<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 March 31, 2000
[ ] 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)
--------------------
<TABLE>
<S> <C>
Delaware 52-1287752
-------- ----------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
</TABLE>
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 May 9, 2000
was 6,666,046.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
<S> <C> <C>
Item 1. Financial Information
Consolidated Balance Sheets as of March 31, 2000 and December 31, 1999 3
Consolidated Statements of Operations for the three months ended March 31, 2000 and 1999 4
Consolidated Statements of Stockholders' Equity for the three months ended March 31, 2000 5
Consolidated Statements of Cash Flows for the three months ended March 31, 2000 and 1999 6
Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2000 and
1999 7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk 12
PART II. OTHER INFORMATION 13
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 13
</TABLE>
2
<PAGE> 3
INFORMATION RESOURCE ENGINEERING, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
--------------------- ---------------------
(unaudited)
<S> <C> <C>
Assets
------
Current Assets:
Cash and cash equivalents $ 22,442 $ 19,161
Short term investments - 501
Accounts receivable, net of allowance for doubtful accounts
of $200 and $251 2,465 4,405
Inventories 2,675 2,946
Prepaid expenses 515 282
--------------------- ---------------------
Total current assets 28,097 27,295
Equipment and leasehold improvements, net of accumulated
depreciation of $2,492 and $2,347 1,290 1,424
Computer software development costs, net of accumulated
amortization of $1,755 and $1,227 1,611 2,107
Goodwill, net of accumulated amortization of $503 and $481 465 486
Prepaid license fees and other assets 565 584
--------------------- ---------------------
$ 32,028 $ 31,896
===================== =====================
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accounts payable $ 673 $ 1,154
Accrued expenses 1,223 1,634
Advance payments and deferred revenue 1,158 1,472
--------------------- ---------------------
Total liabilities 3,054 4,260
--------------------- ---------------------
Stockholders' equity:
Preferred stock, $.01 par value per share.
Authorized 500,000 shares, none issued and outstanding - -
Common stock, $.01 par value per share.
Authorized 15,000,000 shares, issued 6,657,696 shares
in 2000 and 6,541,483 shares in 1999 67 65
Additional paid-in capital 47,703 46,547
Accumulated deficit (17,324) (17,681)
Accumulated other comprehensive income (loss) (1,472) (1,295)
--------------------- ---------------------
Net stockholders' equity 28,974 27,636
--------------------- ---------------------
$ 32,028 $ 31,896
===================== =====================
</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
March 31,
------------------------------------
2000 1999
----------------- ----------------
<S> <C> <C>
Revenues $ 5,838 $ 6,005
Cost of revenues 1,700 2,270
----------------- ----------------
Gross profit 4,138 3,735
----------------- ----------------
Research and development expenses 1,828 1,113
Sales and marketing expenses 1,441 1,822
General and administrative expense 860 573
Amortization of acquired intangible assets 21 23
Recovery of CyberGuard advance (138) -
----------------- ----------------
Total operating expenses 4,012 3,531
----------------- ----------------
Operating income 126 204
Interest income, net 231 20
----------------- ----------------
Income before income taxes 357 224
Income tax expense - 36
----------------- ----------------
Net income $ 357 $ 188
================= ================
Income per common share - basic and diluted
Basic $ 0.05 $ 0.04
================= ================
Diluted $ 0.05 $ 0.03
================= ================
Weighted average number of common shares outstanding:
Basic 6,611 5,292
Diluted 7,343 5,872
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
INFORMATION RESOURCE ENGINEERING, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Three months ended March 31, 2000
(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>
Balance at December 31,
1999 6,541 $ 65 $ 46,547 $ (17,681) $ (1,295) $ 27,636
Stock options exercised 110 1 1,004 - - 1,005
Stock warrants exercised 7 1 118 119
Net income - - - 357 - 357
Foreign currency
translation adjustment - - - - (177) (177)
Other - - 34 - - 34
---------- ------------ ------------- ----------------- ---------------- ----------------
Balance at March 31, 2000 6,658 $ 67 $ 47,703 $ (17,324) $ (1,472) $ 28,974
========== ============ ============= ================= ================ ================
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
INFORMATION RESOURCE ENGINEERING, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------------------
2000 1999
----------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 357 $ 188
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 698 212
Amortization of acquired intangible assets 21 23
Changes in operating assets and liabilities
(Increase) decrease in accounts receivable 1,880 641
(Increase) decrease in inventories 214 70
(Increase) decrease in prepaid expenses (202) (355)
Increase (decrease) in accounts payable (408) 93
Increase (decrease) in accrued expenses (424) (500)
Increase (decrease) in deferred revenues (314) 322
Other 45 25
----------------- ----------------
Net cash provided by operating activities 1,867 719
----------------- ----------------
Cash flows from investing activities:
Sales of short-term investments 501 -
Equipment expenditures (36) (146)
