U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1998 .
--------------------------------
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from ______________ to ______________.
Commission file number 0-19827
-------
HYMEDIX, INC.
(Exact name of registrant, as specified in its charter)
Delaware 22-3279252
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2245 Route 130, Dayton, New Jersey 08810
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (732) 274-2288
Check whether the registrant (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
--- ---
State the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
Class Outstanding as of April 30, 1998
----- --------------------------------
Common Stock 5,713,500
Transitional Small Business Disclosure Format (Check one): Yes No X
--- ---
<PAGE>
HYMEDIX, INC.
INDEX
Page No.
--------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 1998
and December 31, 1997. 3
Consolidated Statements of Operations for the
Three Months Ended March 31, 1998 and March 31, 1997. 4
Consolidated Statements of Stockholders' Equity for the
Three Months Ended March 31, 1998. 5
Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1998 and March 31, 1997. 6
Notes to Interim Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II - OTHER INFORMATION
Item 3. Defaults Upon Senior Securities 12
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 14
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<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
HYMEDIX, INC. AND SUBSIDIARY
Consolidated Balance Sheets
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
------------ ------------
<S> <C> <C>
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 84,820 $ 51,381
Accounts receivable 203,791 226,649
Inventories, net 155,247 235,746
Other current assets 56,433 54,992
------------ ------------
Total current assets 500,291 568,768
INVESTMENTS 168,750 105,469
PROPERTY AND EQUIPMENT, NET 21,883 28,290
PATENTS, NET 85,657 93,517
------------ ------------
Total assets $ 776,581 $ 796,044
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Notes payable $ 4,046,979 $ 4,067,596
Accounts payable and accrued expenses 3,244,818 3,341,269
Accrued legal judgment 367,500 805,964
Deferred revenue 93,750 0
Liabilities related to discontinued line of business 59,222 59,222
------------- ------------
Total current liabilities 7,812,269 8,274,051
------------- ------------
STOCKHOLDERS' DEFICIT:
8% Senior Convertible Preferred Stock, $3.00 par value, 800,000 shares
authorized, 10,190 shares issued and outstanding 30,570 30,570
Preferred Stock, $.01 par value, 3,000 shares authorized,
150 shares issued and outstanding 2 2
Common Stock, $.001 par value, 20,000,000 shares
authorized, 5,713,500 shares issued and outstanding 5,713 5,713
Additional paid-in capital 15,642,174 15,642,174
Unrealized gain (loss) from available for sale investments 9,750 (53,531)
Accumulated deficit (21,223,897) (21,602,935)
Subscription receivable (1,500,000) (1,500,000)
-------------- --------------
Total stockholders' deficit (7,035,688) (7,478,007)
-------------- --------------
Total liabilities and stockholders' deficit $ 776,581 $ 796,044
============= =============
The accompanying notes are an integral part of these consolidated balance sheets.
</TABLE>
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<PAGE>
HYMEDIX, INC. AND SUBSIDIARY
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
1998 1997
---------- ----------
<S> <C> <C>
REVENUES:
Net product sales $ 369,048 $ 99,033
License, royalty and distribution fees 54,050 162,500
Research and development contracts 93,750 31,250
---------- ----------
Total revenues 516,848 292,783
---------- ----------
COSTS AND EXPENSES:
Cost of sales 174,114 40,959
Selling, general and administrative 261,265 413,404
Research and development 121,330 161,113
Reversal of legal judgment (438,464) 0
---------- ----------
Total costs and expenses 118,245 615,476
---------- ----------
Income (loss) from operations 398,603 (322,693)
---------- ----------
INTEREST (EXPENSE) INCOME
Interest expense (19,575) (69,290)
Interest income 10 595
---------- ----------
Total interest expense, net (19,565) (68,695)
---------- ----------
Net income (loss) $ 379,038 $ (391,388)
---------- ----------
BASIC INCOME (LOSS) PER COMMON SHARE $ 0.06 $ (0.07)
========== ==========
DILUTED INCOME (LOSS) PER COMMON SHARE $ 0.05 $ (0.07)
========== ==========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 5,713,500 5,713,500
========== ==========
DILUTED WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 6,731,384 5,713,500
========== ==========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
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<PAGE>
HYMEDIX, INC. AND SUBSIDIARY
Consolidated Statement of Stockholders' Equity
For The Three Months Ended March 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
8% Senior
Convertible Additional
Comprehen- Preferred Preferred Common Paid-in
sive Income Stock Stock Stock Capital
----------- ----------- --------- ------ ----------
<S> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1997 $30,750 $2 $5,713 $15,642,174
Comprehensive income
First Quarter 1998:
Net income $379,038
Unrealized gain on
available for sale
investments 63,281
--------
Comprehensive income $442,319
