposals to be acted upon at the 1999
annual meeting of shareholders were required to be
received by the Company.
SIGNATURES
In accordance with 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.
Date: March 15, 2000 Medwave, Inc.
/s/ Timothy O'Malley
By: Timothy O'Malley
President and Chief Executive Officer
/s/ Mark T. Bakko
Mark T. Bakko
Chief Financial Officer
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EXHIBIT INDEX
MEDWAVE, INC.
FORM 10-Q
FOR QUARTER ENDED
JANUARY 31, 2000
Exhibit No. Description
- ----------- -----------
10.1 Critical Care Concepts Distributor Agreement
27 Financial Data Schedule (filed in electronic format only)
DISTRIBUTOR AGREEMENT
This Distributor Agreement (the "Agreement") is entered into to be
effective as of January 1, 2000 by and between Medwave, Inc. (the "Company") and
Critical Care Concepts, Inc. ("Distributor").
RECITALS:
The Company engages in the business of manufacturing, marketing and
selling devices used in monitoring blood pressure. Distributor desires to be
appointed, and the Company has agreed to appoint Distributor, as an exclusive
distributor of the Company's products within a defined geographical territory,
pursuant to the terms and conditions of this Agreement.
AGREEMENT:
In consideration of the mutual covenants contained herein and other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Designation as Distributor.
a. Appointment. Subject to the terms and conditions of this
Agreement, the Company hereby grants Distributor the right to purchase
the products listed on Exhibit A attached hereto (the "Product" or
"Products") for resale to the market segment defined in Exhibit B
attached hereto ("Market Segment") located within the geographical
territory described in Exhibit B attached hereto (the "Territory").
Distributor is not authorized to solicit sales of or sell the Products
to customers who are not part of the Market Segment or who are located
outside the Territory.
b. Modification and Discontinuance of Products. The Company
reserves the right to discontinue any Product or Product line, or to
modify any Product, without incurring any liability to Distributor
except that Distributor's rights herein shall continue to apply to any
Product as modified.
c. Exclusivity. The Company agrees not to grant any other
party or to itself sell the Products in the Market Segment in that
portion of the Territory which is described as the "exclusive"
Territory in Exhibit B, except as otherwise provided in Sections 1.d
and 1.e below.
d. National Accounts. The Company reserves the right to
designate certain buying groups, such as Columbia, Premier, Novation,
Tenent, or Amerinet, which provide for a discounted selling price of
the Product, as national accounts ("National Accounts"). The Company
shall provide Distributor with written notice of its designation of any
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company as a National Account. If the Company secures a National
Account, the Company and Distributor will split equally the amount by
which the discounted selling price for the Product(s) sold to such
National Accounts is less than the prices for the Products determined
in accordance with Section 3.a of this Agreement; provided, however,
that in no event shall Distributor receive less than a margin of twenty
percent (20%) in connection with sales of Products to National
Accounts.
e. Rental Agents. The Company reserves the right to set up
rental agents who would solicit the rental of the Products in the
Territory. The Company agrees to offer Distributor the opportunity to
act as a rental agent should the Company decide, in its sole
discretion, to enter the rental market. If the Company sells Product(s)
directly to any entity acting as a rental agent in the Territory (other
than the Distributor), the Company shall pay to Distributor a
commission equal to twenty percent (20%) of the sales price to such
rental agent.
2. Purchase of Products.
a. Placement of Orders. Distributor shall order the Products
by delivering a written purchase order to the Company. All orders are
subject to acceptance or rejection by the Company, at its sole
discretion. Orders shall be binding upon the Company only upon its
written acceptance of the purchase order or upon shipment of the
products, whichever occurs first.
b. Terms and Conditions. This Agreement, together with the
Company's standard terms and conditions of sale, as amended from time
to time, which are not inconsistent with the terms of this Agreement,
sets forth the exclusive contract terms between the parties and shall
apply to all orders for the Products. The Company rejects any terms in
any order forms submitted by Distributor or other Distributor documents
which are different from or additional to the provisions hereof and no
such terms shall be binding upon the Company notwithstanding the
Company's acceptance and shipment of Products specified in
Distributor's orders containing such terms.
