FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter 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 1-12727
SENTRY TECHNOLOGY CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 96-11-3349733
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
350 WIRELESS BOULEVARD, HAUPPAUGE, NEW YORK 11788
(Address of principal executive offices) (Zip Code)
516-232-2100
(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 outstanding of issuer's common stock as of May 14, 1997 was
9,676,957.
<PAGE>
SENTRY TECHNOLOGY CORPORATION
INDEX
PAGE NO.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets --
March 31, 1997 and December 31, 1996 3
Condensed Consolidated Statements of Operations --
Three Months Ended March 31, 1997 and 1996 4
Consolidated Statement of Shareholders' Equity
Three Months Ended March 31, 1997 5
Condensed Consolidated Statements of Cash Flows --
Three Months Ended March 31, 1997 and 1996 6
Notes to Condensed Consolidated Financial
Statements -- March 31, 1997 7 - 9
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition 9 - 10
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 11
<PAGE>
SENTRY TECHNOLOGY CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 4,718 $ 7,658
Accounts receivable, less allowance for doubtful
accounts of $950 and $719, respectively 5,597 6,229
Net investment in sales-type leases -
current portion 1,282 1,496
Inventories 8,335 6,926
Prepaid expenses and other current assets 659 389
------ -----
Total current assets 20,591 22,698
NET INVESTMENT IN SALES-TYPE LEASES -
non-current portion 1,327 1,205
SECURITY DEVICES ON LEASE, net 222 281
PROPERTY, PLANT AND EQUIPMENT, net 7,257 7,288
GOODWILL AND OTHER INTANGIBLES, net 11,458 364
OTHER ASSETS 628 1,021
--------- ---------
$ 41,483 $ 32,857
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 2,202 $ 1,101
Accrued liabilities 4,759 2,268
Obligations under capital leases -
current portion 284 392
Deferred lease rentals 224 231
--------- ---------
Total current liabilities 7,469 3,992
OBLIGATIONS UNDER CAPITAL LEASES -
non-current portion 3,125 3,154
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARY 467 463
REDEEMABLE CUMULATIVE PREFERRED STOCK 24,009 ---
SHAREHOLDERS' EQUITY
Common stock 10 5
Additional paid-in capital 17,769 22,329
Retained earnings (accumulated deficit) (11,366) 2,914
---------- ---------
6,413 25,248
--------- ---------
$ 41,483 $ 32,857
========= =========
See notes to the condensed consolidated financial statements.
</TABLE>
<PAGE>
SENTRY TECHNOLOGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
MARCH 31,
1997 1996
<S> <C> <C>
REVENUES $5,103 $ 5,552
COSTS AND EXPENSES:
Cost of sales 2,499 2,600
Customer service expenses 837 662
Selling, general and administrative expenses 2,435 1,876
Research and development 430 372
Interest income, net (54) ---
Purchased in-process research and development 13,200 ---
------- -----
19,347 5,510
--------- -----
OPERATING PROFIT (LOSS) (14,244) 42
OTHER INCOME:
Gain on sale of assets --- 2,462
--------- ---------
INCOME (LOSS) BEFORE INCOME TAXES (14,244) 2,504
INCOME TAXES 36 626
---------- ---------
NET INCOME (LOSS) $ (14,280) $ 1,878
========= =========
NET INCOME (LOSS) PER SHARE $ (1.95) $ .37
========= =========
WEIGHTED AVERAGE COMMON SHARES 7,330 5,022
========= =========
See notes to the condensed consolidated financial statements.
</TABLE>
<PAGE>
SENTRY TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,1997
Additional Total
Common Stock Paid-in Retained Shareholders'
Shares Amount Capital Earnings Equity
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1996
(as previously reported) 5,773 $ 58 $ 22,276 $ 2,914 $ 25,248
Restatement of Knogo N.A.
shares due to the merger (971) (53) 53 --- ---
------ --------- --------- --------- --------
BALANCE, DECEMBER 31, 1996
(as restated) 4,802 5 22,329 2,914 25,248
Shares issued to Video Sentry
shareholders in connection with
the merger 4,842 5 19,449 --- 19,454
Preferred shares issued to former
Knogo N.A. shareholders in
connection with the merger --- --- (24,009) --- (24,009)
Net loss --- --- --- (14,280) (14,280)
------ --------- --------- --------- ---------
BALANCE, MARCH 31, 1997 9,644 $ 10 $ 17,769 $ (11,366) $ 6,413
===== ========= ========= ========= ========
See notes to consolidated financial statements.
