FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 period ended April 30, 1996 .
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the period from ___________ to __________
Commission file number 33-9396-LA
NATIONAL HEALTH ENHANCEMENT SYSTEMS, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 86-0460312
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
Suite 1750
3200 North Central Avenue
Phoenix, Arizona 85012
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (602) 230-7575
Indicate by check mark whether the issuer (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the past 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 [ ].
The number of shares of the Issuer's Common Stock outstanding at June 2, 1996
was 4,356,480 Shares.
Transitional Small Business Disclosure Format (check one)
Yes[ ] No [x]
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NATIONAL HEALTH ENHANCEMENT SYSTEMS, INC. AND SUBSIDIARIES
INDEX TO FORM 10-QSB
PAGE NO.
PART I. FINANCIAL INFORMATION
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ITEM I. Consolidated Financial Statements
Consolidated Balance Sheet at April 30, 1996 3
Consolidated Statements of Operations for the three months
ended April 30, 1996 and 1995 4
Consolidated Statements of Cash Flows for the three months
ended April 30, 1996 and 1995 5
Notes to Consolidated Financial Statements 6
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. 8
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 11
Signatures 12
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NATIONAL HEALTH ENHANCEMENT SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET - APRIL 30, 1996
(Unaudited)
ASSETS
April 30, 1996
--------------
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CURRENT ASSETS:
Cash and cash equivalents (Note 2) $ 560,731
Accounts receivable, less allowance for doubtful accounts of $653,133 (Note 2) 6,009,292
Prepaid, deferred expenses and supplies 959,329
-------
Total current assets 7,529,352
CAPITALIZED SOFTWARE DEVELOPMENT COSTS, less 836,560
accumulated amortization of $1,149,333
PROPERTY AND EQUIPMENT (net) 1,133,855
EXCESS OF PURCHASE PRICE OVER RELATED NET ASSETS ACQUIRED 536,409
OTHER ASSETS 449,276
-------
$ 10,485,452
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current installments of notes payable and obligations under capital leases (Note 2) $ 527,548
Accounts payable 1,187,669
Accrued liabilities (Note 3) 3,489,911
Deferred revenues 3,701,820
---------
Total current liabilities 8,906,948
NOTES PAYABLE AND OBLIGATIONS UNDER CAPITAL LEASES,
excluding current installments (Note 2) 317,264
-------
DEFERRED REVENUES, net of current portion 139,912
-------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Convertible Preferred stock, $.001 par value
2,000,000 shares authorized and none issued and
outstanding 125
Common stock, $.001 par value, 10,000,000
share authorized, 4,356,480 shares issued
and 3,835,380 outstanding 3,836
Capital contributed in excess of par value 3,461,127
Accumulated deficit (2,340,195)
Less treasury stock, 3,568 shares at cost (3,565)
--------------
Stockholders' equity 1,121,328
--------------
$10,485,452
==============
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See accompanying notes to the consolidated financial statements.
3
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NATIONAL HEALTH ENHANCEMENT SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended April 30,
----------------------------
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REVENUES 1996 1995
---- ----
License fees $ 2,856,875 $ 1,678,863
Support fees, marketing services and material sales 2,258,836 1,825,789
---------------- ----------------
Total revenues 5,115,711 3,504,652
---------- ---------
OPERATING EXPENSES
Cost of license fees 1,094,817 545,666
Cost of marketing services and materials sold 333,940 294,093
Selling, product support and development 2,798,380 2,271,944
General and administrative 485,795 390,893
Depreciation and amortization 250,707 179,872
Provision for doubtful accounts 55,000 45,000
------------------ ----------------
Total operating expenses 5,018,639 3,727,468
------------------ ----------------
Income (loss) before income taxes 97,072 (222,816)
Provision for income taxes
- -
------------------ ----------------
NET INCOME (LOSS) available for common stockholders $ 97,072 $ (222,816)
================== ================
Net income (loss) per common share (*) $.02 $(.06)
==== ======
WEIGHTED AVERAGE SHARES OUTSTANDING (*) 5,535,926 3,791,220
========= =========
(*) Fiscal 1995 adjusted to reflect a two for one stock split in January 1996.
