FORM 10 - Q
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 30, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from
---------------------------
Commission file Number: 0-22212
IVI PUBLISHING, INC.
----------------------------------------------------
(Exact Name of Registrant as
specified in its charter)
Minnesota 41-1686038
---------- -----------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
7500 Flying Cloud Drive
Minneapolis, Minnesota 55344-3739
-----------------------------------------------------
(Address of principal executive offices)
(Zip Code)
612-996-6000
---------------------------------
(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
------------- -------------
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.
Class Outstanding as of July 28, 1997
----------------------- -------------------------------
Common Stock 7,662,850 shares
Par Value $.01 Per Share
<PAGE>
IVI PUBLISHING, INC.
Securities and Exchange Commission Form 10-Q
for the Second Quarter Ended June 30, 1997
INDEX
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Condensed Statements of Operations (Unaudited) Three months ended June
30, 1997 and June 30, 1996; Six months ended June 30, 1997 and June 30,
1996
Condensed Balance Sheets June 30, 1997 (Unaudited) and December 31,
1996
Condensed Statements of Cash Flows (Unaudited) Six months ended June
30, 1997 and June 30, 1996
Notes to Condensed Financial Statements (Unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
IVI Publishing, Inc.
Condensed Statements of Operations (Unaudited)
(In thousands except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
------------------ ------------------
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net revenues $ 524 $ 1,651 $ 2,243 $ 4,754
Cost of revenues 266 1,054 1,036 2,435
------- ------- ------- -------
Gross margin 258 597 1,207 2,319
Costs and expenses:
Product development 1,090 1,517 2,401 3,036
Sales and marketing 249 675 643 1,399
General and administrative 2,840 1,115 3,606 2,218
------- ------- ------- -------
Loss from operations (3,921) (2,710) (5,443) (4,334)
Interest (expense) income (57) 57 (116) 149
------- ------- ------- -------
Net loss ($3,978) ($2,653) ($5,559) ($4,185)
======= ======= ======= =======
Preferred stock dividends ($ 30) ($ 30) ($ 60) ($ 60)
Preferred stock accretion (13) (13) (26) (26)
------- ------- ------- -------
Net loss applicable to common stock ($4,021) ($2,696) ($5,645) ($4,271)
======= ======= ======= =======
Net loss per common share ($ 0.52) ($ 0.36) ($ 0.74) ($ 0.56)
------- ------- ------- -------
Weighted average number of common
shares outstanding 7,663 7,569 7,661 7,580
======= ======= ======= =======
</TABLE>
See notes to condensed financial statements.
<PAGE>
IVI Publishing, Inc.
Condensed Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
June 30 December 31
1997 1996
-------- --------
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 717 $ 3,462
Accounts receivable, net 735 4,134
Inventory 142 155
Other current assets 488 585
-------- --------
Total current assets 2,082 8,336
Furniture and equipment 6,720 6,812
Less allowances for depreciation (4,129) (3,622)
-------- --------
2,591 3,190
Other non-current assets 762 1,885
-------- --------
Total assets $ 5,435 $ 13,411
======== ========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 2,551 $ 3,635
Other accrued expenses 123 1,471
-------- --------
Total current liabilities 2,674 5,106
Convertible subordinated debentures 3,500 3,500
Convertible redeemable preferred stock 1,931 1,905
Shareholders' equity:
Common Stock, $.01 par value:
Issued and outstanding shares - 7,663 at
June 30, 1997 and 7,612 at December 31, 1996 77 76
Paid-in capital 70,441 70,453
Accumulated deficit (73,188) (67,629)
-------- --------
Total shareholders' (deficit) equity (2,670) 2,900
-------- --------
Total liabilities and shareholders' (deficit) equity $ 5,435 $ 13,411
======== ========
</TABLE>
See notes to condensed financial statements.
<PAGE>
IVI Publishing, Inc.
Condensed Statements of Cash Flows (Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended June 30
------------------------
1997 1996
------- -------
<S> <C> <C>
Operating activities
Net loss ($5,559) ($4,185)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 659 705
Changes in assets and liabilities:
Decrease (increase) in net accounts receivable 3,399 (390)
Decrease in inventories 13 339
Decrease (increase) in other current assets 97 (256)
Decrease (increase) in other long-term assets 1,094 (645)
Decrease in accounts payable and
accrued liabilities (2,491) (713)
------- -------
Net cash used in operating activities (2,788) (5,145)
Investing activities
Net furniture and equipment (additions) disposals (31) 374
------- -------
Net cash (used) provided by investing activities (31) 374
Financing activities
Proceeds from exercised stock options 74 347
------- -------
Net cash provided by financing activities 74 347
Net decrease in cash and cash equivalents (2,745) (4,424)
Cash and cash equivalents at beginning of period 3,462 7,759
------- -------
Cash and cash equivalents at end of period $ 717 $ 3,335
======= =======
</TABLE>
See notes to condensed financial statements.
