<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 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:
0-21428
OCCUPATIONAL HEALTH + REHABILITATION INC
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 13-3464527
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
175 DERBY STREET, SUITE 36
HINGHAM, MASSACHUSETTS 02043
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(781) 741-5175
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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 [ ]
The number of shares outstanding of the registrant's Common Stock as of
May 1, 1998 was 1,478,977.
----------
================================================================================
<PAGE>
OCCUPATIONAL HEALTH + REHABILITATION INC
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1998
TABLE OF CONTENTS
PART I --- FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets........................... 3
Consolidated Statements of Operations................. 4
Consolidated Statements of Cash Flows................. 5
Notes to Consolidated Financial Statements............ 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations........... 7
Item 3. Quantitative and Qualitative Disclosures About
Market Risk............................................. 11
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K........................ 12
Signatures....................................................... 13
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
OCCUPATIONAL HEALTH + REHABILITATION INC
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
ASSETS 1998 1997
- ------ --------- ------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents...................... $ 3,570 $ 4,180
Accounts receivable, net...................... 3,804 3,207
Note receivable................................ 275 210
Prepaid expenses and other assets.............. 370 456
------- -------
Total current assets........................... 8,019 8,053
Property and equipment, net.................... 1,536 1,539
Goodwill, net.................................. 4,124 3,985
Note receivable................................ 642 707
Other assets................................... 305 289
------- -------
Total assets................................... $14,626 $14,573
======= =======
LIABILITIES, REDEEMABLE STOCK AND
- ---------------------------------
STOCKHOLDERS' EQUITY
- --------------------
Current liabilities:
Accounts payable and accrued expenses.......... $ 2,195 $ 2,073
Current portion of long-term debt.............. 1,082 663
Current portion of obligations under capital
leases........................................ 116 120
------- -------
Total current liabilities...................... 3,393 2,856
Long-term debt, less current maturities........ 898 1,264
Obligations under capital leases............... 119 122
------- -------
Total liabilities.............................. 4,410 4,242
Minority interest.............................. 215 134
Redeemable stock:
Redeemable, convertible preferred stock,
Series A, $.001 par value ---
$8,500,002 liquidation value, 1,666,667
shares authorized, 1,416,667
shares issued and outstanding................ 8,443 8,440
Stockholders' equity:
Preferred stock, $.001 par value - 3,333,333
shares authorized; none issued
and outstanding.............................. --- ---
Common stock, $.001 par value -- 10,000,000
shares authorized; 1,579,479shares issued and
1,478,977 shares outstanding, in 1998 and
1997, respectively............................ 1 1
Additional paid-in capital..................... 10,619 10,619
Accumulated deficit............................ (8,562) (8,363)
Less treasury stock, at cost, 100,502 shares... (500) (500)
------- -------
Total stockholders' equity..................... 1,558 1,757
------- -------
Total liabilities, redeemable stock and
stockholders' equity.......................... $14,626 $14,573
======= =======
</TABLE>
See Accompanying Notes
3
<PAGE>
OCCUPATIONAL HEALTH + REHABILITATION INC
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1998 1997
---------- ----------
<S> <C> <C>
Revenue............................ $ 5,277 $ 3,348
Expenses:
Operating....................... 4,503 3,373
General and administrative...... 708 613
Depreciation and amortization... 176 152
--------- ---------
5,387 4,138
--------- ---------
(110) (790)
Nonoperating gains (losses):
Interest income................. 47 83
Interest expense................ (51) (52)
Minority interest in net (gain)
loss of subsidiaries........... (81) 105
--------- ---------
Net loss........................... $ (195) $ (654)
========= =========
Net loss available to common
shareholders...................... $ (199) $ (659)
========= =========
Net loss per common share......... $ (0.13) $ (0.42)
========= =========
Weighted average common shares..... 1,478,977 1,566,396
========= =========
</TABLE>
See Accompanying Notes
4
<PAGE>
OCCUPATIONAL HEALTH + REHABILITATION INC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1998 1997
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss................................................ $ (195) $ (654)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization....................... 176 156
Minority interest in net gain (loss) of subsidiary.. 81 (105)
Changes in operating assets and liabilities:
Accounts receivable............................... (597) (733)
Prepaid expenses and other current assets......... 90 53
Due from related party, net....................... (25)
Deposits and other noncurrent assets.............. (1) (11)
Accounts payable and accrued expenses
and other long-term liabilities................. 115 (194)
------ -------
Net cash used in operating activities................... (331) (1,513)
INVESTING ACTIVITIES:
Release of restricted cash.............................. 25
