UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarterly Period Ended June 30, 1998
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Transition Period From ___________ to ___________.
Commission file number 0-27074
SECURE COMPUTING CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 52-1637226
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
One Almaden Blvd., Suite 400
San Jose, CA 95113
------------------------------- -------------------
(Address of principal executive offices) (Zip code)
(612) 628-2700
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Registrant's telephone number, including area code
Not Applicable
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date: Common Stock, $.01 par
value - 16,221,247 issued and outstanding as of August 3, 1998, which number
includes 892,061 Exchangeable Shares that have the same voting and other rights
as Common Stock and are immediately exercisable for shares of Common Stock.
1
<PAGE>
SECURE COMPUTING CORPORATION
QUARTERLY REPORT ON FORM 10-Q
PART I. FINANCIAL INFORMATION PAGE NO.
Item 1. Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheets 3
(Unaudited) as of June 30, 1998 and
December 31, 1997
Condensed Consolidated Statements of 4
Operations (Unaudited) for the three
months ended June 30, 1998
and 1997 and the six months ended
June 30, 1998 and 1997.
Condensed Consolidated Statements of 5
Cash Flows (Unaudited) for the six
months ended June 30, 1998
and 1997
Notes to the Condensed Consolidated Financial 6-7
Statements (Unaudited)
Item 2. Management's Discussion and Analysis 8
of Financial Condition and Results of
Operations.
PART II. OTHER INFORMATION 10
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES 12
2
<PAGE>
PART 1. FINANCIAL INFORMATION
SECURE COMPUTING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 1998 AND DECEMBER 31, 1997
(UNAUDITED, IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 19,810 $ 4,880
Accounts receivable, net 15,017 13,553
Deferred income taxes 2,730 2,113
Inventory 825 1,123
Other current assets 1,396 1,760
-------- --------
Total current assets 39,778 23,429
PROPERTY AND EQUIPMENT
Equipment 6,604 8,008
Furniture & fixtures 1,823 2,595
Leasehold improvements 947 1,301
-------- --------
9,374 11,904
Less accumulated depreciation and amortization (5,854) (6,286)
-------- --------
3,520 5,618
OTHER ASSETS 2,878 2,007
-------- --------
$ 46,176 $ 31,054
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 3,176 $ 2,175
Accrued payroll liability 1,607 1,170
Other accrued liabilities 3,789 1,094
Deferred revenue 1,988 1,815
-------- --------
Total current liabilities 10,560 6,254
STOCKHOLDERS' EQUITY
Preferred Stock, par value $.01 per share: -- --
Issued and outstanding shares---June 30, 1998 -- 16,000
and December 31, 1997 -- 0
Common Stock, par value $.01 per share:
Issued and outstanding shares---June 30, 1998 -- 16,157,801
and December 31, 1997 -- 15,762,820 162 158
Additional paid-in capital 85,343 68,131
Accumulated deficit (49,774) (43,378)
Foreign currency translation (115) (111)
-------- --------
Total stockholders' equity 35,616 24,800
-------- --------
$ 46,176 $ 31,054
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
SECURE COMPUTING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 1998 AND 1997 AND
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(UNAUDITED, IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
---------------------- -----------------------
<S> <C> <C> <C> <C>
Products and services revenue $ 11,755 $ 7,207 $ 22,020 $ 13,618
Government contracts revenue 2,770 4,127 5,280 8,325
-------- -------- -------- --------
14,525 11,334 27,300 21,943
Cost of revenue 5,175 4,794 9,426 9,925
-------- -------- -------- --------
Gross profit 9,350 6,540 17,874 12,018
Operating expenses:
Selling and marketing 5,716 4,784 11,527 9,454
Research and development 1,838 2,171 3,740 4,878
General and administrative 1,102 944 1,877 2,159
Restructure costs -- -- 7,800 --
-------- -------- -------- --------
8,656 7,899 24,944 16,491
-------- -------- -------- --------
Operating income(loss) 694 (1,359) (7,070) (4,473)
Net interest income 15 149 57 302
-------- -------- -------- --------
Income(loss) before income taxes 709 (1,210) (7,013) (4,171)
Income tax benefit 260 -- 617 --
-------- -------- -------- --------
Net income(loss) $ 969 $ (1,210) $ (6,396) $ (4,171)
======== ======== ======== ========
Basic earnings(loss) per share $ 0.06 $ (0.08) $ (0.40) $ (0.27)
======== ======== ======== ========
Weighted average shares outstanding 16,038 15,496 15,945 15,430
======== ======== ======== ========
Diluted earnings(loss) per share $ 0.06 $ (0.08) $ (0.40) $ (0.27)
======== ======== ======== ========
Weighted average common shares
and equivalents outstanding 17,471 15,496 15,945 15,430
======== ======== ======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
SECURE COMPUTING CORPORATION CONDENSED
