<PAGE>
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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 QUARTER ENDED MARCH 31, 2000
COMMISSION FILE NUMBER 000-25475
-------------------
LATITUDE COMMUNICATIONS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 94-3177392
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
2121 TASMAN DRIVE, SANTA CLARA, CA 95054
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
(408) 988-7200
(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 30, 2000, there were 19,106,692 shares of the registrant's Common
Stock outstanding.
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<PAGE>
INDEX
<TABLE>
<S> <C>
PAGE
----
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Condensed consolidated balance sheets at March 31, 2000
and December 31, 1999............................................................ 3
Condensed consolidated statements of operations for the three
months ended March 31, 2000 and 1999............................................. 4
Condensed consolidated statements of cash flows for the three
months ended March 31, 2000 and 1999............................................. 5
Notes to condensed consolidated financial statements............................. 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.......................................................... 7
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK....................... 16
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS................................................................ 17
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS........................................ 17
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.................................................. 17
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.............................. 17
ITEM 5. OTHER INFORMATION................................................................ 17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................................................. 17
SIGNATURE........................................................................................ 18
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
LATITUDE COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
--------------- --------------
(UNAUDITED)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents................................................... $ 7,772 $ 10,847
Short-term marketable securities............................................ 28,271 31,611
Accounts receivable, net.................................................... 7,513 8,006
Inventory................................................................... 837 832
Prepaid and other assets.................................................... 1,720 1,508
Deferred tax asset.......................................................... 3,457 3,457
-------------- -------------
Total current assets.................................................... 49,570 56,261
Property and equipment, net.................................................... 3,365 2,655
Long-term marketable securities................................................ 6,277 --
Deposits and other long-term assets............................................ 208 199
Deferred tax asset............................................................. 939 939
-------------- -------------
Total assets............................................................ $ 60,359 $ 60,054
============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable............................................................ $ 1,345 $ 650
Accrued expenses............................................................ 3,925 4,181
Deferred revenue............................................................ 5,296 6,083
Current portion of long-term debt........................................... 523 576
-------------- -------------
Total current liabilities............................................... 11,089 11,490
Long-term debt................................................................. 347 453
-------------- -------------
Total liabilities....................................................... 11,436 11,943
-------------- -------------
Stockholders' equity:
Common stock, $0.001 par value.............................................. 19 19
Additional paid-in capital.................................................. 56,561 56,624
Notes receivable from common stockholders................................... (31) (61)
Deferred stock compensation................................................. (1,141) (1,441)
Accumulated other comprehensive loss........................................ (376) (77)
Accumulated deficit......................................................... (6,109) (6,953)
-------------- ------------
Total stockholders' equity.............................................. 48,923 48,111
-------------- -------------
Total liabilities and stockholders' equity........................ $ 60,359 $ 60,054
============== =============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
3
<PAGE>
LATITUDE COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
------------------
2000 1999
------- -------
<S> <C> <C>
Revenue:
Product........................................................... $7,388 $ 4,627
Service........................................................... 2,977 1,801
------ -------
Total revenue................................................... 10,365 6,428
Cost of revenue:
Product........................................................... 1,226 817
Service (exclusive of non-cash compensation expenses of $19 and
$22 in 2000 and 1999, respectively)............................. 1,502 903
------ -------
Total cost of revenue........................................... 2,728 1,720
------ -------
Gross profit......................................................... 7,637 4,708
------ -------
Operating expenses:
Research and development (exclusive of non-cash compensation
expenses of $20 and $20 in 2000 and 1999, respectively)......... 1,532 903
Marketing and sales (exclusive of non-cash compensation expenses
of $25 and $78 in 2000 and 1999, respectively).................. 4,360 2,868
General and administrative (exclusive of non-cash compensation
expenses of $63 and $75 in 2000 and 1999, respectively)......... 765 426
Amortization of deferred stock compensation....................... 127 195
------ -------
Total operating expenses........................................ 6,784 4,392
------ -------
Income from operations............................................... 853 316
Interest income (expense), net....................................... 587 (8)
------ -------
Income before provision for income taxes............................. 1,440 308
Provision for income tax............................................. (596) (20)
------ -------
Net income........................................................... $ 844 $ 288
====== =======
Other comprehensive income (loss), net of tax--
Unrealized loss on securities..................................... (156) --
------ -------
Comprehensive income................................................. $ 688 $ 288
====== =======
Net income per share--basic........................................... $ 0.05 $ 0.08
======= ========
Shares used in per share calculation--basic........................... 18,662 3,444
======= ========
Net income per share--diluted......................................... $ 0.04 $ 0.02
======= ========
Shares used in per share calculation--diluted......................... 20,059 16,767
======= ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
4
<PAGE>
LATITUDE COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------
2000 1999
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income.................................................................... $ 844 $ 288
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization............................................. 370 172
Provision for (recoveries of) excess and obsolete inventory.............. 97 (63)
Provision for doubtful accounts........................................... 74 --
Amortization of deferred stock compensation............................... 127 195
Changes in operating assets and liabilities:
Accounts receivable..................................................... 419 985
Inventory............................................................... (102) (243)
Prepaids and other assets............................................... (212) (335)
Accounts payable........................................................ 695 (79)
Accrued liabilities..................................................... (256) (3)
Deferred revenue........................................................ (787) 222
---------- ----------
Net cash provided by operating activities........................... 1,269 1,139
---------- ----------
Cash flows from investing activities:
Purchases of property and equipment........................................... (1,080) (246)
Purchases of available for sale securities.................................... (13,375) --
Maturities of available for sale securities................................... 10,139 --
Other......................................................................... (9) (364)
---------- ----------
Net cash used in investing activities............................... (4,325) (610)
---------- ----------
Cash flows from financing activities:
Proceeds from issuance of common stock........................................ 107 14
Repayment of notes payable and capital lease obligations...................... (159) (149)
Other......................................................................... 33 21
---------- ----------
Net cash used in financing activities............................... (19) (114)
---------- ----------
Net increase (decrease) in cash and cash equivalents............................. (3,075) 415
Cash and cash equivalents, beginning of period................................... 10,847 3,982
---------- ----------
Cash and cash equivalents, end of period......................................... $ 7,772 $ 4,397
========== ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
5
<PAGE>
LATITUDE COMMUNICATIONS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--THE COMPANY AND BASIS OF PRESENTATION
Latitude Communications, Inc. (the "Company") is a leading provider of
enterprise e-conferencing solutions that enable geographically dispersed
organizations to collaborate in real time. The company's award-winning
MeetingPlace system is designed for enterprise-wide deployment to improve the
ability of employees, partners, and customers to meet and work. With
MeetingPlace, participants can schedule and attend a meeting, view, share and
edit documents, and capture and retrieve meeting content. MeetingPlace is
designed to be an enterprise-wide resource and to leverage existing technologies
such as telephones, cellular phones and personal computers. Moreover, we expect
that the dramatic growth in web browsers and collaborative software applications
will drive e-conferencing as an important business application of the Internet.
