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                                 UNITED STATES
                       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, 2000

                        COMMISSION FILE NUMBER 000-28317

                            ------------------------

                              DIGIMARC CORPORATION
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                            <C>
               DELAWARE                                      94-3342784
    (State or other jurisdiction of                       (I.R.S. Employer
    incorporation or organization)                     Identification Number)
</TABLE>

              19801 SW 72(ND) AVE, STE 250, TUALATIN, OREGON 97062
                    (Address of principal executive offices)

                           TELEPHONE: (503) 885-9699
              (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 issuer's classes of
common stock, as of the latest practicable date.

    12,903,889 shares of Common Stock, $.001 par value, as of April 30, 2000

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<PAGE>
                              DIGIMARC CORPORATION
                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                        PAGE NO.
                                                                        --------
<S>       <C>                                                           <C>
PART I.   FINANCIAL INFORMATION

Item 1.   Financial Statements:

          Condensed Balance Sheets as of March 31, 2000 and
            December 31, 1999.........................................         2

          Condensed Statements of Operations for the three months
            ended March 31, 2000 and 1999.............................         3

          Condensed Statements of Cash Flows for the three months
            ended March 31, 2000 and 1999.............................         4

          Notes to Condensed Financial Statements.....................         5

Item 2.   Management's Discussion and Analysis of Financial Condition
            and Results of Operations.................................         6

Item 3.   Quantitative and Qualitative Disclosures about Market
            Risk......................................................        18

PART II.  OTHER INFORMATION

Item 6.   Exhibits and Reports on Form 8-K............................        19

Signatures............................................................        20

Index to Exhibits.....................................................        21
</TABLE>

                                       1
<PAGE>
PART I.  FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS

                              DIGIMARC CORPORATION

                            CONDENSED BALANCE SHEETS

                                 (IN THOUSANDS)

                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                              MARCH 31,   DECEMBER 31,
                                                                2000        1999(1)
                                                              ---------   ------------
<S>                                                           <C>         <C>
                                        ASSETS

Current assets:
  Cash and cash equivalents.................................  $ 86,920      $ 90,830
  Trade accounts receivable, net............................     3,142         2,225
  Other current assets......................................     1,273           834
                                                              --------      --------
    Total current assets....................................    91,335        93,889

Property and equipment, net.................................     2,234           961
Other assets, net...........................................        41            53
                                                              --------      --------
    Total assets............................................  $ 93,610      $ 94,903
                                                              ========      ========

                         LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable..........................................  $  1,881      $  1,638
  Accrued payroll and related costs.........................       916           504
  Deferred revenue..........................................     1,166         1,318
  Other current liabilities.................................       589           529
                                                              --------      --------
    Total current liabilities...............................     4,552         3,989

Other long-term liabilities.................................       113           119

Stockholders' equity:
  Common stock..............................................        13            13
  Additional paid-in capital................................   110,747       110,675
  Deferred stock compensation...............................    (7,618)       (8,162)
  Warrant...................................................       633           633
  Accumulated deficit.......................................   (14,830)      (12,364)
                                                              --------      --------
    Total stockholders' equity..............................    88,945        90,795

    Total liabilities and stockholders' equity..............  $ 93,610      $ 94,903
                                                              ========      ========
</TABLE>

------------------------

(1) The information in this column was derived from the Company's audited
    financial statements as of December 31, 1999.

                  See Notes to Condensed Financial Statements.

                                       2
<PAGE>
                              DIGIMARC CORPORATION

                       CONDENSED STATEMENTS OF OPERATIONS

                                 (In Thousands)

                                  (Unaudited)

<TABLE>
<CAPTION>
                                                               THREE MONTHS ENDED
                                                              ---------------------
                                                              MARCH 31,   MARCH 31,
                                                                2000        1999
                                                              ---------   ---------
<S>                                                           <C>         <C>
Revenue:
  Secure documents..........................................   $ 2,541     $  985
  Media commerce............................................        29         74
                                                               -------     ------
    Total revenue...........................................     2,570      1,059

Cost of revenue:
  Secure documents..........................................     1,480        462
  Media commerce............................................        31         18
                                                               -------     ------
    Total cost of revenue...................................     1,511        480

Gross profit................................................     1,059        579

Operating expenses:
  Sales and marketing.......................................     1,513        131
  Research, development and engineering.....................       837        107
  General and administrative................................     1,841        459
  Stock-based compensation..................................       543         --
                                                               -------     ------
    Total operating expenses................................     4,734        697
                                                               -------     ------

Operating loss..............................................    (3,675)      (118)

Other income (expense):
  Interest income...........................................     1,326         13
  Interest expense..........................................       (88)       (26)
  Other.....................................................       (27)         2
                                                               -------     ------
    Total other income (expense), net.......................     1,211        (11)
                                                               -------     ------

Loss before provision for income taxes......................    (2,464)      (129)

Provision for income taxes..................................        --         --
                                                               -------     ------
Net loss....................................................   $(2,464)    $ (129)
                                                               =======     ======

Net loss per share--basic and diluted.......................   $ (0.19)    $(0.06)

Weighted average shares used in computing net loss per
  share--
  basic and diluted.........................................    12,733      2,321
</TABLE>

                  See Notes to Condensed Financial Statements.

