<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-Q/A
(MARK ONE)
----------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
----------------
COMMISSION FILE NUMBER 000-23195
TIER TECHNOLOGIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
----------------
CALIFORNIA (STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)
94-3145844 (INTERNAL REVENUE SERVICE EMPLOYER IDENTIFICATION NO.)
1350 TREAT BOULEVARD, SUITE 250
WALNUT CREEK, CALIFORNIA 94596
(510) 937-3950
----------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
(1) Yes [X] No [ ] (2) Yes [ ] No [X]
As of January 21, 1998, the number of shares outstanding of the Registrant's
Class A Common Stock was 1,639,762 and the number of shares outstanding of the
Registrant's Class B Common Stock was 7,680,888.
This report contains a total of 19 pages of which this page is number 1.
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<PAGE>
TIER TECHNOLOGIES, INC.
FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
PART I -- FINANCIAL INFORMATION ----
<C> <S> <C>
Item 1. Condensed Consolidated Financial Statements (unaudited and restated)
Condensed Consolidated Balance Sheets as of December 31, 1997 and September 30,
1997.......................................................................... 3
Condensed Consolidated Statements of Income for the three months ended
December 31, 1997 and 1996.................................................... 4
Condensed Consolidated Statements of Cash Flows for the three months ended
December 31, 1997 and 1996.................................................... 5
Notes to Condensed Consolidated Financial Statements........................... 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations (restated)......................................................... 8
<CAPTION>
PART II -- OTHER INFORMATION
<C> <S> <C>
Item 2. Changes in Securities and Use of Proceeds...................................... 17
Item 4. Submission of Matters to a Vote of Security Holders............................ 18
Item 6. Exhibits and Reports on Form 8-K............................................... 18
Signatures.............................................................................. 19
</TABLE>
RESTATEMENT OF FINANCIAL STATEMENTS AND CHANGES TO CERTAIN INFORMATION
On October 13, 1998, the Company announced that it would restate its
financial statements for the nine-month fiscal year ended September 30, 1997
and for the two subsequent quarters ended December 31, 1997 and March 31, 1998
to reflect changes in accounting for certain payments made in connection with
two business combinations. This amended filing contains restated financial
information and related disclosures for the year ended September 30, 1997 and
the quarter ended December 31, 1997 (See Note 1 to Condensed Consolidated
Financial Statements).
In addition, the weighted average shares outstanding used in computing both
basic earnings per share and diluted earnings per share for the periods
presented have been changed to reflect the effect of adopting Financial
Accounting Standards Board Statement No. 128, "Earnings per Share," and the
Securities and Exchange Commission Staff Accounting Bulletin No. 98 relating
to "Earnings per Share," as previously reported in the Company's Form 8-K
dated March 9, 1998 (See Note 4 to Condensed Consolidated Financial
Statements).
Quarterly financial statement information and related disclosures included
in this amended filing reflect, where appropriate, changes as a result of the
restatements.
SAFE HARBOR PROVISION
Certain statements contained in this report, including statements regarding
the development of the Company's services, markets and future demand for the
Company's services, and other statements regarding matters that are not
historical facts, are forward-looking statements (as defined in the Private
Securities Litigation Reform Act of 1995). Such forward-looking statements
include risks and uncertainties; consequently, actual results may differ
materially from those expressed or implied thereby. Factors that could cause
actual results to differ materially include, but are not limited to, those
factors listed in "Factors that May Affect Future Results" beginning on page
11 of this report. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. The
Company undertakes no obligation to publicly release the result of any
revisions to these forward-looking statements or factors to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TIER TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1997
------------ -------------
(RESTATED) (RESTATED)
ASSETS
------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents.......................... $17,998 $ 106
Accounts receivables, net.......................... 6,496 5,906
Income taxes receivable............................ 303 820
Prepaid expenses and other current assets.......... 252 286
------- -------
Total current assets............................ 25,049 7,118
Equipment and improvements, net..................... 973 774
Notes receivable from shareholders.................. 1,005 942
Deferred financing costs............................ -- 224
Other assets........................................ 1,589 1,438
------- -------
Total assets.................................... $28,616 $10,496
======= =======
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
CURRENT LIABILITIES:
Borrowings under bank lines of credit.............. $ -- $ 1,232
Accounts payable................................... 1,288 1,374
Accrued liabilities................................ 1,414 652
Accrued compensation and related liabilities....... 1,185 1,228
Deferred revenue................................... 23 34
Notes payable to current and former shareholders... 39 53
Capital lease obligations due within one year...... 18 31
Deferred income taxes.............................. 78 153
------- -------
Total current liabilities....................... 4,045 4,757
Borrowings under bank lines of credit, less current
portion............................................ -- 1,527
Accrued royalties................................... 59 59
Notes payable to current and former shareholders,
less current portion............................... 58 57
Capital lease obligations, less current portion..... 28 25
Deferred income taxes............................... 110 179
SHAREHOLDERS' EQUITY:
Convertible preferred stock, no par value......... -- 1,892
Common stock, no par value........................ 24,957 2,949
Notes receivable from shareholders................ (2,254) (2,253)
Foreign currency translation adjustment........... (66) (40)
Retained earnings................................. 1,679 1,344
------- -------
Total shareholders' equity...................... 24,316 3,892
------- -------
Total liabilities and shareholders' equity...... $28,616 $10,496
======= =======
</TABLE>
See Notes to Condensed Consolidated Financial Statements
3
<PAGE>
TIER TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
---------------------
1997 1996
---------- ----------
(RESTATED) (RESTATED)
<S> <C> <C>
Revenues.................................................. $9,150 $4,407
Cost of revenues.......................................... 5,680 2,947
------ ------
Gross profit.............................................. 3,470 1,460
Costs and expenses:
Selling and marketing.................................... 815 398
General and administrative............................... 1,800 800
Compensation charge related to business combinations..... 198 --
Depreciation and amortization............................ 150 24
------ ------
Income from operations.................................... 507 238
Interest income (interest expense), net................... 56 (24)
------ ------
Income before income taxes................................ 563 214
Provision for income taxes................................ 228 85
------ ------
