<PAGE> 1
================================================================================
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 QUARTERLY PERIOD ENDED MARCH 31, 1998
COMMISSION FILE NO. 1-9158
------------------------
MAI SYSTEMS CORPORATION
(Exact name of Registrant as Specified in its Charter)
DELAWARE 22-2554549
(State of Incorporation) (I.R.S. Employer
Identification Number)
9601 Jeronimo Road
Irvine, California 92618
(Address of Principal Executive Office)
Registrant's telephone number, including area code: (949) 598-6000
-------------------------------
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 and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes [X] No [ ]
As of May 13, 1998 , 10,492,164 shares of the registrant's Common Stock, $0.01
par value, were outstanding.
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<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MAI Systems Corporation
Condensed Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
December 31, March 31,
1997 1998
----------- -----------
ASSETS (in thousands)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,051 $ 3,123
Receivables, less allowance for doubtful accounts of $1,983 in 1997
and $1,954 in 1998 12,268 14,429
Inventories 1,838 1,864
Prepaids and other assets 1,935 1,892
----------- -----------
Total current assets 18,092 21,308
Furniture, fixtures and equipment, net 4,355 4,152
Intangibles, net 10,723 10,638
Other assets 1,443 1,232
----------- -----------
Total assets $ 34,613 $ 37,330
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Line of Credit $ 1,452 $ 1,444
Current portion of long-term debt 682 506
Accounts payable 6,863 7,120
Customer deposits 1,776 2,090
Accrued liabilities 6,477 7,355
Income taxes payable 571 521
Unearned revenue 11,967 14,508
----------- -----------
Total current liabilities 29,788 33,544
Long-term debt 5,230 5,219
Other liabilities 261 261
----------- -----------
Total liabilities 35,279 39,024
----------- -----------
Stockholders' deficiency:
Preferred Stock, par value $0.01 per share; 1,000,000 shares authorized,
none issued and outstanding -- --
Common Stock, par value $0.01 per share; authorized 25,000,000
shares; 10,298,539 shares issued and issuable at
December 31, 1997 and March 31, 1998 105 105
Additional paid-in capital 219,379 219,389
Accumulated other comprehensive income 503 553
Accumulated deficit (220,653) (221,741)
----------- -----------
Total stockholders' deficiency (666) (1,694)
----------- -----------
Commitments and contingencies
Total liabilities and stockholders' deficiency $ 34,613 $ 37,330
=========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
-2-
<PAGE> 3
MAI Systems Corporation
Condensed Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
March 31
---------------------------
1997 1998
-------- --------
(in thousands,
except per share data)
<S> <C> <C>
Revenue:
Software, networks and professional services:
Software sales $ 1,580 $ 2,106
Network and computer equipment 2,940 1,075
Professional services 7,124 7,165
-------- --------
11,644 10,346
Legacy revenue 5,180 4,863
-------- --------
Total revenue 16,824 15,209
Direct costs 10,370 8,034
-------- --------
Gross profit 6,454 7,175
Selling, general and administrative expenses 5,970 6,244
Research and development costs 1,193 965
Amortization of intangibles 316 615
Other operating expense 65 184
-------- --------
Operating loss (1,090) (833)
Equity in net losses of unconsolidated subsidiaries -- (49)
Interest income 21 30
Interest expense (136) (236)
-------- --------
Loss before income taxes (1,205) (1,088)
Provision for income taxes -- --
-------- --------
Net loss $ (1,205) $ (1,088)
======== ========
Loss per share:
Basic loss per share:
Net loss $ (0.14) $ (0.11)
======== ========
Diluted loss per share:
Net loss $ (0.14) $ (0.11)
======== ========
Weighted average common shares
used in determining loss per share
Basic 8,595 10,298
======== ========
Diluted 8,595 10,298
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
-3-
<PAGE> 4
MAI Systems Corporation
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
------------------------------
1997 1998
------------ ------------
(dollars in thousands)
<S> <C> <C>