                                       3
<PAGE>
                              DIGIMARC CORPORATION

                       CONDENSED STATEMENTS OF CASH FLOWS

                                 (IN THOUSANDS)

                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                               THREE MONTHS ENDED
                                                              ---------------------
                                                              MARCH 31,   MARCH 31,
                                                                2000        1999
                                                              ---------   ---------
<S>                                                           <C>         <C>
Cash flows from operating activities:
  Net loss..................................................   $(2,464)    $  (129)
  Adjustments to reconcile net loss to net cash used in
    operating activities:
    Depreciation and amortization...........................       199          55
    Amortization of discount on note payable................        72           2
    Stock-based compensation expense........................       543          --
    Changes in assets and liabilities:
      Trade accounts receivable.............................      (917)       (760)
      Other current assets..................................      (439)       (112)
      Accounts payable......................................       251          61
      Accrued payroll and related costs.....................       428        (180)
      Deferred revenue......................................      (152)         11
                                                               -------     -------
        Net cash used in operating activities...............    (2,479)     (1,052)

Cash flows from investing activities:
  Purchase of property and equipment........................    (1,459)        (12)
  Sale of tradename.........................................        --          10
                                                               -------     -------
        Net cash used in investing activities...............    (1,459)         (2)

Cash flows from financing activities:
  Net proceeds from issuance of preferred stock.............        --           5
  Net proceeds from issuance of common stock................        72          --
  Principal payments under capital lease obligations........       (44)        (39)
                                                               -------     -------
        Net cash provided by (used in) financing
          activities........................................        28         (34)

Net decrease in cash and cash equivalents...................    (3,910)     (1,088)
Cash and cash equivalents at beginning of period............    90,830       2,137
                                                               -------     -------
Cash and cash equivalents at end of period..................   $86,920     $ 1,049
                                                               =======     =======

Supplemental disclosure of cash flow information:
  Cash paid for interest....................................   $    88     $    26

Summary of non-cash investing and financing activities:
  Equipment acquired or exchanged under capital lease
    obligations.............................................   $    --     $   103
</TABLE>

                  See Notes to Condensed Financial Statements.

                                       4
<PAGE>
                              DIGIMARC CORPORATION

                    NOTES TO CONDENSED FINANCIAL STATEMENTS

1.  THE COMPANY, BASIS OF PRESENTATION

    The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles. However, certain information or
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed, or
omitted, pursuant to the rules and regulations of the Securities and Exchange
Commission. In the opinion of management, the statements include all adjustments
necessary (which are of a normal and recurring nature) for the fair presentation
of the results of the interim periods presented. The results of operations for
such periods are not necessarily indicative of the results expected for a full
year or for any future period.

    These financial statements should be read in conjunction with the audited
financial statements for the year ended December 31, 1999 as included in the
Company's Annual Report on Form 10-K dated March 28, 2000.

2.  LOSS PER SHARE COMPUTATION

    Historical basic and diluted net loss per share is computed using the
weighted average number of shares of common stock outstanding for the period.
The effect of outstanding stock options and outstanding warrants are excluded
from the calculation of historical diluted net loss per share for the periods
presented as their inclusion would be antidilutive.

3.  SEGMENT INFORMATION

    The Company derives its revenue from a single operating segment, digital
watermarking applications. Revenue from one customer represented 90% and 93% of
total revenue for the three months ended March 31, 2000 and 1999, respectively.
Accounts receivable from one customer represented 92% and 91% of trade
receivables at March 31, 2000 and December 31, 1999, respectively.

                                       5
<PAGE>
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

    THE FOLLOWING MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS CONTAINS FORWARD-LOOKING STATEMENTS RELATING TO FUTURE
EVENTS OR THE FUTURE FINANCIAL PERFORMANCE OF DIGIMARC, WHICH INVOLVE RISKS AND
UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED
IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS, INCLUDING
THOSE SET FORTH UNDER "RISKS RELATED TO OUR BUSINESS," "RISKS RELATED TO OUR
INDUSTRY," AND ELSEWHERE IN THIS DOCUMENT AND THOSE RISKS DESCRIBED IN OUR
ANNUAL REPORT ON FORM 10-K FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON
MARCH 28, 2000, AND IN OUR REGISTRATION STATEMENT NO. 333-87501, AS AMENDED,
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THIS DISCUSSION AND ANALYSIS
SHOULD BE READ IN CONJUNCTION WITH OUR INTERIM UNAUDITED CONDENSED FINANCIAL
STATEMENTS AND RELATED NOTES INCLUDED HEREIN.

OVERVIEW

    Digimarc is a leading provider of patented digital watermarking technologies
that allow imperceptible digital code to be embedded in the printed or digital
versions of media content, such as commercial and consumer photographs, movies,
music, magazine advertisements, catalogs, product packages and valuable
documents like financial instruments, passports and event tickets. In addition
to a code that can be embedded within various types of media content, our
technologies include reader software that, as a resident application on PCs and
other devices, enables the recognition of embedded codes. We believe our
technologies have many potential applications. We are developing products and
services to address what we believe are our two largest near-term market
opportunities--the deterrence of digital counterfeiting and piracy, and the
enhancement of Internet access and navigation. In addition, we continue to
pursue commercial applications in audio and video digital watermarking.

RESULTS OF OPERATIONS

    The following table presents our statement of operations data for the
periods indicated as a percentage of total revenue.

<TABLE>
<CAPTION>
                                                                    THREE MONTHS
                                                                   ENDED MARCH 31,
                                                              -------------------------
                                                                2000             1999
                                                              --------         --------
<S>                                                           <C>              <C>
Revenue:
  Secure documents..........................................      99%             93%
  Media commerce............................................       1               7
                                                                ----             ---
    Total revenue...........................................     100             100
Cost of revenue:
  Secure documents..........................................      58              44
  Media commerce............................................       1               1
                                                                ----             ---
    Total cost of revenue...................................      59              45
                                                                ----             ---
  Gross Margin..............................................      41              55
Operating expenses:
  Sales and marketing.......................................      59              13
  Research, development and engineering.....................      33              10
  General and administrative................................      71              43
  Stock-based compensation..................................      21              --
                                                                ----             ---
    Total operating expenses................................     184              66
                                                                ----             ---
    Operating loss..........................................    (143)            (11)
Other income (expense)......................................      47              (1)
                                                                ----             ---
    Net loss................................................     (96)%           (12)%
                                                                ====             ===
</TABLE>

                                       6
<PAGE>
THREE MONTHS ENDED MARCH 31, 2000 AND 1999

REVENUE

    Total revenue was $2.6 million and $1.1 million for the three months ended
March 31, 2000 and 1999, respectively. The $1.5 million or 143% increase was
primarily the result of increased service revenue which we earned through our
relationship with a consortium of leading central banks under which we are
developing a system to deter the use of personal computer systems in the
counterfeiting of currency. One customer (the consortium of banks) accounted for
approximately 90% of our total revenue for the three months ended March 31,
2000. The customer has a discretionary right of early termination with respect
to the agreement. Unless the customer exercises this right, we expect revenue
under the agreement to continue at or above current levels for the remainder of
year 2000 and 2001. We intend to pursue further business with this customer and
may be able to achieve other sources of revenue in future periods by providing
additional products and services to them and related institutions. We currently
expect to develop new products and services, which we anticipate selling to
customers through a variety of pricing plans, including license fees and license
fees per document from issuers of valuable documents other than banknotes and
from magazine advertisers and publishers. Successful introduction and
implementation of these new products and services, including self-authenticating
documents and the Digimarc MediaBridge system, if achieved, would significantly
change the mix and concentration of our future revenue.

