UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended MARCH 31, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from __________________to__________________
Commission file number: 0-22052
PROXYMED, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
FLORIDA 65-0202059
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2501 DAVIE ROAD, SUITE 230, FT. LAUDERDALE, FLORIDA 33317
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(954) 473-1001
-------------------------------
(Registrant's telephone number)
----------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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. [X] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
COMMON STOCK, $.001 PAR VALUE
12,544,868 SHARES AS OF APRIL 24, 1998
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
PROXYMED, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
MARCH 31, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,513,083 $ 2,654,423
Accounts receivable - trade, net 2,940,089 2,364,455
Other receivables 860,780 826,998
Inventory 920,702 1,202,431
Other current assets 301,990 319,838
------------ ------------
Total current assets 8,536,644 7,368,145
Property and equipment, net 2,422,396 2,323,174
Capitalized software costs, net 4,590,110 4,730,268
Goodwill and other intangible assets, net 5,011,206 5,138,473
Other assets 48,810 43,061
------------ ------------
Total assets $ 20,609,166 $ 19,603,121
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 750,000 $ 735,980
Accounts payable and accrued expenses 3,321,897 4,239,073
Deferred revenue 542,584 426,686
------------ ------------
Total current liabilities 4,614,481 5,401,739
Long-term debt 1,074,760 1,049,630
------------ ------------
Total liabilities 5,689,241 6,451,369
------------ ------------
Stockholders' equity:
Common stock - $.001 par value. Authorized
20,000,000 shares; issued and outstanding
12,537,579 (after deducting 110,000
shares in treasury) and 11,781,872 shares,
respectively 12,538 11,782
Additional paid-in capital 47,687,420 42,695,386
Accumulated deficit (31,268,033) (29,555,416)
Stock subscription receivable (1,512,000) --
------------ ------------
Total stockholders' equity 14,919,925 13,151,752
------------ ------------
Total liabilities and stockholders' equity $ 20,609,166 $ 19,603,121
============ ============
</TABLE>
See accompanying notes.
2
<PAGE>
PROXYMED, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31,
1998 1997
----------- -----------
Revenues:
Services and license fees $ 3,308,681 $ 120,572
Prescription drugs and computer systems 1,539,235 309,594
----------- -----------
4,847,916 430,166
----------- -----------
Costs and expenses:
Cost of sales 1,769,854 218,208
Selling, general and
administrative expenses 4,148,048 1,904,494
Depreciation and amortization 630,673 100,263
----------- -----------
6,548,575 2,222,965
----------- -----------
Operating loss (1,700,659) (1,792,799)
Other income (expense):
In-process research and
development technology -- (4,300,000)
Interest, net (11,958) 135,919
----------- -----------
Net loss applicable to
common shareholders $(1,712,617) $(5,956,880)
=========== ===========
Basic and diluted loss per share
of common stock $ (.14) $ (.62)
=========== ===========
See accompanying notes.
3
<PAGE>
PROXYMED, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31,
1998 1997
----------- -----------
Cash flows from operating activities:
Net loss $(1,712,617) $(5,956,880)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation and amortization 630,673 100,263
Acquired in-process research and
development technology -- 4,300,000
Amortization of covenant not-
to-compete (20,000) (20,000)
Provision for doubtful accounts 43,875 1,500
Changes in assets and liabilities,
net of effect of acquisition:
Accounts and other receivables (653,290) 463,043
Inventory 281,729 12,354
Accounts payable and accrued
expenses (1,102,516) (143,244)
Deferred revenue 135,898 (18,358)
Other, net 112,156 (23,810)
----------- -----------
Net cash used in operating
activities (2,284,092) (1,285,132)
----------- -----------
Cash flows from investing activities:
Acquisition of business, net of
cash acquired -- (2,745,644)
Maturities of U.S. Treasury Notes -- 1,506,558
Capital expenditures (238,038) (110,373)
Purchased and capitalized software (100,000) (275,360)
----------- -----------
Net cash used in investing activities (338,038) (1,624,819)
----------- -----------
Cash flows from financing activities:
Net proceeds from sale of common
stock (Note 5) (3,250,000) --
Proceeds from exercise of stock options
and warrants 230,790 21,751
Payment of notes payable -- (9,375)
----------- -----------
Net cash provided by financing
activities 3,480,790 12,376
----------- -----------
Net increase (decrease) in cash 858,660 (2,897,575)
Cash and cash equivalents at beginning
of period 2,654,423 6,020,358
----------- -----------
Cash and cash equivalents at end
of period $ 3,513,083 $ 3,122,783
=========== ===========
See accompanying notes.
