<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
/X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For The Quarterly Period Ended September 30, 1996
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from _________________ to _________________
Commission File Number: 0-25530
LIFERATE SYSTEMS, INC.
(Exact name of Registrant as specified in its charter)
MINNESOTA 41-1682994
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
7210 METRO BOULEVARD
EDINA, MINNESOTA 55439
(Address of principal executive offices, including zip code.)
(612) 844-0599
(Registrant's telephone number)
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 / /
As of November 1, 1996, there were 3,811,639 shares of Common Stock outstanding.
Transitional Small Business Disclosure Format (check one): Yes ____ No __X__
<PAGE>
LIFERATE SYSTEMS, INC.
INDEX TO FINANCIAL STATEMENTS
-----------------------------
PAGE
----
ITEM 1. FINANCIAL STATEMENTS
Condensed Balance Sheets -
December 31, 1995 and September 30, 1996 3
Condensed Statements of Operations -
Three Months Ended September 30, 1995 and 1996 and
Nine Months Ended September 30, 1995 and 1996
and Date of Inception to September 30, 1996 4
Statements of Cash Flow -
Nine Months Ended September 30, 1995 and 1996
and Date of Inception to September 30, 1996 5
Notes to Condensed Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS 7
2
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LIFERATE SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
ASSETS (NOTE) (UNAUDITED)
Current assets:
Cash and cash equivalents $ 7,750,500 $ 4,114,300
Accounts receivable, less allowance of $7,500
at December 31, 1995 and $4,100 at September 30,
1996 104,400 177,000
Prepaid expenses and other current assets 61,000 114,100
------------ -------------
Total current assets 7,915,900 4,405,400
Furniture and fixtures 56,200 72,600
Computer equipment 355,800 814,800
Telephone equipment - 48,500
------------ -------------
412,000 935,900
Less accumulated depreciation 87,300 137,400
------------ -------------
324,700 798,500
Software development costs, net of amortization 151,300 75,700
of $0 at December 31, 1996 and $75,600 at
September 30, 1996
Other assets 11,800 -
------------ -------------
Total Assets $ 8,403,700 $ 5,279,600
------------ -------------
------------ -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 1,128,300 $ 839,800
Current portion of notes payable-related parties 6,500 -
Current portion of notes payable 9,900 15,200
Current portion of capitalized lease obligations 11,500 4,100
------------ -------------
Total current liabilities 1,156,200 859,100
Notes payable 12,600 -
Capitalized lease obligation 1,000 -
Deferred rent 28,700 19,800
Deferred revenue 60,900 319,000
Shareholders' equity:
Preferred stock, no par value:
Authorized shares - 1,000,000
Issued and outstanding shares - none in 1995
and 1996
Common stock, no par value:
Authorized shares - 10,000,000
Issued and outstanding shares - 3,474,428 at
December 31, 1995 and 3,811,639 at September 30,
1996 14,384,100 16,293,000
Deficit accumulated during the development stage (7,234,800) (12,211,300)
------------ -------------
7,149,300 4,081,700
Less stock subscriptions receivable 5,000 -
------------ -------------
Total shareholders' equity 7,144,300 4,081,700
------------ -------------
Total liabilities and shareholders' equity $ 8,403,700 $ 5,279,600
------------ -------------
------------ -------------
</TABLE>
Note: The balance sheet at December 31, 1995 has been derived from the audited
financial statements at that date.
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LIFERATE SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
July 18, 1990
(Date of
Inception) to
Three Months Nine Months September 30,
Ended September 30, Ended September 30, 1996
------------------------ ------------------------ -------------
1995 1996 1995 1996
------------------------ ------------------------
<S> <C> <C> <C> <C> <C>
Net revenues $ 19,500 $ 49,200 $ 153,900 $ 308,500 $ 883,100
Cost of revenues 8,300 24,800 8,300 104,600 147,600
-----------------------------------------------------------------------
Gross profit 11,200 24,400 145,600 203,900 735,500
Operating expenses:
Sales and marketing 1,007,700 638,700 2,190,200 1,875,400 4,787,200
Research and development 199,500 564,900 342,100 1,617,200 4,529,000
General and administrative 192,000 700,200 676,600 1,911,100 1,954,100
-----------------------------------------------------------------------
Loss from operations (1,388,000) (1,879,400) (3,063,300) (5,199,800) (10,239,600)
Interest income 27,600 60,200 83,900 228,300 3,140,100
Interest expense - 2,300 - 5,000 48,000
-----------------------------------------------------------------------
Net loss $(1,360,400) $(1,821,500) $(2,979,400) $(4,976,500) $ (7,147,500)
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Net loss per share $ (0.59) $ (0.48) $ (1.45) $ (1.27) $ (5.48)
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Weighted average number of
common shares outstanding 2,318,241 3,811,639 2,058,746 3,931,561 1,305,377
-----------------------------------------------------------------------
-----------------------------------------------------------------------
</TABLE>
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LIFERATE SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
JULY 18, 1990
(DATE OF
NINE MONTHS ENDED SEPTEMBER 30, INCEPTION) TO
------------------------------- SEPTEMBER 30,
1995 1996 1996
------------ ------------ -------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net Loss $(2,979,400) $(4,976,500) $(12,211,300)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 28,700 125,700 213,000
Writedown of software development costs to net realizable value 185,700 0 599,600
Stock issued for services 79,500 0 187,500
Changes in operating assets and liabilities:
Accounts receivable (59,500) (72,600) (177,000)
Advances to agent 108,000 0 0
Prepaid and other current assets (26,400) (53,100) (114,100)
Other assets (9,500) 11,800 0
Accounts payable and other accrued liabilities (200,700) (288,500) 839,800
Deferred revenue (6,100) 258,100 319,000
Deferred rent (13,100) (8,900) 19,800
------------ ------------ -------------
Net cash used in operating activities (2,892,800) (5,004,000) (10,323,700)
INVESTING ACTIVITIES
Software development costs (653,800) 0 (750,900)
Purchase of furniture and equipment (309,300) (523,900) (935,900)
------------ ------------ -------------
Net cash used in investing activities (963,100) (523,900) (1,686,800)
FINANCING ACTIVITIES
Payments on notes payable and capital lease obligations (38,800) (22,200) (270,900)
Stock subscription received 128,000 5,000 0
Proceeds from issuance of notes payable 30,000 0 290,200
Proceeds from issuance of common stock 4,294,600 1,908,900 16,105,500
------------ ------------ -------------
Net cash provided by financing activities 4,413,800 1,891,700 16,124,800
------------ ------------ -------------
Increase in cash and cash equivalents 557,900 (3,636,200) 4,114,300
Cash and cash equivalents at beginning of period 613,200 7,750,500 -
------------ ------------ -------------
Cash and cash equivalents at end of period $ 1,171,100 $ 4,114,300 $ 4,114,300
------------ ------------ -------------
------------ ------------ -------------
</TABLE>
5
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LifeRate Systems, Inc.
