<PAGE>
FORM 10 - Q
SECURITIES AND EXCHANGE COMMISSION
Washington D.C 20549
--------------------------
X Quarterly report pursuant to Section 13 or 15(d)
--- of the Securities Exchange Act of 1934 for the
quarterly period ended September 30, 1996 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: 0-20789
OneWave, Inc.
-------------
(Exact name of registrant as specified in its charter)
Delaware 04-3249618
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Arsenal Marketplace, Second Floor, Watertown, Massachusetts 02172
---------------------------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (617) 923-6500
--------------
-------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
----- -----
As of October 28, 1996 there were 14,813,832 shares of Common Stock outstanding.
<PAGE>
OneWave, Inc.
Table of Contents
PART I - FINANCIAL INFORMATION Page
----
Item 1. Condensed Financial Statements
Condensed Balance Sheets at December 31, 1995 and September 30, 1996. 3
Condensed Statements of Operations for the three months and nine
months ended September 30, 1995 and 1996. 4
Condensed Statements of Cash Flows for the nine months ended
September 30, 1995 and 1996. 5
Notes to Condensed Financial Statements. 6
Item 2. Management's Discussion and Analysis of Financial Conditions
and Results of Operations. 7
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Default Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
2
<PAGE>
OneWave, Inc.
Condensed Balance Sheets
(In thousands)
Part I. Financial Information
- -----------------------------
Item 1. Financial Statements.
<TABLE>
<CAPTION>
December 31, September 30,
1995 1996
------------ -------------
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 105 $ 9,768
Marketable securities - 30,896
Accounts receivable, net 1,909 5,236
Inventories 292 296
Prepaid expenses and other current assets 157 547
------------ -------------
Total current assets 2,463 46,743
Property and Equipment, net 163 2,681
Capitalized Software Development Costs - 265
------------ -------------
Total assets $ 2,626 $ 49,689
============ =============
Liabilities and Stockholders' Equity (Deficit)
Current Liabilities:
Accounts payable $ 576 $ 2,518
Other current liabilities 3,576 4,774
Deferred revenue 278 381
------------ -------------
Total current liabilities 4,430 7,673
Notes Payable to Stockholders 1,000 -
Stockholders' Equity (Deficit):
Preferred stock - -
Common stock 11 15
Additional paid-in capital 1,231 58,252
Note receivable from executive officer - (2,560)
Deferred compensation (167) (125)
Accumulated deficit (3,879) (13,566)
------------ -------------
Total stockholders' equity (deficit) (2,804) 42,016
Total liabilities and stockholders'
equity (deficit) $ 2,626 $ 49,689
============ =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
OneWave, Inc.
Condensed Statements of Operations
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- ---------------------------
1995 1996 1995 1996
------------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
Software license and maintenance $ 400 $ 3,961 $ 443 $ 6,888
Consulting and education services 1,629 1,373 2,600 3,979
---------- ----------- ------------ ------------
Total revenues 2,029 5,334 3,043 10,867
Cost of Revenues:
Software license and maintenance 208 386 230 996
Consulting and education services 1,170 1,459 1,749 3,277
---------- ----------- ------------ ------------
Total cost of revenues 1,378 1,845 1,979 4,273
---------- ----------- ------------ ------------
Gross profit 651 3,489 1,064 6,594
Operating Expenses:
Selling, general and administrative 440 3,371 1,090 7,493
Research and development 331 1,073 645 2,425
Compensation to executive officer - (109) - 6,794
---------- ----------- ------------ ------------
Total operating expenses 771 4,335 1,735 16,712
---------- ----------- ------------ ------------
Operating loss (120) (846) (671) (10,118)
Interest Income (Expense), net (20) 467 (37) 431
---------- ----------- ------------ ------------
Net loss $ (140) $ (379) $ (708) $ (9,687)
========== =========== ============ ============
Net Loss per Common and Common
Equivalent Share $ (0.01) $ (0.03) $ (0.06) $ (0.71)
========== =========== ============ ============
Weighted Average Number of Common
and Common Equivalent Shares
Outstanding 13,141 14,729 12,770 13,670
========== =========== ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
OneWave, Inc.