Net cash provided by (used in) operating activities $ (2,543) $ 1,861
------------ ------------
Cash flows from investing activities:
Capital expenditures (521) (196)
Purchase of businesses (6,102) --
Capitalized software costs -- (406)
------------ ------------
Net cash used in investing activities (6,623) (602)
------------ ------------
Cash flows from financing activities:
Short-term borrowings, net 1,079 (8)
Payments received on notes receivable 79 --
Proceeds from issuance of common stock, net 2,300 --
Proceeds from issuance of subordinated notes payable 6,000 --
Increase in note receivables (25) --
Repayments of term and other long-term debt (85) (187)
Proceeds from the exercise of stock options 71 --
------------ ------------
Net cash (used in) provided by financing activities 9,419 (195)
------------ ------------
Effect of exchange rate changes on cash and cash equivalents (24) 8
------------ ------------
Net change in cash and cash equivalents 229 1,072
------------ ------------
Cash and cash equivalents at beginning of period 3,857 2,051
------------ ------------
Cash and cash equivalents at end of period $ 4,086 $ 3,123
============ ============
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
-4-
<PAGE> 5
MAI Systems Corporation
Notes to Condensed Consolidated Financial Statements
Three months ended March 31, 1998(Unaudited)
1. BASIS OF PRESENTATION
Companies for which this report is filed are MAI Systems Corporation and
its wholly-owned subsidiaries (the "Company"). The information contained
herein is unaudited, but gives effect to all adjustments (which are
normal recurring accruals) necessary, in the opinion of Company
management, to present fairly the condensed consolidated financial
statements for the interim period. All significant intercompany
transactions and accounts have been eliminated in consolidation.
2. INVENTORIES
Inventories are summarized as follows:
<TABLE>
<CAPTION>
December 31, March 31,
1997 1998
----------- -----------
(dollars in thousands)
<S> <C> <C>
Finished goods $ 1,068 $ 1,151
Replacement parts 770 713
----------- -----------
$ 1,838 $ 1,864
=========== ===========
</TABLE>
3. PLAN OF REORGANIZATION
In 1993, the Company emerged from a voluntary proceeding under the
bankruptcy protection laws. Notwithstanding the confirmation and
effectiveness of its Plan of Reorganization (the "Plan"), the Bankruptcy
Court continues to have jurisdiction to resolve disputed pre-petition
claims against the Company to resolve matters related to the
assumptions, assignment or rejection of executory contracts pursuant to
the Plan and to resolve other matters that may arise in connection with
the implementation of the Plan.
Shares of common stock may be distributed by the Company to its former
creditors. As of May 13, 1998, 6,755,751 shares of Common Stock had been
issued pursuant to the Plan and were outstanding. The Company estimates
that approximately 6,820,338 shares will have been issued to creditors
at completion of the Plan.
4. BUSINESS ACQUISITIONS
CIMPRO:
On March 6, 1997, the Company acquired substantially all the assets and
assumed certain liabilities of CIMPRO, which develops and markets
process manufacturing software, for $5,900,000 in cash. The acquisition
of CIMPRO was effected by utilizing the proceeds derived from selling
400,000 shares of Common Stock in a private placement for $6.50 per
share and issuing $6,000,000 of 11% subordinated notes due in 2004 to
investment funds associated with Canyon Capital Management LP
("Canyon"). Interest on the subordinated notes is payable semi-annually
commencing September 3, 1997. Associated with the stock issuance, the
Company incurred $300,000 of issuance costs.
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<PAGE> 6
The acquisition of CIMPRO has been accounted for using the purchase
method of accounting. The allocation of the purchase price is as
follows:
<TABLE>
<CAPTION>
Allocation of
Purchase Price
----------
(in thousands)
<S> <C>
Net current liabilities $ (1,061)
Furniture, fixtures and equipment 400
Intangibles 7,475
Long-term liabilities (586)
----------
$ 6,228
==========
</TABLE>
Intangible assets are being amortized on a straight-line basis over the
expected periods to be benefited of five to seven years.
