<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended: September 30, 1999
------------------
[ ] 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 0-23678
-------
BIOSPHERE MEDICAL, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 04-3216867
- ------------------------------- ------------------------------------
(State or Other Jurisdiction of (IRS Employer Identification Number)
Organization or Incorporation)
111 LOCKE DRIVE, MARLBOROUGH, MASSACHUSETTS 01752
---------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(508) 357-7500
----------------------------------------------------
(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 [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock, par value $.01 per share 8,456,059
- --------------------------------------- -------------------------------
Class Outstanding at November 8, 1999
1
<PAGE> 2
BioSphere Medical, Inc.
INDEX
Page
----
Part I - Financial Information
Item 1. Consolidated Financial Statements
Consolidated Condensed Balance Sheets as of
September 30, 1999 and December 31, 1998..........................3
Consolidated Condensed Statements of Operations for the
Three and Nine Month Periods Ended September 30, 1999
and 1998..........................................................4
Consolidated Condensed Statements of Cash Flows for the
Nine Month Periods Ended September 30, 1999 and 1998..............5
Notes to Consolidated Condensed Financial Statements..............6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................................9
Item 3. Quantitative and Qualitative Disclosures About
Market Risk ........................................................11
Part II - Other Information................................................12
Signatures...................................................................13
2
<PAGE> 3
BioSphere Medical, Inc.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 1999 1998
------------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 5,588 $ 2,235
Accounts receivable 723 --
Inventories (Note 2) 452 --
Prepaid and other current assets 40 55
-------- --------
Total current assets 6,803 2,290
Net assets of discontinued operations -- 10,325
Property and equipment, net (Note 3) 232 42
Cash held in escrow 1,016 --
Goodwill 62 --
Other assets 8 7
-------- --------
Total assets $ 8,121 $ 12,664
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable, current portion of long-term debt
and capital lease obligations $ 42 $ 2,082
Accounts payable 723 142
Related party payable (Note 4) 35 430
Accrued expenses 1,055 792
-------- --------
Total current liabilities 1,855 3,446
Long-term debt and capital lease obligations, net of current portion -- 82
-------- --------
Total liabilities 1,855 3,528
-------- --------
Minority interest 216 --
Stockholders' equity:
Common stock 84 84
Additional paid-in capital 40,587 40,587
Accumulated deficit (34,615) (31,535)
Cumulative translation adjustment (6) --
Total stockholders' equity 6,050 9,136
-------- --------
Total liabilities and stockholders' equity $ 8,121 $ 12,664
======== ========
</TABLE>
The accompanying notes are an integral part
of the consolidated condensed financial statements.
3
<PAGE> 4
BioSphere Medical, Inc.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three - month periods Nine - month periods
ended September 30, ended September 30,
-------------------------- --------------------------
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenue:
Product sales $ 594 $ 34 $ 1,584 $ 124
License fees -- 8 3 35
------- ------- ------- -------
Total revenue 594 42 1,587 159
------- ------- ------- -------
Costs and expenses:
Cost of products sold 382 20 956 75
Research and development 295 9 494 27
Selling, general and administrative 1,008 357 2,773 798
------- ------- ------- -------
Total costs and expenses 1,685 386 4,223 900
------- ------- ------- -------
Loss from continuing operations (1,091) (344) (2,636) (741)
Other income/(expense), net 71 (27) 88 (66)
------- ------- ------- -------
Pretax loss from continuing operations (1,020) (371) (2,548) (807)
Income tax 20 -- -- --
------- ------- ------- -------
Loss before minority interest (1,000) (371) (2,548) (807)
Minority interest 21 -- 6 --
------- ------- ------- -------
Net loss from continuing operations (979) (371) (2,542) (807)
Loss from discontinued operations -- (715) (539) (690)
------- ------- ------- -------
Net loss $ (979) $(1,086) $(3,081) $(1,497)
======= ======= ======= =======
Basic and dilutive net loss per share from
continuing operations $ (0.12) $ (0.05) $ (0.30) $ (0.10)
Basic and dilutive net loss per share from
discontinued operations $ (0.08) $ (0.06) $ ( 0.08)
Basic and dilutive net loss per share $ (0.12) $ (0.13) $ (0.36) $ (0.18)
Weighted average number of common
shares outstanding 8,456 8,431 8,456 8,431
</TABLE>
The accompanying notes are an integral part
of the consolidated condensed financial statements.