<PAGE>
IVI Publishing, Inc.
Notes to the Condensed Financial Statements (Unaudited)
June 30, 1997
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 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 six month period ended June 30, 1997 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1997. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's annual report on Form
10-K for the year ended December 31, 1996.
Note B -- Product Development Costs
Product development costs consist principally of compensation to Company
employees, interactive design costs paid to outside consultants, travel and
supplies. All costs are expensed as incurred.
Costs related to research, design and development of products are charged to
product development expenses as incurred. Under Statement of Financial
Accounting Standards No. 86 (SFAS No. 86), software development costs are
capitalized beginning when a product's technological feasibility has been
established and ending when a product is available for general release to
customers. The Company has not capitalized any software development costs since
such costs meeting the requirements of SFAS No. 86 have not been significant.
Note C -- Net Loss Per Share
Net loss per share is computed using the weighted average number of shares of
common stock outstanding. Common equivalent shares from stock options and
warrants are excluded from the computation as their effect is anti-dilutive.
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, "Earnings Per Share." This statement establishes standards for computing
and presenting basic and diluted earnings per share (EPS) for financial
statements issued for periods ending after December 15, 1997. The adoption of
this statement will not have a material effect on the Company's reported EPS.
<PAGE>
Note D -- Revenue Recognition
The Company's revenues consist of product sales and licensing revenue, contract
development revenue, fees relating to the licensing of its content for use on
cable television, and fees for online services.
Product sales and licensing revenues are made up of retail distribution sales,
direct mail sales, and product sales and royalties on licenses to original
equipment manufacturers. These revenues are recognized upon shipment of the
product or when the Company's obligations under the licensing agreements are
complete. Allowances for returns are recorded at the time revenue is recognized.
Contract development revenue is generated through the use of the Company's
personnel and facilities for the creation of custom multimedia products. This
revenue is recognized by contract on a percentage-of-completion basis or at a
specific hourly rate, depending on the terms of the contract.
Revenues are generated through the licensing of the Company's health and medical
content for use on cable television channels. The Company recognizes revenue
under its cable agreement ratably over the life of the contract.
Revenues were also generated through the Company's online agreement with AT&T in
1996. Revenues generated by the online service were recognized as they were
earned.
Note E -- Change in Accounting Estimates
The Company recognized charges in the quarter ending June 30, 1997 relating to a
change in reserves as well as a change in the estimate of an asset. These
charges totaled $2,066,000, and were made up of $2,000,000 of reserves recorded
against receivables due from America's Health Network (AHN), off-set by
$1,000,000 of liabilities due subsequent to receipt of the receivables, and a
$1,066,000 write-off to record the partial impairment of an asset. The asset,
which is included in other assets, represents the capitalization of cost paid to
Time Life, Inc. for the development of The Medical Advisor, the print version of
Taking Control of Your Health.
<PAGE>
ITEM 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
Overview
In the second quarter of 1997, the Company expanded its participation in the
online market, which is a major facet of its integrated publishing strategy.
While continuing to sell its CD-ROM products, the Company advanced its online
business by launching an all-new Internet site, OnHealth, which is separate from
the Company's Mayo Health O@sis Internet site.
An integral part of the Company's strategy for 1997 involves the generation of
online revenue through the sale of site sponsorships, advertising and premium
services. During the second quarter, the Company made significant strides in
generating this revenue. An agreement was signed with Internet Broadcasting
System (IBS) of Minneapolis, which operates Internet sites with a focus on local
news, sports, weather and other information in Minneapolis and Los Angeles. The
Company agreed to develop an exclusive health site, or OnHealth site, for each
of IBS' local markets, as well as for certain future markets. IBS plans to enter
five to seven other markets by the end of 1997. Currently IBS has formed
partnerships with major CBS-affiliated television stations in both of the
markets in which it operates Internet sites. These television stations, WCCO-TV
(CBS-Minneapolis) and KCBS-TV (CBS-Los Angeles), promote the Internet sites. The
Company developed the Internet sites throughout the second quarter and launched
them in late June. Subsequent to launching the sites, the Company signed its
first agreements with site sponsors and advertisers. The associated revenue will
be recognized during the third quarter and over the life of the contract.
