United States
Securities and Exchange Commission
Washington, D.C. 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 March 31, 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 0-23212
Telular Corporation
(Exact name of Registrant as specified in its charter)
Delaware 36-3885440
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
647 North Lakeview Parkway
Vernon Hills, Illinois
60061
(Address of principal executive offices)
(Zip Code)
(847) 247-9400
(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
The number of shares outstanding of the Registrant's common stock, par value
$.01, as of March 31, 2000, the latest practicable date, was 12,490,412
shares.
<PAGE>
TELULAR CORPORATION
Index
Part I - Financial Information Page No.
Item 1. Financial Statements:
Consolidated Balance Sheets
March 31, 2000 (unaudited) and September 30, 1999 3
Consolidated Statements of Operations (unaudited)
Three Months Ended March 31, 2000 and
March 31, 1999 4
Consolidated Statements of Operations (unaudited)
Six Months Ended March 31, 2000 and
March 31, 1999 5
Consolidated Statement of Stockholders' Equity (unaudited)
Period from September 30, 1999 to
March 31, 2000 6
Consolidated Statements of Cash Flows (unaudited)
Six Months Ended March 31, 2000 and
March 31, 1999 7
Notes to the Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures about Market Risk 14
Part II - Other Information
Item 1. Legal Proceedings 15
Item 2. Changes in Securities and Recent Sales of Unregistered Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 19
Exhibit Index 20
<PAGE>
<TABLE>
TELULAR CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
March 31, September 30,
2000 1999
------------ -------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 22,601 $ 9,972
Short-term investment 900 0
Receivables:
Trade, net of allowance for doubtful accounts
of $150 and $103 at March 31, 2000
and September 30, 1999, respectively 6,501 6,670
Related parties 531 483
------------ ------------
7,032 7,153
Inventories, net 6,439 8,770
Prepaid expenses and other current asset 175 502
------------ ------------
Total current assets 37,147 26,397
Property and equipment, net 4,743 5,202
Other assets:
Excess of cost over fair value of net assets
acquired, less accumulated amortization of
$1,563 and $1,303 at March 31, 2000 and
September 30, 1999, respectively 3,332 3,592
Intangible assets, less accumulated amortization
of $1,095 and $1,089 at March 31, 2000 and
September 30, 1999 0 6
Long-term investment 0 66
Deposits and other 213 65
------------ ------------
$ 45,435 $ 35,328
============ ============
<PAGE>
LIABILITIES, REDEEMABLE PREFERRED STOCK
AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable:
Trade $ 2,215 $ 2,450
Related parties 1,274 1,738
Accrued liabilities 1,639 3,092
------------ ------------
Total current liabilities 5,128 7,280
Long-term debt 2,059 0
Commitments and contingencies 0 0
------------ ------------
Total liabilities 7,187 7,280
------------ ------------
Redeemable Preferred Stock:
Series A convertible preferred stock, $.01 par
value; $12,775 liquidation preference at
September 30, 1999; 21,000 shares authorized
at March 31, 2000 and September 30, 1999; no
shares outstanding at March 31, 2000, and
11,350 shares outstanding at September 30, 1999. 0 13,057
Stockholders' Equity:
Preferred stock $.01 par value; 9,979,000
shares authorized at March 31, 2000 and
September 30, 1999; none outstanding 0 0
Common stock; $.01 par value; 75,000,000
shares authorized; 12,490,412 and 9,563,004
outstanding at March 31, 2000 and
September 30, 1999, respectively 125 97
Additional paid-in capital 148,375 123,730
Deficit (110,702) (106,845)
Accumulated other comprehensive income/(loss) 450 (384)
Treasury stock, no shares on March 31, 2000 and
140,000 shares on September 30, 1999, at cost 0 (1,607)
------------ ------------
Total stockholders' equity 38,248 14,991
------------ ------------
Total liabilities, redeemable preferred stock
and stockholders' equity $ 45,435 $ 35,328
============ ============
See accompanying notes
</TABLE>
<PAGE>
<TABLE>
TELULAR CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share data)
(Unaudited)
Three Months Ended March 31,
2000 1999
----------- ----------
<S> <C> <C>
Net product sales to unrelated parties $ 8,220 $ 7,031
Net product sales to related parties 0 248
----------- ----------
Total net product sales 8,220 7,279
Royalty and royalty settlement revenue 1,434 1,083
----------- ----------
Total revenue 9,654 8,362
Cost of sales 6,877 5,848
----------- ----------
2,777 2,514
Engineering and development expenses 1,475 1,651
Selling and marketing expenses 1,706 1,821
General and administrative expenses 1,028 920
Provision for doubtful accounts 24 25
Amortization 130 194
----------- ----------
Loss from operations (1,586) (2,097)
Other income/(expense) 111 99
----------- ----------
Net loss $ (1,475) $ (1,998)
=========== ==========
Less: Cumulative dividend on redeemable
on preferred stock 0 (186)
----------- ----------
Net loss applicable to common shares $ (1,475) $ (2,184)
=========== ==========
Basic and diluted net loss per common share $ (0.12) $ (0.25)
=========== ==========
Weighted average number
of common shares outstanding 12,048,474 8,793,923
=========== ==========
</TABLE>
<PAGE>
<TABLE>
TELULAR CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share data)
(Unaudited)
Six Months Ended March 31,
2000 1999
---------- ----------
<S> <C> <C>
Net product sales to unrelated parties $ 17,070 $ 15,243
Net product sales to related parties 0 248
---------- ----------
Total net product sales 17,070 15,491
Royalty and royalty settlement revenue 1,605 1,083
---------- ----------
Total revenue 18,675 16,574
Cost of sales 14,041 12,268
---------- ----------
4,634 4,306
Engineering and development expenses 2,755 3,019
Selling and marketing expenses 3,449 3,848
General and administrative expenses 2,096 1,877
Provision for doubtful accounts 48 50
Amortization 259 441
---------- ----------
Loss from operations (3,973) (4,929)
Other income/(expense) 144 244
---------- ----------
Net loss $ (3,829) $ (4,685)
========== ==========
Less: Cumulative dividend on redeemable
on preferred stock (28) (381)
---------- ----------
Net loss applicable to common shares $ (3,857) $ (5,066)
========== ==========
