<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended September 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 number 0-27750
-------
IMPATH INC.
(exact name of registrant as specified in its charter)
--------------------
DELAWARE 8071 13-3459685
(State or other jurisdiction of (Primary Standard (I.R.S. Employer
incorporation or organization) Industrial Classification Identification No.)
Code Number
1010 Third Avenue, Suite 302
New York, New York 10021
(212) 702-8300
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
--------------------
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 SEPTEMBER 30, 1997
- ----- ---------------------------------
Common Stock, par value 5,429,238
$ .005 per share
<PAGE>
INDEX
IMPATH INC.
PAGE NUMBER
- -------------------------------------------------------------------------------
PART I FINANCIAL INFORMATION
Item 1 Consolidated Financial Statements (Unaudited):
Consolidated Balance Sheets at September 30, 1997
and December 31, 1996......................................... 3
Consolidated Statements of Operations for the Three and Nine
Months Ended September 30, 1997 and September 30, 1996........ 4
Consolidated Statement of Stockholders' Equity for the Nine
Months Ended September 30, 1997............................... 5
Consolidated Statements of Cash Flows for the Nine
Months Ended September 30, 1997 and September 30, 1996........ 6
Notes to Consolidated Financial Statements.................... 7
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations............. 8-11
PART II OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K.......................... 12-15
Signatures........................................................ 16
2
<PAGE>
IMPATH INC.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
SEPTEMBER 30, DEC. 31,
1997 1996
ASSETS (unaudited)
------------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 525,094 $ 941,903
Marketable trading securities 15,825,545 23,395,398
Accounts receivable, net of allowance for doubtful accounts 10,530,461 7,059,812
Prepaid expenses and other current assets 780,245 524,599
Deferred tax assets, net 379,506 1,359,285
Investment (50%) in IMPATH Registry 75,000 -
----------- -----------
Total current assets 28,115,851 33,280,997
Fixed assets, less accumulated depreciation and amortization 5,069,896 3,391,965
Deposits and other assets 227,387 98,878
Goodwill, net of accumulated amortization 7,029,282 809,542
----------- -----------
Total Assets $40,442,416 $37,581,382
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of capital lease obligations $ 934,009 $ 704,399
Accounts payable and accrued expenses 963,630 1,116,781
Income taxes payable - 692,193
----------- -----------
Total current liabilities 1,897,639 2,513,373
Capital lease obligations, net of current portion 1,844,714 1,430,104
Stockholders' equity:
Common stock, $.005 par value 27,146 26,611
Additional paid-in capital 33,605,192 32,357,260
Retained Earnings 3,853,337 1,498,878
----------- -----------
37,485,675 33,882,749
Less:
Cost of 7,088 shares of common stock held in treasury (100) (100)
Notes receivable from officers (15,835) (28,421)
Deferred compensation (769,677) (216,323)
----------- -----------
Total stockholders' equity 36,700,063 33,637,905
----------- -----------
Total Liabilities and Stockholders' Equity $40,442,416 $37,581,382
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
IMPATH INC.
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ --------------------------
1997 1996 1997 1996
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
Net diagnostic and prognostic services $9,274,313 $5,312,255 $26,348,490 $15,028,491
Contract laboratory services 54,415 57,779 110,363 163,465
---------- ---------- ----------- -----------
Total revenues 9,328,728 5,370,034 26,458,853 15,191,956
---------- ---------- ----------- -----------
Operating expenses:
Salaries and related costs 3,809,526 2,251,841 10,884,128 6,765,367
Selling, general and administrative 4,053,405 2,343,144 11,935,824 6,844,134
---------- ---------- ----------- -----------
Total operating expenses 7,862,931 4,594,985 22,819,952 13,609,501
---------- ---------- ----------- -----------
Income from operations 1,465,797 775,049 3,638,901 1,582,455
Interest income 265,484 124,098 550,279 499,084
Interest expense (82,610) (58,400) (227,522) (149,147)
Gain on trading marketable securities - 211,275 242,726 291,094
---------- ---------- ----------- -----------
Income before income tax expense 1,648,671 1,052,022 4,204,384 2,223,486
Income tax expense (725,412) (449,671) (1,849,925) (953,548)
---------- ---------- ----------- -----------
Net income 923,259 602,351 2,354,459 1,269,938
Accrued dividends on preferred stock - - - (82,346)
---------- ---------- ----------- -----------
Net income available to common stockholders $ 923,259 $ 602,351 $ 2,354,459 $ 1,187,592
========== ========== =========== ===========
Net Income per share:
- - Primary $0.16 $0.11 $0.41 $0.24
- - Fully diluted $0.16 $0.11 $0.40 $0.24
Weighted average common and
common equivalent shares outstanding:
- - Primary 5,834,000 5,707,000 5,780,000 5,359,000
- - Fully diluted 5,856,000 5,707,000 5,835,000 5,359,000
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
IMPATH INC.
