<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period ended January 31, 1998
Commission File Number 0-27830
-------------------
LYCOS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 04-3277338
(State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.)
</TABLE>
500 Old Connecticut Path, Framingham, Massachusetts 01701-4576
(Address of principal executive offices, including Zip Code)
(508) 424-0400
(Registrant's telephone number, including area code)
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.
[X] Yes [_] No
The number of shares outstanding of the registrant's Common Stock as of
March 4, 1998 was 15,558,509.
================================================================================
<PAGE>
Lycos, Inc.
Table of Contents
Page
------
PART I. Financial Information
ITEM 1 Consolidated Financial Statements:
Consolidated Balance Sheets
January 31, 1998 and July 31, 1997.......................... 3
Consolidated Statements of Operations
Three and six months ended January 31, 1998 and 1997........ 4
Consolidated Statements of Cash Flows
Six months ended January 31, 1998 and 1997.................. 5
Notes to Consolidated Financial Statements................... 6
ITEM 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 9
PART II OTHER INFORMATION
ITEM 1 Legal Proceedings............................................ 12
ITEM 2 Change in Securities......................................... 12
ITEM 3 Defaults Upon Senior Securities.............................. 12
ITEM 4 Submission of Matters to a Vote of Securities Holders........ 12
ITEM 5 Other Information............................................ 12
ITEM 6 Exhibits and Reports on Form 8-K............................. 12
Signature.................................................... 13
2
<PAGE>
LYCOS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
January 31, July 31,
1998 1997
------------ ------------
Assets (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents................................................ $ 41,350,721 $ 40,766,258
Accounts receivable, less allowance for doubtful accounts of $718,000
and $554,000 at January 31, 1998 and July 31, 1997, respectively....... 6,751,374 6,634,262
License fees receivable.................................................. 15,243,507 9,065,806
Prepaid expenses......................................................... 2,094,102 4,259,979
Other current assets..................................................... 128,950 18,439
------------ ------------
Total current assets.................................................. 65,568,654 60,744,744
------------ ------------
Property and equipment, less accumulated depreciation...................... 2,092,727 2,397,600
Long-term license fees receivable.......................................... 2,625,000 650,000
License agreement, net..................................................... 928,735 1,123,645
Goodwill, net.............................................................. 100,742 119,405
Other assets............................................................... 384,960 383,615
------------ ------------
Total assets.......................................................... $ 71,700,818 $ 65,419,009
============ ============
<CAPTION>
Liabilities and Stockholders' Equity
Current liabilities:
<S> <C> <C>
Accounts payable......................................................... $ 5,582,665 $ 3,289,513
Accrued expenses......................................................... 6,484,371 7,387,707
Deferred revenues........................................................ 13,744,258 9,541,566
Billings in excess of revenues........................................... 782,295 2,387,424
Due to related parties................................................... 14,717 9,105
------------ ------------
Total current liabilities............................................. 26,608,306 22,615,315
Long term portion of deferred revenues..................................... 5,962,503 5,100,000
Deferred income taxes...................................................... 46,667 56,667
------------ ------------
6,009,170 5,156,667
Commitments and contingencies
Stockholders' equity:
Preferred stock.......................................................... -- --
Common stock............................................................. 144,436 137,966
Additional paid-in capital............................................... 50,484,069 49,506,906
Treasury stock, at cost.................................................. (1,747) --
Deferred compensation.................................................... (139,606) (185,436)
Accumulated deficit...................................................... (11,403,810) (11,812,409)
------------ ------------
Total stockholders' equity............................................ 39,083,342 37,647,027
------------ ------------
Total liabilities and stockholders' equity............................ $ 71,700,818 $ 65,419,009
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
LYCOS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
January 31, January 31,
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Advertising............................. $ 9,575,267 $ 4,010,467 $15,984,300 $ 7,112,594
License, product and other.............. 3,027,451 993,741 5,921,570 1,554,600
----------- ----------- ----------- -----------
Total revenues....................... 12,602,718 5,004,208 21,905,870 8,667,194
Cost of revenues.......................... 2,817,007 1,089,681 4,694,399 1,927,865
----------- ----------- ----------- -----------
Gross profit......................... 9,785,711 3,914,527 17,211,471 6,739,329
Operating expenses:
