<PAGE> 1
UNITED STATES SECURITIES EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the three months ended July 31, 1996
Commission File Number: 33-17856-C
INNOVATIVE TECH SYSTEMS, INC.
(Exact name of Registrant as specified in its charter)
ILLINOIS 65-0071222
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification Number)
444 JACKSONVILLE ROAD, SUITE 200, WARMINSTER, PA 18974
(Address, including zip code, of registrant's
principal executive offices)
(215) 441-5600
(Registrant's telephone number,
including area code)
(Former name, address and 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 ____
Indicate the number of shares outstanding of each of the Issuer's
classes of common stock, as of the latest practicable date.
Class: Common
Outstanding at September 18, 1996: 10,888,456
<PAGE> 2
INNOVATIVE TECH SYSTEMS, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION PAGE(S)
--------------------
<S> <C>
Item 1.
Balance Sheets as of July 31, 1996 and January 31, 1996 3-4
Statements of Operations for the three months ended July 31, 1996 and 1995 5
Statements of Operations for the six months ended July 31, 1996 and 1995 6
Statements of Cash Flows for the six months ended April 30, 1996 and 1995 7
Notes to Financial Statements 8-10
Item 2.
Management's Discussion and Analysis of Financial Condition
and Results of Operations 11-13
PART II - OTHER INFORMATION
Item 6.
Exhibits and Reports on Form 8-K 14
</TABLE>
2
<PAGE> 3
INNOVATIVE TECH SYSTEMS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS July 31, January 31,
1996 1996
---------- ----------
(Unaudited) (Audited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $1,065,207 $2,815,742
Accounts receivable, net 2,781,599 1,281,707
Inventory 222,187 -
Officer advance 84,452 49,921
Other current assets 91,590 25,812
---------- ----------
Total current assets 4,245,035 4,173,182
Property and equipment, net 922,033 611, 548
Restricted cash 700,000 700,000
Computer software, net of accumulated amortization of
$386,317 and $335,599 at July 31, 1996 and
January 31, 1996, respectively 541,284 369,693
Goodwill 1,629,747 -
Other assets 173,797 -
---------- ----------
Total assets $8,211,896 $5,854,423
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements
3
<PAGE> 4
INNOVATIVE TECH SYSTEMS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
July 31, January 31,
1996 1996
----------- -----------
(Unaudited) (Audited)
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Line of credit $ 400,000 -
Accounts payable 464,451 $ 215,888
Accrued liabilities 86,536 35,273
Accrued payroll and related costs 134,870 138,160
Deferred revenue 504,751 74,881
----------- -----------
Total current liabilities 1,590,608 464,202
----------- -----------
Commitments & contingent liabilities
Shareholders' equity:
Preferred stock, no par value; authorized 200,000,000
shares - -
Common stock, par value $.0185; authorized
100,000,000 shares, issued and outstanding
10,873,456 as of July 31, 1996 and January 31, 1996 201,159 189,215
Additional paid-in capital 7,835,497 6,475,501
Warrants 851,500 850,150
Accumulated deficit (2,266,868) (2,124,645)
----------- -----------
Total shareholders' equity 6,621,288 5,390,221
----------- -----------
Total liabilities and shareholders' equity $ 8,211,896 $ 5,854,423
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements
4
<PAGE> 5
INNOVATIVE TECH SYSTEMS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Three Months Ended
-------------------------------------
July 31, July 31,
1996 1995
------------ ------------
<S> <C> <C>
Revenues $ 1,300,423 $ 409,496
Cost of revenues 95,693 44,335
Selling, general and administrative expenses 1,428,928 1,032,166
------------ ------------
Loss from operations (224,198) (667,005)
Interest expense 1,259 -
Other income 31,368 105,903
------------ ------------
Loss before income taxes and extraordinary item (194,089) (561,102)
Provision for income taxes - -
------------ ------------
Loss before extraordinary item (194,089) (561,102)
Extraordinary item - gain on forgiveness of debt 360,337 -
