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, 1997
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 No.: 1-5270
SOFTNET SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
New York 11-1817252
-------------------------------- ---------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
717 Forest Avenue, Lake Forest, Illinois 60045
------------------------------------------ --------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (847) 266-8150
Not Applicable
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last report
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 issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at June 30, 1997
------------------------------- --------------------------------
Common stock, without par value 6,609,559
<PAGE>
SOFTNET SYSTEMS, INC.
INDEX
Page
Number
------
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets
June 30, 1997 and September 30, 1996 3
Condensed Consolidated Statements of Operations
for the Three and Nine Months Ended
June 30, 1997 and June 30, 1996 4
Condensed Consolidated Statements of Cash Flows
for the Nine Months Ended
June 30, 1997 and June 30, 1996 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
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
<PAGE>
SOFTNET SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
June 30, Sept. 30,
1997 1996
-------- --------
(unaudited)
ASSETS
Current assets:
Cash ............................................. $ 15 $ 426
Accounts Receivables, net ........................ 7,873 6,074
Inventories ...................................... 4,636 5,904
Prepaid expenses ................................. 212 340
-------- --------
Total current assets ...................... 12,736 12,744
Property and equipment, net ......................... 1,472 2,314
Costs in excess of fair value
of net assets acquired, net ....................... 7,191 8,101
Other assets ........................................ 3,037 2,427
-------- --------
$ 24,436 $ 25,586
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses ............ $ 7,412 $ 8,672
Current portion of long term debt ................ 1,104 931
Deferred revenue ................................. 1,298 1,428
-------- --------
Total current liabilities ................. 9,814 11,031
-------- --------
Long term debt, net of current portion .............. 10,042 10,762
-------- --------
Commitments and contingencies
Shareholders' equity:
Preferred stock, $.10 par value,
4 million shares authorized,
none outstanding ............................... -- --
Common stock, $.01 par value,
25 million shares authorized,
6,609,559 and 6,540,065 shares
outstanding, respectively ...................... 66 65
Capital in excess of par value ...................... 33,892 33,517
Accumulated deficit ................................. (29,378) (29,789)
-------- --------
Total shareholders' equity ................ 4,580 3,793
-------- --------
$ 24,436 $ 25,586
======== ========
The accompanying notes are integral part of the condensed
consolidated financial statements
<PAGE>
SOFTNET SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
--------------------- ---------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales ............................................ $ 9,121 $ 9,806 $ 30,073 $ 31,868
Cost of sales ........................................ 5,538 6,364 18,378 20,605
-------- -------- -------- --------
Gross profit ...................................... 3,583 3,442 11,695 11,263
-------- -------- -------- --------
Operating expenses:
Selling ........................................... 1,045 1,346 3,333 3,800
Engineering ....................................... 576 470 1,691 1,308
General and administrative ........................ 1,442 2,025 4,357 5,333
Amortization of goodwill and transaction costs .... 346 240 1,036 930
Costs associated with change in
product line and other ......................... -- 1,302 -- 1,302
-------- -------- -------- --------
Total operating expenses ................ 3,409 5,383 10,417 12,673
-------- -------- -------- --------
Income (loss) from operations ..................... 174 (1,941) 1,278 (1,410)
Interest expense ..................................... (291) (419) (884) (1,249)
Gain on sale of available-for-sale securities ........ -- -- -- 1,883
Other income (expense) ............................... (11) (11) 17 5
-------- -------- -------- --------
Income (loss) before provision and
extraordinary item ............................. (128) (2,371) 411 (771)
Extraordinary item
Loss on sale of business .......................... -- (4,961) -- (4,961)
-------- -------- -------- --------
Net income (loss) $ (128) $ (7,332) $ 411 $ (5,732)
======== ======== ======== ========
Earnings (loss) per share:
Income (loss) before extraordinary item ........... $ (0.02) $ (0.42) $ 0.06 $ (0.14)
Extraordinary item ................................ -- (0.87) -- (0.89)
-------- -------- -------- --------
Continuing Operations ............................. $ (0.02) $ (1.29) $ 0.06 $ (1.03)
======== ======== ======== ========
Weighted average shares outstanding:.................. 6,592 5,702 6,894 5,576
======== ======== ======== ========
</TABLE>
The accompanying notes are integral part of the condensed
consolidated financial statements
<PAGE>
SoftNet Systems, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
Nine months ended
June 30,
--------------------
1997 1996
-------- --------
(Unaudited)
Cash flows from operating activities:
