UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 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: 0-15352
US SERVIS, Inc.
(Exact name of registrant as specified in its charter)
DELAWARE 22-2467332
(State or other jurisdiction of (I.R.S. Employer or Identification Number)
incorporation of organization)
220 Davidson Avenue, Somerset, NJ 08873
(Address of Principal Executive Office) (Zip Code)
(732) 764-9898
(Registrant's telephone number, including area code)
- ------------------------------------------------------------------------------
(Registrant's Former Name)
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_______
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes _______ No _______
APPLICABLE ONLY TO CORPORATE ISSUERS
At August 10, 1998, the registrant had outstanding 6,355,683 outstanding shares
of Common Stock, $0.01 par value.
<PAGE>
US SERVIS, INC. AND SUBSIDIARIES
INDEX
Page No.
PART I - FINANCIAL INFORMATION 1
CONSOLIDATED BALANCE SHEETS AT JUNE 30, 1998 AND
MARCH 31, 1998 2
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE
THREE MONTHS ENDED JUNE 30, 1998 AND 1997 3
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS'
EQUITY FOR THE THREE MONTHS ENDED JUNE 30, 1998 4
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE
MONTHS ENDED JUNE 30, 1998 AND 1997 5-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7-9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 9-12
PART II - OTHER INFORMATION 13
SIGNATURES 14
<PAGE>
PART I
FINANCIAL INFORMATION
1. Consolidated Financial Statements as at June 30, 1998
The consolidated balance sheet as of March 31, 1998 has been derived
from the audited Consolidated Balance Sheet contained in the Company's
Form 10-K and is presented for comparative purposes. Certain items have
been reclassified to conform to the current presentation. The
accompanying consolidated financial statements presume that users have
read the audited consolidated financial statements of the preceding
fiscal year. Accordingly, footnotes which would have substantially
duplicated such disclosures have been omitted.
The interim consolidated financial statements reflect all adjustments
which are, in the opinion of management, necessary for a fair statement
of the results for interim periods presented. Such interim adjustments
consist solely of normal recurring adjustments. The results of
operations for interim periods are not necessarily indicative of the
results to be expected for a full year.
-1-
<PAGE>
US SERVIS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<S> <C> <C>
June 30, March 31,
1998 1998
----------- ----------
ASSETS (UNAUDITED)
CURRENT ASSETS:
Cash and equivalents $4,065,000 $4,852,000
Certificates of deposit 300,000 382,000
Accounts receivable:
Billed, less allowance for doubtful
accounts of $705,000 and $690,000 6,576,000 5,985,000
Unbilled 2,354,000 2,157,000
Prepaid and refundable income taxes 11,000 14,000
Prepaid expenses and other current assets 642,000 493,000
---------- ----------
Total Current Assets 13,948,000 13,883,000
---------- ----------
PROPERTY AND EQUIPMENT 1,867,000 1,764,000
---------- ----------
OTHER ASSETS:
Software technology, less accumulated amortization
of $739,000 and $699,000 272,000 288,000
Goodwill, less accumulated amortization of $510,000
and $485,000 3,042,000 3,066,000
Accounts Receivable 146,000 170,000
Other 769,000 693,000
---------- ---------
Total Other Assets 4,229,000 4,217,000
---------- ----------
$20,044,000 $19,864,000
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $859,000 $748,000
Accrued payroll & benefits 946,000 838,000
Accrued restructuring charges 286,000 289,000
Accrued expenses for use of trade name 84,000 62,000
Other accrued expenses 822,000 977,000
Deferred income 170,000 179,000
Customers' deposits and other current liabilities 340,000 285,000
---------- ----------
Total Current Liabilities 3,507,000 3,378,000
---------- ----------
LONG-TERM LIABILITIES:
Accrued restructuring charges - net of current portion 165,000 196,000
---------- ----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Convertible preferred stock, par value $.01 per share
10,000,000 shares authorized, 2,500,000 issued
and outstanding (liquidation preference
$12,037,000) at June 30, 1998 25,000 25,000
Common stock $.01 par value; 30,000,000 shares
authorized; 6,372,000 shares issued 64,000 64,000
Capital in excess of par value 24,872,000 24,872,000
Retained earnings (deficit) (7,538,000) (8,077,000)