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See accompanying notes to the consolidated financial statements.
4
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NATIONAL HEALTH ENHANCEMENT SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended April 30,
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CASH FLOWS FROM OPERATING ACTIVITIES: 1996 1995
---- ----
Net income (loss) $ 97,072 $ (222,816)
Adjustments to reconcile net income (loss) to net cash provided by operating
activities:
Depreciation and amortization 250,707 179,872
Provision for doubtful accounts 55,000 45,000
(Increase) decrease in accounts receivable (328,514) 988
(Increase) decrease in prepaid deferred expenses and supplies (248,020) (367,923)
Increase (decrease) in accounts payable 189,827 (364,450)
Increase (decrease) in accrued liabilities 410,056 670,324
Increase (decrease) in deferred revenues 308,748 (62,253)
(Increase) decrease in other assets (31,010) 407,235
----------- -----------
Net cash provided by operating activities 703,866 285,977
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in capitalized software development costs (48,670) --
Purchases of property and equipment (135,208) (41,549)
----------- -----------
Net cash used in investing activities (183,878) (41,549)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options -- --
Proceeds from line of credit -- 775,000
Principal payments on line of credit (1,359,489) (1,275,000)
Principal payments on notes payable (77,537) (64,695)
----------- -----------
Net cash used in financing activities (1,437,026) (564,695)
----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENT (917,038) (320,267)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,477,769 1,480,765
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 560,731 $ 1,160,498
=========== ===========
</TABLE>
See accompanying notes to the consolidated financial statements.
5
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NATIONAL HEALTH ENHANCEMENT SYSTEMS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
Note 1
In connection with the preparation of the Company's financial statements for the
fiscal year ended January 31, 1996, the Company determined that the application
of its accounting policy regarding recognizing revenues on sales of its software
products and related services did not comply in all instances with the technical
requirements and interpretations of Statement of Position 91-1, "Software
Revenue Recognition." Accordingly, the Company reevaluated and revised revenue
recognition for the affected transactions and restated the previously reported
accumulated deficit for the cumulative effect of these matters. Additionally,
the Company's fiscal 1995 annual consolidated financial statements and its
fiscal 1996 quarterly consolidated financial statements have also been restated.
The effect of the change on the Company's operating results for the quarter
ended April 30, 1995 is as follows:
Quarter ended April 30, 1995
---------------------------------
As Reported As Restated
Total revenues $ 4,227,795 $ 3,504,652
Income (loss) before provision for
income taxes $ 168,119 $ (222,816)
Net income (loss) $ 168,119 $ (222,816)
Income (loss) per share (*) $ .03 $ (.06)
(*) After giving effect for 2 for 1 stock split completed in January 1996.
The consolidated financial statements, which include the accounts of National
Health Enhancement Systems, Inc. and its wholly owned subsidiaries (collectively
the "Company"), have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission. In the opinion of the Company, the
accompanying unaudited financial statements contain all adjustments (consisting
of only normal recurring adjustments) necessary to present fairly its financial
position, results of its operations, and cash flows for the periods presented.
Certain financial statement items from prior periods have been reclassified to
be consistent with the current period financial statement presentation. It is
suggested that these financial statements be read in conjunction with the
financial statements and the related disclosures contained in the Company's
Annual Report on Form 10-KSB filed for the fiscal year ended January 31, 1996
with the Securities and Exchange Commission.
The results of operations for the period ended April 30, 1996, are not
necessarily indicative of the results to be expected for the full fiscal year.
Note 2
Notes Payable and Obligations Under Capital Leases:
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April 30, 1996
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Revolving line of credit, advances not to exceed the lesser of the calculated $ 246,604
borrowing base, as defined, or $2,000,000, interest at Wall Street Journal
prime rate plus 2.5% (11% at January 31, 1996), matures November 1996,
secured by substantially all assets of the Company, including eligible accounts
receivable, as defined. The Company also has a $500,00 line with
the same bank, which matures in November 1996, interest at Wall
Street Journal prime rate, secured by accounts recievable and
equipment.
