U.S. Securities and Exchange Commission
Washington, D.C. 20549
---------------
Form 10-QSB/A No. 1
(Mark One)
[ X ] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 1997
[ ] 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 1-14076
ALLEGRO NEW MEDIA, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 22-3270045
(State or other jurisdiction (I.R.S. Employer Identification Number)
of incorporation or organization)
111 N. Market Street, San Jose, CA 95113
(Address of principal executive offices)
(408) 537-3000
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 [ ]
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 8,050,424 shares of Common
Stock as of May 1, 1997.
Transitional Small Business Disclosure Format (Check one):
Yes [ ] No [ X ]
---------------
<PAGE>
CROSS REFERENCE SHEET
Page
Number
Cover Page 1
Cross Reference Sheet 2
Part I. Financial Information
Item 1. Financial Statements (Unaudited):
Condensed consolidated balance sheets as of March 31, 1997
and December 31, 1996 3
Condensed consolidated statements of operations for the three
months ended March 31, 1997 and 1996 4
Condensed consolidated statements of cash flows for the three
months ended March 31, 1997 and 1996 5
Notes to condensed financial statements - March 31, 1997 6
Item 2. Management's Discussion and Analysis or Plan of Operation 7
Part II. Other Information
Item 1. Legal Proceedings. 11
Item 2. Changes In Securities. 11
Item 3. Defaults Upon Senior Securities. 11
Item 4. Submission of Matters to a Vote of Security Holders. 11
Item 5. Other Information. 11
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
Index to Exhibits 13
<PAGE>
Part I. Financial Information
ALLEGRO NEW MEDIA, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
Assets (Unaudited)
Current assets:
<S> <C> <C>
Cash and cash equivalents $3,039,829 $ 4,833,454
Restricted cash 1,650,000 1,650,000
Short-term investments 4,359,337 6,328,180
Accounts receivable, net 2,128,046 1,991,790
Inventories (Note 3) 465,700 713,586
Other current assets 395,400 235,849
---------- ----------
Total current assets 12,038,312 15,752,859
Property and euipment, net 444,623 450,867
Acquired software, net 6,420,319 6,787,614
Goodwill and other intangibles, net 3,953,830 4,262,033
----------- ------------
$22,857,084 $27,253,373
Liabilities and Stockholders' Equity
Current liabilities:
<S> <C> <C>
Accounts payable $ 2,135,691 $ 3,509,060
Accrued liabilities 8,832,608 10,186,059
Notes payable 1,798,392 1,882,548
----------- -----------
Total current liabilities 12,766,691 15,577,667
Stockholders' equity:
<S> <C> <C>
Serial Preferred Stock, authorized 1,939,480
shares, none issued and outstanding:
Class B Voting Preferred Stock, authorized
60,520 shares; issued and
outstanding 60,520 shares 61 61
Common stock, par value $.001 per share,
authorized 30,000,000 shares; issued and
outstanding 7,860,243 shares in 1996 and
8,050,424 shares in 1997 8,050 7,860
Additional paid-in capital 42,843,535 41,731,437
Accumulated deficit (32,761,253) (30,063,652)
------------ ------------
Total stockholders' equity 10,090,393 11,675,706
------------ ------------
Total liabilities and stockholders'
equity $22,857,084 $27,253,373
</TABLE>
Note: The balance sheet at December 31, 1996 has been derived from the
audited financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
See notes to condensed financial statements.
<PAGE>
ALLEGRO NEW MEDIA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1997 1996
<S> <C> <C>
Net sales $3,950,252 $ 445,924
Cost of goods sold 951,766 229,402
---------- ---------
Gross profit 2,998,486 216,522
Selling, general and administrative
expenses 4,162,580 502,683
Amortization of acquired software and
goodwill and depreciation 866,919 7,354
Product development 756,212 82,278
Other (income) expense net (89,624) (30,149)
---------- ---------
Net loss $(2,697,601) $(345,644)
Net loss per share $(.34) $(.11)
Weighted average number of common
shares outstanding 7,932,743 3,150,669
--------- ---------
</TABLE>
See notes to condensed financial statements.
