<PAGE>
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 June 30, 1996
-------------
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: 0-25526
C-ATS SOFTWARE INC.
(Exact name of registrant as specified in its charter)
DELAWARE 77-0185283
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1870 EMBARCADERO ROAD, PALO ALTO, CA 94303
(Address of principal executive offices) (Zip Code)
415-321-3000
(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.
[X (1)] Yes [X (2)] No
Number of shares outstanding of the issuer's common stock, $0.001 par value
as of July 31, 1996: 6,614,743
-1-
<PAGE>
C-ATS SOFTWARE INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Interim Financial Statements
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Operations 4
Condensed Consolidated Statements of Cash Flows 5
Notes to Interim Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition 8-12
and Results of Operations
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
Index to Exhibits 15
Exhibit 27 EDGAR Requirements for the Format and Input of 16-17
Financial Data Schedules
-2-
<PAGE>
C-ATS SOFTWARE INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
June 30, December 31,
1996 1995
-------- --------
ASSETS (unaudited)
Current assets:
Cash and cash equivalents $ 1,363 $ 4,199
Short-term investments 19,914 22,502
Accounts receivable, net 7,299 7,153
Prepaid expenses 668 430
Deferred taxes 2,764 2,888
-------- --------
Total current assets 32,008 37,172
Property and equipment, at cost
Equipment 3,119 2,472
Leasehold improvements 314 306
Furniture and fixtures 462 470
-------- --------
3,895 3,248
Accumulated depreciation (2,888) (2,293)
-------- --------
Net property and equipment 1,007 955
Purchased software, at cost 1,447 376
Accumulated amortization (508) (321)
-------- --------
Net purchased software 939 55
Other assets 301 318
-------- --------
$ 34,255 $ 38,500
-------- --------
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 599 $ 1,093
Accrued liabilities 795 1,159
Accrued compensation 1,489 1,019
Accrued taxes payable 127 1,058
Deferred revenue 10,063 11,279
-------- --------
Total current liabilities 13,073 15,608
Commitments:
Shareholders' equity:
Common stock 7 6
Additional paid in capital 22,659 18,205
Cumulative translation adjustment 254 319
Retained earnings (accumulated deficit) (1,738) 4,362
-------- --------
Total shareholders' equity 21,182 22,892
-------- --------
$ 34,255 $ 38,500
-------- --------
-------- --------
-3-
<PAGE>
C-ATS SOFTWARE INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Quarter ended June 30, Six months ended June 30,
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues:
License revenue $ 4,939 $ 4,984 $ 10,325 $ 9,738
Service and other revenue 134 482 442 911
------- ------- -------- --------
Total revenues 5,073 5,466 10,767 10,649
Costs and expenses:
Cost of revenues 74 190 128 479
Research and development 1,567 863 2,791 1,744
Sales & Marketing 2,761 2,590 5,430 4,879
General & administrative 650 723 1,360 1,402
In-Process R&D expense - - 7,066 -
------- ------- -------- --------
Total costs & expenses 5,052 4,366 16,775 8,504
------- ------- -------- --------
Operating income (loss) 21 1,100 (6,008) 2,145
Interest income 240 315 471 401
------- ------- -------- --------
Income (loss) before provision
for income taxes 261 1,415 (5,537) 2,546
Provision for income taxes 97 495 566 891
------- ------- -------- --------
Net income/(loss) $ 164 $ 920 $ (6,103) $ 1,655
------- ------- -------- --------
------- ------- -------- --------
Net income/(loss) per share $ 0.02 $ 0.14 $ (0.95) $ 0.29
------- ------- -------- --------
------- ------- -------- --------
Weighted average common
shares outstanding 6,797 6,418 6,425* 5,791
*excludes anti-dilutive
common share equivalents.
