<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report pursuant to Section 13 of 15(d) of the
Securities Exchange Act of 1934.
For the quarterly period ended June 29, 1996
OR
[ ] Transition Report pursuant to Section 13 of 15(d) of the
Securities Exchange Act of 1934.
For the transition period from____________to____________.
Commission File Number 0-20084
NETFRAME SYSTEMS INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 77-0081278
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1545 Barber Lane, Milpitas, CA 95035
(Address of principal executive offices and zip code)
(408) 474-1000
(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 of 15(d) of the Securities Exchange Act of
1934 during the proceeding 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 August 5, 1996 there were 13,788,114 shares of the registrant's common
stock outstanding.
<PAGE> 2
NETFRAME SYSTEMS INCORPORATED
FORM 10-Q
JUNE 29, 1996
INDEX
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Statements of Operations -
Three months and six months ended
June 29, 1996 and July 1, 1995 3
Consolidated Balance Sheets -
June 29, 1996 and December 31, 1995 4
Consolidated Statements of Cash Flows -
Six months ended June 29, 1996 and
July 1, 1995 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-12
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security
Holders 13
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURE PAGE 15
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
NETFRAME SYSTEMS INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
--------------------- ---------------------
June 29, July 1, June 29, July 1,
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net revenue $ 18,810 $ 19,910 $ 38,879 $ 33,057
Cost of revenue 11,315 10,080 22,235 17,296
-------- -------- -------- --------
Gross profit 7,495 9,830 16,644 15,761
Operating expenses:
Research and development 3,886 3,040 7,544 6,025
Selling, general and administrative 8,778 8,157 17,370 16,953(1)
-------- -------- -------- --------
Total operating expenses 12,664 11,197 24,914 22,978
-------- -------- -------- --------
Operating loss (5,169) (1,367) (8,270) (7,217)
Interest and other income, net 296 353 633 661
-------- -------- -------- --------
Loss before income taxes (4,873) (1,014) (7,637) (6,556)
Benefit for income taxes -- -- -- (277)
-------- -------- -------- --------
Net loss ($ 4,873) ($ 1,014) ($ 7,637) ($ 6,279)
======== ======== ======== ========
Net loss per share ($ 0.36) ($ 0.08) ($ 0.56) ($ 0.47)(1)
======== ======== ======== ========
Number of shares used in computing
per share amounts 13,661 13,496 13,645 13,450
======== ======== ======== ========
</TABLE>
(1) Includes a charge of $1.4 million or $0.10 per share associated with the
write-off of application software and related costs in connection with a
decision to discontinue a management information system upgrade. Net loss,
excluding this charge, would have been $4.9 million or $0.36 per share.
See accompanying notes
3
<PAGE> 4
NETFRAME SYSTEMS INCORPORATED
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
Jun. 29 Dec. 31
1996 1995
--------- --------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 19,310 $ 18,340
Short-term investments 4,000 13,304
-------- --------
Total cash, cash equivalents and short-term investments 23,310 31,644
Accounts receivable, net 16,891 16,623
Inventories 10,485 10,680
Other current assets 808 1,244
-------- --------
Total current assets 51,494 60,191
Property and equipment, net 10,781 9,823
Other assets, net 2,816 1,684
-------- --------
$ 65,091 $ 71,698
======== ========
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<S> <C> <C>
Current liabilities:
Accounts payable $ 7,248 $ 6,374
Accrued compensation and benefits 2,711 2,866
Accrued warranty 874 1,003
Deferred revenue 1,394 1,532
Other accrued liabilities 743 729
-------- --------
Total current liabilities 12,970 12,504
Commitments and contingencies
Stockholders' equity:
Common stock 14 14
Additional paid-in-capital 73,132 72,568
Accumulated deficit (21,025) (13,388)
-------- --------
Total stockholders' equity 52,121 59,194
-------- --------
$ 65,091 $ 71,698
======== ========
</TABLE>
See accompanying notes.
