<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
<TABLE>
<C> <S>
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the transition period from to
</TABLE>
Commission file number: 000-21319
LIGHTBRIDGE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 04-3065140
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
INCORPORATION OR ORGANIZATION)
</TABLE>
67 SOUTH BEDFORD STREET
BURLINGTON, MASSACHUSETTS 01803
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
(781) 359-4000
(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 / /
As of May 10, 1999, there were 16,141,514 shares of the registrant's common
stock, $.01 par value, outstanding.
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<PAGE>
LIGHTBRIDGE, INC.
QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1999
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
-------------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Balance Sheets as of December 31, 1998 and March 31, 1999.................................... 3
Statements of Operations for the three months ended March 31, 1998
and March 31, 1999......................................................................... 4
Statements of Cash Flows for the three months ended March 31, 1998
and March 31, 1999......................................................................... 5
Notes to Unaudited Condensed Consolidated Financial Statements............................... 6
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS........ 7
Item 3. QUANTITATIVE AND QUALITATIVE MARKET RISK DISCLOSURES......................................... 15
PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K............................................................. 15
SIGNATURE............................................................................................... 16
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
LIGHTBRIDGE, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1998 1999
------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................................ $ 16,436,995 $ 19,817,990
Accounts receivable, net......................................................... 18,831,962 18,584,854
Other current assets............................................................. 1,399,196 2,285,259
------------- -------------
Total current assets........................................................... 36,668,153 40,688,103
Property and equipment, net........................................................ 13,454,070 12,797,571
Acquired intangible assets, net.................................................... 4,024,811 3,653,639
Goodwill, net...................................................................... 2,145,313 2,005,379
Other assets, net.................................................................. 1,484,932 1,126,318
------------- -------------
Total assets............................................................... $ 57,777,279 $ 60,271,010
------------- -------------
------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities......................................... $ 10,036,164 $ 9,777,821
Short-term borrowings and current portion of notes payable....................... 652,770 576,468
Deferred revenues................................................................ 1,460,636 2,781,747
------------- -------------
Total current liabilities...................................................... 12,149,570 13,136,036
Other long-term liabilities...................................................... 525,124 546,847
Notes payable.................................................................... 655,484 539,391
------------- -------------
Total liabilities.............................................................. 13,330,178 14,222,274
------------- -------------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value; 5,000,000 shares authorized; no shares issued or
outstanding at December 31, 1998 and March 31, 1999, respectively.............. -- --
Common stock, $.01 par value; 60,000,000 shares authorized; 16,841,823 and
16,951,751 shares issued and 16,014,531 and 16,124,459 shares outstanding at
December 31, 1998 and March 31, 1999, respectively............................. 168,417 169,516
Additional paid-in capital....................................................... 54,285,766 54,582,093
Warrants......................................................................... 598,875 473,875
Accumulated deficit.............................................................. (8,980,994) (7,551,785)
------------- -------------
Total.......................................................................... 46,072,064 47,673,699
Less: treasury stock, at cost................................................... (1,624,963) (1,624,963)
------------- -------------
Total stockholders' equity..................................................... 44,447,101 46,048,736
------------- -------------
Total liabilities and stockholders' equity................................. $ 57,777,279 $ 60,271,010
------------- -------------
------------- -------------
</TABLE>
See notes to unaudited condensed consolidated financial statements.
3
<PAGE>
LIGHTBRIDGE, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------------
1998 1999
------------- -------------
<S> <C> <C>
Revenues:
Transaction...................................................................... $ 7,859,721 $ 14,080,360
Software licensing and maintenance............................................... 4,110,932 1,850,301
Consulting services.............................................................. 1,332,163 3,412,475
------------- -------------
Total revenues................................................................. 13,302,816 19,343,136
------------- -------------
Cost of revenues:
Transaction...................................................................... 4,997,409 6,617,030
Software licensing and maintenance............................................... 1,360,756 950,548
Consulting services.............................................................. 765,894 1,634,925
------------- -------------
Total cost of revenues......................................................... 7,124,059 9,202,503
------------- -------------
Gross profit....................................................................... 6,178,757 10,140,633
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Operating expenses:
Development...................................................................... 2,292,097 2,496,389
Sales and marketing.............................................................. 1,955,937 2,003,726
General and administrative....................................................... 2,052,559 2,610,084
Amortization of goodwill and acquired workforce.................................. 745,557 348,258
------------- -------------
Total operating expenses....................................................... 7,046,150 7,458,457
------------- -------------
Income (loss) from operations...................................................... (867,393) 2,682,176
Other income (expense):
Interest income.................................................................. 228,967 154,678
Interest expense................................................................. (65,840) (41,721)
Other non-operating income....................................................... 39,022 8,076
------------- -------------
Income (loss) before provision for income taxes.................................... (665,244) 2,803,209
Provision for income taxes......................................................... 56,900 1,374,000
------------- -------------
Net income (loss).................................................................. $ (722,144) $ 1,429,209
------------- -------------
------------- -------------
Basic earnings (loss) per common share............................................. $ (0.05) $ 0.09
------------- -------------
------------- -------------
Diluted earnings (loss) per common share........................................... $ (0.05) $ 0.08
------------- -------------
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</TABLE>
See notes to unaudited condensed consolidated financial statements.