GAMING SYSTEMS INTERNATIONAL ("GSI"):
In March 1997, the Company acquired options to purchase 3.5% of Gaming
Systems International ("GSI") Common Stock from two individuals in
exchange for 14,930 shares of the Company's Common Stock valued at
$104,500 and notes payable of $104,500. The transaction resulted in an
increase in goodwill of $209,000.
The Company will, as needed, pursuant to the agreements to acquire the
30% minority interest shares and options, issue additional shares of
Common Stock in order that the recipients ultimately receive shares
worth a fair market value of $9.75 and $7.50 per share, respectively,
but the total number of additional shares issued under these provisions
will not exceed 45,424 shares. As of March 31, 1998, the fair market
value of the Company's Common Stock was $4.63 per share, which would
result in the maximum number of additional shares (45,424) being issued.
The Company is expecting to settle the number of additional shares to be
issued during 1998.
HOTEL INFORMATION SYSTEMS, INC. ("HIS"):
During 1996, the Company entered into arbitration proceedings regarding
the purchase price of HIS. The Company placed approximately 1,100,000
shares of Common Stock issued in connection with the acquisition of HIS
in an escrow account to be released in whole, or in part, upon final
resolution of post closing adjustments.
In November 1997, the purchase price for the acquisition of HIS was
reduced by $931,000 pursuant to arbitration proceedings. As a result,
goodwill was reduced $931,000 and approximately 100,650 shares will be
released from the escrow account and returned to the Company. In
addition, further claims relating to legal costs and certain
disbursements currently estimated at $1,141,000 are presently pending.
Resolution of such claims may result in a further reduction in the
purchase price and a corresponding release of additional escrow shares
to the Company. The amount and number of shares will be determined based
on the final resolution of such claims. Accordingly, as of March 31,
1998, the final purchase price has not been determined.
The Company will, as needed, pursuant to the asset purchase agreement,
issue additional shares of Common Stock in order that the recipients
ultimately receive shares worth a fair value of $9.25 per share (subject
to increase in such amount to approximately $10.00 per share by year end
1997). This adjustment applies to a maximum of 810,004 shares of Common
Stock. As of March 31, 1998, the fair market of the Company's Common
Stock was $4.63 per share, which would result in approximately 939,465
additional shares being issued.
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<PAGE> 7
5. STOCK WARRANTS
On March 3,1997, at the same time that it issued its 11% subordinated
debt to four investment funds managed by Canyon Capital Management LP
("Canyon"), the Company issued to such investment funds detachable
warrants to purchase 750,000 shares of the Company's Common Stock at
$8.00 per share, and sold 400,000 shares of the Company's Common Stock
for $6.50 per share. The purchase price for the shares of Common Stock
was paid in cash. At the time of issuance of the detachable warrants,
the Company recorded an original issue discount of $1,027,000 (which
represented the fair value of the warrants at the time of issuance) on
the subordinated notes. The fair value of the warrants was recorded as a
reduction in the face value of the subordinated notes.
On March 6, 1997, the Company issued warrants to purchase shares of the
Company's Common Stock at $7.50 per share to a related party. These
warrants were issued as additional compensation under a consulting
agreement, dated April 15, 1994, as amended.
On September 4, 1997, the Company issued 157,895 shares of its Common
Stock to a related party, upon his exercise of previously outstanding
warrants, exercisable at $1.90 per share in cash. On September 8, 1997,
the Company issued 398,510 shares of its Common Stock to a related party
in payment for services rendered pursuant to the consulting agreement.
