<PAGE> 1
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 quarter ended: DECEMBER 31, 1996
Commission File Number 0-21333
RMH TELESERVICES, INC.
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 23-2250564
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
40 MORRIS AVENUE, BRYN MAWR, PA 19010
(Address of principal executive offices)
(610) 520-5300
(Registrant's telephone number, including area code)
Indicate by check whether the registrant (1) has filed all report(s) 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
--------- ---------
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 8,120,000 shares of Common
Stock outstanding at February 6, 1997.
<PAGE> 2
INDEX TO FORM 10-Q
RMH Teleservices, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets,
December 31, 1996 (unaudited) and
September 30, 1996 ................................... 1
Consolidated Statements of Operations for the
three months ended December 31, 1996 (unaudited)
and 1995 (unaudited) ................................. 2
Consolidated Statements of Cash Flows for the
three months ended December 31, 1996 (unaudited)
and 1995 (unaudited) ................................. 3
Notes to Consolidated Financial Statements (unaudited) 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations ........ 8
PART II. OTHER INFORMATION .................................... 12
</TABLE>
<PAGE> 3
RMH TELESERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, September 30,
ASSETS 1996 1996
------ ---- ----
(unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $9,025,000 $10,047,000
Accounts receivable, net of allowance
for doubtful accounts of $17,500 at
December 31, 1996 and $10,000 at
September 30, 1996 5,801,000 5,549,000
Prepaid expenses 293,000 327,000
Deferred income taxes 1,112,000 1,112,000
---------- ----------
Total current assets 16,231,000 17,035,000
---------- ----------
PROPERTY AND EQUIPMENT 8,627,000 8,894,000
Less - accumulated depreciation and
amortization (3,761,000) (3,438,000)
----------- -----------
Net property and equipment 4,866,000 5,456,000
----------- -----------
OTHER ASSETS 63,000 64,000
----------- -----------
$21,160,000 $22,555,000
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND December 31, September 30,
SHAREHOLDERS' EQUITY 1996 1996
-------------------- ---- ----
(unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of capitalized lease
obligations $ 30,000 $ 46,000
Accounts payable 401,000 1,682,000
Accrued expenses 1,542,000 2,409,000
--------- ---------
Total current liabilities 1,973,000 4,137,000
--------- ---------
CAPITALIZED LEASE OBLIGATIONS --- 2,000
--------- ---------
DEFERRED INCOME TAXES 100,000 100,000
--------- ---------
SHAREHOLDERS' EQUITY:
Common Stock 48,638,000 48,638,000
Common Stock warrant outstanding 450,000 450,000
Accumulated deficit (30,001,000) (30,772,000)
------------ ------------
Total shareholders' equity 19,087,000 18,316,000
------------ ------------
$21,160,000 $22,555,000
=========== ===========
</TABLE>
The accompanying notes and the notes in the financial statements included in the
Registrant's Annual Report on Form 10-K are an integral part of these
consolidated financial statements.
1
<PAGE> 4
RMH TELESERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
December 31, December 31,
1996 1995
---- ----
<S> <C> <C>
REVENUES $9,749,000 $7,278,000
---------- ----------
OPERATING EXPENSES:
Cost of services 6,623,000 5,127,000
Selling, general and administrative 2,032,000 1,575,000
--------- ---------
Total operating expenses 8,655,000 6,702,000
--------- ---------
Operating income 1,094,000 576,000
INTEREST INCOME (EXPENSE) 111,000 (75,000)
--------- ---------
Income before income taxes 1,205,000 501,000
INCOME TAXES 434,000 ---
--------- ---------
NET INCOME $ 771,000 $ 501,000
========= =========
NET INCOME PER SHARE $ .09
=========
WEIGHTED AVERAGE SHARES OUTSTANDING 8,262,000
(NOTE 4) =========
PRO FORMA DATA:
INCOME BEFORE INCOME TAXES AS REPORTED $ 501,000
PRO FORMA INCOME TAXES (NOTE 3) 200,000
=========
PRO FORMA NET INCOME $ 301,000
=========
PRO FORMA NET INCOME PER SHARE (NOTE 4) $ .06
=========
WEIGHTED AVERAGE SHARES OUTSTANDING 4,642,000
(NOTE 4) =========
</TABLE>
The accompanying notes and the notes in the financial statements included in the
Registrant's Annual Report on Form 10-K are an integral part of these
consolidated financial statements.