(A Development Stage Company)
Notes to Condensed Financial Statements
September 30, 1996
1. Organization and Description of Business
LifeRate Systems, Inc. is a development stage enterprise engaged in
marketing proprietary clinical systems and related software to health
care providers and payors to produce information to measure and quantify
the quality and cost of health care.
2. Basis of Presentation
The financial information presented as of September 30, 1995 and 1996 has
been prepared from the books and records without audit. Financial
information as of December 31, 1995 is based on audited financial
statements of LifeRate Systems, Inc. but does not include all
disclosures required by generally accepted accounting principles. In
the opinion of management, all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the
financial information for the periods indicated have been included. For
further information regarding the Company's accounting policies, refer
to the financial statements and attached notes included in the Company's
Form 10-KSB for the fiscal year ended December 31, 1995 as filed with
the Securities and Exchange Commission.
6
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MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
The Company's activities during the third quarter of 1996 consisted of
marketing the outpatient module of LifeRate Cardiovascular, developing the
cardiac catheterization laboratory (Cath Lab) and operating room modules of
LifeRate Cardiovascular, as well as upgrading the overall performance of
LifeRate Cardiovascular. The Company continued its efforts to expand the
National Cardiology Database and install the system at cardiology
practice groups. The Company also continued development of its asthma and
allergy system in conjunction with an arrangement with National Asthma and
Allergy Systems (NAAS). To date, the Company has entered into agreements for
the sale and installation of LifeRate Cardiovascular with five cardiovascular
practice groups.
The Company generated revenues of $49,200 for the three months ended
September 30, 1996. Recurring license fees contributed $25,500 or 51.7% of
these revenues with the remainder consisting of development and other
non-recurring fees. This compares to $19,500 of revenues generated in the
three months ended September 30, 1995, of which $15,000 were recurring fees
associated with the Company's first cardiology outpatient installation.
Revenues were $308,500 for the nine months ended September 30, 1996, an
increase of $154,600 from the same period in 1995. Current year revenues
reflect the increased installation of LifeRate Cardiovascular in 1996. This
system has been installed at five practice groups through September 30, 1996
compared to only one initial site through September 30, 1995. The Company
anticipates that installations and conversion fees, as well as ongoing
license fees, will continue to grow as a percentage of sales.
The cost of revenues recorded for the third quarter of 1996 reflect the
amortization of capitalized software costs. Cost of revenues for the nine
month period include $75,600 of amortization of capitalized software costs,
$8,600 incurred in the second quarter for LifeRate Cardiovascular
installations, and $18,700 of development expense recorded in the first
quarter against a development contract which produced the majority of revenue
in that period. Cost of revenues for the three and nine months ended
September 30, 1995 include only $8,300 of amortization of capitalized
software costs. In the first three quarters of 1995, costs incurred to
support installation and licensing revenues were included in sales and
marketing expense. Beginning in 1996, these expenses were recorded as cost
of revenues. Future periods will also be affected by royalty payments that
the Company is obligated to pay to third parties based on revenues. The
Company is currently obligated to pay royalties to one third party equal to
10% of the sales of LifeRate Cardiovascular and to another third party equal
to 7.5% of sales of LifeRate's system. The Company is also obligated to pay
royalties to a third party equal to 2% of database sales from August 1, 1996
through July 30, 2001.
Sales and marketing expenses were $638,700 for the three months ended
September 30, 1996, a $369,000 (36.6%) decrease from the same period last
year. For the nine month period ended September 30, 1996, sales and
marketing expenses were $1,875,400, a $314,800 (14.4%) decrease. A portion
of the decrease reflects that during the first three quarters of 1995, costs
to support installation and licensing revenues were included in sales and
marketing expense. Some of these expenses are now included in cost of
revenues. During 1995, Clinical Sales & Service, Inc. (CSSI) provided
substantially all of the Company's sales, marketing and clinical support
functions. Effective January 1, 1996, the employees of CSSI became employees
of the Company. Since that time, the Company has directly employed its sales,
marketing and clinical support personnel. Sales and marketing expenses
increased during the first quarter of 1996 as the Company was developing the
organization to support the intensified sales pace caused by the December
1995 commercial release of LifeRate Cardiovascular. During the second and
third quarters of 1996, the growth of sales and marketing expense slowed from
the prior year (after adjusting for the reclassifications described above and
certain reclassifications of salary) as the hiring and training of employees
has been completed and other of the expenses are now billed to the customer.
7
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Management Discussion and Analysis
Expenses for research and development have increased significantly from 1995
to 1996. Research and development expenses were $564,900 for the third
quarter of 1996, a $365,400 increase from the same period last year. For the
nine month period ended September 30, 1996, research and development expenses
were $1,617,200, $1,275,100 greater than the comparable period of 1995. These
increases reflect the intensified development efforts for the cath lab and
operating room modules of LifeRate Cardiovascular, the addition of a software
quality assurance function, as well as a number of one-time costs associated
with the recruitment and relocation of key staff members and the costs
associated with accommodating the increased staff size. The Company plans to
continue to invest the resources needed to develop the product capabilities
being demanded by its customer base.
