<PAGE> 1
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 March 31, 1997
[ ] 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 0-21541
BITSTREAM INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 04-2744890
State or other jurisdiction of incorporation (I.R.S. Employer
or organization Identification No.)
215 FIRST STREET CAMBRIDGE, MASSACHUSETTS 02142
(Address of principal executive offices) (Zip Code)
(617) 497-6222
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
At May 9, 1997 there were 5,650,824 shares of Class A Common Stock, par
value $0.01 per share, and 422,026 shares of Class B Common Stock, par value
$0.01 per share, outstanding.
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
PAGE
NUMBERS
-------
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1996 AND
MARCH 31, 1997 .......................................... 3
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS
ENDED MARCH 31, 1996 AND 1997 ........................... 4
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE
MONTHS ENDED MARCH 31, 1996 AND 1997 .................... 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ................................. 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS ........................................ 8
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS .................................................. 11
ITEM 2. CHANGES IN SECURITIES .............................................. 11
ITEM 3. DEFAULTS UPON SENIOR SECURITIES .................................... 11
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS ................. 11
ITEM 5. OTHER INFORMATION .................................................. 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ................................... 11
SIGNATURES .................................................. 12
</TABLE>
Page 2 of 13
<PAGE> 3
PART I -- FINANCIAL STATEMENTS
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
BITSTREAM INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1997
------------ ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 11,718,000 $ 11,109,000
Accounts receivable, net of allowance for 1,552,000 1,980,000
doubtful accounts
Current portion of long-term accounts
receivable and extended
plan accounts receivable, net of 1,667,000 1,752,000
allowance for doubtful accounts
Deferred income taxes 868,000 868,000
Other current assets 434,000 239,000
------------ ------------
Total current assets: 16,239,000 15,947,000
------------ ------------
Property and equipment, net: 924,000 887,000
------------ ------------
Other assets:
Long-term accounts receivable, net of 123,000 108,000
current portion
Other assets 191,000 652,000
------------ ------------
Total other assets 314,000 760,000
------------ ------------
Total assets: $ 17,477,000 $ 17,594,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current maturities of capital lease $ 36,000 $ 26,000
obligations
Accounts payable 513,000 413,000
Accrued expenses 1,470,000 1,536,000
------------ ------------
Total current liabilities: 2,019,000 1,975,000
------------ ------------
Capital lease obligations, less current 79,000 73,000
maturities ------------ ------------
Other long-term liabilities: 20,000 22,000
------------ ------------
Stockholders' equity:
Common stock 59,000 60,000
Additional paid-in capital
26,637,000 26,568,000
Accumulated deficit
(11,293,000) (11,061,000)
Cumulative translation adjustment
(44,000) (43,000)
------------ ------------
Total stockholders' equity: 15,359,000 15,524,000
------------ ------------
Total liabilities and stockholders'
equity: $ 17,477,000 $ 17,594,000
============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED FINANCIAL STATEMENTS.
Page 3 of 13
<PAGE> 4
BITSTREAM INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------------
1996 1997
----------- -----------
<S> <C> <C>
REVENUES:
Revenues $ 2,706,000 $ 2,522,000
Cost of revenues 356,000 289,000
----------- -----------
Gross Profit 2,350,000 2,233,000
----------- -----------
OPERATING EXPENSES:
Marketing and selling 1,106,000 1,216,000
Research and development 333,000 509,000
General and administrative 399,000 425,000
----------- -----------
Total operating expenses 1,838,000 2,150,000
----------- -----------
Operating income 512,000 83,000
----------- -----------
Other income (expense), net (9,000) 172,000
----------- -----------
Income before provision for
(benefit from)
income taxes 503,000 255,000
----------- -----------
Provision for (benefit from) income
taxes (37,000) 23,000
----------- -----------
Net income $ 540,000 $ 232,000
=========== ===========
Net income per common and
common equivalent share $ 0.13 $ 0.03
=========== ===========
Weighted average common and
common equivalent shares
outstanding 4,735,771 6,945,390
=========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED FINANCIAL STATEMENTS.