Condensed Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------------------------
1995 1996
----------------- --------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss $ (708) $ (9,687)
Adjustments to reconcile net loss to net cash used in
operating activities:
Compensation expense to executive officer - 6,794
Deferred compensation expense - 41
Depreciation and amortization 27 393
Change in operating assets and liabilities:
Accounts receivable (1,473) (3,327)
Inventories (325) (4)
Prepaid expenses and other current assets (176) (390)
Accounts payable 546 1,942
Other current liabilities 1,006 (1,360)
Deferred revenue 216 102
---------------- --------------
Net cash used in operating activities (887) (5,496)
Cash Flows from Investing Activities:
Purchases of marketable securities - (30,896)
Purchases of property and equipment (88) (2,911)
Capitalized software development costs - (265)
----------------- ---------------
Net cash used in investing activities (88) (34,072)
Cash Flows from Financing Activities:
Proceeds from (payments on) notes payable to stockholders 1,000 (1,000)
Proceeds from issuance of common stock - 43,340
Proceeds from issuance of redeemable convertible preferred sto - 6,780
Proceeds from issuance of convertible preferred stock 5,970
Retirement of common stock - (6,000)
Proceeds from exercise of stock options - 141
--------------- --------------
Net cash provided by financing activities 1,000 49,231
Net Increase in Cash and Cash equivalents 25 9,663
Cash and Cash Equivalents, beginning of period - 105
--------------- --------------
Cash and Cash Equivalents, end of period $ 25 $ 9,768
=============== ==============
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ - $ 92
================ ==============
Supplemental Disclosure of Noncash Financing Activities:
Issuance of note receivable from executive officer $ - $ 2,560
=============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements
5
<PAGE>
OneWave, Inc.
Notes to Condensed Financial Statements
(Unaudited)
1. Basis of Presentation:
The condensed financial statements included herein are unaudited and reflect all
adjustments, consisting of normal recurring adjustments, which are, in the
opinion of management, necessary for a fair presentation of the results for the
interim periods. These financial statements should be read in conjunction with
the financial statements and notes thereto included in the Company's
Registration Statement on Form S-1 (No. 333-04235) as filed with the Securities
and Exchange Commission.
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates and would impact
future results of operations and cash flows.
The results of operations for the reported 1996 periods are not necessarily
indicative of the results to be achieved for the entire year ending December 31,
1996.
2. Computation of Net Loss Per Common and Common Equivalent Share
Net loss per common share is computed based upon the weighted average number of
common shares and common equivalent shares outstanding. In accordance with the
Securities and Exchange Commission Staff Accounting Bulletin No. 83 (" SAB No.
83") all common and common equivalent shares and other potentially dilutive
instruments (including stock options, redeemable convertible preferred stock
and convertible preferred stock) issued during the twelve month period prior to
the public offering date have been included in the calculation as if they were
outstanding for all periods prior to the date of the Company's initial public
offering (IPO).
3. Other transactions
During the quarter ending September 30, 1996, the Company obtained third party
software licenses from a related party in exchange for certain source code
rights previously purchased from Open Environment Corporation. The source code
rights were originally purchased with the intent of embedding the technology
into certain of the Company's future software products. The software licenses
received and the source code rights given were deemed to be of equal value. The
transaction did not impact current period financial results.
4. Capitalized Software Costs
During the quarter ending September 30, 1996, the Company capitalized $265,000
in third party costs pertaining to the development of certain WaveApps products.
The Company has elected to amortize such costs over a period of fifteen months.
5. Marketable Securities
Marketable securities primarily consist of government bonds and commercial paper
with original maturities at date of purchase beyond three months and less than
twelve months. In accordance with Statement of Financial Accounting Standards
No. 115, the Company classifies its marketable securities as "held-to-maturity"
and therefore reports such assets at amortized cost.
6
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following information should be read in conjunction with the financial
statements and notes thereto and risk factors contained in the Company's Form
S-1 ( No. 333-04235) as filed with the Securities and Exchange Commission.
This Form 10-Q contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. The Company's actual results could differ materially from those set
forth in the forward-looking statements. Factors that might cause such a
difference are discussed in the section entitled " Certain Factors that may
Affect Future Results" below.
OVERVIEW:
OneWave, Inc. ("OneWave" or the "Company"), formerly Business@Web, Inc., is a
provider of "web-enabled" software for the development and deployment of
mission-critical business applications across an organization's disparate
information technology systems and the extension of those applications to
Intranets and the Internet.
RESULTS OF OPERATIONS:
Revenues:
- ---------
Total revenues increased $3,305,000 to $5,334,000 for the three months ended
September 30, 1996 from $2,029,000 for the comparable quarter in 1995. The
increase was due primarily to the introduction and expansion of the Company's
product offerings, including the OneWave/(TM)/ product line, and increased
revenue from consulting and education services. For the three months ended
September 30, 1996, software license and maintenance revenues represented 74% of
total revenues with the remaining 26% from consulting and education services,
compared with 20% and 80%, respectively for the comparable prior year period.
