<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 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: 0-22945
-------
THE A CONSULTING TEAM, INC.
---------------------------
(Exact name of Registrant as specified in its charter)
New York 13-3169913
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
200 Park Avenue South
New York, New York 10003
------------------------
(Address of principal executive offices)
(212) 979-8228
--------------
(Registrant's telephone number)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 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
----- -----
As of May 14, 1998 there were 5,485,000 shares
of Common Stock, with $.01 par value per share, outstanding.
Transitional Small Business Disclosure Format (check one):
Yes No X
----- -----
<PAGE>
THE A CONSULTING TEAM, INC.
INDEX
-----
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C>
Index 2
Part I. Financial Information
Item 1. Financial Statements 3-7
Balance Sheets 3
Statements of Operations 4
Statements of Cash Flows 5
Notes to Condensed Financial Statements 6-7
Item 2. Management's Discussion and Analysis or Plan of Operations 8-12
Part II. Other Information
Item 1. Legal Proceedings 13
Item 2. Recent Sales of Unregistered Securities;
Use of Proceeds from Registered Securities 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
Exhibit 27 Financial Data Schedule 15
</TABLE>
2
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
THE A CONSULTING TEAM, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
--------------- ----------------
(unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 15,830,563 $ 16,945,010
Accounts receivable 8,219,079 7,237,905
Prepaid expenses and other current assets 154,477 83,320
--------------- ----------------
Total current assets 24,204,119 24,266,235
Property and equipment, at cost, less accumulated
depreciation and amortization 1,518,975 1,124,396
Deposits 76,692 76,692
=============== ================
Total assets $ 25,799,786 $ 25,467,323
=============== ================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 14,248 $ 13,967
Accounts payable and accrued expenses 2,149,502 2,139,551
Income tax payable 227,592 527,376
Deferred income taxes 417,000 358,000
--------------- ----------------
Total current liabilities 2,808,342 3,038,894
Long-term debt 26,423 30,092
Commitments
Shareholders' equity:
Preferred stock, $.01 par value; 2,000,000 shares
authorized; no shares issued or outstanding - -
Common stock, $.01 par value; 10,000,000 shares authorized;
5,485,000 issued and outstanding 54,850 54,850
Additional paid-in capital 21,051,758 21,051,758
Retained earnings 1,858,413 1,291,729
--------------- ----------------
Total shareholders' equity 22,965,021 22,398,337
--------------- ----------------
Total liabilities and shareholders' equity $ 25,799,786 $ 25,467,323
=============== ================
See accompanying notes to financial statements.
3
<PAGE>
THE A CONSULTING TEAM, INC.
STATEMENTS OF OPERATIONS
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------------
1998 1997
-------------- -------------
(unaudited) (unaudited)
<S> <C> <C>
Revenues:
Consulting services $9,089,143 $7,058,238
Software licensing 1,270,417 298,259
Training services 88,561 71,042
-------------- -------------
Total revenues 10,448,121 7,427,539
Cost of revenues 6,833,795 5,105,987
-------------- -------------
Gross profit 3,614,326 2,321,552
Operating expenses:
Selling, general & administrative 2,798,273 1,600,588
Equity in net (income) loss from joint venture,
including loss on disposal of $1,584 for 1997 - (13,253)
-------------- -------------
Total operating expenses 2,798,273 1,587,335
-------------- -------------
Income from operations 816,053 734,217
Interest income 171,489 170
Interest expense (858) (49,838)
-------------- -------------
Income before income taxes 986,684 684,549
Income taxes 420,000 49,000
============== =============
Net income $ 566,684 $635,549
============== =============
Basic earnings per share $ 0.10
==============
Dilutive earnings per share $ 0.10
==============
Unaudited pro forma information:
Historical income from operations $734,217
Pro forma adjustment for executive compensation (12,500)
-------------
Pro forma income from operations 721,717
Interest (expense) income, net (49,668)
-------------
Pro forma income before income taxes 672,049
Pro forma provision for income taxes 299,000
-------------
Pro forma net income $373,049
=============
Pro forma net income per share basic and dilutive $0.10
=============
Weighted average number of common
shares outstanding 3,729,211
=============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
THE A CONSULTING TEAM, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended March 31,
1998 1997
---------------- ---------------
(unaudited) (unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 566,684 $ 635,549
Adjustments to reconcile net income
to net cash used in operating activites:
Depreciation and amortization 82,105 26,852
