<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-------------------------
FORM 10-Q
Mark One
/X/ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the Quarterly Period Ended March 31, 2000.
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: 333-71997
WORLDGATE COMMUNICATIONS, INC.
--------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware 23-2866697
--------------------------------------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
3190 Tremont Avenue
Trevose, Pennsylvania 19053
--------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(215) 354-5100
--------------------------------------------------------------
(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. Yes /X/ No / /
As of April 28, 2000, there were 21,547,807 shares of common stock, par value
$.01 per share, outstanding.
<PAGE>
WORLDGATE COMMUNICATIONS, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE THREE MONTHS
ENDED MARCH 31, 2000
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . Page 3
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . . Page 8
Item 3. Quantitative and Qualitative Disclosures about Market Risk . . . . . . . . Page 10
PART II OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Page 11
Item 2. Changes in Securities and Use of Proceeds . . . . . . . . . . . . . . . . .Page 11
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . Page 11
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . Page 11
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
WORLDGATE COMMUNICATIONS, INC.
CONDENSED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
(Unaudited)
------------------ ------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 8,729 $ 9,256
Short - term investments 56,382 66,414
Accounts receivable, less allowance for doubtful accounts of $300 at
March 31, 2000 and $150 at December 31, 1999 3,533 3,248
Inventory 7,003 5,600
Prepaid and other assets 772 1,738
------------------ ------------------
Total current assets 76,419 86,256
------------------ ------------------
Property and equipment 2,405 2,196
Less: accumulated depreciation and amortization (516) (402)
------------------ ------------------
Property and equipment, net 1,889 1,794
Prepaid expenses and deposits 1,120 1,120
------------------ ------------------
Total assets $ 79,428 $ 89,170
================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion, notes payable $ 767 $ 796
Current portion, capital leases 5 5
Accounts payable 2,599 2,810
Accrued expenses 606 389
Accrued compensation and benefits 2,895 1,844
Other 30 30
------------------ ------------------
Total current liabilities 6,902 5,874
Notes payable 239 377
Capital leases 5 7
Other 248 255
------------------ ------------------
Total liabilities 7,394 6,513
------------------ ------------------
Stockholders' equity:
Class A Common Stock, $.01 par value, 50,000,000 shares authorized,
21,545,641 shares issued and outstanding at March 31, 2000
and 21,488,456 shares issued and outstanding at December 31, 1999 215 215
Additional paid-in capital 170,703 170,592
Warrant for Class A Common Stock 1,911 1,911
Accumulated deficit (99,918) (89,085)
Unearned stock-based compensation (877) (976)
------------------ ------------------
Total stockholders' equity 72,034 82,657
------------------ ------------------
Total liabilities and stockholders' equity $ 79,428 $ 89,170
================== ==================
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
WORLDGATE COMMUNICATIONS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------------------------------------
2000 1999
--------------------- ---------------------
<S> <C> <C>
Revenues $ 1,573 $ 549
--------------------- ---------------------
Costs and expenses:
Cost of revenues (excluding depreciation and
amortization amounts of $32 and $22 for
the three months ended March 31, 2000
and 1999, respectively) 3,928 1,834
Engineering and development (excluding
depreciation and amortization amounts
of $56 and $1 for the three months
ended March 31, 2000 and 1999, respectively) 4,877 2,330
Sales and marketing (excluding depreciation and
amortization amounts of $26 and $12 for the
three months ended March 31, 2000 and 1999,
respectively) 2,734 1,355
General and administrative 1,914 1,137
Depreciation and amortization 114 35
--------------------- ---------------------
Total costs and expenses 13,567 6,691
--------------------- ---------------------
Loss from operations (11,994) (6,142)
Interest and other income 1,181 38
Interest expense 20 93
--------------------- ---------------------
Net loss (10,833) (6,197)
Accretion on preferred stock - (2,111)
--------------------- ---------------------
Net loss available to common stockholders $ (10,833) $ (8,308)
===================== =====================
Net loss per common share - basic and diluted $ (0.50) $ (0.91)
===================== =====================
Weighted average common shares outstanding -
basic and diluted 21,526,929 9,100,801
===================== =====================
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
WORLDGATE COMMUNICATIONS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------------------
2000 1999
---------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (10,833) $ (6,197)
Adjustments to reconcile net loss to cash used in
operating activities:
Depreciation and amortization 114 35
Bad debt expense 150 -
Amortization of deferred compensation 99 99
Amortization of debt issue costs - 63
Changes in operating assets and liabilities:
Accounts receivable (435) 97
Inventories (1,403) (51)
Prepaid and other assets 966 (326)
Accounts payable (211) (2,610)
Accrued expenses 217 54
Accrued compensation and benefits 1,051 263
Other (7) -
---------------- ----------------
Net cash used in operating activities (10,292) (8,573)
---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (209) (10)
Proceeds from maturities of short-term investments, net 10,032 -
---------------- ----------------
Net cash provided by (used in) investing activities 9,823 (10)
---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of preferred stock - 7,672
Proceeds from exercise of stock options 111 -
Stock issuance costs - (17)
Proceeds from notes payable - 6,000
Debt issue costs - (530)
Repayments of capital leases and notes payable (169) (126)
---------------- ----------------
Net cash (used in) provided by financing activities (58) 12,999
---------------- ----------------
Net (decrease) increase in cash (527) 4,416
Cash and cash equivalents, beginning of period 9,256 128
---------------- ----------------
Cash and cash equivalents, end of period $ 8,729 $ 4,544
================ ================
Noncash investing and financing activities:
Accretion on preferred stock - $ 2,111
Issuance of warrants in connection with financing agreements - 1,030
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
WORLDGATE COMMUNICATIONS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Dollar Amounts are in Thousands, Except Per Share Amounts)
(unaudited)
