FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period to
------------------ ------------------
Commission File Number 1-12902
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FRONTIER ADJUSTERS OF AMERICA, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
ARIZONA 86-0477573
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
45 East Monterey Way, Phoenix, AZ 85012
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(602) 264-1061
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last report
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 [ ]
Number of shares of Common Stock outstanding on November 9, 1998 4,605,358
---------
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
FRONTIER ADJUSTERS OF AMERICA, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1998 JUNE 30, 1998
------------------ -------------
(unaudited) (*)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 933,416 $ 929,364
Investments 1,243,831 1,289,519
Receivables 1,570,145 1,582,020
Prepaid expenses 300,788 317,454
Other 289,905 439,638
---------- ----------
TOTAL CURRENT ASSETS 4,338,085 4,557,995
---------- ----------
PROPERTY AND EQUIPMENT 2,582,270 2,543,631
Less accumulated depreciation and amortization (835,502) (819,302)
---------- ----------
1,746,768 1,724,329
---------- ----------
OTHER ASSETS
Cost of subsidiary in excess of net tangible
assets acquired 213,817 213,817
Less accumulated amortization (179,707) (179,129)
---------- ----------
34,110 34,688
Receivables (Long term) 376,000 431,000
Investments (Long term) 694,831 694,724
Other 336,090 357,964
---------- ----------
1,441,031 1,518,376
---------- ----------
TOTAL ASSETS $7,525,884 $7,800,700
========== ==========
LIABILITIES
CURRENT LIABILITIES
Accounts payable $ 83,166 $ 62,118
Accrued expenses 173,400 513,365
Franchisee/licensee remittance payable 573,089 545,830
Current Portion Long Term Liability 26,527 28,509
Other 180,385 193,684
---------- ----------
TOTAL CURRENT LIABILITIES 1,036,567 1,343,506
---------- ----------
LONG TERM LIABILITY -- 4,953
---------- ----------
STOCKHOLDERS' EQUITY
Common stock 47,820 47,820
Additional paid in capital 2,148,470 2,148,470
Treasury stock (529,584) (529,584)
Other 3,460 49,600
Retained earnings 4,819,151 4,735,935
---------- ----------
6,489,317 6,452,241
---------- ----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $7,525,884 $7,800,700
========== ==========
*Condensed from audited financial statements.
The accompanying notes are an integral part of these condensed statements.
2
<PAGE>
FRONTIER ADJUSTERS OF AMERICA, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
1998 1997
----------- -----------
REVENUE
Continuing licensee and franchisee fees $ 1,273,123 $ 1,220,102
Adjusting and risk management fees 360,246 263,606
----------- -----------
1,633,369 1,483,708
----------- -----------
COST AND EXPENSES
Compensation and fringe benefits 717,766 645,048
Office 95,515 94,149
Advertising and promotion 40,587 60,001
Depreciation and amortization 62,475 61,357
Provision for doubtful accounts 48,000 48,000
Other 273,706 187,069
----------- -----------
1,238,049 1,095,624
----------- -----------
INCOME FROM OPERATIONS 395,320 388,084
----------- -----------
OTHER INCOME (EXPENSE)
Interest income 29,434 36,466
Other (Net) (1,491) 1,679
----------- -----------
TOTAL OTHER INCOME (EXPENSE) 27,943 38,145
----------- -----------
INCOME BEFORE INCOME TAXES 423,263 426,229
INCOME TAXES 167,347 167,587
----------- -----------
NET INCOME $ 255,916 $ 258,642
=========== ===========
EARNINGS PER SHARE
Basic $ .06 $ .06
=========== ===========
Diluted $ .06 $ .06
=========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic 4,605,358 4,605,358
=========== ===========
Diluted 4,609,163 4,605,358
=========== ===========
The accompanying notes are an integral part of these condensed statements.
