<PAGE>
INTEGRAL SYSTEMS, INC.
10-QSB
FOR QUARTER ENDING
MARCH 31, 1998
</PAGE>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(mark one)
X Quarterly report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1998 or
_____ Transition report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission file number 0-18603
INTEGRAL SYSTEMS, INC.
(Exact name of small business issuer as specified in its chapter)
Maryland 52-1267968
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5000 Philadelphia Way, Suite A, Lanham, MD 20706
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (301) 731-4233
(Former name, address and fiscal year, if changed since last report)
Indicate by checkmark 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 March 31, 1998 the aggregate market value of the Common Stock of the
Registrant (based upon the average bid and ask prices of the Common Stock
as reported by the market makers) held by non-affiliates of the Registrant
was $60,691,444.
Registrant had 2,905,488 shares of common stock outstanding as of March
31, 1998.
</PAGE>
<PAGE>
INTEGRAL SYSTEMS, INC.
TABLE OF CONTENTS
Page No.
Part I Financial Information:
Item 1. Financial Statements
Balance Sheets - March 31, 1998, September 30, 1997 1
Statements of Operations - Three and Six Months
Ended March 31, 1998 and March 31, 1997 3
Statement of Cash Flow -Six Months Ended
March 31, 1998 and March 31, 1997 4
Statement of Stockholders' Equity - Six Months
Ended March 31, 1998 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
Part II Other Information:
Item 6. Exhibits and Reports on Form 8-K 13
</PAGE>
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
INTEGRAL SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, 1998 and September 30, 1997
ASSETS
March 31, September 30,
1998 1997
CURRENT ASSETS
Cash $1,302,476 $1,006,614
Accounts Receivable 10,387,309 9,069,607
Prepaid Expenses 56,623 106,230
Deferred Income Taxes 44,324 44,324
TOTAL CURRENT ASSETS 11,790,732 10,226,775
PROPERTY AND EQUIPMENT, at cost, net of 835,057 801,805
accumulated depreciation and amortization
OTHER ASSETS
Software Development Costs 1,413,439 1,452,242
Deposits 12,542 10,142
TOTAL OTHER ASSETS 1,425,981 1,462,384
TOTAL ASSETS $14,051,770 $12,490,964
</PAGE>
<PAGE>
INTEGRAL SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, 1998 and September 30, 1997
LIABILITIES & STOCKHOLDERS' EQUITY
March 31, September 30,
1998 1997
CURRENT LIABILITIES
Accounts Payable $1,894,741 $2,887,419
Accrued Expenses 1,650,374 1,503,321
Notes Payable 500,000 500,000
Capital Leases Payable 150,817 0
Billings in Excess of Cost 1,427,528 803,181
Income Taxes Payable 314,700 175,010
TOTAL CURRENT LIABILITIES 5,938,160 5,868,931
LONG TERM LIABILITIES
Capital Leases Payable 433,044 0
TOTAL LONG TERM LIABILITIES 433,044 0
STOCKHOLDERS' EQUITY
Common Stock, $.01 par value,
10,000,000 shares authorized, and
2,905,488 and 2,862,452 shares issued
and outstanding at March 31, 1998
and September 30, 1997, respectively 29,054 28,624
Additional Paid-in Capital 1,107,682 840,784
Retained Earnings 6,543,830 5,752,625
TOTAL STOCKHOLDERS' EQUITY 7,680,566 6,622,033
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $14,051,770 $12,490,964
<TABLE>
</PAGE>
<PAGE>
INTEGRAL SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<S> <C> <C> <C> <C>
Three Months Ended Six Months Ended
March 31, March 31,
1998 1997 1998 1997
Revenue $5,826,753 $4,409,012 $12,385,731 $9,267,960
Cost of Revenue
Direct Labor 1,523,419 1,114,284 2,802,073 2,106,440
Overhead Costs 1,268,116 699,316 2,329,207 1,509,492
Travel and Other Direct Costs 211,525 171,500 327,335 246,293
Direct Equipment &
Subcontracts 1,090,126 1,549,232 3,829,974 3,652,117
Total Cost of Revenue 4,093,185 3,534,332 9,288,588 7,514,342
Gross Margin 1,733,568 874,680 3,097,143 1,753,618
Operating Expenses
Selling, General &