------------ ------------
Net income (loss) $ 166,248 $ (561,102)
============ ============
Income (loss) per common share:
Loss before extraordinary item $ (.017) $ (.055)
Extraordinary item - gain on forgiveness of debt .031 -
------------ ------------
Income (loss) per common share $ .014 $ (.055)
============ ============
Weighted average shares outstanding (see note 3) 11,476,147 10,227,837
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements
5
<PAGE> 6
INNOVATIVE TECH SYSTEMS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Six Months Ended
-------------------------------------
July 31, July 31,
1996 1995
------------ ------------
<S> <C> <C>
Revenues $ 2,455,778 $ 877,321
Cost of revenues 126,798 89,169
Selling, general and administrative expenses 2,539,216 1,788,298
------------ ------------
Loss from operations (210,236) (1,000,146)
Interest expense 1,259 -
Other income 69,272 259,403
------------ ------------
Loss before income taxes and extraordinary item (142,223) (740,743)
Provision for income taxes - -
------------ ------------
Loss before extraordinary item (142,223) (740,743)
Extraordinary item - gain on forgiveness of debt 360,337 -
------------ ------------
Net income (loss) $ 218,114 $ (740,743)
============ ============
Income (loss) per common share:
Loss before extraordinary item $ (.012) $ (.072)
Extraordinary item - gain on forgiveness of debt .031 -
------------ ------------
Income (loss) per common share $ .019 $ (.072)
============ ============
Weighted average shares outstanding (see note 3) 11,476,147 10,227,837
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements
6
<PAGE> 7
INNOVATIVE TECH SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Six Months Ended
-----------------------------------
July 31, July 31,
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 218,114 $ (740,743)
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Depreciation and amortization 133,385 108,461
Extraordinary gain on forgiveness of debt (360,337) -
Changes in operating assets and liabilities net of effects
from acquisition:
Accounts receivable (968,686) (218,006)
Inventory 14,009 -
Officer advance (34,531) (6,732)
Due from related party - 50,000
Other current assets (65,778) (32,400)
Other assets (88,297) -
Accounts payable 144,743 23,360
Accrued liabilities (47,078) (35,931)
Accrued payroll and related costs (3,290) (10,500)
Deferred revenue 32,745 (35,606)
----------- -----------
Net cash used in operating activities (1,025,001) (898,097)
----------- -----------
Cash flows from investing activities:
Purchase of property and equipment (136,858) (44,481)
Leasehold improvements (3,709) (51,071)
Capitalization of software development tools (5,520) (3,431)
Capitalization of software development costs - (67,734)
Restricted cash - (700,000)
Proceeds from note receivable - 1,000,000
Note receivable - (1,750,000)
----------- -----------
Net cash used in investing activities (146,087) (1,616,717)
----------- -----------
Cash flows from financing activities:
Repayment of long-term debt (560,797) -
Repayment under line of credit (20,000) -
Warrant issuance 1,350 -
----------- -----------
Net cash used in financing activities (579,447) -
----------- -----------
Net decrease in cash and cash equivalents (1,750,535) (2,514,814)
Cash and cash equivalents, beginning of period 2,815,742 5,336,009
----------- -----------
Cash and cash equivalents, end of period $ 1,065,207 $ 2,821,195
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE> 8
NOTES TO FINANCIAL STATEMENTS
The accompanying financial statements are unaudited. In the opinion of
management, all adjustments necessary for a fair presentation of such financial
statements have been included. Such adjustments consisted of normal recurring
items. Interim results are not necessarily indicative of results for a full
year. The financial statements and notes are presented as permitted by Form 10-Q
and do not contain certain information included in the Company's annual
financial statements and notes.
