<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended: March 31, 1998
Commission File Number: 0-22333
NANOPHASE TECHNOLOGIES CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 36-687863
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
453 COMMERCE STREET, BURR RIDGE, ILLINOIS 60521
(Address of principal executive offices, and zip code)
Registrant's telephone number, including area code: (630) 323-1200
----------------------
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
As of May 13, 1998, there were outstanding 12,277,467 shares of common
stock, par value $.01, of the registrant.
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<PAGE> 2
NANOPHASE TECHNOLOGIES CORPORATION
QUARTER ENDED MARCH 31, 1998
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I - FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Item 1. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Balance Sheets as of March 31, 1998 (unaudited) and December 31, 1997 . . . . . . . . . . . . . . . . . 3
Statements of Operations for the three months ended March 31, 1998 (unaudited) and 1997 (unaudited) . . 4
Statements of Cash Flows for the three months ended March 31, 1998 (unaudited) and 1997 (unaudited) . . 5
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . 7
Item 3. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . 10
PART II - OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Item 2. Changes in Securities and Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NANOPHASE TECHNOLOGIES CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . $ 725,113 $ 3,988,368
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,750,756 26,884,852
Trade accounts receivable, less allowance for doubtful accounts
of $19,276 as of March 31, 1998 and December 31, 1997 . . . . . . . . . 816,903 1,641,489
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 944,038 957,303
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . 164,002 112,138
------------ ------------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . 32,400,812 33,584,150
Equipment and leasehold improvements, net . . . . . . . . . . . . . . . . . 2,508,232 2,399,893
Other assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,221 212,526
------------ ------------
$ 35,109,265 $ 36,196,569
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 505,637 $ 930,397
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 839,694 614,838
------------ ------------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . 1,345,331 1,545,235
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 24,088 shares authorized and
no shares issued and outstanding . . . . . . . . . . . . . . . . . . . . -- --
Common stock, $.01 par value, 25,000,000 shares authorized and
12,277,467 shares issued and outstanding . . . . . . . . . . . . . . . . . 122,775 122,775
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . 48,273,230 48,273,230
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . (14,632,071) (13,744,671)
------------ ------------
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . 33,763,934 34,651,334
------------ ------------
$ 35,109,265 $ 36,196,569
============ ============
</TABLE>
See Notes to Financial Statements.
3
<PAGE> 4
NANOPHASE TECHNOLOGIES CORPORATION
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1998 1997
------------- ------------
<S> <C> <C>
REVENUE:
Product revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 636,734 $ 195,136
Other revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66,800 234,328
------------- ------------
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 703,534 $ 429,464
OPERATING EXPENSE:
Cost of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 968,712 $ 1,102,877
Research and development expense . . . . . . . . . . . . . . . . . . . . 189,214 161,198
Selling, general and administrative expense . . . . . . . . . . . . . . . 683,299 425,497
------------- ------------
Total operating expense . . . . . . . . . . . . . . . . . . . . . . . . 1,841,225 1,689,572
------------- ------------
Loss from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,137,691) (1,260,108)
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 406,291 21,917
------------- ------------
Loss before provision for income taxes . . . . . . . . . . . . . . . . . . (731,400) (1,238,191)
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . (156,000) --
------------- ------------
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (887,400) $ (1,238,191)
============= ============
Net loss per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (0.07) $ (15.96)
============= ============
Weighted average number of common shares outstanding . . . . . . . . . . . 12,277,467 77,586
============= ============
Pro forma net loss per share . . . . . . . . . . . . . . . . . . . . . . . n/a $ (0.17)
============= ============
Pro forma weighted average number of common shares outstanding . . . . . . n/a 7,485,940
============= ============
</TABLE>
See Notes to Financial Statements.