4
<PAGE>
LIGHTBRIDGE, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1998 1999
------------- -------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income (loss)................................................................ $ (722,144) $ 1,429,209
Adjustments to reconcile net income (loss) to net cash provided by operating
activities:
Depreciation and amortization.................................................. 2,947,945 2,149,002
Changes in assets and liabilities:
Accounts receivable and other current assets................................. (1,518,704) (638,955)
Other assets................................................................. (122,699) 227,497
Accounts payable and accrued liabilities..................................... (2,899,019) (252,105)
Deferred revenues............................................................ 481,120 1,321,111
Other liabilities............................................................ 373,859 21,723
------------- -------------
Net cash (used in) provided by operating activities.............................. (1,459,642) 4,257,482
------------- -------------
Cash Flows From Investing Activities:
Principal payment--note receivable from officer................................ -- 5,328
Purchases of property and equipment............................................ (1,256,338) (820,847)
------------- -------------
Net cash used in investing activities............................................ (1,256,338) (815,519)
------------- -------------
Cash Flows From Financing Activities:
Principal payments on notes payable............................................ (326,301) (201,301)
Principal payments under capital lease obligations............................. (103,932) (32,093)
Proceeds from issuance of common stock......................................... 192,547 47,426
Proceeds from exercise of warrants............................................. -- 125,000
------------- -------------
Net cash used in financing activities............................................ (237,686) (60,968)
------------- -------------
Net (decrease) increase in cash and cash equivalents............................... (2,953,666) 3,380,995
Cash and cash equivalents, beginning of period..................................... 15,715,726 16,436,995
------------- -------------
Cash and cash equivalents, end of period........................................... $ 12,762,060 $ 19,817,990
------------- -------------
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</TABLE>
See notes to unaudited condensed consolidated financial statements.
5
<PAGE>
LIGHTBRIDGE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION:
The accompanying unaudited condensed consolidated financial statements
include the accounts of Lightbridge, Inc. and its subsidiaries (the "Company").
The Company believes that the unaudited condensed consolidated financial
statements reflect all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of the Company's financial
position, results of operations and cash flows at the dates and for the periods
indicated. Although certain information and disclosures normally included in the
Company's annual financial statements have been omitted, the Company believes
that the disclosures provided are adequate to make the information presented not
misleading. Results of interim periods may not be indicative of results for the
full year or any future periods. These financial statements should be read in
conjunction with the consolidated financial statements and related notes
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1998.
2. SIGNIFICANT ACCOUNTING POLICIES:
REVENUE RECOGNITION
The Company generates revenues from processing qualification and activation
transactions, licensing software and related maintenance, and rendering services
(including business advisory, customization and integration, deployment, and
optimization services). Historically and to a lesser extent, hardware was sold
in conjunction with certain software licenses. The Company's transaction
processing agreements typically provide for fees, payable based on the number
transactions processed. The Company's software license agreements typically
provide for an initial license fee and annual maintenance, as well as, in
certain cases, additional license and maintenance fees for net subscriber
additions. The Company's consulting agreements typically are on a time and
materials basis.
Revenues from processing of transactions generally are recognized in the
period when services are performed. Revenues from software license sales are
recognized when persuasive evidence of an arrangement exists, delivery of the
product has been made, the fee is fixed and collectibility has been determined.
To the extent that obligations exist for other services, the Company allocates
revenues between the license and the services based upon their relative fair
value. Revenues from maintenance support agreements are deferred and recognized
ratably over the term of the agreements. Revenues from consulting and other
services are recognized as those services are rendered.
EARNINGS PER SHARE
Basic earnings per share is computed by dividing income available to common
stockholders by the weighted-average number of common shares outstanding for the
period. Diluted earnings per share reflects the potential dilution that could
occur if outstanding dilutive options and warrants were exercised and resulted
in the issuance of common stock.
A reconciliation of the denominators of the basic and diluted earnings per
share computations is shown below:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------
1998 1999
------------ ------------
<S> <C> <C>
Shares for basic earnings per share............................... 15,707,303 16,054,778
Effect of dilutive options and warrants........................... -- 1,202,084
------------ ------------
Shares for diluted earnings per share............................. 15,707,303 17,256,862
------------ ------------
------------ ------------
</TABLE>
6
<PAGE>
Stock options and warrants convertible into common stock were excluded from
shares for diluted earnings per share for the three months ended March 31, 1998
because they were anti-dilutive. Had such shares been included, shares for
dilutive earnings per share would have increased by approximately 2,100,000
shares.
No adjustments were made to net income in computing diluted earnings per
share.
RECENT ACCOUNTING PRONOUNCEMENTS
In December 1998, the AICPA released Statement of Position No. 98-9 ("SOP
98-9") "Modification of SOP 97-2 'Software Revenue Recognition' with Respect to
Certain Transactions" which the Company adopted January 1, 1999. SOP 98-9 amends
SOP 97-2 to require that an entity recognize revenue for multiple element
arrangements by means of the "residual method" when (1) there is vendor-specific
objective evidence (VSOE) of the fair values of all the undelivered elements
that are not accounted for by means of long-term contract accounting, (2) VSOE
of fair value does not exist for one or more of the delivered elements, and (3)
all revenue recognition criteria of SOP 97-2 (other than the requirement for
VSOE of the fair value of each delivered element) are satisfied. The provisions
of SOP 98-9 that extend the deferral of certain paragraphs of SOP 97-2 and SOP
98-9 will be effective for transactions that are entered into in fiscal years
beginning after March 15, 1999. Retroactive application is prohibited. The
adoption of SOP 98-9 did not have a material effect on its consolidated
financial position or results of operations of the Company.
RECLASSIFICATIONS
Certain reclassifications have been made to the 1998 financial statements to
conform with the 1999 presentation.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THIS FORM 10-Q CONTAINS "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE SECURITIES
EXCHANGE ACT OF 1934. ANY STATEMENTS CONTAINED HEREIN THAT ARE NOT STATEMENTS OF
HISTORICAL FACT MAY BE DEEMED TO BE FORWARD-LOOKING STATEMENTS. WITHOUT LIMITING
THE FOREGOING, THE WORDS "BELIEVES," "ANTICIPATES," "PLANS," "EXPECTS" AND
SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. THE
FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND
OTHER FACTORS, INCLUDING THE FACTORS SET FORTH UNDER "ITEM 1A. RISK FACTORS" IN
THE ANNUAL REPORT ON FORM 10-K OF LIGHTBRIDGE, INC. FOR THE YEAR ENDED DECEMBER
31, 1998, THAT MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE AND ACHIEVEMENTS OF
LIGHTBRIDGE, INC. TO DIFFER MATERIALLY FROM THOSE INDICATED BY THE
FORWARD-LOOKING STATEMENTS. Information set forth under the heading "ITEM 1A.
