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 September 30, 1997
-------------------------------------------------
Commission File Number 0-21041
OBJECT DESIGN, INC.
-------------------
(Exact name of registrant as specified in its charter)
Delaware 02-0424252
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
25 Mall Road, Burlington, MA 01803
---------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 674-5000
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
---- ----
The number of shares outstanding of the registrant's common
stock as of October 31, 1997 was 27,288,837.
1
<PAGE>
OBJECT DESIGN, INC.
INDEX TO FORM 10-Q
Part I - Financial Information Page
- ------------------------------ ----
Consolidated Balance Sheets as of September 30, 1997 3
and December 31, 1996
Consolidated Statements of Operations for the three and nine 4
months ended September 30, 1997 and September 30, 1996
Consolidated Statements of Cash Flows for the nine months 5
ended September 30, 1997 and September 30, 1996
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis of Financial 7
Condition and Results of Operations
Part II - Other Information
- ---------------------------
Item 1. Legal Proceedings 10
Item 6. Exhibits and Reports on Form 8-K 10
Exhibit Index 10
Signatures 11
2
<PAGE>
OBJECT DESIGN, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
Sept. 30, Dec. 31,
1997 1996
---- ----
(unaudited)
-----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 13,848 $ 10,952
Marketable securities 2,722 11,087
Accounts receivable, net 14,879 11,696
Prepaid expenses and other current assets 1,386 598
----- ----
Total current assets 32,835 34,333
Marketable securities 1,521 -
Property and equipment, net 4,003 3,218
Other assets 1,392 910
----- ----
Total assets $ 39,751 $ 38,461
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term obligations $ 60 $ 55
Accounts payable 2,148 1,850
Accrued expenses 2,778 2,506
Accrued compensation 976 1,531
Deferred revenue 3,552 4,166
----- -----
Total current liabilities 9,514 10,108
Long-term obligations 212 120
Stockholders' equity:
Preferred stock, $0.01 par value; 5,000 shares authorized
none issued and outstanding - -
Common stock, $0.001 par value; 200,000 shares
authorized 27,274 and 26,603 shares issued and
outstanding 27 27
Additional paid-in capital 63,788 62,928
Accumulated deficit (31,235) (33,533)
Net unrealized holding gain (loss) on marketable
securities (6) 7
Cumulative translation adjustment (1,351) (218)
Advances to shareholders (887) (887)
Unearned compensation (311) (91)
----- ----
Total stockholders' equity 30,025 28,233
------ ------
Total liabilities and stockholders' equity $ 39,751 $ 38,461
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
OBJECT DESIGN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands,except per share data)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------------- ---------------------------------------
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenues:
Software $ 9,842 $ 6,632 $ 24,747 $ 17,961
Services 3,008 2,649 8,399 7,573
Related party software and services 165 244 2,199 2,185
--------- --------- --------- --------
Total revenues 13,015 9,525 35,345 27,719
Cost of revenues:
Cost of software 319 481 1,122 1,264
Cost of services 2,226 1,590 6,048 4,949
Cost of related party software
and services 59 124 294 372
--------- --------- --------- --------
Total cost of revenues 2,604 2,195 7,464 6,585
Gross profit 10,411 7,330 27,881 21,134
Operating expenses:
Selling and marketing 6,784 4,550 17,312 12,476
Research and development 1,796 1,735 5,774 5,361
General and administrative 1,216 726 3,447 2,547
--------- --------- --------- --------
Total operating expenses 9,796 7,011 26,533 20,384
Operating income 615 319 1,348 750
Other income, net 310 191 1,047 212
Income before provision
for income taxes 925 510 2,395 962
Provision for income taxes - - 97 24
--------- --------- --------- --------
Net income $ 925 $ 510 $ 2,298 $ 938
Accretion of redeemable preferred stock - (174) -- (1,173)
--------- --------- --------- --------
Net income (loss) available to common
stockholders $ 925 $ 336 $ 2,298 $ (235)
========= ========= ========= ========
Historical net income (loss) available
to common stockholders (Note B) $ 0.03 $ 0.02 $0.08 $ (0.02)
========= ========= ========= ========
Historical weighted average number of
common equivalent shares (Note B) 29,289 20,662 29,150 13,054
Supplementary net income per common
equivalent share (Note B) $ 0.02 $0.03
========= ========
Supplementary weighted average number of
common equivalent shares (Note B) 28,561 28,306
</TABLE>
4
<PAGE>