The Company had expected to receive significant revenue in the second quarter
from site sponsorship agreements for its Mayo Health O@sis Internet site.
However, due in part to continuing negotiations with representatives of Mayo
Foundation regarding a new arrangement for revenue and cost sharing and other
matters concerning O@sis, the Company was unable to close on several existing
commitments by potential sponsors prior to June 30. The Company has entered into
a binding agreement in principle with Mayo regarding O@sis as described in Part
II Item 5 "Other Information" below.
During the second quarter of 1997, the Company continued to focus its CD-ROM
efforts on its family health reference CD-ROM titles. The Company's flagship
CD-ROM product is the Mayo Clinic Ultimate Medical Guide, which is the Mayo
Clinic Family Health Book and the Mayo Clinic Family Pharmacist discs packaged
as a single unit. Although the Company's strategy calls for focusing on the
online market for the remainder of 1997, the Company will continue to publish
its family health reference CD-ROM titles.
The Company was unable to recognize the $493,000 of cable royalty revenues due
from its five-year content agreement with America's Health Network (AHN) for the
second quarter. AHN had planned to receive an influx of cash from Columbia/HCA
Healthcare Corporation which would have allowed AHN to meet all of its financial
obligations, including those in its agreement with the Company. However, the
anticipated deal with Columbia fell through on July 30. AHN has entered into
discussions with other potential financial partners, but until a deal is signed
and the Company can be reasonably certain of collectibility, no additional
revenue will be recognized. Additionally, the Company chose to reserve
approximately $2,000,000 of receivables from AHN. By reserving the receivables,
the Company also was able to eliminate $1,000,000 in liabilities which were owed
upon receipt of the AHN receivables. The Company will reevaluate the reserve, if
and when AHN is able to obtain financing.
The Company also wrote off $1,066,000 of an asset that represents the
capitalization of costs paid to Time Life, Inc. for the development of The
Medical Advisor, the print version of Taking Control of Your Health. The Company
has been amortizing this asset as royalties on sales of the print version were
received, however, sales of the print version dropped significantly during the
second quarter of 1997, and management determined that the value of this asset
was partially impaired.
<PAGE>
Results Of Operations
Net revenues for the second quarter of 1997 were $524,000, compared to
$1,651,000 for the second quarter of 1996. The revenues were comprised of the
following:
Second Quarter Second Quarter
1997 1996
----------------- -----------------
CD-ROM Retail $212,000 $364,000
CD-ROM OEM and License 108,000 426,000
Contract Development 203,000 305,000
Amortization of Cable Royalty 493,000
Other Revenue 1,000 63,000
----------------- -----------------
Total Net Revenues $524,000 $1,651,000
================= =================
The decrease in revenues resulted in part from the Company's inability to
recognize any cable royalty revenues from AHN and the inability to close on
several commitments by potential sponsors for the O@sis Internet site.
Additionally, CD-ROM retail and OEM revenues decreased due to market conditions.
Gross margins as a percentage of net revenues for the second quarter and six
months ended June 30, 1997 were 49% and 54%, respectively compared to 36% and
49% for the comparable periods of 1996. Significant increases in margins
recognized for contract development work, as well as stronger margins realized
in the CD-ROM retail business, both contributed to the increase in gross
margins.
Product development expenses were $1,090,000 and $2,401,000 for the second
quarter and six months ended June 30, 1997, respectively, compared to $1,517,000
and $3,036,000 for the comparable periods in 1996. The decrease is partially the
result of the Company's efforts to reduce expenses. Additionally, the Company
has concentrated its development efforts on the online strategy which has
resulted in lower development costs since online development is generally less
expensive than CD-ROM development. The Company's strategy is to continue to
concentrate development efforts on its online content, as well as updating its
family reference CD-ROMs.
Sales and marketing expenses for the second quarter and six months ended June
30, 1997 were $249,000 and $643,000 compared to $675,000 and $1,399,000 for the
comparable periods of 1996. The decrease was due to fewer consulting and
promotional expenses paid on CD-ROM sales. The Company intends to focus its
sales and marketing force on online opportunities, while continuing to maintain
its CD-ROM sales.
