<PAGE>
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
<TABLE>
<S> <C>
For the quarterly period ended October 31, 1996 Commission File Number 0-24418
<CAPTION>
SYSTEMSOFT CORPORATION
(Exact name of registrant as specified in its charter)
<S> <C>
DELAWARE 04-3121799
(State or other jurisdiction of (I.R.S.Employer Identification No.)
incorporation or organization)
2 VISION DRIVE
NATICK, MASSACHUSETTS 01760
(Address of principal executive offices) (Zip Code)
</TABLE>
508-651-0088
(registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------ -----
Registrant had 22,919,111 shares of Common Stock, $.01 par value, outstanding at
December 5, 1996.
<PAGE>
SYSTEMSOFT CORPORATION
FORM 10-Q
For the Quarterly Period Ended October 31, 1996
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
a) Consolidated Balance Sheets as of October 31, 1996
(Unaudited) and January 31, 1996 3
b) Consolidated Statements of Operations for the three and nine
months ended October 31, 1996 and 1995 (Unaudited) 4
c) Consolidated Statements of Cash Flows for the nine
months ended October 31, 1996 and 1995 (Unaudited) 5
d) Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
</TABLE>
2
<PAGE>
SYSTEMSOFT CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
October 31, January 31,
1996 1996
---- ----
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $8,513,714 $7,406,039
Marketable securities 3,882,898 3,960,490
Accounts receivable, less allowance for doubtful
accounts of $760,379 and $491,037 as of
October 31, 1996 and January 31, 1996, respectively 11,101,042 7,561,096
Receivable from related party 1,374,968 692,722
Prepaid and other current assets 2,320,805 868,929
Deferred income taxes 1,512,756 1,512,756
---------------- ----------------
Total current assets 28,706,183 22,002,032
Property and equipment, net 4,422,006 2,830,529
Purchased software costs, net 2,467,299 556,058
Software development costs, net 2,897,731 1,563,303
---------------- ----------------
Total assets $38,493,219 $26,951,922
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $1,682,677 $680,493
Accrued expenses 557,969 402,066
Income taxes payable 1,525,662 524,258
Accrued commissions 346,729 497,354
Accrued compensation and benefits 552,234 582,845
---------------- ----------------
Total current liabilities 4,665,271 2,687,016
Deferred income taxes 674,390 674,390
Minority interest in subsidiary 50,000 50,000
Stockholders' equity:
Preferred stock, $.01 par value; 1,000,000 shares authorized;
none issued and outstanding - -
Common stock, $.01 par value; 90,000,000 and 30,000,000
shares authorized; 22,680,011 and 21,106,038 shares issued
as of October 31, 1996 and January 31, 1996, respectively 226,800 211,060
Additional paid-in capital 29,945,922 24,867,556
Less treasury stock, at cost, 159,246 shares (427,187) (427,187)
Retained earnings (deficit) 3,358,023 (1,110,913)
---------------- ----------------
Total stockholders' equity 33,103,558 23,540,516
---------------- ----------------
Total liabilities and stockholders' equity $38,493,219 $26,951,922
================ ================
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
3
<PAGE>
SYSTEMSOFT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended October 31, Nine Months Ended October 31,
------------------------------ -----------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Software license fees $7,838,810 $4,260,003 $18,649,664 $12,453,591
Engineering services 1,599,165 1,254,080 6,989,239 2,825,747
Related party 870,000 675,000 2,010,000 1,988,111
-------------- -------------- -------------- ---------------
Total revenues 10,307,975 6,189,083 27,648,903 17,267,449
-------------- -------------- -------------- ---------------
Cost of revenues:
Software license fees 865,703 251,166 1,846,156 677,213
Engineering services 915,531 612,092 2,619,120 1,570,910
Related party 313,975 239,759 736,554 1,036,384
-------------- -------------- -------------- ---------------
Total cost of revenues 2,095,209 1,103,017 5,201,830 3,284,507
-------------- -------------- -------------- ---------------
Gross profit 8,212,766 5,086,066 22,447,073 13,982,942
Operating expenses:
Research and development 2,192,000 1,367,985 5,811,271 3,702,887
Sales and marketing 2,549,467 1,881,226 7,633,790 5,181,961
General and administrative 947,894 690,507 2,381,908 1,882,261
-------------- -------------- -------------- ---------------
Total operating expenses 5,689,361 3,939,718 15,826,969 10,767,109
-------------- -------------- -------------- ---------------
Income from operations 2,523,405 1,146,348 6,620,104 3,215,833
Interest income 102,876 147,660 307,012 460,098
Interest expense (156) (337) (416) (925)
Foreign exchange loss (7,014) (23,585) (51,420) (36,321)
-------------- -------------- -------------- ---------------
Income before provision for income taxes 2,619,111 1,270,086 6,875,280 3,638,685
Provision for income taxes 916,689 444,491 2,406,348 1,300,059
-------------- -------------- -------------- ---------------
Net income 1,702,422 825,595 4,468,932 2,338,626
============== ============== ============== ===============
Net income per common share (1) $0.07 $0.04 $0.18 $0.10
============== ============== ============== ===============
Weighted average number of common and
common equivalent shares outstanding (1) 25,486,372 22,961,338 24,560,770 22,701,890
============== ============== ============== ===============
</TABLE>
(1) Amounts retroactively adjusted for 2:1 stock dividend issued on July 17,
1996.