c. Warranties. The Company represents and warrants the
Products to the end user of the Product in accordance with the
Company's written limited warranty set forth in the Company's standard
terms and conditions of sale and the Product literature, as may be
amended from time to time by the Company ("Limited Warranty"). EXCEPT
AS EXPRESSLY PROVIDED IN THE LIMITED WARRANTY, THE COMPANY MAKES NO
REPRESENTATION OR WARRANTY TO DISTRIBUTOR OF ANY KIND, EXPRESS OR
IMPLIED, WITH RESPECT TO THE PRODUCT, WHETHER AS TO MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE, WARRANTIES ARISING FROM COURSE OF
DEALING OR USAGE OR TRADE OR ANY OTHER MATTER. NO EMPLOYEE,
REPRESENTATIVE OR AGENT OF THE COMPANY HAS ANY AUTHORITY TO BIND THE
COMPANY TO ANY AFFIRMATION, REPRESENTATION OR WARRANTY EXCEPT AS STATED
IN THE COMPANY'S WRITTEN WARRANTY POLICY.
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3. Prices and Payment.
a. Prices. The prices for the Products payable by Distributor
to the Company shall be the Company's suggested retail list prices
which are in effect at the time Distributor submits its order to the
Company less the percentage discount set forth on Exhibit C attached
hereto. The Company's suggested retail list prices are subject to
change at any time in the Company's sole discretion; provided, however,
such prices shall not be used to determine Distributor's prices for the
Products until at least ten (10) days after delivery of such revised
suggested retail price list to Distributor by the Company.
b. Taxes; Shipping Costs. All prices are F.O.B. the Company's
Minnesota facility or the Company's manufacturer's facility.
Distributor shall pay or reimburse the Company for any and all taxes,
fees, duties or other governmental charges and for any and all delivery
and shipping insurance costs.
c. Payment. Distributor shall make all payments in U.S.
dollars at the Company's Minnesota facility by the thirtieth (30th) day
after the date of the Company's invoice. If the Company does not
receive payment within such thirty (30) day time period, the Company
reserves the right to make all future deliveries of the Product on a
COD basis, until all such past due amounts are paid in full. In
addition, non-payment is grounds for termination of this Agreement as
provided in Section 13.a.
herein.
d. Late Payment Fee/Collection Costs. Any amounts not paid by
Distributor when due will be subject to a late payment fee computed
daily at a rate equal one and one half percent (1.5%) per month or at
the highest rate permitted under applicable usury law, whichever is
lower. In addition, Distributor shall be liable to the Company for all
costs and expenses incurred by the Company for collection of any such
amounts not paid when due, including, without limitation collection
agency fees and reasonable attorneys' fees and expenses, regardless
whether suit or legal action is commenced.
4. The Company's Duties.
a. Promotional Materials. The Company shall furnish to
Distributor at no cost reasonable quantities of currently available
Product sales literature and materials for Distributor's use in
soliciting sales of the Products.
b. Product Information Seminars. The Company may provide, from
time to time, at the Company's office, seminars for Distributor and
Distributor's employees or agents regarding the Products. Appropriate
sales personnel of Distributor shall attend such seminars. The cost of
conducting such seminars shall be paid for by the Company and all other
costs associated therewith, including travel, food and lodging
expenses, shall be paid by Distributor.
c. Initial Product Information Seminars. As soon as reasonably
practical after execution hereof, the Company agrees to hold an initial
Product information seminar for Distributor's sales personnel at a time
3
<PAGE>
and a location mutually agreed upon between the parties. The Company
agrees to create appropriate education material for dissemination at
such seminar. The cost of conducting such seminar shall be paid for by
the Company, including, without limitation, any travel, food and
lodging for the Company's personnel. The cost associated with
attendance by Distributor's sales personnel shall be paid by
Distributor, including, without limitation, any travel, food and
lodging expenses of Distributor's sales personnel.
d. Upgrading Demonstration Products. If the Company
significantly improves the Products, it agrees to upgrade the
demonstration Products in Distributor's possession or replace such
demonstration units with a new revised demonstration Product, at no
cost to Distributor.
