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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 1997
[ ] 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 0-22521
NETSPEAK CORPORATION
(Exact Name of Registrant
as Specified in Its Charter)
Florida 65-0627616
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
902 Clint Moore Road, Suite 104
Boca Raton, Florida 33487
561-997-4001
(Address, including zip code, and telephone
number (including area code) of registrant's
principal executive office)
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 last 90 days. [X] YES [ ] NO
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Shares Outstanding at November 10, 1997
- ------------------------------------- ---------------------------------------
Common Stock, $.01 par value 10,554,721
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<PAGE>
NETSPEAK CORPORATION
INDEX
PART I - FINANCIAL INFORMATION
- ------------------------------
Item 1. Financial Statements
Page No.
--------
Condensed Consolidated Balance Sheets as of December 31, 1996
and September 30, 1997............................................... 3
Condensed Consolidated Statements of Operations for the three and
nine months ended September 30, 1996 and 1997........................ 4
Condensed Consolidated Statements of Cash Flows for the
nine months ended September 30, 1996 and 1997........................ 5
Notes to Condensed Consolidated Financial Statements.................... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations....................................... 8
PART II - OTHER INFORMATION
- ---------------------------
Other Information........................................................ 12
Signatures............................................................... 13
2
<PAGE>
PART I - FINANCIAL INFORMATION
- ------------------------------
Item 1. FINANCIAL STATEMENTS
NETSPEAK CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(unaudited)
December 31, September 30,
1996 1997
---- ----
ASSETS
Cash and cash equivalents $6,295 $ 5,314
Short-term investments -- 16,262
Accounts receivable 340 570
Prepaid and other current assets 86 683
Deferred tax asset 182 47
------ -------
Total current assets 6,903 22,876
Property and equipment, net 1,050 1,583
Other assets 325 462
------ -------
$8,278 $24,921
====== =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 92 $ 703
Accrued compensation 83 569
Other accrued expenses 182 385
Unearned revenue 2,242 360
------ -------
Total current liabilities 2,599 2,017
------ -------
Commitments and contingencies -- --
Shareholders' equity:
Preferred stock: 1,000,000 shares of
$.01 par value authorized; no shares
issued or outstanding
Common stock: 25,000,000 shares of
$.01 par value authorized; 7,698,532
and 10,554,721 issued and outstanding
at December 31, 1996 and September 30,
1997, respectively 77 106
Additional paid-in capital 9,110 29,590
Accumulated deficit (3,508) (6,792)
------ -------
Total shareholders' equity 5,679 22,904
------ -------
$8,278 $24,921
====== =======
See accompanying notes to condensed consolidated financial statements.
3
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NETSPEAK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(unaudited)
Three months ended Nine months ended
September 30, September 30,
------------------ ------------------
1996 1997 1996 1997
---- ---- ---- ----
Net revenues $ 196 $ 1,503 $ 377 $ 3,537
Operating expenses:
Cost of revenues 11 180 22 386
Research and development 635 1,412 1,384 3,713
Sales and marketing 174 810 442 1,885
General and administrative 234 447 530 1,127
------ ------- ------- -------
Total operating expenses 1,054 2,849 2,378 7,111
Loss from operations (858) (1,346) (2,001) (3,574)
Interest and other income 46 287 92 470
------ ------- ------- -------
Loss before income taxes (812) (1,059) (1,909) (3,104)
Income taxes 11 92 11 180
------ ------- ------- -------
Net loss $ (823) $(1,151) $(1,920) $(3,284)
====== ======= ======= =======
Net loss per share $(0.10) $ (0.11) $ (0.23) $ (0.35)
====== ======= ======= =======
Weighted-average shares outstanding 8,198 10,555 8,198 9,317
====== ======= ======= =======
See accompanying notes to condensed consolidated financial statements.
4
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<TABLE>
<CAPTION>
NETSPEAK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
Nine months ended
September 30,
-----------------
1996 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,920) $ (3,284)
Adjustments to reconcile net loss to net cash
used in operations:
Depreciation 112 406
Common stock issued for services 35 --
Deferred taxes (139) 135
Changes in assets and liabilities:
Accounts receivable (511) (230)
Prepaid and other current assets (59) (530)
Other assets (286) (137)
Accounts payable 621 611
Accrued compensation 94 486
Other accrued expenses 19 203
Unearned revenue 1,429 (1,882)
-------- --------
Net cash used in operating activities (605) (4,222)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment (973) (939)
Purchase of short-term investments -- (20,957)
Maturities and sales of short-term investments -- 4,695
-------- --------
Net cash used in investing activities (973) (17,201)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock and warrant 7,931 17,943
Proceeds from exercise of warrant -- 2,491
Proceeds from exercise of employee stock options 133 8
-------- --------
Net cash provided by financing activities 8,064 20,442
-------- --------
Net increase (decrease) in cash and cash equivalents 6,486 (981)
Cash and cash equivalents, beginning of period 483 6,295
-------- --------
Cash and cash equivalents, end of period $ 6,969 $ 5,314
======== ========
SUPPLEMENTAL INFORMATION:
Cash paid for income taxes $ 150 $ 30
-------- --------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
NETSPEAK CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. BASIS OF PRESENTATION
The interim consolidated financial statements as of September 30, 1997 and
for the three and nine months ended September 30, 1996 and 1997 are unaudited.
