<PAGE> 1
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------------
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 27, 1998
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from __________ to __________
Commission file number 0-21074
SUPERCONDUCTOR TECHNOLOGIES INC.
(Exact name of registrant as specified in its charter)
DELAWARE 77-0158076
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
460 WARD DRIVE, SUITE F
SANTA BARBARA, CALIFORNIA 93111-2310
(Address of principal executive offices & zip code)
(805) 683-7646
(Registrant's telephone number including area code)
----------------------------------
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 August 7, 1998 there were 7,707,081 shares of the Registrant's Common
Stock outstanding.
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SUPERCONDUCTOR TECHNOLOGIES INC.
(A Development Stage Enterprise)
STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 27, 1998 JUNE 28, 1997 JUNE 27, 1998 JUNE 28, 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net revenues:
Government contract revenues $ 1,985,000 $ 2,340,000 $ 3,676,000 $ 4,445,000
Commercial product revenues 255,000 14,000 468,000 27,000
----------- ----------- ----------- -----------
Total net revenues 2,240,000 2,354,000 4,144,000 4,472,000
----------- ----------- ----------- -----------
Costs and expenses:
Cost of commercial revenues 1,486,000 0 2,519,000 0
Contract research and development 1,077,000 1,504,000 2,400,000 2,974,000
Other research and development 495,000 425,000 648,000 777,000
Selling, general and administrative 1,393,000 971,000 2,640,000 1,807,000
----------- ----------- ----------- -----------
Total costs and expenses 4,451,000 2,900,000 8,207,000 5,558,000
----------- ----------- ----------- -----------
Loss from operations (2,211,000) (546,000) (4,063,000) (1,086,000)
Interest income(expense), net 28,000 51,000 44,000 125,000
----------- ----------- ----------- -----------
Net loss ($2,183,000) ($ 495,000) ($4,019,000) ($961,000)
=========== =========== =========== ===========
Basic and diluted loss per share ($0.28) ($0.06) ($0.52) ($0.13)
Weighted average number of
shares outstanding 7,723,335 7,715,699 7,721,787 7,672,183
=========== =========== =========== ===========
</TABLE>
(See accompanying notes)
2
<PAGE> 3
SUPERCONDUCTOR TECHNOLOGIES INC.
(A Development Stage Enterprise)
BALANCE SHEET
<TABLE>
<CAPTION>
(Unaudited)
ASSETS JUNE 27, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,538,000 $ 1,438,000
Short-term investments 0 2,099,000
Accounts receivable 1,594,000 1,048,000
Inventory 1,245,000 677,000
Prepaid expenses and other current assets 112,000 146,000
------------ ------------
Total current assets 4,489,000 5,408,000
Property and equipment, net of accumulated depreciation
of $6,772,000 and $6,534,000, respectively 3,548,000 2,456,000
Patents and licenses, net of accumulated amortization
of $1,171,000 and $1,057,000, respectively 2,097,000 2,152,000
Other assets, net of accumulated
amortization of $86,000 and $86,000, respectively 160,000 71,000
------------ ------------
Total assets 10,294,000 $ 10,087,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable 2,249,000 $ 1,407,000
Accrued compensation 718,000 437,000
Current portion of long-term debt 64,000 64,000
------------ ------------
Total current liabilities 3,030,000 1,908,000
Long-term debt 134,000 13,000
------------ ------------
Total liabilities 3,164,000 1,921,000
------------ ------------
Redeemable Preferred Series A, 2,000,000 shares authorized,
500,000 shares issued and outstanding 3,045,000 0
------------ ------------
Commitments and contingencies
Stockholders' equity:
Common Stock, $.001 par value, 30,000,000 shares authorized,
7,707,081 and 7,699,581 shares issued and outstanding 8,000 8,000
Capital in excess of par value 35,149,000 35,211,000
Deficit accumulated during development stage (31,072,000) (27,053,000)
------------ ------------
Total stockholders' equity 4,085,000 8,166,000
------------ ------------
Total liabilities and stockholders' equity $ 10,294,000 $ 10,087,000
============ ============
</TABLE>
(See accompanying notes)
3
<PAGE> 4
SUPERCONDUCTOR TECHNOLOGIES INC.