Deferred income taxes 59,000 -
Equity in net income from joint venture - (13,253)
Changes in operating assets and liabilities:
Accounts receivable (981,174) (1,726,573)
Prepaid expenses and other (71,157) (108,152)
Accounts payable and accrued expenses 9,951 419,218
Income taxes payable (299,784) 14,191
---------------- ---------------
Net cash used in operating activities (634,375) (752,168)
Cash flows from investing activities:
Purchase of property and equipment (476,684) (99,755)
Repayment from joint venture - 29,705
---------------- ---------------
Net cash used in investing activities (476,684) (70,050)
Cash flows from financing activities:
Bank Overdraft - 568,064
Repayment of loan to shareholder - (65,000)
Repayment of long-term debt (3,388) (3,131)
Deferred offering costs - (25,000)
---------------- ---------------
Net cash (used in) provided by financing activities (3,388) 474,933
---------------- ---------------
Net decrease in cash and cash equivalents (1,114,447) (347,285)
Cash and cash equivalents at beginning of period 16,945,010 347,285
---------------- ---------------
Cash and cash equivalents at end of period $ 15,830,563 $ -
================ ===============
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 858 $ 49,838
================ ===============
Income taxes $ 660,784 $ 35,207
================ ===============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
THE A CONSULTING TEAM, INC.
Notes to Financial Statements
(Unaudited)
1) GENERAL:
These financial statements should be read in conjunction with the Company's
The A Consulting Team, Inc.'s (the "Company") Form 10-KSB for the year ended
December 31, 1997 filed with the SEC, and the accompanying financial
statements and related notes thereto. All outstanding share amounts included
in the accompanying financial statements have been adjusted to reflect a
355,000-for-1 stock split on August 4, 1997. The accounting policies used in
preparing these financial statements are the same as those described in the
Company's Form 10-KSB for the year ended December 31, 1997 filed with the SEC.
2) INTERIM FINANCIAL STATEMENTS:
In the opinion of management, the accompanying unaudited condensed financial
statements contain all the adjustments (consisting only of normal recurring
accruals) necessary to present fairly the financial position as of March 31,
1998 and the results of operations and cash flows for the three months ended
March 31, 1998 and 1997.
The balance sheet at December 31, 1997 has been derived from the audited
financial statements at that date, but does not include all the information
and footnotes required by generally accepted accounting principles for
complete financial statements. For further information, refer to the audited
financial statements and footnotes thereto included in the Form 10-KSB filed
by the Company for the year ended December 31, 1997.
The results of operations for the three months ended March 31, 1998 are not
necessarily indicative of the results to be expected for any other interim
period or for the full year.
3) INCOME PER SHARE:
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings per Share" ("SFAS 128"), which was required to be adopted
on December 31, 1997. Under the new requirements for calculating primary
(basic) earnings per share, the dilutive effect of stock options will be
excluded. Options to purchase 421,250 share of common stock at $12 per share
were outstanding during 1998 but were not included in the computation of
diluted earnings per share because the options' exercise price was greater
than the average market price of the common shares and, therefore, the effect
would be antidilutive.
6
<PAGE>
The following table sets forth the computation of basic and diluted earnings
per share for the three months ended March 31, 1998:
March 31, 1998
-----------------
Numerator:
Net income.....................................$ 566,684
-----------------
Numerator for basic and diluted earnings per
share - income available to common
shareholders...............................$ 566,684
=================
Dennominator:
Denominator for basic earnings per
share - weighted-average shares........... 5,485,000
Effect of dilutive securities:
Employee stock options..................... 5,525
-----------------
Denominator for diluted earnings per
share - adjusted weighted-average share.... 5,490,525
=================
Basic earnings per share........................$ 0.10
=================
Diluted earnings per share......................$ 0.10
=================
4) INCOME TAXES:
The Company's income taxes on actual pretax income for three months
ended March 31, 1998 were calculated on a "C corporation" basis. The Company's
income taxes on actual pretax for the three months ended March 31,1997 were
calculated on an "S corporation" basis. The Company was an "S Corporation"
between January 1, 1995 and August 12, 1997, the day before the Company
completed the Offering. During this period, the Company was not subject to
federal income taxes at the corporate level.