OBJECT DESIGN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
-----------------
Sept. 30, Sept. 30,
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,298 $ 938
Adjustments to reconcile net income
to net cash used for operating activities:
Depreciation and amortization 1,530 1,321
Bad debt provision 165 173
Other 107 8
Changes in operating assets and liabilities:
Accounts receivable (3,702) (1,751)
Prepaids and other current assets (705) (220)
Other assets (484) (422)
Accounts payable 1,136 353
Accrued expenses (966) 558
Deferred revenue (523) (3,557)
------- -----
Net cash used for operating activities (1,144) (2,599)
------- -----
Cash flows from investing activities:
Capital expenditures (2,143) (823)
Purchases of marketable securities (5,400) (4,937)
Proceeds from sale/maturities of marketable securities 12,246 1,500
Purchase of minority interest - (53)
------- -----
Net cash provided by (used for) investing activities 4,703 (4,313)
------- -----
Cash flows from financing activities:
Proceeds from issuance of redeemable
convertible preferred stock - 4,917
Proceeds from issuance of common stock, net - 18,216
Proceeds from exercise of stock options 562 121
Principal payments on long term borrowings - (696)
Principal payments on capital lease obligations (107) (415)
------- -----
Net cash provided by financing activities 455 22,143
Effect of exchange rate changes on cash (1,118) (283)
------- -----
Net increase in cash and cash equivalents 2,896 14,948
Cash and cash equivalents, beginning of period 10,952 2,465
------- -----
Cash and cash equivalents, end of period $13,848 $17,413
======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
5
<PAGE>
Object Design, Inc.
Notes to Consolidated Financial Statements
A. Basis of Presentation
The consolidated financial statements include the accounts of Object Design,
Inc. (the "Company") and its wholly owned subsidiaries. All significant
intercompany transactions and balances have been eliminated. In the opinion of
management, the accompanying condensed consolidated financial statements include
all adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the consolidated financial position, results of operations and
cash flows of the Company. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the Securities
and Exchange Commission rules and regulations. These condensed consolidated
financial statements should be read in conjunction with the consolidated
financial statements and related notes included in the Company's Annual Report
on Form 10-K filed for the year ended December 31, 1996.
B. Net Income per Common and Common Equivalent Share
Net income per common share is based upon the weighted average number of common
shares and common equivalent shares outstanding. Common equivalent shares are
included in the per share calculations where the effect of their inclusion would
be dilutive.
In accordance with Securities and Exchange Commission Staff Accounting Bulletin
No. 83 ("SAB No. 83"), all common and common equivalent shares issued during the
twelve month period prior to the date of the filing of the Company's initial
public offering ("IPO") have been included in the calculations as if they were
outstanding for all periods. As permitted under SAB No. 83, these common
equivalent shares, which consist of stock options, were determined using the
treasury stock method and assumed an initial public offering price of $10.00 per
share. Supplementary net income per common share has been computed in the same
manner except that all outstanding shares of Preferred Stock that were
convertible into common stock upon the effectiveness of the IPO are treated as
having been converted into Common Stock at the date of the original issuance.
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share." SFAS No.
128 establishes a different method of computing net income per share than is
currently required under the provisions of Accounting Principles Board Opinion
No. 15. Under SFAS No. 128, the Company will be required to present both basic
net income per share and diluted net income per share. Basic net income per
share for the three-month and nine-month periods ended September 30, 1997 would
have been $.03 and $.09 per share, respectively, as compared with $.03 and $.12
per share for the corresponding periods in 1996. The impact of SFAS No. 128 on
the calculation of diluted net income per share for these quarters is not
expected to be materially different from reported earnings per share. The
Company plans to adopt SFAS No. 128 in the fourth quarter of 1997 and at that
time all historical net income per share data presented will be restated to
conform to the provisions of SFAS No. 128.