    SECURE DOCUMENTS.  Secure documents revenue was $2.5 million and $985,000
for the three months ended March 31, 2000 and 1999, respectively. The
$1.6 million or 158% increase was the direct result of increased services
provided to the consortium of leading central banks.

    MEDIA COMMERCE.  Media commerce revenue was $29,000 and $74,000 for the
three months ended March 31, 2000 and 1999, respectively. The $45,000 or 61%
decrease was primarily the result of an increased use of our sales, marketing
and research and development personnel to provide education, outreach and
product definition services to our anti-counterfeiting system customer (the
consortium of banks).

COST OF REVENUE

    SECURE DOCUMENTS.  Cost of secure documents revenue primarily includes
compensation for software developers, quality assurance personnel, product
managers and business development personnel, outside contractors and travel
costs directly attributable to certain service and development contracts. Cost
of secure documents revenue was $1.5 million and $462,000 for the three months
ended March 31, 2000 and 1999, respectively. The $1.0 million or 220% increase
was the result of an increased use of our research and development and sales and
marketing personnel to provide services to our anti-counterfeiting customer
under the development contract.

    MEDIA COMMERCE.  Cost of media commerce revenue includes compensation for
operations personnel, cost of outsourced customer support, Internet service
provider connectivity charges and image search data fees to support the services
offered to our media commerce customers. Cost of media commerce revenue was
$31,000 and $18,000 for the three months ended March 31, 2000 and 1999,
respectively.

OPERATING EXPENSES

    SALES AND MARKETING.  Sales and marketing expenses consist primarily of
compensation, benefits and related costs of sales and marketing personnel,
product managers and sales engineers, as well as recruiting, travel, market
research and costs associated with marketing programs, such as trade shows,
public relations and new product launches. Sales and marketing expenses were
$1.5 million and $131,000 for the three months ended March 31, 2000 and 1999,
respectively, representing an increase

                                       7
<PAGE>
of $1.4 million or 1055%. This increase resulted from increased costs of
$1.1 million related to salaries and other employee related costs, including
travel expenses, $556,000 of increased costs related to marketing administration
and promotional activities, offset in part by an increased allocation of
$418,000 to cost of secure documents revenue associated with sales and marketing
personnel who provided education, outreach and product definition services to
our anti-counterfeiting system customer. Sales and marketing employees totaled
47 and nine as of March 31, 2000 and 1999, respectively. We believe that a
significant increase in our sales and marketing effort is essential for the
introduction of new products, including additional secure documents
applications, and the Digimarc MediaBridge system. Accordingly, we anticipate
that we will continue to invest significantly in sales and marketing for the
foreseeable future, and that sales and marketing expenses are likely to increase
in the future.

    RESEARCH, DEVELOPMENT AND ENGINEERING.  Research, development and
engineering expenses consist primarily of compensation, benefits and related
costs of software developers and quality assurance personnel and payments to
outside contractors. Research, development and engineering expenses were
$837,000 and $107,000 for the three months ended March 31, 2000 and 1999,
respectively, representing an increase of $730,000 or 682%. Increased use of
research, development and engineering personnel to provide services to our
anti-counterfeiting system customer resulted in an additional $460,000 of these
expenses being allocated to cost of secure documents revenue, while salaries and
other employee related costs, including travel expenses, increased
$1.1 million. Research, development and engineering personnel totaled 55 and 14
as of March 31, 2000 and 1999, respectively. We believe that a significant
investment in research, development and engineering is essential for us to
maintain our market position, to continue to expand our product lines and to
enhance our technologies and intellectual property rights. Accordingly, we
anticipate that we will continue to invest significantly in product research,
development and engineering for the foreseeable future.

    GENERAL AND ADMINISTRATIVE.  General and administrative expenses consist
primarily of compensation, benefits and related costs of executive, finance and
administrative personnel, facilities costs, legal and other professional fees
and depreciation expense. General and administrative expenses were $1.8 million
and $459,000 for the three months ended March 31, 2000 and 1999, respectively,
representing an increase of $1.4 million or 301%. $500,000 of this increase was
the result of increased executive compensation, travel expenses, and executive
recruiting fees, and $800,000 was the result of increased depreciation, office
expense and professional fees related to our recent growth. General and
administrative employees totaled 22 and four as of March 31, 2000 and 1999,
respectively. We believe that our general and administrative expenses will
continue to increase as a result of the continued expansion of our
administrative staff and expenses associated with being a public company,
including annual and other public-reporting costs, directors' and officers'
liability insurance, investor relations programs and professional-services fees.

    STOCK-BASED COMPENSATION.  Stock-based compensation expense includes costs
relating to stock-based employee compensation arrangements. Stock-based
compensation expense is based on the difference between the fair market value of
our common stock and the exercise price of options to purchase that stock on the
date of the grant, and is being recognized over the vesting periods of the
related options, usually four years. Stock-based compensation expense of
$543,000 was recorded for the three months ended March 31, 2000. The total
deferred stock compensation recorded by us from inception to March 31, 2000 was
$8.7 million. The fair value per share used to determine deferred stock
compensation for stock option grants made prior to our initial public offering
was derived by reference to sales of our preferred and common stock reduced by a
discount factor in each case. At current estimates, additional stock-based
compensation expense related to stock option grants will be approximately
$1.6 million for the remainder of 2000 and $2.2 million for each of 2001 and
2002.

