<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 June 30, 1996
OR
Transition report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the transition period from ___________ to ____________
Commission file number 0-27502
----------------
HEALTH SYSTEMS DESIGN CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 94-3235734
(State or other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
1330 BROADWAY, OAKLAND, CALIFORNIA 94612
(Address of principal executive offices) (Zip code)
(510) 763-2629
(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
1932 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
----- -----
The registrant had 6,429,881 shares of common stock outstanding as of June 30,
1996.
Exhibit index is located on page 11
<PAGE>
HEALTH SYSTEMS DESIGN CORPORATION
INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets -
June 30, 1996 and September 30, 1995 2
Consolidated Statements of Operations -
Three Months and Nine Months Ended June 30, 1996 and 1995 3
Consolidated Statements of Cash Flows -
Nine Months ended June 30, 1996 and 1995 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 6
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
HEALTH SYSTEMS DESIGN CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
June 30, September 30,
1996 1995
------------- -------------
(unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 17,023,247 $ 149,218
Accounts receivable, net of allowance for doubtful
accounts of $75,000 and $50,000 in 1996 and 1995,
respectively 2,353,465 1,419,309
Unbilled revenue 1,602,072 650,204
Prepaids 516,381 41,416
---------- ----------
Total current assets 21,495,165 2,260,147
---------- ----------
Property and equipment:
Computer equipment 1,951,010 1,049,607
Office furniture and other 585,309 442,517
---------- ----------
Total property and equipment 2,536,319 1,492,124
Less: Accumulated depreciation (610,659) (531,107)
---------- ----------
Net property and equipment 1,925,660 961,017
---------- ----------
Deposits and other assets 84,749 166,186
---------- ----------
Software development costs, net of accumulated
amortization of $318,321 and $155,507 in 1996 and 1995,
respectively 307,883 264,159
---------- ----------
Total assets $ 23,813,457 $ 3,651,509
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Line of credit $ - $ 508,427
Current portion of notes payable - 94,004
Current portion of capital lease obligations 5,560 26,904
Accounts payable 693,134 671,185
Accrued liabilities 533,355 214,589
Unearned revenue 1,729,141 1,564,505
Advances from stockholder - 325,000
---------- ----------
Total current liabilities 2,961,190 3,404,614
Notes payable, net of current portion - 516,092
Capital lease obligations, net of current portion - 3,505
---------- ----------
Total liabilities 2,961,190 3,924,211
---------- ----------
Stockholders' equity (deficit):
Preferred stock, $.001 par value, 1,000,000 shares
authorized, none outstanding at June 30, 1996; - -
no shares authorized at September 30, 1995
Common stock, $.001 par value, 20,000,000 shares
authorized, 6,429,881 shares issued and outstanding
at June 30, 1996; no par value, 8,000,000 shares
authorized, 4,442,600 shares issued and outstanding
at September 30, 1995 6,430 247,165
Additional paid-in capital 22,825,380 -
Treasury stock, 2,053 shares (28,500) -
Deferred compensation (62,979) (78,795)
Retained deficit (1,888,064) (441,072)
---------- ----------
Total stockholders' equity (deficit) 20,852,267 (272,702)
---------- ----------
Total liabilities and stockholders' equity (deficit) $ 23,813,457 $ 3,651,509
---------- ----------
---------- ----------
</TABLE>
2
<PAGE>
HEALTH SYSTEMS DESIGN CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
June 30, June 30,
-------------------------- --------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
System sales $ 2,752,282 $ 1,393,516 $ 6,945,238 $ 4,046,009
Services and other 446,662 367,078 1,298,748 872,965
------------ ------------ ------------ ------------
Total revenues 3,198,944 1,760,594 8,243,986 4,918,974
Cost of revenues 932,303 736,366 2,516,350 1,707,022
------------ ------------ ------------ ------------
Gross margin 2,266,641 1,024,228 5,727,636 3,211,952
------------ ------------ ------------ ------------
Operating expenses:
General and administrative 1,047,653 489,235 2,572,303 1,455,982
Sales and marketing 771,503 360,069 1,869,255 782,278
Product development 1,078,026 477,804 2,574,604 1,246,901
------------ ------------ ------------ ------------
Total operating expenses 2,897,182 1,327,108 7,016,162 3,485,161
------------ ------------ ------------ ------------
Loss from operations (630,541) (302,880) (1,288,526) (273,209)
Interest, net 230,855 (13,752) (158,466) (43,669)
------------ ------------ ------------ ------------
Loss before provision for
income taxes (399,686) (316,632) (1,446,992) (316,878)
Benefit from income taxes - 96,905 - 96,905
------------ ------------ ------------ ------------