5. Distributor's Duties. Distributor agrees to perform the following
duties at Distributor's own expense.
a. Promotion. Distributor shall use Distributor's best efforts
to promote the acceptance and sale of, and to solicit inquiries and
orders for, the Products in the Territory. Distributor shall direct to
the Company all orders and inquires it receives concerning the Products
from parties outside of the Territory or from parties who are not part
of the Market Segment. Distributor agrees not to promote, sell or
deliver any of the Products outside of the Territory or to any party
not part of the Market Segment. Distributor agrees to classify the
Products as part of the "exclusive" products marketed and sold by
Distributor, and, as such, shall provide its sales personnel with
additional incentives to market and sell the Products as compared to
Distributor's "non-exclusive" products.
b. Noncompetition. During the term of this Agreement,
Distributor agrees to not, directly or indirectly, represent, solicit,
sell, rent or purchase any product (including any non-invasive blood
pressure devices) that competes with the Products in the Territory.
c. Training. Distributor shall provide the customers in the
Territory with the training necessary for the customer to utilize the
Product in accordance with the Company's written training protocol, as
amended from time to time. Distributor shall provide such training to
National Accounts at the Company's written request, provided, that the
parties agree on a percentage commission payable to Distributor for
such services, as provided in Exhibit C attached hereto.
d. Customer Complaints. Distributor agrees to immediately
report to the Company any customer complaints and, at the Company's
request, investigate and report on any customer complaints concerning
Products sold or delivered within the Territory. In addition, the
Distributor agrees to support the complaint process developed and
utilized by the Company.
e. Written Reports. Distributor shall supply to the Company on
a monthly basis a written report of Distributor's projected sales of
4
<PAGE>
Products for the following ninety (90) day period. Such report shall
also contain a list of the names of each customer that purchased the
Product during the prior calendar month and the date of purchase.
f. Representations and Warranties. Neither Distributor nor
Distributor's employees or agents shall make any representation or
warranty with respect to the Products except those specifically set
forth in written materials and product literature provided by the
Company.
g. Recall. In the event of a recall of any of the Products,
Distributor will cooperate fully with the Company effecting such a
recall, including without limitation, promptly contacting any customers
which the Company desires be contacted during the course of any such
recall and promptly communicating to such customers such information or
instructions as the Company may desire be transmitted to such
customers.
h. Laws and Regulations. Distributor shall conform to all
applicable laws and regulations and to the highest business ethics in
performing Distributor's obligations in accordance with the terms of
this Agreement.
i. Trade Shows. Distributor shall attend state and regional
trade shows in the Territory relating to the Products and shall assist
the Company, at the Company's request, in staffing a booth sponsored by
the Company at any national trade show.
6. Quota.
a. Initial Quota. Distributor shall resell that number of the
Products in the Territory during the initial eighteen (18) month period
during the Initial Term of this Agreement as set forth on Exhibit E
attached hereto ("Quota").
b. Consequences of Failure to Meet Quota. If Distributor fails
to meet at least eighty percent (80%) of the Quota during any Quota
period, the Company shall have the right to terminate this Agreement as
follows: (a) the Distributor shall have sixty (60) days following the
end of such Quota period to cure the shortfall in sales (which shall be
calculated as sales in excess of the monthly allocation of the current
Quota for such sixty (60) day period); and (b) if the shortfall is not
cured, the Company can terminate this Agreement by giving sixty (60)
days prior written notice to Distributor. The Company may not terminate
this Agreement if Distributor's failure to meet Quota was due to the
Company's inability to fill orders for Products submitted by
Distributor.
c. Future Quota. The parties agree to negotiate in good faith
to establish Quota for the second eighteen (18) month period during the
Initial Term of this Agreement, and for the Renewal Term, if any. If
the parties are unable to agree on such Quota within thirty (30) days
after the end of the last established Quota period, the Quota shall not
exceed one hundred twenty five percent (125%) of the prior Quota period
or of the actual sales performance of Distributor during the prior
Quota period, whichever is greater.
