UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
Form 10-Q
---------------------
/X/ Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 2000 or
/ / Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the period from __________ to ___________
Commission file number 0-5404
_____________________
HADRON, INC.
(Exact name of registrant as specified in its charter)
New York 11-2120726
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5904 Richmond Highway
Suite 300
Alexandria, Virginia 22303
(Address of principal executive offices)
Registrant's Telephone number including area code
(703) 329-9400
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:
Yes X No
___ ___
As of May 9, 2000, 5,106,226 shares of the Common Stock of the
registrant were outstanding.
<PAGE>
HADRON, INC.
TABLE OF CONTENTS
Part I Financial Information: Page No.
Item 1. Financial Statements
Consolidated Balance Sheets at 3
March 31, 2000 and June 30, 1999
Consolidated Statements 5
of Operations for the Three and Nine
Months Ended March 31, 2000 and 1999
Consolidated Statements 6
of Cash Flows for the Nine Months Ended
March 31, 2000 and 1999
Notes to Consolidated Financial 7
Statements
Item 2. Management's Discussion and Analysis 12
of Financial Condition and Results
of Operations
Part II Other Information:
Item 2. Changes in Securities and Use of
Proceeds 17
Item 6. Exhibits and Reports on Form 8-K 17
SIGNATURES 19
<PAGE>
<TABLE>
HADRON, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2000 AND JUNE 30, 1999
<CAPTION>
MARCH 31, JUNE 30,
ASSETS 2000 1999
------------- ------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 38,200 $ 256,000
Accounts receivable, net 3,561,700 3,495,700
Prepaid expenses and other 160,200 255,400
------------ ------------
Total current assets 3,760,100 4,007,100
------------ ------------
Fixed assets 225,900 290,900
Goodwill 2,012,600 2,246,600
Other 50,500 145,100
------------ ------------
Total other assets 2,289,000 2,682,600
------------ ------------
Total assets $ 6,049,100 $ 6,689,700
============ ===========
</TABLE>
See Notes to Consolidated Financial Statements
(Unaudited)
-3-
<PAGE>
<TABLE>
HADRON, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2000 AND JUNE 30, 1999
<CAPTION>
MARCH 31, JUNE 30,
LIABILITIES AND SHAREHOLDERS' EQUITY 2000 1999
------------ ------------
(Unaudited)
<S> <C> <C>
Current liabilities:
Accounts payable $ 676,200 $ 917,100
Note payable - line of credit 789,600 638,800
Note payable 500,000 500,000
Notes payable - related party 330,000 150,000
Other current liabilities 1,592,000 1,867,800
------------ -----------
Total current liabilities 3,887,800 4,073,700
------------ -----------
Notes payable 917,700 1,292,700
Notes payable - related parties 705,100 805,100
Other 100,000 62,600
------------ -----------
Total long-term liabilities 1,722,800 2,160,400
------------ -----------
Total liabilities 5,610,600 6,234,100
------------ -----------
Shareholders' equity:
Common stock $.02 par; authorized 20,000,000 shares;
Issued and outstanding - March 31, 2000,
5,059,826 shares And June 30, 1999, 2,487,518 shares 101,200 49,700
Additional capital 10,638,400 9,758,300
Accumulated deficit (10,301,100) (9,352,400)
------------ -----------
Total shareholders' equity 438,500 455,600
------------ -----------
Total liabilities and shareholders' equity $ 6,049,100 $ 6,689,700
============ ============
</TABLE>
See Notes to Consolidated Financial Statements
(Unaudited)
-4-
<PAGE>
<TABLE>
HADRON, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2000 AND 1999
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
2000 1999 2000 1999
----------- ------------- ------------ -----------
<S> <C> <C> <C> <C>
Revenues $ 4,754,800 $ 5,148,200 $ 15,022,100 $ 14,943,200
----------- ------------- ------------ -----------
Operating costs and expenses:
Costs of revenue 3,991,700 4,509,500 12,744,900 13,203,100
Selling, general and 964,700 582,700 2,959,900 1,498,100
administrative
------------ ------------- ------------ -----------
Total operating costs and 4,956,400 5,092,200 15,704,800 14,701,200
expenses
------------ ------------- ------------ -----------
Operating income (loss) (201,600) 56,000 (682,700) 242,000
------------ ------------- ------------ -----------
Other expense:
Interest expense (net) (91,800) (3,200) (258,300) (23,800)
Other expense (24,300) (100) (7,700) (2,900)
------------ ------------- ------------ -----------
Total other expense (116,100) (3,300) (266,000) (26,700)
------------ ------------- ------------ -----------
Income (loss) before income (317,700) 52,700 (948,700) 215,300
taxes
Provision for income taxes - 5,500 - 24,900
------------ ------------- ------------ -----------
Net income (loss) $ (317,700) $ 47,200 $ (948,700) $ 190,400
============ ============= ============ ===========
Per share data:
Net income (loss) per share
Basic $ (.11) $ .03 $ (.35) $ .11
============ ============= ============ ===========
Diluted $ (.11) $ .01 $ (.35) $ .06
============ ============= ============ ===========
Weighted average number of
shares
Basic 2,833,692 1,849,432 2,677,273 1,774,225
============ ============= ============ ===========
Diluted 2,833,692 3,133,088 2,677,273 3,109,660
============ ============= ============ ===========
</TABLE>
See Notes to Consolidated Financial Statements
(Unaudited)
- 5 -
<PAGE>
<TABLE>
HADRON, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED MARCH 31, 2000 AND 1999
<CAPTION>
Nine Months Ended
March 31,
2000 1999
---------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (948,700) $ 190,400
----------- -----------
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Depreciation and amortization 343,300 56,350
Changes in operating assets and liabilities:
Accounts receivable (66,000) 1,240,800
Prepaid expenses and other 95,200 150
Other assets 94,600 (2,400)
Accounts payable (240,900) (620,900)
Other current liabilities (299,800) (242,400)
Other long-term liabilities 37,400 3,100
----------- -----------
Total adjustments (36,200) 434,700
----------- -----------
Net cash provided (used) by operating activities (984,900) 625,100
----------- -----------
Cash flows from investing activities:
Property additions (20,400) (91,000)
Purchase of Vail - (1,193,600)
Cash acquired in connection with Vail purchase - 779,700
----------- -----------
Net cash used by investing activities (20,400) (504,900)
----------- -----------
Cash flows from financing activities:
Proceeds of borrowings on bank and other loans 1,726,700 825,000
Proceeds of stock options and warrants exercised 59,900 3,500
Proceeds of investment group 835,000 -
Proceeds of employee stock purchases 36,700 52,300
Payments on bank and other loans (1,870,800) (994,100)
----------- -----------
Net cash provided (used) by financing activities 787,500 (113,300)
----------- -----------
Net increase (decrease) in cash and cash equivalents (217,800) 6,900
Cash and cash equivalents at beginning of period 256,000 60,500
----------- -----------
Cash and cash equivalents at end of period $ 38,200 $ 67,400
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
(Unaudited)
- 6 -
<PAGE>
HADRON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. Basis of Presentation
The interim consolidated financial statements for Hadron,
Inc. (the "Company") are unaudited, but in the opinion of
management reflect all adjustments (consisting only of normal
recurring accruals) necessary for a fair presentation of results
for such periods. The results of operations for any interim
period are not necessarily indicative of results for the full
year. The balance sheet at June 30, 1999 has been derived from
the audited financial statements at that date but does not
include all of the information and footnotes required by
generally accepted accounting principles for complete financial
statements. These consolidated financial statements should be
read in conjunction with the financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for
the year ended June 30, 1999 ("1999 Form 10-K") filed with the
Securities and Exchange Commission.
