==========================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
for the quarterly period ended January 31, 1998
Commission File Number 0-19558
CENTIGRAM COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 94-2418021
(STATE OF INCORPORATION) (I.R.S. EMPLOYER
IDENTIFICATION NUMBER)
91 East Tasman Drive
San Jose, California 95134
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
Registrant's telephone number, including area code: (408) 944-0250
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 outstanding shares of the Registrant's Common Stock as of
February 28, 1998 was 7,171,000.
==========================================================================
<PAGE>
Part 1. Financial Information
Item 1. Financial Statements
Centigram Communications Corporation
Consolidated Balance Sheets
(In thousands, except share and per share data)
January 31, November 1,
1998 1997
----------- -----------
(Unaudited) (Note)
ASSETS
Current assets:
Cash and cash equivalents $25,262 $19,791
Short-term investments 29,843 32,262
Trade receivables, net 15,463 21,637
Inventories 8,803 9,060
Other current assets 2,084 2,370
----------- -----------
Total current assets 81,455 85,120
Property and equipment, net 11,465 12,893
Intangible assets, net 1,401 1,468
Deposits and other assets 316 439
----------- -----------
$94,637 $99,920
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $7,497 $6,925
Accrued compensation 3,872 5,141
Accrued expenses and other liabilities 4,770 3,991
Warranty and retrofit reserves 2,204 2,161
Current portion of capital lease obligations 38 78
----------- -----------
Total current liabilities 18,381 18,296
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.001 par value, 1,000,000
authorized; none outstanding -- --
Common stock, $.001 par value, 25,000,000
authorized; 7,171,000 and 7,110,000
outstanding and capital in excess of
par value 91,011 90,724
Treasury stock, at cost (2,159) (2,427)
Accumulated deficit (12,683) (6,670)
Unrealized gain on investments 151 68
Cumulative translation adjustments (64) (71)
----------- -----------
Total stockholders' equity 76,256 81,624
----------- -----------
$94,637 $99,920
=========== ===========
Note: The balance sheet at November 1, 1997 has been derived from the
audited financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. See accompanying notes.
<PAGE>
Centigram Communications Corporation
Consolidated Statements of Operations
(In thousands, except per share data - unaudited)
<TABLE>
<CAPTION>
Quarter Ended
----------------------
January 31, February 1,
1998 1997
---------- ----------
<S> <C> <C>
Net revenue $18,158 $27,913
Cost and expenses:
Costs of goods sold 9,071 11,343
Research and development 4,972 5,693
Selling, general and administrative 10,741 10,618
---------- ----------
24,784 27,654
---------- ----------
Operating income (loss) (6,626) 259
Other income and expense, net 723 497
---------- ----------
Income (loss) before income taxes (5,903) 756
Provision for income taxes 75 76
---------- ----------
Net income (loss) ($5,978) $680
========== ==========
Net income (loss) per share:
Basic ($0.85) $0.10
========== ==========
Diluted ($0.85) $0.10
========== ==========
Common and common equivalent
shares used in computing per
share amounts:
Basic 7,016 6,959
========== ==========
Diluted 7,016 6,986
========== ==========
</TABLE>
See accompanying notes.
<PAGE>
Centigram Communications Corporation
Consolidated Statements of Cash Flows
(In thousands - unaudited)
<TABLE>
<CAPTION>
Quarter Ended
----------------------
January 31, February 1,
1998 1997
---------- ----------
<S> <C> <C>
Cash and equivalents, beginning of period $19,791 $12,668
Cash flows from operations:
Net income (loss) (5,978) 680
Depreciation and amortization 2,174 1,987
Trade receivables 6,174 (1,076)
Inventories 257 (17)
Other assets 409 (57)
Accounts payable 572 (1,401)
Accrued expenses and other liabilities (447) 151
---------- ----------
3,161 267
---------- ----------
Cash flows from investing:
Purchase of short-term investments (8,320) (15,793)
Proceeds from sales and maturities of
short-term investments 10,822 18,155
Purchase of property and equipment (672) (1,982)
---------- ----------
1,830 380
---------- ----------
Cash flows from financing:
Proceeds from sale of common stock 2,079 978
Purchase of treasury shares (1,559) --
Principal payments on capital leases (40) (37)
---------- ----------
480 941
---------- ----------
Net change in cash and equivalents 5,471 1,588
---------- ----------
Cash and equivalents, end of period $25,262 $14,256
========== ==========
</TABLE>
See accompanying notes.