</TABLE>
<PAGE>
SENTRY TECHNOLOGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended
MARCH 31,
1997 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (14,280) $ 1,878
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Write-off of purchased in-process research
and development 13,200 ---
Depreciation and amortization of security
devices and property, plant and equipment 292 277
Amortization of goodwill and intangibles 272 13
Provision for bad debts 91 26
Changes in operating assets and liabilities,
net of effects of business acquired:
Accounts receivable 1,245 3,026
Net investment in sales-type leases 92 148
Inventories (523) (327)
Accounts payable (328) (1,336)
Accrued liabilities (803) 446
Other, net 96 144
--------- ---------
Net cash (used in) provided by
operating activities (646) 4,295
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment, net --- (20)
Security devices on lease 39 (62)
--------- ----------
Net cash provided by (used in)
investing activities 39 (82)
--------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of acquired debt (2,166) ---
Repayment of obligations under capital leases (167) (68)
Exercise of stock options --- 36
--------- ---------
Net cash used in financing activities (2,333) (32)
--------- ----------
(DECREASE) INCREASE IN CASH (2,940) 4,181
CASH, at beginning of period 7,658 409
--------- ---------
CASH, at end of period $ 4,718 $ 4,590
========= =========
See notes to the condensed consolidated financial statements.
</TABLE>
<PAGE>
SENTRY TECHNOLOGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
NOTE A -- BASIS OF PRESENTATION - KNOGO NORTH AMERICA INC. AND VIDEO SENTRY
CORPORATION MERGER Sentry Technology Corporation ("Sentry") a newly publicly
traded Delaware Corporation, was established to effect the merger of Knogo North
America Inc. ("Knogo N.A.") and Video Sentry Corporation ("Video Sentry") which
was consummated on February 12, 1997 (the "Effective Date"). The merger resulted
in Knogo N.A. and Video Sentry becoming wholly owned subsidiaries of Sentry. The
term "Company" refers to Sentry as of and subsequent to February 12, 1997 and to
Knogo N.A. prior to such date.
Pursuant to the merger agreement, Sentry issued one share of Common Stock for
each one share of Video Sentry Common Stock outstanding at the effective time of
the merger. Sentry also issued one share of Common Stock and one share of Class
A Preferred Stock for each 1.2022 shares of Knogo N.A. Common Stock outstanding.
The Sentry Class A Preferred Stock has a face value of $5.00 per share and a
cumulative dividend rate of 5.0% (the first two years of which are
paid-in-kind). The preferred is non-voting and subject to a mandatory redemption
four years from the date of issuance and optional redemption by Sentry at any
time after one year from the date of issuance. The redemption price will be
equal to $5.00 per preferred share (plus accrued and unpaid dividends as of the
redemption date) plus the amount, if any, by which the market price of Sentry's
Common Stock at the time of redemption exceeds a hurdle price based on the price
of Sentry Common Stock one year after the Effective Date. The minimum hurdle
price is $5.00 per share and the maximum is $6.50. The preferred stock is not
convertible, but the redemption price may, in certain circumstances, be paid in
common stock at Sentry's option. Undeclared and unpaid cumulative dividends
totaled $154,000 as of March 31, 1997.
The merger was accounted for under the purchase method of accounting and
accordingly, the acquired assets and assumed liabilities have been recorded at
their estimated fair market values at the date of acquisition. Goodwill and
other intangibles in the amount of approximately $11,350,000 have been
capitalized and non-recurring charges of approximately $13,200,000 relating to
in-process research and development have been expensed. The goodwill and other
intangibles will be amortized over an estimated useful life of seven years.
