<PAGE>
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 March 31, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 0-27118
--------
PHARMACOPEIA, INC.
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 33-0557266
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
CN 5350, Princeton, New Jersey 08543-5350
- ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
(609) 452-3600
- ------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
- ------------------------------------------------------------------------------
(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 such shorter period that the registrant was required
to file such reports) and (2) has been subject to such filing requirements for
the past 90 days -- Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
CLASS OUTSTANDING AT APRIL 30, 1999
- ------------------------------------- -----------------------------------
Common Stock, $.0001 par value 19,617,997
<PAGE>
PHARMACOPEIA, INC. AND SUBSIDIARIES
FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE
- ---- ----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Unaudited Financial Statements:
Balance Sheets - March 31, 1999 and December 31, 1998 3
Statements of Operations - Quarters Ended March 31, 1999 and 1998 4
Statements of Cash Flows - Quarters Ended March 31, 1999 and 1998 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and 8
Results of Operations
Item 3. Quantitative and Qualitative Disclosures about Market Risk 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Signature 14
Exhibits 15
</TABLE>
2
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PHARMACOPEIA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
--------------------- ---------------------
<S> <C> <C>
ASSETS (UNAUDITED)
Current assets:
Cash and cash equivalents $ 22,514 $ 36,863
Marketable securities 46,593 44,235
Trade receivables, net of allowance for doubtful accounts
of $691 and $609, respectively 14,659 22,771
Prepaid expenses and other current assets 7,251 5,774
--------------------- ---------------------
Total current assets 91,017 109,643
Property and equipment - net 13,223 13,700
Software development costs - net 3,352 3,492
Goodwill 9,827 -
Other assets 990 1,030
--------------------- ---------------------
Total assets $ 118,409 $ 127,865
--------------------- ---------------------
--------------------- ---------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,387 $ 5,158
Accrued liabilities 15,460 21,427
Deferred revenue, current portion 24,722 24,415
Notes payable, current portion 585 1,316
--------------------- ---------------------
Total current liabilities 44,154 52,316
Note payable, long-term portion 171 328
Other long-term liabilities - 1,240
Deferred revenue, long-term 1,586 1,764
Commitments and Contingencies
Stockholders' equity:
Capital stock 1 1
Additional paid-in capital 146,482 145,499
Accumulated deficit (73,386) (72,820)
Accumulated other comprehensive loss (599) (463)
--------------------- ---------------------
Total stockholders' equity 72,498 72,217
--------------------- ---------------------
Total liabilities and stockholders' equity $ 118,409 $ 127,865
--------------------- ---------------------
--------------------- ---------------------
</TABLE>
See accompanying notes to these unaudited financial statements.
3
<PAGE>
PHARMACOPEIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
1999 1998
----------------- -----------------
<S> <C> <C>
Revenue:
Laboratory services $ 9,076 $ 6,432
Software license, service and other 12,423 13,054
Hardware 1,794 1,066
----------------- -----------------
Total revenue 23,293 20,552
Costs and expenses:
Software license and other 1,170 769
Hardware 1,477 871
Research and Development
Collaborative 5,837 4,420
Proprietary 6,697 6,757
Sales, general and administrative 9,617 8,641
----------------- -----------------
Total costs and expenses 24,798 21,458
----------------- -----------------
Operating loss (1,505) (906)
Interest and other income, net 979 1,042
----------------- -----------------
Income (loss) before provision for income taxes (526) 136
Provision for income taxes 40 928
----------------- -----------------
Net loss $ (566) $ (792)
----------------- -----------------
----------------- -----------------
Net loss per share - Basic $ (0.03) $ (0.04)
----------------- -----------------
----------------- -----------------
Net loss per share - Diluted $ (0.03) $ (0.04)
----------------- -----------------
----------------- -----------------
Weighted average number of common stock
outstanding - Basic 19,275 18,839
Weighted average number of common stock
outstanding - Diluted 19,275 18,839
</TABLE>
See accompanying notes to these unaudited financial statements.
