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 November 30, 1998
or
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the transition period from _________ to ________.
Commission File No. 0-21354
ENDOGEN, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Massachusetts 04-2789249
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
30 Commerce Way
Woburn, Massachusetts 01801-1059
(Address of Principal Executive Offices)
(781) 937-0890
(Issuer's Telephone Number, Including Area Code)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Title Shares Outstanding as of January 11, 1999
- ----------------------------- -----------------------------------------
Common Stock, $0.01 par value 3,454,502
Transitional Small Business Disclosure Format (check one):
Yes No X
--- ---
Exhibit index located on page 17
Page 1 of 17
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ENDOGEN, INC.
FORM 10-QSB
QUARTER ENDED NOVEMBER 30, 1998
TABLE OF CONTENTS
Page
PART I - FINANCIAL INFORMATION Number
- ------------------------------ ------
Item 1 - Financial Statements (Unaudited)
Balance Sheet
November 30, 1998 and May 31, 1998................................. 3
Statement of Operations
for the three months ended November 30, 1998 and November 30, 1997. 4
Statement of Operations
for the six months ended November 30, 1998 and November 30, 1997... 5
Statement of Cash Flows
for the six months ended November 30, 1998 and November 30, 1997... 6
Notes to Unaudited Financial Statements................................ 7
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations.......................... 9
PART II - OTHER INFORMATION
- ---------------------------
Item 4 - Submission of Matters to a Vote of Security Holders................ 15
Item 6 - Exhibits and Reports on Form 8-K................................... 15
Signatures.................................................................. 16
Index To Exhibits........................................................... 17
Page 2 of 17
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
ENDOGEN, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
November 30, May 31,
1998 1998
-------------- ----------
ASSETS (unaudited)
Current assets:
<S> <C> <C>
Cash and cash equivalents $1,144,321 $1,175,490
Accounts receivable, net of allowance for
doubtful accounts and returns of $50,000
at November 30, 1998 and May 31, 1998 1,212,686 1,374,431
Inventories 2,097,683 1,841,135
Prepaid expenses and other current assets 475,357 449,633
Deferred income taxes 151,000 151,000
---------- ----------
Total current assets 5,081,047 4,991,689
Fixed assets, net 1,773,501 2,020,063
Intangible assets, net 241,744 299,907
Deferred income taxes 445,000 445,000
Other assets 147,024 163,662
---------- ----------
$7,688,316 $7,920,321
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of term notes payable - bank $ 200,322 $ 200,322
Current portion of capital lease obligations 7,738 6,917
Accounts payable and accrued expenses 1,060,756 1,088,840
---------- ----------
Total current liabilities 1,268,816 1,296,079
---------- ----------
Term notes payable - bank 94,900 195,061
Capital lease obligations 3,773 7,858
---------- ----------
98,673 202,919
---------- ----------
Stockholders' equity:
Common stock, $.01 par value; 10,000,000 shares
authorized; 3,454,502 and 3,442,802 shares
issued and outstanding at November 30, 1998
and May 31, 1998, respectively 34,545 34,428
Additional paid-in capital 6,365,985 6,342,402
Deferred compensation (78,460) (100,876)
Retained earnings (deficit) (1,243) 145,369
---------- ----------
Total stockholders' equity 6,320,827 6,421,323
---------- ----------
$7,688,316 $7,920,321
========== ==========
</TABLE>
See notes to unaudited financial statements
Page 3 of 17
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ENDOGEN, INC.
STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
November 30, November 30,
1998 1997
-------------- ------------
<S> <C> <C>
REVENUES: $2,576,183 $2,590,448
---------- ----------
COSTS AND EXPENSES:
Cost of revenues 937,216 885,928
Selling, general and administrative 1,311,520 1,027,607
Research and development 523,293 411,161
---------- ----------
2,772,029 2,324,696
---------- ----------
Income (loss) from operations (195,846) 265,752
Interest income (expense), net 29 (3,037)
---------- ----------
Income (loss) before income taxes (195,817) 262,715
Income tax provision (benefit) (18,000) 91,000
---------- ----------
Net income (loss) $ (177,817) $ 171,715
========== ==========
Basic earnings (loss) per share $ (0.05) $ 0.05
========== ==========
Diluted earnings (loss) per share $ (0.05) $ 0.05
========== ==========
Shares used in computing:
Basic earnings (loss) per share 3,454,314 3,428,461
========== ==========
Diluted earnings (loss) per share 3,454,314 3,691,394
========== ==========
</TABLE>
See notes to unaudited financial statements
Page 4 of 17
<PAGE>
ENDOGEN, INC.
STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
November 30, November 30,
1998 1997
------------ ------------
<S> <C> <C>
REVENUES: $5,092,763 $4,914,459
---------- ----------
COSTS AND
EXPENSES:
Cost of revenues 1,922,540 1,778,992
Selling, general and 2,312,437 1,986,819
administrative
Research and development 1,002,734 744,500
---------- ----------
5,237,711 4,510,311
---------- ----------
Income (loss) from operations (144,948) 404,148
Interest expense, net (1,664) (6,255)
---------- ----------
Income (loss) before income taxes (146,612) 397,893
Income tax provision -- 132,000
---------- ----------
Net income (loss) $ (146,612) $ 265,893
========== ==========
Basic earnings (loss) per share $ (0.04) $ 0.08
========== ==========
Diluted earnings (loss) per share $ (0.04) $ 0.07
========== ==========
Shares used in computing:
Basic earnings (loss) per share 3,449,674 3,424,225
========== ==========
Diluted earnings (loss) per share 3,449,674 3,637,986
========== ==========
</TABLE>
See notes to unaudited financial statements
Page 5 of 17
<PAGE>
ENDOGEN, INC.
STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
November 30, November 30,
1998 1997
------------ ------------
<S> <C> <C>
Increase (Decrease) in Cash and Cash Equivalents
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (146,612) $ 265,893
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 467,110 408,114
Decrease in accounts receivable 161,745 192,446
Increase in inventories (256,548) (184,109)
Increase in prepaid expenses and other assets (25,724) (10,125)
Decrease in accounts payable and accrued expenses (28,084) (111,378)
---------- ----------
Net cash provided by operating activities 171,887 560,841
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets (123,331) (298,886)
---------- ----------
Net cash used for investing activities (123,331) (298,886)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of capital lease obligations and term
notes payable - bank (103,425) (76,909)
Proceeds from borrowings under an equipment
line of credit with a bank -- 167,863
Proceeds from issuance of common stock 23,700 54,504
---------- ----------
Net cash provided by (used in)
financing activities (79,725) 145,458
---------- ----------
Net increase (decrease) in cash and cash equivalents (31,169) 407,413
Cash and cash equivalents, beginning of period 1,175,490 334,050
---------- ----------
Cash and cash equivalents, end of period $1,144,321 $ 741,463
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ 18,360 $ 18,551
========== ==========
Cash paid for income taxes $ 162,956 $ 45,465
========== ==========
</TABLE>
See notes to unaudited financial statements
Page 6 of 17
<PAGE>
ENDOGEN, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
1. Basis of Presentation
The unaudited financial statements of Endogen, Inc. (the "Company" or
"Endogen") include, in the opinion of management, all adjustments
(consisting of normal and recurring adjustments) necessary for a fair
presentation of the Company's financial position as of November 30, 1998
and the results of operations for the three and six month periods ended
November 30, 1998 and November 30, 1997. The results of operations are not
necessarily indicative of results for a full year.
These financial statements should be read in conjunction with the
financial statements contained in the Company's Form 10-KSB filed with the
Securities and Exchange Commission (the "SEC") on August 28, 1998 pursuant
to the Securities Exchange Act of 1934, as amended. Certain information and
footnote disclosures normally included in the financial statements prepared
in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to the SEC rules and regulations.
2. Inventories
Inventories consist of the following:
<TABLE>
<CAPTION>
November 30,
1998 May 31, 1998
------------ ------------
<S> <C> <C>
Raw materials and supplies $ 869,638 $ 793,872
Work-in-process 288,089 165,771
Finished goods 939,956 881,492
---------- ----------
$2,097,683 $1,841,135
========== ==========
3. Fixed Assets
Fixed assets consist of the following:
November 30,
1998 May 31, 1998
---------- ------------
Laboratory equipment $1,181,614 $1,142,160
Computer and office equipment 1,058,197 975,033
Leasehold improvements 1,716,458 1,715,745
---------- ----------
3,956,269 3,832,938
Accumulated depreciation and amortization (2,182,768) (1,812,875)
---------- ----------
$1,773,501 $2,020,063
========== ==========
</TABLE>
Page 7 of 17
<PAGE>
ENDOGEN, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
4. Intangible Assets
Intangible assets consist of the following:
<TABLE>
<CAPTION>
November 30,
1998 May 31, 1998
------------ ------------
<S> <C> <C>
Acquired technology $ 305,290 $ 305,290
Patent costs 68,240 68,240
License costs 421,778 421,778
---------- ----------
795,308 795,308
Accumulated amortization (553,564) (495,401)
---------- ----------
$ 241,744 $ 299,907
========== ==========
5. Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consist of the following:
November 30,
1998 May 31, 1998
------------ ------------
Accounts payable $ 368,155 $ 439,215
Accrued wages 211,385 219,026
Accrued royalties 88,808 123,287
Accrued professional fees 382,097 175,620
Accrued taxes payable 10,311 131,692
---------- ----------
$1,060,756 $1,088,840
========== ==========
</TABLE>
6. Borrowings
In August 1998, the Company's existing $850,000 revolving line of
credit agreement with a bank was amended to extend the maturity date to
August 1999 and to reduce the interest rate to the prime rate plus 0.5%
(9.0% at November 30, 1998). At November 30, 1998, the Company had $850,000
available under this revolving line of credit.
7. Common Stock
On November 5, 1998, the stockholders of the Company approved an
increase in the number of shares authorized for issuance under the
Company's 1992 Stock Plan from 1,000,000 shares to 1,250,000 shares.
Page 8 of 17
<PAGE>
ENDOGEN, INC.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion includes forward-looking statements, including,
but not limited to, statements with respect to the Company's future financial
performance, operating results, plans and objectives. Actual results may differ
materially from those currently anticipated depending upon a variety of factors.
See "Certain Factors That May Affect Future Results" herein.
Endogen is principally engaged in the development, manufacture and sale of
specialty reagents, immuno-assay test kits and molecular research products for
pharmaceutical, biotechnology and biomedical research. Endogen's major product
lines include over 360 specialty reagents and 66 immuno-assay test kits that
measure immune system function in human, mouse, rat, or porcine samples. In
August 1998, the Company began to ship Xplore(TM) messenger RNA ("mRNA")
quantification assay kits to life science customers, the first mRNA assay kits
to provide rapid, sensitive and accurate measurement of gene expression.
Products marketed under Endogen's name are sold directly in the United States
and through distributors in over 40 foreign countries. The Company also sells
products on a private label basis to customers who market these products under
their own brand names.
Results of Operations
As an aid to understanding Endogen's operating results, the following table
shows each item from the statement of operations expressed as a percentage of
revenues.