Consolidated Statement of Stockholders' Equity
Nine Months ended September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
------------ PAID-IN ACCUMULATED NOTES RECEIVABLE DEFERRED
SHARES AMOUNT CAPITAL EARNINGS TREASURY STOCK FROM STOCKHOLDER COMPENSATION TOTAL
------- ------ --------- ------------ ------------- ---------------- ------------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1996 5,322,286 $26,611 $32,357,260 $1,498,878 $(100) $(28,421) $(216,323) $33,637,905
Common shares issued
upon exercise of
stock options 100,684 504 324,864 325,368
Common shares issued
upon exercise of
warrants 6,268 31 21,905 21,936
Compensation associated
with issuance of
options 709,945 (709,945) --
Issuance of options
related to Immunopath
Acquisition 191,218 191,218
Repayment of loans to
stockholders 12,586 12,586
Amortization of deferred
compensation 156,591 156,591
Net income for the
period ended
September 30, 1997 2,354,459 2,354,459
--------- ------- ----------- ------------ ------------ ---------- ---------- ---------
Balance at September 5,429,238 $27,146 $33,605,192 $3,853,337 $(100) $(15,835) $(769,677) $36,700,063
30, 1997 ========= ======= =========== ========== ======== ========= ========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
IMPATH INC.
Consolidated Statements of Cash Flows
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1997 1996
------------ ------------
Cash flows from operating activities:
<S> <C> <C>
Net income $ 2,354,459 $ 1,269,938
Adjustments to reconcile net income
to net cash provided by operating activities-
Depreciation and amortization 1,015,945 559,202
Provision for uncollectable accounts receivable 3,430,066 1,633,492
Deferred compensation 156,591 95,688
Changes in assets and liabilities:
(Increase) in accounts receivable (6,425,715) (3,909,714)
(Increase) in prepaid expenses and current assets (255,646) (451,647)
Decrease (increase) in deferred tax asset 979,779 (638,000)
Decrease (increase) in marketable securities 7,569,853 (17,802,718)
(Increase) in deposits and other assets (128,509) (18,917)
(Decrease) in accounts payable and accrued expenses (1,072,611) (534,920)
Decrease (increase) in income taxes payable (692,193) 56,023
----------- ------------
Total adjustments 4,577,560 (21,011,511)
----------- ------------
Net cash provided (used) by operating activities 6,932,019 (19,741,573)
----------- ------------
Cash flows from investing activities:
Investment in IMPATH Registry (75,000) -
Purchase of Oncogenetics Inc. (909,563) -
Purchase of Immunodiagnostic Inc. customer list (425,000) -
Purchase of GenCare (4,600,000) -
Capital expenditures (1,022,562) (328,309)
----------- ------------
Net cash used in investing activities (7,032,125) (328,309)
----------- ------------
Cash flows from financing activities:
Issuance of common stock 347,304 25,826,451
Payment of dividends on preferred stock - (560,346)
Repayment of bank loan - (283,333)
Payments of capital lease obligations (676,593) (398,101)
Payments received on officer loans 12,586 2,914
Deferred registration costs - 746,462
----------- ------------
Net cash (used) provided by financing activities (316,703) 25,334,047
----------- ------------
Net (decrease) increase in cash and cash equivalents (416,809) 5,264,165
Cash and cash equivalents at beginning of period 941,903 1,512,695
----------- ------------
Cash and cash equivalents at end of period $ 525,094 $ 6,776,860
=========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
IMPATH INC.