General and administrative expenses increased in the second quarter of 1997 to
$2,840,000, as compared to $1,115,000 for the second quarter of 1996. These
expenses also increased for the sixth months ended June 30, to $3,606,000 in
1997, as compared to $2,218,000 in 1996. The increase was primarily due to
reserving approximately $2,000,000 in receivables due from AHN, which became
necessary when AHN's financing fell through subsequent to the end of the second
quarter. This $2,000,000 expense was off-set by a reduction of $1,000,000 in
related liability charges. Additionally, general and administrative expenses
increased due to the $1,066,000 partial write-off of an asset that represented
the capitalization of costs paid to Time Life, Inc. for the development of The
Medical Advisor.
<PAGE>
Net interest expense was $57,000 and $116,000 for the second quarter and six
months ended June 30, 1997, compared to net interest income of $57,000 and
$149,000 for the same periods in 1996. The decrease resulted from having less
cash available for investing purposes combined with interest expense payments
made on the Company's convertible subordinated debentures.
Financial Condition, Liquidity and Capital Resources
Capital asset expenditures for the six month period ended June 30, 1997 totaled
$59,000 and consisted principally of computer equipment. Capital asset disposals
totaled $28,000.
At June 30, 1997, the Company had cash and cash equivalents totaling $717,000.
Total cash used during the six months ended June 30, 1997 was $2,745,000. If the
Mayo Agreement is not closed, the Company will require additional financing in
the fourth quarter to be able to continue funding its business. There is no
assurance that such funding would be available on any terms. If the Mayo
Agreement is closed, the Company expects to be able to fund its operations at
least through the first half of 1998.
The Company still has an asset of $684,000 that represents the remaining portion
of the costs paid, net of royalties received and write-offs, to Time Life, Inc.
for the development of the print version of Taking Control of Your Health. The
Company will continue to amortize this asset as royalties on sales of the print
version are received from Time Life, Inc. There are certain risks and
uncertainties in assuming that the sales volume of the print version will be
sufficient to fully amortize this asset; however, based on the most recent
review of this asset, management believes the remaining balance will be
realizable. Management will continue to review this asset's valuation for
impairment.
See Part II Item 5 "Other Information" below for an explanation of risks and
uncertainties that could cause actual results to differ materially from the
forward looking statements set forth in this report.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
Not required for this filing.
<PAGE>
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In February 1996, an action in the District Court of Hennepin County
(Minnesota) was brought by T. Randal Productions et al. against the Company and
one current and two former employees. The plaintiffs make various allegations,
including misappropriation of corporate opportunities and trade secrets by the
Company and its employees. The plaintiffs seek an unspecified award of monetary
damages, exemplary damages and royalties. The case has been scheduled for trial
on September 15, 1997. Management believes that the action is totally without
merit, and it is vigorously defending the action.
In 1996, Berkshire Multimedia Group, Inc. ("Berkshire") initiated
mediation regarding a dispute with the Company. Shortly after an unsuccessful
mediation conference was held in September 1996, Berkshire Multimedia Group
filed a demand for arbitration alleging that the Company breached its
obligations under a contract. An arbitration hearing was completed in January
1997, and in February 1997 the arbitration panel awarded Berkshire $300,000.
Hennepin County (Minnesota) District Court vacated that award on May 29, 1997,
and Berkshire has appealed the case.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
IVI Publishing, Inc. held its 1997 Annual Shareholders Meeting on May 22, 1997.
The following items were voted on and adopted:
1.) To set the Board of Directors at seven (7) directors.
For: 5,894,689 Against: 25,405 Abstentions: 61,750 Non-votes: 0
2.) To elect the Board of Directors consisting of the following seven (7)
directors: Nicholas C. Bluhm, Michael A. Brochu, Ronald E. Eibensteiner,
Alan D. Frazier, Timothy I. Maudlin, Charles A. Nickoloff, and Joy A.
Solomon.
Each director received the following votes:
For: 5,950,414 Against: 31,430 Abstentions: 0 Non-votes: 0
3.) To ratify the appointment of Ernst & Young as the independent auditors for
the Company for the year 1997.
For: 5,961,844 Against: 11,600 Abstentions: 8,400 Non-votes: 0
4.) To amend the Director Option Plan.