PERCENTAGE OF REVENUES
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
November 30, November 30,
------------------ -------------------
1998 1997 1998 1997
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues..................................... 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Cost of revenues........................... 36.4% 34.2% 37.8% 36.2%
Selling, general and administrative........ 50.9% 39.7% 45.4% 40.4%
Research and development................... 20.3% 15.9% 19.7% 15.2%
Income (loss) from operations................ (7.6)% 10.2% (2.9)% 8.2%
Interest income (expense), net............. 0.0% (0.1)% 0.0% (0.1)%
Income (loss) before income taxes............ (7.6)% 10.1% (2.9)% 8.1%
Provision (benefit) for income taxes....... (0.7)% 3.5% 0.0% 2.7%
Net income (loss)............................ (6.9)% 6.6% (2.9)% 5.4%
</TABLE>
Three Month Period Ended November 30, 1998 As Compared
with the Three Month Period Ended November 30, 1997
------------------------------------------------------
Revenues
For the three months ended November 30, 1998, total revenues were $2,576,183
compared to $2,590,448 during the same period last year, a decrease of $14,265.
Domestic and international sales of Endogen branded products increased 10%
during the second quarter of fiscal 1999 compared to the second quarter of
fiscal 1998. This growth was due primarily to increased sales volume from
existing Endogen product lines and new product introductions. This increase was
offset by a decrease of $203,550, or 24%, in private label sales in the second
quarter of fiscal 1999 compared with the second quarter of fiscal 1998 due
primarily to economic conditions and competitive pressures in the Japanese
diagnostic market which negatively impacted sales to a major private label
customer. The Company expects a continued shortfall in sales to this customer in
the second half of fiscal 1999 when compared to sales levels in fiscal 1998.
Page 9 of 17
<PAGE>
ENDOGEN, INC.
Cost of Revenues
Cost of revenues was $937,216 for the three months ended November 30, 1998
compared with $885,928 for the same period last year, an increase of $51,288, or
6%. As a percentage of revenues, cost of revenues was 36% and 34% during the
three month periods ended November 30, 1998 and 1997, respectively. This
increase in cost of revenues as a percentage of revenues was due primarily to
additional expenses associated with product launch activities related to the
Xplore mRNA kits, changes in the mix of products sold and higher fixed overhead
costs.
Selling, General and Administrative Expenses
Selling, general and administrative expense was $1,311,520 for the three
months ended November 30, 1998 compared with $1,027,607 for the same period last
year, an increase of $283,913, or 28%. This increase was due primarily to
increases in catalog expenses and expenditures for marketing activities
associated with the launch of the Xplore mRNA product line and increases in
recruiting and consulting expenses. As a percentage of revenues, selling,
general and administrative expense increased to 51% of revenues for the three
months ended November 30, 1998 compared with 40% for the same period last year.
The Company anticipates making continued investments in new product development
and product launch activities at similar levels in the second half of fiscal
1999.
Research and Development Expenses
Research and development expense was $523,293 for the three months ended
November 30, 1998 compared with $411,161 for the same period last year, an
increase of $112,132, or 27%. Substantially all of the increase in research and
development expenditures relates to investment in the mRNA program. Research and
development expense increased as a percentage of revenues to 20% for the three
months ended November 30, 1998 from 16% for the same period last year. Endogen
plans to continue to spend heavily on product development for new products and
to upgrade existing products.
Interest Income (Expense), Net
Net interest income was $29 for the three months ended November 30, 1998
compared with net interest expense of $3,037 for the same period last year. This
decrease in interest expense was the result of the reduction in the average
outstanding borrowings under term notes payable and capital lease obligations.
Income Taxes
For the three months ended November 30, 1998, the Company recorded an
income tax benefit of $18,000 and for the three months ended November 30,1997,
the Company recorded a provision for income taxes of $91,000 based on estimated
effective tax rates at November 30, 1998 and 1997, respectively.
Six Month Period Ended November 30, 1998 As Compared
with the Six Month Period Ended November 30, 1997
----------------------------------------------------
Revenues
For the six months ended November 30, 1998, total revenues increased to
$5,092,763 from $4,914,459 in the same period last year, an increase of $178,304
or 4%. Domestic and international sales of Endogen branded products increased to
$3,767,846 during the first six months of fiscal 1999 from $3,494,498 in the
same period last year, an increase of 8%. This growth was due primarily to
increased sales volume from existing Endogen product lines and new product
introductions. This increase was offset in part by a 9% decline in private label
sales, which decreased to $1,255,705 in the first six months of fiscal 1999 from
$1,376,811 during the first six months of fiscal 1998. This decline was
attributable primarily to economic conditions and competitive pressures in the
Japanese diagnostic market resulting in decreased sales to one major private
label customer. The Company expects a continued shortfall in sales to this
customer in the second half of fiscal 1999 when compared to sales levels in
fiscal 1998. In August 1998, the Company launched an entirely new line of
products, the Xplore mRNA quantification assay kits, which quantitatively
measure levels of mRNA.
Page 10 of 17
<PAGE>
ENDOGEN, INC.
Cost of Revenues
Cost of revenues was $1,922,540 for the six months ended November 30, 1998
compared with $1,778,992 for the same period last year, an increase of $143,548
or 8%. As a percentage of revenues, cost of revenues was 38% and 36% in the six
month periods ended November 30, 1998 and 1997, respectively. The increase in
cost of revenues as a percentage of revenues during the first six months of
fiscal 1999 was due primarily to additional expenses associated with product
launch activities related to the Xplore mRNA kits, changes in the mix of
products sold and higher fixed overhead costs.
Selling, General and Administrative Expenses
Selling, general and administrative expense was $2,312,437 for the six
months ended November 30, 1998 compared with $1,986,819 for the same period last
year, an increase of $325,618 or 16%. This increase was due primarily to
increases in catalog expenses and expenditures for marketing activities
associated with the launch of the Xplore mRNA product line and increases in
recruiting and consulting expenses. As a percentage of revenues, selling,
general and administrative expense increased to 45% of revenues for the six
months ended November 30, 1998 compared with 40% for the same period last year.