6
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Obligations under capital leases, interest rates ranging from 11% to
28%, maturities through November 2001,
secured by computer and other equipment 598,208
-------
844,812
-------
Less Current installments (527,548)
-------
$ 317,264
=============
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The lines of credit and note payable agreements require the Company to
maintain compliance with certain covenants including, among others, a
debt to net worth, a minimum quick ratio, and a minimum tangible net
worth, as defined in the agreement. At April 30, 1996, the Company was
not in compliance with the debt to net worth requirement. The lender
has waived compliance with this covenant through August 1996.
Future maturities of notes payable and capital leases are as follows as
of April 30, 1996:
Notes Payable Capital Leases
------------- --------------
1997 $ 246,604 $ 374,762
1998 - 193,072
1999 - 98,940
2000 - 30,217
2001 and later - 1,072
------------- --------------
246,604 698,063
Less: Amount Representing Interest - (99,855)
------------- --------------
$ 246,604 $ 598,208
============== ==============
Note 3
Accrued Liabilities consist of the following:
April 30, 1996
--------------
Accrued product cost of sales $ 1,620,062
Accrued payroll and commissions 844,107
Accrued royalties 590,688
Other accrued liabilities 435,054
-------------
$ 3,489,911
=============
Note 4 Income Taxes
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards (SFAS No. 109), "Accounting for Income Taxes",
SFAS No. 109 requires deferred income tax assets and liabilities to be computed
based upon cumulative temporary differences in financial reporting and taxable
income, carryforwards available and enacted tax law.
The components of deferred taxes as of April 30, 1996 are as follows:
Allowance for doubtful accounts $ 261,000
Tax depreciation in excess
of book depreciation (85,000)
Capitalized software costs (335,000)
Accrued Liabilities 350,000
Deferred revenues 515,000
Net operating loss carry forward 119,000
Valuation allowance (825,000)
---------
$ 0
=========
7
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A valuation allowance is provided when it is uncertain that some or all of the
deferred tax asset will be recognized. As of April 30, 1996 the decrease in the
valuation allowance results from changes in temporary differences and net
operating loss carryforwards.
8
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NATIONAL HEALTH ENHANCEMENT SYSTEMS, INC. AND SUBSIDIARIES
ITEM 2
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Restatement of Financial Statements
In connection with the preparation of its financial statements for the year
ended January 31, 1996, the Company determined that the application of its
accounting policy regarding recognizing revenues on its sales of software
products and related services did not comply in all instances with the technical
requirements and interpretations of Statement of Position 91-1, "Software
Revenue Recognition." Accordingly, the Company has reevaluated and revised its
revenue recognition for the affected transactions and has restated its
previously reported accumulated deficit for the cumulative effect of these
matters. Additionally, the Company's fiscal 1995 annual consolidated financial
statements and fiscal 1996 quarterly consolidated financial statements have also
been restated. See Note 1 of Notes to consolidated financial statements. The
information in the following discussion is presented after restatement of the
financial statements.
Results of Operations
Income. For the quarter ended April 30, 1996, the Company had net income of $
97,072 compared to net loss of $222,816 for the quarter ended April 30, 1995.
The improvement in operating results is primarily attributed to the increase in
license fee revenue from the Company's medical call center products such as
Centramax Plus and the voice response product line.
During the past fiscal year ended January 31, 1996, and continuing through the
first quarter ended April 30, 1996 the Company invested resources to expand and
improve its sales and client services functions and also invested to support its
product development efforts. As a result, operating expenses increased and are
expected to continue at current or increasing levels. The Company believes it
will be necessary to continue to invest resources to support the Company's
growth plans, such as the planned launch of its medical call center service
bureau and client obligations. The investment in the sales and client services
functions (which are designed to enable the Company to improve product sales to
its existing client network) and the investment in product development is part
of management's strategy to increase revenues. While management believes this
strategy will result in increased revenues, there are no assurances that future
revenues will increase.
