<PAGE>
CONFORMED COPY
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
Commission File No. 0-23306
PROPHET 21, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware 23-2746447
- ------------------------------- ------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
19 West College Ave., Yardley, Pennsylvania 19067
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(215) 493-8900
-------------------------------
(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:
----- -----
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of April 30, 1997:
Class Number of Shares
----- ----------------
Common Stock, $.01 par value 3,559,600
<PAGE>
PROPHET 21, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
Page
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<S> <C>
PART I. FINANCIAL INFORMATION..............................................1
Item 1. Financial Statements............................................1
Consolidated Balance Sheets........................................2
as at June 30, 1996 and
March 31, 1997 (unaudited)
Consolidated Statements of Operations..............................3
for the three months and the nine months ended
March 31, 1996 and 1997 (unaudited)
Consolidated Statements of Cash Flows..............................4
for the nine months ended
March 31, 1996 and 1997 (unaudited)
Notes to Consolidated Financial Statements.........................5
(unaudited)
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition...................7
Results of Operations..............................................7
Liquidity and Capital Resources...................................10
PART II. OTHER INFORMATION.................................................12
Item 6. Exhibits and Reports on Form 8-K...............................12
SIGNATURES...................................................................13
</TABLE>
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<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
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<PAGE>
PROPHET 21, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
June 30, March 31,
1996 1997
------------------- --------------------
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents....................................... $ 2,860 $ 1,081
Marketable securities........................................... 5,795 7,442
Accounts receivable, net of allowance for
doubtful accounts of $209 and
$343, respectively.......................................... 12,029 10,296
Inventories..................................................... 1,546 1,332
Prepaid and other current assets................................ 618 514
--------------- ----------------
Total current assets........................................ 22,848 20,665
Equipment and improvements, net................................. 2,242 2,262
Deferred income taxes........................................... 19 19
Software development costs...................................... 458 1,620
Other assets.................................................... 265 218
--------------- ----------------
Total assets................................................ $ 25,832 $ 24,784
=============== ================
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable................................................ $ 2,922 $ 2,302
Accrued expenses and other liabilities ......................... 957 815
Commissions payable ............................................ 381 222
Taxes payable .................................................. 391 947
Profit sharing plan contribution payable ....................... 250 216
Deferred income ................................................ 1,950 2,076
--------------- ----------------
Total current liabilities .................................. 6,851 6,578
--------------- ----------------
Commitments and contingent liabilities
Stockholders' equity:
Preferred stock -- $0.01 par value, 1,500,000
shares authorized; no shares issued or
outstanding ................................................ -- --
Common stock -- $0.01 par value, 10,000,000 shares
authorized; 4,002,500 shares issued.......................... 40 40
Additional paid-in capital...................................... 8,821 8,821
Retained earnings .............................................. 10,120 11,414
Less: treasury stock at cost,
359,250 shares at March 31, 1997 -- (2,069)
--------------- -----------------
Total stockholders' equity ................................. 18,981 18,206
--------------- ----------------
Total liabilities and stockholders' equity ................. $ 25,832 $ 24,784
=============== ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
PROPHET 21, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended March 31, Ended March 31,
------------------------------------ -------------------------------------
1996 1997 1996 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue:
System sales................................ $ 4,847 $ 5,213 $ 15,045 $ 15,758
Service and support......................... 3,126 3,427 8,825 10,195
--------------- --------------- --------------- ---------------
7,973 8,640 23,870 25,953
--------------- --------------- --------------- ---------------
Cost of revenue:
System sales................................ 2,643 3,065 8,277 9,065
Service and support......................... 1,732 1,766 4,789 5,246
--------------- --------------- --------------- ---------------
4,375 4,831 13,066 14,311
--------------- --------------- --------------- ---------------
Gross profit................................ 3,598 3,809 10,804 11,642
--------------- --------------- --------------- ---------------
Operating expenses
Sales and marketing......................... 2,047 1,859 5,876 6,100
General and administrative.................. 563 555 1,665 1,739
Research and development.................... 557 595 1,672 1,921
--------------- --------------- --------------- ---------------
3,167 3,009 9,213 9,760
--------------- --------------- --------------- ---------------
Operating income........................ 431 800 1,591 1,882
Interest income................................ 102 92 320 275
--------------- --------------- --------------- ---------------
Income before taxes............................ 533 892 1,911 2,157
Provision for income taxes..................... 211 357 755 863
--------------- --------------- --------------- ---------------