Research and Development Expenses
Research and development expense was $1,002,734 for the six months ended
November 30, 1998 versus $744,500 for the same period last year, an increase of
$258,234, or 35%. Research and development expense increased as a percentage of
revenues to 20% for the six months ended November 30, 1998 from 15% for the same
period last year. Substantially all of the increase in research and development
expenditure between the six-month periods relates to investment in the mRNA
program. Endogen plans to continue to spend heavily on product development for
new products and to upgrade existing products.
Interest Income (Expense), Net
Net interest expense was $1,664 for the six months ended November 30, 1998
compared with net interest expense of $6,255 for the same period last year, a
decrease of $4,591 or 73%. This decrease was the result of the reduction in the
average outstanding borrowings under term notes payable and capital lease
obligations.
Income Taxes
For the six months ended November 30, 1998, the Company did not record a
provision for income taxes and for the six months ended November 30, 1997, the
Company recorded a provision for income taxes of $132,000 based on estimated
effective tax rates at November 30, 1998 and 1997, respectively.
Liquidity and Capital Resources
The growth of Endogen's business has led to increased liquidity
requirements to fund working capital needs and capital expenditures. This
includes financing inventories and accounts receivable to support the Company's
growing operations, as well as purchases of new laboratory equipment and
leasehold improvements to support new product development. In addition, in
connection with its Product Development and Marketing Agreement with Third Wave
Technologies, Inc. ("Third Wave"), the Company is obligated to make funding
payments not to exceed $1,050,000 in total, to Third Wave in quarterly
installments over a three year period beginning December 1, 1997.
At November 30, 1998, Endogen's cash and cash equivalent position was
$1,144,321, a decrease of $31,169 from May 31, 1998. Endogen has financed its
liquidity needs primarily through cash from operations, a working capital line
of credit with a bank and term notes payable with a bank. At November 30, 1998,
the Company had $850,000 available under a working capital line of credit with a
bank. The interest rate on the line of credit is 0.5% above the bank's prime
rate (9.0% at November 30, 1998).
Cash Flows from Operating Activities
Net cash provided by operating activities during the six month period ended
November 30, 1998 was $171,887 as compared to $560,841 during the same period
last year. For the first six months of fiscal 1999, net cash provided by
operating activities consisted primarily of depreciation and amortization of
$467,110 and a decrease in accounts receivable of $161,745. This was offset in
part by a net loss of $146,612, an increase in inventories of $256,548, an
increase in prepaid expenses and other assets of $25,724 and a decrease in
accounts payable and accrued expenses of
Page 11 of 17
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ENDOGEN, INC.
$28,084. For the first six months of fiscal 1998, net cash provided by operating
activities consisted primarily of net income of $265,893, depreciation and
amortization of $408,114 and a decrease in accounts receivable of $192,446. This
was partially offset by an increase in inventories of $184,109, an increase in
prepaid expenses and other assets of $10,125 and a decrease in accounts payable
and accrued expenses of $111,378.
Cash Flows from Investing Activities
Net cash used for investing activities during the six month periods ended
November 30, 1998 and 1997 was $123,331 and $298,886, respectively, and
consisted of investments in capital equipment.
Cash Flows from Financing Activities
During the six month period ended November 30, 1998, net cash used for
financing activities was $79,725 and consisted of repayments of capital lease
obligations and term notes payable of $103,425, offset in part by proceeds from
the issuance of common stock of $23,700. During the six months ended November
30, 1997, net cash provided by financing activities was $145,458 and consisted
of proceeds of $167,863 from borrowings under an equipment line of credit and
$54,504 from the issuance of common stock, offset in part by cash used to
decrease borrowings of $76,909.
The Company expects to continue expanding operations through internal
growth and strategic acquisitions which offer products similar or complementary
to those offered by the Company. Although the Company has no material current
acquisition agreements or arrangements, there may be opportunities which require
additional external financing, and the Company may from time to time seek to
obtain additional funds from public or private issuance of equity or debt
securities. There can be no assurance that such financing will be available at
all or on terms acceptable to the Company.
Based on management's current projections, Endogen believes that its
financial resources and cash flows from operations, together with the revolving
line of credit currently available, will be sufficient to finance its current
and planned operations for at least the next twelve months. There can be no
assurance, however, that the Company will not require additional working capital
and, if it does require such capital, that such capital will be available to the
Company on acceptable terms, if at all.
The foregoing statements contain forward-looking statements which involve
risks and uncertainties. The Company's actual experience may differ materially
from that discussed above.
Year 2000 Compliance
The "Year 2000 Issue" is the result of computer programs being written
using two digits rather than four digits to define the applicable year. The
Company's computer equipment and software and devices with embedded technology
that are time sensitive 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 otherwise engage in normal
business activities. The Company is at risk for both its own Year 2000 Issues
and for the Year 2000 Issues of those with whom it does business, particularly
suppliers of materials and services as well as customers placing orders and
making payments on invoices.
The Company has established a team to study and address its Year 2000
Issues. This team, lead by the Company's Controller, consists of members of each
department within the Company and reports to the Company's Vice President,
Operations and Finance. The following is a summary of the Company's Year 2000
state of readiness as set forth by category.
o Information Technology Systems
- Accounting / Business System. The Company has upgraded the system
software to a version which is Year 2000 compliant, but testing has
not yet been performed. The Company anticipates completing this
testing by June 1999.
Page 12 of 17
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ENDOGEN, INC.
- Production System. The Company has upgraded the system software to a
version which is Year 2000 compliant, but testing has not yet been
performed. The Company anticipates completing this testing by June
1999.
- Sales Reporting System. The Company has upgraded the system software
to a version which is Year 2000 compliant, but testing has not yet
been performed. The Company anticipates completing this testing by
June 1999.