<PAGE>
ALLEGRO NEW MEDIA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended March 31,
1997 1996
Operating activities
<S> <C> <C>
Cash (used in) operations $(2,780,212) $ (631,472)
Investment activities
Cash used to pay acquisition costs ( 959,935)
Purchase of property and equipment ( 32,321) ( 1,953)
Proceeds from sale of short term
investments 1,968,843
Financing activities
Proceeds from sale of common stock 10,000 464,907
Net (decrease) in cash (1,793,625) (168,518)
Cash at beginning of period 4,833,454 2,928,272
----------- ------------
Cash at end of period $ 3,039,829 $ 2,759,755
</TABLE>
See notes to condensed financial statements.
<PAGE>
ALLEGRO NEW MEDIA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB and Item
310 of Regulation S-B. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three month period ended March 31, 1997
are not necessarily indicative of the results that may be expected for the year
ending December 31, 1997. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1996. Certain prior year
information has been reclassified to conform to the current year's presentation.
2. Loss Per Share.
Net loss per share is computed based upon the weighted average number of
shares of common stock and common share equivalents outstanding during the
periods presented. In accordance with the Securities and Exchange Commission
Staff Accounting Bulletin No. 83, common share equivalents resulting from
outstanding options to purchase common stock are excluded as the impact is
anti-dilutive.
3. Inventories
<TABLE>
<CAPTION>
Inventories consist of the following:
March 31, 1997 December 31, 1996
<S> <C> <C>
Raw materials $ 80,801 $ 81,570
Finished goods 384,899 632,016
--------- ----------
$ 465,700 $ 713,586
</TABLE>
4. Stockholder's Equity
During the quarter ending March 31, 1997, the Company issued (a) 71,428
shares of common stock to M. S. Farrell & Co., Inc. ("MSF") and a designee
thereof in connection with the Company's exercise of its right to terminate its
exclusive investment banking and other obligations to MSF and (b) an aggregate
of 118,747 shares of common stock to investment bankers, consultants and upon
the exercise of certain stock options under the Company's 1994 Long-Term
Incentive Plan.
5. Business Combinations
On July 31, 1996, the Company acquired all of the outstanding common stock
of Serif Inc. and all of the outstanding preference and ordinary shares of Serif
(Europe) Limited (collectively "Serif"). The aggregate purchase price was
approximately $4,200,000 and was principally financed through the issuance of
1,000,000 shares of the Company's common stock. The acquisition has been
accounted for as a purchase and the results of operations of Serif are included
in the Company's consolidated financial statements beginning August 1, 1996.
On December 27, 1996, the Company acquired all of the outstanding common
stock of Software Publishing Corporation ("SPC"). The aggregate purchase price,
including all direct costs, was approximately $30,000,000 and was principally
financed through the issuance of 3,376,162 shares of common stock.
<PAGE>
ALLEGRO NEW MEDIA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Item 2. Management's Discussion and Analysis or Plan of Operation.
Statements contained in this Quarterly Report on Form 10-QSB that are not
based upon historical fact are "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Forward-looking statements included
in this Form 10-QSB involve known and unknown risks, uncertainties and other
factors which could cause actual results, performance (financial or operating)
or achievements expressed or implied by such forward looking statements not to
occur or be realized. Such forward looking statements generally are based upon
the best estimates by the Company of future results, performance or achievement,
based upon current conditions and the most recent results of operations.
Forward-looking statements may be identified by the use of forward-looking
terminology such as "may," "will," "expect," "believe," "estimate,"
"anticipate," "continue," or similar terms, variations of those terms or the
negative of those terms.
The Company has recently acquired three operating software companies with
the expectation that such transactions will result in long-term strategic
benefits. The realization of these anticipated benefits will depend in part on
whether the operations of the Company and its recently acquired subsidiaries can
be fully integrated in an efficient and effective manner. This requires, among
other things, integration of the Company's and such subsidiaries' respective
product offerings and coordination of the Company's and such subsidiaries'
sales, marketing and research and development efforts and distribution channels.