The Company's general and administrative expense increased in 1996 from 1995
to support the overall higher activity level of the Company that accompanied
the commercialization of its first product. General and administrative
expenses in the third quarter of 1996 were $700,200 compared to $192,000 in
the prior year, an increase of $508,200. This increase includes $190,000 to
settle a lawsuit brought by a former officer of the Company. General and
administrative expenses for the nine months ended September 30, 1996
increased $1,234,500 over the comparable period of 1995 to $1,911,100. This
increase reflects $181,000 incurred in the second quarter of 1996 to cancel a
lease for new office facilities, the $190,000 lawsuit settlement in the
third quarter of 1996, plus the higher costs incurred to support the
Company's activities, including a $497,000 increase in payroll and related
payroll expenses. The Company has also incurred $179,000 in additional
legal fees in the nine months ended September 30, 1996 compared to the prior
year. These legal expenses were incurred primarily in connection with the
management change completed earlier this year and the above referenced lease
cancellation and lawsuit settlement.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1996, the Company's cash and cash equivalents were
$4,114,300, a decrease of $ 3,363,200 from December 31, 1995. In January
1996, the Company closed on a private placement of 295,546 shares of Common
Stock at a price of $6.50 per share, which provided net proceeds of
$1,683,300 to the Company. During the first three quarters of 1996, the
Company used approximately $5,004,000 to fund operations and $523,900 for the
purchase of equipment. The Company anticipates that additional furniture and
equipment will be needed to complete its office expansion that began at the
end of the third quarter. It has secured an operating lease line of
$180,000, to fund this need. The company has no other significant
commitments to purchase additional equipment but does plan to fund such
purchases as required to support product and market development needs.
The Company believes that cash and cash equivalent balances at September 30,
1996 are sufficient to fund the Company's operations through the first
quarter of 1997. Thereafter, the Company will likely require additional
capital to continue operations. There is no assurance that the Company will
be able to obtain additional financing or that, if available, that terms of
any such financing will be satisfactory to the Company.
8
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On September 25, 1996, the Company entered into a Settlement Agreement with
Donna J. Edmonds, a former officer and director of the Company, settling the
previously disclosed lawsuit filed by Edmonds against the Company. Under the
agreement, all parties to the action dismissed their claims with prejudice.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Item No. Item Method of Filing
10.1 Agreement, dated September 1, 1996, between Filed herewith
Company and William Knopf, M.D.
10.2(a) Consulting and Advisory Agreement, dated Filed herewith
September 1, 1996, between the Company and
William Knopf, M.D.
10.2(b) Non-Statutory Stock Option Agreement, Filed herewith
dated September 1, 1996, between the
Company and William Knopf, M.D.
27.1 Financial Data Schedule Filed herewith
(b) Reports of Form 8-K
None
9
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SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant has
caused this report to be signed on its behalf by the undersigned, thereunder
duly authorized.
Dated: November 8, 1996
LifeRate Systems, Inc.
By:____________________
William W. Chorske
President and Chief Executive Officer
(Principal Executive Officer)
By:____________________
Bruce T. Klein
Chief Financial Officer
(Principal Financial and Accounting Officer)
10
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EXHIBIT INDEX
Exhibit No. Method of Filing
10.1 Agreement, dated September 1, 1996, between Filed herewith
Company and William Knopf, M.D.
10.2(a) Consulting and Advisory Agreement, dated Filed herewith
September 1, 1996, between the Company and
William Knopf, M.D.
10.2(b) Non-Statutory Stock Option Agreement, Filed herewith
dated September 1, 1996, between the
Company and William Knopf, M.D.
27.1 Financial Data Schedule Filed herewith
<PAGE>
AGREEMENT
THIS AGREEMENT, dated as of September 1, 1996, is entered into by and
between LifeRate Systems, Inc., a Minnesota corporation (the "COMPANY"), and
William D. Knopf, M.D., an individual presently residing in the State of
Georgia ("CONSULTANT").
RECITALS
The Company and Consultant desire to (i) enter into a consulting and
advisory arrangement and (ii) resolve in a final and binding way any and all
existing and potential claims between the Company and Consultant relating in
any way to their prior employment relationship and the termination of such
relationship, which termination occurred on the date hereof (the "TERMINATION
DATE").
In consideration of the foregoing and the mutual agreements set forth
below, the parties hereto agree as follows:
1. Subject to the terms and conditions hereof, the Consultant agrees to
the following:
(a) He will execute contemporaneously herewith the Consulting and
Advisory Agreement in the form attached hereto as Exhibit A ("CONSULTING
AGREEMENT"), the terms of which are incorporated herein by reference.
(b) He will execute contemporaneously herewith the Release in the
form attached hereto as Exhibit B, the terms of which are incorporated herein
by reference.
2. Subject to the terms and conditions hereof, the Company agrees to the
following:
(a) The Company will execute the Consulting and Advisory Agreement
in the form attached hereto as Exhibit A, the terms of which are incorporated
herein by reference.
(b) The Company will execute the Non-Statutory Stock Option
Agreement in the form attached hereto as Exhibit C ("OPTION AGREEMENT"), the
terms of which are incorporated herein by reference.
(c) The Company will execute the Release in the form attached hereto
as Exhibit D (together with the Release referred to in Section 1(b), the
"RELEASES"), the terms of which are incorporated herein by reference.
3. Consultant agrees to cooperate with the Company and its counsel in
connection with any litigation matters or disputes involving the Company with
respect to which Consultant has information that would be relevant to such
matters and agrees to make himself available as may reasonably be necessary in
connection
1
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with such matters, including, without limitation, litigation matters involving
Donna Edmonds and/or Clinical Sales and Services, Inc. ("CSSI"). The Company
will make a good faith effort to ensure that this cooperation and assistance
will not unreasonably interfere with Consultant's employment or other business
activities.