Administrative 674,598 541,453 1,361,017 940,765
Product Amortization 165,000 165,000 330,000 330,000
Total Operating Expenses 839,598 706,453 1,691,017 1,270,765
Income From Operations 893,970 168,227 1,406,126 482,853
Other Income (Expense)
Interest Income 9,425 11,360 19,919 24,578
Interest Expense 22,983 (3,115) 47,914 (6,096)
Miscellaneous, net (37,230) (21,481) (89,126) (52,738)
Total Other Income (Expense) (50,788) (13,236) (117,121) (34,256)
Income Before Income Taxes 843,182 154,991 1,289,005 448,597
Provision for Income Taxes 325,600 52,100 497,800 165,500
Net Income $ 517,582 $ 102,891 $ 791,205 $ 283,097
Weighted Average Number of
Common Shares Outstanding
During Period 2,890,918 2,858,538 2,881,393 2,858,070
Earnings per share $0.18 $0.04 $0.27 $0.10
Earnings Per share -
Assuming Dilution $0.17 $0.04 $0.26 $0.10
</TABLE>
</PAGE>
<PAGE>
INTEGRAL SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended
March 31,
1998 1997
Cash flows from operating activities:
Net income $791,205 $283,097
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 521,916 430,421
(Increase) decrease in:
Accounts receivable (1,317,702) (1,853,340)
Prepaid expenses (131,575) (39,182)
(Decrease) increase in:
Accounts payable (992,678) 1,422,996
Accrued expenses 328,235 49,766
Notes Payable 0 370,000
Billings in excess of cost 624,347 263,498
Income taxes payable 139,690 34,550
Total adjustments (827,767) 678,709
Net cash provided (used) by operations (36,562) 961,806
Cash flow from investing activities:
Acquisition of fixed assets (225,168) (290,428)
Increase in software development costs (291,197) (434,425)
Increase in other assets (2,400) 0
Net cash provided (used) in investing activities (518,765) (724,853)
Cash flow from financing activities:
Proceeds from issuance of common stock 267,328 5,556
Proceeds from capital lease 583,861 0
Net cash provided by financing activities 851,189 5,556
Net increase (decrease) in cash 295,862 242,509
Cash - beginning of year 1,006,614 1,369,915
Cash - end of period $1,302,476 $1,612,424
</PAGE>
<PAGE>
<TABLE>
INTEGRAL SYSTEMS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED
MARCH 31, 1998
<S> <C> <C> <C> <C> <C>
Common
Number Stock Additional
of at Par Paid-in Retained
Shares Value Capital Earnings Total
Balance September 30, 1997 2,862,452 $28,624 $840,784 $5,752,625 $6,622,033
Exercise of Stock Options 43,036 430 266,898 - 267,328
Net income - - - 791,205 791,205
Balance March 31, 1998 2,905,488 $29,054 $1,107,682 $6,543,830 $7,680,566
</TABLE>
</PAGE>
<PAGE>
INTEGRAL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
1. Basis of Presentation
The interim financial statements include the accounts of Integral
Systems, Inc. (ISI or the Company) and its two wholly-owned subsidiaries,
Integral Marketing, Inc. (IMI) and InterSys, Inc. (INTSYS). In the opinion
of management, the financial statements reflect all adjustments consisting
only of normal recurring accruals necessary for a fair presentation of
results for such periods. The financial statements, which are condensed
and do not include all disclosures included in the annual financial
statements, should be read in conjunction with the consolidated financial
statements of the Company for the fiscal year ended September 30, 1997. The
results of operations for any interim period are not necessarily
indicative of results for the full year.
Certain accounts in the prior period financial statements have been
reclassified for comparative purposes to conform with the
presentation in the current year financial statements.
2. Accounts Receivable
Accounts receivable at March 31, 1998 and September 30, 1997 consist
of the following:
March 31, 1998 Sept. 30, 1997
Billed $6,122,760 $4,127,460
Unbilled 4,259,300 4,940,947
Other 5,249 1,200
Total $10,387,309 $9,069,607
The Company uses the direct write-off method for bad debts.