While the Company has substantially implemented its integration plans, there can
be no assurance that the expected long-term strategic benefits of the recent
acquisitions will be realized.
Additional potential risks and uncertainties include, among other things,
such factors as the overall level of business and consumer spending for computer
software, the amount of sales of the Company's products, the competitive
environment within the computer software industry, the level and costs incurred
in connection with the Company's product development efforts and the results of
such efforts, the financial strength of the retail industry, market acceptance
of the Company's products, certain technological considerations, competition,
dependence on key personnel and the other factors and information disclosed and
discussed in this "Item 2. Management's Discussion and Analysis or Plan of
Operation" and in other sections of this Form 10-QSB. Readers of this Form
10-QSB should carefully consider such risks, uncertainties and other
information, disclosures and discussions which contain cautionary statements
identifying important factors that could cause actual results to differ
materially from those provided in the forward-looking statements.
General
The Company is an international supplier of computer software applications
and companion utilities primarily for the corporate and SOHO business market.
These software applications and companion utilities are targeted towards the
visual communications product category, and improve the graphical appeal and
overall effectiveness of documents produced by desktop publishing, presentation
graphics, web page, word processing and similar applications. The Company's
product lines include several products based upon its patent-pending Intelligent
Formatting+ technology ActiveOffice, ASAP WordPower, ASAP WebShow and ASAP; as
well as its traditional products such as Serif PagePlus, Serif DrawPlus, Harvard
Graphics, Harvard ChartXL, Harvard Spotlight, Learn to Do Windows 95 with John C
Dvorak, and a line of interactive multimedia products based on Entrepreneur
Magazine publications. In January 1997, the Company introduced ActiveOffice,
which is a companion product to Microsoft Office that is designed to give users
of Microsoft Word, Excel, PowerPoint and Exchange Mail, a quick and easy way to
convert plain text and numbers into visual graphics. The Company also continues
to offer other business productivity software products. The Company has
de-emphasized its word processing and other non-visual communications, business
productivity and interactive multimedia products. The Company currently derives
substantially all of its net sales from products sold directly to end-users by
its direct mail and telemarketing centers, and to retailers, distributors and
corporate purchasers by its internal corporate and retail sales force and
independent sales representatives. As the industry evolves mechanisms for
<PAGE>
efficiently and securely charging customers directly for software over the
Internet, the Company expects that it may be able to supplement traditional
forms of software distribution and distribute software directly over the
Internet medium.
North America and international net revenues for the Company's three month
periods ending March 31, 1997 and 1996 and the percentage of such revenues were
as follows:
<TABLE>
<CAPTION>
Three Months Ended March 31,
1997 1996
Net Revenues % Net Revenues %
<S> <C> <C> <C> <C>
North America $1,872,165 47% $445,924 100%
International 2,078,087 53% -0- 0%
---------- --- -------- ----
Total net revenues $3,950,252 100% $445,924 100%
</TABLE>
The Company believes that end users are continuing to migrate from the
Windows 3.1 to the Windows 95 platform and potentially will migrate to Internet
computing. The Company expects increased competition, including price
competition, in the Windows 3.1, Windows 95 and Windows NT markets in the
future. Several of the Company's competitors have introduced suites of products
which include products that directly compete with the Company's products. These
suites of products may be bundled with other office software programs by the
same or other competitors, or are sold free or included as part of the operating
system. The Company believes these offerings of product suites adversely affect
net revenues, and will continue to adversely affect sales of the Company's
products in the future as the individual products within the suites continue to
gain increased levels of inter-operability and functionality. The Company
currently does not offer a suite of general purpose office products; however,
the Company currently offers two suites of products, Serif Publishing Power
Suite and Harvard Presenters Pack, as well as products that complement
competitive suite products. The Company believes that in order to increase its
net revenues, it must introduce new marketing strategies and continue to develop
and introduce new technologies and products through strategic alliances,
acquisitions or internal development. Any inability or delay in executing these
strategies, difficulties encountered in introducing new products or marketing
programs, or failures of the Company's current and future products to compete
successfully with products offered by other vendors, could adversely affect the
Company's net revenues and profitability.