Research and development................ 1,735,172 976,353 3,170,963 1,943,541
Sales and marketing..................... 7,312,208 4,754,290 12,790,843 9,372,501
General and administrative.............. 1,001,759 736,556 1,945,805 1,317,278
----------- ----------- ----------- -----------
Total operating expenses............. 10,049,139 6,467,199 17,907,611 12,633,320
----------- ----------- ----------- -----------
Operating loss............................ (263,428) (2,552,672) (696,140) (5,893,991)
Interest income........................... 564,547 540,608 1,104,739 1,122,934
----------- ----------- ----------- -----------
Net income (loss)......................... $ 301,119 $(2,012,064) $ 408,599 $(4,771,057)
=========== =========== =========== ===========
Basic earnings (loss) per share........... $ 0.02 $ (0.15) $ 0.03 $ (0.35)
=========== =========== =========== ===========
Diluted earnings (loss) per share......... $ 0.02 $ (0.15) $ 0.03 $ (0.35)
=========== =========== =========== ===========
Shares used in computing Basic earnings
(loss) per share.......................... 14,254,750 13,792,896 14,175,061 13,792,896
=========== =========== =========== ===========
Shares used in computing Diluted earnings
(loss) per share.......................... 14,819,224 13,792,896 14,707,809 13,792,896
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
LYCOS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
January 31,
1998 1997
----------- -----------
<S> <C> <C>
Operating activities
Net income (loss)................................................... $ 408,599 $(4,771,057)
Adjustments to reconcile net income (loss) to net cash used in
operating activities:
Amortization of deferred compensation............................. 45,830 87,340
Depreciation and amortization..................................... 744,338 563,181
Allowance for doubtful accounts................................... 243,314 180,000
Changes in operating assets and liabilities:
Accounts receivable............................................... (360,426) 108,656
License fees receivable........................................... (8,152,701) (5,569,190)
Prepaid expenses.................................................. 2,165,877 (443,621)
Other current assets.............................................. (110,511) --
Other assets...................................................... (1,345) 161,661
Accounts payable.................................................. 2,293,152 (2,188,017)
Accrued expenses.................................................. (903,336) 2,894,145
Deferred revenues................................................. 5,065,195 4,534,561
Billings in excess of revenues.................................... (1,605,129) (224,261)
Due to related parties............................................ 5,612 (227,989)
Deferred income taxes............................................. (10,000) (11,333)
----------- -----------
Net cash used in operating activities............................... (171,531) (4,905,924)
----------- -----------
Investing activities
Purchase of property and equipment.................................. (225,892) (769,358)
----------- -----------
Net cash used in investing activities............................... (225,892) (769,358)
----------- -----------
Financing activities
Proceeds from exercise of stock options............................. 981,886 --
----------- -----------
Cash provided by financing activities............................... 981,886 --
----------- -----------
Net increase (decrease) in cash and cash equivalents................ 584,463 (5,675,282)
----------- -----------
Cash and cash equivalents at beginning of period.................... 40,766,258 44,142,187
----------- -----------
Cash and cash equivalents at end of period.......................... $41,350,721 $38,466,905
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
LYCOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The Company and Basis of Presentation
Lycos, Inc., ("Lycos" or the "Company") is a global Internet navigation and
community network dedicated to helping online users locate, retrieve and manage
information personalized to their individual interests by providing easy-to-use
information tools. The Company was formed in June 1995 by CMG@Ventures L.P., a
wholly-owned subsidiary of CMG Information Services. The Company operates in one
industry segment, selling advertising and facilitating electronic commerce
transactions on its web sites and licensing its technology and products to
customers in various industries worldwide. The Company's fiscal year end is July
31.
The accompanying unaudited consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries and have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions for Form 10-Q and Article 10 of
Regulation S-X. In the opinion of management, these financial statements contain
all adjustments, consisting only of normal recurring adjustments, necessary for
a fair presentation of the results of these interim periods. Certain information
and related footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted, although the Company believes the disclosures in these
financial statements are adequate to make the information presented not
misleading. These financial statements should be read in conjunction with the
Company's audited financial statements for the year ended July 31, 1997,
included in the Company's Annual Report on Form 10-K filed with the Securities
and Exchange Commission. The results of operations for the interim periods shown
are not necessarily indicative of the results for any future interim period or
for the entire fiscal year.
