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 September 30, 1998
------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
AND EXCHANGE ACT OF 1934
Commission File Number 000-21657
---------
SKYMALL, INC.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Nevada 86-0651100
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1520 East Pima Street, Phoenix, Arizona 85034
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (602) 254-9777
--------------
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 [ ]
The number of shares outstanding of the issuer's common shares, as of
November 11, 1998:
COMMON SHARES, $.001 PAR VALUE: 8,514,601 SHARES
<PAGE>
SKYMALL, INC.
INDEX
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Condensed Balance Sheets -
September 30, 1998 and December 31, 1997............................ 3
Condensed Statements of Income -
Three and nine months ended September 30, 1998 and 1997............. 4
Condensed Statements of Cash Flows -
Nine months ended September 30, 1998 and 1997....................... 5
Notes to Condensed Financial Statements................................ 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS............................... 7
ITEM 3. NOT APPLICABLE..................................................... 11
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS ................................................. 12
ITEMS 2. THROUGH 5. NOT APPLICABLE......................................... 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................................... 12
SIGNATURES.................................................................. 12
2
<PAGE>
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SKYMALL, INC.
CONDENSED BALANCE SHEETS
(Amounts in thousands)
September 30, December 31,
1998 1997
------------- ------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 7,188 $ 9,412
Accounts receivable, net 7,839 10,427
Prepaid catalog costs and other 1,849 1,863
Deferred income taxes 495 500
---------- ----------
Total current assets 17,371 22,202
PROPERTY AND EQUIPMENT, net 4,943 4,133
OTHER ASSETS, net 268 299
---------- ----------
Total assets $ 22,582 $ 26,634
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 9,613 $ 13,669
Accrued liabilities 894 1,863
Income taxes 897 556
Current portion of notes payable and
capital leases 80 64
---------- ----------
Total current liabilities 11,484 16,152
DEFERRED INCOME TAXES 109 109
NOTES PAYABLE AND CAPITAL LEASES, net of
current portion 1 66
---------- ----------
Total liabilities 11,594 16,327
---------- ----------
SHAREHOLDERS' EQUITY
Common stock 9 9
Additional paid-in capital 6,735 6,723
Retained earnings 4,244 3,575
---------- ----------
Total shareholders' equity 10,988 10,307
---------- ----------
Total liabilities and shareholders' equity $ 22,582 $ 26,634
========== ==========
See accompanying notes.
3
<PAGE>
SKYMALL, INC.
CONDENSED STATEMENTS OF INCOME
(Amounts in thousands, except shares and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
---------------------------- ----------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES:
Merchandise sales, net $ 9,657 $ 9,175 $ 29,022 $ 25,855
Placement fees and other 3,935 3,793 11,504 11,003
------------ ------------ ------------ ------------
Total revenues 13,592 12,968 40,526 36,858
COST OF GOODS SOLD 6,367 7,707 20,307 21,270
------------ ------------ ------------ ------------
Gross margin 7,225 5,261 20,219 15,588
------------ ------------ ------------ ------------
OPERATING EXPENSES:
Catalog expenses 2,723 2,004 8,103 5,926
Selling expenses 816 736 2,501 2,108
Customer service and fulfillment expenses 940 912 2,951 2,886
General and administrative expenses 2,224 1,394 5,924 3,929
------------ ------------ ------------ ------------
Total operating expenses 6,703 5,046 19,479 14,849
------------ ------------ ------------ ------------
INCOME FROM OPERATIONS 522 215 740 739
Interest expense (4) (33) (22) (92)
Other income 112 141 394 424
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES 630 323 1,112 1,071
Income taxes 250 -- 443 --
------------ ------------ ------------ ------------
NET INCOME $ 380 $ 323 $ 669 $ 1,071
============ ============ ============ ============
BASIC NET INCOME PER COMMON SHARE $ .04 $ .04 $ .08 $ .12
============ ============ ============ ============
BASIC WEIGHTED AVERAGE SHARES OUTSTANDING 8,514,601 8,647,182 8,511,055 8,651,720
============ ============ ============ ============
DILUTED NET INCOME PER COMMON SHARE $ .04 $ .04 $ .08 $ .12
============ ============ ============ ============
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING 8,515,211 8,647,182 8,513,513 8,711,658
============ ============ ============ ============
</TABLE>
See accompanying notes.