Such interim consolidated financial statements have been prepared on the same
basis as the audited consolidated financial statements and, in the opinion of
management, reflect all adjustments (consisting only of normal recurring
accruals) necessary for a fair presentation of the financial position, results
of operations and cash flows for the interim periods presented. The results of
operations for the interim periods presented are not necessarily indicative of
the results to be expected for the full year. The interim consolidated financial
statements should be read in conjunction with the audited consolidated financial
statements and notes thereto, contained in the Company's Registration Statement
on Form S-1 which was declared effective on May 29, 1997.
2. SALE OF COMMON STOCK
On June 3, 1997, the Company closed the initial public offering of its
Common Stock. The Company offered and sold 2,400,000 shares of Common Stock at
an initial public offering price of $8.75 per share, raising proceeds, net of
offering costs, of approximately $17,943,000. Upon consummation of the offering,
Motorola, Inc., a strategic partner of and investor in the Company, exercised a
previously granted warrant to purchase 452,855 shares of Common Stock for
$2,491,000 or $5.50 per share.
3. NET LOSS PER SHARE
Net loss per share was calculated by dividing net loss by the weighted
average number of common shares outstanding during the period adjusted for the
effect of common stock equivalents, consisting of stock options and warrants,
using the treasury stock method. Pursuant to the requirements of the Securities
and Exchange Commission, common stock issued by the Company during the twelve
months immediately preceding the initial public offering, plus the number of
common equivalent shares pursuant to the grant of common stock options or
warrants during the same period, have been included in the calculation of the
shares used in computing net loss per share as if they were outstanding through
June 30, 1997, the end of the interim period that encompassed the initial public
offering.
In February 1997 Statement of Financial Accounting Standards ("SFAS") No.
128, "Earnings Per Share" was issued. SFAS No. 128, requires a dual presentation
of basic and diluted earnings per share on the face of the income statement.
Basic earnings per share excludes dilution and is computed by dividing income or
loss attributable to common shareholders by the weighted-average number of
common shares outstanding for the period. Diluted earnings per share reflects
the potential dilution that could occur if securities or other contracts to
issue common stock were converted into common stock. SFAS No. 128 is effective
for financial statements issued for fiscal periods ending after December 15,
1997; when adopted, all prior-period earnings per share data are required to be
restated. The Company believes that the adoption of SFAS No. 128 will not have
an effect on previously reported net loss per share.
4. COMMITMENTS AND CONTINGENCIES
Elk Industries Inc. ("Elk") has asserted, in a letter to the Company, just
prior to the November 1996 expiration of U.S. Patent No. 4,128,773, owned by
Elk, that the Company's WebPhone client software product infringed the now
expired patent. Given the initial distribution of the Company's WebPhone
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client software prior to expiration of the asserted patent, the Company believes
any potential liability related to the allegation is not significant.
Accordingly, the Company believes that this matter will not have a material
effect on its financial position or results of operations.
In May 1997, the Company received a letter from e-Net, Inc. ("e-Net")
alleging that the Company's WebPhone product infringes U.S. Patent No. 5,526,353
owned by e-Net. Although there can be no assurance of the outcome of this
uncertainty, following an analysis of the subject patent and the WebPhone
product, the Company believes the allegations are without merit and that any
potential liability related to e-Net's allegations will not have a material
effect on the Company's financial position and results of operations.
At present, there are few laws or regulations that specifically address
access to or commerce on the Internet. The increasing popularity and use of the
Internet, however, enhance the risk that the governments of the United States
and other countries in which the Company sells or expects to sell its products
will seek to regulate computer telephony and the Internet with respect to, among
other things, user privacy, pricing and the characteristics and quality of
products and services . The Company is unable to predict the impact, if any,
that future legislation, legal decisions or regulations may have on its
business, financial condition or results of operations.