Risk Factors" in the Annual Report on Form 10-K of Lightbridge, Inc. for the
year ended December 31, 1998 is incorporated as an exhibit to this Form 10-Q.
Unless the context otherwise requires, "Lightbridge" and the "Company" refer
collectively to Lightbridge and its subsidiaries.
CHANNEL WIZARD, CHURN PROPHET, and FRAUDBUSTER are registered trademarks of
Lightbridge, and ALIAS, @RISK, CUSTOMER ACQUISITION SYSTEM, LIGHTBRIDGE, the
Lightbridge logo, and RETAIL MANAGEMENT SYSTEM, are trademarks of Lightbridge.
All other trademarks or trade names appearing in this Form 10-Q are the property
of their respective owners.
OVERVIEW
Lightbridge develops, markets and supports a network of integrated products
and services that enable telecommunications carriers to improve their customer
acquisition, retention and fraud prevention processes.
7
<PAGE>
Lightbridge's transaction revenues are derived primarily from the processing
of applications for qualification of subscribers for wireless telecommunications
services and the activation of service for those subscribers. Over time, the
Company has expanded its offerings from credit evaluation services to include
screening for subscriber fraud, evaluating carriers' existing accounts,
interfacing with carrier and third-party systems and providing call center
services. These services are provided pursuant to contracts with carriers which
specify the services to be utilized and the markets to be served. The Company's
clients are charged for these services on a per-transaction basis. Pricing
varies depending primarily on the volume of transactions, the type and number of
other products and services selected for integration with the services and the
term of the contract under which services are provided. The volume of processed
transactions varies depending on seasonal and retail trends, the success of the
carriers utilizing the Company's services in attracting subscribers and the
markets served by the Company's clients. Revenues generally are recognized in
the period in which the services are performed.
The Company's software licensing and maintenance revenues consist of
revenues attributable to the licensing of the Company's Channel Solutions,
Customer Management and Fraud Management software. Lightbridge's Channel
Solutions products are designed to assist customers in interfacing with the
Company's transaction processing systems as well as to perform other
point-of-sale and distribution channel functionality. The Company's Customer
Management products are designed to help carriers analyze their marketplace to
improve their business operations. The Company's Fraud Management products are
designed to assist carriers in monitoring subscriber accounts to identify
activity that may indicate fraud. While the Company's software products are
licensed as packaged software products, each of these products generally
requires insignificant customization and integration with other products and
systems to varying degrees. Revenues are recognized when persuasive evidence of
an arrangement exists, delivery of the product has been made, and a fixed fee
and collectibility has been determined. Revenues from software maintenance
contracts are recognized ratably over the term of the maintenance agreement.
Prior to the second quarter of 1998, the Company's consulting services
revenues were derived principally from providing consulting for customer
acquisition and retention. During the second quarter of 1998, the Company
launched Lightbridge Consulting Services, which provides business advisory,
customization and integration, deployment, and optimization services in the
areas of customer acquisition and retention, fraud prevention and distribution
management. Revenues from consulting services are generally recognized as the
services are performed, using the percentage-of-completion method, measured by
labor hours.
During the first quarter of 1999, the Company continued its efforts to
complete development of in-process technology acquired from Coral Systems, Inc.
The Company is continuing to develop a new version of FraudBuster that is
expected to contain substantial enhancements in performance, scalability and
functionality and is currently scheduled to be released in mid-1999. The Company
is also continuing to develop Alias and @Risk, which will be complementary to
FraudBuster and will contain new subscription fraud detection tools. These
products also are scheduled to be available in mid-1999. If the Company is
unsuccessful in completing these projects on schedule, the Company's business,
financial condition, results of operations and cash flows could be materially
adversely affected.
Substantially all of the Company's revenues historically have been derived
from clients located in the United States, and the Company expects that domestic
sales will continue to account for more than 90% of its revenues during 1999.
8
<PAGE>
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,
----------------
1998 1999
------- ------
<S> <C> <C>
Revenues:
Transaction.............................................................. 59.1% 72.8%
Software licensing and maintenance....................................... 30.9 9.6
Consulting services...................................................... 10.0 17.6
------- ------
Total revenues......................................................... 100.0 100.0
------- ------
Cost of revenues:
Transaction.............................................................. 37.6 34.2
Software licensing and maintenance....................................... 10.2 4.9
Consulting services...................................................... 5.8 8.5
------- ------
53.6 47.6
------- ------
Gross profit............................................................... 46.4 52.4
------- ------
Operating expenses:
Development.............................................................. 17.2 12.9
Sales and marketing...................................................... 14.7 10.3
General and administrative............................................... 15.4 13.5
Amortization of goodwill and acquired workforce.......................... 5.6 1.8
------- ------
Total operating expenses............................................... 52.9 38.5
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Income (loss) from operations.............................................. (6.5) 13.9
Other income, net.......................................................... 1.5 0.6
------- ------
Income (loss) before provision for income taxes............................ (5.0) 14.5
Provision for income taxes................................................. .4 7.1
------- ------
Net (loss) income.......................................................... (5.4)% 7.4%
------- ------
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</TABLE>
THREE MONTHS ENDED MARCH 31, 1999 COMPARED WITH THREE MONTHS ENDED MARCH 31,
1998
REVENUES. Revenues increased by 45.4% to $19.3 million in the three months
ended March 31, 1999 from $13.3 million in the three months ended March 31,
1998.