Results of Operations
Three Month Period Ended March 31, 1997 Compared to the Three Month Period
Ended March 31, 1996
Net Sales. Net sales increased approximately 786% from $445,924 in the
three month period ended March 31, 1996 to $3,950,252 in the three month period
ended March 31, 1997 as a result of the inclusion of sales from Serif and SPC in
the 1997 three-month period. There were no Serif or SPC results in the 1996
period. The Company provided for returns in the three month period ended March
31, 1997 at approximately 25% of gross sales versus approximately 21% in the
three month period ended March 31, 1996.
Cost of Goods Sold. Cost of goods sold increased approximately 315% from
$229,402 in the three month period ended March 31, 1996 to $951,766 in the three
month period ended March 31, 1997, as a result of higher sales volume. As a
percentage of net sales, cost of goods sold decreased from approximately 51% of
net sales in the three month period ended March 31, 1996 to approximately 24% of
net sales in the three month period ended March 31, 1997 as a result of
increased sales volumes providing lower per unit production costs.
The Company's gross margins and operating income may be affected in
particular periods by the timing of product introductions, promotional pricing
and rebate offers, as well as by return privileges and marketing promotions in
connection with new product introductions and upgrades. These promotions may
have a negative influence on average selling prices and gross margins. Gross
margins have also been, and may continue to be, adversely affected by
competitive pricing strategies in the industry as a whole, including competitive
upgrade pricing, the OEM business and alternative licensing arrangements.
<PAGE>
Costs of goods sold consists primarily of product costs, freight charges,
royalties and an inventory allowance for damaged and obsolete products. Product
costs consist of the costs to purchase the underlying materials and print both
boxes and manuals, media costs (CD-ROM's and other media) and assembly.
Selling, General and Administrative Expenses. Selling, general and
administrative ("SB&A") expenses increased by approximately 728% from $502,683
in the three month period ended March 31, 1996 to $4,162,580 in the three month
period ended March 31, 1997. Substantially all expenses have increased since the
1996 period due to the inclusion of expenditures associated with the operations
of Serif and SPC which were not included in the 1996 period. Total selling
expenses increased approximately 702% from $166,470 in the three month period
ended March 31, 1996 to $1,334,644 in the three month period ended March 31,
1997, primarily as a result of an increase in direct mail advertising associated
with the Company's telemarketing operations and the roll-out costs associated
with the release of the Company's new ActiveOffice product. Total salaries and
wages increased $1,332,449 or approximately 877%, from $151,914 in the three
month period ended March 31, 1996 to $1,484,363 in the three month period ended
March 31, 1997, primarily due to the inclusion of wages attributable to the
operations of Serif and SPC, which were not included in the three-month period
ended March 31, 1996.
The Company is utilizing a consumer rebate offer in connection with its
marketing of its new ActiveOffice product. No assurance can be given that rebate
redemptions will not be at a rate in excess of amounts that the Company may
reserve for such redemptions or that redemptions in excess of such reserve would
not have a material adverse effect on the Company's business, operating results
or financial condition.
The Company establishes several of its marketing expenditure levels based
on expected net revenues. If orders and shipments do not occur when expected,
expenditure levels could be disproportionately high compared to recognized
revenues for the reported period, and the Company's operating results could be
adversely affected. The Company periodically reviews and adjusts its variable
expenditure levels based on actual sales volumes. In the future, the Company's
net revenues and operating results could be adversely affected by these and
other factors, such as delays in new product introductions, the mix of product
sales or distribution channels and customer choices regarding operating systems.
Amortization of Acquired Software and Goodwill and Depreciation. In the
three-month period ended March 31, 1997, the Company recorded approximately
$784,053 in amortization of acquired software and goodwill associated with its
acquisitions of Serif and SPC, which was not included in the three month period
ended March 31, 1996. Depreciatiion expense increased $75,512 or approximately
1,027% from $7,354 in the three month period ended March 31, 1996 to $82,866 in
the three month period ended March 31, 1997, primarily due to the inclusion of
depreciation associated with Serif and SPC which were not included in the 1996
period.