Net loss $ (399,686) $ (219,727) $ (1,446,992) $ (219,973)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Net loss per share $ (0.06) $ (0.05) $ (0.26) $ (0.05)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Weighted average common and common
equivalent shares outstanding 6,672,699 4,762,039 5,535,900 4,758,237
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
3
<PAGE>
HEALTH SYSTEMS DESIGN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended
June 30,
--------------------------
1996 1995
----------- ----------
<S> <C> <C>
Operating Activities:
Net loss $(1,446,992) $ (219,973)
Adjustments to reconcile net loss to cash
provided by (used in) operating activities:
Depreciation and amortization 400,128 205,206
Gain on sale of asset (5,000) -
Amortization of deferred compensation 15,816 -
Write off of debt discount 350,000 -
Write off deferred income tax - (97,337)
Changes in current assets and liabilities:
Accounts receivable (934,156) 849,726
Unbilled revenue (951,868) (299,055)
Prepaids (474,965) 8,738
Accounts payable 21,949 381,788
Accrued liabilities 318,766 146,881
Unearned revenue 164,636 (603,340)
---------- ----------
Net cash provided by (used in) operating activities (2,541,686) 372,634
---------- ----------
Cash flows from investing activities:
Purchases of property and equipment (1,201,957) (417,223)
Proceeds from sale of property and equipment 5,000 -
Capitalization of software development costs (206,538) (238,526)
Other assets 81,437 (18,643)
---------- ----------
Net cash used in investing activities (1,322,058) (674,392)
---------- ----------
Cash flows from financing activities:
Borrowings from line of credit 450,000 1,964,572
Payments under line of credit (958,427) (1,964,572)
Borrowings from notes payable 1,500,000 400,000
Payments under notes payable and capital leases (2,459,945) (221,720)
Proceeds from issuance of common stock, net of
issuance costs 21,722,965 -
Proceeds from exercise of common stock options
and warrants 483,180 1,800
---------- ----------
Net cash provided by financing activities 20,737,773 180,080
---------- ----------
Net increase (decrease) in cash 16,874,029 (121,678)
Cash and cash equivalents at beginning of period 149,218 143,992
---------- ----------
Cash and cash equivalents at end of period $ 17,023,247 $ 22,314
---------- ----------
---------- ----------
Supplemental disclosure of cash flow information:
Interest paid $ 122,726 $ 29,708
Taxes paid $ 800 $ 800
Supplemental disclosure of noncash transactions:
Cancellation of advances from stockholder through
issuance of note payable $ 500,000 $ -
Warrants exercised for common stock $ 475,000 $ -
</TABLE>
4
<PAGE>
HEALTH SYSTEMS DESIGN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and on substantially the same basis as the annual audited
financial statements. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
only of normal recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the three and nine month periods
ended June 30, 1996 are not necessarily indicative of the results that may be
expected for the year ended September 30, 1996. These consolidated financial
statements should be read in conjunction with the financial statements and
footnotes thereto for the year then ended September 30, 1995 included in the
Company's Form S-1 Registration Statement, which was effective March 4, 1996.
2. NET LOSS PER SHARE
Net loss per common and common equivalent share is based on the
weighted average number of common and common dilutive equivalent shares
outstanding during the period. Pursuant to Securities and Exchange Commission
Staff Accounting Bulletin No. 83, common equivalent shares include all common
shares issued and options and warrants to purchase shares of common stock
granted by the Company at a price less than the initial public offering price
during the period March 16, 1995 through the initial public offering date (using
the treasury stock method for options and warrants and based on the public
offering price of $13.00 per share) as if they were outstanding for all periods
presented prior to the initial public offering. Options granted by the Company
prior to March 16, 1995 have been excluded in the calculation of common and
common equivalent shares outstanding, since they would be antidilutive.
3. INITIAL PUBLIC OFFERING
On March 5, 1996, the Company sold 1,855,000 shares of its common stock
through an initial public offering. As a result, the Company received net
proceeds of $21,722,965. A portion of the proceeds were immediately used to
retire short-term and long-term indebtedness to banks and other creditors. In
connection with the repayment of the private placement notes payable of
$2,000,000, the Company recorded a one-time, non-cash charge to interest expense
of approximately $333,000 in the second quarter of fiscal 1996 to reflect the
write-off of deferred interest. A $17,000 non-cash charge to interest expense
was recorded in the first quarter of fiscal 1996. Also, in February, 1996, the
Company reincorporated in the state of Delaware.