C. New Accounting Pronouncements
The Financial Accounting Standard Board recently issued Statement of Financial
Accounting Standard No. 130, "Reporting Comprehensive Income". This Statement
requires that changes in comprehensive income be shown in a financial statement
that is displayed with the same prominence as other financial statements. The
Statement will become effective for fiscal years beginning after December 15,
1997. The Company will adopt the new standard beginning in the first quarter of
the fiscal year ending December 31, 1998.
In June 1997, the Financial Accounting Standard Board issued Statement of
Financial Accounting Standard No. 131, "Disclosures about Segments of an
Enterprise and Related Information" (SFAS NO. 131). SFAS No. 131 specifies new
guidelines for determining a company's operating segments and related
requirements for disclosure. The Company is in the process of evaluating the
impact of the new standard on the presentation of the financial statements and
the disclosures therein. The Statement will become effective for fiscal years
beginning after December 15, 1997. The Company will adopt the new standard for
the fiscal year ending December 31, 1998.
6
<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations:
Total Revenues. The Company's total revenues increased 36.6% from $9.5 million
for the three months ended September 30, 1996 to $13.0 million for the three
months ended September 30, 1997. Total revenues for the nine months ended
September 30, 1997 increased 27.5% to $35.3 million up from $27.7 million for
the same period last year. The growth in revenues resulted primarily from
increases in the volume of ObjectStore software licenses, and, to a lesser
extent, from increased revenues from maintenance and consulting services.
Software Revenues. Software revenues increased 48.4% from $6.6 million for the
three-month period ended September 30, 1996 to $9.8 million for the three-month
period ended September 30, 1997. Software revenues increased 37.8% from $18.0
million for the nine-month period ended September 30, 1996 to $24.7 million for
the nine-month period ended September 30, 1997. These increases were primarily
due to increased volume of ObjectStore software licenses. The Company continued
to expand its customer base as the result of the Company's additional focus on
selling to customers that are developing and deploying component-based computing
applications.
Service Revenues. Service revenues increased 13.6% from $2.6 million for the
three-month period ended September 30, 1996 to $3.0 million for the three-month
period ended September 30, 1997. Service revenues increased 10.9% from $7.6
million for the nine-month period ended September 30, 1996 to $8.4 million for
the nine-month period ended September 30, 1997. The increase was primarily the
result of increased maintenance revenues, reflecting growth in the Company's
installed base, as well as increased consulting revenues relating to increased
customer deployments. Growing demand for the Company's consulting services and
the success of the Company's Technical Account Manager ("TAM") Program have led
the Company to increase the number of its consulting personnel. As a result,
the Company expects its service revenue to grow in future quarters.
Related Party Software and Service Revenue. Revenues from related parties
decreased 32.4% from $244,000 for the three-month period ended September 30,
1996 to $165,000 for the three-month period ended September 30, 1997. Revenues
from related parties remained flat at $2.2 million for the nine-month periods
ended September 30, 1997 and 1996. A single large purchase of software licenses
by IBM in the first quarter of 1997 offset a drop in IBM revenue which resulted
from the discontinuation of a joint development project in 1996. The Company
expects related party software and services revenue to decline in future
periods.
Cost of Software. Cost of software declined 33.7% from $ .5 million for the
three month period ended September 30, 1996 to $ .3 million for the three month
period ended September 30, 1997 and decreased from 7.3% to 3.2% of software
revenues for September 30, 1996 and 1997. Cost of software decreased slightly
from $1.3 million to $1.1 million for the nine months ended September 30, 1996
and September 30, 1997 but decreased as a percentage of software revenues from
7.0% to 4.5% for the same periods, respectively. This decrease as a percentage
of software revenues reflects lower royalty costs in 1997, due in part to a
change in revenue mix toward sales of ObjectStore and other products of the
Company that bear lower or no third party royalties.
