UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10 - QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended November 30, 1998
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE
EXCHANGE ACT
For the transition period from __________ to __________
Commission File Number 0-22969
SYNAPTX WORLDWIDE, INC.
(Exact Name of Small Business Issuer as specified in its charter)
Utah 87-0375342
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
615 Crescent Executive Court, Suite 128, Lake Mary, FL 32746
(Address of Principal Executive Offices)
(407)333-2488
(Issuer's telephone number)
Check whether the issuer (1) 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
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
Outstanding as of
Class December 31, 1998
Common Stock, $ .001 par value 6,664,342
Transitional Small Business Disclosure Format (check one): Yes No X
--- ----
<PAGE>
TABLE OF CONTENTS
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements 3
Condensed Consolidated Balance Sheets - November 30,
1998 and August 31, 1998 4
Condensed Consolidated Statements of Operations -
three months ended November 30, 1998 and 1997 5
Condensed Consolidated Statements of Cash Flows -
three months ended November 30, 1998 and 1997 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis
and Results of Operations 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities and Use of Proceeds 13
SIGNATURES 13
2
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS
The following unaudited Condensed Consolidated Financial Statements for the
three month periods ended November 30, 1998 and 1997 have been prepared by the
Company.
3
<PAGE>
SYNAPTX WORLDWIDE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF NOVEMBER 30, 1998 AND AUGUST 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C>
NOVEMBER 30, 1998 AUGUST 31, 1998
(UNAUDITED) (AUDITED)
----------------- ---------------
ASSETS
Current assets:
Cash $ 72,118 $ 126,532
Accounts receivable (net of allowance
for doubtful accounts of $37,736
and $37,736) 1,423,095 918,785
Prepaid expenses and deposits 37,520 44,861
----------- -----------
Total current assets 1,532,733 1,090,178
Property and equipment 469,974 462,725
Less accumulated depreciation (190,541) (162,045)
----------- -----------
Net property and equipment 279,433 300,680
Costs in excess of net assets acquired
(net of accumulated amortization of
$1,896,911 and $1,878,834) 850,804 868,881
Other assets 69,836 96,839
----------- -----------
Total assets $ 2,732,806 $ 2,356,578
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 567,128 $ 490,726
Accrued expenses and taxes 679,599 438,737
Notes payable 269,741 303,417
Current portion of long-term debt 147,609 175,521
Deferred revenue 85,842 150,427
----------- -----------
Total current liabilities 1,749,919 1,558,828
Long-term debt, net of current portion 320,901 331,502
Commitments
Stockholders' equity
Cumulative, convertible preferred stock;
$.001 par value; 10,000,000 shares authorized,
137,143 issued and outstanding 137 137
Common stock; $.001 par value; 25,000,000 shares
authorized, 6,599,292 and 6,378,503 issued
and outstanding 6,599 6,379
Additional paid in capital 4,548,869 4,284,534
Deficit (3,893,619) (3,824,802)
----------- -----------
Total stockholders' equity 661,986 466,248
----------- -----------
Total liabilities and stockholders' equity $ 2,732,806 $ 2,356,578
=========== ============
</TABLE>
4
<PAGE>
SYNAPTX WORLDWIDE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED NOVEMBER 30, 1998 AND 1997
<TABLE>
<CAPTION>
<S> <C> <C>
1998 1997
(Unaudited) (Unaudited)
----------- -----------
Net sales and revenues:
Marketing services and production $ 378,844 $ 1,072,834
Database services 818,871 149,599
Commission income 852,710 265,090
Executive placement fees - 15,330
----------- -----------
Total revenues 2,050,425 1,502,853
Cost of sales and revenues 1,531,876 1,028,206
----------- -----------
Gross profit 518,549 474,647
Selling, general and administrative expenses 528,708 406,040
Depreciation and amortization 46,572 64,091
----------- -----------
(Loss) income from operations (56,731) 4,516
Interest expense 12,086 10,056
----------- -----------
Net loss (68,817) (5,540)
Cumulative convertible preferred stock
dividend requirements 10,200 -
----------- -----------
Net loss applicable to common shareholders $ (79,017) $ (5,540)