<PAGE>
Centigram Communications Corporation
Notes to Consolidated Financial Statements
(unaudited)
BASIS OF PRESENTATION
The accompanying consolidated financial statements have been
prepared by the Company without audit and reflect all adjustments
(consisting of normal recurring adjustments) which are, in the opinion of
management, necessary to reflect a fair statement of the results for the
interim periods. For further information, refer to the audited Consolidated
Financial Statements and footnotes thereto included in the Company's Annual
Report on Form 10-K for the fiscal year ended November 1, 1997. The
results of operations for the quarter ended January 31, 1998 may not
necessarily be indicative of the results for the fiscal year ending October
31, 1998 or any future period.
INVENTORIES
Inventories consisted of (in thousands):
January 31, November 1,
1998 1997
--------- ---------
Raw materials..................... $3,111 $3,005
Work-in-process................... 2,700 2,274
Finished goods.................... 2,992 3,781
--------- ---------
$8,803 $9,060
========= =========
Earnings (Loss) Per Share
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings per Share," which was required to be
adopted on December 31, 1997. The Company adopted this statement in the
current quarter and restated the quarter ended February 1, 1997. The
following table sets forth the computation of basic and diluted earnings
(loss) per share:
Quarter Ended
-----------------------
January 31, February 1
(in thousands, except per share data) 1998 1997
- ------------------------------------------- ---------- ----------
Numerator:
Net income (loss) ($5,978) $680
========== ==========
Denominator:
Denominator for basic EPS -
weighted average shares 7,016 6,959
Effect of dilutive securities:
Employee stock options -- 27
---------- ----------
Denominator for diluted EPS -
adjusted weighted average shares 7,016 6,986
========== ==========
Basic earnings (loss) per share ($0.85) $0.10
========== ==========
Diluted earnings (loss) per share ($0.85) $0.10
========== ==========
Options were outstanding during the fiscal quarter ended January
31, 1998, but were excluded from the computation of diluted net loss per
common share because the effect in a quarter with a net loss would be
anti-dilutive. Options to purchase 1,319,000 shares of common stock at
a weighted-average price of $17.95 per share were outstanding during the
fiscal quarter ended February 1, 1997, but were not included in the
computation of diluted net income per common share because the options'
exercise price was greater than the average market price of the common
shares and, therefore, the effect would be anti-dilutive.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Centigram Communications Corporation
The following discussion contains forward-looking statements
regarding future events or the future financial performance of Centigram
that involve risks and uncertainties. These statements include but are
not limited to statements related to changes in Centigram's research and
development and selling, general and administrative expenses,
Centigram's effective tax rate, Centigram's expenditures for capital
equipment and sufficiency of Centigram's cash reserves. Actual results
could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including those set forth in
this Management's Discussion and Analysis of Financial Condition and
Results of Operations under "Certain Trends and Uncertainties," and
elsewhere herein.
Centigram designs, manufactures and markets wireless and wireline
messaging and communication systems that integrate voice, data and
facsimile on the Company's communications server and provide access to
this multimedia information through a telephone or a PC. Centigram's
applications all operate on a common hardware and software platform
based on industry-standard hardware and software which is the Company's
implementation of its modular expandable system architecture.
Centigram's system architecture enables a user generally to expand the
capacity of a system in cost-effective increments from the Company's
smallest to its largest system configuration.