Net income................................................ $ 335 $ 129
====== ======
Basic earnings per share.................................. $ .05 $ .03
====== ======
Shares used in computing basic earnings per share......... 6,139 4,300
====== ======
Diluted earnings per share................................ $ .04 $ .03
====== ======
Shares used in computing diluted earnings per share....... 7,464 4,558
====== ======
</TABLE>
See Notes to Condensed Consolidated Financial Statements
4
<PAGE>
TIER TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
------------------
1997 1996
------------ --------
(RESTATED)
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income.............................................. $ 335 $ 129
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 143 25
Deferred income taxes.................................. (144) (94)
Changes in operating assets and liabilities:
Accounts receivable, net.............................. (590) 213
Income taxes receivable............................... 517 (21)
Prepaid expenses and other current assets............. 34 29
Other assets.......................................... 9 (33)
Accounts payable and other accrued liabilities........ 633 (3)
Deferred revenue...................................... (11) 41
---------- --------
Net cash provided by operating activities............... 926 286
INVESTING ACTIVITIES:
Business combinations, net of cash...................... (52) (152)
Purchases of equipment and improvements................. (271) (96)
Notes receivable from shareholders...................... (63) --
Other assets............................................ (179) --
---------- --------
Net cash used in investing activities................... (565) (248)
FINANCING ACTIVITIES:
Borrowings under bank lines of credit................... 6,911 416
Payments on borrowings on bank lines of credit.......... (9,671) (134)
Net proceeds from issuance of common stock.............. 19,972 --
Deferred financing costs................................ 224 --
Exercise of stock options............................... 144 --
Payments on capital lease obligations................... (10) (6)
Payments on notes payable to shareholders............... (13) (8)
---------- --------
Net cash provided by financing activities............... 17,557 268
Effects of exchange rate changes on cash................ (26) --
---------- --------
Net increase in cash and cash equivalents............... 17,892 306
Cash and cash equivalents at beginning of quarter....... 106 --
---------- --------
Cash and cash equivalents at end of quarter............. $ 17,998 $ 306
========== ========
Supplemental disclosures of cash flow information:
Cash paid during the quarter for:
Interest.............................................. 79 21
========== ========
Income taxes paid (refunded), net..................... (145) 150
========== ========
Equipment acquired under capital lease obligations.... -- --
========== ========
Conversion of preferred stock.......................... 1,892 --
========== ========
Accrued purchase price and assumed liabilities related
to business combinations................................ -- 427
========== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
5
<PAGE>
TIER TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 -- RESTATEMENT AND BASIS OF PRESENTATION
The accompanying restated condensed consolidated balance sheets as of
December 31, 1997 and September 30, 1997 and the accompanying restated
condensed consolidated statements of income for the three months ended
December 31, 1997, have been restated to treat as compensation expense certain
payments made in connection with two business combinations that were
previously treated as purchase price. The effect of these restatements is to
reduce previously reported net income for the three months ended December 31,
1997 by $105,000 (or $0.02 per diluted earnings per share) and to decrease
previously reported shareholders' equity at December 31, 1997 and September
30, 1997 by $377,000 and $271,000, respectively. These restatements do not
affect previously reported net cash flows and future amortization expenses
related to these acquisitions will be based on the reduced and restated
purchase price.
The accompanying consolidated financial statements of Tier Technologies,
Inc. (the "Company") include the accounts of the Company and its wholly owned
subsidiaries. All significant intercompany transactions and balances have been
eliminated in consolidation. In the opinion of management, the consolidated
financial statements reflect all normal and recurring adjustments which are
necessary for a fair presentation of the Company's financial position, results
of operations, and cash flows as of the dates and for the periods presented.
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information.
Consequently, these statements do not include all the disclosures normally
required by generally accepted accounting principles for annual financial
statements nor those normally made in the Company's Annual Report on Form 10-
K. Accordingly, reference should be made to the Company's Form S-1
registration statement filed by the Company with the Securities and Exchange
Commission on October 10, 1997, as amended, for additional disclosures,
including a summary of the Company's accounting policies, which have not
changed except as noted herein. The consolidated results of operations for the
three months ended December 31, 1997 are not necessarily indicative of results
that may be expected for the fiscal year ending September 30, 1998 or any
future interim period, and the Company makes no representations related
thereto.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported results of operations during the reporting period.
Actual results could differ from those estimates.
Certain reclassifications have been made to the prior period's financial
statements to conform to the current year presentation.
NOTE 2 -- REVENUE RECOGNITION
The majority of the Company's revenues are from time and materials contracts
and are recognized as services are performed. Revenues from fixed price
contracts are recognized using the percentage-of-completion method of contract
accounting based on the ratio of incurred costs to total estimated costs.
Losses on contracts are recognized when they become known. Actual results of
contracts may differ from management's estimates and such differences could be
material. Most of the Company's contracts are terminable by the client
following limited notice and without significant penalty to the client. The
completion, cancellation or significant reduction in the scope of a large
project could have a material adverse effect on the Company's business,
financial condition and results of operations. Unbilled receivables were $1.5
and $0 million at December 31, 1997 and December 31, 1996, respectively. An
unbilled receivable for one client accounted for 18% of total accounts
receivable at December 31, 1997.
NOTE 3 -- INITIAL PUBLIC OFFERING
In December 1997, the Company completed an initial public offering of
3,400,000 shares of its Class B Common Stock at $8.50 per share. Of those
shares, 2,725,000 shares were sold by the Company and 675,000
6
<PAGE>
TIER TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
shares were sold by certain selling shareholders. In January 1998, the
underwriters from the Company's initial public offering exercised their over-
allotment option to purchase an additional 510,000 shares of Class B Common
Stock at the initial public offering price. Net proceeds to the Company,
excluding the over-allotment option, were approximately $20 million after
deducting the underwriters' discounts, commissions, and related issuance
costs. As of the closing date of the offering, all of the Company's Series A
Convertible Preferred Stock outstanding automatically converted into an
aggregate of 420,953 shares of Class B Common Stock.
