<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended: March 31, 1996
--------------
OR
[ ] 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 0-26540
-------
DESKTOP DATA, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 04-3016142
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
80 Blanchard Road
Burlington, Massachusetts 01803
(Address of principal executive offices)
(617) 229-3000
(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 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 60 days. Yes X . No ___.
-----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Title of each class Outstanding at March 31, 1996
- ------------------- -----------------------------
Common Stock, par value $.01 8,543,325
<PAGE>
DESKTOP DATA, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION Page Number
<TABLE>
<CAPTION>
Item 1 - Financial Statements
<S> <C>
Condensed Consolidated Balance Sheets
March 31, 1996 and December 31, 1995................. 3
Condensed Consolidated Statements of Income
for the three months ended March 31, 1996 and 1995... 4
Condensed Consolidated Statements of Cash Flows
for the three months ended March 31, 1996 and 1995... 5
Notes to the Condensed Consolidated Financial Statements.... 6
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations............... 8
PART II - OTHER INFORMATION
Item 6(a) - Exhibits................................................. 12
Signatures........................................................... 13
Exhibit Index........................................................ 14
Exhibits............................................................. 15
</TABLE>
2
<PAGE>
ITEM 1 DESKTOP DATA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $11,305 $19,301
Short-term investments 21,801 13,117
Accounts receivable 4,764 3,164
Prepaid expenses and deposits 1,310 1,184
------- -------
Total current assets 39,180 36,766
------- -------
Property and equipment, net 3,206 1,991
------- -------
Other assets 195 122
------- -------
Total assets $42,581 $38,879
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,317 $ 974
Accrued expenses 3,512 3,126
Deferred revenue, current 12,168 10,063
Obligation under capital leases, current 25 25
------- -------
Total current liabilities 17,022 14,188
------- -------
Obligation under capital leases, noncurrent 46 53
------- -------
Deferred revenue, noncurrent 28 33
------- -------
Stockholders' equity:
Common stock 85 85
Additional paid in capital 31,028 30,989
Accumulated deficit (5,628) (6,469)
------- -------
Total stockholders' equity 25,485 24,605
------- -------
Total liabilities &
stockholders' equity $42,581 $38,879
======= =======
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
3
<PAGE>
DESKTOP DATA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
---- ----
<S> <C> <C>
Subscription and royalty revenues $ 6,887 $ 4,676
Other revenues 411 369
------ ------
Total revenues 7,298 5,045
Cost of revenues 1,932 1,394
Customer support expenses 781 514
Development expenses 1,071 636
Sales and marketing expenses 2,616 2,010
General and administrative expenses 405 270
------ ------
Total costs and expenses 6,805 4,824
------ ------
Income from operations 493 221
Interest income, net 452 70
------ ------
Income before provision for
income taxes 945 291
Provision for income taxes 104 15
------ ------
Net income $ 841 $ 276
====== ======
Net income per common and common
equivalent share for 1996; Pro
forma net income per common and
common equivalent share for 1995 $0.10 $0.04
====== ======
Weighted average number of
common and common equivalent
shares outstanding 8,763 6,683
====== ======
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
4
<PAGE>
DESKTOP DATA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 841 $ 276
Adjustments to reconcile net
income to net cash provided
by operating activities
Depreciation 191 115
Changes in assets and liabilities:
Accounts receivable (1,600) (1,014)
Prepaid expenses and deposits (126) (340)
Accounts payable 342 72
Accrued expenses 386 656
Deferred revenue 2,100 2,918
-------- -------
Net cash provided by
operating activities 2,134 2,683
-------- -------
Cash flows from investing activities:
Increase in short-term investments (8,684) -
Purchases of property & equipment (1,406) (295)
Increase in other assets (73) -
-------- -------
Net cash used in
investing activities (10,163) (295)
-------- -------
Cash flows from financing activities:
Proceeds from exercise of
stock options 39 15
Payments on obligation under
capital leases (6) (5)
-------- -------
Net cash provided by
financing activities 33 10
-------- -------
(Decrease)increase in cash
and cash equivalents (7,996) 2,398
Cash and cash equivalents,
beginning of period 19,301 4,073