Basic and diluted net loss per common share $ (0.33) $ (0.58)
========== ==========
Weighted average number
of common shares outstanding 11,683,241 8,730,904
========== ==========
See accompanying notes
</TABLE>
<PAGE>
<TABLE>
Telular Corporation
Consolidated Statements of Stockholders' Equity
(Dollars in thousands)
(Unaudited)
Accumulated
Additional Other Total
Preferred Common Paid-in Comprehensive Treasury Stockholder's
Stock Stock Capital Deficit Income/(Loss) Stock Equity
--------- ------ ---------- --------- ----------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1999 $ 0 $ 97 $123,730 $(106,845) $(384) $(1,607) $ 14,991
Comprehensive income/(loss):
Net loss for period from
October 1, 1999 to March
31, 2000 0 0 0 (3,829) 0 0 (3,829)
Other comprehensive income
Unrealized gain on investments 0 0 0 0 834 0 834
---------
Comprehensive income (2,995)
---------
Common stock and warrants
issued in private placement 0 4 9,645 0 0 0 9,649
Deferred compensation related
to stock options 0 0 70 0 0 0 70
Stock options exercised 0 3 1,568 0 0 1,607 3,178
Stock and warrants issued
in connection with services
and compensation 0 0 297 0 0 0 297
Conversion of preferred stock
to common stock 0 21 13,065 0 0 0 13,086
Cumulative dividend on
redeemable preferred stock 0 0 0 (28) 0 0 (28)
--------- ------ --------- --------- ---------- -------- ---------
Balance at March 31, 2000 0 125 148,375 (110,702) 450 0 38,248
========= ====== ========= ========= ========== ======== =========
<FN>
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
TELULAR CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Six Months Ended March 31,
2000 1999
---------- ----------
<S> <C> <C>
Operating Activities:
Net loss $ (3,829) $ (4,685)
Adjustments to reconcile net loss to
net cash used in operating activities
Depreciation 955 776
Amortization 266 441
Inventory obsolescence expense 484 150
Compensation expense related to
stock options and grants 70 135
Common stock issued for services
and compensation 100 90
Changes in assets and liabilities:
Trade receivables, net (362) (1,550)
Related parties receivables, net 483 833
Inventories 1,847 21
Prepaid expenses, deposits and other 377 194
Trade accounts payable (235) 1,035
Related parties accounts payable (464) (894)
Accrued liabilities (1,453) (1,326)
---------- ----------
Net cash used in operating activities (1,761) (4,780)
Investing Activities:
Acquisition of property and equipment (496) (959)
---------- ----------
Net cash used in investing activities (496) (959)
---------- ----------
Financing Activities:
Proceeds from the issuance of common stock 12,827 0
Borrowings, net 2,059 0
---------- ----------
Net cash provided by financing activities 14,886 0
---------- ----------
Net increase/(decrease) in
cash and cash equivalents 12,629 (5,739)
Cash and cash equivalents, beginning of period 9,972 19,854
---------- ----------
Cash and cash equivalents, end of period $ 22,601 $ 14,115
========== ==========
See accompanying notes
</TABLE>
<PAGE>
TELULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
(Unaudited)
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. The preparation
of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that
effect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates. In the
opinion of management, all adjustments considered necessary for a fair
presentation have been included. Operating results for the three and
six months ended March 31, 2000, are not necessarily indicative of the
results that may be expected for the full fiscal year ending September
30, 2000. For further information, refer to the consolidated financial
statements and the footnotes included in the Annual Report on Form 10-K
for the fiscal year ended September 30, 1999.
2. Comprehensive Income
On October 1, 1998, the Company adopted Statement of Financial
Accounting Standard No. 130, "Reporting Comprehensive Income"
(SFAS No. 130). Comprehensive income is defined by SFAS No. 130 as net
income plus other comprehensive income, which, under existing accounting
standards includes foreign currency items, minimum pension liability
and unrealized gains and losses on certain investments in debt and
equity securities. Comprehensive income is reported by the Company in
the consolidated statement of changes in stockholders' equity.
3. Inventories
The components of inventories consist of the following (000's):
March 31, September 30,
2000 1999
(unaudited)
Raw materials $ 3,237 $ 3,873
Finished goods 3,686 5,481
------- -------
6,923 9,354
------- -------
Less: Reserve for obsolescence 484 584
------- -------
$ 6,439 $ 8,770
======= =======
4. Revolving Line of Credit
On January 7, 2000, the Company entered into a Loan and Security
Agreement with Wells Fargo Business Credit Inc. (Wells) to provide a
revolving credit facility with a loan limit of $5 million (the Loan).
Borrowings under the Loan are subject to borrowing base requirements and
other restrictions. At March 31, 2000, the Company had approximately
<PAGE>
$3.9 million of available borrowings under the Loan, of which $2.1
million was outstanding. Under the Loan, the Company is restricted
from making dividend payments. The Loan matures on January 7, 2003.
The Loan carries interest at the bank's prime rate. To reduce
applicable financing fees, the Company issued 50,000 shares of Common
Stock Warrants to Wells. The strike price for the Warrants is $16.29
per share. The value of the warrants was accounted for as deferred
financing costs, included in other assets, and recorded at $197,000,
the fair value of the financing fees.
5. Issuance of Common Stock
On March 3, 2000, the Company issued 444,444 shares of Common Stock for
$9,549,000 which is net of issuance cost of $451,000, including $100,000
of Common Stock to be issued to the Company's placement agent. The
Common Stock was issued to investors under the provisions of Regulation
D of the United States Securities Act of 1933, as amended. In connection
with this financing, the Company issued 395,907 shares of Common Stock
Warrants to investors and the placement agent. The strike prices for
the Warrants range from $12.27 per share to $29.25 per share. The
fair value of these warrants of $1,643,000, determined using the
Black-Scholes method was included in additional paid in capital.