3
<PAGE>
FRONTIER ADJUSTERS OF AMERICA, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
1998 1997
---- ----
NET INCOME $ 255,916 $ 258,642
----------- -----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 63,021 61,903
(Gain) on disposition of property & equipment 4,979 (120)
Allowance for doubtful accounts 48,000 49,038
Change in assets and liabilities:
(Increase) decrease in:
Receivables (26,000) (122,262)
Prepaid expenses 16,666 (34,079)
Other 137,271 (26,537)
Increase (decrease) in:
Accounts payable 21,048 (23,191)
Accrued expenses (339,965) 150,629
Franchisee and licensee remittance payable 27,259 82,595
Other (13,299) (487,666)
----------- -----------
Total adjustments (61,020) (349,690)
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 194,896 (91,048)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of equipment 21,510 200
Capital expenditures (89,497) (16,308)
Investment purchased (988,096) (989,627)
Proceeds from sales of investments 1,000,000 1,000,000
Payments on License acquisition (6,935) (6,451)
Advances to licensees and franchisees (1,092,284) (1,029,663)
Collections of advances to licensees
and franchisees 1,137,159 944,241
----------- -----------
NET CASH (USED IN) INVESTING ACTIVITIES (18,143) (97,608)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends (172,701) (172,701)
Common stock repurchased -- --
----------- -----------
NET CASH PROVIDED BY(USED IN)FINANCING ACTIVITIES (172,701) (172,701)
EFFECT OF EXCHANGE RATE CHANGES ON CASH -- 123
----------- -----------
NET INCREASE (DECREASE) IN CASH 4,052 (361,234)
Cash at beginning of the period 929,364 1,012,233
----------- -----------
Cash at the end of the period $ 933,416 $ 650,999
=========== ===========
Supplemental disclosures of Cash Flow information
Cash paid during the period
Income taxes $ 3,215 $ 86,910
Interest $ 565 $ 1,048
The accompanying notes are an integral part of these condensed statements.
4
<PAGE>
FRONTIER ADJUSTERS OF AMERICA, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(1) BASIS OF PRESENTATION
The financial information included herein is unaudited; however, such
information reflects all adjustments (consisting solely of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
statement of results of operations for the interim periods.
The results of operations for the three month period ended September 30,
1998 are not necessarily indicative of the results to be expected for the
full year.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The statements contained in this Report on Form 10-Q that are not purely
historical are forward looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, including statements regarding the
Company's "expectations", "anticipation", "intentions", "beliefs", or
"strategies" regarding the future. Forward looking statements include
statements regarding revenue, margins, expenses, and earnings analysis with
regard to the Company or with regard to the Company's licensees and
franchisees for the remainder of fiscal 1999 and thereafter; improvement of,
and growth in the number of, licensees and franchisees; future spending on
marketing and product development strategy; the transaction with United
Financial Adjusting Company described below; and liquidity and anticipated
availability of cash for operations, acquisitions, or payment of dividends.
All forward looking statements included in this document are based on
information available to the Company on the date of this report, and the
Company assumes no obligation to update any such forward looking statement.
It is important to note that the Company's actual results could differ
materially from those in such forward looking statements. Among the factors
that could cause actual results to differ materially are the factors
discussed in this Report and in the Company's Form 10-K for the year ended
June 30, 1998, including but not limited to the extent and nature of natural
disasters in geographic areas serviced by the Company or by its licensees
and franchisees; management decisions by insurance companies and
self-insureds to increase or decrease the degree to which they contract for
services offered by the Company, its licensees or franchisees; the Company's
ability to identify and attract new qualified licensees and franchisees; the
Company's ability to successfully manage offices reacquired from existing
licensees and franchisees; and uninsured liability for acts or omissions of
the Company's employees, licensees, or franchisees.