4
<PAGE>
PROXYMED, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) BASIS OF PRESENTATION - The accompanying unaudited condensed consolidated
financial statements of ProxyMed, Inc. and subsidiaries (the "Company")
have been prepared in accordance with the instructions to Form 10-Q and do
not include all of the information and disclosures required by generally
accepted accounting principles. However, such information reflects all
adjustments (consisting solely of normal recurring adjustments) which are,
in the opinion of management, necessary for a fair statement of results for
the interim periods.
The results of operations for the three months ended March 31, 1998 are not
necessarily indicative of the results to be expected for the full year.
Reference is made to the Company's annual report on Form 10-K for the year
ended December 31, 1997. Certain prior period amounts have been
reclassified to conform with the current period presentation.
(2) REVENUE RECOGNITION - Revenue from sales of software, software licenses and
computer hardware is recognized when persuasive evidence of an arrangement
exists, delivery has occurred, the price is fixed or determinable and
collectibility is probable. The same criteria is applied to each element of
multiple element arrangements after allocating the amounts paid to
individual elements based on vendor-specific objective evidence of fair
value. Transaction fee revenue is recorded in the period the service is
rendered. Revenue from software rentals and maintenance fees is recognized
ratably over the applicable period. Revenue from the Company's prescription
drug dispensing activities is reported at net realizable amounts from
insurance providers and patients at the time the individual prescriptions
are delivered to the patients.
(3) INVENTORY - Inventory, consisting of finished goods, is stated at the lower
of cost (first-in, first-out method) or market.
(4) NET LOSS PER SHARE - Basic loss per share of common stock is computed by
dividing net loss applicable to common shareholders by the weighted average
shares of common stock outstanding during the period (11,858,345 shares and
9,568,972 shares for the three months ended March 31, 1998 and 1997,
respectively). Diluted per share results reflect the potential dilution
from the exercise or conversion of securities into common stock. Stock
options, warrants and contingent shares totaling 2,842,529 and 2,572,464
shares at March 31, 1998 and 1997, respectively, were excluded from the
calculation of diluted per share results for both periods presented because
their effect was antidilutive.
5
<PAGE>
(5) CAPITAL TRANSACTIONS - On February 20, 1998, the Company sold 500,000
shares of unregistered common stock at $6.50 per share in a private
placement to Bellingham Industries Inc. ("Bellingham"). Net proceeds from
this sale were $3,250,000. Additionally, on March 3, 1998, the Company sold
200,000 shares of unregistered common stock at $7.56 per share under a
private placement subscription agreement to Bellingham. Net proceeds from
this sale totaling $1,512,000 were received on April 24, 1998. As part of
the latter sale, the Company issued a five-year warrant to Bellingham for
the purchase of 100,000 shares of the Company's common stock at $7.56 per
share. Based on information provided by Bellingham as of April 24, 1998, it
beneficially owned 5,151,210 shares or approximately 40.3% of the Company's
outstanding stock.