The accompanying unaudited condensed consolidated financial statements
reflect all adjustments which, in the opinion of management, are necessary for a
fair presentation of the results for the periods shown. The results of
operations for such periods are not necessarily indicative of the results
expected for the full year or for any future period. The balance sheet at
December 31, 1999 was derived from audited financial statements, however, it
does not include all disclosures required by generally accepted accounting
principles.
The financial statements and related disclosures have been prepared with
the presumption that users of the interim financial information have read or
have access to the audited financial statements for the preceding fiscal year.
Accordingly, these financial statements should be read in conjunction with the
audited financial statements and the related notes thereto contained in the
Company's Annual Report on Form 10-K for the year ended December 31, 1999, dated
March 30, 2000.
NOTE 2--INVENTORY
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
---------- ------------
(UNAUDITED)
<S> <C> <C>
Raw materials...................................................... $ 523 $ 240
Finished goods..................................................... 314 592
---------- ------------
$ 837 $ 832
========== ============
</TABLE>
NOTE 3--RECENT ACCOUNTING PRONOUNCEMENTS
In December 1998, AcSEC released Statement of Position 98-9, or SOP 98-9,
Modification of SOP 97-2, "Software Revenue Recognition," with Respect to
Certain Transactions. SOP 98-9 amends SOP 97-2 to require that an entity
recognize revenue for multiple element arrangements by means of the "residual
method" when (1) there is vendor-specific objective evidence ("VSOE") of the
fair values of all the undelivered elements that are not accounted for by means
of long-term contract accounting, (2) VSOE of fair value does not exist for one
or more of the delivered elements, and (3) all revenue recognition criteria of
SOP 97-2 (other than the requirement for VSOE of the fair value of each
delivered element) are satisfied. The provisions of SOP 98-9 that extend the
deferral of certain paragraphs of SOP 97-2 became effective December 15, 1998.
These paragraphs of SOP 97-2 and SOP 98-9 will be effective for transactions
that are entered into in fiscal years beginning after March 15, 1999.
Retroactive application is prohibited. The Company adopted SOP 98-9 on January
1, 2000 and the adoption did not have a material effect on its results of
operations.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, or SFAS 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133 establishes new standards of
accounting and reporting for derivative instruments and hedging activities and
will be adopted by the Company in the third quarter of 2000. SFAS 133 requires
that all derivatives be recognized at fair value in the statement of financial
position, and that the corresponding gains or losses be reported either in the
statement of operations or as a component of comprehensive income, depending on
the type of hedging relationship that exists. The Company does not currently
hold derivative instruments or engage in hedging activities. The Company is
currently evaluating the impact SFAS 133 will have on its financial position
and results of operations.
6
<PAGE>
In November, 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin 100, or SAB 100, which clarifies the SEC's views on
accounting for and disclosing certain expenses incurred in connection with exit
activities and business combinations. The Company does not expect SAB 100 to
have a material effect on its financial position, results of operations or cash
flow. In December, 1999, SAB 101 was issued which summarizes the SEC's views in
applying generally accepted accounting principles to revenue recognition in
financial statements. SAB 101 is effective beginning in the second quarter of
2000. The Company is currently evaluating the impact SAB 101 will have on its
financial position and results of operations.
In March 2000, the Financial Accounting Standards Board issued
Interpretation No. 44 or FIN 44 Accounting for Certain Transactions involving
Stock Compensation an interpretation of APB Opinion No. 25. FIN 44 clarifies the
application of Opinion 25 for (a) the definition of employee for purposes of
applying Opinion 25, (b) the criteria for determining whether a plan qualifies
as a noncompensatory plan, (c) the accounting for an exchange of stock
compensation awards in a business combination. FIN 44 is effective July 1, 2000,
but certain conclusions cover specific events that occur after either December
15, 1998, or January 12, 2000. The Company believes that the impact of FIN 44
will not have a material effect on its financial position or results of
operations.
NOTE 4--NET INCOME PER SHARE
Basic net income per share is computed by dividing net income available to
common stockholders by the weighted average number of vested common shares
outstanding for the period. Diluted net income per share is computed giving
effect to all dilutive potential common shares, including options, warrants and
preferred stock.
A reconciliation of the numerator and denominator of basic and diluted EPS
is provided as follows (in thousands, except per share amounts).