4
<PAGE> 5
NANOPHASE TECHNOLOGIES CORPORATION
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1998 1997
------------- ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (887,400) $ (1,238,191)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . 111,450 100,115
Changes in assets and liabilities related to operations:
Trade accounts receivable . . . . . . . . . . . . . . . . . . . . . . . 824,586 (305,883)
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,265 123,561
Prepaid expense and other assets . . . . . . . . . . . . . . . . . . . (39,826) 46,395
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . (424,760) 169,878
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 224,856 270,765
------------- ------------
Net cash used in operating activities . . . . . . . . . . . . . . . . . . . (177,829) (833,360)
INVESTING ACTIVITIES:
Acquisition of equipment and leasehold improvements . . . . . . . . . . . . (219,522) (62,580)
Purchases of held-to-maturity investments . . . . . . . . . . . . . . . . . (65,178,904) (3,210,290)
Maturities of held-to-maturity investments . . . . . . . . . . . . . . . . 62,313,000 4,203,808
------------- ------------
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . (3,085,426) 930,938
FINANCING ACTIVITIES:
Deferred offering costs . . . . . . . . . . . . . . . . . . . . . . . . . . -- (267,844)
------------- ------------
Net cash used in financing activities . . . . . . . . . . . . . . . . . . . -- (267,844)
------------- ------------
Decrease in cash and cash equivalents . . . . . . . . . . . . . . . . . . . (3,263,255) (170,266)
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . 3,988,368 617,204
------------- ------------
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . $ 725,113 $ 446,938
============= ============
</TABLE>
See Notes to Financial Statements.
5
<PAGE> 6
NANOPHASE TECHNOLOGIES CORPORATION
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(1) BASIS OF PRESENTATION
The accompanying unaudited interim financial statements of Nanophase
Technologies Corporation (the "Company") reflect all adjustments (consisting of
normal recurring adjustments) which, in the opinion of management, are
necessary for a fair presentation of the financial position and operating
results of the Company for the interim periods presented. Operating results
for the three months ended March 31, 1998 are not necessarily indicative of the
results that may be expected for the year ended December 31, 1998.
These financial statements should be read in conjunction with the
Company's audited financial statements and notes thereto for the year ended
December 31, 1997, included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1997, as filed with the Securities and Exchange
Commission.
(2) DESCRIPTION OF BUSINESS
The Company was incorporated on November 30, 1989, for the purpose of
developing nanocrystalline materials for commercial production and sale in
domestic and international markets. The Company was in its development stage
for the period from inception through December 31, 1996. The Company began
full-scale production in early 1997 at which time it no longer was a
development stage company. The Company issued common stock in its initial
public offering consummated on December 2, 1997.
In the course of its corporate development, the Company has experienced
net losses and negative cash flows from operations. Historically, the Company
has funded its operations primarily through the issuance of equity securities.
Export sales approximated $84,400 and $66,200 for the three months ended
March 31, 1998 and 1997, respectively.
(3) INVESTMENTS
Investments consist of U.S. Treasury bills, government bonds and
commercial paper with an estimated fair value of $29,751,000 at March 31, 1998
and $26,885,000 at December 31, 1997. All investments have been classified as
held-to- maturity and mature in the subsequent year.
(4) INVENTORIES
<TABLE>
<CAPTION>
Inventories consist of the following:
MARCH 31, 1998 DECEMBER 31, 1997
-------------- -----------------
<S> <C> <C>
Raw materials . . . . . . . . . . . $ 393,424 $ 379,505
Finished goods . . . . . . . . . . 550,614 577,798
------------- -------------
$ 944,038 $ 957,303
============= =============
</TABLE>
6
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OVERVIEW
From its inception in November 1989 through December 31, 1996, Nanophase
Technologies Corporation (the "Company") was in the development stage. During
that period, the Company primarily focused on the development of its
manufacturing processes in order to transition from laboratory-scale to
commercial-scale production. As a result, the Company developed an operating
capacity to produce significant quantities of its nanocrystalline materials for
commercial sale. The Company was also engaged in the development of commercial
applications and formulations and the recruiting of marketing, technical and
administrative personnel. Since January 1, 1997, the Company has been engaged
in commercial production and sales of its nanocrystalline materials, and the
Company no longer considers itself in the development stage. All of the
Company's revenue since January 1, 1997 has been generated through commercial
sources. From inception through March 31, 1998, the Company was primarily
capitalized through the private offering of approximately $19,558,069 of equity
securities and its initial public offering of $28,837,936 of Common Stock, each
net of issuance costs. The Company has incurred cumulative losses of
$14,632,071 from inception to March 31, 1998.