Centigram's systems can be integrated with central office, mobile
switch and paging terminal systems as well as with most telephone PBX
systems. Such systems are used for switching telephone calls in a
variety of customer premises equipment (CPE) and service provider
environments. The Company's products can also connect with a broad range
of host and local area network (LAN) - based computer systems, including
systems based on widely-used mainframes and minicomputers and personal
computers in LANs. In addition, Centigram systems located at different
sites can be linked together in a digital network.
RESULTS OF OPERATIONS
Net revenue for the first quarter of fiscal 1998 ended January 31,
1998 was 35% lower than net revenue for the corresponding quarter of
fiscal 1997 and 37% lower than net revenue for the fourth quarter of
fiscal 1997. The decrease in net revenue from the first quarter of 1997
reflects lower sales in all major product segments, including lower
sales of both large system and small system products. Sales to export
customers decreased 40% year over year, decreasing from 46% of net
revenue in the first quarter of fiscal 1997 to 42% in the first quarter
of fiscal 1998. This decrease in export sales resulted primarily from
reduced sales to customers in Europe and the Pacific Rim and delayed
orders in Latin America. CPE sales also decreased in the first quarter
of 1998 over the prior year due to reduced orders from key distributors
of the Company as they experienced lower levels of orders. The Company
also continues to experience increased competition from PC based system
products and sales levels during the first quarter were also adversely
affected by the turnover in the last six months of a number of sales
employees. The decrease in net revenue from the fourth quarter of fiscal
1997 also reflects the same factors as noted above.
Gross margin was 50.0%, 59.4% and 58.8% of net revenue in the
first quarter of fiscal 1998, the first quarter of 1997, and the fourth
quarter of 1997, respectively. The Company experienced a reduction in
its gross margin from the first quarter of last year primarily due to
reduced sales and reduced margins of large systems sold to service
provider customers, offset in part by lower provisions for inventory
obsolescence. The lower gross margin in the first quarter of 1998 as
compared to the fourth quarter of 1997 reflects reduced sales and also
reduced margins on the Company's large system products offset in part by
lower warranty costs in the first quarter. There can be no assurance
that the Company's gross margins will not continue to decline in future
periods. See "Certain Trends and Uncertainties."
Research and development (R&D) expenses decreased 13% in the first
quarter as compared to the corresponding quarter of 1997 and were 4%
lower than the R&D expenses for the fourth quarter of fiscal 1997. These
decreases in expenses primarily result from lower salaries and benefits
due to a lower average headcount in the first quarter of fiscal 1998 as
compared to the other periods. R&D expenses represented 27%, 20%, and
18% of net revenue, respectively, in the first quarter of 1998, the
first quarter of 1997, and the fourth quarter of 1997. The Company
believes that ongoing development of new products and features is
required to maintain and enhance its competitive position. The Company
expects to continue to invest in R&D and therefore R&D expenses should
continue to increase in future periods, notwithstanding the level of
sales realized in future quarters.
Selling, general and administrative (SG&A) expenses for the first
quarter were 1% above SG&A expenses in the first quarter of 1997 and 6%
below such expenses in the fourth quarter of fiscal 1997. The increase
in SG&A expenses for the first fiscal quarter of 1998 as compared to the
first fiscal quarter of 1997 reflects increased sales expenses and
expansion of the Company's customer support programs, including
increases in salaries and facilities costs. The first quarter of fiscal
1998 as compared to the fourth quarter of fiscal 1997 reflects primarily
lower commission expenses resulting from lower levels of quarterly
revenue. SG&A expenses represented 59%, 38%, and 39% of net revenue,
respectively, in the first quarter of 1998, the first quarter of 1997,
and the fourth quarter of fiscal 1997. The Company believes that
continued investments in sales and customer support, particularly in
export markets, are essential to maintaining its competitive position
and that the dollar amount of SG&A expenses will increase in future
periods.
The Company recorded a provision for income taxes for the first
quarter of fiscal 1998 for anticipated foreign income tax liabilities.
