<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MARCH 31, 1999
COMMISSION FILE NUMBER 0-22081
--------------------------------------------------
ELECTRONIC PROCESSING, INC.
MISSOURI 48-1056429
(State or Other Jurisdiction of (IRS Employer Identification Number)
Incorporation or Organization)
501 KANSAS AVENUE, KANSAS CITY, KANSAS 66105-1300
(Address of Principal Executive Office)
913-321-6392
(Issuer's Telephone Number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 number of shares outstanding of registrants common stock at April 30, 1999,
was 4,635,068 shares.
Transitional Small Business Disclosure Format (Check one): Yes No X
--- ---
<PAGE>
ELECTRONIC PROCESSING, INC.
FORM 10-QSB
QUARTER ENDED MARCH 31, 1999
CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
Statements of Income -
Three months ended March 31, 1999 and 1998 3
Balance Sheets - December 31, 1998 and March 31, 1999 4
Statements of Cash Flows -
Three months ended March 31, 1999 and 1998 6
Notes to Financial Statements - March 31, 1999 and 1998 7
Item 2. Management's Discussion and Analysis of Financial Condition and 8
Results of Operations
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 3. Defaults Upon Senior Securities 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
</TABLE>
<PAGE>
ELECTRONIC PROCESSING, INC.
STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
OPERATING REVENUES $ 3,429,910 $ 2,535,796
----------- -----------
COST OF GOODS SOLD AND DIRECT COSTS
Processing costs 1,140,139 891,835
Depreciation and amortization 463,460 285,419
----------- -----------
1,603,599 1,177,254
----------- -----------
GROSS PROFIT 1,826,311 1,358,542
----------- -----------
OPERATING EXPENSES
General and administrative 1,250,201 884,036
Depreciation and amortization 35,065 39,736
----------- -----------
1,285,266 923,772
----------- -----------
INCOME FROM OPERATIONS 541,045 434,770
----------- -----------
OTHER INCOME (EXPENSE)
Interest income 135,332 21,105
Interest expense (7,051) (37,653)
Other 71 325
----------- -----------
128,352 (16,223)
----------- -----------
NET INCOME BEFORE INCOME TAXES 669,397 418,547
PROVISION FOR INCOME TAXES
Current 224,886 147,629
Deferred 32,919 20,371
----------- -----------
257,805 168,000
----------- -----------
NET INCOME PER SHARE $ 411,592 $ 250,547
----------- -----------
----------- -----------
Basic $ .09 $ .07
----------- -----------
----------- -----------
Diluted $ .09 $ .07
----------- -----------
----------- -----------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic 4,634,117 3,409,218
----------- -----------
----------- -----------
Diluted 4,784,840 3,592,205
----------- -----------
----------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
ELECTRONIC PROCESSING, INC.
BALANCE SHEETS
DECEMBER 31, 1998 AND MARCH 31, 1999
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
December 31, 1998 March 31, 1999
----------------- --------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 820,256 $ 467,656
Short-term investment 10,700,000 10,400,000
Accounts receivable, trade, less allowance for
doubtful accounts of $5,000 1,586,303 2,375,908
Prepaid expenses and other 294,024 187,828
Deferred income taxes 39,345 39,344
----------- -----------
Total Current Assets 13,439,928 13,470,736
----------- -----------
PROPERTY AND EQUIPMENT, At cost
Furniture and fixtures 526,862 538,920
Computer equipment 7,254,072 7,884,149
Office equipment 329,775 329,775
Leasehold improvements 864,184 864,184
Transportation equipment 14,969 14,969
----------- -----------
8,989,862 9,631,997
Less accumulated depreciation 3,233,510 3,623,943
----------- -----------
5,756,352 6,008,054
----------- -----------
SOFTWARE DEVELOPMENT COSTS, Net of
amortization 2,016,946 2,047,787
----------- -----------
INTANGIBLE ASSETS, Net of amortization
Excess of cost over fair value of net assets acquired 59,473 58,969
----------- -----------
OTHER ASSETS
5,912 9,214
----------- -----------
$21,278,611 $21,594,760
----------- -----------
----------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
December 31, 1998 March 31, 1999
----------------- --------------
<S> <C> <C>
CURRENT LIABILITIES
Current maturities of long-term debt $ 159,151 $ 126,601
Accounts payable 626,577 400,159
Accrued expenses 450,608 459,584
Income taxes payable 12,672 129,360
----------- -----------
Total Current Liabilities 1,249,008 1,115,704
LONG-TERM DEBT 109,300 139,389
----------- -----------
DEFERRED INCOME TAXES 529,485 529,483
STOCKHOLDERS' EQUITY
Common stock, $.01 par value; authorized 10,000,000
shares; issued and outstanding 4,633,268 shares
December 31, 1998 and 4,635,068 shares March 31, 1999 46,333 46,351