Cash paid for intangibles............................... (102)
Refund of security deposit.............................. (25)
Property and equipment additions........................ (45) (131)
Cash paid for acquisitions.............................. (154) (925)
------ -------
Net cash used in investing activities................... (199) (1,158)
FINANCING ACTIVITIES:
Payments of long-term debt.............................. (47) (32)
Payments of capital lease obligations................... (33)
Cash received by partnership............................ 17
------ -------
Net cash used in financing activities................... (80) (15)
------ -------
Net decrease in cash and cash equivalents............... (610) (2,686)
Cash and cash equivalents at beginning of period........ 4,180 8,616
------ -------
Cash and cash equivalents at end of period.............. $3,570 $ 5,930
====== =======
</TABLE>
See Accompanying Notes
5
<PAGE>
OCCUPATIONAL HEALTH + REHABILITATION INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited interim financial statements of Occupational
Health + Rehabilitation Inc (the "Company") have been prepared in accordance
with the instructions to Form 10-Q and Rule 10.01 of Regulation S-X pertaining
to interim financial information and disclosures required by generally accepted
accounting principles. The interim financial statements presented herein reflect
all adjustments (consisting of normal recurring adjustments) which, in the
opinion of management, are considered necessary for a fair presentation of the
Company's financial condition as of March 31, 1998 and results of operations for
the three months ended March 31, 1998 and 1997. The results of operations for
the three months ended March 31, 1998 are not necessarily indicative of the
results that may be expected for a full year.
2. NET LOSS PER COMMON SHARE
In 1997, the Financial Accounting Standards Board issued Statement No. 128,
Earnings per Share. Statement 128 replaced the calculation of primary and fully
diluted earnings per share with basic and diluted earnings per share. Unlike
primary earnings per share, basic earnings per share excludes any dilutive
effects of options, warrants and convertible securities. Diluted earnings per
share is very similar to the previously reported fully diluted earnings per
share. There was no effect on previously reported net loss per common share
amounts due to the adoption of Statement 128. For the quarter ended March 31,
1998, for purposes of the net loss per common share calculation, the net loss
has been increased by $4,000 of preferred stock accretion. The effect of
options, warrants, convertible preferred stock and a convertible note payable is
not considered as it would be anti-dilutive for the years presented.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The Company is a physician practice management company specializing in
occupational health care throughout the Northeastern United States. The Company
develops and operates multidisciplinary outpatient healthcare centers and
provides on-site services to employers for the prevention, treatment and
management of work-related injuries and illnesses. The Company operates the
centers under management and submanagement agreements with professional
corporations that practice exclusively through such centers. Additionally, the
Company has entered into joint ventures with hospital related organizations to
provide management and related services to the centers established by the joint
ventures.
The Company is the surviving corporation of a merger (the "Merger") of
Occupational Health + Rehabilitation Inc ("OH+R") into Telor Ophthalmic
Pharmaceuticals, Inc ("Telor"). Pursuant to the Merger, the ophthalmic
pharmaceutical business of Telor ceased, and the business of the Company was
changed to the business of OH+R.
The following table sets forth, for the periods indicated, the relative
percentages which certain items in the Company's consolidated statements of
operations bear to revenue. The following information should be read in
conjunction with the consolidated financial statements and notes thereto
included elsewhere in this report. Historical results and percentage
relationships are not necessarily indicative of the results that may be expected
for any future period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
Revenue.................................. 100.0% 100.0%
Operating expenses....................... (85.3) (100.7)
General and administrative expenses...... (13.4) (18.3)
Depreciation and amortization expense.... (3.3) (4.5)
Interest income.......................... 0.8 2.5
Interest expense......................... (1.0) (1.6)
Minority interest in net (gain) loss of
subsidiary.............................. (1.5) 3.1
------- -------
Net loss................................. (3.7)% (19.5)%
======= =======
</TABLE>
7
<PAGE>
RESULTS OF OPERATIONS (DOLLAR AMOUNTS IN THOUSANDS)
- ---------------------
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
- ------------------------------------------
Revenue
Revenue increased 57.6% to approximately $5,277 in the three months ended
March 31, 1998 from approximately $3,348 in the three months ended March 31,
1997. Of the approximately $1,929 increase in revenue in the three months ended
March 31, 1998 compared to the three months ended March 31, 1997, approximately
$1,276 was attributable to the incremental increase of revenue of centers that
were acquired or became part of a joint venture during the quarter ended March
31, 1997, $977 related to centers acquired subsequent to March 31, 1997 and the
remaining $528 related to additional volume at existing centers. These amounts
were offset by $852 of revenue which related primarily to the Company's share of
a partnership's interest which was sold on December 31, 1997.