-------- -------
Cash and cash equivalents,
end of period $ 11,305 $ 6,471
======== =======
Supplemental disclosure of
cash flow information:
Cash paid for income taxes $ 105 $ --
======== =======
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
5
<PAGE>
DESKTOP DATA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
I. Operations and Significant Accounting Policies
Basis of Presentation
The condensed consolidated financial statements of Desktop Data, Inc. (the
Company) presented herein have been prepared pursuant to the rules of the
Securities and Exchange Commission for quarterly reports on Form 10-Q and do not
include all of the information and note disclosures required by generally
accepted accounting principles. These financial statements should be read in
conjunction with the Company's consolidated financial statements and notes
thereto for the year ended December 31, 1995 included in the Company's
Form 10-K. In the opinion of management, the accompanying unaudited consolidated
financial statements include all adjustments, consisting of only normal
recurring adjustments, necessary to present fairly the consolidated financial
position, results of operations and cash flows of the Company and its
subsidiaries. Quarterly operating results are not necessarily indicative of the
results which would be expected for the full year.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries, Desktop Data Canada, Inc. and Desktop
Data Securities Corp. All material intercompany accounts and transactions have
been eliminated in consolidation.
Cash Equivalents and Short-Term Investments
At March 31, 1996, cash equivalents included approximately $225,000 in money
market investments and $8,981,000 in agency agreements. At March 31, 1996,
short-term investments included approximately $8,936,000 in repurchase
agreements and $12,865,000 in agency agreements.
Net Income and Pro Forma Net Income Per Common and Common Equivalent Share
For the three month period ended March 31, 1996, net income per common and
common equivalent share is computed by dividing net income by the weighted
average number of common and common equivalent shares during that period. Common
equivalent shares from stock options have been included in the computation using
the treasury-stock method. For the three months ended March 31, 1995, pro forma
net income per common and common equivalent share is computed by dividing net
income, less the charge for the accretion of the Series B preferred stock, by
the pro forma weighted average number of common and dilutive common stock
equivalent shares outstanding during that period, assuming conversion of all
shares of Series A convertible preferred stock and all shares of Series C and D
redeemable preferred stock into common stock. Stock options granted after July
1, 1994 through August 11, 1995 have been reflected as outstanding for the three
months ended March 31, 1995 using the treasury stock method required by the
Securities and Exchange Commission.
2. Stockholders' Equity
Initial Public Offering
On August 11, 1995, the Company completed an initial public offering of
1,977,000 shares of its common stock, including 300,000 shares granted to the
underwriters upon exercise of their over-allotment option. The proceeds to the
Company, net of underwriting discounts, commissions and offering expenses, were
approximately $26,711,000.
6
<PAGE>
DESKTOP DATA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
2. Stockholders' Equity (Continued)
Convertible Preferred Stock
Concurrent with the above offering, the following transactions occurred:
Upon the closing of the initial public offering, the Series A, Series C and
Series D preferred stock was converted into an aggregate of 3,847,123 shares of
common stock. In addition, the Company paid cash dividends of approximately
$2,009,000 and $629,000 on the Series A and Series B preferred stock,
respectively.
In accordance with the underlying agreement, the mandatory redemption
requirement related to the Series B preferred stock was relieved upon the
Company's initial public offering as the offering price exceeded $13.10 per
share. In December 1995, the Company redeemed the Series B preferred stock for
$10.00 per share or an aggregate of $135,000, representing a $1,232,238
discount.
On June 26, 1995, the Company's stockholders approved a new class of
undesignated preferred stock, which became effective upon the closing of the
Company's initial public offering.
3. Stock Split
On June 26, 1995, the Company's stockholders approved a 1-for-2.25 reverse
stock split of the common stock. The reverse stock split has been retroactively
reflected in the accompanying consolidated financial statements and notes for
all periods presented.
