UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
or
[ ] TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
------------------ -------------------
Commission File Number: 0-26082
VIDAMED, INC.
(exact name of registrant as specified in its charter)
Delaware 77-0314454
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1380 Willow Road, Suite 101
Menlo Park, CA 94025
(Address of principal executive offices)
(415) 328-8781
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
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
The number of outstanding shares of the registrant's Common Stock, $.001 par
value, was 10,845,518 as of August 1, 1996.
Page 1 of 17
Exhibit Index at Page 16
<PAGE>
<TABLE>
VIDAMED, INC.
INDEX
<CAPTION>
PART I: FINANCIAL INFORMATION
Page
<S> <C> <C>
Item 1. Condensed consolidated financial statements - unaudited
Condensed consolidated balance sheets - June 30, 1996
and December 31, 1995 3
Condensed consolidated statements of operations - three months
ended June 30, 1996 and 1995 and six months ended June 30,
1996 and 1995 4
Condensed consolidated statements of cash flows - six months
ended June 30, 1996 and 1995 5
Notes to condensed consolidated financial statements 6
Item 2. Management's discussion and analysis of financial condition
and results of operations 9
PART II: OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
</TABLE>
Page 2 of 17
<PAGE>
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
VidaMed, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
<CAPTION>
June 30, December 31,
1996 1995
--------- ---------
(Unaudited) (*)
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 6,852 $ 5,687
Short-term investments 6,953 8,003
Other current assets 1,811 1,982
-------- --------
Total current assets 15,616 15,672
Property and equipment, net 2,696 2,909
Other assets, net 222 235
-------- --------
Total assets $ 18,534 $ 18,816
======== ========
Liabilities and stockholders' equity
Current liabilities:
Notes payable, current portion $ 1,005 $ 3,650
Accounts payable 662 565
Accrued clinical trial costs 773 978
Accrued and other liabilities 3,020 2,636
Current portion of obligations under capital leases 710 696
Deferred revenue 567 779
-------- --------
Total current liabilities 6,737 9,304
Notes payable, noncurrent 1,026 1,543
Other long-term liabilities 822 1,214
Stockholders' equity:
Capital stock 55,167 45,088
Accumulated deficit (45,218) (38,333)
-------- --------
Total stockholders' equity 9,949 6,755
-------- --------
Total liabilities and stockholders' equity $ 18,534 $ 18,816
======== ========
<FN>
* The Balance Sheet at December 31, 1995 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
</FN>
</TABLE>
Page 3 of 17
<PAGE>
<TABLE>
VidaMed, Inc.
Condensed Consolidated Statements of Operations
(In thousands except per share amounts)
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------ ---------------------------------
1996 1995 1996 1995
------------ ---------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Revenues:
Product sales, net $ 496 $ 800 $ 876 $ 1,468
License fees and grant revenue 107 110 215 219
------------ ---------------- ----------------- ---------------
Net revenues 603 910 1,091 1,687
Operating Expenses:
Cost of product sales 832 893 1,622 1,830
Research and development 1,339 1,645 2,751 3,088
Selling, general and administrative 1,997 1,882 3,611 3,473
------------ ---------------- ----------------- ---------------
Total operating expenses 4,168 4,420 7,984 8,391
------------ ---------------- ----------------- ---------------
Loss from operations (3,565) (3,510) (6,893) (6,704)
Other income(expense), net 11 (182) 8 (321)
------------ ---------------- ----------------- ---------------
Net loss $ (3,554) $ (3,692) $ (6,885) $ (7,025)
============ ================ ============== ===============
Net loss per share $ (.34) $ (1.54) $ (.70) $ (2.97)
============ ================ ============== ===============
Shares used in computing net loss per share 10,420 2,392 9,885 2,362
============ ================ ============== ===============
<FN>
See accompanying notes.
</FN>
</TABLE>
Page 4 of 17
<PAGE>
VidaMed, Inc.