6. Segment Disclosures
The Company, which is organized on the basis of products and services,
has two reportable business segments, Fixed Wireless Terminals and
Security Products. The Company designs, develops, manufactures and
markets both fixed wireless terminals and security products. Fixed
wireless terminals bridge wireline telecommunications customer premises
equipment with cellular-type transceivers for use in wireless
communication networks. Security products provide wireless backup
systems for both commercial as well as residential alarms.
Export sales of fixed wireless terminals represent 81% and 73% of total
fixed wireless net product sales for the first six months of fiscal year
2000 and 1999, respectively.
Export sales of security products were insignificant for the first six
months of fiscal year 2000 and 1999.
Period ending
March 31,
2000 1999
Fixed Wireless Terminals 13,496 11,302
Security Products 5,179 5,272
------ ------
18,675 16,574
Loss From Operations (000's)
Revenue (000's)
Fixed Wireless Terminals (2,638) (4,630)
Security Products (1,335) (299)
------- -------
(3,973) (4,929)
For the first six months of fiscal year 2000, one customer located in
Dominican Republic accounted for 47% of fixed wireless terminal net
<PAGE>
product sales and two customers, both located in the USA, accounted for
20% and 16% of the security products net product sales. For the first
six months of fiscal year 1999, two customers from Mexico and the USA,
accounted for 30% and 14% respectively, of the fixed wireless terminal
net product sales and one customer, located in the U.S. accounted for
36% of the security products net product sales.
7. Redeemable Preferred Stock
During the year ending September 30, 1997, the Company issued 20,000
shares (10,000 shares on April 16, 1997 and 10,000 shares on June 6,
1997) of Series A Convertible Preferred Stock (the Preferred Stock) for
$18,375 which is net of issuance cost of $1,200. The Preferred Stock
included the equivalent of a 5% annual stock dividend. On October 15,
1999, the final 11,350 shares of Preferred Stock automatically converted
into 2,146,540 shares of common stock (the Mandatory Conversion). On
October 18, 1999, the previous holders of the Preferred Stock notified
the Company that they disagree with the conversion formula the Company
used to process the Mandatory Conversion. In Form SC-13G filings with
the Securities and Exchange Commission, the previous holders noted that
based upon their interpretation of the Mandatory Conversion formula,
they are entitled to an aggregate of 4,247,834 additional shares of the
Company's common stock. The Company believes that it processed the
conversion correctly and that the claim by previous holders of
Preferred Stock is unfounded.
8. Contingencies
In 1998, the Company reached settlement in its patent infringement case
against ORA Electronics, Inc. (ORA) and received the following from
ORA: $500,000 in cash, a $1,000,000 promissory note payable through
February 1, 2000, 300,000 shares of ORA Electronics, Inc. common stock
(ORA stock) with a fair market value of $450,000, and the right to
receive additional shares of ORA stock to ensure the fair market value
received in stock is equivalent to $1,500,000 on February 1, 2000. On
February 18, 2000 the Company agreed to defer its right to receive
additional shares of ORA stock to February 1, 2002, and received the
right to sell the shares of ORA stock currently held by the Company. On
February 23, 2000, the Company received the final balloon payment of
$250,000 pursuant to the promissory note from ORA.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview
The Company designs, develops, manufactures and markets products based on its
proprietary interface technologies, which provide the capability to bridge
wireline telecommunications customer premises equipment (CPE) with
cellular-type transceivers for use in wireless communication networks in the
Cellular and PCS bands. Applications of the Company's technology include
fixed wireless telecommunications as a primary access service where wireline
systems are unavailable, unreliable or uneconomical, as well as wireless
backup systems for wireline telephone systems and wireless security and
alarm monitoring signaling (WAS). The Company's principal product lines are:
PHONECELLr, a line of fixed wireless terminals (FWTs), and TELGUARDr, a line
of WAS products.
Currently, the Company is devoting a substantial portion of its resources to
international market development, extension of its core product line to new
wireless standards, expansion, protection and licensing of its intellectual
property rights and development of underlying radio technology.
The Company's operating expense levels are based in large part on expectations
of future revenues. If anticipated sales in any quarter do not occur as
expected, expenditure and inventory levels could be disproportionately high,
and the Company's operating results for that quarter, and potentially for
future quarters, could be adversely affected. Certain factors that could
significantly impact expected results are described in Cautionary Statements
Pursuant to the Securities Litigation Reform Act that is set forth in Exhibit
99 to this Form 10-K.
Results of Operations
Second quarter fiscal year 2000 compared to second quarter fiscal year 1999
Net Product Sales. Net product sales of $8.2 million for the three months
ended March 31, 2000 increased 13% from $7.3 million for the three months
ended March 31, 1999. Sales of FWTs increased 23% from $4.7 million during
the second quarter fiscal year 1999 to $5.8 million during the same quarter
fiscal year 2000, primarily due to increased shipments to the Dominican
Republic. The sale of WAS products decreased 4% from $2.6 million during
the three months ended March 31, 1999 to $2.5 million during the three
months ended March 31, 2000.
Royalty and Royalty Settlement Revenue. Royalty and royalty settlement
revenue increased 32% from $1.1 million during the second quarter of fiscal
year 1999 to $1.4 million during the same quarter of fiscal year 2000. The
1999 fiscal year amount includes $1.0 million in royalty settlement revenue
from Motorola. The 2000 fiscal year amount includes $1.0 million of royalty
revenue from Andrew Corporation. The $0.3 million increase in total royalty
and royalty settlement revenue during fiscal year 2000 compared to fiscal
year 1999 is due to increased royalties from Motorola.
Engineering and Development Expenses. Engineering and development expenses
of $1.5 million during the second quarter of fiscal year 2000 decreased
approximately 11% from the same quarter of fiscal year 1999. In fiscal year
1999 the Company was completing its efforts to transition its product lines
from primarily analog-based products to primarily digital-based products.
<PAGE>
Consequently, engineering and development expenses for several quarters,
including the second quarter of fiscal year 1999, were larger than usual.