1. PROPERTY AND EQUIPMENT:
Property and equipment are comprised of the following:
<TABLE>
<CAPTION>
July 31, January 31,
1996 1996
----------- -----------
(unaudited) (audited)
<S> <C> <C>
Computers and office equipment $ 651,867 $ 416,559
Furniture and fixtures 375,809 233,313
Automobiles 10,138 -
Leasehold improvements 159,023 155,314
----------- -----------
1,196,837 805,186
Less accumulated depreciation (274,804) (193,638)
----------- -----------
$ 922,033 $ 611,548
=========== ===========
</TABLE>
2. INVENTORIES:
Inventories consist of hardware, accessories and repair parts that are purchased
and resold to customers. Inventories are valued at actual cost, but not in
excess of net realizable value.
3. INCOME (LOSS) PER SHARE:
Primary income (loss) per common share is calculated using the weighted average
number of common shares outstanding during the period plus (in periods in which
they have a dilutive effect) the additional number of shares which would be
issuable upon the exercise of stock options and common stock purchase warrants,
assuming that the Company used the proceeds received to purchase additional
shares at the stock's average market price for the period. The fully-diluted
computation is the same as the primary calculation due to the use of the average
market price for the period, which was higher than the market price at the end
of the period.
4. RECENTLY ADOPTED FINANCIAL ACCOUNTING STANDARDS:
On February 1, 1996 the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets
and Long-Lived Assets to Be Disposed Of." This statement requires that
long-lived assets and certain intangibles be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of the
asset may not be recoverable. As of February 1, 1996, no material impact
resulted from the adoption of this accounting standard.
5. SUPPLEMENTAL CASH FLOW INFORMATION:
The Company purchased 100% of the common stock of Facility Management Systems,
Inc. for 645,619 shares of Innovative Tech common stock valued at $1,371,940.
In connection with the acquisition, liabilities were assumed as follows:
Fair value of assets acquired $ (618,144)
Consideration paid 1,371,940
----------
Liabilities assumed $1,990,084
==========
8
<PAGE> 9
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
6. DEFERRED REVENUE:
Deferred revenue of $504,751 at July 31, 1996 represents advances paid by
customers for maintenance services not yet performed. This amount is recognized
ratably over the life of the maintenance contract.
7. LINE OF CREDIT:
The line of credit is payable to a financial institution and bears interest at
the rate of prime plus 1/2%. At July 31, 1996, there were no amounts available
under the line of credit. The line of credit was paid in full on August 16,
1996.
8. STOCK SPLIT:
The Board of Directors of the Company approved a three-for-one forward split of
all outstanding shares of Common Stock and all outstanding Common Stock Purchase
Warrants on August 23, 1995. The three-for-one forward split was effective on
September 18, 1995.
All historic share amounts in the accompanying financial statements and notes to
financial statements have been adjusted to reflect the stock split. All
references in the statements of operations with regard to average number of
shares of Common Stock and related per share amounts have been calculated giving
retroactive effect to the stock split.
9. PREFERRED STOCK:
On July 22, 1994, the shareholders of the Company approved the conversion of all
Senior Preferred Stock into Common Stock on a one-for-one basis (prior to a
one-for-18.54 reverse stock split) and the authorization of a new class of
preferred stock with no par value and 200,000,000 authorized shares.
10. PUBLIC OFFERING:
On July 26, 1994, the Company completed a public offering of 3,900,000 shares of
its Common Stock and 5,400,000 Redeemable Warrants. On August 2, 1994, the
Company received net proceeds of $6,043,433 from the offering, and charged
$347,179 relating to legal, accounting, printing and filing fees to equity as a
reduction of the net proceeds.
On September 14, 1994, the Company's underwriter exercised the over-allotment
option to purchase up to 585,000 additional shares of Common Stock and/or
810,000 Redeemable Warrants. An additional 472,920 shares of Common Stock and
810,000 Redeemable Warrants were purchased. The net proceeds received by the
Company were $743,534.
The shares of Common Stock and Redeemable Warrants are separately tradeable.
