<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _______ TO _______
COMMISSION FILE NUMBER 000-24693
NUTRACEUTIX, INC.
(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
DELAWARE 91-1689591
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
8340 - 154TH AVENUE NORTHEAST
REDMOND, WASHINGTON 98052
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
(425) 883-9518
(ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the issuer was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [ ] No [X]
Number of shares of issuer's common stock outstanding as of November 12, 1998:
16,854,812
Transitional Small Business Disclosure Format: Yes [ ] No [X]
<PAGE> 2
NUTRACEUTIX, INC.
FORM 10-QSB
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets at September 30, 1998 and December 31, 1997
(unaudited)
.................................................................... 1
Statements of Operations for the three and nine month periods
ended September 30, 1998 and 1997 (unaudited)....................... 2
Statements of Cash Flows for the nine months ended September 30,
1998 and 1997 (unaudited) .......................................... 3
Notes to Financial Statements ..................................... 4
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations ............................................. 6
PART II OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds ......................... 10
Item 6. Exhibits and Reports on Form 8-K ................................. 10
Signatures ....................................................... 10
<PAGE> 3
Nutraceutix, Inc.
BALANCE SHEETS
(unaudited)
ASSETS
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- ------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 165,924 $ 132,978
Accounts receivable 734,799 544,172
Inventories 896,691 643,851
Prepaid expenses 173,284 128,509
------------ -----------
Total current assets 1,970,698 1,449,510
EQUIPMENT AND FURNITURE - net 1,194,300 497,811
OTHER ASSETS - net 940,698 1,046,193
------------ -----------
$ 4,105,696 $ 2,993,514
============ ===========
LIABILITIES
CURRENT LIABILITIES
Line of credit $ 266,500 $ 488,000
Current maturities of long-term obligations 210,263 115,187
Current maturities of capital lease obligations 129,787 132,570
Accounts payable 368,053 407,390
Advance royalties 14,017 170,167
Accrued liabilities 167,377 95,038
------------ -----------
Total current liabilities 1,155,997 1,408,352
LONG-TERM OBLIGATIONS, less current maturities 453,342 99,701
CAPITAL LEASE OBLIGATIONS,
less current maturities 233,218 166,941
COMMITMENTS AND CONTINGENCY -- --
STOCKHOLDERS' EQUITY
Preferred stock authorized,
5,000,000 shares $.01 par value -- --
Common stock authorized,
30,000,000 shares $.001 par value 16,795 15,501
Additional contributed capital 11,474,169 10,624,992
Accumulated deficit (9,227,825) (9,321,973)
------------ -----------
Total stockholders' equity 2,263,139 1,318,520
------------ -----------
$ 4,105,696 $ 2,993,514
</TABLE>
The accompanying notes are an integral part of these statements.
1
<PAGE> 4
Nutraceutix, Inc.
STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
------------------ -----------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenues $ 1,632,498 $ 1,055,013 $ 4,689,867 $ 3,163,531
Cost of revenues 937,863 567,382 2,676,784 1,658,406
----------- ----------- ----------- -----------
Gross profit 694,635 487,631 2,013,083 1,505,125
Operating expenses
Marketing and selling 242,533 148,228 606,758 449,373
Research and development 61,210 25,139 138,242 54,160
General and administrative 368,511 326,924 1,064,679 908,483
----------- ----------- ----------- -----------
Operating profit (loss) 22,381 (12,660) 203,404 93,109
----------- ----------- ----------- -----------
Other income (expense)
Interest expense (33,926) (54,860) (109,256) (148,740)
----------- ----------- ----------- -----------
(33,926) (54,860) (109,256) (148,740)
----------- ----------- ----------- -----------
NET EARNINGS (LOSS) $ (11,545) $ (67,520) $ 94,148 $ (55,631)
----------- ----------- ----------- -----------
Net earnings (loss)
per share $ (0.001) $ (0.005) $ 0.007 $ (0.004)
=========== =========== =========== ===========
Net earnings per share
assuming dilution $ 0.006
===========
Accumulated deficit
beginning of period (9,216,280) (9,223,883) (9,321,973) (9,262,072)
----------- ----------- ----------- -----------
Accumulated deficit
end of period (9,227,825) (9,291,403) (9,227,825) (9,292,403)
----------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these statements.
2
<PAGE> 5
Nutraceutix, Inc.
STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Nine months ended
September 30,
1998 1997
--------- ---------
<S> <C> <C>
Increase (Decrease) in Cash
Cash flows from operating activities
Net earnings (loss) $ 94,148 $ (55,631)
Adjustments to reconcile net earnings (loss) to
net cash used in operating activities
Depreciation and amortization 231,056 198,089
Issuance of common stock for finance charges
and consulting services 41,471 54,780
Changes in assets and liabilities
Accounts receivable (190,627) (289,874)
Inventories (252,840) 11,075
Prepaid expenses (29,775) (84,104)
Accounts payable (39,337) (96,256)
Accrued liabilities and deferred revenues (83,811) (42,927)
--------- ---------
Net cash used in operating activities (229,715) (304,848)
--------- ---------
Cash flows from investing activities:
Purchase of equipment (603,947) (9,993)
Patent expenditures (12,534) (6,392)
--------- ---------
Net cash used in investing activities (616,481) (16,385)
--------- ---------
Cash flows from financing activities:
Payments on long-term and capital lease obligations (241,302) (293,471)
Proceeds from long-term obligations 547,944 231,285
Net borrowings on line of credit (221,500) 127,062
Net proceeds from issuance of common stock 794,000 209,512
--------- ---------
Net cash provided by financing activities 879,142 274,388
--------- ---------
Net increase (decrease) in cash 32,946 (46,845)
Cash at beginning of period 132,978 64,432
--------- ---------
Cash at end of period $ 165,924 $ 17,587
========= =========
Cash paid during the year for:
Interest $ 114,028 $ 154,963
========= =========
Noncash investing and financing activities:
Purchase of equipment under capital
lease obligations $ 205,569 $ 166,978
Issuance of common stock to satisfy loans $ - $ 35,000
Issuance of common stock to prepay royalties $ 15,000 $ 30,000
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 6
Nutraceutix, Inc.
FORM 10-QSB
NOTES TO FINANCIAL STATEMENTS
NOTE 1. FINANCIAL STATEMENTS
The unaudited financial statements of the Company have been prepared by the
Company pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. The results of operations for interim periods are not necessarily
indicative of the results to be expected for the entire fiscal year ending
December 31, 1998. This Form 10-QSB should be read in conjunction with the
Company's Form 10-SB, filed on July 27, 1998.
NOTE 2. INVENTORIES
Inventories are stated at the lower of cost or market; cost is determined by
the first-in, first-out method. Inventories consist of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- ------------
(unaudited)
<S> <C> <C>
Raw materials $483,036 $240,560
Work in progress 334,597 345,231
Finished goods 79,058 58,060
-------- --------
$896,691 $643,851
</TABLE> ======== ========
NOTE 3. NET EARNINGS (LOSS) PER SHARE
Basic earnings per share are based on the weighted average number of shares
outstanding during each quarter. The weighted average shares for computing basic
earnings per share were 15,767,220 and 14,338,929 for the quarters and nine
months ended September 30, 1998 and 1997, respectively. The weighted average
shares for computing dilution were 16,812,137 for the nine months ended
September 30, 1998.
Because of the net loss for the nine months ended September 30, 1997, and the
quarters ended September 30, 1998 and 1997, common equivalent shares were not
included in the calculation of diluted earnings per share as their inclusion
would be anti-dilutive.
4
<PAGE> 7
Nutraceutix, Inc.
FORM 10-QSB
NOTES TO FINANCIAL STATEMENTS
NOTE 4. FINANCING
In June of 1998, the Company obtained approximately $533,000 of equipment
financing for its Colorado facility. The equipment financing calls for monthly
payments of $11,045, including interest at 16.39%. The equipment financing
matures in 2003. On September 30, 1998, the Company's line of credit was
increased from $600,000 to $800,000, the interest rate was reduced to 9.25%
from 10.75% and it expires on September 30, 1999.
NOTE 5. EQUITY TRANSACTIONS
From January 1, 1998 through September 30, 1998 the Company has issued 1,293,081
shares of the Company's common stock, of which 1,025,000 were issued through a
private placement stock offering. In connection with this offering, 102,500
shares were issued to a broker as a commission. The Company raised $768,750
through this offering. A total of 101,000 shares were issued for stock options
exercised at $0.25 per share. The remaining 64,581 shares were issued for legal
fees and prepaid royalties at fair value of the consideration received.
5
<PAGE> 8
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH THE
FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING IN THIS FORM
10-QSB. EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE MATTERS
DISCUSSED IN THIS QUARTERLY REPORT CONTAIN FORWARD-LOOKING STATEMENTS THAT ARE
BASED ON MANAGEMENT'S BELIEFS AND ASSUMPTIONS, CURRENT EXPECTATIONS, ESTIMATES,
AND PROJECTIONS.