Included within total revenue for the current quarter is the sale of $2,200,000
in OneWave software to Hewlett Packard to develop vertical retail applications
in conjunction with Internet Business Solutions, Inc. (IBS). Total sales to
Hewlett Packard represented 43% of total revenue for the quarter ending
September 30, 1996. IBS, a joint venture between Samsung Corporation and certain
of the Company's principal shareholders, also participated in a development
effort of a vertical service application with another OneWave customer who
accounted for 13% of total quarterly revenues.
Total revenues increased $7,824,000 to $10,867,000 for the nine months ended
September 30, 1996 from $3,043,000 for the comparable period in 1995. The
increase was due primarily to the introduction and expansion of the Company's
product offerings, including the OneWave/(TM)/ product line, and increased
revenue from consulting and education services. For the nine months ended
September 30, 1996, software license and maintenance revenues represented 63% of
total revenues with the remaining 37% from consulting and education services
compared with 15% and 85%, respectively, for the comparable prior year period.
Gross profit:
- -------------
Cost of software license and maintenance revenues consists of the cost of
software and maintenance purchased for resale from a related party, distribution
costs and product support costs. The cost of consulting and education services
consists primarily of consulting and education personnel salaries, related costs
and fees to third-party service providers. For the three months ended September
30, 1996, total gross profit increased to 65% of total revenues from 32% of
7
<PAGE>
total revenues for the comparable prior year period. For the three months ended
September 30, 1996, the gross profit percentage for license and maintenance
revenues was 90% and consulting and education services generated a gross loss
percentage of 6%. For the comparable prior year quarter, the gross profit
percentage for license and maintenance revenues was 48% and the gross profit
percentage for consulting and education services was 28%. The increase in total
gross profit percentage from the comparable prior year quarter, is primarily
attributable to the mix of revenues between license and maintenance revenues and
consulting and education services. The increase in gross profit percentage for
license and maintenance revenues compared to prior year is attributable to a
higher gross profit achieved on revenues from OneWave/(TM)/ products compared to
prior year license and maintenance revenues generated by reselling third party
licenses and maintenance. The decrease in gross profit percentage for consulting
and education services from the comparable prior year quarter, is attributable
to a greater portion of services revenues involving third-party service
providers, an increase in consulting and education personnel and a decrease in
the number of educational seminars provided. During the three months ended
September 30,1996, the Company recorded a $2,000 loss on a contract performed by
a third party which accounted for 33% of total third quarter consulting and
education revenue. Additionally, there were a number of new employees hired at
the end of the second quarter whose related costs were included in third quarter
cost of revenue, but who were substantially engaged in the Company's orientation
and training process.
For the nine months ended September 30, 1996, total gross profit increased to
61% of total revenue from 35% of total revenues for the comparable prior year
period. For the nine months ended September 30, 1996, the gross profit
percentage for license and maintenance revenues and consulting and education
services was 86% and 18% respectively. For the comparable prior year nine month
period, the gross profit percentage for license and maintenance revenues and
consulting and education services was 48% and 33% respectively. The increase in
total gross profit percentage from the comparable prior year quarter is
primarily attributable to the mix of revenues between license and maintenance
revenues and consulting and education services. The increase in gross profit
percentage for license and maintenance revenues compared to prior year is
attributable to a higher gross profit achieved on revenues from OneWave/(TM)/
products compared to prior year license and maintenance revenues generated by
reselling third party licenses and maintenance. The decrease in gross profit
percentage for consulting and education services from the comparable prior year
nine month period is attributable to a greater portion of services revenues
involving third-party service providers, an increase in consulting and education
personnel and a decrease in the number of educational seminars provided.
Selling, General and Administrative Expenses:
- ---------------------------------------------
Selling, general and administrative expenses consist primarily of payroll costs
related to executive management, finance, administration, sales and marketing
personnel, and costs for advertising, marketing and related administrative
support. Selling, general and administrative expenses increased to $3,371,000
for the three months ended September 30, 1996 from $440,000 for the comparable
prior year period, representing 63% and 22% of total revenues, respectively.
Selling, general and administrative expenses increased to $7,493,000 for the
nine months ended September 30, 1996 from $1,090,000 for the comparable prior
year period, representing 69% and 36% of total revenues, respectively. The
total dollar increase for the three and nine month periods reflects the
Company's increased efforts within the areas of sales, marketing and
distribution. Particularly, there have been increases in headcount and related
staffing expenditures as well as the introduction of specific marketing and
advertising programs. The Company expects selling, general and administrative
expenses to continue to increase throughout 1996 and future periods.