Transaction revenues increased by 79.1% to $14.1 million in the three months
ended March 31, 1999 from $7.8 million in the three months ended March 31, 1998,
while increasing as a percentage of total revenues to 72.8% from 59.1%. The
dollar increase in transaction revenues for the three months ended March 31,
1999 was primarily due to increased volume of qualification and activation
transactions processed for carrier clients. The Company believes that its
transaction-based activities benefited directly from client promotional
activities generally attributable to the current competitve market for wireless
services. The increase in transaction revenues as a percentage of total revenues
for the three month period ended March 31, 1999 principally resulted from an
increase in transaction revenue and a decrease in software licensing revenues
during the period.
The Company believes that its transaction revenues for the remainder of 1999
will not increase at the same rate as they did in 1998. The Company's
transaction revenues will continue to reflect in large part the industry's rate
of growth of new subscribers. The Company believes, based in part on reports of
wireless telecommunication industry analysts, that the rate of subscriber growth
will slow in upcoming years. The rate of growth in the Company's transaction
revenues in 1998 reflected revenues from a number of major PCS carriers that
began operating in late 1997 and in 1998; the Company does not expect that
revenues from these PCS carriers will continue to increase at the same rate as
they did in 1998.
9
<PAGE>
Software licensing and maintenance revenues decreased by 55.0% to $1.9
million in the three months ended March 31, 1999 from $4.1 million in the three
months ended March 31, 1998, while decreasing as a percentage of total revenues
to 9.6% from 30.9%. Both the dollar decrease and the decrease as a percentage of
total revenues in software licensing revenues for the three months ended March
31, 1999 were principally a result of the decrease in revenues attributable to
the Company's Channel Solutions and Fraud Management products and services.
The Company currently anticipates that its software licensing and
maintenance revenues in 1999 will approximate those in 1998, as the Company
continues to integrate its Fraud Management products with its other offerings
and to build its international sales capability. See "Overview" above. Actual
results for 1999 will, however, be subject to a number of uncertainties, some of
which are not within the Company's control. In particular, the Company believes
that software licensing revenues at least through 1999 will be subject to
fluctuation and will be more difficult to anticipate than the Company's other
types of revenues, principally due to the relatively large dollar magnitude and
relatively long sales cycles of the software licenses. The sales cycles for
domestic software licenses generally extend from three to six months and may
extend as long as twelve months; sales cycles for software licenses sold to
international clients often are longer. The predictability of software licensing
revenue is further impeded because the Company's licensed software is a
discretionary purchase for most customers. As a result of the foregoing, a small
number of licensing transactions may have a significant effect on the Company's
software licensing revenues in a quarter.
Consulting services revenues increased by 156.2% to $3.4 million in the
three months ended March 31, 1999 from $1.3 million in the three months ended
March 31, 1998, while increasing as a percentage of total revenues to 17.6% from
10.0%. The dollar increase in consulting services revenues for the three months
ended March 31, 1999 was principally due to increased demand for the consulting
services offered by the Company. The increase in consulting services revenue as
a percentage of total revenues for the three months ended March 31, 1999
principally resulted from an increase in consulting services revenues and a
decrease in software licensing revenues for the same period. The Company is
continuing to standardize its consulting services offerings and to build its
consulting capabilities. Its consulting business continues to become less
concentrated, with consulting work being performed on nearly 60 ongoing projects
for more than 25 clients during the three months ended March 31, 1999.
In the year ended December 31, 1998, three customers accounted for 10% or
more of the Company's total revenues. Lightbridge believes that its
relationships with these customers are good and continues to make efforts to
diversify its customer base.
COST OF REVENUES. Cost of revenues consists primarily of personnel costs,
costs of maintaining systems and networks used in processing qualification and
activation transactions (including depreciation and amortization of systems and
networks) and amortization of capitalized software and acquired technology. Cost
of revenues may vary as a percentage of total revenues in the future as a result
of a number of factors, including changes in the mix of transaction revenues
between revenues from on-line transaction processing and revenues from
processing transactions through the Company's Teleservices Group and changes in
the mix of total revenues among transaction revenues, software licensing
revenues and consulting services revenues.
Transaction cost of revenues increased by 32.4% to $6.6 million in the three
months ended March 31, 1999 from $5.0 million in the three months ended March
31, 1998, while decreasing as a percentage of total revenues to 34.2% from
37.6%. The increase in transaction cost of revenues for the three months ended
March 31, 1999 resulted principally from increases in transaction volume and
costs attributable to expansion of the Company's staff and systems capacity. The
decrease in transaction cost of revenues as a percentage of total revenues for
the three months ended March 31, 1999 principally resulted from an increase in
the number of transactions processed compared to the same period of the prior
year.
10
<PAGE>
Software licensing and maintenance cost of revenues decreased by 30.1% to
$1.0 million in the three months ended March 31, 1999 from $1.4 million in the
three months ended March 31, 1998, while decreasing as a percentage of total
revenues to 4.9% from 10.2%. Both the dollar decrease and the decrease as a
percentage of total revenues in software licensing cost of revenues for the
three months ended March 31, 1999 were primarily due to the decreased cost of
revenues related to the Fraud Management products and a decrease in amortization
expense of acquired technology.
Consulting services cost of revenues increased by 113.5% to $1.6 million in
the three months ended March 31, 1999 from $0.8 million in the three months
ended March 31, 1998, while increasing as a percentage of total revenues to 8.5%
from 5.8%. Both the dollar increase and the increase as a percentage of total
revenues in consulting services cost of revenues were attributable primarily to
the increase in consulting staff due to the expansion of the consulting services
group, including both newly hired personnel and personnel reallocated from other
areas of the Company's operations, including sales and marketing, as part of the
establishment of Lightbridge Consulting Services. The Company expects to
continue hiring consulting staff during the remainder of 1999.