Additionally, in order to induce exercises, on September 12, 1997, the
Company temporarily re-priced all of its outstanding "out of the money"
warrants to an exercise price of $3.04 per share. As a result, holders
of warrants, being a related party with respect to 50,000 warrants, and
the four Canyon investment funds with respect to 750,000 warrants,
exercised such warrants and acquired an aggregate of 800,000 shares of
the Company" Common Stock at $3.04 per share. Such exercises were paid
in cash except that the investment funds paid a portion of the
consideration for their shares by surrendering $750,000 aggregate
principal of promissory notes of the Company (which were credited at the
principal amount together with accrued interest). This use of notes to
pay a portion of the warrant exercise price was authorized by the terms
of the warrants and notes. Such issuances closed on September 18, 1997.
The foregoing issuances were made in transactions exempt under Section
4(2) under the Securities Act of 1993, as transactions not involving any
public offering. The shares issued were legended and appropriate
investment representations were obtained from the purchases.
6. INCOME (LOSS) PER SHARE OF COMMON STOCK
Effective December 31, 1997, the Company adopted SFAS No. 128, "Earnings
Per Share". This statement replaces the previously reported primary and
fully diluted earnings per share with basic and diluted earnings per
share. Unlike primary earnings per share, basic earnings per share
excludes any dilutive effects of options. Diluted earnings per share is
very similar to the previously reported fully diluted earnings per
share. All income (loss) per share amounts for all periods have been
presented and restated to conform to the SFAS No. 128 requirements.
Basic and diluted income (loss) per share is computed using shares of
common stock issued to date and expected to be issued in accordance with
the Plan of Reorganization ("Common Stock") as discussed in Note 3, and
the weighted average shares of Common Stock issued outside the Plan of
Reorganization. As of March 31, 1998, 6,755,751 shares had been issued
pursuant to the Plan of Reorganization. All outstanding options and
warrants have been excluded from diluted loss per share for all periods
presented as their effect would be anti-dilutive.
-7-
<PAGE> 8
7. NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued
statement of Financial Accounting Standards No. 130 ("SFAS No. 130")
"Reporting Comprehensive Income," which establishes standards for
reporting and disclosures of comprehensive income and its components
(revenues, expenses, gains and losses) in a full set of general purpose
financial statements. SFAS No. 130 is effective for fiscal years
beginning after December 15, 1997 and requires reclassification of
financial statements for earlier periods to be provided for comparative
purposes. The Company has not determined the manner in which it will
present the information required by SFAS No. 130 in its annual
consolidated financial statements for the year ending December 31, 1998.
The Company's total comprehensive income (loss) for all periods
presented herein would not have differed materially from those amounts
reported as net income (loss) in the consolidated statements of
operations.
Also in June 1997, the FASB issued SFAS No. 131, "Disclosure About
Segments of an Enterprise and Related Information." The Statement
establishes standards for the manner in which public business
enterprises report information about operating segments in annual
financial statements and requires those enterprises to report selected
information about operating segments in interim financial reports issued
to shareholders. This Statement is effective for annual financial
statements for periods beginning after December 15, 1997, and for
interim periods after the first year of adoption. The Company has not
yet determined the impact of adopting its disclosure requirements on its
annual financial statements.
In October 1997, the American Institute of Certified Public Accountants
("AICPA") released Statement of Position 97-2, "Software Revenue
Recognition" ("SOP 97-2"). Among other things, SOP 97-2 eliminates the
distinction between significant and insignificant vendor obligations
promulgated by SOP 91-1 and requires each element of a software
arrangement to meet certain criteria in order to recognize revenue
allocated to that element. Additionally, SOP 97-2 requires that total
fees under an arrangement be allocated to each element in the
arrangement based upon vendor specific objective evidence, as defined.
SOP 97-2 is effective for software transactions entered into by the
Company in fiscal 1998 and subsequent periods.