2. Revenue Recognition
The Company's advertising revenues are derived principally from short-term
advertising contracts in which the Company guarantees a number of impressions
for a fixed fee or on a per impression basis with an established minimum fee.
Revenues from advertising are recognized as the services are performed.
The Company's license, product and other revenues are derived principally
from product licensing fees and fees from maintenance, development and support
of its products and customers. Other revenues include fixed fees and a share of
proceeds from online sales of merchandise by the Company's electronic commerce
partners. License, product and other revenues are generally recognized upon
delivery provided that no significant Company obligations remain and collection
of the receivable is probable. In cases where there are significant remaining
obligations, the Company defers such revenue until those obligations are
satisfied. Fees from maintenance and support of the Company's products including
revenues bundled with the initial licensing fees are deferred and recognized
ratably over the service period.
3. Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with original
or remaining maturities of three months or less as cash equivalents, and those
with maturities of greater than three months as short-term investments. At
January 31, 1998, the Company had no investments with remaining maturities of
greater than three months.
6
<PAGE>
LYCOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
4. Commitments and Contingencies
The Company leases its facilities and certain other equipment under operating
lease agreements expiring through 2003. Future noncancelable minimum payments
under these leases for each fiscal year end are as follows:
1998 $ 2,797,241
1999 5,403,466
2000 3,092,595
2001 2,165,705
2002 2,118,427
Thereafter 1,102,724
--------------
$ 16,680,158
==============
Included in the table above are future noncancelable minimum payments under
an operating lease agreement for a 77,000 square foot facility located in
Waltham, Massachusetts, entered into in February, 1998, that the Company will
use as its corporate headquarters, under a five-year lease expiring in 2003.
In March 1997, the Company renewed its one year "Premier Provider" agreement
(the "1997 Agreement") with Netscape Communications Corporation ("Netscape")
pursuant to which the Company was designated one of four "Premier Providers" of
search and navigation services accessible from the "Net Search" button on the
Netscape browser. Under the terms of the 1997 Agreement, the Company is
obligated to make installment payments totaling $4.7 million over the term of
the 1997 Agreement, subject to adjustments under certain circumstances. The
Company recognizes the cost of the 1997 Agreement ratably over the term of the
Agreement, with the cost included in sales and marketing expense.
The Company is subject to legal proceedings and claims which arise in the
ordinary course of its business. In the opinion of management, the amount of
ultimate liability with respect to these actions will not materially affect the
financial position, results of operations or cash flows of the Company.
5. Reclassifications
Certain amounts in 1997, which were previously included in the consolidated
income statement under the caption "Cost of revenues", have been reclassified as
"Sales and marketing". This change in classification has no effect on previously
reported net loss or net loss per share.
6. Earnings Per Share
The Company has adopted the disclosure provisions of Financial Accounting
Standards Board Statement No. 128 ("SFAS 128") "Earnings Per Share", which
establishes standards for computing and presenting earnings per share ("EPS")
and applies to entities with publicly held common stock or potential common
stock. This Statement is effective for financial statements issued for both
interim and annual periods ending after December 15, 1997 and requires
restatement of all prior-period EPS data.
7
<PAGE>
LYCOS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
7. Subsequent Event
On February 2, 1998, the Company entered into an Agreement and Plan of
Merger (the "Agreement") by and among the Company, Pod Acquisition Corp., a
Delaware corporation and a wholly-owned subsidiary of the Company ("PAC"),
Tripod, Inc., a Delaware corporation ("Tripod"), Bo Peabody and Richard Sabot,
providing for the merger of PAC with and into Tripod (the "Merger"). On February
11, 1998, the Company completed the closing of the Merger and Tripod became a
wholly-owned subsidiary of the Company. In accordance with the terms of the
Agreement, Richard Sabot will be elected to the Company's Board of Directors for
a term expiring at the first Annual Meeting of the Company's stockholders held
after the Company's fiscal year ending July 31, 2000.