========
------- -- ------ -----------
BALANCE AT MARCH 31, 1998 $30,750 $2 $5,713 $15,642,172
======= == ====== ===========
</TABLE>
<TABLE>
<CAPTION>
Unrealized
Gain/(Loss)
From Total
Available Stock-
Accumulated Subscription For Sale holders'
Deficit Receivable Investments Deficit
----------- ------------ ------------ -------
<S> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1997 $(21,602,935) $(1,500,000) $(53,531) $(7,478,007)
Comprehensive income
First Quarter 1998:
Net income 379,038 379,038
Unrealized gain on
available for sale
investments 63,281 63,281
Comprehensive income
----------- ---------- -------- ----------
BALANCE AT MARCH 31, 1998 ($21,223,897) ($1,500,000) $ 9,750 ($7,035,688)
=========== ========== ======== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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<PAGE>
HYMEDIX, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------
1998 1997
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 379,038 $(391,388)
--------- ---------
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:
Depreciation and amortization 14,267 29,583
(Increase) decrease in:
Accounts receivable 22,858 12,006
Inventories 80,499 23,011
Other current assets (1,441) (4,285)
Increase (decrease) in:
Accounts payable and accrued expenses (96,451) 79,374
Accrued legal judgment (438,464) 0
Deferred revenue 93,750 93,750
--------- ---------
Total adjustments (324,982) 233,439
--------- ---------
Net cash provided by (used in)
operating activities 54,056 (157,949)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes payable 0 570
Restricted cash 0 225,600
Principal repayments of notes payable (20,617) 0
--------- ---------
Net cash (used in) provided by financing activities (20,617) 226,170
--------- -----------
Net increase in cash 33,439 68,221
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 51,381 42,562
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 84,820 $ 110,783
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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<PAGE>
HYMEDIX, INC. AND SUBSIDIARY
Notes to Interim Consolidated Financial Statements
1. MERGER AND REINCORPORATION
HYMEDIX, Inc. (the "Company") was incorporated in Delaware on December
20, 1993, as a wholly-owned subsidiary of Servtex International Inc. (the
"Predecessor"). On February 23, 1994, the Predecessor merged with and into
HYMEDIX, Inc., and, concurrently, a wholly-owned subsidiary of the
Predecessor was merged with and into HYMEDIX International, Inc. ("HYMEDIX
International"), a privately-held Delaware corporation, which resulted in
HYMEDIX International becoming a wholly-owned subsidiary of HYMEDIX, Inc.
HYMEDIX International was incorporated in October, 1985 under the name
Kingston Technologies, Inc.
The unaudited consolidated financial statements have been prepared
based upon financial statements of HYMEDIX, Inc. and its wholly owned
subsidiary, HYMEDIX International, Inc.
2. INTERIM FINANCIAL STATEMENTS
In the opinion of management, the accompanying financial statements of
the Company reflect all adjustments, consisting of normal recurring
accruals, necessary to present fairly, in all material respects, the
Company's financial position as of March 31, 1998 and December 31, 1997 and
the results of operations and cash flows for the three months ended March
31, 1998 and 1997. The results of operations for interim periods are not
necessarily indicative of the results to be expected for an entire fiscal
year.
3. COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income" ("SFAS 130"). SFAS 130 requires the display of
comprehensive income and its components in the financial statements. The Company
adopted SFAS 130 on January 1, 1998. Comprehensive income includes net income
and unrealized gain on available for sale investments for the three months ended
March 31, 1998.
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<PAGE>
4. EARNINGS PER SHARE
In the fourth quarter of 1997, the Company adopted Statement of Financial
Accounting Standards No. 128, "Earnings Per Share," (SFAS 128), which requires
presentation in the consolidated statements of operations of both basic and
diluted earnings per share. The computation of both basic and diluted earnings
per share were as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------- ----------
1998 1997
--------- ----------
<S> <C> <C>
Numerator:
Net income (loss) less preferred dividends
of $34,361 for the period $ 344,677 $ (425,749)
Denominator:
Weighted average common shares outstanding 5,713,500 5,713,500
---------- ----------
BASIC INCOME (LOSS) PER COMMON SHARE $0.06 ($0.07)
===== =====
Numerator:
Net income (loss) less preferred dividends
of $34,361 for the period 344,677 (425,749)
Interest on Convertible Bonds for the period 17,509 (A)
---------- ----------
Subtotal 362,246 (425,749)
---------- ----------
Denominator:
Weighted average common shares outstanding 5,713,500 5,713,500
Common shares that would be issued in exchange
for the Convertible Bonds assuming conversion
at the beginning of the period 1,017,884 (A)
---------- ----------
Subtotal 6,731,384 5,713,500
---------- ----------
DILUTED INCOME (LOSS) PER COMMON SHARE $0.05 ($0.07)
===== =====
</TABLE>
(A) Effect would be anti-dilutive, therefore conversion is not assumed.