- Contact Management System. The Company has upgraded the system
software to a version which is Year 2000 compliant, but testing has
not yet been performed. The Company anticipates completing this
testing by June 1999.
o Non-Information Technology System
The Company has not yet made a review of the Year 2000 compliance of its
non-information technology systems (i.e., embedded technology such as
micro-controllers and processors). These systems include manufacturing, research
and development, telecommunications and office equipment which may contain
embedded technology. The Company initiated such a review beginning in December
1998 and anticipates completing this review no later than June 1999.
o Third Party Compliance
Management believes that the most significant risk to the Company of Year
2000 Issues is the effect such issues may have on its suppliers and customers.
In addition, news reports have indicated that various agencies within the
federal, state and local governments may have difficulty becoming Year 2000
compliant before the year 2000. The Company has not yet completed its assessment
of such third party compliance or undertaken to quantify the effect of such
non-compliance or to determine whether such quantification is even possible. The
Company began an assessment of the Year 2000 compliance of the various third
parties with which it maintains a material business relationship in December
1998 and anticipates completing this assessment no later than June 1999.
The Company is in the process of quantifying the historical costs incurred
and creating an estimate of future costs associated with becoming Year 2000
compliant. The Company plans to have an initial estimate of costs completed by
June 1999.
The Company has not yet begun a comprehensive analysis of the operational
problems and costs (including loss of revenues) that would be reasonably likely
to result from the failure of the Company and certain third parties to complete
efforts necessary to achieve Year 2000 compliance on a timely basis. A
contingency plan has not been developed for dealing with the most reasonably
likely worst case scenario and such scenario has not yet been clearly
identified. The Company began such an analysis in December 1998 and anticipates
completing this analysis no later than June 1999.
The Company presently believes that the Year 2000 Issue will not pose
significant operational problems for the Company. However, if all Year 2000
Issues are not properly identified, or assessment, remediation and testing are
not effected timely with respect to Year 2000 problems that are identified,
there can be no assurance that the Year 2000 Issue will not materially adversely
impact the Company's results of operations or materially adversely affect the
Company's relationships with customers, suppliers or others.
Additionally, there can be no assurance that the Year 2000 Issues of other
entities will not have a material adverse impact on the Company's systems or
results of operations.
The costs of the Company's Year 2000 identification, assessment,
remediation and testing efforts and the dates on which the Company believes it
will complete such efforts are based upon management's best estimates, which
were derived using numerous assumptions regarding future events and actual
results could differ materially from those currently anticipated. Specific
factors that could cause such material differences include, but are not limited
to, the availability and cost of personnel trained in Year 2000 Issues, the
ability to identify, assess, remediate and test all relevant computer codes and
embedded technology, and similar uncertainties.
Page 13 of 17
<PAGE>
ENDOGEN, INC.
Certain Factors That May Affect Future Results
The Company does not provide forecasts of the future financial performance
of the Company. However, from time to time, information provided by the Company
or statements made by its employees may contain "forward-looking" information
that involve risks and uncertainties. In particular, statements contained in
this Form 10-QSB that are not historical facts constitute forward-looking
statements and are made under the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. The Company's actual results of
operations and financial condition have varied and may in the future vary
significantly from those stated in any forward-looking statements. The Company's
future operating results are subject to risks and uncertainties and are
dependent upon many factors, including, without limitation, the Company's
ability to (i) meet its working capital and future liquidity needs, (ii)
successfully implement its strategic growth strategies, (iii) understand,
anticipate and respond to rapidly changing technologies, market trends and
customer needs, (iv) develop, manufacture and deliver high quality,
technologically advanced products on a timely basis to withstand competition
from competitors which may have greater financial, information gathering and
marketing resources than the Company, (v) obtain and protect licensing and
intellectual property rights necessary for the Company's technology and product
development and on terms favorable to the Company, (vi) recruit and retain
highly talented professionals in a competitive job market, and (vii)
successfully address its Year 2000 Issues as more fully described above. The
Company's ability to market and sell its products could also be adversely
affected by the emergence of new competitors in the market place and by changes
resulting in increased government regulation of the manufacture and sale of its
products. In addition, a significant portion of the Company's revenues are
attributable to international customers, which may be adversely affected by
factors including fluctuations in exchange rates, adverse political and economic
conditions, tariff regulation, and difficulties in obtaining export licenses.
Each of these factors, and others, are discussed from time to time in the
filings made by the Company with the Securities and Exchange Commission,
including, but not limited to, the Company's Annual Report on Form 10-KSB filed
on August 28, 1998 and its Quarterly Report on Form 10-QSB filed on October 14,
1998.
Page 14 of 17
<PAGE>
ENDOGEN, INC.
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders
The annual meeting of Stockholders of Endogen, Inc. was held on November 5,
1998. A vote was proposed (1) to elect a Board of Directors to serve for the
ensuing year and until their respective successors have been duly elected and
qualified, or until their earlier resignation or removal; (2) to fix the size of
the Board of Directors at six (6); (3) to approve an amendment to the Company's
1992 Stock Plan to increase the number of shares of Common Stock authorized for
issuance thereunder from 1,000,000 shares to 1,250,000 shares; and (4) to ratify
the selection of the firm of PricewaterhouseCoopers LLP as independent auditors
for the fiscal year ending May 31, 1999. The shareholder voting results are as
follows:
<TABLE>
<CAPTION>
Votes Withheld
for votes
--------- -------
<S> <C> <C>
(1) Election of:
Owen A. Dempsey 3,088,319 74,340
Wallace G. Dempsey 3,088,003 74,656
Irwin J. Gruverman 3,077,319 85,340
Hayden H. Harris 3,088,319 74,340
Wolfgang Woloszczuk 3,088,319 74,340
Charles R. Burke 3,088,166 74,493
<CAPTION>
Votes Votes Votes Broker
for against abstained non-votes
--------- ------- --------- ---------
<S> <C> <C> <C> <C>
(2) Fix the size of the Board
of Directors at six (6) 3,054,340 87,362 20,957 --
Votes Votes Votes Broker
for against abstained non-votes
--------- ------- --------- ---------
(3) Amend 1992 Stock Plan 1,419,785 125,345 16,429 1,601,100
Votes Votes Votes Broker
for against abstained non-votes
--------- ------- --------- ---------
(4) Ratify the selection of
PricewaterhouseCoopers LLP 3,139,946 8,648 14,065 --
</TABLE>
Item 6 - Exhibits and Reports on Form 8-K
(a) - EXHIBITS
10.1 Secured Promissory Note by and between Endogen, Inc. and Owen A.
Dempsey dated September 24, 1998.