No income tax benefit has been recorded for the losses incurred in the
first three months of fiscal 1998 and 1997, respectively, because
realization of the deferred tax assets arising as a result of the losses
sustained are dependent upon future taxable income, the amount and
timing of which are uncertain. Accordingly, a valuation allowance has
been established to fully offset the deferred tax assets resulting from
the losses incurred.
The Company is in active negotiations to sell its CPE business
unit. Any such sale, if consummated, would result in a material
reduction in the Company's revenues, expenses, and cash flows associated
with this business unit. There can be no assurance that such
negotiations will result in the sale of the Company's CPE business unit.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents and short-term investments at the end of
the first quarter were $55.1 million, increasing $3.0 million from the
November 1, 1997 balance of $52.1 million.
Net cash generated from operating activities was $3.2 million
during the first quarter of fiscal 1998. Trade receivables at the end of
the quarter decreased $6.2 million from the November 1, 1997 year end
balance primarily due to reduced revenues in the first quarter as
compared to the fourth quarter. Days sales outstanding (computed using
quarterly revenues) were 77 days at the first quarter as compared to 68
days at end of fiscal 1997. This increase in days sales outstanding was
primarily due to a greater percentage of quarterly sales occurring at
the end of the first quarter as compared to the fourth quarter and
extended payment terms to selected service provider customers. Inventory
levels at January 31, 1998 were down slightly from year end balances.
The Company expects receivables and inventories to continue to represent
a significant portion of working capital.
During the first fiscal quarter ended January 31, 1998, the
Company purchased approximately $0.7 million in capital expenditures.
These expenditures consisted primarily of computer equipment and
engineering software. The Company currently expects to spend
approximately $5.0 million for capital equipment during fiscal 1998. The
Company may finance a portion of these expenditures through leasing
arrangements. The Company presently believes, notwithstanding its
accumulated deficit, that its existing cash and short-term investments
and amounts available under its line of credit and lease credit
arrangements, will be sufficient to support the Company's working
capital and capital equipment purchase requirements at least through
fiscal 1998.
The Company's principal sources of liquidity as of January 31,
1998 consisted of $55.1 million of cash and cash equivalents and short-
term investments and $20.0 million available under the Company's bank
line of credit (which expires April 29, 1998). The Company expects to
renew this bank line in the near term. This bank line requires the
Company to maintain certain financial ratios, minimum working capital,
minimum tangible net worth, and financial performance, and requires the
bank's consent for the payment of cash dividends. There were no
borrowings outstanding under the bank line as of the end of the fiscal
quarter.
CERTAIN TRENDS AND UNCERTAINTIES
The Company has in the past experienced and will likely in the
future experience substantial fluctuations in quarterly operating
results. The Company generally has no long-term order commitments from
its customers, and a significant portion of bookings and shipments in
any quarter have historically occurred near the end of the quarter.
Accordingly, the Company has historically operated with very little
backlog, and net revenue has been difficult to predict. In addition, the
portion of backlog shippable in the next quarter varies over time. As a
result, revenue in future quarters will depend largely on the level of
orders received during such quarters.
If new order bookings do not meet expected levels, or if the
Company experiences delays in shipments at the end of a quarter,
operating results will be adversely affected, and these developments may
not become apparent to the Company until near or at the end of a
quarter. Net revenue can also be affected by product sales mix,
distribution mix, the size and timing of customer orders and shipments,
customer returns and reserves provided therefor, competitive pricing
pressures, the effectiveness of key distributors and the Company's sales
force in selling the Company's products, changes in distributor
inventory levels, the ability of the Company's joint marketing partners
to ship products during the quarter, the timing of new product
introductions by the Company and its competitors, regulatory approvals,
and the availability of components for the Company's products, each of
which is difficult to predict accurately. Each of such factors has in
the past affected the Company's revenue. The Company has recently
experienced higher than usual headcount turnover, including its CPE
sales force, which has had an adverse effect on the Company's booking
levels. There can be no assurance that such turnover will not continue
in future periods. Any failure by the Company to attract, retain and
train additional sales and other personnel could have a material adverse
effect on the Company's business and results of operations.