=========== ===========
Weighted average shares outstanding 6,446,476 5,201,160
=========== ===========
Basic and diluted net loss per share $ (0.01) $ (0.00)
=========== ===========
</TABLE>
5
<PAGE>
SYNAPTX WORLDWIDE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED NOVEMBER 30, 1998 AND 1997
<TABLE>
<CAPTION>
<S> <C> <C>
1998 1997
(Unaudited) (Unaudited)
----------- -----------
Net cash (used in) provided by operating activities (244,533) 61,695
Cash flows from investing activities
Additions to property, plant and equipment (7,248) (22,359)
Reductions in (additions to) other assets 5,003 (22,266)
---------- ----------
Net cash used in investing activities (2,245) (44,625)
Cash flows from financing activities
Reductions in bank lines of credit (33,676) (33,780)
Reductions in long-term debt (10,601) (1,186)
Reductions in short-term debt (27,912) -
Issuance of common stock-net 264,553 28,433
---------- ----------
Cash provided by (used in) financing activities 192,364 (6,533)
---------- ----------
Net (decrease) increase in cash (54,414) 10,537
Cash at beginning of period $ 126,532 $ 58,265
---------- ----------
Cash at end of period $ 72,118 $ 68,802
========== ==========
</TABLE>
6
<PAGE>
SYNAPTX WORLDWIDE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
NOTE 1. Basis of Presentation
The financial information included herein is unaudited; however, such
information reflects all adjustments (consisting solely of normal recurring
adjustments) which, in the opinion of management, are necessary for a fair
statement of results for the interim periods. The accompanying financial
statements include estimated amounts and disclosures based on management's
assumptions about future events. Actual results may differ from those estimates.
The results of operations for the interim periods are not necessarily indicative
of the results to be expected for the full year. Basic and diluted earnings per
share are the same due to the anti-dilutive nature of the options.
The condensed consolidated financial statements have been prepared by the
Company, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. 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 rules and
regulations, although the Company believes that the disclosures are adequate to
make information presented not misleading.
These financial statements should be read in conjunction with the financial
statements included in the Company's Form 10-KSB for the fiscal year ended
August 31, 1998, as filed with the Securities and Exchange Commission and
available under the EDGAR reporting system or from the Company.
The Company's financial statements are presented on a going concern basis, which
contemplates the realization of assets and satisfaction of liabilities in the
normal course of business. The Company's ability to continue as a going concern
is contingent upon its ability to secure additional financing, raise additional
equity investment, and attain profitable operations. Although the Company
is pursuing additional private equity investment as well as the refinancing
and expansion of outstanding debt, there can be no assurance that the Company
will be able to secure financing when needed or obtain such terms satisfactory
to the Company. In addition, the Company's ability to continue as a going
concern must be considered in light of the problems, expenses and complications
frequently encountered by entrance into established markets and the competitive
environment in which the Company operates. The financial statements do not
include any adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and classification
of liabilities that may result from the possible inability of the Company to
continue as a going concern.
During fiscal year 1998, the Company changed its strategy from one of acquiring
and growing mainly distribution companies to one of acquiring customer
management driven companies that enable network and network equipment providers
to identify, acquire, and maintain customers. This shift is a result of what
Management feels is greater opportunity and a greater chance of achieving
profitable operations on a long-term basis.
NOTE 2. Principles of Consolidation
The condensed consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. The subsidiaries consist of Synaptx
Access, Inc. ("Access"), acquired in June, 1996, Synaptx Impulse, Inc.
