UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(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, 2000
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 0-28540
VERSANT CORPORATION
(Exact name of Small Business Issuer as specified in its charter)
California 94-3079392
State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization
6539 Dumbarton Circle
Fremont, California 94555
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (510) 789-1500
Check whether the Issuer (1) 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 of common stock, no par value,
outstanding as of October 30,2000: 11,835,043
Transitional Small Business Disclosure Format (check one):
Yes No X
----- -----
<PAGE>
VERSANT CORPORATION
FORM 10-QSB
Table of Contents
Part I. Financial Information
Item 1. Financial Statements Page No.
Condensed Consolidated Balance Sheets --
September 30, 2000 and December 31, 1999 3
Condensed Consolidated Statements of Operations --
Three and Nine Months Ended September 30, 2000 and 1999 4
Condensed Consolidated Statements of Cash Flows --
Nine Months Ended September 30, 2000 and 1999 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
Part II. Other Information
Item 1. Legal Proceedings 18
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8K 18
Signature 19
2
<PAGE>
VERSANT CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
-------- --------
(UNAUDITED) *
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,092 $ 3,663
Accounts receivable, net 12,275 7,278
Other current assets 728 753
-------- --------
Total current assets 15,095 11,694
Property and equipment 14,116 13,639
Accumulated depreciation (9,611) (8,161)
-------- --------
Property and equipment, net 4,505 5,478
Other assets 36 190
Excess of cost of investment over fair value of
net assets acquired 1,514 1,879
-------- --------
Total assets $ 21,150 $ 19,241
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Line of credit and short term debt $ 118 $ 1,400
Current maturities of long-term debt 420 1,240
Current portion of capital lease obligations 62 253
Accounts payable 487 718
Accrued liabilities 3,818 3,405
Deferred revenue 3,342 3,094
-------- --------
Total current liabilities 8,247 10,110
Long-term liabilities, net of current portion:
Deferred revenue 234 416
Capital lease obligations 57 127
-------- --------
Total liabilities 8,538 10,653
Shareholders' equity:
Preferred stock 5,662 5,662
Common stock 50,972 48,528
Accumulated deficit (43,919) (45,627)
Cumulative other comprehensive income (loss) (103) 25
-------- --------
Total shareholders' equity 12,612 8,588
-------- --------
Total liabilities and shareholders' equity $ 21,150 $ 19,241
======== ========
</TABLE>
* Derived from audited financial statements
The accompanying notes are an integral part of these consolidated balance sheets
3
<PAGE>
VERSANT CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- --------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenue:
License $ 5,785 $ 4,511 $ 14,892 $ 13,149
Services 2,234 2,186 6,436 6,810
-------- -------- -------- --------
Total revenue 8,019 6,697 21,328 19,959
-------- -------- -------- --------
Cost of revenue:
License 183 142 391 608
Services 1,591 960 3,681 3,258
-------- -------- -------- --------
Total cost of revenue 1,774 1,102 4,072 3,866
-------- -------- -------- --------
Gross profit 6,245 5,595 17,256 16,093
-------- -------- -------- --------
Operating expenses:
Marketing and sales 3,099 1,951 7,574 7,507
Research and development 1,491 1,775 4,584 5,491
General and administrative 937 911 2,784 2,570
Amortization of goodwill 126 116 377 347
-------- -------- -------- --------
Total operating expenses 5,653 4,753 15,319 15,915
-------- -------- -------- --------
Income from operations 592 842 1,937 178
Other expense, net (8) (753) (176) (1,142)
-------- -------- -------- --------
Income (loss) before provision for taxes 584 89 1,761 (964)
Provision for taxes 21 23 54 32
-------- -------- -------- --------
Net income (loss) $ 563 $ 66 $ 1,707 $ (996)
======== ======== ======== ========
Basic net income (loss) per share $ 0.05 $ 0.01 $ 0.15 $ (0.10)
======== ======== ======== ========
Diluted net income (loss) per share $ 0.04 $ 0.00 $ 0.11 $ (0.10)
======== ======== ======== ========
Basic weighted average common shares
and common equivalent shares 11,516 10,174 11,210 10,152
======== ======== ======== ========
Diluted weighted average common shares
and common equivalent shares 15,203 13,550 15,311 10,152
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
VERSANT CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------
2000 1999
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income(loss) $ 1,707 $ (996)
Adjustments to reconcile net income(loss) to net
cash used in operating activities:
Depreciation and amortization 1,815 1,792
Write-Off of unamortized note discount 646
Accrued interest on Vertex note -- 299
Provision for doubtful accounts 104 85
Changes in operating assets and liabilities:
Accounts receivable (5,101) (1,691)
Other current assets 25 452
other assets 154 184
Accounts payable (231) (1,430)
Accrued liabilities 413 (1,191)
Deferred revenue 66 (38)
------- -------
Net cash used in operating activities (1,048) (1,888)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (477) (28)
------- -------
Net cash used in investing activities (477) (28)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from sale of common stock 2,444 136
Net proceeds from sale of preferred stock 2,451
Principal payments under capital lease obligations (260) (418)
Principal payments of short-term note and debt (2,102) (750)
------- -------
Net cash provided by financing activities 82 1,419
------- -------
Effect of exchange rate changes on cash (128) (17)
------- -------
NET DECREASE IN CASH AND CASH EQUIVALENTS (1,571) (514)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 3,663 3,564
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,092 $ 3,050
Non-cash financing activities:
Conversion of convertible debt to convertible preferred stock 3,847
</TABLE>
The accompanying notes are an integral part of these statements
5
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
1. BASIS OF PRESENTATION
The consolidated financial statements included herein have been prepared by
Versant Corporation ("Versant" or the "Company"), without audit, pursuant to
rules and regulations of the Securities and Exchange Commission (the "SEC").