A significant portion of the Company's net revenue is attributable
to a limited number of customers. The Company's top five customers,
representing a combination of major distributors and service providers,
accounted for approximately 39%, 31% and 28% of the Company's net
revenue in the first quarter of fiscal 1998, the first quarter of fiscal
1997, and all of fiscal 1997, respectively, although the Company's five
largest customers were not the same in the three periods. The Company
has no long-term order commitments from any of its customers. Any
material reduction in orders from one or more of such customers or the
cancellation or deferral of any significant portion of backlog could
have an adverse effect on net revenue and operating results. Such
concentration of sales typically results in a corresponding
concentration of accounts receivable. Although the Company has
established reserves for uncollectible accounts, the inability of any
large customer to pay the Company could have a material adverse impact
on the Company's financial position, results of operations and cash
flows.
Approximately 42% of the Company's sales in the first fiscal
quarter ended January 31, 1998 consisted of sales outside of the United
States. The Company's international sales are subject to a number of
additional risks generally associated with international sales,
including the effect on demand for the Company's products in
international markets as the results of any strengthening or weakening
of the U.S. dollar, the effect of currency fluctuations on consolidated
multinational financial results, state imposed restrictions on the
repatriation of funds, import and export duties and restrictions, the
need to modify products for local markets, and the logical difficulties
of managing multinational operations. In particular, the Company's sales
in Asia have been adversely affected by financial difficulties in that
region and may be so adversely affected in the future.
The Company's gross margin can be affected by a number of factors,
including changes in product configuration and mix including the volume
of OEM products, distribution channel and customer mix, cost and
availability of parts and components, royalty obligations to suppliers
of licensed software, provisions for warranty, retrofits, and excess and
obsolete inventory, customer returns, and competitive pressures on
pricing. The Company has experienced increasing competitive pricing
pressure in its markets and expects this pricing pressure to continue.
Further, distributors purchase products at discounts, and the Company's
margins can therefore vary depending upon the mix of distributor and
direct end user sales in any particular fiscal period. The Company
anticipates that its sales mix will continue to fluctuate in future
periods.
The Company's future success will depend in part upon the ability
of the Company to continue to introduce new features and products as the
Company's markets evolve, new technologies become available, and
customers demand additional functionality. The Company's competitors
continue to add functionality to their products, and any failure by the
Company to introduce in a timely manner new products and features that
meet customer requirements would adversely affect the Company's
operating results and cash flows. The Company's ability to develop such
new features and products depends in large measure on its ability to
hire and retain qualified technical talent and outside contractors in
highly competitive markets for such services. There can be no assurance
that the Company's product development efforts will be successful, or
that it will be able to introduce new products in a timely manner. Any
material additional delays in the introduction and market acceptance of
such products would be adverse to the Company's business. Moreover,
customers' expectations of the introduction of new products by the
Company or its competitors can adversely affect sales of current
products. In addition, upon the introduction of new products, the
Company could be subject to higher customer returns with respect to
prior generations of products, which could adversely affect the
Company's financial position, operating results and cash flows.
The Company presently uses third parties to perform printed
circuit board and subsystem assembly. In addition, although the Company
has not experienced significant problems with third-party manufacturers
in the past, there can be no assurance that such problems will not
develop in the future. Although the Company generally uses standard
parts and components for its products, certain microprocessors, line
cards, application cards and other semiconductor devices and other
components are available from sole sources. Other components, including
power supplies, disk drives, certain other semiconductor devices and
subcontracted line card assemblies, are presently available or acquired
from a single source or from limited sources. The Company has been
notified by suppliers that certain components will no longer be
manufactured. To date, the Company has been able to obtain adequate
supplies of these components in a timely manner from existing sources
or, when necessary, from alternative sources of supply although such
alternatives have resulted in increased costs to the Company. However,
the inability to develop such alternative sources if and as required in
the future, to obtain sufficient sole or limited source components as
required, or to locate alternatives to discontinued parts would have a
material adverse affect on the Company's operating results and cash
flows. In addition, the Company's products are dependent on the QNX
software operating system, a multitasking, real-time operating system
for Intel microprocessor-based computers. In future periods, the
Company's products may become increasingly dependent on software
licensed from third party suppliers. There can be no assurance such
licenses will continue to be available to the Company as needed or at
commercially reasonable prices.