Research and Development Expenses:
- ----------------------------------
Research and development expenses primarily consist of payroll-related costs,
fees to independent contractors and purchases of technology. To date, the
Company has expensed all internal software development costs as incurred. During
the three months ended September 30,1996, the Company
8
<PAGE>
capitalized $265,000, or 20% of total R&D expenditures, in third party costs
pertaining to the development of certain WaveApps products. Despite the
capitalization of the aforementioned costs, research and development expenses
increased to $1,073,000 for the three months ended September 30, 1996 from
$331,000 for the comparable prior year period, representing 20% and 16% of total
revenues, respectively. Research and development expenses increased to
$2,425,000 for the nine months ended September 30, 1996 from $645,000 for the
comparable prior year period, representing 22% and 21% of total revenues,
respectively. The total dollar increase for the three and nine month periods is
attributable to increased headcount and related costs as well as the purchase of
technology rights . The increases reflect the Company's efforts to enhance the
functionality of its products. The Company believes that it will be necessary to
make continued significant expenditures on research and development to remain
competitive.
Compensation to Executive Officer:
- ----------------------------------
During the three months ended March 31, 1996, certain of the Company's
controlling stockholders sold 960,000 shares of common stock to the Chief
Executive Officer for an aggregate purchase price of $1,440,000, and agreed to
make certain payments to the Chief Executive Officer to secure his services as
the Company's Chief Executive Officer. In accordance with generally accepted
accounting principles, the Company recorded a non-cash expense of $7,515,000
related to these transactions. This non-cash expense consists of: (i)
$5,760,000, which represents the difference between the purchase price paid by
the Chief Executive Officer for the shares of common stock that he purchased and
the fair market value of those shares at that time; (ii) $1,000,000, relating to
a payment received by the Chief Executive Officer from one of the Company's
controlling stockholders; and (iii) $755,000, representing the then current
value of a payment guaranty that such stockholder agreed to make to the Chief
Executive Officer in the event of a decline in the value of certain stock
appreciation rights held by the Chief Executive Officer on capital stock of his
former employer. During the three months ended September 30, 1996, the value of
the guaranty declined due to an increase in the value of the stock appreciation
rights. Accordingly, the Company recorded a favorable credit of $109,000 for the
quarter. In September 1996, the Chief Executive Officer exercised the stock
appreciation rights. No future non-cash credits or charges will be recorded
related to these stock appreciation rights.
Interest Income (Expense), Net:
- -------------------------------
For the three and nine months ended September 30, 1996 the Company recorded net
interest income of $467,000 and $431,000, respectively. The interest income is
a result of interest earned on the net proceeds received by the Company from its
initial public offering in July 1996. For the comparable prior year periods,
the Company recorded interest expense,net of $20,000 and $37,000, respectively.
The expense was related to interest on notes payable to stockholders which has
been repaid in full by the Company.
Liquidity and Capital Resources:
- --------------------------------
In July 1996, the Company completed its initial public offering of 3,750,000
shares of its common stock of which 3,000,000 shares were sold by the Company
and 750,000 shares were sold by certain of the Company's stockholders. The
public offering price was $16.00 per share and the net proceeds to the Company
were approximately $43,340,000, net of underwriting discounts, commissions and
other offering costs. Upon consummation of the IPO, all outstanding shares of
preferred stock were automatically converted into common stock. The Company
used a portion of the proceeds for the repayment of a $2,000,000 note payable to
a bank.
In February 1996, the Company entered into a financing agreement with a bank.
The agreement provides for a revolving line of credit of up to $2,500,000,
subject to certain limitations, and an equipment line of credit up to $500,000
for purchases of new equipment. As of September 30, 1996, the Company had no
outstanding balances under the revolving line of credit or the equipment line of
credit.
9
<PAGE>
The Company's operating activities utilized cash and cash equivalents of
approximately $5,496,000 for the nine month period ending September 30, 1996.
The Company's investing activities, which consisted of investments in software
development, purchases of property and equipment and investments in short-term
marketable securities, utilized cash and cash equivalents of approximately
$34,072,000 for the nine month period ending September 30, 1996. The purchases
of property and equipment were related to increases in headcount and the move to
a new facility in March 1996.
The Company's financing activities provided cash and cash equivalents of
approximately $49,231,000 for the nine month period ending September 30, 1996,
primarily from public and private issuance of equity securities and borrowings
under its notes payable with a bank. The proceeds generated from the issuance
of convertible preferred stock were used to retire common stock. The borrowings
under its note payable with a bank were repaid in full in July 1996.