In August 1998, the Company entered into a letter of intent (the "Letter of
Intent") with United Financial Adjusting Company ("UFAC"), a wholly owned
subsidiary of the Progressive Corporation ("Progressive"), whereby UFAC will
purchase newly issued stock representing approximately 52% of the Company's
voting securities. Following the purchase by UFAC, the Company's
shareholders will be given the option to retain their shares and receive a
cash distribution of $1.60 per share or to surrender their shares for a
price of $2.90 per share. Up to an aggregate of 1,000,000 shares will be
accepted for repurchase. UFAC will purchase the newly issued securities of
the Company at a price of $1.30 per share and will not be entitled to
receive the cash distribution of $1.60 per share. If the transaction
contemplated by the Letter of Intent is consummated, UFAC, and therefore
Progressive, will be able to elect a majority of the board of directors and
therefore, will be able to control the business and affairs of the Company.
Consummation of this transaction is subject to shareholder approval. The
Company will provide its shareholders with a proxy statement containing a
detailed description of the proposed transaction prior to the Company's next
shareholder's meeting.
FINANCIAL CONDITION
The Company has historically financed its growth and on-going operations
with cash generated from operations. In the quarter ended September 30,
1998, Company's operations generated $195,000 in cash.
5
<PAGE>
Compared to the last fiscal year, the most significant item affecting cash
used by the Company's operations is the $340,000 decrease in accrued
expenses. This decrease results from the payout of employee benefits and
bonuses in the first quarter of this fiscal year.
Through its capital investment program, the Company replaces obsolete or
outdated equipment and invests in new equipment and furnishings to maintain
or increase the productivity of the Company and its employees. The Company
anticipates investing $200,000 to $300,000 in fiscal 1999 for equipment and
furnishings pursuant to its capital investment program.
Without giving effect to any extraordinary dividend payable should the
Company consummate the transaction with UFAC contemplated in the Letter of
Intent, management believes that the Company will be able to fund all of its
cash requirements (i.e. current operations, capital asset acquisition, and
the payment of dividends) from its current available cash as well as funds
generated by its operations.
The Company's ratio of current assets to current liabilities was 4.19 to 1
as of September 30, 1998 and 3.39 to 1 as of June 30, 1998.
RESULTS OF OPERATIONS - QUARTER ENDED SEPTEMBER 30, 1998 COMPARED TO 1997
REVENUE
The Company's revenue increased 10% or $149,000 to $1,633,000 in the current
quarter from $1,484,000 in the same period of the prior fiscal year. The
increase is a combined $96,000 increase in adjusting and risk management
fees and a $53,000 increase in continuing licensee and franchisee fees.
The increase of $96,000 in adjusting and risk management fees from $264,000
in the quarter ended September 30, 1997 to $360,000 in the quarter ended
September 30, 1998 represents a 36% increase. The Company experienced an
increase of $120,000 in adjusting fees in its Phoenix office, and decreases
of $17,000 and $7,000 in adjusting fees from the Las Vegas/Henderson and
Tucson offices, respectively. The increase in fees from the Phoenix office
primarily reflects fees generated from a new client.
The Company's revenue from continuing licensee and franchisee fees increased
4% or $53,000 from $1,220,000 in the quarter ended September 30, 1997 to
$1,273,000 in the quarter ended September 30, 1998. This increase reflects
the benefit to the Company's licensees and franchisees due to an increase in
the use of their services by insurance companies and self-insureds resulting
from a larger volume of claims and from a greater demand for the Company's
services.
The Company's revenue is affected by numerous factors including the work
loads of other companies and claims presented by their clients. Therefore,
the Company is unable to project its future revenue. The Company has
historically seen growth in licensee and franchisee fees paid. However,
during the prior fiscal year the Company experienced a decrease in revenue
due primarily to the phase out of its business relationship with its then
major client. The Company has responded to this loss by continuing to
develop and implement sales and marketing efforts to take advantage of its
geographic diversity as well as the unique strengths of its individual
licensees and franchisees. For the quarter ended September 30, 1998, the
Company successfully completed negotiations for national/regional
relationships with three new clients and with one existing client for
additional services. In addition, the Company believes that it will continue
to realize growth as it adds additional qualified licensees and franchisees.