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations. However,
the Company believes that the disclosures are adequate to make the information
presented not misleading. These financial statements and the notes thereto
should be read in conjunction with the Company's audited financial statements
included in the Company's Form 10-KSB for the year ended December 31, 1999 filed
with the SEC. The unaudited information has been prepared on the same basis as
the annual financial statements and, in the opinion of the Company's management,
reflects all normal recurring adjustments necessary for a fair presentation of
the information for the periods presented. The interim results presented herein
are not necessarily indicative of the results of operations that may be expected
for the full fiscal year ending December 31, 2000, or any other future period.
2. ORGANIZATION, OPERATIONS AND LIQUIDITY
Versant Corporation was incorporated in California in August 1988. References to
the "Company" in these Notes to Condensed Consolidated Financial Statements
refer to Versant Corporation and its subsidiaries. The Company operates in a
single industry segment and is involved in the design, development, marketing,
service and support of high-performance data management software for object
databases and middleware infrastructure technology.
The Company is subject to the risks associated with other companies in a
comparable stage of development, as well as risks specific to the Company. These
risks include, but are not limited to, limited working capital, ability to
adequately finance ongoing operations, unpredictability of revenue levels,
fluctuations in operating results, a lengthy sales cycle, customer
concentration, dependence on international operations, securities litigation,
volatility of stock price, concentration of stock ownership, competition,
dependence on successful technology development, need to protect our
intellectual property and dependence on key individuals.
To date, the Company has not achieved business volume sufficient to restore
positive cash flow on a year to date basis. The Company showed a negative cash
flow of $263,000 for the quarter ended September 30, 2000. The Company did
generate net profits of $563,000 for the third quarter and $1.7 million for the
nine-month period ended September 30, 2000, but operated at a net loss of $1.7
million and $19.9 million for the years ended December 31, 1999 and 1998,
respectively. Management anticipates funding future operations and repaying its
debt obligations from current cash resources and future cash flows from
operations. If financial results fall short of projections, additional debt or
equity may be required and the Company may need to implement further cost
controls. No assurances can be given that such efforts will be successful, if
required.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
The Company recognizes revenue in accordance with Statement of Position (SOP)
97-2, "Software Revenue Recognition". Revenue consists mainly of revenue earned
under software license agreements, maintenance agreements and consulting and
training activities.
Revenue from perpetual software license agreements is recognized upon shipment
of the software if there is no significant modification of the software,
persuasive evidence of an arrangement exists, payments are due within the
Company's payment terms and collection of the resulting receivable is probable.
If an acceptance period is required, revenue is recognized upon the earlier of
customer acceptance or the expiration of the acceptance period.
Maintenance revenue is recognized ratably over the term of the maintenance
contract. Consulting and training revenue is recognized when a purchase order or
signed term sheet/letter of intent is received and the services are performed.
Cost of license revenue consists principally of product royalty obligations,
product packaging, freight, user manuals, product media, production labor costs
and reserves for estimated bad debts.
6
<PAGE>
Cost of services revenue consists principally of personnel costs associated with
providing training, consulting, technical support and nonrecurring engineering
work paid for by customers.
Earning (Loss) Per Share
The following table presents the calculation of basic and diluted and pro forma
basic and diluted income (loss) per share (in thousands, except per share
amounts):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income(loss) $ 563 $ 66 $ 1,707 ($ 996)
Basic:
Weighted average shares of common stock outstanding 11,516 10,174 11,210 10,152
======== ======== ======== ========
Basic earnings (loss) per share $ 0.05 $ 0.01 $ 0.15 $ (0.10)
======== ======== ======== ========
Net income (loss) $ 563 $ 66 $ 1,707 ($ 996)
Diluted:
Shares used above 11,516 10,174 11,210 10,152
Weighted average common equivalent shares outstanding:
Employee stock options 277 51 324 --
Warrants 783 346 1,032 --
Preferred stock 2,627 2,979 2,745 --
-------- -------- -------- --------
Weighted average common equivalent shares outstanding: 15,203 13,550 15,311 10,152
======== ======== ======== ========
Diluted earnings (loss) per share $ 0.04 $ 0.00 $ 0.11 $ (0.10)
======== ======== ======== ========
</TABLE>
Diluted earnings per share was the same as basic earnings per share for the nine
months ended September 30, 1999 since the effect of any potentially dilutive
security is excluded, as they are anti-dilutive as a result of the Company's net
loss. The total number of shares excluded from the diluted loss per share
calculation relating to these securities was 4,499,738 shares.
4. COMPREHENSIVE INCOME (LOSS)
Comprehensive income includes foreign currency translation gains and losses and
other unrealized gains and losses that have been previously excluded from net
income and reflected instead in equity.
A summary of comprehensive income (loss) follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -------------------
2000 1999 2000 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income(loss) $ 563 $ 66 $ 1,707 ($ 996)
Foreign currency translation adjustment (103) (15) (128) (17)
------- ------- ------- -------
Comprehensive income(loss) $ 460 $ 51 $ 1,579 ($1,013)
======= ======= ======= =======
</TABLE>
7
<PAGE>
5. SEGMENT INFORMATION
The Company is organized geographically and by line of business. The Company has
three major lines of business operating segments: license, support, and
consulting/training. While the Executive Management Committee evaluates results
in a number of different ways, the line of business management structure is the
primary basis for which it assesses financial performance and allocates
resources.
