INTEGRAL SYSTEMS, INC.
10-QSB
FOR QUARTER ENDING
DECEMBER 31, 1997
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 December 31, 1997 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 registrant as specified in its chapter)
Maryland 52-1267968
(State or other jurisdiction of (I.R.S. Employee
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 December 31, 1997 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 $30,020,478.
Registrant had 2,872,952 shares of common stock outstanding as of December
31, 1997.
INTEGRAL SYSTEMS, INC.
TABLE OF CONTENTS
Page No.
Part I Financial Information:
Item 1. Financial Statements
Balance Sheets - December 31, 1997, September 30, 1996 1
Statements of Operations Three Months
Ended December 31, 1997 and December 31, 1996 3
Statement of Cash Flow Three Months Ended December 31, 1997
and December 31, 1996 4
Statement of Stockholders' Equity Three Months
Ended December 31, 1997 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 11
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
INTEGRAL SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1997 and September 30, 1997
<S> <C> <C>
ASSETS December 31, September 30,
1997 1997
CURRENT ASSETS
Cash $946,541 $1,006,614
Accounts Receivable 8,585,177 9,069,607
Prepaid Expenses 349,263 106,230
Deferred Income Taxes 44,324 44,324
TOTAL CURRENT ASSETS 9,925,305 10,226,775
FIXED ASSETS
Electronic Equipment 1,107,518 1,163,083
Furniture & Fixtures 84,861 80,618
Leasehold Improvements 6,383 11,364
Software Purchases 163,186 156,946
SUBTOTAL 1,361,948 1,412,011
Less: Accumulated. Depreciation 558,917 610,206
TOTAL FIXED ASSETS 803,031 801,805
OTHER ASSETS
Software Development Costs 1,403,517 1,452,242
Deposits 12,542 10,142
TOTAL OTHER ASSETS 1,416,059 1,462,384
TOTAL ASSETS $12,144,395 $12,490,964
</TABLE>
See Notes to Financial Statements
<TABLE>
INTEGRAL SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1997 and September 30, 1997
<S> <C> <C>
LIABILITIES & STOCKHOLDERS' EQUITY December 31, September 30,
1997 1997
CURRENT LIABILITIES
Accounts Payable $2,251,730 $2,887,419
Accrued Expenses 1,366,879 1,503,321
Notes Payable 500,000 500,000
Capital Leases Payable 140,684 0
Billings in Excess of Cost 395,683 803,181
Income Taxes Payable 168,670 175,010
TOTAL CURRENT LIABILITIES 4,823,646 5,868,931
LONG TERM LIABILITIES
Capital Leases Payable 347,053 0
TOTAL LONG TERM LIABILITIES 347,053 0
STOCKHOLDERS' EQUITY
Common Stock, $.01 par value,
10,000,000 shares authorized, and
2,872,952 and 2,862,452 shares issued
and outstanding at December 31, 1997
and September 30, 1997, respectively 28,729 28,624
Additional Paid-in Capital 918,719 840,784
Retained Earnings 6,026,248 5,752,625
TOTAL STOCKHOLDERS' EQUITY 6,973,696 6,622,033
TOTAL LIABILITIES & $12,144,395 $12,490,964
STOCKHOLDERS' EQUITY
</TABLE>
See Notes to Financial Statements
<TABLE>
INTEGRAL SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
December 31,
1997 1996
<S> <C> <C>
Revenue $6,558,978 $4,858,948
Cost of Revenue
Direct Labor 1,278,654 992,156
Overhead Costs 1,061,091 810,176
Travel and Other Direct Costs 115,810 74,793
Direct Equipment & Subcontracts 2,739,849 2,102,885
Total Cost of Revenue 5,195,403 3,980,010
Gross Margin 1,363,575 878,938
Selling, General & Administrative 686,419 399,312
Product Amortization 165,000 165,000
Income From Operations 512,156 314,626
Other Income (Expense)
Interest Income 10,494 13,218
Interest Expense 24,931 (2,981)
Miscellaneous, net (51,896) (31,257)
Total Other Income (Expense) (66,333) (21,020)
Income Before Income Taxes 445,823 293,606
Provision for Income Taxes 172,200 113,400
Net Income $273,623 $180,206
Weighted Average Number of Common
Shares Outstanding During Period 2,870,119 2,857,599
Earnings per share $0.10 $0.06
See Notes to Financial Statements
</TABLE>
<TABLE>
INTEGRAL SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<S> <C> <C>
For the Three Months
Ended
December 31,
1997 1996
Cash flows from operating activities:
Net income $273,623 $180,206
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 262,334 215,089
(Increase) decrease in:
Accounts receivable 484,430 (1,902,480)
Prepaid expenses (243,033) 29,966