Condensed Consolidated Statement of Cash Flows
(In thousands)
(Unaudited)
Six Months Ended
June 30,
---------------------
1996 1995
---------------------
Cash flows from operating activities:
Net loss $ (6,885) $ (7,025)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 712 547
Other 29 1
Changes in assets and liabilities:
Other current assets 171 (262)
Other assets 13 21
Accounts payable 97 (253)
Accrued and other liabilities 179 1,409
Deferred revenue (212) (212)
-------- --------
Net cash used in operating activities (5,896) (5,774)
-------- --------
Cash flows from investing activities:
Expenditures for property and equipment (451) (400)
Purchase of short-term investments (7,846) --
Proceeds from maturities of short-term investments 8,834 --
-------- --------
Net cash provided by/(used in) investing activities 537 (400)
-------- --------
Cash flows from financing activities:
Net cash proceeds from issuance of Common Stock 365 18,071
Principal payments under capital leases (345) (192)
Principal payments of long-term debt (10) (8)
Principal payments of notes payable (3,162) (71)
Net proceeds from issuance of notes payable
and convertible notes 9,676 7,169
-------- --------
Net cash provided by financing activities 6,524 24,969
-------- --------
Net increase in cash and cash equivalents 1,165 18,795
Cash and cash equivalents at the beginning
of the period 5,687 372
-------- --------
Cash and cash equivalents at the end of the period $ 6,852 $ 19,167
======== ========
See accompanying notes.
Page 5 of 17
<PAGE>
VIDAMED, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996
(Unaudited)
1. Basis of presentation
The accompanying unaudited condensed consolidated financial statements of
VidaMed, Inc. (the "Company" or "VidaMed") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions for Form 10-Q and Article 10 of Regulation S-X. The
balance sheet as of June 30, 1996 and the statements of operations for the three
and six months periods ended June 30, 1996 and 1995, and the statements of cash
flows for the six month periods ended June 30, 1996 and 1995, are unaudited but
include all adjustments (consisting of normal recurring adjustments) which the
Company considers necessary for a fair presentation of the financial position at
such dates and the operating results and cash flows for those periods. Although
the Company believes that the disclosures in these financial statements are
adequate to make the information presented not misleading, certain information
normally included in financial statements and related footnotes prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to the rules and regulations of the Securities and Exchange
Commission. The accompanying financial statements should be read in conjunction
with the financial statements and notes thereto included in the Company's annual
report on Form 10-K for the year ended December 31, 1995.
Results for any interim period are not necessarily indicative of results for any
other interim period or for the entire year.
2. Net loss per share
Net loss per share is computed using the weighted average number of shares of
common stock outstanding during the periods presented. Common equivalent shares
are excluded from the computation as their effect is antidilutive, except that,
pursuant to the Securities and Exchange Commission Staff Accounting Bulletins,
common and common equivalent shares (stock options, warrants, convertible notes
and preferred stock) issued during the 12 month period prior to the Company's
initial public offering (IPO) have been included in the calculation as if they
were outstanding for all periods through March 31, 1995 (using the treasury
stock method for stock options and warrants and the if-converted method for
convertible notes and preferred stock).
Page 6 of 17
<PAGE>
The pro forma calculation of net loss per share presented below has been
computed as described above but also gives retroactive effect from the date of
issuance to the conversion of the convertible preferred stock which
automatically converted to common shares upon closing of the Company's initial
public offering.
Three months ended Six months ended
June 30, 1995 June 30, 1995
----------------- ----------------
Pro forma net loss per share $ ( .63) $ (1.21)
================= ================
Shares used in computation 5,860,000 5,830,000
================= ================
3. Initial public offering
In June 1995, the Company completed an initial public offering ("IPO") of
3,565,000 shares of Common Stock at a price to the public of $6.50 per share.
The net proceeds of the offering to the Company, after deducting underwriting
discounts and expenses, were $20.8 million. Upon completion of the IPO all then
outstanding shares of convertible preferred stock were automatically converted
into shares of Common Stock. Upon completion of the IPO $1,518,805 of
convertible notes issued during March and April 1995 were automatically
converted into 333,800 shares of common stock. The conversion price equaled 70%
of the IPO price.