Notes to Consolidated Financial Statements
(unaudited)
GENERAL:
The accompanying unaudited consolidated financial statements have been prepared
by management in accordance with the rules and regulations of the United States
Securities and Exchange Commission.
In the opinion of IMPATH Inc. (the "Company" or "IMPATH"), the accompanying
unaudited consolidated financial statements contain all adjustments, consisting
only of normal recurring adjustments necessary for the fair presentation of the
financial information for all periods presented. Results for the interim periods
are not necessarily indicative of the results for an entire year and do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. These financial
statements should be read in conjunction with the financial statements and the
notes thereto contained in the Company's Annual Report on Form 10-K for the year
ended December 31, 1996.
NET INCOME PER SHARE:
Net income per share is based on the weighted average number of shares of common
stock outstanding after giving effect to the conversion (calculated using the
as-converted method) of the convertible preferred stock that converted upon the
completion of the Company's initial public offering in February 1996. Common
equivalent shares from stock options and warrants are included in the
computation using the treasury stock method to the extent their effect is
dilutive. All stock options and warrants issued within a one year period prior
to the initial public offering have been treated as outstanding before the
completion of the offering.
INVESTMENT:
The Company invested approximately $20,000,000 of the net proceeds from its
initial public offering in a portfolio of short term fixed income securities
that are managed by a Wall Street investment firm. In accordance with Statement
of Financial Accounting Standards No. 115, the Company's investments are being
recorded at fair value with gains and losses reported in the Statement of
Operations. At September 30, 1997, all securities in the investment portfolio
contained original maturities exceeding three months which were included in
current assets.
ACQUISTIONS:
On September 30, 1997, IMPATH Inc. acquired certain assets of the GenCare
division of Bio Reference Laboratories ("GenCare"). The purchase price for
GenCare was $6,000,000, which included an initial payment of $4,600,000 made on
September 1st and an obligation to pay up to $1,400,000 over a two year period,
subject to certain conditions. GenCare is a New Jersey based cancer laboratory
specializing in tissue-based testing and tumor marker analyses. The resulting
intangible asset of $4,600,000 relates to a cusotmer list and will be amorized
over 15 years.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1997
Compared with Three Months Ended September 30, 1996
The Company's total revenues for the three months ended September 30, 1997 and
1996 were $9,329,000 and $5,370,000, respectively, representing an increase of
$3,959,000, or 73.7%, in 1997. This growth was primarily attributable to a 49.9%
increase in case volume resulting from increased sales and marketing activities,
as well as the successful integration of our two recent acquisitions- certain
assets of Arizona-based Oncogenetics and certain assets of Florida-based
Immunodiagnostic Laboratories. Revenues were adversely impacted by the UPS
strike in August and slower than anticipated volume from Oncology offices in the
summer months. These factors however, were partially mitigated by the increase
in revenue realization per case resulting from product mix changes toward cases
which carry higher reimbursement rates, as well as a payor mix shift from
institutional billing to third-party.
Salaries and related costs for the three months ended September 30, 1997 and
1996 were $3,810,000 and $2,252,000, respectively, representing an increase of
$1,558,000, or 69.2%, in 1997. This increase was the result of increased
personnel associated with case volume growth and the Company's expansion
activities. Salaries and related costs, as a percentage of total revenues,
decreased to 40.8% in 1997 from 41.9% in 1996.
Selling, general and administrative expenses for the three months ended
September 30, 1997 and 1996 were $4,053,000 and $2,343,000, respectively,
representing an increase of $1,710,000, or 73.0%, in 1997. This increase was due
to an increase in bad debt expense of approximately $685,000 as a result of
higher revenues and a shift to more revenues requiring copayments. Third-party
revenues have historically had a higher bad debt rate than institutional
revenues. In addition, there was an increase in operating expenses of
approximately $818,000 incurred by the Company's new Arizona-based cancer
testing facility which was acquired in January, 1997. The Company incurred over
$418,000 in higher supply and courier costs due to increased volume and the
logistics required to service the Company's expanding oncology office based
business. The Company also incurred higher travel related expenses and
professional fees associated with expanded sales, marketing and investor
relations activities. As a result of these factors, selling, general and
administrative expenses as a percentage of total revenues remained essentially
flat at 43.4% in 1997 compared to 43.6% in 1996.