Certain reclassifications have been made to prior period
amounts to conform to current period classifications.
2. Debt
The Company entered into a Loan and Security Agreement dated
June 29, 1999 (the "Loan Agreement") with United Bank. The Loan
Agreement provides the Company with a one-year $1.5 million line
of credit facility (the "Credit Facility") and a three-year $1.5
million term loan (the "Term Loan"). Interest on each of the
facilities is at the prime rate plus 150 basic points. Dr. C.W.
Gilluly, Chairman of the Company, and his wife have personally
guaranteed the Term Loan. The Company is subject to certain
financial covenants pursuant to the Loan Agreement, including
debt to net worth ratio, debt to EBITDA ratio, and working
capital and net worth requirements.
On April 12, 2000, the Company entered into a First
Modification and Extension Agreement (this "Agreement") with
United Bank. This Agreement extends the maturity date on the
Credit Facility from June 29, 2000 to October 31, 2000.
On April 12, 2000, the Company entered into an Amended and
Restated Guaranty of Payment with Dr. Gilluly and his wife to
modify their personal guarantee on the Notes to cover 50% of the
aggregate principal outstanding in an amount not to exceed
$750,000, through October 31, 2000. In addition, Jon M. Stout,
the Company's newly elected President and Chief Executive
Officer, pursuant to the April, 12, 2000 Guaranty of Payment,
will guarantee the remaining 50% of the principal outstanding in
an amount not to exceed $750,000, through October 31, 2000. On
April 12, 2000, United Bank granted a waiver and modification of
the original financial covenants set forth in the Loan Agreement
through June 30, 2000. The Company is now in compliance with
these modified financial covenants.
<PAGE>
The Credit Facility replaces the Company's previous line of
credit with Century National Bank. At March 31, 2000, the
Company had outstanding borrowings of $790,000 under this
facility. Proceeds from the Term Loan were used to repay the
Company's $1.5 million in short-term notes that were issued in
connection with the Company's May 1999 acquisition of Avenue
Technologies, Inc. ("ATI"). The Term Loan provides for monthly
principal payments of approximately $42,000, plus interest. As
of March 31, 2000, principal payments of $375,000 have been
made, constituting all principal payments due at such time,
leaving an outstanding balance of $1,125,000.
The Term Loan and the Credit Facility are secured by the
accounts receivable and other assets of the Company. In
addition, the 3-year $998,000 convertible notes, interest
payable at 6%, issued by the Company to the former shareholders
of ATI in connection with the Company's acquisition of ATI, were
subordinated to the Company's obligations under the Term Note
and the Credit Facility. The notes are convertible into 444,000
shares of the Company's Common Stock at $2.25 per share.
In January 2000, the Company borrowed $430,000 from Dr.
C.W. Gilluly to meet its operating needs. On February 15, 2000,
these borrowings were converted into a $430,000 note payable,
due on demand, to Dr. Gilluly with interest of 12% per annum.
In consideration of the loans evidenced by this Note, the
Company issued to Dr. Gilluly a warrant, which entitles him to
purchase 430,000 shares of Common Stock, par value $0.02 per
share, at the exercise price of seventy-two cents ($0.72)
("Warrant"). The term of the Warrant is for a period of five
years, commencing on February 15, 2000 and ending February 15,
2005. As of March 31, 2000, the Company has made principal and
interest payments of $200,000 and $10,400, respectively, leaving
an outstanding note balance of $230,000.
<PAGE>
In connection with the December 1998 purchase of Vail
Research and Technology Corporation ("Vail"), the Company issued
two non-interest bearing promissory notes of $300,000 and
$100,000, respectively. The $300,000 non-interest bearing note,
which was based upon the collection of Vail's accounts
receivable, was payable each month in the amount of $25,000 for
twelve months. As of December 31, 1999, $286,000 has been paid
and $14,000 offset due to post-closing adjustments, satisfying
the note obligation of $300,000. The $100,000 non-interest
bearing promissory note is due and payable on the two-year
anniversary of the closing date, less permitted deductions taken
for contingent liabilities and uncollected accounts receivable.