4
<PAGE> 5
BioSphere Medical, Inc.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine- month periods
ended September 30,
------------------------
1999 1998
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(3,081) $(1,497)
Less: Net loss from discontinued operations (539) (690)
------- -------
Net loss from continuing operations (2,542) (807)
Adjustments to reconcile net loss from continuing operations to
net cash used in continuing operating activities:
Depreciation and amortization 21 12
Issuance of warrants -- 30
Minority interest (6) --
Changes in operating assets and liabilities:
Marketable securities -- 146
Accounts receivable 44 --
Inventories (58) --
Prepaid and other current assets 15 (13)
Accounts payable 209 (394)
Inter Company Payables -- 29
Related parties payable (394)
Accrued expenses (76) (251)
------- -------
Net cash used in operating activities (2,788) (1,248)
------- -------
Cash flows from investing activities:
Additions to property and equipment (158) --
Increase in restricted cash (1,016) --
Change in other assets (1) 1
------- -------
Net cash (used in)/provided by investing activities (1,175) 1
------- -------
Cash flows from financing activities:
Net (repayments)/borrowings under line of credit agreements (2,032) 1,917
Repayments of long term borrowings (590) (424)
------- -------
Net cash (used in)/ provided by financing activities (2,622) 1,493
------- -------
Effect of exchange rate changes on cash and cash equivalents (2) --
------- -------
Net (decrease) /increase in cash and cash equivalents (6,587) 246
Net cash provided by discontinued operations 9,940 182
Cash and cash equivalents at beginning of period 2,235 2,370
------- -------
Cash and cash equivalents at end of period $ 5,588 $ 2,798
======= =======
Acquisition of BioSphere Medical:
Liabilities assumed $(1,493) $ --
Fair value of assets acquired 1,493
------- -------
$ -- $ --
======= =======
</TABLE>
The accompanying notes are an integral part
of the consolidated condensed financial statements.
5
<PAGE> 6
BioSphere Medical, Inc.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying consolidated condensed financial statements are
unaudited and have been prepared on a basis substantially consistent
with BioSphere Medical, Inc.'s, f/k/a BioSepra Inc. (the "Company")
annual audited financial statements included in the Company's Form
10-K. The consolidated condensed financial statements include the
accounts of the Company and its subsidiaries. All material intercompany
balances and transactions were eliminated in consolidation.
Certain information and footnote disclosures normally included in the
Company's annual statements have been condensed or omitted. The
consolidated condensed financial statements, in the opinion of
management, reflect all adjustments (including normal recurring
accruals) necessary for a fair statement of the results for the three
month and nine month periods ended September 30, 1999 and 1998. The
results of operations for the periods are not necessarily indicative of
the results of operations to be expected for the fiscal year. These
consolidated condensed financial statements should be read in
conjunction with the audited financial statements included in the
Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1998.
Certain prior period amounts have been reclassified to conform to
current reporting, including the impact of the operations of the
Company, which were discontinued in the second quarter of fiscal 1999.