("Impulse"), acquired in October, 1996, ORAYCOM, Inc. ("ORAYCOM"), acquired in
June, 1997, WG Controls, Inc. ("WG"), acquired in January, 1998, and Primus
Marketing Associates, Inc. ("Primus"), acquired in June, 1998. Upon
consolidation, significant intercompany accounts, transactions and profits are
eliminated.
7
<PAGE>
NOTE 3. Private Placements
During the first quarter ended November 30, 1998, the Company raised $290,514 as
a result of selling 166,008 shares of its Common Stock in a private placement.
Additionally, each share subscribed called for the issuance of a Warrant to
purchase the Company's Common Stock at $3.00 per share. Therefore, 166,008
Warrants were issued. Additionally in the quarter, 53,573 shares and
corresponding Warrants were issued to private placement subscribers who
originally purchased shares at $2.00 per share which was the original price of
this placement. Due to market conditions, the placement was re-priced at $1.75
and retroactively made available at this price to previous subscribers in this
placement. The Company also issued 657 shares of its Common Stock as
compensation to an unrelated individual who assisted in the placement of the
Company's stock.
NOTE 4: Business Discontinuation
On November 2, 1998, the Company, as a result of repeated and recurring losses,
made the decision to terminate its operations under the Advantage Technologies
name in San Jose, CA. The Company is not expected to incur material costs
related to this closure.
On November 11, 1998, the Company signed a Letter Agreement to sell all of the
capital stock in ORAYCOM, Inc. to O. Ray Strickland and O. Ray Strickland IRA,
(collectively, the "Strickland Group"). This transaction took effect after
the close of business on November 30, 1998. Mr. Strickland is an employee of
the Company and the General Manager of ORAYCOM, Inc. He was the sole
shareholder of ORAYCOM, Inc. when the Company acquired it from him in June,
1997. The agreement calls for Strickland Group to convey to the Company,
80,000 shares of Synaptx stock in exchange for all of the issued and outstanding
shares of ORAYCOM, Inc. and waiver of the non-compete agreement in place with
O. Ray Strickland. As a result, the Company took a charge in the fourth
quarter of fiscal 1998 of $428,054 to write off the remaining balance
of the goodwill related to the purchase of ORAYCOM. ORAYCOM is not
considered a material subsidiary to the Company's consolidated business.
NOTE 5. Supplemental Cash Flow Disclosures
Cash paid for interest was approximately $23,013 and $11,200 for the three month
periods ended November 30, 1998 and 1997, respectively.
NOTE 6. Subsequent Events
On December 29, 1998 the Company, signed a Letter of Intent to acquire all the
issued and outstanding capital stock of Bradas, Inc. ("Bradas") for 50,000
shares of the Company's Common Stock and 400,000 Warrants to purchase the
Company's Common Stock at a price consistent with the Company's policy of
valuing other incentive awards (e.g. stock options) which generally calls for
the value of the Common Stock to be based on the average bid and ask price of
the Company's Common Stock as quoted on the OTC Bulletin Board, over a set
period of time. Additionally, existing Bradas debt will be converted to equity.
Other than 20,000 shares of the Company's Common Stock payable upon closing, the
remainder of the consideration to Bradas is payable upon the achievement of
certain pre-determined milestones. It is anticipated that this transaction
will close in early February, 1999.
Bradas is a start-up developer and provider of database software solutions,
located outside Washington, DC. They have no material revenues as of the date of
this filing.
8
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Synaptx Worldwide, Inc. ("Synaptx" or the "Company") through its operating
subsidiaries, provides database analysis, consulting, marketing and sales
services and executive search ("Search") assistance within the
telecommunications industry. The Company intends to seek acquisitions of
existing companies exhibiting the potential for growth as telecommunications
customer management and software providers needing developed marketing channels.
Except for the acquisitions consummated, as described below, and the Letter of
Intent discussed in Note 6 to the Condensed Consolidated Financial Statements,
the Company has no agreements or understandings regarding possible future
acquisitions. The Company's fiscal year ends August 31.