7
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
NetSpeak Corporation ("NetSpeak" or the "Company") cautions readers that
certain important factors may affect the Company's actual results and could
cause such results to differ materially from any forward-looking statements
which may be deemed to have been made in this report or which are otherwise made
by or on behalf of the Company. For this purpose, any statements contained in
this report that are not statements of historical fact may be deemed to be
forward-looking statements. Without limiting the generality of the foregoing,
words such as "may", "will", "expect", believe", "anticipate", "intend",
"could", "would", "estimate", or "continue" or the negative other variations
thereof or comparable terminology are intended to identify forward-looking
statements. Factors which may affect the Company's results include, but are not
limited to, the Company's limited operating history, the need for ongoing
product development in an environment of rapidly changing technology, the
uncertainty of acceptance of the Company's products in the marketplace, the
uncertainty of the Internet and its use as a means for real-time voice and video
communications, the uncertainty of future governmental regulation, the highly
competitive nature of the industry and the Company's ability to compete
successfully, the Company's ability to successfully enter into new, and maintain
existing, strategic relationships, the Company's ability to develop a recurring
revenue stream, manage growth, obtain patent protection, obtain additional funds
and other risks discussed in this Report and in the Company's other filings with
the Securities and Exchange Commission.
INTRODUCTION
NetSpeak develops, markets, licenses and supports a suite of intelligent
software modules which provide business solutions for concurrent, real-time
interactive voice, video and data communications over packetized data networks
such as the Internet and Local Area Networks and Wide Area Networks. NetSpeak's
technologies allow organizations to build voice and video-enabled communications
networks, or to add these communications capabilities to their existing
packetized data networks.
The Company released its first product in February 1996 and, for accounting
purposes, emerged from the development stage during 1996. Since inception, the
Company has raised an aggregate of approximately $29,094,000, net of offering
costs, of which approximately $17,943,000 was raised through an initial public
offering consummated in June 1997 (the "IPO") and approximately $11,151,000
through private offerings of equity securities and exercises of warrants and
options.
The Company generates revenues from the sale of products, licenses and fees
for services. The Company's products are licensed primarily to
telecommunications companies, network service providers, corporate customers and
directly to individual client software end-users. Service revenues consist of
customer support, maintenance and engineering fees.
Product and license revenues are generally recognized upon shipment,
provided that there are no significant post-delivery obligations and that
payment is due within one year. If customer acceptance is required, revenues are
recognized upon customer acceptance. Customer support revenues are recognized
over the term of the support period, which is typically one year. Engineering
fees are recognized upon customer acceptance or over the period in which
services are provided if customer acceptance is not required. All research and
development costs to date have been expensed as incurred.
The Company has only a limited operating history upon which an evaluation
of the Company and its prospects can be based. As of September 30, 1997, the
Company had an accumulated net loss of $6,792,000. The limited operating history
of the Company makes its future results of operations difficult to predict. The
Company's operating results may fluctuate significantly in the future as a
result of a variety of factors such as the introduction of new products or
services by the Company or its competitors,
8
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the amount and timing of capital expenditures and other costs relating to the
expansion of the Company's operations, the budgeting cycles of potential
customers, the timing in the deployment of the Company's products by customers,
technical difficulties with respect to product development or the use of
products developed by the Company and general economic conditions.
RESULTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
Net revenues for the three months ended September 30, 1997 were $1,503,000
as compared to $196,000 for the three months ended September 30, 1996. Net
revenues were $3,537,000 and $377,000 for the nine months ended September 30,
1997 and 1996, respectively.
Net revenues from gateway products and business systems continued to
increase during the quarter as compared to prior quarters, representing 45% and
26% of total net revenues for the three and nine months ended September, 30,
1997, respectively. Net revenues generated from gateway products and business
systems includes the sale of the Company's proprietary computer software modules
as well as the sale of fully integrated "turn-key" systems, where the Company
integrates third party computer hardware and software components with its
gateway and business system software. The increase is due to revenues generated
from gateway products and business systems as a result of the commercial
deployment of the Company's systems and the shipment of additional evaluation
systems to telecommunications carriers and equipment suppliers. The Company's
gateway and business systems products are currently in a limited release to key
customers and strategic partners. The Company is working closely with these
parties to enhance and refine the functionality and usability of its
carrier-grade gateway products and business systems, prior to general
distribution.
Net revenues from client software represented 43% and 46% of total net
revenues for the three and nine months ended September 30, 1997, respectively.
Net revenues generated from client software are primarily due to a product
license and distribution agreement with Creative Technology Ltd. ("Creative").