(A Development Stage Enterprise)
STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(Unaudited)
<TABLE>
<CAPTION>
ASSETS JUNE 27, JUNE 28,
1998 1997
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($4,019,000) ($ 962,000)
Adjustments to reconcile net loss to net cash used
for operating activities:
Depreciation and amortization
614,000 479,000
Changes in assets and liabilities:
Accounts receivable (546,000) (344,000)
Inventory (568,000) (42,000)
Prepaid expenses and other current assets 34,000 (8,000)
Patents and licenses (58,000) (96,000)
Other assets (89,000) 145,000
Accounts payable and accrued expenses 1,123,000 (289,000)
Billings in excess of cost and earnings on
uncompleted contracts 0 (264,000)
----------- -----------
Net cash used for operating activities (3,509,000) (1,381,000)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Change in short-term investments 2,099,000 (216,000)
Purchases of property and equipment (1,593,000) (537,000)
----------- -----------
Net cash provided by (used in) investing activities 506,000 (753,000)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 159,000 0
Principal payments on long-term obligations (39,000) (210,000)
Proceeds from sale of preferred and common stock, net 2,983,000 416,000
----------- -----------
Net cash provided by financing activities 3,103,000 206,000
----------- -----------
Net increase (decrease) in cash and cash equivalents 100,000 (1,928,000)
Cash and cash equivalents at beginning of period 1,438,000 2,599,000
----------- -----------
Cash and cash equivalents at end of period $ 1,538,000 $ 671,000
=========== ===========
</TABLE>
(See accompanying notes)
4
<PAGE> 5
SUPERCONDUCTOR TECHNOLOGIES INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
A. GENERAL
The unaudited financial information furnished herein has been prepared in
accordance with generally accepted accounting principles and reflects all
adjustments, consisting only of normal recurring adjustments, which in the
opinion of management, are necessary to fairly state the Company's financial
position, the results of its operations and its cash flows for the periods
presented.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and the accompanying
notes. Actual results could differ from those estimates and such differences may
be material to the financial statements. This quarterly report on Form 10-Q
should be read in conjunction with the Company's Form 10-K for the year ended
December 31, 1997. The results of operations for the three months and six months
ended June 27, 1998 are not necessarily indicative of results for the entire
fiscal year ending December 31, 1998.
The Company reports on a 13-week quarter period ending on the Saturday nearest
the calendar quarter end. The Company's fiscal year-end is December 31.
B. INVENTORIES
Inventories are stated at the lower of cost (first-in, first out) or market and
consist of the following:
<TABLE>
<CAPTION>
JUNE 27, 1998 DECEMBER 31, 1997
------------- -----------------
<S> <C> <C>
Raw Materials $ 580,000 $336,000
Work-in-Progress 638,000 302,000
Finished Goods 27,000 39,000
---------- --------
Total Inventory $1,245,000 $677,000
========== ========
</TABLE>
C. PER SHARE INFORMATION
Basic net loss per share is computed by dividing net loss available to common
stockholders by the weighted average number of common shares outstanding in each
year. Diluted net loss per share is computed by dividing income available to
common stockholders plus income associated with dilutive securities by the
weighted average number of common shares outstanding plus any potential dilution
that could occur if securities or other contracts to issue common stock were
exercised or converted into common stock in each year. Potential Common Stock
issuable upon exercise of options and warrants to purchase shares of the
Company's Common Stock (and conversion of the outstanding Preferred Stock to
Common Stock) is not included as the result would have been antidilutive
considering the Company's reported net loss from operations for all periods
presented.
D. PRIVATE PLACEMENT
On March 26, 1998, the Company completed a private placement of 500,000 shares
of Series A 6% Cumulative Convertible Preferred Stock ("Preferred Shares") to
certain investors at $6.00 per share. The proceeds of the offering, net of
offering expenses, totaled approximately $3 million. Each Preferred Share is
convertible into two shares of Common Stock at $3 per share and carries a
cumulative dividend of 6% per annum. The Preferred Shares also have voting
rights and liquidation preferences. The Preferred Shares are not redeemable
prior to March 26, 2001. Thereafter, the Company may redeem the Preferred Shares
at 110% of the carrying amount plus accrued dividends. Subsequent to March 26,
2005, the holders of the Preferred Shares have the option to redeem the
Preferred Shares at their carrying amount plus accrued dividends. The Company
has an option, exercisable through March 26, 1999, to sell up to an additional
$2 million of Preferred Shares under the same terms provided the Company meets a
certain milestone.