The accompanying notes are an integral part of the consolidated
financial statements
4
<PAGE>
SYSTEMSOFT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended October 31,
----------------------------
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $4,468,935 $2,338,626
Adjustments to reconcile net income to cash provided by
operating activities:
Depreciation and amortization 2,199,542 1,062,526
Provision for doubtful accounts 535,547 (127,996)
Tax benefit of disqualifying dispositions
of stock options 1,034,411 968,759
Changes in operating assets and liabilities:
Accounts receivable (6,057,580) (3,447,243)
Receivable from related party (1,419,800) (473,931)
Prepaid and other current assets (1,161,668) (344,566)
Accounts payable 1,002,184 438,979
Accrued expenses 1,181,627 (124,449)
Income taxes payable 1,001,404 113,734
Accrued commissions 409,639 (205,623)
Accrued compensation and benefits (30,608) (175,491)
Deferred revenue from related party - (260,000)
-------------- --------------
Net cash provided by (used in) operating activities 3,163,633 (236,675)
-------------- --------------
Cash flows from investing activities:
Sale of marketable securities, net 77,592 981,058
Purchase of property and equipment (2,569,318) (1,773,118)
Purchased software costs (1,649,585) (401,446)
Software development costs (1,974,342) (670,168)
-------------- --------------
Net cash used in investing activities (6,115,653) (1,863,674)
-------------- --------------
Cash flows from financing activities:
Proceeds from exercise of stock options 4,059,695 749,685
-------------- --------------
Net cash provided by financing activities 4,059,695 749,685
-------------- --------------
Net increase (decrease) in cash and cash equivalents 1,107,675 (1,350,664)
Cash and cash equivalents at beginning of period 7,406,039 7,806,387
-------------- --------------
Cash and cash equivalents at end of period $8,513,714 $6,455,723
============== ==============
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
5
<PAGE>
SYSTEMSOFT CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Unaudited Consolidated Financial Statements
The accompanying consolidated financial statements of the Company as of
October 31, 1996 and for the three and nine months ended October 31, 1996 and
1995 are unaudited. All adjustments (consisting only of normal recurring
adjustments) have been made which, in the opinion of management, are necessary
for a fair presentation thereof. These financial statements should be read in
conjunction with the Company's financial statements and notes thereto contained
in the Company's Form 10-K, SEC File No. 0-24418, filed on April 30, 1996. The
results of operations for the three and nine month periods ended October 31,
1996 are not necessarily indicative of the results that may be expected for the
full year or for any future period. In June 1995, the Company completed a merger
with Ventura Micro, Inc. ("VMI") which was accounted for as a pooling of
interests. The consolidated statements of operations for the nine months ended
October 31, 1995, the consolidated statements of cash flows for the nine months
ended October 31, 1995 and all related footnotes presented herein include the
accounts of the Company and VMI restated for the periods prior to the merger.
2. Stock dividend
The Company issued a 2:1 stock split in the form of a stock dividend on
July 17, 1996. All amounts and per share data has been retroactively adjusted
for the earliest period presented.