5) CONCENTRATION OF CREDIT RISK:
Sales to three customers represent approximately 41% and 40% of the Company's
revenue for the three months ended March 31, 1998 and 1997, respectively.
7
<PAGE>
Item 2.
THE A CONSULTING TEAM, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATIONS FOR THE THREE MONTHS
ENDED MARCH 31, 1998 AND 1997
The following discussion and analysis of significant factors
affecting the Company's operating results and liquidity and capital resources
should be read in conjunction with the Company's Form 10-KSB for the year
ended December 31, 1997, the accompanying financial statements and related
notes.
Overview
TACT provides enterprise-wide IT consulting, software and training
services and solutions primarily to Fortune 1000 companies in a wide range of
industries. The Company generates over 87% of its revenues from IT consulting
services. Moreover, over 95% of the Company's consulting services revenues
were generated from the hourly billing of its consultants' services to its
clients under time and materials engagements, with the remainder generated
under fixed-price engagements.
The Company establishes standard billing guidelines for consulting
services based on the type of service offered. Actual billing rates are
established on a project by project basis and may vary from the standard
guidelines. The Company typically bills its clients for time and materials
services on a semi-monthly basis. Arrangements for fixed-price engagements are
made on a case-by-case basis. Consulting services revenues generated under
time and materials engagements are recognized as those services are provided,
whereas consulting services revenues generated under fixed-price engagements
are recognized according to the percentage of completion method.
The Company's most significant operating cost is its personnel cost,
which is included in cost of revenues. As a result, the Company's financial
performance is primarily based upon billing margin (billable hourly rate less
the consultant's hourly cost) and consultant utilization rates (number of days
worked by a consultant during a semi-monthly billing cycle divided by the
number of billing days in that cycle). During the periods presented, the
Company has been able to increase its billing margins by increasing its hourly
billing rates and through higher margin service offerings in new technologies
such as client/server and internet/intranet. These increases, however, were
partially offset by increases in consultants' and employees' salaries and
wages. Because most of the Company's engagements are on a time and materials
basis, the Company generally has been able to pass on to its clients most
increases in cost of services. Accordingly, such increases have historically
not had a significant impact on the Company's financial results. Further, most
of the Company's engagements allow for periodic price adjustments to address,
among other things, increases in consultant costs. TACT also actively manages
its personnel utilization rates by constantly monitoring project requirements
and timetables. As projects are completed, consultants are re-deployed either
to new projects at the current client site or to new projects at another
client site, or are encouraged to participate in TACT's training programs in
order to expand their technical skill sets.
The Company also generates revenues by selling software licenses and
providing training services. In addition to initial software license fees, the
Company derives revenues from the annual renewal of software licenses.
Revenues from the sale of software licenses are recognized upon delivery of
the software to a customer, and training service revenues are recognized as
the services are provided.
8
<PAGE>
The Company's revenue growth has been driven by three primary
factors: increasing the number of technical consultants, managing the business
to attain higher average billing rates through the delivery of higher
value-added services to the Company's clients, and carefully managing
consultant utilization rates. Additionally, the Company has expanded its
Technical Practices into areas such as Windows NT and Internet/Intranet, which
has enabled it to cross-sell higher-margin services. The Company also has been
successful in expanding existing client relationships as well as establishing
new client relationships. Such relationships are established and maintained
through the Company's local Solution Branch offices located in New York, New
Jersey and Connecticut.