2
<PAGE> 5
RMH TELESERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
For The Three Months Ended
December 31, December 31,
1996 1995
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $771,000 $501,000
Adjustments to reconcile net income to net cash
provided by (used in) operating activities
Depreciation and amortization 323,000 245,000
Changes in operating assets and liabilities -
Accounts receivable (252,000) 555,000
Prepaid expenses 34,000 (28,000)
Other assets 1,000 40,000
Accounts payable and accrued expenses (2,148,000) (1,298,000)
----------- -----------
Net cash provided by (used in)
operating activities (1,271,000) 15,000
----------- ----------
INVESTING ACTIVITIES:
Purchases of property and equipment (226,000) (620,000)
----------- ----------
FINANCING ACTIVITIES:
Proceeds of assets refinanced 493,000 ---
Net repayments on lines of credit --- (225,000)
Repayments on capitalized lease obligations (18,000) (89,000)
Proceeds from long term borrowings --- 1,205,000
Repayment of long term borrowings --- (96,000)
--------- ---------
Net cash provided by financing activities 475,000 795,000
--------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (1,022,000) 190,000
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 10,047,000 322,000
---------- ---------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $9,025,000 $ 512,000
========== =========
</TABLE>
The accompanying notes and the notes in the financial statements included in the
Registrant's Annual Report Form 10-K are an integral part of these consolidated
financial statements.
3
<PAGE> 6
RMH TELESERVICES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
NOTE 1 - BASIS OF PRESENTATION:
The consolidated financial statements have been prepared by the Registrant
pursuant to the rules and regulations of the Securities and Exchange Commission
("SEC") and, in the opinion of management, include all adjustments, consisting
of normal recurring adjustments, necessary to present fairly the financial
position and results of operations. Operating results for the three-month period
ended December 31, 1996 and 1995, are not necessarily indicative of the results
that may be expected for the complete fiscal year. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such SEC rules and regulations. These financial statements
be read in conjunction with the consolidated financial statements and notes
thereto included in the Registrant's Annual Report on Form 10-K for the year
ended September 30, 1996.
RMH Teleservices, Inc. (the Company) provides outbound and inbound teleservices
to major corporations, such as those in the insurance, financial services and
telecommunications industries. The Company was founded in 1983 by two
individuals (the Founders). On May 24, 1996, the Company completed a leveraged
recapitalization (the Recapitalization) pursuant to which a portion of the
Common Stock owned by the Founders was redeemed and two investors (the
Investors) purchased Preferred and Common Stock (see Note 2). These transactions
were accounted for as a sale of newly issued stock by the Company and a
redemption of previously outstanding shares. Accordingly, the historical bases
of the Company's assets and liabilities have been retained.
NOTE 2 - RECAPITALIZATION & INITIAL PUBLIC OFFERING OF COMMON STOCK:
On May 24, 1996, the Company authorized (i) 20,000,000 shares of Common Stock,
no par value, consisting of 10,000,000 shares of Class A Voting Common Stock
(the Class A Common) and 10,000,000 shares of Class B Non-Voting Common Stock
(the Class B Common), and (ii) 10,000,000 shares of Preferred Stock, of which
1,000,000 shares were designated as Series A Preferred Stock (the Series A
Preferred) and 6,500,000 shares were designated as Series B Preferred Stock (the
Series B Preferred). The previously outstanding Common Stock was converted into
10,000,000 shares of Class A Common. All references in the accompanying
financial statements to the number of Common shares have been retroactively
restated to reflect the recapitalization.