3. Increase to authorized capital
At a special meeting of stockholders held on July 30, 1996, a majority of
the stockholders of the Company voted to increase the number of authorized
shares of Common Stock by 60,000,000 from 30,000,000 to 90,000,000 shares.
6
<PAGE>
SYSTEMSOFT CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is a discussion of the financial condition and results of
operations of the Company for the three and nine months ended October 31, 1996
and 1995. The Company designs, develops, markets, licenses and supports to the
personal computer industry call-avoidance software and system-level software
designed to be the communication path between the personal computer hardware and
its operating system software. The principal markets for the Company's products
are U.S. and Asia Pacific based manufacturers of personal computers and related
devices. In June 1995, the Company completed a merger with VMI which was
accounted for as a pooling of interests. The management's discussion and
analysis of financial condition and results of operations presented herein
includes the accounts of the Company and VMI restated for the periods prior to
the merger.
Results of Operations
The following table sets forth, for the periods indicated, certain
financial data as a percentage of total revenues (except cost of revenues items,
which are set forth as a percentage of the corresponding revenue items):
<TABLE>
<CAPTION>
Three Months Ended October 31, Nine Months Ended October 31,
------------------------------ -----------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Software license fees 76.0% 68.8% 67.4% 72.1%
Engineering services 15.6 20.3 25.3 16.4
Related party 8.4 10.9 7.3 11.5
------------------------------ -----------------------------
Total revenues 100.0 100.0 100.0 100.0
------------------------------ -----------------------------
Cost of revenues:
Software license fees 11.0 5.9 9.9 5.4
Engineering services 57.3 48.8 37.5 55.6
Related party 36.1 35.5 36.6 52.1
------------------------------ -----------------------------
Total cost of revenues 20.3 17.8 18.8 19.0
------------------------------ -----------------------------
Gross margin 79.7 82.2 81.2 81.0
Operating expenses:
Research and development 21.3 22.1 21.1 21.4
Sales and marketing 24.7 30.4 27.6 30.0
General and administrative 9.2 11.2 8.6 11.0
------------------------------ -----------------------------
Total operating expenses 55.2 63.7 57.3 62.4
------------------------------ -----------------------------
Income from operations 24.5 18.5 23.9 18.6
Interest income 1.0 2.4 1.2 2.7
Interest expense 0.0 0.0 0.0 0.0
Foreign exchange loss -0.1 -0.4 -0.2 -0.2
------------------------------ -----------------------------
Income before provision for income taxes 25.4 20.5 24.9 21.1
Provision for income taxes 8.9 7.2 8.7 7.6
------------------------------ -----------------------------
Net income 16.5% 13.3% 16.2% 13.5%
============================== =============================
</TABLE>
7
<PAGE>
Comparison of Three Months Ended October 31, 1996 and 1995
Revenues. Revenues were $10,308,000 and $6,189,000 in the three months
ended October 31, 1996 and 1995, respectively, an increase of approximately 67%.
Software license fees increased to $7,839,000 from $4,260,000, or approximately
84%. This increase was primarily due to growth in the software license fees for
PC Card and BIOS products as well as software license fees on the Company's new
call avoidance and Universal Serial Bus ("USB") products. Certain contracts
include fixed royalty fees for various time periods in lieu of royalties on a
per unit basis. Revenues attributable to such fees, which are included in
software license fees, were $1,100,000 and $475,000 in the three months ended
October 31, 1996 and 1995, respectively. Although such contracts provide for
fixed payments to be made at specified time periods, the timing or amount of
such payments may be renegotiated as a matter of business practice. There were
no revenues from renegotiated contract terms included in the fixed royalties
recognized in the three months ended October 31, 1996. Engineering services
increased to $1,599,000 from $1,254,000, or approximately 28% due to engineering
services related to a contract to develop call-avoidance software products, as
well as growth in the mobile computing market engineering services. Related
party revenues increased to $870,000 from $675,000, or approximately 29%.
Revenues generated under the Development and License Agreement, as amended, with
Intel Corporation (The "Intel Agreement") were $750,000 and $655,000 in the
three months ended October 31, 1996 and 1995, respectively.