Furthermore, the Company expects to continue to reflect revenue from its
Phoenix, Tucson, and Las Vegas/ Henderson operations.
COMPENSATION AND FRINGE BENEFITS
Compensation and fringe benefits represent approximately 58% of the
Company's costs and expenses and represent the largest single item of
expense. These expenses increased 11% or $73,000 from $645,000 in the three
months ended September 30, 1997 to $718,000 in the current quarter. This
increase is the result of the addition of a Marketing Director in the second
quarter of the last fiscal year, additional employees hired including
temporary employees to handle increased work loads in the Corporate and
Phoenix office, and cost of living, and merit increases given to employees.
6
<PAGE>
EXPENSES OTHER THAN COMPENSATION AND FRINGE BENEFITS
The Company's expenses other than compensation and fringe benefits increased
$70,000 during the three months ended September 30, 1998 as compared to the
same quarter of the prior fiscal year. The principal items affecting these
expenses are a $40,000 increase in audit and accounting fees, a $15,000
increase in computer consulting fees, a $14,000 increase in directors fees,
a $12,000 increase in insurance costs, and a $19,000 decrease in advertising
and promotional expenses.
The increase in audit and accounting fees reflects the Company's decision to
outsource certain accounting functions that were previously performed
in-house. The Company believes that this will enable it to more efficiently
monitor compliance of the constantly changing state and federal laws and
regulations. Furthermore, the Company incurred increased auditing and
accounting consulting fees in the current quarter. The increase in computer
consulting fees relates to the Company's planning for and utilization of
improved technology to provide better services to its franchisees/licensees
and clients. The increase in insurance costs results from an increase in the
cost of insurance as well as increased coverage. The increase in directors
fees reflects the greater number of directors meetings in the first quarter
of this fiscal year due to consideration by the Board of the UFAC
transaction. The decrease in advertising and promotional expenses reflects
the purchase of promotional items in the first quarter of the prior fiscal
year. The Company anticipates similar purchases in the second quarter of the
current fiscal year. The balance of the Company's costs and expenses have
not significantly changed from the same period of the prior year.
INCOME TAXES
The Company's income taxes were 39.5% of its income before taxes, or
approximately the same as they were in the prior fiscal year. Changes made
in the tax laws by various states and by the federal government have not had
a material affect on the Company's current overall tax rates, however, this
could change at any time.
OTHER INCOME
The Company's other income decreased $10,000 or 26% from $38,000 in the
quarter ended September 30, 1997 to $28,000 in the current quarter. The most
significant items affecting other income include a $7,000 decrease in
interest income, and a loss on the sale of fixed assets of $5,000.
NET INCOME
The Company's net income for the quarter ended September 30, 1998, decreased
$3,000 or 1% from $259,000 in the quarter ended September 30, 1997 to
$256,000 in the current quarter. The most significant items affecting net
income were a $149,000 increase in revenue, a $73,000 increase in
compensation and fringe benefits, a $70,000 increase in expenses other than
compensation and fringe benefits.
RESULTS OF OPERATIONS - QUARTER ENDED SEPTEMBER 30, 1997 COMPARED TO 1996
REVENUE
The Company's revenue decreased 10.8% or $180,000 to $1,484,000 in the
current quarter from $1,664,000 in the same period of the prior fiscal year.
The decrease is a combined $12,000 decrease in adjusting and risk management
fees and a $168,000 decrease in continuing licensee and franchisee fees.
The decrease of $12,000 in adjusting and risk management fees from $275,000
in the quarter ended September 30, 1996 to $263,000 in the quarter ended
September 30, 1997 represents a 4.4% decrease. A substantial portion of this
decrease is related to a major storm that occurred in mid August 1996 in the
Phoenix, Arizona metropolitan area where the Company's main offices are
located. Claims resulting from this storm provided the Company with $80,000
in adjusting services revenue in the quarter ended September 30, 1996. The
Company did however, experience a $5,000 increase in fees in its Tucson
office as compared to the same period in the previous fiscal year.
