U. S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[ x ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended ......June 30, 1998 .............................
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from ........................... to ..................
Commission file number .................0-19499 .......................
......................Champion Financial Corporation..........................
(Exact name of small business issuer as
specified in its charter)
Utah 88-0169547
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification no.)
9495 E. San Salvador Drive
Scottsdale, Arizona 85258
(Address of principal executive offices)
...........(602) 451-8575 ..........
(Issuer's telephone number)
........................................................................
(Former name, former address and former fiscal year, if changed
since last report) Check 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
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the last practicable date: .......Common stock, $0.001 par
value, 5,969,903 outstanding as of August 10, 1998 ....
<PAGE>
Champion Financial Corporation
Index
<TABLE>
<CAPTION>
Part I: Financial Information
Item 1. Financial Statements
<S> <C>
Consolidated Balance Sheets as of June 30, 1998 and March 31, 1998.......... 3
Consolidated Statements of Operations for the Three Months ended June 30,
1998 and 1997 .............................................................. 4
Consolidated Statements of Cash Flows for the Three Months ended June
30, 1998 and 1997 .......................................................... 5
Notes to Unaudited Consolidated Financial Statements...... ................. 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations .............................................................. 10
Part II: Other Information
Exhibits - None
Signatures ................................................................. 14
</TABLE>
2
<PAGE>
CHAMPION FINANCIAL CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30,
1998 March 31,
(UNAUDITED) 1998
----------- -----------
Assets
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 38,908 $ 199,466
Trade accounts receivable, less allowance for doubtful accounts of $332,111 2,474,149 2,512,446
at 6/30/98 and $250,000 at 3/31/98
Other current assets 107,911 69,126
----------- -----------
Total current assets 2,620,968 2,781,038
----------- -----------
Property and equipment, net 2,687,222 2,851,957
Investment in healthcare technology company 309,626 309,626
Intangibles, net of accumulated amortization of $262,219 at 6/30/98 and $146,030 at 3/31/98 8,890,276 9,006,465
Other assets, at cost 436,243 499,577
----------- -----------
$14,944,335 $15,448,663
=========== ===========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 910,113 $ 1,163,741
Accrued expenses 1,687,981 2,269,678
Current portion of long-term debt 550,000 400,000
Note payable 200,000 200,000
----------- -----------
Total current liabilities 3,348,094 4,033,419
----------- -----------
Line of credit 500,000 300,000
Long-term debt 5,950,000 6,100,000
----------- -----------
Total liabilities $ 9,798,094 $10,433,419
Shareholders' equity:
Common stock, $.001 par value 100,000,000 shares authorized, 5,955,802 shares
issued and outstanding at June 30, 1998 and 5,855,802 at March 31, 1998 5,956 5,856
Additional paid -in- capital 4,646,493 4,617,015
Retained earnings 493,792 392,373
----------- -----------
Total shareholders' equity 5,146,241 5,015,244
----------- -----------
Total liabilities and shareholders' equity $14,944,335 $15,448,663
=========== ===========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
3
<PAGE>
CHAMPION FINANCIAL CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Operations and Retained Earnings
(Unaudited)
Three Months Ended
June 30,
-----------------------
1998 1997
---------- ----------
Revenues:
Capitated fees $2,731,436 $ 138,976
Repricing fees 1,801,479 578,442
Other fees 196,970 5,590
---------- ----------
4,729,885 723,008
---------- ----------
Operating expenses:
Cost of services 702,868 282,917
Salaries and wages 2,029,672 228,129
General and administrative 1,391,469 157,036
Depreciation and amortization 289,114 13,538
Interest expense 160,343 --
---------- ----------
4,573,466 681,620
---------- ----------
Earnings before income taxes 156,419 41,388
Income tax 55,000 10,000
---------- ----------
Net earnings 101,419 31,388
Retained earnings at beginning of quarter 392,373 88,268
---------- ----------
Retained earnings at end of quarter 493,792 119,656
========== ==========
Earnings per share-Basic $ 0.02 $ 0.01
========== ==========
Weighted average shares outstanding-Basic 5,955,802 5,473,302
========== ==========
See accompanying notes to unaudited consolidated financial statements.