The Company expects fluctuations in gross profit may occur primarily due to
fluctuations in revenue generated from the Company's three revenue components,
particularly revenues from software licensing which have historically generated
higher gross profit margins.
DEVELOPMENT. Development expenses include internal software development
costs and consist primarily of personnel and outside technical services costs
related to developing new products and services, enhancing existing products and
services, and implementing and maintaining new and existing products and
services.
Development expenses increased by 8.9% to $2.5 million in the three months
ended March 31, 1999 from $2.3 million in the three months ended March 31, 1998,
while decreasing as a percentage of total revenues to 12.9% from 17.2%. The
increase in costs for the three months ended March 31, 1999 resulted primarily
from the addition of engineering personnel necessary to support the Company's
product development plans. Included in these development efforts was the
development and deployment of enhanced versions of its Fraud Management software
product, FraudBuster, development of its Customer Acquisition System and its
Fraud Management software products, Alias and @Risk. Many of the engineering
personnel were hired near the end of the three months ended March 31, 1999, and
therefore their salaries had a limited effect on development expenses for the
period. The decrease in development expenses as a percentage of total revenues
for the three months ended March 31, 1999 was principally due to total revenues
increasing at a greater rate than total development expenses during the same
period. The Company expects to continue to increase its engineering and
development efforts in order to continue enhancing its existing products and
services, including its Channel Solutions, Churn and Fraud Management products
and services, as well as to develop new products and services. As a result, the
Company expects that its development expenses, as a percentage of total
revenues, will be higher during the last nine months of 1999 as compared to the
first three months of 1999.
SALES AND MARKETING. Sales and marketing expenses consist primarily of
salaries, commissions and travel expenses of direct sales and marketing
personnel, as well as costs associated with advertising, trade shows and
conferences.
Sales and marketing expenses remained constant at $2.0 million for the three
months ended March 31, 1999 and 1998, while decreasing as a percentage of total
revenues to 10.3% from 14.7%. Sales and marketing dollars remained constant due
to the reallocation of certain personnel to Lightbridge Consulting Services
which offset the hiring of additional sales and marketing personnel. The
decrease as a percentage of total revenues was due to revenues increasing while
sales and marketing expenses remained constant during the period. The Company
expects to continue to invest in sales and marketing efforts, both domestically
and internationally, in order to increase its penetration of existing accounts
and to add new clients and markets.
11
<PAGE>
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
principally of salaries of executive, finance, human resources and
administrative personnel and fees for outside professional services.
General and administrative expenses increased by 27.2% to $2.6 million in
the three months ended March 31, 1999 from $2.1 million in the three months
ended March 31, 1998, while decreasing as a percentage of total revenues to
13.5% from 15.4%. The dollar increase was primarily due to the hiring of new
personnel. The decrease in general and administrative expenses as a percentage
of total revenues for the three months ended March 31, 1999 was principally due
to total revenues increasing at a greater rate than total general and
administrative expenses during the same period. The Company expects that its
general and administrative expenses will not significantly change for the
remainder of 1999.
AMORTIZATION OF GOODWILL AND ACQUIRED WORKFORCE. Amortization of goodwill
and acquired workforce consists of amortization expense of certain acquired
intangible assets from the acquisition of Coral Systems, Inc.
Amortization of goodwill and acquired workforce expense decreased by 53.3%
to $0.3 million in the three months ended March 31, 1999 from $0.7 million in
the three months ended March 31, 1998 and also decreased as a percentage of
total revenues to 1.8% from 5.6%. Both the dollar decrease and the decrease as a
percentage of total revenues was due to a decrease in goodwill amortization
expense during the first three months of 1999 due to the goodwill impairment
charge taken by the Company in the fourth quarter of 1998.
OTHER INCOME, NET. Other income, net in the three months ended March 31,
1999 consisted predominantly of interest income and expense. Interest expense
consists of interest, commitment fees and other similar fees payable with
respect to the Company's bank lines of credit, subordinated notes and capital
leases. Interest income remained the same at $0.2 million in the three months
ended March 31, 1999 and 1998. Interest expense decreased to $0.04 million in
the three months ended March 31, 1999 from $0.1 million in the three months
ended March 31, 1998 as a result of lower debt balances. Interest income for the
three months ended March 31, 1999 reflected a tax-adjusted average rate of
return of approximately 5.1%.
PROVISION FOR (BENEFIT FROM) INCOME TAXES. The Company's effective tax rate
was 49% and 47% for the three months ended March 31, 1999 and 1998,
respectively. The relatively high effective tax rate for both years results in
part from goodwill and acquired intangible assets attributable to the Company's
acquisition of Coral; the amortization of this goodwill and acquired intangible
assets is recognized as an expense for accounting purposes, but is not
deductible for tax purposes. Since the goodwill and acquired intangible assets
attributable to the Coral acquisition will continue to be amortized at various
rates through the quarter ending December 31, 2002 the Company anticipates that
its effective tax rate will continue to be relatively high during that period.
The actual effective tax rate for 1999 may vary significantly from the Company's
estimates as the result of a number of factors, including any and all factors
that cause the Company's actual revenues for those years to vary from the
Company's internal estimates.
LIQUIDITY AND CAPITAL RESOURCES
During the first three months of 1999 the Company generated positive cash
flows from operating activities of $4.3 million and used cash of $0.8 million
and $0.1 million in investing and financing activities, respectively.
The Company's capital expenditures in the three months ended March 31, 1999
and 1998 aggregated $0.8 million and $1.3 million, respectively. The capital
expenditures during these periods consisted of purchases of fixed assets,
principally for the Company's services delivery infrastructure and computer
equipment for development activities. The Company currently estimates that its
capital expenditures for the remainder of 1999 will total approximately $5.2
million to $6.2 million, although the actual amount of
12
<PAGE>
those expenditures may vary significantly, depending upon, among other things,
the extent to which the Company determines to update the capacity of its data
center and to acquire additional computer equipment. The Company leases its
facilities and certain equipment under non-cancelable capital and operating
lease agreements that expire at various dates through December 2002.