Cost of Services. Cost of services increased 40.0% from $1.6 million for the
three month period ended September 30, 1996 to $2.2 million for the three month
period ended September 30, 1997 and increased as a percent of service revenues
from 60.0% to 74.0% for the same periods, respectively. Cost of services
increased 22.2% from $4.9 million for the nine month period ended September 30,
1996 to $6.0 million for the nine month period ended September 30, 1997 and
increased as a percentage of service revenues from 65.3% to 72.0% for the same
periods, respectively. The increase in cost of services as a percentage of
services revenue reflects the Company's continued initiative to invest in
non-billable technical account managers ("TAMs") to ensure successful customer
deployments of component-based applications based on ObjectStore. The Company
has recently expanded its TAM program as a fee-based service. Although the
Company expects cost of service revenue will continue to grow in absolute
dollars in future quarters, it is expected to grow at a slower rate than service
revenue.
Cost of Related Party Software and Services Revenue. The cost of related party
software and services revenue declined 52.4% from $124,000 in the three
month-period ended September 30, 1996 to $59,000 for the corresponding period in
1997, and declined as a percentage of related party software and services
revenue from 50.8% to 35.7% in such periods, respectively. The cost of related
party software also decreased from $372,000 and 17.1% of related party revenue
in the nine month period ended September 30, 1996 to $294,000 and 13.4% of
related party revenue for the corresponding 1997 period. The decrease in dollar
amount and as a percentage of revenue was attributable to a shift in the mix of
revenues toward higher margin software revenue in the 1997 period from lower
margin consulting revenue in the 1996 period.
7
<PAGE>
Selling and Marketing. Selling and marketing expenses increased 49.1% from $4.6
million for the three month period ended September 30, 1996 to $6.8 million for
the three month period ended September 30, 1997 and increased as a percentage of
total revenues from 47.8% to 52.1% for the same periods, respectively. Selling
and marketing expenses increased 38.8% from $12.5 million for the nine months
ended September 30, 1996 to $17.3 million for the nine months ended September
30, 1997 and increased as a percentage of total revenues from 45.0% to 49.0% for
the same periods, respectively. The increases in dollar amount and as a
percentage of revenues resulted primarily from the rapid expansion of the
Company's sales force. These expenses include increased expenditures on salaries
and advances against commissions for new direct sales personnel, recruiting fees
and travel and other expenses. In addition, the Company paid higher commissions
as a result both of increased sales and of higher commission rates payable to
sales personnel who were at or above their annual quotas in the nine months
ended September 30, 1997. The Company intends to continue to expand its direct
sales force and maintain higher levels of marketing investments directed at
component-based computing opportunities throughout 1997 and into 1998. The
Company expects selling and marketing expenses to increase in absolute dollar
amount in the quarters ahead.
Research and Development. Research and development expenses increased 3.5% from
$1.7 million for the three month period ended September 30, 1996 to $1.8 million
for the three month period ended September 30, 1997 but decreased as a percent
of total revenues from 18.2% to 13.8% for the same periods, respectively.
Research and development expense increased 7.7% from $5.4 million for the nine
months ended September 30, 1996 to $5.8 million for the nine months ended
September 30, 1997 but decreased as a percentage of total revenues from 19.3% to
16.3% for the same periods, respectively. The Company expects that research and
development expenses will increase in dollar amount in future periods as the
Company continues to enhance ObjectStore and related products and to develop new
products for component-based computing applications.
General and Administrative. General and administrative expenses increased 67.5%
from $.7 million for the three months ended September 30, 1996 to $ 1.2 million
for the three months ended September 30, 1997 and increased slightly as a
percentage of total revenues from 7.6% to 9.30% for the same periods,
respectively. General and administrative expenses increased 35.3% from $2.5
million for the nine months ended September 30, 1996 to $3.4 million for the
nine months ended September 30, 1997, and increased slightly from 9.2% to 9.8%
of total revenues for both periods. The increase in dollar amount is reflective
of the increased staffing, investments in information technology, professional
expenses and other costs associated with expanding operations and the reporting
requirements of a public company.