Operating, General and Administrative Expenses
Operating expenses increased 33.5% to approximately $4,503 in the three
months ended March 31, 1998 from approximately $3,373 in the three months ended
March 31, 1997. This increase was principally due to the acquisition and
development of additional centers. As a percentage of revenue, operating
expenses declined to 85.3% in the three months ended March 31, 1998 as compared
to 100.7% in the three months ended March 31, 1997. The centers, in the
aggregate, achieved profitability during the first quarter of 1998 versus the
first quarter of 1997 as individual centers reached critical mass in terms of
volume. In prior years, many centers were in a transition mode and incurred
expenses to establish infrastructure.
General and administrative expenses increased 15.5% to approximately $708 in
the three months ended March 31, 1998 from $613 in the three months ended March
31, 1997. The increase was the result of the Company's expanding its corporate
staff to support the growth in the centers. As a percentage of revenue, general
and administrative expenses decreased to 13.4% in the three months ended March
31, 1998 as compared to 18.3% in the three months ended March 31, 1997. The
Company believes that as additional acquisitions are completed, further
leveraging of existing management will occur.
Depreciation and Amortization
Depreciation and amortization expense increased 15.8% to approximately $176 in
the three months ended March 31, 1998 from approximately $152 in the three
months ended March 31, 1997. The increase occurred primarily as a result of the
Company's having additional growth through center development and acquisitions.
As a percentage of revenue, depreciation and amortization was 3.3% in the three
months ended March 31, 1998 compared to 4.5% in the three months ended March 31,
1997.
Interest Income
Interest income is generated primarily from cash invested in highly liquid
funds with a maturity of three months or less. Interest income decreased 43.4%
to approximately $47 in the three months ended March 31, 1998 from $83 in the
three months ended March 31, 1997. The decrease was related to the Company's
having less cash funds to invest in the three months ended March 31, 1998 versus
the prior year since the Company utilized cash during 1997 for acquisitions and
other general corporate needs.
8
<PAGE>
Minority Interest
Minority interest represents the share of (profits) and losses of minority
investors in certain joint ventures with the Company. In the three months ended
March 31, 1998, the minority interest in net gains of subsidiaries was ($81)
compared to the minority interest in net losses of subsidiaries equaling $105 in
the three months ended March 31, 1997. For the first quarter of 1998, the
financial performance of the joint venture centers generally improved over the
prior year.
SEASONALITY
The Company is subject to the natural seasonal swing that impacts the various
employers and employees it serves. Although the Company hopes that as it
continues its growth and development efforts it may be able to anticipate the
effect of these swings and provide services aimed to ameliorate this impact,
there can be no assurance that it can completely alleviate the effects of
seasonality. Historically, the Company has noticed these impacts in portions of
the first and fourth quarters. Traditionally, revenues are lower during these
periods since patient visits decrease due to the occurrence of plant closings,
vacations, holidays, a reduction in new employee hirings and the impact of
severe weather conditions in the Northeast. These activities also cause a
decrease in drug and alcohol testings, medical monitoring services and pre-hire
examinations. The Company has also noticed similar impacts during the summer
months, but typically to a lesser degree than during the first and fourth
quarters.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company's funding requirements have been met through a
combination of issuances of capital stock, long-term debt and other commitments,
the utilization of capital leases and loans to finance equipment purchases, the
sale of certain accounts receivable and the creation of minority interests. Net
proceeds from the sale of capital stock have totaled approximately $14 million,
including the Company's private placement of its Series A Convertible Preferred
Stock on November 6, 1996. The proceeds from the sale of this preferred stock
provided the Company with cash proceeds of approximately $8.4 million, net of
expenses. At March 31, 1998, the Company had $4,626 in working capital, a
decrease of $571 from December 31, 1997. The Company has utilized its funds in
its expansion effort and for working capital. The Company's principal sources
of liquidity as of March 31, 1998 consisted of (i) cash and cash equivalents
aggregating approximately $3,570 and (ii) current accounts and a note receivable
of approximately $4,079.
Net cash used in operating activities by the Company during the three months
ended March 31, 1998 was approximately $331 as compared to approximately $1,513
for the three months ended March 31, 1997. During these periods, the primary
uses of cash were the funding of working capital in centers in early stages of
development or centers that were recently acquired and to fund Company operating
losses. The improvement in net cash used in operating activities is primarily
due to the improved financial performance by the Company's centers.