4. Commitments
On August 31, 1995, the Company entered into an operating lease for office
facilities, which commenced in February, 1996 and expires in fiscal 2003. The
Company will pay out a total of approximately $2.3 million in monthly lease
payments over the period of the lease. The Company has paid approximately
$153,000 related to an initial security deposit on the lease.
7
<PAGE>
ITEM 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations
Overview
Desktop Data, through its NewsEDGE service and software, delivers a large
variety of news and information sources in real time to personal computers and
workstations installed on LANs, automatically monitors and filters the news, and
alerts the users to stories of interest to them.
The Company's revenues consist primarily of NewsEDGE subscription fees and
related royalties received from news providers in connection with sales of their
newswires through NewsEDGE. Historically, royalties have constituted less than
10% of this amount. The Company's other revenues consist principally of NewsEDGE
installation services and related computer hardware system sales, and non-
recurring custom development projects related to the Company's software.
NewsEDGE subscriptions are generally for an initial term of twelve months,
payable in advance, and are automatically renewable for successive one year
periods unless the customer delivers notice of termination prior to the
expiration date of the then current agreement. NewsEDGE subscription revenues
are recognized ratably over the subscription term, beginning on installation of
the NewsEDGE service. Accordingly, a substantial portion of the Company's
revenues are recorded as deferred revenues until they are recognized over the
license term. The Company does not capitalize customer acquisition costs.
Certain newswires offered by the Company through NewsEDGE are purchased by the
customer directly from the news provider and payments are made directly from the
NewsEDGE customer to the provider. For some of these newswires, the Company
receives ongoing royalties on payments made by the customer to the news
provider, and those royalties constitute part of the Company's subscription and
royalty revenues. For other newswires that are resold by Desktop Data to the
NewsEDGE customer, the Company includes a fee for the newswire in the NewsEDGE
subscription fee paid by the customer and pays a royalty to the news provider.
Such royalties are included in the Company's cost of revenues.
Results of Operations for the Three Months Ended March 31, 1996 and compared to
the Three Months Ended March 31, 1995
Total revenues increased 45%, from $5.0 million for the three months ended
March 31, 1995 to $7.3 million for the three months ended March 31, 1996. In the
first fiscal quarter of 1996, subscription and royalty revenues increased 47% to
$6.9 million, up from $4.7 million for the same period in 1995. Other revenues
increased 12% to $411,000 for the three month period ended March 31, 1996, up
from $369,000 for the same period in 1995. The increase in subscription and
royalty revenues was due to increased subscription revenues from new customers,
the retention and growth of revenues from existing customers and increased
royalties from the sale of third party information news. The increase in other
revenues was due to increased non-recurring custom development projects.
The number of installed customers increased from 285 customers at March 31,
1995, to 351 customers at March 31, 1996, an increase of 23%. The number of
authorized users within customer organizations increased from 55,107 users at
March 31, 1995 to 89,290 users at March 31, 1996, an increase of 62%. The
average users per customer increased from 198 users at March 31, 1995 to 248
users at March 31, 1996, an increase of 25%. The Company's average revenues per
customer increased from $17,320 for the three months ended March 31, 1995 to
$20,078 for the three months ended March 31, 1996, an increase of 16%.
Cost of revenues as a percentage of total revenues decreased slightly to 26%
for the three months ended March 31, 1996 from 28% for the three months ended
March 31, 1995, due primarily to decreases in the percentage of royalties paid
to third party information providers.
8
<PAGE>
Customer support expenses increased 52% to $781,000 for the three months ended
March 31, 1996, as compared to $514,000 for the same period in 1995. These
increases result primarily from higher staffing levels and the continuing need
for the Company to provide additional support to its growing customer base. As a
percentage of total revenues, customer support expenses remained relatively
constant at 11% for the three month period ended March 31, 1996 versus 10% for
the comparable period in 1995.
Development expenses increased 69% to $1.1 million for the three months ended
March 31, 1996, as compared to $636,000 for the three months ended March 31,
1995. Development expenses increased as a result of higher staffing levels to
provide for enhancements of existing features and the development of new
features. Development expenses, as a percentage of total revenues, increased to
15% for the three month period ended March 31, 1996, as compared to 13% for the
comparable period in 1995.
