UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to__________
Commission file number 0-20329
EIS INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware No. 06-1017599
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification Number)
555 Herndon Parkway
Herndon, VA 20170
(703) 478-9808
(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
---- ----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock: Common Stock, par value $.01 per share, outstanding as of
October 23, 1997: 11,640,834 shares.
<PAGE>
EIS INTERNATIONAL, INC. and SUBSIDIARIES
INDEX to Financial Statements Filed with Quarterly Report of Registrant
on Form 10-Q for the Quarter Ended September 30, 1997
(Unaudited)
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements: Page
----
Unaudited Consolidated Balance Sheets as of
September 30, 1997 and December 31, 1996 3
Unaudited Consolidated Statements of Operations
for the three and nine months ended
September 30, 1997 and 1996 4
Unaudited Consolidated Statements of Cash Flows
for the nine months ended September 30, 1997 and 1996 5
Notes to Consolidated Financial Statements
(unaudited) 6-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities Not Applicable
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 13
Signatures 14
2
<PAGE>
EIS INTERNATIONAL, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in Thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------ -----------
Assets (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 16,297 $ 11,099
Short-term investments 2,359 3,660
Accounts receivable, trade, less allowances
for doubtful accounts and sales returns of
$5,468 in 1997 and $6,117 in 1996 14,825 21,335
Current portion of installment and lease receivables 1,658 2,007
Inventories (note 4) 5,496 7,732
Deferred income taxes 9,148 8,638
Refundable income taxes 2,359 2,450
Prepaids and other current assets 931 576
-------- --------
Total current assets 53,073 57,497
Capitalized software development costs, net 4,523 4,617
Property and equipment, net 7,615 8,181
Installment and lease receivables, less current portion 1,517 2,470
Other assets 1,733 1,925
-------- --------
Total assets $ 68,461 $ 74,690
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 13,738 $ 18,894
Deferred revenue 6,011 5,683
Net liability of discontinued operations 762 2,738
-------- --------
Total current liabilities 20,511 27,315
Deferred income taxes 1,829 1,829
Other liabilities 266 304
-------- --------
Total liabilities 22,606 29,448
Commitments and Contingencies
Stockholders' equity:
Common Stock, $.01 par value, 15,000,000
shares authorized, issued 11,639,584 shares
in 1997 and 11,173,252 shares in 1996 116 112
Additional paid-in capital 59,714 58,268
Accumulated translation adjustments (418) (196)
Retained deficit (12,652) (12,037)
Treasury stock, at cost - 101,225 shares in
1997 and 1996 (905) (905)
-------- --------
Total stockholders' equity 45,855 45,242
-------- --------
Total liabilities and stockholders' equity $ 68,461 $ 74,690
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
EIS INTERNATIONAL, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(In Thousands, Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
--------------------- ----------------------
1997 1996 1997 1996
--------- --------- --------- ----------
<S> <C> <C> <C> <C>
Net revenues:
Product and software sales $ 14,117 $ 12,763 $ 44,415 $ 59,331
Service and other 6,884 5,443 19,922 15,256
-------- -------- -------- --------
21,001 18,206 64,337 74,587
Cost of revenues:
Cost of product and software sold 4,563 8,667 16,057 24,168
Cost of services and other 3,505 3,969 11,657 9,939
-------- -------- -------- --------
8,068 12,636 27,714 34,107
-------- -------- -------- --------
Gross margin 12,933 5,570 36,623 40,480
-------- -------- -------- --------
Operating cost and expense:
Research and development cost 2,769 3,499 9,171 9,553
Selling, general, and administrative 8,045 8,944 26,486 28,827
Restructuring costs - - 2,877 -
Acquired technology in process - 1,345 - 18,245
-------- -------- -------- --------
10,814 13,788 38,534 56,625
-------- -------- -------- --------
Operating income (loss) 2,119 (8,218) (1,911) (16,145)
Interest and other income, net 363 292 895 986
-------- -------- -------- --------
Income (loss) before income taxes 2,482 (7,926) (1,016) (15,159)
Income tax benefit (expense) (934) 2,435 401 (1,623)
-------- -------- -------- --------
Income (loss) from continuing operations 1,548 (5,491) (615) (16,782)
-------- -------- -------- --------
Discontinued operations:
Loss on discontinued operations,
net of tax - (1,395) - (2,776)
-------- -------- -------- --------
Net income (loss) $ 1,548 $ (6,886) $ (615) $(19,558)
======== ======== ======== ========
Primary and fully diluted income (loss)
per share:
Continuing operations $ 0.13 $ (0.50) $ (0.05) $ (1.59)
Discontinued operations - (0.13) - (0.26)
-------- -------- -------- --------
Primary and fully diluted income
(loss) per share $ 0.13 $ (0.63) $ (0.05) $ (1.85)
======== ======== ======== ========
Weighted average common and common
equivalent shares:
Primary and fully diluted 11,887 10,971 11,289 10,560
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
EIS INTERNATIONAL, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Dollars in Thousands)
(Unaudited)
Nine Months
Ended September 30,
----------------------
1997 1996
--------- ---------
Cash flows from operating activities:
Net loss $ (615) $(19,558)
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities:
Provision for doubtful accounts and
sales returns 2,518 4,035
Write-off acquired technology in process - 18,245
Depreciation and amortization 5,949 5,054
Deferred income taxes (510) -
Changes in assets and liabilities:
Accounts receivable, trade 3,992 (1,497)
Installment and lease receivables 1,302 (1,777)
Inventories 2,236 681
Prepaids and other current assets (355) (80)
Accounts payable and accrued expenses (5,152) (5,398)
Deferred revenue 328 (790)
Other (704) (945)
------- --------
Net cash provided by (used in) continuing operations 8,989 (2,030)
Cash used in discontinued operations (1,976) (604)
------- --------
Net cash provided by (used in) operating activities 7,013 (2,634)
------- --------
Cash flows from investing activities:
Purchases of property and equipment (3,671) (3,371)
Sales of short-term investments 3,371 -
Purchases of short-term investments (2,070) -
Capitalization of software development costs (944) (2,118)
Purchases of businesses, net of cash acquired - (7,340)
------- --------
Net cash used in investing activities (3,314) (12,829)
------- --------
Cash flows from financing activities:
Sale of lease portfolio - 5,200
Purchase of treasury stock - (386)
Proceeds from exercise of stock options 1,499 5,630
------- --------
Net cash provided by financing activities 1,499 10,444
------- --------
Net increase (decrease) in cash and cash equivalents 5,198 (5,019)
Cash and cash equivalents at beginning of period 11,099 21,002
------- --------
Cash and cash equivalents at end of period $16,297 $ 15,983
======= ========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 32 $ 99
Income taxes 158 3,267
Non-cash financing activities:
Tax benefit from exercise of stock options - 2,125
See accompanying notes to consolidated financial statements.