3. Earnings Per Share
The following table sets forth the computation of basic and
diluted earnings per share:
<TABLE>
Three Months ended Nine Months Ended
March 31, March 31,
2000 1999 2000 1999
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Numerator: Net Income (Loss) $(317,700) $ 47,200 $(948,700) $ 190,400
Effect of dilutive securities:
Convertible debt - 3,000 - 9,000
---------- --------- ---------- ----------
Numerator for diluted earnings
per share - income available
to common shareholders after
assumed conversion $(317,700) $ 50,200 $(948,700) $ 199,400
========== ========= ========== =========
Denominator:
Denominator for basic
earnings per share:
weighted average shares
outstanding 2,833,692 1,849,432 2,677,273 1,774,225
Effect of dilutive securities:
Warrants 846,743 874,286
Employee stock options 236,913 261,149
Convertible debt 200,000 200,000
---------- --------- ---------- ----------
Denominator for diluted
earnings per share 2,833,692 3,133,088 2,677,273 3,109,660
========== ========= ========== =========
Basic earnings per share $ (.11) $ .03 $ (.35) $ .11
========== ========= ========== =========
Diluted earnings per share $ (.11) $ .01 $ (.35) $ .06
========== ========= ========== =========
</TABLE>
<PAGE>
Shares issuable upon the exercise of stock options or
warrants or upon conversion of debt have been excluded from the
computation to the extent that their inclusion would be anti-
dilutive.
4. Concentration of Business
The Company provides a broad range of information,
management and technical services to businesses and federal
government agencies. The Company specializes in developing
innovative technical solutions for the intelligence community,
analyzing and supporting defense systems (including intelligent
weapons systems and biological warfare defense), and supporting
computer systems.
Revenues from services performed under direct and indirect
long-term contracts and subcontracts with government defense and
intelligence agencies comprise the majority of the Company's
business. The majority of the Company's technical and
professional service business with governmental departments and
agencies is obtained through competitive procurement and through
"follow-up" services related to existing contracts. In certain
instances, however, the Company acquires such service contracts
because of special professional competency or proprietary
knowledge in specific subject areas.
5. Equity Capital
On March 30, 2000, the Company received $877,500 in equity
capital from a group of investors led by Jon M. Stout, who has
been named to the position of President and Chief Executive
Officer. The investment group, which also included investment
banker J. Richard Knop and John D. Sanders, financial advisor and
a member of the Company's Board of Directors, purchased 2,250,000
units, each consisting of one share of common stock and a warrant
to purchase 0.9 shares of common stock, at $0.39 per unit. The
five-year warrants are exercisable at $0.72 per share. The
Company incurred legal and financial fees of $42,500 in
connection with this investment.
6. Business segments and major customers
The Company has four reportable segments, comprising its
individual operating subsidiaries: Avenue Technologies, Inc.
("ATI"), Engineering & Information Services, Inc. ("EISI"), SyCom
Services, Inc. ("SyCom"), and Vail Research and Technology
Corporation ("Vail"). Each of the operating subsidiaries
performs within the Company's one industry segment, providing
engineering, computer support services and other professional
technical services. The reportable segments are distinguished by
their individual clients, prior experience and technical skills
within the industry segment.
<PAGE>
Each of the reportable segments has a president who is
responsible for the operating results. Operating results are
measured at the net income level for each segment. The
accounting policies of the reportable segments are the same as
those described in the summary of significant accounting
policies. Interest on debt incurred in connection with an
acquisition and applicable associated goodwill amortization is
charged to the reportable segment. The Company's corporate
amounts consist primarily of certain activities and assets not
attributable to the reportable segments.
<TABLE>
HADRON, INC.
REPORTABLE SEGMENTS
FASB STATEMENT 131
FOR THE THREE AND NINE MONTHS
ENDED MARCH 31, 2000 AND 1999
THREE MONTHS THREE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED ENDED
MARCH 2000 MARCH 1999 MARCH 2000 MARCH 1999
<CAPTION>
DESCRIPTON:
- -------------------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Trade revenues:
ATI $ 1,088,000 $ - $ 3,677,000 $ -
EISI 2,255,100 2,801,500 7,201,600 8,293,600
SyCom 1,317,900 2,022,000 3,847,900 6,257,200
Vail 49,700 316,300 153,700 367,800
Corporate 44,100 8,400 141,900 24,600
------------ ----------- ------------ -----------
Total trade revenues $ 4,754,800 $ 5,148,200 $ 15,022,100 $ 14,943,200
============ =========== ============ ===========
Net income/(loss):
ATI $ (230,600) $ - $ (620,300) $ -
EISI 13,600 68,200 164,800 294,700
SyCom (25,900) (13,500) (277,900) (67,400)
Vail (8,400) (1,400) (132,300) 1,500
Corporate (66,400) (6,100) (83,000) (38,400)
------------ ----------- ------------ -----------
Total net income $ (317,700) $ 47,200 $ (948,700) $ 190,400
============ =========== ============ ===========
Assets:
ATI $ 3,578,500 $ - $ 3,578,500 $ -
EISI 806,300 880,800 806,300 880,800
SyCom 567,700 781,700 567,700 781,700
Vail 700,500 1,169,000 700,500 1,169,000
Corporate 396,100 543,000 396,100 543,000
------------ ----------- ------------ -----------
Total assets $ 6,049,100 $ 3,374,500 $ 6,049,100 $ 3,374,500
============ =========== ============ ===========
</TABLE>
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS AND QUANTITATIVE AND
QUALITATIVE DISCLOSURE ABOUT MARKET RISK
COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 2000
TO THE THREE MONTHS ENDED MARCH 31, 1999
Revenues for the three months ended March 31, 2000 were
approximately $4,755,000, an 8% decrease from the prior year
quarter. This decrease is due to the hiring of certain of the
Company's technical employees by EISI's major client and
difficulties recruiting new technical employees at SyCom,
partially offset by additional revenue from ATI.
Costs of revenue for the quarter ended March 31, 2000 were
approximately $3,992,000, a decrease of approximately 11%. The
decrease is primarily due to the lowered personnel costs of both
EISI and SyCom. Costs of revenue as a percentage of revenues
were approximately 84% and 88% for the quarters ended March 31,
2000 and 1999, respectively. This 4% decrease is primarily due
to incorporating the cost mixes of ATI and Vail, coupled with the
reduction in retention of technical personnel on overhead while
awaiting new customer tasking and funding.
Selling, general and administrative expenses totaled
approximately $965,000 for the March 31, 2000 quarter, compared
with approximately $583,000 for the prior year quarter. The
increase is primarily due to the addition of key administrative
personnel of ATI and Vail, the Company's business development
efforts targeting the biological weapons defense and
counterterrorism arenas, along with the amortization of goodwill
associated with the purchase of ATI.
