<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- --- SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997.
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 0-21059
ACE*COMM CORPORATION
--------------------------------
(Exact name of registrant as specified in its charter)
Maryland 52-1283030
----------------- -----------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
704 Quince Orchard Road, Gaithersburg, MD 20878
- ------------------------------------------ -------------
(Address of principal executive offices) (Zip Code)
301-721-3000
- -------------------------------
(Registrant's telephone number, including area code)
- -------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or 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
--- ---
Number of shares of Common Stock outstanding as of April 30, 1997 8,237,877
1
<PAGE>
ACE*COMM CORPORATION
INDEX
PART I--FINANCIAL INFORMATION
<TABLE>
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 1997 (Unaudited) and June 30, 1996 3
Consolidated Statements of Operations (Unaudited) for the Three and Nine Months Ended
March 31, 1997 and 1996 4
Consolidated Statements of Stockholder's Equity for the nine months ended March 31,
1997 (Unaudited) and the year ended June 30, 1996 5
Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended March 31,
1997 and 1996 6
Notes to Consolidated Financial Statements (Unaudited) 7
Item 2. Management's Discussion and Analysis of Results of Operations and Financial
Condition 8
Part II--Other Information
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
</TABLE>
2
<PAGE>
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
ACE*COMM CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(UNAUDITED)
MARCH 31, JUNE 30,
1997 1996
------------------ -------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents.......... $6,583,361 $ 369,206
Accounts receivable, less $10,000
allowance........................ 14,206,274 8,643,871
Inventories........................ 2,025,260 1,836,317
Prepaid expenses and other......... 614,847 283,813
------------ -----------
Total current assets............... 23,429,742 11,133,207
Property and equipment, net........ 2,479,388 1,305,844
Capitalized software development
costs, net....................... 1,911,152 1,393,067
Other assets....................... 109,701 466,268
------------ -----------
Total assets...................... $27,929,983 $ 14,298,386
------------ -----------
------------ -----------
Liabilities, Mandatorily Redeemable
Preferred Stock and Stockholders'
Equity (Deficit)
Current liabilities:
Current borrowings................ $274,554 $ 2,097,178
Accounts payable.................. 1,746,281 3,122,212
Accrued expenses.................. 819,452 1,036,684
Accrued compensation.............. 1,342,559 1,010,922
Officer loan...................... -- 78,572
Income taxes payable.............. 736,022 --
Deferred revenue.................. 2,110,370 1,890,103
------------ -----------
Total current liabilities......... 7,029,238 9,235,671
Noncurrent borrowings.............. 345,501 2,951,541
------------ -----------
Total liabilities................. 7,374,739 12,187,212
------------ -----------
Mandatorily redeemable Class C
Preferred Stock, $5.14 par value,
0 and 340,211 shares authorized,
issued and outstanding........... -- 2,261,627
------------ -----------
Contingencies
Stockholders' equity (deficit)
Class B Preferred Stock, $1.00 par
value, 0 and 1,000 shares
authorized, issued and
outstanding...................... -- 1,000
Common stock, $.01 par value,
45,000,000 shares authorized,
8,237,877 and 3,590,451 shares
issued and outstanding 82,379 35,905
Additional paid-in capital....... 19,072,417 343,124
Retained earnings (accumulated
deficit)......................... 1,400,448 (530,482)
------------ -----------
Total stockholders' equity
(deficit)........................ 20,555,244 (150,453)
------------ -----------
Total liabilities, mandatorily
redeemable preferred stock and
stockholders' equity (deficit)... $27,929,983 $ 14,298,386
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
ACE*COMM CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
MARCH 31, MARCH 31,
-------------------------- ----------------------------
1997 1996 1997 1996
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
Revenue--products and services......................... $ 8,208,973 $ 4,906,153 $ 21,729,871 $ 13,111,225
Cost of products and services.......................... 3,951,639 2,533,302 10,568,369 7,007,336
------------ ------------ ------------- -------------
Gross margin........................................... 4,257,334 2,372,851 11,161,502 6,103,889
Selling, general and administrative.................... 2,805,509 1,438,851 7,452,241 4,408,818
Research and development............................... 299,975 264,109 1,166,220 630,808
------------ ------------ ------------- -------------
Total cost and operating expenses...................... 7,057,123 4,236,262 19,186,830 12,046,962
------------ ------------ ------------- -------------
Income from operations................................. 1,151,850 669,891 2,543,041 1,064,263
Interest (income) expense, net......................... (85,253) 84,698 (123,912) 285,605
------------ ------------ ------------- -------------
Income before income taxes............................. 1,237,103 585,193 2,666,953 778,658
Income taxes........................................... 469,604 -- 736,023 --
------------ ------------ ------------- -------------
Net income............................................. $ 767,499 $ 585,193 $ 1,930,930 $ 778,658
------------ ------------ ------------- -------------
------------ ------------ ------------- -------------
Income per share (pro forma for all periods except the
three months ended March 31, 1997) $ .09 $ .10 $ .23 $ .14
Shares used in computing income per share.............. 9,012,056 5,846,160 8,253,105 5,754,000
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
ACE*COMM CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
RETAINED
PREFERRED STOCK COMMON STOCK ADD'L STOCK EARNINGS
PAR PAR PAID-IN SUBSCRIP. (ACCUM.
