<PAGE> 1
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 June 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-20634
INFORMATION RESOURCE ENGINEERING, INC.
(Exact name of registrant as specified in its charter)
---------------
Delaware 52-1287752
- ------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
8029 Corporate Drive, Baltimore, Md. 21236
------------------------------------------
(Address of principal executive offices)
(410) 931-7500
--------------
(Registrant's telephone number)
Indicate by a check mark whether the issuer (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 twelve 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
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
The number of shares outstanding of the issuer's Common Stock as of July 31,
1998 was 5,466,327.
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INFORMATION RESOURCE ENGINEERING, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Information
Consolidated Balance Sheets as of June 30, 1998 (unaudited)
and December 31, 1997 3
Consolidated Statements of Operations for the three months
and six months ended June 30, 1998 and 1997 (unaudited) 4
Consolidated Statements of Stockholders' Equity for the six
months ended June 30, 1998 and 1997 (unaudited) 5
Consolidated Statements of Cash Flows for the six months
ended June 30, 1998 and 1997 (unaudited) 6
Consolidated Statements of Comprehensive Income (Loss) for
the six months ended June 30, 1998 and 1997 (unaudited) 7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10
PART II. OTHER INFORMATION 14
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES 14
</TABLE>
2
<PAGE> 3
INFORMATION RESOURCE ENGINEERING, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------------------ ------------------
(unaudited)
Assets
------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 5,000 $ 7,222
Short-term investments 500 2,339
Accounts receivable 4,716 3,217
Inventories 3,815 2,915
Prepaid Expenses 328 357
------------------ ------------------
Total current assets 14,359 16,050
Equipment and leasehold improvements, net of accumulated
depreciation of $1,530 and $1,321 1,515 1,576
Computer software development costs, net of accumulated
amortization of $682 and $498 1,467 1,407
Goodwill, net of accumulated amortization of $326 and $265 897 958
Prepaid license fee and other assets 1,522 1,540
------------------ ------------------
$ 19,760 $ 21,531
================== ==================
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Current maturities of long-term debt $ 7 $ 17
Accounts payable 1,714 1,035
Accrued expenses 1,325 1,737
Advance payments and deferred revenue 578 762
------------------ ------------------
Total current liabilities 3,624 3,551
Stockholders' equity:
Preferred stock, $.01 par value per share.
Authorized 500,000 shares, issued and outstanding, none - -
Common stock, $.01 par value per share.
Authorized 15,000,000 shares, issued and outstanding 5,466,327
shares in 1998 and 5,462,727 in 1997 55 55
Additional paid-in capital 30,938 30,929
Accumulated deficit (13,962) (12,235)
Accumulated other comprehensive income (loss) (895) (769)
------------------ ------------------
Net stockholders' equity 16,136 17,980
------------------ ------------------
$ 19,760 $ 21,531
================== ==================
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
INFORMATION RESOURCE ENGINEERING, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- ------------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues $ 4,405 $ 3,737 $ 9,291 $ 6,887
Cost of Revenues 1,842 1,590 4,097 3,051
---------- ---------- ---------- ----------
Gross Profit 2,563 2,147 5,194 3,836
Operating Expenses
Research and development expenses 1,120 958 2,002 1,894
Sales and marketing expenses 1,823 1,634 3,640 3,283
General and administrative expense 886 579 1,395 1,215
Amortization of acquired intangible assets 31 31 61 62
---------- ---------- ---------- ----------
3,860 3,202 7,098 6,454
Operating loss (1,297) (1,055) (1,904) (2,618)
Interest income, net 78 137 177 276
---------- ---------- ---------- ----------
Loss before income taxes (1,219) (918) (1,727) (2,342)
Income taxes - - - -
---------- ---------- ---------- ----------
Net loss (1,219) (918) (1,727) (2,342)
========== ========== ========== ==========
Loss per common share - basic and diluted $ (0.22) $ (0.17) $ (0.32) $ (0.43)
Weighted average number of shares outstanding 5,465 5,462 5,464 5,461