Beginning in its third quarter of fiscal year 1999 and continuing through
the second quarter of fiscal year 2000, the Company has reduced its
engineering and development expenses to more usual levels, primarily
through reductions in material costs and contracted engineering services.
Selling and Marketing Expenses. Selling and marketing expenses of $1.7
million for second quarter of fiscal year 2000 decreased 6% compared to
the second quarter of fiscal year 1999. The decrease is primarily due to
a reduction in product introduction expenses during the second quarter of
fiscal year 2000 compared to the same period of last fiscal year (see
Engineering and Development Expenses above).
General and Administrative Expenses (G&A). G&A for the second quarter of
fiscal year 2000 increased 12% compared to the same quarter of fiscal year
1999. The increase relates to legal fees for patent defense in New Zealand.
Amortization. Amortization expense decreased 33% during the second quarter
of fiscal year 2000 compared to the second quarter fiscal year ended 1999
due to certain intangible assets which became fully amortized during fiscal
year 1999.
Net loss. The Company recorded a net loss of $1.5 million for the second
quarter of fiscal year 2000 compared to a net loss of $2.0 million for the
second quarter of fiscal year 1999. Earnings per share increased 48% during
the second quarter of fiscal year 2000, from net loss per share of $0.23 for
the second quarter of fiscal year 1999 to a net loss per share of $0.12 for
the second quarter of fiscal year 2000.
Net loss applicable to common shares. A net loss of $1.5 million, or $0.12
per share, for the second quarter of fiscal year 2000 compares to a net loss
of $2.2 million, or $0.25 per share, after giving effect to the cumulative
preferred stock dividend of $0.2 million for the second quarter of fiscal
year 1999.
First half fiscal year 2000 compared to first half fiscal year 1999
Net Product Sales. Net product sales of $17.1 million for the six months
ended March 31, 2000 increased 10% from $15.5 million for the six months
ended March 31, 1999. Sales of FWTs increased 16% from $10.2 million during
the first half of fiscal year 1999 to $11.9 million during the same period
of fiscal year 2000. The sale of WAS products decreased 2% from $5.3 million
during the six months ended March 31, 1999 to $5.2 million during the six
months ended March 31, 2000.
Royalty and Royalty Settlement Revenue . Royalty and royalty settlement
revenue increased 48% from $1.1 million during the first half of fiscal year
1999 to $1.6 million during the same period of fiscal year 2000. The fiscal
year 1999 amount includes $1.0 million in royalty settlement revenue from
Motorola. The fiscal year 2000 amount includes $1.0 million of royalty
revenue from Andrew Corporation. The $0.5 million increase in total royalty
and royalty settlement revenue during fiscal year 2000 compared to fiscal
year 1999 is due to increased royalties from Motorola.
Engineering and Development Expenses . Engineering and development expenses
of $2.8 million during the first six months of fiscal year 2000 decreased
approximately 9% from the first six months of fiscal year 1999. In fiscal
year 1999 and prior the Company had increasing engineering and development
<PAGE>
expenses as a result of efforts to bring several new lower cost products and
a wider range of products to market. Many new products were completed and
introduced to market during that year, and therefore the Company has reduced
engineering and development expenses, primarily through reductions in
material costs and contracted engineering services.
Selling and Marketing Expenses. Selling and marketing expenses for the first
half of fiscal year 2000 decreased 10% or $0.4 million compared to the same
period of fiscal year 1999. The decrease is primarily due to a reduction in
product introduction expenses during the first six months of fiscal year
2000 compared to the same period of last fiscal year (see Engineering and
Development Expenses above).
General and Administrative Expenses (G&A). G&A for the first half of fiscal
year 2000 increased 12% compared to the first half of fiscal year 1999. The
increase relates to legal fees for patent defense in New Zealand.
Other Income. Other income during the first half of fiscal year 2000
decreased by $0.1 million compared to the same period of fiscal 1999. The
decrease is primarily due to lower interest income, as a result of lower
average cash balances during the first half of fiscal year 2000 compared
to the same period of fiscal year 1999, and the addition of interest
expense on the new revolving line of credit for the first half of fiscal
year 2000.
Net loss. The Company recorded a net loss of $3.8 million for the first
half of fiscal year 2000 compared to a net loss of $4.7 million for the
first half of fiscal year 1999. Earnings per share increased 39% during the
first half of fiscal year 2000, from net loss per share of $0.54 for the
first half of fiscal year 1999 to a net loss per share of $0.33 for the
first half of fiscal year 2000.
Net loss applicable to common shares. After giving effect to the cumulative
preferred stock dividend of $28 for the first half of fiscal year 2000, net
loss applicable to common shares of $3.9 million or $0.33 per share compares
to a net loss of $5.1 million or $0.58 per share in the first half of fiscal
year 1999.
Liquidity and Capital Resources
On March 31, 2000, the Company had $22.6 million in cash and cash equivalents
with a working capital surplus of $32.0 million.
The Company used $1.8 million of cash for operating activities during the
first half of fiscal year 2000 compared to $4.8 million used during the same
period of fiscal year 1999. The decrease in cash used for operations is
primarily due to a reduction in inventory and accounts receivable. Cash used
for capital spending was $0.5 million during the first half of fiscal year
2000, compared to $1.0 million during the same period of fiscal year 1999.
Cash generated from financing activities for the first half of fiscal year
2000 of $14.9 million relates to proceeds from the issuance of common stock
and borrowings under the credit facility. There was no cash activity from
financing activities during the first half of fiscal year 1999.
On March 3, 2000, the Company issued 444,444 shares of Common Stock for
$9,549,000 which is net of issuance cost of $451,000, including $100,000 of
Common Stock to be issued to the Company's placement agent. The Common Stock
was issued to investors under the provisions of Regulation D of the United
<PAGE>
States Securities Act of 1933, as amended. Management expects to register the
Common Stock for resale under the Securities Act of 1933, as amended, during
its third fiscal quarter of 2000. In connection with this financing, the
Company issued 395,907 shares of Common Stock Warrants to investors and the
placement agent. The strike prices for the Warrants range from $12.27 per
share to $29.25 per share. The fair value of these warrants of $1,643,000,
determined using the Black-Scholes method was included in additional paid in
capital. This financing also provides the investors with the right, but not
the obligation to a one day purchase of up to 177,746 additional shares at a
price of $28.13 per share. Upon such a purchase the investors would also
receive up to an additional 50,000 shares of Common Stock Warrants.