Although Video Sentry shareholders have a majority voting interest in Sentry
based upon their common stock ownership percentage, generally accepted
accounting principles requires consideration of a number of factors, in addition
to voting interest, in determining the acquiring entity for purposes of purchase
accounting treatment. Such other factors to be considered include: (i) key
Sentry management positions are held by individuals previously holding similar
such positions in Knogo N.A.; (ii) the assets, revenues and net earnings of
Knogo N.A. significantly exceed those of Video Sentry; and (iii) the market
value of the securities received by the former holders of Knogo N.A. Common
Stock significantly exceeds the market value of the securities received by the
former holders of Video Sentry Common Stock. As a result of these other factors,
and solely for accounting and financial reporting purposes, the merger has been
accounted for as a reverse acquisition of Video Sentry by Knogo N.A. Accordingly
the financial statements of Knogo N.A. are the historical financial statements
of Sentry and the results of Sentry's operations include the results of
operations of Video Sentry after the Effective Date.
The consolidated balance sheet reflects the merger as of February 12, 1997, when
Sentry acquired all of the outstanding Video Sentry Common Stock at its fair
value plus direct costs incurred which are approximately $2,383,000. The
consolidated statements of operations and cash flows include the historical
results of Knogo N.A. in all periods presented and include the results of Video
Sentry after the Effective Date.
The consolidated financial statements are unaudited. In the opinion of
management, all adjustments, consisting of normal recurring adjustments
necessary for a fair presentation of the financial information for the periods
indicated have been included. Interim results are not necessarily indicative of
results for a full year.
NOTE B -- RESTATEMENT
Common stock, additional paid-in capital and the weighted average common shares
have been retroactively restated to the earliest year presented in order to
reflect the effect of the recapitalization that occurred during the reverse
acquisition.
<PAGE>
SENTRY TECHNOLOGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
NOTE C -- NET INVESTMENT IN SALES-TYPE LEASES The Company is the lessor of
security devices under agreements expiring in various years through 2001. The
net investment in sales-type leases consists of:
<TABLE>
<CAPTION>
MARCH 31, 1997 DECEMBER 31, 1996
-------------- -----------------
(in thousands)
<S> <C> <C>
Minimum lease payments receivable $ 3,053 $ 3,152
Allowance for uncollectible minimum
lease payments (153) (157)
Unearned income (321) (324)
Unguaranteed residual value 30 30
--------- ---------
Net investment 2,609 2,701
Less current portion 1,282 1,496
--------- ---------
Non-current portion $ 1,327 $ 1,205
========= =========
</TABLE>
NOTE D -- INVENTORIES Inventories consist of the following:
<TABLE>
<CAPTION>
MARCH 31, 1997 DECEMBER 31, 1996
-------------- -----------------
(in thousands)
<S> <C> <C>
Raw materials $ 3,379 $ 2,498
Work-in-process 3,270 2,547
Finished goods 1,686 1,881
--------- ---------
$ 8,335 $ 6,926
========= =========
</TABLE>
Reserves for excess and obsolete inventory totaled $1,778,000 and $1,691,000 as
of March 31, 1997 and December 31, 1996, respectively and have been included as
a component of the above amounts.
NOTE E -- SUPPLY AGREEMENT
Knogo N.A. has a supply agreement in which Sensormatic is obligated to purchase
products from Knogo N.A. in the amount of $12,000,000 during 1995 and an
additional $12,000,000 during the ensuing 18 months. Such products are priced to
yield Knogo N.A. a 35% gross margin. Sales under the supply agreement were
$774,000 and $2,163,000 in the quarters ended March 31, 1997 and 1996,
respectively. During the quarter ended March 31, 1997, Sensormatic did not meet
its minimum purchase amounts and, in accordance with the agreement, was charged
with a profit factor on the shortfall of $502,000 which was included in
revenues. Included in accounts receivable as of March 31, 1997 and December 31,
1996 are amounts due from Sensormatic of $896,000 and $1,212,000, respectively.
NOTE F -- GAIN ON SALE OF ASSETS
In March 1996, the Company completed the sale of certain assets (primarily
patents and technology) of its library security systems business to Minnesota
Mining and Manufacturing Company ("3M") for a purchase price of $3 million, paid
at closing. In connection with such sale, Knogo N.A. and 3M entered into an
agreement pursuant to which the Company has become a distributor of certain of
3M's library systems products for an initial term of three years and has agreed
not to compete with 3M in the sale of security systems products (other than
closed circuit video systems) in the library market except as otherwise
contemplated by the transaction documentation. The parties also settled certain
patent litigation between them.
<PAGE>
SENTRY TECHNOLOGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
The impact of the transaction resulted in an increase in cash of $3 million and
pretax gain of approximately $2.5 million in the quarter ended March 31, 1996.