Subscription receivable (140,000) (140,000)
Note receivable - related party (852,000) (395,000)
---------- ----------
16,431,000 16,349,000
Less Treasury Stock at cost: 16,000 shares 59,000 59,000
---------- ----------
Total Shareholders' Equity 16,372,000 16,290,000
---------- ----------
$20,044,000 $19,864,000
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
US SERVIS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<S> <C> <C>
THREE MONTHS ENDED
JUNE 30,
---------------------------
1998 1997
---------- ----------
REVENUES:
Service fees $6,152,000 $5,893,000
Software license fees 71,000 133,000
Sales of equipment 8,000 5,000
Interest and other 106,000 92,000
---------- ----------
6,337,000 6,123,000
---------- ----------
EXPENSES:
Cost of services 4,914,000 4,434,000
Cost of equipment sales 6,000 2,000
Research and development 259,000 534,000
Selling, general and administra 1,069,000 2,051,000
Interest expense 8,000 25,000
Loan Impairment Charge (Reversa (458,000) 284,000
---------- ----------
5,798,000 7,330,000
---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES 539,000 (1,207,000)
FEDERAL AND STATE INCOME TAXES - -
---------- -----------
NET INCOME (LOSS) 539,000 (1,207,000)
========== ===========
EARNINGS PER SHARE
BASIC 0.05 (0.22)
========== ===========
DILUTED 0.04 (0.22)
========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE>
US SERVIS, INC. AND SUBSIDIARIES
CONSODIDATED STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY
FOR THE THREE MONTHS ENDED JUNE 30, 1998
(UNAUDITED)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PREFERRED STOCK COMMON STOCK CAPITAL IN NOTE
-------------------- ------------------ EXCESS OF RETAINED SUBSCRIPTION RECEIVABLE - TREASURY
SHARES PAR VALUE SHARES PAR VALUE PAR VALUE EARNINGS RECEIVABLE RELATED PARTY STOCK
--------- --------- --------- -------- ---------- ----------- --------- ----------- --------
BALANCE, MARCH 31, 1998 2,500,000 $25,000 6,372,000 $64,000 $24,872,000 ($8,077,000) ($140,000) ($395,000) ($59,000)
THREE MONTHS ENDED
JUNE 30, 1998
Reversal of loan
collateral impairment charge (457,000)
Net Income 539,000
--------- ------- --------- ------ ---------- ----------- --------- --------- ---------
BALANCE, JUNE 30, 1998 2,500,000 $25,000 6,372,000 $64,000 $24,872,000 ($7,538,000) ($140,000) ($852,000) ($59,000)
========= ======= ========= ====== ========== =========== ========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
US SERVIS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<S> <C> <C>
THREE MONTHS ENDED
JUNE 30,
-----------------------
1998 1997
--------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $539,000 ($1,207,000)
Adjustments to reconcile net income (loss) to net cash flows
from operating activities:
Depreciation and amortization of property and equipment 153,000 169,000
Accrued interest on capitalized lease obligations 10,000
Amortization of software technology 40,000 60,000
Amortization of goodwill 24,000 24,000
Amortization of convertible preferred issue costs 9,000
Provision for losses on accounts receivable 15,000 154,000
Fair value adjustment of collateral held for
note receivable from related party (457,000) 284,000
Changes in operating assets and liabilities-
Accounts receivable, billed (606,000) (1,298,000)
Accounts receivable, unbilled (197,000) -
Prepaid and refundable income taxes 3,000 -
Prepaid expenses and other current assets (149,000) 40,000
Other assets (52,000) (39,000)
Accounts payable 111,000 4,000
Accrued payroll & benefits 108,000 234,000
Accrued expenses for use of trade name 22,000 (62,000)
Other accrued expenses (155,000) 6,000
Accrued restructuring (34,000) (174,000)
Deferred income (9,000) (114,000)
Customer deposits and other current liabilities 55,000 2,000
--------- -----------
Net cash flows from operating activities: (589,000) (1,898,000)
--------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Maturity of certificate of deposit 82,000 -
Increase in software technology (24,000) (103,000)
Purchase of property and equipment (256,000) (279,000)
--------- ----------
Net cash flows from investing activities (198,000) (382,000)
--------- -----------
NET CHANGE IN CASH AND EQUIVALENTS (787,000) (2,280,000)
CASH AND EQUIVALENTS, BEGINNING OF PERIOD 4,852,000 8,063,000
--------- -----------
CASH AND EQUIVALENTS, END OF PERIOD $4,065,000 $5,783,000
========= ===========
See accompanying notes to consolidated financial statements.