STATEMENTS THAT ARE NOT HISTORICAL FACTS, INCLUDING WITHOUT LIMITATION,
STATEMENTS WHICH ARE PRECEDED BY, FOLLOWED BY OR INCLUDE THE WORDS "BELIEVES,"
ANTICIPATES," "PLANS," "EXPECTS," "MAY," "SHOULD," OR SIMILAR EXPRESSIONS ARE
FORWARD-LOOKING STATEMENTS. MANY OF THE FACTORS THAT WILL DETERMINE THE
COMPANY'S FUTURE RESULTS ARE BEYOND THE ABILITY OF THE COMPANY TO CONTROL OR
PREDICT. THESE STATEMENTS ARE SUBJECT TO RISKS AND UNCERTAINTIES AND, THEREFORE,
ACTUAL RESULTS MAY DIFFER MATERIALLY.
THE COMPANY DISCLAIMS ANY OBLIGATION TO UPDATE ANY FORWARD-LOOKING STATEMENTS
WHETHER AS A RESULT OF THE NEW INFORMATION, FUTURE EVENTS OR OTHERWISE.
IMPORTANT FACTORS THAT MAY AFFECT FUTURE RESULTS INCLUDE, BUT ARE NOT LIMITED
TO: THE IMPACT OF COMPETITIVE PRODUCTS AND PRICING, PRODUCT DEVELOPMENT, CHANGES
IN LAW AND REGULATIONS, CUSTOMER DEMAND, LITIGATION, AVAILABILITY OF FUTURE
FINANCING, UNCERTAINTY OF MARKET ACCEPTANCE OF NEW PRODUCTS, AND OTHER RISKS
DETAILED FROM TIME TO TIME IN THE COMPANY'S SEC REPORTS, COPIES OF WHICH ARE
AVAILABLE UPON REQUEST FROM THE COMPANY'S INVESTOR RELATIONS DEPARTMENT.
6
<PAGE> 9
Nutraceutix, Inc. (the "Company") develops and manufactures both proprietary and
non-proprietary nutraceutical based health supplement products which it licenses
and manufactures. These proprietary products are both developed internally and
licensed from research institutions and companies. Proprietary products include
Calcium D-GLUCARATE(TM), LIVEBAC(R) Probiotic Caplets, and Controlled Delivery
Tablets. Non-proprietary products include multivitamins and single-entity
formulas, minerals, herbals, and other probiotics. National health supplement
brands of proprietary and non-proprietary products are sold to customers who
sell through health food stores, mass merchants and multi-level marketing
channels.
Agricultural animal health products and forage preservative products are sold
under the COBACTIN(R) microbial feed additive and BIOPOWER(R) silage inoculant
brands as well as private label.
Revenue from the sales of the Company's products is recognized at the time
products are shipped to customers. Net sales are net of discounts, allowances
and estimated returns and credits. The Company's principal executive offices,
laboratory and manufacturing are located at Redmond, Washington. The Company
also operates a manufacturing facility in Lafayette, Colorado.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------
1998 1997
------------------------------------ ------------------------------------
<S> <C> <C> <C> <C>
Net Sales $ 1,632,498 100.0 % $ 1,055,013 100.0 %
Cost of goods sold 937,863 57.4 % 567,382 53.8 %
------------- ------------- ------------- -------------
Gross Profit 694,635 42.6 % 487,631 46.2 %
Operating expenses 672,254 41.2 % 500,291 47.4 %
------------- ------------- ------------- -------------
Income (loss) from operations 22,381 1.4 % (12,660) (1.2)%
Other expense net (33,926) (2.1)% (54,860) (5.2)%
Provision for income taxes -- --
------------- ------------- ------------- -------------
Net loss $ (11,545) (0.7)% $ (67,520) (6.4)%
============= ============= ============= =============
</TABLE>
THREE MONTHS ENDED SEPTEMBER 30, 1998 AND THREE MONTHS ENDED SEPTEMBER 30, 1997
Net Sales: Net sales increased 55% or $577,485 to $1,632,498 for the three
months ended September 30, 1998 from $1,055,013 for the three months ended
September 1997. The increase in net sales resulted primarily from a combination
of new product introductions and the increase in packaging business.