Creative represents the Company's largest customer, accounting for 49% and 64%
of net revenues for the three and nine months ended September 30, 1997,
respectively. As of September 30, 1997, the Company had unearned revenue of
$343,000 from Creative which represents advance payments for client software
licenses and maintenance agreements. The Company expects that revenues generated
from Creative, as well as client software, will decrease significantly in the
near future. The Company anticipates that its sales mix will shift towards a
greater percentage of revenue generated from gateway products and business
systems, including turn-key systems, in future periods.
Cost of revenues for the three months ended September 30, 1997 was $180,000
as compared to $11,000 for the three months ended September 30, 1996. Cost of
revenues was $386,000 and $22,000 for the nine months ended September 30, 1997
and 1996, respectively. The increase in cost of revenues was primarily due to an
increase in the sale of fully integrated gateway and business systems. The
Company anticipates that as sales of fully integrated systems increase as a
percentage of net revenues, cost of revenues will also increase as a percentage
of net revenues. Additionally, should the Company elect to manufacture and sell
certain specialized computer hardware components that it is currently designing,
cost of revenues would increase as a percentage of net revenues.
Research and development expenses for the three months ended September 30,
1997 were $1,412,000 as compared to $635,000 for the three months ended
September 30, 1996. Research and development expenses were $3,713,000 and
$1,384,000 for the nine months ended September 30, 1997 and 1996, respectively.
The increases in research and development expenses were primarily the result of
the expansion of the Company's research and development staff. As a result, the
Company also experienced an increase in costs related to computer hardware and
software utilized in product development and
9
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greater equipment depreciation. During the three months ended September 30, 1997
the Company also began development of a new line of gateway products and, as a
result, the Company incurred additional costs to facilitate the development and
testing of these products. All research and development costs have been expensed
as incurred. The Company intends to significantly increase research and
development expenses in future periods to perform product enhancements and new
product development to maintain a competitive advantage.
Sales and marketing expenses for the three months ended September 30, 1997
were $810,000 as compared to $174,000 for the three months ended September 30,
1996. Sales and marketing expenses were $1,885,000 and $442,000 for the nine
months ended September 30, 1997 and 1996, respectively. The increases in sales
and marketing expenses were primarily due to the expansion of the Company's
sales and marketing staff. The Company also increased its promotion activities
during 1997, primarily through generating a greater presence at industry trade
shows and conferences. The Company intends to continue to intensify and expand
its sales and marketing efforts and, as a result, expects sales and marketing
expenses to significantly increase in future periods.
General and administrative expenses for the three months ended September
30, 1997 were $447,000 as compared to $234,000 for the three months ended
September 30, 1996. General and administrative expenses for the nine months
ended September 30, 1997 and 1996 were $1,127,000 and $530,000, respectively.
The increases in general and administrative expenses were due to the expansion
of the Company's corporate infrastructure primarily through the addition of
personnel and greater operating expenses as a result of the expansion thereof.
The Company expects general and administrative expenses to increase in future
periods as it continues to expand its corporate infrastructure.
Interest income for the three months ended September 30, 1997 was
$287,000 as compared to $46,000 for the three months ended September 30 1996.
Interest income for the nine months ended September 30, 1997 and 1996 was
$470,000 and $92,000, respectively. The increase in interest income is the
result of interest earned on excess funds attributable to the net proceeds from
the Company's initial public offering on its Common Stock ("IPO").
Income taxes for the three and nine months ended September 30, 1997 were
$92,000 and $180,000, respectively. Income taxes for the three and nine months
ended September 30, 1996 were $11,000. Such taxes were the result of income
taxes paid to the Singapore government related to license fees received pursuant
to agreements with Creative.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1997, the Company had $5,314,000 in cash and cash
equivalents and $16,262,000 in short-term investments. The Company does not
currently have any available lines of credit. Since inception, the Company has
financed its operations through the sale of equity securities, as described
elsewhere herein.
Net cash used in operating activities during the nine months ended
September 30, 1997 and 1996 was $4,222,000 and $605,000, respectively. Net cash
used in operating activities primarily related to the Company's continued
expansion of its research and development and sales and marketing efforts.
Net cash used in investing activities during the nine months ended
September 30, 1997 and 1996 was $17,201,000 and $973,000, respectively. For the
nine months ended September 30, 1997 net cash used in investing activities
reflects $16,262,000 in net purchases of short-term investments and $939,000
related to purchases of equipment. Net cash used during 1996 primarily related
to purchases of equipment.