(6) SOURCE CODE LICENSE SALES - On March 30, 1998 the Company sold a
non-exclusive source code license and related services for ProxyCare(TM),
its advanced online information system for pharmacies affiliated with
long-term care facilities, to a national institutional pharmacy company for
$1,800,000. Of this amount, $1,500,250 was earned and recorded as revenue
in the quarter ended March 31, 1998 and the balance will be recorded as
revenue in subsequent periods as services are performed. Additionally, on
April 17, 1998, the Company sold a similar license to another national
institutional pharmacy company for $1,800,000. In addition to the source
code license, both sales include ongoing network services, database
subscriptions and implementation support services for which recurring
revenues will be earned as provided for in the agreements.
(7) NEW ACCOUNTING PRONOUNCEMENTS - Effective December 31, 1997, the Company
adopted Statement of Position ("SOP") No. 97-2, "Software Revenue
Recognition." The adoption of SOP No. 97-2 did not have a material effect
on the timing of the Company's revenue recognition. Also effective
December 31, 1997, the Company adopted SOP No. 98-1, "Accounting for the
the Costs of Computer Software Developed or Obtained for Internal Use."
When indications of impairment are present, the carrying value of such
software is assessed based upon an analysis of estimated future cash flows
on an undiscounted basis and before interest charges. The adoption of SOP
No. 98-1 did not have a material effect on the Company's financial
statements.
(8) SUBSEQUENT EVENTS - PROPOSED ACQUISITION - On April 24, 1998, the Company
entered into a definitive agreement to acquire the all of the capital stock
of WPJ, Inc. (d/b/a Integrated Medical Systems or "IMS") a California
corporation engaged in the business of processing electronic medical claims
and other financial EDI transactions. The purchase price consists of
$20,620,000 in cash and $6,750,000 in ProxyMed common stock (481,836
shares). The closing date for this transaction is scheduled for May 15,
1998. This acquisition will be accounted for under the purchase method of
accounting. The Company plans to raise the funds necessary to consummate
this acquisition through a private placement sale of common stock.
6
<PAGE>
(9) SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
THREE MONTHS ENDED MARCH 31,
1998 1997
---------- -----------
Acquisition of business:
Common stock issued for business acquired $ -- $ 760,452
Debt issued for business acquired -- 1,649,555
Other acquisition costs accrued -- 225,000
Details of acquisitions:
Working capital components, other than cash -- 21,549
In-process research and development technology -- (4,300,000)
Property and equipment -- (1,432)
Goodwill and other intangible assets -- (1,001,872)
Other assets -- (108,271)
Note payable -- 9,375
---------- -----------
Net cash from acquisition $ -- $(2,745,644)
========== ===========
(10) SEGMENT INFORMATION -The Company operates in the following reportable
segments which are separately managed: Prescription drug dispensing,
healthcare EDI and software products and services, and network integration
services. Intersegment sales are not material and there were no foreign
sales for any periods presented.
THREE MONTHS ENDED MARCH 31,
1998 1997
----------- -----------
Net sales:
Prescription drug dispensing $ 343,522 $ 297,520
Healthcare EDI and software
products and services 2,878,064 132,646
Network integration services 1,626,330 --
----------- -----------
$ 4,847,916 $ 430,166
=========== ===========
Operating loss:
Prescription drug dispensing $ (11,516) $ (20,205)
Healthcare EDI and software
products and services (647,015) (1,191,565)
Network integration services (207,134) --
Corporate (834,994) (581,029)
----------- -----------
$(1,700,659) $(1,792,799)
=========== ===========
7
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION RESULTS OF
OPERATIONS
GENERAL
The Company is a healthcare information systems company providing
healthcare technology software products and online clinical and financial
transaction processing services to physicians through their existing practice
management information systems, as well as connectivity to various healthcare
providers (such as pharmacies, labs, hospitals, insurers and managed care
organizations) through ProxyNet(TM), the Company's national healthcare
information network. In addition, the Company derives revenue from network
integration services and related computer hardware sales, and through the
dispensing of prescription drugs to patients who reside in long-term care
facilities. Substantially all of the Company's services have been provided from
its operating facilities located in Florida and Texas. The Company's operations
are subject to extensive and evolving statutory and regulatory framework on both
the state and federal levels.