5
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company provides managed care information systems software to
healthcare organizations that use managed care techniques to deliver
services, manage financial risk and control costs. The Company introduced
its first internally financed and developed application, Diamond BBx, in
fiscal 1992, followed by Diamond Client/Server and Diamond Objects in fiscal
1995 and Diamond QuickStart in fiscal 1996.
The Company's revenues are derived from licensing Diamond BBx, Diamond
Client/Server, Diamond QuickStart and Diamond Objects, providing the
associated implementation, modification, support and consulting services,
and, to a lesser extent, reselling third party products and hardware.
License revenues are recognized on a percentage of completion basis based on
the labor hours required to implement the system. Implementation,
modification, support and consulting fees are billed either on an hourly or
monthly basis and are recognized as services are rendered. Third party
software and hardware are typically billed and recognized as revenues when
delivered to the client.
RESULTS OF OPERATIONS
REVENUES
Total revenues were $3,199,000 and $1,761,000 for the three months ended
June 30, 1996 and 1995, respectively, representing an increase of 82%. Total
revenues were $8,244,000 and $4,919,000 for the nine months ended June 30,
1996 and 1995, respectively, representing an increase of 68%. The growth in
total revenues is attributable primarily to Diamond Client/Server
implementations in progress during the periods, as revenues associated with
Diamond BBx remained relatively constant in the comparable periods.
The Company's relationship with Blue Cross and Blue Shield of Florida,
which commenced in November, 1995, contributed approximately $1,363,000 in
revenues for the quarter. The relationship with Shared Medical Systems (SMS)
accounted for approximately $353,000 in revenues for the quarter, compared
with approximately $335,000 in the comparable year earlier period.
SYSTEM SALES. System sales revenues were $2,752,000 and $1,394,000 for
the three months ended June 30, 1996 and 1995, respectively, representing an
increase of 98%. System sales revenues were $6,945,000 and $4,046,000 for
the nine months ended June 30, 1996 and 1995,
6
<PAGE>
respectively, representing an increase of 72%. Revenues associated with
Diamond Client/Server sales were responsible for the majority of the increase
in systems sales revenues, with significant increases in Diamond
Client/Server license, implementation and modification fees.
SERVICES AND OTHER. Services and other revenues were $447,000 and
$367,000 for the three months ended June 30, 1996 and 1995, respectively,
representing an increase of 22%. Services and other revenues were $1,299,000
and $873,000 for the nine months ended June 30, 1996 and 1995, respectively,
representing an increase of 49%. Support fees continued to account for the
majority of services and other revenues. The increase in services and other
revenues was due primarily to the expansion of the installed base for Diamond
BBx.
COST OF REVENUES. Cost of revenues was $932,000 and $736,000 for the
three months ended June 30, 1996 and 1995, respectively, representing an
increase of 27%. Cost of revenues was $2,516,000 and $1,707,000 for the nine
months ended June 30, 1996 and 1995, respectively, representing an increase
of 47%. Cost of revenues increased in absolute terms primarily as a result
of the increased number of personnel, both HSD employees and independent
contractors, required to implement and support the larger client base. Cost
of revenues declined from 42% of total revenues in the three months ended
June 30, 1995, to 29% of total revenues in the three months ended June 30,
1996, although no long-term trend should be implied from this quarter to
quarter comparison. The cost of revenues as a percentage of sales is
dependent on the mix of license, service, and third party hardware and
software revenues, and may fluctuate over time as these revenue sources
fluctuate.
OPERATING EXPENSES.
GENERAL AND ADMINISTRATIVE. General and administrative expenditures
were $1,048,000 and $489,000 for the three months ended June 30, 1996 and
1995, respectively, representing an increase of 114%. General and
administrative expenditures were $2,572,000 and $1,456,000 for the nine
months ended June 30, 1996 and 1995, respectively, representing an increase
of 77%. The increase in general
7
<PAGE>
and administrative expenses was due primarily to staff additions and
investment in infrastructure to support the Company's expanded operations as
well as fulfilling the obligations of being a public company. The Company
expects general and administrative expenditures to increase as the Company
continues to expand its operations.
SALES AND MARKETING. Sales and marketing expenditures were $772,000 and
$360,000 for the three months ended June 30, 1996 and 1995, respectively,
representing an increase of 114%. Sales and marketing expenditures were
$1,869,000 and $782,000 for the nine months ended June 30, 1996 and 1995,
respectively, representing an increase of 139%. The Company continues to
emphasize the expansion of its sales and marketing department to better
address market demand for its products. Sales and marketing expenses as a
percentage of revenues increased in the three months ended June 30, 1996 when
compared to the corresponding period in 1995, primarily as a result of
aggressive hiring of sales and marketing personnel. The increase in sales
and marketing expenditures in nominal terms is expected to continue in the
near future.