1. Basis of Presentation.
The unaudited financial statements of WorldGate Communications, Inc. (the
"Company") for the three months ended March 31, 2000 and March 31, 1999
presented herein have been prepared by the Company pursuant to the rules and
regulations of the Securities and Exchange Commission for quarterly reports on
Form 10-Q. 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 such rules and
regulations. These financial statements should be read in conjunction with the
financial statements for the year ended December 31, 1999 and the notes thereto
included in the Company's Statement on Form 10-K.
The financial information in this Report reflects, in the opinion of
management, all adjustments of a normal recurring nature necessary to present
fairly the results for the interim period. Quarterly operating results are not
indicative of the results that may be expected for the year ending December 31,
2000.
2. Recent Accounting Pronouncements.
On April 3, 2000 the Financial Accounting Standards Board (FASB)
issued FASB Interpretation (FIN) 44, "Accounting for Certain Transactions
Involving Stock Compensation - an Interpretation of APB 25". FIN 44
specifically answers twenty-nine questions on the implementation of APB 25
that were derived from a survey of members of the Emerging Issues Task Force
(EITF) and the task force on stock compensation. FIN 44 is effective July 1,
2000, but certain conclusions in the Interpretation cover specific events
that occur after December 15, 1998. To the extent that the Interpretation
covers events occurring during the period after December 15, 1998, but before
the effective date of July 1, 2000, the effects of applying the
Interpretation are recognized on a prospective basis from July 1, 2000.
Management is currently evaluating the impact, if any, the Interpretation
will have on the Company's financial position or results of operation.
On March 24, 2000 the Securities and Exchange Commission issued Staff
Accounting Bulletin (SAB) No. 101A which amends the implementation date of SAB
101, "Revenue Recognition" to the three month period ending June 30, 2000. SAB
101 provides guidance on the recognition, presentation, and disclosure of
revenue in financial statements. Management is currently assessing the impact,
if any, the SAB will have on the Company's financial position or results of
operations.
3. Inventories.
Inventories are summarized as follows:
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
-------------------- ----------------------
(Dollars in thousands)
<S> <C> <C>
Raw Material $3,090 $3,046
Work in Progress 1,460 340
Finished Goods 2,453 2,214
-------------------- ----------------------
$7,003 $5,600
==================== ======================
</TABLE>
Customers and vendors held $1,814 and $1,710 of the Company's finished
goods inventories at March 31, 2000 and December 31, 1999, respectively, for use
in system trials and product testing.
6
<PAGE>
4. Stockholders' Equity.
STOCK OPTION PLAN
On May 4, 2000, the Company's Board of Directors increased, subject to
stockholder approval, the total amount of common stock available under the 1996
plan to 3,200,000 shares.
EARNINGS PER SHARE
The following table is a reconciliation of the computation of net loss per
common share:
<TABLE>
<CAPTION>
Three months ended March 31
------------------------------------------------
2000 1999
---------------------- ----------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
Net loss available to common stockholders:
Net Loss $ (10,833) $ (6,197)
Accretion on preferred stock -- (2,111)
------------ ------------
Net loss available to common stockholders $ (10,833) $ (8,308)
============ ============
Basic and diluted net loss per common share*:
Weighted average shares outstanding 21,526,929 9,100,801
------------ ------------
Net loss per share - basic and diluted $ (0.50) $ (0.91)
============ ============
</TABLE>
* Common stock equivalents are not included in the computation of diluted
earnings per share as their effect would be anti-dilutive.