5
<PAGE>
US SERVIS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(concluded)
THREE MONTHS ENDED
JUNE 30,
----------------------
1998 1997
-------- ----------
SUPPLEMENTAL INFORMATION:
Interest paid $ - 25,000
=========== ========
Income taxes paid 7,000 $ -
=========== ========
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
US SERVIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998
(UNAUDITED)
Note A - Basis of Presentation:
The consolidated financial statements include all the accounts of US SERVIS,
Inc. and its wholly-owned subsidiaries (collectively, the "Company"). All
significant intercompany transactions have been eliminated.
Note B - Nature of Business:
The Company is a provider of outsourced business and information management
services to physicians, physician networks, hospitals and ambulatory care
centers associated with integrated delivery systems. The Company's principal
focus is providing billing and accounts receivement management services. The
Company, through a strategic alliance, has expanded its product offerings to
include the implementation of electronic medical records systems. The Company
has also historically been a provider of certain third party administrative
services to a managed care organization and of clinical information systems
products to hospitals. The Company is phasing out of these activities. (See
Notes 2 and 9 to the Consolidated Financial Statements as of March 31, 1998).
Note C - Earnings Per Share:
In February 1997, the FASB issued SFAS No. 128, EARNINGS PER SHARE. This
Statement established new standards for computing and presenting earnings per
share ("EPS"). The statement requires dual presentation of basic and diluted EPS
on the face of the income statement for entities with complex capital structures
and requires a reconciliation of the numerator and denominator of the basic EPS
computation to the numerator and denominator of the diluted EPS computation. The
following is a reconciliation of the numerators and denominators for the
computation of basic and diluted earnings per share (in thousands, except per
share amounts):
7
<PAGE>
Three Months Ended
June 30,
--------------------
1998 1997
-------- ------------
Basic earnings per share
Numerator
Net income (loss) $539,000 ($1,207,000)
Less preferred dividends 235,000 217,000
-------- -----------
Income (loss) for common 304,000 (1,424,000)
-------- -----------
Denominator
Weighted average number of
common shares outstanding 6,356,000 6,351,000
--------- ----------
Basic EPS $0.05 ($0.22)
--------- ----------
Diluted earnings per share
Numerator
Income (loss) for common 304,000 (1,424,000)
--------- -----------
Denominator
Weighted average number of
common shares outstanding 6,356,000 6,351,000
Common equivalents of -
Warrants 369,000
Stock options 518,000
--------- ----------
Total shares 7,243,000 6,351,000
--------- ----------
Diluted EPS $0.04 ($0.22)
--------- ----------
Note D - Subsequent Events:
On July 20, 1998, the Company entered into an Agreement of Merger (the
"Agreement") with HBO & Company, a Delaware corporation ("HBO"), and HBO &
Company of Georgia, a Delaware corporation ("HBO Sub"), pursuant to which the
Company will be merged with and into HBO sub (the "Merger") and the stockholders
of the Company will receive for each share of capital stock of the Company
(including the Company's Series A Preferred Stock, Series B Preferred Stock and
Common Stock, each $.01 per share par value) a fraction of a share of HBO Common
Stock, $.05 per share par value, ("HBO Common Stock") to be determined by
dividing $50 Million by the product of the Market Value (as hereinafter defined)
and the Fully Diluted Shares (as hereinafter defined).
Consummation of the Merger is subject to the satisfaction or waiver of numerous
conditions, including without limitation, the following: (i): expiration or
termination of the waiting period under the Hart-Scott-Rodino Anti-Trust
Improvements Act of 1976, as amended; (ii) approval of the Agreement and the
Merger by the stockholders of the Company; (iii) the effectiveness of the
registration statement filed by HBO with the Securities and Exchange Commission
covering the shares of HBO Common Stock to be issued in the Merger;
8
<PAGE>
(iv) accuracy of each party's respective representations and warranties and the
fulfillment of their respective covenants set forth in the Agreement; (v)
absence of any change or changes in the business, properties, rights or
operations of the Company which, individually or in the aggregate, constitutes a
material adverse effect (as such term is defined in the Agreement); (vi) receipt
of an opinion of each party's tax counsel that the Merger qualifies as a tax
free reorganization; and (vii) receipt of an opinion of each party's independent
accountants that the Merger may be accounted for as a "pooling of interests." In
addition, the Company and HBO have certain rights to terminate the Agreement
including, if the conditions are not satisfied or waived, the Merger is not
consummated by November 15, 1998, or if the Market Value of HBO Common Stock is
less than $23.50 per share.
Certain stockholders of the Company holding shares of capital stock of the
Company representing approximately 40% of the outstanding voting capital stock
of the Company have entered into Voting Agreements with HBO and HBO sub to have
their shares voted in favor of the Merger.
The Company expects the Merger to be consummated on or about September 30, 1998.