PRODUCT DEVELOPMENT. Product development expenditures, net of software
capitalization, were $1,078,000 and $478,000 for the three months ended June
30, 1996 and 1995, respectively, representing an increase of 126%. Product
development expenditures, net of software capitalization, were $2,575,000 and
$1,247,000 for the nine months ended June 30, 1996 and 1995, respectively,
representing an increase of 106%. The Company capitalized $116,000 and
$70,000 of product development costs in the three months ended June 30, 1996
and 1995, respectively, and $207,000 and $239,000 in the nine months ended
June 30, 1996 and 1995, respectively. The increase in product development
expenditures, net of capitalization, is due primarily to the continued
development of Diamond Client/Server, including increased staffing and the
hiring of technical consultants to assist such efforts. The Company believes
that research and development expenditures are essential to maintaining its
competitive position and expects these costs to continue to constitute a
significant percentage of total revenues in the near future.
INTEREST INCOME (EXPENSE), NET. Interest income, net of interest expense,
was $231,000 and $(14,000) for the three months ended June 30, 1996 and 1995,
respectively. Interest income, net of interest expense, was $(158,000) and
$(44,000) for the nine months ended June 30, 1996 and 1995, respectively.
The Company recorded approximately $232,000 and $292,000 in interest income
in the three months and nine months ended June 30, 1996, respectively, and had
no interest income in the three and nine months ended June 30, 1995. The
interest income was the result of the cash proceeds from the initial public
offering completed on March 5, 1996.
8
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by (used in) operating activities was $(2,542,000) and
$373,000 in the nine months ended June 30, 1996 and 1995, respectively. In
the nine months ended June 30, 1996, net cash used by operating activities
consisted primarily of the net loss for the period and an increase in
accounts receivable, unbilled revenues and prepaid expenses, partially offset
by an increase in accrued liabilities. The increase in accounts receivable
in the nine months ended June 30, 1996 was due primarily to both the
execution of several contracts at the end of the period as well as an overall
increase in the sales volume of the Company. The increase in accrued
liabilities was due primarily to the accrual of royalties due third parties.
Net cash used in investing activities was $1,322,000 and $674,000 in the
nine months ended June 30, 1996 and 1995, respectively, and consisted
primarily of purchases of computer equipment and furniture related to the
increase in the number of employees of the Company.
Net cash provided by financing activities was $20,738,000 and $180,000
in the nine months ended June 30, 1996 and 1995, respectively. In March
1996, the Company raised $21,722,965, net of offering costs, from its initial
public offering of 1,855,000 shares of Common Stock. The Company has repaid
certain of its short and long-term debt obligations with the proceeds of this
offering, including $508,000 from Silicon Valley Bank through a long term
note secured by the California State Guarantee Loan Program, $450,000 from
Silicon Valley Bank through a credit line and $2,000,000 in notes issued in a
private placement. The Company intends to use the remaining proceeds to fund
the purchase of capital equipment and finance general working capital needs.
As of June 30, 1996 and 1995, the Company had cash, and cash equivalents
in the amounts of $17,023,000 and $22,000, respectively. The company
believes that the proceeds from its recent public offering and its cash flow
from operations will be adequate to fund its presently anticipated working
capital requirements for at least the next 12 months.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act
of 1995: The statements contained in this report which are not historical facts
are forward-looking statements that are subject to risks and uncertainties that
could cause actual results to differ materially from those set forth in or
implied by forward-looking statements, including the Company's dependence on a
single product line, the recent introduction of Diamond Client/Server, which is
based on client/server technology, dependence of the Company's results of
operations on its relationship with SMS, Blue Cross and Blue Shield of Florida,
and other large customers, the variable nature of the Company's operating
results, the length of the Company's sales cycle, the Company's dependence on
key personnel, intense competition, and other risks described in the Company's
Securities and Exchange filings.
