<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 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: 0-25612
STARBASE CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 33-0567363
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
4 Hutton Centre Drive, Suite 800
Santa Ana, California 92707
(Address of principal executive offices) (Zip code)
(714) 445-4400
(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) been subject to such filing requirements
for the past 90 days.
Yes [X] No [ ]
Number of shares outstanding as of July 31, 2000: Common Stock: 46,549,629
Preferred Stock: 0
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StarBase Corporation
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Balance Sheets at June 30, 2000 (Unaudited) and March 31, 2000 3
Consolidated Statements of Operations (Unaudited) for the three month
periods ended June 30, 2000 and 1999 4
Consolidated Statements of Comprehensive Operations (Unaudited) for the three
month periods ended June 30, 2000 and 1999 5
Consolidated Statements of Cash Flows (Unaudited) for the three month
periods ended June 30, 2000 and 1999 6
Notes to Consolidated Financial Statements (Unaudited) 7
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 12
ITEM 3. Qualitative and Quantitative Disclosures about Market Risk 21
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 22
Signatures 23
</TABLE>
2
<PAGE> 3
PART I
ITEM 1
FINANCIAL STATEMENTS
STARBASE CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
June 30, March 31,
2000 2000
----------- --------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 10,488 $ 11,448
Restricted cash 39 39
Marketable securities 9 11
Accounts receivable, net of allowances of $403 at
June 30, 2000 and $202 at March 31, 2000 6,546 6,696
Notes and other receivables, net of allowances of
$720 at June 30, 2000 and $707 at March 31, 2000 96 26
Prepaid expenses and other assets 984 568
--------- --------
Total current assets 18,162 18,788
Property and equipment, net 1,547 1,526
Intangible assets, net 32,767 21,074
Note receivable from officer 100 99
Long-term restricted cash 39 39
Other non-current assets 253 687
--------- --------
Total assets $ 52,868 $ 42,213
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 1,430 $ 1,358
Accrued compensation 1,632 1,475
Other accrued liabilities 575 390
Deferred revenue 4,293 4,017
Current portion of long-term obligations 273 119
--------- --------
Total current liabilities 8,203 7,359
Long-term liabilities:
Long-term obligations, less current portion 95 49
Long-term deferred revenue 431 535
--------- --------
Total long-term liabilities 526 584
--------- --------
Total liabilities 8,729 7,943
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value; 10,000,000 shares
authorized, none issued and outstanding at
June 30, 2000 and March 31, 2000 -- --
Common stock, $.01 par value; 80,000,000 authorized;
46,440,669 and 44,315,610 shares issued and
outstanding at June 30, 2000 and March 31, 2000 464 443
Additional paid-in capital 105,981 92,242
Accumulated deficit (62,193) (58,305)
Accumulated other comprehensive loss (113) (110)
--------- --------
Total stockholders' equity 44,139 34,270
--------- --------
Total liabilities and stockholders' equity $ 52,868 $ 42,213
========= ========
</TABLE>
The accompanying notes are an integral part of the financial statements
3
<PAGE> 4
STARBASE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three months ended
June 30,
--------------------------
2000 1999
----------- --------
(Unaudited)
<S> <C> <C>
Revenues:
License $ 5,114 $ 2,972
Service 1,927 521
-------- --------
Total revenues 7,041 3,493
Cost of Revenues:
License 104 249
Service 925 197
Amortization of intangibles 405 --
-------- --------
Total cost of revenues 1,434 446
-------- --------
Gross margin 5,607 3,047
Operating Expenses:
Research and development 1,827 975
Sales and marketing 3,922 1,927
General and administrative 1,540 795
Non-cash stock based compensation 1,122 9
Amortization of intangibles 1,240 49
-------- --------
Total operating expenses 9,651 3,755
-------- --------
Operating loss (4,044) (708)
Interest and other income (expense) 157 3
-------- --------
Loss before income taxes (3,887) (705)
Provision for income taxes 1 --
-------- --------
Net loss (3,888) (705)
Non-cash dividend and accretion of beneficial
conversion feature -- 596
-------- --------
Net loss applicable to common stockholders $ (3,888) $ (1,301)
======== ========
Per share data:
Basic and diluted net loss per common share $ (0.09) $ (0.05)
======== ========
Basic and diluted weighted average common
shares outstanding 44,335 27,924
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements
4
<PAGE> 5
STARBASE CORPORATION
CONSOLIDATED STATEMENTS OF COMPRENSIVE OPERATIONS
(in thousands)
Three months ended
June 30,
----------------------
2000 1999
------- ------
(Unaudited)
Net loss $(3,888) $(705)
Other comprehensive loss:
Unrealized loss on available for sale securities (2) --
------- -----
Total comprehensive loss $(3,890) $(705)
======= =====
The accompanying notes are an integral part of the financial statements
5
<PAGE> 6
STARBASE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Three months ended
June 30,
-------------------
2000 1999
-------- -------
(Unaudited)
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss $ (3,888) $ (705)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 1,785 138
Provision for doubtful accounts and sales returns 34 --
Stock option compensation expense 1,122 9
Changes in operating assets and liabilities, net
of effects of acquisitions:
Accounts receivable 273 (1,717)
Notes and other receivables (91) 5
Prepaid expenses and other assets (247) 45
Other non-current assets (63) 19
Accounts payable and accrued liabilities (421) 161
Deferred revenue 164 868
-------- -------
Net cash used in operations (1,332) (1,177)
Cash Flows from Investing Activities:
Cash paid for acquisitions, net of cash acquired 30 --
Capital expenditures (161) (43)
-------- -------
Net cash used in investing activities (131) (43)
Cash Flows from Financing Activities:
Proceeds from issuance of common stock:
Exercise of options 181 447
Exercise of warrants 400 294
Payment of financing related costs (1) (21)
Payments on capitalized lease obligations (77) (27)
-------- -------
Net cash provided by financing activities 503 693
-------- -------
Net decrease in cash (960) (527)
Cash and cash equivalents, beginning of period 11,448 1,363
-------- -------
Cash and cash equivalents, end of period $ 10,488 $ 836
Supplemental Cash Flow Information:
Interest paid $ 10 $ 7
======== =======
Income taxes paid $ 1 $ 0
======== =======
Non-cash investing and financing transactions:
Non-cash preferred stock and common stock dividends $ -- $ 596
======== =======
Conversion of preferred stock to common stock $ -- $ 7
======== =======
Capitalized lease and insurance financing $ 171 $ 63
======== =======
Change in unrealized loss on securities
available for sale $ 2 $ --
======== =======
</TABLE>
See Note 7 for details of assets acquired and liabilities
assumed in purchase transactions.