The Company opened its Solution Branch in Connecticut in December
1997. The Company plans to open additional Solution Branches in one or two
other select major U.S. markets in 1998. Considering its limited experience
with opening Solution Branches, the Company cannot predict when new Solution
Branches will contribute to the Company's net income. Until such time, the
Company will have incurred the costs associated with opening each new Solution
Branch, including the costs of office equipment, salaries and occupancy.
The Company was an "S Corporation" between January 1, 1995 and August
12, 1997, the day before the Company completed its initial public offering
(the "Offering"). During this period, the Company was not subject to federal
income taxes at the corporate level.
Results of Operations
The following tables set forth the percentage of revenues of certain
items included in the Company's Statements of Operations:
Three Months Ended
March 31,
--------------------------
1998 1997
---- ----
Consulting services............................ 87.0 % 95.0 %
Software licensing............................. 12.2 4.0
Training services.............................. 0.8 1.0
------------ ------------
Total revenues............................ 100.0 100.0
Cost of revenues............................... 65.4 68.7
------------ ------------
Gross profit.............................. 34.6 31.3
Selling, general and administrative expense... 26.8 21.5
Income from operations......................... 7.8 9.9
Net income..................................... 5.4 8.6
===
Pro forma income from operations............... 9.7
Pro forma net income........................... 5.0
===
Comparison of the Three Months Ended March 31, 1998 to the Three Months Ended
March 31, 1997
9
<PAGE>
Revenues. Revenues of the Company increased by $3 million, or 41%,
from $7.4 million for the three months ended March 31, 1997 ("1997") to $10.4
million for the three months ended March 31, 1998 ("1998"). Revenues from
consulting services increased by $2 million, or 29%, from $7.1 million in 1997
to $9.1 million in 1998. The increase in 1998 Period revenues from consulting
services was primarily the result of an increased number of consultants and,
to a lesser extent, higher hourly billing rates offset by a reduction in the
consultant utilization rate. The number of consultants engaged by the Company
increased 22% from March 31, 1997 to March 31, 1998. The Company obtained
significant full life cycle projects involving networking and system
management, client/server development, quality assurance and testing, and
internet/intranet from existing clients which resulted in higher billings.
Software licensing revenues increased by $1 million, or 326%, from
$0.3 million in 1997 to $1.3 million in 1998. This increase was primarily due
to an increase in Year 2000 product sales.
Revenues from training services represented less than 1% of the
Company's total revenues in for the three months ended March 31, 1998 and 1997
respectively.
Gross Profit. The resulting gross profit increased by $1.3 million,
or 56%, from $2.3 million in 1997 to $3.6 million in 1998. As a percentage of
total revenues, gross profit increased from 31% of total revenues for the
three months ended March 31, 1997 to 35% for the same period in 1998. This
increase directly relates to the change in revenue mix, with higher software
sales during the quarter.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $1.2 million, or 75%, from $1.6 million
for the three months ended March 31, 1997 to $2.8 million for the same period
in 1998. Expressed as a percentage of sales, selling, general and
administrative expenses increased, representing 27% of total three months
ended March 31, 1998 revenues as compared to 22% of total revenues for the
same period in 1997. The increase in selling, general and administrative
expenses for the three months ended March 31, 1998 was primarily the result of
increases in the number of technical practice personnel hired and not fully
utilized, the addition of sales, recruiting and administration staff, the
establishment of the Stamford, Connecticut Solutions Branch office and
increased health care costs and depreciation expense.
Actual and Pro Forma Net Income. Actual net income decreased slightly
by approximately $69,000 from $636,000 for the three months end March 31, 1997
to $567,000 thousand for the same period in 1998. Pro forma net income was
$373,000 for the three months ended March 31, 1997 as compared to $567,000 for
the same period in 1998. Pro forma net income includes an adjustment for
executive compensation to reflect the terms of new contracts with the Chief
Executive Officer and Chief Financial Officer. In addition, it also includes
an adjustment to provide for income taxes as if the Company had been a C
corporation.
Liquidity and Capital Resources
The Company's operations and geographic expansion are funded from
cash flow generated from operations, borrowings under the Company's credit
line, borrowing from the principal shareholder and from balances generated
from the Offering. The Company currently has no outstanding borrowings.