5
<PAGE> 6
E. FINANCING
The Company has firm commitments to receive $2.5 million of debt financing from
two financial institutions. The first facility is to provide $1.0 million in
equipment financing on a sale/leaseback arrangement over a six-month period. The
other facility is to provide $1.5 million of a revolving line of credit, of
which $.5 million can be converted into a term loan supported by equipment for a
36-month period. Both agreements are subject to documentation and final due
diligence. In addition, the Company has an option to exercise an additional $2
million of Preferred Shares provided it meets a certain milestone (see "Private
Placement"). The Company believes that the debt financing facilities and the
option exercise for preferred shares will provide adequate financing to meet its
operational needs over the next 12 months. However, in the event that the debt
financing is not successfully executed or the preferred share option is not
exercised, the Company will be required to seek alternative financing. There can
be no assurance that such alternative financing would be available on terms
acceptable to the Company, if at all. Depending upon the timing of market
acceptance of the Company's products and the manufacturing ramp-up necessary to
support the market acceptance, additional working capital financing may be
required to fully implement the Company's business plan. Under such
circumstances, the Company's inability to fully implement its business plan,
including the procurement of additional financing, would have a material adverse
effect on the Company's business, operating results and financial condition.
F. NEWLY ISSUED FINANCIAL REPORTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"). SFAS 133 becomes effective for the Company
in 2000. The adoption of SFAS 133 is not expected to have a material effect on
the Company's financial statement disclosures.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This Quarterly Report on Form 10-Q 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, as amended. These statements are in "Results of
Operations for the three-month and six-month periods ended June 27, 1998 and
June 27, 1997" and "Liquidity and Capital Resources". These statements represent
the Company's expectations or beliefs concerning future events and include
statements, among others, regarding commercial revenues and the Company's
financial resources. Actual results could differ materially from those projected
in the forward-looking statements as a result of the risk factors set forth
herein. Investors are strongly encouraged to review the section entitled
"Factors Affecting Future Business Operations" for a discussion of factors that
could affect future performance.
RESULTS OF OPERATIONS FOR THE THREE-MONTH AND SIX-MONTH PERIODS ENDED JUNE 27,
1998 AND JUNE 28, 1997
Total net revenues decreased by $114,000, or 5%, from $2,354,000 in the second
quarter of 1997 to $2,240,000 in the second quarter of 1998. Net revenues
decreased by $328,000, or 7%, from $4,472,000 in the first six months of 1997 to
$4,144,000 in the first six months of 1998. These changes are due to decreases
in government contract revenues offset by increases in commercial revenues.
Government contract revenues decreased by $355,000, or 15%, from $2,340,000 in
the second quarter of 1997 to $1,985,000 in the second quarter of 1998.
Government contract revenues decreased by $769,000, or 17%, from $4,445,000 in
the first six months of 1997 to $3,676,000 in the first six months of 1998.
These decreases are attributable to the completion of certain government
programs and the transition period associated with entering into new government
contracts.
Commercial product revenues increased $241,000 from $14,000 in the second
quarter of 1997 to $255,000 in the second quarter of 1998. Commercial product
revenues increased $441,000 from $27,000 in the first six months of 1997 to
$468,000 in the first six months of 1998. These increases are due to increased
shipments of the Company's commercial products.
6
<PAGE> 7
As the Company continues to focus on its commercial products, commercial product
revenues are expected to increase as a percentage of revenues over the next
several quarters; however, there can be no assurance that such commercial
revenues will increase. Furthermore, as the Company attempts to achieve
commercialization of products, it could encounter seasonality or other currently
unforeseen factors causing additional variability in its results.
The cost of commercial revenues was $1,486,000 for the second quarter of 1998
and $2,519,000 in the first six months of 1998. This represents an increase over
1997 in cost of commercial revenues and related start-up costs to support the
increase in commercial sales and manufacturing capacity.
Total research and development expenses decreased by $357,000, or 19%, from
$1,929,000 in the second quarter of 1997 to $1,572,000 in the second quarter of
1998. Total research and development expenses decreased by $703,000, or 19%,
from $3,751,000 in the first six months of 1997 to $3,048,000 in the first six
months of 1998. The Company's continued focus on commercial production and
ramp-up of manufacturing capacity has directly contributed to the decline in
research and development expenses.
Contract research and development expenses decreased by $427,000, or 28%, from
$1,504,000 in the second quarter of 1997 to $1,077,000 in the second quarter of
1998. Contract research and development expenses decreased by $574,000, or 19%,
from $2,974,000 in the first six months of 1997 to $2,400,000 in the first six
months of 1998. These decreases are attributable to the decreases in contract
revenues, which are directly related to contract research and development
expenses.
Other research and development expenses increased by $70,000, or 16%, from
$425,000 in the second quarter of 1998 to $495,000 in the second quarter of
1998. This increase is due to efforts to improve the process development and
manufacturability of the commercial products. Other research and development
expenses decreased by $129,000, or 17%, from $777,000 in the first six months of
1997 to $648,000 in the first six months of 1998.
