FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter period ended September 30, 1998
- OR -
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______ to ________
Commission file number 333-20709
TRANSITION ANALYSIS COMPONENT TECHNOLOGY, INC.
-----------------------------------------------------------------
(Exact Name of small business issuer as specified in its charter)
DELAWARE 13-3391820
- -------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
22681/22687 Old Canal Road, Yorba Linda, CA 92687
-------------------------------------------------
(Address of principal executive offices)
(714) 974-7676
----------------------------------------------------
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the registrant (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 periods 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 of common stock, $.01 par value, outstanding as of November
10, 1998 was 598,734.
1
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<TABLE>
<CAPTION>
INDEX
<S> <C> <C>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets - September 30, 1998 and
June 30, 1998..................................................................3
Condensed consolidated statements of operations - three months ended
September 30, 1998 and 1997....................................................4
Condensed consolidated statements of cash flows - three months ended
September 30, 1998 and 1997....................................................5
Notes to condensed consolidated financial statements - September 30, 1998......6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations..........................................................8
PART II. OTHER INFORMATION
Item 5. Other Information.............................................................13
Item 6. Exhibits and Reports on Form 8-K..............................................14
Signatures....................................................................15
</TABLE>
2
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PART 1. FINANCIAL INFORMATION
TRANSITION ANALYSIS COMPONENTS TECHNOLOGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30 June 30
1998 1998
------------ --------
(000's omitted
except share data)
---------------------
(Unaudited) (Note)
<S> <C> <C>
Assets
Current assets
Cash $ 203 $ 120
Accounts receivable, less allowances of $25 and $20, respectively 829 754
Prepaid expenses and other current assets 42 64
------- -------
Total current assets 1,074 938
Furniture and equipment 676 669
Less accumulated depreciation and amortization 427 407
------- -------
249 262
Other assets
Security deposits 82 82
Software development costs - net 57 60
Excess of cost over fair value of net assets acquired, net 50 52
------- -------
Total assets $ 1,512 $ 1,394
======= =======
Liabilities and stockholders' equity
Current liabilities
Accounts payable and accrued expenses $ 224 $ 411
Accrued compensation expense 373 332
Deferred income 408 301
------- -------
Total current liabilities 1,005 1,044
Long-term obligation, line of credit 845 620
Stockholders' equity (deficiency)
Common stock, par value $.01 per share; authorized 5,000,000 shares; issued
598,734 shares as of September 30, 1998 and
June 30, 1998 6 6
Additional paid-in capital 553 553
Accumulated deficit (897) (829)
------- -------
Total stockholders' equity (deficiency) (338) (270)
------- -------
Total liabilities and stockholders' equity (deficiency) $ 1,512 $ 1,394
======= =======
</TABLE>
Note: The consolidated balance sheet at June 30, 1998 has been derived from the
audited consolidated financial statements at that date.
See notes to condensed consolidated financial statements.
3
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TRANSITION ANALYSIS COMPONENT TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
September 30,
---------------------
1998 1997
------- --------
(000's omitted, except per share data)
<S> <C> <C>
Revenues $ 924 $ 648
Selling, general and administrative expenses 949 600
Depreciation of equipment 20 11
Amortization of software development costs and acquisition
costs 5 1
Interest expense 18 3
------- -------
Income (loss) before income taxes (68) 33
Provision for income taxes -- 7
------- -------
Net income (loss) $ (68) $ 26
======= =======
Net income (loss) per common share - basic and diluted $ (.11) $ 0.05
======= =======
Number of shares used in computation - basic and diluted 598,734 568,798
======= =======
</TABLE>
See notes to condensed consolidated financial statements.