For: 5,741,676 Against: 158,568 Abstentions: 81,300 Non-votes: 300
<PAGE>
ITEM 5. OTHER INFORMATION
Agreement with Mayo
The Company announced on August 21, 1997 that it has entered into a
binding agreement in principle with representatives of the Mayo Foundation for
Medical Education ("Mayo") including a full transfer of control of O@sis to Mayo
and a new arrangement for revenue and cost sharing and other matters concerning
the O@sis Website. This agreement is subject to execution of a final agreement
and certain closing conditions, including the requirement that the Company
obtain the consent of the holders of a majority in principal amount of the
Company's outstanding convertible subordinated debentures. Although the Company
believes that it will be able to obtain the consent of the debenture holders and
satisfy the other conditions to closing, there is no assurance that it will be
able to do so. The specific material terms of the binding agreement are as
follows: (i) Mayo will pay the Company a total of $3 million in cash and Mayo
will return 490,000 shares of IVI common stock currently valued at approximately
$1.45 million; (ii) Mayo will pay the Company a royalty on all net revenues
received from third parties in connection with O@sis through the year 2001, and
IVI will also receive a royalty on all net revenues received from third parties
through the year 2001 in connection with any non-O@sis Internet project
commenced by Mayo before the year 2000; (iii) the Company will release Mayo from
the Company's "right of first offer" on Mayo health products produced for the
electronic media; and (iv) effective retroactive to January 1, 1997, Mayo
assumes all financial obligations associated with the operation of O@sis.
Cautionary Statement Relating to Forward Looking Information
Certain statements included in this Quarterly Report on Form 10-Q are
forward-looking statements that involve a number of risks and uncertainties
which may cause the Company's future operations and results of operations to
differ materially from those anticipated in this report. Specifically, whether
AHN will obtain permanent financing which allows it to meet its obligations to
the Company is a matter outside of the Company's control and subject to
significant uncertainty. The discussion relating to the Company's binding
agreement in principle with Mayo is subject to a number of risks, including the
possibility that the transactions contemplated under the agreement will not
close, or that the Company will be unable to obtain the necessary consents from
its debenture holders or satisfy other conditions to the agreement. Statements
relating to the litigation matters in which the Company is involved are subject
to the risk that the matters are resolved in a manner adverse to the Company
resulting in significant damages to the Company. The Company's expectations
regarding its OnHealth Internet site may not be realized if unexpected
difficulties in development occur or if the site is not as well-received as
anticipated. All of the foregoing matters will affect the Company's future needs
for financing. If the transactions under the Mayo Agreement are not closed or
the Company suffers a materially adverse result in its litigation proceedings,
the Company's financial condition will be significantly worse than currently
anticipated and it may not be able to continue funding its business.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are included herein:
(11) Computation of per share loss.
(27) Financial Data Schedule (included only in electronic version).
(b) No reports on Form 8-K were filed by the Company for the quarter ended
June 30, 1997
<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.
IVI PUBLISHING, INC.
By /s/ Charles A. Nickoloff
Charles A. Nickoloff
Vice President and
Acting Chief Financial Officer
Date: August 21, 1997
EXHIBIT 11 - STATEMENT RE: COMPUTATION OF PER SHARE LOSS (Unaudited)
(In thousands except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
------------------ ------------------
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Average common shares outstanding 7,663 7,569 7,661 7,580
Net loss ($3,978) ($2,653) ($5,559) ($4,185)
Preferred stock dividends (30) (30) (60) (60)
Preferred stock accretion (13) (13) (26) (26)
------- ------- ------- -------
Net loss applicable to common stock ($4,021) ($2,696) ($5,645) ($4,271)
======= ======= ======= =======
Net loss per common share ($ 0.52) ($ 0.36) ($ 0.74) ($ 0.56)
======= ======= ======= =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 717
<SECURITIES> 0
<RECEIVABLES> 735
<ALLOWANCES> 0
<INVENTORY> 142
<CURRENT-ASSETS> 488
<PP&E> 6,720
<DEPRECIATION> 4,129
<TOTAL-ASSETS> 5,435
<CURRENT-LIABILITIES> 2,674
<BONDS> 3,500
0
0
<COMMON> 77
<OTHER-SE> (2,747)
<TOTAL-LIABILITY-AND-EQUITY> 5,435
<SALES> 524
<TOTAL-REVENUES> 524
<CGS> 266
<TOTAL-COSTS> 266
<OTHER-EXPENSES> 4,179
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 57
<INCOME-PRETAX> (3,978)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,978)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,978)
<EPS-PRIMARY> (.52)
<EPS-DILUTED> (.52)
</TABLE>