The accompanying notes are an integral part of the financial statements
6
<PAGE> 7
STARBASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS
StarBase Corporation, a Delaware corporation (the Company), is a leading
provider of collaboration products for the creation and management of integrated
code and content eBusiness applications. Collaboration is the simultaneous
coordination, management and communication of geographically dispersed
contributors of both code and content for eBusiness applications. The Company
develops, markets, and supports a complete family of user-friendly software
products that support the continuous cycle of creating, linking and managing
digital assets, which comprise complex eBusiness applications. The Company's
products enable users with differing technical and functional backgrounds to
collaborate on the production of Web sites and eBusiness initiatives from
multiple locations. The Company's professional services organization provides
implementation, consulting and training expertise. The Company's current product
line consists of StarTeam(R) and StarTeam(R) Enterprise, StarDisk(R),
StarGate(R), StarSweeperTM, StarTeam Web Edition(R), StarTeam Web Approval(R),
StarFlow(R), StarEstimator(R), StarSync(R), RoundTable(R), and Versions(R) as
well as the product lines acquired in the Premia acquisition: CodeWright(R),
DocWright(R) and SpyWright(R).
2. BASIS OF PRESENTATION
The unaudited interim consolidated financial statements as of June 30, 2000 and
for the three months ended June 30, 2000, and 1999, have been prepared pursuant
to the rules and regulations of the Securities and Exchange Commission.
Accordingly, certain information and footnote disclosures normally included in
consolidated financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have not been
presented. The interim consolidated financial statements reflect all normal
recurring adjustments that are, in the opinion of management, necessary for a
fair presentation of the Company's financial position, results of operations and
cash flows for the period presented. The results of operations for the three
months ended June 30, 2000 are not necessarily indicative of the operating
results for the full year. The accompanying unaudited consolidated financial
statements should be read in conjunction with the financial statements and the
notes thereto included in the StarBase Corporation report to the Securities and
Exchange Commission on Form 10-K, for the year ended March 31, 2000.
NET LOSS PER SHARE
Basic and diluted net loss per share applicable to common stockholders is
computed using the weighted average number of common shares outstanding during
the periods presented. Potentially dilutive shares have not been included where
inclusion would be antidilutive. Escrow Shares (1,418,638) will be released to
the founders upon attaining certain defined cash flow requirements. The release
of the Escrow Shares will be deemed compensatory and, accordingly, will result
in charges to earnings equal to the fair market value of these shares recorded
ratably over the period beginning on the date when management determines that
the cash flow requirements are probable of being met and ending on the date when
the goal is attained, causing the Escrow Shares to be released. At the time a
goal is attained, previously unrecognized compensation expense will be adjusted
by a one-time charge based on the then fair market value of the shares released
from escrow. Such charges could substantially reduce the Company's net income or
increase the Company's loss for financial reporting purposes in the periods such
charges are recorded. Based upon historical results, the attainment of the goal
is not probable at this time. However, this does not preclude the attainment of
the goal with future results.
For the three months ended June 30, 2000, net loss and net loss applicable to
common stockholders was $3,888,000. For the three months ended June 30, 1999,
net loss applicable to common stockholders was $1,301,000 representing net loss
of $705,000 plus non-cash dividend and accretion of beneficial conversion
feature of $596,000 consisting of $548,000 associated with the Series H
Preferred Stock and $48,000 associated with the Series I Preferred Stock.
7
<PAGE> 8
STARBASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Potentially dilutive securities, which consist of options to purchase 3,742,198
shares of common stock at prices ranging from $0.625 to $13.07 per share,
warrants to purchase 172,715 shares of common stock at prices ranging from $0.73
to $3.88 per share and 1,418,638 common shares held in escrow were not included
in the computation of diluted loss per share because such inclusion would have
been antidilutive for the three month period ended June 30, 2000. Common stock
equivalents, which consist of options to purchase 2,095,476 shares of common
stock at prices ranging from $0.625 to $3.44 per share, warrants to purchase
2,678,657 shares of common stock at prices raging from $0.59 to $3.25 per share,
and 1,418,638 common shares held in escrow were not included in the computation
of diluted loss per share because such inclusion would have been antidilutive
for the three month period ended June 30, 1999.