The Company has a $4.0 million working capital line of credit and a $3.0
million equipment line of credit with a bank. The working capital line of credit
is secured by a pledge of the Company's accounts receivable, equipment and
intangible assets, and borrowing availability is based on the amount of
qualifying accounts receivable. Advances under the working capital line of
credit and equipment line of credit bear interest at the bank's prime rate
(7.75% at March 31, 1999). The working line of credit also provides for the
issuance of letters of credit, which reduce the amount that may be borrowed
under the line of credit and are limited to $1,250,000 in the aggregate. At
March 31, 1999, there were no borrowings outstanding under the working capital
line of credit or the equipment line of credit. The Company's agreements with
the bank contain covenants that, among other things, prohibit the declaration or
payment of dividends and require the Company to maintain certain financial
ratios which the Company believes are not restrictive to its business
operations. The working capital line of credit expires in June 1999 and the
equipment line of credit expires in June 2001. The Company currently expects to
renew its existing working capital line of credit upon its expiration in June
1999.
As of March 31, 1999, the Company had cash and cash equivalents of $19.8
million and working capital of $27.6 million. The Company believes that the
current cash balances and funds available under existing lines of credit,
together with cash flows provided by operations, will be sufficient to finance
the Company's operations and capital expenditures for at least the next twelve
months.
YEAR 2000 IMPACT ON INFORMATION TECHNOLOGY COSTS
Many companies' currently installed computer systems and software products
are coded to accept only two digit year entries in date coded fields,
potentially with the incorrect assumption of 1900 as the century. To eliminate
date ambiguity, these date coded fields need to accept four digit entries, or
utilize a consistent, predictable technique to distinguish twenty-first century
dates from twentieth century dates. In addition, four digit year dates must be
stored in database or file fields, regardless of the entry of two digit years.
As a result, in less than a year, computer systems and software used by many
companies may need to be upgraded to comply with these "Year 2000" requirements.
Significant uncertainty exists in the software industry concerning the potential
effects associated with such compliance.
Lightbridge has been actively involved in addressing Year 2000 issues since
early 1997. Lightbridge believes that its software products are generally Year
2000 compliant, meaning that the use or occurrence of dates after January 1,
2000 will not materially affect the performance of Lightbridge's software
products with respect to date dependent data, or the ability of such products to
correctly create, store, process and output information related to such date
data. The Company is continuing its testing and modification efforts relating to
its software products. There can be no assurance that Lightbridge's software
products contain all necessary software routines and codes necessary for the
accurate calculation, display, storage and manipulation of data involving dates.
The Company may be required to make significant expenditures in connection with
the on-going design and testing of its software-based services and products and
interfaces to third-party systems for Year 2000 compatibility, and any related
modifications or other development work that may be required to cause those
services and products to be Year 2000 compatible. In addition, in certain
circumstances, Lightbridge has warranted that the use or occurrence of dates on
or after January 1, 2000 will not adversely affect the performance of
Lightbridge's products with respect to date dependent data or the ability to
create, store, process and output information related to such data. If any of
Lightbridge's clients experience Year 2000 problems, such clients could assert
claims for damages against Lightbridge. Lightbridge's agreements with clients in
most cases limit liability to prevent unlimited exposure from such claims.
13
<PAGE>
Lightbridge has completed an inventory and review of the Year 2000
compliance status of the software and systems considered critical to its service
bureau operations and its internal business, and has been obtaining appropriate
assurances of compliance from manufacturers of such software and systems and
agreements to modify or replace all non-compliant products. In addition,
Lightbridge is converting certain of its software and systems to commercial
products that are known to be Year 2000 compliant. Implementation of software
products of third parties, however, will require the dedication of substantial
administrative and management information resources, the assistance of
consulting personnel from third party software vendors and the training of
Lightbridge's personnel using such systems. Based on the information available
to date, Lightbridge believes it has made the necessary modifications to its
service bureau systems. Back office software and systems considered critical to
Lightbridge's business are scheduled to be Year 2000 compliant by the second
quarter of 1999. Nevertheless, particularly to the extent Lightbridge is relying
on the products of other vendors to resolve Year 2000 issues, there can be no
assurance that Lightbridge will not experience delays in completing the
resolution of such issues. If a key system, or a significant number of systems,
were to fail as a result of software products that were not Year 2000 compliant,
Lightbridge could incur substantial costs and experience disruption of its
business, which could have a material adverse effect on Lightbridge's business,
financial condition, results of operations and cash flows.
Lightbridge expects that its Year 2000 procedures with respect to its
software products, service bureau systems, and internal business software and
systems, will be substantially completed by the second quarter of 1999.
Lightbridge has not separately tracked the costs incurred for investigating and
remedying issues related to Year 2000 compliance, and all of the costs have been
internal. Lightbridge currently estimates that it will spend approximately $0.5
million on Year 2000 testing and compliance during 1999, of which it spent
approximately $0.3 million in the first three months of 1999. There can be no
assurance that Company resources spent on investigating and remedying Year 2000
issues will not have a material adverse effect on Lightbridge's business,
financial condition, results of operations and cash flows.
In addition, Year 2000 issues may affect the purchasing patterns of clients
and potential clients. Many companies are expending significant resources to
correct their current software systems for Year 2000 compliance. These
expenditures may adversely affect the amount or timing of funds available to
purchase software products or consulting services such as those offered by
Lightbridge, which could have an adverse effect on Lightbridge's business,
financial condition, results of operations and cash flows.
