<PAGE> 1
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDING JUNE 30, 1998
Commission File Number 000-22755
---------
COMPUTER MOTION, INC.
--------------------------------------------------------------------------
(Exact name of registrant as specified on in its charter)
Delaware 77-0458805
------------------------------ ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
130-B Cremona Drive
Goleta, CA 93117
--------------------------------------------------------------------------
(Address of principal executive offices)
(805) 968-9600
(Registrant's telephone number, including area code)
Indicate by check [X] whether the registrant (1) has filed all reports required
to be filed by Sections 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 July 30, 1998 there were 8,006,000 shares of the Registrant's common stock
outstanding.
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
COMPUTER MOTION, INC.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, 1998 December 31,1997
(Unaudited) (1)
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 17,950,000 $ 22,555,000
Marketable securities 8,703,000 10,179,000
Accounts receivable 1,912,000 1,804,000
Inventory 2,490,000 992,000
Prepaid expenses 246,000 283,000
------------ ------------
Total current assets 31,301,000 35,813,000
Plant and equipment, net 1,769,000 1,108,000
Other assets 480,000 392,000
------------ ------------
Total assets $ 33,550,000 $ 37,313,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,560,000 $ 1,218,000
Accrued expenses 1,345,000 1,039,000
Capital lease obligations 101,000 141,000
------------ ------------
Total current liabilities 3,006,000 2,398,000
Shareholders' equity:
Preferred stock, $.001 par value; authorized 5,000,000 shares -- --
Common stock, $.001 par value; authorized 25,000,000 shares
outstanding - 7,967,155 and 7,670,589 shares 8,000 8,000
Additional paid-in capital 59,388,000 58,341,000
Deferred compensation expense (1,464,000) (1,781,000)
Accumulated deficit (27,388,000) (21,653,000)
------------ ------------
Total shareholders' equity 30,544,000 34,915,000
------------ ------------
Total liabilities and shareholders' equity $ 33,550,000 $ 37,313,000
============ ============
</TABLE>
(1) Derived from audited financial statements for the year ended December 31,
1997.
See notes to condensed financial statements.
2
<PAGE> 3
COMPUTER MOTION, INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
------------------------------- -------------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue $ 2,274,000 $ 1,483,000 $ 4,351,000 $ 2,856,000
Cost of revenue 951,000 724,000 1,844,000 1,375,000
----------- ----------- ----------- -----------
Gross profit 1,323,000 759,000 2,507,000 1,481,000
Selling, general and administrative
expense 2,865,000 2,340,000 5,441,000 3,677,000
Research and development expense 1,840,000 788,000 3,585,000 1,346,000
----------- ----------- ----------- -----------
Loss from operations (3,382,000) (2,369,000) (6,519,000) (3,542,000)
Other expense (income) (384,000) 1,011,000 (797,000) 1,367,000
----------- ----------- ----------- -----------
Loss before income taxes (2,998,000) (3,380,000) (5,722,000) (4,909,000)
Provision for taxes 6,000 -- 13,000 1,000
----------- ----------- ----------- -----------
Net loss ($3,004,000) ($3,380,000) ($5,735,000) ($4,910,000)
=========== =========== =========== ===========
Weighted average shares outstanding used
to compute net loss per share 7,941,000 1,925,000 7,803,000 1,834,000
=========== =========== =========== ===========
Net loss per share - basic and diluted ($ 0.38) ($ 1.76) ($ 0.73) ($ 2.68)
=========== =========== =========== ===========
</TABLE>
See notes to condensed financial statements.