9
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits
11.1 Statement re: computation of earnings per share
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter for which
this report is filed.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Health Systems Design Corporation
Date: August 9, 1996 By: /s/ Richard C. Auger
----------------------------
Richard C. Auger, Chairman and
Chief Executive Officer
By: /s/ Richard E. Malone
-----------------------------
Richard E. Malone,
Chief Financial Officer
10
<PAGE>
HEALTH SYSTEMS DESIGN CORPORATION
INDEX TO EXHIBITS
EXHIBIT DESCRIPTION
3.1 Certificate of Incorporation of the Registrant, as amended*
3.2 By-laws of the Registrant*
4.1 Specimen Common Stock Certificate*
10.1 Office building lease, dated February 24, 1994, as amended, for the
Registrant's principal executive offices*
10.2 1994 Equity Incentive Plan*
10.3 1996 Omnibus Equity Incentive Plan*
10.4 Marketing Agreement dated January 31, 1994 between the Registrant and
Shared Medical Systems Corporation*+
10.6 Promissory Note, dated May 31, 1995, issued by the Registrant to SVB*
10.7 Commercial Security Agreement, dated May 31, 1995, between the
Registrant and SVB*
10.8 Commercial Guaranty, dated May 31, 1995, made by J. Matthew Mackowski
for the benefit of SVB*
10.9 Commercial Guaranty, dated May 31, 1995, made by Catherine C. Roth for
the benefit of SVB*
10.10 Commercial Guaranty, dated May 31, 1995, made by Richard C. Auger for
the benefit of SVB*
10.11 Commercial Guaranty, dated May 31, 1995, made by David M. Roth for the
benefit of SVB*
10.12 Business Loan Agreement, effective August 22, 1995, between the
Registrant and SVB*
10.13 Promissory Note, dated August 15, 1995, issued by the Registrant to
SVB*
10.14 Commercial Security Agreement, dated August 15, 1995, between the
Registrant and SVB*
10.15 Loan Modification Agreement, dated January 4, 1996, to SVB Business
Loan Agreement*
10.16 Promissory Note, dated May 6, 1994, issued by the Registrant to Wells
Fargo Bank, National Association*
10.17 Note and Warrant Purchase Agreement dated December 14, 1995 between the
Registrant and the Purchasers listed on Exhibit A
thereto*
10.23 Advisory Agreement dated July 18, 1995 between the Registrant and
Mackowski & Shepler*
10.24 Form of Indemnification Agreement between the Registrant and its
directors and executive officers*
10.25 Registrant's 401(k) Plan, as amended*
10.26 License Agreement, dated March 25, 1996 between the Registrant and Blue
Cross/Blue Shield of Florida*+
11.1 Computation of net loss per share
21.1 List of Subsidiaries*
23.1 Consent of Orrick, Herrington & Sutcliffe (included in Exhibit 5.1)*
23.2 Consent of Arthur Andersen LLP*
24.1 Powers of Attorney*
_____
* Previously filed.
+ Confidential treatment has been granted with respect to portions of
this exhibit..
11
<PAGE>
Exhibit 11.1
HEALTH SYSTEMS DESIGN CORPORATION
COMPUTATION OF NET LOSS PER SHARE
<TABLE>
<CAPTION>
Three months ended June 30, Nine months ended June 30,
--------------------------- --------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net income (loss) $ (399,686) $ (219,727) $(1,446,992) $ (219,973)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Weighted average common shares outstanding 6,421,440 4,437,692 5,284,641 4,433,890
Common shares, options, and warrants granted
(using the treasury stock method assuming an
initial public offering price of $13.00) since
March 16, 1995 included pursuant to Secureities
and Exchange Commission Rules 251,259 324,347 251,259 324,347
----------- ----------- ----------- -----------
Weighted average common and common equivalent
shares outstanding 6,672,699 4,762,039 5,535,900 4,758,237
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Net loss per common and common equivalent share $ (0.06) $ (0.05) $ (0.26) $ (0.05)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 17,023,247
<SECURITIES> 0
<RECEIVABLES> 2,428,465
<ALLOWANCES> 75,000
<INVENTORY> 0
<CURRENT-ASSETS> 21,495,165
<PP&E> 2,536,319
<DEPRECIATION> 610,659
<TOTAL-ASSETS> 23,813,457
<CURRENT-LIABILITIES> 2,961,190
<BONDS> 0
0
0
<COMMON> 6,430
<OTHER-SE> 20,845,837
<TOTAL-LIABILITY-AND-EQUITY> 23,813,457
<SALES> 8,243,986
<TOTAL-REVENUES> 8,243,986
<CGS> 0
<TOTAL-COSTS> 2,516,350
<OTHER-EXPENSES> 7,016,162
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 158,466<F1>
<INCOME-PRETAX> (1,446,992)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,446,992)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,446,992)
<EPS-PRIMARY> (.26)
<EPS-DILUTED> (.26)
<FN>
<F1>NET INTEREST
</FN>
</TABLE>