5. Related Party Transactions.
In 1997, the Company entered into an agreement with a cable operator who is
an investor. Revenues recognized from this investor were approximately $665 and
$431, respectively, for the three months ended March 31, 2000 and March 31,
1999. Accounts receivable amounted to approximately $815 at March 31, 2000 and
$738 at December 31, 1999.
In 1997 and 1998, the Company entered into agreements with four
stockholders to provide the Company with engineering and development support. As
a result of these agreements, the Company has expensed approximately $1,444 and
$380, respectively, for the three months ended March 31, 2000 and March 31,
1999. Accounts payable amounted to approximately $612 as of March 31, 2000 and
approximately $126 at December 31, 1999. These stockholders are suppliers of
technology and components for the Company's products and services. These
agreements provide for licensing of technology, as well as contracted services,
including hardware and software development, product testing and certification,
and the creation and development of tools and systems to facilitate the
Company's engineering efforts. These agreements do not provide for ongoing
royalties, purchase provisions, nor for any requirement to provide additional
funding to the Company.
6. Subsequent Events.
On April 28, 2000, the Company acquired the capital stock of
Digital Video Arts, Inc. (DVA), a Campbell, California based engineering
services operation providing out-sourced product development, with expertise in
digital television and 3D graphics. The acquisition will be recorded under the
purchase method of accounting. The total maximum purchase price, including
contingent consideration, is $8,006, and is to be paid in the Company's common
stock as valued at the time of payments.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
(Dollars Amounts are in Thousands, Except Per Share Amounts)
FORWARD-LOOKING AND CAUTIONARY STATEMENTS.
We may from time to time make written or oral forward-looking statements,
including those contained in the foregoing Management's Discussion and Analysis
of Financial Condition and Results of Operations. In order to take advantage of
the "safe harbor" provisions of the Private Securities Litigation Reform Act of
1995, we are hereby identifying certain important factors which could cause our
actual results, performance or achievement to differ materially from those that
may be contained in or implied by any forward-looking statement made by or on
behalf of WorldGate. The factors, individually or in the aggregate, that could
cause such forward-looking statements not to be realized include, without
limitation, the following: (1) difficulty in developing and implementing
marketing and business plans, (2) continued losses, (3) industry competition
factors and other uncertainty that a market for the WORLDGATEsm Service will
develop, (4) challenges associated with cable operators (including, uncertainty
that they will offer the WORLDGATE Service, inability to predict the manner in
which they will market and price the WORLDGATE Service and existence of
potential conflicts of interests and contractual limitations impeding their
ability to offer the WORLDGATE Service), (5) challenges associated with cable
box manufacturers (including uncertainty that they will support our technology
in their cable boxes), (6) challenges with advertisers and television
programmers (including uncertainties that they will support our CHANNEL
HYPERLINKINGsm technology), (7) loss of any one of our largest customers, (8)
departure of one or more key persons and (9) other risks identified in filings
with the Securities and Exchange Commission. We caution you that the foregoing
list of important factors is not intended to be, and is not, exhaustive. We do
not undertake to update any forward-looking statement that may be made from time
to time by or on behalf of WorldGate.
Results of Operations:
Three Months Ended March 31, 2000 and March 31, 1999.
Revenues. Revenues for the three months ended March 31, 2000 were $1,573,
an increase of 186% when compared to revenues of $549 for the three months ended
March 31, 1999. Substantially all revenues continue to be attributable to the
increase in commercial deployments of the WorldGateSM Service and cable
subscribers subscribing to the WorldGate Service as of March 31, 2000. At March
31, 2000 there were 16 commercial deployments, with approximately 19,000 cable
customers subscribing to the WorldGate Service compared to 7 commercial
deployments and approximately 2,800 cable customers subscribing at March 31,
1999. For the three months ended March 31, 2000 revenues were derived primarily
from the delivery of headends, keyboards and related products.
Costs and Expenses.
Cost of Revenues. Cost of revenues consists primarily of
product costs related to commercial deployments and WorldGate modules to be
incorporated into set-top boxes. Cost of revenues for the three months ended
March 31, 2000 was $3,928, or approximately 250% of revenues compared to the
cost of revenues of $1,833, or approximately 334% of revenues for the three
months ended March 31, 1999. This reduction in cost of revenues as a percent of
revenues is primarily attributable to the Company's reduction of unit costs and
the reduced requirement for WorldGate to supply modules to be incorporated into
set-top box deliveries.