3
<PAGE> 4
COMPUTER MOTION, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30
---------------------------------
1998 1997
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss ($ 5,735,000) ($ 4,910,000)
Adjustments to reconcile net loss to cash used by operating activities:
Depreciation and amortization 193,000 190,000
Provision for doubtful accounts 103,000 19,000
Common stock issued for services 46,000 44,000
Financing costs attributable to fixed conversion feature of a convertible
debenture and warrants issued with certain debt -- 1,126,000
Compensation expense for stock options, warrants and common stock
issued below fair market value 317,000 788,000
Deferred public offering costs -- (213,000)
Increase (decrease) in working capital (1,025,000) 232,000
------------ ------------
Net cash used by operating activities (6,101,000) (2,724,000)
Cash flows from investing activities:
Purchase of plant and equipment (851,000) (271,000)
Net proceeds from short-term investments 1,476,000 --
------------ ------------
Net cash used by investing activities 625,000 (271,000)
Cash flows from financing activities:
Proceeds from issuance of debt -- 254,000
Repayment of debt (40,000) (1,451,000)
Proceeds from common stock and warrant issuance 193,000 4,227,000
Proceeds from preferred stock issuance -- 2,341,000
Receivable from shareholder (126,000)
Investment in sales-type lease (92,000) (216,000)
Proceeds from stock option exercises 794,000 134,000
Unrealized gain due to currency translation 16,000 --
------------ ------------
Net cash provided by financing activities 871,000 5,163,000
------------ ------------
Increase (decrease) in cash and cash equivalents (4,605,000) 2,168,000
Cash and cash equivalents at beginning of period 22,555,000 432,000
------------ ------------
Cash and cash equivalents at end of period $ 17,950,000 $ 2,600,000
============ ============
</TABLE>
See notes to condensed financial statements
4
<PAGE> 5
Computer Motion, Inc.
Notes to Condensed Financial Statements
Note 1. Basis of Presentation
- --------------------------------
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and in accordance with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
financial information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring adjustments) considered necessary
for a fair presentation have been included.
The operating results of the interim periods presented are not
necessarily indicative of the results expected for the year ending December 31,
1998 or for any other interim period. The accompanying condensed financial
statements should be read in conjunction with the audited financial statements
and notes thereto for the year ended December 31, 1997 included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1997 as filed with
the Securities and Exchange Commission.
Note 2. Net Loss Per Share
- -----------------------------
Statement of Financial Accounting Standard ("SFAS") No. 128, "Earnings
Per Share," requires presentation of both basic and diluted net loss per share
in the financial statements. The Company's basic net loss per share is the same
as its diluted net loss per share because inclusion of outstanding stock options
and warrants in the calculation is antidilutive. Net loss per share is based on
the weighted average number of common shares outstanding. Under SFAS No. 128,
outstanding shares no longer include the dilutive effect of common shares
issued, or issuable pursuant to the exercise of warrants issued or options
granted, during the 12 months immediately preceding the Company's initial public
offering.
Note 3. Initial Public Offering
- ----------------------------------
The Company closed its initial public offering ("IPO") of 2,500,000
shares of common stock at a price of $14.00 per share in August 1997. In
September 1997, the underwriters exercised an option to purchase an additional
375,000 shares of common stock at $14.00 per share. Net proceeds of
approximately $37,000,000 were received by the Company. All shares of
convertible preferred stock were converted to common stock upon the IPO.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- -------------------------------------------------------------------------------
OF OPERATIONS.
--------------
This report contains forward looking statements that involve risks and
uncertainties. The Company's actual results may differ materially due to factors
that include, but are not limited to, the risks discussed herein under "Risk
Factors That May Affect Future Results" as well as those discussed in the "Risk
Factors That May Affect Future Results" section of the Company's Annual Report
on Form 10-K for the year ended December 31, 1997.
5
<PAGE> 6
OVERVIEW
- --------
Computer Motion, Inc. (the "Company") develops and markets proprietary
robotic and computerized surgical systems that are intended to enhance a
surgeon's performance and centralize and simplify a surgeon's control of the
operating room ("OR"). The Company believes that its products and products under
development will provide surgeons with the precision and dexterity necessary to
perform complex, minimally invasive surgical procedures, as well as enable
surgeons to control critical devices in the OR through simple verbal commands.
The Company believes that its products and products under development will
broaden the scope and increase the effectiveness of minimally invasive surgery,
improve patient outcomes, and create a safer, more efficient and cost effective
OR.