The impact on the Company's historical revenues and net income from the sale of
products covered by the patents and related technology sold is not material.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS:
Consolidated revenues were 8% lower in the first quarter ended March 31, 1997
than in the quarter ended March 31, 1996. Revenues from customers other than
Sensormatic in the current period were $3,827,000 or 75% of total revenues as
compared to $3,389,000 or 61% of total revenues in the prior period. As the
merger only became effective February 12, 1997, revenues from Video Sentry's
product lines contributed only $358,000 but still represented the majority of
the increase in the quarter. In 1996, the Company entered into a contract with a
retail customer which provided for additional revenues if certain shrinkage
reductions were met. In the first quarter of 1997, the Company was notified by
the customer that although there were overall shrinkage reductions, the
contractual target amounts were not achieved and, therefore, the additional
revenues for those stores would not be due. Subsequently, however, the customer
amended and renewed its master agreement with the Company to be the exclusive
supplier of EAS and CCTV equipment for the next five years with standard pricing
and terms. Sales under the Supply Agreement with Sensormatic in the first
quarter of 1997 were significantly lower representing $774,000 or 15% of total
revenues as compared to $2,163,000 or 39% of total revenues in the first quarter
of 1996. Under the terms of the Supply Agreement, Sensormatic had minimum
obligations to purchase $2 million in each of the two remaining quarters of 1997
before the agreement expires on June 30. As Sensormatic did not meet its minimum
order amounts in the current period, the Company recorded in revenues $502,000
which represented the minimum contractual margins on the shortfall. Based on
meetings with Sensormatic management and forecasts received, the Company expects
that the minimum order amounts will not be met in the next quarter and
Sensormatic will be obligated to pay the Company the agreed upon margins on the
shortfall. Sentry anticipates replacing these future revenues with continued
growth in its core markets and through the promotion of the SentryVision(TM)
product line. Sales represented 80% and service revenues and other income 20% of
total revenues in 1997 as compared to 90% and 10% in 1996.
Cost of sales were 49% of total revenues in the quarter ended March 31,
1997 compared to 47% in the same period in the previous year. The cost of sales
percentage is impacted by several factors including the mix of products sold to
its own third party customers and the amount of sales to Sensormatic under the
Supply Agreement. In the first quarter of 1997, the Company sold a higher
percentage of CCVS equipment and 3M library products to its third party
customers than in the same period in 1996. These products are not manufactured
directly by Sentry and carry lower margins than the traditional EAS products it
does produce. In the first three months of 1997 cost of sales was also
negatively impacted by the lower production levels at the Company's Puerto Rico
manufacturing facility due to the decline in sales to Sensormatic and the
ramping up for the production of Sentry Vision(TM) products which had not yet
commenced.
Customer service expenses were higher in the first quarter of 1997 as
compared to the first quarter of 1996 due to the addition of Video Sentry
customer service staff, technical updates made to the existing installed Video
Sentry customer base and cross training for existing staff on EAS and CCTV
(including SentryVision(TM)) product lines.
<PAGE>
SENTRY TECHNOLOGY CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The increase in selling, general and administrative expenses in the first
quarter of 1997 as compared to the first quarter of 1996 is primarily a result
of the amortization of acquired goodwill and intangibles, merger related
integration and sales promotion expenses and higher provisions for bad debts.
The increase in research and development costs in the quarter ended March 31,
1997 as compared to the quarter ended March 31, 1996 is a result of the
continuing efforts towards improving the SentryVision(TM) traveling CCTV
surveillance system which the Company commenced selling in the first quarter of
1997.
In the first quarter of 1997 when the merger was consummated, Sentry recorded a
non-recurring charge of $13,200,000 relating to purchased in-process research
and development. The amount was based on the purchase price allocation and a
valuation of existing technology and technology in-process. The charge for
in-process research and development equaled its estimated current fair value
based on a risk adjusted cash flows of specifically identified technologies for
which the technological feasibility has not been established and alternative
future uses did not exist.
The Company's interest income was $75,000 in the first quarter of 1997 as
compared to $21,000 in the same period of 1996. The increase is due to the
investment of the proceeds from the sale/leaseback transaction of the Company's
corporate headquarters at the end of 1996. These amounts are shown net of
interest expense of $21,000 in both periods related to capitalized leases.