4. Without in any way limiting the scope of the Release referred to in
Section 1(b), Consultant agrees not to assert as an employee, officer,
director, or shareholder of CSSI or in any other capacity, any claims or causes
of action against the Company, or any of its directors, officers or employees,
nor to cooperate or voluntarily assist other parties in the assertion of any
such claims or causes of action, for or in respect of any matters, actions or
relationships between the Company and CSSI, including, without limitation, in
respect of the Sales and Marketing Services Agreement dated as of September 18,
1995. This provision does not preclude Consultant from responding to a
subpoena or other legal process.
5. Consultant agrees and understands that he is entitled to no other
compensation or benefits other than those enumerated in this Agreement and will
not accrue or become entitled to any benefits other than as provided herein.
6. Consultant hereby acknowledges he has had up to 21 days to consider
the terms of this Agreement before signing, that he fully understands and
accepts the terms of this Agreement, that his signature is freely, voluntarily
and knowingly given, and that he has been provided a full opportunity to review
and reflect on the terms of this Agreement and to obtain the advice of legal
counsel of his choice, which advice the Company has encouraged him to obtain.
7. After executing this Agreement, Consultant understands that he may
rescind this Agreement by delivering written notice of such rescission ("NOTICE
OF RESCISSION") within 15 days of the date of such execution by certified mail,
return receipt requested, to LifeRate Systems, Inc., 7210 Metro Boulevard,
Edina, Minnesota 55439; Attn: Chief Executive Officer. Consultant understands
that in the event he exercises this right of rescission, then this Agreement,
the Consulting Agreement, the Option Agreement and the Releases shall all be
simultaneously deemed to be rescinded and rendered null and void in all
respects upon receipt by the Company of the Notice of Rescission.
8. This Agreement does not constitute an admission that the Company
violated any statute or principle of common law or engaged in any wrongdoing.
9. This Agreement constitutes the entire agreement between the parties
and supersedes all previous negotiations, representations and agreements
heretofore made by the parties with respect to the subject matter hereof. No
amendment, waiver or
2
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discharge hereof shall be valid unless in writing and executed by both parties
hereto.
10. The laws of the State of Minnesota will govern the validity,
construction and performance of this Agreement, without regard to the conflict
of law provisions of any jurisdictions. Any legal proceeding related to this
Agreement will be brought in an appropriate Minnesota court, and both the
Company and Consultant hereby consent to the exclusive jurisdiction of that
court for this purpose.
11. Whenever possible, each provision of this Agreement will be
interpreted so that it is valid under the applicable law. If any provision of
this Agreement is to any extent invalid under the applicable law, that
provision will still be effective to the extent it remains valid and the
remainder of this Agreement shall continue to be valid; provided that such
resulting construction of this Agreement does not frustrate the main purpose of
this Agreement.
12. Consultant may not assign this Agreement to any third party for
whatever purpose without the express written consent of the Company. The
Company may not assign this Agreement to any third party, except by operation
of law through merger, consolidation, liquidation or recapitalization, or by
sale of all or substantially all of the assets of the Company, without the
express written consent of Consultant.
13. The parties hereto agree that the rights granted by this Agreement
are both unique and special, and the parties contemplate that enforcement of
this Agreement may be had by recourse to the equitable remedies available in
courts of appropriate jurisdiction in addition to any other remedies which may
be or may become available at law.
The parties have duly executed this Agreement as of the date first above
written.
LIFERATE SYSTEMS, INC.
By: /s/ William W. Chorske
-------------------------------------
Title: Chief Executive Officer
----------------------------------
/s/ William D. Knopf, M.D.
----------------------------------------
William D. Knopf, M.D.
Address: 540 Chestnut Rose Lane
Atlanta, GA 30327
3
<PAGE>
EXHIBIT A
CONSULTING AND ADVISORY AGREEMENT
THIS CONSULTING AGREEMENT, dated as of September 1, 1996 by and between
LifeRate Systems, Inc., a Minnesota corporation (the "COMPANY") and William D.
Knopf, M.D., an individual presently residing in the State of Georgia
("CONSULTANT").
A. The Company and Consultant desire to establish a consulting and
advisory arrangement.
B. The Company and Consultant are entering into this Consulting and
Advisory Agreement in conjunction with the simultaneous execution of the
Agreement, dated of even date herewith, between the Company and Consultant
regarding the settlement of certain claims (the "AGREEMENT").
In consideration of the foregoing and of the respective covenants and
agreements of the parties herein contained, the receipt and sufficiency of
which consideration are hereby acknowledged, the parties hereto agree as
follows:
1. CONSULTANCY. The Company agrees to retain Consultant as a consultant and
advisor, and Consultant agrees to serve the Company, on the terms and
conditions set forth herein. The retention of Consultant by the Company as a
consultant and advisor shall be for the period commencing on September 1, 1996
and expiring September 1, 1998 (the "EXPIRATION DATE"), unless such consultancy
shall have been sooner terminated as hereinafter set forth in Section 4.
2. RESPONSIBILITIES. Consultant's role hereunder (i) as an advisor shall
primarily be as a clinical advisor to the Company and (ii) as consultant shall
primarily be in the area of support and promotion of the Company's products and
services. As a clinical advisor, Consultant's duties would include, but not be
limited to: providing design input on product releases; identifying appropriate
data fields and data structures; assisting in testing of new design concepts;
and interacting with the Company's clinical liaisons and product managers.
Consultant shall report directly to the Chief Executive Officer of the Company
and shall perform such duties as the Chief Executive Officer shall reasonably
assign from time to time to Consultant. While the daily commitment required by
Consultant to fulfill his duties hereunder will vary, it is understood that
such duties assigned hereunder and not intended to materially interfere or
prevent Consultant from reasonably performing his duties with Atlanta
Cardiology Group, P.C.
3. COMPENSATION. During the term of his consultancy hereunder, Consultant
shall receive a consulting fee of $60,000, per year, payable bi-weekly. If
Consultant is requested to travel to render services hereunder, the Company
shall reimburse Consultant for all necessary and reasonable expenses incurred
by Consultant in accordance with and as permitted by the expense reimbursement
policies adopted by the Company.