Page 4 of 13
<PAGE> 5
BITSTREAM INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------------
1996 1997
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss) $ 540,000 $ 232,000
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities-
Depreciation and amortization 52,000 99,000
Deferred income tax benefit (78,000) 0
Net loss (gain) on disposal of property and
equipment (4,000) 0
Changes in assets and liabilities-
Accounts receivable 124,000 (428,000)
Long-term and extended plan accounts receivable (554,000) (70,000)
Other current assets 95,000 295,000
Accounts payable (126,000) (100,000)
Accrued expenses (163,000) 83,000
------------ ------------
Net cash provided by (used in) operating
activities $ (114,000) $ 111,000
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment, net (218,000) (47,000)
Acquisition/Purchase of assets 0 (505,000)
Change in other assets 2,000 (70,000)
Change in other long term liabilities (2,000) (13,000)
------------ ------------
Net cash provided by (used in) investing
activities $ (218,000) $ (635,000)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt to stockholders 600,000 0
Payments on capital lease obligations (37,000) (16,000)
Payments on IPO offering expenses 0 (89,000)
Proceeds from the exercise of stock options and
warrants 0 20,000
------------ ------------
Net cash provided by (used in) financing
activities $ 563,000 $ (85,000)
------------ ------------
Net Increase (Decrease) in Cash and Cash Equivalents 231,000 (609,000)
Cash and Cash Equivalents, beginning of period 390,000 11,718,000
------------ ------------
Cash and Cash Equivalents, end of period $ 621,000 $ 11,109,000
------------ ------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 15,000 $ 3,000
Cash paid for income taxes $ 40,000 $ 23,000
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED FINANCIAL STATEMENTS.
Page 5 of 13
<PAGE> 6
BITSTREAM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
(UNAUDITED)
(1) BASIS OF PRESENTATION
The consolidated financial statements of Bitstream Inc. (the "Company")
presented herein, without audit, have been prepared pursuant to the rules of the
Securities and Exchange Commission (the "SEC") for quarterly reports on Form
10-Q and do not include all of the information and footnote disclosures required
by generally accepted accounting principles. The balance sheet information at
December 31, 1996 has been derived from the Company's audited consolidated
financial statements. These statements should be read in conjunction with the
financial statements and notes thereto for the period ended December 31, 1996
included in the Company's Report on Form 10-K which was filed by the Company
with the SEC on March 31, 1997.
The balance sheet as of March 31, 1997, the statements of income for the
three months ended March 31, 1996 and 1997, the statements of cash flows for the
three months ended March 31, 1996 and 1997 and the notes to each thereof are
unaudited but, in the opinion of management, include all adjustments necessary
for a fair presentation of the consolidated financial position, results of
operations, and cash flows of the Company and its subsidiaries for these interim
periods.
The results of operations for the three months ended March 31, 1997 are not
necessarily indicative of the results to be expected for any future interim
period or for the year ending December 31, 1997.
(2) NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE
Net income per common and common equivalent share for the three months ended
March 31, 1996 and 1997, have been determined in accordance with the modified
treasury stock method by dividing (i) net income increased by the effect of
reduced interest expense associated with the assumed repayment of certain
indebtedness as of the beginning of the period and by the effect of increased
interest income associated with the assumed investment in U.S. Government
securities as of the beginning of the period with the assumed proceeds from the
exercise of outstanding options and warrants by (ii) the weighted average number
of common and common equivalent shares outstanding, including the dilutive
effect of options and warrants.
(3) CONCENTRATION OF CREDIT RISK
The Company has no significant off-balance-sheet concentration of credit risk
such as foreign exchange contracts, option contracts or other foreign hedging
arrangements.
For the three months ended March 31, 1997, two customers represented 15% and
12% of revenues respectively. For the three-month period ended March 31, 1996,
three customers represented 17%, 16% and 13% of revenues respectively.
(4) RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings Per Share. SFAS No. 128
establishes standards for computing and presenting earnings per share and
applies to entities with publicly held common stock or potential common stock.