Additional paid-in capital 17,660,878 17,668,635
Retained earnings (deficit) 1,683,607 2,095,198
----------- -----------
19,390,818 19,810,184
----------- -----------
$21,278,611 $21,594,760
----------- -----------
----------- -----------
</TABLE>
<PAGE>
ELECTRONIC PROCESSING, INC.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
----- -----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) 411,592 250,547
Items not requiring (providing) cash:
Deferred income taxes 1 20,371
Depreciation 390,571 248,415
Amortization of software development costs 107,451 76,237
Amortization of intangible assets 503 503
Changes in:
Accounts receivable (789,605) (223,182)
Prepaid expenses and other assets 102,894 (29,329)
Accounts payable and accrued expenses (217,442) (143,499)
----------
Income taxes payable 116,688
---------
Net cash provided by operating activities 122,652 200,063
--------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (671,199) (56,280)
Expenditures for software development costs (138,293) (156,706)
Equipment sold from fixed assets 95,852
Proceeds from sale of investments 300,000
--------- ----------
Net cash used in investing activities (413,640) (212,986)
--------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments under capital lease obligation (65,221) (96,234)
Principal payments on long-term debt (4,166) (81,092)
Exercise stock options 7,775 6,773
--------- ----------
Net cash provided by financing activities (61,612) (170,553)
--------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (352,600) (183,476)
CASH AND CASH EQUIVALENTS,
BEGINNING PERIOD 820,256 1,835,233
--------- ----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 467,656 $1,651,757
--------- ----------
--------- ----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
ELECTRONIC PROCESSING, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
AND MARCH 31, 1999 AND 1998
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Electronic Processing, Inc. (the Company) develops, markets, and licenses
proprietary software products and provides support services for Chapter 7 and
Chapter 13 bankruptcy trustees and other users of the federal bankruptcy system.
EPI serves a national client base with specialty products that facilitate the
financial and administrative aspects of bankruptcy management and that are
accompanied by a high level of coordinated support including network
integration, post-installation support and value added services.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
PROPERTY AND EQUIPMENT
Property and equipment are depreciated on a straight-line basis over the
estimated useful life of each asset as follows:
<TABLE>
<S> <C>
Furniture and fixtures 10 years
Computer equipment 5 years
Office equipment 5-10 years
Transportation equipment 3-5 years
</TABLE>
Leasehold improvements are depreciated over the shorter of the lease term
or the estimated useful lives (5-10 years) of the improvements.
SOFTWARE DEVELOPMENT COSTS
Certain internal software development costs incurred in the creation of
computer software products are capitalized once technological feasibility has
been established. Prior to the completion of a detail program design,
development costs are expensed. Capitalized costs are amortized based on current
and future revenue for each product with an annual minimum equal to the
straight-line amortization over the remaining estimated economic life of the
product, not to exceed five years.
INTANGIBLE ASSETS
The excess of cost over fair value of net assets acquired is being
amortized on a straight-line basis over 40 years.
<PAGE>
NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
REVENUE RECOGNITION
For the Company's Chapter 7 bankruptcy software product, monthly fees are
received from a national financial institution after the product is installed
and deposits are transferred based on the level of trustees' deposits with that
institution. Revenues for Chapter 13 processing and noticing are recorded
monthly at the completion of the services based on the trustees' month-end
caseloads. All ancillary fees are recognized as the services are provided.
INCOME TAXES
Deferred tax liabilities and assets are recognized for the tax effects of
differences between the financial statement and tax bases of assets and
liabilities. A valuation allowance is established to reduce deferred tax assets
if it is more likely than not that a deferred tax asset will not be realized.
CASH EQUIVALENTS
The Company considers all liquid investments with original maturities of
three months or less (primarily money market accounts) to be cash equivalents.