The foregoing is a Year 2000 readiness disclosure within the meaning of the
Year 2000 Information and Readiness Disclosure Act.
INFLATION
Although certain of the Company's expenses increase with general inflation
in the economy, inflation has not had a material impact on the Company's
financial results to date.
RECENT ACCOUNTING PRONOUNCEMENTS
In December 1998, the AICPA released Statement of Position No. 98-9 ("SOP
98-9") "Modification of SOP 97-2 'Software Revenue Recognition' with Respect to
Certain Transactions" which the Company adopted January 1, 1999. SOP 98-9 amends
SOP 97-2 to require that an entity recognize revenue for multiple element
arrangements by means of the "residual method" when (1) there is vendor-specific
objective evidence (VSOE) of the fair values of all the undelivered elements
that are not accounted for by means of long-term contract accounting, (2) VSOE
of fair value does not exist for one or more of the delivered elements, and (3)
all revenue recognition criteria of SOP 97-2 (other than the requirement for
VSOE of the fair value of each delivered element) are satisfied. The provisions
of SOP 98-9 that extend the deferral of certain paragraphs of SOP 97-2 and SOP
98-9 will be effective for transactions that are
14
<PAGE>
entered into in fiscal years beginning after March 15, 1999. The adoption of SOP
98-9 did not have a material effect on its consolidated financial position or
results of operations of the Company.
ITEM 3. QUANTITATIVE AND QUALITATIVE MARKET RISK DISCLOSURES
The market risk exposure inherent in the Company's financial instruments and
consolidated financial position represents the potential losses arising from
adverse changes in interest rates. The Company is exposed to such interest rate
risk primarily in its significant investment in cash and cash equivalents and
the use of fixed- and variable-rate debt to fund its acquisitions of property
and equipment in past years.
Market risk for cash and cash equivalents and fixed-rate borrowings is
estimated as the potential change in the fair value of the assets or obligations
resulting from a hypothetical ten percent adverse change in interest rates,
which would not have been significant to the Company's financial position or
results of operations during 1999. The effect of a similar hypothetical change
in interest rates on the Company's variable-rate debt also would have been
insignificant due to the immaterial amounts of borrowings outstanding under the
Company's credit arrangements.
For additional information about the Company's financial instruments and
debt obligations, see Notes to Consolidated Financial Statements in the
Company's Annual Report on Form 10-K for the year ended December 31, 1998.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
NO. DESCRIPTION
- --------- -----------------------------------------------------------------------------------------------------------
<C> <S>
10.1 Employment Agreement dated as of May 26, 1998 between the Company and
Joseph S. Tibbetts, Jr.
27.1 Financial Data Schedule for the three months ended March 31, 1999
99.1 Information set forth under the heading "ITEM 1A. Risk Factors" in the Annual Report on Form 10-K of the
Company for the year ended December 31, 1998 is incorporated herein by reference
</TABLE>
(b) Reports on Form 8-K
On February 25, 1999, the Company filed a Current Report on Form 8-K dated
February 24, 1999 providing a copy of a press release with respect to changes in
the accounting used by the Company in connection with its acquisition of Coral
Systems, Inc. in November 1997.
15
<PAGE>
SIGNATURE
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.
LIGHTBRIDGE, INC.
By: /s/ JOSEPH S. TIBBETTS, JR.
-----------------------------------------
Joseph S. Tibbetts, Jr.
Senior Vice President, Finance &
Administration and Chief Financial
Officer (Principal Financial and
Date: May 14, 1999 Accounting Officer)
16
<PAGE>
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
This Employment Agreement is made as of the 26th day of May, 1998 by and
between Lightbridge, Inc., a Delaware corporation (the "Company"), and Joseph S.
Tibbetts, Jr. of Dover, Massachusetts (the "Employee").
WHEREAS, the Company has hired the Employee to serve as the Senior Vice
President, Finance & Administration, Chief Financial Officer and Treasurer of
the Company, commencing on the date hereof; and
WHEREAS, the Company and the Employee desire to establish certain terms and
conditions governing the Employee's employment by the Company;
NOW, THEREFORE, in consideration of the premises and the mutual promises
hereinafter set forth, the Company and the Employee agree as follows:
1. EMPLOYMENT. The Company hereby employs the Employee, and the Employee
accepts employment with the Company. The Employee's title and duties at the
start of this agreement shall be those of Senior Vice President, Finance &
Administration, Chief Financial Officer and Treasurer of the Company. As such,
the Employee shall report directly to the Company's President and Chief
Executive Officer.
2. TERM OF EMPLOYMENT. There shall be no definite term of employment, and
Employee shall be an employee at will. However, if prior to May 26, 1999 (a) the
Company terminates the Employee's employment hereunder without Cause or (b) the
Employee resigns from the Company for Good Reason, the Company shall make
severance payments to Employee equal to one year of Base Salary, payable over
twelve (12) months. If on or after May 26, 1999 (a) the Company terminates the
Employee's employment hereunder without Cause or (b) the Employee resigns from
the Company for Good Reason, the Company shall make severance payments to
Employee equal to six (6) months of Base Salary, payable over six (6) months.
"Cause" shall mean dishonesty or misappropriation of assets of the Company,
gross failure to perform duties to the Company, or the commission of a crime
involving moral turpitude or constituting a felony. "Good Reason" shall mean
termination of employment with the Company by the Employee upon not less than 30
days' prior written notice to the Company (to allow the Company to cure any
basis for Good Reason) as a result of (i) a material diminution in the
Employee's duties (for example, elimination of his responsibility to represent
the Company in its relationship with the public investment community), it being
understood and agreed that a Change of Control in and of itself shall not
constitute "Good Reason" hereunder, (ii) a requirement to relocate from the
greater Boston area, or (iii) a reduction in his Base Salary (other than as part
of a general reduction in Base Salary applicable to the Company's executives).