4
<PAGE>
Champion Financial Corporation
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Three Months Ended June 30,
---------------------------
1998 1997
--------- ---------
<S> <C> <C>
Operating activities:
Net earnings $ 101,419 $ 31,388
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 289,114 13,538
Bad debt expense 82,111 --
Interest expense on debentures 29,578 --
Increase (decrease) in cash resulting from changes in operating
assets and liabilities:
Trade accounts receivable (43,814) (29,405)
Other current assets (38,785) (5,698)
Accounts payable (253,628) (80,148)
Accrued expenses (581,697) (17,035)
Deferred revenue -- (48,909)
--------- ---------
Net cash provided by (used in) operating activities (415,702) (136,269)
--------- ---------
Investing activities:
Purchases of equipment (8,190) (11,600)
Preaquisition cost -- (7,711)
Investment in healthcare technology company -- (309,626)
--------- ---------
Net cash provided by (used in) investing activities (8,190) (328,937)
--------- ---------
Financing activities:
Decrease in other assets 63,334 --
Payments on note payable -- (24,340)
Net proceeds from line of credit 200,000 --
--------- ---------
Net cash provided by (used in) financing activities 263,334 (24,340)
--------- ---------
Net decrease in cash and cash equivalents (160,558) (489,546)
Cash and cash equivalents at beginning of quarter $ 199,466 $ 896,096
--------- ---------
Cash and cash equivalents at end of period $ 38,908 $ 406,550
========= =========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
5
<PAGE>
CHAMPION FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
(1) Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited consolidated financial statements of Champion
Financial Corporation and Subsidiaries have been prepared in accordance
with generally accepted accounting principles for interim financial
information and pursuant to rules and regulations of the Securities and
Exchange Commission. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for a complete financial statement presentation. In the
opinion of management such unaudited interim information reflects all
adjustments, consisting only of normal recurring adjustments, necessary
to present the Company's financial position and results of operations for
the periods presented. The results of operations for interim periods are
not necessarily indicative of the results to be expected for a full
fiscal year. The consolidated Balance Sheet as of March 31, 1998 was
derived from audited consolidated financial statements as of that date
but does not include all the information and footnotes required by
generally accepted accounting principles. It is suggested that these
consolidated financial statements be read in conjunction with the
Company's audited consolidated financial statements included in the
Company's Annual Report Form 10-KSB, for the year ended March 31, 1998.
Description of Business
Champion Financial Corporation is a healthcare management company
dedicated to controlling the cost, improving the quality and enhancing
the delivery of healthcare services. The Company also provides related
products and services designed to reduce healthcare costs. The Company
markets and provides programs and services to insurance companies,
self-insured businesses for their medical plans and third parties that
administer employee medical plans. These programs and services assist its
clients in reducing healthcare costs for group health plans and for
workers' compensation coverage and automobile accident injury claims.
Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements
in conformity with generally accepted accounting principles.
Principles of Consolidation
The consolidated financial statements include the financial statements
of the Company and its two wholly-owned subsidiaries. All significant
intercompany balances and transactions have been eliminated in
consolidation.
Cash Equivalents
The Company considers all highly liquid instruments with original
maturities of three months or less to be cash equivalents.
Earnings Per Share
The Company adopted Statement of Accounting Standards No. 128 "Earnings
per Share" (SFAS 128) during 1997. The Company's Earnings per Common
Share (EPS) figures for the prior period were not effected by adoption of
SFAS 128. In accordance with SFAS 128, basic EPS is computed by dividing
net income, after deducting preferred stock dividends requirements (if
any), by the weighted average number of shares of common stock
outstanding.
6
<PAGE>
CHAMPION FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements, Continued
Diluted EPS reflects the maximum dilution that would result after giving
effect to dilutive stock options and warrants and to the assumed
conversion of all dilutive convertible securities and stock.
For purposes of the diluted earnings per share calculation, the
convertible debentures had an antidilutive effect.
Fair Value of Financial Instruments
The fair value of a financial instrument is the amount at which the
instrument could be exchanged in a current transaction between willing
parties. Management believes that the recorded amounts of current assets
and current liabilities approximate fair value because of the short
maturity of these instruments. The recorded balance of long-term debt
approximates fair value, as the terms of the debt are similar to rates
currently offered to the Company for similar debt instruments.
Revenue Recognition
Repricing fees are derived from a negotiated percentage of the medical
savings generated from customer claims managed by the Company or on a per
member per month basis. The percentage of savings fees are recognized as
revenue as the Company renders services and notifies the health care
provider of their required billings reduction for a specified period of
time. The Company receives monthly capitation fees based upon the number
of each customer's members regardless of services actually provided.
Cost of Services
The major components of cost of services consist of utilization review,
case management and external marketing commissions.
Property and Equipment
Property and equipment are stated at cost. Depreciation is calculated
using the straight-line method over the estimated useful lives of the
assets, which approximates three years for equipment to seven years for
furniture and fixtures. Computer software is amortized over three to five
years.