Selling, general and administrative expenses increased by $422,000, or 43%, from
$971,000 in the second quarter of 1997 to $1,393,000 in the second quarter of
1998. Selling, general and administrative expenses increased by $833,000, or 46%
from $1,807,000 in the first six months of 1997 to $2,640,000 in the first six
months of 1998. These increases are due to increased labor-related expenses,
attributable to the expansion of the Company's sales force, as well as increased
efforts in the Company's marketing program as had been anticipated.
Interest income decreased by $26,000, or 43%, from $60,000 in the second quarter
of 1997 to $34,000 in the second quarter of 1998. Interest income decreased by
$93,000, or 64%, from $145,000 in the first six months of 1997 to $52,000 in the
first six months of 1998. The decreases in interest income are primarily due to
withdrawal of interest-earning investment balances utilized by the Company to
fund and expand operations.
Interest expense decreased by $3,000, or 33%, from $9,000 in the second quarter
of 1997 to $6,000 in the second quarter of 1998. Interest expense decreased by
$12,000, or 60%, from $20,000 in the first six months of 1997 to $8,000 in the
first six months of 1998. These decreases are attributable to the reduction in
the Company's long-term portion of note payable and capitalized lease
obligations.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents and short-term investments decreased by $1,999,000, or
57%, from $3,537,000 on December 31, 1997 to $1,538,000 on June 27, 1998. The
decrease is the result of operating losses of $4.0 million and purchases of new
equipment in the amount of $1.6 million for expansion of manufacturing
operations offset by a private placement of $3.0 million in the first quarter of
1998.
The Company's principal resource commitments at June 27, 1998 consist of
accounts payable and accrued employee compensation of $2,249,000 and $718,000,
respectively, and approximately $198,000 of equipment financing commitments.
7
<PAGE> 8
The Company has firm commitments to receive $2.5 million of debt financing from
two financial institutions. The first facility is to provide $1.0 million in
equipment financing on a sale/leaseback arrangement over a six-month period. The
other facility is to provide $1.5 million of a revolving line of credit, of
which $.5 million can be converted into a term loan supported by equipment for a
36-month period. Both agreements are subject to documentation and final due
diligence. In addition, the Company has an option to exercise an additional $2
million of Preferred Shares provided it meets a certain milestone (see "Private
Placement"). The Company believes that the debt financing facilities and the
option exercise for preferred shares will provide adequate financing to meet its
operational needs over the next 12 months. However, in the event that the debt
financing is not successfully executed or the preferred share option is not
exercised, the Company will be required to seek alternative financing. There can
be no assurance that such alternative financing would be available on terms
acceptable to the Company, if at all. Depending upon the timing of market
acceptance of the Company's products and the manufacturing ramp-up necessary to
support the market acceptance, additional working capital financing may be
required to fully implement the Company's business plan. Under such
circumstances, the Company's inability to fully implement its business plan,
including the procurement of additional financing, would have a material adverse
effect on the Company's business, operating results and financial condition.
IMPACT OF YEAR 2000
The Company currently uses a limited number of software products that are not
Year 2000 compliant. However, the Company currently has acquired manufacturing
software in order to support its expansion efforts. The new software is Year
2000 compliant and replaces substantially all non-Year 2000 compliant software.
Accordingly, the Company does not expect the amounts required to be expensed to
become Year 2000 compliant to have a material effect on its business, operating
results or financial condition.
FACTORS AFFECTING FUTURE BUSINESS OPERATIONS
EARLY STAGE OF THE COMMERCIAL SUPERCONDUCTOR PRODUCTS MARKET: MARKET ACCEPTANCE
AND RELIABILITY
The commercial superconductor products market has experienced limited product
commercialization to date. Moreover, since inception, the Company has been
principally engaged in research and development activities and has only limited
experience in the commercialization of its products. The Company's ability to
grow will depend on its ability to successfully transition its expertise in HTS
filter and cryogenics technologies and applications to commercial markets,
including the wireless communications market. There can be no assurance that the
Company will be able to produce its products in volume or that any of the
Company's products will achieve market acceptance. The failure to produce
products in volume or achieve market acceptance would have a material adverse
effect on the Company's business, operating results and financial condition.
DEPENDENCE ON SALES TO SERVICE PROVIDERS AND OEMS
To gain market acceptance, the Company must demonstrate that its products will
provide advantages to service providers who utilize base station systems and
OEMs that manufacture base station systems. These advantages include a decrease
in system size, an increase in range extension and a reduction in interference.