(Decrease) increase in:
Accounts payable (635,691) 1,255,422
Accrued expenses (136,442) (221,222)
Billings in excess of cost (407,498) 388,104
Income taxes payable (6,340) 68,900
Total adjustments (682,240) (166,221)
Net cash provided (used) by operations (408,617) 13,985
Cash flow from investing activities:
Acquisition of fixed assets (98,560) (137,571)
Increase in software development costs (116,275) (200,320)
Increase in other assets (2,400) 0
Net cash provided (used) in investing activities (217,235) (337,891)
Cash flow from financing activities:
Proceeds from issuance of common stock 78,042 0
Proceeds from capital lease 487,737 0
Net cash provided by financing activities 565,779 0
Net increase (decrease) in cash (60,073) (323,906)
Cash - beginning of year 1,006,614 1,369,915
Cash - end of period $946,541 $1,046,009
See Notes to Financial Statements
</TABLE>
<TABLE>
INTEGRAL SYSTEMS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED
DECEMBER 31, 1997
<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 10,500 105 77,935 - 78,040
Net income - - - 273,623 273,623
Balance December 31, 1997 2,872,952 $28,729 $918,719 $6,026,248 $6,973,696
See Notes to Financial Statements
</TABLE>
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 December 31, 1997 and September 30, 1997
consist of the following:
December 31, 1997 Sept. 30, 1997
Billed $4,473,970 $4,127,460
Unbilled 4,116,147 4,940,947
Other 5,060 1,200
Total $8,595,177 $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
December 31, 1997 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 $500,000 at December
31, 1997. The $500,000 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.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
The components of the Company's income statement as a percentage
of revenue are depicted in the following table for the three months
ended December 31, 1997 and December 31, 1996:
<TABLE>
% of % of
1997 Revenue 1996 Revenue
(000's omitted) (000's omitted)
<S> <C> <C> <C> <C>
Revenue
Government $3,837 58.5 $3,150 64.8
Commercial 2,722 41.5 1,790 35.2
Total Revenue 6,559 100.0 4,859 100.0
Cost of Revenue 5,195 79.2 3,980 82.0
Gross Margin 1,364 20.8 879 18.0
Operating Expenses
SG&A 686 10.5 399 8.2
Prod. Amortization 165 2.5 165 3.4
Other 67 1.0 21 .4
Total Operating Exp. 918 14.0 585 12.0
Pretax Income 446 6.8 294 6.0
Income Taxes 172 2.6 114 2.3
Net Income $ 274 4.2 $ 180 3.7
</TABLE>
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 December 31, 1997, consolidated revenue
increased by over 35% compared to the three months ended December 31,
1996, climbing from $4.9 million to $6.6 million. The Company has
posted new highs in quarterly revenue totals in five of the last six
fiscal quarters, including this first quarter of fiscal year 1998.
During the three months ended December 31, 1997, the Company derived
approximately 42% of its consolidated revenue from commercial
opportunities compared to 35% of such revenue during the comparable
period last fiscal year. Commercial revenues also increased in absolute
dollar terms, rising from $1.7 million during the 1st quarter of fiscal
year 1997 to $2.7 million during the 1st quarter of fiscal year 1998; an
increase of approximately 55%. This increase is primarily due to new
contract awards of the Company's EPOCH products.
In addition, revenues from government contracts increased 19% over the
first quarter of fiscal year 1996. This increase resulted primarily
from growth of existing contracts and new contracts with the National
Oceanic and Atmospheric Administration (NOAA).
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 believe 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 these items up less than 15%.
Engineering service margins typically range between 20% and 30% 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.
Although in many instances, margins on given contracts are bundled
together as part of an overall price and are therefore subject to
estimated allocation, the Company believes that the table below fairly
and accurately portrays the Company's revenue and gross margin results
for the three months ended December 31, 1997 and December 31, 1996.