NOTE 4 -- EARNINGS PER SHARE
The Financial Accounting Standards Board recently issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS No. 128").
SFAS No. 128 is effective for annual and interim periods ending after December
15, 1997.
The following table sets forth the computation of basic and diluted earnings
per share under SFAS No. 128:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
DECEMBER 31,
---------------------
1997 1996
---------- ----------
(RESTATED) (RESTATED)
(IN THOUSANDS,
EXCEPT PER
SHARE DATA)
<S> <C> <C>
NUMERATOR:
Net income............................................... $ 335 $ 129
DENOMINATOR:
Weighted-average shares................................ 6,139 4,300
------ ------
Denominator for basic earnings per share............... 6,139 4,300
Effect of dilutive securities:
Employee stock options................................ 969 258
Convertible preferred stock........................... 356 --
------ ------
Dilutive potential common shares....................... 1,325 258
------ ------
Denominator for diluted earnings per share-adjusted
weighted-average shares and assumed conversions....... 7,464 4,558
====== ======
BASIC EARNINGS PER SHARE................................. $ 0.05 $ 0.03
====== ======
DILUTED EARNINGS PER SHARE............................... $ 0.04 $ 0.03
====== ======
</TABLE>
In January 1998, the underwriters from the Company's initial public offering
exercised their over-allotment option and purchased 510,000 additional shares
of Class B Common Stock at the initial public offering price.
NOTE 5 -- NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement No.
130 "Reporting Comprehensive Income," ("FAS 130"), and Statement No. 131
"Disclosure about Segments of an Enterprise and Related Information" ("FAS
131"). The Company is required to adopt these Statements in fiscal year 1999.
FAS 130 establishes new standards for reporting and displaying comprehensive
income and its components. FAS 131 requires disclosure of certain information
regarding operating segments, products and services, geographic areas of
operation and major customers. Adoption of these Statements is expected to
have no material impact on the Company's consolidated financial position,
results of operations or cash flows.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (RESTATED)
OVERVIEW
Tier Technologies, Inc. (the "Company") provides information technology
("IT") consulting, application development and software engineering services
that facilitate the migration of clients' enterprise-wide systems and
applications to leading edge technologies. Through its ten offices located in
three countries, the Company works closely with its Fortune 1000, government
and other clients to determine, evaluate and implement an IT strategy that
allows the Company to rapidly adopt, deploy and transfer emerging technologies
while preserving viable elements of the client's installed IT base.
As of December 31, 1997, the Company's consultants consisted of salaried and
hourly employees and independent contractors. In addition, the Company has a
non-consultant workforce consisting of sales & marketing and general &
administrative salaried employees. As of December 31, 1997, the Company's
total workforce was 251 as compared to 135 as of December 31, 1996.
The Company has derived, and believes that it will continue to derive, a
significant portion of its revenue from a small number of large clients. For
many of these clients, the Company performs a number of different projects
pursuant to multiple contracts or purchase orders. For the quarter ended
December 31, 1997, Unisys Corporation, the State of Missouri, and Equifax
Europe (UK) Limited accounted for approximately 25%, 21% and 15% of the
Company's revenues, respectively. This concentration as a percent of revenue
is expected to continue to decline throughout the 1998 fiscal year.
From December 1996 through the end of this reported quarter, the Company
made five acquisitions. These acquisitions helped to expand the Company's
operations in the United States, to establish the Company's operations in
Australia and the United Kingdom, to broaden the Company's client base and
technical expertise and to supplement its access to human resources.
International operations accounted for approximately 20% of the Company's
revenue for the quarter ended December 31, 1997 as compared to 0% for the
quarter ended December 31, 1996.
In September 1997, the Company changed its fiscal year end to September 30.
The quarter ended December 31, 1997 is the first quarter of its fiscal year
ending September 30, 1998. In December 1997, the Company successfully
completed an initial public offering of 3,400,000 shares of its Class B Common
Stock, raising approximately $20 million in proceeds net of underwriters'
discounts, commissions, and related issuance costs. In January 1998, the
underwriters exercised their over-allotment option to purchase an additional
510,000 shares of Class B Common Stock at the original initial public offering
price. As a result, total proceeds to the Company, net of underwriters'
discounts, commissions, and related issuance costs, increased to approximately
$24 million.
8
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, selected
statements of operations data as a percentage of net revenues:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED DECEMBER 31,
-----------------------
1997 1996
------------ ---------
(RESTATED)
<S> <C> <C>
STATEMENT OF EARNINGS DATA:
Revenues.............................................. 100.0% 100.0%
Cost of revenues...................................... 62.1% 66.9%
--------- ---------
Gross profit.......................................... 37.9% 33.1%
Costs and expenses:
Selling and marketing............................... 8.9% 9.0%
General and administrative.......................... 19.7% 18.2%
Compensation charge related to business
combinations....................................... 2.1% 0.0%
Depreciation and amortization....................... 1.6% 0.5%
--------- ---------
Income from operations.............................. 5.6% 5.4%
Interest income (interest expense), net............... 0.6% (0.5%)
--------- ---------
Income before income taxes............................ 6.2% 4.9%
Provision for income taxes............................ 2.5% 2.0%
--------- ---------
Net income............................................ 3.7% 2.9%
========= =========
</TABLE>
QUARTER ENDED DECEMBER 31, 1997, COMPARED TO QUARTER ENDED DECEMBER 31, 1996
Revenues. Revenues increased 108% to $9.2 million for the quarter ended
December 31, 1997 compared to $4.4 million for the quarter ended December 31,
1996, due principally to revenues associated with the Company's acquisitions,
an increase in the number of new clients, and the undertaking of additional
projects for existing clients. The Company's United States revenues grew 67%
to $7.4 million for the quarter ended December 31, 1997 from $4.4 million for
the quarter ended December 31, 1996. The Company's international operations
were established in March and July of 1997 through acquisitions and
contributed $1.8 million in revenue for the quarter ended December 31, 1997.