4
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TRANSITION ANALYSIS COMPONENT TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
September 30,
--------------------
1998 1997
--------- -------
(000's omitted)
<S> <C> <C>
Operating activities
Net income (loss) $ (68) $ 26
Adjustments to reconcile net income (loss) to net cash used in operating
activities:
Depreciation and amortization 25 12
Changes in operating assets and liabilities:
Accounts receivable (75) (31)
Prepaid and other current assets 22 (19)
Accounts payable and accrued expenses (146) (48)
Deferred income 107 (17)
Rent security deposits -- (79)
Net cash used in operating activities (135) (156)
------- -------
Investing activities
Costs related to RAC acquisition, net of cash received -- 12
Purchase of equipment (7) (40)
Additions to software development -- (5)
------- -------
Net cash used in investing activities (7) (33)
------- -------
Financing activities
Proceeds from lines of credit 225 350
Net decrease in due to former parent -- (170)
------- -------
Net cash provided by financing activities 225 180
------- -------
Net increase (decrease) in cash and cash equivalents 83 (9)
Cash at beginning of period 120 133
------- -------
Cash at end of period $ 203 $ 124
======= =======
</TABLE>
See notes to condensed consolidated financial statements.
5
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TRANSITION ANALYSIS COMPONENT TECHNOLOGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 1998
Note A - Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three-month period ended September 30,
1998 are not necessarily indicative of the results that may be expected for the
year ending June 30, 1999.
Note B - Organization
Acquisition of Research Analysis Corp.
On September 22, 1997, Transition Analysis Component Technology, Inc. ("TACTech"
or the "Company") acquired the net assets of Research Analysis Corporation
("RAC") pursuant to a merger (the "Merger") of Research Technology Analysis
Corp., a California corporation formed for this purpose and wholly-owned by the
Company with and into RAC. Upon consummation of the Merger, RAC, as the
surviving corporation, became a wholly-owned subsidiary of the Company. The RAC
acquisition was accounted for pursuant to the purchase method of accounting and
is effective as of September 1, 1997.
The following unaudited pro-forma information has been prepared assuming that
this acquisition had taken place at the beginning of the 1998 fiscal year after
giving effect to pro-forma adjustments for compensation accruals and income
taxes:
Three months ended September 30
1997
-------------------------------
Revenue $756,076
Net (loss) income $ (4,851)
Net (loss) income per common share $ (0.01)
6
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TRANSITION ANALYSIS COMPONENT TECHNOLOGY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
Note C - Summary of Significant Accounting Policies
In 1997, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards ("FAS") No. 128, "Earnings per Share." FAS No. 128 replaced
the previously reported primary and fully diluted earnings per share with basic
and diluted earnings per share. Unlike primary earnings per share, basic
earnings per share excludes any dilutive effects of options, warrants, and
convertible securities. Diluted earnings per share is very similar to the
previously reported fully diluted earnings per share. All earnings per share
amounts for all periods have been presented in conformity with FAS No. 128.
As of July 1, 1998 the Company adopted AICPA SOP 97-2 Software Revenue
Recognition, which was effective for transactions that the Company entered into
in fiscal 1999. There was no effect on operating results for September 30, 1998
as a result of adopting SOP 97-2.
7
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PART 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
TRANSITION ANALYSIS COMPONENT TECHNOLOGY, INC.
The following table sets forth for the periods indicated the percentage
relationship to net sales of certain items from the statements of operations:
<TABLE>
<CAPTION>
Percent of Net Sales
Three months ended
September 30,
1998 1997
------- -------
<S> <C> <C>
Revenues 100.0% 100.0%
Selling, general and administrative expenses 102.7 92.6
Depreciation and amortization of equipment and software
development costs 2.7 1.9
Interest expense 1.9 .5
------- -------
Income (loss) before income taxes (7.3) 5.0
Provision for income taxes -- 1.0
------- -------
Net income (loss) (7.3)% 4.0%
======= =======
</TABLE>
Results of Operations - Three Months Ended September 30, 1998 Compared to Three
Months Ended September 30, 1997
The Company reported a loss of $68,000 or $0.11 per share (basic and diluted)
for the quarter ended September 30, 1998, as compared to income of $26,000 or
$.05 per share (basic and diluted) for the quarter ended September 30, 1997.