The Company's accounts receivable consist of amounts due on prime
contracts and subcontracts with the U.S. Government and contracts with
various private organizations. Unbilled accounts receivable consist
principally of amounts that are billed in the month following the
incurrence of cost or when milestones are delivered under fixed price
contracts. All unbilled receivables are expected to be billed and
collected within one year.
3. Line of Credit
The Company has a line of credit agreement with a local bank for
$3,000,000. Borrowings under the line of credit bear interest at
the Eurodollar Rate plus 1.9% per annum. Any accrued interest is
payable monthly. The line of credit is secured by the Company's
billed and unbilled accounts receivable. The line also has certain
financial covenants, including minimum net worth and liquidity
ratios. The line expires February 28, 1999. At March 31, 1998 and
September 30, 1997, the Company had $500,000 outstanding balance
under the line of credit.
4. Capital Lease
During the quarter, the Company secured a $1.0 million equipment
lease line of credit that had a balance of $583,000 at March 31,
1998. The balance is payable over 36 months and bears interest at a
rate of 8.4% per annum. The unused portion of the line of credit
will be used to finance future equipment purchases and will have
similar terms.
</PAGE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Comparison Of The Three Months Ended March 31, 1998
To The Three Months Ended March 31, 1997
The components of the Company's income statement as a percentage of
revenue are depicted in the following table for the three months ended
March 31, 1998 and March 31, 1997:
% of % of
1998 Revenue 1997 Revenue
(000's omitted) (000's omitted)
Revenue $5,827 100.0 $4,409 100.0
Expenses
Cost of Revenue 4,093 70.2 3,534 80.2
SG&A 675 11.6 542 12.3
Prod. Amortization 165 2.8 165 3.7
Other 51 .9 13 .3
Income Taxes 325 5.6 52 1.2
Total Expenses 5,309 91.1 4,306 97.7
Net Income $ 518 8.9 $ 103 2.3
Revenue
The Company sells its products and services by contract to the Federal
Government as well as commercial and international organizations. The
Company defines commercial contracts as any business opportunity that
includes, as the principal part of the sale, any of its commercial off-
the-shelf (COTS) software products. The Company presently sells three
proprietary COTS products, namely EPOCH, OASYS, and DRS.
The Company, through its wholly owned subsidiary, Integral Marketing, Inc.
(IMI), earns commissions by representing a number electronic product
manufacturers in Maryland, Virginia and the District of Columbia. The
Company classifies IMI revenues as commercial revenues.
During the three months ended March 31, 1998, consolidated revenue
increased by over 32% compared to the three months ended March 31, 1997,
increaing from $4.4 million to $5.8 million. This revenue total represents
the third highest quarterly amount in the Company's history.
During the three months ended March 31, 1998, the Company derived
approximately 45% of its consolidated revenue from commercial
opportunities compared to 40% of such revenue during the comparable period
last fiscal year. Commercial revenues also increased in absolute dollar
terms, rising from $1.8 million during the 2nd quarter of fiscal year 1997
to $2.6 million during the 2nd quarter of fiscal year 1998; an increase of
approximately 48%. This increase is primarily due to new contract awards
involving the Company's EPOCH products.
In addition, revenues from government contracts increased 21% over the
second quarter of fiscal year 1997. This increase resulted primarily from
growth of existing contracts and new contracts with the National Oceanic
and Atmospheric Administration (NOAA).
</PAGE>
<PAGE>
Gross Margin
Although management believes that the distinction between Government
revenue and Commercial revenue is important in understanding the financial
dynamics of its business, management also believes that it is important to
analyze the Company's revenue by the categories of products and services
it sells. Specifically, the Company categorizes sales from the following
sources:
- Software licenses
- Engineering Services
- Equipment and Subcontract pass throughs
- IMI commission revenues
Each of the above revenue types has different gross margin
characteristics. Generally, license revenues have the highest gross
margins, as the Company believes that this revenue type has virtually no
marginal cost associated with it. By contrast, equipment and subcontract
pass throughs have lower gross margin rates associated with them, as the
Company generally marks up these items less than 15%.