3. COMPOSITION OF CERTAIN BALANCE SHEET CAPTIONS
<TABLE>
<CAPTION>
(In thousands) June 30, March 31,
2000 2000
----------- --------
(Unaudited)
<S> <C> <C>
Property and equipment:
Computer hardware $ 1,991 $ 1,836
Furniture and fixtures 633 628
Computer software 239 239
Motor vehicle 32 32
Leasehold improvements 251 251
-------- --------
3,146 2,986
Less accumulated depreciation and amortization (1,599) (1,460)
-------- --------
$ 1,547 $ 1,526
======== ========
Intangible assets:
Patents and trademarks $ 20 $ 20
Developed technology 9,533 988
Customer lists 161 161
Assembled workforce 368 368
Goodwill 24,837 13,959
-------- --------
34,919 21,581
Less accumulated amortization (2,152) (507)
-------- --------
$ 32,767 $ 21,074
======== ========
</TABLE>
4. EQUITY TRANSACTIONS
WARRANTS
Warrant activity for the three month period ended June 30, 2000 is as follows:
Warrant Price
Shares Per Share
--------- -------------
Outstanding at March 31, 2000 239,669 $0.73 - $2.00
Granted 146,379 $3.88
Exercised (213,333) $1.25 - $2.00
--------
Outstanding at June 30, 2000 172,715 $0.73 - $3.88
========
8
<PAGE> 9
STARBASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. STOCK OPTION PLAN
The Company's stock option plan (the 1996 Plan) provides for the grant of
non-qualified and incentive stock options to directors, officers and employees
of the Company. Options are granted at exercise prices equal to the fair market
value of the common stock on the date of grant. Generally, twenty-five percent
of the options are available for exercise at the end of one year, while the
remainder of the grant is exercisable ratably over the next thirty-six month
period, provided the optionee remains in service to the Company. The
weighted-average remaining contractual life of options outstanding at June 30,
2000 was 8.4 years. A total of 2,833,333 shares of common stock have been
authorized under the 1996 Plan, of which 1,547,751 were outstanding at June 30,
2000. In addition, the Company has granted non-qualified stock options, of which
12,318,807 were outstanding at June 30, 2000. As a result of the acquisition of
Premia Corporation, the Company assumed all of the outstanding options granted
under the Premia ISO stock option plan, of which 222,413 were outstanding at
June 30, 2000.
Stock option activity for the three month period ended June 30, 2000 is as
follows:
Weighted-
Average
Exercise
Shares Price
---------- ---------
Outstanding at March 31, 2000 11,836,123 $4.16
Granted 2,700,157 $4.84
Lapsed or canceled (316,310) $8.09
Exercised (130,999) $1.26
----------
Outstanding at June 30, 2000 14,088,971 $4.22
==========
Exercisable at June 30, 2000 3,742,198 $1.86
==========
Stock option summary information at June 30, 2000 is as follows:
<TABLE>
<CAPTION>
Options Outstanding
---------------------------------------------------- Options Exercisable
Weighted-Average --------------------------------
Range of Remaining Weighted-Average Weighted-Average
Exercise Prices Shares Contractual Life Exercise Price Shares Exercise Price
--------------- ---------- ---------------- ---------------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
$0.50 - $1.00 1,951,151 8.3 years $0.67 885,572 $0.67
$1.01 - $1.50 3,959,571 8.2 years $1.31 1,115,939 $1.29
$1.51 - $2.00 1,712,697 7.9 years $1.66 782,372 $1.65
$2.01 - $2.50 406,352 8.9 years $2.11 260,964 $2.07
$2.51 - $3.00 226,292 5.1 years $2.68 113,245 $2.69
$3.01 - $3.50 178,126 7.6 years $3.46 20,416 $3.44
$3.51 - $4.00 1,546,820 7.2 years $3.87 446,250 $3.88
$4.01 - $4.50 285,000 8.0 years $4.05 0 $0.00
$4.51 - $10.00 1,109,300 9.4 years $5.91 53,445 $5.07
$10.01- $20.00 2,713,662 9.6 years $12.68 63,995 $10.96
--------- ---------
14,088,971 3,742,198
========== =========
</TABLE>
9
<PAGE> 10
STARBASE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. OPERATING SEGMENT INFORMATION
Operating segments are defined as components of an enterprise about which
separate financial information is available that is evaluated regularly by the
Company's chief operating decision-maker, or decision-making group, in deciding
how to allocate resources and in assessing performance. The operating segments
of the Company are managed separately because each segment represents a
strategic business unit that offers different products or services.
The Company's reportable operating segments include software licenses and
services. The software licenses operating segment develops and markets the
Company's eBusiness collaboration products. The services segment provides
after-sale support for software products and fee-based training and consulting
services related to the Company products.
The Company does not allocate operating expenses to these segments, nor does it
allocate specific assets to these segments. Therefore, segment information
reported includes only revenues, cost of revenues and gross margin.
Operating segment data for the three month ended June 30, 2000 and 1999 was as
follows:
Software
licenses Services Total
-------- -------- ------
(In thousands)
Three months ended June 30, 2000:
Revenues $5,114 $1,927 $7,041
Cost of revenues 509 925 1,434
------ ------ ------
Gross margin $4,605 $1,002 $5,607
====== ====== ======
Three months ended June 30, 1999:
Revenues $2,794 $ 699 $3,493
Cost of revenues 164 282 446
------ ------ ------
Gross margin $2,630 $ 417 $3,047
====== ====== ======
7. ACQUISITIONS
On April 13, 2000, the Company, through a wholly owned subsidiary, acquired all
of the outstanding common stock of ObjectShare, Inc. (ObjectShare), in exchange
for 1,210,838 shares of the Company's common stock valued at $8,842,000,
transaction costs of $1,065,000 (payable in 100,000 shares of the Company's
common stock valued at $506,000 and cash of $559,000) and the assumption of net
liabilities of $972,000. The net liabilities assumed include a write-down of
$279,000 of property to its estimated fair market value and the assumption of
$253,000 of severance liabilities which was settled by the issuance of 49,985
shares of the Company's common stock. The acquisition was accounted for as a
purchase and the purchase price of $10,879,000 was allocated as follows:
(In thousands)
Current assets $ 179
Goodwill 11,630
Long-term assets 42
Liabilities assumed (972)
-------
Total purchase price $10,879
=======
ObjectShare's operating results have been included in the Company's financial
statements from the date of acquisition. Goodwill will be amortized on a
straight-line basis over five years and recorded as an operating expense.
10
<PAGE> 11
On June 12, 2000, the Company, through a wholly owned subsidiary, acquired all
of the outstanding common stock of Genitor Corporation (Genitor), in exchange
for 419,904 shares of the Company's common stock valued at $2,456,000,
transaction costs of $7,000, and the assumption of net liabilities of $34,000.