10.2 Pledge Agreement by and between Endogen, Inc. and Owen A. Dempsey
dated September 24, 1998.
11.1 Statement Re: Computation of Earnings Per Share
27.1 Financial Data Schedule
27.2 Restated Financial Data Schedule
(b) - REPORTS ON FORM 8-K
No reports on Form 8-K have been filed during the quarter for which this
report is filed.
Page 15 of 17
<PAGE>
ENDOGEN, INC.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
ENDOGEN, INC.
BY:
Date: January 14, 1999 /s/ Owen A. Dempsey
--------------------------------
Owen A. Dempsey
Director, President and
Chief Executive Officer
(Principal Executive Officer)
Date: January 14, 1999 /s/ Avery W. Catlin
--------------------------------
Avery W. Catlin
Vice President, Operations and Finance,
Treasurer and Chief Financial Officer
(Principal Financial and
Chief Accounting Officer)
Page 16 of 17
<PAGE>
ENDOGEN, INC.
INDEX TO EXHIBITS
Exhibit Number Description
- -------------- -----------
10.1 Secured Promissory Note by and between Endogen, Inc. and Owen A. Dempsey
dated September 24, 1998.
10.2 Pledge Agreement by and between Endogen, Inc. and Owen A. Dempsey dated
September 24, 1998.
11.1 Statement Re: Computation of Earnings per Share.
27.1 Financial Data Schedule.
27.2 Restated Financial Data Schedule.
Page 17 of 17
SECURED PROMISSORY NOTE
$36,000.00 September 24, 1998
FOR VALUE RECEIVED, Owen A. Dempsey, an individual with an address at 21
Harris Street, Brookline, Massachusetts 02146 (the "Maker"), promises to pay to
the order of Endogen, Inc. ("Endogen") the principal sum of THIRTY-SIX THOUSAND
AND 00/100 DOLLARS ($36,000.00), together with interest thereon from the date
hereof on the unpaid principal balance from time to time outstanding, on the
earliest to occur of: (a) one year from the date hereof, (b) the date the Maker
ceases employment or other business relationship with Endogen or (c) the sale or
transfer by the Maker of any of his shares of Endogen's Common Stock (any event
described in (a), (b) or (c) above shall be referred to hereinafter as a
"Payment Due Date"). Interest on the unpaid principal balance hereof shall
accrue from and including the date hereof to the date such principal amount is
paid at the annual rate of 5.42% compounded annually. Interest on the unpaid
principal balance of this Secured Promissory Note shall be payable on the
Payment Due Date, and in the event of failure of payment on the Payment Due
Date, monthly thereafter until this Secured Promissory Note is paid in full.
Payments of both principal and interest are to be made at Endogen's
principal offices located at 30 Commerce Way, Woburn, Massachusetts 01801 or
such other place as Endogen designates to the Maker in writing, in lawful money
of the United States of America. Interest shall be computed on the basis of a
360-day year and twelve 30-day months.
No delay or omission on the part of Endogen in exercising any right
hereunder shall operate as a waiver of such right or of any other right of
Endogen, nor shall any delay, omission or waiver on any one occasion be deemed a
bar to or waiver of the same or any other right on any future occasion.
This Secured Promissory Note may be prepaid at any time, in whole or in
part, by the Maker without penalty.
This Secured Promissory Note is secured by and entitled to the benefits
of a pledge of securities pursuant to a Pledge Agreement, dated the date hereof,
by the Maker in favor of Endogen (the "Pledge Agreement"). Upon the occurrence
of an Event of Default (as defined in the Pledge Agreement), Endogen may declare
any or all obligations or liabilities of the Maker to Endogen (including the
unpaid principal hereunder and any interest due thereof), immediately due and
payable without presentment, demand, protest or notice. The Maker shall remain
personally liable to Endogen with respect to all of the obligations under this
Secured Promissory Note.
<PAGE>
When this Secured Promissory Note has been paid in full, the pledge of
the collateral pursuant to the Pledge Agreement shall cease, and the collateral
pursuant to the Pledge Agreement shall revert to the Pledgor free and clear of
all liens securing any obligation or liability of the Pledgor to Endogen, and
Endogen's rights, title, and interest therein shall cease and become void.
The Maker hereby waives presentment, demand, protest, and notice of
every kind. The Maker shall pay on demand all costs, including court costs and
reasonable attorney's fees, paid or incurred by Endogen in enforcing this
Secured Promissory Note upon default.
This Secured Promissory Note shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the Maker has caused this Secured Promissory Note to
be signed under seal, as of the date first above written.
MAKER
Witness: /s/Avery W. Catlin /s/Owen A. Dempsey
---------------------- -------------------------
Owen A. Dempsey
PLEDGE AGREEMENT
PLEDGE AGREEMENT dated as of September 24, 1998 by and between Owen A.
Dempsey, an individual with an address at 21 Harris Street, Brookline,
Massachusetts 02146 (the "Pledgor"), in favor of Endogen, Inc., a Massachusetts
corporation, having its principal place of business at 30 Commerce Way, Woburn,
Massachusetts 01801 ("Endogen").
WHEREAS, Endogen has agreed to lend to the Pledgor $36,000.00 (the
"Loan"), which Loan is evidenced by a secured promissory note in the principal
amount of $36,000.00 of the Pledgor to Endogen dated as of the date hereof (the
"Note"); and
WHEREAS, the obligation of Endogen to grant the Loan is subject to the
condition that the Pledgor execute and deliver this Pledge Agreement and grant
the security interest hereinafter described.