</TABLE>
-4-
<PAGE>
C-ATS SOFTWARE INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30, June 30,
1996 1995
-------------- -------------
(unaudited) (unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (6,103) $ 1,655
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 434 300
Acquired in-process research and development 7,066 --
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (146) 920
(Increase) in prepaid expenses (238) (347)
(Increase) decrease in other assets 17 (199)
(Increase) decrease in deferred tax asset 124 (157)
Increase (decrease) in accounts payable (494) 403
(Decrease) in accrued liabilities (364) (287)
Increase (decrease) in accrued compensation 470 (261)
(Decrease) in accrued taxes payable (931) (291)
Increase (decrease) in deferred revenue (1,216) 574
-------- --------
Net cash provided (used) by operating activities (1,381) 2,310
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of short-term investments (215) (19,808)
Investment in acquisition of LORGB (8,084) --
Purchase of property and equipment (373) (421)
-------- --------
Net cash used in investing activities (8,672) (20,229)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of short-term investments 2,803 --
Proceeds from issuance of common stock 4,455 14,148
-------- --------
Net cash provided by financing activities 7,258 14,148
-------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS (41) 284
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS (2,836) (3,487)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD
4,199 7,689
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,363 $ 4,202
-------- --------
-------- --------
</TABLE>
-5-
<PAGE>
C-ATS SOFTWARE INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. NATURE OF OPERATIONS:
C-ATS Software Inc. (the "Company") was organized in 1988 as a successor to
a partnership formed in 1986. The Company develops and markets client/server
software for financial risk management. The majority of the Company's current
clients are domestic and international financial institutions.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
annual financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to those rules and
regulations, although the Company believes that the disclosures made are
adequate to make the information presented not misleading. The interim
financial statements are unaudited, but reflect all adjustments (consisting of
only normal recurring adjustments) which are, in the opinion of management,
necessary for a fair presentation. The financial statements should be read in
conjunction with the Company's financial statements and footnotes as presented
in the Company's Annual Report filed under SEC Form 10-K.
REVENUE RECOGNITION
The Company licenses its products to end users under annual license
agreements which include rights to maintenance support services and product
upgrades. Accordingly, license revenues are recognized ratably over twelve
months.
In addition, the Company provides training and consulting services to its
clients. Revenue from such services is generally recognized as the services are
performed. When performing long-term systems integration projects for its
clients, revenues are recognized based on the percentage-of-completion method,
and any anticipated losses would be recorded in the earliest period in which
such loss may become evident. The Company completed its most recent systems
project in the fourth quarter of 1995 and does not currently have a long-term
project in process.
-6-
<PAGE>
EARNINGS PER SHARE
Earnings per share is computed using the weighted average number of shares
of common stock and dilutive common share equivalents from stock options (using
the treasury stock method). Pursuant to the Securities and Exchange Commission
Staff Accounting Bulletin No. 83, common and common share equivalents issued
during the twelve-month period prior to the Company's March 1995 public offering
are included in the calculation of common and common share equivalents as if
they were outstanding for all periods prior to the initial public offering.
Furthermore, common share equivalents from convertible stock that converted upon
the Company's initial public offering were included in the calculation as if
they had been converted on March 28, 1995.
In the first half of 1996, common share equivalents, if included, would
have an anti-dilutive effect on the net loss per share calculation, and are
therefore are excluded from the calculation for this period. The Financial
Accounting Standards Board is currently considering a proposal to eliminate
common share equivalents from all future earnings per share calculations
beginning in 1997.
STOCK EXCHANGE; COMMON STOCK
The Company was reincorporated in Delaware, effective March 1995. Pursuant
to the reorganization, the Delaware successor Company issued one share of stock
for each share of outstanding Common Stock and Preferred Stock. During March
1995, the Company completed its initial public offering of stock and sold an
aggregate of 1.3 million shares of Common Stock generating net proceeds to the
Company, after underwriting and other costs, of approximately $13.8 million.
-7-
<PAGE>
C-ATS SOFTWARE INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Actual results could differ materially from those
projected in the forward looking statements as a result of factors set forth in
the section titled "Future Operating Results" and elsewhere.