The Company generates revenue primarily through licensing agreements. TACTech's
license agreements fall into two broad categories: (1) TACTech basic site
service ("Basic Site Service") which encompasses an electronic semi-conductor
library and database and (2) the TACTRAC service which consists of a Basic Site
Service, combined with proprietary software tools for the processing and
handling of all configuration customer bill of materials indenturing and a
workstation application that allows the customer to view solutions, analyses and
reports. The number of subscriber licenses increased by approximately 13% at
September 30, 1998 as compared to September 30, 1997:
Three months ended
September 30,
1998 1997
------- -------
Basic Site Service 87 93
TACTRAC 18 --
------- -------
105 93
======= =======
Revenues for the three months ended September 30, 1998 increased by $276,000, or
43% over the three months ended September 30, 1997. The increase is primarily
attributable to (1) the conversion of customers from the existing TACTech
product to the new TACTRAC product version which incorporated technology
acquired in the September 1, 1997 acquisition of Research Analysis Corporation
("RAC") and (2) the increase in the subscription prices and up-front fees
associated with the TACTRAC product. The increase in revenue was partly offset
by decreases of TACTech product revenue and, to a lesser extent, the phasing out
of consulting fees attributable to the former RAC operation.
8
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PART 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
TRANSITION ANALYSIS COMPONENT TECHNOLOGY, INC.
Results of Operations - Three Months Ended September 30, 1998 Compared to Three
Months Ended September 30, 1997 (continued)
Selling, general and administrative expenses, as a percentage of sales,
increased to 103% for the three months ended September 30, 1998 compared to 93%
for the comparable 1997 period. The total dollar increase of approximately
$350,000 is attributable to the following: 1) salaries and related costs
associated with the RAC acquisition and personnel increases in the area of
programming, both amounting to approximately $175,000; 2) consulting costs
amounting to approximately $62,000 associated with continued development of the
TACTRAC software, 3) selling and advertising costs of approximately $70,000
incurred to promote TACTRAC product sales; and 4) approximately $40,000 in other
expenses related to the expanded new facility location.
A comparative summary of personnel staffing is illustrated in the following
table:
Number of Employees
Three Months Ended September 30,
1998 1997
------- -------
Sales, marketing, training and customer service 9 5
Software development, data base maintenance and
computer maintenance 16 18
Data processing 3 3
General and administrative 9 8
------- -------
37 34
======= =======
Depreciation and amortization increased approximately $13,000 for the three
months ended September 30, 1998 as compared to the 1997 period due to the
acquisition of assets in the RAC merger plus the purchase of approximately
$120,000 of computers and related equipment in the fiscal year ended June 30,
1998.
Interest expense increased approximately $15,000 for the three months ended
September 30, 1998 as a result of increased bank borrowings used to fund
operations and purchase computers and related equipment.
There is no provision for income taxes for the three months ended September 30,
1998 because of current and carryforward net operating losses (approximately
$230,000 which expire in 2013) for which the related deferred tax asset has been
fully reserved. The difference between the effective tax rate and the federal
tax rate of 34% at September 30, 1997 is due to the effect of the graduated
federal tax rate schedule and state taxes.
9
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PART 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (continued)
TRANSITION ANALYSIS COMPONENT TECHNOLOGY, INC.
Liquidity and Capital Resources
For the three months ended September 30, 1997, cash from a line of credit was
used for the acquisition of computers and computer related equipment, to
liquidate all obligations to its former parent company, Zing Technologies, Inc.,
and to pay costs related to the acquisition of RAC. For the three months ended
September 30, 1998, cash from the line of credit was used to fund operations.