INTERIM FINANCIAL STATEMENTS
The balance sheet as of March 31, 1999 and the statements of income,
shareholders' equity and cash flows for the three month periods ended March 31,
1999 and 1998 have been prepared by the Company without audit. In the opinion of
management, all adjustments (which included only normal, recurring adjustments)
necessary for fair presentation have been made. The results for these periods
are not necessarily indicative of the results to be expected for the full year.
NOTE 2: ADDITIONAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Three Months Ended
March 31
December 31, --------------------
1998 1999 1998
----------- ------ ------
(unaudited)
<S> <C> <C> <C>
NONCASH INVESTING AND FINANCING
ACTIVITIES
Capital lease obligation and notes
payable incurred for equipment $ 28,828 $ 66,926 $434,241
ADDITIONAL CASH INFORMATION
Interest paid 97,780 7,051 36,144
Income taxes paid 654,438 219,355 110,000
</TABLE>
<PAGE>
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
OF OPERATIONS
QUARTER ENDED MARCH 31, 1999 COMPARED TO QUARTER ENDED MARCH 31, 1998
Operating revenues increased 35.3%, or $894,114 to $3,429,910 in the
three-month period ended March 31, 1999, compared to $2,535,796 in the
three-month period ended March 31, 1998. Approximately 99.3% of the growth in
operating revenues were attributable to revenues generated by Chapter 7.
Chapter 7 sales increased 74.7%, or $887,660 to $2,076,245 in the
three-month period ended March 31, 1999, compared to $1,188,585 in the
three-month period ended March 31, 1998. The increase in Chapter 7 revenue
was due in part to the growth in new Chapter 7 trustee business for the
Company resulting in higher monthly fees paid to EPI and the release of
version 4.0 of TCMS, the Chapter 7 software product. Chapter 13 revenue
increased 6.6%, or $80,589 to $1,313,385 in the three- month period ended
March 31, 1999 compared to $1,232,796 in the three-month period ended March
31, 1998. The sale of additional hardware to existing Chapter 13 trustee
clients as they converted to CASEPOWER contributed to the increase.
Total cost of goods sold and direct costs increased 36.2%, or $426,345
to $1,603,599 in the three-month period ended March 31, 1999, compared to
$1,177,254 in the three-month period ended March 31, 1998. Total cost of
goods sold and direct costs as a percentage of operating revenues was 46.8%
in the three-month period ended March 31, 1999 compared to 46.4% in the
three-month period ended March 31, 1998. Processing costs increased 27.8%, or
$248,304, to $1,140,139 in the three-month period ended March 31, 1999,
compared to $891,835 in the three-month period ended March 31, 1998. The
increase in 1999 resulted principally from an increase in customer service
expense to support the growth in Chapter 7 sales and the cost of computer
hardware for the trustee clients converting to CASEPOWER. Processing costs as
a percentage of operating revenues decreased to 33.2% in the three-month
period ended March 31, 1999 compared to 35.2% in the three-month period ended
March 31, 1998. Depreciation and amortization increased 62.4%, or $178,041,
to $463,460 in the three-month period ended March 31, 1999, compared to
$285,419 in the three-month period ended March 31, 1998, primarily due to the
purchase of computer equipment for the Company's Chapter 7 product.
Operating expenses increased 39.1%, or $361,494 to $1,285,266 in the
three-month period ended March 31, 1999, compared to $923,772 in the
three-month period ended March 31, 1998. Operating expenses as a percentage
of operating revenues was 37.5% in the three-month period ended March 31,
1999 compared to 36.4% in the three-month period ended March 31, 1998. The
increase in operating expenses was due to increases in general and
administrative infrastructure necessary to support a higher level of
revenues, including additional sales and marketing expenses related to growth
of the Company's Chapter 7 product. Sales and marketing expenses include
sales and marketing salaries, trade show costs, travel associated with
Chapter 7 installations, and advertising costs. Sales and marketing expenses
increased 48.1%, or $137,559 to $423,416 in the three-month period ended
March 31, 1999, compared to $285,857 in the three-month period ended March
31, 1998.
Other income (expense) which includes interest income and interest
expense, was $128,352 in the three-month period ended March 31, 1999 compared
to ($16,223) in the three-month period ended March 31, 1998. This resulted
from a reduction in net interest expense due to interest income from the
investment of the net proceeds from the sale of
<PAGE>
1,140,500 shares of Common Stock in a secondary public offering completed in
June of 1998. Outstanding debt was paid off with a portion of the net
proceeds from the stock offerings resulting in a reduction in interest
expense.