4. Inventories
Inventories are stated at the lower of cost (determined using the first-in,
first-out method) or market value. Inventories at June 30, 1996 and December 31,
1995 consist of the following:
June 30, December 31,
1996 1995
----------------- ----------------
Raw Materials $ 356,000 $ 507,000
Work in process 235,000 154,000
Finished Goods 475,000 684,000
----------------- ----------------
$ 1,066,000 $ 1,345,000
================== ================
5. Intellectual Property Litigation Risks
The Company is aware that EP Technologies, Inc. ("EPT") and the University of
California ("UC") have filed a United States patent application in the field of
ablation of body tissue. These parties have also requested the United States
Patent and Trademark Office to declare an interference with two of VidaMed's
United States patent applications on which notices of allowances have been
received. The inventors identified on the EPT/UC application are Stuart Edwards,
who was previously VidaMed's Chief Executive Officer and was previously the
Chief Technical Officer of EPT, and a cardiologist from the University of
California, San Francisco, who worked as a consultant to EPT while Mr. Edwards
was employed there.
Page 7 of 17
<PAGE>
Although the Company believes that the interference will not be allowed on the
patents, an adverse determination in litigation or interference proceedings to
which the Company may become a party could subject the Company to significant
liabilities to third parties or require the Company to seek licenses from third
parties. There can be no assurance that necessary licenses would be available to
the Company on satisfactory terms or at all. Accordingly, an adverse
determination in a judicial or administrative proceeding or failure to obtain
necessary licenses could prevent the Company from manufacturing and selling its
products, which would have a material adverse effect on the Company's business,
financial condition and results of operations.
6. Cash, cash equivalents and short-term investments
The Company considers all highly liquid investments with an original maturity of
90 days or less to be cash equivalents. The Company invests its excess cash with
major banks or investment managers. Short-term investments consist of corporate
paper and government securities with remaining maturities at the date of
purchase of greater than 90 days and less than one year. Short-term investments
are designated as available for sale and carried at fair market value, with
unrealized gains and losses reported in stockholders' equity.
7. Convertible notes
In March 1996, the Company completed the sale of $10.1 million of 5% convertible
subordinated notes (the "Notes"). Interest is payable semiannually in either
cash or Common Stock of the Company. The Notes are convertible into Common Stock
of VidaMed based upon a percentage (ranging from 80% to 85%) of the average
closing bid price over a period of five trading days prior to conversion. As of
June 30, 1996 all of the $10.1 million in principal and accrued interest on the
Notes had been converted into an aggregate of 1,375,676 shares of Common Stock.
Page 8 of 17
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and Results of
Operations for the three and six months ended June 30, 1996 and 1995, should be
read in conjunction with the Management's Discussion and Analysis of Financial
Condition and Results of Operations included in the Company's 10K for the year
ended December 31, 1995.
This Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements which involve risks and
uncertainties. The Company's actual results may differ significantly from those
anticipated by the forward-looking statements. Factors that might cause such a
difference include, but are not limited to, those discussed below and in the
Company's report on Form 10-K for the year ended December 31, 1995.
Overview
VidaMed has a limited history of operations and has experienced significant
operating losses since inception. As of June 30, 1996, the Company had an
accumulated deficit of $45.2 million. The Company commenced sales of its
TransUrethral Needle Ablation ("TUNA") system in late 1993. Revenues for the
three and six months ended June 30, 1995 also include consulting revenues and
electronic component sales by Scionex, a wholly-owned subsidiary acquired in
June 1994. Sales by Scionex to third parties have been discontinued as of the
end of 1995 as Scionex has directed all of its activities to development and
production of the radiofrequency generators for the TUNA System. Revenues for
the quarters ended June 30, 1996 and 1995 include license fees for distribution
rights in Japan and a United Kingdom government grant.