On February 25, 1999, the Company acquired 51% of the outstanding
common stock of BioSphere Medical, S.A. ("BMSA"), a French societe
anonyme. The Company acquired the 51% ownership by granting an
exclusive license pertaining to certain patents and technology and the
transfer of certain other technology to BMSA. The Company has the
option to acquire the remaining 49% of the outstanding common stock of
BMSA through December 31, 2004, pursuant to the terms of the
acquisition agreement. Additionally, the holder of the remaining 49% of
the outstanding common stock of BMSA has an option to require the
Company to purchase its shares from December 31, 2003 until December
31, 2004 at a price of not less than FF 6,000,000 ($977,000 as of
September 30, 1999). The Company will accrete the value of this put
right over the period ending December 31, 2003. The results of
operations of BioSphere have been included in the consolidated
condensed statements since the date of acquisition.
On May 17, 1999, the Company completed the sale of substantially all
its assets and the business of BioSepra Inc., other than assets
relating to intracorporeal and "on-line" extracorporeal therapies or
any autologous treatment. Simultaneously with the closing of this
transaction, the Company changed its corporate name from BioSepra Inc.
to BioSphere Medical, Inc. Financial information relative to BioSepra
Inc. is included in the financial statements as Discontinued
Operations.
6
<PAGE> 7
2. Inventories
Inventories consist of the following:
September 30, December 31,
1999 1998
------------- ------------
Raw material $189 $ --
Work in progress 45 --
Finished goods 218 --
-------------------
$452 $ --
===================
3. Property and Equipment
Property and equipment consists of the following:
September 30, December 31,
1999 1998
------------- ------------
Equipment $297 $ 77
Less accumulated depreciation and
amortization (65) (35)
-------------------
Total property & equipment $232 $ 42
===================
4. Related party transactions
The related party payable represents amounts due for certain services
and facilities provided by Sepracor Inc., the Company's majority
stockholder.
In January 1996, the Company entered into a promissory note for
$350,000 with Sepracor. This amount did not bear interest. The Company
utilized the funds for leasehold improvements to the Company's
facilities. As of June 30, 1999, the loan has been fully repaid.
On September 1, 1999 the Company entered into a 3.0 million French
Franc ($488,918 at September 30, 1999) convertible term loan with its
51% owned subsidiary, BioSphere Medical S.A. The proceeds of the term
loan were used by BMSA to repay a 2.7 million French Franc ($440,026 at
September 30, 1999) loan from Guerbet Medical which expired on August
31, 1999. The new term loan matures in 24 months, accrues interest at
an annual rate of 5.5% and allows the Company to convert the
outstanding balance into a maximum 17% of the outstanding common stock
at the end of the loan term based upon a per share price of 1800 French
Francs.
5. Net Loss Per Share
Basic net loss per common share is computed by dividing net loss by the
weighted average number of common shares outstanding during the period.
Diluted net loss per share is the same as basic net loss per share as
the effects of common stock equivalents are antidilutive for all
periods presented. Total dilutive shares of approximately 3,538,030 and
1,657,000 for the three and nine months ended September 30, 1999 and
1998, respectively, have been excluded from the calculation of weighted
average number of potentially diluted common shares outstanding.
6. Statements of Cash Flows
Cash payments for interest for the nine months ended September 30, 1999
and 1998 were $71,224 and $139,000, respectively.
7
<PAGE> 8
7. Comprehensive Income/ (Loss)
The Company adopted Statement of Financial Account Standards No. 130
("SFAS 130"), "Reporting Comprehensive Income", effective January 1,
1998. SFAS 130 established standards for reporting and display of
comprehensive income (loss) and its components in the financial
statements. The Company's only item of other comprehensive income
(loss) relates to foreign currency translation adjustments, and is
presented separately on the balance sheet as required. If presented on
the statement of operations for the nine months ended September 30,
1999, comprehensive loss would be approximately $541 greater than
reported net income (loss), due to foreign currency translation
adjustments. There was no effect for the corresponding period of 1998.