Additions to computer software development costs (32) (144)
----------------- ----------------
Net cash provided by (used in) investing activities 433 (290)
----------------- ----------------
Cash flows from financing activities:
Proceeds from exercise of stock options 1,005 512
Proceeds from exercise of stock warrants 119 -
Other - 5
----------------- ----------------
Net cash provided by financing activities 1,124 517
----------------- ----------------
Effect of exchange rate changes on cash (143) (376)
----------------- ----------------
Net increase in cash and cash equivalents 3,281 570
Cash and cash equivalents at beginning of period 19,161 5,866
----------------- ----------------
Cash and cash equivalents at end of period $ 22,442 $ 6,436
================= ================
Cash paid for:
Interest expense $ - $ -
================= ================
Income taxes $ 57 $ -
================= ================
</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>
Three Months Ended
March 31,
------------------------------------
2000 1999
----------------- ----------------
<S> <C> <C>
Net income $ 357 $ 188
Other comprehensive income (loss):
Foreign currency translation adjustments (177) (535)
----------------- ----------------
Comprehensive income (loss) $ 180 $ (347)
================= ================
</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 consolidated financial statements have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
annual financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to those rules or
regulations. The interim financial statements are unaudited, but reflect all
adjustments which are, in the opinion of management, necessary to present a fair
statement of results for the interim periods presented. These financial
statements should be read in conjunction with the financial statements and the
notes thereto in the Company's Annual Report on Form 10-K for the year ended
December 31, 1999. The results of operations for the interim period are not
necessarily indicative of results to be expected in future periods.
(2) Inventories
<TABLE>
<CAPTION>
Inventories consist of the following (in thousands):
As of
----------------------------------------------
March 31, December 31,
2000 1999
-------------------- ---------------------
<S> <C> <C>
Raw materials $ 1,349 $ 1,366
Finished goods 1,326 1,580
-------------------- ---------------------
Total $ 2,675 $ 2,946
==================== =====================
</TABLE>
(3) Accrued Expenses
<TABLE>
<CAPTION>
Accrued expenses consist of the following (in thousands):
As of
----------------------------------------------
March 31, December 31,
2000 1999
-------------------- ---------------------
<S> <C> <C>
Accrued salaries and commissions $ 734 $ 1,110
Other 489 524
-------------------- ---------------------
Total $ 1,223 $ 1,634
==================== =====================
</TABLE>
(4) Income Taxes
The income tax expense for the three months ended March 31, 1999
represents current income taxes for the Company's Swiss subsidiary. During the
three months ended March 31, 2000, income taxes with respect to the current
period earnings were offset by a reduction in the Company's deferred tax
valuation allowance.
(5) Income Per Common Share
Basic earning per share ("EPS") is calculated by dividing net income
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 basic and diluted EPS is summarized as follows (in
thousands):
8
<PAGE> 9
<TABLE>
<CAPTION>
Three Months
Ended March 31,
------------------------------------
2000 1999
----------------- ----------------
<S> <C> <C>
Net income $ 357 $ 188
================= ================
Weighted-average common shares outstanding - basic 6,611 5,292
Effect of dilutive securities-options 732 580
----------------- ----------------
Adjusted weighted average common shares
outstanding - diluted 7,343 5,872
================= ================
</TABLE>
Segments of the Company and Related Information
The Company has three reportable segments: products, chips and
software designed and manufactured in the United States for sale to companies
that will embed the Company's products into their products for ultimate sale to
end-users ("Technology Operations"), network security products designed and
manufactured in the United States for direct sales to end-users ("Product
Operations"), and security products designed and manufactured outside the United
States ("European Operations"). The reportable segments are strategic business
units that offer different products. The segments are managed separately because
each segment requires different technology and marketing strategies. The
Technology Operations and Product Operations include some international sales
mainly to South America and Asia. Information presented below is as of and for
the three months ended March 31, 2000 and 1999, respectively (in thousands):
<TABLE>
<CAPTION>
2000
-------------------------------------------------------------------------------------
Technology Product European
Operations Operations Operations Consolidated
------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Revenues from external customers $ 2,671 $ 2,386 $ 810 $ 5,867
Intersegment revenues - (24) (5) (29)
------------------- ------------------- ------------------- -------------------
Consolidated revenues $ 2,671 $ 2,362 $ 805 $ 5,838
=================== =================== =================== ===================
Operating income (loss) $ 92 $ 425 $ (391) $ 126
Income (loss) before income taxes 201 538 (382) 357
Depreciation and amortization 484 197 38 719