7
<PAGE>
Furthermore, the Company's Las Vegas/Henderson office, which was acquired in
the last quarter of the prior fiscal year from a former licensee, provided
$87,000 in adjusting fees during the current quarter.
The Company's revenue from continuing licensee and franchisee fees decreased
12% or $168,000 from $1,388,000 in the quarter ended September 30, 1996 to
$1,220,000 in the quarter ended September 30, 1997. This decrease reflects
the loss of revenue attributed to a client that contributed 18.8% to the
continuing licensee and franchisee fees in fiscal 1997. In June 1997, this
client elected to place its adjusting service needs with other vendors. This
will be reflected in the Company's 1998 fiscal year.
The Company's revenue is affected by numerous factors including the work
loads of other companies and claims presented by their clients. Therefore,
the Company is unable to project its future revenue. The Company has
historically seen growth in licensee and franchisee fees paid. However,
during the current fiscal year the Company has seen a decrease in revenue
due primarily to the phase out of its business relationship with its major
client. The Company has responded to this loss of revenue by developing and
implementing sales and marketing efforts to take advantage of its geographic
diversity as well as the unique strengths of its individual licensees and
franchisees, and anticipates that over time the lost business will be
replaced. In addition, the Company believes that it will continue to realize
growth as it adds additional qualified licensees and franchisees.
Furthermore, the Company expects to continue to reflect revenue from its
Tucson and Las Vegas operations.
COMPENSATION AND FRINGE BENEFITS
Compensation and fringe benefits represented approximately 59% of the
Company's costs and expenses and represent the largest single item of
expense. These expenses decreased 1% or $6,000 from $651,000 in the three
months ended September 30, 1996 to $645,000 in the current quarter.
EXPENSES OTHER THAN COMPENSATION AND FRINGE BENEFITS
The Company's expenses other than compensation and fringe benefits decreased
$41,000 during the three months ended September 30, 1997 as compared to the
same quarter of the prior fiscal year. The principal items affecting these
expenses are a $28,000 decrease in legal expenses and a $21,000 decrease in
advertising and promotional expenses. The balance of the Company's costs and
expenses did not significantly change from the same period of the prior
year.
INCOME TAXES
The Company's income taxes were 39% of its income before taxes, or
approximately the same as they were in the prior fiscal year. Changes made
in the tax laws by various states and by the federal government have not had
a material affect on the Company's current overall tax rates, however, this
could change at any time.
OTHER INCOME
The Company's other income decreased $6,000 or 14% from $44,000 in the
quarter ended September 30, 1996 to $38,000 in the current quarter. The most
significant items affecting other income include a $3,000 decrease in the
sales of computer software to the Company's licensees and franchisees and a
$1,000 increase in expenses related to rental property.
NET INCOME
The Company's net income for the quarter ended September 30, 1997, decreased
$83,000 or 24% from $342,000 in the quarter ended September 30, 1996 to
$259,000 in the current quarter. The most significant items affecting net
income were the $180,000 decrease in revenue, the $41,000 decrease in
expenses other than compensation and fringe benefits and the $54,000
decrease in income.
8
<PAGE>
YEAR 2000 COMPLIANCE
The "Year 2000" issue creates risk for the Company from unforeseen problems
in its own computer systems and from third parties with whom the Company
deals. Many currently installed computer systems and software products are
coded to accept two digit entries in the date code field. These date code
fields will need to accept four digit entries to distinguish 21st century
dates from 20th century dates. Left uncorrected, time sensitive software may
recognize a date using "00" as the year 1900 rather than the year 2000,
resulting in a computer shutdown or incorrect calculations. Failures of the
Company's and/or third parties' computer systems could have a material
adverse effect on the Company's ability to conduct its business.