8. Discontinued operations
On May 17, 1999, the Company sold substantially all of its assets and
business, other than such assets and business relating to
intracorporeal and "on-line" extracorporeal therapies or any autologous
treatment, for approximately $11.2 million in cash, including $1.0
million which is being held in escrow. The purchaser also assumed
certain liabilities of the Company. The escrow funds are being held in
the event, that pursuant to the asset purchase agreement, there is a
future adjustment to the closing balance sheet of the assets sold and
liabilities assumed. In the event no adjustment is required, the funds
will be released to the Company on November 17, 2000. The Company
utilized a portion of the proceeds to pay approximately $880,000 of
transaction costs, to repay approximately $2.0 million of outstanding
bank debt, and to repay approximately $143,000 due to Sepracor.
On September 17, 1999, Life Technologies, Inc. filed a claim for
indemnification against the $1,000,000 escrow account pursuant to the
asset purchase agreement. The Company has resolved the dispute, in
principle, by agreeing to pay Life Technologies $175,000 in exchange
for an accelerated release of the remaining escrow amount (an estimated
$841,000 on September 30, 1999) at the time the agreement is finalized.
The net assets included in the sale had a net book value of
approximately $10.5 million on May 17, 1999, which was included in
calculating a net loss for the sale of approximately $70,000. The
operations, assets and liabilities of the business have been presented
in accordance with Accounting Principles Board (APB) Opinion No. 30,
Reporting the Results of Operations--Reporting the Effects of Disposal
of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions in the accompanying consolidated
financial statements. Accordingly, the operating results of the
discontinued business for the nine months ended September 30, 1999 and
the three and nine months ended September 30, 1998 have been segregated
from the continuing operations and reported as a separate line item on
the consolidated condensed statements of income. The consolidated
condensed balance sheet as of December 31, 1998 has also been restated
to reflect the net assets of the sold business.
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Overview
During the nine month period ending September 30, 1999 the Company transitioned
from a chromatography based company (included in discontinued operations) to a
medical device business. The Company is implementing its new strategic plan to
develop its proprietary spherical biocompatible beads for the treatment of
hypervascularized tumors and arteriovenous malformations, and to further develop
the technology for use in the treatment of uterine fibroids and other disease
indications. In connection with the implementation of its strategic plan, the
Company completed an acquisition of a 51% interest in BMSA, by granting an
exclusive license pertaining to certain patents and technology, and the transfer
of certain other technology to BMSA. In addition, the Company completed a sale
of substantially all its assets and the business of BioSepra Inc., other than
its assets relating to intracorporeal and "on-line" extracorporeal therapies or
any autologous treatment, for approximately $11.2 million in cash on May 17,
1999. Simultaneously with the closing of this transaction, the Company changed
its corporate name from BioSepra Inc. to BioSphere Medical, Inc. Funds realized
from the sale were used to satisfy certain outstanding obligations, and the
remainder will be sufficient to fund the Company's development of the medical
device business for at least the next twelve months.
Three and Nine months ended September 30, 1999 and 1998
Revenue from product sales increased to $594,000 for the three months ended
September 30, 1999 from $34,000 for the same period in 1998. Revenue from
product sales for the nine months ended September 30, 1999 increased to
$1,584,000 compared to $124,000 for the same period in 1998. The increase is
attributable to revenue from product sales generated through the acquisition of
BMSA on February 25, 1999.
Cost of products sold for the three month period ended September 30,1999 was
$382,000 compared to $20,000 for the same period in 1998. For the nine month
period ended September 30, cost of products sold was $956,000 in 1999 and
$75,000 in 1998. The increase is attributable to expenses incurred with the sale
of new products resulting from the acquisition of BMSA.
Research and development expenses increased to $295,000 for the three months
ended September 30, 1999 from $9,000 for the same period in 1998. For the nine
month period ended September 30, 1999, research and development expenses
increased to $494,000 from $27,000 for the comparable period in 1998. This
increase is primarily attributable to regulatory expenses incurred relative to
seeking embosphere product approval in the United States.