Cost of Revenues. Cost of revenues was $2,095,000 and $1,103,000 in the
three months ended October 31, 1996 and 1995, respectively. Cost of revenues
consists primarily of amortization of software development costs and purchased
software, royalties and engineering costs associated with engineering services
revenues. Cost of revenues as a percentage of revenues increased by 2% to 20%
from 18% in the three months ended October 31, 1996 and 1995, respectively. Cost
of software license fees as a percentage of software license fees revenues
increased to 11% from 6% in the three months ended October 31, 1996 and 1995,
respectively primarily due to increases in royalties and amortization of
purchased software and software development costs. The increase in amortization
expense in both absolute dollars and percentage of revenues was due to increases
in purchased software and software development costs and the commencement of
amortization with new product releases. Cost of engineering services increased
as a percentage of engineering service revenues to 57% from 49% in the three
months ended October 31, 1996 and 1995, respectively primarily due to staff
additions. Cost of related party revenues as a percentage of related party
revenues remained constant at 36% for both periods.
Research and Development. Research and development expenses, consisting
primarily of payroll and related expenses, were $2,192,000 and $1,368,000, net
of capitalized development costs of $771,000 and $339,000, in the three months
ended October 31, 1996 and 1995, respectively, an increase of approximately 60%.
The increase in expenses resulted primarily from staff additions. Research and
development expenses as a percentage of revenue decreased to 21% from 22% due to
the substantial relative growth in revenues. Included in Research and
Development are costs associated with certain work done under the Intel
Agreement.
Sales and Marketing. Sales and marketing expenses, consisting primarily of
payroll and related expenses, costs of marketing programs and events, sales
commissions to internal sales
8
<PAGE>
personnel and independent manufacturers' representatives and travel costs, were
$2,549,000 and $1,881,000 in the three months ended October 31, 1996 and 1995,
respectively, an increase of approximately 36%. The percentage increase was
primarily due to staff additions, increased costs of marketing programs and
events and additional travel costs. Sales and marketing expenses as a percentage
of revenues decreased to 25% from 30% due to the substantial relative growth in
revenues.
General and Administrative. General and administrative expenses,
consisting primarily of payroll and related expenses, provision for doubtful
accounts and professional fees, were $948,000 and $691,000 in the three months
ended October 31, 1996 and 1995, respectively, an increase of approximately 37%.
The increase was primarily due to staff additions and an increase in the
provision for doubtful accounts. General and administrative expenses as a
percentage of revenues decreased to 9% from 11% due to the substantial relative
growth in revenues.
Provision for Income Taxes. Provision for income taxes was $917,000 and
$444,000 in the three months ended October 31, 1996 and 1995, respectively. In
the three months ended October 31, 1996 and 1995, the Company was able to reduce
its federal tax liability through the utilization of certain tax credits.
Comparison of Nine Months Ended October 31, 1996 and 1995
Revenues. Revenues were $27,649,000 and $17,267,000 in the nine months
ended October 31, 1996 and 1995, respectively, an increase of approximately 60%.
Software license fees increased to $18,650,000 from $12,454,000 or approximately
50%. This increase was primarily due to software license fees on the Company's
new call avoidance products as well as growth in the software license fees for
BIOS, PC Card and USB products. Certain contracts include fixed royalty fees for
various time periods in lieu of royalties on a per unit basis. Revenues
attributable to such fees, which are included in software license fees, were
$2,150,000 and $2,222,000 in the nine months ended October 31, 1996 and 1995,
respectively. Although such contracts provide for fixed payments to be made at
specified time periods, the timing or amount of such payments may be
renegotiated as a matter of business practice. The fixed royalties recognized in
the nine months ended October 31, 1996 included $452,000 which resulted from
renegotiated contract terms. Such revenue would have otherwise been recorded in
the subsequent two fiscal quarters. Engineering services increased to $6,989,000
from $2,826,000 or approximately 147% due to engineering services related to a
contract to develop call-avoidance software products, as well as growth in the
mobile computing market engineering services. Related party revenues increased
to $2,010,000 from $1,988,000 or approximately 1%. Revenues generated under the
Intel Agreement were $1,500,000 and $1,860,000 in the nine months ended October
31, 1996 and 1995, respectively.