5
<PAGE>
EIS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Basis of Presentation
The unaudited consolidated financial statements presented herein have been
prepared in accordance with the instructions to Form 10-Q and do not
include all of the information and note disclosures necessary to conform
with annual reporting requirements. The statements should be read in
conjunction with the audited consolidated financial statements and notes
thereto included in the Company's Annual Report for the year ended December
31, 1996. In the opinion of management, the accompanying consolidated
financial statements include all adjustments necessary for a fair
presentation of the Company's financial position and results of operations.
The results of operations for the three and nine month periods ended
September 30, 1997 may not be indicative of the results for the full year.
(2) Principles of Consolidation
The accompanying financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany balances
and transactions have been eliminated in consolidation.
(3) Discontinued Operations and Restructuring
On February 28, 1997, at the recommendation of new management, the Board of
Directors of the Company resolved to discontinue the operations of Surefind
Information, Inc. ("Surefind"). Accordingly, the Consolidated Statements of
Operations for the three and nine month periods ended September 30, 1996
have been reclassified to reflect the results of Surefind on a discontinued
operations basis. The results of Surefind for the three and nine months
ended September 30, 1997 have been charged against the provision for
estimated operating losses during the phase out period established at
December 31, 1996.
On March 3, 1997, the Company announced a restructuring and reorganization
program (the "Restructuring"), the purpose of which was to refocus the
Company on its core business and to reduce costs. During the first quarter
of 1997, in connection with the Restructuring, the Company recorded charges
of $2.9 million, including $1.1 million of severance costs, $1.3 million of
facilities leases and fixed asset disposal costs, and $0.5 million of other
costs.
(4) Inventories
Inventories primarily consists of finished goods as of September 30, 1997
and December 31, 1996.
6
<PAGE>
EIS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(Unaudited)
(5) New Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 128, "Earnings per
Share" which is effective for all interim and annual periods ending after
December 15, 1997. SFAS No. 128 replaces primary and fully diluted earnings
per share ("EPS") with "basic" and "diluted" EPS on the face of the
statement of operations. The Company does not expect the adoption of SFAS
No. 128 to have a material effect on its financial position or results of
operations.
In February 1997, FASB issued SFAS No. 129, "Disclosure of Information
about Capital Structure" which is effective for the year ending December
31, 1998. SFAS No. 129 continues the previous requirements to disclose
certain information about an entity's capital structure found in Accounting
Principles Board ("APB") Opinions No. 10, "Omnibus Opinion-1966," and No.
15, "Earnings per Share," and FASB SFAS No. 47, "Disclosure of Long-Term
Obligations." The Company has been subject to the requirements of those
standards, and as a result does not expect the adoption of SFAS No. 129 to
have a material impact on the Company's financial statements.
In June 1997, FASB issued SFAS No. 130, "Reporting Comprehensive Income"
which is effective for the year ending December 31, 1998. SFAS No. 130
establishes standards for the reporting and display of comprehensive income
and its components in the financial statements. Earlier application of this
statement is permitted; however, upon adoption the Company will be required
to reclassify previously reported annual and interim financial statements.
The Company believes that the disclosure of comprehensive income in
accordance with the provisions of SFAS No. 130 will change the manner of
presentation of its financial statements as currently and previously
reported.
In June 1997, FASB issued SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information," which is effective for the year ending
December 31, 1998. SFAS No. 131 requires companies to present certain
information about operating segments and related information, including
geographic and major customer data, in its annual financial statements and
in condensed financial statements for interim periods. The Company does not
believe that the adoption of SFAS No. 131 will have a material impact on
its financial statements.
7
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Cautionary Statement
In addition to historical information contained herein, this document contains
certain "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended, and are subject to the safe harbors created thereby.
All statements included in this document regarding the Company's financial
position, business strategy and plans, objectives for future operations,
industry conditions -- other than statements of historical facts -- are
forward-looking statements. While these statements reflect the Company's
reasonable assumptions, based upon management's beliefs and information
currently available to it, the Company can give no assurance that such
expectations will prove to be correct.
These statements are subject to certain risks, uncertainties, and assumptions
related to certain factors including, without limitations, competitive factors,
general economic conditions, customer relations, technological change, product
introductions and acceptance, distribution networks, changes in industry
practices, one-time events and other factors described herein and under the
heading "Factors Affecting Future Results" in the Company's Annual Report on
Form 10-K for the year ending December 31, 1996. Based upon changing conditions,
should any one or more of these risks or uncertainties materialize, or should
any underlying assumptions prove incorrect, the Company may experience material
fluctuations in its future quarterly and annual operating results that may vary
materially from those described herein and that could materially and adversely
affect its business, financial condition, operating results and stock price. The
Company does not intend to update these forward-looking statements.
Results of Operations
NET REVENUES
Net revenues increased 15% from $18.2 million in the third quarter of 1996 to
$21.0 million in the third quarter of 1997. Product and software sales revenue
during the third quarter of 1997 increased $1.4 million (11%) while service and
other revenues also increased $1.4 million (26%) from the third quarter of 1996.