Other Income. Other income increased 62.3%, from $191,000 for the three-month
period ended September 30, 1996 to $310,000 for the corresponding period in
1997. Other income increased from $212,000 for the nine-month period ended
September 30, 1996 to $1.0 million for the corresponding period in 1997. This
increase was largely the result of increased interest income on increased cash
balances resulting from the Company's initial public offering in July 1996
Provision for Income Taxes. The Company's effective tax rate of 4.0% for the
nine months ended September 30, 1997 and 2.5% for the nine months ended
September 30, 1996 reflects an alternative minimum tax provision for federal
taxes and certain state taxes. The Company did not provide for taxes in the
three month ended September 30, 1997 and 1996. The effective tax rate in all
periods presented is lower than the statutory rate principally due to the
utilization of net operating loss carryforwards.
Liquidity and Capital Resources. Until its initial public offering in July 1996,
the Company financed its operations through a combination of sales of preferred
stock, bank lines of credit and capital and operating leases. In July 1996, the
Company completed an initial public offering and sold an aggregate of 3,000,000
shares of common stock at $7.00 per share, resulting in net proceeds to the
Company, after underwriting commissions and other costs, of $18.2 million.
As of September 30, 1997, the Company had cash and cash equivalents of $13.8
million, down from $17.4 million as of September 30, 1996. During the nine-month
period ended September 30, 1997, the Company had net income of $2.3 million and
generated a net cash increase of $2.9 million. This compares to net income of
$938,000 and a net cash increase of $14.9 million for the corresponding period
in 1996. Net cash used for operating activities was $1.1 million for the nine
months ended September 30, 1997, as compared to $2.6 million used in the
corresponding period in 1996. The improvement in cash usage is the result of
increased net income, accounts payable and decreased deferred revenue versus the
prior year, partially offset by increased accounts receivable and lower accrued
expenses. The increased cash used in accounts receivable reflects revenue growth
and the slower collection of certain accounts receivable, primarily
international. The decline in accrued expenses reflects the utilization of
accruals for distributor commissions and for localization of ObjectStore
documentation and the payout of accrued bonuses and commissions in the first
quarter of 1997. The Company's investing activities provided $4.7 million of
cash in the nine-month period ended September 30, 1997 compared with cash used
by the Company's investing activities of $4.3 million in the corresponding
period of 1996. This increase is attributable primarily to the net sale of $6.8
million of marketable securities, partially offset by increased investments in
capital expenditures in the nine-month period ended September 30, 1997.
8
<PAGE>
The Company's financing activities provided $455,000 and $22.1 million for the
nine months ended September 30, 1997 and 1996, respectively. This decrease is
the result of non-recurring events in 1996, including an issuance of redeemable
convertible preferred stock and the Company's initial public offering, as well
as the impact of exchange rate fluctuations in the 1997 period.
The Company entered into a line of credit with Bank of Boston in December 1996
in the amount of $2,000,000. At September 30, 1997 no borrowings were
outstanding under the line of credit, but letters of credit in the amount of
$650,000 had been issued for the account of the Company under the line of
credit. The line of credit is collateralized by substantially all the assets of
the Company. The Company's agreements with the Bank contain various covenants,
including financial covenants tested on a quarterly basis, that require
maintenance of a specified quick ratio, leverage ratio and minimum capital base
and prohibit losses in excess of a specified maximum. Upon the occurrence of an
event of default under the Bank agreements that is not waived by the Bank or
cured, the Bank is entitled to, among other things, demand payment of all
outstanding amounts and terminate the letters of credit. At September 30, 1997,
the Company was in compliance with the Bank's covenants.
The Company believes that its current cash, cash equivalents marketable
securities, capital leases, bank facilities, and funds generated from
operations, if any, will provide adequate liquidity to meet the Company's
capital and operating requirements for the next twelve months. The Company plans
to finance its long-term capital needs with its line of credit, and cash flow
from operations together with the balance of the proceeds from its initial
public offering.