                                       8
<PAGE>
    PROVISION FOR INCOME TAXES.  We have recognized operating losses since
inception and as such have not incurred income tax expense. As of December 31,
1999, we had operating loss carryovers for federal and state income tax
reporting purposes of approximately $9.1 million and research and development
tax credit carryforwards of $113,000, the last of which will expire through 2019
if not utilized. Under the Tax Reform Act of 1986, the amounts of and benefits
from net operating loss carryforwards may be impaired or limited in certain
circumstances, including a change of more than 50% in ownership. Such a change
in ownership occurred with the sale of preferred stock in June 1996, July 1996,
and July 1999 and in connection with the initial public offering of our common
stock in December 1999. Accordingly, we estimate that approximately
$9.0 million of net operating loss carryforwards are subject to the utilization
limitation.

OTHER INCOME (EXPENSE)

    Other income (expense) consists primarily of interest received and paid, as
well as corporate tax expense. Other income (expense) was $1.2 million and
$(11,000) for the three month periods ended March 31, 2000 and 1999,
respectively. The $1.2 million increase came as a result of a significantly
higher cash and cash equivalent balance earning interest due to the funds
received from our initial public offering in December 1999.

LIQUIDITY AND CAPITAL RESOURCES

    As of March 31, 2000, we had cash and cash equivalents of $86.9 million,
representing a decrease of $3.9 million from $90.8 million at December 31, 1999.
Working capital at March 31, 2000 was $86.8 million, compared to working capital
of $89.9 million at December 31, 1999. The decrease in working capital is
attributable primarily to the cash needs for our current operations.

    Our operating activities resulted in net cash outflows of $2.5 million and
$1.1 million for the three months ended March 31, 2000 and 1999, respectively.
This $1.4 million increase in operating cash outflows was due primarily to
growth in the Company and increased operations in the three months ended
March 31, 2000.

    Investing activities used cash of $1.5 million and $2,000 for the three
months ended March 31, 2000 and 1999, respectively. This $1.5 million increase
in cash used in investing activities related primarily to the purchase of
property and equipment. We anticipate that we will experience an increase in our
capital expenditures consistent with our anticipated growth in operations,
infrastructure and personnel.

    Financing activities provided net cash of $28,000 and used net cash of
$34,000 for the three months ended March 31, 2000 and 1999, respectively. Net
cash provided by, or used in, financing activities in each of these periods was
related primarily to proceeds from issuance of common stock offset by principal
payments on our equipment lease obligations.

    We have computers and office equipment financed under long-term capital
leases that expire over the next 30 months. As of March 31, 2000, we had an
outstanding balance of $214,000 of capital lease obligations. We had unsecured
notes payable to common stockholders totaling $384,000 at March 31, 2000 which
bear interest at 7% per annum. Other significant commitments consist of
obligations under non-cancelable operating leases, which totaled $4.2 million as
of March 31, 2000, and are payable in monthly installments through 2005.

RECENT ACCOUNTING PROUNCEMENT

    In March 2000, the Financial Accounting Standards Board, or FASB, issued
Interpretation No. 44, ACCOUNTING FOR CERTAIN TRANSACTIONS INVOLVING STOCK
COMPENSATION--AN INTERPRETATION OF APB OPINION NO. 25 (FIN 44). FIN44 applies
prospectively to new awards, exchanges of awards in a business

                                       9
<PAGE>
combination, modifications to outstanding awards, and changes in grantee status
that occur on or after July 1, 2000, except for the provisions related to
repricings and the definition of an employee, which apply to awards issued after
December 15, 1998. The provisions related to modifications to fixed stock
options awards to add a reload feature are effective for awards modified after
January 12, 20000. We do not expect that this statement will have a significant
impact on our financial condition or results of operations.

RISKS RELATED TO OUR BUSINESS

WE HAVE A LIMITED OPERATING HISTORY AND ARE SUBJECT TO THE RISKS ENCOUNTERED BY
EARLY-STAGE COMPANIES

    We incorporated in January 1995. Accordingly, we have a limited operating
history, and our business and prospects must be considered in light of the risks
and uncertainties to which early-stage companies in new and rapidly evolving
markets, such as digital watermarking, are exposed. These risks include the
following:

    - our developing revenue models and anticipated products and services may be
      unable to attract or retain customers;

    - the intense competition and rapid technological change in our industry
      could adversely affect the market's acceptance of our products and
      services;

    - we may be unable to build and maintain our brand;

    - we may be unable to develop and maintain the strategic relationships upon
      which we currently rely for our revenue; and

    - our quarterly operating results may fluctuate significantly.

    We cannot assure you that our business strategy will be successful or that
we will successfully address these risks and the risks described below.

WE HAVE A HISTORY OF LOSSES AND EXPECT FUTURE LOSSES; WE CANNOT ASSURE YOU THAT
WE WILL ACHIEVE PROFITABILITY

    We have incurred significant net losses since inception and we expect to
continue to incur losses for the foreseeable future in light of our planned
operating expenditures. We incurred net losses of $2.5 million for the first
three months of 2000, $2.4 million in 1999, $3.4 million in 1998, $4.0 million
in 1997, $1.6 million in 1996 and $874,000 in 1995. We have not been profitable
and cannot assure you that we will realize sufficient revenue to achieve
profitability. Our accumulated deficit as of March 31, 2000 was approximately
$14.8 million. In order to achieve profitability, we will need to generate
significantly higher revenue than we have in prior years. Even if we ultimately
achieve profitability, we may not be able to sustain or increase our
profitability. We anticipate that we will increase our research and development,
sales and marketing, product development and general and administrative expenses
for the foreseeable future. If our revenue grows more slowly than we anticipate,
or if our operating expenses exceed our expectations, our operating results will
be harmed and we may not be profitable.