4
<PAGE>
PHARMACOPEIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1999 1998
----------------- ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES: (UNAUDITED)
Net loss $ (566) $ (792)
Adjustments to reconcile net loss to net cash
used in operations
Depreciation and amortization 1,877 1,482
Changes in assets and liabilities:
Accounts receivable 8,112 8,266
Other current assets (1,478) (1,010)
Accounts payable (1,771) (1,500)
Accrued liabilities (5,966) (5,129)
Deferred revenue 129 (3,597)
Other (990) 1,506
----------------- ------------------
Net cash used in operating activities (653) (774)
CASH FLOWS FROM INVESTING ACTIVITES:
Purchase of property and equipment (907) (1,176)
Purchase of marketable securities (8,377) (19,254)
Sales of marketable securities 6,019 19,322
Acquisition of distribution rights and joint venture interest (10,037) -
Increase in capitalized software development costs (353) (374)
----------------- ------------------
Net cash used in investing activities (13,655) (1,482)
CASH FLOWS FROM FINANCING ACTIVITES:
Principal payments under capital lease obligations (188) (232)
Proceeds from issuance of common stock 983 292
Principal payment on note payable (700) (700)
----------------- ------------------
Net cash provided by (used in) financing activities 95 (640)
Exchange rate effect on cash and equivalents (136) (167)
----------------- ------------------
Net decrease in cash and equivalents (14,349) (3,063)
Cash and equivalents, beginning of period 36,863 24,609
----------------- ------------------
Cash and equivalents, end of period $ 22,514 $ 21,546
----------------- ------------------
----------------- ------------------
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 167 $ 226
----------------- ------------------
----------------- ------------------
Income taxes $ 26 $ 588
----------------- ------------------
----------------- ------------------
</TABLE>
See accompanying notes to these unaudited financial statements.
5
<PAGE>
PHARMACOPEIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE (1) - BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, these unaudited financial statements do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all normal
recurring adjustments necessary for a fair presentation of the financial
statements have been included.
The Company's consolidated financial statements include the accounts of
its wholly-owned subsidiary, Molecular Simulations Incorporated ("MSI"). In June
1998, all of the outstanding shares of MSI were acquired by the Company in a
business combination accounted for as a pooling-of-interests. Accordingly, all
prior financial data have been restated to represent the combined financial
results of the previously separate entities (See Note 2).
Interim results are not necessarily indicative of the results that may
be expected for the year. For further information, refer to the financial
statements and footnotes thereto included in the Company's Annual Report on Form
10-K for the year ended December 31, 1998, as amended.
NOTE (2) - BUSINESS COMBINATIONS
MERGER WITH MOLECULAR SIMULATIONS INC.
In June 1998, the Company completed a merger with MSI through the
issuance of approximately 7.1 million shares of common stock for all of the
capital stock of MSI, a privately held developer of software for the
pharmaceutical, biotechnology, chemical, petrochemical and materials industries.
The merger was accounted for as a pooling-of-interests and, accordingly, the
Company's financial statements for the periods prior to the merger have been
restated to include MSI.
ACQUISITION OF JAPANESE DISTRIBUTION RIGHTS AND REMAINING JOINT
VENTURE INTEREST
In March 1999, the Company completed the re-purchase of certain
distribution rights to MSI software in Japan and acquired the remaining 50%
interest of its Japanese joint venture from Teijin Ltd. for a total cash
purchase price of approximately $10.6 million. The joint venture markets,
distributes, licenses and supports the Company's software products in the
Asia/Pacific region. As a result of the transaction, Company ownership of the
joint venture became 100%. The acquisition has been accounted for by the
purchase method of accounting and, accordingly, the assets acquired and
liabilities assumed have been recorded at their estimated fair values. The
6
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excess of cost over the estimated fair value of the net assets acquired was
allocated to goodwill in the amount of $9.8 million, which will be amortized on
a straight-line basis over 20 years.
Pro forma results of operations presented as if the acquisition of the
remaining joint venture interest had taken place as of the beginning of the
periods presented would not materially affect reported revenues and would not
materially change net loss or net loss per share from the figures presented in
the accompanying statements of operations.
NOTE (3) - IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In March 1998, the American Institute of Certified Public
Accountants issued Statement of Position 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use" (SOP 98-1). SOP
98-1 requires the capitalization of certain costs incurred after the date of
adoption in connection with developing or obtaining software for internal
use. The Company adopted the Statement of Position effective January 1, 1999.