The license line of the business is represented by the Object Database
Management System (ODBMS), the Versant Enterprise Container (VEC) and peripheral
products that include Versant Asynchronous Replication, Fault Tolerance Server
and Versant XML toolkit. The ODBMS enables users to create, store, retrieve, and
modify the various types of data stored in a computer system. VEC enables users
to also store, retrieve and modify object data within an application server
environment. The support line of business provides customers with a wide range
of support services that include on-site support, telephone or Internet access
to support personnel, as well as software upgrades. The consulting and training
line of business provides customers with a wide range of consulting and training
services to assist the customer in evaluating, installing and customizing the
ODBMS or VEC and a dedicated practice to provide IBM WebSphere consulting
services as part of a multi-year agreement with IBM Software Group where Versant
serves as a sub-contractor to IBM.
The accounting policies of the line of business operating segments are the same
as those described in the summary of significant accounting policies.
The Company does not track assets by operating segments. Consequently, it is not
practicable to show assets by operating segment.
The table below presents a summary of operating segments (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------- ---------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues from Unaffiliated Customers
License $ 5,785 $ 4,511 $ 14,892 $ 13,149
Support 1,352 1,329 4,056 4,190
Consulting & Training 882 857 2,380 2,620
-------- -------- -------- --------
Total Revenue $ 8,019 $ 6,697 $ 21,328 $ 19,959
Distribution Margin
License $ 5,602 $ 4,369 $ 14,501 $ 12,541
Support 962 942 2,847 3,052
Consulting & Training (319) 284 (92) 500
-------- -------- -------- --------
Total Distribution Margin 6,245 5,595 17,256 16,093
Profit Reconciliation:
Operating Expenses 5,653 4,753 15,319 15,915
Other Income (Expense), net (8) (753) (176) (1,142)
-------- -------- -------- --------
Income (Loss) Before Provision for Income Taxes $ 584 $ 89 $ 1,761 ($ 964)
======== ======== ======== ========
</TABLE>
8
<PAGE>
The table below presents the Company's revenues by legal subsidiary (in
thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------- -----------------
2000 1999 2000 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Total Revenues Attributable To:
United States/Canada $ 4,542 $ 4,149 $12,824 $10,614
Germany 595 539 1,884 3,150
France 1,216 1,448 2,243 2,588
United Kingdom 1,407 299 3,589 2,790
Australia/Asia Pacific 259 262 788 817
------- ------- ------- -------
Total $ 8,019 $ 6,697 $21,328 $19,959
======= ======= ======= =======
</TABLE>
6. RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities", which requires
companies to value derivative financial instruments, including those used for
hedging foreign currency exposures, at current market value with the impact of
any change in market value being charged against earnings in each period. In
June 1999, the Financial Accounting Standards Board issued SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of SFAS No. 133" to defer the effective date of SFAS No. 133
until fiscal years beginning after June 15, 2000. To date, the Company has not
entered into any derivative financial instrument contracts. Thus the Company
anticipates that SFAS No. 133 will not have a material impact on its
consolidated financial statements.
In December 1999, the SEC issued Staff Accounting Bulletin ("SAB") No. 101,
"Revenue Recognition in Financial Statements." SAB No. 101 and related
interpretations summarize the SEC's view in applying generally accepted
accounting principles to selected revenue recognition issues. We are required to
apply the guidance in SAB No. 101 to our financial statements no later than our
fourth quarter of fiscal 2000. We currently are reviewing the impact of SAB No.
101 on our revenue recognition policy and the related impact on our consolidated
financial statements. At this time, we do not believe SAB No. 101 will have a
material impact on our financial position or results of operations.
In March 2000, the FASB issued FASB Interpretation No. 44 (FIN 44), "Accounting
for Certain Transactions involving Stock Compensation - an interpretation of APB
Opinion No. 25". FIN 44 is effective July 1, 2000. The interpretation clarifies
the application of APB Opinion No. 25 for certain issues, specifically, (a) the
definition of an employee, (b) the criteria for determining whether a plan
qualifies as a non-compensatory plan, (c) the accounting consequence of various
modifications to the terms of a previously fixed stock option or award, and (d)
the accounting for an exchange or stock compensation awards in a business
combination. The adoption of FIN 44 did not have a material impact on our
financial position or the results of our operations.
7. LINE OF CREDIT
The Company maintains a revolving credit line with a bank that expires on June
1, 2001. The maximum amount that can be borrowed under the revolving credit line
is $5.0 million. As of September 30, 2000 zero borrowings were outstanding.
Borrowings under the revolving credit line are limited to 80% of eligible
accounts receivable and are secured by substantially all of the Company's
assets. These borrowings bear interest at the bank's base lending rate (9.50%,
at September 30, 2000) plus 2.0%. The line of credit contains certain financial
covenants and also prohibits cash dividends and mergers and acquisitions without
the bank's prior approval. In March 2000 the Company negotiated new covenants
for the year ending December 31, 2000, based on the Company's forecasted
performance in 2000. Certain of these covenants, with which the Company was not
in compliance as of September 30, 2000 have been waived through such date.
On March 19, 1998, the Company converted an interest only, variable rate note to
a variable rate, term loan with principal and interest payable over 36 months.
The term loan covenants and interest rate were amended in conjunction with the
new line of credit agreement in March 1998. Borrowings under the loan are
secured by all assets acquired using the proceeds of the loan, which have been
used for the acquisition of equipment and leasehold improvements. The loan bears
interest at the bank's base lending rate (9.50%, at September 30, 2000) plus
2.5%. The loan contains
9
<PAGE>
certain financial covenants and also prohibits cash dividends and mergers and
acquisitions without the bank's prior approval. In March 2000 the Company
negotiated new covenants for the year ending December 31, 2000, based on the
Company's forecasted performance in 2000. Certain of these covenants, with which
the Company was not in compliance as of September 30, 2000, have been waived
through such date.