SHARES VALUE SHARES VALUE CAPITAL RECEIVABLE DEFICIT) TOTAL
------------------------- --------- ----------- ---------- --------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1995... 1,000 1,000 3,297,245 32,972 319,875 (5,900) (1,590,138) (1,242,191)
Accretion of preferred
stock dividends........ -- -- -- -- (139,894) -- -- (139,894)
Exercise of common stock
options................ -- -- 293,206 2,933 163,143 (117,232) -- 48,844
Payment of stock
subscriptions
receivable............. -- -- -- -- -- 123,132 -- 123,132
Net income for the year
ended June 30, 1996.... -- -- -- -- -- -- 1,059,656 1,059,656
---------------------------------------------------------------------------------------------------
Balance, June 30, 1996... 1,000 1,000 3,590,451 35,905 343,124 -- (530,482) (150,453)
Accretion of preferred
stock dividends
(Unaudited)............ -- -- -- -- (17,487) -- -- (17,487)
Conversion of preferred
stock Class C
(Unaudited)............ -- -- 1,530,950 15,310 2,263,804 -- -- 2,279,114
Redemption of preferred
stock Class B
(Unaudited)............ (1,000) (1,000) -- -- (307,000) -- -- (308,000)
Issuance of common stock
(Unaudited).............. -- -- 2,645,000 26,450 16,083,653 -- -- 16,110,103
Exercise of common stock
options (Unaudited)...... -- -- 493,332 4,933 979,192 -- -- 984,125
Repurchase and retirement
of common stock
(Unaudited)............ -- -- (21,856) (219) (272,869) -- -- (273,088)
Net income for the period
ended March 31, 1997
(Unaudited)............ -- -- -- -- -- -- 1,930,930 1,930,930
---------------------------------------------------------------------------------------------------
Balance, March 31, 1997
(Unaudited).............. -- $ -- 8,237,877 $ 82,379 $ 19,072,417 $ -- $ 1,400,448 $ 20,555,244
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
ACE*COMM CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
MARCH 31,
-------------------------
1997 1996
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Net income........................................................ $ 1,930,930 $ 778,658
Adjustments to reconcile net income to net cash (used for)
provided by operating activities:
Depreciation..................................................... 287,618 204,777
Amortization of capitalized software............................. 447,650 389,766
Changes in operating assets and liabilities:
Accounts receivable.............................................. (5,562,403) (213,943)
Inventories...................................................... (188,943) (395,788)
Other assets..................................................... 25,533 (100,299)
Accounts payable................................................. (1,375,931) 812,455
Accrued expenses................................................. (217,232) 171,043
Accrued compensation............................................. 331,637 250,529
Income taxes payable............................................. 736,022 --
Deferred revenue................................................. 220,267 (379,267)
------------ -----------
Net cash (used for) provided by operating activities.............. (3,364,852) 1,517,931
------------ -----------
Cash flows from investing activities:
Purchases of property and equipment............................... (1,239,009) (160,532)
Additions to capitalized software development costs............... (965,735) (479,336)
------------ -----------
Net cash used for investing activities............................ (2,204,744) (639,868)
------------ -----------
Cash flows from financing activities:
Net (decrease) increase in line of credit......................... (4,446,563) 719,626
Other borrowings.................................................. -- 105,539
Payments on debt.................................................. (271,214) (1,925,946)
Principal payments under capital lease obligation................. (11,612) --
Net proceeds from common stock issued............................. 16,110,103 --
Exercise of common stock options.................................. 984,125 29,322
Repayment of stock subscriptions receivable....................... -- 5,900
Repurchase and retirement of common stock......................... (273,088) --
Redemption of class B preferred shares............................ (308,000) --
------------ -----------
Net cash provided by (used for) financing activities.............. 11,783,751 (1,065,559)
------------ -----------
Net increase (decrease) in cash and cash equivalents.............. 6,214,155 (187,496)
Cash and cash equivalents at beginning of period.................. 369,206 189,903
------------ -----------
Cash and cash equivalents at end of period........................ $ 6,583,361 $ 2,407
------------ -----------
------------ -----------
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
ACE*COMM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include the
accounts of ACE*COMM Corporation and its subsidiaries ("ACE*COMM" or the
Company). The financial statements have been prepared by ACE*COMM in
accordance with generally accepted accounting principles for interim
financial statements and pursuant to the rules of the Securities and Exchange
Commission for Form 10-Q. Accordingly, certain information and footnotes
required by generally accepted accounting principles for complete financial
statements have been omitted. It is the opinion of management that all
adjustments considered necessary for a fair presentation have been included,
and that all such adjustments are of a normal and recurring nature. Operating
results for the periods presented are not necessarily indicative of the
results that may be expected for any future periods. For further information,
refer to the audited financial statements and footnotes included in the
Company's Registration Statement, Form S-1.