Product Development. Product development expenses increased approximately
819% from $82,278 in the three month period ended March 31, 1996 to $756,212 in
the three month period ended March 31, 1997, principally as a result of an
increase in product development costs associated with producing new products and
the inclusion of the product development costs associated with the Serif and SPC
subsidiaries which were not included in the 1996 period. As a percentage of net
sales, the Company's product development costs were approximately 19.1% in the
three month period ended March 31, 1997 versus 18.5% in the three month period
ended March 31, 1996. The Company expects that product development expenses will
increase in dollar amount in the future as the Company expands its product
development activities, although the Company's long-term goal is to reduce
product development costs as a percentage of sales. All product development
costs have been expensed in the period incurred.
Other Income. Other income increased from $30,149 in the three month period
ended March 31, 1996 to $89,624 in the three month period ended March 31, 1997,
primarily as a result of higher cash balances.
Liquidity and Capital Resources
During the three month period ended March 31, 1997, the Company's cash,
cash equivalents and short-term investments decreased by $3,762,468 from
$11,161,634 at December 31, 1996 to $7,399,166 at March 31, 1997, primarily as a
result of using $2,780,212 in operations and $959,935 to pay certain acquisition
costs. Although the Company had a working capital deficit of $728,379 at March
31, 1997, the Company believes that its existing cash and cash equivalents and
cash generated from operations, if any, should be sufficient to meet its
<PAGE>
currently anticipated liquidity and capital expenditure requirements for at
least the next twelve months. There can be no assurance, however, that the
Company will be successful in attaining its sales goals, nor that attaining such
goals will have the desired effect on the Company's cash resources. If the
Company does not attain its revenue and cash collection goals or if the
Company's cash resources are not sufficient, it may be necessary to obtain
additional sources of financing. The Company has a letter of credit facility of
$300,000 relating to certain lease obligations; however, there can be no
assurances that the Company will be able to obtain additional financing, if at
all, or that such financing will be on terms acceptable to the Company. The
Company is pursuing a possible offering of its equity or debt securities.
However, there can be no assurance that the Company will be successful in
completing such an offering.
The Company's operating activities for the first three months of 1997 used
cash of $2,780,212, which reflected a reduction of $1,373,369 in trade accounts
payable. The Company generated cash of $976,587 in its investment activities,
after giving effect to the use of $959,935 of cash relating to the payment of
acquisition costs. The Company intends to continue to utilize its resources in
1997 for product development, marketing and advertising, to finance the higher
level of inventory and accounts receivable necessary to support the anticipated
increase in sales, for capital expenditures, including the purchase of computer
equipment, and for internal and external software development. However, the
Company's cash requirements may change depending upon numerous factors,
including, without limitation, the need to finance the licensing or acquisition
of third party software as well as increased inventory and accounts receivable
arising from the sale and shipment of new products.
In the three month period ended March 31, 1997, approximately 53% of the
Company's total sales were generated outside the U.S. The Company expects this
practice to continue. The Company's exposure for foreign currency exchange gains
and losses is partially mitigated, as the Company incurs operating expenses in
most of the currencies in which it invoices customers. As of March 31, 1997, the
Company had no foreign exchange contracts outstanding. The Company's foreign
exchange gains and losses may be expected to fluctuate from period to period
depending on the movement in exchange rates.
In June 1994, SPC sold its Superbase product line to Computer Concepts
Corporation ("CCC") (Nasdaq National Market: CCEE) for shares of CCC's
restricted common stock. As of March 31, 1997, SPC owned 3,039,894 shares of
common stock of CCC, which it has or expects to sell during the remainder of
1997, or as soon thereafter as practicable. As of May 12, 1997 the closing price
of the CCC common stock on The Nasdaq National Market was $.53 per share.