Overview
- --------
The Company's products and services consist primarily of supporting the customer
management functions of clients in the telecommunications, data communications
and cable TV industries. The mission of Synaptx is to help our clients know
their customers better and manage them in a manner to more profitably grow their
businesses. This involves using information technology to more precisely target
their prospective customers, to develop and implement customized sales and
marketing programs, and to develop and implement unique programs to nurture
relationships with existing customers to avoid expensive customer turnover.
The other significant service being offered is sales representation offered
through the following subsidiaries: Access, WG Controls, Inc. ("WG") and Primus
Marketing Associates, Inc. ("Primus"). Another sales representative subsidiary,
ORAYCOM, Inc. ("ORAYCOM") was included with these operations through November
30, 1998, but an agreement was reached to sell this unit back to its prior owner
subsequent to the close of business on November 30, 1998. ORAYCOM was not
considered a significant part of the business. These sales representative
operations provide field sales and business development support for cable TV,
and telecommunications (both voice and data networking) original equipment
manufacturers (commonly referred to as OEMs). Commissions are earned for sales
generated for the designated products within the assigned territories at rates
ranging from approximately 3.5% to 10%, depending on the sophistication of the
client's products and services represented.
The Company's financial statements are presented on a going concern basis, which
contemplates the realization of assets and satisfaction of liabilities in the
normal course of business. The Company's ability to continue as a going concern
is contingent upon its ability to secure additional financing, raise additional
equity investment, and attain profitable operations. Although the Company
is pursuing additional private equity investment as well as the refinancing
and expansion of outstanding debt, there can be no assurance that the Company
will be able to secure financing when needed or obtain such terms satisfactory
to the Company. In addition, the Company's ability to continue as a going
concern must be considered in light of the problems, expenses and complications
frequently encountered by entrance into established markets and the competitive
environment in which the Company operates. The financial statements do not
include any adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and classification
of liabilities that may result from the possible inability of the Company to
continue as a going concern.
During fiscal year 1998, the Company changed its strategy from one of acquiring
and growing mainly distribution companies to one of acquiring customer
management driven companies that enable network and network equipment providers
to identify, acquire, and maintain customers. This shift is a result of what
9
<PAGE>
Management feels is greater opportunity and a greater chance of achieving
profitable operations on a long-term basis.
Results of Operations
- ---------------------
The following table sets forth the percentage relationship to total revenues of
principal items contained in the Company's Condensed Consolidated Statements of
Operations for the three months ended November 30, 1998 and 1997 respectively.
The percentages discussed throughout this analysis are stated on an approximate
basis.
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended
November 30,
<S> <C> <C>
1998 1997
--------------------
(unaudited)
Net sales and revenues.......................... 100% 100%
Cost of sales................................... 75% 68%
--- ---
Gross Profit.................................... 25% 32%
Selling, general and administrative expenses.... 27% 31%
--- ---
Operating (loss) income.......................... (2%) 1%
Interest expense................................. 1% 1%
--- ---
Net (loss) income................................ (3%) 0%
=== ===
</TABLE>
Net Sales and Revenues
- ----------------------
The Company's net sales and revenues increased by $547,572 or 36%, from
$1,502,853 for the three months ended November 30, 1997 ("1Q/98") to $2,050,425
for the three months ended November 30, 1998. ("1Q/99"). The increase was
attributable to increases of $669,272 from Database Services, and $587,620 from
Commission Income, offset by decreases of $693,990 from Marketing Services and
Production, and $15,330 from Executive Placement Fees. The increase in
Commission Income is attributable to 1Q/99 figures having a full three months of
activity of ORAYCOM, WG and Primus, while 1Q/97 revenues included three months'
activity for ORAYCOM, but no activity for WG or Primus. The increase in Database
Services and the decrease in Marketing Services and Production is consistent
with the Company's refocusing on the software and services area and moving away
from the pure marketing collateral materials as its primary focus in the Impulse
unit. As discussed in Note 4 to the Condensed Consolidated Financial Statements,
the ORAYCOM subsidiary was disposed of subsequent to the end of the quarter.