In the first quarter of 1996, the Company sold certain assets to 3M, consisting
of patents and technology, for a purchase price of $3 million. The proceeds, net
of certain costs including patent costs, inventory write downs, new product
training costs, legal and other costs, resulted in a gain of approximately $2.5
million which is included in the results of that period. See Note F.
Sentry's lower income taxes in the current period represents the normal
provisions on the earnings of the Puerto Rico manufacturing operations. The
higher amount in the 1996 period was primarily related to the tax on the gain on
the sale of assets to 3M which were taxed at the statutory federal tax rate.
As a result of the foregoing, Sentry had a net loss of $14,280,000 in the
quarter ended March 31, 1997 as compared to net income of $1,878,000 in the
quarter ended March 31, 1996.
FINANCIAL CONDITION AS OF MARCH 31, 1997
During the quarter and primarily as a result of the merger, Sentry used
approximately $2.9 million in cash. The Company utilized existing funds of $2.2
million to retire acquired Video Sentry debt. As of March 31, 1997 the Company
had no bank debt.
Before the end of May 1997, Sentry intends to enter into a new credit
arrangement with Knogo N.A.'s present lender, Fleet Bank, and thereafter to make
advances to each of Video Sentry and Knogo N.A. as the business of the two
subsidiaries may require. Based upon discussions between Knogo N.A.'s management
and senior lending officers at Fleet Bank, Sentry believes that a new facility
will be made available to it for at least the same amount, and on substantially
the same terms, as are currently made available to Knogo N.A. Such facility
would be secured by a lien on substantially all of the assets of Sentry and its
subsidiaries.
Despite the expiration of the Supply Agreement, the Company anticipates that
current cash reserves, cash generated by operations and cash obtained under the
bank credit facility expected to be entered into by Sentry will be adequate to
finance its anticipated working capital requirements as well as future capital
expenditure requirements for at least the next twelve months.
<PAGE>
SENTRY TECHNOLOGY CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
On January 14, 1997, Video Sentry, at that time the sole
shareholder of the Corporation, executed a written consent
appointing additional directors of the Corporation. On February
12, 1997, prior to the consummation of the merger, Video Sentry,
as sole shareholder of the Corporation, executed a written
consent approving the adoption of the Corporation's 401(k) Plan
and the Stock Incentive Plan.
Item 6. Exhibits and Reports on Form 8-K
(a) List of Exhibits:
27. Financial Data Schedule (For SEC use only)
(b) Reports on Form 8-K
On February 27, 1997, the Corporation filed a Current Report on
Form 8-K reporting under Item 2 the consummation of the merger of
Knogo N.A. and Video Sentry into wholly-owned subsidiaries of the
Corporation. This Form 8-K was amended on April 28, 1997 to set
forth the financial information required by the Form.
On March 10, 1997, the Corporation filed a Current Report on Form
8-K reporting under Item 2 the consummation in December 1996 of a
sale/leaseback transaction of the Hauppauge, New York facility of
Knogo N.A. The transaction had been reported previously by Knogo
N.A. under Item 5 of Form 8-K.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant had duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SENTRY TECHNOLOGY CORPORATION
Date: MAY 15, 1997 By: /S/ PETER J. MUNDY
-------------------------
Peter J. Mundy, Vice
President - Finance and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE PERIOD ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1997
<CASH> 4,718
<SECURITIES> 0
<RECEIVABLES> 6,547
<ALLOWANCES> 950
<INVENTORY> 8,335
<CURRENT-ASSETS> 20,591
<PP&E> 13,434
<DEPRECIATION> 6,177
<TOTAL-ASSETS> 41,483
<CURRENT-LIABILITIES> 7,469
<BONDS> 3,125
24,009
0
<COMMON> 10
<OTHER-SE> 6,403
<TOTAL-LIABILITY-AND-EQUITY> 41,483
<SALES> 4,078
<TOTAL-REVENUES> 5,103
<CGS> 2,499
<TOTAL-COSTS> 16,811
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 91
<INTEREST-EXPENSE> (54)
<INCOME-PRETAX> (14,244)
<INCOME-TAX> 36
<INCOME-CONTINUING> (14,280)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (14,280)
<EPS-PRIMARY> (1.95)
<EPS-DILUTED> (1.95)
</TABLE>