The increase in product and software sales revenue during the third quarter of
1997 compared to the third quarter of 1996, is primarily the result of two
factors: first, the Company's allowance for sales returns decreased by $627,000
during the third quarter of 1997 compared to the third quarter of 1996; and
second, the Company's decision during the third quarter of 1996 to take back a
call processing system as a result of a customer dispute, which reduced revenue
by $2.2 million during that period. The increase in service and other revenues
during the third quarter of 1997 compared to the third quarter of 1996 was
primarily due to expansion of the Company's customer base covered by service
contracts and the expansion of its systems integration business.
Net revenues of $64.3 million during the first nine months of 1997 decreased
$10.3 million (14%) from $74.6 million during the first nine months of 1996.
Product and software sales revenue during this period decreased $14.9 million
(25%) while service and other revenues increased $4.7 million (31%) from the
first nine months of 1996. The decrease in Product and software sales revenue is
primarily a result of a decrease in sales of the Company's mature products which
were not offset by an increase in sales of its newer products, and a decrease in
sales of the Company's wholly owned subsidiary, Cybernetics Systems
International Corp. ("Cybernetics"). The increase in service and other revenues
during the first nine months of 1997 compared to the first nine months of 1996
was primarily due to expansion of the Company's customer base covered by service
contracts and the expansion of its systems integration business.
8
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
COST OF REVENUES
Cost of revenues was 38% of net revenues in the third quarter of 1997 compared
to 69% of net revenues in the third quarter of 1996. The cost of product and
software sold as a percentage of product and software sales revenue decreased to
32% in the third quarter of 1997 from 68% in the third quarter of 1996. The
decrease in cost of product and software sold as a percentage of product and
software sales revenue during the third quarter of 1997 compared to the third
quarter of 1996 is primarily due to four factors. First, the percentage of
product and software sold associated with hardware declined by 29% during the
third quarter of 1997 as compared to the third quarter of 1996 as a result of
customers purchasing the Company's software to be installed on existing
hardware. Second, during the third quarter of 1996, the Company recorded an
inventory write-down of $1.8 million related to the acceleration of the
end-of-life cycle for its OCM and System 7000 products as a result of the
Company's growing confidence in its newer, faster Centenium and CPS product
lines. Third, the cost of product and software sold as a percentage of product
and software sales revenue in the third quarter of 1996 was negatively affected
by the lower revenue base used in the calculation as a result of the sales
returns and allowance explained above under "Net Revenues". And finally,
staffing expenses included in the cost of product and software sold during the
third quarter of 1997 decreased from the staffing expenses during the third
quarter of 1996.
Cost of revenues was 43% of net revenues during the first nine months of 1997
compared to 46% during the same period in 1996. The cost of product and software
sold as a percentage of product and software sales revenue decreased to 36%
during the first nine months of 1997 as compared to 41% for the same period in
1996. The above explanations for the decrease in cost of product and software
sold as a percentage of product and software sales revenue during the third
quarter of 1997 as compared to the third quarter of 1996, were also the primary
causes for the decrease in cost of product and software sold as a percentage of
product and software sales revenue for the 9 month periods.
Service and other costs were 51% of service and other revenues in the third
quarter of 1997 compared to 73% in the third quarter of 1996. Service and other
costs were 59% of service and other revenues during the first nine months of
1997 compared to 65% for the same period in 1996. The decrease in costs of
service and other as a percentage of service and other revenues during 1997 is
due primarily to expenditures incurred during the 1996 periods for building the
infrastructure of the service organizations in advance of generating additional
service revenue. The improvement in the 1997 periods also resulted from a
decline in the cost of supplying parts under customer maintenance agreements,
during the third quarter of 1997, as a result of management's efforts to improve
this operation.
RESEARCH AND DEVELOPMENT COST
Research and development cost decreased $730,000 from $3.5 million in the third
quarter of 1996 to $2.8 million during the third quarter of 1997 and also
decreased $382,000 from $9.6 million during the first nine months of 1996 to
$9.2 million during the first nine months of 1997. These decreases were
primarily due to a decline in the use of subcontract software engineers.
9
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expense decreased $899,000 from $8.9 million
in the third quarter of 1996 to $8.0 million during the third quarter of 1997
and also decreased $2.3 million from $28.8 million during the first nine months
of 1996 to $26.5 million during the first nine months of 1997. These decreases
were primarily due to the fact that during the first quarter of 1997, in
connection with the Restructuring, EIS consolidated several of its
administrative functions and facilities and downsized its Cybernetics and Pulse
Technologies, Inc. ("Pulse") subsidiaries.
RESTRUCTURING COSTS
As discussed above, during the first quarter of 1997, the Company downsized its
Cybernetics and Pulse subsidiaries and consolidated several of its
administrative functions and facilities. The Restructuring costs of
approximately $2.9 million incurred during the first quarter of 1997 primarily
represent severance and lease buyout costs associated with those actions.
ACQUIRED TECHNOLOGY IN PROCESS
The acquired technology in process costs of $1.3 million during the third
quarter of 1996 and $18.2 million incurred during the first nine months of 1996
reflect the fair value of the software products under development at Cybernetics
and Pulse that had not achieved technological feasibility at the date of
acquisition, had no alternative future uses, and were therefore charged against
operations at the time of the acquisitions.
INTEREST AND OTHER INCOME, NET
Interest and other income increased $71,000 during the third quarter of 1997 as
compared to the same period in 1996. This increase was due to higher cash and
cash equivalent balances during the third quarter of 1997 as compared to the
third quarter of 1996. Interest and other income decreased $91,000 during the
first nine months of 1997 compared to the same period in 1996 primarily due to
the sale of a major portion of the Company's lease portfolio during the first
quarter of 1996, and higher cash and cash equivalent balances during the first
six months of 1996.