4
<PAGE>
SKYMALL, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
Nine months ended
September 30,
-----------------------
1998 1997
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 669 $ 1,071
Adjustments to reconcile net income to net
cash used in operating activities -
depreciation and amortization 882 417
Changes in operating assets and liabilities (2,046) (2,821)
---------- ----------
Net cash used in operating activities (495) (1,333)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (1,692) (1,761)
---------- ----------
Net cash used in investing activities (1,692) (1,761)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on line of credit -- 138
Payments on notes payable and capital leases, net (49) (702)
Repurchase of common shares (127) (611)
Payments on notes payable to shareholders -- (120)
Proceeds from issuance of common stock 139 --
---------- ----------
Net cash used in financing activities (37) (1,295)
---------- ----------
DECREASE IN CASH AND
CASH EQUIVALENTS (2,224) (4,389)
CASH AND CASH EQUIVALENTS,
beginning of period 9,412 11,491
---------- ----------
CASH AND CASH EQUIVALENTS,
end of period $ 7,188 $ 7,102
========== =========
See accompanying notes.
5
<PAGE>
SKYMALL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(Unaudited)
(1) BASIS OF PRESENTATION
The accompanying condensed financial statements have been prepared in
accordance with generally accepted accounting principles, pursuant to the rules
and regulations of the Securities and Exchange Commission. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Certain information and
footnote disclosures normally included in financial statements have been
condensed or omitted pursuant to such rules and regulations. These financial
statements should be read in conjunction with the financial statements and the
notes thereto included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1997. The results of operations for the three and nine month
periods ended September 30, 1998 are not necessarily indicative of the results
to be expected for the full year.
(2) NET INCOME PER COMMON SHARE
Basic net income per common share is based upon the weighted average shares
outstanding. Outstanding stock options and warrants are treated as common stock
equivalents for the purposes of computing diluted net income per common share
and represent the difference between basic and diluted weighted average shares
outstanding. The following is a summary of the computation of basic and diluted
net income per common share (amounts in thousands except per share amounts):
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
------------------ -----------------
1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Basic net income per common share:
Net income $ 380 $ 323 $ 669 $ 1,071
======= ======= ======= =======
Weighted average common shares 8,515 8,647 8,511 8,652
======= ======= ======= =======
Basic per share amount $ .04 $ .04 $ .08 $ .12
======= ======= ======= =======
Three months ended Nine months ended
September 30, September 30,
------------------ -----------------
1998 1997 1998 1997
------- ------- ------- -------
Diluted net income per common share:
Net income $ 380 $ 323 $ 669 $ 1,071
======= ======= ======= =======
Weighted average common shares 8,515 8,647 8,511 8,652
Options and warrants assumed converted 0 0 3 60
Total common shares plus assumed conversions 8,515 8,647 8,514 8,712
======= ======= ======= =======
Diluted per share amount $ .04 $ .04 $ .08 $ .12
======= ======= ======= =======
</TABLE>
6
<PAGE>
(3) SUBSEQUENT EVENT
On October 12, 1998 the Company purchased 100 percent of the stock of
Durham & Company for $3.1 million. The Company paid $2.9 million in cash to the
stockholders of Durham & Company with the remaining $200,000 secured by a
Promissory Note bearing interest at nine percent and payable on October 12,
1999. Durham & Company is a 15-year-old logo merchandise catalog and recognition
jewelry company based in Tempe, Arizona. Durham publishes logo merchandise
catalogs and supplies high-quality recognition jewelry and related products to a
number of organizations, including airlines. This acquisition will be accounted
for as a purchase. The results of operations will be included in the Company's
financial statements beginning at the date of acquisition.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the attached
condensed financial statements and notes thereto and with the Company's audited
financial statements, notes to the financial statements, and Management's
Discussion and Analysis of Financial Condition and Results of Operations
relating thereto included or incorporated by reference in the Company's Annual
Report on Form 10-K for the year ended December 31, 1997.
Certain statements herein, in future filings by the Company with the
Securities and Exchange Commission and in the Company's written and oral
statements made by or with the approval of an authorized executive officer
constitute "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934,
and the Company intends that such forward-looking statements be subject to the
safe harbors created thereby. The words and phrases "should be," "will be,"
"believes," "expects," "anticipates," "plans," "intends" and similar expressions
identify forward-looking statements. These forward-looking statements reflect
the Company's current views with respect to future events and financial
performance, but are subject to many uncertainties and factors relating to the
Company's operations and business environment, which may cause the actual
results of the Company to be materially different from any future results
expressed or implied by such forward-looking statements. Examples of such
uncertainties include, but are not limited to, the Company's dependence on its
relationships with its airline partners, fluctuations in paper prices and
airline fuel costs, customer credit risks, competition from other catalog
companies and retailers, and the Company's reliance on information and
telecommunications systems, all of which are discussed in more detail in the
Company's other filings with the Securities and Exchange Commission. The Company
undertakes no obligation to publicly update or revise any forward-looking
statements whether as a result of new information, future events or otherwise.