RESULTS OF OPERATIONS
Revenue is recorded when the Company ships products, when specific
milestones are met regarding development arrangements or when the Company
licenses its technology and transfers proprietary information. Total revenue
increased to $703,534 for the three months ended March 31, 1998, compared to
$429,464 for the same period in 1997. This increase in total revenue of
$274,070 was primarily attributed to increased product sales offset by a
reduction in other revenue. Revenue from product sales increased to $636,734
for the three months ended March 31, 1998, compared to $195,136 for the same
period in 1997. Other revenue decreased to $66,800 for the three months ended
March 31, 1998, compared to $234,328 for the three months ended March 31, 1997.
The majority of the revenue generated during the three months ended March 31,
1998 was from customers in the electronics and structural ceramics and
composites markets.
Cost of revenue generally includes costs associated with commercial
production, customer development arrangements and licensing fees. Cost of
revenue decreased to $968,712 for the three months ended March 31, 1998,
compared to $1,102,877 for the same period in 1997. This decrease in cost of
revenue was generally attributed to increased efficiencies in the manufacture
of the Company's products and the reduced cost of development activities. Cost
of revenue as a percentage of total revenue decreased significantly for the
three months ended March 31, 1998, compared to the same period in 1997, because
of the increased efficiencies in the Company's manufacturing processes and
increased production volumes.
Research and development expense primarily consists of costs associated
with the Company's development or acquisition of new product applications and
coating formulations and the cost of enhancing the Company's manufacturing
processes. Research and development expense increased to $189,214 for the three
months ended March 31, 1998, compared to $161,198 for the same period in 1997.
This increase in research and development expense was primarily attributed to
increased costs of developing new formulations and product applications and the
ongoing experimentation expense associated with technological enhancements and
product improvements. The Company expects to further increase its research and
development expense for the remainder of 1998 in connection with its plans to
continue to enhance and expand its product lines and manufacturing processes.
7
<PAGE> 8
Selling, general and administrative expense increased to $683,299 for the
three months ended March 31, 1998, compared to $425,497 for the same period in
1997. This increase was primarily attributed to increased costs associated
with being a public company and recruiting costs. The Company expects to
further increase its selling, general and administrative expense during the
remainder of 1998 in connection with its plans to further expand its sales
force and administrative staff.
Interest income increased to $406,291 for the three months ended March
31, 1998, compared to $21,917 for the same period in 1997. This increase was
primarily due to the investment of net proceeds from the Company's sale of
equity securities pending use of such proceeds for operating activities and
expansion of its manufacturing facility.
Income tax expense was $156,000 for the three months ended March 31,
1998, compared to zero for the same period in 1997. This expense was due to the
foreign taxes withheld from license fees received from C.I. Kasei Co., Ltd. The
payment of such taxes create a foreign tax credit which may be available to
offset federal income taxes when the Company generates taxable income.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash, cash equivalents and investments amounted to
$30,475,869 at March 31, 1998, compared to $1,451,208 at March 31, 1997. The
net cash used in the Company's operating activities was $177,829 for the three
months ended March 31, 1998, compared to $833,360 for the same period in 1997.