VidaMed anticipates that a substantial amount of its revenues from product sales
in the future will be from sales in the United States. The Company filed a
premarket 510(k) notification with the Food and Drug Administration ("FDA") for
the TUNA System in March 1996. The Company will not be permitted to market the
TUNA System for BPH in the United States unless and until approval of such
510(k) notification is received. Currently, VidaMed sells its products primarily
internationally to distributors who resell to physicians and hospitals. Sales to
distributors are made on open credit terms and may include volume purchase
discounts and extended payment terms. Therefore, distributors may purchase
several months of inventory at one time to take advantage of discounts and
extended payment terms. While revenue from product sales are generally
recognized at the time of shipment (net of allowances for discounts and
estimated returns), a portion of the Company's initial shipments to distributors
have not been recognized as revenues due to extended payment terms or limited
sell through experience associated with these distributors. The Company
anticipates continuing this revenue recognition policy; however, as its
distributor relationships mature, the Company believes that it will recognize a
greater portion of revenues upon shipment.
The Company expects its operating losses to continue through at least fiscal
year 1996 as it continues to expend substantial resources in funding clinical
trials in support of regulatory and reimbursement approvals, expansion of
marketing and sales activities and research and development. The Company's
future profitability will be dependent upon, among other factors, receipt of FDA
clearance of the Company's 510(k) notification for the TUNA System, market
acceptance of the TUNA System and availability of third-
Page 9 of 17
<PAGE>
party reimbursement for procedures performed with the TUNA System. There can be
no assurance as to when or whether the Company will receive such 510(k)
clearance, as to eventual market acceptance or as to the availability of
third-party reimbursement, even if 510(k) clearance is received.
The Company does not have a backlog of orders for its products in countries
where the TUNA System is approved and anticipates that it will continue to
manufacture and ship orders after their receipt. Accordingly, the Company does
not anticipate that it will develop a significant backlog in the future.
Results of Operations
Net revenue for the three months ended June 30, 1996 decreased 34% to $603,000
from $910,000 in the three months ended June 30, 1995. Product sales in the
second quarter of 1996 decreased 38% to $496,000 from $800,000 in the same
period in 1995. The decrease in product sales between the second quarter of 1995
and 1996 is primarily the result of the discontinuance of Scionex sales to third
party customers in 1996. Scionex had sales of approximately $550,000 in the
first six months of 1995. VidaMed product sales in the second quarter of 1996
increased by 21% from the second quarter of 1995. For the first six months of
1996 net revenue decreased 35% to $1,091,000 from $1,687,000 during the same
period in 1995. Product sales for the first six months of 1996 decreased 40% to
$876,000 from $1,468,000 during the same period in 1995. The decrease in product
sales is primarily due to the discontinuance of Scionex sales to third party
customers.
Cost of product sales decreased 7% to $832,000 in the three months ended June
30, 1996 from $893,000 in the three months ended June 30, 1995. For the six
months ended June 30, 1996 cost of product sales decreased 11% to $1,622,000
from $1,830,000 in the same period in 1995. The decrease is primarily due to
lower product sales in the first six months of 1996, although excess overhead
caused by decreased production partially offset the reduction.
Research and development expenses decreased 19% to $1,339,000 in the three
months ended June 30, 1996 from $1,645,000 in the three months ended June 30,
1995. For the six months ended June 30, 1996 research and development expenses
decreased 11% to $2,751,000 from $3,088,000 in the same period in 1995. The
decrease was primarily due to lower clinical trial expenses in 1996, but was
partially offset by an increase in product development material costs. The
decrease in clinical trial costs is due to the completion of the enrollment in
the U.S. clinical trials in 1995.
Selling, general and administrative expenses increased 6% to $1,997,000 in the
three months ended June 30, 1996 from $1,882,000 in the three months ended June
30, 1995. For the six months ended June 30, 1996 selling, general and
administrative expenses increased 4% to $3,611,000 from $3,473,000 in the same
period in 1995. The increase was primarily due to increased sales and marketing
expense in anticipation of the U.S. TUNA product launch. Sales and
administrative personnel were hired throughout 1996 in preparation of the TUNA
introduction.