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
INFORMATION RESOURCE ENGINEERING, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited - in thousands)
<TABLE>
<CAPTION>
Accumulated
Common Stock Additional other Net
---------------- paid-in Accumulated comprehensive stockholders'
Shares Amount capital Deficit income (loss) equity
------ ------ ---------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Six months ending June 30, 1998
- ----------------------------------------
Balance at beginning of period 5,463 $ 55 $ 30,929 $ (12,235) $ (769) $ 17,980
Stock options exercised 3 - 9 - - 9
Net loss - - - (1,727) - (1,727)
Foreign currency translation adjustment - - - - (126) (126)
------- ------ ---------- ----------- ------------- ------------
Balance at end of period 5,466 $ 55 $ 30,938 $ (13,962) $ (895) $ 16,136
======= ====== =========== =========== ============= ============
<CAPTION>
Accumulated
Common Stock Additional other Net
---------------- paid-in Accumulated comprehensive stockholders'
Shares Amount capital Deficit income (loss) equity
------ ------ ---------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Six months ending June 30, 1997
- ----------------------------------------
Balance at beginning of period 5,458 $ 55 $ 30,917 $ (8,597) $ (514) $ 21,861
Stock options exercised 4 - 11 - - 11
Net loss - - - (2,342) - (2,342)
Foreign currency translation adjustment - - - - (250) (250)
------- ------ ---------- ----------- ------------- ------------
Balance at end of period 5,462 $ 55 $ 30,928 $ (10,939) $ (764) $ 19,280
======= ====== ========== =========== ============= ============
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
INFORMATION RESOURCE ENGINEERING, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(Unaudited - in thousands)
<TABLE>
<CAPTION>
1998 1997
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (1,727) $ (2,342)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 411 401
Amortization of acquired intangible assets 61 61
Changes in operating assets and liabilities
Increase in accounts receivable (1,480) (1,912)
Increase in inventories (938) (176)
Increase in prepaid expenses - (168)
Increase in accounts payable 619 71
Increase (decrease) in accrued expenses (389) 139
Increase (decrease) in deferred revenues (171) 39
Other 46 31
------------ -----------
Net cash used in operating activities (3,568) (3,856)
------------ -----------
Cash flows from investing activities:
Purchase of short-term investments (500) (6,511)
Sales of short-term investments 2,339 1,303
Equipment expenditures (170) (163)
Additions to computer software development costs (244) (262)
------------ -----------
Net cash provided by (used in) investing activities 1,425 (5,633)
------------ -----------
Cash flows from financing activities:
Proceeds from exercise of stock options 9 11
Payments of long-term debt (10) (9)
------------ -----------
Net cash provided by (used in) financing activities (1) 2
------------ -----------
Effect of exchange rate changes on cash (78) (150)
------------ -----------
Net decrease in cash and cash equivalents (2,222) (9,637)
Cash and cash equivalents at beginning of period 7,222 11,917
------------ -----------
Cash and cash equivalents at end of period $ 5,000 $ 2,280
============ ===========
Cash paid for:
Interest expense $ 1 $ 1
============ ===========
Income taxes $ - $ -
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE> 7
INFORMATION RESOURCE ENGINEERING, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited - in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------------------------------
1998 1997
------------- ---------------
<S> <C> <C>
Net loss $ (1,727) $ (2,342)
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments (126) (250)
------------- ---------------
Comprehensive loss $ (1,853) $ (2,592)
============= ===============
</TABLE>
See accompanying notes to consolidated financial statements.
7
<PAGE> 8
INFORMATION RESOURCE ENGINEERING, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
(1) Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
reporting and instructions to Form 10-Q. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting only of normal recurring accruals) necessary for a fair
presentation have been included.
(2) Revenues
One commercial client accounted for 16% and 13% of revenues in the six month
periods ended June 30, 1998 and 1997, respectively.