Net income..................................... $ 322 $ 535 $ 1,156 $ 1,294
=============== =============== =============== ===============
Net income per share........................... $ 0.08 $ 0.14 $ 0.29 $ 0.33
=============== =============== =============== ===============
Weighted average common
and common equivalent shares
outstanding................................. 4,003 3,821 4,003 3,922
=============== =============== =============== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
PROPHET 21, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
Nine Months Ended March 31,
---------------------------
1996 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income........................................................ $ 1,156 $ 1,294
-------------- ---------------
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Depreciation and amortization.............................. 737 727
Gain on sale of equipment.................................. -- (13)
Provision for losses on accounts receivable................ 65 134
Decreases (increases) in operating assets:
Accounts receivable........................................ (1,530) 1,599
Inventories................................................ (781) 214
Prepaid expenses and other assets.......................... 88 151
Increases (decreases) in operating liabilities:
Accounts payable........................................... 228 (620)
Accrued expenses........................................... (1) (413)
Income taxes payable....................................... 163 668
Profit sharing plan contribution payable................... 175 (34)
Deferred income............................................ 321 126
--------------- --------------
Total adjustments.......................................... (535) 2,539
--------------- --------------
Net cash provided by operating activities......................... 621 3,833
--------------- --------------
Cash flows from (used in) investing activities:
Cash purchases of equipment.................................... (939) (881)
Purchases of marketable securities............................. (5,190) (4,000)
Maturity of marketable securities.............................. 2,000 2,500
Additions to capitalized software development costs............ (78) (1,162)
--------------- --------------
Net cash used by investing activities............................. (4,207) (3,543)
--------------- --------------
Cash flows from financing activities:
Purchase of treasury stock..................................... -- (2,069)
--------------- --------------
Net cash used by financing activities............................. -- (2,069)
--------------- --------------
Net decrease in cash and cash equivalents......................... (3,586) (1,779)
Cash and cash equivalents at beginning
of period...................................................... 7,064 2,860
--------------- --------------
Cash and cash equivalents at end of period........................ $ 3,478 $ 1,081
================ ==============
Supplemental cash flow disclosures:
Income taxes paid.............................................. $ 616 $ 84
============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
PROPHET 21, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(Information for March 31, 1996 and 1997 is unaudited)
Note 1 -- Basis of Presentation:
The information presented for March 31, 1996 and 1997, and for the
three-month and the nine-month periods then ended, is unaudited, but, in the
opinion of the Company's management, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting only of normal
recurring accruals) which the Company considers necessary for the fair
presentation of the Company's financial position as of March 31, 1997 and the
results of its operations and its cash flows for the three-month and the
nine-month periods ended March 31, 1996 and 1997. The financial statements
included herein have been prepared in accordance with generally accepted
accounting principles and the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted. These
consolidated financial statements should be read in conjunction with the
Company's audited financial statements for the year ended June 30, 1996 which
were included as part of the Company's Annual Report on Form 10-K.
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany balances have been
eliminated.
Results for the interim period are not necessarily indicative of results
that may be expected for the entire year.
Note 2 -- Inventories (in thousands):
A summary of the major components of inventories are as follows:
<TABLE>
<CAPTION>
June 30, March 31,
-------- ---------
1996 1997
---- ----
<S> <C> <C>
Finished goods............................ $ 1,412 $ 1,273
Used equipment inventory.................. 134 59
--------------- -------------------
$ 1,546 $ 1,332
=============== ===================
</TABLE>
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<PAGE>
PROPHET 21, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(Information for March 31, 1996 and 1997 is unaudited)
(Continued)
Note 3 -- Capitalized Software Development Costs (in thousands):
The Company has capitalized certain software development costs in
accordance with the Statement of Financial Accounting Standards Board ("SFAS")
No. 86. Such costs are capitalized only after technological feasibility has been
demonstrated. Such capitalized amounts will be amortized commencing with product
introduction on a straight-line basis utilizing the estimated economic life of
three years. Amortization of capitalized software development costs will be
charged to cost of sales. At June 30, 1996 and March 31, 1997, the Company had
capitalized $458 and $1,620 of software development costs, respectively, none of
which had been amortized. All other research and development costs have been
expensed.
Note 4 -- Stockholders' Equity:
Preferred Stock:
The Company has an authorized class of 1,500,000 shares of Preferred Stock
which may be issued by the Board of Directors on such terms and with such
rights, preferences and designations as the Board may determine.
Note 5 -- Stock Repurchase Program:
In August 1996, the Company's Board approved a resolution to repurchase up
to 400,000 shares of its Common Stock in open market purchases. The Company
repurchased 359,250 shares at a cost of $2,069,000 during the first three
quarters of fiscal 1997.