<PAGE>
4. TERMINATION
(a) DEATH. Consultant's consultancy hereunder shall terminate upon his
death.
(b) CAUSE. The Company may terminate Consultant's consultancy hereunder
for Cause. For the purposes of this Consulting Agreement, the Company shall
have "Cause" to terminate Consultant's consultancy and advisory relationship
hereunder upon Consultant's (i) willful, continuing, material and bad faith
failure to perform and discharge his duties and responsibilities hereunder, or
(ii) gross misconduct that is materially and demonstratively injurious to the
Company, or (iii) conviction of a felony (unless such conviction is reversed in
any final appeal thereof); provided that, in the case of termination under
clauses (i) or (ii)of this Section 4(b), Consultant shall have first received
written notice of proposed termination at least 30 days prior thereto,
specifying the grounds for such termination and Consultant shall have failed to
cure such matters.
(c) DATE OF TERMINATION. "Date of Termination" shall mean the earlier of
(i) the Expiration Date or (ii) if Consultant's employment is terminated by his
death, then the date of his death, or if pursuant to Section 4(b), then the
date specified in the notice of termination.
5. COMPETITIVE ACTIVITIES
Consultant agrees that during his consultancy hereunder, for a period of
12 months after his consultancy and advisory relationship with the Company ends:
(a) He will not alone, or in any capacity with another entity:
(i) directly or indirectly engage in any commercial activity that
competes with the Company's business, as the Company has conducted it during
the 12-month period before the Consultant's consultancy and advisory
relationship with the Company ends, within any state in the United States in
which the Company directly or indirectly markets or services products or
provides services;
(ii) in any way interfere or attempt to interfere with the Company's
relationships with any of its current or potential customers; or
(iii) employ or attempt to employ any of the Company's then
employees on behalf of any other entity competing with the Company.
(b) He will, prior to accepting employment with any new employer, inform
that employer of this Consulting Agreement and provide that employer with a
copy of this Consulting Agreement.
2
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(c) Consultant may seek the advice of the Company from time to time on
whether prospective employment he proposes would, in the Company's opinion,
violate the provisions of this Section 5, by submitting in writing to the
Company appropriate information.
6. CONFIDENTIAL INFORMATION
(a) CONFIDENTIAL INFORMATION. For purposes of this Consulting Agreement,
the term "Confidential Information" means information that is not generally
known and that is proprietary to the Company, including (i) trade secret
information about the Company and its products and services; and (ii)
information relating to the business of the Company as conducted at any time or
anticipated to be conducted by the Company, and to any of its past, current or
anticipated products and services, including without limitation, information
about the Company's research, development, design, manufacturing, purchasing,
accounting, engineering, marketing, selling, leasing or servicing. All
information that Consultant has a reasonable basis to consider Confidential
Information or which is treated by the Company as being Confidential
Information shall be presumed to be Confidential Information, whether
originated by Consultant or by others, and without regard to the manner in
which Consultant obtains access to such information. Notwithstanding the
foregoing, information shall cease to be Confidential Information for purposes
of this Section 6 when (i) it is required by law or legal process to be
disclosed in the public domain or (ii) it has become public information as a
direct or indirect result of disclosure by any person other than Consultant.
In the event Consultant receives any notice of any action to require disclosure
of any Confidential Information, as required by law or legal process,
Consultant immediately shall notify the Company of the notice and any action to
require disclosure of Confidential Information to permit the Company to
challenge the required disclosure and seek a protective order.
(b) RESTRICTED USE AND NONDISCLOSURE. Consultant shall not, either
during the term of this Consulting Agreement or for a period of five years
following expiration or termination of this Consulting Agreement, (i) use any
Confidential Information for any purpose other than the performance of his
duties and responsibilities under this Consulting Agreement for the benefit of
the Company or (ii) disclose any Confidential Information to any person not
employed by the Company, without the prior written authorization of the
Company. Consultant shall exercise prudence and the highest degree of care to
safeguard and protect, and to prevent the unauthorized disclosure of, all such
Confidential Information.
(c) RETURN OF INFORMATION AT TERMINATION. Upon termination of the
consultancy, Consultant shall deliver to the Company all materials, including
but not limited to product formulations, customer lists, business plans,
business strategies, instruction sheets, drawings, manuals, letters, notes,
notebooks, books, reports and copies thereof, computer records, audiotapes and
videotapes or other media that include Confidential Information.
3
<PAGE>
Consultant shall not retain any copies or reproductions of any materials,
product formulations, customer lists, business plans, business strategies,
instruction sheets, drawings, manuals, letters, notes, notebooks, books,
reports and copies thereof, computer records, audiotapes, videotapes or other
materials of the Company that came into Consultant's possession at any time
during the term of this Consulting Agreement.
7. INVENTIONS.
(a) INVENTIONS. For purposes of this Consulting Agreement, the term
"Inventions" means any business plan, strategy, technology, discovery,
improvement, innovation, idea, formula, shop right, trademark or work of
authorship or expression (whether or not patentable or copyrightable, and
whether or not put into writing or reduced to practice) made, generated, or
conceived by Consultant (whether alone or with others) while employed by the
Company or to which Consultant has agreed to assign the rights, interest and
ownership under this Consulting Agreement or under any other document or
instrument.
NOTICE: Pursuant to Minnesota Statutes Section 181.78, Consultant is
hereby notified that this Agreement does not apply to an invention for which no
equipment, supplies, facility, Confidential Information or trade secret
information of the Company was used AND which was developed entirely on
Consultant's own time AND does not relate (1) directly to the business of the
Company OR (2) to the Company's actual or demonstrably anticipated research or
development, OR does not result from any work performed by Consultant for the
Company.
(b) PROPERTY OF THE COMPANY. All Inventions made, authored or conceived
by Consultant, either solely or jointly with others, during Consultant's
consultancy with the Company or within one (1) year after the termination of
this Consulting Agreement, are works made for hire and the entire title and
ownership interest in such items in any form shall be the sole and exclusive
property of the Company. Consultant shall execute instruments of assignment
confirming the foregoing as requested by the Company.