Engineering service margins typically range between 20% and 35% of
revenue, but can be less depending on specific contract pricing and/or
contract overruns. Margins for IMI vary considerably depending on items
sold and the sales volume achieved.
In many instances, margins for the Company's products and services are
bundled together as part of an overall price for a given contract and are
therefore subject to estimated allocation. The following table, which
includes such estimates, sets forth the Company's revenue and gross margin
results for its products and services for the three months ended March 31,
1998 and March 31, 1997.
1998 1997
Revenue Margin % Margin Revenue Margin % Margin
Licenses $ 441 $ 441 100.0 $ 295 $ 295 100.0
Services 3,639 973 26.7 2,349 425 18.1
Equip. and
Subcontracts 1,240 101 8.2 1,684 127 7.5
IMI 507 219 43.2 81 28 34.6
Totals $5,827 $1,734 29.8 $4,409 $ 875 19.8
The Company's gross margin percentage increased from 19.8% in the 2nd
quarter of fiscal year 1997 to 29.8% in the 2nd quarter of fiscal year
1998. As shown in the table, margins for all elements of revenue improved
in fiscal year 1998 over fiscal year 1997. Further, revenue from low
margin equipment and subcontracts accounted for only 21% of total revenue
during the current year quarter compared to 38% of total revenue last
fiscal year.
A large portion of the overall margin improvement is related to increases
in engineering services margins. Specifically certain commercial contract
overruns that occurred in the 2nd quarter of fiscal year 1997 did not
reoccur in the 2nd quarter of fiscal year 1998. Moreover, margins on
several commercial fixed price contracts improved over prior quarter
results as cost to complete estimates on these jobs have been lowered.
</PAGE>
<PAGE>
In addition, software license revenue and margins increased by 49% rising
from $295,000 to $441,000. Finally, the 526% increase in IMI sales caused
IMI's gross margin rate to increase from 34.6% in the 2nd quarter of fiscal
year 1997 to 43.2% in the 2nd quarter of fiscal year 1998.
Operating Expenses
Selling, general and administrative (SG&A) increased by approximately
$133,000 between the periods compared as the Company continues to build an
operating infrastructure to support its commercial business. Bid and
proposal expenses for the Company's Government operations were also higher
in the current period compared to last fiscal year. As a percentage of
revenue, SG&A accounted for 11.6% of revenue in the current period
compared to 12.3% during the 2nd quarter of fiscal year 1997.
Product amortization was $165,000 in the current quarter and the 2nd
quarter in fiscal year 1997. Product amortization now only pertains to
the Company's EPOCH and OASYS products as amortization for all other
products was fully recognized in fiscal year 1996.
Comparison Of The Six Months Ended March 31, 1998
To The Six Months Ended March 31, 1997
The components of the Company's income statement as a percentage of
revenue are depicted in the following table for the six months ended March
31, 1998 and March 31, 1997:
% of % of
1998 Revenue 1997 Revenue
(000's omitted) (000's omitted)
Revenue $12,386 100.0 $9,268 100.0
Expenses
Cost of Revenue 9,289 75.0 7,514 81.1
SG&A 1,361 11.0 941 10.1
Prod. Amortization 330 2.7 330 3.5
Other 117 .9 34 .4
Income Taxes 498 4.0 166 1.8
Total Expenses 11,595 93.6 8,985 96.9
Net Income $ 791 6.4 $ 283 3.1
Revenue
The Company sells its products and services by contract to the Federal
Government as well as commercial and international organizations. The
Company defines commercial contracts as any business opportunity that
includes, as the principal part of the sale, any of its commercial off-
the-shelf (COTS) software products. The Company presently sells three
proprietary COTS products, namely EPOCH, OASYS, and DRS.
The Company, through its wholly owned subsidiary, Integral Marketing, Inc.
(IMI), earns commissions by representing a number electronic product
manufacturers in Maryland, Virginia and the District of Columbia. The
Company classifies IMI revenues as commercial revenues.
</PAGE>
<PAGE>
During the six months ended March 31, 1998, consolidated revenue increased
by over 33% compared to the six months ended March 31, 1997, increasing
from $9.3 million to $12.4 million.