Subsequent to the end of the quarter, in April 1997, the Company's Board
approved a resolution to repurchase up to an additional 200,000 shares of its
Common Stock in open market purchases. As of April 30, 1997, the Company had
repurchased an additional 83,650 shares at a cost of $449,100.
-6-
<PAGE>
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition.
General
The Company was founded in 1967 to provide custom programming services and,
in 1974, it began to design, develop, market and support automated business
management systems for distributors, wholesalers and dealers. The Company's
revenue is derived primarily from the sale of Prophet 21 Systems, maintenance
contracts which provide for software support and equipment maintenance and the
sale of optional software products. Each Prophet 21 System includes the Prophet
21 XL Software, an IBM RISC System/6000 computer, various optional third-party
software products and hardware components, training, support and installation.
The Company's cost of revenue consists principally of the costs of hardware
components, customer support, installation and training and, to a lesser extent,
third-party software.
The Company implemented a strategic decision early in 1992 to move from its
internally developed proprietary hardware system to an open system platform,
based on the UNIX/AIX operating system running on an IBM RISC System/6000
computer. The Company's adoption of an open system solution broadened the market
for the Prophet 21 System, facilitated greater customer acceptance, and allowed
successful integration of industry standard third-party software and hardware.
In fiscal 1996, the Company introduced its next generation product,
Prophet 21 Acclaim, a complete business management system that combines the
functionality of the traditional Prophet 21 System with the technology of
Progress Software Corporation's DBMS. Prophet 21 Acclaim is targeted for sales
to new and current customers. It has been designed so that current customers can
move to this new product while preserving their existing technology
infrastructure. The general release of Prophet 21 Acclaim began late in the
second quarter of fiscal 1997.
Results of Operations
Three Months Ended March 31, 1996 and 1997
Revenue. Revenue increased by 8.4% or $667,000, from $7,973,000 in the
three months ended March 31, 1996 ("Third Quarter of Fiscal 1996") to $8,640,000
in the three months ended March 31, 1997 ("Third Quarter of Fiscal 1997").
System sales revenue increased by 7.6%, or $366,000, from $4,847,000 in the
Third Quarter of Fiscal 1996 to $5,213,000 in the Third Quarter of Fiscal 1997.
This increase was attributable primarily to the increase in the average selling
price, which resulted from the Company's focus on larger systems sales and the
continued sales of the Company's new Prophet 21 Acclaim product. Service and
support revenue increased by 9.6%, or $301,000, from $3,126,000 in the Third
Quarter of Fiscal 1996 to $3,427,000 in the Third Quarter of Fiscal 1997. This
increase was attributable primarily to an increase in the
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<PAGE>
number of new users who have entered into maintenance contracts and, to a lesser
extent, to a price increase implemented by the Company on such maintenance
contracts during the second quarter of fiscal 1997 and to an increase in
services performed by the Company in connection with the general release of the
new Prophet 21 Acclaim product.
Gross profit. The Company's gross profit increased by 5.9%, or
$211,000, from $3,598,000 in the Third Quarter of Fiscal 1996 to $3,809,000 in
the Third Quarter of Fiscal 1997. Gross profit margin decreased from 45.1% of
revenue in the Third Quarter of Fiscal 1996 to 44.1% of revenue in the Third
Quarter of Fiscal 1997. Gross profit from system sales decreased by 2.5%, or
$56,000, from $2,204,000 in the Third Quarter of Fiscal 1996 to $2,148,000 in
the Third Quarter of Fiscal 1997. Gross profit margin attributable to system
sales decreased from 45.5% of system sales revenue in the Third Quarter of
Fiscal 1996 to 41.2% in the Third Quarter of Fiscal 1997. The decreases in such
gross profit and gross profit margin were attributable primarily to decreased
sales volume of optional Prophet 21 software which, in general, carries higher
margins offset, in part, by the Company's focus on larger system sales resulting
in an increase in the average price of systems sold. Gross profit from service
and support revenue increased by 19.2%, or $267,000, from $1,394,000 in the
Third Quarter of Fiscal 1996 to $1,661,000 in the Third Quarter of Fiscal 1997.
Gross profit margin attributable to service and support revenue increased from
44.6% of service and support revenue in the Third Quarter of Fiscal 1996 to
48.5% of service and support revenue in the Third Quarter of Fiscal 1997. The
increases in such gross profit and gross profit margin from service and support
revenue were attributable primarily to an increase in the number of new users
who have entered into maintenance contracts and, to a lesser extent, to a price
increase implemented by the Company on such maintenance contracts during the
second quarter of fiscal 1997 and to an increase in services performed by the
Company in connection with the general release of the new Prophet 21 Acclaim
product.