RESULTS OF OPERATIONS - THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
REVENUES AND GROSS MARGIN. Net merchandise sales increased to $9.7 and
$29.0 million for the three and nine months ended September 30, 1998 from $9.2
and $25.9 million for the same periods in 1997, or five and 12 percent,
respectively. The increases are primarily due to increases over the same periods
in the prior year in pages per catalog of 16 and 14 percent respectively for the
7
<PAGE>
three and nine months ended September 30, 1998. Placement fees and other
revenues as a percent of total revenues were constant at 29 percent for the
three months ended September 30, 1998 and 1997, and decreased to 28 percent for
the nine months ended September 30, 1998 from 30 percent for the same period in
1997. Gross margins increased to $7.2 and $20.2 million, or 53 and 50 percent of
total revenues, for the three and nine months ended September 30, 1998, from
$5.3 and $15.6 million, or 41 and 42 percent of total revenues, for the same
periods in 1997. The increase in gross margin was primarily due to a change in
the mix of agreements with merchants, emphasizing more variable compensation
versus fixed placement fees.
OPERATING EXPENSES. Total operating expenses increased to $6.7 and $19.5
million, or 49 and 48 percent of total revenues, for the three and nine months
ended September 30, 1998, from $5.0 and $14.8 million, or 39 and 40 percent of
total revenues, for the same periods in 1997, respectively. Catalog expenses,
which consist of catalog production, paper and printing costs, increased to $2.7
and $8.1 million for the three and nine months ended September 30, 1998, from
$2.0 and $5.9 million for the same periods in 1997, or 36 and 37 percent,
respectively. The increases are due primarily to increases in (i) average pages
per catalog of 16 and 14 percent and (ii) the average equivalent paper cost per
hundred weight to $47, respectively, for the three and nine months ended
September 30, 1998 from $41 for the same periods in 1997, or 15 percent,
respectively. The total number of catalogs distributed decreased one percent for
the comparable three month period and increased three percent for the nine month
period ended September 30, 1998 from 1997 levels. Selling expenses, which
represent commissions paid to airlines and other marketing partners and are
generally variable in nature, remained consistent, at six percent of total
revenues for all periods reported. Customer service and fulfillment expenses,
which include a full-service customer contact center and a drop-ship and
order-coordination center, and are generally variable in nature, decreased to
seven percent of total revenues for the three and nine months ended September
30, 1998, compared with seven and eight percent for the same periods in 1997 as
a result of operational improvements made during the three and nine months ended
September 30, 1998. General and administrative expenses increased to $2.2 and
$5.9 million for the three and nine months ended September 30, 1998, from $1.4
and $3.9 million for the same periods in 1997, or 60 and 51 percent,
respectively. The increases are due primarily to infrastructure investments
relating to the Company's new business initiatives.
INCOME FROM OPERATIONS. The Company reported income from operations of
$522,000 and $740,000 for the three and nine months ended September 30, 1998 as
a result of the items discussed above, compared with income from operations of
$215,000 and $739,000 for the same periods in 1997.
INCOME TAXES. Income tax expense was $250,000 and $443,000 for the three
and nine months ended September 30, 1998, or approximately 40 percent of pre-tax
income. The Company incurred no income tax expense for the three and nine months
ended September 30, 1997 due to a reduction in certain temporary differences, as
well as a reduction in the valuation allowance for deferred tax asset items.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1998, the Company had net working capital of $5.9 million,
which included cash and cash equivalents of $7.2 million compared with working
capital of $6.1 million and cash and cash equivalents of $9.4 million at
8
<PAGE>
December 31, 1997. Additionally, the Company maintains a reducing revolving line
of credit at a bank with a maximum available line of $4.0 million. As of
November 14, 1998, the entire balance of the revolving line of credit was
unused. The Company believes that cash flow provided from operations, and the
Company's available cash are adequate to supply required working capital and
provide for investing activities for the foreseeable future.
Cash used in operating activities was $0.5 million for the nine months
ended September 30, 1998 compared with $1.3 million for the same period in 1997.
The decrease in cash used is due primarily to the timing of cash receipts and
cash disbursements.
Cash used in investing activities was $1.7 million for the nine months
ended September 30, 1998 compared with $1.8 million for the same period in 1997.
Cash used in investing activities for both periods relates to purchases of
telecommunications and computer equipment and software, building improvements,
and furniture and fixtures.