The Company's cash balances were $16,945,000 at December 31,1997, and
$15,831,000 at March 31, 1998. Net cash used in operating activities was
approximately $634,000 and $752,000 for the three months ended March 31, 1998
and 1997, respectively. In accordance with investment guidelines approved by
the Company's Board of Directors, cash balances in excess of those required to
fund operations have been invested in short-term commercial paper with a
credit rating no lower than A1, P1.
The Company currently has a line of credit of $2,100,000 and no
outstanding borrowings. The line of credit is guaranteed by the Company's
principal shareholder. The line of credit bears interest at a variable rate
based on prime plus 1% (8.5% at March 31, 1998).
10
<PAGE>
The Company's accounts receivable at March 31, 1998 and December 31,
1997 were $8,219,000 and $7,238,000, respectively, representing 69 and 67 days
of sales outstanding ("DSO"), respectively. The Company does not anticipate
any difficulty in collecting amounts due, since this increase in DSO resulted
from increased sales toward the end of the reporting period and business with
a client that has been granted longer payment terms.
For the three months ended March 31, 1998, the Company had revenues
from three customers which represented 41% of revenues. For the same period in
1997, the Company had revenues from one customer which represented 26% of
revenues. Besides these customers, no other customer represented greater than
10% of the Company's revenues.
Net cash used in financing activities was approximately $3,400 for
the three months ended March 31, 1998, representing the repayment of long-term
debt. Net cash provided by financing activities for the three months ended
March 31, 1997 was approximately $475,000, primarily representing proceeds
from bank overdrafts, offset by repayment of a loan from the majority
shareholder and deferred offering costs.
Net cash used in investing activities was approximately $477,000 for
the three months ended March 31, 1998, representing the purchase of fixed
assets. Net cash used in investing activities for the three months ended March
31, 1997 was approximately $70,000 representing the purchase of fixed assets
offset by repayment of an advance to a joint venture.
In management's opinion, cash flows from operations and borrowing
capacity combined with proceeds from the Offering will provide adequate
flexibility for funding the Company's working capital obligations and
expansion plans.
New Accounting Pronouncements
In June 1997, the FASB issued Statement No. 131, "Disclosures
about Segments of an Enterprise and Related Information" ("SFAS No. 131"),
which the Company is required to adopt for its year ended December 31, 1998.
SFAS No. 131 establishes standards for the way that public business
enterprises report information about operation segments in annual financial
statements and requires that those enterprises report selected information
about operating segments in interim financial reports issued to shareholders.
It also establishes standards for related disclosures about product and
services, geographic areas, and major customers. The adoption of SFAS No. 131
had no impact on the Company's consolidated results of operations, financial
position or cash flow.
Impact of Year 2000
Management has initiated a program to prepare the Company's computer
systems to accurately process transactions relating to the year 2000 and
beyond. The Company utilizes third party vendor network equipment,
telecommunication products, and other third party software products. The
failure of any critical components in these products to operate properly in
the year 2000 may have an adverse impact on business operations and require
the Company to incur unanticipated expenses.
The Company has an overall plan and a systematic process in place to
make its internal financial and administrative systems year 2000 ready within
the next twelve to eighteen months. Modification or replacement of portions of
the Company's software may be required so that the computer systems will
function properly with respect to date values for the year 2000 and
thereafter. The Company presently believes that with modifications to existing
software and conversions to new software, year 2000 issues will not pose
significant operational problems for its computer systems. During the
execution of the compliance process the Company will incur certain costs and
expenses. Though the Company has not established a final cost estimate, the
expense of the year 2000 compliance process is not expected to have a material
effect on the Company's financial position or results of operations. The
Company expects that its internal year 2000 compliance process will be
completed on a timely basis. If such modifications are not made, however, or
are not completed in a timely manner, the year 2000 issues could have a
material impact on the
11
<PAGE>
operations and financial condition of the Company.