Engineering and Development. Engineering and development
expenses primarily consist of the compensation, cost of design, programming,
testing, documentation and support of the Company's hardware, software and
services. Engineering and development costs were $4,877 for the three months
ended March 31, 2000, an increase of $2,547 when compared to $2,330 for the
three months ended March 31, 1999. The Company anticipates continued increases
in staff and expenditures for the development of new and enhanced products,
software and services.
Sales and Marketing. Sales and marketing costs consist
primarily of compensation, attendance at conferences and trade shows, travel
costs necessary to cover a domestic and international customer market
8
<PAGE>
base, promotions and other marketing programs substantially related to trial
installations and commercial deployments. For the three months ended March 31,
2000 sales and marketing expenses were $2,734. This is an increase of $1,379,
when compared to sales and marketing expenses of $1,355 for the three months
ended March 31, 1999. The increase is primarily the result of increased
expenditures for market research of $100, advertising of $206 and increases in
staff and travel expenditures of approximately $950. The Company anticipates
that these expenses will continue to increase with the expected growth in the
number of new, and the expansion of existing, commercial deployments. Increased
expenditures are also anticipated for advertising and other trade promotional
activities.
General and Administrative. General and administrative
expenses consist primarily of expenditures for administration, office and
facility operations, finance and general management activities, including legal,
accounting and other professional fees. General and administrative expenses were
$1,914 for the three months ended March 31, 2000, an increase of $777 when
compared to $1,137 for the three months ended March 31,1999. This increase was
primarily due to an increase in Allowance for Doubtful Accounts of $150, and
approximately $600 in increased legal, facility and insurance costs incurred
during the three months ended March 31, 2000 when compared to the same period in
1999. The Company relocated to larger facilities in June 1999. The Company
anticipates that general and administrative expenses will continue to increase
as the Company fills open positions and incurs additional costs such as expenses
related to directors' and officers' insurance and increased professional fees.
Interest and Other Income and Interest Expense. Interest and
other income and interest expense consist of interest earned on cash and cash
equivalents and short-term investments, and interest expense on equipment
financing and short-term debt. Interest and other income were $1,181 for the
three months ended March 31, 2000, compared to $38 for the three months ended
March 31, 1999. During the three months ended March 31, 1999 the company earned
interest on an average cash balance of approximately $1,500 and incurred
interest expense related to its $6,000 financing and $1,100 equipment financing
facility. In comparison, during the three months ended March 31, 2000, the
Company earned interest on an average cash balance of approximately $70,830 and
incurred interest expense related to its $1,100 equipment financing facility.
Income Taxes. The Company has incurred net operating losses since
inception and accordingly had no income taxes due and has not recorded any
income tax benefit for those losses.
Liquidity and Capital Resources.
As of March 31, 2000, the Company's primary source of liquidity consisted
of cash and debt instruments that are highly liquid, are of high quality
investment grade and predominantly have maturities less than one year.
At March 31, 2000, the Company had cash and cash equivalents of $8,729 (in
addition to $56,382 in short-term investments) as compared to $9,256 (in
addition to $66,414 in short-term investments) at December 31, 1999. Net cash
used in operations was $10,293 for the three months ended March 31, 2000, as
compared to $8,573 used for the same period in 1999. The increase in net cash
used in operations was primarily attributable to the Company's increased losses
during the three months ended March 31, 2000, and inventory increases in
anticipation of greater future deliveries.
Net cash for the three months ended March 31, 2000 was further reduced by
$266, reflecting the Company's repayment of equipment financing obligations and
the purchase of additional capital equipment. In comparison, net cash provided
from financing activities was $12,999 during the three months ended March 31,
1999. This was primarily the result of net proceeds received during the first
quarter of 1999 of $5,470 from a loan and $7,655 from the sale of Series C
convertible preferred stock in a private placement. These amounts were partially
offset by the repayment of capital leases and equipment financing obligations.
Y2K Compliance. Many existing computer programs use only two digits to
identify a year. These programs were designed and developed without addressing
the impact of the change in the century. If not corrected, many computer
software applications could fail or create erroneous results after year 2000. To
date, the Year 2000 issue has not had a material effect on our products,
services or operations.
On April 3, 2000 the Financial Accounting Standards Board (FASB) issued
FASB Interpretation (FIN) 44, "Accounting for Certain Transactions Involving
Stock Compensation - an Interpretation of APB 25".