On January 7, 2000, the Company entered into a Loan and Security Agreement
with Wells Fargo Business Credit Inc. (Wells) to provide a revolving credit
facility with a loan limit of $5 million (the Loan). Borrowings under the
Loan are subject to borrowing base requirements and other restrictions. At
March 31, 2000, the Company had approximately $3.9 million of available
borrowings under the Loan, of which $2.1 million was outstanding. Under the
Loan, the Company is restricted from making dividend payments. The Loan
matures on January 7, 2003. The Loan carries interest at the bank's prime
rate. To reduce applicable financing fees, the Company issued 50,000 shares
of Common Stock Warrants to Wells. The strike price for the Warrants is
$16.29 per share. The value of the warrants was accounted for as deferred
financing costs, included in other assets, and recorded at $197,000, the
fair value of the financing fees.
The Company expects to use the proceed from its recent equity financing and
borrowings under the Loan to fund working capital requirements, to fund
future product development efforts and to sustain significant levels of cash
reserves which are required to qualify for large sales opportunities.
Based upon its current operating plan, the Company believes its existing
capital resources should enable it to maintain its current and planned
operations. Cash requirements may vary and are difficult to predict given
the nature of the developing markets targeted by the Company. The amount
of royalty income from the Company's licensees is unpredictable, but could
have an impact on the Company's actual cash flow.
The Company requires its foreign customers to obtain letters of credit or
to qualify for export credit insurance underwritten by third party credit
insurance companies prior to making international shipments. Also, to
mitigate the effects of currency fluctuations on the Company's results of
operations, the Company conducts all of its international transactions in
U.S. dollars.
Outlook
The statements contained in this outlook are based on current expectations.
These statements are forward looking, and actual results may differ
materially.
Based upon observed trends, the Company believes that the market for FWTs
will experience substantial growth over the next five years. Nearer term
prospects should enable the Company to grow, but at more modest rates. The
Company has identified significant near term opportunities in Brazil, China,
Dominican Republic, Mexico, Malaysia, Egypt and the USA. Each of these
markets will develop at a different pace, and the sales cycle for these
regions are likely to be several months or quarters, but market indications
are positive. The Company is well positioned with a wide range of products
<PAGE>
to capitalize on these market opportunities.
Statements contained in this filing, other than historical statements,
consist of forward-looking information. The Company's actual results may
vary considerably from those discussed in the "Outlook" section and elsewhere
in this filing as a result of various risks and uncertainties. For example,
there are a number of uncertainties as to the degree and duration of the
Company's revenue momentum, which could impact the Company's ability to be
profitable as lower sales may likely result in lower margins. In addition,
product development expenditures, which are expected to benefit future
periods, are likely to have a negative impact on near term earnings. Other
risks and uncertainties, which are discussed in Exhibit 99 to the Company's
Form 10-K for the period ended September 30, 1999, include the risk that
technological change could render the Company's technology obsolete,
unfavorable economic conditions could lead to lower sales of products,
the risk of litigation, the Company's ability to develop new products, the
Company's dependence on contractors and Motorola, the Company's ability to
maintain quality control, the risk of doing business in developing markets,
the Company's dependence on research and development, the uncertainty of
additional funding, the effects of control by existing shareholders, the
effect of changes in management, intense industry competition and uncertainty
in the development of wireless service generally.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In 1998, the Company received 300,000 shares of ORA Electronics, Inc. common
stock (ORA stock) in connection with the settlement of litigation. ORA stock
is traded on Nasdaq's Over The Counter (OTC) system. Although ORA stock is
subject to price fluctuations associated with all securities that are traded
on the OTC system, the Company has the right to receive additional shares of
ORA stock to ensure the fair market value of the settlement consideration
received in stock is equivalent to $1.5 million on February 1, 2002.
The Company frequently invests available cash and cash equivalents in short
term instruments such as: certificates of deposit, commercial paper and money
market accounts. Although the rate of interest available on such investments
may fluctuate over time, each of the Company's investments is made at a fixed
interest rate over the duration of the investment. All of these investments
have maturities of less than 90 days. The Company believes its exposure to
market risk fluctuations for these investments is not material as of March
31, 2000.
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of trade accounts
receivable. Credit risks with respect to trade receivables are limited due
to the diversity of customers comprising the Company's customer base. The
Company generally receives irrevocable letters of credit that are confirmed
by U.S. banks to reduce its credit risk. Further, the Company purchases
credit insurance for all significant open accounts outside of the United
States. The Company performs ongoing credit evaluations and charges
uncollectible amounts to operations when they are determined to be
uncollectible.
<PAGE>
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
In 1997, the Company filed suit in New Zealand against Industrial
Communications Service Limited (ICS) to prevent the infringement of its New
Zealand patents. On March 1, 2000, the High Court in New Zealand entered
a Final Order permanently enjoining ICS from making, using, selling or
otherwise disposing of its infringing product or any other products which
infringe any of the Company's New Zealand Patents in New Zealand and
wherever the Company has equivalent patents worldwide.
Item 2. CHANGES IN SECURITIES AND RECENT SALES OF UNREGISTERED SECURITIES
Changes in Securities
Under the terms of the Loan and Security Agreement with Wells Fargo Business
Credit Inc., the Company is prohibited from paying dividends during the term
of the loan.