Pro forma income per share is computed using the weighted average number
of shares of common stock, adjusted for the dilutive effect of common stock
equivalent shares of common stock options and assuming the conversion of
redeemable preferred stock as of the beginning of the period presented.
Pursuant to Securities and Exchange Commission Staff Accounting Bulletin No.
83, common stock and common stock equivalent shares issued by the Company at
prices below its initial public offering price during the twelve month period
prior to the initial public offering date (using the treasury stock method
and an offering price of $7.00 per share) have been included in the
calculation of pro forma income per share for all periods except the three
months ended March 31, 1997, as if they were outstanding for all of the
period regardless of whether they are dilutive.
RECLASSIFICATIONS
Certain prior year information has been reclassified to conform with current
year presentation.
INITIAL PUBLIC OFFERING
On August 13, 1996, in connection with the Company's initial public
offering, 2,875,000 shares of Common Stock, 2,645,000 of which were offered by
the Company, were sold at $7.00 per share. The net proceeds raised by the
Company totaled $16,110,103.
The Mandatorily Redeemable Class C Preferred Stock was automatically
converted into Common Stock upon the completion of the Company's public
offering. No dividends were payable with respect to the converted shares.
On August 28, 1996, the Company redeemed the Class B Preferred Stock for
$308,000 in accordance with such terms requiring redemption upon transfer of
substantially all assets or of majority control of the Company.
Funds generated by the Company's initial public stock offering afforded the
opportunity to reduce bank and other debt obligations by $5.3 million.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
ACE*COMM Corporation ("ACE*COMM" or the "Company") develops, markets and
services operations support systems ("OSS") products for networks deployed by
telecommunications service providers. These include telephone companies, other
public carriers and large enterprises operating data and voice networks. The
Company's products perform such functions as billing data collection, network
surveillance, alarm processing and network management for some of the largest
carriers and enterprises in the world.
The Company sells its products through direct channels and through its
strategic alliance partners, for delivery to end users in the United States and
abroad. Since June 1994, the Company, consistent with its strategic emphasis,
derived most of its revenue from sales of its carrier network products. The
Company expects such sales to provide a major percentage of its revenue for at
least the next several years. The balance of the Company's revenue is derived
from the sale of network management products to enterprise customers, including
the armed forces and agencies of the U.S. government.
Substantially all of the Company's revenue derives from dollar-denominated
sales and, although the Company in its most recent fiscal years has had
significant sales to foreign end users, it does not have significant foreign
operations. The Company maintains no inventory abroad, shipping all products
from the United States, pursuant to terms of orders issued by customers.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain items on
the Company's statement of operations as a percentage of revenue:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
-------------------- --------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenue--products and services.................................................. 100.0% 100.0% 100.0% 100.0%
Costs and operating expenses:
Cost of products and services.................................................. 48.1% 51.6% 48.6% 53.5%
Selling, general and administrative............................................ 34.2% 29.3% 34.3% 33.6%
Research and development....................................................... 3.7% 5.4% 5.4% 4.8%
--------- --------- --------- ---------
Income from operations.......................................................... 14.0% 13.7% 11.7% 8.1%
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
REVENUES
Revenues for the quarter ended March 31, 1997 were $8.2 million, up $3.3
million, or 67.3%, over the prior year third quarter. Revenues for the nine
months ended March 31, 1997 were $21.7 million, as compared to $13.1 million for
the nine months ended March 31, 1996, an increase of 65.6%. The increase in
revenues is primarily a result of increased sales volumes of the Company's
products. The Company's carrier network products sales volume increased
primarily as a result of shipments to Telefonos de Mexico S.A. de C.V.