The Company's AESOP(R) line of robotic endoscope positioning systems is
Food and Drug Administration ("FDA") cleared. AESOP allows direct surgeon
control of the endoscope through simple verbal commands, eliminating the need
for a member of a surgical staff to manually control the camera while providing
a more stable and sustainable endoscopic image. The Company believes that AESOP
is the world's first FDA-cleared robot and first voice control interface for a
surgical device. Over 350 AESOP units have been sold worldwide, which the
Company believes have been used to perform over 45,000 procedures.
The Company's HERMES(TM) OR Control Center is designed to enable a
surgeon to directly control multiple OR devices, including various laparoscopic,
arthroscopic and video devices, as well as the Company's robotic devices,
through simple verbal commands. HERMES also provides standardized visual and
digitized voice feedback to a surgical team. The Company believes that the
enhanced control and feedback provided by HERMES has the potential to improve
safety, increase efficiency, shorten procedure times and reduce costs. Six
510(k) submissions relating to HERMES have been cleared by the FDA and the
Company has commenced marketing of HERMES through its OEM agreement with Stryker
Corporation in the third quarter.
The Company's ZEUS(TM) Robotic Surgical System is designed to
fundamentally improve a surgeon's ability to perform complex surgical procedures
and enable new, minimally invasive surgical procedures, including fully
endoscopic multivessel coronary artery bypass grafts ("E-CABG(TM)") which are
currently very difficult or impossible to perform. ZEUS is comprised of three
surgeon-controlled robotic arms, one of which positions the endoscope and two of
which manipulate surgical instruments. The Company believes that ZEUS will
improve a surgeon's dexterity and precision and enhance visualization of, and
access to, confined operative sites. The Company also believes that new
minimally invasive surgical procedures performed with ZEUS will result in
reduced patient pain and trauma, fewer complications, lessened cosmetic concerns
and shortened convalescent periods and will increase the number of patients
qualified for certain surgical procedures. In addition, the Company believes
that an increase in minimally invasive procedures will result in lower overall
healthcare costs to providers, payors and patients. The Company has commenced
clinical trials for tubal reanastomosis procedures under an Investigational
Device Exemption ("IDE") from the FDA and is performing limited pre-clinical
testing for heart procedures and intends to seek clearance from the FDA later
this year to commence clinical trials for ZEUS-based human heart procedures.
6
<PAGE> 7
The Company has sustained significant losses since inception and expects
to continue to incur significant losses due to research and development efforts,
costs associated with obtaining regulatory approvals and clearances, continued
marketing expenditures to increase sales and other costs associated with the
Company's anticipated growth. Furthermore, the Company anticipates that its
operating results may fluctuate significantly from quarter to quarter in the
future, depending on a number of factors, many of which are outside the
Company's control. These factors include timing and results of pre-clinical and
clinical trials, delays associated with FDA and other clearance processes,
clinician acceptance of the Company's products, changes in pricing policy by the
Company or its competitors, the number, timing and significance of product
enhancements and new products by the Company and its competitors, health care
reimbursement policies and product quality issues.
RESULTS OF OPERATIONS
- ---------------------
Three Months Ended June 30, 1998 compared to the Three Months Ended June 30,
1997.
Revenue. Revenue increased $791,000 (53%) to $2,274,000 for the three
months ended June 30, 1998 from $1,483,000 for the same period in 1997. The
increase resulted in part from a $290,000 (22%) increase in AESOP revenue from
the second quarter 1997 to the second quarter 1998. Although AESOP robotic arm
unit sales were down by 29%, average selling prices increased by 47%. The second
quarter 1998 also included $459,000 of revenue related to the Company's HERMES
OR Control Center, the majority of which was related to the Company's original
equipment agreement with Stryker Corporation, and $207,000 of development
related revenue for the Company's ZEUS product line.
Gross Profit. Gross profit increased $564,000 (74%) to $1,323,000 for
the three months ended June 30, 1998 from $759,000 for the same period in 1997.
Gross margin increased to 58.2% in the second quarter of 1998 as compared to
51.2% in the second quarter of 1997. The increase in gross margin was primarily
due to increased AESOP average selling prices.