4
<PAGE> 7
Common Stock Redemption
On May 24, 1996, the Company redeemed 8,500,000 shares of Class A Common for
$20,136,521, as follows:
<TABLE>
<S> <C>
Cash payment $16,001,646
Final redemption price adjustment (paid in August 1996) 436,980
Issuance of 6%, $3,000,000 subordinated note
payable to Founders (the "Founders' Note") 2,022,639
Issuance of 1,000,000 shares of 6%, Series A Preferred 524,450
Deferred tax liability for difference in basis of
Founders' Note 476,831
Transaction costs 673,975
----------
$20,136,521
===========
</TABLE>
On May 23, 1996, the Company distributed $4,600,000 of accounts receivable to
the Founders as a Subchapter S distribution of previously taxed income. The
Company is collecting these receivables on behalf of the Founders.
The Founders' Note initially had a face amount of $3,000,000 and was
subordinated to all other liabilities. The face amount of the Founders' Note was
increased to $4,000,000 due to the achievement of certain financial goals as
defined in the note. The Founders' Note bore interest at an annual rate of 6%,
payable quarterly, and was due in two equal installments on May 24, 2003 and
2004. Upon the completion of the Company's initial public offering, the
Founders' Note was satisfied through the issuance of 320,000 shares of Common
Stock at the offering price.
The Series A Preferred had 1,000,000 shares outstanding, a face amount of
$1,000,000 and, upon completion of the Company's initial public offering, the
Series A Preferred was converted into 80,000 shares of Common Stock at the
offering price.
Sale of Preferred and Common Stock
On May 24, 1996, the Company issued Preferred and Common Stock for $9,500,000 to
the Investors, as follows:
<TABLE>
<S> <C>
Series B Preferred Stock $ 3,783,059
Class A Voting Common Stock 3,278,666
Class B Non-Voting Common Stock 2,438,275
-----------
$ 9,500,000
===========
</TABLE>
5
<PAGE> 8
The Company issued 6,500,000 shares of Series B Preferred for an aggregate of
$6,500,000 or $1.00 per share. Upon completion of the Company's initial public
offering, the Series B Preferred was redeemed for $6,500,000 plus accrued
dividends of $182,356.
The Company issued 1,720,427 shares of Class A Common and 1,279,573 shares of
Class B Common for an aggregate of $3,000,000 or $1.00 per share. The Common
Stock was valued at $1.91 per share based on the relative estimated fair values
of the Series B Preferred and Class A and B Common Stock issued to the
Investors. The Class B Common shares were converted into an equal number of
Class A Common shares upon the completion of the initial public offering and the
division of Common Stock between two classes was eliminated.
Initial Public Offering of Common Stock
On September 18, 1996, the Company completed an initial public offering of 3.22
million shares of Common Stock, raising net proceeds of approximately $36.3
million.
NOTE 3 - INCOME TAXES:
Prior to May 24, 1996, the Company was an S Corporation for Federal and
Pennsylvania income tax purposes and, accordingly, income was passed through to
the shareholders and taxed at the individual level. The Company was not an S
Corporation in New Jersey, and therefore, the Company paid income taxes on its
taxable income in that state. The S Corporation status was terminated on May 24,
1996. The pro forma data in the consolidated Statements of Operations provides
information as if the Company had been treated as a C Corporation for income tax
purposes for the quarter ended December 31, 1995, based on the tax laws in
effect during the period presented. For the three months ended December 31,
1996, the Company had been fully subject to federal and state income taxes.
NOTE 4 - EARNINGS PER SHARE:
The earnings per share is based upon the weighted average number of common
shares and common share equivalents, if applicable, during each of the periods
presented. Pro forma earnings per share for the quarter ended December 31, 1995,
assumes the recapitalization and respective number of shares were outstanding
throughout the quarter.