This report contains "forward-looking statements" within the meaning of
the federal securities laws. These forward-looking statements include, among
others, statements relating to the Company's growth strategy, which is based
upon the Company's interpretation and analysis of healthcare industry trends and
management's ability to successfully develop, implement, market and sell its
online transaction processing services to physicians and other healthcare
providers. This strategy assumes that physicians will prefer "one-stop shopping"
for online services and that the Company will be able to successfully acquire or
develop all of the necessary clinical and financial transaction sets and
implement them into the Company's existing products and services. This strategy
also assumes that the Company will be able to successfully develop and execute
its strategic relationships, especially with the providers of information
systems to physicians under the Company's Electronic Commerce Partner ("ECP")
program, and with pharmacy chains, independent pharmacy owners and pharmacy
information vendors. Many known and unknown risks, uncertainties and other
factors may cause these assumptions to prove incorrect and may cause the actual
results, performance or achievements of the Company to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Additionally, all of the Company's software and
EDI products, including without limitation, any parts or components thereof,
when used prior to, during and after the turn-of-the-century, are programmed to
process turn-of-the-century dates. The Company continuing its review of its
internal business and computer systems, and is querying its customers, vendors
and resellers as to their progress in identifying and addressing problems that
their computer systems may face in correctly interrelating and processing date
information as the year 2000 approaches and is reached. Based on the results of
such efforts achieved to date, the expenses of the Company's continuing efforts
to identify and address any such issues, or the expenses or liabilities to which
the Company may become subject as a result of such issues, are not considered to
be material.
8
<PAGE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998, COMPARED TO THREE MONTHS ENDED MARCH 31, 1997
NET SALES. Consolidated net revenue for the three months ended March 31,
1998 increased by $4,417,750, or 1,027%, to $4,847,916 from consolidated net
revenue of $430,166 for the three months ended March 31, 1997. The increase in
net revenue resulted from the following: (i) network integration services
segment sales were $1,626,330 in the 1998 period compared to no such sales in
the 1997 period, due to the acquisition of Hayes Computer Systems, Inc. ("HCS")
in April 1997; (ii) as a result of the acquisitions of Clinical MicroSystems,
Inc. ("CMS"), U.S. HealthData Interchange, Inc. ("USHDI") and the PreScribe(TM)
software product at various times throughout 1997, healthcare EDI and software
products and services segment sales increased by approximately $954,000 over the
prior period levels; (iii) the Company's first sale of its ProxyCare(TM)
software license, an advanced online information system for pharmacies
affiliated with long-term care facilities totaling $1,500,250; and (iv) other
increases in revenue ($337,000).
GROSS PROFIT MARGIN. Consolidated gross profit margin for the three months
ended March 31, 1998 was 63% compared to 49% for the three months ended March
31, 1997. This increase is due to the impact of higher sales in the 1998 period
for the healthcare EDI and software products and services segment. The gross
margin for this segment was 84% in the 1998 period compared to 85% in 1997
period, which is primarily attributable to the Company's sales and licensing of
its software products and annual software support contracts that typically carry
high gross profit margins. The gross profit margin in the network integration
services segment was 33% in the 1998 period due to the concentration of lower
margin hardware products. The gross profit margin in the drug dispensing segment
was 34% in both the 1998 and 1997 periods.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Consolidated selling,
general and administrative expenses for the three months ended March 31, 1998
increased by $2,243,554, or 118%, to $4,148,048 from consolidated selling,
general and administrative expenses of $1,904,494 for the three months ended
March 31, 1997. The increase in selling, general and administrative expenses
resulted from the following: (i) additional payroll and related costs from the
acquisitions of HCS, CMS and USHDI, corporate management and administration, and
internal growth for the core healthcare EDI and software products and services
segment ($1,800,000); (ii) additional marketing expenses including attendance at
national and local trade shows, print ads, and travel to potential customers
primarily for the healthcare EDI and software products and services segment
($75,000), (iii) telecommunication costs including those related to the
Company's further development of its ProxyNet(TM) network and the network
integration services segment ($159,000); (iv) consulting fees to various
software and business consultants primarily for the healthcare EDI and software
products and services segment (decrease of $135,000); (v) occupancy costs
primarily associated with the acquisitions in 1997 and additional facilities for
product development and sales ($143,000); and (vi) net increases in various
other selling, general and administrative expenses ($202,000). Consolidated
selling, general and administrative expenses as a percentage of consolidated net
sales decreased to 86% in the 1998 period from 443% in the 1997 period, as the
rate of
9
<PAGE>
increase in sales in 1998 exceeded the rate of increase in selling, general and
administrative expenses.