Income from operations for the three months ended September 30, 1997 and 1996
was $1,466,000 and $775,000, respectively, representing an increase of $691,000,
or 89.2%, in 1997. The 1997 figure reflects increased Company operating margins
from its core diagnostic and prognostic services. As a percentage of total
revenues, income from operations increased to 15.7% in 1997 from 14.4% in 1996.
Other income, net for the three months ended September 30, 1997 and 1996 was
$183,000 and $277,000, respectively, representing a decrease of $94,000 in 1997.
This decrease was due to a decrease of approximately $7,570,000 in the amount
invested in fixed income securities. The proceeds from the sale of securities
are being used to fund the Company's expansion and database development
activities.
The tax provision for the three months ended September 30, 1997 of approximately
$725,000 reflects federal, state and local income tax expense. The Company has
estimated its annual effective tax rate for 1997 to be approximately 44% which
is in line with the current provision.
Net income for the three months ended September 30, 1997 and 1996 was $923,000
and $602,000, respectively, representing an increase of $321,000, or 53.3%, in
1997. As a result of the factors described above, net income as a percentage of
total revenues decreased to 9.9% in 1997 from 11.2% in 1996.
8
<PAGE>
NINE MONTHS ENDED SEPTEMBER 30, 1997
Compared with Nine Months Ended September 30, 1996
The Company's total revenues for the nine months ended September 30, 1997 and
1996 were $26,459,000 and $15,192,000, respectively, representing an increase of
$11,267,000, or 74.2%, in 1996. This growth was primarily due to a 47.7%
increase in case volume resulting from increased sales and marketing activities,
as well as the successful integration of our two recent acquisitions-certain
assets of Arizona-based Oncogenetics and certain assets of Florida-based
Immunodiagnostic Laboratories. In addition, revenue realization per case
increased as a result of product mix changes toward cases with higher
reimbursement rates.
Salaries and related costs for the nine months ended September 30, 1997 and 1996
were $10,884,000 and $6,765,000, respectively, representing an increase of
$4,119,000, or 60.9%, in 1997. This increase was due to personnel costs
associated with case volume growth and the Company's recent acquisitions.
Salaries and related costs, as a percentage of total revenues decreased to 41.1%
in 1997 from 44.5% in 1996.
Selling, general and administrative expenses for the nine months ended September
30, 1997 and 1996 were $11,936,000 and $6,844,000, respectively, representing an
increase of $5,092,000, or 74.4%, in 1997. This increase was due to an increase
in bad debt expense of approximately $1,797,000 associated with higher revenues,
as well as a shift to more revenues requiring copayments. The Company also
incurred $2,129,000 in additional operating expenses associated with the
Company's new Arizona based cancer testing facility which was acquired in
January, 1997. In addition, the Company incurred over $1,045,000 in higher
supply and courier costs due to increased volume and the logistics required to
service the Company's rapidly growing oncology office based business. Finally,
depreciation and amortization costs increased approximately $457,000 primarily
due to the Company's two recent acquisitions and the development of an outcomes
database. The Company also incurred higher travel related expenses and
professional fees associated with expanded sales, marketing and investor
relations activities. As a result of these factors, selling, general and
administrative expenses as a percentage of total revenues remained flat at 45.1%
in 1997 compared to 1996.
Income from operations for the nine months ended September 30, 1997 and 1996 was
$3,639,000 and $1,582,000, respectively, representing an increase of $2,057,000
or 130.0% in 1997. The 1997 figure reflects increased Company operating margins
from its core diagnostic and prognostic services. As a percentage of total
revenues, income from operations increased to 13.8% in 1997 from 10.4% in 1996.
Other income, net for the nine months ended September 30, 1997 and 1996 was
$565,000 and $641,000, respectively, representing a decrease of $76,000 in 1997.