The Company's operations continue to be affected by consolidation, alliances and
mergers in the healthcare market. While there are no assurances, the Company's
management believes that its competitive strengths will permit it to continue to
compete in its targeted market and that the Company is positioned favorably to
take advantage of future opportunities in the healthcare market The Company's
management also believes its products help healthcare providers improve their
services and also help reduce healthcare costs by providing objective
information on healthcare issues to individuals thereby enabling them to make
informed choices about when, where and how to seek healthcare services and
reduce healthcare costs while providing healthcare providers with a favorable
return on their investment in the Company's products. Nonetheless, the Company's
operations may be materially and adversely affected by continuing consolidation,
alliances and mergers in the healthcare industry, healthcare reform in the
private or public sector, and by future economic conditions.
Revenues and operating results depend primarily on the volume and timing of
orders received during each fiscal quarter, which are difficult to forecast.
Historically, the Company has often recognized a substantial portion of its
license revenues in the last month of each fiscal quarter, frequently in the
last week. Because a significant portion of the Company's operating expenses are
relatively fixed with personnel levels and other expenses based upon anticipated
revenues, a substantial portion of which may not be generated until the end of
each fiscal quarter, the Company may not be able to reduce spending in response
to sales shortfalls or delays. These factors could cause variations in operating
results from quarter to quarter.
Revenues. Total revenues increased approximately 46% to $5,115,711 for the
quarter ended April 30, 1996 from $3,504,652 for the quarter ended April 30,
1995. The increase was attributed primarily to an increase in revenues generated
from license fees.
License fees consist primarily of revenues from the initial sale of the
Company's products: Centramax, Centramax Plus, the Profit Acceleration
System(TM) ("PAS") (which includes nine health screening and education
products), and voice response products. Revenue from license fees increased
approximately 70% to $ 2,856,875 for the quarter ended April 30, 1996, from
9
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$1,678,863 for the quarter ended April 30, 1995. The increase is primarily
attributed to the sale of the Company's medical call center products such as
Centramax Plus and the voice response products.
Support fees, marketing services and material sales revenue increased
approximately 24% to $ 2,258,836 for the quarter ended April 30, 1996, from
$1,825,789 for the quarter ended April 30, 1995. Support fees represent charges
to the Company's licensees, as provided for in the Company's license agreements,
for a continued license to use the products and for ongoing software maintenance
and enhancement to the products. The support fees have historically begun within
six to twelve months after a customer executes a license agreement. The Company,
however has recently modified the support fee terms to begin within thirty days
from the contract date. Revenue generated from support fees increased for the
quarter ended April 30, 1996 compared to the quarter ended April 30, 1995,
primarily as a result of the increase in the number of customers. The Company
believes that as the number of customers it has for all products increases,
revenues generated from support fees should continue to increase. Revenues
generated from the sale of materials represent the sale of printed
questionnaires and reports from the Company's PAS and Health Direct products.
The revenue from the sale of materials for the quarter ended April 30, 1996
decreased from the quarter ended April 30, 1995. For the remainder of its
current fiscal year, the Company does not expect any significant increase or
decrease in future revenues associated with the PAS product and Health Direct
products. Marketing services represents revenue from strategic and creative
services provided and generated by the Company's subsidiary First Strategic
Group ("FSG"). Revenues from marketing services for the quarter ended April 30,
1996 were comparable to the quarter ended April 30, 1995.
Operating Expenses. Total operating expenses increased approximately 35% to $
5,018,639 for the quarter ended April 30, 1996 from $3,727,468 for the quarter
ended April 30, 1995. Total operating expenses increased primarily due to
increases in variable costs from increased revenue and costs associated with
certain selling, product support and development expenses due to an increase in
the Company's sales staff, customer base and related product support
obligations.