Selling, General and Administrative. Selling, general and administrative
expense increased $525,000 (22%) to $2,865,000 for the three months ended June
30, 1998 from $2,340,000 for the same period in 1997. The increase was due
mainly to the addition of sales and marketing personnel as the Company expanded
its domestic sales force and product management capability, related recruiting
and relocation costs, higher commissions on increased AESOP sales, and higher
travel and business related expenses. Amortization of non-cash compensation
charges related to the grant of stock, warrants and stock options was $170,000
in the second quarter 1998 as compared to $762,000 in the second quarter 1997.
The Company expects selling, general and administrative expenses to increase in
future periods as it continues to expand its sales and marketing capability.
Research and Development. Research and development expenses increased
$1,052,000 (134%) to $1,840,000 for the three months ended June 30, 1998 from
$788,000 for the same period in 1997, primarily as a result of the addition of
personnel and increased development efforts with respect to the HERMES and ZEUS
product lines, as well as for pre-clinical and clinical trial activity. The
Company expects research and development expenditures to increase as it
continues to develop its technologies and conduct clinical trials.
7
<PAGE> 8
Other Expense (Income). Other income of $384,000 for the three months
ended June 30, 1998 compared to other expense of $1,011,000 for the three months
ended June 30, 1997. Other income for the three months ended June 30, 1998,
included interest income derived from proceeds of the Company's IPO which was
completed in August 1997. Other expense for the three months ended June 30, 1997
included the amortization of $896,000 of interest costs relating to the fixed
conversion feature of a convertible debenture and warrants issued with certain
debt.
Six Months Ended June 30, 1998 compared to the Six Months Ended June 30, 1997.
Revenue. Revenue increased $1,495,000 (52%) to $4,351,000 for the six
months ended June 30, 1998 from $2,856,000 for the same period in 1997. The
increase resulted principally from an increase in AESOP revenue of $567,000,
which reflected a 46% increase in average selling price, as well as $698,000 of
revenue related to the Hermes product line.
Gross Profit. Gross profit increased $1,026,000 (69%) to $2,507,000 for
the six months ended June 30, 1998 from $1,481,000 for the same period in 1997.
Gross margin improved from 51.9% to 57.6% between the two periods. The increase
in gross margin was primarily due to increased AESOP average selling prices.
Selling, General and Administrative. Selling, general and administrative
expense increased $1,764,000 (48%) to $5,441,000 for the first half of 1998 as
compared to $3,677,000 for the first half of 1997. The increase was due to the
addition of sales and managerial personnel, related recruiting and relocation
costs, greater travel and business expenses and higher commissions based on
increased AESOP sales.
Research and Development. Research and development expense increased
$2,239,000 (166%) to $3,585,000 for the first half of 1998 as compared to
$1,346,000 for the first half of 1997, primarily as a result of additional
personnel and increased development efforts with respect to HERMES and ZEUS, as
well as for building additional R&D infrastructure.
Other Expense (Income). Other income of $797,000 in the first half 1998
compared to other expense of $1,367,000 for the first half of 1997. Other income
for the six months ended June 30, 1998, included interest income derived from
proceeds of the Company's IPO which was completed in August 1997. Other expense
in the first half of 1997 included the amortization of $1,126,000 of interest
costs attributable to the fixed conversion feature of a convertible debenture
and warrants issued with certain debt.
Income Taxes. Minimal provisions for the state income taxes have been
recorded for the Company's pre-tax losses to date. As of December 31, 1997, the
Company had federal and state net operating loss (NOL) carryforwards of
approximately $18.0 million and $8.0 million, respectively which are available
to offset future federal and state taxable income. Federal carryforwards expire
fifteen years after the year of loss and state carryforwards expire from five to
seven years after the year of loss. The Company has provided a full valuation
allowance on the deferred tax asset because of the uncertainty regarding its
realization.
8
<PAGE> 9
FINANCIAL CONDITION
- -------------------
Since its inception, the Company's expenses have exceeded its revenue,
resulting in an accumulated deficit of $27,388,000 as of June 30, 1998. Until
its initial public offering in August 1997, the Company had primarily relied on
proceeds from issuance of preferred and common stock and bridge debt financing
to fund its operations.
During the third quarter 1997 the Company filed an S-1 registration
statement with the Securities and Exchange Commission (Registration No.