The Company's effective tax rates were 38.5% and 40.1% for the
three-month periods ended March 31, 1999 and March 31, 1998, respectively.
Net income increased 64.3%, or $161,045, to $411,592 in the three-month
period ended March 31, 1999, compared to net income of $250,547 in the
three-month period ended March 31, 1998. Net income as a percentage of
operating revenues increased to 12.0% in the three-month period ended March
31, 1999 from 9.9% in the three-month period ended March 31, 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company had total cash and short-term investments of $10,867,656 at
March 31, 1999 and working capital of $12,355,032. In June of 1998, the
Company sold 1,140,500 shares of Common Stock, which resulted in cash
proceeds of $12,727,980.
The Company generated cash from operations of $122,652, and $200,063 for
the three-months ended March 31,1999, and March 31, 1998, respectively. The
cash flow from operations in the three-months ended March 31, 1999 consisted
primarily of net income before deferred taxes of $411,592, depreciation and
amortization of $498,525, offset by an increase in accounts receivable of
$789,605 and an decrease in accounts payable and accrued expenses of
$217,442. The increase in depreciation and amortization relates primarily to
the purchase of computer equipment for the installations of the Company's
Chapter 7 product. Accounts receivable increased primarily due to increased
revenues.
The cash flow from operations in the three-months ended March 31, 1998
consisted primarily of net income before deferred taxes of $270,918,
depreciation and amortization of $325,155, offset primarily by an increase in
accounts receivable of $223,182, and a decrease in accounts payable and
accrued expenses of $143,499.
The Company invested in property and equipment totaling $738,125 and
$490,521 for the three-month period ended March 31, 1999, and March 31, 1998,
respectively, which related principally to the installation of computer
equipment for the Company's Chapter 7 product.
The Company incurred expenditures for software costs totaling $138,292
and $156,706 for the three-months ended March 31, 1999, and March 31, 1998,
respectively. These expenditures are capitalized and are being amortized on a
straight-line basis over a maximum five-year period. Internal software costs
incurred in the creation of computer software products are capitalized as
soon as technological feasibility has been established. Prior to the
completion of a detailed program design, development costs are expensed.
Capitalized costs are amortized based on current and future revenue for each
product with an annual minimum equal to straight-line amortization over the
remaining estimated economic life of the product, not to exceed five years.
Additionally, the Company anticipates future software development will be at
or above the spending levels of prior years.
The Company believes that the net proceeds from the June 1998 stock
offering, together with funds that may be generated from operations, will be
sufficient to finance the Company's currently anticipated working capital and
property and equipment expenditures for the foreseeable future.
<PAGE>
YEAR 2000
Many currently installed computer systems and software products are
coded to accept only two-digit entries to represent years. For example, the
year "1998" would be represented by "98." These systems and products will
need to be able to accept four digit entries to distinguish 21st century
dates from 20th century dates. Any programs that have time sensitive software
may recognize a date using "00" as the year 1900 rather than the year 2000.
This could result in the computer shutting down or performing incorrect
computations. As a result, in less than one year, computer systems and
software products used by many companies, that do not accept four-digit year
entries, will need to be upgraded or replaced to comply with such "Year 2000"
requirements.
The Company believes that its currently marketed software products are
Year 2000 compliant. In the first quarter of 1998, the Company began shipping
release 3.0 of TCMS, as part of the Company's continual process of enhancing
and upgrading its existing software products. Although release 3.0 of TCMS
was written to be Year 2000 compliant, the impetus for its design was the
Company's desire to further streamline Chapter 7 case administration for
trustees. The Company introduced release 4.0 of TCMS in March, 1999, which
release was also introduced for market and enhancement purposes unrelated to
Year 2000 issues, but was written to be Year 2000 compliant. Similarly, in
1997 the Company began shipping CASEPOWER, a new proprietary
Windows95/NT-based client-server software application for Chapter 13
trustees. Like TCMS, CASEPOWER was written to be Year 2000 compliant. Also
like TCMS, the impetus for CASEPOWER'S design was the Company's commitment to
the development and marketing of new and competitive bankruptcy case
management conventions. The Company estimates that its national upgrade
program for existing Chapter 13 customers, from its older AS/400 legacy
product to CASEPOWER, is 90% completed. All Chapter 13 trustees are scheduled
to be upgraded by June 1999.