The acquisition will be accounted for as a purchase. The purchase price will
be allocated to the assets acquired and liabilities assumed based on their
estimated fair values at the acquisition date. Results of operations for
Tripod will be included with those of the Company for periods subsequent to
the date of acquisition.
In the Merger, all outstanding shares of Common Stock and Preferred Stock of
Tripod and options and warrants to purchase Common Stock and Preferred Stock of
Tripod were converted into 1,560,363 shares and options and warrants to purchase
Common Stock, par value $.01 per share, of the Company at an Exchange Ratio of
3.2427566. All outstanding options to purchase Common Stock of Tripod have been
assumed by the Company and converted into options to purchase Common Stock of
the Company, and all outstanding warrants to purchase Preferred Stock of Tripod
have been assumed by the Company and converted into warrants to purchase Common
Stock of the Company.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The matters discussed in this report contain forward-looking statements that
involve risks and uncertainties. The Company's actual results could differ
materially from those discussed herein. Factors that could cause or contribute
to such differences include, but are not limited to, those discussed in this
section and elsewhere in this Report, and the risks discussed in the ''Factors
Affecting the Company's Business, Operating Results and Financial Condition''
section included in the Company's 1997 Annual Report on Form 10-K filed with the
Securities and Exchange Commission.
Results of Operations
Total revenues Total revenues for the three and six months ended January
31, 1998 were $12.6 million and $21.9 million versus $5.0 million and $8.7
million for the three and six months ended January 31, 1997, as a result of the
growth in the number of advertisers and average contract duration and value. As
of January 31, 1998, deferred revenues, including billings in excess of
revenues, increased to $20.5 million, compared to $17.0 million at July 31, 1997
attributable to advertising contracts and guaranteed commitments under license
and electronic commerce agreements for which there are significant obligations
of the Company remaining.
Advertising revenues Advertising revenues were $9.6 million and $16.0
million for the three and six months ending January 31, 1998, representing 76%
and 73% of total revenues, as compared to advertising revenues of $4.0 million
and $7.1 million for the three and six months ended January 31, 1997, which
represented 80% and 82% of total revenues. The top ten customers accounted for
30% of advertising revenues in the quarter ended January 31, 1998 as compared to
35% of advertising revenues in the quarter ended January 31, 1997.
The Company's advertising revenues are derived from the sale of advertising on
its Internet Websites. Advertising contracts vary in duration from one week to
five years but are generally short term in nature. Advertising contracts are
principally sold as: (1) a "general rotation" contract under which a customer
is guaranteed a number of impressions; (2) a "key word" contract in which a
customer purchases the right to advertise in connection with specific word
searches; (3) a "targeted" contract in which the customer purchases a
specified number of impressions in one of the Web Guides or on a specific page
or service, or (4) a combination of any or all of general rotation, key word and
targeted contracts.
License, product and other revenues License, product and other revenues
were $3.0 million and $5.9 million for the three and six months ending January
31, 1998, representing 24% and 27% of total revenues, as compared to license,
product and other revenues of $994,000 and $1.6 million for the three and six
months ended January 31, 1997, which represented 20% and 18% of total revenues.
The increase in license, product and other revenue is attributable primarily to
the addition of several new partners.
Cost of revenues Cost of revenues were $2.8 million and $4.7 million for
the three and six months ending January 31, 1998, representing 22% and 21% of
total revenues, as compared to cost of revenues of $1.1 million and $1.9 million
for the three and six months ended January 31, 1997, which represented 22% and
22% of total revenues. Cost of revenues consist primarily of expenses associated
with the ongoing maintenance and support of the Company's products and services,
including compensation, consulting fees, equipment costs, networking and other
related indirect costs.
Operating expenses
Research and Development Research and development expenses were $1.7
million and $3.2 million for the three and six months ending January 31, 1998,
representing 14% and 15% of total revenues, as compared to research and
development expenses of $976,000 and $1.9 million for the three and six months
ended January 31, 1997, which represented 20% and 22% of total revenues.
9
<PAGE>
Research and development expenses consist primarily of equipment and salary
costs. The overall increase in research and development expenses was primarily
due to increased engineering staffing to continue to develop and enhance the
Company's expanded product offerings.
To date, all research and development costs have been expensed as incurred.