(c) DISCLOSURE. Consultant shall promptly and without request by the
Company fully disclose to the Company in writing any Inventions. Consultant
shall report on a monthly basis to the Company, or more frequently as requested
by the Company, regarding any and all research and development activities
during that period.
(d) COOPERATION. Upon the request of the Company, Consultant shall apply
for such United States or foreign trademarks, patents or copyrights as the
Company may deem desirable, and Consultant shall do any and all acts necessary
in connection with such applications for trademarks, patents or copyrights, or
assignments, in order to establish in the Company the entire right, title and
interest in and to such trademarks, patents or copyrights. All costs and
expenses incurred in connection with any such application for such trademarks,
patents
4
<PAGE>
or copyrights shall be paid by the Company, and Consultant shall be reimbursed
by the Company to the extent any such costs and expenses were incurred
personally by Consultant.
8. INJUNCTIVE RELIEF
Consultant and the Company acknowledge that a breach by the other of any
of the terms of Sections 5, 6 or 7 of this Consulting Agreement will render
irreparable harm to the other and that the Company or Consultant (as the case
may be) shall therefore be entitled to any and all equitable relief, including
but not limited to injunctive relief, and to any other remedy that may be
available under any applicable law or agreement between the parties.
9. REPRESENTATIONS OF CONSULTANT.
Consultant represents and warrants that his execution and delivery of this
Consulting Agreement and performance by Consultant of his obligations under
this Consulting Agreement shall in no way violate the terms and conditions of
any other agreement, written or oral, or any other instrument or arrangement to
which Consultant is a party or by which Consultant is bound.
10. MISCELLANEOUS.
(a) WAIVER. No waiver of any term, condition or covenant of this
Consulting Agreement shall be deemed to be a waiver of subsequent breaches of
the same or other terms, covenants or conditions hereof.
(b) AMENDMENT. This Consulting Agreement may not be amended, altered or
modified except by a written agreement between the parties hereto.
(c) ASSIGNABILITY.
(i) CONSULTANT ASSIGNABILITY. Consultant shall not assign this
Consulting Agreement to any third party for whatever purpose without the
express, prior written consent of the Company.
(ii) COMPANY ASSIGNABILITY. The Company shall have the right to
assign this contract to its successors or permitted assigns, (but not to
other persons,) and all covenants or agreements hereunder shall inure to
the benefit of and be enforceable by or against its successors or assigns.
(iii) DEFINITIONS. The terms "successor" and "permitted assigns"
shall include any person, individual or entity that buys all or
substantially all the Company's assets, or a controlling portion of its
stock, or with which it merges or consolidates.
(d) INVALIDITY AND SEVERABILITY. In the event part or any portion of
this Consulting Agreement is determined to be invalid or
5
<PAGE>
unenforceable by any court of competent jurisdiction, the parties agree that
this Consulting Agreement as so construed shall remain in force and effect
between them and shall be applied as if the offending part or portion did not
comprise an element hereof; provided that such resulting construction of this
Consulting Agreement does not frustrate the main purpose of this Consulting
Agreement.
(e) NOTICES. Any notice required to be given hereunder shall be duly and
properly given if hand delivered, transmitted by facsimile or mailed postage
prepaid to either party at the addresses set forth below, effective as of the
date of mailing:
If to Consultant: William D. Knopf, M.D.
540 Chestnut Rose Lane
Atlanta, GA 30327
If to the Company: LifeRate Systems, Inc.
7210 Metro Boulevard
Minneapolis, MN 55439-2128
Attention: Chief Executive Officer
With a copy to: Michel A. LaFond, Esq.
Oppenheimer Wolff & Donnelly
45 South Seventh Street
Suite 3400
Minneapolis, MN 55402
Either party may change its address by giving ten days' prior written
notice to the other party of the new address.
(f) DEFINITIONS. For purposes of this Consulting Agreement, the
following words shall have the meanings indicated:
(i) TECHNOLOGY. The term "technology" means all know-how, trade
secrets, processes, inventions, specifications, equipment, computer
software, trademarks, trade names, service marks, patents, patent
applications, proprietary information, copyrights and other related
intellectual property.
(ii) TRADE SECRET. The term "trade secret" means any information or
compilation of information possessed by the Company that derives
independent economic value, actual or potential, from not being generally
known to, and not being readily ascertainable by proper means by other
persons who can obtain economic value from its disclosure or use. For
purposes of this Consulting Agreement, the term "trade secret" includes
both information disclosed to Consultant by the Company and information
developed by Consultant in the course of his employment.
(g) GOVERNING LAW. This Consulting Agreement shall be governed by and
construed under the laws of the State of Minnesota.
6
<PAGE>
(h) RESCISSION OF AGREEMENT. Notwithstanding any provision in this
Consulting Agreement to the contrary, in the event Consultant delivers a Notice
of Rescission (as defined in the Settlement Agreement) to the Company, then
this Consulting Agreement shall, upon receipt of the Notice of Rescission by
the Company, also be deemed to be simultaneously rescinded and rendered null
and void in all respects.
IN WITNESS WHEREOF, the parties have duly executed, or caused to be
executed by a duly authorized representative, this Consulting Agreement as of
the date first set forth above.
LIFERATE SYSTEMS, INC.
By /s/ William A. Chorske
---------------------------------------------
CONSULTANT
/s/ William D. Knopf
-----------------------------------------------
William D. Knopf, M.D.
7
<PAGE>
NON-STATUTORY STOCK OPTION AGREEMENT
THIS AGREEMENT is effective as of September 1, 1996 (the "DATE OF GRANT"),
by and between LifeRate Systems, Inc. (the "COMPANY") and William D. Knopf,
M.D. (the "OPTIONEE").
A. The Company has adopted the 1993 Stock Option Plan (the "PLAN")
authorizing the Board of Directors of the Company, or a committee as provided
for in the Plan (the Board or such a committee to be referred to as the
"COMMITTEE"), to grant non-statutory stock options to employees and nonemployee
consultants and independent contractors of the Company.