The Company had an operating loss of $202,000 in the March
31, 2000 quarter, compared to an operating profit of $56,000 in
the corresponding prior period. This operating loss is primarily
attributable to the loss of billable employees, as discussed
above, coupled with the increase in corporate personnel hired to
develop the Company's initiatives in the areas of biological
weapons defense and counterterrorism.
Net interest expense increased approximately $89,000 between
the quarter ended March 31, 1999 and the quarter ended March 31,
2000, due to higher outstanding borrowings and increases in debt
associated with the recent acquisitions.
The net loss for the quarter ended March 31, 2000 was
$318,000, compared to net income of approximately $47,000 in the
prior year quarter. The net loss resulted primarily from the
loss of billable positions, as discussed above, coupled with the
costs of retaining key technical professional personnel and
diversifying business development efforts.
<PAGE>
COMPARISON OF THE NINE MONTHS ENDED MARCH 31, 2000
TO THE NINE MONTHS ENDED MARCH 31, 1999
Revenues for the nine months ended March 31, 2000 were
approximately $15,022,000, less than a 1% increase from the prior
year period. This increase reflects revenues from ATI, partially
offset by fewer contract requirements at major government and
commercial customers of both EISI and SyCom, due to certain
government budgetary constraints and the hiring of certain of the
Company's technical employees by its major customers.
Costs of revenue for the nine months ended March 31, 2000
were approximately $12,745,000, a decrease of approximately 3%.
The decrease is primarily due to the loss of billable personnel
at both EISI and SyCom. Costs of revenue as a percentage of
revenues were approximately 85% and 88% for the period ended
March 31, 2000 and 1999, respectively. This 3% decrease is
primarily due to incorporating the cost mixes of the ATI and
Vail.
Selling, general and administrative expenses totaled
approximately $2,960,000 for the nine months ended March 31,
2000, compared with approximately $1,498,000 for the prior year
period. The increase is primarily due to the addition of key
administrative personnel of ATI and Vail, the Company's business
development efforts targeting the biological weapons defense and
counterterrorism arenas and the goodwill amortization associated
with the purchase of ATI.
The Company had an operating loss of $683,000 for the nine
months ended March 31, 2000, compared to an operating profit of
$242,000 in the prior year period. This operating loss is
primarily attributable to the loss of billable employees due to
customer cutbacks, coupled with the retaining of technical
personnel on overhead while awaiting new customer tasking and
funding, along with the increase in corporate personnel hired to
develop the Company's initiatives in the areas of biological
weapons defense and counterterrorism.
Net interest expense increased approximately $234,000 from
the nine months ended March 31, 1999 to the nine months ended
March 31, 2000, due to higher outstanding borrowings and
increases in debt associated with the recent acquisitions.
The net loss for the nine months ended March 31, 2000 was
$949,000, compared to net income of approximately $190,000 in the
prior year period. The net loss resulted primarily from the loss
of billable positions and hiring freezes by the Company's major
customers, plus the hiring of certain of the Company's technical
employees by its major customers, coupled with the costs of
retaining key technical professional personnel and diversifying
business development efforts.
<PAGE>
CAPITAL RESOURCES AND LIQUIDITY
The working capital deficit at March 31, 2000 increased by
approximately $61,000 from June 30, 1999 primarily due to the
lower base of billable technical employees at the Company's two
largest customers and the costs associated with its business
development endeavors, partially offset by an infusion of equity
capital.
Effective June 29, 1999, the Company entered into a Line of
Credit Agreement with United Bank, which provides the Company
with a $1,500,000 line of credit facility. The line of credit
provides additional working capital availability to fund the
Company's growth. Borrowings outstanding under the line of
credit totaled $790,000 at March 31, 2000.
The Company had been unable to comply with certain of the
original financial covenants of its bank credit facility at March
31, 2000 due to operating losses incurred. On April 12, 2000,
the Company received a waiver and modification of the original
financial covenants through June 30, 2000. The Company is now in
compliance with these amended and modified covenants. The
Company believes it has a good relationship with its bank, and
that the bank will continue to work with the Company as it seeks
to improve its financial condition. However, the inability of
the Company to maintain compliance with the covenants going
forward, could have a material adverse effect on the Company's
liquidity, financial condition and results of operations. The
Company may require additional infusion of equity capital to
pursue its new business development strategy and/or to facilitate
ongoing compliance with bank loan covenants.
The Company is exposed to market risks related to
fluctuations in interest rates on its debt. Increases in
prevailing interest rates could increase the Company's interest
payment obligations relating to variable rate debt. For example,
a 100 basis points increase in interest rates would increase
annual interest expense by $19,000.
On March 30, 2000, the Company received $877,500 in equity
capital from a group of investors led by Jon M. Stout. The
investment group purchased 2,250,000 units, each consisting of
one share of common stock and a warrant to purchase 0.9 shares of
common stock, at $0.39 per unit. The five-year warrants are
exercisable at $0.72 per share. The Company incurred legal and
financial fees of $42,500 in connection with this investment.
For the nine months ended March 31, 2000, the Company
received new capital of $932,000, resulting from the exercise of
stock warrants and options, purchase of stock in connection with
the Company's Stock Purchase Program, and the recent equity
capital from a group of investors.
<PAGE>
EISI's major client, John's Hopkins University Applied
Physics Laboratory ("APL"), has informed the Company that hiring
ceilings previously imposed on APL by the Government and
University have been removed and that APL anticipates converting
contractor positions to APL staff positions and using contract
labor only for positions expected to last for less than a year.
Moreover, EISI has been informed that most contract labor
positions staffed by EISI will be converted to APL staff
positions, and that most individuals in such positions would be
offered employment by APL by September 30, 2000. APL has
indicated it wishes to pursue a new relationship with EISI,
including possible use of EISI for staffing assistance,
recruiting assistance, to fill certain "temp-to-perm" positions
and to continue to fill certain short-term positions. There can
be no assurance that such discussions will lead to a revised
contractual relationship or what the terms of such new working
agreement would be.
On April 26, 2000, the Company was awarded a $3,367,000 one-
year contract with the Defense Advanced Research Projects Agency
("DARPA") to provide research in the area of biological warfare
defense.