CONSOLDIATED STATEMENTS OF CASH FLOWS FOR THE SIX
MONTHS ENDED JUNE 30, 1998 AND 1997
(UNAUDITED, IN THOUSANDS)
Six months ended June 30,
1998 1997
-------- --------
NET CASH USED IN OPERATING ACTIVITIES $ (732) $ (5,641)
INVESTING ACTIVITIES
Proceeds from sales of investments -- 4,953
Purchase of property and equipment (1,197) (1,223)
Increase in intangibles and other assets (1,082) (149)
-------- --------
Net cash provided by (used in) investing activities (2,279) 3,581
FINANCING ACTIVITIES
Proceeds from issuance of Preferred Stock 15,432 --
Proceeds from issuance of Common Stock 1,784 944
Proceeds from sales-lease-back transaction 729 --
-------- --------
Net cash provided by financing activities 17,945 944
-------- --------
EFFECT OF EXCHANGE RATE CHANGES (4) --
-------- --------
Increase (decrease) in cash and cash equivalents 14,930 (1,116)
CASH AND CASH EQUIVALENTS BEGINNING OF PERIOD 4,880 12,130
-------- --------
CASH AND CASH EQUIVALENTS END OF PERIOD $ 19,810 $ 11,014
======== ========
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
SECURE COMPUTING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying condensed consolidated financial statements have been
prepared by Secure Computing Corporation (the "Company") without audit and
reflect all adjustments (consisting only of normal and recurring
adjustments and accruals) which are, in the opinion of management,
necessary to present a fair statement of the results for the interim
periods presented. The statements have been prepared in accordance with
the regulations of the Securities and Exchange Commission, but omit
certain information and footnote disclosures necessary to present the
statements in accordance with generally accepted accounting principles.
The results of operations for the interim periods presented are not
necessarily indicative of the results to be expected for the full fiscal
year. These condensed financial statements should be read in conjunction
with the Consolidated Financial Statements and footnotes thereto included
in the Company's Annual Report on form 10-K for the year ended December
31, 1997, as filed with the Securities and Exchange Commission.
2. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All inter-company balances and transactions have
been eliminated in consolidation. The financial statements for all periods
presented have been restated to reflect the pooling of interests of the
Company and its acquired subsidiaries Secure Computing Canada Ltd.
(formerly Border Network Technologies Inc.) and Enigma Logic, Inc.
3. NET EARNINGS (LOSS) PER SHARE
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings Per Share", which was adopted on December 31,
1997. All earnings (loss) per share amounts for all periods have been
presented, and where necessary, restated to conform to the Statement 128
requirements. Basic earnings per share is computed on the basis of the
average number of common shares outstanding. Diluted loss per share does
not include the effect of outstanding stock options and warrants in a loss
period as they are anti-dilutive.
4. RESTRUCTURING
In the first quarter of 1998, the Company announced plans to implement a
restructuring plan designed to facilitate further integration of acquired
businesses, and recorded a pre-tax expense of $7.8 million to account for
these actions, which include costs of lease terminations, streamlining its
product offerings and reducing the Company's cost structure to increase
operational efficiency. The plan will result in the separation of some
employees worldwide and the closing of certain facilities.
5. SALE OF CONVERTIBLE PREFERRED STOCK
In June 1998, the Company sold 16,000 shares of Series C Convertible
Preferred Stock (the "Preferred Stock") resulting in net proceeds to the
Company of approximately $15,432,000, net of $568,000 in transaction
costs. In connection with the sale of the Preferred Stock, the Company
also issued warrants to purchase 174,464 shares of the Company's Common
Stock. The warrants may be exercised on the earlier of June 29, 2001 or a
merger involving the Company in which the Company is not the surviving
entity. The exercise price of the warrants is 130% of the average closing
bid price of the Company's Common Stock on the 15 trading days immediately
prior to June 30, 1998. The Preferred Stock is convertible into the number
of shares of Common Stock which may be purchased for the stated value of
$1,000 per share of Preferred Stock at a per share price equal to the
lower of a) the average closing bid price of the Common Stock for the five
trading days immediately prior to the date of conversion, b) the average
closing bid price of the Common Stock for the 15 trading days immediately
prior to the date of conversion, and c) 103% of the average closing bid
price of the Common Stock for the 15 trading days immediately prior to the
day of issuance of the Preferred Stock.