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------
2000 1999
----------- -----------
(UNAUDITED)
<S> <C> <C>
Net income per share, basic and diluted:
Numerator for net income, basic and diluted................. $ 844 $ 288
---------- ----------
Denominator for basic net income per share:
Weighted average vested common shares outstanding......... 18,662 3,444
---------- ----------
Net income per share basic.................................. $ 0.05 $ 0.08
========== ==========
Denominator for diluted earnings per share:
Weighted average vested common shares outstanding......... 18,662 3,444
Effect of dilutive securities:
Nonvested common shares................................. 314 294
Common stock options.................................... 1,042 1073
Warrants................................................ 41 120
Convertible preferred stock............................. -- 11,836
---------- ----------
Weighted average common and common equivalent shares........ 20,059 16,767
---------- ----------
Net income per share diluted................................ $ 0.04 $ 0.02
========== ==========
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
This Management's Discussion and Analysis of Financial Condition and
Results of Operations and other parts of this Form 10-Q contain forward-looking
statements that involve risks and uncertainties. Words such as "anticipates,"
"expects," "intends," "plans," "believes," "seeks," "estimates," and similar
expressions identify such forward-looking statements. These statements are not
guarantees of future performance and are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
expressed or forecasted. Factors that might cause such a difference include, but
are not limited to, those discussed in the section entitled "Factors That May
Affect Future Results" and those appearing elsewhere in this Form 10-Q. Readers
are cautioned not to place undue reliance on these forward-looking statements,
which reflect management's analysis only as of the date
7
<PAGE>
hereof. The Company assumes no obligation to update these forward-looking
statements to reflect actual results or changes in factors or assumptions
affecting such forward-looking statements.
OVERVIEW
We are a leading provider of integrated voice and data conferencing
solutions for geographically dispersed organizations. We develop, market and
support our MeetingPlace system, which allows companies to conduct virtual
meetings and extend real-time decision making processes irrespective of the
geographic location of participants. With MeetingPlace, participants can
schedule and attend a meeting, view, share and edit documents, and capture and
retrieve meeting content. MeetingPlace is designed to be an enterprise-wide
resource and to leverage existing technologies such as telephones, cellular
phones and personal computers.
We generate revenue from sales of our MeetingPlace products and related
services revenue. Revenue derived from product sales constituted 71% of total
revenue in the first quarter of 2000 and 72% during the corresponding period of
1999. Product revenue is generally recognized upon shipment. We calculate an
allowance for returns based on historical rates. Service revenue includes
revenue from implementation and integration services, system management
services, warranty coverage and customer support. Revenue from implementation
and system integration services is recognized as the services are performed,
while revenue from system management services, warranty coverage and customer
support is recognized ratably over the period of the contract.
We sell our MeetingPlace products primarily through our direct sales force
and, to a lesser extent, through indirect distribution channels. The majority of
our revenue is derived from Fortune 1000 companies, many of which initially
purchase MeetingPlace servers and later expand deployment of our products as
they require additional capacity for voice and data conferencing. In 1997, we
expanded into international markets by opening a sales office in the United
Kingdom and establishing distributor relationships in Hong Kong and Singapore,
and in 1998, we established a distributor relationship in Australia. While we
intend to increase sales through indirect channels and internationally, we
cannot assure you that we will be successful. In 1998, we expanded the breadth
of our support services by establishing a consulting services group to provide
expanded implementation services, system management services and customized
project consulting.
Total cost of revenue consists of component and materials costs, direct
labor costs, warranty costs, royalties and overhead related to manufacturing of
our products, as well as materials, travel and labor costs related to personnel
engaged in our service operations. Product gross margin is impacted by the
proportion of product revenue derived from software sales, which typically carry
higher margins than hardware sales, and from indirect distribution channels,
which typically carry lower margins than direct sales. Service gross margin is
impacted by the mix of services we provide, which have different levels of
profitability, and the efficiency with which we provide full care support and
other services to our customers.
8
<PAGE>
RESULTS OF OPERATIONS
The following table lists, for the periods indicated, the percentage of
total revenue of each line item from our condensed consolidated statement of
operations to total revenues:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------
2000 1999
----------- -----------
Revenue:
<S> <C> <C>
Product............................................. 71.3% 72.0%
Service............................................. 28.7% 28.0%
---------- ----------
Total revenue................................... 100.0% 100.0%
Cost of revenue:
Product............................................. 11.8% 12.7%
Service............................................. 14.5% 14.1%
---------- ----------
Total cost of revenue........................... 26.3% 26.8%
---------- ----------
Gross profit........................................... 73.7% 73.2%
---------- ----------
Operating expenses:
Research and development............................ 14.8% 14.0%
Marketing and sales................................. 42.1% 44.6%
General and administrative.......................... 7.4% 6.6%
Amortization of deferred stock compensation......... 1.2% 3.1%
---------- ----------
Total operating expenses........................ 65.5% 68.3%
---------- ----------
Income from operations................................. 8.2% 4.9%
Interest income (expense), net......................... 5.7% (0.1)%
---------- ----------
Income before provision for income tax................. 13.9% 4.8%
Provision for income tax............................... (5.8)% (0.3)%
---------- ---------
Net income............................................. 8.1% 4.5%
========== =========
</TABLE>
PRODUCT REVENUE
Product revenue was $7.4 million for the first quarter of 2000, which
represented an increase of 60% when compared to the corresponding period of
1999. The increase was due primarily to increased sales of our MeetingPlace
products domestically to new customers, increased sales of additional products
and features to existing customers, and, to a lesser extent, increased
international sales. International sales represented approximately 11% and 5% of
product revenue in the three months ended March 31, 2000 and 1999, respectively.
SERVICE REVENUE
Service revenue was $3.0 million for the first quarter of 2000, which
represented an increase of 65% when compared to the corresponding period of
1999. The increase was attributable primarily to growth in our customer base
during this period, which led to increased sales of full care support services,
as well as the introduction of additional consulting services such as managed
services and expanded implementation and integration services.