The effect of the adoption was not material.
NOTE (4) - SEGMENT INFORMATION
The Company operates in two business segments; laboratory services and
software. Summarized information concerning industry segment operations for the
three months ended March 31, 1999 and 1998, and for industry segment assets as
of March 31, 1999 and December 31, 1998, is presented below:
<TABLE>
<CAPTION>
1999 1998
------------------------------------------ ------------------------------------------
Laboratory Laboratory
Software Services Total Software Services Total
------------------------------------------ ------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Laboratory services $ - 9,076 $ 9,076 $ - $ 6,432 $ 6,432
Software licences, service & other 12,423 - 12,423 13,054 - 13,054
Hardware 1,794 - 1,794 1,066 - 1,066
------------------------------------------ ------------------------------------------
Total $14,217 $ 9,076 $ 23,293 $14,120 $ 6,432 $ 20,552
Operating income (loss) $ 504 $(2,009) $ (1,505) $ 2,393 $ (3,299) $ (906)
Total assets $45,019 $73,390 $118,409 $50,789 $ 77,076 $127,865
</TABLE>
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis of financial condition and
results of operations should be read in conjunction with the unaudited financial
statements included elsewhere in this Form 10-Q.
RESULTS OF OPERATIONS
QUARTERS ENDED MARCH 31, 1999 AND 1998
Total revenues grew 13% to $23.3 million in the first quarter of 1999
from $20.6 million in the first quarter of 1998. Laboratory services revenue
increased 41% to $9.1 million in 1999 from $6.4 million in 1998 primarily as a
result of an increase in the number and size of collaborations in progress. This
growth included no one time milestone or up front license fee payments. However,
certain collaborations accounting for about 25% of the 1999 first quarter
laboratory services revenue will be winding down in the second quarter of 1999,
and the Company will need to identify new collaborations in order to maintain
current revenue levels thereafter.
Total revenues generated from the software business segment (software
license, service, hardware and other) increased marginally to $14.2 million in
the first quarter of 1999 compared to $14.1 million in the first quarter of
1998. Hardware revenue increased $0.7 million to $1.8 million in 1999 while
software license, service and other revenue declined 5% to $12.4 million
compared to $13.0 million for the quarter ended March 31, 1998. The decline in
software license, service and other revenue resulted primarily from a 36%
decrease in Asian software revenues, which was partially offset by modest growth
in Europe and the U.S. combined. However, distribution agreements were
negotiated during the first quarter of 1999 that assured Asian software segment
revenues denominated in local currency for the entire year 1999 will recover to
an amount that approximates 1998 levels.
Total research and development expenses, both collaborative and
proprietary, increased to $12.5 million for the quarter ended March 31, 1999,
compared to $11.2 million for the corresponding period in 1998. The increase of
$1.3 million or 12% was generated entirely from increased activities associated
with collaborative research. Proprietary research and development expenses
decreased slightly from $6.8 million to $6.7 million reflecting the very initial
stages of the Company's laboratory services strategic plan to decrease internal
drug discovery efforts. Proprietary research and development costs include
internal discovery programs, software development, ultra high-throughput
screening, and informatics. Future research and development expenses may
increase, even if internal drug discovery efforts decrease, as the Company
further expands its software, ultra high-throughput screening, informatics and
other development endeavors.
Sales, general and administrative expenses increased to $9.6 million
(41% of revenue) for the quarter ended March 31, 1999, compared to $8.6 million
(42% of revenue) for the corresponding quarter in 1998. The increase of $1.0
million, or 12% is primarily attributable to
8
<PAGE>
increases in sales, marketing and service expenses within the software
business segment. These increases were made primarily in the latter portions
of 1998 as the Company continued to expand its global selling, marketing and
services activities.
The Company recorded interest and other income of $1.0 million for each
of the quarters ended March 31, 1999 and 1998. Although the average balance of
cash, cash equivalents and marketable securities declined from 1999 to 1998,
interest earnings were offset by foreign exchange losses to a lesser extent in
the first quarter of 1999 compared to 1998.
