<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
------------------
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 000-20805
--------------------------------------------------------
APACHE MEDICAL SYSTEMS, INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 23-2476415
- ---------------------------------- --------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1650 Tysons Boulevard, McLean, Virginia 22102
- --------------------------------------- -----
(Address of principal executive offices) (Zip Code)
</TABLE>
(703) 847-1400
--------------
(Registrant's telephone number, including area code)
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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 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 No X
---------- -------
6,871,353
---------
(Number of shares of common stock
outstanding as of August 9, 1996)
<PAGE> 2
APACHE MEDICAL SYSTEMS, INC.
INDEX
<TABLE>
<CAPTION>
Page No.
-------
<S> <C>
Part I - Financial Information
Item 1 - Financial Statements
Consolidated Balance Sheets - June 30, 1996
(unaudited) and December 31, 1995 1
Consolidated Statements of Operations (unaudited)
- three months and six months ended June 30,
1996 and 1995 2
Consolidated Statements of Changes in
Stockholders' Deficit - six months ended June
30, 1996 (unaudited) and year ended December
31, 1995 3
Consolidated Statements of Cash Flows (unaudited)
- six months ended June 30, 1996 and 1995 4
Notes to Consolidated Financial Statements (unaudited) 5-6
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-9
Part II - Other Information
Item 5 - Other Information 10
Item 6 - Exhibits and Reports on Form 8--K 11-12
Signatures 13
</TABLE>
<PAGE> 3
PART I: FINANCIAL INFORMATION
APACHE MEDICAL SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands except share data)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------ -------------
(unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 876 $ 4,036
Accounts receivable, net of allowance for doubtful accounts 2,303 1,420
Other trade receivables 103 162
Prepaid expenses and other 1,142 124
------------ -------------
TOTAL CURRENT ASSETS 4,424 5,742
Other trade receivables, net of current maturities 29 75
Furniture and equipment 2,821 2,887
Less accumulated depreciation and amortization (1,766) (1,496)
------------ -------------
1,055 1,391
Capitalized software development costs, net 660 701
------------ -------------
TOTAL ASSETS $ 6,168 $ 7,909
============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 884 $ 922
Accrued expenses 1,159 723
Current maturities of obligations under capital leases 150 191
Current maturities of notes payable - stockholders 223 250
Current maturities of notes payable - other 130 224
Deferred revenue 1,583 1,915
------------ -------------
TOTAL CURRENT LIABILITIES 4,129 4,225
Deferred rent benefit 176 186
Obligations under capital leases, net of current maturities 11 63
Notes payable - stockholders, net of current maturities 995 835
Notes payable - other, net of current maturities 136 181
Redeemable convertible preferred stock 21,364 20,732
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $.01 par value, authorized shares, 30,000,000 at June 30,
1996 and 5,769,231 at December 31, 1995; issued and outstanding shares,
1,076,246 at June 30, 1996 and 1,075,458 at December 31, 1995 11 11
Additional paid-in capital 1,370 1,363
Cumulative dividends and accreted issue costs on redeemable convertible
preferred stock (2,448) (1,779)
Accumulated deficit (19,576) (17,908)
------------ -------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (20,643) (18,313)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 6,168 $ 7,909
============ =============
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE> 4
APACHE MEDICAL SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(dollars in thousands, except share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, 1996 June 30, 1995 June 30, 1996 June 30, 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
REVENUE:
Systems $1,567 $ 626 $ 2,809 $ 1,326
Support 375 282 705 600
Professional services 69 408 156 649
------------- ------------- ------------- -------------
Total revenue 2,011 1,316 3,670 2,575
EXPENSES:
Cost of operations 761 715 1,514 1,448
Research and development 297 497 661 1,075
Selling, general and administrative 1,588 1,379 3,034 2,956
------------- ------------- ------------- -------------
Total expenses 2,646 2,591 5,209 5,479
LOSS FROM OPERATIONS (635) (1,275) (1,539) (2,904)
OTHER INCOME (EXPENSE):
Interest income 23 8 81 27
Interest expense (105) (115) (210) (154)
Other, net - - - -
------------- ------------- ------------- -------------
Total other income (expense) (82) (107) (129) (127)
NET LOSS $ (717) $ (1,382) $ (1,668) $ (3,031)
============= ============= ============= =============
Net loss per share $ (0.13) - $ (0.32) -
