<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the quarter ended March 31, 2000
or
[ ] 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: 0-27600
OPTICAL SENSORS INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 41-1643592
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7615 Golden Triangle Drive, Suite A, Minneapolis, Minnesota 55344-3733
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (612) 944-5857
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
As of May 8, 2000, the Registrant had 8,982,461 of Common Stock
outstanding.
<PAGE>
Index
OPTICAL SENSORS INCORPORATED
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Balance Sheets - March 31, 2000 and December 31,1999
Statements of Operations - Quarters ended March 31, 2000 and March 31,
1999
Statements of Cash Flows - Quarters ended March 31, 2000 and March 31,
1999
Notes to Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Part II. Other Information
Item 4. Submission of Matters to Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
1
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Optical Sensors Incorporated
Balance Sheets
<TABLE>
<CAPTION>
March 31, 2000 December 31,1999
-------------------------------------
(Unaudited) (Note)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 1,773,572 $ 1,450,872
Accounts receivable 40,934 52,516
Inventory 1,295,146 1,305,065
Prepaid expenses and other current assets 63,084 29,418
-------------------------------------
Total current assets 3,172,736 2,837,871
Property and equipment:
Leased Equipment 1,157,989 1,157,989
Research and development equipment 742,971 742,971
Leasehold improvements 340,802 340,802
Furniture and equipment 174,517 161,048
Marketing equipment 1,004,840 1,004,840
Production equipment 478,913 478,919
-------------------------------------
3,900,032 3,886,569
Less accumulated depreciation (3,161,063) (2,975,140)
-------------------------------------
738,969 911,429
Other assets:
Patents 555,866 530,198
Other assets 16,278 16,278
-------------------------------------
572,144 546,476
-------------------------------------
Total assets $4,483,849 $4,295,776
=====================================
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $266,332 $110,595
Employee compensation 175,138 134,372
Other liabilities and accrued expenses 75,238 75,499
Convertible notes payable 1,400,000
Obligations under capital lease, current portion 434,583 516,487
-------------------------------------
Total current liabilities 2,351,291 836,953
Obligations under capital lease, less current portion 58,550 104,108
Shareholders' equity
Convertible preferred stock, par value $.01
per share:
Authorized shares--5,000,000
Common stock, par value $.01 per share:
Authorized shares--30,000,000
Issued and outstanding shares 2000--8,982,461; and
1999--8,935,304 89,825 89,353
Additional paid-in capital 70,860,908 69,416,688
Accumulated deficit (68,876,725) (66,151,326)
-------------------------------------
Total shareholders' equity 2,074,008 3,354,715
-------------------------------------
Total liabilities and shareholders' equity $4,483,849 $4,295,776
=====================================
</TABLE>
Note: The balance sheet at December 31,1999 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See accompanying notes.
2
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Optical Sensors Incorporated
Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31, March 31,
2000 1999
--------------------------------
<S> <C> <C>
Net sales $ 0 $ 59,960
Cost of goods sold 0 745,088
--------------------------------
Gross margin 0 (685,128)
Operating expenses:
Research and development expenses 786,005 968,775
Selling, general and administrative
expenses 325,203 1,362,131
--------------------------------
Operating loss (1,111,208) (3,016,034)
Interest expense (1,427,015) (23,665)
Interest income 12,872 74,425
Other income (expense) (200,048) 664
--------------------------------
(1,614,191) 51,424
--------------------------------
Net loss $(2,725,399) $(2,964,610)
================================
Net loss per common share:
Basic and diluted $ (.30) $ (.34)
================================
Shares used in calculation of net
loss per share 8,949,922 8,837,932
================================
</TABLE>
See accompanying notes.
3
<PAGE>
Optical Sensors Incorporated
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31, March 31,
2000 1999
-------------------------------------
<S> <C> <C>
Operating activities
Net loss $(2,725,399) $(2,964,610)
Adjustments to reconcile net loss to net cash used in
operating activities:
Non-cash interest expense 1,400,000
Depreciation and amortization 210,449 294,860
Deferred compensation amortization 23,010
Amortization of warrants in connection with debt and lease
financings 2,775
Changes in operating assets and liabilities:
Receivables 11,582 121,509
Inventories (860) 110,826
Prepaid expenses and other assets (73,081) (26,818)
Accounts payable and accrued expenses 196,242 (147,202)
-------------------------------------
Net cash used in operating activities (981,061) (2,585,650)
Investing activities
Purchases of property and equipment (13,463) (22,253)
-------------------------------------
Net cash used in investing activities (13,463) (22,523)
Financing activities
Proceeds from Convertible notes payable 1,400,000
Net proceeds from issuance of common stock 44,692 12,275
(Payments) on long-term debt and lease obligations (127,462) (65,930)
-------------------------------------
Net cash provided by (used in) financing activities 1,317,230 (53,655)
-------------------------------------
Increase (decrease) in cash and cash equivalents 322,706 (2,661,558)
Cash and cash equivalents at beginning of period 1,450,872 8,079,871
-------------------------------------
Cash and cash equivalents at end of period $1,773,572 $5,418,313
=====================================
</TABLE>
See accompanying notes.