("TELMEX"), ICL Enterprises, Samsung Electronics and Iljin Corporation while an
increase in the Company's network management products was primarily attributable
to sales to WinStar Telecommunications Group, GeoPhone Company, L.L.C. and
Tubedale Communications Limited. Third quarter 1997 carrier network revenues
grew 46.6% over the March 1996 quarter and represented 62.6% of the total
quarterly revenue, compared to 71.9% in the March 1996 quarter. For the nine
months ended March 31, 1997, carrier network revenues grew 77.4% over the same
period in 1996, representing 74.5% of total revenues, compared to 70.0% in the
previous year.
8
<PAGE>
COST OF PRODUCTS AND SERVICES
Cost of products and services were $4.0 million, or 48.1% of revenue, for
the quarter ended March 31, 1997 and $2.5 million, or 51.6% of revenue, for the
quarter ended March 31, 1996. For the nine months ended March 31, 1997, cost of
products and services were $10.6 million, or 48.6% of revenue, as compared to
$7.0 million, or 53.4%, for the nine months ended March 31, 1996. The increase
in costs is primarily attributable to hardware costs associated with shipments
to TELMEX, ICL Enterprises, Samsung Electronics and Iljin Corporation and to an
increase in labor costs required to produce the increased revenues over the
previous year. Travel and contractor costs also increased primarily due to
extensive efforts required by international contracts, such as TELMEX, Samsung
Electronics and Iljin Corporation. Gross margins were 51.9% and 48.4% for the
quarters ending March 31, 1997 and 1996, respectively, and 51.4% and 46.6% for
the nine months ended March 31, 1997 and 1996, respectively. Gross margins
improved over the comparable periods of the prior year primarily as a result of
an increase in higher margin software revenue.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses were $2.8 million, or 34.2% of
revenue, for the quarter ended March 31, 1997, and $7.5 million, or 34.3% of
revenue, for the nine months ended March 31, 1997. By comparison, selling,
general and administrative expenses were $1.4 million, or 29.3% of revenue, for
the quarter ended March 31, 1996, and $4.4 million, or 33.6% of revenue, for the
nine months ended March 31, 1996. The increase in expenses is primarily
attributable to an increase in personnel and related fringe costs due to growth
of the Company, intensified marketing efforts, additional commission expense due
to increase in revenues, an increase in office rent as a result of the
relocation of the Company's headquarters to a larger facility, growth in other
facility costs due to the increase in personnel and non-recurring expenses
related to the relocation.
RESEARCH AND DEVELOPMENT
Research and development expenses for the quarter ended March 31, 1997 were
$300,000, or 3.7% of revenue, compared to $264,000, or 5.4% of revenue, for the
quarter ended March 31, 1996. For the nine months ended March 31, 1997, research
and development expenses were $1.2 million, or 5.4% of revenue, compared to
$631,000, or 4.8% of revenue, for the nine months ended March 31, 1996. The
increase is primarily attributable to the addition of software development
engineers to continue the development and enhancement of the Company's products.
INTEREST (INCOME) EXPENSE
Net interest (income) expense was ($85,000) for the quarter ended March 31,
1997 and $85,000 for the quarter ended March 31, 1996. For the nine months ended
March 31, 1997, net interest (income) expense was ($124,000) as compared to
$286,000 for the nine months ended March 31, 1996. The increase in net interest
income reflects the application of proceeds from the Company's initial public
offering in the first quarter of fiscal 1997, which allowed the company to repay
bank debt and invest remaining funds.
PROVISION FOR INCOME TAXES
The provision for income taxes was $470,000 for the quarter ended March 31,
1997 and $736,000 for the nine months ended March 31, 1997. No income tax
provision was recorded for the quarter and nine months ended March 31, 1996
since any provision was offset by a similar decrease in the valuation allowance.
Due to the availability of operating loss carryforwards and tax credits, the
Company did not begin to incur tax expense until the second quarter of fiscal
1997.
9
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1997, the Company had $6.6 million in cash and cash
equivalents and $16.4 million in working capital. These values represent
increases of $6.2 million in cash and cash equivalents and $14.5 million in
working capital over the year ended June 30, 1996. These increases are primarily
related to the Company's initial public offering of common stock, which raised
net proceeds of $16,110,103.