============= ============= ============= =============
Weighted average number of shares used for calculation
of net loss per share 4,646 - 4,638 -
============= ============= ============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 5
APACHE MEDICAL SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
(in thousands except share data)
<TABLE>
<CAPTION>
CUMULATIVE
DIVIDENDS AND
COMMON STOCK ACCRETED ISSUE
------------------------- ADDITIONAL COSTS ON CUMULATIVE
PAR PAID-IN REDEEMABLE
SHARES VALUE CAPITAL PREFERRED STOCK
------------ --------- ----------- ------------------
<S> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1994 1,072,835 $11 $569 ($878)
Issuance of convertible preferred
stock warrants - - 787 -
Exercise of stock options 2,623 - 7 -
Accretion of cumulative dividends and
issue costs on redeemable preferred
stock - - - (901)
Net loss - - - -
------------ --------- ----------- ------------------
BALANCE AT DECEMBER 31, 1995 1,075,458 11 1,363 (1,779)
Exercise of stock options (unaudited) 788 - 7 -
Accretion of cumulative dividends and
issue costs on redeemable preferred
stock (unaudited) - - - (669)
Net loss (unaudited) - - - -
------------ --------- ----------- ------------------
BALANCE AT JUNE 30, 1996 (UNAUDITED) 1,076,246 11 1,370 (2,448)
============ ========= =========== ==================
</TABLE>
<TABLE>
<CAPTION>
ACCUMULATED
DEFICIT TOTAL
------------ -----------
<S> <C> <C>
BALANCE AT DECEMBER 31, 1994 ($14,100) ($14,398)
Issuance of convertible preferred
stock warrants - 787
Exercise of stock options - 7
Accretion of cumulative dividends and
issue costs on redeemable preferred
stock - (901)
Net loss (3,808) (3,808)
------------ -----------
BALANCE AT DECEMBER 31, 1995 (17,908) (18,313)
Exercise of stock options (unaudited) - 7
Accretion of cumulative dividends and
issue costs on redeemable preferred
stock (unaudited) - (669)
Net loss (unaudited) (1,668) (1,668)
------------ -----------
BALANCE AT JUNE 30, 1996 (UNAUDITED) (19,576) (20,643)
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 6
APACHE MEDICAL SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
(unauditied)
(in thousands)
<TABLE>
<CAPTION>
6 MONTHS ENDED
June 30, June 30,
1996 1995
------------ ------------
<S> <C> <C>
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES:
Net loss $ (1,668) $ (3,031)
Adjustments to reconcile net loss to net cash
from (used for) operating activities:
Depreciation and amortization 441 290
Provision for doubtful accounts 50 -
Loss on sale of furniture and equipment - 69
Accretion of interest 133 114
Increase in accounts receivable (933) (32)
Decrease in other trade receivables 105 36
Increase in other current assets (1,027) (134)
Increase in accounts payable and accrued expenses 398 123
Decrease in deferred rent (11) (16)
Increase (decrease) in deferred revenue (332) 878
------------ ------------
NET CASH USED IN OPERATING ACTIVITIES (2,844) (1,703)
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:
Capitalized software development costs (65) (150)
Purchase of furniture and equipment, net of disposals 10 (17)
Proceeds from sale of furniture and equipment - 93
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (55) (74)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
Principal payments on capital lease obligations (92) (64)
Principal payments on borrowings (139) (68)
Proceeds from issuance of note payable - 1,750
Issuance costs on preferred stock (37) -
Proceeds from issuance of common stock upon exercise of options 7 -
------------ ------------
NET CASH FROM (USED IN) FINANCING ACTIVITIES (261) 1,618
------------ ------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (3,160) (159)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 4,036 209
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 876 $ 50
============ ============
SUPPLEMENTAL INFORMATION:
Cash payments for interest $ 49 $ 5
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 7
APACHE MEDICAL SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared by the
Company pursuant to the rules and regulations of the Securities and Exchange
Commission ("SEC"). The financial information included herein is unaudited,
however, in the opinion of management, all adjustments (which include normal
recurring adjustments) considered necessary for a fair presentation have been
made. Certain information and footnote disclosures normally included in annual
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, but the Company believes that the disclosures made are adequate to
make the information presented not misleading. For more complete financial
information, these financial statements should be read in conjunction with the
audited financial statements and notes thereto for the year ended December 31,
1995 included in the Company's prospectus. Results for interim periods are not
necessarily indicative of the results for any other interim period or for the
full fiscal year.