Based upon current and anticipated levels of operations, the Company believes
that its cash flow from operations, combined with borrowings available under the
existing line of credit, will be sufficient to meet is current and anticipated
cash operating requirements, including scheduled interest payments, capital
expenditures and working capital needs for the foreseeable future.
Year 2000 Impact - Overview
Nearly every aspect of a modern organization is supported by information
technology. As a result, the unavailability of computer services or errors in
data processing would have a considerable impact on most businesses.
Many computer systems and electronic devices process dates using two digits,
representing only the last two numerals of a year instead of four digits. Dates
processed by these systems are assumed to occur in the 20th century. By January
1, 2000, and sometimes even sooner, unless these systems' deficiencies in this
area are addressed and resolved, these systems could miscalculate dates or fail
completely, which could result in disruption of business operations controlled
by such systems and devices.
The following discussion of the effect of the Year 2000 on the Company's systems
is based on management's best estimates, which were derived using numerous
assumptions of future events, including the continuing availability of basic
utilities and other resources, the availability of trained personnel at
reasonable cost, and the ability of third parties to cure noncompliant software
and hardware. There can be no guarantee that these assumptions will prove
accurate, and accordingly the actual results may materially differ from those
anticipated.
Evaluation Efforts
TACTech is proceeding in its assessment of all of its systems that could be
affected by the Year 2000 problem. This includes software developed specifically
for license or sale, software developed for in-house use, third-party software
and hardware used by TACTech, and telecommunications systems. In addition,
TACTech is gathering Year 2000 compliance information from its significant
vendors and suppliers and plans to gather Year 2000 compliance information from
its customers as well.
Readiness and Compliance Plan
TACTech's Year 2000 compliance efforts fall into four major areas: Information
Technology (including production software, internal software and hardware),
Telecommunications Systems, Compliance by Vendors, and Compliance by Customers.
Information Technology
Production Software - TACTRAC and TACTech Basic Site Services
10
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PART 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (continued)
TRANSITION ANALYSIS COMPONENT TECHNOLOGY, INC.
TACTech markets information services based on two different sets of software,
"TACTRAC" and "TACTech Basic Site Services."
TACTRAC
TACTech has evaluated its TACTRAC software for Year 2000 readiness and concludes
that the TACTRAC software itself is fully Year 2000 compliant.
However, information updates to the TACTRAC software are part of the services
that the TACTRAC customer pays for. These updates are dependent upon software
that runs at TACTech's headquarters in Yorba Linda, California. This software
has been evaluated and has been determined to be only partially Year 2000
compliant. TACTech has determined that an operating system software upgrade and
compiler software upgrade are necessary to bring this software to Year 2000
compliance. These upgrades are proceeding as part of routine system maintenance
an are scheduled to be completed by December 31, 1998.
TACTech Basic Site Services
TACTech has evaluated its Basic Site Services software for Year 2000 readiness
and concludes that this software is only partially Year 2000 complaint. TACTech
has determined that an operating system software upgrade and compiler upgrade
are necessary to bring this software to Year 2000 compliance. These upgrades are
proceeding as part of routine system maintenance and are scheduled to be
completed by December 31, 1998.
Internal IT Systems
TACTech has evaluated all of its internal IT Systems software and has determined
that its systems fall into the following categories:
a) Approximately 20% of its systems are not Year 2000 compliant, and
either have been discarded as unnecessary for continued operation or
are scheduled to be completely replaced by fully Year 2000 compliant
systems before June 1999.
b) Approximately 40% of its systems are not Year 2000 compliant, and
are necessary for continued business operations into the next
century. In each of these cases either an operating system upgrade
or software upgrade is required. Some of these systems have already
been upgraded. Some upgrades are schedule to be completed by
December 31, 1998. All systems are scheduled to be upgraded by June
1999.
c) Approximately 40% of its systems are already fully Year 2000
compliant.