Except for the historical information contained herein, the
matters discussed in this 10-Q include forward-looking statements
within the meaning of Section 21E of the Securities and Exchange
Act of 1934, as amended, that involve a number of risks and
uncertainties. These forward-looking statements may be
identified by reference to a future period by use of forward-
looking terminology such as "anticipate", "expect", "could",
"may" and other words of similar nature. There are certain
important factors and risks that could cause results to differ
materially from those anticipated by the statements contained
herein. Such factors and risks include business conditions and
growth in the information services, engineering services,
software development and government contracting arenas and in the
economy in general. Competitive factors include the pressures
toward consolidation of small government contracts into larger
contracts awarded to major, multi-national corporations; the
Company's ability to continue to recruit and retain highly
skilled technical, managerial and sales/marketing personnel; and
the Company's ability to successfully identify, complete and
integrate acquisitions. Other risks may be detailed from time to
time in the Company's SEC reports.
<PAGE>
Part II. Other Information
Items 1.
None.
Item 2. Changes in Securities and Use of Proceeds.
On March 30, 2000, the Company sold securities not
registered under the Securities Act of 1933 (the
"Act"), as reported in Item 1 of Form 8-K dated March
30, 2000, filed April 14, 2000, which is incorporated
herein by reference. The transaction was a privately
negotiated transaction exempt from the registration
requirements of the Securities Act of 1933 pursuant to
Section 4(2) of the Act and Rule 506 of Regulation D
promulgated thereunder.
Item 3-5.
None.
Item 6. Exhibits and Reports.
(a) Exhibits
Exhibit No.
10.1 Note Agreement between C.W. Gilluly and Hadron,Inc.
dated February 15, 2000.
10.2 Stock Purchase Warrant granted to C.W. Gilluly Dated
February 15, 2000.
27 Financial Data Schedule.
(b) Reports on Form 8-K
On April 14, 2000, the Company filed a report on Form 8-
K disclosing that on March 30, 2000, the Company entered
into a securities purchase agreement with Jon M. Stout,
Patricia W. Stout, the Stout Dynastic Trust, J. Richard
Knop and John D. Sanders (collectively being referred to
as the "Purchasers") and C.W. Gilluly. Pursuant to the
Securities Purchase Agreement, the Purchasers purchased
2,250,000 shares of Common Stock and warrants to
purchase an additional 2,025,000 shares of Common Stock
for a total consideration of $877,500. The Purchasers
hold 2,313,475 shares or 45.7% of the Corporation's
issued and outstanding Common Stock.
<PAGE>
In addition, two members of the Corporations Board of
Directors, William Howard and Robert J. Lynch, Jr. have
resigned and Mr. Stout was appointed to serve.
In connection with the Securities Purchase Agreement,
United Bank delivered a letter to the Company agreeing
to waive certain financial covenants set forth in
Section VI(A) of the June 29, 1999 loan and security
agreement upon the execution and delivery of a guaranty
of payment from Mr. Stout and an amended and restated
guaranty by Dr. and Ms. Gilluly whereby each party would
agree to guaranty payment of 50% of the principal amount
of the outstanding balance of the Loan in an amount not
to exceed $750,000. In addition, United Bank extended
the term of the loan to October 31, 2000.
<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 there unto duly authorized.
Date: May 15, 2000
Hadron, Inc.
(Registrant)
By:/S/ Jon M. Stout
Jon M. Stout
President and Chief Executive Officer
(Principal Executive Officer)
Acting Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
<PAGE>
NOTE
U.S. $430,000.00 February 15, 2000
FOR VALUE RECEIVED, the undersigned, HADRON, INC. a New York
corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order
of C. W. GILLULY (the "Lender"), upon demand, the principal sum of
U.S. Four Hundred Thirty Thousand Dollars ($430,000.00) which
constitutes the aggregate principal amount of the Advances
(defined below) made by the Lender to the Borrower (defined
below) and outstanding on the date hereof.
The Borrower also promises to pay interest on the unpaid
principal amount of each Advance from the date of such Advance
until such principal amount is paid in full, at the rate of 12%
per annum.
Both principal and interest are payable in lawful money of
the United States of America to the Lender at 415 First Street,
S.E. Washington, D.C., or such other address as the holder hereof
may designate in writing, in same day funds, without defense,
offset or counterclaim.
Borrower acknowledges the receipt of the following amounts
from the Lender: the amount of $80,000, which amount was loaned
as of January 7, 2000, and the amount of $350,000, which amount
was loaned as of January 21, 2000 (such amounts together referred
to as the "Advances").
In consideration of the loans evidenced by this Note, the
Borrower further agrees to issue to the Borrower a common stock
call option ("Warrant"), which entitles the Lender to purchase
from the Borrower up to 430,000 shares of the Borrower's common
stock, par value $0.02 per share at the exercise price of seventy-
two cents ($0.72). The term of the Warrant shall be shall be for
a period of five (5) years, commencing on February 15, 2000, and
ending February 15, 2005. The Warrant shall contain such
additional terms and conditions as are usual and customary in
such instrument.
The Borrower shall pay all reasonable costs, fees and
expenses (including court costs and reasonable attorneys' fees)
incurred by the Lender in collecting or attempting to collect any
amount that becomes due hereunder or in seeking legal advice with
respect to such collection or a default hereunder. This Note may
be prepaid at any time without penalty.
The Borrower, and every guarantor and endorser hereof,
hereby waive presentment, demand, notice of dishonor, protest and
all other demands and notices in connection with the delivery,
acceptance, performance and enforcement of this Note.
This Note shall be governed by and construed in accordance
with the laws of the Commonwealth of Virginia, without reference
to conflict of laws principles.
THE BORROWER HEREBY WAVES TRIAL BY JURY IN ANY LITIGATION
IN ANY COURT WITH RESPECT TO THIS NOTE OR THE ENFORCEMENT OR
COLLECTION HEREOF.
IN WITNESS WHEREOF, the Borrower has caused this Note to be
executed by its duly authorized representative as of the day and
year first above written.
HADRON, INC., a New York
corporation
By: /S/ S. AMBER GORDON
S. Amber Gordon
Executive Vice President
WARRANT
THE SECURITIES REPRESENTED HEREBY AND THE SECURITIES ISSUABLE
UPON THE EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AS AMENDED OR ANY STATE SECURITIES LAW AND
MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR A VALID
EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS.