None of the common shares issuable under the Company's stock option plan,
upon conversion of the preferred stock or through the outstanding warrants were
included in the above earnings per share calculations because their inclusion
would be anti-dilutive for both the three months ended March 31, 1998 and 1997,
respectively.
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This report contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Actual results could differ materially
from those projected in the forward-looking statements as a result of
the risk factors set forth below. The industry in which the Company
competes is characterized by rapid changes in technology and frequent
new product introductions. The Company believes that its long-term
growth depends largely on its ability to continue to enhance existing
products and to introduce new products and technologies that meet the
continually changing requirements of customers. While the Company has
devoted significant resources to the development of new products and
technologies, there can be no assurance that it can continue to
introduce new products and technologies on a timely basis or that
certain of its products and technologies will not be rendered
noncompetitive or obsolete by its competitors.
Overview
HYMEDIX, Inc. ("HYMEDIX") was incorporated in Delaware on December 20,
1993 as a wholly-owned subsidiary of Servtex International Inc. (the
"Predecessor"). On February 23, 1994, the Predecessor merged with and into
HYMEDIX, Inc. and, concurrently, a wholly-owned subsidiary of the Predecessor
was merged with and into HYMEDIX International, Inc. ("HYMEDIX International")
which resulted in HYMEDIX International becoming a wholly-owned subsidiary of
HYMEDIX. As used in this Form 10-QSB, unless the context otherwise requires, the
term "Company" collectively means HYMEDIX, HYMEDIX International and their
respective predecessors. HYMEDIX International was incorporated in October, 1985
under the name Kingston Technologies, Inc.
Results of Operations
Revenues
The Company's total revenues for the three months ended March 31, 1998
were $516,848 versus $292,783 for the same period in 1997, an increase of 76.5%.
For the three months ended March 31, 1998, the increased revenues over the same
period in 1997 came mainly from (1) increased sales of $276,886 in net sales of
hydrogels; (2) an increase of $62,500 in research and development contract
revenues; offset by (3) a decrease of $108,450 in license, royalty and
distribution fees; and (4) reduced net sales of $6,871 in domestic and
international sales of skin care products. The decrease in license, royalty and
distribution fees is primarily attributable to a $150,000 milestone payment that
was received in January, 1997 under a licensing agreement which was later
terminated at the end of 1997.
Costs and Expenses
Cost of sales for the three months ended March 31, 1998 was $174,114
versus $40,959 for the same period in 1997, an increase of $133,155 or 325.1%.
The increase for the three months ended March 31, 1998 was attributable to the
272.7% increase in net product sales. Selling, general and administrative
expenses decreased 36.8% to $261,265 for the three ended months March 31, 1998
from $413,404 for the same period of 1997. The decrease was principally due to
lower employee related and premises expenses. The research and development costs
for the three months ended March 31, 1998 were $121,330, as compared to $161,113
for the same period in 1997, a decrease of 24.7%, resulting mainly from lower
outside consulting costs and decreased license maintenance fees.
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<PAGE>
Legal Judgment
During the first quarter of 1998, a legal judgment that was previously
accrued for was partially reversed on appeal. Based upon the appeal, the Company
reversed $438,464 of the accrued legal judgment along with the related accrued
interest charges.
Interest Expense, Net
Total interest expense, net, decreased to $19,565 for the three months
ended March 31, 1998 from $68,695 for the same period in 1997, mainly
attributable to the reversal of approximately $48,000 of interest accrued
related to the legal judgment.
As a result of the reversal of the legal judgment and decreased costs
and expenses described above for the three months ended March 31, 1998 as
compared to the same period of the prior year and the increased revenues
described above for the same period of 1998 versus the prior year, the Company
recorded net income of $379,038 for the three months ended March 31, 1998 as
compared to the net loss of $391,388 for the same period in 1997.
Liquidity, Capital Resources and Changes in Financial Condition
The Company had $84,820 in cash and cash equivalents on hand on March
31, 1998 versus $51,381 on December 31, 1997. The working capital deficit of
$(7,311,978) on March 31, 1998 represents a decrease of $393,305 from the
previous year-end deficit level of $(7,705,283). The decrease in working capital
deficit was primarily attributable to the net income recorded in the three-month
period ended March 31, 1998.