MOST OF OUR SIGNIFICANT REVENUE MODELS ARE UNDER DEVELOPMENT, AND THE
CORRESPONDING ANTICIPATED PRODUCTS AND SERVICES MAY FAIL TO ATTRACT OR RETAIN
CUSTOMERS

    Our business involves embedding digital watermarks in traditional and
digital media, including secure documents, images on the Internet and video
merchandise. Our current applications include media commerce and counterfeiting
and piracy deterrence. To date, our revenue stream has been based primarily on a
combination of development, consulting, subscription and license fees from
copyright communication, and in recent periods, from secure document
applications. In the future, we anticipate that an increasing share of our
revenue will be from sales of our Digimarc MediaBridge system, which

                                       10
<PAGE>
is planned for release in the second half of 2000, and sales of other
applications of our digital watermarking technologies. We have not fully
developed a revenue model for the Digimarc MediaBridge system, or for our other
future applications. In addition, because we have not yet sold these products in
the marketplace and because these products will be sold in new and undeveloped
markets, we cannot be certain that the pricing structure and product marketing
that we are currently developing for these new products will be accepted. We
must complete the development of the Digimarc MediaBridge system and obtain
revenue from its commercial launch in order to meet our revenue objectives. If
we do not successfully develop, market and support the Digimarc MediaBridge
system, it is likely that our future revenue will fall below our targeted
objectives. Any shortfall in revenue from the Digimarc MediaBridge system or our
other future applications could reduce the trading price of our common stock. We
believe that it is too early to determine whether revenue from these
applications will meet our objectives, and whether the revenue models that we
are currently developing and may develop in the future will be successful or
require changes after adoption. We cannot assure you that our anticipated
products and services will be able to compete effectively against other
alternative technologies in our target markets or that we will be able to
compete effectively against current or future digital watermark companies in
terms of price, performance, applications or other features of their
technologies. In addition, as we develop models for generating revenue, they may
not be sustainable over time, and as a result, our business, operating results
and financial condition may seriously be harmed.

BECAUSE WE CURRENTLY RECEIVE 90% OF OUR REVENUE FROM A SINGLE CUSTOMER, THE LOSS
OF THIS CUSTOMER WOULD SERIOUSLY HARM OUR BUSINESS, OPERATING RESULTS AND
FINANCIAL CONDITION

    We derive a substantial portion of our revenue from a consortium of leading
central banks with whom we have a development and license agreement related to
banknote counterfeit deterrence. Revenue from products and services provided to
this significant customer accounted for 90% of our total revenue during the
three months ended March 31, 2000, 89% of our total revenue in 1999 and 51% of
our total revenue in 1998. We anticipate that this relationship will account for
most of our revenue until we are able to generate additional revenue from the
introduction of other new products and services that we are developing,
including the Digimarc MediaBridge system. The customer has a discretionary
right of early termination with respect to the agreement. Unless the customer
exercises this right, we expect revenue under the agreement to continue at or
above current levels for the next two years.

    Under the terms of our agreement with this customer, we are obliged to keep
the identity of the participating banks, design of the system and timetable for
deployment confidential. Any change in our relationship with this customer,
including any actual or alleged breach of the contract by either party or the
early termination of, or any other material change in, the agreement would
seriously harm our business, operating results and financial condition.

OUR FUTURE GROWTH WILL DEPEND ON THE SUCCESSFUL IMPLEMENTATION OF OUR PRODUCT
SOLUTIONS BY THIRD-PARTY PARTNERS

    The Digimarc MediaBridge system and other applications and services which we
plan on providing in the future will rely on the successful implementation of
our product solutions, including our reader technology, by third-party software
developers and original equipment manufacturers. We anticipate maintaining and
entering into agreements with major third-party vendors to create and promote
products that incorporate, embed, integrate or bundle our technologies. If we
fail to obtain partners that will incorporate, embed, integrate or bundle our
technologies or these partners are unsuccessful in their efforts, our business,
operating results and financial condition could be seriously harmed. In
addition, if our technologies do not perform according to market expectations,
our business will be seriously harmed.

                                       11
<PAGE>
OUR FUTURE QUARTERLY OPERATING RESULTS MAY NOT MEET ANALYSTS' EXPECTATIONS AND
MAY FLUCTUATE SIGNIFICANTLY IN THE FUTURE, WHICH COULD ADVERSELY AFFECT OUR
STOCK PRICE

    Our quarterly operating results have fluctuated significantly in the past,
and we expect that our quarterly operating results will fluctuate significantly
in the future. Our operating results are difficult to forecast because of our
limited operating history. Accordingly, you should not rely on
quarter-to-quarter comparisons of our historical results as an indication of
future performance or any trend in our performance. If our quarterly operating
results do not meet the expectations of analysts or investors, the market price
of our common stock will likely decline.

    Our quarterly results may fluctuate in the future as a result of many
factors, some of which are outside our control, including:

    - the timing, introduction and successful commercialization of our new
      products and services, including the Digimarc MediaBridge system;

    - the timing and success of our brand-building and marketing campaigns;

    - the loss of or reduction in revenue from the customer that currently
      accounts for 90% of our total revenue or any other significant customer;

    - the market's acceptance of our products and services, including the
      Digimarc MediaBridge system;

    - our ability to establish and maintain strategic relationships;

    - the potential costs of litigation and intellectual property protection;

    - the operating costs and capital expenditures related to the expansion of
      our business operations and infrastructure, domestically and
      internationally, including the hiring of key personnel and new employees;

    - the introduction of similar or substitute technologies by our competitors;

    - the timing of future licensing revenue; and

    - the marketing arrangements that we enter into during early market
      development.

    In addition, because the markets for our products and services are new and
rapidly evolving, it is difficult for us to predict our future financial
results. Our research and development, sales and marketing efforts and business
expenditures are based in part on our expectations regarding developments in
counterfeiting and piracy, and our estimates as to the use of digital
watermarking as a solution to those problems. To the extent that these
predictions prove inaccurate, our revenue and operating results will fluctuate
from our anticipated results.

THE MARKETS FOR DIGITAL WATERMARK APPLICATIONS ARE NEW AND DEVELOPING

    Digital watermarking is a new and developing technology. Our success depends
on the acceptance of this technology and the adoption of applications in areas
such as digital media commerce, counterfeiting and piracy deterrence an
self-authentication of documents. The markets for products and services using
digital watermarks are rapidly evolving and are characterized by an increasing
number of market entrants who have introduced or developed products and services
using digital watermarking or alternative technologies. As is typical in a new
and rapidly evolving industry, demand and market acceptance of recently
introduced products and services are subject to a high level of uncertainty. Our
products and services are currently used by only a limited number of customers.
It is difficult to predict the future growth rate, if any, and ultimate size of
these markets or our anticipated future markets. We cannot assure you that
markets for our products and services will develop.