Net income (loss) ..................................... $ 411 $ (5,732)
Adjustments to reconcile net income (loss)
to net cash provided (used) by
operating activities
Gain on sale of available-for-sale securities ....... -- (1,883)
Loss on sale of business ............................ -- 4,961
Depreciation and amortization ....................... 1,560 1,556
Gain on sale of assets .............................. (82) --
Provision for bad debts ............................. 22 69
Changes in operating assets and liabilities,
net of effect of purchase transaction-
Accounts receivable ........................ (1,977) (2,063)
Inventories ................................ 741 (2,369)
Prepaid expenses ........................... 203 183
Accounts payable and accrued expenses ...... (559) 176
Deferred revenue ........................... 122 1,010
-------- --------
Net cash provided (used) by operating
activities ............................ 441 (4,092)
-------- --------
Cash flows from investing activities:
Purchase of property and equipment .................... (236) (914)
Additions to capitalized product design ............... (610) --
Acquisition of business, net of cash acquired ......... -- (2,007)
Proceeds from sale of available-for-sale securities ... -- 2,410
Payment for acquisition costs ......................... -- (83)
Settlement of remaining obligations to
owners of discontinued operations .................. -- (116)
Increase in other assets .............................. -- (1,895)
-------- --------
Net cash used by investing activities ... (846) (2,605)
-------- --------
Cash flows from financing activities:
Borrowings under revolving credit note ................ 7,973 9,831
Payments under revolving credit note .................. (8,284) (5,586)
Capitalized lease obligations paid .................... (173) (187)
Proceeds from issuance of long-term debt .............. 737 2,910
Repayment of long-term debt ........................... (259) (143)
Proceeds from exercise of warrants .................... -- 17
Payment of put obligation ............................. -- (200)
Proceeds from settlement of related
party receivable ................................... -- 819
-------- --------
Net cash provided (used) by
financing activities ................ (6) 7,461
-------- --------
Net increase (decrease) in cash ......................... (411) 764
Cash, beginning of period ............................... 426 573
-------- --------
Cash, end of period ..................................... $ 15 $ 1,337
======== ========
Cash paid during the period for:
Interest ............................................ $ 744 1,125
Taxes ............................................... -- --
Supplemental non-cash transactions
Conversion of debt for common stock ................. 381 4084
Property acquired by capitalized leases ............. -- 161
Businesses acquired with issuance
of stock and notes ............................... -- 1,022
Change in unrealized appreciation in
available-for-sale securities .................... -- (729)
The accompanying notes are integral part of the condensed
consolidated financial statements
<PAGE>
SoftNet Systems, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
June 30, 1997 and 1996
(unaudited)
1. Basis of Presentation
The financial information, except for the balance sheet as of September 30,
1996, included herein is unaudited; however, such information reflects all
adjustments (consisting solely of normal recurring adjustments) which are, in
the opinion of management, necessary for a fair presentation of the condensed
consolidated statements of financial position, results of operations and cash
flows as of and for the interim periods ended June 30, 1997 and 1996.
The Company's annual report on form 10-K for the fiscal year ended September 30,
1996, as filed with the Securities and Exchange Commission, should be read in
conjunction with the accompanying condensed consolidated financial statements.
The condensed consolidated balance sheet as of September 30, 1996 was derived
from the Company's audited Consolidated Financial Statements.
The results of operation for the nine months ended June 30, 1997 are based in
part on estimates that may be subject to year-end adjustments and are not
necessarily indicative of the results to be expected for the full year.
2. Debt
Debt is summarized as follows (in thousands):
June 30, September 30,
1997 1996
------------ -------------
(unaudited)
Bank Debt $ 6,574 $ 6,649
Convertible subordinated notes 3,674 4,011
Other 898 1,033
----------- ------------
11,146 11,693
Less current portion (1,104) (931)
----------- ------------
$ 10,042 $ 10,762
=========== ============
Subsequent to June 30, 1997, the Company received a temporary increase in its
revolving facility the Company is able to borrow $750,000 in excess of available
assets through September 30, 1997. On October 1, 1997, the amount of credit
available under the revolving credit facility reverts to the original amount
available not to exceed $9.5 million. To date, the Company has not made use of
this temporary increase in the revolving facility. In addition, the Company
obtained an additional credit facility whereby the Company can borrow up to $1.5
million against qualified lease arrangements it enters into with customers.
During the nine months ended June 30, 1997, the Company made draws in the amount
of $737,000 against this credit facility. The Company extended the maturity date
of its credit facilities to October 15, 1998.