This decrease was the result of a decrease of approximately $7,570,000 in the
amount invested in fixed income securities. These securities were originally
purchased with the proceeds from the Company's initial public offering of common
stock which commenced in February 1996. The proceeds from the sale of these
securities are being used to fund the Company's expansion and database
development.
The tax provision for the nine months ended September 30, 1997 of approximately
$1,850,000 reflects federal, state and local income tax expense. The Company
has estimated its annual effective tax rate for 1997 to be approximately 44%
which is in line with the current provision.
Net income for the nine months ended September 30, 1997 and 1996
was $2,354,000 and $1,270,000, respectively, representing an increase of
$1,084,000, or 85.4%, in 1997. As a result of the factors described above, net
income as a percentage of total revenues increased to 8.9% in 1997 from 8.4% in
1996.
9
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company has financed its operations through its February
1996 initial public offering, the private issuance of convertible preferred
stock prior to the initial public offering, secured term loans and operating and
capital equipment leases. The Company's working capital and capital expenditure
needs have increased and are expected to continue to increase as the Company
expands its existing facilities and pursues its growth strategy.
The Company's cash and cash equivalent balances at September 30, 1997 and
December 31, 1996 were $525,000 and $942,000, respectively, representing a
decrease of $417,000 in 1997. The Company also has approximately $15,826,000
invested in a portfolio of fixed income securities at September 30, 1997 which
is managed by a Wall Street investment firm.
For the nine months ended September 30, 1997, net cash from operating activities
was approximately $6,932,000. This increase was primarily the result of higher
net income as well as the sale of marketable trading securities of $7,570,000.
This increase was partially off-set by an increase in accounts receivable, net
of allowance for bad debt of $2,996,000 due to rapid sales growth. In addition,
the Company reduced its accounts payable and accrued expenses by $1,073,000.
During the first nine months of 1997, the Company used approximately $6,010,000
of cash to fund its growth strategy through the acquisition of certain assets of
Oncogenetics, Immunodiagnostics Laboratories and GenCare, a division of
BioReference Laboratories Inc., as well as a joint venture with Medical Registry
Services, Inc.. In addition, the Company had capital expenditures of $1,023,000
during the period. The Company received approximately $347,000 during the first
nine months of 1997 through the exercise of incentive stock options and used
approximately $677,000 for principal payments on capital lease obligations.
In August 1996, the Company renewed its line of credit at an aggregate amount of
$2,500,000 with the Chase Manhattan Bank. Borrowing under the line will bear
interest at the Chase Manhattan Bank's prime rate. The availability of the line
of credit is subject to the execution of such additional documentation as the
Chase Manhattan Bank may request. As of September 30, 1997 the Company had not
drawn on the line of credit.
The Company's growth strategy is anticipated to be financed through the net
proceeds from the initial public offering, its current cash resources and
existing third-party credit facilities. The Company believes the combination of
these sources will be sufficient to fund its operations and satisfy the
Company's cash requirements for the next 12 months and the foreseeable future.
There may be circumstances, however, that would accelerate the Company's use of
proceeds from the initial public offering. If this occurs, the Company may,
from time to time, incur additional indebtedness or issue, in public or private
transactions, equity or debt securities. However, there can be no assurance
that suitable debt or equity financing will be available to the Company.
IMPACT OF INFLATION AND CHANGING PRICES
The impact of inflation and changing prices on the Company has been primarily
limited to salary, laboratory and operating supplies and rent increases and has
not been material to date to the Company's operations. In the future, the
Company may not be able to raise the prices for its cases by an amount
sufficient to cover the cost of inflation, although the Company is responding to
these concerns by attempting to increase the volume and adjust the product mix
of its business.
10
<PAGE>
SIGNIFICANT/SUBSEQUENT EVENTS
On September 30, 1997, IMPATH Inc. acquired certain assets of the GenCare
division of Bio Reference Laboratories ("GenCare"). The purchase price for
GenCare was $6,000,000, which included an initial payment of $4,600,000 made on
September 1st and an obligation to pay up to $1,400,000 over a two year period,
subject to certain conditions. GenCare is a New Jersey-based cancer laboratory
specializing in tissue-based testing and tumor marker analyses.