Sales and marketing expenses increased 30% to $2.6 million for the three month
period ended March 31, 1996, as compared to $2.0 million for the same period in
1995. Sales and marketing expenses, as a percentage of total revenues, decreased
to 36% for the three month period ended March 31, 1996, from 40% for the same
period in 1995. Sales and marketing expenses increased during these periods,
primarily due to the expansion of the sales and marketing organizations. As a
percentage of total revenues, however, sales and marketing expenses decreased
primarily as a result of the increase in the Company's revenues, without a
corresponding increase in sales and marketing expenses.
General and administrative expenses increased 50% to $405,000 from $270,000
for the three months ended March 31, 1996 and 1995, respectively. The increases
in general and administrative expenses were due primarily to additions to staff
to support the Company's growth. General and administrative expenses, as a
percentage of total revenues, remained relatively constant at 6% and 5% for the
three month periods ended March 31, 1996 and 1995, respectively.
Interest income (expense), net increased to $452,000 in the three month period
ended March 31, 1996, from $70,000 for the comparable period in 1995 due to the
interest earned on higher cash balances generated from operations and the
proceeds from the Company's initial public offering.
The provision for income taxes of $104,000 and $15,000 for the three month
periods ended March 31, 1996 and 1995, respectively, represent the alternative
minimum tax due under the Internal Revenue Code and state taxes due in states
that do not have net operating loss carryforwards available.
Liquidity and Capital Resources
The Company's cash, cash equivalents and short-term investments balance was
$33.1 million at March 31, 1996, as compared to $32.4 million at December 31,
1995, an increase of $700,000. Net cash generated from operations was $2.1
million for the three months ending March 31, 1996 compared with $2.7 million
for the comparable period in 1995, due primarily to higher net income in the
period ended March 31, 1996 combined with an increase in the change in accounts
receivable and a decrease in the change in deferred revenue related to the
timing of cash receipts. Net cash used for investing activities for the three
months ended March 31, 1996 was $10.2 million, due primarily to the purchase of
short-term investments. Net cash provided by financing activities in the three
months ended March 31, 1996 was $33,000, due primarily to employee stock option
exercises.
The Company continues to investigate the possibility of investments in or
acquisitions of complementary businesses, products or technologies, although the
Company has not entered into any commitments or negotiations with respect to any
such transactions.
The Company believes that its current cash balances and funds anticipated to
be generated from operations, will be sufficient to satisfy working capital and
capital expenditure requirements for the next twelve months.
9
<PAGE>
Certain Factors Affecting Future Operating Results
The Company operates in a rapidly changing environment that involves a number
of risks, some of which are beyond the Company's control. The following
discussion highlights some of the risks which may affect future operating
results.
Competition. The business information services industry is intensely
competitive and is characterized by rapid technological change and the entry
into the field of extremely large and well-capitalized companies as well as
smaller competitors. Increased competition, on the basis of price or otherwise,
may require price reductions or increased spending on marketing or software
development, which could have a material adverse effect on the Company's
business and results of operations. The Company competes or may compete directly
or indirectly with the following categories of companies: (i) large, well-
established news and information providers such as Knight-Ridder Information
Services, Inc. ("Dialog"), Dow Jones & Company, Inc. ("Dow Jones"), Reed
Elsevier PLC ("Lexis/Nexis"), Pearson PLC ("Pearson"), Reuters America, Inc.
("Reuters") and Thomson Financial Networks, Inc. ("Thomson"); (ii) market data
services companies such as Automatic Data Processing, Inc. ("ADP"), Bloomberg
L.P. ("Bloomberg"), Quotron Systems, Inc. ("Quotron") and Dow Jones Telerate
Inc. ("Telerate"); (iii) traditional print media companies that are increasingly
searching for opportunities for on-line provision of news, including through the
establishment of World Wide Web sites on the Internet; (iv) large providers of
LAN-based software systems such as Lotus Development Corporation ("Lotus") and
Microsoft Corporation ("Microsoft"), which could, in the future, ally with
competing news and information providers; and (v) to a lesser degree, consumer-
oriented commercial on-line services and Internet access providers. Many of
these companies and market participants not named above have substantially
greater financial, technical and marketing resources than the Company. The
Company believes that NewsEDGE is differentiated from the news and system
products offered by the large news and systems providers because of the
Company's ability to deliver news from many different, competing providers on an
enterprise-wide basis, directly to LAN-connected personal computers, customized
to meet the needs of each individual user, at a relatively low cost per user.