TACTech has evaluated all of its internal IT Systems hardware and has determined
that it falls into the following categories:
a) Approximately 25% of its hardware is fully Year 2000 compliant.
b) Approximately 60% of its hardware is not fully Year 2000 compliant
and
11
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PART 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
TRANSITION ANALYSIS COMPONENT TECHNOLOGY, INC.
will require a minor software or BIOS fix.
c) Approximately 15% of its hardware is not fully Year 2000 compliant,
and will require an upgrade to the BIOS chip. This hardware is of
older vintage, not critical to continued business operation, and
will either be replaced by fully Year 2000 compliant hardware before
December 31, 1999, or upgraded with Year 2000 compliant BIOS before
December 31, 1999.
Telecommunications Systems
TACTech has evaluated its telecommunications systems and has concluded that both
its PBX telephone system and its voice mail system are not Year 2000 compliant.
These two systems are scheduled to be replaced with fully Year 2000 compliant
systems before March 31, 1999.
Vendor Compliance
TACTech is beginning the process of requesting Year 2000 compliance certificates
from its vendors, and has received such certifications from approximately 5% of
its vendors. TACTech anticipates that it will have such certifications from all
of its vendors by June 1999.
Customer Compliance
TACTech intends to begin requesting similar compliance certifications from its
major customers. This process will begin before December 31, 1998, and is
anticipated to be completed by June 1999. TACTech cannot guarantee that is
customers will either be Year 2000 compliance, or will comply with TACTech's
request for certification.
Cost of Year 2000 Compliance
TACTech estimates that the total cost of achieving Year 2000 compliance will be
approximately $20,000. The bulk of these costs are for new versions and upgrades
to software and operating systems, and telephone equipment. Routine personnel
and labor costs which are not specifically incurred for achieving Year 2000
compliance are included in salaries and are not included in this total. In
addition, other software and operating system upgrades are already paid for by
ongoing maintenance contracts and are not included in the above total. To date,
TACTech has spent approximately $1000 for its Year 2000 compliance efforts
beyond the amounts expended for annual system and software maintenance, which
includes but is not limited to, services to achieve Year 2000 compliance.
Contingency Plan
Since TACTech believes that its production software, information technology
systems, hardware and telecommunications systems will be Year 2000 compliant by
December 31, 1999, it has not developed and does not plan to develop a
contingency plan for noncompliant software, information technology systems,
hardware and telecommunications systems.
Management believes that TACTech's ability to assemble and acquire the updated
component data used in its Basic Site Service and by its TACTRAC service is
facilitated by, but is not dependent upon,electronic data processing and
telecommunications systems. If such systems were to fail as a result
12
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PART 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
TRANSITION ANALYSIS COMPONENT TECHNOLOGY, INC.
of the advent of January 1, 2000 without its data suppliers having achieved Year
2000 compliance, TACTech could, and will if necessary, continue to obtain such
data through available printed documentation as it has done in the past and
continued to do presently.
TACTech provides its component compatibility and other information through
routine telephone and Internet connections. If TACTech's current Internet
Service Provider is unable to provide a certificate of compliance prior to
January 1, 2000, TACTech will select another provider from among the hundreds of
other such providers, many of whom are expected to have achieved Year 2000
compliance before such date. If Internet access is unavailable from any source,
at either the Customer's site or at TACTech, direct telephone data transmission
will continue to be available.
13
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PART II. OTHER INFORMATION
TRANSITION ANALYSIS COMPONENT TECHNOLOGY, INC.
ITEM 5. OTHER INFORMATION
When used in this Form 10-QSB, and in future filings by TACTech with the
Securities and Exchange Commission, in TACTech's press releases and in any oral
statements made with the approval of an authorized TACTech executive officer,
the words or phrases "will likely result", "are expected to", "will continue",
"is anticipated", "estimate", "project", or similar expressions are intended to
identify "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such statements are subject to certain
risks and uncertainties, including those discussed below, that could cause
actual results to differ materially from historical earnings or those presently
anticipated or projected. TACTech wishes to caution readers not to place undo
reliance on such "forward-looking statements", which speak only as of the date
made. TACTech wishes to advise readers that factors listed below could affect
TACTech's financial performance and could cause TACTech's actual results for
future periods to differ materially from any opinion or statements expressed
with respect to future periods in any current statements.