NOTE 5 - MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK:
The Company is dependent on several large customers for a significant portion of
its revenues. Four customers accounted for 87.9% and 91.0% of revenues for the
quarters ended December 31, 1996 and 1995, respectively. The loss of one or more
of these customers could have a materially adverse effect on the Company's
business. During the quarter ended December 31, 1996 and 1995, revenues from
customers within the insurance industry accounted for 81.7% and 67.9% of
revenues, respectively.
6
<PAGE> 9
As a result of the issuance of the Common Stock to one of the Investors (see
Note 2), the Company is now affiliated with one of its customers. This customer
represented 6.5% and 23.0% of revenues for the quarters ended December 31, 1996
and 1995, respectively.
Concentration of credit risk is limited to accounts receivable and is subject to
the financial conditions of the Company's customers. Three of the Company's
largest customers are engaged in transactions with each other and represent a
single credit risk to the Company. The Company does not require collateral or
other securities to support customer receivables. At December 31, 1996, the
accounts receivable from the customers that represent a single credit risk were
$4,676,098.
7
<PAGE> 10
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Safe Harbor for Forward-Looking Statements
From time-to-time, the Company may publish statements which are not historical
facts but are forward-looking statements relating to such matters as anticipated
financial performance, business prospects, technological developments, new
products, research and development activities and similar matters. The Private
Securities Litigation Reform Act of 1995 provided a safe harbor for
forward-looking statements. In order to comply with the terms of the safe
harbor, the Company notes that a variety of factors could cause the Company's
actual results and experience to differ materially from the anticipated results
or other expectations expressed in the Company's forward-looking statements. The
risks and uncertainties that may affect the operations, performance, development
and results of the Company's business include, but are not limited to: (i)
reliance on principal client relationships in the insurance and financial
services industries; (ii) fluctuations in quarterly results of operations due to
the timing of clients' telemarketing campaigns, the timing of opening new call
centers and expansion of existing call centers and changes in competitive
conditions affecting the telemarketing industry; (iii) difficulties of managing
growth profitably; (iv) pressure on gross margins as a result of large volume
opportunities that may warrant appropriate pricing discounts (v) dependence on
the services of the Company's executive officers and other key operations and
technical personnel; (vi) changes in the availability of qualified employees
(vii) performance of automated call-processing systems and other technological
factors; (viii) reliance on independent long-distance companies; (ix) changes in
government regulations affecting the teleservices and telecommunications
industries; (x) competition from other outside providers of teleservices and
in-house telemarketing operations of existing and potential clients; and (xi)
competition from providers of other marketing formats, such as direct mail and
emerging strategies such as interactive shopping and marketing over the
Internet.
Overview
The Company is a leading provider of outbound and inbound teleservices to major
corporations, such as those in the insurance, financial services and
telecommunications industries. Founded in 1983, the Company opened its first
call center in 1985 to support the marketing efforts of its consulting
customers. At the present time, outbound business-to-consumer teleservices has
become the predominant business of the Company.
RMH's results of operations in any single interim period should not be viewed as
an indication of future results of operations. The Company may experience
quarterly variations in net revenue and operating income as a result of the
timing of clients' telemarketing campaigns, the commencement and expiration of
contracts, the amount of new business generated by the Company, the timing of
additional selling, general and administrative expenses to acquire and support
such new business and changes in the Company's revenue mix among its various
customers.
8
<PAGE> 11
Three Months Ended December 31, 1996 Compared to Three Months Ended December 31,
1995
Revenues - Revenues increased to $9,749,000 for the quarter ended December 31,
1996 from $7,278,000 for the quarter ended December 31, 1995, an increase of
$2,471,000 or 33.9%. Of such increase in revenues, approximately $2,037,000 was
attributable to increased calling volumes from existing clients and $434,000 to
new clients. To meet the demands of increased call volumes, the Company added a
new 80-workstation call center in Harrisburg, PA during the quarter ended
December 31, 1996 and plans on opening an additional three call centers by July
1, 1997.