In addition, several smaller companies offer directly competitive products or
services that provide news to enterprises through the customer's computer
network. The Company believes that NewsEDGE offers advantages over each of these
competing products. For example, each of the competing services offers
substantially fewer real-time news sources than does NewsEDGE. Furthermore,
unlike NewsEDGE, certain competitors do not offer real-time scrolling of news
stories, while others do not support Lotus Notes or other groupware
applications. In addition, many competitors rely on database engines developed
by third parties, and as a result the Company believes these services are not as
readily adaptable to evolving customer or information provider needs as is
NewsEDGE. Finally, each of these smaller competitors is owned by a larger
organization, which the Company believes restricts their ability to attract a
large variety of news sources and makes it difficult for them to provide the
same level and focus of sales, development and customer support as can be
provided by Desktop Data.
Dependence on NewsEDGE Service. The Company currently derives substantially
all of its revenues from NewsEDGE service subscriptions and related royalties.
Although the Company intends to increase the number of news and other
information sources available through NewsEDGE and to otherwise enhance
NewsEDGE, the Company's strategy is to continue to focus on providing the
NewsEDGE service as its sole line of business. In addition, there can be no
assurance that the Company will be able to increase the number of news sources
or otherwise enhance NewsEDGE. As a result, any factor adversely affecting sales
of NewsEDGE would have a material adverse effect on the Company. The Company's
future financial performance will depend principally on the market's acceptance
of NewsEDGE and the Company's ability to sell NewsEDGE to additional customers
and to increase revenue derived from existing customers by increasing the number
of users within each customer, adding additional newswires or adding additional
NewsEDGE servers.
10
<PAGE>
Dependence on News Providers. The Company currently makes over 500 news and
information sources available through NewsEDGE, pursuant to agreements between
the Company and over 50 different news providers. A significant percentage of
the Company's customers subscribe to services provided by one or more of Press
Association Inc., a subsidiary of The Associated Press ("The Associated Press"),
Dow Jones, The Financial Times, Reuters and Thomson. The Company's agreements
with news providers are generally for a term of one year, with automatic renewal
unless notice of termination is provided before the end of the term by either
party. These agreements may also be terminated by the provider if Desktop Data
fails to fulfill its obligations under the agreement and, under some of the
agreements, upon the occurrence of a change in control of the Company. Many of
these news and information providers compete with one another and, to some
extent, with the Company. Termination of one or more significant news provider
agreements would decrease the news and information which the Company can offer
its customers and would have a material adverse effect on the Company's business
and results of operations.
Dependence on News Transmission Sources. NewsEDGE news and information is
transmitted using one or more of three methods: leased telephone lines,
satellites or FM radio transmission. None of these methods of news transmission
is within the control of the Company, and the loss or significant disruption of
any of them could have a material adverse effect on the Company's business. Many
newswire providers have established their own broadcast communications networks
using one or more of these three vehicles. In these cases, Desktop Data's role
is to arrange communications between the news provider and the NewsEDGE
customer's server. For sources which do not have their own broadcast
communications capability, news and information is delivered to the Company's
news consolidation facility, where it is reformatted for broadcast to NewsEDGE
servers and retransmitted to customers through an arrangement between the
Company and Mainstream Data, Inc. ("Mainstream"), a common carrier
communications vendor. Mainstream is also the communications provider for many
newswires offered by the Company through NewsEDGE. The Company's agreement with
Mainstream expires on December 31, 1996 and can be terminated earlier in the
event of a material breach by the Company of the agreement. If the agreement
with Mainstream were terminated on short notice, or if Mainstream were to
encounter technical or financial difficulties adversely affecting its ability to
continue to perform under the agreement or otherwise, the Company's business
would be materially and adversely affected. Mainstream was recently acquired by
WavePhore. The Company believes that if Mainstream were unable to fulfill its
obligations, other sources of retransmission would be available to the Company,
although the transition from Mainstream to those sources could result in delays
or interruptions of service that could have a material adverse affect on the
Company's business.