"Change of Control" shall mean a sale of the Company, including a merger of the
Company with another corporation in which the stockholders of the Company
immediately prior to the merger do not own at least 50% of the voting securities
of the surviving corporation immediately after the merger.
3. COMPENSATION.
(a) During the term of this Agreement, the Company shall pay the Employee a
Base Salary, payable in accordance with the Company's standard schedule for
salary payments to its executives (but no less frequently than monthly) in
arrears, in equal installments at an annual rate equal to $215,000. At the
beginning of each fiscal year, the Board of Directors shall consider in its
discretion increases in the Base Salary.
(b) The Board of Directors shall determine on an annual basis the amount of
any bonus to be paid to the Employee. Bonuses will be paid out over a three-year
period, with a target payout of 50% of the Employee's base salary.
(c) All payments of salary and incentive compensation to the Employee shall
be made after deduction of any taxes which are required to be withheld with
respect thereto under applicable federal and state laws.
<PAGE>
4. OFFICE AND FRINGE BENEFITS. The Employee shall be provided with an
office, secretary and other facilities and services commensurate with his
position as a senior executive of the Company.
5. EXPENSES. The Company shall reimburse the Employee for all reasonable
business expenses incurred by the Employee in connection with his employment by
the Company, including, without limitation, expenses of travel and
entertainment. The Company shall promptly reimburse the Employee for all such
expenses upon presentation of appropriate vouchers, receipts and other
supporting documents as reasonably required by the Company.
6. DUTY TO PERFORM SERVICES. The Employee shall devote his full time
during normal business hours to rendering services to the Company hereunder, and
shall exert all reasonable efforts in the rendering of such services. Nothing in
this Agreement shall prohibit the Employee from:
(a) making and managing passive investments;
(b) serving on the Board of Directors of any company (provided the
Employee notifies the Board of Directors of the Company of any such
service);
(c) participating in professional organizations; and
(d) engaging in religious, charitable or other community or nonprofit
activities, provided none of the foregoing shall interfere with Employee's
duties hereunder.
The Employee agrees that in the rendering of all services to the Company and
in all aspects of his employment as a senior level executive of the Company, he
will comply in all material respects with all directives, policies, standards
and regulations from time to time established by the Board of Directors of the
Company to the extent they are not in conflict with this Agreement.
7. VACATIONS; HOLIDAYS; SICK TIME. The Employee shall be entitled to three
(3) weeks of vacation per year, which shall accrue at the rate of 1.25
days per month. The Employee's vacation, holiday and sick leave benefits
shall be in accordance with the Company's policies for senior executive
officers, as in effect from time to time.
8. OTHER AGREEMENTS. Nothing in this Agreement shall supersede or modify
Employee's obligations under any existing non-competition or
non-disclosure agreement with the Company or the terms of any stock
option agreement between the Employee and the Company.
9. NOTICES. All notices, requests, demands and other communications
required by or permitted under this Agreement shall be in writing and
shall be sufficiently delivered if delivered by hand or sent by
registered or certified mail, postage prepaid, to the parties at their
respective addresses listed below:
(a) if to the Employee:
Joseph S. Tibbetts, Jr.
116 Farm Street
Dover, MA 02030
(b) if to the Company:
Lightbridge, Inc.
67 South Bedford Street
Burlington, MA 01803
Attn: Chief Executive Officer
Any party may change such party's address by such notice to the other party.
10. GOVERNING LAW. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of The Commonwealth of
Massachusetts.
2
<PAGE>
11. BINDING UPON SUCCESSORS. This Agreement shall be binding upon, and shall
inure to the benefit of, the parties hereto and their respective heirs,
legal representatives, successors and assigns.
12. WAIVERS AND AMENDMENTS.
(a) This Agreement may be amended, modified or supplemented, and any
obligation hereunder may be waived, only by a written instrument
executed by the parties hereto. The waiver by any party hereto of a
breach of any provision of this Agreement shall not operate as a
waiver of any subsequent breach.
(b) No failure on the part of any party to exercise, and no delay in
exercising, any right or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right
or remedy by such party preclude any other or further exercise
thereof or the exercise of any other right or remedy. All rights and
remedies hereunder are cumulative and are in addition to all other
rights and remedies provided by law, agreement or otherwise.
IN WITNESS WHEREOF, the Company and the Employee have executed this
Agreement as of the date first above written.
<TABLE>
<S> <C> <C>
LIGHTBRIDGE, INC.
By: /s/ PAMELA D.A. REEVE
-----------------------------------------
Pamela D.A. Reeve
President and CEO
/s/ JOSEPH S. TIBBETTS, JR.
-----------------------------------------
Joseph S. Tibbetts, Jr.
</TABLE>
3
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 19,817,990
<SECURITIES> 0
<RECEIVABLES> 19,328,973
<ALLOWANCES> 744,119
<INVENTORY> 0
<CURRENT-ASSETS> 40,688,103
<PP&E> 24,586,920
<DEPRECIATION> 11,789,349
<TOTAL-ASSETS> 60,271,010
<CURRENT-LIABILITIES> 13,136,036
<BONDS> 0
0
0
<COMMON> 169,516
<OTHER-SE> 45,879,220
<TOTAL-LIABILITY-AND-EQUITY> 60,271,010
<SALES> 19,343,136
<TOTAL-REVENUES> 19,343,136
<CGS> 9,202,503
<TOTAL-COSTS> 9,202,503
<OTHER-EXPENSES> 7,046,150
<LOSS-PROVISION> 250,534
<INTEREST-EXPENSE> 41,721
<INCOME-PRETAX> 2,803,209
<INCOME-TAX> 1,374,000
<INCOME-CONTINUING> 1,429,209
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> 1,429,209
<EPS-PRIMARY> 0.09
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</TABLE>