Cost of Sales
- -------------
Cost of sales and revenues increased by $503,670 in 1Q/99, or 49%, from
$1,028,206 in 1Q/98 to $1,531,876 in 1Q/99. The increase was consistent with the
increase in net sales and revenues and is a result of the heavier mix of
Database and Commission Income which typically operate on lower margins than
traditional professional fee services.
Gross Profit
- ------------
The Company's gross profit margin, was 25% and 32% for 1Q/99 and 1Q/98,
respectively. The decrease in gross profit margin of 7 percentage points in
1Q/99 is primarily attributable to a shift in the mix from higher margin,
in-house, professional services to more externally supported database and sales
representation services with corresponding lower gross margins.
10
<PAGE>
Selling, General and Administrative Expenses
- --------------------------------------------
Selling, general and administrative expenses, including depreciation and
amortization, increased by $105,149 in 1Q/99 or 22%, from $470,131 in 1Q/98 to
$575,280 in 1Q/99. The increase was primarily due to 1Q/99 results having a full
three months of activity of Impulse, Access, ORAYCOM, WG and Primus, while 1Q/98
figures included no activity for WG or Primus. Goodwill and depreciation
decreased by $17,519 as a result of decreased amortization of approximately
$26,000 as a result of fully amortizing all goodwill related to ORAYCOM and
Impulse in the fourth quarter of fiscal 1998, offset by increased depreciation
of approximately $8,481, primarily a result of the addition of the WG and
Primus subsidiaries.
Interest Expense
- ----------------
Interest expense increased by $2,030 in 1Q/99 or 20%, from $10,056 in 1Q/98 to
$12,086 in 1Q/99. This increase is attributable to reduced borrowings on bank
lines of credit offset by additional interest on notes payable to related
parties.
<PAGE>
Net Operating Loss
- ------------------
The Company has accumulated approximately $2,000,000 of net operating loss
carryforwards as of November 30, 1998, which may be offset against taxable
income and income taxes in future years. The use of these losses to reduce
future income taxes will depend on the generation of sufficient taxable income
prior to the expiration of the net operating loss carry forwards. The carry
forwards expire in the year 2013. In the event of certain changes in control of
the Company, there will be an annual limitation on the amount of net operating
loss carry forwards which can be used. No tax benefit has been reported in the
financial statements for the three months or the three months ended November 30,
1998 because there is a 50% or greater chance that the carry forward will not be
utilized. Accordingly, the potential tax benefit of the loss carry forward is
offset by a valuation allowance of the same amount.
Liquidity and Capital Resources
- -------------------------------
The Company's principal cash requirements are for operating expenses, including
employee costs, outside consultants such as independent contractors who provide
design, database, copywriting and professional marketing and sales consulting
services, funding of accounts receivable, capital expenditures and funding of
acquisitions. The Company's primary sources of cash have been from private
placements of the Company's common stock and cash derived from operations. The
Company is investigating various sources for additional financing, including
additional equity infusion and debt facility arrangements. There is no assurance
that the Company will consummate any additional financing or that any additional
financing will not be dilutive to shareholders.
Three Months Ended November 30, 1998
Cash decreased $54,414 from $126,536 at the beginning of the period to $72,118
at the end of the period. Net cash used in operations was $244,533 primarily due
to an increase in accounts receivable of approximately $500,000, a decrease in
deferred revenue of approximately $65,000, offset by an increase in accounts
payable and accrued expenses of approximately $317,000.
Net cash used in investing activities was $2,245 attributable to fixed asset
purchases of $7,248 offset by a reduction in other assets of $5,003
Net cash provided by financing activities was $192,364 attributable to proceeds
from issuance of common stock of $264,553, offset by net decreases in
borrowings, both short and long-term, of $72,189.