The Company's two term loans, advanced to the Company by licensees
pursuant to license agreements, in the principal amounts of $1,500,000 and
$1,000,000, respectively, each have been classified as current liabilities as
they are in technical default as a result of certain interest payments not
having been made.
During the first quarter of 1996, the Company issued a convertible bond
in the principal amount of $150,000 (the "September Bond") pursuant to a
Convertible Bond Purchase Agreement effective March 5, 1996, by and among the
Company, HYMEDIX International and Su Chen Huang. The September Bond bears
interest at a rate of 7% per annum and matured (after being extended) on March
31, 1998. The Company is negotiating to extend the due date of the bond. The
September Bond is convertible in whole at any time prior to payment or
prepayment into one hundred fifty thousand (150,000) shares of common stock of
the Company. Interest on the September Bond is payable at maturity or upon
prepayment or conversion thereof.
In April of 1996, the Company issued convertible bonds in the aggregate
principal amount of approximately $981,000 (the "June Bonds") pursuant to a
Convertible Bond Purchase Agreement effective February 27, 1996, by and among
the Company, HYMEDIX International, First Taiwan Investment and Development,
Inc. and the Purchasers (as defined therein). The June Bonds bear interest at a
rate of 7% per annum and matured (after being extended) on March 31, 1998. The
Company is negotiating to extend the due date of the bonds. The June Bonds are
convertible in whole or in part at any time prior to payment or prepayment into
one thousand (1,000) shares of common stock of the Company for each one thousand
dollars ($1,000) of principal amount outstanding. Interest on the June Bonds is
payable at maturity or upon prepayment or conversion thereof.
Both the June Bonds and the September Bond are structured in such a way
as to permit the Company, subject to certain terms and conditions, including
approval of the Bondholders (as hereinafter defined), to make withdrawals from a
special account (the "Special Account") up to the principal amount of the bonds
on a periodic basis and to require the Company to reduce the amount withdrawn
with respect to the Special Account by making payments into the Special Account.
As of March 31, 1998, the Company had made various withdrawals from and
repayments to the Special Account.
Pursuant to a Security Agreement dated as of August 8, 1996, by and
among the Company and the Bondholder Representative (as defined therein), in
order to induce the Purchasers and Su Chen Huang (collectively, the
"Bondholders") to approve future withdrawals by the Company from the special
account, the Company granted to the
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<PAGE>
Bondholder Representative, for the ratable benefit of the Bondholders, a
security interest in all of the Company's assets and properties.
In June of 1997, the Company received a payment of a $100,000
refundable deposit from a potential distributor with whom the Company has
reached an agreement in principle regarding certain aspects of the Company's
consumer skin care business. The Company has agreed to grant the distributor an
option to negotiate an agreement with the Company with respect to the Company's
skin care product in certain territories or to match the terms of any such
agreement that the Company may negotiate with a third party, on a right-of-first
refusal basis. This option expires on the earlier of June 30, 2001 or the date
on which the Company reaches any such third party agreement. The $100,000
deposit would be refundable to the distributor in the event any such third party
agreement is consummated or creditable against amounts payable under any
definitive agreement between the Company and this distributor. This option is
subject to negotiation and execution of a definitive agreement regarding this
matter.
The Company is currently in discussions with potential investors to
receive additional financing, however, there is no assurance that such financing
will be consummated. Management believes that the Company will have adequate
resources to finance its operations in 1998. On April 29, 1998 the appellate
court reversed $438,464 of the legal judgment against the Company and affirmed
the remaining $367,500 against the Company. If the Plaintiff moves to collect on
the judgment prior to adjudication of the appeal, or if a verdict is rendered
against the Company in appellate court, the Company must attempt to finance both
its operations and satisfaction of the judgment. Management believes this will
be difficult. In addition, the Company's secured convertible bonds are both past
due, and while the Company is managing to make some payments on past due
interest and principal, there is no assurance that sufficient funds will be
available to the Company to service these debts and to continue its operations.
Management plans to continue to seek and evaluate financing alternatives for the
Company. In the event that cash flow from operations and the anticipated
proceeds from the financing, if any, are not sufficient to fund the Company's
operations in 1998, there is no assurance that other sources of funds will be
available to the Company.
Year 2000 Compliance
As of March 31, 1998, the Company has not assessed whether or not the
systems that are currently in place are Year 2000 compliant. However, management
believes that the cost and time to install a new system would not be
substantial.