4
<PAGE>
Optical Sensors Incorporated
Notes to Financial Statements
(Unaudited)
March 31, 2000
Note A - Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three month period ended March 31, 2000 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 2000. For further information, refer to the financial
statements and footnotes thereto included in the Optical Sensors Incorporated
Annual Report on Form 10-K for the year ended December 31,1999.
Note B - Net Loss Per Share
Basic and diluted net loss per common share is computed using the weighted
average number of common shares outstanding during the period. Options and
warrants were outstanding during the quarters ended March 31, 2000 and 1999, but
were not included in the computation of diluted net loss per common share
because the effect would be antidilutive. All earnings per share amounts for all
periods have been presented, and where necessary, restated to conform to the
Statement 128 requirements.
Note C - Investment Agreement
In March 2000, the Company entered into an Investment Agreement with Circle
F Ventures, LLC and Special Situations Fund III, L.P., pursuant to which the
Company agreed to issue convertible promissory notes in the aggregate principal
amount of up to $3,000,000. These notes are convertible into units, each unit
consisting of 50,000 shares of Common Stock and a five-year warrant to purchase
12,500 shares of common stock at an exercise price of $1.00 per share, at a
conversion price equal to $50,000 per unit, in accordance with the Investment
Agreement. The Company received advances under these notes in the aggregate
amount of $1,400,000 on March 10, 2000. The notes are due March 10, 2001.
Under FASB reporting rules the Company is required to recognize as interest
expense the "intrinsic value of a beneficial conversion feature embedded in a
convertible security", i.e. the difference between the market price and the
conversion price. The Company's share price as listed on the Nasdaq Stock Market
on March 10, 2000 was $3.53 and the conversion price of
5
<PAGE>
Investment Agreement was $1.00. The recognizable interest expense is limited to
the proceeds of the convertible security or $1,400,000. Accordingly the Company
has recognized $1,400,000 as interest expense in the first quarter of 2000 with
a corresponding addition to additional paid in capital.
6
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Overview
Since October 1998, Optical Sensors Incorporated (the "Company") has been
focusing its resources on development and commercialization of the CapnoProbe,
which is a handheld device with a carbon dioxide ("CO2") probe that is slipped
under the tongue like a thermometer. It non-invasively measures the tissue CO2
of the mucous membrane in the mouth -- a sensitive measure that can indicate
reduced blood flow to non-vital organs. Reduced blood flow, or "hypoperfusion,"
can be an early manifestation of clinical shock, even when traditional vital
signs may still appear relatively normal. Diagnosis of inadequate tissue
perfusion may be difficult in its early stages when the signs and symptoms are
masked by the body's natural compensatory mechanisms that preserve blood supply
to vital organs by reducing blood flow to other organs. If treatment is delayed
to the point that the body's compensatory systems can no longer maintain
adequate circulation and vital tissue perfusion, the consequences can be
disastrous for the patient. To date, there has been no rapid, low-cost,
noninvasive method to objectively determine when a patient has inadequate tissue
perfusion.
In December 1998, the Company filed a 510(k) application for FDA clearance
of the CapnoProbe as a Class II medical device. At the FDA's request and as part
of that submission, the Company provided additional data to the FDA on March 20,
2000. Prototype versions of the CapnoProbe system are currently being evaluated
at clinical sites in the United States. The Company has completed set up of one
manufacturing pod for manual assembly of the prototype probes and finished
preliminary plans for automated probe assembly. The Company is re-evaluating the
timing of commercialization of the CapnoProbe.
Since January 1999, the Company has been exploring strategic alternatives,
including joint ventures, corporate strategic alliances, sale of the business or
product lines, or other business combinations. In January 2000, the Company
signed a non-binding letter of intent with a major supplier of medical products
and services to negotiate a definitive agreement for the Company's CapnoProbe
product and technology. On May 11, 2000 the Company announced that it had
discontinued negotiations with this company. The Company continues to discuss
with other parties potential transactions involving the CapnoProbe.