4
<PAGE> 5
NETFRAME SYSTEMS INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH FLOWS
(IN THOUSANDS)
(Unaudited)
<TABLE>
<CAPTION>
Six months ended
---------------------------
June 29, 1996 July 1, 1995
------------- ------------
<S> <C> <C>
Cash flows from (required for) operating activities:
Net loss ($ 7,637) ($ 6,279)
Items not requiring the current use of cash:
Amortization of deferred compensation -- 53
Loss on disposal of capital assets 297 1,375
Depreciation and amortization 3,684 2,376
Changes in items affecting operations:
Accounts receivable (269) 10,329
Inventories 195 (879)
Other current assets 436 (360)
Accounts payable 874 (1,144)
Accrued liabilities (408) 807
-------- --------
Cash generated from (required for) operating activites (2,828) 6,278
Cash flows from (required for) investing activities:
Acquisitions of property and equipment (3,939) (2,262)
Other assets (2,132) (205)
Purchase of available-for-sale securities (40,106) (81,300)
Maturities of available-for-sale securities 49,410 77,300
Purchase of held-to-maturity investments -- (1,474)
Sale of held-to-maturity investments -- 10,800
-------- --------
Cash generated from investing activities 3,233 2,859
Cash flows from (required for) financing activities:
Payments on short-term borrowings -- (1,048)
Payments on capital lease obligations -- (58)
Payments on stockholders' notes receivable -- (15)
Issuance of common stock, net 565 463
-------- --------
Cash generated from (required for) financing activities 565 (658)
Net increase in cash and cash equivalents 970 8,479
Cash and cash equivalents at the beginning of the period 18,340 9,748
-------- --------
Cash and cash equivalents at the end of the period $ 19,310 $ 18,227
======== ========
Supplemental disclosures:
Cash paid during the period for:
Interest -- $ 3
Income taxes $ 10 $ 25
</TABLE>
5
<PAGE> 6
NETFRAME SYSTEMS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. QUARTERLY CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q but do not include
all of the information and footnotes required by generally accepted
accounting principles for complete consolidated financial statements and
should, therefore, be read in conjunction with the Company's audited
consolidated financial statements and notes thereto for the fiscal year ended
December 31, 1995 included in the Annual Report on Form 10-K. The
accompanying statements include all normal recurring adjustments which the
Company believes necessary for a fair presentation of the statements. The
interim operating results are not necessarily indicative of the results for
the full year.
Certain reclassifications have been made to prior year amounts to conform
with the 1996 presentation.
2. INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
June 29, 1996 Dec. 31, 1995
------------- -------------
<S> <C> <C>
Raw materials $ 2,266 $ 1,954
Work in process 1,319 2,411
Finished goods 6,900 6,315
------- -------
$10,485 $10,680
======= =======
</TABLE>
3. PROVISION (BENEFIT) FOR INCOME TAXES
The Company provides for income tax expense (or benefit) during interim
reporting periods based upon an estimate of the annual effective tax rate. The
rate of tax (benefit) is less than the federal statutory rate of 35% due to the
limitations controlling the timing for realization of net operating losses and
tax credits (which may carryforward to partially offset future income taxes)
established by the Statement of Financial Accounting Standards No. 109 (FAS
109), "Accounting for Income Taxes".
4. NET LOSS PER SHARE
Net loss per share is based upon the weighted average number of outstanding
shares of common stock.
6
<PAGE> 7
NETFRAME SYSTEMS INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This section contains certain forward-looking statements. Actual results may
differ materially from the results described in such trend analysis and forward
looking statements. Factors that might cause such a difference include, but are
not limited to, those discussed in "Business Factors".
RESULTS OF OPERATIONS
NET REVENUE AND GROSS MARGIN:
<TABLE>
<CAPTION>
Three months ended Six months ended
-------------------- --------------------
(in thousands) June 29, July 1, June 29, July 1,
1996 1995 1996 1995
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Net Revenue $18,810 $19,910 $38,879 $33,057
Domestic Sales $16,810 $15,856 $35,182 $27,101
Percent of net revenue 89% 80% 90% 82%
Export Sales $ 2,000 $ 4,054 $ 3,697 $ 5,956
Percent of net revenue 11% 20% 10% 18%
Gross Margin 40% 49% 43% 48%
</TABLE>
Net revenue decreased 6% for the second quarter and increased 18% for the first
six months of 1996 when compared to the same periods in the prior year. The
decrease in net revenue from the comparable quarters was primarily due to a
decrease in unit sales for the second quarter of 1996 slightly offset by a shift
in product mix resulting in higher average sales prices. The increase in net
revenue for the first six months of 1996 when compared to the first six months
of 1995 was primarily due to a shift in product mix resulting in an increase in
average sales prices which was partially offset by lower unit sales. The Company
believes that customer expectation of an upcoming transition to next-generation
products, coupled with more intense price competition on existing products,
contributed to both a revenue and an earnings shortfall, and caused sales cycles
to lengthen. There can be no assurance that a successful and timely transition
to a next generation of products will occur, or, if it occurs, will result in
increased unit sales or revenues, that customer uncertainty with respect to the
upcoming transition to next-generation products and price competition will not
7
<PAGE> 8
continue to have an adverse effect on the Company's business, results of
operations or financial condition. The Company anticipates that many of the
factors which negatively impacted operating results in the first six months of
1996 will continue to have an adverse impact on the Company's operating results
for the remainder of fiscal 1996.