In addition, a number of other companies, including competitors of
the Company, hold patents in the same general area as the technology
used by the Company. The Company from time to time has received, and
may receive in the future, letters alleging infringement of patent
rights by the Company's products. For example, in December 1997,
representatives of Lucent informed the Company that they believed that
the Company's products may infringe upon certain patents issued to
Lucent, and that Lucent was seeking compensation for any past
infringement by the Company. The Company is in the process of
evaluating the assertions of Lucent. Lucent, or any other third party,
alleging infringement, could seek an injunction prohibiting the Company
from selling some or all of its products, which would have an immediate,
adverse impact in the Company's business, financial condition and
results of operations, There can be no assurance that the Company would
prevail in any litigation to enjoin the Company from selling its
products on the basis of such alleged infringement, or that the Company
would be able to license any valid and infringed patents on reasonable
terms, or at all.
The Company has conducted a comprehensive review of its internal
computer systems, as well as the Company`s product line, to identify
the systems that could be affected by the "Year 2000" issue and is
developing an implementation plan to resolve the issue. The Year 2000
problem is the result of computer programs being written using two
digits (rather than four) to define the applicable year. Software
programs that have time-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a
major system failure or miscalculations. The Company presently believes
that, with modifications to existing software, the Year 2000 problem
will not pose significant operational problems for the Company's
computer systems or the Company's product line. However, if such
modifications are not made in a timely manner, the Company or its
customers may be unable to implement appropriate Year 2000 solutions,
which could have a material adverse affect on the Company's business,
financial condition or results of operations.
In recent years, stock markets have experienced extreme price and
volume trading volatility. This volatility has had a substantial effect
on the market prices of securities of many high technology companies for
reasons frequently unrelated to the operating performance of the
specific companies. These broad markets fluctuations may adversely
affect the market price of the Company's common stock. In addition, the
trading price of the Company's common stock could be subject to wide
fluctuations in response to quarter-to-quarter variations in operating
results, announcements of new products or technological innovations by
the Company or its competitors, and general conditions in the computer
and communications industries.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27.1 Financial Data Schedule.
(b) Reports on Form 8-K
There were no reports filed on Form 8-K during the quarter
ended January 31,1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CENTIGRAM COMMUNICATIONS CORPORATION
(Registrant)
Date: March 13, 1998 By: /s/ Robert L. Puette
Robert L. Puette
President and Chief Executive
Officer
Date: March 13, 1998 By: /s/ Dennis P. Wolf
Dennis P. Wolf
Sr. Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE ACCOMPANYING CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-02-1997
<PERIOD-END> JAN-31-1998
<CASH> 25,262
<SECURITIES> 29,843
<RECEIVABLES> 15,463
<ALLOWANCES> 0
<INVENTORY> 8,803
<CURRENT-ASSETS> 81,455
<PP&E> 11,465
<DEPRECIATION> 0
<TOTAL-ASSETS> 94,637
<CURRENT-LIABILITIES> 18,381
<BONDS> 0
0
0
<COMMON> 91,011
<OTHER-SE> (14,755)
<TOTAL-LIABILITY-AND-EQUITY> 94,637
<SALES> 18,158
<TOTAL-REVENUES> 18,158
<CGS> 9,071
<TOTAL-COSTS> 9,071
<OTHER-EXPENSES> 15,713
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (5,903)
<INCOME-TAX> 75
<INCOME-CONTINUING> (5,978)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,978)
<EPS-PRIMARY> ($0.85)
<EPS-DILUTED> ($0.85)
</TABLE>