As a result of certain issues raised in applying SOP 97-2, in March
1998, the AICPA issued a Statement of Position ("SOP") which will delay
for one year the effective date of certain provisions of SOP 97-2 with
respect to what constitutes vendor-specific objective evidence of fair
value of the delivered software element in certain multiple-element
arrangements that include service elements entered into by entities that
never sell the software elements separately. The Company does not
anticipate that the adoption of SOP 97-2 and the subsequent SOP will
have a material effect on the Company's results of operations. However,
the ultimate resolution of the implementation issues referred to above
could change the Company's expectation.
8. RECLASSIFICATIONS
Certain reclassifications have been made to the 1997 condensed
consolidated financial statements to conform to the 1998 presentation.
-8-
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1998, working capital decreased from a deficit of $11,696,000 at
December 31, 1997 to a deficit of $12,236,000. Excluding unearned revenue of
$14,508,000, the Company's working capital at March 31, 1998 would be $2,272,000
or a ratio of current assets to current liabilities of 1.12 to 1.0. The
comparable ratio at December 31, 1997 was 1.02 to 1.0. The improvement in the
Company's working capital position, excluding unearned revenue, is attributed to
increased renewals of maintenance service contracts.
Cash and cash equivalents were $3,123,000 at March 31, 1998, as compared to
$2,051,000 as of December 31, 1997. The Company continues to have available a
$4,000,000 secured revolving credit facility. The availability of this line of
credit is based on a calculation reflecting the age and nature of certain
accounts receivable. At March 31, 1998, the available balance was approximately
$2,200,000, of which approximately $1,444,000 was drawn down under this
facility.
Net cash used for investing activities in the three months ended March 31, 1998,
totaled $602,000. Capital expenditures comprised $196,000.
Stockholders' equity decreased $1,028,000 at March 31, 1998, due principally to
the net loss of $1,088,000.
The Company believes it will continue to have sufficient cash available to fund
its operating and capital requirements through 1998.
RESULTS OF OPERATIONS
Three Months Ended March 31, 1997 Compared to Three Months Ended March 31, 1998
<TABLE>
<CAPTION>
Three months ended Percentage Three months ended Percentage
March 31, 1997 of Revenue March 31, 1998 of Revenue
-------------- ---------- -------------- ----------
(in thousands)
<S> <C> <C> <C> <C>
Revenues:
Hospitality $ 7,298 43.4% $ 7,811 51.4%
Process Manufacturing 3,802 22.6% 2,160 14.2%
Gaming 327 1.9% 366 2.4%
Legacy 5,180 30.8% 4,863 32.0%
Other 217 1.3% 9 0.1%
Total Revenue 16,824 100.0% 15,209 100.0%
Gross profit 6,454 38.4% 7,175 47.2%
Selling, general &
administrative expenses 5,970 35.5% 6,244 41.1%
Research and development costs 1,193 7.1% 965 6.3%
Amortization of intangibles 316 1.9% 615 4.0%
Other operating (income) expense 65 0.4% 184 1.2%
</TABLE>
The year-to-year decrease in revenue of 9.6% was due primarily to a decrease in
hardware sales, as well as a 6.1% decrease in Legacy revenue. This is consistent
with the Company's strategy to focus on providing software and services to its
vertical markets.
Gross profit increased to 47.2% from 38.4% due to higher gross margins from
increases in software sales and professional services. Revenue on lower margin
functions such as hardware and Legacy declined.
Selling, general and administrative expenses ("SG&A") increased 4.6% to
$6,244,000. The increase is related to the Company's strategy at winning
contracts with large customers, as well as a full period of costs relating to
the CIMPRO product line.
Research and development costs decreased 19.1% over the comparable period in
1997 as there was less work required on the Lodging Touch product line and less
activity on Legacy customers.
The 94.6% increase in amortization of intangibles is related to the expensing of
a full period of goodwill expense for the acquisition of CIMPRO in March 1997.