10
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Net cash provided by financing activities for the nine months ended
September 30, 1997 was $20,442,000. On June 3, 1997, the Company closed the IPO
of its Common Stock. The Company offered and sold 2,400,000 shares of Common
Stock at an initial public offering price of $8.75 per share, raising proceeds,
net of offering costs, of approximately $17,943,000. Upon consummation of the
IPO, Motorola, Inc., a strategic partner of and investor in the Company,
exercised a previously granted warrant to purchase 452,855 shares of Common
Stock for $2,491,000 or $5.50 per share. Net cash provided by financing
activities for the nine months ended September 30, 1996 was $8,064,000 and was
primarily attributable to private offerings of equity securities.
The Company has no material commitments other than those under office and
equipment leases. The Company expects to increase its capital expenditures in
future periods as a result of anticipated growth, primarily through the purchase
of computer-related equipment. The Company anticipates that, based on its
present plans and assumptions, the current cash balances will be sufficient to
enable it to maintain its current and planned operations for a period of at
least 12 months. If the Company's estimates or assumptions prove to be
incorrect, the Company may require additional capital. Additional funding,
whether obtained through public or private debt or equity financing, or from
strategic alliances, may not be available when needed or may not be available on
terms acceptable to the Company. Failure to secure needed additional financing,
if and when needed, may have a material adverse effect on the Company's
business, financial condition and results of operations.
11
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PART II - OTHER INFORMATION
- ---------------------------
Item 2.
On May 29, 1997, the U.S. Securities and Exchange Commission declared
effective the Company's Registration Statement of Form S-1 (SEC File Number
333-22123). The offering of the securities (the "Offering") registered pursuant
to the Registration Statement also commenced on May 29, 1997. The Offering
terminated after the sale of 2,400,000 shares of the Company's Common Stock for
$8.75 per share. The managing underwriters for the public offering of the
Company's Common Stock were Josephthal, Lyon & Ross Incorporated and Cruttenden
Roth, Inc.
The Company incurred expenses of approximately $1,587,000 in connection
with the Offering. These expenses represented directs payments to others and not
direct or indirect payments to directors or officers of the Company or to
persons owning more than 10% of any class of securities of the Company. Net
proceeds from the Offering were $17,943,000. The Company has used approximately
$371,000 for the purchase of equipment, approximately $320,000 to increase the
Company's research and development and sales, marketing and administrative
staff, and approximately $1,436,000 for working capital. None of the payments
from the use of proceeds were made to officers, directors or persons owning
more than 10% of any class of securities of the Company. The Company invested
$16,262,000 of the Offering proceeds in short-term, investment-grade,
interest-bearing securities.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
11 Computation of net loss per share.
27 Financial Data Schedule.
(b) Reports on Form 8-K. None.
12
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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.
NETSPEAK CORPORATION
--------------------
(Registrant)
Date: November 12, 1997 By: /s/ Stephen R. Cohen
--------------------------------------------
Chairman of the Board and Chief Executive
Officer (Principal Executive Officer)
By: /s/ John W. Staten
--------------------------------------------
Chief Financial Officer (Principal Financial
and Accounting Officer)
13
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EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
11 Computation of net loss per share.
27 Financial Data Schedule.
EXHIBIT 11
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
------------------ -----------------
1996 1997 1996 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net loss $ (823) $ (1,151) $ (1,920) $ (3,284)
======== ======== ======== ========
Weighted average common stock outstanding
during the period 7,205 10,555 6,791 9,006
Impact of shares issued within 12 months of the
initial public offering 494 -- 908 --
Effect of stock options granted within 12 months of
the initial public offering, using the treasury stock
method 243 -- 243 161
Effect of warrants granted within 12 months of the
initial public offering, using the treasury stock
method 256 -- 256 150
-------- -------- -------- --------
Shares used in computing net loss per share 8,198 10,555 8,198 9,317
======== ======== ======== ========
Net loss per share $ (0.10) $ (0.11) $ (0.23) $ (0.35)
======== ======== ======== ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 5,314
<SECURITIES> 16,262
<RECEIVABLES> 570
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 22,876
<PP&E> 2,192
<DEPRECIATION> (609)
<TOTAL-ASSETS> 24,921
<CURRENT-LIABILITIES> 2,017
<BONDS> 0
0
0
<COMMON> 106
<OTHER-SE> 22,798
<TOTAL-LIABILITY-AND-EQUITY> 24,921
<SALES> 1,503
<TOTAL-REVENUES> 1,503
<CGS> 180
<TOTAL-COSTS> 180
<OTHER-EXPENSES> 2,669
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,059)
<INCOME-TAX> 92
<INCOME-CONTINUING> (1,346)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,151)
<EPS-PRIMARY> (0.11)
<EPS-DILUTED> 0
</TABLE>