Gross Profit. Cost of revenues, which consist of those costs directly
attributable to providing services to a client, including consultant salaries,
benefits and travel expenses, increased 93% to $5.7 million for the quarter
ended December 31, 1997. The absolute dollar increase is attributable to the
additional hiring and retention of consultants to support the increased
services being provided. The number of consultants retained by the Company
increased 87% to 213 globally. Gross profit margins improved to 37.9% for the
quarter ended December 31, 1997 as compared to 33.1% for the quarter ended
December 31, 1996. The increase in gross profit margins is primarily due to
higher profitability from the Company's larger project engagements. The
Company periodically reviews and updates its billing rates. It also
periodically reviews wages and salaries and may experience an increase in
these costs as a result of continued competition for talented IT resources.
Selling and Marketing Expenses. Selling and marketing expenses were
$815,000, or 8.9% of revenues, in the quarter ended December 31, 1997 as
compared to $398,000, or 9.0% of revenues, for the quarter ended December 31,
1996. The absolute dollar increase is primarily attributable to an increase in
payroll and payroll related expenses associated with the increase in sales and
marketing personnel. The Company continued its investment in the development
of its marketing strategy. The Company currently expects to maintain sales and
marketing expenses as a percentage of net revenues at approximately the
current level for the remainder of the 1998 fiscal year.
9
<PAGE>
General and Administrative Expenses. General and administrative expenses
were $1.8 million, or 19.7% of revenues, for the quarter ended December 31,
1997 as compared to $800,000, or 18.2% of revenues, for the quarter ended
December 31, 1996. The percentage increase is primarily due to the continued
building of infrastructure to support the growth of the business. The absolute
dollar increase reflects expenses associated with an increased workforce to
support the Company's growth and geographic expansion in the United States,
the United Kingdom, and Australia. The Company currently expects general and
administration expenses as a percentage of revenues to decline slightly over
the remainder of the 1998 fiscal year, while continuing to provide sufficient
support for the Company's global growth strategy.
Compensation Charge Related to Business Combinations (as restated). Business
combination compensation expenses were $198,000, or 2.1% of revenues, for the
quarter ended December 31, 1997 as compared to no charge for the quarter ended
December 31, 1996. These expenses represent payments made in connection with
business combinations based upon the achievement of certain performance
criteria and the continued employment of key employee/sellers (See Note 1 to
Condensed Consolidated Financial Statements). The increase relates to payments
made in connection with the Company's acquisition of certain assets of
Albanycrest Limited and Encore Consulting, Inc.
Depreciation and Amortization Expense (as restated). Depreciation and
amortization expense increased to $150,000, or 1.6% of revenues, for the
quarter ended December 31, 1997 as compared to $24,000 for the quarter ended
December 31, 1996. This increase is due to the amortization of acquired
intangible assets and the increased investment in equipment and improvements
associated with the addition of new offices and the increase in the Company's
workforce.
Interest Income and Interest Expense, Net. The Company had net interest
income of $56,000 for the quarter ended December 31, 1997 as compared to net
interest expense of $24,000 for the quarter ended December 31, 1996. The
increase is attributable to interest income on notes receivable from
shareholders and interest income earned from the proceeds of the initial
public offering, and a decrease in interest expense due to the repayment of
the Company's bank lines of credit.
Provision for Income Taxes (as restated). The Company's effective income tax
rate increased to 40.5% for the quarter ended December 31, 1997 from 39.7% for
the quarter ended December 31, 1996 due to the expansion of the Company's
international operations. The Company's effective tax rate may vary from
period to period based on the Company's future expansion into areas of varying
country, state, and local statutory income tax rates.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1997 the Company had approximately $18 million of cash
and cash equivalents as compared to approximately $106,000 as of December 31,
1996. This change is primarily attributable to the Company's initial public
offering of 3,400,000 shares of its Class B Common Stock at $8.50 per share in
December 1997, 2,725,000 shares of which were sold by the Company and 675,000
shares of which were sold by certain selling shareholders. The net proceeds to
the Company from the offering were approximately $20 million (not including
the January 1998 exercise of the underwriters' over-allotment option for
510,000 shares at the initial public offering price). The Company used
approximately $3 million of these proceeds to repay its bank lines of credit.
The remaining $17 million of these proceeds will be used for working capital,
capital expenditures, and general corporate purposes. A portion of the net
proceeds from the offering may be used in the future to acquire other
businesses that would expand or complement the Company's business.
Prior to the Company's initial public offering in December 1997, the
Company's primary source of liquidity had been from operating cash flows and
from borrowings under the Company's bank lines of credit.
The Company maintains a $5 million credit facility with a commercial bank.
The credit facility requires, among other things, that the Company maintain
certain financial ratios, including tangible net worth, debt to equity, and
operating profitability. At December 31, 1997 the Company was in compliance
with these financial ratio requirements and had no borrowings under these
facilities.
10
<PAGE>
The Company's days sales outstanding, excluding unbilled receivables, was 54
days for the quarter ended December 31, 1997 as compared to 56 days for the
quarter ended December 31, 1996. The decrease in days sales outstanding is
primarily due to the Company's continued collection efforts.
The Company currently anticipates that the net proceeds received by the
Company from the initial public offering, together with amounts available
under its current credit facility, cash generated from operations and existing
cash balances will be sufficient to satisfy its operating cash needs for the
next twelve months. Should the Company's business expand more rapidly than
expected, the Company would seek additional bank credit to fund such operating
and capital requirements. In addition, the Company may consider seeking
additional public or private debt or equity financing to fund future growth
opportunities.