This statement is effective for the fiscal years ending after December 15, 1997
and early adoption is not permitted. When adopted, the statement will require
restatement of prior years' earnings
Page 6 of 13
<PAGE> 7
per share. The Company will adopt this statement for its fiscal year ended
December 31, 1997. Pro forma calculations of basic and diluted earnings per
share as required by SFAS No. 128 are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------------
1997 1996
---------- ----------
<S> <C> <C>
Basic EPS Net Income $ 232,000 $ 540,000
Weighted average common shares 5,918,717 3,486,414
outstanding
Basic EPS 0.04 0.15
Diluted EPS Net Income 232,000 540,000
Weighted average common and common
equivalent shares outstanding 7,368,668 4,717,603
Diluted EPS 0.03 0.11
</TABLE>
(5) SUBSEQUENT EVENTS
The Company acquired Archetype, Inc. ("Archetype"), a Delaware corporation
primarily engaged in the business of developing and marketing server-based
information management computer software for the graphic arts industry, pursuant
to an Agreement and Plan of Merger, dated March 27, 1997 (the "Merger
Agreement") among the Company, Archetype, and Archetype Acquisition Corporation
("A-Sub"), a newly organized wholly owned subsidiary of the Company. Pursuant to
the Merger Agreement, the acquisition was accomplished by merging (the "Merger")
Archetype into A-Sub.
Archetype's products include: MediaBank, a digital asset management product
that allows for the cataloging, archiving, and management of electronic images,
text and documents; InterSep OPI and InterSep Output Manager, advanced open
prepress interface and print management products for raster image processors and
servers; and NuDoc, an advanced document composition technology.
The Merger was consummated on April 28, 1997. In connection with the Merger,
Archetype stockholders received an aggregate of approximately $1.3 million in
cash and 510,000 shares of the Company's Class A Common Stock in exchange for
their shares of Archetype capital stock. In addition, the Company satisfied
approximately $1.6 million of obligations and indebtedness owed by Archetype,
and issued options and warrants (the "Options") to purchase approximately
575,000 shares of the Company's Class A Common Stock, in order to induce the
former Archetype employees and other persons receiving such Options to become
employees of, or perform certain services for the Company and/or to replace
certain outstanding options and warrants issued by Archetype. Of these Options,
375,000 have an exercise price of $.90 per share and were issued under the
Company's 1996 Stock Plan and the remaining 200,000 have an exercise price of
$3.94 per share and were issued under the Company's 1997 Stock Plan.
Out of the above described cash payments made and securities issued by the
Company on the consummation of the Merger, an aggregate of $295,334 in cash,
130,382 shares of Class A Common Stock and 32,460 Options issued to the former
Archetype stockholders in connection with the Merger were deposited with a third
party escrow agent to be held for up to one year to satisfy certain amounts
which may be payable to the Company in connection with certain adjustments which
may be made to the consideration payable under the Merger Agreement or certain
claims for indemnification which may be made by the Company under the terms of
the Merger Agreement.
Page 7 of 13
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company develops and markets software products and technologies to
enhance the creation, transport, viewing and printing of electronic documents.
The Company primarily licenses its products and technologies to original
equipment manufacturers ("OEMs") and independent software vendors ("ISVs") for
inclusion in their output devices, embedded systems, applications, Internet
authoring tools, World Wide Web browsers and other products.
The Company derives revenues principally from the following sources: (i)
licensing fees and royalty payments paid by OEM and ISV customers; (ii) direct
sales of custom and other type products to end users such as graphic artists,
desktop publishers and corporations; and (iii) sales of type products to foreign
customers primarily through distributors. Royalty payments due from OEM and ISV
customers, who generally pay specified minimums or fixed fees for the right to
include the Company's products as a component of a larger product for a
specified time period or volume limit, are generally recognized as revenue at
the time the software is delivered to the OEM or ISV customer. If the royalty
payments are to be received over a period of time greater than one year, the
amount recognized is discounted to the present value of the future minimum
payments. Certain OEM and ISV customers pay royalties only upon the sublicensing
of the Company's products to end users. Royalties due from these OEM and ISV
customers are recognized when such sublicenses are reported to the Company by
the OEM or ISV customer. Revenues from sales to end users and foreign
distributors are generally recognized at the time the software products are
delivered to the customer.