                                       12
<PAGE>
WE MAY NOT BE ABLE TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY, AND WE MAY
BE SUBJECT TO INFRINGEMENT CLAIMS

    Our success depends on our proprietary technologies. We rely on a
combination of patent, copyright, trademark and trade secret rights,
confidentiality procedures and licensing arrangements to establish and protect
our proprietary rights. Recently, we have offered to license some of our
technologies to parties involved with the Secure Digital Music Initiative under
its directives. We face risks associated with our patent position, including the
potential need to engage in significant legal proceedings to enforce our
patents, the possibility that the validity or enforceability of our patents may
be denied, the possibility that third parties will be able to compete against us
without infringing our patents and the possibility that our products may
infringe patent rights of third parties. If we fail to protect our intellectual
property rights and proprietary technologies adequately, if there are changes in
applicable laws that are adverse to our interests, or if we become involved in
litigation relating to our intellectual property rights and proprietary
technologies or relating to the intellectual property rights of others, our
business could be harmed.

    As part of our confidentiality procedures, we generally enter into
non-disclosure agreements with our employees, consultants and corporate
partners, and attempt to control access to and distribution of our technologies,
documentation and other proprietary information. Despite these procedures, third
parties could copy or otherwise obtain and make unauthorized use of our
technologies or independently develop similar technologies. The steps that we
have taken to prevent misappropriation of our solutions or technologies may not
prevent their misappropriation, particularly in foreign countries where laws or
law enforcement practices may not protect our proprietary rights as fully as in
the United States.

    Effective protection of intellectual property rights may be unavailable or
limited, both in the United States and in foreign countries. Patent protection
throughout the world is generally established on a country-by-country basis. We
have applied for patent protection both inside the United States and in various
countries outside the United States. However, we cannot assure you that pending
patents will issue or that issued patents will be valid or enforceable. We
cannot assure you that the protection of our proprietary rights will be adequate
or that our competitors will not independently develop similar technologies,
duplicate our services or design around any patents or other intellectual
property rights we hold.

    We license some rights management technology from a third party, and may
need the assistance of this third party to enforce our rights to this
technology. Although we do not currently rely on this technology for our core
products, we may in the future. The cooperation of any third party in
enforcement of patent rights we may license cannot be assured.

    We have registered "DIGIMARC" and "MARCSPIDER" as trademarks in the United
States and other countries, and are pursuing registration of the "DIGIMARC"
trademark in additional countries. We also have trademark rights with respect to
"MediaBridge" and "MarcCentre" and are pursuing registration of these marks in
the United States and other countries. However, our tradenames or trademarks may
be registered by third parties in other countries, impairing our ability to
enter and compete in these markets. In the United States, the trademarks
"Digimark" and "Mediabridge" and the domain names "Digimark.com" and
"Mediabridge.com" have been registered by unrelated companies. While we have
successfully co-existed with these other companies, we cannot assure you that
this state of affairs will continue. If we were forced to change our name or
were prevented from using our other brand names, including MediaBridge, we would
lose a significant amount of our brand equity, and our business would suffer.

    As more companies enter the digital watermark marketplace and develop
intellectual property rights, it is increasingly likely that claims may arise
which assert that some of our products or services infringe upon other parties'
intellectual property rights. These claims could subject us to costly

                                       13
<PAGE>
litigation, divert management resources and result in the invalidation of our
intellectual property rights. These claims may require us to pay significant
damages, cease production of infringing products, terminate our use of
infringing technologies or develop non-infringing technologies. In these
circumstances, continued use of our technologies may require that we acquire
licenses to the intellectual property that is the subject of the alleged
infringement, and we might not be able to obtain these licenses on commercially
reasonable terms or at all. Our use of protected technologies may result in
liability that threatens our continuing operation.

THE SECURITY SYSTEMS THAT WE USE IN OUR PROPRIETARY TECHNOLOGIES MAY BE
CIRCUMVENTED BY THIRD PARTIES, WHICH COULD DAMAGE OUR REPUTATION AND DISRUPT OUR
BUSINESS

    Our products and services involve the embedding of digital code in media
content that is imperceptible in normal use but that can be read by
digitally-enabled devices. The success of our products and services depends on
the security of our media commerce, anti-counterfeiting and piracy systems and
self-authentication solutions. Security breaches of these systems and solutions
could damage our reputation and expose us to a risk of loss or litigation and
possible liability. The security measures that we use in our products and
services may not prevent security breaches, and failure to prevent these
security breaches may disrupt our business. A party who is able to circumvent
our security measures could misappropriate proprietary information or cause
interruptions or otherwise damage our products and services and the properties
of our customers. If unintended parties obtain sensitive data and information,
or create bugs or viruses in an attempt to sabotage the functionality of our
products and services, we may receive negative publicity, incur liability to our
customers or lose the confidence of our customers, any of which may cause the
termination or modification of our contracts.

    We may be required to expend significant capital and other resources to
protect ourselves against the threat of security breaches or to alleviate
problems caused by these breaches. However, protection may not be available at a
reasonable price or at all.

OUR PRODUCTS COULD HAVE UNKNOWN DEFECTS

    Products as complex as those we offer or develop frequently contain
undetected defects or errors. Despite testing, defects or errors may occur in
existing or new products, which could result in loss of revenue or market share,
failure to achieve market acceptance, diversion of development resources, injury
to our reputation, increased insurance costs and increased service and warranty
costs, any of which could materially harm our business. Furthermore, we often
provide implementation, customization, consulting and other technical services
in connection with the implementation and ongoing maintenance of our products.
The performance of these products typically involves working with sophisticated
software, computing and communications systems. Our inability to meet customer
expectations or project milestones in a timely manner could also result in a
loss of, or delay in, revenue, loss of market share, failure to achieve market
acceptance, injury to our reputation and increased costs.