INCOME TAXES
The Company's effective income tax rate was 38% for the third quarter of 1997 as
compared to 31% for the same period in 1996. The Company had a tax benefit of
$401,000 during the first nine months of 1997, as compared to a tax expense of
$1.6 million during the same period in 1996. This difference was primarily
attributable to the non-deductible acquired technology in process and other
costs incurred during the first and third quarters of 1996 associated with the
Company's acquisitions during those periods.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital was $32.6 million at September 30, 1997 as
compared to 30.2 million at December 31, 1996. Cash and cash equivalents and
short-term investment balances were $18.7 million at September 30, 1997 compared
to $14.8 million at December 31, 1996. Operating activities generated $7 million
in cash during the nine month period ended September 30, 1997 compared to the
use of $2.6 million in cash for the same period in 1996. This increase in cash
provided by operations was primarily due to improved collections in accounts
receivable and lease receivables, along with lower inventory levels as of
September 30, 1997. Cash and cash equivalents used to invest in the purchase of
property and equipment was $3.7 million for the first nine months of 1997 and
$3.4 million during the first nine months
10
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
of 1996. The capitalization of software development costs decreased from $2.1
million during the first nine months of 1996 to $944,000 for the same period in
1997. This decline was primarily due to the Company's focus on improving
features in software already generally available, in addition to ongoing
research and development efforts which do not qualify for capitalization under
Statement of Financial Accounting Standards No. 86. Proceeds from the exercise
of stock options decreased to $1.5 million during the first nine months of 1997
from $5.6 million during the same period in 1996.
On September 3, 1997, the Company entered into a Loan Document Modification
Agreement (the "New Loan Agreement") which amended the terms and conditions
under the previous line of credit. Under the New Loan Agreement, the Company may
borrow up to $7 million, subject to certain borrowing base limitations, and
amounts outstanding accrue interest at the bank's prime rate plus .75%. The New
Loan Agreement is secured by substantially all assets of the Company and expires
on September 2, 1998. There were no amounts outstanding under the New Loan
Agreement as of September 30, 1997. Prior to the New Loan Agreement, the Company
had an unsecured line of credit of $12.5 million with the same commercial bank
under a commitment that expired in January 1997.
The Company expects that its current cash balances and short-term investments,
together with cash anticipated to be provided by operating activities, and
amounts available under the New Loan Agreement, will be sufficient to fund its
working capital requirements (including research and development) for the
foreseeable future. However, the Company's ability to achieve that result will
be affected by the amount of cash generated from operations and the pace that
its available resources are utilized. Accordingly, the Company may in the future
be required to seek additional sources of financing, including borrowing and/or
the sale of equity. If additional funds are raised by issuing equity, further
dilution to shareholders may result. No assurance can be given that any such
additional sources of financing will be available on acceptable terms, or at
all.
11
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
The Company and certain individuals indicated below are named as defendants in
the following lawsuits, each of which were filed on the date indicated in the
United States District Court for the District of Connecticut, allegedly on
behalf of certain of the Company's shareholders, each of which claim certain
alleged misleading representations regarding the Company's acquisition of
Surefind and Cybernetics and their operations, each of which seek damages in an
unspecified amount.
1. Warburgh v. EIS International, Inc., Joseph J. Porfeli, Edward J. Sarkisian
---------------------------------------------------------------------------
and Kent M. Klineman, filed April 25, 1997.
-------------------------------------------
2. Wallace v. EIS International, Inc., Joseph J. Porfeli, Edward J. Sarkisian,
---------------------------------------------------------------------------
Harry Peisach, and Kent M. Klineman, filed May 21, 1997.
--------------------------------------------------------
3. Augenbaum v. EIS International, Inc., Joseph J. Porfeli, Edward J.
------------------------------------------------------------------
Sarkisian, Kent M. Klineman, Robert Jesurum and Herbert Balzuweit, filed
------------------------------------------------------------------------
May 23, 1997.
-------------
4. Romano, et. al. v. EIS International, Inc., Joseph J. Porfeli, Edward J.
------------------------------------------------------------------------
Sarkisian, and Kent M. Klineman, filed June 4, 1997.
----------------------------------------------------
5. Dechter v. EIS International, Inc., Joseph J. Porfeli, Edward J. Sarkisian,
---------------------------------------------------------------------------
Kent M. Klineman and Harry Peisach, filed June 4, 1997.
-------------------------------------------------------
These lawsuits have been consolidated into a single case and the Company expects
an amended complaint will be filed by December 1997. The Company and various
other defendants have retained counsel, the claims are being reviewed, and the
lawsuits will be vigorously defended.
The Company is a party to various legal actions and claims arising in the
ordinary course of its business. The Company believes that it has adequate legal
defenses for each of the actions and claims and believes that their ultimate
disposition will not have a material adverse effect on the Company's
consolidated financial position or results of operations.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
12
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit 10.32 - Loan Document Modification Agreement
Exhibit 11 - Statement Re Computation of Earnings Per Share
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
None.
13
<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.
EIS INTERNATIONAL, INC.
Date: November 12, 1997 By: /s/ James E. McGowan
----------------------- ----------------------
James E. McGowan
President and Chief Executive Officer
Date: November 12, 1997 By: /s/ Frederick C. Foley
--------------------- ------------------------
Frederick C. Foley
Senior Vice President, Finance,
Chief Financial Officer and Treasurer
14
EXHIBIT 10.32
LOAN DOCUMENT MODIFICATION AGREEMENT
(No. 5; dated as of September 3, 1997)
LOAN DOCUMENT MODIFICATION AGREEMENT (this "Agreement"), dated as of
September 3, 197, by and among EIS INTERNATIONAL, INC., a Delaware corporation
with its principal place of business at 555 Herndon Parkway, Herndon, Virginia
20170 ("EIS"), EIS INTERNATIONAL SERVICES CORP., a Virginia corporation with its
principal place of business at 555 Herndon Parkway, Herndon, Virginia 20170
("ISC" and together with EIS, the "Borrowers"), and SILICON VALLEY BANK, a
California-chartered bank with its principal place of business at 3003 Tasman
Drive, Santa Clara, California 95054 and with a loan production office located
at One Central Plaza 11300 Rockville Pike, Suite 1205, Rockville, Maryland
20852, doing business under the name "Silicon Valley East" (the "Bank").