Cost of License Fees and Materials Sold. The cost of initial license fees
increased to $ 1,094,817 for the quarter ended April 30, 1996 from $545,666 for
the quarter ended April 30, 1995. The increase is due primarily to an increase
in variable costs associated with the increase in initial fee revenue and
reflects a higher costs from increased sales of the voice response product which
has a higher per unit cost.
Cost of materials sold, which includes the cost of support fees, the cost of
printed report forms and questionnaires sold to PAS licensees and the costs of
materials associated with the Health Direct product increased to $ 333,940 for
the quarter ended April 30, 1996 from $294,093 for the quarter ended April 30,
1995. The increase is due to higher costs associated with increased revenues
from support fees.
Selling, Product Support and Development. Selling, product support and
development expenses increased to $2,798,380 for the quarter ended April 30,
1996 from $2,271,944 for the quarter ended April 30, 1995. The increase is
attributable to increases in the Company's payroll costs associated with
increased staffing of its sales, product development and client support and
services functions. In addition, certain selling costs such as commissions and
travel expenses increased in the quarter ended April 30,1996 compared to the
quarter ended April 30,1995.
General and Administrative. General and administrative operating expenses
increased to $ 485,795 for the quarter ended April 30, 1996 compared to $390,893
for the quarter ended April 30, 1995. The increase is attributable to general
inflationary increases and to general increases in office space rent,
professional liability insurance, professional services and other general
operating expenses.
Depreciation and Amortization. Depreciation and amortization expense increased
to $250,707 for the quarter ended April 30, 1996 from $179,872 for the quarter
ended April 30, 1995. The increase is due to increased depreciation from
additional equipment purchased and from the amorization of additional software
development costs.
10
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Liquidity and Capital Resources.
As of April 30, 1996, the Company had a working capital deficit of $ 1,377,596,
compared to a working capital deficit of $1,349,989 as of January 31, 1996. The
Company's accounts receivable balance increased to $ 6,009,292 at April 30, 1996
from $5,735,778 at January 31 1995, which include first quarter sales coupled
with of shorter payment terms. The Company expects improved cash receipts from
initial fee recievables will continue in the foreseeable future, although there
are no assurances.
On November 13, 1995 the Company obtained a revolving line of credit providing
up to $2,000,000. The revolving line of credit bears interest a prime plus 2.5%
, is secured by accounts receivable and matures on November 13, 1996. The
availability of borrowing on the revolving line of credit is subject to
available eligible accounts receivable and certain other covenants. The Company
also obtained a line of credit of $500,000, from the same lender. The $500,000
line of credit is secured by accounts receivable and equipment. Interest is paid
monthly on the unpaid balance at an annual rate of one percentage point above
the bank's prime rate. The line matures in November 1996 and $ 246,604 was
outstanding under those lines at April 30,1996.
The Company is currently dependent on cash from operations and available
proceeds from its lines of credit for its daily operational cash requirements.
The Company will be required to renew or replace the lines of credit in
November, 1996 in order to continue to meet its cash requirements. Creation and
operation of the planned medical call center service bureau is dependent upon,
among other things, acquiring capital to fund the launch and working capital
needs of the center. The Company continues to evaluate opportunities to expand
and increase the existing capital available to it and continues to evaluate
opportunities to reduce the number of days it takes to collect the initial fee
accounts receivable. The Company is actively seeking alternative sources to
raise additional capital to support its current operations and launch of the
planned medical call center service bureau and the future growth plans, but
there are no assurances that the Company will be successful in obtaining
additional capital.
In each of its fiscal years ending January 31, 1996 and 1995, the Company
offered a discount to its PAS users to prepay monthly support fees for a one
year period. In each of these fiscal years, the Company generated approximately
$300,000 in cash from the program. Cash from this prepayment program is
recognized as revenue over the period benefited, generally a 12-month period.
The Company expects to offer a similar discount to its PAS users in the second
quarter of its current fiscal year.