9
<PAGE>
FIN 44 specifically answers twenty-nine questions on the implementation of
APB 25 that were derived from a survey of members of the Emerging Issues Task
Force (EITF) and the task force on stock compensation. FIN 44 is effective
July 1, 2000, but certain conclusions in the Interpretation cover specific
events that occur after December 15, 1998. To the extent that the
Interpretation covers events occurring during the period after December 15,
1998, but before the effective date of July 1, 2000, the effects of applying
the Interpretation are recognized on a prospective basis from July 1, 2000.
Management is currently evaluating the impact, if any, the Interpretation
will have on the Company's financial position or results of operation.
On March 24, 2000 the Securities and Exchange Commission issued Staff Accounting
Bulletin (SAB) No. 101A which amends the implementation date of SAB 101,
"Revenue Recognition" to the three month period ending June 30, 2000. SAB 101
provides guidance on the recognition, presentation, and disclosure of revenue in
financial statements. Management is currently assessing the impact, if any, the
SAB will have on the Company's financial position or results of operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
INTEREST RATE RISK. Our exposure to market risk related to changes in interest
rates relates primarily to our investment portfolio. We invest in instruments
that meet high credit quality standards, and we limit the amount of credit
exposure to any one issue, issuer and type of investment.
As of March 31, 2000, our investments consisted of $65,111 most of which
were debt securities having a maturity of less than one year. Due to the average
maturity and conservative nature of our investment portfolio, a sudden change in
interest rates would not have a material effect on the value of the portfolio.
Management estimates that had the average yield of our investments decreased by
100 basis points, our interest income for the three months ended March 31, 2000
would have decreased by less than $194. This estimate assumes that the decrease
occurred on the first day of 2000 and reduced the yield of each investment
instrument by 100 basis points. The impact on our future interest income of
future changes in investment yields will depend largely on the gross amount of
our investments.
10
<PAGE>
PART II. OTHER INFORMATION
(Dollars Amounts are in Thousands, Except Per Share Amounts)
ITEM 1. LEGAL PROCEEDINGS. There has been no material development in any of the
Legal Proceedings in which the Company is currently a party.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
INITIAL PUBLIC OFFERING/USE OF PROCEEDS.
On April 15, 1999, the Company's Registration Statement on Form S-1
(Commission file number 333-71997) covering the initial public offering of
5,750,000 shares of our common stock at twenty one dollars ($21.00) per share
was declared effective.
The net proceeds of the offering to the Company (after deducting the
foregoing expenses associated with such offering) was $111,192. From the
effective date of the Registration Statement to March 31, 2000, the net proceeds
have been used for the following purposes:
<TABLE>
<S> <C>
Construction of plant, building and facilities $ --
Purchase and installation of machinery and equipment 1,055
Purchase of real estate --
Acquisition of other business (including transaction costs) --
Repayment of indebtedness 5,893
Working capital 39,144
Temporary investments, including cash and cash equivalents 8,700
Other purposes (for which at least $100 has been used) including:
investments, including debt instruments of the United States Government
and its agencies and in high
quality corporate issuers 56,400
--------
$111,192
========
</TABLE>
Except for compensation expenses, all of the foregoing payments were direct
or indirect payments to persons other than (i) directors, officers or their
associates; (ii) persons owning ten percent (10%) or more of the Company's
common stock; or (iii) affiliates of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit Number Description
-------------- -----------
<S> <C>
27.1 Financial Data Schedules
</TABLE>
(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.
Date: May 15, 2000
/s/ Hal M. Krisbergh
---------------------------------------
Hal M. Krisbergh
President and Chief Executive Officer
/s/ James V. Agnello
---------------------------------------
James V. Agnello
Vice President and Chief Financial Officer
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 8,729,000
<SECURITIES> 56,382,000
<RECEIVABLES> 3,833,000
<ALLOWANCES> 300,000
<INVENTORY> 7,003,000
<CURRENT-ASSETS> 76,419,000
<PP&E> 2,405,000
<DEPRECIATION> 516,000
<TOTAL-ASSETS> 79,428,000
<CURRENT-LIABILITIES> 6,902,000
<BONDS> 244,000
0
0
<COMMON> 215,000
<OTHER-SE> 77,819,000
<TOTAL-LIABILITY-AND-EQUITY> 79,428,000
<SALES> 1,573,000
<TOTAL-REVENUES> 1,573,000
<CGS> 3,928,000
<TOTAL-COSTS> 9,489,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 150,000
<INTEREST-EXPENSE> 20,000
<INCOME-PRETAX> (10,833,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (10,833,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,833,000)
<EPS-BASIC> (.50)
<EPS-DILUTED> (.50)
</TABLE>