8. LEGAL PROCEEDINGS
The Company and certain of its present and former officers and directors were
named as defendants in four class action lawsuits filed in the United States
District Court for the Northern District of California, on January 26, 1998,
February 5, 1998, March 11, 1998 and March 18, 1998, respectively. On June 19,
1998, a Consolidated Amended Complaint was filed in the above-mentioned court,
by the court-appointed lead Plaintiff. On May 22, 2000, the Court granted
defendants' motion to dismiss the Consolidated Amended Complaint, permitting
plaintiffs leave to amend. Plaintiffs filed a Second Amended Complaint on July
7, 2000. Like its predecessors, the Second Amended Complaint alleged violations
of Sections 10(b) and 20(a) of the Securities Exchange Act, and Securities and
Exchange Commission Rule 10b-5 promulgated under the Securities Exchange Act, in
connection with public statements about the Company and its financial
performance. The Second Amended Complaint seeks an unspecified amount of
damages. The Company vigorously denies the plaintiffs' claims and has filed a
motion to dismiss the Second Amended Complaint. Securities litigation can be
expensive to defend, consume significant amounts of management time and result
in adverse judgments or settlements that could have a material adverse effect on
the Company's results of operations and financial condition.
On January 7, 2000 Versant gave 30 days written notice to Buzzeo, Inc., a
customer of Versant, informing Buzzeo Inc. that it was in default of the
Promissory Note in favor of Versant dated January 13, 1999 and the Value Added
Reseller Agreement dated June 27, 1997. Versant also demanded final payment in
the amount of $762,966.55 and informed Buzzeo Inc. of Versant's intention to
pursue legal action in the event of non-payment. On February 2, 2000, Buzzeo,
Inc. filed a Complaint in the United States District Court for the District of
Arizona, against Versant Corporation arising from the Value Added Reseller
Agreement dated June 27, 1997. On February 24, 2000, Versant filed a Motion to
Dismiss. On February 28, 2000, Versant filed an Answer and Counterclaim. On
March 28, 2000, Versant filed a motion for Summary Judgment. On August 16, 2000
the court denied the Motion to Dismiss finding the argument more appropriately
addressed in the context of the Motion for Summary Judgment. The plaintiff's
claim seeks damages based on an alleged breach of contract, implied covenant and
warranty under the Agreement plus interest and costs. The company has
counter-claimed plaintiff, seeking payment under the Agreement plus interest and
costs. The Company vigorously denies the plaintiffs' claims and seeks summary
judgement dismissing the claim.
10
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
This Management's Discussion and Analysis of Financial Condition and Results of
Operations includes a number of forward-looking statements within the meaning of
the Securities Exchange Act which reflect our current views with respect to
future events and financial performance. We have identified, with a preceding
asterisk, various sentences within this Form 10-QSB which contain such
forward-looking statements and words such as "believe," "anticipate," "expect,"
"intend" and similar expressions are also intended to identify forward looking
statements, but these are not the exclusive means of identifying such
statements. The forward looking statements included in this Form 10-QSB involve
numerous risks and uncertainties which are described throughout this Form
10-QSB, including under Footnote 2 to the financial statements and under
"Revenues" and "Risk Factors" within this Item 2. Please also refer to our
December 31, 1999 10KSB on file with the Securities and Exchange Commission,
especially the section labeled "Risk Factors," for additional risks and
uncertainties related to our business. The actual results that we achieve may
differ materially from any forward-looking statements due to such risks and
uncertainties. We do not undertake any obligation to update these forward
looking statements.
We were incorporated in August 1988 and commenced commercial shipments of our
principle products the Versant ODBMS and Versant Enterprise Container ("VEC"),
in 1991 and 1999 respectively. In 2000, Versant began an engineering effort to
add significant new functionality to the Versant Enterprise Container and the
resultant product suite is called Versant enJin. Versant enJin serves the
e-business market by providing a transaction caching platform that integrates
with leading application servers to provide object persistence, synchronization
to a relational database and fault tolerance capabilities. *We expect to ship an
early release of the enJin product by the end of 2000. *We expect that most of
our future revenue will be derived from Versant enJin and Versant ODBMS (renamed
Versant Developer Suite), including sales of development, deployment and project
licenses, peripheral products and related maintenance, training and consulting
services.
Through 2000, our revenues have been primarily derived from:
1) sales of development, deployment and project licenses for the
Versant ODBMS and VEC
2) sales of peripheral products for the Versant ODBMS and VEC
3) related maintenance and support, training, consulting and
nonrecurring engineering fees received in connection with providing
services associated with the Versant ODBMS and VEC
4) resale of licenses, maintenance, training and consulting for
third-party products that complement the Versant ODBMS and VEC
Our emphasis on electronic business or "e-business" infrastructure continues to
yield benefits, with a substantial portion, approximately $3.5 million, of third
quarter's 2000 revenue and over $7.5 million of the first nine months of 2000
revenue being generated in this area. *We believe the rapid adoption of
application servers for e-business applications has been demonstrated and
represents a significant new growth market for Versant.
During the third quarter we had three transactions in the $1 million range, with
the remaining revenue coming from smaller transactions. Two of the large
transactions were in the e-business area.
Worldwide headcount as of September 30, 2000 was 132 compared to the September
30, 1999 total of 113.