The acquisition was accounted for as a purchase and the purchase price of
$2,459,000 was allocated as follows:
(In thousands)
Current assets $ 34
Developed technology 2,455
Long-term assets 4
Liabilities assumed (34)
------
Total purchase price $2,459
======
Genitor's operating results have been included in the Company's financial
statements from the date of acquisition. Developed technology will be amortized
on a straight-line basis over five years and recorded as a cost of revenue.
The following unaudited pro forma results of operations assume that the Genitor
acquisition had occurred on the first day of each period presented. The pro
forma results of operations are presented for information purposes only. It is
based on historical information and does not necessarily reflect the actual
results that would have occurred nor is it indicative of future results of
operations of the combined enterprise.
Three months ended Year Ended
June 30, 2000 March 31, 2000
------------------ --------------
(in thousands, except
per share amounts)
Net revenues $ 7,119 $17,676
Net loss (4,045) (6,619)
Net loss applicable to common stockholders (4,045) (7,165)
Basic and diluted net loss per common share (0.09) (0.21)
11
<PAGE> 12
PART I
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The discussion in this Form 10-Q contains forward-looking statements that
involve risks and uncertainties. The statements that are not purely historical
are forward-looking statement within the meaning of the Private Securities
Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as
amended, and Sections 21E of the Securities Exchange Act of 1934, as amended. We
have based these forward-looking statements on currently available information
and our current beliefs, expectation and projections about future events,
including, among other things: successfully implementing our business strategy;
maintaining and expanding market acceptance of the products we offer; and our
ability to successfully compete in our marketplace. All forward-looking
statements included in this document are based on the information available to
the Company on the date hereof, and the Company assumes no obligation to update
any such forward-looking statements. Actual results could differ materially from
the results discussed herein. Factors that might cause or contribute to such
differences include, but are not limited to, those discussed under the caption
"Risk Factors" of this document and in the Company's other filing with the
Securities and Exchange Commission, including the Company's Annual Report for
the year ended March 31, 2000 on Form 10-K.
The following discussion should be read in conjunction with the consolidated
financial statements and notes thereto.
RESULTS OF OPERATIONS
The following table summarizes our results of operations as a percentage of
total revenue for the three months ended June 30, 2000 and 1999.
Three months ended
June 30,
--------------------
2000 1999
----- -----
Revenues:
License 72.6% 85.1%
Service 27.4 14.9
----- -----
Total revenues 100.0 100.0
Cost of revenues:
License 1.5 7.1
Service 13.1 5.6
Amortization of intangibles 5.8 --
----- -----
Total cost of revenues 20.4 12.8
----- -----
Gross profit 79.6 87.2
Operating expenses:
Research and development 25.9 27.9
Sales and marketing 55.7 55.2
General and administrative 21.9 22.8
Non-cash stock based compensation 15.9 0.2
Amortization of intangibles 17.6 1.4
----- -----
Total operating expenses 137.0 107.5
----- -----
Loss from operation (57.4) (20.3)
Other income (expense), net 2.2 0.1
----- -----
Loss before income taxes (55.2) (20.2)
Provision for income taxes 0.0 0.0
----- -----
Net loss (55.2) (20.2)
Non-cash dividend and accretion of beneficial
conversion feature -- 17.0
----- -----
Net loss applicable to common stockholders (55.2)% (37.2)%
===== =====
12
<PAGE> 13
THREE MONTHS ENDED JUNE 30, 2000 AND 1999
REVENUES
Revenues were $7.0 million and $3.5 million for the three month periods ended
June 30, 2000 and 1999, respectively, representing an increase of $3.5 million
or 102%. International revenues accounted for less than 10% of total revenue in
the three months ended June 30, 2000 and 1999.
License - License revenues were $5.1 million and $3.0 million for the three
month periods ended June 30, 2000 and 1999, respectively, representing an
increase of $2.1 million or 72%. License revenues represented 72.6% and 85.1% of
total revenues for the three months ended June 30, 2000 and 1999, respectively.
The increase in license revenues was due to an increase in the Company's sales
force along with the new products available through the Premia acquisition. The
acquired products were CostWright, DocWright, and SpyWright.
Service - Service revenues were $1.9 million and $521,000 for the three month
periods ended June 30, 2000 and 1999, respectively, representing an increase of
$1.4 million or 270%. Service revenues represented 27.4% and 14.9% of total
revenues for the three months ended June 30, 2000 and 1999, respectively. The
increase in service revenues was due to an increase in the Company's training
and consulting organization along with an increase in the number of software
licenses sold with maintenance agreements.
COST OF REVENUES
License - License cost of revenues consists primarily of manufacturing and
related costs such as media, documentation, product assembly. The Company
out-sources manufacturing for all software products, with the exception of the
Company's Roundtable product. License cost of revenues was $104,000 and $249,000
for the three month periods ended June 30, 2000 and 1999, respectively,
representing a decrease of $145,000 or 58%. License cost of revenues as a
percentage of total revenue was 1.5% and 7.1% for the three months ended June
30, 2000 and 1999, respectively. The decrease in cost of revenues was a result
of an increase in the average size of the Company's sales thus requiring a fewer
number of manuals and media to be shipped.
Service - Service cost of revenues consists of the costs associated with
performing training and consulting services. Service cost of revenues were
$925,000 and $197,000 for the three month periods ended June 30, 2000 and 1999,
respectively, representing and increase of $728,000 or 370%. Service cost of
revenues as a percentage of total revenue was 13.1% and 5.6% for the three
months ended June 30, 2000 and 1999, respectively. The increases were due to the
increases in the training and consulting organization along with training costs
related to the increase in personnel.
Amortization of intangibles - Amortization of intangibles consists of the
amortization of developed technology associated with the Premia and Genitor
acquisitions. Amortization of intangibles was $405,000 for the three months
ended June 30, 2000 and was 5.8% of total revenues. There was no amortization of
intangibles for the three months ended June 30, 1999. See Note 7 of the Notes to
the Consolidated Financial Statements for more information concerning the
purchase price allocation associated with the Genitor acquisition.