<PAGE>
SoftNet Systems, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
June 30, 1997 and 1996
(unaudited)
3. Stock Options and Warrants
Outstanding options and warrants to purchase shares of common stock at June 30,
1997 were as follows (in thousands, except price per option data):
Outstanding at October 1, 1996 1,569
Granted at prices ranging from $4.94 to $5.31 400
Exercised or canceled at prices ranging from $8.25 to $4.94 (50)
----------
Outstanding at June 30, 1997 1,919
==========
In November 1996 the Company repriced 312,167 employee stock options by reducing
the exercise price from $8.25 to $4.94 per share
(the market price on the date of such change).
4. Earnings per common share
At June 30, 1997, the computation of both primary and fully diluted earnings per
share were based on the weighted average number of shares outstanding. The
inclusion of additional shares assuming the exercise of stock options and
warrants and the conversion of all convertible subordinated notes had an
immaterial effect on the earnings per share computation.
5. Supplemental Cash Flow Information
During the nine months ended June 30, 1997, the buyer of the operations of the
Company's wholly owned subsidiary, Communicate Direct, Inc. repaid $455,000 of
long-term debt and capitalized leases on behalf of the Company.
6. New Accounting Pronouncements
Effective for periods ending after December 15, 1997, the Company is required to
adopt Statement of Financial Accounting Standards No. 128 "Earnings Per Share"
("SFAS 128"). SFAS 128 requires companies to calculate basic and diluted
earnings per share based upon standards designed to provide consistency and
compatibility with calculations of other countries and with that of the
International Accounting Standards Committee. The Company does not expect
earnings per share as reported to be materially different than basic or diluted
earnings per share to be reported upon adoption of the new accounting standard.
Statement of Financial Accounting Standards (SFAS) No. 129, "Disclosure of
Information about Capital Structure," was issued in February 1997 and is
effective for periods ending after December 15, 1997. This statement establishes
standards for disclosing information about an entity's capital structure by
superseding and consolidating previously issued accounting standards. The
financial statements of the Company are prepared in accordance with the
requirements of SFAS No. 129.
<PAGE>
SoftNet Systems, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
June 30, 1997 and 1996
(unaudited)
In June 1997 the FASB issued SFAS Statement No. 131, "Disclosures about Segments
of an Enterprise and Related Information." This statement, effective for
financial statements for periods beginning after December 15, 1997, requires
that a public business enterprise report financial and descriptive information
about its reportable operating segments. Generally, financial information is
required to be reported on the basis that it is used internally for evaluating
segment performance and deciding how to allocate resources to segments. The
Company currently reports its business segments reflecting the organizational
structure of the Company . The Company has not yet determine the impact this new
accounting standard will have, but it does not believe the change will be
material.
7. Reclassification
Certain amounts in the combined condensed consolidated statements of operations
for the prior fiscal year have been reclassified to conform with current year
presentation.
<PAGE>
Item 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
This Form 10-Q contains "forward looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995, including (without limitation)
statements as to expectations, beliefs and future financial performance and
assumptions underlying the foregoing relating to the ability to meet working
capital requirements, capital expenditure and expected cash flow from
operations. The actual results or outcomes could differ materially from those
discussed in the particular forward looking statements. The risks and
uncertainties that may affect the operations, performance, developments and
results of the Company's business include the following: national and regional
economic conditions; market acceptance of the Company's products and services;
the Company's continued ability to provide integrated communications solutions
for customers in a dynamic industry, as well as competitive factors.
Results of operations for the three months ended June 30, 1997,compared to the
same period in 1996.
For the three months ended June 30, 1997, net sales decreased by $685,000 (or
7.0%) to $9.1 million compared to $9.8 million for the three months ended June
30, 1996. Sales in the Company's document management segment increased slightly
due primarily to increased volume of systems and spare parts. Sales in the
Company's telecommunications segment decreased $1.2 million (or 24.4%). The
decrease in sales in the telecommunications segment was primarily a result of
the disposition of substantially all of the operations of the Company's wholly
owned subsidiary, Communicate Direct, Inc. ("CDI") in October 1996 (with revenue
of $954,000 for the three months ended June 30, 1996). The overall decrease in
sales was offset in part by the operations of MediaCity World, Inc.
("MediaCity"), a provider of Internet services which was acquired in June 1996.
MediaCity added $195,000 to revenue for the three months ended June 30, 1997.
For the three months ended June 30, 1997, gross profit increased $141,000 (or
4.1%) to $3.6 million from $3.4 million for the same period in 1996. For the
three months ended June 30, 1997, gross profit as a percentage of sales
increased from 35.1% in 1996 to 39.3% in 1997. The percentage increase relates
primarily to improving margins in the telecommunications segment as a result of
the disposition of substantially all of the operations of the Company's wholly
owned subsidiary CDI.