In October 1997, IMPATH Inc. purchased certain assets of Aeron Biotechnology,
Inc. ("Aeron") for approximately $557,000. Aeron is a California based cancer
testing facility specializing in breast cancer prognostic analysis.
11
<PAGE>
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) The exhibits required to be filed as part of this Quarterly Report on
Form 10-Q are listed in the attached Index to Exhibits.
(b) No reports on Form 8-K were filed during the quarter for which this
Quarterly Report on Form 10-Q is filed.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: November 5, 1997 IMPATH INC.
-----------
(Registrant)
Dated: November 5, 1997 By /s/ ANU D. SAAD
----------------------------
Anu D. Saad, Ph.D.
President and Chief
Executive Officer
Dated: November 5, 1997 By /s/ JOHN P. GANDOLFO
----------------------------
John P. Gandolfo
Executive Vice President,
Chief Financial Officer
and Principal Accounting
Officer
13
<PAGE>
INDEX TO EXHIBITS
-----------------
Exhibit Page
Number Description Number
- ------- ----------- ------
11 Statement re Computation of Per Share Earnings
for the Three Months and Nine Months ended
September 30, 1997 and September 30, 1996 (Unaudited) 14
27 Financial Data Schedule 15
<PAGE>
EXHIBIT 11
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
-------------------------- ------------------------
1997 1996 1997 1996
(unaudited) (unaudited) (unaudited) (unaudited)
------------ ---------- ----------- -----------
<S> <C> <C> <C> <C>
Net income for computing net income per share $ 923,259 $ 602,351 $2,354,459 $1,187,592
Accrued dividends on preferred stock - - - 82,346
---------- ---------- ---------- ----------
Net income for computing net income per share $ 923,259 $ 602,351 $2,354,459 $1,269,938
========== ========== ========== ==========
Weighted average common shares outstanding,
assuming conversion of all preferred stock 5,408,833 5,282,517 5,383,265 4,848,039
Shares of common stock assumed to be issued upon
exercise of common stock options and warrants to
purchase common stock using treasury stock method:
- Primary 425,167 424,483 396,735 510,961
- Fully diluted 447,167 424,483 451,735 510,961
---------- ---------- ---------- ----------
Weighted average number of common and common
equivalent shares outstanding during the period:
- Primary 5,834,000 5,707,000 5,780,000 5,359,000
- Fully diluted 5,856,000 5,707,000 5,835,000 5,359,000
Net income per share
- Primary $ 0.16 $ 0.11 $ 0.41 $ 0.24
========== ========== ========== ==========
- Fully diluted $ 0.16 $ 0.11 $ 0.40 $ 0.24
========== ========== ========== ==========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-START> JUL-1-1997 JAN-01-1997
<PERIOD-END> SEP-30-1997 SEP-30-1997
<CASH> 525,094 525,094
<SECURITIES> 15,825,545 15,825,545
<RECEIVABLES> 15,206,396 15,206,396
<ALLOWANCES> 4,675,935 4,675,935
<INVENTORY> 194,040 194,040
<CURRENT-ASSETS> 28,115,851 28,115,851
<PP&E> 7,472,568 7,472,568
<DEPRECIATION> 2,402,672 2,402,672
<TOTAL-ASSETS> 40,442,416 40,442,416
<CURRENT-LIABILITIES> 1,897,639 1,826,057
<BONDS> 0 0
0 0
0 0
<COMMON> 27,146 27,146
<OTHER-SE> 36,672,917 36,672,917
<TOTAL-LIABILITY-AND-EQUITY> 40,442,416 40,442,416
<SALES> 9,328,728 26,458,853
<TOTAL-REVENUES> 9,328,728 26,458,853
<CGS> 0 0
<TOTAL-COSTS> 7,862,931 22,819,952
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 82,610 227,522
<INCOME-PRETAX> 1,648,671 4,204,384
<INCOME-TAX> 725,412 1,849,925
<INCOME-CONTINUING> 923,259 2,354,459
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 923,259 2,354,459
<EPS-PRIMARY> 0.16 0.41
<EPS-DILUTED> 0.16 0.40
</TABLE>