To date, the Company has determined that certain of the software used by the
Company is not Year 2000 compliant. The Company has identified upgraded
software that is Year 2000 compliant. The Company expects to complete these
upgrades by December 31, 1998.
The Company is finalizing arrangements with a consulting firm to undertake a
complete analysis of the Company's operations to identify the remaining Year
2000 issues embodied in its operations and facility, and to develop a plan
to resolve such issues. The Company expects this analysis to begin during
the second quarter of this fiscal year and to be completed by December 31,
1998. Thereafter, the Company will resolve such issue.
Certain software products sold by the Company to certain of its licensees
and franchisees in prior years are not Year 2000 compliant. The Company's
computer staff is developing an upgrade of the software that will be Year
2000 compliant. The Company expects to complete development of the Year 2000
compliant version of its software by December 31, 1998. The Company will
distribute this version to purchasers of the non-compliant version, free of
charge. The Company does not anticipate that the cost of this upgrade will
be material to the Company's operations.
Members of the Company's computer staff are undertaking the task of
contacting the Company's customers and vendors to determine the status of
such customers' and vendors' software for Year 2000 compliance. As the
Company identifies these issues, it will determine the steps necessary to
avoid disruptions due to failures in Year 2000 compliance by its customers
and/or vendors.
The Company expects that the cost of analysis and development and
implementation of a plan to address its Year 2000 issues will not exceed
$175,000. The Company's estimate reflects assumptions regarding the extent
of the Year 2000 issues embodied in the Company's operations and facilities,
the availability and cost of personnel trained in this area, the compliance
plans of third parties, and similar uncertainties. However, due to the
complexity and pervasiveness of the Year 2000 issue, and in particular, the
uncertainty regarding the compliance programs of third parties, no assurance
can be given that these estimates will be achieved, and actual results could
differ materially from those anticipated. If the Company is unable to
address the Year 2000 issues successfully, or in a timely fashion, the
Company may need to devote more resources to the process and additional
costs may be incurred. This could have a material adverse effect on the
Company's results of operations. The Company has purchased insurance that
may offset certain losses to the Company for claims based upon
non-compliance with Year 2000 issues.
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
From time to time in the normal course of its business, the Company is named
as a defendant in lawsuits. The Company does not believe that it is subject
to any such lawsuits or litigation or threatened lawsuits or litigation that
will have a material adverse effect on the Company or its business.
9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FRONTIER ADJUSTERS OF AMERICA, INC.
Date: November 11, 1998 /s/ William J. Rocke
----------------------- ----------------------------------------
William J. Rocke, Chief Executive
Officer/Chairman of the Board,
Acting Chief Financial Officer, Director
Date: November 11, 1998 /s/ Jean E. Ryberg
----------------------- ----------------------------------------
Jean E. Ryberg, President, Director
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED
CONSOLIDATED BALANCE SHEET AT SEPTEMBER 30, 1998 (UNAUDITED) AND THE CONDENSED
CONSOLIDATED STATEMENT OF INCOME FOR THE NINE MONTHS
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 933,416
<SECURITIES> 1,243,831
<RECEIVABLES> 1,988,264
<ALLOWANCES> 418,119
<INVENTORY> 0
<CURRENT-ASSETS> 4,338,085
<PP&E> 2,582,270
<DEPRECIATION> 835,502
<TOTAL-ASSETS> 7,525,884
<CURRENT-LIABILITIES> 1,036,567
<BONDS> 0
47,820
0
<COMMON> 0
<OTHER-SE> 6,441,497
<TOTAL-LIABILITY-AND-EQUITY> 7,525,884
<SALES> 0
<TOTAL-REVENUES> 1,633,369
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,238,049
<LOSS-PROVISION> 48,000
<INTEREST-EXPENSE> 523
<INCOME-PRETAX> 423,263
<INCOME-TAX> 167,347
<INCOME-CONTINUING> 255,916
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 255,916
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