Total operating expenses in the three months ended June 30, 1996 decreased 6% to
$4,168,000 from $4,420,000 in the three months ended June 30, 1995. Total
operating expenses for the first six months of 1996 decreased 5% to $7,984,000
from $8,391,000 in the same period in 1995.
Page 10 of 17
<PAGE>
Other income for the three and six months ended June 30, 1996 was $11,000 and
$8,000, respectively, compared to other expense of $182,000 and $321,000 for the
comparable periods in 1995. This change is primarily due to interest earned on
proceeds from the IPO and Convertible Notes offsetting interest expense.
The net loss for the three and six month periods ended June 30, 1996 was
$3,554,000 and $6,885,000, respectively, compared to $3,692,000 and $7,025,000
for the comparable periods in 1995.
Liquidity and Capital Resources
At June 30, 1996 the Company's cash, cash equivalents and short-term investments
were $13,805,000, compared to $13,690,000 at December 31, 1995. In June 1995 the
Company completed an initial public offering of 3,565,000 shares of Common Stock
at a price to the public of $6.50 per share. The net proceeds of the offering to
the Company, after deducting underwriting discounts and expenses, were $20.8
million. In March 1996, the Company completed the issuance of $10.1 million in
convertible subordinated. As of June 30, 1996 all of the $10.1 million in
principal and accrued interest on these notes had been converted into an
aggregate of 1,375,676 shares of Common Stock.
In April 1995, the Company obtained a $3,000,000 secured credit facility. To
date, the Company has borrowed $3,000,000 under this facility. Borrowings bear
interest at the prime rate plus 3% per annum plus additional lump-sum interest
of 15% of each borrowing, payable at maturity. Repayment is based on a three
year amortization schedule.
In January and February 1996, the Company repaid $2,700,000 in previously
outstanding notes payable issued by the Company in January and February 1995.
Interest on these notes accrued at the prime rate.
During the six months ended June 30, 1996 and 1995, VidaMed consumed cash in
operations of $5,896,000 and $5,774,000, respectively. The changes in cash used
in operations were due to increased selling, general and administrative expenses
to support increased operations offset by the payment of clinical trial costs.
Although VidaMed believes that the proceeds from its initial public offering,
the issuance of convertible notes and cash generated from the sale of products
will be sufficient to meet the Company's operating and capital requirements
through the next twelve months, there can be no assurance that the Company will
not require additional financing within this time frame. There can be no
assurance that additional financing, if required, will be available on
satisfactory terms or at all. In any event, VidaMed may in the future seek to
raise additional funds through bank facilities, debt or equity offerings or
other sources of capital. VidaMed's future liquidity and capital requirements
will depend on numerous other factors, including progress of clinical trials,
actions related to regulatory and reimbursement matters, and the extent to which
the TUNA system gains market acceptance.
Page 11 of 17
<PAGE>
VIDAMED, INC.
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
See page 14
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
See page 14
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
(11.1) Statement Re: Computation of Net Loss Per Share
(27.1) Financial Data Schedule
b) Reports on Form 8-K. On June 13, 1996, the Company
filed a report on Form 8-K presenting certain interim
financial information for the purpose of demonstrating
compliance with the requirements for continued listing of
the Company's Common Stock on the Nasdaq National Market.
Page 12 of 17
<PAGE>
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.
VIDAMED, INC.
Date: August 12, 1996 By: /s/ James A. Heisch
--------------------------- ------------------------
James A. Heisch
President, Chief Executive Officer,
Chief Financial Officer
(Principal Financial Officer)
Date: August 12, 1996 By: /s/ Thomas M. Fahey
--------------------------- ------------------------
Thomas M. Fahey
Director of Finance
(Principal Accounting Officer)
Page 13 of 17
<PAGE>
PART II. OTHER INFORMATION
Item 2. CHANGES IN SECURITIES
During the second quarter of 1996 the entire $10.1 million of Convertible Notes
issued in the first quarter of 1996 were converted into VidaMed Common Stock.
The $10.1 million of Notes and accrued interest were converted into 1,375,676
shares of Common Stock.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company solicited proxies for an annual meeting of stockholders on June 20,
1996 to all of the Company's stockholders.