5
<PAGE>
7. Trademarks, Patents and Use of Name. Distributor acknowledges that
the Company is not by this Agreement granting any right or license whatsoever,
by implication, estoppel or otherwise, to Distributor to utilize any
information, know-how, proprietary data, trademarks or patent rights which the
Company may have or may secure in the future relating to any of the Products.
Distributor agrees not to use the Company's name, any other similar name or any
other trademark of the Company except to indicate that Distributor is an
authorized sales Distributor of the Company in advertising, pamphlets,
letterhead or other media approved in writing by the Company prior to its use or
dissemination.
8. Confidential Information.
a. Definition. "Confidential Information" with respect to a
party means any information or compilation of information which is
proprietary to such party and which relates to its existing or
reasonably foreseeable business, including, but not limited to, trade
secrets and information contained in or relating to product designs,
manufacturing methods, processes, techniques, tooling, sales
techniques, marketing plans or proposals, pricing and sales
information, financial information, existing or potential customer
lists and all other customer information. Information shall be treated
as Confidential Information irrespective of its source and all
information which such party identifies as being "confidential" or
"trade secret" shall be presumed to be Confidential Information.
b. Nondisclosure. During the term of this Agreement and at all
times thereafter, each party agrees to hold in strictest confidence and
to never disclose, furnish, communicate, make accessible to any person
or use in any way for its own or another's benefit any Confidential
Information relating to the other party or permit the same to be used
in competition with such other party. Each party agrees to refrain from
such acts and omissions which would reduce the value of the
Confidential Information to such other party.
9. Assignment of Inventions. Distributor agrees to and does hereby
assign to the Company any inventions created or conceptualized by Distributor or
any of its employees during the term of this Agreement relating to non-invasive
blood pressure monitoring. Distributor agrees, at the Company's expense, to give
the Company all reasonable assistance it reasonably requires to perfect, protect
or use its right to such inventions.
10. Independent Contractor.
a. Relationship. Distributor is and shall remain an
independent contractor and is not and shall not be deemed to be an
employee, joint venturer, partner or franchisee of the Company for any
purpose whatsoever. Accordingly, Distributor shall be exclusively
responsible for the manner in which Distributor performs Distributor's
duties under this Agreement and for the profitability or lack thereof
of Distributor's activities under this Agreement. All financial
obligations associated with Distributor's business are the sole
responsibility of Distributor. Distributor does not have, and shall not
represent itself as having, any right or authority to obligate or bind
the Company in any manner whatsoever.
6
<PAGE>
b. Employee Obligations. Distributor shall be solely
responsible to Distributor's own employees for any compensation due
them and for compliance with all applicable laws with respect to
workmen's compensation, withholding taxes, unemployment compensation,
social security payments, and any other charges against compensation
imposed by any governmental authority as to Distributor's own
employees. Distributor agrees to provide proof of workmen's
compensation coverage for Distributor's employees upon the request of
the Company.
11. Indemnification.
a. By Distributor. Distributor shall indemnify and hold the
Company harmless from any and all loss, damage, liability, cost or
expense (including reasonable attorneys' fees and expenses) which the
Company may suffer or incur as a result of any third party claim of any
kind whatsoever alleging personal injury, damage, economic loss or
other damage caused by or arising out of: (i) any act or omission by
Distributor or any of Distributor's employees or agents which violates
this Agreement; (ii) any representation or warranty given by
Distributor, or Distributor's employees or agents regarding the
Products which is different from or in addition to the representations
and warranties regarding the Products contained in the Company's
written marketing and promotional materials; (iii) the demonstration,
installation, servicing or repair of the Products carried out by
Distributor or Distributor's employees or agents, contrary to the
instructions of or without the authorization of the Company; (iv) any
Product defect proximately caused by or resulting from the willful act
or negligence of Distributor, Distributor's agents or employees; or (v)
the employment or engagement by Distributor of any person or entity.