Gross Profit: Gross profit increased 42% or $207,004 to $694,635 for the three
months ended September 30, 1998 from $487,631 for the three months ended
September 30, 1997. Excluding royalties, gross margin decreased to 36% for the
three months ended September 30, 1998 from 43% for the three months ended
September 30, 1997. Increases in sales were primarily due to increased packaging
business which has lower margins than the Company's other operations.
7
<PAGE> 10
Selling and Marketing Expenses: Selling and marketing expenses consist primarily
of cost of sales presentations, commissions, travel related expenses, and
payroll. Selling and marketing expenses increased 64% or $94,305 to $242,533 for
the three months ended September 30, 1998 from $148,228 for the three months
ended September 30, 1997. The increase was primarily due to additional sales
activity and additional payroll expenses to support increases in net sales.
General and Administrative Expenses: General and administrative expenses consist
primarily of personnel costs related to general management functions, finance,
accounting, research and development, as well as professional fees related to
legal, audit, tax and depreciation and amortization. General and administrative
expenses increased 13% or $41,587 to $368,511 for the three months ended
September 30, 1998 from $326,924 for the three months ended September 30, 1997.
This increase is primarily due to securities related professional fees
associated with the filing of a Form 10-SB and building the infrastructure to
support the Company's growth.
Interest Expense: Interest expense decreased 38% to $33,926 for the three months
ended September 30, 1998 from $54,860 for the three months ended September 30,
1997. Decrease was due to the payoff of certain debt and reduction of the amount
outstanding under the line of credit through the use of equity capital raised
during the three months ended September 30, 1998.
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1997
Net Sales: Net sales increased 48% or $1,526,336 to $4,689,867 for the nine
months ended September 30, 1998 from $3,163,531 for the nine months ended
September 30, 1997. The increase in net sales resulted primarily from a
combination of new product introductions and the increase in packaging
business.
Gross Profit: Gross profit increased 34% or $507,958 to $2,013,083 for the nine
months ended September 30, 1998 from $1,505,125 for the nine months ended
September 30, 1997. Excluding royalties, gross margin decreased to 38% for the
nine months ended September 30, 1998 from 46% for the nine months ended
September 30, 1997. Increases in sales were primarily due to increased packaging
business which has lower margins than the Company's other operations.
Selling and Marketing Expenses: Selling and marketing expenses consist primarily
of costs of sales presentation, and related payroll expenses and commissions.
Selling and marketing expenses increased 35% or $157,385 to $606,758 for the
nine months ended September 30, 1998 from $449,373 for the nine months ended
September 30, 1997. The increase was primarily due to additional sales activity
and personnel expenses to support increased net sales.
General and Administrative Expenses: General and administrative expenses consist
primarily of personnel costs related to general management functions, finance,
accounting and information systems, research and development expenses, as well
as professional fees related to legal, audit and tax matters and depreciation
and amortization. General and administrative expenses increased 17% or $156,196
to $1,064,679 for the nine months ended September 30, 1998 from $908,483 for the
nine months ended September 30, 1997. This increase was primarily attributable
to building the infrastructure to support and manage the Company's growth, as
well
8
<PAGE> 11
as expenses associated with the preparation and filing of the Form 10-SB.
Interest Expense: Interest expense decreased 27% to $109,256 for the nine
months ended September 30, 1998 from $148,740 for the nine months ended
September 30, 1997. The decrease was a result of available capital from a
private placement which reduced borrowing.
LIQUIDITY AND CAPITAL RESOURCES
The Company has recently financed its operations and capital requirements
primarily through borrowing, raising equity capital, and operations. As of
September 30, 1998, the Company had working capital of $814,701 as compared to
working capital of $41,158 at September 30, 1997. This increase is due to funds
derived from a private placement offering completed in July 1998.
On September 30, 1998, the Company's conventional bank line of credit was
increased by 200,000 to 800,000. As of September 30, 1998, the Company had an
available balance of 533,500 to borrow from the Company's conventional bank
line of credit.
One of the Company's business strategies is to pursue acquisition of proprietary
technologies that complement its existing products, expand its distribution
channels or are compatible with its business philosophy and strategic goals. The
Company regularly evaluates the potential technologies and may hold discussions
regarding such potential acquisitions of technologies. As a general rule, the
Company will publicly announce such acquisitions of technologies only after a
definitive agreement has been signed. Future acquisitions of technologies and
development of new products, if any, could be financed by current cash on hand,
bank borrowings, public offerings or private placements of equity or debt
securities, or a combination of the foregoing. There can be no assurance that
such additional financing will be available on terms acceptable to the Company
or at all. The failure to raise the funds necessary to finance its future cash
requirements or consummate future acquisitions could adversely affect the
Company's ability to pursue its strategy and could negatively affect its
operations in future periods.