Export net revenue decreased as a percentage of total net revenue for the second
quarter and first six months of 1996 when compared to the same periods in the
prior year. The decrease may be partially attributable to increased competitive
pressures. Although the Company has attempted to build new distribution channels
in Europe, there can be no assurance that the Company will be successful in
distributing its products through this new channel.
The Company recognizes revenue upon shipment of product and records allowances
for estimated uncollectible accounts and sales returns. For the second quarter
and first six months of 1996, when compared to the corresponding periods of
1995, the Company experienced a lower rate of sales returns. However, in the
second quarter of 1996, the Company recorded additional reserves to reflect
potential risks related to certain international receivables. There can be no
assurance that such reserves will be adequate for the future.
In order for the Company to increase its net revenue it must continue to develop
and introduce new products. Any delay in this process, deferral of purchases by
customers in anticipation of such new product introductions, difficulties
encountered in introducing these new products, or failure of these products to
achieve market acceptance, compete successfully with alternatives offered by
other vendors could adversely affect net revenue and profitability.
Gross margins were 40% and 43%, respectively, for the second quarter and first
six months of 1996 as compared to 49% and 48%, respectively, for the same
periods one year ago. The Company believes that its competitively driven pricing
actions in memory and drives as well as a higher mix of these add-ons were the
key reasons for the decline in overall gross margins. In addition, the reserve
for excess and obsolete inventory was increased in the second quarter of 1996,
and is reflective of reduced sales volumes. There can be no assurance that the
Company will not experience futher increases in excess and obsolete inventory
reserves if unit sales and net revenues continue to decrease on a sequential
quarterly basis.
In addition, the Company lowered end-user list prices throughout fiscal 1995 and
the first half of 1996 and will continue to lower the end-user list price of
certain of the components it sells. The Company believes the gross margins may
continue to decrease through fiscal 1996 as a result of its pricing strategy.
8
<PAGE> 9
OPERATING EXPENSES:
<TABLE>
<CAPTION>
Three months ended Six months ended
----------------------- -------------------
(in thousands) June 29, July 1, June 29, July 1,
1996 1995 1996 1995
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Research & development $ 3,886 $ 3,040 $ 7,544 $ 6,025
Percent of net revenue 21% 15% 19% 18%
Selling, general & $ 8,778 $ 8,157 $17,370 $16,953
administrative
Percent of net revenue 47% 41% 45% 52%
Total Operating Expenses $12,664 $11,197 $24,914 $22,978
Percent of net revenue 68% 56% 64% 70%
</TABLE>
Research and development expense increased for both the second quarter and first
six months ending June 29, 1996 when compared to the same periods one year ago.
The expenses for 1996 increased primarily due to consulting, product prototype
expense and executive officer recruiting. The Company expects that research and
development expenses will continue to increase as a percentage of net revenue
for the remainder of fiscal 1996 as the Company continues to invest in research
and development, although these expenses can vary from period to period
primarily due to variable spending on product prototypes.
The Company records software development costs in accordance with Statement of
Financial Accounting Standards ("FAS") No. 86. During the first half of 1996,
approximately $150,000 of software development costs were capitalized as
compared to $205,000 of software development costs capitalized in the
corresponding period in 1995. At June 29, 1996, $651,000 of capitalized software
development costs, net of accumulated amortization, were included in other
assets.
The Company operates in a rapidly changing and highly competitive marketplace
and, as a result, believes it is critical to continue to make substantial
investments in research and development activities in order to maintain its
competitive position.
Selling, general and administrative expenses for the second quarter of 1996
increased to 47% of net revenue from 41% for the same period in 1995 due
primarily to an increase in headcount and headcount related expenses. Expenses
for the first six months of 1996 were 45% of net revenue as compared to 52% for
the comparable period in 1995. The decrease was primarily attributable to
severance costs and a one-time charge to discontinue a management information
system upgrade in the first quarter of 1995.
9
<PAGE> 10
INTEREST AND OTHER INCOME, NET:
Interest and other income, net, decreased for the second quarter and first six
months of 1996 when compared to the same periods in the prior year due primarily
to lower lower cash balances, offset to some extent by higher interest rates.
PROVISION (BENEFIT) FOR INCOME TAX:
The Company recorded no provision for income taxes for the second quarter or the
first six months ended June 29, 1996 and a benefit of $277,000 for the first six
months of 1995. The Company provides for income taxes (benefits) during interim
reporting periods based upon an estimated annual effective tax rate, applied to
income (loss) before income taxes.