Rapid Technological Change. The business information services, software and
communications industries are subject to rapid technological change, which may
render existing products and services obsolete or require significant
unanticipated investments in research and development. The Company's future
success will depend, in part, upon its ability to enhance NewsEDGE and keep pace
with technological developments.
Dependence on Key Personnel. The Company's success depends to a significant
extent upon the continued service of its executive officers and other key
management, sales and technical personnel, and on its ability to continue to
attract, retain and motivate qualified personnel. The competition for such
employees is intense. The Company has no long-term employment contracts with any
of its employees, and, with the exception of the Company's executive officers,
none of its employees is bound by a non-competition agreement. The loss of the
services of one or more of the Company's executive officers, sales people,
design engineers or other key personnel or the Company's inability to recruit
replacements for such personnel or to otherwise attract, retain and motivate
qualified personnel could have a material adverse effect on the Company's
business and results of operations. The Company maintains $3 million of key-man
life insurance on Donald L. McLagan, the Company's Chairman, President and Chief
Executive Officer.
11
<PAGE>
DESKTOP DATA, INC.
PART II - OTHER INFORMATION
Item 6(a) - EXHIBITS
Exhibit 11.1 - Computation of Earnings Per Share
Item 6(b) - REPORTS ON FORM 8-K
No reports on Form 8-K have been filed during the quarter for which
this report is filed.
12
<PAGE>
DESKTOP DATA, INC.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
DESKTOP DATA, INC.
(Registrant)
Date: May 3, 1996 /s/ Edward R. Siegfried
-----------------------------------------
Edward R. Siegfried
Vice President--Finance and Operations
Treasurer and Assistant Secretary
13
<PAGE>
DESKTOP DATA, INC. AND SUBSIDIARIES
EXHIBIT INDEX
Exhibit No. Description Page
- ----------- ----------- ----
11.1 -- Computation of earnings per share 15
14
<PAGE>
DESKTOP DATA, INC. AND SUBSIDIARIES EXHIBIT 11.1
COMPUTATION OF NET EARNINGS PER SHARE
(UNAUDITED)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
-------- ---------
<S> <C> <C>
Net income $ 841 $ 276
Accretion of dividends on Series B redeemable
preferred stock - (34)
------ ------
Net income available for common
stockholders $ 841 $ 242
====== ======
Weighted average common shares outstanding 8,525 2,630
Weighted average shares to reflect the
conversion of Series A, Series C, and Series D
preferred stock as of the beginning of
the period - 3,847
Common stock options issued after July 1, 1994,
pursuant to the treasury stock method - 43
Common stock equivalents outstanding, pursuant
to the treasury stock method 238 163
------ ------
Weighted average number of common and
common equivalent shares outstanding
in 1996; Pro forma weighted average number
of common and common equivalent shares
outstanding in 1995 8,763 6,683
------ ------
Net income per common and common equivalent
share in 1996; Pro forma net income per
common and common equivalent share
in 1995 $0.10 $0.04
====== ======
</TABLE>
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 11,305
<SECURITIES> 21,801
<RECEIVABLES> 4,764
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 39,180
<PP&E> 4,718
<DEPRECIATION> 1,512
<TOTAL-ASSETS> 42,581
<CURRENT-LIABILITIES> 17,022
<BONDS> 0
<COMMON> 85
0
0
<OTHER-SE> 25,400
<TOTAL-LIABILITY-AND-EQUITY> 42,581
<SALES> 7,298
<TOTAL-REVENUES> 7,298
<CGS> 1,932
<TOTAL-COSTS> 6,805
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 945
<INCOME-TAX> 104
<INCOME-CONTINUING> 841
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 841
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