Results of Operations
Net sales were zero in the first quarter of 2000 as compared to $59,560 in the
first quarter in 1999. The decrease in sales is the result of OSI's suspension
of direct sales and support activities of the SensiCath System in January 1999.
The Company does not expect meaningful sales of the SensiCath System in the
future.
Costs of products sold were zero in the first quarter of 2000 as compared to
$557,371 in the first quarter in 1998. Personnel, equipment and facility costs
formerly utilized in the production of the SensiCath product have been applied
fully towards development of the CapnoProbe product. Accordingly, beginning in
year 2000 these costs are being reclassified as research and development
activities. The total amount reclassified for the first quarter of 2000 is
$212,550.
7
<PAGE>
Research and development costs for the first quarter of 2000 decreased $182,770
to $786,005 or 19% from $968,775 in the first quarter of 1999. Research and
development efforts during the quarter were directed towards product development
and regulatory activities for the CapnoProbe. Research and development staffing
was reduced by approximately 25% in the first quarter of 1999. These savings
were offset partially by the reclassification to research and development of
former manufacturing resources and related costs totaling $212,550 in the first
quarter of 2000. Under the July 1998 license agreement with ICCM, the Company
expects to pay $300,000 in minimum royalties in 2000. The minimum royalty
payments will be recorded as research and development expenses because no
significant CapnoProbe sales are anticipated in 2000. The Company is obligated
to pay ICCM a customary royalty equal to a percentage of sales, which varies
depending on the selling price to the customer of the CapnoProbe. However, the
Company does not currently expect to have any significant commercial sales of
the CapnoProbe in 2000. Research and development costs are expected to continue
at this level for the foreseeable future.
Selling, general and administrative expenses in the first quarter of 2000
decreased $1,036,928 or 76% to $325,203 from $1,362,131 in the first quarter of
1999. Substantially all sales and marketing activities related to the SensiCath
product line were suspended during the first quarter of 1999. Selling, general
and administrative expenses consist primarily of the cost of ongoing
administrative activities and costs of maintaining the Company's public status.
These costs are expected to continue at the current level for the foreseeable
future.
Interest expense, prior to a $1,400,000 accounting charge described below under
"Liquidity and Capital Resources ", in the first quarter of 2000 increased
$3,350 to $27,015 from $23,665 in the first quarter of 1999. The increase is the
result of previously reported restructuring of certain capitalized leases.
Interest income in the first quarter of 2000 decreased $61,553 to $12,872 from
$74,425 in the first quarter of 1999. The decrease in interest income in the
first quarter of 2000 is due to declining cash balances. The Company expects
interest income to continue to decline in future periods as it uses cash for
operations.
Other expense for the quarter ended March 31, 2000 included a $200,000 accrual
for a payment to settle an arbitration proceeding. Other expense and income
items for the quarters ended March 31, 1999 and ended March 31, 2000 were
insignificant.
Since its inception, the Company has experienced significant operating losses.
The Company incurred a net loss of $2,725,399 for the quarter ended March 31,
2000, compared to a net loss of $2,964,610 for the quarter ended March 31, 1999.
As of March 31, 2000, the Company had an accumulated deficit of $68,876,725. The
Company anticipates that its operating losses will continue for the foreseeable
future. Except for historical information contained herein, the disclosures in
this report are forward looking statements. See "Certain Important Factors".
8
<PAGE>
Liquidity and Capital Resources
To date, the Company has financed its operations primarily through the sale
of equity securities. From inception through December 31, 1995, the Company
raised net proceeds of $30,400,000 from private equity financings and stock
option exercises. In the first quarter of 1996, the Company completed an initial
public offering of 2,875,000 shares of Common Stock. The net proceeds to the
Company from the public offering were approximately $33,916,000. In January
1998, the Company sold 441,203 shares of Common Stock in a private transaction,
at a price of $5.00 per share (which is equal to the closing market price on the
date before signing of the agreement) for a total price of $2,206,015.