TOTAL COST OF REVENUE
Total cost of revenue was $2.7 million for the first quarter of 2000, which
represented an increase of 59% when compared to the corresponding period of
1999. The increase in total cost of revenue was attributable primarily to
increased sales of our MeetingPlace products and related services, as well as
the increased size of our services staff and the costs of providing services to
support an increasingly geographically dispersed customer base. Resulting gross
profit was $7.6 million for the first quarter of 2000, as compared to $4.7
million in the corresponding period of 1999. Gross margin was 74% as a
percentage of revenue, for the first quarter of 2000, as compared to 73% for the
corresponding period of 1999.
9
<PAGE>
Product gross margin increased slightly to 83% as a percentage of product
revenue for the first quarter of 2000 as compared to 82% for the corresponding
period of 1999. We expect that product gross margin may decrease in the future
due in part to potential pricing pressure and an expected increase in the
proportion of revenue derived from indirect distribution channels.
Service gross margin was 50% as a percentage of revenue for both the first
quarter of 2000, and the corresponding period in 1999. We expect that service
gross margin may decline in the future as a result of the addition of support
personnel, potential pricing pressure and an increase in the mix of lower margin
service offerings.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses consist primarily of compensation and
related costs for research and development personnel, facilities expenses for
testing space and equipment and royalty payments. Research and development
expenses were $1.5 million for the first quarter of 2000, which represented
increase of 70% when compared to corresponding period in 1999. As a percentage
of total revenues, research and development expenses rose from 14% in the first
quarter of 1999 to 15% in the first quarter of 2000. The increase was
attributable primarily to the addition of personnel in our research and
development organization associated with product development. We expect to
continue to make substantial investments in research and development and
anticipate that research expenses will continue to increase in absolute dollars.
MARKETING AND SALES EXPENSES
Marketing and sales expenses consist primarily of promotional expenditures
and compensation and related costs for marketing and sales personnel. Marketing
and sales expenses were $4.4 million for the first quarter of 2000, which
represented increases of 52% when compared to corresponding period in 1999. As a
percentage of total revenues, marketing and sales expenses declined from 45% in
the first quarter of 1999 to 42% in the first quarter of 2000. The decrease in
marketing and sales expenses as a percentage of revenue was due primarily to
increased revenue. The increase in absolute dollars of $1.5 million for the
first quarter of 2000 as compared to the corresponding period in 1999, reflected
the addition of personnel in our sales and marketing organizations, as well as
costs associated with increased selling efforts to develop market awareness of
our products and services.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses consist primarily of personnel
expenses, legal and accounting expenses and other general corporate expenses.
General and administrative expenses were $765,000 for the first quarter of 2000,
which represented an increase of 80% when compared to the corresponding period
in 1999. As a percentage of total revenues, general and administrative expenses
were constant at 7% in the first quarter of both 2000 and 1999. The increase in
absolute dollars was attributable primarily to the addition of personnel in our
general and administrative organization and expenses in connection with being a
public company. We expect general and administrative expenses to increase in
absolute dollars as we add personnel and incur additional costs related to the
anticipated growth of our business and operation as a public company.
AMORTIZATION OF DEFERRED STOCK COMPENSATION
In connection with the completion of our initial public offering in May
1999, options granted in the last quarter of 1997, 1998 and the first quarter of
1999 have been considered to be compensatory. Total deferred stock compensation
associated with these options as of March 31, 2000 amounted to $3.1 million, of
which $2,000, $299,000, $752,000 and $127,000 had been amortized to expense in
1997, 1998, 1999 and the first quarter of 2000, respectively. These amounts are
being amortized based on the vesting period of these options, most of which are
over 48 months. We expect amortization of approximately $359,000 in the balance
of 2000, $472,000 in 2001 and $314,000 in 2002 related to the options presently
outstanding.
INTEREST INCOME (EXPENSE), NET
Interest income, net of interest expense, was $587,000 for the first
quarter of 2000, compared to interest expense, net of interest income, of
$(8,000) for the corresponding period in 1999. Interest expense was related to
obligations under capital leases and equipment loans. The increase in net
interest income was attributable primarily
10
<PAGE>
to interest income earned on higher cash and marketable securities average
balances in the first quarter of 2000, primarily from net proceeds from our
initial public offering in May 1999.
INCOME TAXES
For the quarter ended March 31, 2000, the provision for income tax was
$596,000, compared to $20,000 in the quarter ended March 31, 1999. Our effective
tax rate was approximately 41% for the first quarter of 2000 and approximately
6% for the same period in 1999. The rate in 1999 was lower than the statutory
U.S. federal rate due primarily to the utilization of net operating loss
carryforwards.
LIQUIDITY AND CAPITAL RESOURCES
In May 1999, we completed an initial public offering of common stock,
resulting in net proceeds to us of approximately $33.8 million. As of March 31,
2000, we had $42.3 million of cash, cash equivalents and investments, which
represented 70% of total assets.
Cash provided by operating activities was $1.3 million in the first three
months of 2000, compared to $1.1 million in the same period of 1999. Cash
provided by operating activities in the first three months of 2000 increased
relative to the same period in 1999 due to adjustments for non-cash items
and for changes in working capital.
Cash used in investing activities in the first three months of 2000 was
$4.3 million, which consisted primarily of the purchase of marketable securities
of $13.4 million and purchase of property and equipment of $1.1 million,
partially offset by maturities of marketable securities or $10.1 million. For
the first three months in 1999, cash used in investing activities of $610,000
consisted primarily of the purchase of property and equipment.