OPERATING EXPENSES
Research and development expenses - Research and development expenses were $1.8
million and $1.0 million for the three months ended June 30, 2000 and 1999,
respectively, representing an increase of 800,000 or 87%. The increase was
primarily related to an increase of 31 software developers and quality assurance
personnel compared to the same period in the prior year.
Sales and marketing - Sales and marketing expenses were $3.9 million and $1.9
million for the three months ended June 30, 2000 and 1999, respectively,
representing an increase of $2.0 million or 103%. The increase was primarily
related to the increase in salaries and related expenses incurred in increase
the sales and marketing staff.
13
<PAGE> 14
General and administrative - General and administrative expenses were $1.5
million and $800,000 for the three months ended June 30, 2000 and 1999,
respectively, representing an increase of $700,000 million or 94%. The increase
was primarily due an increase in salaries and related expenses incurred in
building our infrastructure.
Non-cash stock based compensation - Non-cash stock based compensation was $1.1
million and $9,000 for the three months ended June 20, 2000 and 1999,
respectively, representing an increase of $1.1 million. Non-cash stock based
compensation expense represents the difference between the exercise price of
stock options and warrants granted to non-employees and the deemed fair market
value of the Company's common stock at the date of the grant amortized over the
vesting period.
Amortization of intangibles - Amortization of intangibles was $1.2 million and
$49,000 for the three months ended June 30, 2000 and 1999, respectively. This
includes amortization of goodwill, customer list and assembled workforce
associated with the SITE, Premia, and ObjectShare acquisitions. See Note 7 to
the Notes to the Consolidated Financial Statements for more information
concerning the purchase price allocation associated with the ObjectShare
acquisition.
Other income (expense), net - Other income (expense), net was $157,000 and
$3,000 for the three months ended June 30, 2000 and 1999, respectively,
representing an increase of $154,000. The increase is due to higher interest
income resulting from more cash being available to invest.
Provision for income taxes - Provision for income taxes was $1,000 for the three
months ended June 30, 2000. This represents the minimum amount required for
state taxes. The Company has not recorded a current or deferred provision for
deferral income taxes for any period to date, as a result of losses incurred
since its inception.
Net loss applicable to common stockholders - Net loss applicable to common
stockholders for the three months ended June 30, 2000 was $3.9 million
consisting of our net loss for the period. Net loss applicable to common
stockholders for the three months ended June 30, 1999 was $1.3 million
consisting of our net loss for the period of $705,000 and $596,000 of non-cash
dividend and accretion of beneficial conversion feature of preferred stock.
INFLATION
Inflation has not had a significant effect on our results of operations of
financial position for the three month periods ended June 30, 2000 and 1999.
LIQUIDITY AND CAPITAL RESOURCES
We have funded our business, to date, primarily from the issuance of equity
securities. Cash and cash equivalents as of June 30, 2000 were $10,488,000 and
$11,448,000 as of March 31, 2000. At June 30, 2000 the Company had working
capital of $9,959,000, compared to $11,429,000 at March 31, 2000.
Net cash used in operating activities was $1,332,000 and $1,177,000 for the
three months ended June 30, 2000 and 1999, respectively. The increase was
primarily due to an increased loss from operations of $3,183,000 offset by an
increase in depreciation and amortization of $1,647,000 and an increase in stock
option compensation expense of $1,113,000.
Net cash used in investing activities was $131,000 and $43,000 for the three
months ended June 30, 2000 and 1999, respectively. The increase was primarily
due to an increase in capital expenditures.
Net cash provided from financing activities was $503,000 and $693,000 for the
three months ended June 30, 2000 and 1999, respectively. For the three months
ended June 30, 2000, exercise of options provided $181,000 and exercise of
warrants provided $400,000.
The Company believes that our existing cash balances and cash equivalents and
cash from operations will be sufficient to finance our operations through at
least the next twelve months. If additional financing is needed, there can be no
assurance that such financing will be available to us on commercially reasonable
term or at all.
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The Company warrants products against defects for 90 days and has a policy
permitting the return of products within 30 days. Warranty costs and returns,
which are not significant, have historically been within management's
expectations. The Company has reserved approximately $403,000 at June 30, 2000
for future returns and other collection issues, no change from March 31, 1999.
NEW ACCOUNTING STANDARDS
In December 1999, Staff Accounting Bulletin No. 101 was issued to provide to
staff's views in applying generally accepted accounting principles to revenue
recognition in financial statements. SAB 101, is effective no later than the
fourth fiscal quarter of fiscal years beginning after December 15, 1999. The
Company is currently evaluating the impact this bulletin may have on its
financial statements.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities, which the Company
is required to adopt effective in its fiscal year 2002. SFAS No. 133 will
require the Company to record all derivatives on the balance sheet at fair
value. The Company does not currently engage in hedging activities and the
effect of adopting SFAS No. 133 is not presently determinable.
RISK FACTORS
Our business is subject to a variety of risks and special considerations. As a
result, our prospective investors should carefully consider the risks described
below and the other information in this document before deciding to invest in
the shares.
Our business, financial condition and results of operations could be adversely
affected by any of the following risks. If we are adversely affected by such
risks, then the trading price of our common stock could decline, and you could
lose all or part of your investment.
OUR QUARTERLY REVENUES AND OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY, WHICH
MAY CAUSE THE PRICE OF OUR COMMON STOCK TO DECLINE
Our revenues and operating results for any quarter are not necessarily
indicative of results to be expected in future periods. We expect our common
stock price to vary with our operating results and, consequently, any adverse
fluctuations in our operating results could have an adverse effect on our stock
price. Our operating results have in the past been, and will continue to be,
subject to quarterly fluctuations as a result of a number of factors. These
factors include:
o the size and timing of customer orders and the recognition of revenue from
those orders;
o changes in budgets or purchasing patterns of our customers;
o increased pricing pressure from competitors in the software and Internet
industries;
o the introduction and market acceptance of new technologies and standards;
o the integration of people, operations, and products from acquired
businesses and technologies;
o changes in operating expenses and personnel; and
o changes in general and specific economic conditions in the software and
Internet industries.