The Company's investing activities for the three months ended March 31, 1998
used cash of $199 versus $1,158 for the three months ended March 31, 1997.
These activities included the purchase of a physician and physical therapy
practice and the payment of additional purchase price in accordance with the
terms negotiated in connection with certain prior acquisitions which amounted to
$154. For the three months ended March 31, 1997, the Company paid $925 for the
purchase of several physician practices and
9
<PAGE>
the investments in two joint ventures. The Company has an equity interest equal
to or in excess of 51% in all joint ventures. Additional investing activities
included the use of $45 and $131 for fixed asset additions in the three months
ended March 31, 1998 and 1997, respectively. Fixed asset additions for the three
months ended March 31, 1998 related primarily to computer equipment.
Finally, in the three months ended March 31, 1998 and 1997, the Company
utilized $80 and $32, respectively, towards the payment of long-term debt and
other long-term obligations. The Company expects that its principal use of
funds in the near future will be in connection with acquisitions, the formation
of joint venture entities and the establishment of management agreements,
working capital requirements, debt repayments and purchases of property and
equipment. During November of 1997, the Company entered into a financing
arrangement with BankBoston, N.A. whereby it has access to two separate credit
facilities. The first credit facility provides the Company with $2.5 million
for working capital and acquisition needs. The second facility provides up to
$4.5 million to be utilized by the Company's existing and future joint ventures.
As of March 31, 1998, the Company's borrowings under the second facility amount
to approximately $287. The borrowing base of the joint venture credit facility
is eighty-five percent (85%) of the joint ventures' accounts receivable less
than 120 days old. Both facilities expire on September 30, 1999. The Company
expects that the cash received as the result of the Merger, the sale of
1,416,667 shares of its Series A Convertible Preferred Stock, the credit
facilities, and cash generated from operations will be adequate to provide
working capital requirements and to fund debt repayments and to finance any
necessary capital expenditures through December 31, 1998. However, the Company
believes that the level of financial resources available to it is an important
competitive factor. The Company will consider raising additional capital on an
on-going basis as market factors and its needs suggest since additional capital
may be necessary to fund acquisitions by the Company.
Impact of Year 2000
The Company is aware of the issues associated with the programming code in
existing computer systems as the year 2000 approaches. The "Year 2000" problem
is pervasive and complex, as virtually every computer operation will be affected
in the same way by the rollover of the two digit year value to 00. The issue is
whether computer systems will properly recognize date sensitive information when
the year changes to 2000. Systems that do not properly recognize such
information could generate erroneous data or cause a system to fail.
The Company is utilizing both internal and external resources to identify,
correct or reprogram, and test its systems for Year 2000 compliance. It is
currently anticipated that all reprogramming efforts will be completed by
December 31, 1998, allowing adequate time for testing. A preliminary assessment
has indicated that some of the Company's older personal computers and ancillary
software programs may not be Year 2000 compatible. The Company intends to
either replace or modify these computers and programs. The cost of this
replacement is not expected to be material as the shelf life of the Company's
personal computers is 3 to 5 years, and as a result historically each year
approximately 25% of all personal computers are replaced or upgraded. All
personal computers purchased in 1997 and through March 31, 1998 are Year 2000
compatible.
The Company is also obtaining confirmations from the Company's primary vendors
that plans are being developed or are already in place to address processing of
transactions in the Year 2000. However, there can be no assurance that the
systems of other companies on which the Company's systems rely also will be
converted in a timely fashion or that any such failure to convert by another
company would not have an adverse effect on the Company's systems. Management
is in the process of completing its assessment of the Year 2000 compliance
costs. However, based on currently available information (excluding the
possible
10
<PAGE>
impact of vendor systems which management currently is not in a position to
evaluate) as noted above, management does not believe that these costs will have
a material effect on the Company's earnings.
INFLATION
The Company does not believe that inflation had a significant impact on its
results of operations during the last three years. Further, inflation is not
expected to adversely affect the Company in the future unless it increases
substantially, and the Company is unable to pass through the increases in its
billings and collections.