WARRANT TO PURCHASE SHARES OF COMMON STOCK
(subject to adjustment hereinafter provided)
of
HADRON, INC.
This certifies that, for value received, C.W.Gilluly or his
registered assigns ("Holder") is entitled, subject to the terms
set forth below, to purchase from Hadron, Inc., a New York
corporation (the "Company"), such number of shares of the Common
Stock, par value $0.02 per share ("Common Stock"), of the
Company, that are purchasable in connection with the exercise of
the Warrant, as defined in Section 3 below, upon surrender hereof
at the principal office of the Company referred to below, with
the Notice of Exercise attached hereto as Attachment A duly
executed and simultaneous payment therefor (at the Exercise Price
as set forth in Section 2 below) in lawful money of the United
States or otherwise as hereinafter provided. The number and
Exercise Price of such shares of Common Stock are subject to
adjustment as provided below. The term "Warrant" as used herein
shall include the Warrant under this Warrant and any warrants
delivered in substitution or exchange therefor as provided
herein.
1. Term of Warrant. Subject to the terms and conditions
set forth herein, the Warrant shall be exercisable, in whole or
in part, for a period of five (5) years commencing on February
15, 2000 and ending on February 15, 2005.
2. Exercise Price. The exercise price at which this
Warrant may be exercised shall be seventy-two cents ($0.72) per
share of Common Stock. (the "Exercise Price").
3. Number of Shares; Exercise of Warrant.
3.1 Exercise and Number of Shares. Subject to the
provisions of this Agreement, the Holder of this Warrant shall
have the right to purchase from the Company (and the Company
shall issue and sell to such Holder), in the aggregate, up to
four hundred thirty thousand (430,000) shares of the Company's
Common Stock. This Warrant may be exercised in whole or in part
in as many exercises as Holder may elect. The Exercise Price
shall be payable by check for good and sufficient United States
funds.
3.2 Cashless Exercise. Subject to the other
provisions of this Agreement, in lieu of any cash payment
required upon exercise of the Warrant, the Holder may elect to
exercise this Warrant in full or in part by surrendering this
Warrant in the manner specified in Section 3.1 hereof in exchange
for the number of shares of Common Stock equal to the product of
(i) the number of shares of Common Stock as to which the Warrant
is being exercised multiplied by (ii) a fraction, (y) the
numerator of which is the Fair Market Value of a share of Common
Stock on the date of exercise less the Exercise Price, and (z)
the denominator of which is the Fair Market Value of a share of
Common Stock on such date of exercise. Fair Market Value shall
be equal to the average of the last sale price of Common Stock on
each of the ten trading days prior to the exercise date of this
Warrant on the principal exchange of which the Common Stock may
at the time be listed; or, if there shall have been no sales on
such exchange on any such trading day, the average of the closing
bid and asked prices on such exchange on such trading day; or, if
there is no such bid and asked price occurred; or, if the Common
Stock shall not be so listed, the average of the closing sales
prices as reported by NASDAQ (including its bulletin board) at
the end of each of the ten trading days prior to the date of
exercise of this Warrant in the over-the counter market; provided
that if one class of the Common Stock is listed or reported as
described in this sentence but the class of Common Stock with
respect to which Fair Market Value is being measured is not so
listed or reported, then the Fair Market Value per share with
respect to such unlisted and unreported class shall be identical
to such listed or reported class.
3.3 Delivery. The Warrant shall be exercisable by (i)
delivering to the Company the form of notice of exercise attached
hereto as Exhibit A duly completed and signed by the Holder or by
the duly appointed legal representative or duly authorized
attorney thereof, and (ii) depositing with the Company the
original of this Warrant, paying the aggregate Exercise Price for
the number of shares of Common Stock in respect of which the
Warrant is being exercised. Upon each partial exercise of the
Warrant, a new Warrant evidencing the balance of the shares of
Common Stock issuable hereunder will be issued to the Holder, as
soon as reasonably practicable, on the same terms as the Warrant
partially exercised. All payments due upon any exercise of this
Warrant shall be made in cash or by check or by making a Cashless
Exercise.
3.4 Time of Exercise. This Warrant shall be deemed to
have been exercised immediately prior to the close of business on
the date of its surrender for exercise and the person entitled to
receive the shares of Common Stock issuable upon such exercise
shall be treated for all purposes as the holder of record of such
shares as of the close of business on such date; provided,
however, that in the event that the transfer books of the Company
are closed on the date of exercise, the Holder shall be deemed to
have become a stockholder of record on the next succeeding day
that the transfer books are open and until such date, the Company
shall be under no duty to cause to be delivered any certificate
for such shares. As promptly as practicable on or after such
date and in any event within ten (10) days thereafter, the
Company at its expense shall issue and deliver to the person or
persons entitled to receive the same a certificate or
certificates for the number of shares issuable upon such
exercise. In the event that this Warrant is exercised in part,
the Company at its expense will execute and deliver a new Warrant
of like tenor exercisable for the number of shares for which this
Warrant may then be exercised.
4. Payment of Taxes and Expenses. The Company shall pay
all expenses in connection with, and all taxes and other
governmental charges that may be imposed with respect to, the
issuance or delivery of this Warrant and the Warrant Stock,
unless any such tax or charge is imposed by law upon the Holder
or upon the income or gain of Holder in connection with this
Warrant, in which case such tax or charge shall be paid by the
Holder. The Company shall not be required, however, to pay any
tax or other charge imposed in connection with any transfer
involved in the issuance of any certificate for shares of Common
Stock in any name other than that of the Holder, and in such case
the Company shall not be required to issue or deliver any stock
certificate until such tax or other charge has been paid or it
has been established to the satisfaction of the Company that no
such tax or other charge is due.
5. No Fractional Shares. No fractional shares shall be
issued upon the exercise of this Warrant. In lieu of any
fractional share to which the Holder would otherwise be entitled,
the Company shall make a cash payment equal to the Exercise Price
multiplied by such fraction.