There can be no assurance that upon acceptance, the Company's products will be
able to achieve any of these advantages. Moreover, even if the Company is able
to demonstrate such advantages, there can be no assurance that service providers
and OEMs will elect to incorporate the Company's products into their systems or,
if they do, that related system and manufacturing requirements can or will be
met.
LIMITED MANUFACTURING EXPERIENCE
To date, the Company has sold products only in limited quantities, primarily for
use in field-testing as well as development and prototypes. During the first
half of 1998 the Company has significantly increased its manufacturing capacity
in order to meet the increased demand for its products as well as for expected
future requirements. While the Company has increased its manufacturing capacity,
there can be no assurance that the Company will be successful in overcoming the
technological, engineering and management challenges associated with the
production of commercial quantities of superconducting or cryogenic products at
acceptable costs and on a timely basis.
8
<PAGE> 9
HIGH DEGREE OF DEPENDENCE ON GOVERNMENT CONTRACTS
A significant portion of the Company's revenues have historically consisted of
government research and development contract revenues. The Company expects that
government contract revenues will continue to account for a substantial portion
of total net revenues over the next several quarters. Government contract
revenues have historically fluctuated from period to period. This variability is
attributable to government contract budgeting and funding patterns, as the
government procurement process is lengthy and may involve competing budget
considerations, making the timing of the Company's revenues difficult to
predict. Funds authorized by the government under any development contract may
be reduced or eliminated at any time, and there can be no assurance that the
Company will receive all or any part of the funds under any of the Company's
existing government contracts not yet performed.
UNCERTAINTY OF PATENTS AND PROPRIETARY RIGHTS
The Company relies on a combination of patent, trademark, trade secret and
copyright law and internal procedures and nondisclosure agreements to protect
its intellectual property. There can be no assurance that the Company's
intellectual property rights can be successfully asserted in the future or will
not be invalidated, circumvented or challenged. In addition, the laws of certain
foreign countries in which the Company's products may be produced or sold do not
protect the Company's intellectual property rights to the same extent as the
laws of the United States. The failure of the Company to protect its proprietary
information could have a material adverse effect on the Company's business,
results of operations and financial condition.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
In addition to the election of the directors, the following matters were
submitted to the shareholders at the Company's Annual Meeting of Shareholders
held May 20, 1998:
1) The Company's Amended and Restated Certificate of Incorporation was amended
to increase the number of authorized shares of Common Stock from 15,000,000
shares to 30,000,000 shares.
<TABLE>
<S> <C>
Votes For: 6,094,574
Votes Against: 203,822
Votes Abstaining: 51,788
Broker Non-Votes: 0
</TABLE>
2) The appointment of PricewaterhouseCoopers (formerly known as Price
Waterhouse LLP) as independent auditors of the Company was ratified for the
year ending December 31, 1998.
<TABLE>
<S> <C>
Votes For: 6,283,824
Votes Against: 23,260
Votes Abstaining: 43,100
Broker Non-Votes: 0
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended June 27, 1998.
9
<PAGE> 10
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SUPERCONDUCTOR TECHNOLOGIES INC.
---------------------------------------
(Registrant)
Dated: August 10, 1998 /s/ James G. Evans, Jr.
---------------------------------------
James G. Evans, Jr.
Vice President, Chief Financial Officer
10
<PAGE> 11
EXHIBIT INDEX
Exhibit
Number Description
- ------- --------------
27.1 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-27-1998
<CASH> 985,000
<SECURITIES> 553,000
<RECEIVABLES> 1,594,000
<ALLOWANCES> 0
<INVENTORY> 1,245,000
<CURRENT-ASSETS> 4,489,000
<PP&E> 10,320,000
<DEPRECIATION> 6,772,000
<TOTAL-ASSETS> 10,294,000
<CURRENT-LIABILITIES> 3,030,000
<BONDS> 0
0
3,045,000
<COMMON> 8,000
<OTHER-SE> 35,149,000
<TOTAL-LIABILITY-AND-EQUITY> 10,294,000
<SALES> 468,000
<TOTAL-REVENUES> 4,144,000
<CGS> 2,519,000
<TOTAL-COSTS> 7,559,000
<OTHER-EXPENSES> 648,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,000
<INCOME-PRETAX> (4,019,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (31,072,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,019,000)
<EPS-PRIMARY> (.52)
<EPS-DILUTED> (.52)
</TABLE>