Recent Sales of Unregistered Securities
On March 3, 2000, the Company issued 444,444 shares of Common Stock for
$9,549,000 which is net of issuance cost of $451,000, including $100,000 of
Common Stock to be issued to the Company's placement agent. The Common
Stock was issued to investors under the provisions of Regulation D of the
United States Securities Act of 1933, as amended. Management expects to
register the Common Stock for resale under the Securities Act of 1933, as
amended, during its third fiscal quarter of 2000. In connection with this
financing, the Company issued 395,907 shares of Common Stock Warrants to
investors and the placement agent. The strike prices for the Warrants
range from $12.27 per share to $29.25 per share. This financing also
provides the investors with the right, but not the obligation to a one day
purchase of up to 177,746 additional shares at a price of $28.13 per share.
Upon such a purchase the investors would also receive up to an additional
50,000 shares of Common Stock Warrants.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Shareholders was held on January 25, 2000.
The number of shares issued and outstanding and entitled to vote was
11,709,544. There were present at said meeting, in person or by proxy,
shareholders holding 10,064,248 shares of common stock, that is 86% of the
stock outstanding, and entitled to vote, which constituted a quorum.
The only matter voted upon was the election of the Board of Directors. The
directors elected were as follows:
For Withheld
John E. Berndt 10,021,766 42,482
William L. DeNicolo 10,021,192 43,056
Larry J. Ford 10,022,339 41,909
Daniel D. Giacopelli 10,021,127 43,121
Richard D. Haning 10,022,489 41,759
Kenneth E. Millard 10,018,929 45,319
Mark R. Warner 10,022,339 41,909
All nominees for Director were elected.
<PAGE>
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits (listed by number according to Exhibit table of Item 601
in Regulation S-K)
Number Description Reference
------ ----------- ------------------------------
3.1 Certificate of Incorporation Filed as Exhibit 3.1 to
Registration Statement
No. 33-72096 (the Registration
Statement)
3.2 Amendment No. 1 to Certificate Filed as
of Incorporation Exhibit 3.2 to
the Registration
Statement
3.3 Amendment No. 2 to Certificate Filed as
of Incorporation Exhibit 3.3 to
the Registration
Statement
3.4 Amendment No. 3 to Certificate Filed as
of Incorporation Exhibit 3.4 to
Form 10-Q filed
February 16, 1999
3.5 Amendment No.4 to Certificate Filed as
of Incorporation Exhibit 3.5 to
Form 10-Q filed
February 16, 1999
3.6 By-Laws Filed as
Exhibit 3.4 to
the Registration
Statement
4.1 Loan Agreement with LaSalle Filed as Exhibit
National Bank and Amendment 4.1 to Form 10-K
thereto filed December 27, 1995
4.2 Debenture Agreements dated Filed as Exhibit
December 11, 1995 4.2 to Form 10-K
filed December 27, 1995
4.3 Certificate of Designations, Filed as Exhibit 99.2
Preferences, and Rights of Form 8-K filed
Series A Convertible Preferred April 25, 1997
Stock
4.4 Loan and Security Agreement Filed as Exhibit 4.2 to
with Sanwa Business Credit Form 10-Q filed
Corporation August 14, 1997
10.1 Consulting Agreement with Filed as Exhibit
William L. De Nicolo 10.1 to the
Registration Statement
<PAGE>
10.2 Employment Agreement with Filed as Exhibit
Kenneth E. Millard 10.1 to Form 10-Q
filed August 14, 1996
10.3 Stock Option Agreement with Filed as Exhibit
Kenneth E. Millard 10.2 to Form 10-Q
filed August 14, 1996
10.4 Stock Purchase Agreement By Filed as Exhibit
and Among Telular Corporation 10.3 to Form 10-Q
and TelePath Corporation (which filed August 14, 1996
had changed its name to Wirelss
Domain, Incorporated)
10.5 Appointment of Larry J. Ford Filed as Exhibit 10.2
to Form 10-Q filed
May 1, 1995
10.6 Option Agreement with Motorola Filed as Exhibit 10.6
dated November 10, 1995 to Form 10-K filed
December 26, 1996(1)
10.7 Amendment No.1 dated Filed as Exhibit 10.7
September 24, 1996 to Option to Form 10-Q filed
Agreement with Motorola August 13, 1999(1)
10.8 Amendment No.2 dated Filed as Exhibit 10.8
April 30, 1999 to Option to Form 10-Q filed
Agreement with Motorola August 13, 1999(1)
10.9 Stock Purchase Agreement Filed as Exhibit 10.11
between Motorola, Inc. and to the Registration
Telular Corporation dated Statement
September 20, 1993
10.10 Patent Cross License Agreement Filed as Exhibit 10.12
between Motorola, Inc. and the to the Registration
Company, dated March 23, 1990 Statement(1)
and Amendments No. 1, 2 and
3 thereto
10.11 Amendment No. 4 to Patent Filed as Exhibit 10.11
Cross License Agreement between to Form 10-Q filed
Motorola, Inc. and the Company August 13, 1999 (1)
dated May 3, 1999
10.12 Exclusive Distribution and Filed as Exhibit 10.14
Trademark License Agreement the Registration
between Telular Canada Inc. Statement(1)
and the Company, dated April 1,
1989, and Amendments thereto
10.13 Amended and Restated Shareholders Filed as Exhibit 10.15
Agreement dated November 2, 1993 to the Registration
Statement(1)
10.14 Amendment No. 1 to Amended and Filed as Exhibit 10.24
Restated Shareholders Agreement, the Registration
dated January 24, 1994 Statement
<PAGE>
10.15 Amendment No. 2 to Amended and Filed as Exhibit 10.5
Restated Shareholders Agreement, to the Form 10-Q filed
dated June 29, 1995 July 28, 1995
10.16 Amended and Restated Filed as Exhibit 10.16