11
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth the percentages that income statement items
compare to total revenue for the three and nine months ended September 30, 2000
and 1999:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------- --------------
2000 1999 2000 1999
----- ----- ----- -----
<S> <C> <C> <C> <C>
Revenue:
License 72.1% 67.4% 69.8% 65.9%
Services 27.9% 32.6% 30.2% 34.1%
----- ----- ----- -----
Total revenue 100.0% 100.0% 100.0% 100.0%
Cost of revenue:
License 2.3% 2.1% 1.8% 3.1%
Services 19.8% 14.4% 17.3% 16.3%
---- ---- ---- ----
Total cost of revenue 22.1% 16.5% 19.1% 19.4%
Gross profit 77.9% 83.5% 80.9% 80.6%
Operating expenses:
Marketing and sales 38.6% 29.1% 35.5% 37.6%
Research and development 18.6% 26.5% 21.5% 27.5%
General and administrative 11.7% 13.6% 13.1% 12.9%
Amortization of goodwill 1.6% 1.7% 1.8% 1.7%
----- ----- ----- -----
Total operating expenses 70.5% 71.0% 71.8% 79.7%
Income from operations 7.4% 12.6% 9.1% 0.9%
Other expense, net (0.1%) (11.3%) (0.8%) (5.7%)
----- ----- ----- -----
Income (loss) before taxes 7.3% 1.3% 8.3% (4.8%)
Provision for taxes 0.3% .3% 0.3% 0.2%
----- ----- ----- -----
Net income (loss) 7.0% 1.0% 8.0% (5.0%)
===== ===== ===== =====
</TABLE>
REVENUE
Total consolidated revenue increased 19.7% from $6.7 million in the third
quarter of 1999 to $8.0 million in the third quarter of 2000. This increase in
total revenue was primarily due to an increase in license revenues. Total
consolidated revenue increased 6.9% from $20.0 million for the nine-month period
ended September 30, 1999 to $21.3 million for the corresponding period ended
September 30, 2000. This increase in total revenue was due to a 13.3% increase
in license revenues offset by a 5.5% decline in services revenue.
License revenue
License revenue increased 28.2% from $4.5 million in the third quarter of 1999
to $5.8 million in the third quarter of 2000 and increased 13.3% to $14.9
million for the nine-month period ended September 30, 2000, from $13.1 million
for the corresponding period in 1999. License revenue increased in the third
quarter of 2000 to 72.1% of total sales compared to 67.4% in the third quarter
of 1999 and increased for the nine-month period ended September 30, 2000 to
69.8% of total sales compared to 65.9% for the corresponding period in 1999. The
increase in third quarter license revenue reflects stronger performance in
Europe as well as increased e-business revenues versus the same period last
year. The increase for the nine-month period originated in the United
States/Canada offset by decreases in Europe and Australia/Asia Pacific.
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Services revenue
Services revenue remained flat at $2.2 million for the third quarters of 2000
and 1999. Services revenue decreased 5.5% to $6.4 million, for the nine-month
period ended September 30, 2000, from $6.8 million in the corresponding period
in 1999. This decrease was due to significant first quarter decreases in both
maintenance and consulting revenue that were offset in part by favorable second
and third quarter performances in these areas on a year over year comparison
basis.
International revenue
International revenue increased 36.5% to $3.5 million in the third quarter of
2000 compared to $2.5 million in the third quarter of 1999. International
revenue decreased 8.9% to $8.5 million, for the nine-month period ended
September 30, 2000, from $9.3 million in the corresponding period in 1999. The
increase in international revenue during the third quarter of 2000 resulted
primarily from higher license sales in Europe. The decrease for the nine-month
period ended September 30, 2000 was primarily due to the shortfall in services
revenue from Europe stemming from reduced consulting opportunities in the first
quarter and secondarily due to lower license revenues from Europe. International
revenue as a percentage of total revenue increased for the third quarter 2000 to
43% from 38% in 1999 but decreased to 40% for the nine-month period ended
September 30, 2000 from 47% for the corresponding period in 1999.
COST OF REVENUE AND GROSS PROFIT
Total cost of revenue increased 61.0% to $1.8 million in the third quarter of
2000 from $1.1 million in the third quarter of 1999. Total cost of revenue
increased 5.3% to $4.1 million for the nine-month period ended September 30,
2000, from $3.9 million in the corresponding period in 1999. These increases
were primarily the result of increased expenses for consulting services. Total
cost of revenue as a percentage of total revenues increased to 22.1% in the
third quarter of 2000 versus 16.5% in 1999 but decreased to 19.1% for the
nine-month period ended September 30, 2000 from 19.4% in the corresponding
period in 1999.
Cost of license revenue
Cost of license revenue consists primarily of product royalty obligations
incurred by us when we sublicense tools provided by third parties, royalty
obligations incurred by us under porting services agreements, user manuals,
product media, product packaging, adjustments to bad debt reserves, and
secondarily of production labor costs and freight. Cost of license revenue
increased 28.9% to $183,000 in the third quarter of 2000 compared to $142,000 in
the third quarter of 1999 but remained consistent when expressed as a percentage
of revenues at 3.2% and 3.1% for the third quarters of 2000 and 1999
respectively. Cost of license revenue decreased 35.7% to $391,000 for the
nine-month period ended September 30, 2000, from $608,000 for the corresponding
period in 1999. This decrease was the result of higher than normal adjustments
for bad debts and product royalty obligations in the first quarter of 1999.
Cost of services revenue
Cost of services revenue consists principally of personnel costs associated with
providing consulting, training, technical support and technical support work
paid for by customers. Cost of services revenue increased 65.7% to $1.6 million
in the third quarter of 2000 compared to $960,000 in the third quarter of 1999.
Cost of services revenue increased 13.0% to $3.7 million for the nine-month
period ended September 30, 2000, from $3.3 million for the corresponding period
in 1999. These increases were attributable to increased personnel costs due to
the Company's decision to expand the consulting organization. Cost of services
revenue as a percentage of services revenue increased to 71.2% for the third
quarter 2000 and increased to 57.2% for the nine-month period ended September
30, 2000 compared to 43.9% and 47.8% respectively, for the corresponding periods
in 1999. These costs are increasing as a percentage of revenue due to the impact
of hiring and training new consultants prior to their being able to generate
consulting revenues. *We expect to increase our cost of service revenue in the
fourth quarter of 2000 and through the first half of 2001, both in absolute
dollars as well as in terms of percentage of service revenues. *We believe that
expansion of our consulting organization will position us to support our
customers' time-to-market initiatives and result in increased consulting
revenues as well as seeding potential license sales.