Cash used by financing activities in the first three months of 2000 of
$19,000 consisted primarily of payments on obligations under capital leases and
notes payable of $159,000 partially offset by the proceeds from issuance of
common payable stock under employee benefit plans of $107,000. For the first
three months of 1999, cash used by financing activities of $114,000 primarily
consisted of payments on obligations under capital leases and notes payable of
$149,000, partially offset by the proceeds from issuance of common stock of
$14,000.
We believe that our current cash, cash equivalents and marketable
securities will be sufficient to meet our anticipated cash needs for working
capital and capital expenditures for at least the next 12 months.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In December 1998, AcSEC released Statement of Position 98-9, or SOP 98-9,
Modification of SOP 97-2, "Software Revenue Recognition," with Respect to
Certain Transactions. SOP 98-9 amends SOP 97-2 to require that an entity
recognize revenue for multiple element arrangements by means of the "residual
method" when (1) there is vendor-specific objective evidence ("VSOE") of the
fair values of all the undelivered elements that are not accounted for by means
of long-term contract accounting, (2) VSOE of fair value does not exist for one
or more of the delivered elements, and (3) all revenue recognition criteria of
SOP 97-2 (other than the requirement for VSOE of the fair value of each
delivered element) are satisfied. The provisions of SOP 98-9 that extend the
deferral of certain paragraphs of SOP 97-2 became effective December 15, 1998.
These paragraphs of SOP 97-2 and SOP 98-9 will be effective for transactions
that are entered into in fiscal years beginning after March 15, 1999.
Retroactive application is prohibited. The Company adopted SOP 98-9 on January
1, 2000 and the adoption did not have a material effect on its results of
operations.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, or SFAS 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133 establishes new standards of
accounting and reporting for derivative instruments and hedging activities and
will be adopted by the Company in the third quarter of 2000. SFAS 133 requires
that all derivatives be recognized at fair value in the statement of financial
position, and that the corresponding gains or losses be reported either in the
statement of operations or as a component of comprehensive income, depending on
the type of hedging relationship that exists. The Company does not currently
hold derivative instruments or engage in hedging activities. The Company is
currently evaluating the impact SFAS 133 will have on its financial position
and results of operations.
11
<PAGE>
In November, 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin 100, or SAB 100, which clarifies the SEC's views on
accounting for and disclosing certain expenses incurred in connection with exit
activities and business combinations. The Company does not expect SAB 100 to
have a material effect on its financial position, results of operations or cash
flow. In December, 1999, SAB 101 was issued which summarizes the SEC's views in
applying generally accepted accounting principles to revenue recognition in
financial statements. SAB 101 is effective beginning in the second quarter of
2000. The Company is currently evaluating the impact SAB 101 will have on its
financial position and results of operations.
In March 2000, the Financial Accounting Standards Board issued
Interpretation No. 44 or FIN 44 Accounting for Certain Transactions involving
Stock Compensation an interpretation of APB Opinion No. 25. FIN 44 clarifies the
application of Opinion 25 for (a) the definition of employee for purposes of
applying Opinion 25, (b) the criteria for determining whether a plan qualifies
as a noncompensatory plan, (c) the accounting for an exchange of stock
compensation awards in a business combination. FIN 44 is effective July 1, 2000,
but certain conclusions cover specific events that occur after either December
15, 1998, or January 12, 2000. The Company believes that the impact of FIN 44
will not have a material effect on its financial position or results of
operations.
FACTORS THAT MAY AFFECT FUTURE RESULTS
In addition to the other information in this report, the following factors
should be considered carefully in evaluating the Company's business and
prospects:
OUR FUTURE PROFITABILITY IS UNCERTAIN DUE TO OUR LIMITED OPERATING HISTORY.
We have a limited operating history and cannot assure you that our revenue will
continue to grow or that we will maintain profitability in the future. Our
financial statements must be considered in light of the risks and uncertainties
encountered by companies in the early stages of development. We rely
substantially on sales of our MeetingPlace products, which have limited market
acceptance.
In addition, we are unable to predict our future product development, sales
and marketing, and administrative expenses. To the extent that these expenses
increase, we will need to increase revenue to sustain profitability. Our ability
to increase revenue and sustain profitability also depends on the other risk
factors described in this section.
OUR OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY. Our operating results
are difficult to predict. Our future quarterly operating results may fluctuate
and may not meet the expectations of securities analysts or investors. If this
occurs, the price of our common stock would likely decline. The factors that may
cause fluctuations of our operating results include the following:
o changes in our mix of revenues generated from product sales and
services;
o changes by existing customers in their levels of purchases of our
products and services;
o changes in our mix of sales channels through which our products and
services are sold; and
o changes in our mix of domestic and international sales.
Orders at the beginning of each quarter typically do not equal expected
revenue for that quarter. In addition, a significant portion of our orders is
received in the last month of each fiscal quarter. If we fail to ship products
by the end of a quarter in which the order is received, or if our prospective
customers delay their orders or delivery schedules until the following quarter,
we may fail to meet our revenue objectives.
OUR MARKET IS HIGHLY COMPETITIVE. Because of intense market competition, we
may not be successful. Currently, our principal competitors include:
o major telecommunications carriers that operate service bureaus for
voice conferencing, such as AT&T Corp., MCI Worldcom, Inc. and Sprint
Corporation;
o private branch exchange, or PBX, vendors that sell systems with voice
conferencing capabilities, such as Lucent Technologies Inc. and Nortel
Networks; and
o smaller companies that offer web-based voice and data conferencing
products.
Many of these companies have longer operating histories, stronger brand
names and significantly greater financial, technical, marketing and other
resources than we do. These companies also may have existing
12
<PAGE>
relationships with many of our prospective customers. In addition, these
companies may be able to respond more quickly than we can to new or emerging
technologies and changes in customer requirements.