1. Reference to Existing Loan Documents.
-------------------------------------
Reference is hereby made to that certain Amended and Restated Commitment
Letter (the "Commitment Letter"), dated as of May 19, 1994, between EIS and the
Bank, as amended by a Joinder and Assumption Agreement ("Amendment No. 1"),
dated as of October 28, 1994, among EIS, ISC and the Bank, as further amended by
a Loan Modification Agreement ("Amendment No. 2"), dated as of October 4, 1995,
among EIS, ISC and the Bank, and as further amended by a Loan Document
Modification Agreement ("Amendment No. 3"), dated of December 27, 1995, among
EIS, ISC and the Bank, and a Loan Document Modification Agreement ("Amendment
No. 4"), dated as of April 15, 1996 among EIS, ISC and the Bank. The Commitment
Letter, together with the schedules and exhibits attached thereto, as amended by
Amendment No. 1, Amendment No. 2, Amendment No. 3 and Amendment No. 4 is herein
after referred to as the "Credit Agreement". Reference is also hereby made to
the Loan Documents referred to in the Credit Agreement, including without
limitation that certain Third Amended and Restated Promissory Note of the
Borrowers, dated December 27, 1995, as amended and restated of even date
herewith, in the principal amount of $7,000,000 (the "Note") and that certain
Amended and Restated Security Agreement, of even date herewith, by and between
EIS and the Bank and that certain Amended and Restated Security Agreement, of
even date herewith, by and between ISC and the Bank (collectively, the "Security
Agreements"). Unless otherwise defined herein, capitalized terms used in this
Agreement shall have the same respective meanings herein as are set forth in the
Credit Agreement.
2. Effective Date.
---------------
This Agreement shall be deemed effective as of September 3, 1997 (the
"Effective Date"), provided that the Bank shall have received the following on
or before September 12, 1997 and provided further, however, that in no event
shall this Agreement become effective until signed by an officer of the Bank in
California:
a. two copies of this Agreement, duly executed by each of the Borrowers;
<PAGE>
-2-
b. a fourth amended and restated promissory note in the principal amount
of $7,000,000 payable to the order of the Bank in the form enclosed herewith
(the "Amended Note"), duly executed by each of the Borrowers.
c. two copies of each of the Security Agreements, duly executed by each
of the Borrowers;
d. Perfection Certificates, duly executed by each of the Borrowers;
e. financing statements on Form UCC-1 (or, where applicable, amendments
thereto on Form UCC-3), duly executed by each of the Borrowers, to be filed in
each jurisdiction where such filing is required to perfect the Bank's security
interest in the Collateral granted by the Borrowers pursuant to the Security
Agreement;
f. a certificate of the secretary or assistant secretary of each of the
Borrowers, attesting to the continuing validity of the certificate of
incorporation and by-laws of each of the Borrowers, the incumbency and
signatures of any officers executing this Agreement and the Loan Documents and
the approval by the Board of Directors of each of the Borrowers of this
Agreement and the Amended Note; and
g. a check in the amount of $4,350 in payment of the fees of Sullivan
& Worcester LLP, special counsel to the Bank.
By the signature of their respective authorized officers below, each
Borrower is hereby representing that, except as modified in Schedule A attached
hereto, the representations of such Borrower set forth in the Loan Documents
(including those contained in the Credit Agreement, as amended by this
Agreement) are true and correct as of the Effective Date as if made on and as of
such date. The Borrowers jointly and severally agree to pay on or before the
Effective Date a nonrefundable facility fee in connection herewith in the
aggregate amount of $26,250. In order to effectuate the foregoing, EIS confirms
its authorization as to the debiting of its account with the Bank in such amount
in order to pay the Bank the facility fee for the period up to and including the
extending Expiry Date. Finally, each Borrower agrees, that as of the Effective
Date, it has no defenses against its obligations to pay any amounts and perform
any of its obligations under the Credit Agreement and the other Loan Documents.
3. Description of Change in Terms.
-------------------------------
As of the Effective Date, the Credit Agreement is modified in the following
respects:
a. Section 2 of the Credit Agreement is hereby amended by deleting the
date "December 26, 1996" form the first line thereof and replacing it with the
date "September 2, 1998".
b. The first sentence of Section 3 of the Credit Agreement is hereby
deleted in its entirety and replaced with the following sentence:
<PAGE>
-3-
"Advances under the Commitment shall bear interest at a fluctuating rate
per annum equal to the Bank's Prime Rate (as defined below) plus
three-quarters of one percent (0.75%)."
c. The first sentence of the Section 4 of the Credit Agreement is
hereby deleted in its entirety and replaced with the following:
"The Borrowers jointly and severally agree to pay to the Bank a facility
fee for the period from December 27, 1996 through the Expiry Date in the
amount of Twenty Six Thousand Two Hundred Fifty Dollars ($26,250):"
d. Section 10 of the Credit Agreement is hereby amended by deleting
the last phrase of the first paragraph thereof (immediately following
subparagraph (A)) and replacing it with the following:
"to exceed at any time an amount equal to the lesser of (A) 70% of all
Eligible Accounts Receivable (as defined in Schedule III attached hereto)
at such time (the "Borrowing Base") and (B) Seven Million Dollars
($7,000,000) (the "Commitment" or the "Commitment Amount").
e. Section 10 of the Credit Agreement is hereby further amended by
deleting the second paragraph thereof in its entirety and replacing it with the
following:
"If the Credit Amount shall at any time exceed the Borrowing Base, the
Borrowers shall, on the next Business Day, (1) prepay or repay (together
with accrued interest thereon) such principal amount of the advances, and
any unreimbursed drawings under such letters of credit, or (2) if any
advances, drawings or obligations remain unpaid or unreimbursed, pledge to
the Bank, pursuant to a cash collateral pledge agreement duly executed by
the Borrowers in form and substance satisfactory to the Bank, an amount in
cash ("Cash Collateral"), such that, giving effect to such prepayment or
repayment, or such pledge of Cash Collateral, the Credit Amount shall be
less than the sum of the Borrowing Base plus all Cash Collateral pledged
to the Bank as provided in (2) above."
f. Section 19 of the Credit Agreement is hereby amended by deleting
the address of EIS International listed therein and inserting in lieu thereof
the following address:
"EIS INTERNATIONAL, INC.