Cost of revenues is comprised of direct costs of licenses and royalties, as
well as direct costs of product sales to end users. Included in cost of licenses
and royalties are fees paid to third parties for the development or license of
rights to technology and/or unique typeface designs and the costs incurred in
the fulfillment of custom orders from OEM and ISV customers. Included in cost of
product sales to end users and distributors are the direct costs associated with
the duplication, packaging and shipping of products, and any royalty fees paid
to third parties for rights to license typefaces.
Operating expenses consist primarily of sales and marketing expenses
(principally sales compensation and commissions), research and development
expense and general and administrative expenses.
Except for the historical information contained herein, this quarterly Report
on Form 10-Q may contain 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. Investors are cautioned that
forward-looking statements are inherently uncertain. Actual performance and
results of operations may differ materially from those projected or suggested in
the forward-looking statements due to certain risks and uncertainties,
including, without limitation, market acceptance of the Company's products,
including its TrueDoc enabling technology, competition and the timely
introduction of new products. Additional information concerning certain risks
and uncertainties that would cause actual results to differ materially from
those projected or suggested in the forward-looking statements is contained in
the Company's filings with the Securities and Exchange Commission, including
those risks and uncertainties discussed in the Company's final Prospectus, dated
October 30, 1996, included as part of the Company's Registration Statement on
Form S-1 (333-11519), in the section entitled "Risk Factors." The
forward-looking statements contained herein represent the Company's judgment as
of the date of this report, and the Company cautions readers not to place undue
reliance on such statements.
Page 8 of 13
<PAGE> 9
RESULTS OF OPERATIONS
Revenues. Revenues for the three months ended March 31, 1997 decreased by
$184,000, or 6.8%, to approximately $2.5 million, as compared to approximately
$2.7 million for the three months ended March 31, 1996. The decrease in revenues
was due primarily to the delay in the consummation of certain licensing
agreements with OEM customers from March to April 1997. Due to the nature of the
Company's OEM business, revenues are subject to quarter to quarter fluctuations.
The Company believes that quarter to quarter revenue comparisons are not
necessarily meaningful and should not be relied upon as indicative of future
performance.
Gross Profit. Gross profit for the three months ended March 31, 1997
decreased by $117,000, or 5.0%, to approximately $2.2 million, compared to
approximately $2.3 million, for the three months ended March 31, 1996. Gross
profit as a percentage of revenues for the three months ended March 31, 1997
increased to 88.5% compared to 86.8% for the three months ended March 31, 1996.
The increase in gross profit as a percentage of revenues reflects a decrease in
third party royalties and development fees.
Marketing and Selling. Marketing and selling expenses for the three months
ended March 31, 1997 increased by $110,000, or 9.9%, to approximately $1.2
million, compared to approximately $1.1 million for the three months ended March
31, 1996, as a result of additional sales personnel and marketing programs which
were added as a result of the acquisition of Mainstream Software Solutions
(described below).
Research and Development. Research and development expenses for the three
months ended March 31, 1997 increased by $176,000, or 52.9%, to approximately
$509,000 from approximately $333,000 for the three months ended March 31, 1996.
The increase in research and development costs was due to the hiring of
additional personnel into the Company's software engineering group.
General and Administrative. General and administrative expenses for the three
months ended March 31, 1997 increased by $26,000, or 6.5%, to $425,000, from
$399,000 for the three months March 31, 1996, reflecting an increase in
professional fees in the three months ended March 31, 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company has funded its operations primarily through the public sale of
equity securities and cash flow from operations.
The Company's operating activities provided cash of $111,000 for the three
months ended March 31, 1997 as compared to a usage of cash of $114,000 for the
three months ended March 31, 1996. The Company's investing activities used cash
of $635,000 for the three months ended March 31, 1997 as compared to $218,000
for the three months ended March 31, 1996. Investing activities consisted
principally of the purchase of substantially all of the assets of Mainstream
Software Solutions, a corporation organized under the laws of England primarily
engaged in the business of marketing, selling, distributing and supporting the
Company's type products in the United Kingdom, for approximately $505,000, as
well as the purchase of property and equipment to support the growing employee
base and corporate infrastructure for the three months ended March 31, 1996.
The Company's financing activities used cash of $85,000 for the three months
ended March 31, 1997 and provided cash of $563,000 for the three months ended
March 31, 1996. As of March 31, 1997, the Company had cash and cash equivalents
of approximately $11.1 million, a decrease of approximately $600,000 from $11.7
million at December 31, 1996.