Cash used in financing activities was $37,000 for the nine months ended
September 30, 1998 compared with $1.3 million for the same period in 1997. Cash
used in financing activities for the nine months ended September 30, 1998
resulted primarily from payments on capital lease obligations and repurchases of
common stock, offset by proceeds from the issuance of common stock. Cash used in
financing activities for the nine months ended September 30, 1997 resulted from
payments on notes payable to vendors, shareholders, and others, offset by
borrowing under the Company's line of credit.
CHANGES IN SECURITIES AND USE OF PROCEEDS
On December 11, 1996, the Company's Registration Statement on Form S-1
(File No. 333-17609) (the "Form S-1"), was declared effective by the U.S.
Securities and Exchange Commission. The Form S-1 was prepared in connection with
an initial public offering by the Company of 2,000,000 shares (the "Shares") of
common stock (the "Offering"). The Offering commenced on December 11, 1996 and
terminated December 16, 1996, the date on which all of the Shares were sold. The
Offering was underwritten by Josephthal Lyon & Ross Incorporated and Cruttenden
Roth Incorporated on a firm commitment basis. The Shares were offered to the
public at a price of $8.00 per share, or $16.0 million in the aggregate for all
2,000,000 Shares offered, all of which were sold as of the date the offering
terminated.
The Company's actual expenses incurred in connection with the issuance and
distribution of the Shares registered pursuant to the Form S-1 equaled
approximately $2.0 million in the aggregate, which consisted of the following:
(i) $1.1 million in aggregate underwriting discounts and commissions, (ii) $0.2
million in expenses paid to or for the underwriter, and (iii) $0.7 million in
other expenses. Of the $0.7 million in other expenses, no direct or indirect
payments were made to the Company's officers, directors, holders of 10 percent
or more of any class of the Company's outstanding securities or other affiliated
parties (collectively "Affiliates").
After deducting the foregoing expenses, the Offering resulted in
approximately $14.0 million in net proceeds to the Company. For the period from
December 16, 1996 through September 30, 1998, the Company used the net proceeds
9
<PAGE>
as follows: approximately (i) $1.2 million for building improvements to the
corporate offices and the customer contact center, (ii) $3.3 million for the
purchase and installation of telephone and computer software and equipment,
(iii) $4.0 million for the reduction of the Company's revolving line of credit,
(iv) $0.7 million for marketing and promotional expenses, (v) $1.6 million for
development of additional circulation media, (vi) $1.0 million for the
repurchase of 164,400 of the Company's common shares, and (vii) $2.2 million for
temporary investments consisting primarily of money market funds and commercial
paper. None of the above mentioned amounts consist of direct or indirect
payments to Affiliates. The preceding discussion of the Company's use of net
proceeds is based upon reasonable estimates by management. Except for capital
expenditures, the reduction of the line of credit, and the repurchase of the
Company's common shares discussed in items (i), (ii), (iii), and (vi) above, the
Company's use of proceeds from the Offering, as described herein, does not
represent a material change from that described in the Prospectus included in
the Form S-1. The Company continues to evaluate the use and allocation of the
Offering proceeds and, as discussed in the Form S-1, may re-allocate or use the
Offering proceeds for different purposes as business conditions warrant.
YEAR 2000
Background:
The Company has initiated a comprehensive program to evaluate and address its
exposure to the Year 2000 (Y2K) computer issue. The Y2K issue arose because many
computer programs use only the last two digits in date fields to refer to a
year. Therefore, these programs do not properly recognize a year that begins
with "20" instead of the familiar "19". Further, certain programs may not
properly process the dates of September 9, 1999 or February 29, 2000. If not
corrected, many computer applications could fail or create erroneous results.
State of Readiness:
The Company has initiated a comprehensive program to identify its exposure to
this issue and has begun to implement measures to mitigate any problems. The
Company believes it has identified all significant internal systems and
applications that require attention of some form in order to address the Y2K
risks.
The information or production systems which consist of order entry, order
conveyance and customer service are primarily based on the Microsoft suite of
products and the hardware is principally late model Compaq servers, both of
which are designed to meet Y2K functional requirements. The Company is in the
process of obtaining confirmation that these systems meet Y2K requirements.
The Company has other non-production systems such as internal security systems,
telephone systems, and network computer equipment, which are also under review.
In addition the capability of critical systems of third parties such as its
vendor partners, banks, and telephone service providers.
The Company plans to resolve any Y2K issues by June 30, 1999.
10
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Costs:
The financial and resource demands of the Y2K project are estimated to total
less than $100,000. Much of this amount represents the use of existing resources
which will be refocused to survey third parties, review internal and external
systems environments, analyze potential impacts and document the effort.