Finally, the Company licenses software developed by third parties to
end user clients. The third party developers have designed and tested the
majority of their recent product offerings to be year 2000 compliant. However,
there is currently a small minority of the Company's end user clients
utilizing product offerings that have not been updated to meet the year 2000
compliance specifications. The Company is making efforts to address this issue
and expects that the third party developers will continue to update older
products and test all new product offerings for year 2000 compliance. The
Company is requiring its third party software developers to represent that the
products provided are or will be year 2000 compliant. There can be no
assurance, however, that all of the Company's products under license and in
use by clients will be year 2000 compliant prior to and following January 1,
2000. No assurances can be given that the Company can completely avoid all
costs and uncertainties arising from non-compliance that might materially
affect future financial results.
Forward Looking Statements
Statements included in this Management's Discussion and Analysis
and elsewhere in this document that do not relate to present or historical
conditions are "forward-looking statements" within the meaning of that term in
Section 27A of the Securities Act of 1933, as amended, and in Section 21F of
the Securities Exchange Act of 1934, as amended. Additional oral or written
forward-looking statements may be made by the Company from time to time, and
such statements may be included in documents that are filed with the
Securities and Exchange Commission ("SEC"). Such forward-looking statements
involve risk and uncertainties that could cause results or outcomes to differ
materially from those expressed in such forward-looking statements.
Forward-looking statements may include, without limitation, statements made
pursuant to the safe harbor provision of the Private Securities Litigation
Reform Act of 1995. Words such as "believes," "forecasts," "intends,"
"possible," "expects," "estimates," "anticipates," or "plans" and similar
expressions are intended to identify forward-looking statements. The Company
cautions readers that results predicted by forward-looking statements,
including, without limitation, those relating to the Company's future business
prospects, revenues, working capital, liquidity, capital needs, interest
costs, and income are subject to certain risks and uncertainties that could
cause actual results to differ materially from those indicated in the
forward-looking statements, due to the following factors, among other risks
and factors identified from time to time in the Company's filings with the
SEC. Among the important factors on which such statements are based are
assumptions concerning the anticipated growth of the information technology
industry, the continued needs of current and prospective customers for the
Company's services, the availability of qualified professional staff, and
price and wage inflation.
12
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings
Item 2. Recent Sales of Unregistered Securities;
Use of Proceeds from Registered Sales
For the three months ended March 31, 1998, the amount of net offering
proceeds used for any purpose for which at least 5% of the issuer's
total offering proceeds has been used was:
Working Capital and General Business Purposes $900,000
Such payments referred to above were not direct or indirect payments
to officers, directors, general partners of the issuer or their
associates, affiliates of the issuer or any person owning 10% or more
of any class of equity securities of the issuer, nor were such
payments referred to above were direct or indirect payments to
others, except as indicated.
Item 6. Exhibits and Reports on Form 8-K
Exhibits
27 Financial Data Schedule: Information Provided Pursuant to
Article 5 of Regulation S-X
No reports on Form 8-K were filed during the quarter for which this report is
filed.
13
<PAGE>
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.
THE A CONSULTING TEAM, INC.
May 14, 1998 By: /s/ Shmuel BenTov
- ---------------- --------------------------------------
Date Shmuel BenTov, President
and Chief Executive Officer
May 14, 1998 By: /s/ Frank T. Thoelen
- ---------------- --------------------------------------
Date Frank T. Thoelen, Secretary-Treasurer
and Chief Financial Officer
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 15,830,563
<SECURITIES> 0
<RECEIVABLES> 8,219,079
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 24,204,119
<PP&E> 2,052,674
<DEPRECIATION> 533,699
<TOTAL-ASSETS> 25,799,786
<CURRENT-LIABILITIES> 2,808,342
<BONDS> 0
0
0
<COMMON> 54,850
<OTHER-SE> 22,910,171
<TOTAL-LIABILITY-AND-EQUITY> 25,799,786
<SALES> 10,448,121
<TOTAL-REVENUES> 10,448,121
<CGS> 6,833,795
<TOTAL-COSTS> 9,632,926
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 858
<INCOME-PRETAX> 986,684
<INCOME-TAX> 420,000
<INCOME-CONTINUING> 566,684
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 566,684
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