b. By the Company. The Company shall indemnify and hold the
Distributor harmless from any and all loss, damage, liability, cost or
expense (including reasonable attorneys' fees and expenses) which
Distributor may suffer or incur as a result of any third party claim of
any kind whatsoever alleging personal injury, damage, economic loss or
other damage caused by or arising out of (i) any act or omission by
Distributor or any of Distributor's employees or agents which violates
this Agreement; (ii) the defective manufacture of the Products or the
negligent design of the Products, (iii) the breach of the written
warranty, if any, provided by the Company to end users regarding the
Products, or (iv) the employment or engagement by the Company of any
other person or entity.
c. Right to Defend Third Party Claims. The indemnified party
shall notify the indemnifying party of any third party claim made
against it within ten (10) days of knowledge of the same if the
indemnified party intends to seek indemnity with respect to such claim
under this Section. The indemnifying party shall have the right to
undertake, conduct and control, through counsel of its own choosing,
the defense and settlement of any such claim. The indemnified party
shall have the right to be represented by counsel of its own choosing,
but at its own expense. So long as the indemnifying party is contesting
any such claim in good faith, the indemnified party shall not pay or
settle such claim.
7
<PAGE>
12. Term. This Agreement shall commence as of the effective date set
forth on the first page of this Agreement and shall remain in effect for a
period of three (3) years (the "Initial Term"), unless terminated earlier
pursuant to the terms of Section 13. This Agreement shall automatically renew
for one additional one (1) year term (the "Renewal Term") if Distributor meets
its sales Quota for the entire Initial Term. Otherwise, this Agreement may only
be renewed after the expiration of the Initial Term or the Renewal Term by the
mutual written agreement of both parties hereto.
13. Termination.
a. Nine Month Review. At the end of the first nine (9) months
after the effective date of this Agreement, the parties agree to meet
to discuss any issues either party may have relating to this Agreement
(the "Nine Month Review"). Each party agrees to raise with the other
party any issues it has with the other party at the Nine Month Review
and to discuss the issues raised by the other party during the Nine
Month Review. After the nine Month Review, but no later than ten (10)
months after the effective date of this Agreement, the Company shall
have the right to terminate this Agreement effective immediately upon
delivery of written notice to Distributor if the Distributor has failed
to resell three hundred forty (340) units of Products during the nine
(9) month period; and Distributor shall have the right to terminate
this Agreement effective immediately upon delivery of written notice to
the Company if the Company has failed to resolve issues raised by
Distributor relating to material non-performance of the Products or the
Company was unable to produce sufficient quantities of the Product in
the nine (9) month period in order to keep up with customer demand in
the Territory.
b. Breach of Agreement. Either party may terminate this
Agreement by delivery of written notice to the other party if the other
party breaches any of the terms and conditions of this Agreement;
provided, however, such notice shall not be effective unless and until
such breach remains uncured for a period of thirty (30) days after
delivery of such notice; provided, however, if such breach is
non-payment by Distributor, the cure period shall be fifteen (15)
business days rather than thirty (30) days. Failure to meet the Quota
for the Territory, as defined in Exhibit E, shall allow the Company to
terminate this Agreement in accordance with the provisions of Section
6.
c. Insolvency. Either party may terminate this Agreement
effective immediately upon delivery of written notice to the other
party, if the other party (i) ceases to actively conduct Distributor's
business, (ii) files a voluntary petition for bankruptcy or has filed
against Distributor an involuntary petition for bankruptcy not
dismissed within sixty (60) days in case of involuntary filing, (iii)
becomes unable to pay Distributor's debts as they become due, (iv)
makes a general assignment for the benefit of its creditors or (v)
applies for the appointment of a receiver or trustee for substantially
all of it's property or assets or permits the appointment of any such
receiver or trustee who is not discharged within sixty (60) days of
such appointment.
8
<PAGE>
d. Sale to Competitor. The Company may terminate this
Agreement effective immediately upon delivery of written notice to
Distributor if a direct competitor of the Company acquires ownership or
control of the Distributor by any means, including, without limitation,
by way of merger, reorganization, stock sale, stock redemption or sale
of all or substantially all of the assets of Distributor, without the
Company's prior written consent.