Selling, general and administrative expenses increased to $1,008,000 for the
three months ended September 30, 1999 from $357,000 for the comparable period in
1998. For the nine month period ending September 30, 1999, selling, general, and
administrative expenses increased to $2,773,000 from $798,000 for the comparable
period in 1998. The increase is primarily due to the acquisition of BMSA and
other expenses related to the implementation of the Company's new strategic
plan, including personnel costs, recruiting expenses and other expenses
associated with developing a new business.
Other income/(expense), net, was $71,000 for the three months ended September
30, 1999 as compared to other income/(expense), net, of $(27,000) for the
comparable period in 1998. Other income/(expense), net, was $88,000 for the nine
months ended September 30, 1999 as compared to other income/(expense), net of
$(66,000) for the comparable period in 1998. This change is due to interest
earned on the funds received from the sale of the discontinued operations
contrasted with interest expense incurred in the prior year on an outstanding
line of credit, which has been repaid from proceeds of the sale.
The Company's net loss from continuing operations increased to $979,000 for the
three months ended September 30, 1999 compared to a net loss of $371,000 for the
three months ended September 30, 1998. For the first nine months of 1999, the
Company's net loss increased to $2,542,000 from $807,000 for the comparable
period in 1998. The increase is primarily due to the ramp up of expenses related
to the implementation of the Company's new strategic plan.
9
<PAGE> 10
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically funded its operations from product sales, license
fees, net proceeds provided from the Company's initial public offering, funds
provided by Sepracor, bank financing and equipment financing leases. As of
September 30, 1999, the Company had $5,588,000 of cash and cash equivalents and
$4,983,000 of working capital. Cash and cash equivalents for the nine months
ended September 30, 1999 increased by $3,353,000 from $2,235,000 at December 31,
1998. For the nine months ended September 30, 1999, the Company utilized cash
for operations of $2,788,000 primarily to fund its operating losses and reduce
payables. On May 17, 1999, the Company completed the sale of its
biopharmaceutical drug purification business and research consumable business
for cash. A loss of $70,000 was recognized as a part of its discontinued
operations. The Company generated cash from the sale of its discontinued
operating assets of $9,224,000, including $1,000,000 held in escrow for any
unforeseen liabilities related to the sale that may arise in the next twelve
months. The Company expects that the funds realized from the sale will be
sufficient to fund the Company's development of the medical device business for
at least the next twelve months. The Company used cash in financing activities
of $2,622,000 primarily to repay its bank line of credit.
As of September 30, 1999 the Company repaid $440,000 for a French loan of its
majority owned subsidiary BioSphere Medical, SA. In addition, Sepracor
guarantees certain capital lease obligations of the Company. The outstanding
balance of the capital lease obligation guaranteed by Sepracor was $42,000 as of
September 30, 1999.
FUTURE OPERATING RESULTS
Certain of the information contained in this Quarterly Report on Form 10-Q
consist of forward-looking statements. Without limiting the foregoing, the words
"believes," "anticipates," "plans," "expects," "intends," and similar
expressions are intended to identify forward-looking statements. There are a
number of factors that could cause the Company's actual results to differ
materially from those indicated by such forward-looking statements. These
factors include, without limitation, the factors set forth under the heading
"Management's Discussion and Analysis of Financial Condition and Results of
Operations- Future Operating Results" in the Company's current Annual Report on
Form 10-K which has been filed and is available at the Securities and Exchange
Commission, as well as the following:
In February 1999, the Company completed its acquisition of a 51% interest in
BMSA. The principal purpose for the acquisition was to gain access to product
know-how and CE (European equivalent to the FDA) approval of BMSA's product
Embospheres(TM), a spherical bead used in three medical applications within the
European medical community. BMSA commenced operations in May 1998 as a result of
purchasing several product lines from Guerbet, S.A. There are numerous risks
associated with this acquisition including, among other things, potential
exposure to unknown liabilities of BMSA prior to the acquisition, risks
associated with assimilating its operations and personnel, risks related to the
acquired technologies and with the further development and commercialization of
the technology, potential disruptions in the Company's business resulting from
the acquisition, diversion of management time and attention, and the potential
failure to achieve anticipated financial, operating and strategic benefits from
the acquisition. The future success of the Company will depend largely on its
ability to develop the medical technology of microspheres for use in uterine
fibroids in the United States.