NOW, THEREFORE, in consideration of the covenants and conditions set
forth herein and to induce Endogen to grant the Loan, the Pledgor hereby agrees
with Endogen as follows:
Section 1. Defined Terms. The following terms have the following
meanings:
"Code" means the Uniform Commercial Code from time to time in effect in
the Commonwealth of Massachusetts.
"Collateral" means the Pledged Stock and all Proceeds.
"Foreclosure Date" means any date on which Endogen sends to the Pledgor
a Foreclosure Notice.
"Foreclosure Notice" means notice that Endogen may give to the Pledgor
when an Event of Default occurs and is continuing, which notice shall state (i)
that Endogen is exercising its rights under this Pledge Agreement, (ii) the
nature of the Event of Default.
"Loan" means the loan by Endogen of $36,000.00 in favor of the Pledgor.
"Pledge Agreement" means this Pledge Agreement, as amended, supplemented
or otherwise modified from time to time.
"Pledged Stock" means 12,000 shares of Endogen Common Stock owned by the
Pledgor.
<PAGE>
"Proceeds" means all "proceeds" as such term is defined in Section
9-306(1) of the Uniform Commercial Code in effect in Massachusetts on the date
hereof and, in any event, includes, without limitation, all dividends or other
income from the Pledged Stock, collections thereon or distribution with respect
thereto.
Section 2. Pledge; Grant of Security Interest. The Pledgor grants to
Endogen a first security interest in the Collateral, as collateral security for
the prompt and complete payment of the Note in accordance to its terms. The
Pledgor shall deliver to Endogen the stock certificate or certificates
representing the Pledged Stock to be held in escrow by Endogen until the Note is
paid in full, together with an undated stock power or powers covering such
certificate or certificates, duly executed in blank.
Section 3. Representations and Warranties. The Pledgor represents and
warrants that:
(a) this Pledge Agreement has been duly executed by the Pledgor,
and constitutes a legal, valid and binding obligation of the
Pledgor enforceable in accordance with its terms;
(b) no consent or authorization of, filing with, or other act by
or with respect to, any arbitrator or governmental authority
and no consent of any other person (including without
limitation, any creditor of the Pledgor), is required in
connection with the execution, delivery, performance,
validity or enforceability of this Pledge Agreement; and
(c) the Pledgor is the record and beneficial owner of the Pledged
Stock, and the Pledged Stock is free of any and all liens,
pledges, security interests, encumbrances or options in favor
of, or claims of, any other person, except the lien created
by this Pledge Agreement.
Section 4. Covenants. The Pledgor covenants and agrees with Endogen
that, from and after the date of this Pledge Agreement until the Note is paid in
full:
(a) At any time and from time to time, upon written request of
Endogen, and at the sole expense of the Pledgor, the Pledgor
shall promptly and duly execute and deliver such further
instruments and documents and take such further actions as
Endogen may reasonably request for the purposes of obtaining
or preserving the full benefits of this Pledge Agreement and
of the rights and powers herein granted. If any amount
payable under or in connection with any of the Collateral is
or becomes evidenced by a promissory note, other instrument
or chattel paper, such note, instrument or chattel paper
shall be promptly delivered to Endogen, duly endorsed in a
manner satisfactory to Endogen, to be held as Collateral
pursuant to this Pledge Agreement.
<PAGE>
(b) The Pledgor agrees to pay, and to save Endogen harmless from,
any and all liabilities with respect to, or resulting from
any delay in paying, any and all stamp, excise, sales or
other taxes which may be payable or determined to be payable
with respect to any of the Collateral or in connection with
any of the transactions contemplated by this Pledge
Agreement.
Section 5. Cash Dividends; Voting Rights. Unless an Event of Default has
occurred and is continuing and Endogen has given a Foreclosure Notice to the
Pledgor, the Pledgor shall be permitted to receive all cash dividends paid by
Endogen with respect to the Pledged Stock and shall possess all rights to vote
the Pledged Stock at any meeting of shareholders of Endogen or otherwise.
Section 6. Default. The failure by the Pledgor to pay any amount due and
payable under the Note within ten (10) business days after such amount becomes
due and payable shall constitute a default hereunder (an "Event of Default").
Section 7. Rights of Endogen. (a) If an Event of Default occurs and is
continuing and Endogen gives a Foreclosure Notice to the Pledgor (i) Endogen
shall have the right to receive any and all cash dividends paid with respect to
the Pledged Stock and make application thereof to the Note in such order as it
may determine, and (ii) all shares of the Pledged Stock shall be registered in
the name of Endogen or its nominee, and Endogen or its nominee may thereafter
exercise (A) all voting, corporate and other rights pertaining to such shares of
the Pledged Stock at any meeting of shareholders of Endogen or otherwise and (B)
any and all rights of conversion, exchange, subscription and any other rights,
privileges or options pertaining to the Pledged Stock as if it were the absolute
owner thereof (including, without limitation, the right to exchange at its
discretion any and all of the Pledged Stock upon the merger, consolidation,
reorganization, recapitalization or other fundamental change in the corporate
structure of Endogen, or upon the exercise by the Pledgor or Endogen of any
right, privilege or option pertaining to such shares of the Pledged Stock, and
in connection therewith, the right to deposit and deliver any and all of the
Pledged Stock with any committee, depository, transfer agent, registrar or other
designated agency upon such terms and conditions as it may determine), all
without liability except to account for property actually received by it, but
Endogen shall have no duty to exercise any such right, privilege or option and
shall not be responsible for any failure to do so or delay in so doing.
Upon the occurrence of an Event of Default, Endogen shall have the rights and
remedies set forth in this Section 7 and in any other instrument or agreement
evidencing or relating to the Loan, and all rights and remedies of a secured
party under the Code or other applicable law. The Pledgor shall remain
personally liable to the Company with respect to all of the obligations under
that certain "full recourse" Note of even date herewith.