14. Effect of Termination.
a. Return of Supplies and Confidential Information. Upon
expiration or termination of this Agreement, Distributor shall
immediately cease soliciting orders for the Products and using the
Company's trademark(s), and shall, within ten (10) days after request
by the Company, return to the Company any supplies provided at no
charge and copies of Product literature and materials and all documents
or copies thereof containing any Confidential Information of the
Company. Distributor shall be entitled to retain copies of Product
literature necessary to resell any existing Products in Distributor's
inventory subject to the provisions of subsection c below.
b. Payment Obligations. Distributor shall promptly pay when
due any amounts owing to the Company on orders of the Products accepted
by the Company prior to the effective date of expiration or
termination.
c. Repurchase of Product Inventory. Upon expiration of this
Agreement, upon the termination of this Agreement by Distributor in
accordance with Section 13 or upon the termination of this Agreement by
the Company in accordance with Section 13(a), the Company shall
repurchase from Distributor any current, non-damaged Products with
serial numbers contained in Distributor`s inventory ("Serial Product
Inventory") and any demonstration Products in Distributor's possession
("Demonstration Products"), as of such date. Upon termination of this
Agreement by the Company in accordance with Section 13 (b), (c) or (d),
the Company shall have the option to repurchase, in its sole
discretion, the Serial Product Inventory and the Demonstration
Products. Upon expiration or any termination of this Agreement, for
whatever reason, the Company shall have the option to repurchase, in
its sole discretion, the non-serial numbered Products in Distributor's
inventory ("Non-Serial Product Inventory").
The Company shall pay to Distributor, within thirty (30) days after its
receipt of the repurchased Product inventory, the original purchase
price paid by Distributor for the repurchased Product inventory, less
(i) a fifteen percent (15%) restocking charge for the Serial or
Non-Serial Product Inventory which was purchased by Distributor no more
than six (6) months prior to the effective date of expiration or
termination, less (ii) a twenty five percent (25%) restocking charge
for Serial or Non-Serial Product Inventory purchased more than six
months prior to the effective date of expiration or termination, and
less (iii) accumulated appreciation on the Demonstration Product
Inventory. The Company shall also deduct from such payment any and all
taxes, shipping and handling costs incurred in the repurchase of such
Product inventory. Distributor shall have the right to sell any
9
<PAGE>
Products in its inventory, which are not repurchased by the Company as
provided above, for a period of ninety (90) days following the
effective date of expiration or termination.
d. Sales By Company. During any termination notification
period required under this Agreement or as required under any
applicable law or statute, the Company shall have the right to directly
contact and sell the Products to customers in the Territory. The
Company shall pay to Distributor the percentage commission set forth in
Exhibit C on any order for Products solicited by the Company which is
submitted by a customer located in the Territory prior to the effective
date of termination of this Agreement within ten (10) days after
receipt of payment from the customer for such order.
15. General Provisions.
a. Notices. Any notice or other communication required or
permitted under this Agreement shall be in writing and shall be deemed
to have been delivered (i) when received, if personally delivered or
(ii) one business day after being sent by a nationally recognized
overnight courier service which provides a return-receipt, delivery fee
prepaid and is addressed to the appropriate party using the address as
stated under such party's signature space on this Agreement. If either
party changes its address, such party shall provide written notice of
such change to the other party, however, such change of address shall
not be effective until actually received by the other party.
b. Entire Agreement. This Agreement, together with the
Exhibits attached hereto, constitutes the entire Agreement between the
parties and supersedes any and all prior and contemporaneous oral or
written understandings between the parties relating to the subject
matter of this Agreement.
c. Modification or Waiver. No purported amendment,
modification or waiver of any provision of this Agreement shall be
binding unless set forth in a writing signed by both parties (in the
case of amendments and modifications) or by the party to be charged
thereby (in the case of waivers). Any waiver shall be limited to the
circumstance or event specifically referenced in the written waiver
document and shall not be deemed a waiver of any other term of this
Agreement or of the same circumstance or event upon any recurrence of
such circumstance or event.
d. Assignment. Distributor shall not assign, transfer or sell
all or any part of Distributor's rights or obligations hereunder, by
operation of law or otherwise, without the prior written consent of the
Company. This Agreement shall be binding upon and inure to the benefit
of any successor or assignee of the Company and of any permitted
successors and assigns of Distributor as provided above.