Net cash provided by operating activities (as restated) was $926,000 and
$286,000 for the quarters ended December 31, 1997 and December 31, 1996,
respectively. The increase in the quarter ended December 31, 1997 is
attributable to the increase in net income, the cash provided by the increase
in accounts payable and other accrued liabilities, and the decrease in income
taxes receivable. This was partially offset by the increase in accounts
receivable as a result of increases in the Company's sales volume.
Net cash used in investing activities (as restated) totaled $565,000 and
$248,000 for the quarters ended December 31, 1997 and December 31, 1996,
respectively. For the quarter ended December 31, 1997, the Company made
additional purchase price payments on previous acquisitions in addition to the
purchase of equipment and improvements.
Net cash provided from financing activities totaled $17,557,000 and $268,000
for the quarters ended December 31, 1997 and December 31, 1996, respectively.
For the quarter ended December 31, 1997, the increase was attributable to the
proceeds from the Company's initial public offering in December 1997.
FACTORS THAT MAY AFFECT FUTURE RESULTS
Variability of Quarterly Operating Results. The Company's revenues and
operating results are subject to significant variation from quarter to quarter
due to a number of factors, including the number, size and scope of projects
in which the Company is engaged; the contractual terms and degree of
completion of such projects; competitive pressures on pricing of the Company's
services; any delays incurred in connection with, or early termination of, a
project; employee utilization rates; the adequacy of provisions for losses;
the accuracy of estimates of resources required to complete ongoing projects;
demand for the Company's services generated by strategic partnerships and
certain prime contractors; the Company's ability to increase both the number
and size of engagements from existing clients; and economic conditions in the
vertical and geographic markets served by the Company. Due to the relatively
long sales cycles for the Company's services in the government services
market, the timing of revenue is difficult to forecast. In addition, the
achievement of anticipated revenues is substantially dependent on the
Company's ability to attract, on a timely basis, and retain skilled personnel.
A high percentage of the Company's operating expenses, particularly personnel
and rent, are fixed. Changes in the number, scope, duration or progress toward
completion, of the Company's projects or in employee utilization rates would
cause significant variations in operating results in any particular quarter.
In addition, the Company typically reaches the annual limitation on its FICA
contributions for many of its consultants before the end of the calendar year.
As a result, payroll taxes as a component of cost of sales will vary from
quarter to quarter during the fiscal year and will generally be higher for
salaries paid at the beginning of the calendar year. Therefore, the Company
believes that period-to-period comparisons of its operating results are not
necessarily meaningful, should not be relied upon as indications of future
performance and may result in volatility in the price of the Class B Common
Stock. Due to the foregoing factors, among others, the Company's operating
results will from time to time be below the expectations of the analysts and
investors.
Customer Concentration; Dependence on Large Projects. The Company has
derived, and believes that it will continue to derive, a significant portion
of its revenue from a small number of large clients. For many of these
clients, the Company performs a number of different projects pursuant to
multiple contracts or purchase
11
<PAGE>
orders. For the quarter ended December 31, 1997, Unisys Corporation, the State
of Missouri, and Equifax Europe (UK) Limited accounted for approximately 25%,
21% and 15% of the Company's revenues, respectively. The volume of work
performed for specific clients is likely to vary from quarter to quarter, and
a major client in one quarter may not use the Company's services in a
subsequent quarter. Most of the Company's contracts are terminable by the
client following limited notice and without significant penalty to the client.
The completion, cancellation or significant reduction in the scope of a large
project could have a material adverse effect on the Company's business,
financial condition and results of operations. In addition, the amount of the
Company's services required by any of its clients can be adversely affected by
a number of factors, including technological developments and the internal
budget cycles of such clients. As a result of the Company's focus in specific
vertical markets, economic and other conditions that affect these industries
could lead to a reduction in capital spending on IT projects, government
spending cuts or general budgetary constraints, any of which would have a
material adverse effect on the Company's business, financial condition and
results of operations.
Need to Attract and Retain Professional Staff. The Company's success will
depend in large part upon its ability to attract, retain, train, manage and
motivate skilled employees, particularly project managers and other senior
technical personnel. There is significant competition for employees with the
skills required to perform the services the Company offers. In particular,
qualified project managers and senior technical and professional staff are in
great demand worldwide and competition for such persons is likely to increase.
In addition, the Company requires that a significant number of its employees
travel to client sites to perform services on its behalf, which may make a
position with the Company less attractive to potential employees. There can be
no assurance that a sufficient number of skilled employees will continue to be
available to the Company, or that the Company will be successful in training,
retaining and motivating current or future employees. The Company's inability
to attract, retain and train skilled employees or failure of its employees to
achieve expected levels of performance could impair the Company's ability to
adequately manage and staff its existing projects and to bid for or obtain new
projects, which would have a material adverse effect on the Company's
business, financial condition and results of operations.
Dependence on Key Personnel. The Company's success will depend in large part
upon the continued services of a number of key employees, including its Chief
Executive Officer and Chairman of the Board of Directors, James L. Bildner,
and its President and Chief Operating Officer, William G. Barton. The loss of
the services of either of Messrs. Bildner or Barton or of one or more of the
Company's other key personnel could have a material adverse effect on the
Company's business. Although the Company has entered into employment
agreements with each of Messrs. Bildner and Barton, either of them may
terminate their employment agreement at any time. If one or more of the
Company's key employees resigns from the Company to join a competitor or to
form a competing company, the loss of such personnel and any resulting loss of
existing or potential clients to any such competitor could have a material
adverse effect on the Company's business, financial condition and results of
operations. In the event of the loss of any such personnel, there can be no
assurance that the Company would be able to prevent the unauthorized
disclosure or use of its technical knowledge, practices or procedures by such
personnel.