Revenues from foreign clients were 50% and 46% in the six month periods ended
June 30, 1998 and 1997, respectively. The majority of these revenues were
derived from sales to unaffiliated customers of the Company by its Swiss
subsidiary.
(3) Inventories
Inventories consists of the following at June 30, 1998:
Raw materials $1,894
Finished goods 1,921
------
Total $3,815
======
(4) Accrued Expenses
Accrued expenses consists of the following at June 30, 1998:
Accrued salaries and commissions $736
Other 589
------
Total $1,325
======
(5) Income Taxes
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of the deferred tax assets
is dependent upon the generation of future taxable income during the periods in
which temporary differences become deductible and net operating losses are
allowable. Based on consideration of the above factors, management determined an
increase in the valuation allowance of $566,000 and $871,000 was required at
June 30, 1998 and June 30, 1997, respectively. This is an increase of $403,000
and $395,000 for the three months ended June 30, 1998 and June 30, 1997,
respectively. The full amount of the deferred tax asset at June 30, 1998 was
$4.3 million, and has been fully reserved.
(6) Loss per Common Share
The Company adopted SFAS No. 128, Earnings per Share, during the year ended
December 31, 1997. Statement 128 establishes revised standards for computing and
presenting earnings per share (EPS) data. It requires dual presentation of
"basic" and "diluted" EPS on the face of the statements of income and
reconciliation of the numerators and denominators used in the basic and diluted
EPS calculations. As required by SFAS No. 128, EPS data for prior periods
presented have been restated to conform to the new standard.
8
<PAGE> 9
INFORMATION RESOURCE ENGINEERING, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited) (Continued)
(6) Continued
Basic EPS is calculated by dividing net loss by the weighted-average number of
common shares outstanding for the applicable period. Diluted EPS is calculated
after adjusting the numerator and the denominator of the basic EPS calculation
for the effect of all dilutive potential common shares outstanding during the
period. Information related to the calculation of net loss per share of common
stock is summarized as follows for the three months and six months ended June
30:
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
-------------------------------- ------------------------------
1998 1997 1998 1997
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
Net loss
attributable to
common
stockholders $ (1,219) $ (918) $ (1,727) $ (2,342)
- -------------------------------------------------------------- ------------------------------
Weighted-average
shares outstanding -
basic 5,465 5,462 5,464 5,461
Dilutive securities
options - - - -
- -------------------------------------------------------------- ------------------------------
Adjusted weighted-
average shares
used in EPS
computation - diluted 5,465 5,462 5,464 5,461
- -------------------------------------------------------------- ------------------------------
</TABLE>
(7) Accumulated other comprehensive income
In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS No.
130, Reporting Comprehensive Income. SFAS No. 130 establishes standards for
reporting and display of comprehensive income and its components in a full set
of general purpose financial statements. It does not, however, specify when to
recognize or how to measure items that make up comprehensive income.
SFAS No. 130 is effective for both interim and annual periods beginning after
December 15, 1997 and as a result was adopted by the Company during the three
months ended March 31, 1998. Comparative financial statements have been
provided and earlier periods have been reclassified to reflect the provisions
of this statement.
9
<PAGE> 10
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Except for historical information contained herein, the statements in this
Item are forward-looking statements that are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements involve known and unknown risks and uncertainties
which may cause the Company's actual results in future periods to differ
materially from forecasted results. Those risks include, among others, risks
associated with the receipt and timing of future customer orders, price
pressures and other competitive factors leading to a decrease in anticipated
revenues and gross profit margins.
OVERVIEW
The Company designs, manufactures and markets enterprise network security
solutions using encryption technology. The Company's products are used in
electronic commerce applications by financial institutions, government agencies
and large corporations to secure data transmissions on private and public
computer networks, such as the Internet. The Company's Swiss subsidiary,
GRETACODER Data Systems AG ("GDS"), designs, manufactures and markets
cryptographic equipment primarily in Switzerland and Europe.