1997 1996
Revenue Margin % Margin Revenue Margin % Margin
(000's (000's (000's (000's
omitted) omitted) omitted) omitted)
Licenses $ 334 $ 334 100.0 $245 $245 100.0
Services 2,928 680 23.2 2,207 438 19.8
Equip. &
Subcontracts 2,986 231 7.7 2,269 164 7.2
IMI 311 119 38.3 138 32 23.2
Totals $6,559 $1,364 20.8 $4,859 $879 18.1
The Company's gross margin percentage increased from 18.1% in the 1st
quarter of fiscal year 1997 to 20.8% in the 1st 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. The bulk of the
increase is related to improvements in engineering services margins because
certain commercial contract overruns that were occurred in the 1st quarter
of fiscal year 1997 did not reoccur in the 1st quarter of fiscal year 1998.
In addition, software license revenue and margins increased by 36% , rising
from $245,000 to $334,000. Finally, the 125% increase in IMI sales enabled
IMI's gross margin rate to increase from 23.2% in the 1st quarter of
fiscal year 1997 to 38.3% in the 1st quarter of fiscal year 1998.
Operating Expenses
SG&A increased by approximately $290,000 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 10.5% of revenue in the current period compared to 8.2%
during the 1st quarter of fiscal year 1997.
Product amortization was $165,000 in the current quarter and the 1st
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.
Summary
During the three months ended December 31, 1997, the Company recorded
its highest revenue total for any fiscal quarter in its history. From a
profitability standpoint, the Company's improved gross margin (both in
dollar and percentage terms) more than offset increases in SG&A expense,
contributing to a 50% increase in net income between the 1st quarter of
fiscal year 1997 and the 1st quarter of fiscal year 1998.
Outlook
The Company's strong first quarter 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
contract awards it believes are imminent and proposals in the pipeline.
Based on management's expectations of increases in sales of its software
products and engineering services, continuing success with sales through
its IMI subsidiary and the general economic conditions and continuing
demand for satellite technology, the Company believes that operating
results for its fiscal year 1998 will exceed those for 1997 for both
revenue and profitability.
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 December 31,
1997 (see note 3 of the Notes to Financial Statements).
During the 1st quarter of fiscal year 1998, the Company used
approximately $410,000 of cash from operating activities and used
approximately $215,000 for investing activities, including approximately
$116,000 for newly capitalized software development costs.
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 $500,000 at December 31, 1997. The Company intends to
utilize the remaining $500,000 of this financing 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
1. Amendment dated October 21, 1997 to contract dated April 8,
1996 between Integral Systems, Inc. and Loral Skynet
(formerly AT&T Corporation), page 13. (Portions of this
exhibit have been omitted pursuant to a request for
confidential treatment filed with the Securities and
Exchange Commission.)
b. Reports on Form 8-K
None.
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: February 13, 1998 By: /s/
Thomas L. Gough
President & Chief Operating Officer
Date: February 13, 1998 By: /s/
Elaine M. Parfitt
Vice President & Chief Financial Officer
<PAGE>
EXHIBIT A
Contract No. LLJ168E
Amendment No. 3
Page 1 of 2
CONTRACT AMENDMENT NO. 3
SUPPLIER: INTEGRAL SYSTEMS, INC.
5000 Philadelphia Way
Lanham, MD 20706
Contract No. LLJ168E dated April 8, 1996 between LORAL SKYNET and Integral
Systems, Inc., as heretofore amended, is hereby further amended as follows:
EXHIBIT B - Milestone Payment Plan is deleted and replaced with new Milestone
Payment Plan attached as page 2 of this Amendment.
Following is a contract price summary which includes this Amendment:
Original Firm Fixed Price $ %%%.%%
Previous Amendments $ %%%.%%
This Amendment $ %%%.%%
Total $ %%%.%%
ALL OTHER TERMS, CONDITIONS AND SPECIFICATIONS REMAIN UNCHANGED.