The Company's operating results continue to be inconsistent on a month-to-month
basis and are dependent upon retention and performance of the Company's sales
staff, long product sales cycles related in part to pricing of the Company's
products and customer budget requirements, and to other factors, such as
uncertainties associated with the healthcare market and economic conditions,
beyond the control of the Company. The Company, however, will continue to
evaluate methods to improve and increase its product distribution channels and
to enhance or expand its current product lines. The Company has expanded, and
will seek to continue to improve and enhance, its product lines in order to be
more responsive to the market. The Company's management believes that quarterly
operating results are dependent, and will continue to be dependent, on the
initial license fee revenues in the foreseeable future. The recurring monthly
revenue from support fees, material sales and services is currently not
sufficient to maintain a break-even level at the Company's current operating
expense levels. The Company will continue to focus its efforts on improving cash
from operations, increasing recurring revenue and increasing its operating
income.
The Company intends to continue to invest in product and software development,
which will require additional support staff and related operating expenses. The
Company has expanded its current office space and has made commitments to lease
approximately 5,000 square feet of office space for its planned medical call
center service bureau. In addition the Company has made certain capital
commitments related to the additional office space. The Company expects that
additional space will be taken and staff will be hired during its current fiscal
year (ending January 31, 1997) for its current operations and for the planned
medical call center service bureau and additional capital resources will be
needed to fund this growth and expansion. In the past, the Company has funded
its growth primarily through cash from operations and its existing lines of
credit. The Company believes that additional capital will be necessary to
support operations and planned growth in the coming fiscal year, including for
implementing its service bureau strategy and is actively seeking sources of such
capital. There are no assurances the Company will be successful in renewing or
replacing its $2,500,000 in credit lines or in raising additional capital to
support planned growth.
11
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The discussion above includes statements which constitute forward looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995, which are statements other than historical fact, that involve risks and
uncertainties. In addition to the factors discussed elsewhere herein, important
factors may cause the Company's actual results to differ materially from these
and any future forward looking statements by or on behalf of the Company. Those
factors include, among others, uncertainties and delays in the development and
marketing of new products and services, particularly the planned medical call
center service bureau products, and services demand and market acceptance risks,
the Company's ability, or not, to obtain required renewed credit lines and
additional financing, the impact of competitive products, services and pricing,
continued rapid change and consolidation in the health care market, general
changes in economic conditions not presently contemplated, and other factors
detailed in the Company's Securities and Exchange Commission filings.
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
a. Exhibits required by Item 601 of Regulation S-B.
Exhibit #27 Financial Data Schedule.
b. No reports on Form 8-K were filed during the quarter ended April 30,1996
12
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SIGNATURES
Pursuant to the requirement 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.
National Health Enhancement Systems, Inc.
(Registrant)
Date: June 13, 1996 /s/ Gregory J. Petras
--------------------- ----------------------
Gregory J. Petras, President and
Chief Executive Officer
Date: June 13, 1996 /s/ Jeffrey T. Zywicki
----------------------- -----------------------
Jeffrey T. Zywicki, Senior Vice President
Finance and Treasurer
13
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-START> FEB-01-1996
<PERIOD-END> APR-30-1996
<EXCHANGE-RATE> 1
<CASH> 560,731
<SECURITIES> 0
<RECEIVABLES> 6,009,292
<ALLOWANCES> 653,133
<INVENTORY> 0
<CURRENT-ASSETS> 7,529,352
<PP&E> 1,133,855
<DEPRECIATION> 0
<TOTAL-ASSETS> 10,485,452
<CURRENT-LIABILITIES> 8,906,948
<BONDS> 0
0
125
<COMMON> 3,836
<OTHER-SE> 1,117,367
<TOTAL-LIABILITY-AND-EQUITY> 10,485,482
<SALES> 5,115,711
<TOTAL-REVENUES> 5,115,711
<CGS> 1,428,757
<TOTAL-COSTS> 5,018,639
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 97,072
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 97,072
<EPS-PRIMARY> $0.02
<EPS-DILUTED> 0
</TABLE>