The Company recorded an income tax provision of $40,000 for the quarter
ended March 31, 1999 compared to $0.9 million for the quarter ended March 31,
1998. The year to year favorable tax variance is the result of the combined
companies' ability to offset MSI's taxable income with Pharmacopeia's losses
during the period following the completion of the merger.
In the first quarter of 1999 the increase in revenue and reduced tax
provision were almost entirely offset by the increase in research and
development and sales, general and administrative expenses, resulting in a net
loss of $0.6 million or $0.03 per share. This compares to a net loss of $0.8
million or $0.04 per share in the comparable quarter of 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company has funded its activities to date primarily through the
sale of equity securities, funding under collaborative laboratory services
arrangements, and sales of software licenses, software maintenance services and
hardware. As of March 31, 1999, the Company had working capital of $46.9 million
compared to $57.3 million as of December 31, 1998. The majority of this $10.4
million decrease in working capital resulted from the re-purchase of
distribution rights to MSI software in Japan and the acquisition of the
remaining 50% interest of a Japanese joint venture (See Note 2). Additionally,
capital expenditures of $0.9 million (primarily computer hardware and laboratory
equipment) contributed to cash used in investing activities. As of March 31,
1999, the Company's cash, cash equivalents and marketable securities totaled
$69.1 million, which are invested in U.S. Treasury and government agency
obligations, investment grade commercial paper and other short-term money market
instruments.
As of March 31, 1999, the Company had outstanding commitments for
equipment purchases totaling $0.2 million. The Company anticipates that its
capital requirements may continue to increase in future periods as the Company
expands its research and development activities, expands its facilities, and
acquires additional equipment.
The Company anticipates that its existing capital resources will be
adequate to fund the Company's operations at least through 2000. However, there
can be no assurance that changes will not occur that would consume available
capital resources before such time. The Company's capital requirements depend on
numerous factors, including the ability of the Company to extend existing
collaborations and enter into additional collaborative arrangements, competing
technological and market developments, changes in the Company's existing
collaborative relationships, the cost of filing, prosecuting, defending and
enforcing patent claims and other intellectual property rights and the outcome
of related litigation, the purchase of additional capital equipment,
acquisitions of other businesses or technologies, the progress of the
9
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Company's drug discovery programs and the progress of the Company's
customers' milestone and royalty producing activities. There can be no
assurance that additional funding, if necessary, will be available on
favorable terms, if at all. The Company's forecasts of the period of time
through which its financial resources will be adequate to support its
operations is forward looking information, and actual results could vary. The
factors described earlier in this paragraph will impact the Company's future
capital requirements and the adequacy of its available funds.
YEAR 2000
The year 2000 presents concerns for business computing because the use
of certain two digit date formats could cause date sensitive software to
recognize "00" as the year 1900 rather than the year 2000. The problem exists
for many kinds of software and hardware, including mainframes, mini-computers,
PC's and embedded systems. The year 2000 issue could affect the Company's
software products, its internal systems, and the systems used by its
distributors, customers and vendors.
The Company is continuing to test its MSI software products and to
classify its tested products as "compliant", "compliant with minor issues" and
"not compliant". Of the more than 100 application modules comprising MSI's
product lines, only one module has been identified as "not compliant" and a
minor correction has been identified to make this module "compliant". The
Company is also developing software updates to address those products that have
been classified as "compliant with minor issues". None of these corrections or
updates is expected to require a substantial resource commitment or to disrupt
the Company's ongoing business activities. Pharmacopeia's policy is to make its
commercially offered software products year 2000 "compliant".
Pharmacopeia is also testing the readiness of its internal systems,
including information technology (IT) and non-IT systems, for handling the year
2000, and has started the remediation and certification process. The Company is
also reviewing its facilities and infrastructures. Contingency plans will be
developed, where appropriate, in parallel with the testing and remediation
efforts.
Pharmacopeia is evaluating its third-party distribution and supply
chain to understand their ability to continue providing services and products
through the change to the year 2000. The Company is monitoring and working
directly with key vendors, service providers, hardware manufacturers and
distributors to avoid any business interruption in the year 2000. If critical
third parties are identified to have issues, contingency plans will be
developed.