The rate of tax (benefit) was less than the federal statutory rate of 35% due to
the limitations controlling the timing for realization of net operating losses
and tax credits (which may carry forward to partially offset future income
taxes) established by the Statement of Financial Accounting Standards No. 109
(FAS 109), "Accounting for Income Taxes".
BUSINESS FACTORS:
In the past, the Company has experienced fluctuations in its operating results
and believes it will continue to experience fluctuations. The Company generally
fills orders shortly after receipt from customers and, therefore, backlog at the
beginning of a fiscal period represents only a small percentage of the product
sales anticipated in that period. Further, a substantial portion of the
Company's net revenue in each quarter generally results from orders received
during the last few weeks of that quarter. The absence of significant backlog
and the concentration of sales at the end of the quarter impairs the Company's
ability to control expense, production and inventory levels, which are incurred
based on forecasted revenue and are relatively fixed in the short term. If
anticipated shipments in any quarter do not occur or are delayed, expenditure
levels could be disproportionately high, and the Company's operating results for
that quarter would be materially adversely affected.
The introduction or shipment of new products by the Company's competitors, or
any delay in the introduction or shipment of new products by the Company, could
have a materially adverse affect on the Company's operating results. In
addition, the Company's operating results may fluctuate as a result of a number
of other factors, including variation in the size and timing of individual
transactions, the mix of products sold, variation in the mix of sales by
distribution channel, mix in
10
<PAGE> 11
international and domestic sales, end users' capital spending cycles, changes in
pricing policies by the Company, its competitors or its suppliers, the
availability and cost of key components, European and Pacific Rim market
seasonality and the timing of introduction and the market acceptance of new and
enhanced versions of the Company's products.
The Company's primary means of distribution is through VARs, systems integrators
and distributors. The Company's business and financial results could be
adversely affected in the event that the financial condition of the VARs and
system integrators worsens to the point that it affects their ability to sell or
pay for the Company's products. In addition, the Company is evaluating its
distribution channels, particularly in Europe and the Pacific Rim. Any changes
could result in fluctuations in net revenue, gross margins, and/or operating
expenses. The Company cannot at this time determine the ultimate effect of these
or other future distribution channel modification efforts on the Company's
future operating results.
In recent quarters, in response to requests by certain large customers, the
Company has sold products directly to such customers. While these sales
typically are at higher average selling prices, they may require the Company to
incur additional installation and support obligations that would otherwise be
provided by the Company's VARs and system integrators. The Company cannot at
this time determine the ultimate effect on operating results of an increase in
the level of direct sales. While the Company attempts to limit these direct
sales in order to avoid conflicts with its existing distribution channels, there
can be no assurance that an increase in direct sales will not adversely affect
the Company's relationships with its VARs and system integrators. The Company
believes that it will continue to rely on VARs and system integrators as its
primary means of distribution and any disruption in these channels could have a
material adverse affect on the Company's operating results.
In the first six months of 1996, over 90% of the products sold by the Company
utilize operating systems provided by Novell and Microsoft. Any problems in the
use of these operating systems by end users could adversely affect the Company's
sales.
The introduction or shipment of new products by the Company's competitors, or
any delay in the introduction or shipment of new products by the Company, could
have a materially adverse affect on the Company's operating results. In
addition, the Company's operating results may fluctuate as a result of a number
of other factors, including variation in the size and timing of individual
transactions, the mix of products sold, variation in the mix of sales by
distribution channel, mix in international and domestic sales, end users'
capital spending cycles, changes in pricing policies by the Company, its
competitors or its suppliers, the availability and cost of key components,
European and Pacific Rim market seasonality and the timing of introduction and
the market acceptance of new and enhanced versions of the Company's products.
11
<PAGE> 12
The Company's products include certain components that are currently available
only from single sources or limited sources. Any availability limitations,
interruptions in supplies, or price increases relative to these components could
adversely affect the Company's financial condition, business or results of
operations.
Because of the variety and uncertainty of the factors affecting the Company's
operating results, past financial performance and historic trends may not be a
reliable indicator of future performance. These factors, as well as other
factors affecting the Company's operating performance, and the fact that the
Company participates in a highly dynamic industry, may result in significant
volatility in the Company's common stock price.