The net cash used in operating activities for the three months ended March 31,
1998 was primarily for the further development of product applications, the
funding of research and development activities, the funding of inventory levels
and the payment of accounts payable, which was offset by the collection of
accounts receivable and an increase in accrued liabilities. Net cash used in
investing activities, including capital expenditures and purchases and sales of
securities in which cash is invested pending its use for operating activities
and expansion of the Company's manufacturing facility, amounted to $3,085,426
for the three months ended March 31, 1998, compared to net cash provided of
$930,938 for the same period in 1997. Capital expenditures, primarily related
to the further expansion of the Company's existing manufacturing facility and
the purchase of operating equipment, amounted to $219,522 for the three months
ended March 31, 1998, compared to $62,580 for the same period in 1997. No cash
was used or provided through financing activities during the three month period
ended March 31, 1998, while $267,844 was used for deferred offering costs during
the same period in 1997.
The Company believes that cash from operations and cash on hand, together
with the net proceeds of its initial public offering of Common Stock
consummated in December 1997, will be adequate to fund the Company's current
operating plans for the foreseeable future. The Company's actual future
capital requirements will depend, however, on many factors, including continued
progress in its research and development activities and product testing
programs, the magnitude of these activities and programs, the costs necessary
to increase and expand the Company's manufacturing capabilities and to market
any resulting materials and product applications, and customer acceptance of
the Company's current and potential materials and product applications.
Depending on future requirements, the Company may seek additional funding
through public or private financing, collaborative relationships, government
contracts or additional licensing agreements. There can be no assurance that
such additional financing will be available on acceptable terms or at all, and
any such additional financing could be dilutive to the Company's stockholders.
At March 31, 1998, the Company had a net operating loss carryforward of
approximately $14 million for income tax purposes. Because the Company may
have experienced "ownership changes" within the meaning of the U.S. Internal
Revenue Code (the "Internal Revenue Code") in connection with
8
<PAGE> 9
its various, prior equity offerings, future utilization of this carryforward
may be subject to certain limitations as defined by the Internal Revenue Code.
If not utilized, the carryforward expires at various dates between 2005 and
2012. As a result of the annual limitation, a portion of this carryforward may
expire before ultimately becoming available to reduce income tax liabilities.
At March 31, 1998, the Company also had a foreign tax credit carryforward of
$156,000, which could be used as an offsetting tax credit to reduce U.S. income
taxes. The foreign tax credit will expire in 2012 if not utilized before that
date.
IMPACT OF YEAR 2000
The Year 2000 Issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Computer
programs that have time-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in a system failure
or miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices or engage
in similar normal business activities.
The Company processes its transactions and applications utilizing
personal computers. Based on a recent assessment, the Company determined that
no significant modifications or replacements of its software or systems will be
required to function properly with respect to dates in the year 2000 and
thereafter. As of January 1, 1998, the Company only acquires software and
invests in systems which are compliant with the year 2000 conventions.
To date, the Company does not have any direct interface between its
systems and those of any significant supplier or customer. Although the Company
recognizes that it is vulnerable to third parties that fail to remediate their
own Year 2000 Issues, it does not believe that such failure would significantly
affect its operations. However, there can be no guarantee that the systems of
other companies on which the Company relies will be timely converted or that
their failure to do so would not have an adverse effect on the Company's
operations. The Company has determined it has no exposure to contingencies
related to the Year 2000 Issue for the products it has previously sold.
SAFE HARBOR PROVISION
Because the Company wants to provide investors with more meaningful and
useful information, this Quarterly Report on Form 10-Q (the "Form 10-Q")
contains, and incorporates by reference, certain "forward-looking statements"
(as such term is defined in Section 21E of the Securities Exchange Act of 1934,
as amended), that reflect the Company's current expectations regarding the
future results of operations, performance and achievements of the Company.