Cost of Revenues. Cost of revenues was $5,202,000 and $3,285,000 in the
nine months ended July 31, 1996 and 1995, respectively. Cost of revenues as a
percentage of revenues remained constant at 19% in the nine months ended October
31, 1996 and 1995. Cost of software license fees as a percentage of software
license fees revenues increased to 10% from 5% primarily due to increases in
royalties and amortization of purchased software and software development costs.
The increase in amortization expense in both absolute dollars and percentage of
revenues
9
<PAGE>
was due to increases in purchased software and software development costs and
the commencement of amortization with new product releases. Cost of engineering
services decreased as a percentage of engineering service revenues to 38% from
56%, primarily due to increased efficiency in providing engineering services and
substantial relative growth of revenues. Cost of related party revenues as a
percentage of related party revenues decreased to 37% from 52%, due to a
decrease in the lower margin services provided under the original Intel
Agreement as well as certain personnel costs being included in Research and
Development under the Intel Agreement.
Research and Development. Research and development expenses were
$5,811,000 and $3,703,000, net of capitalized development costs of $1,974,000
and $670,000, in the nine months ended October 31, 1996 and 1995, respectively,
an increase of approximately 57%. The increase in expenses resulted primarily
from staff additions. Research and development expenses as a percentage of
revenues were 21% in both periods. Included in Research and Development are
costs associated with certain work done under the Intel Agreement.
Sales and Marketing. Sales and marketing expenses were $7,634,000 and
$5,182,000 in the nine months ended October 31, 1996 and 1995, respectively, an
increase of approximately 47%. The percentage increase was primarily due to
staff additions, increased costs of marketing programs and events, additional
travel costs and sales commissions resulting from the increased level of
revenue. Sales and marketing expenses as a percentage of revenues decreased to
28% from 30% due to the substantial relative growth in revenues.
General and Administrative. General and administrative expenses were
$2,382,000 and $1,882,000 in the nine months ended October 31, 1996 and 1995,
respectively, an increase of approximately 27%. The increase was primarily due
to staff additions and an increase in the provision for doubtful accounts.
General and administrative expenses as a percentage of revenues decreased to 9%
from 11% due to the substantial relative growth in revenues.
Provision for Income Taxes. Provision for income taxes was $2,406,000 and
$1,300,000 in the nine months ended October 31, 1996 and 1995, respectively. In
the nine months ended October 31, 1996 and 1995, the Company was able to reduce
its federal tax liability through the utilization of certain tax credits.
Liquidity and Capital Resources
During the nine months ended October 31, 1996, the Company funded its
operations primarily through its operating profits. As of October 31, 1996, the
Company had cash and cash equivalents and marketable securities of $12,397,000
and working capital of $24,041,000. The Company's operating activities provided
cash of $3,164,000 for the nine months ended October 31, 1996. The Company's
investing activities used cash of $6,116,000 in the nine months ended October
31, 1996. The principal uses of cash have been the purchase of property and
equipment of $2,569,000, software development costs of $1,974,000 and purchased
software of $1,650,000. During the nine months ended October 31, 1996, the
Company's financing activities have provided cash of $4,060,000, due to the
exercise of stock options. The Company believes that its current cash balances
and cash flow from operations will be sufficient to meet its working capital and
10
<PAGE>
capital expenditure requirements through the next twelve months. To date,
inflation has not had a material impact on the Company's financial results.
Certain Factors That May Affect Future Results
Information provided by the Company or statements made by its employees may
contain "forward-looking" information which involves risk and uncertainties. In
particular, statements contained in the Management's Discussion and Analysis of
Financial Condition and Results of Operations which are not historical facts
(including, but not limited to, statements concerning sufficiency of funds for
the Company's working capital) are "forward-looking statements." The Company's
actual future results may differ significantly from those stated in any forward-
looking statements. Factors that may cause such differences include, but are not
limited to, the factors discussed below as well as the accuracy of the Company's
internal estimates of revenue and operating expense levels. Each of these
factors, and others, are discussed from time to time in the Company's Securities
and Exchange Commission filings.