Sales and marketing expenses. Sales and marketing expenses decreased
by 9.2%, or $188,000, from $2,047,000 in the Third Quarter of Fiscal 1996 to
$1,859,000 in the Third Quarter of Fiscal 1997, and decreased as a percentage of
revenue from 25.7% to 21.5%, respectively. Such expenses decreased in absolute
dollars and as a percentage of revenue due primarily to decreased marketing
costs and the completion of salesperson training and, to a lesser extent,
decreased staffing in the marketing department.
General and administrative expenses. General and administrative
expenses decreased by 1.4%, or $8,000, from $563,000 in the Third Quarter of
Fiscal 1996 to $555,000 in the Third Quarter of Fiscal 1997, and decreased as a
percentage of revenue from 7.0% to 6.4%, respectively. The decrease in absolute
dollars and as a percentage of revenue in general and administrative expenses
was due to a decrease in certain administrative expenses.
Research and development expenses. Research and development expenses
increased by 6.8%, or $38,000, from $557,000 in the Third Quarter of Fiscal 1996
to $595,000 in the Third Quarter of Fiscal 1997, but remained relatively
constant as a percentage of revenue from 7.0% to 6.9%, respectively. The
increase in absolute dollars was due primarily to an increase in salary
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<PAGE>
expenses and staffing. The Company also capitalized $463,000 in software
development expenditures during the Third Quarter of Fiscal 1997.
Income taxes. The Company's effective tax rate was 39.6% and 40% in
the Third Quarter of Fiscal 1996 and 1997, respectively.
Nine Months Ended March 31, 1996 and 1997
Revenue. Revenue increased by 8.7%, or $2,083,000, from $23,870,000
in the first nine months of fiscal 1996 to $25,953,000 in the first nine months
of fiscal 1997. System sales revenue increased by 4.7%, or $713,000, from
$15,045,000 in the first nine months of fiscal 1996 to $15,758,000 in the first
nine months of fiscal 1997. This increase was attributable primarily to sales of
the Company's new Prophet 21 Acclaim product which began late in the second
quarter of fiscal 1997. Such increase was offset, in part, by a decrease in
programming revenue and by lower sales volume of Prophet 21 XL Software upgrades
as many existing customers, during the first quarter of fiscal 1997, were
evaluating whether to upgrade to XL9, the latest version of the Company's XL
Software, or purchase the new Prophet 21 Acclaim product. Service and support
revenue increased by 15.5%, or $1,370,000, from $8,825,000 in the first nine
months of fiscal 1996 to $10,195,000 in the first nine months of fiscal 1997.
This increase was attributable primarily to an increase in the number of new
users who have entered into maintenance contracts and, to a lesser extent, to a
price increase implemented by the Company on such maintenance contracts during
the second quarter of fiscal 1997 and to an increase in services performed by
the Company in connection with the general release of the new Prophet 21 Acclaim
product.
Gross profit. The Company's gross profit increased by 7.8%, or
$838,000, from $10,804,000 in the first nine months of fiscal 1996 to
$11,642,000 in the first nine months of fiscal 1997. Gross profit margin
decreased from 45.3% of revenue in the first nine months of fiscal 1996 to 44.9%
of revenue in the first nine months of fiscal 1997. Gross profit from system
sales decreased by 1.1%, or $75,000, from $6,768,000 in the first nine months of
fiscal 1996 to $6,693,000 in the first nine months of fiscal 1997. Gross profit
margin attributable to system sales decreased from 45.0% of system sales revenue
in the first nine months of fiscal 1996 to 42.5% in the first nine months of
fiscal 1997. The decreases in such gross profit and gross profit margin were
attributable primarily to decreased sales volume of optional Prophet 21 software
which, in general, carries higher margins offset, in part, by the Company's
focus on larger system sales resulting in an increase in the average price of
systems sold. Gross profit from service and support revenue increased by 22.6%,
or $913,000, from $4,036,000 in the first nine months of fiscal 1996 to
$4,949,000 in the first nine months of fiscal 1997. Gross profit margin
attributable to service and support revenue increased from 45.7% of service and
support revenue in the first nine months of fiscal 1996 to 48.5% in the first
nine months of fiscal 1997. The increases in such gross profit and gross profit
margin were attributable primarily to an increase in the number of new users who
have entered into maintenance contracts and, to a lesser extent, to a price
increase implemented by the Company on such maintenance contracts during the
second quarter
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<PAGE>
of fiscal 1997 and to an increase in services performed by the Company in
connection with the general release of the new Prophet 21 Acclaim product.