6
<PAGE>
6. SIGNIFICANT ACCOUNTING POLICIES
In November 1997, the Financial Accounting Standards Board issued SOP 97-2
"Software Revenue Recognition" to replace SOP-91-1. The Company adopted
SOP 97-2 in the first quarter of 1998 and it did not materially impact
revenue recognition for this time period.
As of January 1, 1998, the Company adopted Statement 130, "Reporting
Comprehensive Income". Statement 130 establishes new rules for the
reporting and display of comprehensive income and its components; however,
the adoption of this Statement had no impact on the Company's net income
ore shareholders equity. Statement 130 requires foreign currency
translation adjustments, which prior to adoption were reported separately
in shareholders' equity to be included in other comprehensive income.
Prior year financial statements have been reclassified to conform to the
requirements of Statement 130. During the second quarter of 1998 and 1997,
total comprehensive income amounted to $867,000 and ($1,210,000),
respectively.
7
<PAGE>
SECURE COMPUTING CORPORATION
Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF OPERATIONS
REVENUE. The Company's revenue increased 28.2 percent to $14,525,000 for the
second quarter of 1998 up from $11,334,000 in the same period of 1997. The
increase resulted from higher products and services revenue. Products and
services revenue was $11,755,000 for the quarter, an increase of 63.1 percent
over 1997, and reflects the Company's increased marketing and sales effort in
the commercial market. Government contracts revenue was $2,770,000 for the
quarter, a decrease of 32.9 percent from the second quarter of 1997, which
reflects the companies continued planned shift toward higher margin products.
The Company expects quarterly revenue from government contracts for the rest of
1998 to decline in comparison to the second quarter of 1998.
GROSS PROFIT. Gross profit as a percentage of revenue increased from 57.5
percent in the second quarter of 1997 to 64.4 percent in 1998. The increase
resulted mainly from software only sales within products and services revenue,
which carry higher margins than sales of systems bundled with hardware. The
increased gross margin was also a result of a decrease in lower margin
government contract revenue. The Company believes, with the leveling in
government contracts revenue, that margins for the remainder of the year should
trend slightly higher.
SELLING AND MARKETING. Selling and marketing expense increased 19.5 percent to
$5,716,000 in the first quarter of 1998 up from $4,784,000 in the same period of
1997. As a percentage of revenue, selling and marketing expense was 39.4 percent
for the quarter compared to 42.2 percent in the same period of 1997. The
increase resulted primarily from expenses for a stronger sales and marketing
presence needed due to competitive pressures, increased international activities
and personnel additions made to position the Company for future growth. The
Company expects selling and marketing expenses for the rest of 1998 will remain
at levels comparable to the second quarter of 1998.
RESEARCH AND DEVELOPMENT. Research and development expense decreased by 15.3
percent to $1,838,000 in the first quarter of 1998 down from $2,171,000 in the
same period of 1997. As a percentage of revenue, research and development
expense was 12.7 percent for the quarter compared to 19.2 percent in the same
period of 1997. The decrease resulted primarily from savings achieved from
integrating duplicative development efforts.
GENERAL AND ADMINISTRATIVE. As a percentage of revenue, general and
administrative expenses were 7.6 percent for the second quarter of 1998 compared
to 8.3 percent for the second quarter of 1997. The Company expects the quarterly
rate of general and administrative expenses for the rest of 1998 to remain at
levels comparable to those of the second quarter of 1998.
RESTRUCTURE COSTS. In the first quarter of 1998, the Company announced and began
to implement a restructuring plan designed to facilitate further integration of
acquired businesses, and recorded a pre-tax expense of $7.8 million to account
for these actions, which include streamlining its product offerings and reducing
the unit's cost structure and the closure of certain facilities. The Company
expects that approximately $4.2 million of the non-recurring charges require
expenditures of cash. A significant portion of the restructuring activities will
be implemented and completed by the end of the third quarter of 1998. The
largest components of the charge will be lease termination costs of
approximately $2.5 million and the write off of related assets of $2.1 million.
NET INTEREST INCOME. The difference in net interest income between the periods
reflects lower average cash and investment balances in 1998 as compared to 1997.
INCOME TAXES. The Company recognized an income tax benefit in the second quarter
of 1998 of $260,000 compared to no income tax in the same period of 1997.