Cost of Services - Cost of Services increased to $6,623,000 for the quarter
ended December 31, 1996 from $5,127,000 for the quarter ended December 31, 1995.
As a percentage of revenues, cost of services decreased to 67.9% for the quarter
ended December 31, 1996 as compared to 70.4% for the quarter ended December 31,
1995. This decrease was the result of spreading fixed costs over a larger
revenue base coupled with greater utilization of the call centers on a quarter
to quarter comparative basis. The Company anticipates the cost of services, as a
percentage of revenue, may be impacted during the remainder of the year to the
degree that large volume opportunities warrant appropriate pricing discounts.
Selling, General and Administrative - Selling, general and administrative
expenses increased to $2,032,000 for the quarter ended December 31, 1996 from
$1,575,000 for the quarter ended December 31, 1995. As a percentage of revenues,
selling, general and administrative expenses decreased to 20.8% for the quarter
ended December 31, 1996 from 21.6% for the quarter ended December 31, 1995. The
dollar increase was primarily the result of increased staffing and expanding
operating costs required to support the growth in the Company's revenues.
Interest Income (Expense) - Interest income for the quarter ended December 31,
1996 amounted to $111,000 and was earned by investing the remaining proceeds of
the Company's initial public offering in short term cash equivalents. Interest
expense for the quarter ended December 31, 1995 was $75,000 resulting primarily
from the interest charged on borrowings incurred to finance both equipment
purchases and working capital needs.
Income Tax Expense - Income tax expense for the quarter ended December 31, 1996
was $434,000 and represents income taxes based upon an effective tax rate of
36%. This tax rate is reflective of both the Federal tax rate in effect and
those State tax rates in effect where the Company does business coupled with
certain tax planning strategies implemented in fiscal 1996. Prior to May 24,
1996, the Company was an S Corporation for Federal and Pennsylvania income tax
purposes and, accordingly, income was passed through to the shareholders and
taxed at the individual level. The S Corporation status was terminated on May
24, 1996. The pro forma data in the consolidated Statements of Operations
provides information as if the Company had been treated as a C Corporation for
income tax purposes for the quarter ended December 31, 1995, based on the tax
laws in effect during the period presented.
9
<PAGE> 12
Liquidity and Capital Resources
Historically, the Company's primary sources of liquidity have been cash flow
from operations and borrowings under its credit facilities. These funds,
combined with borrowings under capitalized lease obligations, have provided the
liquidity to finance the growth of the Company.
On May 24, 1996, the Company completed the Recapitalization, which included the
purchase of a significant equity interest in the Company by Advanta Partners.
See Note 2 to the Registrant's Consolidated Financial Statements for the quarter
ended December 31, 1996.
In conjunction with the Recapitalization, the Company distributed to the
Founders $4.6 million of accounts receivable. As part of the Recapitalization,
the Company also distributed $16.4 million in cash, $1.0 million in Series A
Preferred Stock, and a Founders' Note in the initial principal amount of $3.0
million, (which was subsequently increased by $1.0 million) all for the
redemption of an aggregate of 8,500,000 shares of Common Stock owned by the
Founders. In addition, Advanta Partners and Glengar invested $9.5 million in
Series B Preferred Stock and Class A and Class B Common Stock.
On September 24, 1996, the Company completed an initial public offering and
raised net proceeds of approximately $36.3 million. The Company used
approximately $27.9 million of these proceeds to repay all bank indebtedness,
redeem its Series B Preferred Stock and pay certain one-time Special Bonuses to
the Founders. The remaining $9.5 million in proceeds will be used for working
capital and general corporate purposes. Upon completion of the Company's initial
public offering, the Founders exchanged the Series A Preferred Stock and the
Founders' Note for 400,000 shares of Common Stock.
In conjunction with the Recapitalization, the Company entered into a Credit
Facility with Chemical Bank, which provides for a $14.0 million Term Loan and a
$6.0 million Revolver. The Term Loan and Revolver are secured by all of the
assets of the Company. In addition, the loan agreement contains financial
covenants and certain restrictions on the Company's ability to pay dividends on
the Common Stock, incur debt and make capital expenditures and acquisitions.