Sales and marketing expenses. Sales and marketing expenses increased
by 3.8%, or $224,000, from $5,876,000 in the first nine months of fiscal 1996 to
$6,100,000 in the first nine months of fiscal 1997, but decreased as a
percentage of revenue from 24.6% to 23.5%, respectively. Sales and marketing
expenses increased in absolute dollars due primarily to increased salesperson
compensation and to increased marketing costs associated with the new Prophet 21
Acclaim product. Sales and marketing expenses decreased as a percentage of
revenue as a result of increased sales volume.
General and administrative expenses. General and administrative
expenses increased by 4.4%, or $74,000, from $1,665,000 in the first nine months
of fiscal 1996 to $1,739,000 in the first nine months of fiscal 1997, but
decreased as a percentage of revenue from 7.0% to 6.7%, respectively. The
increase in absolute dollars in general and administrative expenses was due to
an increase in salary expenses. General and administrative expenses decreased as
a percentage of revenue as a result of increased sales volume.
Research and development expenses. Research and development expenses
increased by 14.9%, or $249,000, from $1,672,000 in the first nine months of
fiscal 1996 to $1,921,000 in the first nine months of fiscal 1997, and increased
as a percentage of revenue from 7.0% to 7.4%, respectively. Such increases were
due primarily to an increase in salary expenses and staffing. The Company also
capitalized $1,162,000 in software development expenditures during the first
nine months of fiscal 1997.
Income taxes. The Company's effective tax rate was 39.5% and 40% in
the first nine months of fiscal 1996 and 1997, respectively.
Liquidity and Capital Resources
Since its inception, the Company has funded its operations primarily
from cash generated by operations and available cash. The Company's cash flow
from operations was $3,833,000 for the nine months ended March 31, 1997.
The Company's working capital was approximately $16,101,000 and
$14,087,000 at March 31, 1996 and 1997, respectively.
The Company invested $881,000 in capital equipment and leasehold
improvements in the nine months ended March 31, 1997. There are no other
material commitments for capital expenditures currently outstanding. The Company
also invested $1,162,000 in software development during the nine months ended
March 31, 1997.
The Company does not have a significant concentration of credit risk
with respect to accounts receivable due to the large number of customers
comprising the Company's customer base and their dispersion across different
geographic regions. The Company performs on-going
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<PAGE>
credit evaluations and generally does not require collateral. The Company
maintains reserves for potential credit losses, and, to date, such losses have
been within the Company's expectations.
In August 1996, the Company's Board of Directors approved a resolution to
repurchase up to 400,000 shares of the Common Stock in open market purchases. As
of March 31, 1997, the Company had repurchased 359,250 shares at a cost of
$2,069,000.
Subsequent to the end of the quarter, in April 1997, the Company's Board
approved a resolution to repurchase up to an additional 200,000 shares of its
Common Stock in open market purchases. As of April 30, 1997, the Company
repurchased an additional 83,650 shares at a cost of $442,100.
The Company believes that available funds and the cash flow expected to be
generated from operations, will be adequate to satisfy its current and planned
operations for at least the next 24 months.
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<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
None.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter for which this
report on Form 10-Q is filed.
-12-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Prophet 21, Inc.
DATE: May 13, 1997 By: /s/ Charles L. Boyle, III
-----------------------------
Charles L. Boyle, III,
President and Chief
Executive Officer
(Principal Executive Officer)
DATE: May 13, 1997 By: /s/ Thomas M. Giuliani
-----------------------------
Thomas M. Giuliani,
Chief Financial Officer
and Treasurer
(Principal Financial and
Accounting Officer)
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 1,081
<SECURITIES> 7,442
<RECEIVABLES> 10,639
<ALLOWANCES> (343)
<INVENTORY> 1,332
<CURRENT-ASSETS> 20,665
<PP&E> 2,262
<DEPRECIATION> (727)
<TOTAL-ASSETS> 24,784
<CURRENT-LIABILITIES> 6,578
<BONDS> 0
0
0
<COMMON> 40
<OTHER-SE> 18,166
<TOTAL-LIABILITY-AND-EQUITY> 24,784
<SALES> 25,953
<TOTAL-REVENUES> 25,953
<CGS> 14,311
<TOTAL-COSTS> 14,311
<OTHER-EXPENSES> 9,760
<LOSS-PROVISION> 1,882
<INTEREST-EXPENSE> (275)
<INCOME-PRETAX> 2,157
<INCOME-TAX> 863
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,294
<EPS-PRIMARY> 0.33
<EPS-DILUTED> 0.33
</TABLE>