11
<PAGE>
Three Months Ended November 30, 1997
Cash increased $10,537 from $58,265 at the beginning of the period to $68,802 at
the end of the period. Net cash provided by operations was $61,695 mainly
attributable to non-cash expense items (depreciation and amortization) of
$64,091 and an net increase in accounts payable and accrued expenses of $55,299
and a decrease in accounts receivable of $51,275, offset by the net loss of
$5,540 and a decrease in deferred revenue of $105,700.
Net cash used in investing activities was $44,625 attributable to additions to
fixed assets of $22,359 and additions to other long term assets of $22,266.
Net cash used in financing activities was $6,533 primarily attributable to
proceeds from issuance of common stock of $28,433, offset by reductions in bank
lines of credit of $33,780.
Year 2000 Issue
- ---------------
The "Year 2000 Issue" is whether the Company's computer systems will properly
recognize date sensitive information when the year changes to 2000, or "00."
Systems that do not properly recognize such information could generate erroneous
data or cause a system to fail. The Company has conducted preliminary reviews of
its computer systems and its purchased software programs (including accounting
software) and does not believe the Year 2000 Issue will pose any significant
operational problems for its systems or software or any significant costs to the
Company.
In addition, the Company intends to make similar reviews of the systems of
potential acquisition candidates for any financial or operational impact the
Year 2000 Issue may pose. Preliminary review at Bradas, the Company's planned
acquisition candidate, indicate the Year 2000 Issue will not pose any
significant operational problems for its systems or software or any significant
costs to the Company upon closing of the transaction.
Inflation
- ---------
In the opinion of management, inflation has not had a material effect on the
operations of the Company.
Risk Factors and Cautionary Statements
- --------------------------------------
Forward-looking statements in this report are made pursuant to the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995. The Company
wishes to advise readers that actual results may differ substantially from such
forward-looking statements. Forward-looking statements involve risks and
uncertainties that could cause actual results to differ materially from those
expressed in or implied by the statements, including, but not limited to, the
following: the ability of the Company to provide for its debt obligations and to
provide for working capital needs from operating revenues, and other risks
detailed in the Company's periodic report filings with the Securities and
Exchange Commission.
12
<PAGE>
PART II
ITEM 1. LEGAL PROCEEDINGS
There are no material pending legal proceedings in which the Company is
involved. The Company continues to pursue a customer for non-payment for
services performed. As the outcome is unknown at this time, the Company has
fully reserved the entire amount as uncollectible at November 30, 1998.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(c) For information regarding private placements during the
first quarter ended November 30, 1998, see Note 3 to the
Condensed Consolidated Financial Statements elsewhere in
this filing. The placements were exempt from the
Registration provisions of the Securities Act of 1933 by
reason of Section 4(2) thereof.
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.
SYNAPTX WORLDWIDE, INC.
Date: January 14, 1999 By /s/ Ronald L. Weindruch
------------------------------------
RONALD L. WEINDRUCH, President
and Chief Executive Officer
13
<PAGE>
EXHIBIT INDEX
Exhibit Description
------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
SYNAPTX WORLDWIDE, INC. FORM 10-QSB FOR THE PERIOD ENDED NOVEMBER 30,
1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1999
<PERIOD-END> NOV-30-1998
<CASH> 72
<SECURITIES> 0
<RECEIVABLES> 1,423
<ALLOWANCES> 37
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 470
<DEPRECIATION> (191)
<TOTAL-ASSETS> 2,732
<CURRENT-LIABILITIES> 1,750
<BONDS> 0
0
0
<COMMON> 7
<OTHER-SE> 655
<TOTAL-LIABILITY-AND-EQUITY> 2,732
<SALES> 2,050
<TOTAL-REVENUES> 2,050
<CGS> 1,532
<TOTAL-COSTS> 1,532
<OTHER-EXPENSES> 575
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12
<INCOME-PRETAX> (69)
<INCOME-TAX> 0
<INCOME-CONTINUING> (69)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (69)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