While year 2000 issues present a potential risk to Pharmacopeia's
internal systems, distribution and supply chain, and facilities, the Company is
minimizing risk with a worldwide effort. Pharmacopeia is performing an extensive
assessment and is in the process of testing and remediating mission critical
components. The current plan is to have all of these components resolved by
September 1999. Management currently believes that all critical systems will be
ready by the year 2000 and that the cost to address all issues will not exceed
$0.7 million.
10
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Despite the efforts the Company is making to address the year 2000
issue with respect to its products, internal systems, key vendors, service
providers and distributors, the Company recognizes that its customers and
potential customers may devote increasing resources and substantial portions of
their 1999 information systems spending to addressing their own year 2000 issues
rather than purchasing and installing new software from the Company. These
commitments by customers and potential customers to address their own year 2000
issues may result in the delay or loss of orders for the Company's software
products and services. Any such delays or loss of orders could have a material
adverse impact on the Company's 1999 sales volume. Mitigating this concern is
the fact that a large portion of the Company's software revenues are derived
from the renewal of existing annual license arrangements whereby the customer is
no longer entitled to use the software if the renewal is not executed.
11
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's international operations are subject to risks inherent
with exchange rate fluctuations. In the first quarter of 1999 approximately 46%
of the Company's consolidated revenue was derived from customers outside the
United States. Approximately 32% of the Company's revenue was derived from
customers in Europe and approximately 14% was derived from customers in the
Asia/Pacific region. The Company's exchange rate risk is greatest for
dollar/euro and dollar/yen fluctuations. The Company's direct international
sales generally are denominated in local currencies. Fluctuations in the value
of currencies in which the Company conducts business relative to the United
States dollar result in currency transaction gains and losses. When deemed
appropriate, the Company engages in exchange rate hedging transactions in an
attempt to mitigate the impact of adverse exchange rate fluctuations. At March
31, 1999, the Company had no material hedging transactions in effect.
The Company does not use derivative financial instruments in its
operations or investment portfolio. However, the Company regularly invests
excess cash in overnight repurchase agreements that are subject to changes in
short-term interest rates. The Company believes that market risk arising from
holding these financial instruments is minimal.
The Company does not have exposure to market risks associated with
changes in interest rates as it has no variable interest rate debt outstanding.
The Company does not believe that it has any other material exposure to market
risks associated with interest rates.
12
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PART II
OTHER INFORMATION
ITEM 1. Legal Proceedings
The Company is not a party to any material litigation and is
not aware of any threatened material litigation.
ITEM 2. Changes in Securities - None
ITEM 3. Defaults upon Senior Securities - None
ITEM 4. Submission of Matters to a Vote of Security Holders - None
ITEM 5. Other Information - None
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits - See Exhibit Index on Page 15
(b) Reports on Form 8-K - No reports on Form 8-K were required
to be filed during the three months ended March 31, 1999.
13
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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.
PHARMACOPEIA, INC.
By: /s/ BRUCE C. MYERS
----------------------------------
Bruce C. Myers
Senior Vice President Finance,
Chief Financial Officer
(Duly Authorized Officer and Chief
Accounting Officer)
Date: May 14, 1999
14
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PHARMACOPEIA, INC.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
No. EXHIBIT
<S> <C>
27 Financial Data Schedule, March 31, 1999
</TABLE>
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 22,514
<SECURITIES> 46,593
<RECEIVABLES> 15,350
<ALLOWANCES> (691)
<INVENTORY> 0
<CURRENT-ASSETS> 91,017
<PP&E> 28,299
<DEPRECIATION> 15,076
<TOTAL-ASSETS> 118,409
<CURRENT-LIABILITIES> 44,154
<BONDS> 0
0
0
<COMMON> 1
<OTHER-SE> 72,497
<TOTAL-LIABILITY-AND-EQUITY> 118,409
<SALES> 1,794
<TOTAL-REVENUES> 23,293
<CGS> 1,477
<TOTAL-COSTS> 8,484
<OTHER-EXPENSES> 16,314
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 979
<INCOME-PRETAX> (526)
<INCOME-TAX> (40)
<INCOME-CONTINUING> (566)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (566)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