Concentration of Control; Voting Trust. All of the holders of Class A Common
Stock have entered into a voting trust (the "Voting Trust") with respect to
their shares of Class A Common Stock, which represents 68.1% of the Common
Stock voting power as of January 21, 1998. All power to vote shares held in
the Voting Trust has been vested in the Voting Trust's trustees, Messrs.
Bildner and Barton. As a result, Messrs. Bildner and Barton will be able to
control the outcome of all corporate actions requiring shareholder approval,
including the election of a majority of the Company's directors, proxy
contests, mergers involving the Company, tender offers, open-market purchase
programs or other purchases of Common Stock that could give holders of the
Company's Class B Common Stock the opportunity to realize a premium over the
then-prevailing market price for their shares of Class B Common Stock. The
concentration of voting control could have the effect of delaying or
preventing a change in control of the Company and may affect the market price
of the Class B Common Stock. The holders of the Class A Common Stock also hold
a number of shares of Class B Common Stock that represents 42.3% of the shares
of Class B Common Stock outstanding as of January 21, 1998. If such holders
12
<PAGE>
vote their shares of Class B Common Stock as a block, it is likely they will
initially be able to elect all of the directors to be elected solely by the
holders of the Class B Common Stock. In addition, based upon provisions in the
Company's Amended and Restated Bylaws (the "Bylaws") and the concentration of
voting control, Messrs. Bildner and Barton may take certain actions by written
consent without formally convening a meeting of shareholders and without
giving all shareholders prior notice of such actions.
Risks Associated with Rapid Technological Advances. The Company's success
will depend in part on its ability to develop IT solutions that keep pace with
continuing changes in technology, evolving industry standards and changing
client preferences. There can be no assurance that the Company will be
successful in developing such IT solutions in a timely manner or that if
developed the Company will be successful in the marketplace. Delay in
developing or failure to develop new IT solutions would have a material
adverse effect on the Company's business, financial condition and results of
operations.
Risks Associated with Possible Acquisitions. A principal component of the
Company's business strategy is to grow by acquiring additional businesses to
expand its presence in new or existing markets. From December 1996 through
December 1997, the Company acquired five businesses. There can be no assurance
that the Company will be able to identify, acquire or profitably manage
additional businesses or to integrate successfully any acquired businesses
into the Company without substantial expense, delay or other operational or
financial problems. Acquisitions may also involve a number of special risks,
including diversion of management's attention, failure to retain key
personnel, amortization of acquired intangible assets, client dissatisfaction
or performance problems with an acquired firm, assumption of unknown
liabilities, or other unanticipated events or circumstances, any of which
could have a material adverse effect on the Company's business, financial
condition and results of operations. There can be no assurance that any
acquired business will achieve anticipated revenues and operating results. The
failure of the Company to manage its acquisition strategy successfully could
have a material adverse effect on the Company's business, financial condition
and results of operations.
Management of Growth. The Company's growth has placed, and is expected to
continue to place, significant demands on its management, financial, staffing
and other resources. The Company has expanded geographically by opening new
offices domestically and abroad, and intends to open additional offices. The
Company's ability to manage its growth effectively will require it to continue
to develop and improve its operational, financial and other internal systems,
as well as its business development capabilities, and to train, motivate and
manage its employees. In addition, the Company's future success will depend in
large part upon its ability to continue to estimate project parameters
accurately, to maintain employee utilization rates and project quality and to
meet delivery dates, particularly if the average size and number of the
Company's projects continues to increase. If the Company is unable to manage
its growth and projects effectively, such inability would have a material
adverse effect on the quality of the Company's services, its ability to retain
key personnel, and its business, financial condition and results of
operations. There can be no assurance that the Company's rate of growth will
continue or that the Company will be successful in managing any such growth.
Partnerships. The Company has entered into written arrangements or
understandings with certain technology and service providers pursuant to which
the providers have agreed that the Company is, or will be, the exclusive, or
one of a small number of, preferred systems integrators for that provider's
clients within specific market segments or geographic areas. These
arrangements are typically of limited duration, include broad exceptions to
each party's obligations and are terminable by either party following limited
notice and without significant penalty. Certain of these arrangements contain
provisions whereby the provider agrees to utilize a specified number of the
Company's consultants or agrees to provide the Company with business
opportunities resulting in specified revenues. There can be no assurance that
any of these arrangements will result in the future utilization of the
Company's consultants, additional business opportunities or additional
revenues. There also can be no assurance that any business opportunities that
do result from these arrangements will be on terms ultimately satisfactory or
profitable to the Company. The cancellation or a significant reduction in the
scope of any of these arrangements, or the refusal or inability of a provider
to meet its obligations under the relevant arrangement, would have a material
adverse effect on the Company's business, financial condition and results of
operations.
13
<PAGE>
In addition, in the government services market, the Company often joins with
another organization, such as Unisys, to obtain engagements. In these
engagements, the Company is a subcontractor to the prime contractor of the
engagement. There can be no assurance that actions or failures attributable to
the prime contractor of such engagements will not also negatively affect the
Company's business, financial condition or results of operations.
Project Risks. Many of the Company's engagements involve projects which are
critical to the operations of its clients' businesses and provide benefits
that may be difficult to quantify. The failure of the Company, or of the prime
contractor on an engagement in which the Company is a subcontractor, to meet a
client's expectations in the performance of its services could damage the
Company's reputation and adversely affect its ability to attract new business,
and could have a material adverse effect upon its business, financial
condition and results of operations. The Company has undertaken, and may in
the future undertake, projects in which the Company guarantees performance
based upon defined operating specifications or guaranteed delivery dates.