Each Redeemable Warrant entitles the holder to purchase one share of Common
Stock at an exercise price of $2.33 for a period of 60 months commencing 12
months after the effective date of the offering. Each Redeemable Warrant is
redeemable by the Company at a redemption price of $.083 per Redeemable Warrant
commencing 15 months after the effective date of the offering upon not less than
30 days' prior written notice by the Company, provided that the average closing
bid price of the Common Stock equals or exceeds $2.92 for any 20 trading days
within a period of 30 consecutive trading days ending on the fifth trading day
immediately prior to the notice of redemption.
On November 27, 1995, the Company received proceeds of $59,400 from the exercise
of underwriter warrants, which were offered in connection with the July 26, 1994
Public Offering.
9
<PAGE> 10
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
11. SIGNIFICANT CUSTOMERS:
For the three months ended July 31, 1996, revenues from Regent Systems, Inc.,
the United States Department of Defense, and Landis & Gyr (Europe) Corp. were
approximately 19%, 9% and 9%, respectively, of total revenues. For the three
months ended July 31, 1995, revenues from the United States Department of
Defense, the Worldbank and Intergraph Corporation were approximately 33%, 9% and
8%, respectively, of total revenues.
12. RELATED PARTY TRANSACTION:
On March 17, 1995, the Company pledged a six month $700,000 certificate of
deposit as collateral for a mortgage loan obtained by Thompson Enterprises,
L.P., a limited partnership, which is classified as restricted cash in the
accompanying balance sheet.
13. ACQUISITION:
Effective July 26, 1996, the Company acquired 100% of the outstanding common
stock of Facility Management Systems, Inc. ("FMS"). Under the terms of the
agreement, FMS shareholders received 50.114 shares of Innovative Tech common
stock in exchange for each share of FMS common stock. This exchange ratio
resulted in 645,619 shares of Innovative Tech common stock being issued to FMS
shareholders.
The acquisition has been recorded using the purchase method of accounting. The
accompanying balance sheet as of July 31, 1996 includes preliminary allocations
of the purchase price which is subject to final adjustment. The results of
operations are included in the Company's consolidated financial statements
from the date of acquisition.
The following unaudited pro forma financial information combines the
consolidated results of operations as if the acquisition had occurred as of the
beginning of the periods presented. Pro forma adjustments include only the
effects of events directly attributed to a transaction that are factually
supportable and expected to have a continuing impact.
For The Six Months Ended July 31,
-----------------------------------
1996 1995
----------- -----------
Revenues $ 4,119,693 $ 3,002,011
Net loss $ 109,439 $ 897,318
Loss per share $ .009 $ .087
The pro forma financial information does not necessarily reflect the operating
results that would have occurred had the acquisitions been consummated as of the
above dates, nor is such information indicative of future operating results. In
addition, the pro forma financial results contain estimates since the acquired
business did not maintain information on a period comparable with the Company's
fiscal year end.
10
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW AND SIGNIFICANT EVENTS
The significant progress made during fiscal 1996 has continued through the first
and second quarters of fiscal 1997, as the Company reported record revenues for
the three and six months ended July 31, 1996. The continued revenue growth
indicates that the Company's fundamental strategies are working. The Company's
SPANoFM(TM) software products have been well received, as evidenced by the April
1996 Readers' Choice Award for Excellence in Computer Software from Today's
Facility Manager Magazine.
Effective July 26, 1996, the Company acquired 100% of the outstanding common
stock of Facility Management Systems, Inc. ("FMS"). Under the terms of the
agreement, FMS shareholders received 50.114 shares of Innovative Tech common
stock in exchange for each share of FMS common stock. This exchange ratio
resulted in 645,619 shares of Innovative Tech common stock being issued to FMS
shareholders. FMS develops and sells software for facility management
applications utilizing bar code systems, and pioneered the use of bar codes for
facility management. Users of FMS's software include Boston College, Ford Motor
Company, Pitney Bowes and Sun Company.
The Company has expanded its direct sales staff by hiring regional sales
representatives that operate from their homes with product shipment, support and
customization being done from the Company's home office in Warminster,
Pennsylvania. The Company currently has regional sales representatives located
in Boston; Tampa; Winnipeg, Canada; New York; Philadelphia and Los Angeles.