The Company has agreed to loan an executive officer up to $2,560,000 for payment
of his anticipated income tax liability resulting from his purchase of 960,000
shares of the Company's common stock from a significant stockholder for a
purchase price less than its then fair market value. The Company believes that
it will fund the amounts under the loan agreement in the first quarter of 1997.
The Company has no other significant commitments other than obligations under
its operating leases.
The Company currently anticipates that the net proceeds of the IPO, existing
cash balances and borrowings under the Company's bank agreement will be
sufficient to meet its anticipated working capital and capital expenditure
requirements through December 31, 1997. 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 or
services, to respond to competitive pressures or to acquire complementary
businesses or technologies. 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 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, financial
condition or operating results.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
This Form 10-Q contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. The Company's actual results could differ materially from those set
forth in the forward-looking statements. Certain factors that might cause such
a difference include limited operating history, potential fluctuations in
quarterly results, recent introduction of OneWave/(TM)/ products, delays in
development or product releases, changes in the market for the Company's
products and services, slowdown in the rate of acceptance of the Company's
products, dependence of the Company's business on the Internet, competition,
development of competing products, risk of software defects, disproportionate
reliance on strategic relationships, difficulties in management of growth,
dependence on key personnel, evolving distribution strategy, proprietary
technology and the inherent difficulties in protecting intellectual property,
dependence on third-party technology, product liability and risks associated
with global operations which are discussed in the section entitled "Risk
Factors" on page 5 of the Company's prospectus dated July 2, 1996 contained in
the Company's registration statement on Form S-1 ( No. 333-04325). Upon
request, the Company will provide a copy of the prospectus without charge.
10
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Default Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
John Burke, the Vice President of Sales, has come to a mutual decision
with OneWave to leave the Company to pursue new opportunities.
Due to a lack of market demand, the Company has decided to delay and
possibly cancel the release of the virtual database product until a
future period.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 11
Statement regarding computation of earnings per share
(b) Reports on Form 8 K
None
(a) Exhibit 27
Financial Data Schedule
<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, thereto duly authorized.
Dated: November 8, 1996
OneWave, Inc.
(Registrant)
---------------------------------------
Klaus P. Besier
Chairman and Chief Executive Officer
---------------------------------------
Mark J. Gallagher
Principal Financial Officer
<PAGE>
EXHIBIT 11
OneWave, Inc.
Statement Regarding Computation of Net Loss Per Share
(In thousands, except per share data)
Exhibit 11
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- -------------------------
1995 1996 1995 1996
--------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Net loss $ 140 $ 379 $ 708 $ 9,687
Weighted average shares outstanding
during the period (1) 10,737 14,677 10,366 12,050
Common stock equivalent shares (1) 2,404 52 2,404 1,620
---------- -------- ---------- ----------
Weighted average number of common and
common stock equivalents 13,141 14,729 12,770 13,670
Net loss per common and common equivalent share $ (0.01) $ (0.03) $ (0.06) $ (0.71)
========== ========== ========== ==========
</TABLE>
(1) In accordance with the Securities and Exchange Commission Staff Accounting
Bulletin No. 83 ( "SAB 83" ) all common and common equivalent shares and
other potentially dilutive instruments ( including stock options,
redeemable convertible preferred stock and convertible preferred stock )
issued during the last twelve month period prior to the public offering
date have been included in the calculation as if they were outstanding for
all periods prior to the date of the IPO.
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED FINANCIALS IN THE COMPANY'S 9/30/96 10-Q AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996
<PERIOD-START> JUL-01-1996 JAN-01-1996
<PERIOD-END> SEP-30-1996 SEP-30-1996
<CASH> 9,768 9,768
<SECURITIES> 30,896 30,896
<RECEIVABLES> 5,411 5,411
<ALLOWANCES> 175 175
<INVENTORY> 296 296
<CURRENT-ASSETS> 46,743 46,743
<PP&E> 3,137 3,137
<DEPRECIATION> 456 456
<TOTAL-ASSETS> 49,689 49,689
<CURRENT-LIABILITIES> 7,673 7,673
<BONDS> 0 0
0 0
0 0
<COMMON> 15 15
<OTHER-SE> 42,001 42,001
<TOTAL-LIABILITY-AND-EQUITY> 49,689 49,689
<SALES> 5,434 10,967
<TOTAL-REVENUES> 5,334 10,867
<CGS> 1,845 4,273
<TOTAL-COSTS> 1,845 4,273
<OTHER-EXPENSES> 4,335 16,712
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (467) (431)
<INCOME-PRETAX> (379) (9,687)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (379) (9,687)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (379) (9,687)
<EPS-PRIMARY> (.03) (.71)
<EPS-DILUTED> (.03) (.71)
</TABLE>