In addition, we expect competition to persist and intensify in the future,
which could adversely affect our ability to increase sales, penetrate new
markets and maintain average selling prices. In the future, we may experience
competition from potential competitors that include:
o networking companies, such as Cisco Systems, Inc., 3Com Corporation,
Lucent Technologies Inc. and Nortel Networks that are focusing on
enabling the transmission of voice over the Internet and that may
offer voice and data conferencing functionality; and
o collaborative software providers, such as Microsoft Corporation and
Lotus Development Corporation, that are focusing on data conferencing
products and that may in the future incorporate voice conferencing
functionality into their products.
OUR MARKET IS IN AN EARLY STAGE OF DEVELOPMENT, AND OUR PRODUCTS MAY NOT BE
ADOPTED. If the market for our integrated voice and data conferencing products
fails to grow or grows more slowly than we anticipate, we may not be able to
increase revenues or remain profitable. The market for integrated real-time
voice and data conferencing is relatively new and rapidly evolving. Our ability
to remain profitable depends in large part on the widespread adoption by end
users of real-time voice and data conferencing.
We will have to devote substantial resources to educate prospective
customers about the uses and benefits of our products. In addition, businesses
that have invested substantial resources in other conferencing products may be
reluctant or slow to adopt our products, which might replace or compete with
their existing systems. Our efforts to educate potential customers may not
result in our products achieving market acceptance.
RAPID TECHNOLOGICAL CHANGES COULD CAUSE OUR PRODUCTS TO BECOME OBSOLETE OR
REQUIRE US TO REDESIGN OUR PRODUCTS. The market in which we compete is
characterized by rapid technological change, frequent new product introductions,
changes in customer requirements and emerging industry standards. In particular,
we expect that the growth of the Internet and Internet-based telephony
applications, as well as general technology trends such as migrations to new
operating systems, will require us to adapt our product to remain competitive.
This adaptation could be costly and time-consuming. Our products could become
obsolete and unmarketable if products using new technologies are introduced and
new industry standards emerge. For example, the widespread acceptance of
competing technologies, such as video conferencing and the transmission of voice
over the Internet, could diminish demand for our current products. As a result,
the life cycle of our products is difficult to estimate.
To be successful, we will need to develop and introduce new products and
product enhancements that respond to technological changes or evolving industry
standards, such as the transmission of voice over the Internet, in a timely
manner and on a cost effective basis. We cannot assure you that we will
successfully develop these types of products and product enhancements or that
our products will achieve broad market acceptance.
OUR SALES CYCLE IS LENGTHY AND UNPREDICTABLE. Any delay in sales of our
products could cause our quarterly revenue and operating results to fluctuate.
The typical sales cycle of our products is lengthy, generally between six to
nine months, unpredictable, and involves significant investment decisions by
prospective customers, as well as our education of potential customers regarding
the use and benefits of our products. Furthermore, many of our prospective
customers have neither budgeted expenses for voice and data conferencing systems
nor have personnel specifically dedicated to procurement and implementation of
these conferencing systems. As a result, our customers spend a substantial
amount of time before purchasing our products in performing internal reviews and
obtaining capital expenditure approvals. We cannot be certain that this cycle
will not lengthen in the future. The emerging and evolving nature of the
real-time voice and data conferencing market may lead to confusion in the
market, which may cause prospective customers to postpone their purchase
decisions.
IF WE FAIL TO EXPAND OUR SALES AND DISTRIBUTION CHANNELS, OUR BUSINESS
COULD SUFFER. If we are unable to expand our sales and distribution channels, we
may not be able to increase revenue or achieve market acceptance of our
MeetingPlace product. We have recently expanded our direct sales force and plan
to recruit additional sales personnel. New sales personnel will require training
and take time to achieve full productivity, and there is strong competition for
qualified sales personnel in our business. In addition, we believe that our
future success is dependent upon establishing successful relationships with a
variety of distribution partners. To date, we have entered into agreements with
only a small number of these distribution partners. We cannot be certain that we
will be able to reach agreement with additional distribution partners on a
timely basis or at all, or that these distribution partners
13
<PAGE>
will devote adequate resources to selling our products. Furthermore, if our
distribution partners fail to adequately market or support our products, the
reputation of our products in the market may suffer. In addition, we will need
to manage potential conflicts between our direct sales force and third-party
reselling efforts.
OUR ABILITY TO EXPAND INTO INTERNATIONAL MARKETS IS UNCERTAIN. We intend to
continue to expand our operations into new international markets. In addition to
general risks associated with international expansion, such as foreign currency
fluctuations and political and economic instability, we face the following risks
and uncertainties any of which could prevent us from selling our products in a
particular country or harm our business operations once we have established
operations in that country:
o the difficulties and costs of localizing products for foreign markets,
including the development of multilingual capabilities in our
MeetingPlace system;
o the need to modify our products to comply with local
telecommunications certification requirements in each country; and
o our lack of a direct sales presence in other countries, our need to
establish relationships with distribution partners to sell our
products in these markets and our reliance on the capabilities and
performance of these distribution partners.
IF WE FAIL TO INTEGRATE OUR PRODUCTS WITH THIRD-PARTY TECHNOLOGY, OUR SALES
COULD SUFFER. Our products are designed to integrate with our customers' data
and voice networks, as well as with enterprise applications such as browsers and
collaborative software applications. If we are unable to integrate our products
with these networks and systems, sales of our products could suffer.
In addition, we may be required to engage in costly and time-consuming
redesigns of our products because of technology enhancements or upgrades of
these systems. We may not be able to redesign our products or be certain that
any of these redesigns will achieve market acceptance. In addition, we will need
to continually modify our products as newer versions of the enterprise
applications with which our products integrate are introduced. Our ability to do
so largely depends on our ability to gain access to the advanced programming
interfaces for these applications, and we cannot assure you that we will have
access to necessary advanced programming interfaces in the future.