The Company believes that significant investments in research and development
are required to remain competitive. As a consequence, the Company expects to
continue to commit substantial resources to research and development in the
future.
Sales and Marketing Sales and marketing expenses were $7.3 million and
$12.8 million for the three and six months ending January 31, 1998, representing
58% and 58% of total revenues, as compared to sales and marketing expenses of
$4.8 million and $9.4 million for the three and six months ended January 31,
1997, which represented 95% and 108% of total revenues. Sales and marketing
expenses consist primarily of compensation, advertising, public relations, trade
shows, travel and costs of marketing literature. The spending increases were due
to the addition of sales and marketing personnel, increased commissions
associated with higher sales, and expenses pertaining to the Company's expanded
advertising, marketing and public relations campaign. Sales and marketing
expenses also include the cost of the Company's "Premier Provider" Agreements
with Netscape, as further described below. The Company expects continued
increases in sales and marketing expenses in future periods.
In March 1997, the Company renewed its one year "Premier Provider" Agreement
("the 1997 Agreement") with Netscape pursuant to which the Company was
designated one of four "Premier Providers" of search and navigation services
accessible from the "Net Search" button on the Netscape browser. Under the
terms of the 1997 Agreement, the Company is obligated to make installment
payments totaling $4.7 million over the term of the 1997 Agreement, subject to
adjustments under certain circumstances. The Company recognizes the cost of the
1997 Agreement ratably over the term of the 1997 Agreement with the cost
included in sales and marketing expense.
General and Administrative General and administrative expenses were $1.0
million and $1.9 million for the three and six months ending January 31, 1998,
representing 8% and 9% of total revenues, as compared to general and
administrative expenses of $737,000 and $1.3 million for the three and six
months ended January 31, 1997, which represented 15% and 15% of total revenues.
General and administrative expenses consist primarily of compensation, rent
expenses and fees for professional services. The increases in spending were
primarily due to the expansion of the Company's corporate infrastructure,
including the addition of finance and administrative personnel and increased
costs for professional services.
Interest Income Interest income was approximately $565,000 and $1.1 million
for the three and six months ending January 31, 1998, as compared to interest
income of $541,000 and $1.1 million for the three and six months ended January
31, 1997. Interest income is generated from investment of the Company's cash
equivalents.
Factors which may affect future operations
There are a number of business factors which singularly or combined may affect
the Company's future operating results. These factors include dependence on
third party relationships to create traffic on the Company's websites,
dependence on major customers, dependence on advertising revenues, dependence on
the Internet, rapid technological change, competition and variability of
quarterly results, which have been outlined in the Company's 1997 Annual Report
on Form 10-K.
Liquidity and Capital Resources
At January 31, 1998, the Company had cash and cash equivalents of
approximately $41.4 million. The Company regularly invests excess funds in
short-term money market funds, government securities and commercial paper.
10
<PAGE>
The Company used cash from operations of approximately $172,000 during the six
months ended January 31, 1998, due primarily to increases in accounts
receivable, license fees receivable and decreases in accrued expenses and
billings in excess of revenues, offset by net income and decreases in prepaid
expenses and increases in accounts payable and deferred revenues. The Company's
primary investing activity during the year has been, and further expenditures
are anticipated to be, for the purchase of computers and office equipment to
support the Company's continued growth. During the six months ended January 31,
1998, the Company also used approximately $1.3 million for payments under the
1997 Agreement with Netscape.
As of January 31, 1998, the Company is committed to noncancelable minimum
payments totaling $16.7 million under operating lease agreements that expire at
various times through 2003. In addition, the Company is obligated to make
remaining installment payments totaling approximately $1.8 million under its
1997 Agreement with Netscape.
At January 31, 1998, the Company had deferred revenues of $19.7 million
representing primarily license fees to be earned in the future on noncancelable
license agreements. In addition, the Company had billings in excess of revenues
from advertising contracts of $782,000 at January 31, 1998.