WE HAVE A HISTORY OF LOSSES AND EXPECT TO INCUR FUTURE LOSSES
Since our inception, we have had a history of losses and as of June 30, 2000, we
had an accumulated deficit of $62,193,000. Further, our cash requirements to run
our business have been and will continue to be significant. In the past, we have
had negative cash flow from operations. We anticipate incurring additional
losses until we can successfully develop, market and distribute our products.
Developing software products is difficult and time consuming and requires the
coordinated participation of various technical and marketing personnel and, at
times, independent third-party suppliers. This development process often
encounters unanticipated delays and expenses. The likelihood of the success of
our business must be considered in light of the problems, expenses,
difficulties, complications and unforeseen delays frequently encountered in
connection with the development of new software technologies. Further, our
ability to achieve or sustain our revenue or profit goals depends on a number of
factors outside of our control, including the extent to which:
o there is market acceptance of commercial services utilizing our products;
o our competitors announce and develop competing products or significantly
lower their prices; and
o our customers promote our product.
We may not be able to achieve our goals and become profitable.
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WE RELY HEAVILY ON SALES OF STARTEAM AND IF IT DOES NOT SUSTAIN OR INCREASE
MARKET ACCEPTANCE, WE ARE LIKELY TO EXPERIENCE LARGER LOSSES
For the three months ended June 30, 2000, we generated 55% of our total revenues
and 76% of our licensing revenues from licenses of our StarTeam product line. We
believe that revenues generated from StarTeam will continue to account for a
large percentage of our revenues for the foreseeable future. A decline in the
price of, or demand for, StarTeam would have a material adverse effect on our
business, operating results and financial condition. The following events may
reduce the demand for StarTeam:
o competition from other products;
o flaws in our software products or incompatibility with third-party
hardware or software products;
o negative publicity or evaluation of our company; or
o obsolescence of the hardware platforms or software environments in which
our systems run.
In addition, our future financial performance will depend upon successfully
developing and selling enhanced versions of StarTeam. If we fail to deliver
product enhancements or new products for our customers it will be difficult for
us to succeed.
WE FACE INTENSE COMPETITION FOR EBUSINESS SOFTWARE, WHICH COULD MAKE IT
DIFFICULT TO ACQUIRE AND RETAIN CUSTOMERS
The eBusiness software market is intensely competitive and rapidly evolving. Our
customer's requirements and the technology available to satisfy those
requirements continually change. We expect competition to intensify in the
future. Our principal competitors include in-house development efforts by
potential customers or partners, vendors of code management software, and
vendors of content management software. Many of these companies have longer
operating histories and significantly greater financial, technical, marketing
and other resources than we do. Many of these companies can also leverage
extensive customer bases and adopt aggressive pricing policies to gain market
share. Potential competitors may bundle their products in a manner that may
discourage users from purchasing our products. In addition, it is possible that
new competitors or alliances among competitors may emerge and rapidly acquire
significant market share.
Competitive pressures may make it difficult for us to acquire and retain
customers and may require us to reduce the price of our software. If we fail to
compete successfully against current or future competitors, we could lose
customers and our business, operating results and financial condition would
suffer.
THE SALES CYCLE FOR OUR PRODUCTS CAN BE LONG AND MAY HARM OUR OPERATING RESULTS
The period of time between initial customer contact and an actual sales order
may span several months. This long sales cycle increases the risk that we will
not forecast our revenue accurately and adjust our expenditures accordingly. The
longer the sales cycle, the more likely a customer is to decide not to purchase
our products or to scale down its order of our products for various reasons,
including changes in our customers' budgets and purchasing priorities and
actions by competitors, including introduction of new products and price
reductions. In addition, we often must provide a significant level of education
to our prospective customers regarding the use and benefit of our products,
which may cause additional delays during the evaluation process.
WE MUST ATTRACT AND RETAIN QUALIFIED PERSONNEL, WHICH IS PARTICULARLY DIFFICULT
FOR US BECAUSE WE COMPETE WITH OTHER SOFTWARE COMPANIES WHERE COMPETITION FOR
PERSONNEL IS EXTREMELY INTENSE
Our success depends on our ability to attract and retain qualified, experienced
employees. We compete in a relatively new market and there are a limited number
of people who have acquired the skills needed to provide the services that our
clients demand. We compete for experienced engineering, sales and consulting
personnel with Internet professional
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services firms, software vendors, consulting firms and professional services
companies. Since we may issue options as compensation to recruit employees, the
volatility of the market price of our common stock may make it difficult for us
to attract and retain highly qualified employees.
In addition, our customers that license our software generally engage our
professional services organization to assist with support, training, consulting
and implementation of their Web solutions. While we have recently established
relationships with some third-party service providers, we continue to be the
primary provider of these services. Competition for qualified services personnel
with the appropriate Internet specific knowledge is intense. We could also
experience deterioration in service levels or decreased customer satisfaction.
Any of these events could disrupt our business and have a materially adverse
effect on our business, operating results and financial condition.
IF WE DO NOT DEVELOP OUR INDIRECT SALES CHANNEL, OUR REVENUES MAY DECLINE
Domestic and international resellers and original equipment manufacturers may be
able to reach new customers more quickly or more effectively than our direct
sales force. Although we are currently investing and plan to continue to invest
significant resources to develop these indirect sales channels, we may not
succeed in establishing a channel that can market our products effectively and
provide timely and cost-effective customer support and services. In addition, we
may not be able to manage conflicts across our various sales channels, and our
focus on increasing sales through our indirect channel may divert management
resources and attention from our direct sales efforts.