Borrowings on the Revolver are limited to 85% of eligible accounts receivable.
The Term Loan and Revolver bear interest at the bank's base rate plus 1.5% or
LIBOR plus 3.0%. The Revolver expires on May 24, 2001. As of September 30, 1996,
the Company had retired the full $14.0 million amount of the Term Loan and since
that date had no draws outstanding on the Revolver.
Net cash used in operating activities was $1,271,000 during the quarter ended
December 31, 1996, compared to cash used provided by operations of $15,000
during the quarter ended December 31, 1995. The cash used in operations
reflected the Company's net income reduced by a decrease in accounts payable and
accrued expenses which was primarily due to the Company satisfying its accrued
expenses relating to its initial public offering and other year-end payroll
expenses.
10
<PAGE> 13
The Company's teleservices operations will continue to require significant
capital expenditures. Capital expenditures, during the quarter ended December
31, 1996 and 1995 were $226,000 and $620,000, respectively. The Company expects
to allocate approximately $5.0 million on capital expenditures during the
remainder of the fiscal year ending September 30, 1997, primarily for the
addition of three call centers, which will be designed to meet the technological
needs of both inbound and outbound teleservices, capacity expansion and other
enhancements of technology used throughout its call center operations. Should
the Company further expedite its call center expansion plans, it anticipates
that each additional center would cost approximately $1.2 million.
During the quarter ended December 31, 1996, the Company chose to finance
approximately $859,000 of additional capital expenditures through an operating
lease agreement. At the end of the term and at the Company's option, the Company
may acquire the equipment at the current fair market value. In the future, the
Company will continue to evaluate the benefits and costs of leasing such
equipment and may decide to finance future capital expenditures under similar
types of leases, if such leases can be obtained under favorable terms.
The Company believes that funds generated from operations, together with the
remaining proceeds of its initial public offering, available credit under the
Revolver and future leasing agreements, will be sufficient to finance its
current operations and planned capital expenditures at least through the end of
September 30, 1997.
11
<PAGE> 14
PART II
OTHER INFORMATION
Item 1: Legal Proceedings
None.
Item 2: Changes in Securities
None.
Item 3: Defaults upon Senior Securities
None.
Item 4: Submission of Matters to a Vote of Security Holders
None.
Item 5: Other Information
None.
Item 6: Exhibits and Reports on Form 8-K
a. Exhibits
27 - Financial Data Schedule
b. Reports on From 8-K
None.
12
<PAGE> 15
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.
RMH Teleservices, Inc.
DATE: February 6, 1997 BY:/s/ RAYMOND J. HANSELL
--------------------------------------
Raymond J. Hansell
Chief Executive Officer
DATE: February 6, 1997 BY:/s/ RICHARD C. ALTUS
--------------------------------------
Richard C. Altus
Chief Financial Officer
(Principal Financial and Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 9,025,000
<SECURITIES> 0
<RECEIVABLES> 5,818,500
<ALLOWANCES> 17,500
<INVENTORY> 0
<CURRENT-ASSETS> 16,231,000
<PP&E> 8,627,000
<DEPRECIATION> 3,761,000
<TOTAL-ASSETS> 21,160,000
<CURRENT-LIABILITIES> 1,973,000
<BONDS> 0
0
0
<COMMON> 48,638,000
<OTHER-SE> (30,001,000)
<TOTAL-LIABILITY-AND-EQUITY> 21,160,000
<SALES> 0
<TOTAL-REVENUES> (9,749,000)
<CGS> 0
<TOTAL-COSTS> 8,655,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,205,000)
<INCOME-TAX> (434,000)
<INCOME-CONTINUING> (771,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (771,000)
<EPS-PRIMARY> (.09)
<EPS-DILUTED> (.09)
</TABLE>