<PAGE>
(b) Endogen shall not be under any obligation to sell of otherwise
disposeof any Collateral upon request of the Pledgor or any other
person or take any other action whatsoever with regard to the
Collateral or any part thereof.
(c) When the Note has been paid in full, the pledge of the
Collateral shallcease, and the Collateral shall revert to the
Pledgor free and clear of all liens securing any obligation or
liability of the Pledgor to Endogen, and Endogen's rights, title,
and interest therein shall cease and become void.
Section 8. Severability. Any provision of this Pledge Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 9. No Waiver; Cumulative Remedies. No failure to exercise, nor
any delay in exercising, on the part of Endogen, any right, power or privilege
hereunder shall operate as a waiver thereof. No single or partial exercise of
any right, power or privilege hereunder shall preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. The
rights and remedies herein provided are cumulative, may be exercised singly or
concurrently and are not exclusive of any rights or remedies provided by law.
Section 10. Waivers and Amendments; Successors and Assigns; Governing
Law. None of the terms or provisions of this Pledge Agreement, may be waived,
amended, supplemented or otherwise modified except by a written instrument
executed by the Pledgor and Endogen, provided, that any provision of this Pledge
Agreement may be waived by Endogen in a letter or agreement executed by Endogen.
This Pledge Agreement shall be binding upon the successors and assigns of the
Pledgor and shall inure to the benefit of Endogen and its successors and
assigns. This Pledge agreement shall be governed by and construed and
interpreted in accordance with, the laws of the Commonwealth of Massachusetts.
Each party hereto consents to the jurisdiction of the state courts of the
Commonwealth of Massachusetts and the United States courts for the District of
Massachusetts with respect to the transactions contemplated hereby.
Section 11. Notices. Notices under this Pledge Agreement may be given by
express overnight courier service or by facsimile transmission, addressed to the
Parties at their respective addresses set forth in the first paragraph to this
Pledge Agreement and shall be effective when sent. Either party may change their
respective addresses by written notice to the other party.
Section 12. Counterparts. This Pledge Agreement may be executed in
several counterparts, each of which shall constitute an original, but all of
which, when taken together, shall constitute but one agreement.
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Pledge Agreement to
be duly executed and delivered as of the date first above.
PLEDGOR:
/s/Owen A. Dempsey
---------------------------
Owen A. Dempsey
ENDOGEN, INC.
/s/Avery W. Catlin
----------------------------
Avery W. Catlin
Vice President, Operations & Finance
ENDOGEN, INC.
EXHIBIT 11.1
Computation of Net Income (Loss) Per Share
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
November 30, November 30,
1998 1997 1998 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
BASIC
- -----
Weighted average number of common
shares outstanding 3,454,314 3,428,461 3,449,674 3,424,225
============== ============== ============== ==============
Net income (loss) applicable to common shares $ (177,817) $ 171,715 $ (146,612) $ 265,893
============== ============== ============== ==============
Basic earnings (loss) per share $ (0.05) $ 0.05 $ (0.04) $ 0.08
============== ============== ============== ==============
DILUTED
- -------
Weighted average number of common
shares outstanding 3,454,314 3,428,461 3,449,674 3,424,225
Weighted average incremental shares from the
assumed exercise of stock options and warrants -- 262,933 -- 213,761
-------------- -------------- -------------- --------------
3,454,314 3,691,394 3,449,674 3,637,986
============== ============== ============== ==============
Net income (loss) applicable to common shares
and common equivalent shares $ (177,817) $ 171,715 $ (146,612) $ 265,893
============== ============== ============== ==============
Diluted earnings (loss) per share $ (0.05) $ 0.05 $ (0.04) $ 0.07
============== ============== ============== ==============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements included in the Form 10-QSB for the quarter ended November
30, 1998, of Endogen, Inc. to which this exhibit is a part and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-START> JUN-01-1998
<PERIOD-END> NOV-30-1998
<CASH> 1,144
<SECURITIES> 0
<RECEIVABLES> 1,263
<ALLOWANCES> 50
<INVENTORY> 2,098
<CURRENT-ASSETS> 5,081
<PP&E> 3,956
<DEPRECIATION> 2,183
<TOTAL-ASSETS> 7,688
<CURRENT-LIABILITIES> 1,269
<BONDS> 0
0
0
<COMMON> 35
<OTHER-SE> 6,286
<TOTAL-LIABILITY-AND-EQUITY> 7,688
<SALES> 5,093
<TOTAL-REVENUES> 5,093
<CGS> 1,923
<TOTAL-COSTS> 5,238
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2
<INCOME-PRETAX> (147)
<INCOME-TAX> 0
<INCOME-CONTINUING> (147)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (147)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements included in the Form 10-QSB for the quarter ended November
30, 1996 of Endogen, Inc. to which this exhibit is a part and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> NOV-30-1996
<CASH> 405
<SECURITIES> 0
<RECEIVABLES> 1,606
<ALLOWANCES> 20
<INVENTORY> 1,577
<CURRENT-ASSETS> 3,787
<PP&E> 2,941
<DEPRECIATION> 849
<TOTAL-ASSETS> 6,709
<CURRENT-LIABILITIES> 1,827
<BONDS> 0
0
0
<COMMON> 30
<OTHER-SE> 3,181
<TOTAL-LIABILITY-AND-EQUITY> 6,709
<SALES> 4,704
<TOTAL-REVENUES> 4,704
<CGS> 1,614
<TOTAL-COSTS> 4,265
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 120
<INCOME-PRETAX> 319
<INCOME-TAX> 50
<INCOME-CONTINUING> 269
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 269
<EPS-PRIMARY> .09
<EPS-DILUTED> .08
</TABLE>