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MARKETING AND SALES EXPENSES
Marketing and sales expenses consist primarily of marketing and sales personnel
costs, including sales commissions, recruiting, travel, sales offices, product
descriptive literature, seminars, trade shows, product management, depreciation,
occupancy expense, lead generation and mailings. Marketing and sales expenses
increased 58.8% to $3.1 million in the third quarter of 2000 compared to $2.0
million in the third quarter of 1999. Marketing and sales expenses increased 1%
to $7.6 million for the nine-month period ended September 30, 2000, from $7.5
million for the corresponding period in 1999. These increases were attributable
to increased expenses associated with marketing programs, facility operations,
sales commissions due to higher sales volumes and employee recruiting. *We
expect marketing and sales expenses to increase in the fourth quarter of 2000,
compared to the current quarter, in absolute dollar terms but remain constant as
a percent of total revenues, due to selective headcount additions and increased
efforts to market our products to new "e-business" markets. *However, if we
increase our marketing and sales expenditures without obtaining corresponding
increases in revenue, marketing and sales expenditures as a percentage of
revenue could increase, and our results of operations would be adversely
affected. As a percentage of total revenues marketing and sales expenses
increased to 38.6% for the third quarter 2000 versus 29.1% for the third quarter
1999 primarily due to marketing activities in support of our e-business
initiatives offset in part by higher sales volumes in third quarter 2000 versus
1999. As a percentage of total revenue, marketing and sales expenditures in the
nine-month period ended September 30, 2000 decreased to 35.5% of revenue
compared to 37.6% of revenue for the corresponding period in 1999 due primarily
to higher license revenues in 2000 versus 1999 offset in part by increased
marketing program expense in 2000.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses consist primarily of salaries, other
personnel-related expenses, depreciation, the expensing of development
equipment, occupancy expenses, travel and supplies. Research and development
expenses decreased 16.0% to $1.5 million in the third quarter of 2000 compared
to $1.8 million in the third quarter of 1999 and decreased 16.5% to $4.6 million
for the nine-month period ended September 30, 2000 compared to $5.5 million for
the corresponding period in 1999. The decrease for both periods primarily
resulted from reduced compensation and other personnel expenses, due to
selective replacement of manpower turnover and decreases in Soft Mountain
headcount and engineering activity. *We believe that a significant level of
research and development expenditures is required to remain competitive and
complete products under development. *Accordingly, we anticipate that we will
continue to devote substantial resources to research and development in order to
design, produce and increase the quality, competitiveness and acceptance of our
products. *Due to our e-business efforts to bring forward a new product suite,
Versant enJin, as well as ongoing improvements in our ODBMS (to be renamed
Versant Developer Suite), we expect research and development expenses to be
higher in the fourth quarter of 2000, compared to the current quarter results,
in absolute dollars and as a percentage of revenues. *However, if we increase
our research and development efforts without corresponding increases in revenue,
our results of operations will be adversely affected. To date, all research and
development expenditures have been expensed as incurred. As a percent of total
revenues, research and development costs decreased to 18.6% for the third
quarter 2000 and 21.5% for the nine-month period ended September 30, 2000
compared to 26.5% and 27.5% respectively, for the corresponding periods in 1999.
The decrease as a percentage of revenues was primarily due to higher revenues
for the third quarter comparisons and due to lower expenses when comparing the
nine-month periods.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses consist primarily of salaries, recruiting
and other personnel-related expenses for our accounting, human resources,
management information systems, legal and general management functions. In
addition, general and administrative expenses include outside legal, audit and
public reporting costs. General and administrative expenses increased 2.9% to
$937,000 in the third quarter of 2000 compared to $911,000 in the third quarter
of 1999 and increased 8.3% to $2.8 million for the nine-month period ended
September 30, 2000, from $2.6 million for the corresponding period in 1999.
These increases were primarily attributable to increased compensation expenses,
and Nasdaq re-listing fees (from SmallCap to National Market), and secondarily
to increased fees associated with regulatory filings. *We anticipate that
general and administrative expenses will be at similar levels in absolute dollar
terms but slightly decrease as a percentage of revenues in the fourth quarter of
2000, compared to the current quarter results. As a percentage of total
revenues, general and administrative costs decreased to 11.7% for the third
quarter 2000 versus 13.6% for the third quarter 1999. The decrease is
attributable to higher revenues in third quarter 2000 versus the same period
last year while for the nine-month period ended September 30, 2000 general and
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administrative costs increased to 13.1% of revenues versus 12.9% of revenues for
the same period in 1999 due mainly to higher expense.
AMORTIZATION OF GOODWILL
The acquisition of Versant Europe in March 1997 resulted in our recording an
intangible asset representing the cost in excess of fair value of the net assets
acquired in the amount of $3.3 million, which is being amortized over a
seven-year period. Additionally in 1998 we wrote down the Versant Europe
goodwill by $1.6 million due to our revised estimated discounted cash flow over
the next five years. During quarters ended September 30, 2000 and 1999, we
amortized $47,100 for each quarter and $141,300 for the nine-month period ended
September 30, 2000 and 1999, respectively. *We expect to amortize approximately
$47,100 of this remaining goodwill amount during the balance of 2000.