The failure of the Merger to be consummated would have a material adverse effect
on the financial condition, result of operations and business of the Company. In
December, 1996 the Company entered into a strategic alliance with IDX Systems
Corporation ("IDX"), a software systems provider to larger physician networks.
The IDX alliance was to have been beneficial to the Company in its efforts to
further penetrate the physician network market through the user or the IDX
software which is favored by many larger physician networks. While the IDX
alliance did not contribute significantly to the Fiscal 1998 revenues; the
Company believes it would have been an important relationship for the future
growth of the Company's physician network business and the Company's new
business generation will be adversely affected by such termination. Shortly
after the announcement of the Merger, IDX advised the Company that IDX was
terminating the strategic alliance because as a result of the Merger, the
Company would become part of HBO, whose business is similar to IDX's. Under the
terms of the agreement, the termination by IDX does not constitute a material
adverse effect giving HBO the right to terminate the Agreement. In the event the
Merger is not consummated for any reason, the Company believes that a strategic
alliance similar to the IDX alliance would be critical to the Company's future
growth in its outsourcing business for the physician network market, and no
assurance can be given that the Company would be able to establish such a
strategic alliance.
In addition, in the event the Merger is not consummated the Company will have
incurred expenses in connection with the Merger of approximately $1.3 million.
As used above, the following terms shall have the meanings set forth below.
(i) "Fully Diluted Shares" means the total number of shares of Company
Common Stock issued and outstanding immediately prior to the effective
time of the Merger ("Effective Time"), plus the number of shares of
Company Common Stock useable pursuant to all options, warrants or other
rights which permit the holder thereof to acquire or convert into
shares of Company Common Stock outstanding immediately prior to the
Effective Time.
(ii) "Market Value" shall mean the average closing price per share reported
by Nasdaq (or if there is no sale on such date then the average between
9
<PAGE>
the closing bid and ask prices on any such day) for shares of HBO
Common Stock during the twenty (20) consecutive trading days ending on
the third trading day prior to the date of the Special Meeting of
stockholders of the Company held to approve the Merger.
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations
GENERAL
For the quarter ended June 30, 1998, the Company reported net income of
$539,000. This marks the Company's third consecutive profitable quarter.
Management is encouraged by the Company's continued improved financial
performance. During the first four (4) months of Fiscal 1999 a great deal of
time was devoted to negotiating the Agreement of Merger with HBO & Company.
Management strongly supports the pending merger with HBO & Company and believes
it is in the best interests of the Company's shareholders, customers and
employees.(See Note D to the consolidated Financial Statements.)
LIQUIDITY AND CAPITAL RESOURCES
June 30, 1998 March 31, 1998
------------- --------------
Current Assets $13,948,000 $13,883,000
Current Liabilities 3,507,000 3,378,000
----------- -----------
Working Capital 10,441,000 10,505,000
Working Capital Ratio to 1 4.0 4.1
During the three months ended June 30, 1998, Working Capital decreased $64,000
from $10,505,000 to $10,441,000. Cash and Equivalents decreased $787,000
primarily due to an increase in accounts receivable of $788,000.
The Company anticipates that available cash and cash flow from operations will
be sufficient to meet the Company's operating and capital requirements for the
next twelve months.
As discussed in the Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1998, the Company is presently working on (i) making its
Infinity and Infinity X information systems year 2000 compliant and (ii)
replacing its OPMS/Alliant information system with an alternative system.
Infinity, Infinity X and OPMS/Alliant are the principal information systems used
by the Company. The Company has estimated that the costs associated with making
these systems year 2000 compliant are approximately $350,000.
10
<PAGE>
RESULTS OF OPERATIONS
REVENUES
Three Months Ended June 30,
1998 1997
---------- ----------
Service fees $6,152,000 $5,893,000
Software license fees 71,000 133,000
Sales of equipment 8,000 5,000
Interest and other 106,000 92,000
---------- ----------
$6,337,000 $6,123,000
For the three months ended June 30, 1998, the Company's revenues increased
$214,000, or 3.5%, when compared to the same period in the prior fiscal year.
Contributing to this increase were increases in service fees of $259,000, sales
of equipment of $3,000 and interest and other of $14,000. These increases were
partially offset by a decrease in software licenses fees of $62,000.
Contributing to the increase in revenues from service fees were increases of
$542,000 from hospital services and $1,274,000 from physician services. These
increases were partially offset by a $1,462,000 decrease in revenues from TPA
services provided to MetroPlus (See Note 9 to the Consolidated Financial
Statements included in Form 10K for the fiscal year ended March 31, 1998), and a
$95,000 decrease in revenues from discontinued clinical services.