Management believes it is more likely than not that deferred tax assets, which
total $3.0 million at June 30, 1998, will be realized. The computation of the
Company's deferred tax assets and valuation allowance are based in part on
taxable income expected to be earned on government contracts and projected
interest income. The amount of the deferred tax assets considered realizable
could be reduced in the near term if estimates of future taxable income are
reduced.
8
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents increased by $14,930,000 from December
31, 1997 to June 30, 1998. The increase resulted primarily from the gross
proceeds of a $16,000,000 Preferred Stock offering offset by the use of cash to
fund operations and purchase capital equipment. As of June 30, 1998, the Company
had working capital of $31.2 million. The Company anticipates using available
cash to fund growth in operations, invest in capital equipment, acquire
businesses, license technology or products related to the Company's line of
business, and provide for restructuring activities.
Capital additions in the second quarter of 1998 were $622,000 and were primarily
made up of computer equipment, office furniture and leasehold improvements. The
Company expects to invest approximately $800,000 additional throughout the
remainder of 1998 mainly for computer equipment and facilities and business
systems upgrades.
At its current level of operations, the Company believes that its existing cash
and cash equivalents are sufficient to meet the Company's current working
capital and capital expenditure requirements through at least the next 12
months.
FORWARD LOOKING STATEMENTS
Certain statements made above, which are summarized below, are forward-looking
statements that involve risks and uncertainties, and actual results may be
materially different. Factors that could cause actual results to differ include
those identified below:
* THE COMPANY EXPECTS THAT THE PERCENTAGE OF ITS REVENUES DERIVED FROM
PRODUCTS AND RELATED SERVICES WILL INCREASE IN FUTURE YEARS, AS THE
COMPANY INCREASINGLY FOCUSES ON PRODUCT SALES. Meeting this expectation
depends upon the Company's ability to achieve a higher level of products
and services revenue, which may not occur for a variety of reasons,
including general market conditions for the Company's products and
services, delays or difficulties in the development of new products
inability to obtain market acceptance of new products offered by the
Company, and introduction of products by competitors.
* DURING 1998, THE COMPANY PLANS TO CONTINUE ITS RESEARCH AND DEVELOPMENT,
GENERAL AND ADMINISTRATIVE, AND SALES AND MARKETING EXPENDITURES AT
CURRENT LEVELS. This expectation depends on the Company maintaining the
current anticipated level of product development, which may not occur due
to unexpected increases in such costs or because of a need to accelerate
or begin new product development and also may be affected by current plans
for a full scale product marketing and branding campaign being curtailed,
delayed or decreased products and services revenue resulting in lower
selling expense. Fluctuations in revenue from quarter to quarter will
likely have an increasingly significant impact on the Company's results of
operations. Additionally, meeting this expectation depends upon the
Company's ability to control costs and achieve a higher level of revenue,
which may not occur for a variety of reasons, including general market
conditions for the company's products and services, development and
acceptance of new products offered by the Company, and introduction of
products by competitors.
* MANAGEMENT BELIEVES IT IS MORE LIKELY THAN NOT THAT DEFERRED TAX ASSETS,
WHICH TOTAL $3.0 MILLION AT JUNE 30, 1998, WILL BE REALIZED. This
expectation depends mainly on the Company maintaining, at current levels,
its existing government contract business. If these contracts were lost or
adjusted downward, deferred tax assets would be expected to be written
down with a corresponding charge to income tax expense recorded.
* AT ITS CURRENT LEVEL OF OPERATIONS, THE COMPANY BELIEVES THAT ITS EXISTING
CASH AND CASH EQUIVALENTS ARE SUFFICIENT TO MEET THE COMPANY'S CURRENT
WORKING CAPITAL AND CAPITAL EXPENDITURE REQUIREMENTS THROUGH AT LEAST THE
NEXT 12 MONTHS. The Company's ability to generate revenue as currently
expected, unexpected expenses and the need for additional funds to react
to changes in the marketplace, including unexpected increases in personnel
costs and selling and marketing expenses or currently unplanned
acquisitions may impact whether the Company has sufficient cash resources
to fund its product development and marketing and sales plans for the
remainder of 1998 and early 1999.
* THE COMPANY EXPECTS QUARTERLY REVENUE FROM GOVERNMENT CONTRACTS FOR THE
REST OF 1998 TO REMAIN COMPARABLE TO THE SECOND QUARTER OF 1998. THE
COMPANY BELIEVES IN THE LEVELING IN GOVERNMENT CONTRACTS REVENUE, THAT THE
MARGINS FOR THE REMAINDER OF THE YEAR SHOULD TEND SLIGHTLY HIGHER. If the
government contracts were lost or adjusted downward, the quarterly revenue
from such contracts would decline, which decline could have a material
adverse effect on the Company's business, financial condition or results
of operations.