RESULTS OF OPERATIONS:
The following table sets forth for the periods indicated the percentage of
revenues represented by certain line items in the Company's Consolidated
Statements of Operations:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
----------- ----------- ----------- -----------
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenues:
License revenue 97% 91% 96% 91%
Service and other revenue 3 9 4 9
---- ---- ---- ----
Total revenues 100 100 100 100
Costs and expenses:
Cost of revenues 1 1 5
Research and development 31 16 26 16
Sales and marketing 55 47 50 46
General and administrative 13 13 13 13
In process R&D expense -- -- 66 --
---- ---- ---- ----
Total costs and expenses 100 80 156 80
---- ---- ---- ----
Operating income (loss) 0 20 (56) 20
Interest income 5 4 4 4
---- ---- ---- ----
Income (loss) before provision for income taxes 5 24 (52) 24
Provision for income taxes 2 8 5 4
---- ---- ---- ----
Net income (loss) 3% 6% (57)% 16%
</TABLE>
REVENUES
Total revenues during the second quarter of 1996 decreased to $5.1 million,
a 7% decline versus second quarter of 1995 revenues of $5.5 million. The major
contributor to the decline was a reduction in service and other revenues
described below. Revenues for the first six months of 1996 increased by 1% to
$10.8 million from $10.6 million in 1995. International revenues accounted for
-8-
<PAGE>
80% of total revenues in the second quarter and the first six months of 1996
compared to 80% and 78% during the same periods in 1995. Domestic revenues
increased by 11% and 14% in the second quarter and first half, respectively
versus 1995, while international revenues remained the same in the second
quarter and increased by 5% year-to-date over the same period of 1995. Domestic
revenues were enhanced by new clients sales associated with the acquisition of
LORGB in the first quarter of 1996
LICENSE. License revenue was reduced by 1% to $4.9 million in the second
quarter of 1996 from $5.0 million in the second quarter of 1995. For the first
six months of 1996, license revenue increased by 6% to $10.3 million from $9.7
million in 1995. The decline in the second quarter was due primarily to the loss
of a single renewal client who had converted to an internally developed system.
SERVICE AND OTHER. Service and other revenue declined to $.1 million and
$.4 million in the second quarter and the first six months of 1996 versus year
earlier service revenue of $.5 million and $.9 million, respectively. Service
and other revenue decreased primarily due to the completion of a systems
integration project that was undertaken and subcontracted by the Company in the
middle of 1994 and concluded in the fourth quarter of 1995.
COSTS AND EXPENSES
COST OF REVENUES. Cost of revenues includes the cost of documentation
materials, royalties and the cost of subcontracted services. Cost of revenues
decreased to $0.1 million in the second quarter of 1996, from $.2 million in the
second quarter of 1995. Cost of revenues decreased to $0.1 million in the first
half of 1996 from $0.5 million in the first half of 1995. These decreases were
due primarily to the reduction in subcontracted services related to the systems
integration project, referred to above
RESEARCH AND DEVELOPMENT. Most of research and development expenditures
are personnel related. Total expenditures for research and development
increased to $1.6 million in the second quarter of 1996 and $2.8 million in the
first half of 1996, from $0.9 million and $1.7 million in the second quarter and
first half of 1995, respectively. The increase in research and development
expenditures was due primarily to increases in expenditures for continuation and
completion of in-process research and development ($.5 million and $.7 million
in the second quarter and first half of 1996, respectively) and new product
development. The increase includes the addition of research staff from the
acquired firm of Lor/Geske Bock Associates, Inc. ("LORGB") during the first
quarter of 1996. In connection with the LORGB acquisition, the Company
recognized a one-time expense amounting to $7.1 million of in process research
and development. The amounts of ongoing software development costs which could
have been capitalized were immaterial and, therefore, no internal software
development costs have been capitalized by the Company to date. The Company
believes that significant investment for product research and development is
essential to product and technical leadership, and the Company anticipates that
it will continue to commit substantial resources to research and development in
the future. The focus of this increased research and development spending will
be to expand the platforms upon which the Company's products operate; to
integrate the acquired products from LORGB; and to continue to enhance the
features and functionality of the
-9-
<PAGE>
company's core capital and treasury market products. The Company anticipates
that research and development expenditures will continue to increase in dollar
amount during the remainder of 1996.
SALES AND MARKETING. Sales and marketing expenses consist principally of
salary, commissions and facilities-related costs. Sales and marketing
expenditures increased to $2.8 million in the second quarter and $5.4 million in
the first half of 1996, up from $2.6 million and $4.9 million in the second
quarter and first half of 1995, respectively. The increase in sales and
marketing expenditures was due primarily to increases in personnel-related
costs. The Company anticipates that sales and marketing expenses will continue
to increase in dollar amount in 1996 as the Company expands its sales and
service organization.
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist of
personnel costs for finance, contract administration, human resources and
general management and administration, as well as legal, accounting and auditing
expenses. General and administrative expenses in the second quarter and first
half remained level at $0.7 million and $1.4 million, respectively, in 1996 and
in 1995. The Company anticipates that general and administrative expenses will
increase in dollar amount in 1996.
INTEREST INCOME
Interest income is comprised primarily of interest earned on the Company's
excess cash and short term investment balances, net of interest expense.
Interest income was reduced to $240,000 in the second quarter of 1996 from
$315,000 in the second quarter of 1995. Interest income decreased as a result
of lower cash and short term investment balances, and lower effective yields
available on short-term investments. Interest income increased to $471,000 in
the first half of 1996 from $401,000 in the first half of 1995. Cash balances
available for investment were lower in the first quarter of 1995 prior to the
company's initial public offering on March 27, 1995.