333-29505) for 2,875,000 shares of its common stock and on August 15, 1997 the
Company completed its initial public offering by selling 2,500,000 shares of its
common stock at $14.00 per share, less underwriting discounts and commissions of
$.98 per share, to its underwriters, Montgomery Securities and Piper Jaffray,
Inc. The Company received net proceeds of $32,550,000 from this sale before
deducting offering expenses. Effective upon the closing of the IPO, all of the
outstanding shares of convertible preferred stock of the Company were converted
into 2,344,387 shares of common stock.
In September 1997, the underwriters exercised their option to purchase
an additional 375,000 shares of common stock directly from the Company at a
price of $14.00 per share, less underwriting discounts and commissions of $.98
per share. The Company received net proceeds of $4,883,000 from this sale before
deducting offering expenses.
In conjunction with completing the IPO, the Company incurred total
direct offering expenses of $727,000. Total net proceeds to the Company from the
IPO and the exercise of the over-allotment option, after deducting underwriting
discounts and commissions and total direct offering expenses, was $36,706,000.
In 1997, the Company used $3,250,000 of the net proceeds from the IPO
for repayment of certain outstanding indebtedness and $490,000 to make capital
purchases. In the first half of 1998, the Company made capital expenditures
totaling $851,000. Proceeds from the IPO are also funding the Company's current
operating losses. The remaining net proceeds of the IPO of approximately
$26,000,000 have been invested in short-term investment grade debt securities.
At June 30, 1998, the Company's current ratio (current assets divided by
current liabilities) was 10.4 to 1 versus 14.9 to 1 at December 31, 1997, and
reflects the use of the initial public offering proceeds to fund operations.
For the six months ended June 30, 1998, the Company had net cash used in
operating activities of $6,101,000 primarily attributable to the net loss and,
to a lessor extent, an increase in inventory.
For the six months ended June 30, 1998, cash outflow from purchases of
plant and equipment was $851,000. The Company currently has no material
commitments for capital expenditures, but is planning to procure additional
leased space in anticipation of continued business growth.
9
<PAGE> 10
For the six months ended June 30, 1998, net cash provided by financing
activities of $871,000 was almost entirely attributable to proceeds from stock
option exercises of $794,000.
The Company does not expect to be materially impacted by the effect of
Year 2000 issues. The Company's products have no Year 2000 issues. The Company's
internal business systems are not Year 2000 compliant and a plan has been
developed to replace these systems in a timely fashion at a cost estimated at
$250,000.
The Company's operations to date have consumed substantial amounts of
cash, and the Company expects its capital and operating expenditures to continue
to increase. The Company believes that the net proceeds of its initial public
offering should be adequate to fund its expected operating losses and satisfy
its capital requirements through 1999. The Company's need for additional
financing will depend upon numerous factors, including, but not limited to, the
extent and duration of the Company's future operating losses, the level and
timing of future revenue and expenditures, the progress and scope of clinical
trials, the timing and costs required to receive both United States and
international governmental approvals or clearances, market acceptance of new
products, the results and scope of ongoing research and development projects,
the costs of training physicians to become proficient in the use of the
Company's products and procedures, and the cost of further developing marketing
and distribution capabilities. To the extent that existing resources are
insufficient to fund the Company's activities, the Company may seek to raise
additional funds through public or private financing. There can be no assurance
that additional financing, if required, would be available on acceptable terms,
if at all. If adequate funds are not available, the Company's business,
financial condition and results of operations would be materially adversely
affected.
RISK FACTORS THAT MAY AFFECT FUTURE RESULTS
- -------------------------------------------
The Company operates in a rapidly changing environment that involves a
number of risks, some of which are beyond the Company's control. The following
discussion summarizes some of these risks which could affect the Company's
actual future results and could cause them to differ materially from any
forward-looking statements made by the Company.