Other factors that may adversely affect the Company's future operating results
include: intense competition from other companies selling or developing
spherical bead products, the loss of any significant customer, risks attendant
to the conduct of business in foreign countries, risks relating to the Company's
ability to maintain meaningful patent protection of its proprietary information,
risks associated with attaining FDA product approval, and the risk of product
liability claims associated with the testing, marketing and sale of the
Company's products.
Because of the foregoing factors, the Company believes that period-to-period
comparisons of its financial results are not necessarily meaningful and it
expects that its results of operations may continue to fluctuate from period to
period in the future.
10
<PAGE> 11
YEAR 2000 COMPLIANCE
The Company is currently working to negate any potential impact of the year 2000
on the processing of date-sensitive information by the Company's computerized
information systems. The year 2000 problem is the result of computer programs
being written using two digits (rather than four) to define the applicable year.
Any of the Company's programs that have time-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000, which could result
in miscalculation or system failures. The Company has completed the assessment
of its requirements to become year 2000 compliant and, internally, completed its
remediation and testing of noncompliant systems. In this connection, the Company
upgraded certain of its computer hardware and software, and does not believe it
has any legacy systems that are non-Y2K compliant. The Company estimates that
historical expenditures to achieve compliance were less than $50,000 and that it
will not incur material expenditures in the future in connection with its year
2000 remediation and testing. In the event that the Company encounters year 2000
problems, it has a contingency plan in place to minimize the disruption to its
ongoing business operations. For the remainder of 1999, the Company will focus
upon the review and status of its suppliers' readiness; the Company will also
test its contingency plan. However, failure of the Company, its customer or
vendors to resolve any compliance issues in a timely manner, could have an
adverse effect on the Company's business, financial condition and results of
operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company is subject to market risk in the form of interest rate risk and
foreign currency risk.
The Company's investments in short-term cash equivalents are subject to interest
rate movements, but the time to maturity is very short and therefore the Company
does not believe these exposures are material. The Company, from time to time,
has minor intercompany transactions with its French subsidiary. The payable is
due in local French currency, and therefore the Company may experience gains,
and/or losses upon the payment of this account payable obligation.
11
<PAGE> 12
PART II.
OTHER INFORMATION
Items 1 - 5. None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
None.
b) Reports on Form 8-K
i) Current report on Form 8-K/A filed on August 2, 1999 which
amends a Current Report on Form 8-K filed on June 2, 1999
12
<PAGE> 13
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.
BIOSPHERE MEDICAL, INC.
Date: November 8, 1999 /s/ Philip V Holberton
------------------------------------------
Philip V. Holberton
Chief Financial Officer
(Principal Financial & Accounting Officer)
13
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 5,588,000
<SECURITIES> 0
<RECEIVABLES> 723,000
<ALLOWANCES> 0
<INVENTORY> 452,000
<CURRENT-ASSETS> 6,803,000
<PP&E> 297,000
<DEPRECIATION> (65,000)
<TOTAL-ASSETS> 8,121,000
<CURRENT-LIABILITIES> 1,855,000
<BONDS> 0
0
0
<COMMON> 84,000
<OTHER-SE> 5,966,000
<TOTAL-LIABILITY-AND-EQUITY> 8,121,000
<SALES> 1,584,000
<TOTAL-REVENUES> 1,587,000
<CGS> 956,000
<TOTAL-COSTS> 956,000
<OTHER-EXPENSES> 3,267,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 107,000
<INCOME-PRETAX> (2,542,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,542,000)
<DISCONTINUED> (539,000)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,081,000)
<EPS-BASIC> (0.30)
<EPS-DILUTED> (0.36)
</TABLE>