Segment assets 12,407 13,883 5,738 32,028
1999
-------------------------------------------------------------------------------------
Technology Product European
Operations Operations Operations Consolidated
------------------- ------------------- ------------------- -------------------
Revenues from external customers $ 941 $ 1,524 $ 3,610 $ 6,075
Intersegment revenues - (70) - (70)
------------------- ------------------- ------------------- -------------------
Consolidated revenues $ 941 $ 1,454 $ 3,610 $ 6,005
=================== =================== =================== ===================
Operating income (loss) $ (926) $ (651) $ 1,781 $ 204
Income (loss) before income taxes (920) (642) 1,786 224
Depreciation and amortization 54 143 38 235
Segment assets 2,542 7,252 9,280 19,074
GEOGRAPHIC INFORMATION
Revenues Long-Lived Assets
----------------------------------------- -----------------------------------------
2000 1999 2000 1999
------------------- ------------------- ------------------- -------------------
United States $ 4,787 $ 2,222 $ 2,701 $ 2,976
Switzerland 503 2,503 665 784
Other foreign countries 548 1,280 - -
------------------- ------------------- ------------------- -------------------
Total $ 5,838 $ 6,005 $ 3,366 $ 3,760
=================== =================== =================== ===================
</TABLE>
9
<PAGE> 10
In 2000, one commercial client of the Technology operations and one
commercial client of the Product operations accounted for 41% and 26%,
respectively of the Company's consolidated revenues. In 1999, one commercial
client of the European operations accounted for 21% of the Company's
consolidated revenues.
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, achieving technical and product development milestones, the ability
to negotiate favorable strategic agreements with original equipment
manufactures, and other competitive factors leading to a decrease in anticipated
revenues and gross profit margins and product development expenses.
OVERVIEW
The Company designs, manufactures and markets enterprise network
security technology and systems that enable the deployment of secure Virtual
Private Network ("VPN") solutions over the Internet and other shared public
networks. The Company's technology and products are used in VPN and electronic
commerce applications by financial institutions, government agencies, large
corporations, telecommunication and Internet service providers to secure data
transmissions on private and public computer networks, such as the Internet. The
Company's Swiss subsidiary 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 products for the
Internet and the SafeNet/Security Center(TM), a high performance workstation,
which automatically manages SafeNet products and the development of integrated
circuits for the original equipment manufacturer market. Management believes
that growth in the market for products that provide secure remote access to
computer networks will require the Company to increase its future investments in
development, sales and marketing activities. These investments will enable 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
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
Ended March 31,
---------------------------------------
2000 1999
----------------- ----------------
<S> <C> <C>
Revenues 100 % 100 %
Cost of revenues 29 38
----------------- ----------------
Gross profit 71 62
----------------- ----------------
Research and development expenses 31 19
Sales and marketing expenses 25 30
General and administrative expenses 15 9
Amortization of acquired intangible assets - -
Recovery of CyberGuard advance (2) -
----------------- ----------------
Total operating expenses 69 58
----------------- ----------------
Operating income 2 4
Interest income, net 4 -
----------------- ----------------
Income before income taxes 6 4
Income tax expense - 1
================= ================
Net income 6 % 3 %
================= ================
</TABLE>
The Company has three reportable segments: products, chips and
software designed and manufactured in the United States for sale to companies
that will embed the Company's products into their products for ultimate sale to
end-users ("Technology Operations"), network security products designed and
manufactured in the United States for direct sales to end-users ("Product
Operations"), and network security products designed and manufactured outside
the United States ("European Operations"). The reportable segments are strategic
business units that offer different products. The segments are managed
separately because each segment requires different technology and marketing
strategies. The Technology Operations and Product Operations include some
international sales mainly to South America and Asia.
Three Months ended March 31, 2000 compared to Three Months ended March 31, 1999
Revenues decreased 3%, or $167,000, to $5,838,000 for the three
months ended March 31, 2000, from $6,005,000 in 1999. The Technology Operations'
revenues increased $1,730,000 as a result of shipments of a software VPN
product, Safenet/Soft-PK. Revenues from the Product Operations segment increased
$908,000 primarily due to large shipments of Safenet VPN products to the
Internal Revenue Service. The European Operations' revenues decreased $2,805,000
as a result of the completion of a large contract during 1999 and a reduction of
sales to financial institutions in Europe. Revenues from two customers
represented approximately 67% of the Company revenues for the three months ended
March 31, 2000.