Selling, engineering, general and administrative expenses decreased $778,000 (or
20.4%) to $3.1 million for the three months ended June 30, 1997 from $3.8
million for the same period in 1996. The decrease in operating expenses caused
by the disposition of CDI and continued cost reductions in all operating areas
was offset in part by the start-up operations of the Internet services segment
and the communication integration group.
Amortization expense increased $106,000 (or 44.2%) to $346,000 for the three
months ended June 30, 1997, from $240,000 for the same period in 1996. The
increase in amortization expense was caused by the acquisition of MediaCity in
June 1996.
The Company has made no provision for income taxes for the three months ending
June 30, 1997, as a result of the Company's net operating loss carry forward.
Interest expense decreased $128,000 (or 30.6%) to $291,000 for the three months
ended June 30, 1997 from $419,000 for the same period in 1996. Interest expense
decreased as a result of lower debt outstanding during the three month period
ended June 30, 1997 compared to the same period in 1996. The decrease in
outstanding indebtedness was principally a result of the conversion of $4.1
million convertible subordinated notes in June 1996 and reduced outstanding
indebtedness on the Company's line of credit facility.
For the three months ended June 30, 1997, net loss before extraordinary items
decreased $2.2 million to $128,000 and loss per share of common stock before
extraordinary items decreased $0.40 to $0.02, compared to the same period in
1996.
<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
During the three months ended June 30, 1996, the Company disposed of a portion
of the operations of CDI. As a result, the Company incurred a $5.0 million
extraordinary charge for the disposal of this business.
At June 30, 1997, the computation of both primary and fully diluted earnings per
share were based on the weighted average number of shares outstanding. The
inclusion of additional shares assuming the exercise of stock options and
warrants and the conversion of all convertible subordinated notes had an
immaterial effect on the earnings per share computation.
Results of operations for the nine months ended June 30, 1997,compared to the
same period in 1996.
For the nine months ended June 30, 1997, net sales decreased by $1.8 million (or
5.6%) to $30.1 million compared to $31.9 million for the same period in 1996.
Sales increased in the Company's document management segment by $1.1 million (or
7.2%) principally as a result of higher volume of units sold as compared to the
same period in the prior year. Sales in the Company's telecommunications segment
decreased $3.7 million (or 27.7%). The decrease in sales in the
telecommunications segment was primarily a result of the disposition of
substantially all of the operations of the Company's wholly owned subsidiary,
CDI in October 1996 (with revenue of $5.3 million for the nine months ended June
30, 1996 compared to $142,000 for the same period in 1997). This decrease in the
telecommunications division was offset in part by the acquisition of
Executone-Milwaukee in December 1995 (which added $2.6 million to revenue for
the nine months ended June 30, 1997 compared to $1.1 million for the same period
in 1996). In addition, MediaCity, which provides Internet services, acquired in
June 1996, added $813,000 to revenue for the nine months ended June 30, 1997.
For the nine months ended June 30, 1997, gross profit increased $432,000 (or
3.8%) to $11.7 million from $11.3 million for the same period in 1996. For the
nine months ended June 30, 1997, gross profit as a percentage of sales increased
from 35.3% in 1996 to 38.9% in 1997. The percentage increase relates primarily
to improving margins in the telecommunications segment as a result of the
disposition of the operations of the Company's wholly owned subsidiary CDI.
Selling, engineering, general and administrative expenses decreased $1.1 million
(or 10.2%) to $9.4 million for the nine months ended June 30, 1997 from $10.4
million for the same period in 1996. The decrease in operating expenses caused
by the disposition of CDI ($1.9 million for the nine months ended June 30, 1996)
was offset in part by the acquisitions of Executone-Milwaukee ($715,000 for the
nine months ended June 30, 1997 compared to $453,000 for the same period in
1996) and MediaCity ($640,000 for the nine months ended June 30, 1997).
Amortization expense increased $106,000 (or 11.4%) to $1.0 million for the nine
months ended June 30, 1997, from $930,000 for the same period in 1996. The
increase in amortization expense was caused by the acquisitions of MediaCity
World (in June 1996) and Executone-Milwaukee (in December 1995). During the nine
months ended June 30, 1996, the Company incurred amortization expense of the
goodwill which arose from the acquisition of CDI in October 1994. In June 1996,
the Company wrote off the remaining goodwill of CDI in connection with the
disposition of certain assets. Accordingly, the nine months ended June 30, 1997
did not include any goodwill amortization from CDI.
During the nine months ended June 30, 1997, the Company sold available-for-sale
securities for net proceeds of $2.4 million. Accordingly, the Company recorded a
gain on the sale of available-for-sale securities of $1.9 million.