In March 2000, the Company entered into an Investment Agreement with Circle F
Ventures, LLC and Special Situations Fund III, L.P., pursuant to which the
Company agreed to issue convertible promissory notes in the aggregate principal
amount of up to $3,000,000. These notes are convertible into units, each unit
consisting of 50,000 shares of Common Stock and a five-year warrant to purchase
12,500 shares of Common Stock at an exercise price of $1.00 per share, at a
conversion price equal to $50,000 per unit, in accordance with the Investment
Agreement. The Company received advances under these notes in the aggregate
amount of $1,400,000 on March 10, 2000. The Company has the right to request
additional advances up to the aggregate principal amount of $1,600,000 at any
time during the 60 day period beginning on the first day after both of the
following have occurred: (1) the Company executes a definitive distribution
agreement for the Company's CapnoProbe product with a major medical company, and
(2) the stockholders of the Company have approved the conversion of any
additional advances to be made under the notes into units at the Company's 2000
Annual Meeting of Stockholders. The Company's stockholders approved the
conversion on May 4, 2000. The Company's right to request additional advances
expires on June 15, 2000. The Company does not expect to enter into a definitive
distribution agreement prior to June 15, 2000. Accordingly, the Company does not
expect to be able to convert the outstanding indebtedness or request additional
advances under the notes.
The proceeds from the sales of these securities have been used to fund costs of
producing products and for the operating expenses described above and capital
expenditures described below. The Company's Common Stock is quoted on the OTC
Bulletin Board under the symbol "OPSI."
Under FASB reporting rules the Company is required to recognize as interest
expense the "Intrinsic value of a beneficial conversion feature embedded in a
convertible security", i.e. the difference between the market price and the
conversion price. The Company's share price as listed on the Nasdaq Stock Market
on March 10, 2000 was $3.53 and the conversion price of Investment Agreement was
$1.00. The recognizable interest expense was limited to the proceeds of the
convertible security or $1,400,000. Accordingly the Company has recognized
$1,400,000 as interest expense in the first quarter of 1999 with a corresponding
addition to additional paid in capital.
9
<PAGE>
The Company's cash and cash equivalents were $1,773,572 and $1,450,872 at
March 31, 2000 and December 31, 1999, respectively. The increase in the
Company's cash balance is due to $1,400,000 received upon issuance of
convertible promissory offset partially by the operating losses described above.
The Company incurred cash expenditures of $981,061 for operations and $13,463
for capital expenditures in the first quarter of 2000. The inventory at March
31, 2000 consisted primarily of OpticalCAM monitors and ABG Modules for which
the Company plans to use in conjunction with future configurations of the
CapnoProbe product and other research and commercial applications.
The Company has contracts to purchase minimum quantities of instrumentation
and other inventory items with an outstanding aggregate commitment of
approximately $1,400,000. Based on discussions with the parties to these
obligations, the Company does not believe that any future costs to the Company
under these agreements are likely. The Company is obligated to pay ICCM $300,000
annually under the previously described license agreement. As of March 31, 2000,
the Company had no material commitments outstanding for tooling, equipment or
outside development contracts.
The Company believes that its current cash balances, including the proceeds
received on March 10, 2000 from advances under the notes issued under the
Investment Agreement described above, will be sufficient to fund the Company's
operations through June 30, 2000. Thereafter, the Company will require
additional capital to continue operations. If the Company is unable to obtain
additional financing when needed, it will likely be forced to cease operations.
Certain Important Factors
In addition to the factors identified above, there are several important
factors that could cause the Company's actual results to differ materially from
those anticipated by the Company or which are reflected in any forward-looking
statements of the Company. These factors, and their impact on the success of the
Company's operations and its ability to achieve its goals, include the
following:
o Need for Additional Financing. The Company believes that its current
cash balances, including the proceeds received on March 10, 2000 from
advances under the notes issued under the Investment Agreement
described above, will be sufficient to fund the Company's operations
through June 30, 2000. Thereafter, the Company will require additional
capital to continue operations. Accordingly, the report of the
independent auditors on the Company's 1999 financial statements
contains an explanatory paragraph regarding the Company's ability to
continue as a going concern. If the Company is unable to obtain
additional financing when needed, it will likely be forced to cease
operations. Additionally, any additional equity financings may be
dilutive to the Company's existing stockholders, and debt financing,
if available, may involve restrictive covenants on the Company's
business.
o Development and Commercialization of CapnoProbe. The Company's future
success will depend, in large part, on successful development and
commercialization of the CapnoProbe product. The Company is in the
later stages of developing and testing prototypes and is currently
engaged in human clinical trials of the CapnoProbe product. The
Company has set up one manufacturing pod for manual assembly of the
prototype
10
<PAGE>
probes and finished preliminary plans for automated probe assembly.