* THE COMPANY EXPECTS THAT NON-RECURRING CHARGES RELATING TO RESTRUCTURING
COSTS WILL BE COMPLETED BY THE END OF THE THIRD QUARTER OF 1998. If the
charges incurred by the Company in connection with the restructuring are
greater than expected or if such charges continue beyond the third
quarter, such charges could have a material adverse effect on the
Company's business, financial condition and results of operations.
9
<PAGE>
SECURE COMPUTING CORPORATION
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable
ITEM 2. CHANGES IN SECURITIES
On June 30, 1998, the Company sold 16,000 shares of newly issued
Series C Convertible Preferred Stock (the "Series C Preferred") and
warrants to acquire 174,464 shares of Common Stock to two investors
affiliated with Credit Suisse First Boston and Castle Creek
Partners. The offer and sale of these securities were completed
pursuant to the exemption provided by Regulation D under the
Securities Act of 1933.
The Series C Preferred is convertible at the election of the holder
into shares of Common Stock beginning six months after issuance, and
at any time prior to six months upon the occurrence of certain
events, including a merger and similar transactions which would
result in a change of control of the Company. The Series C Preferred
is senior to the Company's Series A and Series B Convertible
Preferred Stock and to the Company's Common Stock in respect of the
right to receive dividend payments and liquidation preferences. The
issuance of the Series C Preferred may result in dilution to
existing stockholders. The foregoing summary of the principal rights
and preferences of the Series C Preferred is a general description
only and is qualified by the detailed terms and conditions of the
Certificate of Designation of Series C Preferred Stock. A more
comprehensive description of the rights and preferences of the
Series C Preferred is contained in the Company's Report on Form 8-K
filed with the Commission on July 15, 1998. A copy of the
Certificate of Designation of Series C Preferred Stock is filed as
an exhibit to the Report on Form 8-K.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The following matters were approved at the Company's Annual Meeting
of Stockholders held on May 14, 1998 and reconvened May 27, 1998.
a) The following directors were elected:
Directors For Against
---------------------------------------------------------
Betsy S. Atkins 8,394,030 67,179
Steven M. Puricelli 8,394,030 67,179
b) Amendment of the 1995 Omnibus Stock Plan
Number of Common Shares Voted
1995 Stock Plan For Against Abstain
--------------------------------------------------------------------
Amendment to 1995 Stock Plan 5,786,464 2,668,465 27,494
c) The stockholders also approved the following proposal:
Number of Common Shares Voted
Independent Accountants For Against Abstain
-------------------------------------------------------------------
Ratification of Ernst & Young LLP
as independent accountants 8,447,605 28,268 6,550
ITEM 5. OTHER INFORMATION
None
10
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
The following exhibits are filed as part of this Quarterly Report on Form
10-Q for the quarterly period ended June 30, 1998:
27.1 Financial Data Schedule
11
<PAGE>
SECURE COMPUTING CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SECURE COMPUTING CORPORATION
DATE: ____________, 1998 By: \s\ Timothy P. McGurran
----------------------------------------
Timothy P. McGurran,
Senior Vice President of Operations
and Chief Financial Officer
(Duly authorized officer and
Principal Financial Officer)
12
<PAGE>
INDEX TO EXHIBITS
EXHIBIT DESCRIPTION PAGE
- ------- ----------------------- --------------------
27.1 Financial Data Schedule FILED ELECTRONICALLY
13
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1998
<CASH> 19,810,000
<SECURITIES> 0
<RECEIVABLES> 15,934,000
<ALLOWANCES> 917,000
<INVENTORY> 825,000
<CURRENT-ASSETS> 39,778,000
<PP&E> 9,374,000
<DEPRECIATION> 5,854,000
<TOTAL-ASSETS> 46,176,000
<CURRENT-LIABILITIES> 10,560,000
<BONDS> 0
0
0
<COMMON> 162,000
<OTHER-SE> 85,343,000
<TOTAL-LIABILITY-AND-EQUITY> 46,176,000
<SALES> 27,300,000
<TOTAL-REVENUES> 27,300,000
<CGS> 9,426,000
<TOTAL-COSTS> 9,426,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (57,000)
<INCOME-PRETAX> (7,013,000)
<INCOME-TAX> (617,000)
<INCOME-CONTINUING> (6,396,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,396,000)
<EPS-PRIMARY> (.40)
<EPS-DILUTED> (.40)
</TABLE>