Registration Rights Agreement to the Registration
dated November 2, 1993 Statement
10.17 Amendment No. 1 to Amended Filed as Exhibit 10.25
and Restated Registration to the Registration
Rights Agreement, dated Statement
January 24, 1994
10.18 Amended and Restated Employee Filed as Exhibit 10.17
Stock Option Plan to Form 10-K filed
December 26, 1996
10.19 Stock Option Grant to Filed as Exhibit 10.7
Independent Directors to Form 10-Q filed
July 28, 1995
10.20 Securities Purchase Agreement Filed as Exhibit 99.1 to
dated April 16, 1997, by and Form 8-K filed
between Telular Corporation and April 25, 1997
purchasers of the Series A
Convertible Preferred Stock
10.21 Registration Rights Agreement Filed as Exhibit 99.3 to
dated April 16, 1997, by and Form 8-K filed
between Telular Corporation and April 25, 1997
purchasers of the Series A
Convertible Preferred Stock
10.22 Securities Purchase Agreement Filed as Exhibit 99.3 to
dated June 6, 1997, by and Registration Statement on
between Telular Corporation and Form S-3, Registration
purchasers of the Series A No. 333-27915, as amended
Convertible Preferred Stock by Amendment No. 1 filed
June 13, 1997, and further
Amended by Amendment
No. 2 filed July 8, 1997
(Form S-3)
10.23 Registration Rights Agreement Filed as Exhibit 99.4 to
dated June 6, 1997, by and Form S-3
between Telular Corporation and
purchasers of the Series A
Convertible Preferred Stock
10.24 Agreement and Plan of Merger Filed as Exhibit 10.21
by and among Wireless Domain to Form 10-K filed
Incorporated (formerly December 19, 1998
TelePath), Telular-WD
(a wholly-owned subsidiary of
Telular) and certain stockholder
of Wireless Domain Incorporated
<PAGE>
10.25 Common Stock Investment Filed as Exhibit 4.8 to
Agreement dated March 3, 2000 Registration Statement on
Form S-3, Registration
No. 333-33810 filed
March 31, 2000
10.26 Registration Rights Agreement Filed as Exhibit 4.9 to
dated March 3, 2000 Registration Statement on
Form S-3, Registration
No. 333-33810 filed
March 31, 2000
10.27 Employment Agreement with Filed as Exhibit 10.22
Daniel D. Giacopelli to Form 10-Q filed
February 13, 1998
10.28 Employment Agreement with Filed as Exhibit 10.23
Robert C. Montgomery to Form 10-Q filed
February 13, 1998
10.29 OEM Equipment Purchase Agreement Filed as Exhibit 10.27
for WAFU dated April 30, 1999 to form 10-Q filed
August 13, 1999 (1)
11 Statement regarding computation Filed herewith
of per share earnings
27 Financial data schedule Filed herewith
99 Cautionary Statements Pursuant Filed as Exhibit 99 to Form
to the Securities Litigation 10-K filed
Act of 1995 December 20, 1999
(1) Confidential treatment granted with respect to redacted portions
of documents.
(b) Reports on Form 8-K
The Company filed one (1) report on Form 8-K during the three months
ended March 31, 2000:
(i) On March 6, 2000, the Company reported it had issued 444,444 shares
of Common Stock and filed related documents.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report on Form 10-Q to be signed on its
behalf by the undersigned, thereunto duly authorized.
Telular Corporation
Date May 15, 2000 By: /s/ Kenneth E. Millard
Kenneth E. Millard
President & Chief Executive Officer
Date May 15, 2000 /s/ Jeffrey L. Herrmann
Jeffrey L. Herrmann
Senior Vice President &
Chief Financial Officer
Date May 15, 2000 /s/ Robert L. Zirk
Robert L. Zirk
Controller & Chief Accounting Officer
<PAGE>
Exhibit Index
Number Description Reference
------ ----------- ------------------------------
3.1 Certificate of Incorporation Filed as Exhibit 3.1 to
Registration Statement
No. 33-72096 (the Registration
Statement)
3.2 Amendment No. 1 to Certificate Filed as
of Incorporation Exhibit 3.2 to
the Registration
Statement
3.3 Amendment No. 2 to Certificate Filed as
of Incorporation Exhibit 3.3 to
the Registration
Statement
3.4 Amendment No. 3 to Certificate Filed as
of Incorporation Exhibit 3.4 to
Form 10-Q filed
February 16, 1999
3.5 Amendment No.4 to Certificate Filed as
of Incorporation Exhibit 3.5 to
Form 10-Q filed
February 16, 1999
3.6 By-Laws Filed as
Exhibit 3.4 to
the Registration
Statement
4.1 Loan Agreement with LaSalle Filed as Exhibit
National Bank and Amendment 4.1 to Form 10-K
thereto filed December 27, 1995
4.2 Debenture Agreements dated Filed as Exhibit
December 11, 1995 4.2 to Form 10-K
filed December 27, 1995
4.3 Certificate of Designations, Filed as Exhibit 99.2
Preferences, and Rights of Form 8-K filed
Series A Convertible Preferred April 25, 1997
Stock
4.4 Loan and Security Agreement Filed as Exhibit 4.2 to
with Sanwa Business Credit Form 10-Q filed
Corporation August 14, 1997
10.1 Consulting Agreement with Filed as Exhibit
William L. De Nicolo 10.1 to the
Registration Statement
10.2 Employment Agreement with Filed as Exhibit
Kenneth E. Millard 10.1 to Form 10-Q
filed August 14, 1996
<PAGE>
10.3 Stock Option Agreement with Filed as Exhibit
Kenneth E. Millard 10.2 to Form 10-Q
filed August 14, 1996
10.4 Stock Purchase Agreement By Filed as Exhibit
and Among Telular Corporation 10.3 to Form 10-Q
and TelePath Corporation (which filed August 14, 1996
had changed its name to Wirelss
Domain, Incorporated)
10.5 Appointment of Larry J. Ford Filed as Exhibit 10.2
to Form 10-Q filed
May 1, 1995
10.6 Option Agreement with Motorola Filed as Exhibit 10.6
dated November 10, 1995 to Form 10-K filed
December 26, 1996(1)
10.7 Amendment No.1 dated Filed as Exhibit 10.7