EXPENSES
Three Months Ended June 30,
1998 1997
---------- ----------
Cost of services $4,914,000 $4,434,000
Cost of equipment sales 6,000 2,000
Research and development 259,000 534,000
Selling, general and administrative 1,069,000 2,051,000
Interest expense 8,000 25,000
Loan impairment charge (reversal) (458,000) 284,000
---------- ----------
$5,798,000 $7,330,000
For the three months ended June 30, 1998, the Company's expenses decreased
$1,532,000, or 20.9%, when compared to the same period in the prior fiscal year.
Contributing to this decrease were decreases in research and development
expenses of $275,000, selling, general and administrative expenses of $982,000
and interest expense of $17,000; plus a net reduction in the loan impairment
11
<PAGE>
charge (reversal) during the current period compared to the charge during the
same period of the prior fiscal year in the amount of $742,000. These decreases
were partially offset by increases in cost of services of $480,000 and cost of
equipment sales of $4,000.
The major components of the increase in cost of services were $712,000 of
additional expenses for services to University Physician Associates ("UPA"),
approximately $225,000 for services to four new physician clients and $145,000
for services to one new hospital client. These increases were partially offset
by a $496,000 decrease in the cost of TPA services provided to MetroPlus, a
$75,000 decrease related to the implementation of MedicaLogicTM for one of our
clients and other net decreases of $31,000.
The decrease in selling, general and administrative expense resulted from
planned decreases in sales and marketing expenses of $246,000, decreases in
legal fees (primarily related to MetroPlus) of $233,000, a reduction in the
allowance for doubtful accounts of $139,000, decreases in senior management
compensation of $107,000 as the result of pay reductions and the elimination of
one position effective August 15, 1997, a reduction of occupancy cost of
$76,000, other staff reductions of $58,000, a decrease in amortization of
$29,000 and other net decreases of $94,000.
On June 30, 1998, the Company recorded a reversal of loan impairment charges in
the amount of $458,000 representing the increase during the quarter in market
value of the 252,557 shares of the Company's common stock held as security for a
loan made in connection with an acquisition in 1991. This reversal was based on
the closing price of the Company's common stock on June 30, 1998, which was
$3.375 per share. If and to the extent that the closing stock price at the end
of any subsequent quarter is greater than $3.375, there will be additional
reversals of the loan impairment charge.
NET INCOME (LOSS)
For the three months ended June 30, 1998, the Company reported net income of
$539,000 compared to a net loss of $1,207,000 during the same period last year.
After provisions for preferred dividends, the Company's net income per share was
$0.04 (diluted) compared to a net loss per share of $0.22 last year.
12
<PAGE>
PART II - OTHER INFORMATION
Item 1 - Litigation
Other Litigation There has been no material change to the
status of the other litigation described in Item 3 of the
Company's report on Form 10-K for the fiscal year ended March
31, 1998.
Item 2 - Changes in Securities
None
Item 3 - Defaults Upon Senior Securities
None
Item 4 - Submission of Matters to a Vote of Security Holders
None
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits: The Financial Data Schedule for the
quarter ending June 30, 1998.
(b) Reports on Form 8-K: No report on Form 8-K was
filed during the quarter ending June 30, 1998.
13
<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.
US SERVIS, INC.
(Registrant)
/S/ Graham O. King
Date: August 11, 1998 By: ________________________ (L.S.)
Graham O. King
Chairman of the Board and
Chief Executive Officer
/S/ Robert E. Van Metre
Date: August 11, 1998 By: _________________________(L.S.)
Robert E. Van Metre
Principal Accounting Officer and
Chief Financial Officer
14
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 4,365,000
<SECURITIES> 0
<RECEIVABLES> 7,281,000
<ALLOWANCES> 705,000
<INVENTORY> 0
<CURRENT-ASSETS> 13,948,000
<PP&E> 5,263,000
<DEPRECIATION> 3,396,000
<TOTAL-ASSETS> 20,044,000
<CURRENT-LIABILITIES> 3,507,000
<BONDS> 0
0
25,000
<COMMON> 64,000
<OTHER-SE> 16,283,000
<TOTAL-LIABILITY-AND-EQUITY> 20,044,000
<SALES> 0
<TOTAL-REVENUES> 6,337,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,790,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,000
<INCOME-PRETAX> 539,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 539,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 539,000
<EPS-PRIMARY> .05
<EPS-DILUTED> .04
</TABLE>