Risk Factors and Cautionary Statements
When used in this Form 10-QSB and in future filings by the Company with
the Securities and Exchange Commission, in the Company's press releases and in
oral statements made with the approval of an authorized executive officer, the
words or phrases "will likely result", "are expected to", "will continue", "is
anticipated", "estimate", "project", or similar expressions are intended to
identify "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such statements are subject to certain
risks and uncertainties, including those discussed under this caption "Risk
Factors and Cautionary Statements," that could cause actual results to differ
materially from historical earnings and those presently anticipated or
projected. The Company wishes to caution readers not to place undue reliance on
any such forward-looking statements, which speak only as of the date made, and
wishes to advise readers that the factors listed below could cause the Company's
actual results for future periods to differ materially from any opinions or
statements expressed with respect to future periods in any current statements.
The Company will NOT undertake and specifically declines any obligation
to publicly release the result of any revisions which may be made to any
forward-looking statements to reflect events or circumstances after the date of
such statements or to reflect the occurrence of anticipated or unanticipated
events.
o The Company's revenues and income are derived primarily from the
development and commercialization of medical and skin care products. The medical
and skin care products industries is highly competitive. Such
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<PAGE>
competition could negatively impact the Company's market share and therefore
reduce the Company's revenues and income.
o Competition may also result in a reduction of average unit prices
paid for the Company's products. This, in turn, could reduce the percentage of
profit margin available to the Company for its product sales.
o The Company's future operating results are dependent on its ability
to develop, produce and market new and innovative products and technologies, and
to successfully enter into favorable licensing and distribution relationships.
There are numerous risks inherent in this complex process, including rapid
technological change and the requirement that the Company develop procedures to
bring to market in a timely fashion new products and services that meet
customers' needs.
o Historically, the Company's operating results have varied from fiscal
period to fiscal period; accordingly, the Company's financial results in any
particular fiscal period are not necessarily indicative of results for future
periods.
o The Company may offer a broad variety of products and technologies to
customers around the world. Changes in the mix of products and technologies
comprising revenues could cause actual operating results to vary from those
expected.
o The Company's success is partly dependent on its ability to
successfully predict and adjust production capacity to meet demand, which is
partly dependent upon the ability of external suppliers to deliver components
and materials at reasonable prices and in a timely matter; capacity or supply
constraints, as well as purchase commitments, could adversely affect future
operating results.
o The Company offers its products and technologies directly and through
indirect distribution channels. Changes in the financial condition of, or the
Company's relationship with, distributors, licensees and other indirect channel
partners, could cause actual operating results to vary from those expected.
o The Company does business and continues to seek to develop business
on a worldwide basis. Global and/or regional economic factors and potential
changes in laws and regulations affecting the Company's business, including
without limitation, currency exchange rate fluctuations, changes in monetary
policy and tariffs, and federal, state and international laws regulating its
products, could impact the Company's financial condition or future results of
operations.
o The market price of the Company's securities could be subject to
fluctuations in response to quarter to quarter variations in operating results,
market conditions in the medical and skin care products industry, as well as
general economic conditions and other factors external to the Company.
PART II - OTHER INFORMATION
Item 3. Defaults Upon Senior Securities.
The information regarding the default of certain senior securities
of the Company is stated in Item 2. Management's Discussion and
Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources and is incorporated
herein by reference.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
None.
(b) Reports on Form 8-K.
None.
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<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
HYMEDIX, INC.
(Registrant)
Date: May 15, 1998 By: /s/ Joseph Y. Peng
-----------------------------------------
Joseph Y. Peng
President (Principal Executive Officer),
Treasurer
Date: May 15, 1998 By: /s/ William G. Gridley, jr.
-----------------------------------------
William G. Gridley, jr.
Chief Financial Officer (Principal Financial
Officer and Principal Accounting Officer)
Secretary, Director
- 14 -
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<CASH> 84,820
<SECURITIES> 168,750
<RECEIVABLES> 203,791
<ALLOWANCES> 0
<INVENTORY> 155,247
<CURRENT-ASSETS> 500,291
<PP&E> 249,006
<DEPRECIATION> 227,123
<TOTAL-ASSETS> 776,581
<CURRENT-LIABILITIES> 7,812,269
<BONDS> 1,015,136
0
30,572
<COMMON> 5,713
<OTHER-SE> (7,071,973)
<TOTAL-LIABILITY-AND-EQUITY> 776,581
<SALES> 369,048
<TOTAL-REVENUES> 516,848
<CGS> 174,114
<TOTAL-COSTS> 556,709
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (438,464)
<INTEREST-EXPENSE> 19,575
<INCOME-PRETAX> 379,038
<INCOME-TAX> 0
<INCOME-CONTINUING> 379,038
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 379,038
<EPS-PRIMARY> .06
<EPS-DILUTED> .05
</TABLE>