The Company believes that the cash generated from the proceeds of its initial
public offering of its Class A Common Stock, cash from operations and current
cash balances will be sufficient to meet the Company's operating and capital
requirements for at least the next 12 months. There can be no assurance,
Page 9 of 13
<PAGE> 10
however, that the Company will not require additional financing in the future.
If the Company were required to obtain additional financing in the future, there
can be no assurance that sources of capital will be available on terms favorable
to the Company, if at all.
From time to time, the Company evaluates potential acquisitions of products,
businesses and technologies that may complement or expand the Company's
business. Any such transactions consummated may use a portion of the Company's
working capital or require the issuance of equity or debt.
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES
During the quarter ended March 31, 1997, the Company issued an aggregate of
21,000 shares of Class A Common Stock in connection with the exercise of 21,000
vested options and warrants issued under the Company's 1994 Stock Plan.
The sales and issuances of securities in the transactions described above are
deemed to be exempt from registration under the Securities At of 1933, as
amended, by virtue of Rule 701 promulgated thereunder, in that they were issued
either pursuant to written compensatory benefit plans or pursuant to a written
contract relating to compensation, as provided by Rule 701.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
Page 10 of 13
<PAGE> 11
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11 - Computation of Earnings per Share
27 - Financial Data Schedule
(b) Reports on form 8-K
No reports on form 8-K were filed by the Company during the quarter ended
March 31, 1997.
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.
BITSTREAM INC.
(Registrant)
SIGNATURE TITLE DATE
--------- ----- ----
/s/ C. Raymond Boelig President, Chief Executive May 14, 1997
- ---------------------- Officer
C. Raymond Boelig and Director
/s/ James D. Hart Vice President, Finance and May 14, 1997
- ---------------------- Administration, Treasurer
James D. Hart and Chief
Financial Officer
Page 11 of 13
<PAGE> 12
EXHIBIT INDEX
-------------
Exhibit No. Description
----------- -----------
11 Computation of Earnings per Share
27 Financial Data Schedule
<PAGE> 1
EXHIBIT 11
BITSTREAM INC AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
3 MOS 3 MOS
ENDED ENDED
3/31/96 3/31/97
---------- ----------
<S> <C> <C>
Preferred Stock, Convertible 3,173,737 --
Common Stock - Class A 281,813 5,496,691
Common Stock - Class B Convertible 30,864 422,026
--------- ---------
Weighted average common shares
outstanding during
the period 3,486,414 5,918,717
Dilutive effect of common stock options 1,249,357 1,026,673
and warrants
Weighted average common and common
equivalent
shares outstanding 4,735,771 6,945,390
Net income adjusted for assumed
interest expense
savings and incremental interest $ 605,680 $ 241,593
income
Net income per common and common $ 0.13 $ 0.03
equivalent share
</TABLE>
Page 12 of 13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE THREE
MONTHS ENDED 3-31-97 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
FINANCIAL STATEMENTS AND NOTES THERETO CONTAINED IN THE COMPANY'S QUARTERLY
REPORT ON FORM 10-Q.
</LEGEND>
<CIK> 0000818813
<NAME> BITSTREAM INC.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 11,109,000
<SECURITIES> 0
<RECEIVABLES> 4,056,000
<ALLOWANCES> 325,000
<INVENTORY> 37,000
<CURRENT-ASSETS> 15,947,000
<PP&E> 3,491,000
<DEPRECIATION> 2,603,000
<TOTAL-ASSETS> 17,594,000
<CURRENT-LIABILITIES> 1,975,000
<BONDS> 0
0
0
<COMMON> 59,000
<OTHER-SE> 15,465,000
<TOTAL-LIABILITY-AND-EQUITY> 17,594,000
<SALES> 2,522,000
<TOTAL-REVENUES> 2,522,000
<CGS> 289,000
<TOTAL-COSTS> 2,150,000
<OTHER-EXPENSES> 172,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 255,000
<INCOME-TAX> 23,000
<INCOME-CONTINUING> 232,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 232,000
<EPS-PRIMARY> 0.03
<EPS-DILUTED> 0
</TABLE>