Seasonality
The computer software market is characterized by significant seasonal
swings in demand, which typically peak in the fourth quarter of each year. This
seasonal pattern is due primarily to the increased demand for software during
the year-end holiday buying season. The Company expects its net sales and
operating results to continue to reflect this seasonality. The Company's
revenues may also experience substantial variations as a result of a number of
factors, such as consumer and business preferences and introduction of competing
titles by competitors, as well as limited time promotional pricing offers. There
can be no assurance that the Company will achieve consistent growth or
profitability on a quarterly or annual basis.
Inflation
The Company believes that inflation has generally not had a material impact
on its operations.
<PAGE>
PART II. Other Information
Item 1. Legal Proceedings.
Reference is hereby made to the Company's Annual Report on Form 10-KSB for
the fiscal year ended December 31, 1996, Item 3 thereof (page 14), filed April
15, 1997 (Commission file No.: 1-14076), and to the references therein, for a
discussion of all material pending legal proceedings to which the Company or any
of its subsidiaries are parties.
Item 2. Changes in Securities.
None.
Item 3. Defaults upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K
(a) 10.2 Director and Advisor Stock Option Plan.
27 Financial Data Schedule.
(b) Reports filed on Form 8-K during the quarter ended March 31, 1997:
On January 2, 1997, the Company filed a Current Report on Form 8-K (Date of
Report: December 27, 1996) with the Commission reporting, as an Item 2
disclosure, the Company's acquisition of SPC as a result of the merger of a
wholly owned subsidiary of the Company with and into SPC. The Form 8-K included
(by incorporation by reference to the Company's Registration Statement on Form
S-4 (Registration No.: 333-16449), filed with the Commission on November 20,
1996) the following financial statements and information:
(i) Financial Statements of Business Acquired.
(A) Audited financial statements of SPC as of September 30, 1996 and
1995 and for the years then ended.
(ii) Pro Forma Financial Information (Unaudited).
(A) Pro forma condensed combined balance sheet of the Company and its
subsidiaries as of September 30, 1996.
(B) Pro forma condensed combined statements of operations of the
Company and its subsidiaries for the year ended December 31, 1995.
(C) Pro forma condensed combined statements of operations of the
Company and its subsidiaries for the nine months ended September 30,
1996.
(D) Notes to unaudited pro forma consolidated financial statements.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ALLEGRO NEW MEDIA, INC.
Date: August 18, 1997 By: /s/ Barry A. Cinnamon
Barry A. Cinnamon
Chairman of the Board, President and
Chief Executive Officer
(Principal Executive Officer)
Date: August 18, 1997 By: /s/ Mark E. Leininger
Mark E. Leininger
Chief Operating Officer, Vice President-
Finance, Treasurer, Chief Financial
Officer (Principal Accounting Officer)
<PAGE>
EXHIBIT INDEX
10.2 Director and Advisor Stock Option Plan.*
27 Financial Data Schedule.
- ----------
* Previously filed
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
condensed financial statements for the quarter ended March 31, 1997 and is
qualified in its entirety by reference to such statements. (Replace this text
with the legend)
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-END> Mar-31-1997
<CASH> 4,689,829
<SECURITIES> 4,359,337
<RECEIVABLES> 5,789,643
<ALLOWANCES> 3,661,597
<INVENTORY> 465,700
<CURRENT-ASSETS> 12,038,312
<PP&E> 444,623
<DEPRECIATION> 0
<TOTAL-ASSETS> 22,857,084
<CURRENT-LIABILITIES> 12,766,691
<BONDS> 0
0
61
<COMMON> 8,050
<OTHER-SE> 10,082,282
<TOTAL-LIABILITY-AND-EQUITY> 22,857,084
<SALES> 3,950,252
<TOTAL-REVENUES> 3,950,252
<CGS> 951,766
<TOTAL-COSTS> 951,766
<OTHER-EXPENSES> 1,623,131
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (89,624)
<INCOME-PRETAX> (2,697,601)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,697,601)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,697,601)
<EPS-PRIMARY> (.34)
<EPS-DILUTED> (.34)
</TABLE>