The Company's future results are subject to substantial risks and
uncertainties. Revenue growth rates experienced by the Company to date may not
be indicative of future growth rates and there can be no assurance that the
Company will remain profitable in the future. The market for the Company's
system-level and call-avoidance software is characterized by rapidly changing
technology, evolving industry standards and frequent new product introductions.
The Company's future success will depend upon its ability to enhance its current
software and to develop and introduce new software which keeps pace with
technological developments and evolving industry standards as well as to respond
to changes in customer requirements. The Company may confront new competitors as
it introduces new products and expands into new markets. Certain current and
potential competitors of the Company are more established, benefit from greater
market recognition and have substantially greater financial, development and
marketing resources than the Company. Competitive pressures or other factors,
including entry into new markets, may result in unit royalty erosion that could
have a material adverse effect on the Company's results of operations. The
Company believes that its success to date has been largely dependent on the
adoption of its software by key participants in the PC industry the loss of
which could adversely affect the Company's product development efforts. In
addition, the inability of the Company to replace revenues provided by a key
customer could have a material adverse effect on the Company's business and
financial condition. The Company's success to date has depended to a significant
extent upon a number of key management and technical employees. The loss of
services of one or more of these key employees could have a material adverse
effect on the Company's business and financial condition.
The Company believes that future results of operations may fluctuate
significantly based upon numerous factors including the timing of new product
introductions, product mix, activities of competitors and the ability of the
Company to penetrate new markets. The volume and timing of new contracts could
have a significant impact on operating results for a particular quarter and may
result in unanticipated quarterly earnings, shortfalls or losses. In such an
event, the price of the Company's Common Stock would likely be materially
adversely affected.
11
<PAGE>
Part II. OTHER INFORMATION
Item 6. - Exhibits and Reports on Form 8-K
(a) Exhibits.
--------
None
(b) Reports on Form 8-K:
-------------------
No reports on Form 8-K were filed during the three month period
for which this report is filed.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
SYSTEMSOFT CORPORATION
December 12, 1996 By:/s/ Robert F. Angelo
--------------------------------
Robert F. Angelo
President, Chief Executive Officer and
Chairman of the Board
December 12, 1996 By:/s/ David P. Sommers
---------------------------------
David P. Sommers
Vice President, Finance and
Chief Financial Officer
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTING FROM 10-Q
QUARTER ENDED 10/31/96 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> JAN-31-1997 JAN-31-1996
<PERIOD-START> AUG-31-1996 AUG-01-1995
<PERIOD-END> OCT-31-1996 OCT-31-1995
<CASH> 8,513,714 7,406,039
<SECURITIES> 3,882,898 3,960,490
<RECEIVABLES> 12,476,010 8,253,818
<ALLOWANCES> 760,379 491,037
<INVENTORY> 0 0
<CURRENT-ASSETS> 28,706,183 22,002,032
<PP&E> 7,226,429 4,291,032
<DEPRECIATION> 2,804,423 1,460,503
<TOTAL-ASSETS> 38,493,219 26,951,922
<CURRENT-LIABILITIES> 4,665,271 2,687,016
<BONDS> 0 0
0 0
0 0
<COMMON> 226,800 211,060<F1>
<OTHER-SE> 32,876,758 23,329,456<F1>
<TOTAL-LIABILITY-AND-EQUITY> 38,493,219 26,951,922
<SALES> 7,838,810 4,260,003
<TOTAL-REVENUES> 10,307,975 6,189,083
<CGS> 865,703 251,166
<TOTAL-COSTS> 2,095,209 1,103,017
<OTHER-EXPENSES> 5,689,361 3,939,718
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 156 337
<INCOME-PRETAX> 2,619,111 1,270,086
<INCOME-TAX> 916,689 444,491
<INCOME-CONTINUING> 1,702,422 825,595
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,702,422 825,595
<EPS-PRIMARY> .07 .04<F1>
<EPS-DILUTED> .07 .04<F1>
<FN>
<F1>THE COMPANY ISSUED A 2:1 STOCK SPLIT IN THE FORM OF A STOCK DIVIDEND ON JULY
17, 1996. ALL AMOUNTS HAVE BEEN RETROACTIVELY ADJUSTED FOR THE EARLIEST PERIOD
PRESENTED.
</FN>
</TABLE>