September 24, 1996 to Option to Form 10-Q filed
Agreement with Motorola August 13, 1999(1)
10.8 Amendment No.2 dated Filed as Exhibit 10.8
April 30, 1999 to Option to Form 10-Q filed
Agreement with Motorola August 13, 1999(1)
10.9 Stock Purchase Agreement Filed as Exhibit 10.11
between Motorola, Inc. and to the Registration
Telular Corporation dated Statement
September 20, 1993
10.10 Patent Cross License Agreement Filed as Exhibit 10.12
between Motorola, Inc. and the to the Registration
Company, dated March 23, 1990 Statement(1)
and Amendments No. 1, 2 and
3 thereto
10.11 Amendment No. 4 to Patent Filed as Exhibit 10.11
Cross License Agreement between to Form 10-Q filed
Motorola, Inc. and the Company August 13, 1999 (1)
dated May 3, 1999
10.12 Exclusive Distribution and Filed as Exhibit 10.14
Trademark License Agreement the Registration
between Telular Canada Inc. Statement(1)
and the Company, dated April 1,
1989, and Amendments thereto
10.13 Amended and Restated Shareholders Filed as Exhibit 10.15
Agreement dated November 2, 1993 to the Registration
Statement(1)
10.14 Amendment No. 1 to Amended and Filed as Exhibit 10.24
Restated Shareholders Agreement, the Registration
dated January 24, 1994 Statement
<PAGE>
10.15 Amendment No. 2 to Amended and Filed as Exhibit 10.5
Restated Shareholders Agreement, to the Form 10-Q filed
dated June 29, 1995 July 28, 1995
10.16 Amended and Restated Filed as Exhibit 10.16
Registration Rights Agreement to the Registration
dated November 2, 1993 Statement
10.17 Amendment No. 1 to Amended Filed as Exhibit 10.25
and Restated Registration to the Registration
Rights Agreement, dated Statement
January 24, 1994
10.18 Amended and Restated Employee Filed as Exhibit 10.17
Stock Option Plan to Form 10-K filed
December 26, 1996
10.19 Stock Option Grant to Filed as Exhibit 10.7
Independent Directors to Form 10-Q filed
July 28, 1995
10.20 Securities Purchase Agreement Filed as Exhibit 99.1 to
dated April 16, 1997, by and Form 8-K filed
between Telular Corporation and April 25, 1997
purchasers of the Series A
Convertible Preferred Stock
10.21 Registration Rights Agreement Filed as Exhibit 99.3 to
dated April 16, 1997, by and Form 8-K filed
between Telular Corporation and April 25, 1997
purchasers of the Series A
Convertible Preferred Stock
10.22 Securities Purchase Agreement Filed as Exhibit 99.3 to
* dated June 6, 1997, by and Registration Statement on
* between Telular Corporation and Form S-3, Registration
purchasers of the Series A No. 333-27915, as amended
Convertible Preferred Stock by Amendment No. 1 filed
June 13, 1997, and further
Amended by Amendment
No. 2 filed July 8, 1997
(Form S-3)
10.23 Registration Rights Agreement Filed as Exhibit 99.4 to
dated June 6, 1997, by and Form S-3
between Telular Corporation and
purchasers of the Series A
Convertible Preferred Stock
10.24 Agreement and Plan of Merger Filed as Exhibit 10.21
by and among Wireless Domain to Form 10-K filed
Incorporated (formerly December 19, 1998
TelePath), Telular-WD
(a wholly-owned subsidiary of
Telular) and certain stockholder
of Wireless Domain Incorporated
<PAGE>
10.25 Common Stock Investment Filed as Exhibit 4.8 to
Agreement dated March 3, 2000 Registration Statement on
Form S-3, Registration
No. 333-33810 filed
March 31, 2000
10.26 Registration Rights Agreement Filed as Exhibit 4.9 to
dated March 3, 2000 Registration Statement on
Form S-3, Registration
No. 333-33810 filed
March 31, 2000
10.27 Employment Agreement with Filed as Exhibit 10.22
Daniel D. Giacopelli to Form 10-Q filed
February 13, 1998
10.28 Employment Agreement with Filed as Exhibit 10.23
Robert C. Montgomery to Form 10-Q filed
February 13, 1998
10.29 OEM Equipment Purchase Agreement Filed as Exhibit 10.27
for WAFU dated April 30, 1999 to form 10-Q filed
August 13, 1999 (1)
11 Statement regarding computation Filed herewith
of per share earnings
27 Financial data schedule Filed herewith
99 Cautionary Statements Pursuant Filed as Exhibit 99 to Form
to the Securities Litigation 10-K filed
Act of 1995 December 20, 1999
(1) Confidential treatment granted with respect to redacted portions
of documents.
Exhibit (11) - Statement Re: Computation of Earnings Per Share and
Pro Forma Earnings Per Share (2000)
<TABLE>
<CAPTION> Three Months Ended
March 31,
2000 1999
-------------- -------------
<S> <C> <C>
Average number of shares outstanding 12,048,474 8,793,923
============== =============
Net loss $ (1,475,000) $ (1,998,000)
Less: cumulative dividend on
redeemable preferred stock $ 0 $ (186,000)
-------------- -------------
Loss applicable to common shares $ (1,475,000) $ (2,184,000)
============== =============
Net loss per share $ (0.12) $ (0.25)
============== =============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-END> MAR-31-2000
<CASH> 22601
<SECURITIES> 900
<RECEIVABLES> 7182
<ALLOWANCES> 150
<INVENTORY> 6439
<CURRENT-ASSETS> 37147
<PP&E> 11866
<DEPRECIATION> 7123
<TOTAL-ASSETS> 45435
<CURRENT-LIABILITIES> 5128
<BONDS> 2059
0
0
<COMMON> 125
<OTHER-SE> 38123
<TOTAL-LIABILITY-AND-EQUITY> 45435
<SALES> 8220
<TOTAL-REVENUES> 9654
<CGS> 6877
<TOTAL-COSTS> 6877
<OTHER-EXPENSES> 4196
<LOSS-PROVISION> 24
<INTEREST-EXPENSE> 32
<INCOME-PRETAX> (1475)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1475)
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1475)
<EPS-BASIC> (0.12)
<EPS-DILUTED> (0.12)
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