-9-
<PAGE> 10
NEW ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board issued SFAS Nos. 130 and
131, "Reporting Comprehensive Income" ("SFAS 130") and "Disclosures about
Segments of an Enterprise and Related Information" ("SFAS 131"), respectively
(collectively, the "Statements"). The Statements are effective for fiscal years
beginning after December 15, 1997. SFAS 130 establishes standards for reporting
of comprehensive income and its components in annual financial statements. SFAS
131 establishes standards for reporting financial and descriptive information
about an enterprise's operating segments in its annual financial statements and
selected segment information in interim financial reports. Reclassification or
restatement of comparative financial statements or financial information for
earlier periods is required upon adoption of SFAS 130 and SFAS 131,
respectively. Application of the Statements' requirements is not expected to
have a material impact on the Company's consolidated financial position, results
of operations or income (loss) per share data as currently reported. Effective
March 31, 1998 the Company adopted SFAS 130 and SFAS 131.
In October 1997, the American Institute of Certified Public Accountants
("AICPA") released Statement of Position 97-2, "Software Revenue Recognition"
("SOP 97-2"). Among other things, SOP 97-2 eliminates the distinction between
significant and insignificant vendor obligations promulgated by SOP 91-1 and
requires each element of a software arrangement to meet certain criteria in
order to recognize revenue allocated to that element. Additionally, SOP 97-2
requires that total fees under an arrangement be allocated to each element in
the arrangement based upon vendor specific objective evidence, as defined. SOP
97-2 is effective for software transactions entered into by the Company in
fiscal 1998 and subsequent periods.
As a result of certain issues raised in applying SOP 97-2, in March 1998, the
AICPA issued a Statement of Position ("SOP") which will delay for one year the
effective date of certain provisions of SOP 97-2 with respect to what
constitutes vendor-specific objective evidence of fair value of the delivered
software element in certain multiple-element arrangements that include service
elements entered into by entities that never sell the software elements
separately. The Company does not anticipate that the adoption of SOP 97-2 and
the subsequent SOP will have a material effect on the Company's results of
operations. However, the ultimate resolution of the implementation issues
referred to above could change the Company's expectation.
-10-
<PAGE> 11
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
-11-
<PAGE> 12
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As a consequence of the commencement of the Company's bankruptcy
proceedings, the Company has filed objections to a large number of
proofs of claim. Sums determined to be due to claimants, as a result of
settlement or judicial determinations, will be treated under the Plan of
Reorganization as claims and claimants will receive either cash or
shares of common stock in exchange for their claims. The Company does
not believe the outcome of these objections to be material.
Further, the Company instituted several adversary proceedings prior to
the effective date of the Plan of Reorganization. None of those
proceedings involve allegations of material claims against the Company.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(a) None.
(b) None.
(c) None.
(d) None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
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.
27 Financial Data Schedule
(b) Reports on Form 8-K.
None.
-12-
<PAGE> 13
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.
MAI SYSTEMS CORPORATION
(Registrant)
Date: May 15, 1998
-------------------------------
Lewis H. Stanton
Executive Vice President and
Chief Operating and Financial Officer
(Chief Accounting Officer)
-13-
<PAGE> 14
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 3,123
<SECURITIES> 0
<RECEIVABLES> 16,383
<ALLOWANCES> (1,954)
<INVENTORY> 1,864
<CURRENT-ASSETS> 21,308
<PP&E> 14,545
<DEPRECIATION> (10,393)
<TOTAL-ASSETS> 37,330
<CURRENT-LIABILITIES> 33,544
<BONDS> 0
0
0
<COMMON> 105
<OTHER-SE> (1,799)
<TOTAL-LIABILITY-AND-EQUITY> 37,330
<SALES> 15,209
<TOTAL-REVENUES> 15,209
<CGS> (8,034)
<TOTAL-COSTS> (8,034)
<OTHER-EXPENSES> (8,086)
<LOSS-PROVISION> 29
<INTEREST-EXPENSE> (206)
<INCOME-PRETAX> (1,088)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,088)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,088)
<EPS-PRIMARY> (0.11)
<EPS-DILUTED> (0.11)
</TABLE>