DEPRECIATION AND AMORTIZATION. Consolidated depreciation and amortization
expense increased $530,410, or 529%, to $630,673 for the three months ended
March 31, 1998 from $100,263 for the three months ended March 31, 1997. This
increase was primarily due to the following four factors: (i) amortization of
capitalized software costs for healthcare EDI and software products and
services, many of which were completed in 1997 ($210,000), (ii) exclusivity
charges payable to Walgreen's associated with the acquisition of the
PreScribe(TM) software which was acquired in June 1997 ($125,000), (iii)
amortization charges for goodwill and other intangible assets associated with
the Company's acquisitions completed in 1997 ($121,000), and (iv) increases in
depreciation for new equipment purchases ($74,000).
INTEREST, NET. The Company incurred net interest expense of $11,958 in the
three months ended March 31, 1998 compared to net interest income of $135,919 in
the three months ended March 31, 1997. The charge is due primarily to lower
average cash balances resulting from increased operating and acquisition
activities, and interest expense in 1998 imputed on the obligations incurred
upon the acquisition of CMS.
OTHER. As a result of the acquisition of CMS, the Company recorded a
charge of $4,300,000 in 1997 related to the expensing of in-process research and
development technology. As of March 31, 1998, all significant costs to complete
the projects related to this technology have been incurred. Additionally, the
Company is unaware of any uncertainties that may affect the carrying value of
such projects which may have a material impact on future operating results.
NET LOSS. As a result of the foregoing, the Company recorded a net loss of
$1,712,617 for the three months ended March 31, 1998, as compared to a net loss
of $5,956,880 for the three months ended March 31, 1997. The Company believes it
is making progress in its acquisition strategy, strategic relationships and
other plans to increase the usage of its healthcare information technology
products and services to achieve requisite economies of scale. However, the
Company anticipates that it will continue to incur operating losses until it
generates substantial recurring revenues from these products and services. There
can be no assurance that the Company will realize a significant level of
recurring revenues from the sale of its products and services, or that revenues
from these operations or those of its recently acquired businesses and any
future acquisitions will ultimately result in significant reductions in losses
or achievement of profitability.
10
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
In the three month period ended March 31, 1998, cash used in operating
activities totaled $2,284,092. These activities were financed through available
cash resources, the private placement sale of 500,000 shares of the Company's
common stock resulting in net proceeds of $3,250,000, and $230,790 in proceeds
from the exercise of stock options and warrants. After these receipts and
expenditures, the Company had cash and cash equivalents totaling $3,513,083 as
of March 31, 1998. These available funds continue to be used for operations, the
further development and marketing of the Company's products and services,
equipment and other general corporate purposes. In addition, the Company is
continuously evaluating acquisition opportunities (including IMS) that add
synergies to the Company's product offerings and business strategy.
The Company has a revolving bank line of credit of up to $5,000,000,
subject to availability of suitable collateral, which is scheduled to expire in
August 1998. Borrowings, if any, are due on demand, collateralized by
certificates of deposit and U.S. Treasury Notes, and bear interest at the prime
rate less 3/4%. There are no outstanding borrowings on this line of credit as of
March 31, 1998. Prior to expiration of this line of credit, the Company intends
to renew or renegotiate this arrangement with its current bank or seek an
alternative sources at similar or more favorable terms, depending upon market
conditions.