Unsatisfactory performance or unanticipated difficulties or delays in
completing such projects may result in client dissatisfaction and a reduction
in payment to, or payment of damages (as a result of litigation or otherwise)
by, the Company, which could have a material adverse effect upon its business,
financial condition and results of operations. In addition, unanticipated
delays could necessitate the use of more resources than initially budgeted by
the Company for a particular project, which also could have a material adverse
effect upon its business, financial condition and results of operations. Any
failure in a client's system could result in a claim for substantial damages
against the Company, regardless of the Company's responsibility for such
failure. There can be no assurance that the limitations of liability set forth
in the Company's service contracts will be enforceable or will otherwise
protect the Company from liability for damages. Although the Company maintains
general liability insurance coverage, including coverage for errors or
omissions, there can be no assurance that such coverage will continue to be
available on reasonable terms, will be available in sufficient amounts to
cover one or more claims or that the insurer will not disclaim coverage as to
any future claim. The successful assertion of one or more claims against the
Company that exceed available insurance coverage or changes in the Company's
insurance policies, including premium increases or the imposition of large
deductible or co-insurance requirements, would adversely affect the Company's
business, financial condition and results of operations.
Reliance on Government Contracts. A significant reduction in government
funds available for agencies or departments to which Tier supplies IT
services, either due to budget cuts or the imposition of budgetary
constraints, or a determination by the particular federal, state or foreign
government that funding of such agencies or departments should be reduced or
discontinued, would have a material adverse effect on the Company's business,
financial condition and results of operations. In addition, the loss of a
major government client, or any significant reduction or delay in orders by
such client, would have a material adverse effect on the Company's business,
financial condition and results of operations.
Fixed Price Contracts. The Company's failure to estimate accurately the
resources required for a fixed price project or its failure to complete its
contractual obligations in a timely manner consistent with the project plan
upon which its fixed price contract is based could have a material adverse
effect on the Company's business, financial condition and results of
operations. In addition, the Company may establish prices before project
design specifications are finalized, which could result in a fixed price that
proves to be too low and therefore adversely affects the Company's business,
financial condition and results of operations.
Competition. The IT services market is highly competitive and is served by
numerous international, national and local firms. Market participants include
systems consulting and integration firms, including national accounting firms
and related entities, the internal information systems groups of its
prospective clients, professional services companies, hardware and application
software vendors, and divisions of large integrated technology companies and
outsourcing companies. Many of these competitors have significantly greater
financial, technical and marketing resources, generate greater revenues and
have greater name recognition than the Company. In addition, there are
relatively low barriers to entry into the IT services market, and the Company
has faced, and expects to continue to face, additional competition from new
entrants into the IT services market.
14
<PAGE>
The Company believes that the principal competitive factors in the IT
services market include reputation, project management expertise, industry
expertise, speed of development and implementation, technical expertise,
competitive pricing, and the ability to deliver results on a fixed price as
well as a time and materials basis. The Company believes that its ability to
compete also depends in part on a number of competitive factors outside its
control, including the ability of its clients or competitors to hire, retain
and motivate project managers and other senior technical staff; the ownership
by competitors of software used by potential clients; the price at which
others offer comparable services; the ability of its clients to perform the
services themselves; and the extent of its competitors' responsiveness to
client needs. There can be no assurance that the Company will be able to
compete effectively on pricing or other requirements with current and future
competitors or that competitive pressures will not cause the Company's
revenues or income to decline or otherwise materially adversely affect its
business, financial condition and results of operations.
Intellectual Property Rights. The Company relies on a combination of trade
secrets, nondisclosure and other contractual arrangements, and copyright and
trademark laws to protect its intellectual property rights. The Company enters
into confidentiality agreements with its employees, generally requires that
its consultants and clients enter into such agreements and limits access to
its proprietary information. There can be no assurance that the steps taken by
the Company in this regard will be adequate to avoid the loss or
misappropriation of its proprietary information, or that the Company will able
to detect unauthorized use of such information and take appropriate steps to
enforce its intellectual property rights.
A portion of the Company's business involves the development of software
applications for specific client engagements. Ownership of such software is
the subject of negotiation with each particular client and is typically
assigned to the client. The Company also develops software application
frameworks, and may retain ownership or marketing rights to these application
frameworks, which may be adapted through further customization for future
client projects. Certain clients have prohibited the Company from marketing
the software and application frameworks developed for them entirely or for
specified periods of time or to specified third parties, and there can be no
assurance that clients will not demand similar or other restrictions in the
future. Issues relating to the ownership of and rights to use software and
application frameworks can be complicated, and there can be no assurance that
disputes will not arise that affect the Company's ability to resell or reuse
such software and application frameworks.
Although the Company believes that its services and products do not infringe
on the intellectual property rights of others, there can be no assurance that
such a claim will not be asserted against the Company in the future, or that
if asserted, any such claim will be successfully defended.
International Operations. The Company intends to expand its existing
international operations and enter additional international markets, which
will require significant management attention and financial resources and
could adversely affect the Company's operating margins and earnings. In order
to expand international operations, the Company will need to hire additional
personnel and develop relationships with potential international clients
through acquisition or otherwise. To the extent that the Company is unable to
do so on a timely basis, any growth of the Company in international markets
would be limited, and the Company's business, financial condition and results
of operations would be materially and adversely affected.
The Company's international business operations are subject to a number of
risks, including, but not limited to, difficulties in building and managing
foreign operations, enforcing agreements and collecting receivables through
foreign legal systems, longer payment cycles, fluctuations in the value of
foreign currencies and unexpected regulatory, economic or political changes in
foreign markets. There can be no assurance that these factors will not have a
material adverse effect on the Company's business, financial condition and
results of operations.
Authorization to Issue Preferred Stock. The Board of Directors has the
authority to issue Preferred Stock and to determine the preferences,
limitations and relative rights of shares of Preferred Stock and to fix the
number of shares constituting any series and the designation of such series,
without any further vote or action by the
15
<PAGE>
Company's shareholders. The Preferred Stock could be issued with voting,
liquidation, dividend and other rights superior to the rights of the Class B
Common Stock. The potential issuance of Preferred Stock may delay or prevent a
change in control of the Company, discourage bids for the Class B Common Stock
at a premium over the market price and adversely affect the market price and
the voting and other rights of the holders of the Common Stock.