WE MAY EXPERIENCE DIFFICULTIES MANAGING OUR EXPECTED GROWTH. Our recent
growth has strained, and we expect that any future growth will continue to
strain, our management systems and resources, which could hinder our ability to
continue to grow in the future. We may also experience difficulties meeting the
demand for our products and services. If we are unable to provide training and
support for our products, the implementation process will be longer and customer
satisfaction may be lower.
We may not be able to install management information and control systems in
an efficient and timely manner, and our current or planned personnel, systems,
procedures and controls may not be adequate to support our future operations.
Competition for qualified personnel in the San Francisco Bay area, as well as
other markets in which we recruit, is extremely intense and characterized by
rapidly increasing salaries, which may increase our operating expenses or hinder
our ability to recruit qualified candidates.
OUR BUSINESS COULD SUFFER IF WE LOSE THE SERVICES OF OUR CURRENT MANAGEMENT
TEAM. Our future success depends on the ability of our management to operate
effectively, both individually and as a group. If we were to lose the services
of any of these key employees we may encounter difficulties finding qualified
personnel to replace them. Recently, we have had three individuals join and two
individuals leave the management team.
THE LOSS OF OUR RIGHT TO USE TECHNOLOGY LICENSED TO US BY THIRD PARTIES
COULD HARM OUR BUSINESS. We license technology that is incorporated into our
products from third parties, including digital signal processing algorithms and
the MeetingPlace server's operating system and relational database. Any
interruption in the supply or support of any licensed software could disrupt our
operations and delay our sales, unless and until we can replace the
functionality provided by this licensed software. Because our products
incorporate software developed and maintained by third parties, we depend on
these third parties to deliver and support reliable products, enhance their
current products, develop new products on a timely and cost-effective basis and
respond to emerging industry standards and other technological changes.
14
<PAGE>
ANY INTERRUPTION IN SUPPLY OF COMPONENTS FROM OUTSIDE MANUFACTURERS AND
SUPPLIERS COULD HINDER OUR ABILITY TO SHIP PRODUCTS IN A TIMELY MANNER. We rely
on third parties to obtain most of the components of the MeetingPlace server and
integrate them with other standard components, such as the central processing
unit and disk drives. If these third parties are no longer able to supply and
assemble these components or are unable to do so in a timely manner, we may
experience delays in shipping our products and have to invest resources in
finding an alternative manufacturer or manufacture our products internally.
In addition, we obtain key hardware components, including the processors
and digital signal processing devices used in the MeetingPlace server, from sole
source suppliers. In the past, we have experienced problems in obtaining some of
these components in a timely manner from these sources, and we cannot be certain
that we will be able to continue to obtain an adequate supply of these
components in a timely manner or, if necessary, from alternative sources. If we
are unable to obtain sufficient quantities of components or to locate
alternative sources of supply, we may experience delays in shipping our products
and incur additional costs to find an alternative manufacturer or manufacture
our products internally.
OUR PRODUCTS MAY SUFFER FROM DEFECTS, ERRORS OR BREACHES OF SECURITY.
Software and hardware products as complex as ours are likely to contain
undetected errors or defects, especially when first introduced or when new
versions are released. Any errors or defects that are discovered after
commercial release could result in loss of revenue or delay in market
acceptance, diversion of development resources, damage to our customer
relationships or reputation or increased service and warranty cost. Our products
may not be free from errors or defects after commercial shipments have begun,
and we are aware of instances in which some of our customers have experienced
product failures or errors.
Many of our customers conduct confidential conferences, and transmit
confidential data, using MeetingPlace. Concerns over the security of information
sent over the Internet and the privacy of its users may inhibit the market
acceptance of our products. In addition, unauthorized users in the past have
gained, and in the future may be able to gain, access to our customers'
MeetingPlace systems. Any compromise of security could deter people from using
MeetingPlace and could harm our reputation and business and result in claims
against us.
WE MAY BE UNABLE TO ADEQUATELY PROTECT OUR PROPRIETARY RIGHTS, AND WE MAY
BE SUBJECT TO INFRINGEMENT CLAIMS. Unauthorized parties may copy aspects of our
products and obtain and use information that we regard as proprietary, which
could cause our business to suffer. Furthermore, the laws of many foreign
countries do not protect our intellectual property rights to the same extent as
the laws of the United States.
In the future, we may be subject to legal proceedings and claims for
alleged infringement of third party proprietary rights. Any of these claims,
even if not meritorious, could result in costly litigation, divert management's
attention and resources, or require us to enter into royalty or license
agreements which are not advantageous to us. Parties making these claims may be
able to obtain injunctive or other equitable relief, which could prevent us from
selling our products.
Dell Computer Corporation has registered the "Latitude" mark for computers
in the United States and in other countries. Dell's United States trademark
registration and Canadian application have blocked our ability to register the
"Latitude Communications" and "Latitude" with logo marks in the United States
and the "Latitude Communications" mark in Canada. Since we believe that we have
priority of trade name usage in the United States, we have petitioned to cancel
Dell's United States registration and opposed its Canadian application. The
outcome of these proceedings is uncertain. If Dell's registration for the
"Latitude" mark is not canceled or if we are unable to obtain consent from Dell
for our registration of our marks, we may not be able to register our marks and
would have to rely solely on common law protection for these marks. We cannot
assure you that we will be free from challenges of or obstacles to our use or
registration of our marks.
WE ARE SUBJECT TO GOVERNMENT REGULATION, AND OUR FAILURE TO COMPLY WITH
THESE REGULATIONS COULD HARM OUR BUSINESS. Our products are subject to a wide
variety of safety, emissions and compatibility regulations imposed by
governmental authorities in the United States or in other countries in which we
sell our products. If we are unable to obtain necessary approvals or maintain
compliance with the regulations of any particular jurisdiction, we may be
prohibited from selling our products in that territory. In addition, to sell our
products in many international markets, we are required to obtain certifications
that are specific to the local telephony infrastructure.