YEAR 2000
The Company is in the process of assessing the internal and external risks
associated with the Year 2000 issue, including soliciting material and service
suppliers, financial institutions, original equipment manufacturers and
third-party payees to determine their plans to limit potential problems. After
completing this assessment, the Company will develop a plan to ensure that its
computer systems and other operations are modified to be compliant on a timely
basis.
SEASONALITY
The Company's business is seasonal, with lower sales typically realized during
the third quarter and higher sales typically realized during the first and
second fiscal quarters. The Company believes such fluctuations in sales are the
result of customer buying patterns, and consumer
9
<PAGE> 12
spending related primarily to the consumers' interest in achieving personal
health and fitness goals after the beginning of each new calendar year and
before the summer fashion season.
Furthermore, as a result of changes in product sales mix and other factors, as
discussed above, the Company experiences fluctuations in gross profit and
operations margins on a quarter-to-quarter basis.
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On July 15, 1998, the Company sold a total of 825,000 shares of Common Stock to
two unaffiliated private investors at a price of $0.75 per share. The shares
were sold for cash and the Company received total proceeds of $618,750. The
sales were completed pursuant to the exemption from registration provided under
Rule 504 of Regulation D. In connection with these sales, as well as sales of
an additional 200,000 shares completed in June 1998 pursuant to the same
offering, the Company paid a commission to a nonaffiliated broker. The entire
commission was paid on July 28, 1998 through the delivery of 102,500 shares of
the Company's Common Stock (representing 10% of the total number of shares sold
in the offering).
On September 30, 1998, the Company issued 17,750 shares of Common Stock to a
nonaffiliated licensor in satisfaction of $15,000 in royalties payable by the
Company to the licensor. These shares were issued pursuant to the exemption
from registration provided by Section 4(2) of the Securities Act of 1933, as
amended.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS: The following exhibits are filed as part of this report:
EXHIBIT NO. DESCRIPTION
11.1 Computation of Earnings (Loss) Per Share
27 Financial Data Schedule for the Quarter Ended
September 30, 1998
(b) Reports on Form 8-K.
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed by the undersigned thereunto
duly authorized.
NUTRACEUTIX, INC.
Date: November 13, 1998 By: /s/ William St. John
----------------------------------
WILLIAM ST. JOHN
President, Chairman of the Board
(Principal Executive Officer)
Date: November 13, 1998 By: /s/ Steven H. Moger
----------------------------------
STEVEN H. MOGER
Vice President, Operations
(Principal Financial Officer)
10
<PAGE> 1
EXHIBIT 11.1
COMPUTATION OF EARNINGS (LOSS) PER SHARE
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
------------------------ ------------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
PRIMARY AND FULLY DILUTED:
Average shares outstanding 15,767,220 14,338,929 15,767,220 14,338,929
Dilutive stock equivalents 1,044,917
---------- ---------- ---------- ----------
Total 15,767,220 14,338,929 16,812,137 14,338,929
========== ========== ========== ==========
Net Earnings (Loss) $ (11,545) $ (67,520) $ 94,148 $ (55,631)
========== ========== ========== ==========
Net Earnings (loss) per share $ (.001) $ (.005) $ .006 $ (.004)
========== ========== ========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET OF NUTRACEUTIXM INC. AS OF SEPTEMBER 30, 1998 AND THE RELATED STATEMENT
OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998, AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 165,924
<SECURITIES> 0
<RECEIVABLES> 734,799
<ALLOWANCES> 0
<INVENTORY> 896,691
<CURRENT-ASSETS> 1,970,698
<PP&E> 1,194,300
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,105,696
<CURRENT-LIABILITIES> 1,155,997
<BONDS> 0
0
0
<COMMON> 16,795
<OTHER-SE> 11,474,169
<TOTAL-LIABILITY-AND-EQUITY> 4,105,696
<SALES> 4,689,867
<TOTAL-REVENUES> 4,689,867
<CGS> 2,676,784
<TOTAL-COSTS> 2,676,784
<OTHER-EXPENSES> 1,809,679
<LOSS-PROVISION> 203,404
<INTEREST-EXPENSE> (109,256)
<INCOME-PRETAX> 94,148
<INCOME-TAX> 0
<INCOME-CONTINUING> 94,148
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 94,148
<EPS-PRIMARY> .007
<EPS-DILUTED> .006
</TABLE>