The Company has signed an exclusive five-year OEM agreement with the Intergraph
Corporation to private label certain Innovative Tech software packages. The
financial terms of the agreement provide for Innovative Tech to receive 30
percent royalties on all sales of the SPAN-FM(TM) software by Intergraph
Corporation. Minimum royalties during each year of the agreement must be $1.5
million in order for Intergraph Corporation to maintain exclusive distribution
rights. The Company did not receive any royalties pursuant to the agreement for
the three months ended July 31, 1996.
On April 11, 1996, the Company signed a seven (7) year strategic marketing
agreement with Landis & Gyr (Europe) Corp., a Swiss based provider of building
performance and energy efficiency solutions with $2.5 billion in annual
revenues. Under the terms of the agreement, Landis & Gyr (Europe) Corp. will
distribute and market Innovative Tech's SPANoFM(TM) product line in Europe,
South Africa, and the Near and Middle East. The terms of the agreement in the
initial year call for Landis & Gyr (Europe) Corp. to commit financial resources
for revisions and enhancements to the SPANoFM(TM) product line. During the
remaining six years of the contract, the Company is to receive royalties based
on revenue generated from product distribution and sales of SPAN-FM(TM) by
Landis & Gyr (Europe) Corp. in Europe. As the new European partner of Innovative
Tech, Landis & Gyr (Europe) Corp. will also translate the SPAN-FM(TM) software
into the various languages used in the market area. The Company recognized
$300,000 in revenues pursuant to the agreement for the three months ended July
31, 1996.
11
<PAGE> 12
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity needs have related to and are expected to continue
relating to, capital investments and working capital requirements. The Company
has met its liquidity needs over the last two years primarily through funds
provided by the issuance of common stock in an underwritten public offering. The
Company believes that cash provided by operating activities, together with the
remaining net proceeds generated from the sale of shares of the Company's common
stock, should be adequate for its presently foreseeable working capital and
capital investment requirements.
The Company's cash position at July 31, 1996 decreased $1,750,535 or 62% from
the January 31, 1996 balance. The decrease was primarily attributable to
$1,025,001 used in operations to support the Company's ongoing product
development efforts, and increased sales and marketing activities. In
addition, the Company repaid $592,689 of long-term debt of its wholly-owned
subsidiary, FMS. The Company also purchased $136,858 of property and equipment.
Accounts receivable at July 31, 1996 increased $968,686 from the January 31,
1996 balance. This increase is due primarily to the increased sales volume
experienced for the three months ended July 31, 1996. Working capital at
July 31, 1996 was $2,654,427. The Company had $400,000 of short-term
borrowings under a line of credit agreement at July 31, 1996. The line of
credit was paid in full on August 16, 1996.
The Company's cash position at July 31, 1995 decreased $2,514,814 or 47% from
the January 31, 1995 balance. The decrease was primarily attributable to
$898,097 used in operations to support the Company's product development
efforts, and increased advertising and marketing activities. Advertising and
marketing activities accounted for $292,315 of the decrease. This decrease was
also attributable to a $750,000 loan, which was held in escrow, that the Company
made to a non-affiliated company. The loan was repaid in full on August 24,
1995, including origination fees of $55,000. In addition, the Company purchased
$44,481 of property and equipment, and $51,071 in leasehold improvements. The
leasehold improvements related to the Company's move to its current headquarters
located in Warminster, Pennsylvania. The move was effective on September 1,
1995.
Accounts receivable at July 31, 1995 increased $218,006 over the January 31,
1995 balance. The Company has not experienced any material collection
difficulties.
Working capital at July 31, 1995 was $4,530,986. Included in accounts payable at
July 31, 1995 was $38,000 of property and equipment which was paid in the third
quarter of fiscal year 1996. The Company had no loans or notes payable at July
31, 1995.
On July 22, 1994, the shareholders of the Company approved the conversion of all
Senior Preferred Stock into Common Stock on a one-for-one basis (prior to the
reverse stock split) and the authorization of a new class of preferred stock
with no par value and 200,000,000 authorized shares.