The Company's has made no provision for income taxes for the nine months ended
June 30, 1997, as a result of the Company's net operating loss carry forward.
<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Interest expense decreased $365,000 (or 29.2%) to $884,000 for the nine months
ended June 30, 1997 from $1.2 million for the same period in 1996. Interest
expense decreased as a result of lower debt outstanding during the nine month
period ended June 30, 1997 compared to the same period in 1996. The decrease in
outstanding indebtedness was principally a result of the conversion of $4.1
million convertible subordinated notes in June 1996 and reduced outstanding
indebtedness on the Company's line of credit facility.
For the nine months ended June 30, 1997, net income before extraordinary items
increased $1.2 million to $411,000 and earnings per share increased $0.20 to
$0.06, compared to the same period in 1996.
During the nine months ended June 30, 1996, the Company disposed of a portion of
the operations of CDI. As a result, the Company incurred a $5.0 million
extraordinary charge for the disposal of this business.
At June 30, 1997, the computation of both primary and fully diluted earnings per
share were based on the weighted average number of shares outstanding. The
inclusion of additional shares assuming the exercise of stock options and
warrants and the conversion of all convertible subordinated notes had an
immaterial effect on the earnings per share computation.
<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources
At June 30, 1997 the Company's current ratio was 1.30 to 1 with working capital
of $2.9 million. This compares with a current ratio of 1.16 to 1 and working
capital of $1.7 million at September 30, 1996.
For the nine months ended June 30, 1997, cash flows provided by operating
activities were $441,000 compared to $4.1 million used by operating activities
for the same period in 1996. Cash flows used by investing activities were
$846,000 for the nine months ended June 30, 1997 compared to $2.6 million for
the same period in 1996. The decrease in cash used in investing activities was
primarily a result of decreased mergers and acquisition activity during the nine
months ended June 30, 1997 compared to the same period in the prior year. Cash
flows used by financing activities were $6,000 for the nine months ended June
30, 1997 compared to $7.5 million provided by investing activities for the same
period in 1996. Borrowings from the Company's line-of-credit facility was
significantly reduced during the nine months ended June 30, 1997 compared to the
same period in the prior year due to the overall improvement in the Company's
operations.
Subsequent to June 30, 1997, the Company received a temporary increase in its
revolving facility whereby the Company is able to borrow $750,000 in excess of
available assets through September 30, 1997. On October 1, 1997, the amount of
credit available under the revolving credit facility reverts to the original
amount available not to exceed $9.5 million. To date, the Company has not made
use of this temporary increase in the revolving facility. In addition, the
Company obtained an additional credit facility whereby the Company can borrow up
to $1.5 million against qualified lease arrangements it enters into with
customers. During the nine months ended June 30, 1997, the Company made draws in
the amount of $737,000 against this credit facility. The Company extended the
maturity date of its credit facilities to October 15, 1998.
The Company expects to be able to finance its working capital requirements and
capital expenditures from its operating income and existing credit facilities
for the fiscal year ending September 30, 1997.
Adoption of New Accounting Standards
Reference is made to Note 6 to the Condensed Consolidated Financial Statements.
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27: Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the
quarter ended June 30, 1997.
<PAGE>
SIGNATURES
In accordance with 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.
SoftNet Systems, Inc.
/s/ A.J.R. Oosthuizen
---------------------------
A.J.R. Oosthuizen
President and Chief Executive Officer
/s/ Martin A. Koehler
---------------------------
Martin A. Koehler
Vice President - Finance and
Chief Financial Officer
Dated: August 14, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM FORM 10-Q FOR THE
QUARTERLY PERIOD ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FORM 10-Q.
</LEGEND>
<CIK> 0000097196
<NAME> SOFTNET SYSTEMS INC.
<MULTIPLIER> 1,000
<CURRENCY> US Dollars
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> SEP-30-1996
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1.000
<CASH> 15
<SECURITIES> 0
<RECEIVABLES> 8,477
<ALLOWANCES> 604
<INVENTORY> 4,636
<CURRENT-ASSETS> 12,736
<PP&E> 2,885
<DEPRECIATION> 1,413
<TOTAL-ASSETS> 24,436
<CURRENT-LIABILITIES> 9,814
<BONDS> 10,042
0
0
<COMMON> 33,958
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 24,436
<SALES> 30,073
<TOTAL-REVENUES> 30,073
<CGS> 18,378
<TOTAL-COSTS> 10,417
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 884
<INCOME-PRETAX> 411
<INCOME-TAX> 0
<INCOME-CONTINUING> 411
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 411
<EPS-PRIMARY> 0.06
<EPS-DILUTED> 0
</TABLE>