2. INITIAL PUBLIC OFFERING
On July 3, 1996, the Company completed an initial public offering of its Common
Stock whereby 2,000,000 shares were issued at $12 per share resulting in net
proceeds of approximately $22,320,000, after underwriting discounts and
commissions and before other expenses of the offering. Additionally, 300,000
shares for the underwriter's over-allotment were issued on July 9, 1996 at $12
per share resulting in net proceeds of approximately $3,348,000, after
underwriter discounts and commissions and before other expenses of the
offering. The initial public offering commenced on June 28, 1996, and the
closing and payment of the purchase price took place on July 3, 1996.
According to the SEC rules and regulations, the transactions relating to the
initial public offering are not reflected in the accompanying financial
statements.
5
<PAGE> 8
On July 3, 1996 (consummation of the offering), all the outstanding shares of
Series A, B, C, D, E and F Redeemable Convertible Preferred Stock were
automatically converted into 3,294,519 shares of common stock, and at the
holders' option, conversion of $939,940 of cumulative dividends into 78,331
shares of common stock based on the stated preference of the holders. During
the third quarter of 1996, cumulative dividends of $909,464 were paid with the
proceeds of this offering, and $608,090 of accreted issue costs have been
reflected as a decrease in paid-in capital. Additionally, notes payable with
an outstanding balance of $1,000,000 and a net carrying value of approximately
$895,000 were converted into 122,257 shares of common stock.
3. EARNINGS PER SHARE
Earnings per share is computed based on the weighted average number of shares
of common stock and common stock equivalents outstanding during the period.
Common stock equivalents include the conversion of preferred shares and certain
convertible debt.
4. COST OF OPERATIONS AND GROSS MARGIN BY PRIMARY REVENUE
SOURCES
The following represents revenues and cost of operations by primary revenue
sources for the three months and six months ended June 30, 1996:
<TABLE>
<CAPTION>
3 Months Ended 6 Months Ended
June 30, 1996 June 30, 1996
-----------------------------------
(in thousands)
<S> <C> <C>
Revenue:
Systems $ 1,567 $ 2,809
Support 375 705
Professional services 69 156
------------- -------------
Total revenue 2,011 3,670
Cost of operations:
Systems 544 1,107
Support 155 278
Professional services 62 129
------------- -------------
Total cost of operations 761 1,514
------------- -------------
Gross margin $ 1,250 $ 2,156
============= =============
</TABLE>
6
<PAGE> 9
APACHE MEDICAL SYSTEMS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - THREE MONTHS AND SIX MONTHS
ENDED JUNE 30, 1996 AND 1995
RESULTS OF OPERATIONS
- ---------------------
Three Months Ended June 30, 1996 and 1995
- -----------------------------------------
Revenue for the quarter ended June 30, 1996 increased 53% to $2.0 million from
$1.3 million in the prior year period. Systems revenue for the quarter ended
June 30, 1996, increased 150% to $1.6 million from $626,000 in the prior year
period. The increase was due primarily to the increase in unit sales of the
Company's MCMP product; the introduction and sale of new MCMP component
products and other systems; and revenue relating to the percentage of
completion method of accounting for 1995 system deliveries. Support revenue
for the quarter ended June 30, 1996 increased 33% to $375,000 from $282,000 in
the prior year period due to an increase in the MCMP installed client base.
Professional service revenue for the quarter ended June 30, 1996 decreased 83%
to $69,000 from $408,000 for the prior year period. This change was primarily
related to the decrease in consulting contracts from the prior year.
Cost of operations for the quarter ended June 30, 1996 increased 6% to $761,000
from $715,000 in the prior year period, due to the increase in staffing
requirements for client services and the increase of $53,000 in amortization
expense of capitalized software development costs. This was partially offset by
a decrease in staffing for professional services. In spite of these factors,
cost of operations for the quarter ended June 30, 1996 decreased to 38% of
revenue from 54% in the prior year period, due to the increase in revenue for
the period.
Research and development expenses for the quarter ended June 30, 1996 decreased
40% to $297,000 from $497,000 in the prior year period, due primarily to a
decrease in third party research fees and staffing for development related
activities. During the quarter ended June 30, 1996, $23,000 of product
development activity was capitalized, compared to $83,000 in the prior year
period. Research and development expenses for the quarter ended June 30, 1996
decreased to 15% of revenue from 38% in the prior year period, due to the same
factors together with an increase in revenue during the same period.
7
<PAGE> 10
Selling, general and administrative expenses for the quarter ended June 30,
1996 increased 15% to $1.6 million from $1.4 million in the prior year period,
due to an increase in sales staff and related overhead costs and sales
commissions resulting from an increase in sales. Selling, general and
administrative expenses for the quarter ended June 30, 1996 decreased to 79% of
revenue from 105% for the prior year period due primarily to the increase in
revenue and the relative fixed nature of these costs.