6. Replacement of Warrant. On receipt of evidence
reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant and, in the case of
loss, theft or destruction, on delivery of an indemnity agreement
reasonably satisfactory in form and substance to the Company or,
in the case of mutilation, or surrender and cancellation of this
Warrant, the Company at its expense shall execute and deliver, in
lieu of this Warrant, a new warrant of like tenor and amount.
7. Adjustments.
(a) Adjustment. The number of shares of Common Stock
for which this Warrant is exercisable and the Exercise Price at
which such shares may be purchased shall be subject to adjustment
from time to time as set forth in this Section 7.
(b) Stock Dividends, Subdivisions and Combinations.
If at any time the Company shall:
(i) pay or make a dividend on Common Stock
payable in additional shares of Common Stock;
(ii) subdivide its outstanding shares of Common
Stock into a larger number of shares of Common Stock; or
(iii) combine its outstanding shares of Common
Stock into a smaller number of shares of Common Stock;
then (A) the number of shares of Common Stock for which this
Warrant is exercisable immediately after the happening of such
event shall be adjusted to equal the number of shares of Common
Stock which a record holder of the same number of shares of
Common Stock immediately prior to the happening of such event
would own or be entitled to receive after the happening of such
event, and (B) the Exercise Price shall be adjusted to equal (1)
the Exercise Price multiplied by the number of shares of Common
Stock for which this Warrant is exercisable immediately prior to
the adjustment divided by (2) the number of shares for which this
Warrant is exercisable immediately after such adjustment.
(c) Dividends and Distributions. If the Company shall
distribute to all holders of its outstanding shares of Common
Stock evidence of indebtedness of the Company, cash (including
cash dividends payable out of consolidated earnings or earned
surplus) or assets or securities other than additional shares of
Common Stock, including stock of a subsidiary but excluding
dividends or distributions referred to in Section 7(b) above (any
such evidences of indebtedness, cash, assets or securities, the
"assets or securities"), then, in each case, the number of
shares of Common Stock issuable after such record date to Holder
upon the exercise of each Warrant shall be determined by
multiplying the number of shares of Common Stock issuable upon
the exercise of such Warrant immediately prior to such record
date by a fraction, the numerator of which shall be the fair
market value per share of Common Stock immediately prior to the
record date for such distribution and the denominator of which
shall be the fair market value per share of Common Stock
immediately prior to the record date for such distribution less
the then fair value (as determined in good faith by the Board) of
the evidences of its indebtedness, cash or assets or other
distributions so distributed attributable to one share of Common
Stock. Such adjustment shall be made whenever any such
distribution is made, and shall become effective on the date of
distribution retroactive to the record date for the determination
of stockholders entitled to receive such distribution. Any
adjustment required by this Section 7(c) shall be made whenever
any such distribution is made, and shall become effective on the
date of such distribution retroactive to the record date for the
determination of stockholders entitled to receive such
distribution.
(d) Reorganization, Reclassification, Consolidation or
Merger. If the Company shall (i) effect any reorganization or
reclassification of its capital stock or (ii) consolidate or
merge with or into, or transfer all or substantially all of its
properties and assets to, any other person, in either case in a
transaction in connection with which a Holder has not exercised
this Warrant, then, upon any exercise of this Warrant subsequent
to the consummation thereof, such Holder shall be entitled to
receive, in lieu of the Common Stock issuable upon exercise
immediately prior to such consummation, the highest amount of
stock, other securities or property (including cash) to which
such Holder would have been entitled upon such consummation if
such Holder had exercised this Warrant immediately prior thereto,
all subject to further adjustments thereafter as provided in this
Section 7. In the case of a consolidation, merger, sale or
transfer which includes an election as to the kind of
consideration to be received by the holders, and the transfer is
not the same for each share of Common Stock, then for the
purposes of this Section the kind and amount of securities, cash
and other property receivable upon such consolidation, merger,
sale or transfer shall be deemed to be the kind and amount so
receivable per share by a plurality of the holders.
(e) All calculations under this Section 7 shall be made to
the nearest cent or to the nearest one-hundredth of a share, as
the case may be.
8. No Rights of Stockholders. Subject to this Warrant,
the Holder shall not be entitled to vote, to receive dividends or
subscription rights, or to be deemed the holder of Common Stock
or any other securities of the Company that may at any time be
issuable on the exercise hereof for any purpose, nor shall
anything contained herein be construed to confer upon the Holder,
as such, any of the rights of a stockholder of the Company,
including without limitation any right to vote for the election
of directors or upon any matter submitted to stockholders, to
give or withhold consent to any corporate action (whether upon
any recapitalization, issuance of stock, reclassification of
stock, change of par value or change of stock to no par value,
consolidation, merger, conveyance, or otherwise), to receive
notices, or otherwise, until the Warrant shall have been
exercised as provided herein.
9. Transfer of Warrant.
9.1 Warrant Register. The Company will maintain a
register (the "Warrant Register") containing the names and
addresses of the Holder or Holders. Any Holder of this Warrant
or any portion thereof may change its address as shown on the
Warrant Register by written notice to the Company requesting such
change, and the Company shall promptly make such change. Until
this Warrant is transferred on the Warrant Register of the
Company, the Company may treat the Holder as shown on the Warrant
Register as the absolute owner of this Warrant for all purposes,
notwithstanding any notice to the contrary.
9.2 Exchange of Warrant Upon a Transfer. On surrender
of this Warrant for exchange, properly endorsed on the Assignment
attached hereto and subject to the provisions of this Warrant and
with the limitations on assignments and transfers as contained in
this Section 9, the Company at its expense shall issue to or on
the order of the Holder a new warrant or warrants of like tenor,
in the name of the Holder or as the Holder (on payment by the
Holder of any applicable transfer taxes) may direct, for the
number of shares issuable upon exercise hereof.
10. Reservation and Authorization of Common Stock.
(a) The Company shall at all times reserve and keep
available for issuance upon the exercise of this Warrant the
maximum number of its authorized but unissued shares of Common
Stock as could then potentially be required to permit the
exercise in full of this and all outstanding Warrants. All
shares of Common Stock issuable upon exercise of any Warrant and
payment therefor in accordance with the terms of such Warrant
shall be duly and validly issued and fully paid and nonassesable,
and not subject to or privileged with any preemptive rights.