The Company is re-evaluating the anticipated timing of
commercialization of the CapnoProbe. The Company has not yet
established commercial manufacturing for the CapnoProbe. Accordingly,
there can be no assurance that the Company will successfully develop a
commercial CapnoProbe product.
o Completion of Corporate Alliance or Business Combination. Since
January 1999, the Company has been exploring strategic alternatives,
including joint ventures, corporate strategic alliances, sale of the
business or product lines, or other business combinations. In January
2000, the Company signed a non-binding letter of intent with a major
supplier of medical products and services to negotiate a definitive
agreement for the Company's CapnoProbe product. On May 11, the Company
announced that it had discontinued negotiations with this company.
o Nasdaq Listing. As of March 31, 2000 the Company had total net
tangible assets of $1.5 million. This amount was below the minimum
requirements for maintaining listing on the Nasdaq Market.
Accordingly, the Company's common stock ceased to be quoted on the
Nasdaq National Market on May 12, 2000 and was transferred to the
Over-The-Counter ("OTC") Bulletin Board. Because the Company's common
stock is traded on the OTC Bulletin Board, trading is subject to
"penny stock" rules under the Securities Exchange Act of 1934 as
amended, and the public trading market for the Company's common stock
could be adversely affected.
o Competition. Competition among medical device companies is intense and
increasing. There can be no assurance that the Company's competitors
will not succeed in developing or marketing technologies and products
that are more effective or less expensive than the Company's products
or that would render the Company's products obsolete or
non-competitive.
o Regulatory Approvals. The Company's ability to market its current
products and any products that it may develop in the future requires
clearances or approvals from the FDA and other governmental agencies,
including, in some instances, foreign and state agencies. The process
for maintaining and obtaining necessary regulatory clearances and
approvals can be expensive and time consuming. There can be no
assurance that the Company will be able to maintain or obtain
necessary regulatory approvals and clearances in the future.
Part II. Other Information
Item 1. Legal Proceedings
In April 2000, the Company and Instrumentation Laboratory Company entered
into a Settlement Agreement resolving the previously disclosed arbitration
proceeding and releasing certain claims.
11
<PAGE>
Item 4. Submission of Matters to Vote of Security Holders
On May 4, 2000, the Company held its annual meeting of stockholders.
The following matters were voted on at the annual meeting:
(a) The following directors were elected to serve until the 2000 Annual Meeting
of Stockholders:
Director Votes For Votes Withheld
-------- --------- --------------
Paulita M. LaPlante 7,579,421 204,715
Sam B. Humphries 7,500,351 283,785
Richard B. Egen 7,579,421 204,715
Richard J. Meelia 7,578,866 205,270
Demetre M. Nicoloff, M.D. 7,579,421 204,715
Gary A. Peterson 7,578,549 205,587
(b) The selection of Ernst & Young, LLP as the Company's independent auditors
for the year ending December 31, 1998 was ratified with 7,758,452 shares
voting in favor, 2,213 shares voting against, 23,471 shares abstaining and
zero broker non-votes.
(c) The proposal to approve the issuance of 1,600,000 shares of the Company's
common stock and warrants to purchase an additional 400,000 shares of the
common stock upon conversion of convertible promissory notes was approved
with 7,564,697 shares voting in favor, 117,130 shares voting against,
102,309 shares abstaining and zero broker non-votes.
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibit is included herein:
(27) Financial Data Schedule
(b) Reports on Form 8-K
On March 14, 2000, the Company filed a Report on Form 8-K reporting the
sale of convertible promissory notes and an amendment to the Company's
Shareholder Rights Agreement.
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.
OPTICAL SENSORS INCORPORATED
Date May 12, 2000
---------------------------------------------
/s/ Paulita M. LaPlante
President and Chief Executive Officer
(Principal Executive Officer)
Date May 12, 2000
---------------------------------------------
/s/ Wesley G. Peterson
Chief Financial Officer, Vice President of
Finance and Administration and Secretary
(Principal Financial and Accounting Officer)
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 215,697
<SECURITIES> 1,557,875
<RECEIVABLES> 40,934
<ALLOWANCES> 0
<INVENTORY> 1,295,146
<CURRENT-ASSETS> 3,172,736
<PP&E> 3,900,032
<DEPRECIATION> 3,161,063
<TOTAL-ASSETS> 4,483,849
<CURRENT-LIABILITIES> 2,351,291
<BONDS> 0
0
0
<COMMON> 89,825
<OTHER-SE> 1,984,183
<TOTAL-LIABILITY-AND-EQUITY> 4,483,849
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,111,208
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,427,015
<INCOME-PRETAX> (2,725,399)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,725,399)
<EPS-BASIC> (.30)
<EPS-DILUTED> 0
</TABLE>