Intangibles
Intangibles, which represent the excess of purchase price over fair value
of net tangible assets acquired, are amortized on a straight-line basis
over the expected periods to be benefited, generally 20 years. The
Company assesses the recoverability of intangible assets by determining
whether the amortization of the intangibles over their remaining lives
can be recovered through undiscounted future operating cash flows of the
acquired operation. The amount of intangible impairment, if any, is
measured based on projected discounted future operating cash flows using
a discount rate reflecting the Company's average cost of funds. The
assessment of the recoverability of intangibles will be impacted if
estimated future operating cash flows are not achieved.
7
<PAGE>
CHAMPION FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements, Continued
Income Taxes
The Company accounts for income taxes under the asset and liability
method. Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
A valuation allowance must be established to reduce deferred income tax
benefits if it is more likely than not that a portion of the deferred
income tax benefits will not be realized. It is management's opinion that
the entire deferred tax benefit may not be recognized in future years.
Therefore, a valuation allowance equal to the deferred tax benefit has
been established.
Impairment of Long-Lived Assets
Management reviews the possible impairment of long-lived assets and
certain identifiable intangible assets whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by
a comparison of the carrying amount of an asset to future net cash flows
expected to be generated by the asset. If such assets are considered to
be impaired, the impairment to be recognized is measured by the amount by
which the carrying amount of the assets exceed the fair value of the
assets.
Year 2000
Management has developed a plan to address the Year 2000 problem and all
computer systems are in the process of conversion to be Year 2000
compliant. The Year 2000 problem is the result of computer programs being
written using two digits rather than four digits to define the applicable
year. The total cost of the project is not material and the Company is
expensing all associated costs as they are incurred.
(3) Property and Equipment
A summary of property and equipment by major classification at June 30,
1998 follows:
Furniture and fixtures $ 790,025
Computer software 608,000
Equipment 1,750,672
-----------
3,148,697
Accumulated depreciation (461,475)
-----------
$ 2,687,222
===========
8
<PAGE>
CHAMPION FINANCIAL CORPORATION
AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements, Continued
(4) Debt
The Company maintains a $1,500,000 line of credit with Harris Trust and
Savings Bank. The line of credit bears interest at prime (8.5% at June
30, 1998). The line is collateralized by substantially all the assets of
the Company. There were $500,000 in borrowings against this line of
credit at June 30, 1998.
<TABLE>
<CAPTION>
Debt consists of the following at June 30, 1998:
<S> <C>
8% Series A Senior Subordinated Convertible Debentures due
December 3, 1999 in an aggregate principal amount, interest payable
quarterly $ 4,000,000
Note payable to Harris Trust and Savings Bank due on December 14,
2000, with quarterly principal payments ranging from $100,000 -
$150,000 plus interest on the unpaid balance at prime (8.5% at June
30, 1998), secured by substantially all the assets of the Company 2,500,000
Unsecured note payable to an individual, interest payable monthly at
8%, due December 15, 1998 200,000
------------------
6,700,000
Less current maturities 750,000
------------------
$ 5,950,000
==================
(5) Accrued Expenses
A summary of accrued expenses at June 30, 1998 follows:
Salaries and benefits $ 623,605
Professional fees 275,470
Income taxes 33,300
Transaction and restructuring costs 138,997
Interest 63,648
Other 552,961
------------------
$ 1,687,981
==================
</TABLE>
(6) Common Stock Transaction
During the quarter ended June 30, 1998, the Company agreed to issue 9,101
shares of common stock valued at $29,578 (market value) for interest
payments due on convertible debentures. This is in accordance with the
terms of the convertible debenture agreement. These shares are reflected
in additional paid in capital.
9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Management's Discussion and Analysis of Financial Condition and Results of
Operations should be read in conjunction with the financial statements and
footnotes for the quarter ended June 30, 1998 and the year ended March 31, 1998
contained in the Company's Form 10-KSB filed with the Securities and Exchange
Commission on June 29, 1998.
The managed healthcare cost containment industry is highly fragmented, with a
large number of competitors. The Company does not believe that any single
company commands significant market share. The management of the Company
believes the level of competition will continue to increase in the future. Most
of the Company's competitors are national managed care providers, insurance
companies, HMOs, and third-party administrators that have implemented their own
managed care programs. Several large insurance companies for workers'
compensation, health and automobile have also implemented their own
cost-containment programs through the carrier's own personnel. Many of the
Company's current and potential competitors are significantly larger and have
greater financial, technical, marketing, and management resources than the
Company.