(b) Before taking any action which would cause an
adjustment reducing the Exercise Price below the then par value,
if any, of the shares of Common Stock issuable upon exercise of
the Warrants, the Company shall take any corporate action which
may be necessary in order that the Company may validly and
legally issue fully paid and nonassessable shares of such Common
Stock at such adjusted Exercise Price.
10. Notices. Any notice, request, consent or other
communication required to be made hereunder shall be deemed to
have been made: (a) in the case of personal delivery, on the date
of such delivery; (b) in the case of mailing, on the third
business day following the date of such mailing; and (c) in the
case of facsimile transmission, when confirmed by facsimile
machine report to the parties at the following addresses:
If to Holder: C.W. Gilluly
415 First Street, S.E.
Washington, D.C. 20003
If to Company:
5904 Richmond Highway
Suite 300
Alexandria, Virginia 22303
Fax: 703/329-9409
11. Legend. Neither this Warrant nor the shares of common
stock issuable upon exercise of this Warrant have been registered
under the Securities Act of 1933, as amended, or under the
securities laws of any state. Neither this Warrant nor the
shares of common stock issued upon exercise of this Warrant may
be sold, transferred, pledged or hypothecated in the absence of
(i) an effective registration statement for this Warrant or the
shares, as the case may be, under the Securities Act of 1933, as
amended, and such registration or qualification as may be
necessary under the securities laws of any state, or (ii) an
opinion of counsel reasonably satisfactory to the Company that
such registration or qualification is not required. The Company
shall cause a certificate or certificates evidencing all or any
of the shares of common stock issued upon exercise of this
Warrant prior to said registration and qualification of such
shares to bear the following legend:
THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY
STATE. THE SHARES MAY NOT BE SOLD, TRANSFERRED,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND SUCH
REGISTRATION OR QUALIFICATION AS MAY BE NECESSARY
UNDER THE SECURITIES LAWS OF ANY STATE, [OR A
VALID EXEMPTION FROM REGISTRATION UNDER SUCH
LAWS].
(c) Termination of Restrictions. The legend requirements
of Section 11 shall terminate when either (i) the security in
question shall have been effectively registered under the
Securities Act and disposed of pursuant thereto or (ii) the
Company shall have received an opinion of counsel reasonably
satisfactory to it that such legend is not required in order to
insure compliance with the Securities Act.
12. Investment Covenant. The Holder by his or her
acceptance hereof covenants that this Warrant is and any common
stock issued hereunder will be acquired for investment purposes,
and that the Holder will not distribute the same in violation of
any state or federal law or regulation.
13. Amendments. The terms and provisions of this Warrant
may not be modified or amended, or any provisions hereof waived,
temporarily or permanently, except by written consent of the
Company and the Holder.
14. Certificate. Upon request by the Holder of this
Warrant, the Company shall promptly deliver to such holder a
certificate executed by its President or Chief Financial Officer
setting forth the total number of outstanding shares of capital
stock, convertible debt instruments and options, rights, warrants
or other agreements relating to the purchase of such capital
stock or convertible debt instruments, together with its
calculation of the number of shares remaining available for
issuance upon exercise of this Warrant, and a certificate of the
accuracy of the statements set forth therein.
15 Successors and Assigns. This Warrant and the rights
and duties of the Holder set forth herein may be assigned, in
whole or in part, by the Holder. The obligations of the Company
evidenced by this Warrant shall be binding upon its successors,
but neither this Warrant nor any of the rights or duties of the
Company set forth herein shall be assigned by the Company, in
whole or in part, without having first received the written
consent of the Holder.
16. Governing Law. This Warrant shall be governed by, and
construed in accordance with, the laws of the Commonwealth of
Virginia without regard to the principles of conflicts of law
thereof.
IN WITNESS WHEREOF, the Company has caused this Warrant to
be executed on its behalf and under its corporate seal as of the
date first above written by one of its duly authorized officers
and its execution hereof to be attested by another of its duly
authorized officers.
Date: February 15, 2000 HADRON, INC.
By: /S/ S. AMBER GORDON
_________________________________
S. Amber Gordon,
Executive Vice President
Attested:
/S/ CARIDAD C. MILLER
________________________
Assistant Secretary
ATTACHMENT A
NOTICE OF EXERCISE
To: HADRON, INC. (the "Company")
The undersigned hereby irrevocably elects to exercise the
right of purchase thereunder, ____________ shares of Common Stock
of the Company, as provided for therein, and tenders herewith
payment of the purchase price in full in the form of wire
transfer, cash or a check in the aggregate amount of
$___________. If said number of shares shall not be all the
shares purchasable under the within Warrant, a new Warrant
Certificate is to be issued in the name of said undersigned for
the balance remaining of the shares purchasable thereunder less
any fraction of a share paid in cash.
Please issue a certificate or certificates for such shares
of Common Stock in the name of, and pay any cash for any
fractional share to:
Name:______________________________
By:________________________________
Signature:___________________________
ASSIGNMENT
(To be executed only upon assignment of Warrant)
For value received, __________________________, hereby
sells, assigns and transfers unto ________________________ the
within Warrant, together with all right, title and interest
therein, and does hereby irrevocably constitute and appoint
_______________________ attorney, to transfer said Warrant on the
books of the within-named Company, with full power of
substitution of the premises.
Dated: ___________________, 20___
____________________________________
By:
________________________________
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> MAR-31-2000
<CASH> 38
<SECURITIES> 0
<RECEIVABLES> 3712
<ALLOWANCES> 150
<INVENTORY> 0
<CURRENT-ASSETS> 3760
<PP&E> 808
<DEPRECIATION> 582
<TOTAL-ASSETS> 6049
<CURRENT-LIABILITIES> 3888
<BONDS> 0
0
0
<COMMON> 101
<OTHER-SE> 338
<TOTAL-LIABILITY-AND-EQUITY> 6049
<SALES> 15022
<TOTAL-REVENUES> 15022
<CGS> 12745
<TOTAL-COSTS> 15705
<OTHER-EXPENSES> 8
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 258
<INCOME-PRETAX> (949)
<INCOME-TAX> 0
<INCOME-CONTINUING> (949)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (949)
<EPS-BASIC> (35)
<EPS-DILUTED> (35)
</TABLE>