B. Optionee is a consultant to the Company and has entered into a
Consulting Agreement with the Company (the "CONSULTING AGREEMENT") dated the
date hereof, and an Agreement with the Company dated the date hereof (the
"AGREEMENT") regarding the settlement of certain claims.
C. The Company desires to give the Optionee an inducement to acquire a
proprietary interest in the Company and an added incentive to advance the
interests of the Company by granting to the Optionee an option to purchase
shares of common stock of the Company pursuant to the Plan.
Accordingly, the parties hereby agree as follows:
ARTICLE 1. GRANT OF OPTION.
The Company hereby grants to the Optionee the right, privilege, and option
(the "OPTION") to purchase Fifty Thousand (50,000) shares (the "OPTION SHARES")
of the Company's common stock (the "COMMON STOCK"), according to the terms and
subject to the conditions set forth in this Agreement and the Plan. The Option
is not intended to be in a "incentive stock option," as that term is used in
Section 422 of the Internal Revenue Code of 1986, as amended (the "CODE").
ARTICLE 2. OPTION EXERCISE PRICE.
The per share price to be paid by Optionee in the event of an exercise of
the Option shall be the Fair Market Value (as defined in the Plan) on August
27, 1996.
ARTICLE 3. DURATION OF OPTION AND TIME OF EXERCISE.
3.1 INITIAL PERIOD OF EXERCISABILITY. The Option shall become
exercisable with respect to the Option Shares in three installments. The
following table sets forth the initial dates of exercisability of each
installment and the number of Option Shares as to which this Option shall
become exercisable on such dates:
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<PAGE>
Initial Date of Number of Option Shares
Exercisability Available for Exercise
--------------- -----------------------
September 1, 1996 16,667
September 1, 1997 16,667
September 1, 1998 16,666
The foregoing rights to exercise this Option shall be cumulative with
respect to the Option Shares becoming exercisable on each such date but in no
event shall this Option be exercisable after, and this Option shall become void
and expire as to all unexercised Option Shares at, 5:00 p.m. (Minneapolis,
Minnesota time) on September 1, 2006 (the "TIME OF TERMINATION").
3.2 INITIAL PERIOD OF EXERCISABILITY
(a) In the event the Optionee's service with the Company is terminated
for "Cause" (as defined in the Consulting Agreement) or the Optionee terminates
his service with the Company prior to September 1, 1998, this Option shall
remain exercisable to the extent exercisable as of such termination until three
months after such termination.
(b) In the event the Optionee's service with the Company is terminated
without "Cause" or by death or total disability, this Option shall become
immediately exercisable in full until the Time of Termination.
(c) Notwithstanding anything in this Agreement or the Plan to the
contrary, in the event that the Optionee materially breaches the terms of any
confidentiality or non-compete agreement entered into by the Optionee with the
Company or the Optionee's actions result in a material breach of the terms of
any confidentiality or non-compete agreement with the Company, whether such
breach occurs before or after termination of the Optionee's service with the
Company, the Committee in its sole discretion may immediately terminate all
rights of the Optionee under this Agreement and the Plan without notice of any
kind.
ARTICLE 4. MANNER OF OPTION EXERCISE.
4.1 NOTICE. This Option may be exercised by the Optionee in whole or in
part from time to time, subject to the conditions contained herein, by
delivery, in person or by registered mail, to the Company at its principal
executive office in Edina, Minnesota (Attention: Chief Financial Officer), of a
written notice of exercise. Such notice shall be specify the number of Option
Shares with respect to which the Option is being exercised, and shall be signed
by the Optionee. In the event that the Option is being exercised by any person
or persons other than the Optionee (such as by the Optionee's heir(s) or legal
representative(s), in the event of death or disability of Optionee), the notice
shall be accompanied by appropriate proof of right of such person or persons to
exercise the Option. Such notice shall be accompanied by payment in full of
the total purchase price of the Option Shares purchased. In the event that the
Option is being
2
<PAGE>
exercised, as provided by the Plan, by any person or persons other than the
Optionee, the notice shall be accompanied by appropriate proof of right of such
person or persons to exercise the Option. As soon as practicable after the
effective exercise of the Option, the Optionee shall be recorded on the stock
transfer books of the Company as the owner of the Option Shares purchased, and
the Company shall deliver to the Optionee one or more duly issued stock
certificates evidencing such ownership.
4.2 PAYMENT. At the time of exercise of this Option, the Optionee shall
pay the total purchase price of the Option Shares to be purchased solely in
cash (including a personal check or a certified or bank cashier's check,
payable to the order of the Company; provided, however, that to the extent
permitted by the Plan, the Committee, in its sole discretion, may allow such
payments to be made, in whole or in part, by delivery of a Broker Exercise
Notice or a promissory note (containing such terms and conditions as the
Company may in its discretion determine), by transfer from the Optionee to the
Company of Previously Acquired Shares, or by a combination thereof. For
purposes of this Agreement, the terms "Broker Exercise Notice" and "Previously
Acquired Shares" shall have the meanings set forth in the Plan. In the event
the Optionee is permitted to pay the total purchase price of this Option in
whole or in part with Previously Acquired Shares, the value of such shares
shall be equal to their Fair Market Value on the date of exercise of this
Option.