EIS INTERNATIONAL SERVICES CORP.
555 Herndon Parkway
Herndon, VA 20170
Attn: Chief Financial Officer
Telecopy: (703) 787-6720
g. Schedule I to the Credit Agreement is hereby amended by inserting
the following new Section 14 at the end thereof:
<PAGE>
-4-
"14. Borrowing Base. Giving effect to any advances to be made, letters
of credit to be issued and/or FX Contracts entered into as of the date
hereof under the Commitment Letter, as amended, the aggregate Credit Amount
does not exceed the lesser of the Borrowing Base or the Commitment on such
date."
h. Subsections 4(a) through 4(c) of Schedule II to the Credit
Agreement are hereby deleted in their entirety and replaced with the following:
"(a) within twenty-five (25) days after the end of each month
(including the last month of the year), the unaudited consolidated balance
sheet and income statement of the Borrowers and their Subsidiaries on a
consolidated basis as at the end of, and for, such month, accompanied by a
certificate of the vice president of finance or chief financial officer of
each of the Borrowers, which certificate shall state that said consolidated
financial statements fairly present the consolidated financial condition
and results of operations of the Borrowers and their Subsidiaries in
accordance with GAAP (except for the absence of footnotes) consistently
applied, as at the end of, and for, such month (subject to normal year-end
audit adjustments);
(b) within ninety (90) days after the last day of each fiscal year of
the Borrowers, the audited consolidated balance sheet and income statement
and statement of cash flows of the Borrowers and their Subsidiaries as at
and for the fiscal year then ended, certified by the Accountants (the
substance of such report to be satisfactory to the Bank), together with a
certificate of the chief financial officer of each of the Borrowers to the
effect that such financial statements fairly present the consolidated
financial condition of the Borrowers and their Subsidiaries as of the end
of such fiscal year and the consolidated results of operations for such
fiscal year, in each case in accordance with GAAP. The Borrowers shall
indicate on said financial statements all guarantees or unusual forward or
long-term commitments made by the Borrowers or any Subsidiary thereof;
(c) at the time of the delivery of the monthly and yearly financial
statements required by Paragraphs 4(a) and 4(b), a Compliance Certificate
of the chief financial officer of each of the Borrowers in the form
attached to this Schedule II as Exhibit A;"
i. Subsection 4(g) of Schedule II to the Credit Agreement is hereby
deleted in its entirety and replaced with the following:
"(g) within fifteen (15) days after the end of each fiscal month of
the Borrowers, (i) a list of the accounts receivable aging for the
Borrowers and their Subsidiaries on a consolidated basis as of the end of
such month in such form as is reasonably acceptable to the Bank, all in
reasonable detail and (ii) a Borrowing Base Certificate signed by the chief
financial officer of each of the Borrowers in the form attached to this
Schedule II as Exhibit B. The Bank will require audits no more than once
during each fiscal year of the Borrowers; provided, however, that the
Borrowers shall not receive any further advances under the Commitment
unless and until an agent of the Bank
<PAGE>
-5-
has conducted and the Bank has received an audit of the Borrowers'
accounts receivable, with the costs thereof to be borne by the Borrowers;"
j. Section 22 through 24 of Schedule II to the Credit Agreement are
hereby deleted in their entirety and replaced with the following:
"22. Leverage. The Borrowers will not permit the ratio of Total
Senior Liabilities (net of Deferred Revenues) to Tangible Net Worth
to exceed 0.75 to 1 at the end of any fiscal quarter.
23. Quick Ratio. The Borrowers will not permit the Quick Ratio
to be less than 1.25 to 1 at the end of any fiscal quarter.
24. Minimum Tangible Net Worth. The Borrowers will not permit
Tangible Net Worth at the end of the fiscal quarter ending
September 30, 1997 to be less than Thirty Seven Million Dollars
($37,000,000); will not permit Tangible Net Worth at the end of the
fiscal quarter ending December 31, 1997 to be less than an amount
equal to Thirty Seven Million Dollars ($37,000,000) plus 75% of Net
Income (and not taking into account any Net Loss) for the previous
quarter; and will not permit Tangible Net Worth at the end of each
subsequent fiscal quarter to be less than an amount equal to the
minimum Tangible Net Worth for the previous fiscal quarter, as
determined in accordance with the terms hereof, plus 75% of Net
Income (and not taking into account any Net Loss) for the previous
quarter."
k. Section 25 of Schedule II to the Credit Agreement is hereby
deleted in its entirety.
l. Schedule II to the Credit Agreement is hereby further amended by
restating in its entirety Exhibit A thereto in the form of Exhibit A hereto.
l. Schedule II to the Credit Agreement is hereby further amended by
restating in its entirety Exhibit B thereto in the form of Exhibit B hereto.
m. Schedule III to the Credit Agreement is hereby amended to add the
following new definitions in alphabetical order:
"'Borrowing Base' shall have the meaning given to such term in Section
10 of the Commitment Letter."
"'Eligible Accounts Receivable' means those accounts that arise
in the ordinary course of the Borrowers' business; provided, that
standards of eligibility may be fixed and revised from time to tome by
Bank in Bank's reasonable judgment and upon notification thereof to
the Borrowers in accordance with the provisions hereof. Unless
otherwise agreed to by Bank, Eligible Accounts Receivable shall meet
the following specifications at the time they come into existence and
continue to meet the same through the date of determination:
<PAGE>
-6-
(a) The account (if not a lease or time receivable) is not more than
90 days from the date of the invoice thereof, and the account, regardless
of its stated maturity date, does not remain unpaid more than 90 days after
such invoice date.