During the six months ended March 31, 1998, the Company derived
approximately 49% of its consolidated revenue from commercial
opportunities compared to 38% of such revenue during the comparable period
last fiscal year. Commercial revenues also increased in absolute dollar
terms, rising from $3.5 million during the 1st half of fiscal year 1997 to
$6.1 million during the 1st half of fiscal year 1998; an increase of
approximately 76%. This increase is primarily due to new contract awards
involving the Company's EPOCH products.
In addition, revenues from government contracts increased 8% over the
first half of fiscal year 1997. This increase resulted primarily from
growth of existing contracts and new contracts with the National Oceanic
and Atmospheric Administration (NOAA) and a new subcontract with NASA.
Gross Margin
Although management believes that the distinction between Government
revenue and Commercial revenue is important in understanding the financial
dynamics of its business, management also believes that it is important to
analyze the Company's revenue by the categories of products and services
it sells. Specifically, the Company categorizes sales from the following
sources:
- Software licenses
- Engineering Services
- Equipment and Subcontract pass throughs
- IMI commission revenues
Each of the above revenue types has different gross margin
characteristics. Generally, license revenues have the highest gross
margins, as the Company believes that this revenue type has virtually no
marginal cost associated with it. By contrast, equipment and subcontract
pass throughs have lower gross margin rates associated with them, as the
Company generally marks up these items less than 15%.
Engineering service margins typically range between 20% and 35% of
revenue, but can be less depending on specific contract pricing and/or
contract overruns. Margins for IMI vary considerably depending on items
sold and the sales volume achieved.
In many instances, margins for the Company's products and services are
bundled together as part of an overall price for a given contract and are
therefore subject to estimated allocation. The following table, which
includes such estimates, sets forth the Company's revenue and gross margin
results for its products and services for the six months ended March 31,
1998 and March 31, 1997.
1998 1997
Revenue Margin % Margin Revenue Margin % Margin
Licenses $ 775 $ 775 100.0 $ 540 $ 540 100.0
Services 6,541 1,627 24.9 4,556 863 18.9
Equip. &
Subcontracts 4,252 357 8.4 3,953 291 7.4
IMI 818 338 41.3 219 60 27.4
Totals $12,386 $3,097 25.0 $9,268 $1,754 18.9
</PAGE>
<PAGE>
The Company's gross margin percentage increased from 18.9% in the 1st half
of fiscal year 1997 to 25.0% in the 1st half of fiscal year 1998. As shown
in the table, margins for all elements of revenue improved in fiscal year
1998 over fiscal year 1997. Further, revenue from low margin equipment
and subcontracts accounted for only 34% of total revenue during the first
half of the current year compared to 42% of total revenue last fiscal
year.
A large portion of the overall margin improvement is related to increase
in engineering services margins. Specifically certain commercial contract
overruns that occurred in the 1st half of fiscal year 1997 did not reoccur
in the 1st half of fiscal year 1998. Moreover, margins on several
commercial fixed price contracts improved over prior year results as cost
to complete estimates on these jobs have been lowered.
In addition, software license revenue and margins increased by 44% rising
from $540,000 to $775,000. Finally, the 274% increase in IMI sales caused
IMI's gross margin rate to increase from 27.4% in the 1st half of fiscal
year 1997 to 41.3% in the 1st half of fiscal year 1998.
Operating Expenses
Selling, general and administrative (SG&A) increased by approximately $420,000
between the periods compared as the Company continues to build an operating
infrastructure to support its commercial business. Bid and proposal expenses
for the Company's Government operations were also significantly higher in the
current period compared to last fiscal year. As a percentage of revenue, SG&A
accounted for 11.0% of revenue in the current period compared to 10.1% during
the 1st half of fiscal year 1997.
Product amortization was $330,000 in both periods. Product amortization
now only pertains to the Company's EPOCH and OASYS products as
amortization for all other products was fully recognized in fiscal year
1996.