PROVISION FOR INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes," which
provides for a liability approach under which deferred income taxes are provided
based upon enacted laws and rates applicable to the periods in which the taxes
become payable. The provision for income taxes was 37% and 35% in the second
quarter of 1996 and 1995, respectively. The provision for income taxes takes
into account the effects of foreign income taxes and state income taxes, offset
by utilization of research and development credits in 1995 and foreign tax
credits in both years. The higher rate in 1996 anticipates that the research and
development credit which expired in 1995 will not be re-instated during the 1996
tax year.
As of June 30, 1996, the Company had $4.5 million of deferred tax assets,
primarily associated with its deferred revenue liability, for application
against future income. Due to certain time limitations of benefits related to
tax carrybacks, the Company has provided a valuation allowance of $1.7 million
related to the deferred tax asset. Accrued taxes payable include reserves for
tax liabilities. The
-10-
<PAGE>
Company's tax returns for 1990 through 1994 are currently being examined by the
Internal Revenue Service. Such examination may result in adjustments to
previously filed tax returns. While the Company has sufficient financial
resources to cover such adjustment and the Company believes that it has reserves
sufficient to cover any actual tax liabilities as a result of this examination,
no assurance can be given that the reserves will be adequate.
FUTURE OPERATING RESULTS
The Company has derived substantially all of its revenues from the sale of
software products and services for derivatives risk management, and its future
growth is critically dependent on increased revenues from products for this use.
The market for derivative risk management products is highly competitive. There
is no assurance that competition will not cause the Company to lose market share
or will not affect pricing and margins. In addition, the Company offers
products to facilitate firm-wide risk managment The market for firm-wide risk
managment products is at a very early stage of development. Failure of a
significant market for firm-wide risk management products to develop or, if it
does, failure of the Company's products to achieve broad market acceptance could
have a material adverse affect on the Company's business, operating results and
financial condition.
The Company's revenues are derived primarily from annual renewable license
fees, and although the Company has been successful to date in negotiating
renewable licenses rather than perpetual licenses, the Company may in the future
encounter resistance to such renewable licenses. A significant decline in the
percentage of clients who renew their license or the failure of the Company to
enter into renewable licenses would have a material adverse effect on the
business, operating results and financial condition of the Company.
A significant portion of the Company's revenues are derived from sales to
international clients. International sales and operations may be limited or
disrupted by the imposition of government controls, export license requirements,
political instability, trade restrictions, changes in tariffs and exchange
rates, difficulties in staffing, coordinating communications, managing
international operations and other factors. The Company prices its products in
U.S. dollars, but it incurs expenses in local currencies for its overseas
operations. The Company attempts to reduce its exposure to exchange rate
fluctuations by purchasing foreign currencies every six to twelve months in
amounts equal to the operating expenses estimated to be payable in such
currencies during the next six to twelve months. Regulatory compliance
requirements differ among foreign countries and are also different from those
established in the United States, and any inability to obtain necessary foreign
regulatory approvals on a timely basis could have an adverse effect on the
Company's international sales, and thereby on its business, financial condition
and results of operations. Additionally, the Company's business, financial
condition and international operating results may be adversely affected by
fluctuations in currency exchange rates as well as increases in duty rates,
difficulties in obtaining export licenses, ability to maintain or increase
prices and competition.
The Company's acquisition of LORGB entails various risks. Additional
development will be required before the LORGB products are broadly marketed.
There is no assurance that the development work will be completed timely or
successfully. There is also no assurance that the LORGB products will win broad
market acceptance. The addition of the LORGB personnel and
-11-
<PAGE>
related overhead also increases the Company's expenses. If the Company is not
successful in developing and marketing the LORGB products, then the Company's
earnings will be adversely affected.
The Company's quarterly operating results may fluctuate substantially as a
result of a variety of factors including the volume and timing of license
renewals by existing clients, license agreements with new clients, the timing
and market acceptance of new products or technological advances by the Company
or its competitors, price levels, and unexpected expenses. The Company's expense
levels are based, in part, on expectations of future revenues. If revenues in a
particular quarter do not meet expectations, operating results could be
adversely affected. The Company expects that its operating results will
fluctuate in the future as a result of these and other factors. Additionally,
the Company has accrued a reserve for tax liabilities in connection with an
Internal Revenue Service examination. There can be no assurance that such
reserve will be adequate to cover any liabilities. Results of past quarters
should not be relied on as an indication of future results.