(b) The account arose from the performance of services or an outright
sale or license of goods by one of the Borrowers, such goods have been
shipped to the account debtor, and such Borrower has possession of shipping
and delivery receipts evidencing such shipment.
(c) The account is owned solely by a Borrower and is not subject to
any assignment, claim, lien, or security interest, other than a security
interest in favor of the Bank.
(d) The account is not subject to set-off, credit, allowance or
adjustment by the account debtor, except discount allowed for prompt
payment, and the account debtor has not complained in writing as to his
liability thereon and has not returned any of the goods from the sale from
which the account arose.
(e) The account arose in the ordinary course of a Borrower's business,
and did not arise from the performance of services or a sale of goods to a
supplier or employee of such Borrower.
(f) No event of the type described in clause (f) of the definition of
"Event of Default" contained in this Schedule III has occurred with respect
to the account debtor.
(g) The Borrower in question has pledged any instrument or chattel
paper evidencing the account to the Bank pursuant to the provisions of the
Security Agreement.
(h) Not more than 50% of the aggregate accounts, of the account
debtor, excluding lease and time receivables, are over ninety (90) days
from invoice on the date of determination.
(i) The aggregate accounts from the account debtor do not exceed 25%
of the total Eligible Accounts Receivable of the Borrower in question on
the date of determination; that portion of the accounts over the 25% level
will be disqualified.
(j) The account does not result from goods placed on consignment,
guaranteed sale, sale or return, sale on approval, bill and hold, or other
terms by reason of which payment by the account debtor may be conditional.
(k) The account is not a result of an inter-company transfer by the
Borrowers.
(l) Neither Borrower owns any amounts to the account debtor on the
date of determination; to the extent that any amounts are so owed, the
accounts of
<PAGE>
-7-
such account debtor in an amount equal to the amounts owed by the
Borrowers to the account debtor, shall be disqualified.
(m) The Bank has not notified the Borrowers that the Bank has
determined (which determination shall not be made unreasonably) that the
account or account debtor is unsatisfactory.
(n) If the account debtor is a Governmental Authority, the Borrower in
questions has assigned the account to the Bank in compliance with the
Federal Assignment of Claims Act (or similar state law, if the Governmental
Authority is a state or a political subdivision thereof), and has furnished
to the Bank all documents and filings evidencing such compliance.
(o) The account debtor is a Person located in the United States, and
the account arose out of services rendered or goods delivered in the United
States.
(p) That portion of a lease or time receivable which is due within 90
days and which lease or time account debtor is current in its payments to
the Borrower.
n. Schedule III to the Credit Agreement is hereby further amended by
deleting the definition of "Net Income" and restating in their entirety the
definitions of "Net Income" or "Net Loss" as follows:
"'Net Income' or 'Net Loss' for any period in respect of which the
amount thereof is to be determined, shall mean the aggregate of the
consolidated net income (or net loss) after taxes for such period (taken as
a cumulative whole) of the Borrowers and their Subsidiaries, determined in
accordance with GAAP, exclusive of the write-up of any asset, less the
amount of any increase to the Borrowers' capitalized software account under
GAAP during the period in question, plus the aggregate amount of
capitalized software amortized during such period."
4. Continuing Validity.
Upon the effectiveness hereof, each reference in each Loan Document to
"the Credit Agreement", "thereunder", "thereof", "therein", or words of like
import referring to the Credit Agreement, shall mean and be a reference to the
Credit Agreement, as amended hereby. Except as specifically set forth above, the
Credit Agreement shall remain in full force and effect and is hereby ratified
and confirmed. Except as set forth in Section 3 above and in the fourth amended
and restated Note, each of the other Loan Documents is in full force and effect
and is hereby ratified and confirmed. The amendments set forth above (i) do not
constitute a waiver or modification of any term, condition or covenant of the
Credit Agreement or any other Loan Document, other than as expressly set forth
herein, and (ii) shall not prejudice any rights which the Bank may now or
hereafter have under or in connection with the Credit Agreement, as modified
hereby, or the other Loan Documents and shall not obligate the Bank to assent to
any further modifications.
<PAGE>
-8-
5. Miscellaneous.
a. This Agreement may be signed in one or more counterparts each of
which taken together shall constitute one and the same document.
b. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.
c. EACH OF THE BORROWERS ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS
PROPERTIES, UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF ANY STATE OR
FEDERAL COURT OF COMPETENT JURISDICTION IN THE COMMONWEALTH OF MASSACHUSETTS IN
ANY ACTION, SUIT, OR PROCEEDING OF ANY KIND AGAINST IT WHICH ARISES OUT OF OR
BY REASON OF THIS LOAN MODIFICATION AGREEMENT; PROVIDED, HOWEVER, THAT IF FOR
ANY REASON THE BANK CANNOT AVAIL ITSELF OF THE COURTS OF THE COMMONWEALTH OF
MASSACHUSETTS, THEN VENUE SHALL LIE IN SANTA CLARA COUNTY, CALIFORNIA.
d. The Borrowers jointly and severally agree to promptly pay on demand
all costs and expenses of the Bank in connection with the preparation,
reproduction, execution and delivery of this letter amendment and the other
instruments and documents to be delivered hereunder, including the reasonable
fees and out-of-pocket expenses of Sullivan & Worcester LLP, special counsel for
the Bank with respect thereto.
[Remainder of page intentionally left blank.]
<PAGE>
-9-
IN WITNESS WHEREOF, the Bank and the Borrowers have caused this Agreement
to be signed under seal by their respective duly authorized officers as of the
date set forth above.
SILICON VALLEY EAST, a Division
of Silicon Valley Bank, as the Bank
By: /s/ Peter McDonald
-------------------------------
Name: Peter McDonald
Title: Assistant Vice President
SILICON VALLEY BANK, as the Bank
By: /s/ Heidi Fetty
--------------------------------
Name: Heidi Fetty
Title: Document Officer
(signed in Santa Clara, CA)
EIS INTERNATIONAL, INC.