LIQUIDITY AND CAPITAL RESOURCES
At June 29, 1996, the Company had cash, cash equivalents and short-term
investments of approximately $23.3 million, a decrease of $8.3 million from
$31.6 million at December 31, 1995. During the first six months of 1996, the
Company used $2.8 million of cash in operating activities which consisted
primarily of a net loss of $7.6 million, offset by depreciation and amortization
expense of $3.7 million and an increase in accounts payable of $874,000.
During the first six months of 1996, the Company purchased capital equipment
totaling $2.8 million. Of this amount, $1.7 million was purchased with cash and
$1.1 million was acquired through the capitalization of inventory. Capital
equipment purchases for the remainder of 1996 are anticipated to be
approximately $2.8 million.
At June 29, 1996, the Company's principal sources of liquidity consisted of its
cash, cash equivalents and short-term investments. The Company currently
anticipates that its existing cash, cash equivalents and short-term investments
will be sufficient to satisfy the Company's cash requirements for at least
twelve months. Actual cash requirements could differ materially from those
expressed in the preceding forward-looking statement, as actual cash
requirements are dependent on many factors, including: the ability of the
Company to achieve its planned operating results and , if additional funds may
be needed, the ability of the Company to secure additional funds with acceptable
terms.
12
<PAGE> 13
PART II. OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF STOCKHOLDERS
The Company's Annual Meeting of Stockholders was held on June 6, 1996.
Proxies for the meeting were solicited pursuant to Regulation 14A. At the
meeting, management's nominees for directors were elected. A summary of the
nominees and voting results are as follows:
Nominee Shares Voting For Shares Withheld
------- ----------------- ---------------
Gordon E. Eubanks, Jr 8,762,063 728,884
Robert L. Puette 8,765,527 725,420
Edward R. Kozel 8,765,477 725,470
James P. Lally 8,770,377 720,570
The other matters presented and the voting of stockholders with respect thereto
are as follows:
(i) Proposal to approve an amendment to the Company's 1992 Stock Option
Plan to, among other things, increase the number of shares of Common Stock
reserved for issuance thereunder by 150,000 and to impose limits on stock option
grants to employees to qualify the compensation associated with such grants as
"performance-based" compensation within the meaning of Section 162(m) of the
Internal Revenue Code of 1986, as amended.
For: 7,383,635 Against: 1,912,915 Abstained: 50,112
Broker Non-Votes: 144,285
(ii) Proposal to approve an amendment to the Company's Employee Stock
Purchase Plan to increase the number of shares of Common Stock reserved for
issuance thereunder by 500,000 shares:
For: 8,982,020 Against: 311,279 Abstained: 53,363
Broker Non-Votes: 144,285
(iii) Proposal to ratify the selection of Ernst & Young LLP as the
Company's independent auditors for the fiscal year ending December 28, 1996.
For: 9,400,021 Against: 65,135 Abstained: 25,791
13
<PAGE> 14
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
10.1 (1) 1992 Stock Option Plan, as amended.
10.2 (2) 1992 Employee Stock Purchase Plan, as amended.
27.1 Financial Data Schedule.
(1) Incorporated by reference from the Registrant's Registration
Statement on Form S-8 (Reg. No. 333-7075), which became effective on
or about June 28, 1996.
(2) Incorporated by reference from the Registrant's Registration
Statement on Form S-8 (Reg. No. 33-80194) dated June 14, 1994.
b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended June 29,
1996.
14
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
NetFRAME Systems Incorporated
Registrant
Date August 8, 1996 /s/ Robert L. Puette
--------------- --------------------
Robert L. Puette
President and Chief Executive Officer
(Principal Executive Officer)
Date August 8, 1996 /s/ Dan McCammon
-------------- ----------------
Dan McCammon
Vice President, Finance and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
15
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-29-1996
<CASH> 19,310
<SECURITIES> 4,000
<RECEIVABLES> 17,568
<ALLOWANCES> 677
<INVENTORY> 10,485
<CURRENT-ASSETS> 51,494
<PP&E> 28,285
<DEPRECIATION> 17,504
<TOTAL-ASSETS> 65,091
<CURRENT-LIABILITIES> 12,970
<BONDS> 0
0
0
<COMMON> 14
<OTHER-SE> 52,107
<TOTAL-LIABILITY-AND-EQUITY> 65,091
<SALES> 36,937
<TOTAL-REVENUES> 38,879
<CGS> 21,458
<TOTAL-COSTS> 22,235
<OTHER-EXPENSES> 24,914
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (633)
<INCOME-PRETAX> (7,637)
<INCOME-TAX> 0
<INCOME-CONTINUING> (7,637)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,637)
<EPS-PRIMARY> (0.56)
<EPS-DILUTED> (0.56)
</TABLE>