The acquisition of Soft Mountain in September 1998 resulted in our writing off
$528,000 of in-process research and development expenses associated with the
purchased software and recording an intangible asset representing the cost in
excess of fair value of the net assets acquired in the amount of $1.2 million,
which is being amortized over a five-year period. In November 1999, the Company
issued an additional 30,000 shares of common stock, to the original shareholders
of Soft Mountain in connection with the acquisition. This additional cost was
added to the original goodwill amount and is amortized equally over the
remaining goodwill period. The addition to goodwill was valued at $149,000 and
will be amortized at a rate of approximately $9,900 per quarter. During quarters
ended September 30, 2000 and 1999, we amortized $71,100 and $61,200 respectively
and for the nine-month period ended September 30, 2000 and 1999, we amortized
$213,200 and $122,400, respectively. *We expect to amortize approximately
$71,100 of this remaining goodwill amount during the balance of 2000.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents decreased by $1.6 million from $3.7 million at
December 31, 1999 to $2.1 million at September 30, 2000. This decrease due to
increases in accounts receivable which resulted from providing limited extended
payment terms to certain qualified customers.
For the nine-month period ended September 30, 2000, our operating activities
used $1,048,000 of cash and cash equivalents primarily as a result of the
aforementioned increase in accounts receivable, offset in part by our net income
for the period, and depreciation and amortization costs. Investing activities
used $477,000 for the purchase of capital equipment needed for operational
activities. Financing activities generated net cash of $82,000 due to the sale
of common stock through the Company's employee stock purchase and stock
incentive plans but offset by the pay down of our revolving line of credit and
regular principal payments on our bank and lease financing arrangements.
Total assets increased by 9.9% from $19.2 million at December 31, 1999 to $21.1
million at September 30, 2000. The increase in total assets was primarily due to
the significant increase in accounts receivable, and was offset by a decrease in
other current and long term assets and net property and equipment balances as
depreciation expense exceeded the additional assets added in the first nine
months of 2000.
Total liabilities decreased 19.9% from $10.7 million at December 31, 1999 to
$8.5 million at September 30, 2000. This decrease was primarily due to the pay
down of our short term revolving line of credit, reduced bank and lease debt,
and reduced accounts payable, offset partially by increases in deferred revenue
and the increase in accrued liabilities.
Total shareholders' equity increased 46.9% from $8.6 million at December 31,
1999 to $12.6 million at September 30, 2000. This increase primarily results
from the sale of common stock to our employees and the positive year to date net
income.
At September 30, 2000, we had $2.1 million in cash and cash equivalents and
positive working capital of approximately $6.8 million. The Company maintains a
revolving credit line with a bank that expires on June 1, 2001. The maximum
amount that can be borrowed under the revolving credit line is $5.0 million. As
of September 30, 2000 zero borrowings were outstanding. Borrowings under the
revolving credit line are limited to 80% of eligible accounts receivable and are
secured by substantially all of the Company's assets. These borrowings bear
interest at the bank's base lending rate (9.50%, at September 30, 2000) plus
2.0%. The line of credit contains certain financial covenants and also prohibits
cash dividends and mergers and acquisitions without the bank's prior approval.
In March 2000 the Company negotiated new covenants for the year ending December
31, 2000, based on the Company's forecasted performance in 2000.
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Certain of these covenants, with which the Company was not in compliance as of
September 30, 2000 have been waived through such date.
On March 19, 1998, the Company converted an interest only, variable rate note to
a variable rate, term loan with principal and interest payable over 36 months.
The term loan covenants and interest rate were amended in conjunction with the
new line of credit agreement in March 1998. Borrowings under the loan are
secured by all assets acquired using the proceeds of the loan, which have been
used for the acquisition of equipment and leasehold improvements. The loan bears
interest at the bank's base lending rate (9.50%, at September 30, 2000) plus
2.5%. The loan contains certain financial covenants and also prohibits cash
dividends and mergers and acquisitions without the bank's prior approval. In
March 2000 the Company negotiated new covenants for the year ending December 31,
2000, based on the Company's forecasted performance in 2000. Certain of these
covenants, with which the Company was not in compliance as of September 30,
2000, have been waived through such date. To date, we have not achieved business
volume sufficient to restore a consistent positive cash flow. Although we
generated a profit in the nine months ended September 30, 2000, we operated at a
net loss of $1.7 million and $19.9 million for the years ended December 31, 1999
and 1998. *If cash available to us is insufficient to satisfy our liquidity
requirements, we will seek additional debt or equity financing. Such financing
may not be available on terms acceptable to us, if at all. The sale of
additional equity or convertible debt securities would result in dilution to our
shareholders. *A portion of our cash may be used to acquire or invest in
complementary businesses or products or to obtain the right to use complementary
technologies. From time to time, we evaluate potential acquisitions of such
businesses, products and technologies. The actual cash resources required to
successfully implement our business plan will depend upon numerous factors.
RISK FACTORS
This Form 10-QSB contains forward-looking statements that involve risks and
uncertainties, including, but not limited to, those set forth below, and those
set forth in our Form 10-KSB for the year ended December 31, 1999 that could
cause actual results to differ materially from those in the forward-looking
statements. The matters set forth below should be carefully considered when
evaluating our business and prospects.
RISKS RELATED TO OUR BUSINESS
WE HAVE LIMITED WORKING CAPITAL. At September 30, 2000, we had $6.8 million of
working capital. To date we have not achieved positive cash flow on a sustained
basis. As our revenue is unpredictable, and a significant portion of our
expenses are fixed, a revenue shortfall could deplete our limited financial
resources. We are also providing limited extended payment terms to certain
qualified customers, which could adversely affect our liquidity, especially if
we experience any difficulty in collections. A liquidity shortfall could require
us to substantially reduce operations or to raise additional funds through debt
or equity financings. There can be no assurance any equity or debt funding would
be available to us on favorable terms, if at all. The sale of additional equity
or convertible debt securities would result in dilution to our shareholders.