IMPORTANT FACTORS REGARDING FORWARD-LOOKING STATEMENTS
Statements contained in the Quarterly Report on Form 10-Q, including in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," contain forward-looking statements within the meaning of Section
21E of the Securities Exchange Act, which statements are intended to be subject
to the "safe-harbor" provisions of the Private Securities Litigation Reform Act
of 1995. The forward-looking statements are based on management's current
expectations and are subject to many risks and uncertainties, which could cause
actual results to differ materially from such statements. Such statements
include statements regarding the Company's objective to develop a comprehensive
regional network of occupational healthcare centers providing integrated
services through multi-disciplinary teams. Among the risks and uncertainties
that will affect the Company's actual results in achieving this objective are
locating and identifying suitable acquisition candidates, the ability to
consummate acquisitions on favorable terms, the success of such acquisitions, if
completed, the cost and delays inherent in managing growth, the ability to
attract and retain qualified professionals and other employees to expand and
complement the Company's services, the availability of sufficient financing and
the attractiveness of the Company's capital stock to finance acquisitions,
strategies pursued by competitors, the restrictions imposed by government
regulation, changes in the industry resulting from changes in workers'
compensation laws and regulations and in the healthcare environment generally
and other risks described in this Quarterly Report on Form 10-Q and this
Company's other filings with the Securities and Exchange Commission.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
11
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. EXHIBITS
11.01 Statement re Computation of Per Share Earnings.*
27.01 Financial Data Schedule.*
*Filed herewith
B. REPORTS ON FORM 8-K
On January 9, 1998, the Company filed a Current Report on Form 8-K dated
December 31, 1997 reporting in Item 2 thereof the sale of its general
partnership interest in Argosy Health Northeast.
12
<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.
OCCUPATIONAL HEALTH + REHABILITATION INC
By: /s/ John C. Garbarino
--------------------------------------------
John C. Garbarino
President and Chief Executive Officer
(principal executive officer)
By: /s/ Richard P. Quinlan
------------------------------------------
Richard P. Quinlan
Chief Financial Officer, Treasurer,
Secretary and General Counsel
(principal financial officer)
Date: May 8, 1997
13
<PAGE>
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
- ------ -----------
11.01 Statement re Computation of Per Share Earnings.
27.01 Financial Data Schedule.
<PAGE>
EXHIBIT NO. 11.01
OCCUPATIONAL HEALTH + REHABILITATION INC
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31
1998 1997
---------------------------
<S> <C> <C>
EARNINGS PER COMMON SHARE - BASIC
Weighted average common
stock outstanding during
the period................ 1,478,977 1,566,396
========== ===========
Net loss..................... $ (195) $ (654)
Less: Accretion of preferred
stock redemption value... .. (4) (5)
---------- -----------
Net loss available to
common stock................ $ (199) $ (659)
========== ===========
Net loss per share - basic... $(0.13) $ (0.42)
========== ===========
EARNINGS PER COMMON SHARE-
DILUTED
Weighted average common stock
outstanding during
the period.................. 1,478,977 1,566,396
Plus: Incremental shares
from assumed conversions
Series A preferred
stock.................... 1,416,667 1,416,667
Convertible subordinated
debt..................... 25,000 7,778
---------- -----------
Adjusted weighted average
shares...................... 2,920,644 2, 990,841
========== ===========
Net loss..................... $ (195) $ (654)
Plus: Interest expense on
convertible subordinated
debt......................... 4 1
Less: Accretion on preferred
stock redemption value....... (4)
---------- -----------
Net loss available to
common stock................ $ (195) $ (653)
========== ===========
Net loss per share -
diluted..................... $(0.07) $ (0.22)
========== ===========
</TABLE>
NOTES: THE EFFECT OF OPTIONS AND WARRANTS IS NOT CONSIDERED AS IT WOULD BE
ANTIDILUTIVE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1998 JAN-01-1997
<PERIOD-END> MAR-31-1998 MAR-31-1997
<CASH> 3,570 4,180
<SECURITIES> 0 0
<RECEIVABLES> 3,804 3,207
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 8,019 8,053
<PP&E> 2,456 2,359
<DEPRECIATION> (920) (820)
<TOTAL-ASSETS> 14,626 14,573
<CURRENT-LIABILITIES> 3,393 2,856
<BONDS> 0 0
8,443 8,440
0 0
<COMMON> 1 1
<OTHER-SE> 1,557 1,756
<TOTAL-LIABILITY-AND-EQUITY> 14,626 14,573
<SALES> 5,277 3,348
<TOTAL-REVENUES> 5,277 3,348
<CGS> 0 0
<TOTAL-COSTS> 4,503 3,373
<OTHER-EXPENSES> 884 765
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 51 52
<INCOME-PRETAX> (195) (654)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (195) (654)
<EPS-PRIMARY> (0.13) (0.42)
<EPS-DILUTED> (0.07) (0.22)
</TABLE>