On July 26, 1994, the Company completed a public offering of 3,900,000 shares of
its Common Stock and 5,400,000 Redeemable Warrants. On August 2, 1994, the
Company received proceeds of $6,043,433 from the offering.
On September 14, 1994, the Company's underwriter exercised the over-allotment
option to purchase up to 585,000 additional shares of Common Stock and/or
810,000 Redeemable Warrants. An additional 472,920 shares of Common Stock and
810,000 Redeemable Warrants were purchased. The proceeds received by the Company
were $743,534.
12
<PAGE> 13
RESULTS OF OPERATIONS
Revenues for the three months ended July 31, 1996 and 1995 were $1,300,423 and
$409,496, respectively. Revenues for the six months ended July 31, 1996 and 1995
were $2,455,778 and $877,321, respectively. Management attributes these
increases to the release of the Windows(TM) version of its SPAN-FM(TM) product
line, and increased sales and marketing activities, which generated a higher
volume of sales transactions.
The Company continues to provide services to the Department of Defense, and
sales made by the Company to the Department of Defense constituted approximately
9% and 33% of the Company's total revenues for the three months ended July 31,
1996 and 1995. The Company anticipates that sales to the United States
Department of Defense will continue to be a significant part of the Company's
revenues during fiscal year 1997. Such continued sales to the United States
Department of Defense will arise as a result of the Company's performance of its
obligations under existing agreements with the United States Department of
Defense.
Cost of revenues were $95,693 and $44,335 for the three months ended July 31,
1996 and 1995, respectively. Included within cost of revenues is computer
hardware, software and services purchased by the Company and subsequently sold
to customers, and amortization of capitalized software. Such purchases are made
only as required under customer contracts. Therefore, the volume of purchases
may fluctuate significantly based upon specific contract requirements. Software
amortization was $25,408 and $35,265 for the three months ended July 31, 1996
and 1995, respectively.
Selling, general and administrative expenses for the three months ended July 31,
1996 increased $396,762 over the three month period ended July 31, 1995. The
increase is due primarily to increased wages incurred by the Company as a result
of hiring additional employees to support the Company's development, sales and
marketing efforts. The increased development and marketing efforts have resulted
in increased revenues.
13
<PAGE> 14
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by Item 601 of Regulation S-K.
None.
(b) Reports on form 8-K.
None.
14
<PAGE> 15
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 hereunto duly authorized.
INNOVATIVE TECH SYSTEMS, INC.
(Registrant)
Dated: September 18, 1996
Innovative Tech Systems, Inc.
By: \s\ Louis J. Desiderio
----------------------
Louis J. Desiderio,
Vice President, Chief Financial Officer
and Assistant Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-START> MAY-01-1996
<PERIOD-END> JUL-31-1996
<CASH> 1,065,207
<SECURITIES> 0
<RECEIVABLES> 2,791,599
<ALLOWANCES> (10,000)
<INVENTORY> 222,187
<CURRENT-ASSETS> 4,245,035
<PP&E> 1,196,837
<DEPRECIATION> (274,804)
<TOTAL-ASSETS> 8,211,896
<CURRENT-LIABILITIES> 1,590,608
<BONDS> 0
0
0
<COMMON> 201,159
<OTHER-SE> 6,420,129
<TOTAL-LIABILITY-AND-EQUITY> 8,211,896
<SALES> 1,300,423
<TOTAL-REVENUES> 1,300,423
<CGS> 95,693
<TOTAL-COSTS> 1,524,621
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,259
<INCOME-PRETAX> (194,089)
<INCOME-TAX> 0
<INCOME-CONTINUING> (194,089)
<DISCONTINUED> 0
<EXTRAORDINARY> 360,337
<CHANGES> 0
<NET-INCOME> 166,248
<EPS-PRIMARY> 0.014
<EPS-DILUTED> 0.014
</TABLE>