IF WE DO NOT CONTINUE TO RECEIVE REPEAT BUSINESS FROM EXISTING CUSTOMERS, OUR
REVENUE WILL SUFFER
We generate a significant amount of our software license revenues from existing
customers. Most of our current customers initially purchase a limited number of
licenses as they implement and adopt our products. Even if the customer
successfully uses our products, customers may not purchase additional licenses
to expand the use of our products. Purchases of expanded licenses by these
customers will depend on their success in deploying our products, their
satisfaction with our products and support services and their use of competitive
alternatives. A customer's decision to widely deploy our products and purchase
additional licenses may also be affected by factors that are outside of our
control or which are not related to our products or services. In addition, as we
deploy new versions of our products or introduce new products, our current
customers may not require the functionality of our new products and may decide
not to license these products.
OUR PRODUCTS COULD BECOME OBSOLETE IF WE ARE UNABLE TO ADAPT TO THE RAPID
CHANGES IN THE EBUSINESS MARKET
Rapidly changing Internet technology and standards may impede market acceptance
of our products. The continued success of our products will require us to
develop and introduce new technologies and to offer functionality that we do not
currently provide. We may not be able to quickly adapt our products to new
Internet technology. If Internet technologies emerge that are incompatible with
StarTeam or other new Internet products that we develop, our products may become
obsolete and existing and potential new customers may seek alternatives. The
following factors characterize the markets for our products:
o rapid technological advances;
o evolving industry standards, including operating systems;
o changes in end-user requirements; and
o frequent new product introductions and enhancements.
To succeed, we will need to enhance our current products and develop new
products on a timely basis to stay current with developments related to Internet
technology and to satisfy the increasingly sophisticated requirements of our
customers. Internet commerce technology, particularly eBusiness software
technology, is complex and new products and product enhancements can require
long development and testing periods. Any delays in developing and releasing
enhanced or new products could cause us to lose market share and have a material
adverse effect on our business, operating results and financial condition.
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IF WE FAIL TO ESTABLISH AND MAINTAIN STRATEGIC RELATIONSHIPS, THE MARKET
ACCEPTANCE OF OUR PRODUCTS AND OUR FINANCIAL PERFORMANCE MAY SUFFER
To offer products and services to a larger customer base our direct sales force
depends on strategic partnerships and marketing alliances to obtain customer
leads, referrals and distribution. If we are unable to maintain our existing
strategic relationships or fail to enter into additional strategic
relationships, our ability to increase our sales will be harmed. We would also
lose anticipated customer introductions and co-marketing benefits. In addition,
our strategic partners may not regard us as significant for their own
businesses. Therefore, they could reduce their commitment to us or terminate
their relationships with us, pursue other partnerships or relationships, or
attempt to develop or acquire products or services that compete with our
products and services. Even if we succeed in establishing these relationships,
they may not result in additional customers or revenues.
WE MAY NOT BE ABLE TO SUCCESSFULLY INTEGRATE OUR RECENT ACQUISITION OF PREMIA
CORPORATION
We acquired Premia Corporation on March 8, 2000. The success of this acquisition
will depend on our ability to:
o successfully integrate and manage Premia's technology and operations;
o retain Premia's software developers;
o develop and market new products and enhance existing products based on
Premia's technology; and
o retain Premia's customer base.
Our failure to successfully address the risks associated with our acquisition of
Premia could hurt our ability to develop and market products based on Premia's
technology.
WE MAY ACQUIRE ADDITIONAL TECHNOLOGIES OR COMPANIES IN THE FUTURE AND THESE
ACQUISITIONS COULD RESULT IN DILUTION TO OUR STOCKHOLDERS AND/OR DISRUPT OUR
BUSINESS
We may acquire additional technologies or companies in the future through a
merger, acquisition, joint venture or other structure. We may not be able to
identify, acquire, profitably manage or successfully integrate any acquired
business without substantial expense, delay or other operational or financial
problems. Entering into an acquisition entails many risks, including:
o diversion of management's attention from other business concerns;
o failure to integrate and manage the combined company's business;
o potential loss of key employees, including software developers and other
information technology, or IT, professionals, from either our business or
an acquired business;
o dilution to our existing stockholders as a result of issuing common stock
or other securities; and
o assumption of liabilities of an acquired company.
Any of these risks could significantly harm our business, operating results or
financial condition or result in dilution to our stockholders. Except for the
proposed merger with ObjectShare, we have no current agreements with respect to
any future acquisitions.
WE HAVE LIMITED EXPERIENCE CONDUCTING OPERATIONS INTERNATIONALLY, WHICH MAY MAKE
OVERSEAS EXPANSION MORE DIFFICULT AND COSTLY
To date, we have derived most of our revenues from sales to North American
customers. We plan to expand our international operations in the future. There
are many barriers and risks to competing successfully in the international
marketplace, including:
o costs of customizing products for foreign countries;
o foreign currency risks;
o dependence on local vendors;
o compliance with multiple, conflicting and changing governmental laws and
regulations;
o longer sales cycles; and
o import and export restrictions and tariffs.
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As a result of these competitive barriers to entry and risks, we cannot assure
you that we will be able to successfully market, sell and deliver our products
and services in international markets.
WE MAY FAIL TO EFFECTIVELY MANAGE AND SUPPORT OUR ANTICIPATED GROWTH IN
OPERATIONS
To succeed in the implementation of our business strategy, we must rapidly
execute our sales strategy, further develop and enhance products and expand our
service capabilities. To manage anticipated growth resulting from this strategy,
we must:
o continue to implement and improve our operational, financial and
management information systems;
o hire, train and retain qualified personnel;
o continue to expand and upgrade core technologies; and
o effectively manage multiple relationships with our customers, applications
developers and other third parties.
If we fail to manage and support our growth as planned, our business strategy
and the anticipated growth in revenues and our profitability may not be
achieved.
WE MAY BE UNABLE TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY RIGHTS
Our success depends significantly on our ability to protect our proprietary
technologies. If we are not adequately protected, our competitors could use the
intellectual property that we have developed to enhance their products and
services to our detriment. We rely on a combination of trade secrets,
confidentiality provisions and other contractual provisions to protect our
proprietary rights, but these legal means provide only limited protection.