The Company competes on the basis of its specialized knowledge and expertise in
the managed healthcare services industry and on its ability to deliver effective
services to the customer with a high level of customer satisfaction at a very
affordable price. There can be no assurance that the Company will be able to
compete successfully. The managed healthcare industry has experienced
significant changes in recent years, primarily as a result of rising healthcare
costs. The Company will be required to respond to various competitive factors
affecting the healthcare industry, including new medical technologies that may
be introduced; general trends relating to the demand for healthcare services;
regulatory, economic, and political factors; changes in patient demographics;
and competitive pricing strategies by HMOs and other healthcare plans.
Results of Operations
When comparing the Company's financial results for the three months
ended June 30, 1998 to the three months ended June 30, 1997, it is important to
note that the majority of the increase in the level of revenues and expenses is
due primarily to the Company's acquisition of HealthStar, Inc., which was
completed on December 15, 1997.
Revenue
The Company derives the majority of its revenue from fees charged to
clients for access to the Company's network of contracted providers. The
Company's client base consists of a variety of payors of medical claims such as
insurance companies, third-party administrators and self-insured employers.
Access fees can be either a fixed, monthly fee per enrolled subscriber which is
called a capitated fee or can be based on a percentage of the amount of the
discount off of billed charges which is granted by a contracted provider. The
Company's participation in the amount saved varies from 20% to 25% with the
exact amount determined by contractual provisions with the Company's clients.
Total revenue increased $4,006,877 to $4,729,885 for the three months
ended June 30, 1998 compared to $723,008 for the three months ended June
30,1997, an increase of 554%. The increase was a result of operations from the
newly acquired subsidiary HealthStar, Inc.. Revenues for the Company's NHBC
division were unchanged from prior year's levels.
10
<PAGE>
Operating Expenses
Cost of services includes the cost of outsourcing the case management
and utilization review functions, commissions paid to outside brokers, fees paid
to other regional PPO networks for access to providers not contracted directly
with the Company and other products and services provided by outside vendors.
Cost of services increased $419,951 to $702,868 for the three months ended June
30, 1998 from $282,917 in 1997. The entire increase is attributable to
HealthStar and is primarily related to the cost of outsourcing the case
management and utilization review functions. As a percentage of revenue, cost of
services decreased from 39.1% in 1997 to 14.9% in 1998. This margin improvement
is a result of the fact that HealthStar contracts directly with healthcare
providers which limits the fees paid to access other PPO networks.
Salaries and wages includes all employee compensation including payroll
taxes, health insurance and other employee benefits. Also included are
commissions paid to in-house sales and marketing personnel. Salaries and wages
increased $1,801,543 from $228,129 for the three months ended June 30,1997 to
$2,029,672 for the comparable period in 1998. Approximately $1.7 million of this
increase is due to the addition of HealthStar. Other factors include the hiring
of additional administrative personnel and related expenses to accommodate the
increase in business and future growth.
General and administrative expenses include all other operating
expenses such as telephone charges, office supplies, postage, travel and
entertainment, professional fees, insurance, rent and utilities. General and
administrative expenses increased $1,234,433 from $157,036 in 1997 to $1,391,469
in 1998. The majority of this increase is due to the addition of HealthStar and
legal expenses incurred by the Company for the lawsuit filed in March 1998
against the holders of the convertible debentures.
Depreciation and amortization increased significantly due to the
goodwill created as a result of the HealthStar acquisition. Goodwill of
approximately $9,000,000 is being amortized over 20 years.
Interest expense of $160,343 relates to the indebtedness incurred as a
result of the HealthStar acquisition. The interest rate on the Company's term
loan and line of credit was 8.5% at June 30, 1998. The interest rate on the
convertible debentures is 8.0%, and the interest rate on the seller note payable
is 8.0%. Approximately $64,000 is due to the amortization of prepaid financing
costs related to the convertible debentures and the Harris Bank term loan and
line of credit.
Net income for the three months ended June 30, 1998 increased $70,031
or 223% from $31,388 in June 30, 1997. Net income was impacted adversely by
$150,000 in legal fees incurred for the lawsuit against the holders of the
convertible debentures. Earnings per share for the three months ended June 30,
1998 was $0.02 compared to $0.01 for the three months ended June 30, 1997.
Liquidity and Capital Resources
The Company has historically funded its working capital requirements
and capital expenditures primarily from cash flow generated from operations
supplemented by borrowings under the Company's line of credit.
The Company had approximately $39,000 in cash and cash equivalents at
June 30, 1998.
11
<PAGE>
In connection with the acquisition of HealthStar, the Company issued
$4,000,000 Series A 8% Senior Subordinated Convertible Redeemable debentures.