4.3 INVESTMENT PURPOSE. The Company shall not be required to issue or
deliver any shares of Common Stock under this Option unless (1)(a) such shares
are covered by an effective and current registration statement under the
Securities Act of 1933 and applicable state securities laws or (b) exemptions
from registration under the Securities Act of 1933 and applicable state
securities laws are available for such issuance (as determined by counsel to
the Company) and the Company has received from the Optionee (or, in the event
of death or disability, the Optionee's heir(s) or legal representative(s)) any
representations or agreements requested by the Company in order to permit such
issuance to be made pursuant to such exemptions, and (2) the Company has
obtained any other consent, approval or permit from any state or federal
governmental agency which the Company shall, in its sole discretion upon the
advice of counsel, deem necessary or advisable. In the event that, at the time
of the attempted exercise of this Option, any of these conditions to the
issuance of a certificate for shares of Common Stock have not been satisfied,
such exercise shall be deemed withdrawn and the Company shall return any
payments made with respect thereto unless the Optionee, within 15 days after
being informed of the nonsatisfaction of such conditions, gives the Company
written notice that he or she wants such exercise to remain suspended (in which
event such exercise shall be deemed to be effective on the earliest date upon
which such conditions have been satisfied). Unless a registration statement
under the Securities Act of 1933 is in effect with respect to the issuance or
transfer of Option Shares, each certificate representing any such shares shall
be restricted by the Company as to transfer unless the Company receives an
opinion of counsel satisfactory to the Company to the effect that registration
under the Securities Act of 1933 and applicable state securities laws is not
required with respect to such transfer.
3
<PAGE>
ARTICLE 5. NONTRANSFERABILITY.
Neither this Option nor the Option Shares acquired upon exercise may be
transferred by the Optionee, either voluntarily or involuntarily, or subjected
to any lien, directly or indirectly, by operation of law or otherwise, except
as provided in the Plan. Any attempt to transfer or encumber this Option
other than in accordance with this Agreement shall be null and void and shall
void this Option.
ARTICLE 6. LIMITATION OF LIABILITY
Nothing in this Agreement shall be construed to (a) limit in any way the
right of the Company to terminate the service of the Optionee at any time, or
(b) be evidence of any agreement or understanding, express or implied, that the
Company will retain the Optionee in any particular position, at any particular
rate of compensation or for any particular period of time.
ARTICLE 7. NO WITHHOLDING TAXES.
The Company is entitled to (a) withhold and deduct from future fees
payable to the Optionee (or from other amounts which may be due and owing to
the Optionee from the Company), or make other arrangements for the collection
of, all legally required amounts necessary to satisfy any federal, state or
local withholding and employment-related tax requirements attributable to the
grant or exercise of this Option or otherwise incurred with respect to this
Option, or (b) require the Optionee promptly to remit the amount of such
withholding to the Company before acting on the Optionee's notice of exercise
of this Option. In the event that the Company is unable to withhold such
amounts, for whatever reason, the Optionee hereby agrees to pay to the Company
an amount equal to the amount the Company would otherwise be required to
withhold under federal, state or local law.
ARTICLE 8. ADJUSTMENTS.
In the event of any reorganization, merger, consolidation,
recapitalization, liquidation, reclassification, stock dividend, stock split,
combination of shares, rights offering, extraordinary dividend or divestiture
(including a spin-off) or any other change in the corporate structure or shares
of the Company, the Company (or, if the Company is not the surviving
corporation in any such transaction, the board of directors of the surviving
corporation), in order to prevent dilution or enlargement of the rights of the
Optionee, shall make appropriate adjustment (which determination shall be
conclusive) as to the number, kind and exercise price of securities subject to
this Option.
4
<PAGE>
ARTICLE 9. SUBJECT TO PLAN.
The Option and the Option Shares granted and issued pursuant to this
Agreement have been granted and issued under, and are subject to the terms of,
the Plan. The terms of the Plan are incorporated by reference herein in their
entirety, and the Optionee, by execution hereof, acknowledges having received a
copy of the Plan. The provisions of this Agreement shall be interpreted as to
be consistent with the Plan, and any ambiguities herein shall be interpreted by
reference to the Plan. In the event that any provision hereof is inconsistent
with the terms of the Plan, the terms of the Plan shall prevail.
ARTICLE 10. MISCELLANEOUS.
10.1 BINDING EFFECT. This Agreement shall be binding upon the heirs,
executors, administrators and successors of the parties hereto.
10.2 GOVERNING LAW. This Agreement and all rights and obligations
hereunder shall be construed in accordance with and governed by the laws of
the State of Minnesota.
10.3 ENTIRE AGREEMENT. This Agreement and the Plan set forth the entire
agreement and understanding of the parties hereto with respect to the grant and
exercise of this Option and the administration of the Plan and supersedes all
prior agreements, arrangements, plans and understandings relating to the grant
and exercise of this Option and the administration of the Plan.
10.4 AMENDMENT AND WAIVER. This Agreement may be amended, waived,
modified or canceled only by a written instrument executed by the parties
hereto or, in the case of a waiver, by the party waiving compliance.
10.5 RESCISSION OF OPTION. Notwithstanding any provision in this Option
Agreement to the contrary, in the event the Optionee delivers a Notice of
Rescission (a defined in the Settlement Agreement) to the Company, then this
Option Agreement and the Option and Option Shares shall, upon receipt of the
Notice of Rescission by the Company, also be deemed to be simultaneously
rescinded and rendered null and void in all respects.
The parties hereto have executed this Agreement effective as of the day
and year first above written.
LIFERATE SYSTEMS, INC.
By:/s/ William W. Chorske
--------------------------------------
Its: CEO
-------------------------------------
5
<PAGE>
OPTIONEE:
[By execution hereof, the /s/ William D. Knopf, M.D.
Optionee acknowledges having ------------------------------------
received a copy of the Plan.] William D. Knopf, M.D.
6
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STATEMENT OF EARNINGS AND THE BALANCE SHEET, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 4,114
<SECURITIES> 0
<RECEIVABLES> 181
<ALLOWANCES> 4
<INVENTORY> 0
<CURRENT-ASSETS> 4,405
<PP&E> 936
<DEPRECIATION> 137
<TOTAL-ASSETS> 5,280
<CURRENT-LIABILITIES> 859
<BONDS> 0
0
0
<COMMON> 16,293
<OTHER-SE> (12,211)
<TOTAL-LIABILITY-AND-EQUITY> 5,280
<SALES> 49
<TOTAL-REVENUES> 49
<CGS> 25
<TOTAL-COSTS> 1,904
<OTHER-EXPENSES> (60)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2
<INCOME-PRETAX> (1,822)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,822)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,822)
<EPS-PRIMARY> (.48)
<EPS-DILUTED> (.48)
</TABLE>