OUR PRODUCTS USE TECHNOLOGY THAT MAY INFRINGE ON THE PROPRIETARY RIGHTS OF THIRD
PARTIES, WHICH MAY EXPOSE US TO LITIGATION AND OTHER COSTS
As the number of entrants into our market increases, the possibility of a patent
infringement claim against us grows. For example, we inadvertently may be
infringing a patent of which we are unaware. In addition, because patent
applications can take many years to issue, there may be a patent application now
pending of which we are unaware, which will cause us to be infringing such
patent when it issues in the future. To address any patent infringement claims,
we may have to enter into royalty or licensing agreements on commercial terms
that are not favorable to us. A successful claim of product infringement against
us, or our failure to license the infringed or similar technology, may cause us
to delay or cancel shipment of our products or result in significant costs. This
could hurt our revenues and profitability and result in a material adverse
effect on our business, operating results and financial condition. In addition,
any infringement claims, with or without merit, would be time-consuming and
expensive to litigate or settle and could divert management attention from
administering our core business.
OUR FAILURE TO DELIVER DEFECT-FREE SOFTWARE COULD RESULT IN GREATER LOSSES AND
HARMFUL PUBLICITY
Our software products are complex and may contain defects or failures. Moreover,
third parties may develop and spread computer viruses that may damage the
functionality of our software products. Any of these events may result in
delayed or lost revenues, loss of market share, failure to achieve market
acceptance, reduced customer satisfaction, diversion of development resources,
product liability or warranty claims against us, and damage to our reputation.
Although we maintain liability insurance, this insurance coverage may not be
adequate to cover losses from claims against us. Further, defending a product
liability lawsuit, regardless of its merits, could harm our business because it
entails substantial expense and diverts the time and attention of key management
personnel.
OUR PERFORMANCE WILL DEPEND ON THE GROWTH OF THE INTERNET FOR EBUSINESS
Our future success depends heavily on the Internet being accepted and widely
used for commerce. If Internet commerce does not continue to grow or grows more
slowly than expected, our business, operating results and financial condition
would be materially adversely affected. Consumers and businesses may reject the
Internet as a viable commercial medium for a number of reasons, including
potentially inadequate network infrastructure, slow
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development of enabling technologies or insufficient commercial support. The
Internet infrastructure may not be able to support the demands placed on it by
increased Internet usage and bandwidth requirements. Enterprises that have
already invested substantial resources in other methods of conducting eBusiness
may be reluctant or slow to adopt a new approach that may replace, limit or
compete with their existing systems. Any of these factors could inhibit the
growth of eBusiness solutions and in particular the market's acceptance of our
products and services. In addition, delays in the development or adoption of new
standards and protocols required to handle increased levels of Internet
activity, or increased government regulation, could cause the Internet to lose
its viability as a commercial medium. Even if the required infrastructure,
standards, protocols or complementary products, services or facilities are
developed, we may incur substantial expenses adapting our solutions to changing
or emerging technologies.
THERE IS SUBSTANTIAL RISK THAT FUTURE REGULATIONS COULD BE ENACTED THAT EITHER
DIRECTLY RESTRICT OUR BUSINESS OR INDIRECTLY IMPACT OUR BUSINESS BY LIMITING THE
GROWTH OF INTERNET COMMERCE
As Internet commerce evolves, we expect that federal, state or foreign agencies
will adopt new legislation or regulations covering issues such as user privacy,
pricing, content and quality of products and services. If enacted, these laws,
rules or regulations could directly or indirectly harm us to the extent that
they impact our business, customers and potential customers. We cannot predict
if or how any future legislation or regulations would impact our business.
Although many of these regulations may not apply to our business directly, we
expect that laws regulating or affecting commerce on the Internet could
indirectly harm our business.
WE MAY BE UNABLE TO MEET OUR FUTURE CAPITAL REQUIREMENTS
We expect cash on hand, cash equivalents, our line of credit and cash from
future operations to meet our current working capital and capital expenditure
needs. We may need to raise additional funds for other purposes and we cannot be
certain that we would be able to obtain additional financing on favorable terms,
if at all. If we cannot raise necessary funds on acceptable terms, we may not be
able to develop or enhance our products, take advantage of future opportunities
or respond to competitive pressures or unanticipated capital requirements, which
could have a material adverse effect on our business, operating results and
financial condition.
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ITEM 3
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
It is our current policy to not enter into derivative financial instruments. We
do not currently have any significant foreign currency exposure since we do not
transact business in foreign currencies. Due to this, we do not have any
significant overall currency exposure at June 30, 2000.
We are exposed to a number of market risks in the ordinary course of business.
These risks, which include interest rate risk, foreign currency exchange risk
and commodity price risk, arise in the normal course of business rather than
from trading. We have examined our exposures to these risks and concluded that
none of our exposures in these areas is material to fair values, cash flows or
earnings. We regularly review these risks to determine if we should enter into
active strategies, such as hedging, to help manage the risks. At the present
time, we do not have any hedging programs in place and we are not trading in any
financial or derivative instruments.
We currently do not have any material debt, so we do not have interest rate risk
from a liability perspective. We do have a significant amount of cash and
short-term investments with maturities less than three months. This cash
portfolio exposes us to interest rate risk as short-term investment rates can be
volatile. Given the short-term maturity structure of our investment portfolio,
and the high-grade investment quality of our portfolio, we believe that we are
not subject to principal fluctuations and the effective interest rate of our
portfolio tracks closely to various short-term money market interest rate
benchmarks.
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PART II
ITEM 6
EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit Ref./
Number Description Of Document Page
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27 Financial data schedule
(b) Reports on Form 8-K
In a report filed on Form 8-K, dated April 27, 2000, the Company reported the
acquisition of ObjectShare, Inc.
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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.
STARBASE CORPORATION
(Registrant)
August 4, 2000 /s/ Douglas S. Norman
-------------- -------------------------------
Date Douglas S. Norman
Chief Financial Officer
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EXHIBIT INDEX
EXHIBIT REF./
NUMBER DESCRIPTION PAGE
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27 Financial Data Schedule