e. Severability and Interpretation. In the event that a court
of competent jurisdiction holds a provision of this Agreement invalid,
the remaining provisions shall nonetheless be enforced in accordance
with their terms. Further, in the event that any provision is held to
10
<PAGE>
be overbroad as written, such provision shall be deemed amended to
narrow its application to the extent necessary to make the provision
enforceable according to applicable law and shall be enforced as
amended.
f. Injunctive Relief. In addition to any other relief afforded
by law, the Company shall have the right to enforce covenants contained
in Sections 5.b., 7, 8, and 12.a. hereof by specific performance and
preliminary, temporary and permanent injunctive relief against
Distributor and any other person concerned thereby. Damages, specific
performance and injunctive relief are all proper modes of relief and
shall not be considered alternative remedies.
g. LIMITATION OF REMEDY. THE COMPANY SHALL HAVE NO LIABILITY
TO DISTRIBUTOR FOR INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL
DAMAGES OF ANY DESCRIPTION, WHETHER ARISING OUT OF WARRANTY OR OTHER
CONTRACT, NEGLIGENCE OR OTHER TORT, OR OTHERWISE FOR ANY FAILURE TO
TIMELY DELIVER PRODUCT.
h. No Third Party Beneficiaries. No person or entity is a
third party beneficiary to this Agreement.
i. Survival. The provisions contained in Sections 8, 9, 12 and
13 shall survive the execution and termination of this Agreement.
j. Arbitration. Any dispute, controversy or claim arising out
of or relating to this Agreement or the relationship between the
parties shall be settled by binding arbitration in accordance with the
rules of the American Arbitration Association ("AAA"). Such arbitration
shall be conducted exclusively in the metropolitan area of New York,
New York or such other location as the parties may mutually agree. The
arbitration shall be conducted by one (1) arbitrator mutually agreed
upon between the parties. If the parties are unable to agree upon a
single arbitrator within thirty (30) days after one party has delivered
written notice to the other party requesting arbitration of a stated
dispute, each party shall select one arbitrator and the selected
arbitrators shall select a third arbitrator in accordance with the AAA
Rules. The decision of the arbitrator(s) shall be final and accorded
full faith and credit and entitled to recognition and enforcement by
the federal and state courts of the United States. Any arbitration
award shall set forth findings of fact and conclusions of law. The
parties may pursue preliminary injunctive or offer temporary relief in
any court of competent jurisdiction pending the outcome of arbitration.
11
<PAGE>
The parties have executed this Agreement in the manner appropriate to
each to be effective the day and year entered on the first page hereof.
CRITICAL CARE CONCEPTS, INC.
("Distributor")
By /s/ Robert M Stonikas
Its President
Address:
3135 Avalon Ridge Place, Suite 200
Norcross GA 30071
MEDWAVE, INC
(the "Company")
By /s/ Tim O'Malley
Its President
Address:
4382 Round Lake Road West
Arden Hills, MN 55112-3923
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
FORM 10-Q FOR NINE MONTHS ENDED JANUARY 31, 2000 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-2000
<PERIOD-START> MAY-01-1999
<PERIOD-END> JAN-31-2000
<EXCHANGE-RATE> 1
<CASH> 1,952,699
<SECURITIES> 358,724
<RECEIVABLES> 225,966
<ALLOWANCES> 0
<INVENTORY> 151,852
<CURRENT-ASSETS> 2,799,193
<PP&E> 552,987
<DEPRECIATION> 453,629
<TOTAL-ASSETS> 4,521,884
<CURRENT-LIABILITIES> 300,240
<BONDS> 0
0
0
<COMMON> 16,436,870
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 4,521,884
<SALES> 371,023
<TOTAL-REVENUES> 371,023
<CGS> 0
<TOTAL-COSTS> 444,838
<OTHER-EXPENSES> 1,924,683
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,819,414)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,819,414)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,819,414)
<EPS-BASIC> (.33)
<EPS-DILUTED> (.33)
</TABLE>