LIQUIDITY AND CAPITAL RESOURCES
The Company has funded its operations to date through cash flow from
operations and its initial public offering of stock effective March 20, 1995.
As of June 30, 1996, the Company had $21.3 million in cash, cash equivalents and
short-term investments, and no long term debt.
Net cash used by operating activities totaled $1.3 million during the first
half of 1996. In the first half of 1995, operating activities provided $2.3
million to net cash. The Company used $8.7 million of net cash in the first
half of 1996 for acquisitions versus the $20.2 million utilized for investing
activities in the first half of 1995. The Company's investments in short-term
investments increased by $19.8 million in the first half of 1995. The Company
added $0.4 million of property and equipment in both the first half of 1996 and
1995. The Company has no significant capital commitments and currently
anticipates that additions to property and equipment for 1996 will be
approximately $0.9 million. In April 1995, the Company's existing lease for its
Palo Alto, California facilities expired and the Company signed a new lease for
another facility in Palo Alto, California in close proximity to its previous
office. This new facility lease is for approximately 30,000 square feet of
space and expires in April 2001.
Financing activities provided cash of $2.8 million in the first half of
1996 resulting from the sale of short-term investments. In addition, the Company
issued $4.5 million of common stock in connection with the acquisition of LORGB
and stock option exercises. This compares to the $14.2 million provided by
financing activities in the first half of 1995 which is primarily attributable
to the completion of the Company's initial public offering of stock in March of
1995.
The Company believes that the liquidity provided by existing cash, cash
equivalents and short-term investment balances, and the cash flow expected to be
generated from operations will be adequate to meet the Company's anticipated
cash needs for working capital and capital expenditure requirements for at least
the next twelve months.
-12-
<PAGE>
C-ATS SOFTWARE INC.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No items were submitted to a vote of security holders during the
quarter ended June 30, 1996.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
No reports on Form 8-K were required to be filed by the Company during
the quarter ended June 30, 1996.
-13-
<PAGE>
C-ATS SOFTWARE INC.
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.
C-ATS Software Inc.
(Registrant)
Date: August 12, 1996 By:
-------------------------------
Rod A. Beckstrom
President, Chief Executive
Officer and Chairman
(Principal Executive Officer)
Date: August 12, 1996 By:
-------------------------------
G. Bradford Solso
Vice President,
Chief Financial Officer and
Treasurer
(Principal Financial and
Principal Accounting Officer)
-14-
<PAGE>
C-ATS SOFTWARE INC.
INDEX TO EXHIBITS
EXHIBIT PAGE
NUMBER EXHIBIT TITLE NUMBER
27 Requirements for the Format and Input of Financial Data Schedules 16
-15-
<PAGE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,363
<SECURITIES> 19,914
<RECEIVABLES> 7,299
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 32,008
<PP&E> 5,342
<DEPRECIATION> 3,396
<TOTAL-ASSETS> 34,255
<CURRENT-LIABILITIES> 13,073
<BONDS> 0
0
0
<COMMON> 7
<OTHER-SE> 21,182
<TOTAL-LIABILITY-AND-EQUITY> 34,255
<SALES> 5,694
<TOTAL-REVENUES> 10,767
<CGS> 128
<TOTAL-COSTS> 9,709
<OTHER-EXPENSES> 7,066<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 471
<INCOME-PRETAX> (5,537)
<INCOME-TAX> 566
<INCOME-CONTINUING> (6,103)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,103)
<EPS-PRIMARY> (0.95)
<EPS-DILUTED> (0.95)<F2>
<FN>
<F1>IN CONNECTION WITH THE ACQUISITION OF LOR/GESKE BOCK ASSOCIATES, INC., THE
COMPANY RECOGNIZED A ONE-TIME EXPENSE AMOUNTING TO $7.1 MILLION OF IN PROCESS
RESEARCH AND DEVELOPMENT.
<F2>IN THE FIRST HALF OF 1996, COMMON SHARE EQUIVALENTS, IF INCLUDED, WOULD HAVE AN
ANTI-DILUTIVE EFFECT ON THE NET LOSS PER SHARE CALCULATION, AND ARE THEREFORE
EXCLUDED FROM THE FULLY DILUTED CALCULATION. IF INCLUDED, THE NET LOSS PER
SHARE WOULD BE $0.89 PER SHARE.
</FN>
</TABLE>