    Because customers rely on our products for critical security applications,
defects or errors in our products might discourage customers from purchasing our
products. These defects or errors could also result in product liability or
warranty claims. Although we attempt to reduce the risk of losses resulting from
these claims through warranty disclaimers and liability limitation clauses in
our sales agreements, these contractual provisions may not be enforceable in
every instance. Furthermore, although we maintain errors and omissions
insurance, this insurance coverage may not adequately cover these claims. If a
court refused to enforce the liability-limiting provisions of our contracts for
any reason, or if liabilities arose that were not contractually limited or
adequately covered by insurance, our business could be materially harmed.

                                       14
<PAGE>
WE MAY ENCOUNTER DIFFICULTIES MANAGING OUR PLANNED GROWTH AND EXPANSION THAT MAY
HARM OUR BUSINESS

    As of March 31, 2000 we had 124 employees. In addition, we expect that we
need to hire a total of approximately 64 additional employees in all areas in
2000. To manage this expected growth, our management must continue to improve
our operational and financial systems and expand, train, retain and manage our
growing employee base. In addition, any additional growth of our product lines
or business will place an even more significant strain on our managerial and
financial resources. If we cannot manage our growth effectively, we may not be
able to coordinate the activities of our technical, accounting and marketing
staffs, and our business could be harmed.

WE MAY ACQUIRE OTHER BUSINESSES OR TECHNOLOGIES; IF WE DO, WE MAY BE UNABLE TO
INTEGRATE THEM WITH OUR OWN BUSINESS, OR WE MAY IMPAIR OUR FINANCIAL PERFORMANCE

    While from time to time we have discussions with third parties about
potential acquisitions, we do not currently have any understandings, commitments
or agreements with respect to any acquisition. If appropriate opportunities
present themselves, we may attempt to acquire other businesses or technologies.
We may not be able to identify, negotiate or finance any future acquisition
successfully. Even if we do succeed in acquiring a business, technology, service
or product, we have limited experience in integrating an acquisition into our
business. The process of integration may produce operating difficulties and
expenditures and may require significant attention of our management that
otherwise would be available for the ongoing development of our business.
Moreover, if we make acquisitions, we may issue shares of stock that dilute our
stockholders, incur debt, assume contingent liabilities or create additional
expenses related to amortizing goodwill and other intangible assets, any of
which might negatively affect our financial results and cause our stock price to
decline. Any financing that we might need for future acquisitions may also place
restrictions on our business. We may never achieve any of the benefits that we
might anticipate from a future acquisition.

WE DEPEND ON OUR KEY EMPLOYEES FOR OUR FUTURE SUCCESS

    Our success depends to a significant extent on the performance and continued
service of our senior management. None of our senior management has an
employment agreement. Although our employees have executed agreements containing
non-competition clauses, there is no assurance that a court would enforce all of
the terms of these clauses or the clauses generally. If these clauses were not
fully enforced, our employees would be freely able to join our competitors. In
addition, we currently have key person life insurance only on Bruce Davis, our
president and chief executive officer, and Geoffrey Rhoads, our chief technology
officer. The loss of the services of any of our senior management or any of our
other key employees could harm our business.

IF WE ARE NOT ABLE TO HIRE, INTEGRATE OR RETAIN QUALIFIED PERSONNEL, OUR
BUSINESS MAY BE HARMED

    The recent growth in our business has resulted in an increase in the
responsibilities for both existing and new management personnel. Many of our
personnel are presently serving in more than one capacity. In addition, we
expect that we will need to hire a total of approximately 64 additional
employees in all areas in 2000, including general managers for new operations in
key market segments. Competition for experienced personnel in our market
segments is intense. We may not be able to retain our current key employees or
attract, integrate or retain other qualified personnel in the future. If we do
not succeed in attracting new personnel or in integrating, retaining and
motivating our current personnel, our business could be harmed. In addition,
because our business is based on our patented technology, which is unique and
not generally known, new employees will require substantial training, which will
require substantial resources and management attention.

                                       15
<PAGE>
OUR PROMOTION OF THE DIGIMARC BRAND MUST BE SUCCESSFUL IN ORDER FOR US TO
ATTRACT USERS AS WELL AS ADVERTISERS AND OTHER STRATEGIC PARTNERS

    We believe that establishing and maintaining our brand is critical to our
success and that the importance of brand recognition will increase due to the
growing number of technologies that compete with our watermarking technologies
and the increasing number of competitors offering technologies similar to ours.
We intend to increase our marketing and branding expenditures in our effort to
increase awareness of our brand. If our brand-building strategy is unsuccessful,
these expenses may never be recovered, we may be unable to increase our future
revenue and our business could be materially harmed.

FUTURE SALES OF OUR COMMON STOCK COULD CAUSE OUR STOCK PRICE TO DECLINE

    Sales of a substantial number of shares of our common stock could adversely
affect the market price of our common stock and could impair our ability to
raise capital through the sale of additional equity securities. A substantial
majority of our shares of common stock currently outstanding are considered
restricted securities under the federal securities laws. Many of our
stockholders and option holders signed lock-up agreements in connection with our
initial public offering that limit their ability to sell their shares of our
common stock. Subject to limited exceptions, these securityholders cannot sell
or otherwise dispose of any shares of our common stock until May 29, 2000
without the prior written approval of FleetBoston Robertson Stephens Inc. On
that date, unless these shareholders enter into another agreement to limit the
sales of those shares, these shares and the shares underlying the options held
by these people will become eligible for sale, in some cases only in accordance
with the volume, manner of sale and notice requirements of the federal
securities laws. The sale of these shares could adversely affect the market
price of our common stock and could impair our ability to raise capital through
the sale of additional equity securities.

ANTI-TAKEOVER PROVISIONS IN OUR CHARTER DOCUMENTS COULD PREVENT OR DELAY
TRANSACTIONS THAT COULD BE PROFITABLE FOR OUR STOCKHOLDERS FROM OCCURRING

    The anti-takover provisions of Delaware law and our certificate of
incorporation and bylaws may make a change of control of us more difficult, even
if a change of control would be beneficial to our stockholders. These provisions
may allow our board of directors to prevent changes in management and control of
us. Under Delaware law, our board may adopt additional anti-takeover measures in
the future.