No Dividends. The Company has never declared or paid cash dividends on its
capital stock and does not anticipate paying any cash dividends in the
foreseeable future.
16
<PAGE>
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
C. RECENT SALES OF UNREGISTERED SECURITIES:
Upon completion of the Company's initial public offering, 420,953 shares of
the Company's Series A Convertible Preferred Stock were automatically
converted into 420,953 shares of the Company's Class B Common Stock.
During the quarter ended December 31, 1997, an optionee exercised an
incentive stock option to purchase 14,697 shares of Class B Common Stock under
the Company's Amended and Restated 1996 Equity Incentive Plan at an exercise
price of $2.45 per share.
The issuance of the securities in the transaction described in paragraph (1)
above was deemed to be exempt from registration under the Securities Act by
virtue of Section 3(a)(9) thereof.
The sale of securities in the transaction described in paragraph (2) above
was deemed to be exempt from registration under the Securities Act by virtue
of Rule 701 promulgated thereunder in that it was offered and sold pursuant to
a written compensatory benefit plan, as provided by Rule 701.
D. USE OF PROCEEDS*: (IN THOUSANDS)
<TABLE>
<S> <C>
Effective Date of the Company's
Registration Statement: December 16, 1997
Commission File Number: 333-37661
Date Offering Commenced: December 16, 1997
Date Offering Completed: Upon the sale of all the shares registered
Names of Managing Underwriters: Adams, Harkness & Hill, Inc.
NationsBanc Montgomery Securities, Inc.
Class of Securities Registered: Class B Common Stock
Shares Registered and Sold: 3,400
Sold by Company 2,725
Sold by Selling Shareholders 675
Aggregate Price of Offering
Amount Registered and Sold: $28,900
Gross Proceeds to Company $23,162
Gross Proceeds to Selling
Shareholders $ 5,738
Underwriter's discounts and
commissions Charged to the
Company (2) $ 1,621
Other issuance costs (1) (2)
(net of expenses borne by
selling shareholders) $ 1,569
Total expenses to the Company $ 3,190
Net offering proceeds to the
Company $19,972
Approximate use of net offering
proceeds through December 31,
1997:
Paydown of Bank Lines of Credit
(2) $ 3,080
Working capital (1) --
-------
$ 3,080
Temporary investments:
Cash and cash equivalents $16,892
</TABLE>
- --------
* In connection with the initial public offering, the Company granted the
underwriters an over-allotment option to purchase 510,000 additional shares of
the Company's Class B Common Stock at the original initial public offering
price. The option was exercised in January 1998. The above "Use of Proceeds"
section does not reflect the impact of the exercise of the underwriters' over-
allotment option.
(1) These amounts represent a reasonable estimate.
(2) This amount was paid to persons other than those described in Item
701(f)(4)(v)(A).
17
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company circulated a written consent of its shareholders on December 3,
1997. Pursuant to the written consent, the shareholders were asked to approve
the following items: (1) the amendment and restatement of the Company's
articles of incorporation, (2) the amendment and restatement of the Company's
bylaws, (3) the amendment and restatement of the Company's Amended and
Restated 1996 Equity Incentive Plan, (4) certain loans to executive officers
of the Company, (5) the adoption of the Company's Employee Stock Purchase
Plan, and (6) the purchase of Series A Convertible Preferred Stock of the
Company by certain of its officers and directors. The consent was circulated
to and approved by the holders of 1,625,368 shares of Class A Common Stock and
2,160,000 shares of Class A Common Stock, or approximately 69% of the total
common stock voting power.
In addition, the Company circulated a written consent of its Series A
Preferred shareholders on November 21, 1997. Pursuant to the written consent,
the shareholders were asked to approve the amendment and restatement of the
Company's articles of incorporation. The consent was circulated to all of the
Series A Preferred shareholders, representing 420,953 shares, and approved by
the holders of 395,713 shares, or approximately 94% of the outstanding shares
of Series A Convertible Preferred.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------------------
<S> <C>
27.1 Financial Data Schedule
</TABLE>
The Company did not file any reports on Form 8-K during the three months
ended December 31, 1997.
18
<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.
Tier Technologies, Inc.
Date: October 21, 1998
/s/ James L. Bildner
By___________________________________
JAMES L. BILDNER
CHAIRMAN OF THE BOARD AND CHIEF
EXECUTIVE OFFICER
(DULY AUTHORIZED OFFICER)
/s/ George K. Ross
By___________________________________
GEORGE K. ROSS
EXECUTIVE VICE PRESIDENT AND CHIEF
FINANCIAL OFFICER
(PRINCIPAL FINANCIAL AND
ACCOUNTING OFFICER)
19
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
------- ----------- ----
<C> <S> <C>
27.1 Financial Data Schedule..........................................
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 17,998
<SECURITIES> 0
<RECEIVABLES> 6,551
<ALLOWANCES> 55
<INVENTORY> 0
<CURRENT-ASSETS> 25,049
<PP&E> 1,325
<DEPRECIATION> 352
<TOTAL-ASSETS> 28,616
<CURRENT-LIABILITIES> 4,045
<BONDS> 0
0
0
<COMMON> 24,957
<OTHER-SE> (641)
<TOTAL-LIABILITY-AND-EQUITY> 28,616
<SALES> 9,150
<TOTAL-REVENUES> 9,150
<CGS> 0
<TOTAL-COSTS> 5,680
<OTHER-EXPENSES> 2,963
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 79
<INCOME-PRETAX> 563
<INCOME-TAX> 228
<INCOME-CONTINUING> 335
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 335
<EPS-PRIMARY> 0.05
<EPS-DILUTED> 0.04
</TABLE>