Other income (expense) increased from ($107,000) in the quarter ended June 30,
1995 to ($82,000) for the quarter ended June 30, 1996. The increase is
attributable to the increase in interest income from the Company's average cash
and cash equivalent balance and a decrease in interest-bearing notes.
Six Months Ended June 30, 1996 and 1995
- ---------------------------------------
Revenue for the six months ended June 30, 1996 increased 43% to $3.7 million
from $2.6 million in the prior year period. Systems revenue for the six months
ended June 30, 1996, increased 112% to $2.8 million from $1.3 million in the
prior year period. This increase was due primarily to the increase in unit
sales of the Company's MCMP product; sale of new MCMP component products and
other systems; and revenue relating to the percentage of completion method of
accounting for 1995 system deliveries. Support revenue for the six months ended
June 30, 1996 increased 18% to $705,000 from $600,000 in the prior year period
due to an increase in the MCMP installed client base. Professional service
revenue for the six months ended June 30, 1996 decreased 76% to $156,000 from
$649,000 for the prior year period. This change was primarily related to the
decrease in consulting contracts from the prior year.
Cost of operations for the six months ended June 30, 1996 increased 5% to $1.5
million from $1.4 million in the prior year period, due to an increase in
staffing requirements in client services and the increase of $105,000 in
amortization expense of capitalized software development costs. This was
partially offset by a decrease in staffing for professional services. In spite
of these factors, cost of operations for the six months ended June 30, 1996
decreased to 41% of revenue from 56% in the prior year period, due to the
increase in revenue for the period.
Research and development expenses for the six months ended June 30, 1996
decreased 39% to $661,000 from $1.1 million in the prior year period, due
primarily to a decrease in third party research fees and staffing for
development related activities. During the six months ended June 30, 1996,
$65,000 of product development activity was capitalized, compared to $150,000
in the prior year period.
8
<PAGE> 11
Research and development expenses for the six months ended June 30, 1996
decreased to 18% of revenue from 42% in the prior year period, due to the same
factors together with an increase in revenue.
Selling, general and administrative expenses for the six months ended June 30,
1996 were consistent with the prior year period. Selling, general and
administrative expenses for the six months ended June 30, 1996 decreased to 83%
of revenue from 115% for the prior year period due primarily to the increase in
revenue and the relative fixed nature of these costs.
Other income (expense) decreased from ($127,000) in the six months ended June
30, 1995 to ($129,000) for the six months ended June 30, 1996. The decrease is
attributable to the increase in non-cash imputed interest expense resulting
from the issuance of convertible debt in February and April 1996, which was
partially offset by an increase in interest income from the Company's average
cash and cash equivalent balance.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Cash and cash equivalents were $876,000 as of June 30, 1996 compared to $4.0
million as of December 31, 1995. The decrease in cash and cash equivalents is
due primarily to funds used for operating activities totaling $2.8 million.
The Company currently has no material commitments for capital expenditures.
On July 3, 1996, the Company completed an initial public offering of its Common
Stock whereby 2,000,000 shares were issued at $12 per share resulting in net
proceeds of approximately $22,320,000, after underwriting discounts and
commissions and before other expenses of the offering. Additionally, 300,000
shares for the underwriter's over-allotment were issued on July 9, 1996 at $12
per share resulting in net proceeds of approximately $3,348,000, after
underwriter discounts and commissions and before other expenses of the
offering.
The Company anticipates that net proceeds from the initial public offering and
funds generated from operations will be sufficient to meet its planned ongoing
working capital requirements and to finance planned product development, sales
and marketing activities and capital acquisitions.
9
<PAGE> 12
PART II - OTHER INFORMATION
Item 5: Other Information
-----------------
In connection with the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995, the Company believes that a number of
important factors could cause the Company's actual results to differ from those
that may have been or may be projected in forward-looking statements made by or
on behalf of the Company from time to time. These factors are described under
the heading "Risk Factors" in the Company's Registration Statement on Form S-1
(File No. 333-4106), as amended, filed with the Securities and Exchange
Commission on April 26, 1996. Specific reference is made to the Risk Factors
set forth therein entitled "History of Operating Losses and Accumulated
Deficit; Expected Losses; Uncertainty of Future Profitability", "Fluctuations
in Quarterly Operating Results", "Uncertainty of Market Acceptance" and "State
and Federal Government Regulation".