Outlook
The Company's strong second quarter and 1st half results continue a trend
of increased sales and profitability on those sales. At this time the
Company has a significant backlog of work to be performed, as well as
contracts that it expects to be awarded in the near future based on past
experience. Management believes that operating results for future periods
will continue to improve based on the following expectations:
- Sales of its software products and engineering services will
continue to increase
- Sales from its IMI subsidiary will continue to grow
- General economic conditions will continue to remain favorable
- Demand for satellite technology will continue to expand
Liquidity and Capital Resources
The Company has been profitable on an annual basis since inception and has
been able to generate adequate cash flow from operations to fund its
operating and capital expenses. To supplement operating cash flows, the
Company has access to a line of credit facility in the amount of $3.0
million which had an outstanding balance of $500,000 at March 31, 1998
(see note 3 of the Notes to Financial Statements).
During the 1st half of fiscal year 1998, the Company used approximately
$40,000 of cash from operating activities and used approximately $520,000
for investing activities, including approximately $290,000 for newly
capitalized software development costs.
</PAGE>
<PAGE>
As a result of its current cash reserves, its unused lines of credit, its
current profitability and management's internal budgeting and planning,
the Company believes it will have adequate cash resources to meet its
current operating obligations for the foreseeable future. The Company
may, from time to time, avail itself of its line of credit facility to
finance the build up of accounts receivable. Furthermore, to facilitate
future growth, the Company is exploring a possible secondary public
offering.
In terms of capital purchases, historically the Company has funded such
items through operating cash flow or capital lease. The Company has
recently secured a $1.0 million equipment lease line of credit that had a
balance of $584,000 at March 31, 1998. The Company intends to utilize the
remaining portion of this facility to purchase capital equipment over the
next 18 to 24 months.
With respect to software development, the Company intends to continue to
invest in the improvement of its principal software products, EPOCH and
OASYS, at amounts approximately commensurate with fiscal year 1997
spending levels.
Forward Looking Statements
Certain of the statements contained in this section, including those under
the headings "Outlook" and "Liquidity and Capital Resources" are forward-
looking. In addition from time to time, the Company may publish forward-
looking statements relating to such matters as anticipated financial
performance, business prospects, technological developments, new products,
research and development activities and similar matters. While the
Company believes that these statements are and will be accurate, a variety
of factors could cause the Company's actual results and experience to
differ materially from the anticipated results or other expectations
expressed in the Company's statements. The Company's business is
dependent upon general economic conditions and upon various conditions
specific to its industry, and future trends cannot be predicted with
certainty. Particular risks and uncertainties that may effect the
Company's business including the following:
- The presence of competitors with greater financial resources and
their strategic response to the Company's new services.
- The potential obsolescence of the Company's services due to the
introduction of new technologies.
- The response of customers to the Company's marketing strategies
and services.
- Activity levels in the Company's core markets.
Part II. Other Information
6. Exhibits and Reports on Form 8-K
a. Exhibits
None
b. Reports on Form 8-K
None
</PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
INTEGRAL SYSTEMS, INC.
(Registrant)
Date: March 14, 1998 By: /s/
Thomas L. Gough
President & Chief Operating Officer
Date: March 14, 1998 By: /s/
Elaine M. Parfitt
Vice President & Chief Financial Officer
</PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> MAR-31-1998
<CASH> 1,302,476
<SECURITIES> 100,947<F1>
<RECEIVABLES> 10,387,309
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 11,790,732
<PP&E> 2,742,657<F2>
<DEPRECIATION> 481,619
<TOTAL-ASSETS> 14,051,770
<CURRENT-LIABILITIES> 6,371,204
<BONDS> 0
29,054
0
<COMMON> 29,054
<OTHER-SE> 7,651,512
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 12,385,731
<TOTAL-REVENUES> 12,385,731
<CGS> 9,288,588
<TOTAL-COSTS> 3,097,143
<OTHER-EXPENSES> 1,706,224
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 47,914
<INCOME-PRETAX> 1,289,005
<INCOME-TAX> 497,800
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 791,205
<EPS-PRIMARY> .18
<EPS-DILUTED> .17
<FN>
<F1>Does not represent securities. Includes Prepaid Expenses @ $56,6223 +
Deferred Income Tax @ $44,324.
<F2>Includes PP&E @ $1,316,676 + S/W dev. costs @ $1,413,439 + Misc. deposits @
$12,542.
<F3>Includes capital lease payable/long-term @ 433,044
</FN>
</TABLE>