The election of all directors was conducted and the following nominees were
elected: David L. Douglass, Stuart D. Edwards, James A. Heisch, Lawrence G.
Mohr, Jr., Joseph E. Oesterling, M.D. and Michael H. Spindler. The vote with
respect to each nominee was as follows:
Votes Votes
Name For Withheld
-------------------------- ----------- ----------
David L. Douglass 6,796,697 286,410
Stuart D. Edwards 6,796,197 286,910
James A. Heisch 6,796,697 286,410
Lawrence G. Mohr, Jr. 6,796,697 286,410
Joseph E. Oesterling, M.D. 6,798,958 284,149
Michael H. Spindler 6,798,958 284,149
The Company's Stock Plan was amended and the number of shares of Common Stock
reserved for issuance under the plan was increased by 1,400,000 to 2,733,334
with 5,360,967 votes in favor, 260,225 votes against and 287,443 abstentions.
The Company's Director Stock Plan was amended and the number of shares of Common
Stock reserved for issuance under the plan was increased by 100,000 to 200,000
with 5,425,191 votes in favor, 224,904 votes against and 281,734 abstentions.
Ernst & Young LLP was ratified as the independent auditors of the Company for
the fiscal year ending December 31, 1996 with 6,808,017 votes in favor, 8,576
votes against and 266,514 abstentions.
Page 14 of 17
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
11.1 Statement regarding computation of net loss per share
27.1 Financial Data Schedule
Page 15 of 17
EXHIBIT 11.1
<TABLE>
VIDAMED, INC.
STATEMENT RE: COMPUTATION OF NET LOSS PER SHARE
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------- ---------------------------
1996 1995 1996 1995
------------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Calculation of shares outstanding for
computing net loss per share:
Weighted average shares of
common stock outstanding 10,420,000 2,392,000 9,885,000 1,827,000
SEC Staff Accounting Bulletin
Nos. 55, 64 and 83 "cheap stock" - - - 535,000
------------- ------------ ------------ -------------
Total shares used in calculation
of net loss per share 10,420,000 2,392,000 9,885,000 2,362,000
============= ============ ============ =============
Net loss $(3,554,000) $(3,692,000) $(6,885,000) $(7,025,000)
============= ============ ============ =============
Net loss per share ($.34) ($1.54) ($.70) ($2.97)
============= ============ ============ =============
Calculation of shares outstanding for computing
pro forma net loss per share:
Shares used in computing net loss
per share: Adjusted to reflect the
effect of the assumed conversion
of Preferred Stock from the date
of issuance - 3,468,000 - 3,468,000
------------- ------------ ------------ -------------
Shares used in computing pro forma
net loss per share - 5,860,000 - 5,830,000
============= ============ ============ =============
Net loss - $(3,692,000) - $(7,025,000)
============= ============ ============ =============
Pro forma net loss per share - ($.63) - ($1.21)
============= ============ ============ =============
</TABLE>
Page 16 of 17
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 6,852
<SECURITIES> 6,953
<RECEIVABLES> 480
<ALLOWANCES> 118
<INVENTORY> 1,066
<CURRENT-ASSETS> 15,616
<PP&E> 4,983
<DEPRECIATION> 2,287
<TOTAL-ASSETS> 18,534
<CURRENT-LIABILITIES> 6,737
<BONDS> 1,653
<COMMON> 11
0
0
<OTHER-SE> 9,938
<TOTAL-LIABILITY-AND-EQUITY> 18,534
<SALES> 876
<TOTAL-REVENUES> 1,091
<CGS> 1,622
<TOTAL-COSTS> 6,362
<OTHER-EXPENSES> (31)
<LOSS-PROVISION> 75
<INTEREST-EXPENSE> (11)
<INCOME-PRETAX> (6,851)
<INCOME-TAX> 34
<INCOME-CONTINUING> (6,885)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,885)
<EPS-PRIMARY> (0.70)
<EPS-DILUTED> (0.70)
</TABLE>