The Company currently believes that available funds and cash flows expected to
be generated by operations, if any, will be sufficient to fund its working
capital and capital expenditures requirements for at least the next twelve
months. Thereafter, the Company may need to raise additional funds. The Company
may need to raise additional funds sooner in order to fund more rapid expansion,
to develop new or enhanced products and services, to respond to competitive
pressures or to acquire complementary businesses or technologies. If additional
funds are raised through the issuance of equity securities, the percentage
ownership of the stockholders of the Company will be reduced, stockholders may
experience additional dilution, and such equity securities may have rights,
preferences or privileges senior to those of the Company's Common Stock. There
can be no assurance that additional financing will be available when needed on
terms favorable to the Company or at all. If adequate funds are not available or
are not available on acceptable terms, the Company may be unable to develop or
enhance products or services, take advantage of future opportunities or respond
to competitive pressures, which could have a material adverse effect on the
Company's business, results of operations or financial condition.
Management has reviewed the Company's systems relating to the year 2000
concerns and believes that the costs for compliance will not be material to the
Company.
11
<PAGE>
PART II
ITEM 1. Legal Proceedings
The Company is not currently involved in any legal proceedings that it
believes could have, either individually or in the aggregate, a
material adverse effect on its business, financial condition, results
of operations or cash flows.
ITEM 2. Changes in Securities
None.
ITEM 3. Defaults Upon Senior Securities
None.
ITEM 4. Submission of Matters to a Vote of Securities Holders
None.
ITEM 5. Other Information
None.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibit 11.1: Statement of Computation of Basic and Diluted Net
Income (Loss) Per Share herein included on page 14.
Exhibit 27.1: Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter
ended January 31, 1998.
12
<PAGE>
SIGNATURE
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.
LYCOS, INC.
Date: March 4, 1998 By:/s/ Edward M. Philip
--------------------------------
Edward M. Philip
Chief Operating Officer and
Chief Financial Officer
(Principal Financial and Accounting
Officer, Authorized Officer)
13
<PAGE>
EXHIBIT 11.1
LYCOS, INC.
Computation of Shares Used in Computing Basic and Diluted Net Income (Loss)
Per Share
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
January 31, January 31,
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net income (loss)........................... $ 301,119 $(2,012,064) $ 408,599 $(4,771,057)
----------- ----------- ----------- -----------
Basic net income (loss) per share:
Weighted average common shares
outstanding................................ 14,254,750 13,792,896 14,175,061 13,792,896
----------- ----------- ----------- -----------
Shares used in computing per share amount... 14,254,750 13,792,896 14,175,061 13,792,896
=========== ========== =========== ===========
Basic net income (loss) per share........... $ 0.02 $ (0.15) $ 0.03 $ (0.35)
=========== ========== =========== ===========
Diluted net income (loss) per share:
Weighted average common shares
outstanding................................ 14,254,750 13,792,896 14,175,061 13,792,896
Dilutive stock options..................... 564,474 -- 532,748 --
----------- ----------- ----------- -----------
Shares used in computing per share amount... 14,819,224 13,792,896 14,707,809 13,792,896
=========== ========== =========== ===========
Diluted net income (loss) per share......... $ 0.02 $ (0.15) $ 0.03 $ (0.35)
=========== ========== =========== ===========
</TABLE>
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> JUL-31-1998 JUL-31-1997
<PERIOD-START> AUG-01-1997 AUG-01-1996
<PERIOD-END> JAN-31-1998 JAN-31-1997
<CASH> 41,350,721 40,766,258
<SECURITIES> 0 0
<RECEIVABLES> 7,469,374 7,188,262
<ALLOWANCES> 718,000 554,000
<INVENTORY> 0 0
<CURRENT-ASSETS> 65,568,654 60,744,744
<PP&E> 3,750,669 3,524,776
<DEPRECIATION> 1,657,943 1,127,176
<TOTAL-ASSETS> 71,700,818 65,419,009
<CURRENT-LIABILITIES> 26,608,306 22,615,315
<BONDS> 0 0
0 0
0 0
<COMMON> 144,436 137,966
<OTHER-SE> 38,938,906 37,509,061
<TOTAL-LIABILITY-AND-EQUITY> 71,700,818 65,419,009
<SALES> 21,905,870 8,667,194
<TOTAL-REVENUES> 21,905,870 8,667,194
<CGS> 4,694,399 1,927,865
<TOTAL-COSTS> 22,602,010 14,561,185
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
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