TACTech will NOT undertake and specifically declines any obligation to publicly
release the result of any revisions which may be made to any forward-looking
statements to reflect events or circumstances after the date of such statements
or to reflect the occurrence of anticipated or unanticipated events.
Dependence on Key Personnel
The business of TACTech is substantially dependent upon the active participation
and technical expertise of its executive officers. TACTech is dependent upon the
services of Malcolm Baca, its Executive Vice President and Chief Operating
Officer. The Company currently maintains a key-man life insurance policy on such
executive officer in the amount of $1,700,000. The Company's Board of Directors
regularly re-evaluates the need for and the amount of such key-man life
insurance. There can be no assurance, however, that TACTech can obtain
executives of comparable expertise and commitment in the event of death, or that
the business of TACTech would not suffer material adverse effects as the result
of the death (notwithstanding coverage by key-man insurance), disability or
voluntary departure or any such executive officer.
Competition
TACTech's Basic Site Service license agreements are cancelable on thirty (30)
days notice. Approximately 50% of TACTech's information for its data bases comes
from numerous companies in the private sector. Accordingly, there can be no
assurance that existing arrangements with private suppliers of data will
continue in effect or, if they are canceled, that TACTech will be able to enter
into arrangements with other suppliers on terms as beneficial to TACTech as
those presently in effect. Moreover, there can be no assurance that other
companies, including existing customers of TACTech, will not avail themselves of
sources of data to develop their own software and data base services either in
competition with TACTech or to enable them to have their own sources for such
services or obtain such services from others. TACTech's software services and
data bases are protected by trade secret provisions of license agreements and by
copyright laws, but because such provisions and laws are frequently difficult or
costly to enforce, there can be no assurance that such protection will prove
effective.
14
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TRANSITION ANALYSIS COMPONENT TECHNOLOGY, INC.
Technical Changes
In the event of changes in the structure of the computer hardware systems used
by subscribers to operate TACTech's data software, TACTech would incur capital
costs for new equipment and development costs in connection with the
reconfiguring of its software programs, which cost could be substantial and
could have an adverse effect on TACTech's profitability.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The following exhibit is included herein:
No exhibit is included herein.
The Company did not file any report on Form 8-K during the three months
ended September 30, 1998.
15
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TRANSITION ANALYSIS COMPONENT TECHNOLOGY, INC.
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.
Transition Analysis Component Technology, Inc.
----------------------------------------------
(Registrant)
Date: November 10, 1998 /s/ Robert E. Schrader
-------------------------------------
Robert E. Schrader
President and Chief Executive Officer
Date: November 10, 1998 /s/ Martin S. Fawer
-------------------------------------
Martin S. Fawer
Treasurer and Chief Financial Officer
16
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> SEP-30-1998
<CASH> 203
<SECURITIES> 0
<RECEIVABLES> 854
<ALLOWANCES> 25
<INVENTORY> 0
<CURRENT-ASSETS> 1,074
<PP&E> 676
<DEPRECIATION> 427
<TOTAL-ASSETS> 1,512
<CURRENT-LIABILITIES> 1,005
<BONDS> 0
0
0
<COMMON> 6
<OTHER-SE> (344)
<TOTAL-LIABILITY-AND-EQUITY> 1,512
<SALES> 924
<TOTAL-REVENUES> 924
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 974
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18
<INCOME-PRETAX> (68)
<INCOME-TAX> 0
<INCOME-CONTINUING> (68)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (68)
<EPS-PRIMARY> (.11)
<EPS-DILUTED> (.11)
</TABLE>