By: /s/ Frederick C. Foley
---------------------------------
Name: Frederick C. Foley
Title: Senior Vice President - Finance and
Treasurer
EIS INTERNATIONAL SERVICES CORP.
By: /s/ Frederick C. Foley
-----------------------------------
Name: Frederick C. Foley
Title: Senior Vice President-Finance and
Treasurer
<PAGE>
EXHIBIT A
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: EIS INTERNATIONAL, INC. and EIS INTERNATIONAL SERVICES CORP.
The undersigned authorized officers of EIS International, Inc. and EIS
International Services Corp. hereby certifies that in accordance with the terms
and conditions of the Credit Agreement, as amended, between Borrower and Bank
(the "Agreement"), (i) each Borrower is in complete compliance for the period
ending ______________ with all required covenants except as noted below and (ii)
all representations and warranties of each Borrower stated in the Agreement are
true and correct in all material respects as of the date hereof. Attached
herewith are the required documents supporting the above certification. Each
Officer further certifies that these are prepared in accordance with Generally
Accepted Accounting Principles (GAAP) and are consistently applied from one
period to the next except as explained in an accompanying letter or footnotes.
The Officer expressly acknowledges that no borrowings may be requested by a
Borrower at any time or date of determination that such Borrower is not in
compliance with any of the terms of the Agreement, and that such compliance is
determined not just at the date this certificate is delivered.
Please indicate compliance status by circling Yes/No under "Complies" column.
Reporting Covenant Required
------------------ --------
Complies
--------
Monthly financial statements Monthly within 25 days Yes No
Annual (CPA Audited) FYE within 90 days Yes No
A/R Agings Monthly within 15 days Yes No
A/R Audit Initial and Annual Yes No
Financial Covenant Required Actual Complies
------------------ -------- ------ --------
Maintain on a Quarterly Basis:
Minimum Quick Ratio 1.25:1.0 ___:1.0 Yes No
Minimum Tangible Net Worth $37,000,000* $______ Yes No
Maximum Debt/Tangible Net Worth 0.75:1.0 ___:1.0 Yes No
*increasing by 75% of Net Income the previous quarter.
Comments Regarding Exceptions: See Attached.
Sincerely,
EIS INTERNATIONAL, INC. EIS INTERNATIONAL SERVICES CORP.
- ------------------------------------ ----------------------------------
SIGNATURE SIGNATURE
TITLE TITLE
DATE DATE
<PAGE>
EXHIBIT B
BORROWING BASE CERTIFICATE
Borrowers: EIS International, Inc. and EIS International Services Corp.
Bank: Silicon Valley Bank
Commitment Amount: $7,000,000
- --------------------------------------------------------------------------------
ACCOUNTS RECEIVABLE
1. Accounts Receivable Book Value as of ________ $_________
2. Lease Receivables $_________
3. TOTAL ACCOUNTS RECEIVABLE $_________
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4. Amounts over 90 days due $_________
5. Balance of 50% over 90 day accounts $_________
6. Concentration Limits $_________
7. Foreign Accounts $_________
8. Contra Accounts $_________
9. Promotion or Demo Accounts $_________
10. Intercompany/Employee Accounts $_________
11. Other (please explain on reverse) $_________
12. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $_________
13. Eligible Accounts (#3 minus #12) $_________
14. LOAN VALUE OF ACCOUNTS (70% of #13) $_________
BALANCES
15. Maximum Loan Amount $7,000,000
16. Total Borrowing Base (#14) $_________
17. Total Funds Available (Lesser of #15 or #16) $_________
18. Present balance owing on Commitment $_________
19. RESERVE POSITION (#17 minus #18) $_________
The undersigned represents and warrants that the foregoing is true, complete
and correct, and that the information reflected in this Borrowing Base
Certificate complies with the representations and warranties set forth in
the amended and restated Commitment Letter, as amended, between the Borrowers
and Silicon Valley Bank.
COMMENTS:
By: _____________________________
Authorized Signer
EIS International, Inc. and Subsidiaries Exhibit 11
Statement Re Computation of Per Share Earnings
(in thousands, except for per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Income (loss) from continuing operations $ 1,548 $(5,491) $ (615) $(16,782)
Discontinued operations - (1,395) - (2,776)
------- ------- -------- --------
Net income (loss) $ 1,548 $(6,886) $ (615) $(19,558)
======= ======= ======== ========
Weighted average number of common and
common equivalent shares:
Common shares outstanding 11,505 10,971 11,289 10,560
Dilutive effect of stock options and warrants, -
primary computation 382 - -
------- ------- -------- --------
Weighted average number of common and
common equivalent shares utilized in the primary
income (loss) per share computation: 11,887 10,971 11,289 10,560
Additional dilutive effect of stock options and
warrants, fully diluted computation - - - -
------- ------- -------- --------
Weighted average number of common and
common equivalent shares utilized in the fully
diluted loss per share computation 11,887 10,971 11,289 10,560
======= ======= ======== ========
Primary and fully diluted income (loss) per share:
Continuing operations $ 0.13 $ (0.50)$ (0.05) $ (1.59)
Discontinued operations - (0.13) - (0.26)
------- ------- -------- --------
Primary and fully diluted income (loss) per share $ 0.13 $ (0.63)$ (0.05) $ (1.85)
======= ======= ======== ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 16,297
<SECURITIES> 0
<RECEIVABLES> 14,825
<ALLOWANCES> 5,468
<INVENTORY> 5,496
<CURRENT-ASSETS> 53,073
<PP&E> 7,615
<DEPRECIATION> 13,707
<TOTAL-ASSETS> 68,461
<CURRENT-LIABILITIES> 20,511
<BONDS> 0
0
0
<COMMON> 116
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 68,461
<SALES> 64,337
<TOTAL-REVENUES> 64,337
<CGS> 27,714
<TOTAL-COSTS> 63,371
<OTHER-EXPENSES> 2,877
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,016)
<INCOME-TAX> 401
<INCOME-CONTINUING> (615)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (615)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