The Company is also in the process of discussing with its vendors and
customers the potential impact the Year 2000 issue may have on their systems.
More specifically, the Company has reviewed and assessed the probability of a
material adverse effect from the Year 2000 issue on the Company's exclusive
national marketing arrangement with Bank of America. Bank of America has
reported that it undertook a process of software inventory, analysis,
modification, testing and verification to assess the potential impact of the
Year 2000 issue on its systems. Bank of America expects to substantially
complete the Year 2000 software conversion projects for its systems by the
end of 1999. Bank of America's management believes that its plans for dealing
with the Year 2000 issue will result in timely and adequate modifications of
systems and technology. Over the next 9 months, the plans of other third
parties to address the Year 2000 issue will be monitored and any identified
impact on the Company will be evaluated.
The Year 2000 issue also affects the Company's internal systems,
including information technology (IT) and non-IT systems. The Company has
assessed the readiness of its systems for handling the Year 2000. Management
currently believes that all material systems are either compliant, or will be
upgraded or replaced by the Year 2000. The costs associated with this project
are being expensed as incurred and are not expected to be material to the
Company's financial position or results of operations.
As previously discussed, the Company believes their currently marketed
software products and internal systems are Year 2000 compliant or will be by
the end of 1999. Additionally, they are not aware of any vendors or customers
with Year 2000 problems which could materially impact their operations.
Accordingly, the Company has not specifically evaluated a worst-case
scenario, nor has it developed contingency plan of such scenario.
<PAGE>
FORWARD-LOOKING STATEMENTS
This Form 10-QSB contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended and Section 21E of
the Securities Exchange Act of 1934, as amended, including those relating to
the possible or assumed future results of operations and financial condition
of the Company. Because those statements are subject to a number of
uncertainties and risks, actual results may differ materially from those
expressed or implied by the forward-looking statements. Factors that could
cause actual results to differ from those expressed or implied include, but
are not limited to, any material changes in the total asset proceeds on
deposit by Chapter 7 trustees served by the Company, changes in the number of
bankruptcy filings each year, the Company's reliance on its marketing
arrangement for Chapter 7 revenue, the Company's ability to achieve or
maintain technological advantages, and any material adverse effect of the
Year 2000 issue and other factors described in the Company's filings with the
Securities Exchange Commission under the Securities Act of 1933 and the
Securities Exchange Act of 1934.. The Company undertakes no obligation to
update any forward-looking statements contained herein to reflect future
events or developments.
<PAGE>
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
The following Exhibit is filed by attachment to this Form 10-QSB:
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit Page
- ---------------------------------------------------------------
<S> <C> <C>
27 Financial Data Schedule 13
</TABLE>
(b) REPORTS ON FORM 8-K:
None
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ELECTRONIC PROCESSING, INC.
Date: May 15, 1999 /s/ Tom W. Olofson
-----------------------------------
Tom W. Olofson
Chairman of the Board
Chief Executive Officer
(Principal Executive Officer)
Director
Date: May 15, 1999 /s/ Nanci R. Trutna
-----------------------------------
Nanci R. Trutna
Vice President Finance
And Secretary
(Principal Financial Officer)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ELECTRONIC
PROCESSING, INC. CONSOLIDATED STATEMENT OF INCOME FOR THE QUARTER ENDED MARCH
31, 1999 AND CONSOLIDATED BALANCE SHEET AS AT MARCH 31, 1999 QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 467,656
<SECURITIES> 10,400,000
<RECEIVABLES> 2,380,908
<ALLOWANCES> 5,000
<INVENTORY> 0
<CURRENT-ASSETS> 13,470,736
<PP&E> 9,631,997
<DEPRECIATION> 3,623,943
<TOTAL-ASSETS> 21,594,760
<CURRENT-LIABILITIES> 1,115,704
<BONDS> 0
0
0
<COMMON> 17,668,635
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 21,594,760
<SALES> 3,429,910
<TOTAL-REVENUES> 3,429,910
<CGS> 1,603,599
<TOTAL-COSTS> 1,603,599
<OTHER-EXPENSES> 1,149,863
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,051
<INCOME-PRETAX> 669,397
<INCOME-TAX> 257,805
<INCOME-CONTINUING> 411,592
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 411,592
<EPS-PRIMARY> .09
<EPS-DILUTED> .09
</TABLE>