The entire proceeds of the issuance and the debentures were utilized in the
acquisition. Beginning on January 17, 1998, the debentures were convertible into
common shares of the Company's stock based upon a formula related to the market
price of the stock. In the event that the entire amount of the debentures have
not been converted prior to the maturity date of December 3, 1999, the
debentures will automatically convert to common shares of the Company on the
said maturity date.
Also in connection with the acquisition of HealthStar, the Company
secured a $1,500,000 line of credit with Harris Trust and Savings Bank. The line
of credit bears interest at the Prime rate (8.5% at March 31, 1998) and is
secured by substantially all of the assets of Champion and its subsidiaries. At
June 30, 1998, the Company had borrowed $500,000 on the line of credit, and had
approximately $750,000 of additional borrowing capacity available.
Although there can be no assurances, management of the Company
anticipates growth and expansion to continue to accelerate in 1998 through the
acquisition of complementary businesses or business lines, management personnel
and infrastructure additions. The Company believes additional sources of cash
flow may be required in conjunction with any such acquisition activity. There
can be no assurance that the Company may be able to obtain such funds on terms
acceptable to the Company. Management currently believes that cash on hand,
amounts available under the revolving line of credit and cash generated from
future operations will be sufficient to fund the Company's operations and
anticipated expansion plans.
Legal Proceedings
In March 1998, the Company, as assignee of a shareholder, filed a
lawsuit in U.S. District Court in Arizona, alleging that a Canadian brokerage
firm, among others, perpetrated a "scheme and conspiracy to defraud" by
"manipulating the market in Champion common stock." The suit names Thomas
Kernaghan & Co. Ltd.; Ronald G. Williams; Sheldon D. Taiger; London Select
Enterprises Ltd.; Select Capital Advisors, Inc.; Mark Valentine; and Bronia GmbH
as defendants. The complaint alleges that the defendants manipulated the market
in and for Company's common stock and, more particularly artificially depressed
the price at which the Company's common stock traded, resulting in damages,
including to the business and reputation of the Company. Certain of the
defendants have filed motions to stay and/or dismiss the lawsuit.
Additionally, Thomson Kernaghan & Co. LTD and Bronia GmbH have filed an
arbitration proceeding against the Company with the American Arbitration
Association in New York City, claiming that the Company "wrongfully refused to
honor their request to convert" certain debentures into common stock of the
Company. The relief sought against the Company is to convert certain debentures
into common stock of the Company and for "liquidated and punitive damages."
From time to time, the Company is named as a defendant in routine
litigation incidental to its business. Based on the information currently
available, the Company believes that none of such current proceedings,
individually or in the aggregate, will have a material adverse effect on the
Company.
12
<PAGE>
New Accounting Standards
Statement of Financial Accounting Standards No. 130, "Reporting of
Comprehensive Income" establishes standards for reporting and display of
comprehensive income (all changes in equity during a period except those
resulting from investments by and distributions to owners) and its components in
financial statements. The adoption of this statement contains no change in
disclosure requirements for the Company.
Statement of Financial Accounting Standards No. 131, "Disclosure about
Segments of an Enterprise and Related Information" establishes standards for
reporting information about operating segments in annual financial statements,
selected information about operating segments in interim financial reports and
disclosures about products and services, geographic area and major customers.
This pronouncement will be required to be implemented in the year ended March
31, 1999 and may result in presenting more detailed information in the notes to
the Company's consolidated financial statements.
13
<PAGE>
CHAMPION FINANCIAL CORPORATION
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.
Champion Financial Corporation
DATE: August 10, 1998 BY: BY:/S/ STEPHEN J. CARDER
STEPHEN J. CARDER
PRESIDENT
CHIEF EXECUTIVE OFFICER
AND PRINCIPAL EXECUTIVE AND
FINANCIAL OFFICER
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF JUNE 30, 1998, AND STATEMENT OF INCOME FOR THE THREE MONTHS ENDING
JUNE 30, 1998, OF CHAMPION FINANCIAL CORPORATION AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 39,908
<SECURITIES> 0
<RECEIVABLES> 2,806,260
<ALLOWANCES> 332,111
<INVENTORY> 0
<CURRENT-ASSETS> 2,620,968
<PP&E> 3,148,697
<DEPRECIATION> (461,475)
<TOTAL-ASSETS> 14,944,335
<CURRENT-LIABILITIES> 3,348,094
<BONDS> 0
0
0
<COMMON> 5,956
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 4,729,885
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,573,466
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 156,419
<INCOME-TAX> 55,000
<INCOME-CONTINUING> 101,419
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 101,419
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0.00
</TABLE>