The Company's historical operating results have been dependent on a
variety of factors including, but not limited to, the length of the sales cycle,
the timing of orders from and shipments to clients, product development expenses
and the timing of development and introduction of new products. The Company's
expense levels are based, in part, on expectations of future revenues. The size
and timing of the Company's historical revenues have varied substantially from
quarter to quarter and year to year. Accordingly, the results of a particular
period, or period to period comparisons of recorded sales and profits may not be
indicative of future operating results.
While Management is committed to the long-term profitability of the
Company, the recent growth of the computer security industry has made it
important that market share be obtained. The Company has undertaken various
strategies in order to increase its revenues and improve its future operating
results, including new product offerings such as its SafeNet/Enterprise(TM)
products for the Internet and the SafeNet/Security Center(TM), a high
performance workstation which automatically manages SafeNet/Enterprise(TM)
products. Management believes that growth in the market for products that
provide secure remote access to computer networks requires the Company to
continue its investment in development, sales and marketing activities to allow
the Company to take advantage of this market opportunity and to achieve
long-term profitability thereby maximizing shareholder value. However, there can
be no assurance that these strategies will be successful.
10
<PAGE> 11
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS OF THE COMPANY
The following table sets forth certain Consolidated Statement of
Operations data of the Company as a percentage of revenues for the periods
indicated.
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
--------------------------- ---------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues 100 % 100 % 100 % 100 %
Cost of revenues 42 43 44 44
----------- ----------- ----------- -----------
Gross profit 58 57 56 56
Operating expenses
Research and development expenses 25 26 22 28
Sales and marketing expenses 41 44 39 48
General and administrative expenses 20 15 15 18
Amortization of acquired intangible assets 1 1 1 1
----------- ----------- ----------- -----------
87 86 77 95
----------- ----------- ----------- -----------
Operating loss (29) (29) (21) (39)
Interest income, net 2 4 2 4
----------- ----------- ----------- -----------
Loss before income taxes (27) (25) (19) (35)
Income taxes - - - -
----------- ----------- ----------- -----------
Net loss (27) % (25)% (19) % (35)%
----------- ----------- ----------- -----------
</TABLE>
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997
In the first six months of 1998, revenue was $9.3 million, an increase of
35%, compared to revenue of $6.9 million for the same period in the prior year.
The increase in revenues was primarily a result of increased sales in Safenet
and GDS products, as well as professional services provided by engineering.
For the six months ending June 30, 1998, gross margin remained flat at 55.9%
compared to 55.7% for the same period in 1997.
Research and development expenses were approximately $2.0 million for the
six months ended June 30, 1998, compared to $1.9 million for the same period in
1997. The increase is primarily attributable to a higher level of outside
engineering expenses.
Sales and marketing expenses increased by 11% to $3.6 million compared to
$3.3 million for the same six month period in 1997. The increase is primarily
related to increased personnel related costs and increased public relations and
marketing activities.
General and administrative expenses increased to $1.4 million from $1.2
million, for the same six month period in 1997. The primary reason for the
increase was the professional and legal fees related to a proxy dispute. The
fees associated with that dispute totaled approximately $300,000.
The Company had no income tax benefit in either period. A valuation
allowance for the full amount of the net deferred tax asset has been
established since the Company's ability to use the net operating loss is
dependent upon future taxable income.
11
<PAGE> 12
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
The Company had a net loss of $1.7 million for the six months ended June
30, 1998 compared to a net loss of $2.3 million for the same period in 1997.
The loss per common share was $0.32 in 1998 compared to $0.43 in 1997.
THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE MONTHS ENDED JUNE 30, 1997
Revenue for the second quarter of 1998 was $4.4 million, an increase of $0.7
million, or 18%, from $3.7 million for the second quarter of 1997.
Gross margin for second quarter was 58.2% compared to 57.4% for the same
quarter last year. The increase in margin for Q2 was attributable to a
favorable product mix shipped in the quarter.
Research and development expenses were approximately $1.1 million for the
three months ended June 30, 1998, compared to $1.0 million for the same period
in 1997. The increase is primarily attributable to a higher level of outside
engineering expenses.