10
<PAGE> 13
Item 6: Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits --
Exhibit
Number Description
- ------ -----------
3.1 Amended and Restated Certificate of Incorporation*
3.2 By-laws*
4.1 Specimen Common Stock Certificate*
10.1 APACHE Medical Systems, Inc. Employee Stock Option Plan+*
10.2 APACHE Medical Systems, Inc. Non-Employee Director Option
Plan+*
10.3 Sublease Agreement between the Company and First Union
National Bank of Virginia, dated March 17, 1994*
10.4 Registration Agreement between the Company and Certain
Stockholders, dated December 28, 1995*
10.5 Form of Warrant Agreement relating to warrants issued in 1995*
10.6 Warrant Agreement between the Company and Venture Fund of
Washington, dated May 13, 1991*
10.7 Loan Agreement between the Company and Benefit Capital
Management Corporation, dated February 24, 1995*
10.8 Licensing Agreement between the Company and Cerner
Corporation, dated February 2, 1995*
10.9 Nonqualified Stock Option Agreement between the Company and
The Cleveland Clinic Foundation, dated August 19, 1994*
10.10 Agreement between the Company and The George Washington
University, dated August 19, 1994*
10.11 Letter Agreement between the Company and the Northern New
England Cardiovascular Disease Study Group, dated March
13, 1995*
11
<PAGE> 14
10.12 Licensing Agreement between the Company and Quality
Information Management Corporation, dated March 24, 1994*
10.13 Marketing Agreement between the Company and American
Healthcare Systems Purchasing Partners, L.P., dated as of June
3, 1996*
11.1 Computation of Earnings Per Share
27 Financial Data Schedule
- ---------------
+ Denotes compensatory plan.
* Incorporated herein by reference from the Company's
Registration Statement on Form S-1, SEC file no. 333-4106,
dated April 26, 1996.
(b) Reports on Form 8-K --
No reports on Form 8-K have been filed during the quarter ended June
30, 1996.
12
<PAGE> 15
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.
APACHE MEDICAL SYSTEMS, INC.
Date: August 9, 1996 /s/Gerald E. Bisbee, Jr.
---------------- ------------------------------------
Gerald E. Bisbee, Jr.
Chairman and Chief Executive
Officer
Date: August 9, 1996 /s/Brion D. Umidi
---------------- ------------------------------------
Brion D. Umidi
Vice President, Finance and
Administration and Treasurer (Chief
Financial and Accounting Officer)
13
<PAGE> 1
APACHE MEDICAL SYSTEMS, INC.
EXHIBIT 11 - COMPUTATION OF EARNINGS PER SHARE
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three months Six months
ended ended
June 30, 1996 June 30, 1996
------------- -------------
<S> <C> <C>
Income applicable to common shares:
Net loss $ (717) $ (1,668)
Increase in earnings resulting from conversion of
convertible debt (1) 91 182
------------- -------------
Loss applicable to common shares $ (626) $ (1,486)
============= =============
Weighted average common shares outstanding:
Weighted average number of common
shares outstanding (2) 1,076 1,076
Assuming conversion of preferred shares 3,373 3,365
Assuming conversion of convertible debt 122 122
Cheap stock options and warrants (1) 75 75
------------- -------------
Weighted average common shares 4,646 4,638
============= =============
Loss per common share $ (0.13) $ (0.32)
============= =============
</TABLE>
(1) Assumes the conversion took place January 1, 1996, or the date of the
issuance of the convertible debt if later.
(2) After considering the 1 for 2.86 reverse stock split effective June 18,
1996.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 876
<SECURITIES> 0
<RECEIVABLES> 2,377
<ALLOWANCES> (74)
<INVENTORY> 0
<CURRENT-ASSETS> 4,424
<PP&E> 2,821
<DEPRECIATION> (1,766)
<TOTAL-ASSETS> 6,168
<CURRENT-LIABILITIES> 4,129
<BONDS> 1,142
21,364
0
<COMMON> 11
<OTHER-SE> (20,654)
<TOTAL-LIABILITY-AND-EQUITY> 6,168
<SALES> 3,670
<TOTAL-REVENUES> 3,751
<CGS> 0
<TOTAL-COSTS> 1,514
<OTHER-EXPENSES> 3,695
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 210
<INCOME-PRETAX> (1,668)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,668)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,668)
<EPS-PRIMARY> ($0.32)
<EPS-DILUTED> ($0.32)
</TABLE>