UNPREDICTABILITY OF REVENUE; OUR STOCK PRICE IS VOLATILE. Our revenue, operating
results and stock price have been and may continue to be subject to significant
volatility, particularly on a quarterly basis. We have previously experienced
significant shortfalls in revenue and earnings from levels expected by
securities analysts and investors, which has had an immediate and significant
adverse effect on the trading price of our common stock. This may occur again in
the future. Additionally, as a significant portion of our revenue often occurs
late in the quarter, we may not learn of revenue shortfalls until late in the
quarter, which could result in an even more immediate and adverse effect on the
trading price of our common stock.
STOCK OWNERSHIP HAS BECOME MORE CONCENTRATED; SUBSTANTIAL SHARES ELIGIBLE FOR
ISSUANCE AND SALE TO PUBLIC. As a result of the Vertex note conversion and
equity financing in July 1999, ownership of our equity has become more
concentrated. Based on Vertex's filings with the SEC and assuming, as of
September 30, 2000, 15,813,253shares outstanding (assuming conversion of all
outstanding preferred stock and exercise of all warrants outstanding), Vertex
and its affiliates would own approximately 25.3% of our common stock if it
converted all of its Preferred Stock and exercised all of its warrants. The
Company has registered 5,839,091 shares issuable upon conversion/exercise of the
outstanding preferred stock and warrants. The issuance of such shares could
result in the dilution of other shareholders, and the sale of such shares could
depress the market price of our stock.
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WE DEPEND ON OUR PERSONNEL FOR WHOM COMPETITION IS INTENSE. Our future
performance depends in significant part upon the continued service of our key
technical, sales and senior management personnel, especially our President and
CEO, Nick Ordon. The loss of the services of key employees could have a material
adverse effect on our business. Our future success also depends on our
continuing ability to attract, train and motivate highly qualified technical,
sales and managerial personnel. Competition for such personnel is intense,
especially in Silicon Valley where our headquarters are located, and we may not
be able to attract, train and motivate such personnel.
Please refer to our December 31, 1999 10KSB, on file with the SEC, section
labeled "Risk Factors" for additional risk factors applicable to us.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company and certain of its present and former officers and directors were
named as defendants in four class action lawsuits filed in the United States
District Court for the Northern District of California, on January 26, 1998,
February 5, 1998, March 11, 1998 and March 18, 1998, respectively. On June 19,
1998, a Consolidated Amended Complaint was filed in the above-mentioned court,
by the court-appointed lead Plaintiff. On May 22, 2000, the Court granted
defendants' motion to dismiss the Consolidated Amended Complaint, permitting
plaintiffs leave to amend. Plaintiffs filed a Second Amended Complaint on July
7, 2000. Like its predecessors, the Second Amended Complaint alleged violations
of Sections 10(b) and 20(a) of the Securities Exchange Act, and Securities and
Exchange Commission Rule 10b-5 promulgated under the Securities Exchange Act, in
connection with public statements about the Company and its financial
performance. The Second Amended Complaint seeks an unspecified amount of
damages. The Company vigorously denies the plaintiffs' claims and has filed a
motion to dismiss the Second Amended Complaint. Securities litigation can be
expensive to defend, consume significant amounts of management time and result
in adverse judgments or settlements that could have a material adverse effect on
the Company's results of operations and financial condition.
On January 7, 2000 Versant gave 30 days written notice to Buzzeo, Inc., a
customer of Versant, informing Buzzeo Inc. that it was in default of the
Promissory Note in favor of Versant dated January 13, 1999 and the Value Added
Reseller Agreement dated June 27, 1997. Versant also demanded final payment in
the amount of $762,966.55 and informed Buzzeo Inc. of Versant's intention to
pursue legal action in the event of non-payment. On February 2, 2000, Buzzeo,
Inc. filed a Complaint in the United States District Court for the District of
Arizona, against Versant Corporation arising from the Value Added Reseller
Agreement dated June 27, 1997. On February 24, 2000, Versant filed a Motion to
Dismiss. On February 28, 2000, Versant filed an Answer and Counterclaim. On
March 28, 2000, Versant filed a motion for Summary Judgment. On August 16, 2000
the court denied the Motion to Dismiss finding the argument more appropriately
addressed in the context of the Motion for Summary Judgment. The plaintiff's
claim seeks damages based on an alleged breach of contract, implied covenant and
warranty under the Agreement plus interest and costs. The company has
counter-claimed plaintiff, seeking payment under the Agreement plus interest and
costs. The Company vigorously denies the plaintiffs' claims and seeks summary
judgement dismissing the claim.
ITEM 5. OTHER INFORMATION
On October 18, 2000, Shyam Rangole was elected to our Board of Directors. In
connection with such election, and the appointment of one of our current
directors, William Shellooe, to the position of Senior Vice President Worldwide
Field Operations, we changed the composition of our audit and compensation
committees. The new members of our audit committee are David Banks, Hank
Delavati and Shyam Rangole, and the new members of our compensation committee
are David Banks and Hank Delavati.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8K
(a)
EXHIBIT NO. EXHIBIT TITLE
----------- -------------
27.01 Financial Data Schedule
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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.
VERSANT CORPORATION
DATE: NOVEMBER 13, 2000 /S/ LEE MCGRATH
---------------------- -----------------------------------
Lee McGrath
Vice President
Finance and Administration.
Chief Financial Officer, Treasurer and Secretary
(Duly Authorized Officer and Principal
Financial Officer)
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EXHIBIT INDEX
EXHIBIT EXHIBIT TITLE
NUMBER
27.01 -- Financial Data Schedule
20