15
<PAGE>
OUR STOCK PRICE MAY BE VOLATILE. We expect that the market price of our
common stock will fluctuate as a result of variations in our quarterly operating
results. These fluctuations may be exaggerated if the trading volume of our
common stock is low. In addition, due to the technology-intensive and emerging
nature of our business, the market price of our common stock may rise and fall
in response to:
o announcements of technological or competitive developments;
o acquisitions or strategic alliances by us or our competitors; or
o the gain or loss by us of significant orders.
OUR EXECUTIVE OFFICERS AND DIRECTORS AND THEIR AFFILIATES OWN A LARGE
PERCENTAGE OF OUR VOTING STOCK AND COULD CONTROL THE VOTING POWER OF THE COMMON
STOCK. Our executive officers and directors and their affiliates beneficially
own, in the aggregate, a large percentage of our outstanding common stock. As a
result, these stockholders are able to exercise control over all matters
requiring stockholder approval, including the election of directors and approval
of significant corporate transactions. This concentration of ownership may
delay, deter or prevent transactions that would result in the change of control,
which in turn could reduce the market price of our common stock.
FUTURE SALES OF OUR COMMON STOCK MAY DEPRESS OUR STOCK PRICE.
If our stockholders sell substantial amounts of common stock, including
shares issued upon the exercise of outstanding options and warrants, in the
public market, the market price of our common stock could fall.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Our exposure to market risk for changes in interest rates relates primarily
to our investment portfolio. We do not use derivative financial instruments in
our investment portfolio. We place our investments with high credit quality
issuers and, by policy, limit the amount of credit exposure to any one issuer.
The portfolio includes only marketable securities with maturities of three to 24
months and with active secondary or resale markets to ensure portfolio
liquidity. We have no investments denominated in foreign country currencies and
therefore are not subject to foreign currency risk on such investments.
The tables below presents principal amounts and related weighted average
interest rates for our investment portfolio at March 31, 2000.
SHORT-TERM INVESTMENTS (IN THOUSANDS):
<TABLE>
<CAPTION>
FAIR AVERAGE
VALUE INTEREST RATE
<S> <C> <C>
Mutual funds......................................................................... $ 2,032 5.65%
Auction rate securities.............................................................. 1,000 5.68%
Commercial Paper..................................................................... 1,910 6.57%
Corporate notes and bonds............................................................ 23,329 5.53%
--------
$ 28,271
========
</TABLE>
LONG-TERM INVESTMENTS (IN THOUSANDS):
<TABLE>
FAIR AVERAGE
VALUE INTEREST RATE
<S> <C> <C>
Corporate notes and bonds............................................................ $ 6,277 7.04%
</TABLE>
Currently, the majority of our sales and expenses are denominated in U.S.
dollars and, as a result, we have not experienced significant foreign exchange
gains and losses to date. While we do expect to effect some transactions in
foreign currencies in the next 12 months, we do not anticipate that foreign
exchange gains and losses will be significant. We have not engaged in foreign
currency hedging activities to date.
16
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS--NOT APPLICABLE.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
On May 6, 1999, in connection with the Company's initial public offering, a
Registration Statement on Form S-1 (No. 333-72935) was declared effective by the
Securities and Exchange Commission, pursuant to which 3,125,000 shares of the
Company's Common Stock were offered and sold for the account of the Company at a
price of $12.00 per share, generating gross offering proceeds of $37.5 million.
The managing underwriters were Credit Suisse First Boston Corporation, Hambrecht
& Quist LLC and Dain Rauscher Wessels. After deducting approximately $2.6
million in underwriting discounts and $1.1 million in other related expenses,
the net proceeds of the offering were approximately $33.8 million. The Company
has not yet used any of the funds from the initial public offering, and the
$33.8 million has been invested in investment grade, interest bearing
securities. The Company intends to use such remaining proceeds for capital
expenditures, including the acquisition of redundant computer and communication
systems, and for general corporate purposes, including working capital to fund
increased accounts receivable and inventory levels.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES--NOT APPLICABLE.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS--NOT APPLICABLE.
ITEM 5. OTHER INFORMATION--NOT APPLICABLE.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
27.1--Financial Data Schedule
(b) Reports on Form 8-K--None
--------------
17
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LATITUDE COMMUNICATIONS, INC.
BY: /s/ RICK M. MCCONNELL
----------------------------------------------
Rick M. McConnell
Vice President of Finance and
Administration and Chief Financial Officer
(Principal Financial and Accounting Officer)
Date: May 15, 2000
18
<PAGE>
EXHIBIT INDEX
27.1 Financial Data Schedule
- --------------
19
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 7772
<SECURITIES> 28271
<RECEIVABLES> 7824
<ALLOWANCES> 311
<INVENTORY> 837
<CURRENT-ASSETS> 49570
<PP&E> 6987
<DEPRECIATION> 3622
<TOTAL-ASSETS> 60359
<CURRENT-LIABILITIES> 11089
<BONDS> 0
0
0
<COMMON> 19
<OTHER-SE> 48904
<TOTAL-LIABILITY-AND-EQUITY> 60359
<SALES> 10365
<TOTAL-REVENUES> 10365
<CGS> 1226
<TOTAL-COSTS> 2728
<OTHER-EXPENSES> 6784
<LOSS-PROVISION> 74
<INTEREST-EXPENSE> 30
<INCOME-PRETAX> 1440
<INCOME-TAX> (596)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 844
<EPS-BASIC> 0.05
<EPS-DILUTED> 0.04
</TABLE>