9
<PAGE>
Part II: OTHER INFORMATION
Item 1. Legal Proceedings
There are no material legal proceedings pending with respect to the Company.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
--------
Exhibit Numbers Description
- --------------------------------------------------------------------------------
11.1 Statement regarding Computation of Net Income (Loss)
per Common and Common Equivalent Share
27.1 Financial Data Schedule
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed during the quarter ended September
30, 1997
10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Object
Design, Inc. has duly caused this Quarterly Report on Form 10-Q to be signed on
its behalf by the undersigned, thereunto duly authorized, on November 14, 1997.
OBJECT DESIGN, INC.
(Registrant)
November 14, 1997 By:_________________________________
Robert N. Goldman
President, Chairman of the Board
November 14, 1997 By:_________________________________
Lacey P. Brandt
Chief Financial Officer
11
OBJECT DESIGN, INC.
STATEMENT REGARDING COMPUTATION OF NET INCOME (LOSS) Exhibit 11.1
PER COMMON AND COMMON EQUIVALENT SHARE
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Historical - Primary:
Weighted average issued common
stock outstanding 27,203 18,634 26,983 7,517
Weighted average cheap stock (2) - 1,921 - 5,537
Weighted average common stock equivalents 2,086 108 2,167 -
-------- ---------- --------- ---------
Weighted average number of common and
common equivalent shares outstanding 29,289 20,662 29,150 13,054
======== ========== ========= =========
Net income $ 925 $ 510 $ 2,298 $ 938
Less: accretion of redeemable convertible
preferred stock to redemption value - (174) - (1,173)
-------- ---------- --------- ---------
Net income (loss) available to common
stockholders $ 925 $ 336 $ 2,298 $ (235)
======== ========== ========= =========
Net income (loss) per common and
common equivalent share $ 0.03 $ 0.02 $ 0.08 $ (0.02)
======== ========== ========= =========
Supplementary (1)
Weighted average issued common
stock outstanding 27,203 25,087 26,983 24,219
Weighted average cheap stock (2) - 432 - 278
Weighted average common stock equivalents 2,086 3,042 2,167 3,809
-------- ---------- --------- ---------
Weighted average number of common and
common equivalent shares outstanding 29,289 28,561 29,150 28,306
======== ========== ========= =========
Net income $ 925 $ 510 $ 2,298 $ 938
Net income per share $ 0.03 $ 0.02 $ 0.08 $ 0.03
======== ========== ========= =========
</TABLE>
Notes:
(1) All shares of convertible preferred stock are considered, on a
supplementary basis, to be common stock and are included using the
if-converted method on the dates of their original issuance.
(2) In accordance with Securities and Exchange Commission Staff Accounting
Bulletin No. 83, issuances of common stock, common stock equivalents and
Series J Preferred Stock within one year prior of the initial filing of the
registration statement, at share prices below the assumed initial public
offering price of $10.00 per share are considered to have been made in
anticipation of the contemplated public offering for which this
registration statement was prepared. Accordingly, these stock issuances are
treated as if issued and outstanding, using the treasury stock method for
options, since the inception of the Company.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS INCLUDED IN THE FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER
30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 13,848
<SECURITIES> 2,722
<RECEIVABLES> 15,679
<ALLOWANCES> 800
<INVENTORY> 0
<CURRENT-ASSETS> 32,835
<PP&E> 11,721
<DEPRECIATION> 7,718
<TOTAL-ASSETS> 39,751
<CURRENT-LIABILITIES> 9,514
<BONDS> 212
0
0
<COMMON> 27
<OTHER-SE> 29,998
<TOTAL-LIABILITY-AND-EQUITY> 39,751
<SALES> 24,747
<TOTAL-REVENUES> 35,345
<CGS> 1,122
<TOTAL-COSTS> 7,464
<OTHER-EXPENSES> 26,533
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,395
<INCOME-TAX> 97
<INCOME-CONTINUING> 2,298
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,298
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