Accepted:
INTEGRAL SYSTEMS, INC. LORAL SKYNET
By: Steve Carchedi By: C.T. Brown
Title: Vice President Title: Senior Contract Specialist
Date: 10/21/97 Date: 10/15/97
MILESTONE PAYMENT PLAN
<TABLE>
<S> <C> <C> <C>
PHASE I- Telstar 5
Milestone Item Delivery Amount
Kick-off Meeting 1 $ %%%.%%
Preliminary Design Review 2 $ %%%.%%
Critical Design Review 3 $ %%%.%%
FS1300 Compatability Test @ SSL 4 $ %%%.%%
In-Plant Formal Qualification Test @ ISI 5 $ %%%.%%
Installation and Integration at Hawley 6 $ %%%.%%
Hawley Acceptance 7 $ %%%.%%
Installation and Integration at Three Peaks 8 $ %%%.%%
Acceptance Test Compliance Matrix All Phases 9A Jan 98 $ %%%.%%
Hawley Acceptance all Phases 9B Jan 98 $ %%%.%%
Three Peaks Acceptance all Phases 9C Jan 98 $ %%%.%%
Final Documentation 10 Mar 98 $ %%%.%%
</TABLE>
<TABLE>
<S> <C> <C> <C>
Milestone PHASE II-Telstar 401/402
Item Delivery Amount
Kick-Off Meeting 1 $ %%%.%%
Critical Design Review 2 Oct 97 $ %%%.%%
In-Plant Formal Qualification Test @ ISI 3 Oct 97 $ %%%.%%
Installation and Integration at Hawley
(Telemetry and Ranging) 4A Nov $ %%%.%%
Qualification Testing at Hawley $ %%%.%%
Installation and Integration at Hawley
(Commanding) 4B Jan 98 $ %%%.%%
Installation and Integration at Three Peaks
(Telemetry and Ranging) 6A Nov 97 $ %%%.%%
Installation and Integration at Three Peaks
(Commanding) 6B Jan 98 $ %%%.%%
Acceptance Test Compliance Matrix All Phases 5A Jan 98 $ %%%.%%
Hawley Acceptance all Phases 5B Jan 98 $ %%%.%%
Three Peaks Acceptance all Phases 7 Feb 98 $ %%%.%%
Final Documentation 8 Mar 98 $ %%%.%%
</TABLE>
<TABLE>
<S> <C> <C> <C>
Milestone PHASE III - Echostar 101/102
Item Delivery Amount
Kick-off Meeting 1 $ %%%.%%
Critical Design Review 2 Oct 97 $ %%%.%%
In-Plant Formal Qualification Test @ ISI 3 Jan 98 $ %%%.%%
Installation and Integration at Hawley
(Telemetry, Ranging and Commanding) 4 Jan 98 $ %%%.%%
Qualification Testing at Hawley 4 Jan 98 $ %%%.%%
Installation and Integration at Three Peaks
(Telemetry,Ranging and Commanding) 6 Jan 98 $ %%%.%%
Acceptance Test Compliance Matrix all Phases 5A Jan 98 $ %%%.%%
Hawley Acceptance all Phases 5B Jan 98 $ %%%.%%
Three Peaks Acceptance all Phases 7 Feb 98 $ %%%.%%
Final Documentation 8 Mar 98 $ %%%.%%
Note: The information provided above is considered proprietary. Confidential
information has been redacted with the use of the % symbol.
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3 MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> DEC-31-1997
<CASH> 946,541
<SECURITIES> 393,587<F1>
<RECEIVABLES> 8,585,177
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 9,925,305
<PP&E> 2,778,007<F2>
<DEPRECIATION> 558,917
<TOTAL-ASSETS> 12,144,395
<CURRENT-LIABILITIES> 5,170,699<F3>
<BONDS> 0
28,729
0
<COMMON> 28,729
<OTHER-SE> 6,944,967
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 6,558,978
<TOTAL-REVENUES> 6,558,978
<CGS> 5,195,403
<TOTAL-COSTS> 1,363,575
<OTHER-EXPENSES> 892,821
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24,931
<INCOME-PRETAX> 445,823
<INCOME-TAX> 172,200
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 273,623
<EPS-PRIMARY> 0.10
<EPS-DILUTED> 0.10
<FN>
<F1>Does not represent securities. Includes prepaid expenses @ $349,263 +
Deferred income tax @ $ 44,324.
<F2>Includes PP&E @ $1,361,948 + S/W dev. costs @ $ 1,403,517 + Misc. deposits
@ $12,542.
<F3>Includes Capital Leases Payable/Long-Term @ $347,053.
</FN>
</TABLE>