Sales and marketing expenses increased by 12% to $1.8 million compared to
$1.6 million for the same three month period in 1997. The increase for the
quarter is primarily related to increased sales travel, public relations and
marketing activities.
General and administrative expenses increased to $0.9 million from $0.6
million, for the same three month period in 1997, an increase of $300,000. The
principal reason for the increase was the legal and professional fees related
to a proxy dispute.
The Company had no income tax benefit in either period. A valuation
allowance for the full amount of the net deferred tax asset has been
established since the Company's ability to use the net operating loss is
dependent upon future taxable income.
The Company had a net loss of $1.2 million for the quarter ended June 30,
1998 compared to a net loss of $0.9 million for the same period in 1997. The
loss per common share for the second quarter was $0.22 in 1998 compared to
$0.17 in 1997.
LIQUIDITY AND FINANCIAL POSITION OF THE COMPANY
The Company believes that its current cash resources, together with cash
flows from operations, will be sufficient to meet its needs for the next year.
As of June 30, 1998, the Company had cash and short-term investments of $5.5
million. Working capital totaled $10.7 million at the end of the second quarter
1998.
In August 1996, the Company signed a two year Joint Development and
Marketing Agreement with CyberGuard Corporation ("CyberGuard"). The companies
have developed and intend to market a product that combines the Company's
SafeNet/Enterprise products and CyberGuard's Firewall product. In connection
therewith, the Company has prepaid a refundable $1.0 million license fee to
CyberGuard.
In June 1998, this agreement was replaced by a Distribution Agreement and an
Original Equipment Manufacturer Agreement. Under these agreements the
$1,000,000 license fee paid to Cyberguard, less amounts already credited, shall
represent a prepayment of amounts that become due under the agreements executed
in June 1998, net of a $250,000 right to manufacture fee, and shall be credited
against any amounts that otherwise will become due to Cyberguard under the
agreements. Cyberguard shall repay to IRE the unused balance of license fees on
or before December 31, 1998. As of June 30, 1998, the Company has utilized
$42,000 in credits against the prepaid license fee.
12
<PAGE> 13
INFLATION AND SEASONALITY
The Company does not believe that inflation will significantly impact its
business, The Company does not believe its business is seasonal, however,
because the Company recognizes revenues upon shipment of finished products,
such recognition may be irregular and uneven, thereby disparately impacting
quarterly operating results and balance sheet comparisons.
13
<PAGE> 14
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits required by Item 601 of Regulation S-B.
27 Financial Data Schedule
(b) Reports on Form 8-K: None
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.
INFORMATION RESOURCE ENGINEERING, INC.
August 13, 1998
By:/s/Anthony A. Caputo
-----------------------
ANTHONY A. CAPUTO,
Chairman, President and
Chief Executive Officer
August 13, 1998
By:/s/Richard G. Tennant
-----------------------
RICHARD G. TENNANT,
Senior Vice President,
Chief Financial Officer
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET ON JUNE 30, 1998 & THE CONSOLIDATED STATEMENT OF
OPERATIONS FOR THE QUARTER ENDED JUNE 30, 1998 FOR INFORMATION RESOURCE
ENGINEERING AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 5,000
<SECURITIES> 0
<RECEIVABLES> 4,776
<ALLOWANCES> 60
<INVENTORY> 3,815
<CURRENT-ASSETS> 14,359
<PP&E> 3,045
<DEPRECIATION> 1,530
<TOTAL-ASSETS> 19,760
<CURRENT-LIABILITIES> 3,624
<BONDS> 0
0
0
<COMMON> 55
<OTHER-SE> 16,081
<TOTAL-LIABILITY-AND-EQUITY> 19,760
<SALES> 4,405
<TOTAL-REVENUES> 4,405
<CGS> 1,842
<TOTAL-COSTS> 1,842
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 60
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,219)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,219)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,219)
<EPS-PRIMARY> (0.22)
<EPS-DILUTED> (0.22)
</TABLE>