For the nine months ended March 31, 1997, cash flows used in operations were
$3.4 million compared to cash provided from operations of $1.5 million for the
nine months ended March 31, 1996. The decrease in cash flow was comprised
primarily of an increase in accounts receivable of $5.6 million resulting from
advance billings on new orders and billings related to shipments made late in
the third quarter of 1997 and a decrease in accounts payable of $1.4 million
resulting from the Company's effort to reduce the age of its accounts payable
subsequent to the initial public offering. These decreases were offset by the
net income for the period of $1.9 million, the increase in income taxes payable
of $736,000 and the increase in depreciation and amortization of assets of
$141,000.
Cash used for investing activities during the nine months ended March 31,
1997 was $2.2 million as compared to $640,000 for the nine months ended March
31, 1996. The cash used for the nine months ended March 31, 1997 includes
$1.2 million in capital expenditures and $966,000 for capitalized software
development activities. The capital expenditures include purchases of
computers, equipment and furniture resulting from Company growth. The
capitalized software is primarily attributable to the development of new
switch interfaces for carrier network products targeted for sales in Korea
and other foreign end users as well as the continued development of the
Company's network management products.
Funds generated by the Company's initial public stock offering afforded the
opportunity to reduce bank and other debt obligations by $5.3 million in the
nine months ended March 31, 1997. Currently, the Company has two lines of credit
with Crestar Bank, totaling $3.5 million, both of which expire on
November 30, 1997. At March 31, 1997, no amounts were outstanding under the two
credit facilities.
The Company believes that existing cash balances, cash flow from operations
and available bank lines will be sufficient to support its working capital
requirements for at least the next 12 months. To the extent that the Company's
existing resources, together with future earnings, are insufficient to fund the
Company's future activities, the Company may need to raise additional funds
through public or private financings.
RECENT ACCOUNTING PRONOUNCEMENTS
In October 1995, the Financial Accounting Standards Board issued Statement
No. 123, "Accounting for Stock-Based Compensation" (SFAS 123) effective for
certain stock-based transactions entered into after December 15, 1995. In
accordance with the standard, the company intends to continue to measure
compensation expense for its stock option plan using the intrinsic value method
prescribed by Accounting Principles Bulletin No. 25, "Accounting for Stock
issued to Employees." The company intends to adopt any material disclosure
provisions of FAS 123 in the June 30, 1997 financial statements.
10
<PAGE>
Part II: Other Information
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
NUMBER DESCRIPTION
------ -----------
11.1 Statement of Computation of Earnings per Share
27 Financial Data Schedule
(b) Reports on Form 8-K
None.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ACE*COMM CORPORATION
DATE__________________ BY:____________________________________
GEORGE T. JIMENEZ
PRESIDENT AND CHIEF EXECUTIVE OFFICER
____________________________________
JEFFREY S. SIMPSON, VICE PRESIDENT--
FINANCE
(PRINCIPAL FINANCIAL OFFICER)
12
<PAGE>
ACE*COMM CORPORATION
EXHIBIT 11.1
COMPUTATION OF EARNINGS PER SHARE
(In thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
-------------------- -------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Weighted average shares outstanding:
Common stock........................................ 8,068 5,486 7,416 5,397
Common stock equivalents............................ 944 360 837 357
--------- --------- --------- ---------
Weighted average common shares and equivalents........ 9,012 5,846 8,253 5,754
Net income............................................. $ 767 $ 585 $ 1,931 $ 779
--------- --------- --------- ---------
--------- --------- --------- ---------
Net income per share $ .09 $ .10 $ .23 $ .14
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from ACE*COMM
Corporation's unaudited financial statements as of and for the nine months ended
March 31, 1997 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 6,583
<SECURITIES> 0
<RECEIVABLES> 14,216
<ALLOWANCES> 10
<INVENTORY> 2,025
<CURRENT-ASSETS> 23,430
<PP&E> 3,595
<DEPRECIATION> 1,116
<TOTAL-ASSETS> 27,930
<CURRENT-LIABILITIES> 7,029
<BONDS> 346
0
0
<COMMON> 82
<OTHER-SE> 20,473
<TOTAL-LIABILITY-AND-EQUITY> 27,930
<SALES> 21,730
<TOTAL-REVENUES> 21,730
<CGS> 10,568
<TOTAL-COSTS> 10,568
<OTHER-EXPENSES> 8,618
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (124)
<INCOME-PRETAX> 2,667
<INCOME-TAX> 736
<INCOME-CONTINUING> 1,931
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,931
<EPS-PRIMARY> .23
<EPS-DILUTED> 0
</TABLE>