    We have the following anti-takeover provisions in our charter documents:

    - our board of directors is divided into three classes of directors, with a
      separate class of directors being elected at each successive annual
      meeting for a term of three years;

    - special meetings of the stockholders may be called only by our president,
      our secretary or at the discretion of our board of directors;

    - vacancies on our board of directors may be filled by a majority of
      directors in office, and not by the stockholders; and

    - our board of directors may issue preferred stock and determine the price,
      rights, preferences and privileges of those shares without any vote or
      further action by the stockholders.

    These provisions could have the effect of discouraging a third party from
making a tender offer or otherwise attempting to gain control of us. In
addition, these provisions could limit the price that investors might be willing
to pay in the future for shares of our common stock.

                                       16
<PAGE>
RISKS RELATED TO OUR INDUSTRY

IF WE ARE UNABLE TO RESPOND TO REGULATORY OR INDUSTRY STANDARDS EFFECTIVELY, OUR
BUSINESS COULD BE HARMED

    Our future success will depend in part on our ability to enhance and improve
the responsiveness, functionality and features of our products and services in
accordance with newly-imposed regulatory or industry standards. Our ability to
remain competitive will depend in part on our ability to influence and respond
to emerging industry standards, including any standards that may be adopted for
the protection of audio content, digital photography or video on DVD, in a
timely and cost-effective manner. For instance, our video copy prevention
solution is competing with another solution to become the industry standard for
DVD copy protection. In addition, the Digimarc MediaBridge system competes
against companies that provide Internet portals, and other Internet companies
that provide search and directory services. If we are unable to influence or
respond to these standards effectively, our business could be harmed.

IF WE ARE UNABLE TO INTEGRATE NEW TECHNOLOGIES EFFECTIVELY, OUR BUSINESS COULD
BE HARMED

    Our target markets are characterized by new and evolving technologies. The
success of our business will depend on our ability to address the increasingly
sophisticated technological needs of our customers in a timely and
cost-effective manner. Our ability to remain competitive will depend in part on
our ability to:

    - enhance and improve the responsiveness, functionality and other features
      of the products and services we offer or plan to offer;

    - continue to develop our technical expertise; and

    - develop and introduce new services, applications and technologies to meet
      changing customer needs and preferences and to integrate new technologies.

    We cannot assure you that we will be successful in responding to these
technological and industry challenges in a timely and cost-effective manner. If
we are unable to integrate new technologies effectively or respond to these
changing needs, our business could be harmed.

OUR MARKETS ARE HIGHLY COMPETITIVE

    The markets for digital watermarking applications are new, intensely
competitive and rapidly evolving. We expect competition to continue to increase
from both existing competitors and new market entrants. We face competition from
other companies using digital watermarking technologies and from alternative
technologies. As we expand the applications for our digital watermarking
technologies, we will experience more competition from products and services
that are substitutes for our digital watermarking applications. Because our
business model is new and emerging, we may face competition from unexpected
sources. Alternative technologies that may directly or indirectly compete with
certain applications of our watermarking technologies include:

    - encryption--securing data during distribution using a secret code so it
      cannot be accessed except by authorized users;

    - containers--inserting a media object in a wrapper, which prevents the
      media object from being duplicated;

    - dataglyphs--a visible modification of the characteristics of an image that
      is machine-readable;

    - scrambled indicia--optical refraction-based data-hiding technique that is
      inserted into an image and can be read with a glass;

                                       17
<PAGE>
    - traditional anti-counterfeiting technologies--a number of solutions used
      currently by many governments that compete for budgetary outlays designed
      to deter counterfeiting, including optically sensitive ink, magnetic
      threads and other materials used in the printing of currencies;

    - radio frequency tags--embedding a chip that emits a signal when in close
      proximity with a receiver, which is being used in photo identification,
      labels and tags;

    - Internet technologies--numerous existing and potential Internet access and
      search methods will be potentially competitive with the Digimarc
      MediaBridge system; and

    - bar codes--visible data-carrying code.

    In addition, as we apply our technologies to the Internet through the
anticipated introduction of the Digimarc MediaBridge system, we may begin to
compete with a wide range of other companies. Many of the companies that
currently compete with us, as well as other companies with whom we may compete
in the future, are national or international in scope and may have greater
resources than we do. These resources could enable these companies to initiate
severe price cuts or take other measures in an effort to gain market share in
our target markets. We cannot assure you that digital watermarking technologies,
and our products and services using these technologies, will gain widespread
market acceptance.

    We cannot assure you that we will be able to compete successfully against
current or future participants in our markets or against alternative
technologies, nor can we assure you that the competitive pressures we face will
not harm our business, operating results and financial condition.

ITEM 3:  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

    The Company's market risk disclosures set forth in Item 7A of its Annual
Report on Form 10-K for the year ended December 31, 1999 have not changed
significantly.

                                       18
<PAGE>
PART II.  OTHER INFORMATION

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits.

<TABLE>
<CAPTION>
           EXHIBIT
           NUMBER           DESCRIPTION
    ---------------------   -----------
    <C>                     <S>
             27             Financial Data Schedule
</TABLE>

(b) Reports on Form 8-K.

    No reports on Form 8-K were filed during the three months ended March 31,
2000.

ITEMS 1, 2, 3, 4 AND 5 HAVE BEEN OMITTED AS THEY ARE NOT APPLICABLE.

                                       19
<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.

<TABLE>
<S>                                          <C>  <C>
Date: May 12, 2000                           DIGIMARC CORPORATION

                                             By:                /s/ E.K. RANJIT
                                                  ------------------------------------------
                                                                  E.K. Ranjit
                                                            CHIEF FINANCIAL OFFICER
                                                         (Duly Authorized Officer and
                                                         Principal Financial Officer)
</TABLE>

                                       20
<PAGE>
                               INDEX TO EXHIBITS

<TABLE>
<CAPTION>
       EXHIBIT
       NUMBER           DESCRIPTION
---------------------   -----------
<C>                     <S>
         27             Financial Data Schedule
</TABLE>

                                       21