The Company has a limited operating history and has not yet made a
profit. The HERMES and ZEUS product lines are important to the Company's future
success and ZEUS has not achieved regulatory approval or clearance, and neither
product has achieved market acceptance. Government regulation of the medical
device industry is strict and regulatory approvals are generally lengthy,
expensive and uncertain. There are alternative treatments and procedures to
using the Company's products. The Company's products are subject to rapid
technological change and the success of the Company, in part, is based on its
ability to obtain patent protection for its products. The Company is dependent
on sole source suppliers for principal components of its products. The Company's
anticipated growth will place significant demands on the Company's management
and resources, particularly in research and development, sales and marketing and
manufacturing. A more detailed discussion of factors that could affect the
Company's future results can be found in the "Risk Factors That May Affect
Future Results" section of the Company's Annual Report on Form 10-K for the year
ended December 31, 1997.
10
<PAGE> 11
PART II OTHER INFORMATION
- ---------------------------
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
- ---------------------------------------------------
Reference is made to the discussion of the use of proceeds of the Company's
initial public offering under the caption "Financial Condition" in Management's
Discussion and Analysis.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- -------------------------------------------------------------
On May 19, 1998, the Company held its Annual Meeting of Shareholders with
shareholders holding 6,824,029 shares of common stock (representing 86% of the
total number of shares outstanding and entitled to vote) present in person or by
proxy at the meeting. Proxies for the meeting were solicited pursuant to
Regulation 14A of the Securities Exchange Act of 1934. Daniel R. Doiron, Robert
W. Duggan, M. Jacqueline Eastwood, W. Peter Geis, Yulun Wang and William D.
Williams were listed as management's nominees in the Proxy Statement and were
elected as directors at the meeting. The votes for each nominee were as follows:
<TABLE>
<CAPTION>
Number of
Number of Number of Votes
Name Affirmative Votes Negative Votes Witheld
- ---- ----------------- -------------- -------
<S> <C> <C> <C>
Daniel R. Doiron 6,823,564 -- 465
Robert W. Duggan 6,823,564 -- 465
M. Jacqueline Eastwood 6,823,564 -- 465
W. Peter Geis 6,823,564 -- 465
Yulun Wang 6,823,564 -- 465
William D. Williams 6,823,564 -- 465
</TABLE>
At the meeting, the Company also sought the ratification of the re-appointment
of Arthur Andersen LLP as independent auditors of the Company for the fiscal
year ending December 31, 1998. This proposal was approved by 6,820,909
affirmative votes. There were 400 negative votes and 2,720 abstentions.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------------------------------------------
(a) Exhibits:
27.1 - Financial data schedule
(b) No Reports on Form 8-K were filed during the quarter ended June 30, 1998.
11
<PAGE> 12
SIGNATURE
- ---------
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.
Date: August 10, 1998 Computer Motion, Inc.
By: /s/ Stephen L. Wilson
-------------------------------
Stephen L. Wilson
Executive Vice President, Chief
Financial fficer and Secretary
(Principal Financial and
Accounting Officer)
12
<PAGE> 13
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<C> <S>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED BALANCE SHEETS AND CONDENSED STATEMENTS OF OPERATIONS FOUND ON PAGES
TWO AND THREE OF THE COMPANY'S FORM 10Q FOR THE YEAR TO DATE AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 17,950,000
<SECURITIES> 8,703,000
<RECEIVABLES> 2,077,000
<ALLOWANCES> 165,000
<INVENTORY> 2,490,000
<CURRENT-ASSETS> 31,301,000
<PP&E> 3,146,000
<DEPRECIATION> 1,377,000
<TOTAL-ASSETS> 33,550,000
<CURRENT-LIABILITIES> 3,006,000
<BONDS> 0
0
0
<COMMON> 8,000
<OTHER-SE> 30,536,000
<TOTAL-LIABILITY-AND-EQUITY> 33,550,000
<SALES> 4,351,000
<TOTAL-REVENUES> 4,351,000
<CGS> 1,844,000
<TOTAL-COSTS> 1,844,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 103,000
<INTEREST-EXPENSE> 28,000
<INCOME-PRETAX> (5,722,000)
<INCOME-TAX> 13,000
<INCOME-CONTINUING> (5,735,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,735,000)
<EPS-PRIMARY> (.73)
<EPS-DILUTED> (.73)
</TABLE>