Gross margin increased to 71% for the three months ended March 31,
2000, from 62% in 1999. Margins on sales of software licenses and OEM products
in the Technology Operations segment led the increase with an overall 83% gross
margin compared to a 1999 gross margin of 50% made up of primarily development
project sales. Product Operations' margins increased to 64% on strong sales of
VPN products. The gross profit margin for the European operations decreased to
53% from 70% in 1999 as a result of lower revenues available to recover fixed
costs.
Research and development expenses increased 64%, or $715,000, to
$1,828,000 for the three months ended March 31, 2000, from $1,113,000 in 1999.
The increase is primarily attributable to increased personnel related costs and
increased outside engineering expenses related to the Company's software and
integrated circuit development projects in the Technology Operations. As a
percentage of revenues, the expenses were 31% and 19% in 2000 and 1999,
respectively.
Sales and marketing expenses decreased to $1,441,000 for the three
months ended March 31, 2000, from $1,822,000 in 1999 due to a decrease in
personnel and their salaries, commissions, travel and related expenses. As a
percentage of revenues, the expenses were 25% and 30% in 2000 and 1999,
respectively.
11
<PAGE> 12
General and administrative expenses increased 50%, or $287,000, to
$860,000 for the three months ended March 31, 2000, from $573,000 in 1999. The
increase is primarily due to professional fees incurred to export software
developed in the United States to the European Operations segment and costs
associated with hiring an interim Managing Director in the European Operations
segment. As a percentage of revenues, the expenses were 15% and 9% of revenues
in 2000 and 1999, respectively.
The 1999 income tax expense of $36,000 was for estimated taxes on
the income of the European Operations that had no income tax liability in 2000.
The Company had no United States income tax benefit in either period. A
valuation allowance for the full amount of the United States net deferred tax
asset has been established since the Company's ability to use the United States
net operating loss is dependent upon future taxable income.
The Company had net income of $357,000 for the three months ended
March 31, 2000 compared to a net income of $188,000 for the same period in 1999.
The diluted income per common share was $0.05 in 2000 compared to $.03 per
common share in 1999.
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. At March 31, 2000, the Company had working capital of $25,043,000
including cash and cash equivalents of $22,442,000.
For the three months ended March 31, 2000, cash and cash equivalents
increased $3,281,000. Significant sources of cash for the Company in 2000
included $1,867,000 from operating activities and $1,124,000 from the exercise
of stock options and warrants.
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.
CHANGE IN ACCOUNTING STANDARDS
In 1998, the Financial Accounting Standards Board issued SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133
establishes accounting and reporting standards for derivative instruments and
for hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities at fair value. Adoption of SFAS No. 133 is required
for the fiscal year 2000 and is not expected to have a material impact on the
Company's financial position or results of operations.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's major market risk is to fluctuations in foreign
currency exchange rates, principally related to the Swiss Franc. As of March 31,
2000, the Company's investment in its Swiss subsidiary was approximately
$5,129,000. A 10% change in the average Swiss Franc exchange rate for the three
months ended March 31, 2000 would have changed the Company's reported earnings
for the three months by approximately $28,000. A 10% change in the March 31,
2000 Swiss Franc exchange rate would have changed the Company's reported
currency translation adjustment for three months ended March 31, 2000 by
approximately $384,000.
At March 31, 2000, the Company did not have any interest bearing
obligations. In addition, the Company does not hold any derivative instruments
and does not have any commodity risk.
12
<PAGE> 13
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits required by Item 601 of Regulation S-K.
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.
May 10, 2000 /s/ Anthony A. Caputo
----------------------
ANTHONY A. CAPUTO
Chairman, President and Chief Executive Officer
May 10, 2000 /s/ Carole D. Argo
----------------------
CAROLE D. ARGO
Senior Vice President and Chief Financial Officer
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT MARCH 31, 2000 AND THE CONSOLIDATED STATEMENT OF
OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2000 FOR INFORMATION RESOURCE
ENGINEERING, INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1000
<CURRENCY> DOLLAR
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1000
<CASH> 22442
<SECURITIES> 0
<RECEIVABLES> 2665
<ALLOWANCES> 200
<INVENTORY> 2675
<CURRENT-ASSETS> 28097
<PP&E> 3782
<DEPRECIATION> 2492
<TOTAL-ASSETS> 32028
<CURRENT-LIABILITIES> 3054
<BONDS> 0
0
0
<COMMON> 67
<OTHER-SE> 28907
<TOTAL-LIABILITY-AND-EQUITY> 32028
<SALES> 5838
<TOTAL-REVENUES> 5838
<CGS> 1700
<TOTAL-COSTS> 1700
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 15
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 357
<INCOME-TAX> 0
<INCOME-CONTINUING> 357
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 357
<EPS-BASIC> .05
<EPS-DILUTED> .05
</TABLE>