These forward- looking statements are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. The
Company has tried, wherever possible, to identify these forward-looking
statements by using words such as "anticipates," "believes," "estimates,"
"expects," "plans," "intends" and similar expressions. These statements
reflect the Company's current beliefs and are based on information currently
available to it. Accordingly, these statements are subject to certain risks,
uncertainties and contingencies, which could cause the Company's actual
results, performance or achievements to differ materially from those expressed
in, or implied by, such statements. These risks, uncertainties and
contingencies include, without limitation, demand for, and acceptance of, the
Company's nanocrystalline materials; changes in development and distribution
relationships; the impact of competitive products and technologies; and the
factors set forth under "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations--Risk Factors" in the Company's
Form 10-K for the year ended December 31, 1997, as filed with the Securities
and Exchange Commission. The Company undertakes no obligation
9
<PAGE> 10
to update or revise any such forward-looking statements that may be made to
reflect events or circumstances after the date of this Form 10-Q or to reflect
the occurrence of unanticipated events.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
10
<PAGE> 11
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On November 26, 1997 (the "Effective Date") the Company's Registration
Statement on Form S-1 (File No. 333-36937) relating to the Company's initial
public offering of Common Stock (the "Offering") was declared effective by the
Securities and Exchange Commission. Since the Effective Date, of its
$28,837,936 of net proceeds from the Offering, the Company has used $219,522
for capital expenditures primarily related to the further expansion of the
Company's existing manufacturing facility and the purchase of operating
equipment. The remainder of the net proceeds has been invested by the Company,
pending its use, in short-term, investment grade, interest-bearing obligations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
A. EXHIBITS.
Exhibit 11 - Statement regarding computation of loss per share
Exhibit 27 - Financial Data Schedule
B. REPORTS ON FORM 8-K.
The Company did not file any current reports on Form 8-K during the
first quarter of 1998.
11
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NANOPHASE TECHNOLOGIES CORPORATION
Date: May 14, 1998 By: /s/ ROBERT W. CROSS
-----------------------------------
Robert W. Cross
President, Chief Executive Officer
(principal executive officer) and
a Director
Date: May 14, 1998 By: /s/ DENNIS J. NOWAK
-----------------------------------
Dennis J. Nowak
Vice President-Finance and
Administration, Chief Financial
Officer, Treasurer and Secretary
(principal financial and accounting
officer)
12
<PAGE> 13
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Name
- ------ ------------
<S> <C>
11 Statement regarding computation of loss per share
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 11
NANOPHASE TECHNOLOGIES CORPORATION
STATEMENT REGARDING COMPUTATION OF LOSS PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1998 1997
------------ -------------
(Unaudited)
<S> <C>
HISTORICAL:
Weighted average common shares outstanding . . . . . . . . . . . . . . . . . 12,277,467 77,586
============ =============
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (887,400) $ (1,238,191)
============ =============
Net loss per common share . . . . . . . . . . . . . . . . . . . . . . . . . . $ (0.07) $ (15.96)
============ =============
PRO FORMA:
Weighted average common shares outstanding . . . . . . . . . . . . . . . . . n/a 77,586
Weighted average preferred shares outstanding . . . . . . . . . . . . . . . . n/a 7,408,354
------------ -------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . n/a 7,485,940
============ =============
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . n/a $ (1,238,191)
============ =============
Pro forma net loss per common share . . . . . . . . . . . . . . . . . . . . . n/a $ (0.17)
============ =============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 725,113
<SECURITIES> 29,750,756
<RECEIVABLES> 816,903
<ALLOWANCES> 19,276
<INVENTORY> 944,038
<CURRENT-ASSETS> 32,400,812
<PP&E> 3,499,620
<DEPRECIATION> 991,388
<TOTAL-ASSETS> 35,109,265
<CURRENT-LIABILITIES> 1,345,331
<BONDS> 0
0
0
<COMMON> 48,396,005
<OTHER-SE> (14,632,071)
<TOTAL-LIABILITY-AND-EQUITY> 35,109,265
<SALES> 636,734
<TOTAL-REVENUES> 703,534
<CGS> 968,712
<TOTAL-COSTS> 1,841,225
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