As a result of the acquisitions of CMS, HCS and PreScribe(TM) in 1997, the
Company is obligated to make certain payments in the next 12 months. These
payments are as follows: $750,000 for CMS (which was paid on April 28, 1998),
$1,000,000 for HCS with at least 50% in cash and the balance, if any, in common
stock, and $500,000 for PreScribe(TM).
As described in the Note 8 to the consolidated financial statements, the
Company has entered into a definitive agreement to acquire the capital stock of
IMS. This transaction is scheduled to close on May 15, 1998. The Company plans
to raise the cash portion of the purchase price ($20,620,000) through a private
placement offering of common stock.
The ratio of current assets to current liabilities was 1.8 times in the
1998 period compared to 1.4 times in the 1997 period. This increase is primarily
due to the receipt of cash from sales of common stock and the use of funds to
pay accounts payable, as well as an increase in accounts receivable in the
healthcare EDI and software products and services segment. Accounts receivable
turnover for the Company was 6.6 times in the 1998 period compared to 2.3 times
in the 1997 period. Inventory turnover was 6.7 times for the Company in the 1998
period compared to 4.6 times in the 1997 period. The increase in both ratios
reflect the favorable impact of the acquisitions in 1997.
As noted above, the Company expects to continue to incur negative net cash
flow from operations until it begins receiving substantial recurring revenues
from the sale of its healthcare EDI and software products and services and/or
from cash generated by its network integration services segment. Management is
committed to the strategy of investing funds in further marketing and
development of its products and services and
11
<PAGE>
may pursue additional acquisitions which are deemed to be in accordance with its
business strategy, both of which require additional equity or debt financing.
However, there can be no assurances that such financing will be available under
terms and conditions acceptable to the Company.
PART II - OTHER INFORMATION
ITEM 2 - CHANGE IN SECURITIES
(c) On February 20, 1998, the Company sold 500,000 shares of unregistered
common stock for $6.50 per share to Bellingham Industries, Inc.
("Bellingham"). Additionally, on March 3, 1998, the Company sold
200,000 shares of unregistered common stock for $7.56 per share under a
subscription agreement to Bellingham. Such issuances are exempt from
the registration provisions of Section 5 of the Securities Act of 1933,
as amended (the "Act"), by virtue of Section 4(2) of the Act. The
Company has agreed to file a registration statement for such shares
under the Act upon demand. No underwriting discounts or commissions
were paid in connection with these sales.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
27 Financial Data Schedule.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter ended March 31,
1998.
12
<PAGE>
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.
PROXYMED, INC.
(Registrant)
MAY 12, 1998 /s/ BENNETT MARKS
- ------------ -------------------------------------
(Date) Bennett Marks
Executive Vice President - Finance,
Chief Financial Officer and Principal
Accounting Officer
13
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------- -----------
27 Financial Data Schedule.
14
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 3,513,083
<SECURITIES> 0
<RECEIVABLES> 3,217,137
<ALLOWANCES> (277,048)
<INVENTORY> 920,702
<CURRENT-ASSETS> 8,536,644
<PP&E> 3,242,479
<DEPRECIATION> (820,083)
<TOTAL-ASSETS> 20,609,166
<CURRENT-LIABILITIES> 4,614,481
<BONDS> 0
0
0
<COMMON> 12,538
<OTHER-SE> 47,687,420
<TOTAL-LIABILITY-AND-EQUITY> 20,609,166
<SALES> 1,539,235
<TOTAL-REVENUES> 4,847,916
<CGS> 1,769,854
<TOTAL-COSTS> 6,548,575
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,958
<INCOME-PRETAX> (1,712,617)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,712,617)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,712,617)
<EPS-PRIMARY> (0.14)
<EPS-DILUTED> (0.14)
</TABLE>