Risks:
The Company has identified what it believes are its most significant worst case
Y2K scenarios. These revolve around the ability of the Company's vendors to
process orders and conduct business such as arranging deliveries to customers
and replenishing inventories. The Company does not currently have enough data to
make an accurate assessment of the potential impact of a material failure of its
vendors to be adequately prepared for Y2K issues.
Contingency Plans:
The Company has not yet developed formal contingency plans to address the
possibility that its critical systems, as well as those of its key business
partners on which the Company relies, will experience significant interruption
as a result of Y2K issues. The Company will develop contingency plans by June
30, 1999, if such plans are deemed necessary after a more thorough evaluation of
all mission critical systems.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities. The Statement establishes accounting and reporting
standards requiring that every derivative instrument (including certain
derivative instruments embedded in other contracts) be recorded in the balance
sheet as either an asset or liability measured at its fair value. The Statement
requires that changes in the derivative's fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. Special accounting
for qualifying hedges allows a derivative's gains and losses to offset related
results on the hedged item in the income statement, and requires that a company
must formally document, designate, and assess the effectiveness of transactions
that receive hedge accounting.
Statement 133 is effective for fiscal years beginning after June 15, 1999.
A company may also implement the Statement as of the beginning of any fiscal
quarter after issuance (that is, fiscal quarters beginning June 16, 1998 and
thereafter). Statement 133 cannot be applied retroactively. Statement 133 must
be applied to (a) derivative instruments and (b) certain derivative instruments
embedded in hybrid contracts that were issued, acquired, or substantively
modified after December 31, 1997 (and, at the company's election, before January
1, 1998). Application of the Statement's requirements is not expected to have a
material impact on the Company's financial position, results of operations, or
earnings per share data as currently reported.
ITEM 3. NOT APPLICABLE
11
<PAGE>
PART II. OTHER INFORMATION
ITEMS 1. LEGAL PROCEEDINGS
On May 13, 1998 Kathy Jordan, a purchaser of one pair of cuff links through
a SkyMall catalog in March 1998, filed an action in the District Court of
Cherokee County, Oklahoma against SkyMall, Inc. Plaintiff alleges that SkyMall
improperly collected from her certain state and local taxes relating to her
purchase, and that the rates used by SkyMall to calculate state and local taxes
due on an order were in excess of the actual rates applicable to her. Plaintiff
brought the action "on behalf of herself and a class of persons in the United
States similarly situated, excluding residents of Arizona, who have at any time
purchased a product from the Defendant and paid money which was collected under
the designation of a purported 'sales tax' but which was either 1) not
authorized by law; or 2) not remitted in full to the proper taxing authority."
She alleges causes of action for unjust enrichment, fraud, breach of contract,
and declaratory judgement, and seeks return of allegedly unlawful revenue
collected with interest, an injunction against collecting taxes improperly,
compensatory and punitive damages, and attorneys' fees and costs. SkyMall
believes that it has properly collected applicable state and local taxes, and
that it has remitted all amounts collected from purchasers to the various state
taxing authorities. Therefore, the Company believes Ms. Jordan's claims are
without merit and intends to vigorously defend this action.
ITEMS 2. THROUGH 5. NOT APPLICABLE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibit is included herein:
(27) Financial Data Schedule
(b) No reports on Form 8-K have been filed during the quarter for which this
report is filed.
SIGNATURE
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.
Date: November 13, 1998 By: /s/ Robert M. Worsley
----------------- --------------------------------------
Robert M. Worsley
Chairman of the Board,
President and Chief Executive Officer
(Principal Accounting Officer)
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONDENSED BALANCE SHEET AT SEPTEMBER 30, 1998 AND THE UNAUDITED
CONDENSED STATEMENT OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS INCLUDED
IN THIS FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 7,188
<SECURITIES> 0
<RECEIVABLES> 8,577
<ALLOWANCES> 738
<INVENTORY> 0
<CURRENT-ASSETS> 17,371
<PP&E> 8,328
<DEPRECIATION> 3,385
<TOTAL-ASSETS> 22,582
<CURRENT-LIABILITIES> 11,484
<BONDS> 0
0
0
<COMMON> 9
<OTHER-SE> 10,979
<TOTAL-LIABILITY-AND-EQUITY> 22,582
<SALES> 29,022
<TOTAL-REVENUES> 40,526
<CGS> 20,307
<TOTAL-COSTS> 20,307
<OTHER-EXPENSES> 19,479
<LOSS-PROVISION> 219
<INTEREST-EXPENSE> 22
<INCOME-PRETAX> 1,112
<INCOME-TAX> 443
<INCOME-CONTINUING> 669
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 669
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
