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 March 31, 1999
___ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from _________ to ________
Commission File Number 1-12738
ONSITE ENERGY CORPORATION
(Name of small business issuer in its charter)
Delaware 33-0576371
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
701 Palomar Airport Road, Suite 200, Carlsbad, CA 92009
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (760) 931-2400
Check whether the issuer (1) 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 Class A common stock, $0.001 par value, outstanding as of May 10,
1999 is 18,584,663.
<PAGE>2
Onsite Energy Corporation
Condensed Consolidated Balance Sheet
March 31, 1999
(Unaudited)
ASSETS
Current Assets:
Cash $ 578,741
Accounts receivable, net of allowance for doubtful
accounts of $13,000 6,554,083
Inventory 189,018
Capitalized Project Costs 65,498
Costs and estimated earnings in excess of billings
on uncompleted contracts 2,230,237
Other current assets 220,469
------------
TOTAL CURRENT ASSETS 9,838,046
Cash-restricted 133,695
Property and equipment, net of accumulated
depreciation and amortization 1,584,597
Excess of purchase price over net assets
acquired, net of amortization of $391,000 3,186,925
Other assets 65,936
------------
TOTAL ASSETS $ 14,809,199
============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable - related parties $ 290,063
Notes payable 1,811,282
Accounts payable 8,581,371
Billings in excess of costs and estimated
earnings on uncompleted contracts 2,631,395
Accrued expenses and other liabilities 982,187
------------
TOTAL CURRENT LIABILITIES 14,296,298
Long-Term Liabilities:
Accrued future operation and maintenance costs
associated with energy services agreements 465,359
------------
TOTAL LIABILITIES 14,761,657
------------
Commitments and contingencies
Shareholders' Equity:
Preferred Stock, Series C, 842,500 shares authorized,
633,674 issued and outstanding (Aggregate $2,066,400
liquidation preference) 633
Preferred Stock, Series D, 157,500 shares authorized,
issued and outstanding and held in escrow -
Common Stock, $.001 par value, 24,000,000 shares authorized:
Class A common stock, 23,999,000 shares authorized,
18,551,621 issued and outstanding 18,552
Class B common stock, 1,000 shares authorized,
none issued and outstanding -
Additional paid-in capital 25,485,866
Notes receivable - stockholders (3,172,611)
Accumulated deficit (22,284,898)
------------
TOTAL SHAREHOLDERS' EQUITY 47,542
------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 14,809,199
============
The accompanying notes are an integral part of the financial statements
<PAGE>3
Onsite Energy Corporation
Condensed Consolidated Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31, Nine Months Ended March 31,
1999 1998 1999 1998
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenues $ 12,632,384 $ 3,452,652 $ 31,271,427 $ 8,994,035
Cost of sales 9,299,313 2,677,705 24,949,680 6,819,570
-------------- -------------- -------------- --------------
Gross margin 3,333,071 774,947 6,321,747 2,174,465
Selling, general, and
administrative expenses 2,691,633 1,033,769 8,139,931 2,475,031
Depreciation and amortization expense 258,421 151,497 814,044 415,421
-------------- -------------- -------------- --------------
Operating income/(loss) 383,017 (410,319) (2,632,228) (715,987)
-------------- -------------- -------------- --------------
Other income/(expense):
Interest expense (38,571) (5,762) (206,882) (14,350)
Interest income 30,341 9,392 96,390 22,766
Other expense - (47,641) - (53,200)
-------------- -------------- -------------- --------------
Total other expense (8,230) (44,011) (110,492) (44,784)
-------------- -------------- -------------- --------------
Net income/(loss) $ 374,787 $ (454,330) $ (2,742,720) $ (760,771)
============== ============== ============== ==============
Earnings/(Loss) per common share:
Basic $ 0.02 $ (0.03) $ (0.16) $ (0.06)
============== ============== ============== ==============
Diluted $ 0.02 * * *
============== ============== ============== ==============
Shares used in per common share
calculation:
Basic 18,537,128 14,714,361 18,433,065 13,061,167
============== ============== ============== ==============
Diluted 22,567,490 * * *
============== ============== ============== ==============
</TABLE>
*Not applicable as effect would be anti-dilutive
The accompanying notes are an integral part of the financial statements
<PAGE>4
Onsite Energy Corporation
Condensed Consolidated Statement of Cash Flows
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
1999 1998
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (2,742,720) $ (760,771)
Adjustments to reconcile net loss to net cash
used in operating activities:
Amortization of goodwill 376,793 266,667
Amortization of acquired contract costs 131,720 101,048
Provision for bad debts 90,000 -
Depreciation 437,251 148,754
Change in operating assets and liabilities:
Accounts receivable (3,125,213) (3,213,391)
Billings related to costs and estimated earnings
on uncompleted contracts (1,542,681) 800,611
Inventory (10,803) (110,273)
Other assets 244,402 (804,143)
Cash-restricted 24,141 41,252
Accounts payable 5,201,100 1,958,506
Accrued expenses and other liabilities (503,806) -
------------- -------------
Net cash used in operating activities (1,419,816) (1,571,740)
------------- -------------
Cash flows from investing activities:
Purchases of property and equipment (63,670) (327,597)
Loans to stockholders (1,837,394) -
------------- -------------
Net cash used in investing activities (1,901,064) (327,597)
------------- -------------
Cash flows from financing activities:
Proceeds from exercise of stock options 23,479 20,157
Proceeds from issuance of stock 2,000,000 1,947,287
Repayment of notes payable-related party (178,266) (83,104)
Payments on borrowings, net (38,598) -
------------- -------------
Net cash provided by financing activities 1,806,615 1,884,340
------------- -------------
Net increase (decrease) in cash (1,514,265) (14,997)
Cash, beginning of year 2,093,006 526,894
------------- -------------
Cash, end of period $ 578,741 $ 511,897
============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE>5
ONSITE ENERGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: As contemplated by the Securities and Exchange
Commission under Item 310 of Regulation S-B, the
accompanying financial statements and footnotes have been
condensed and do not contain all disclosures required by
generally accepted accounting principles and, therefore,
should be read in conjunction with the Form 10-KSB for
Onsite Energy Corporation dba ONSITE SYCOM Energy
Corporation (the "Company") as of and for the year ended
June 30, 1998. In the opinion of management, the
accompanying unaudited financial statements of the Company
contain all adjustments (consisting only of normal
recurring adjustments) necessary to present fairly its
financial position and results of its operations for the
interim period.
NOTE 2: The consolidated balance sheet as of March 31, 1999, and
the consolidated statements of operations and cash flows
for the three and nine months ended March 31, 1999 and
1998, represent the financial position and results of
operations of the Company.
NOTE 3: Earnings per share calculations for the three and nine
month periods ended March 31, 1998 and March 31, 1999 are
as follows:
<TABLE>
<CAPTION>
Three Months Nine Months
Ended March 31, Ended March 31,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
BASIC
Net income/(loss) $ 374,787 $ (454,330) $ (2,742,720) $ (760,771)
Less: Preferred stock dividends (51,596) (24,375) (127,339) (24,375)
------------- ------------- ------------- -------------
Net income/(loss) allocated to common
shareholders $ 323,191 $ (478,705) $ (2,870,059) $ (785,146)
============= ============= ============= =============
Weighted average number of common shares 18,537,128 14,714,361 18,433,065 13,061,167
============= ============= ============= =============
Basic earnings/(loss) per common share $ 0.02 $ (0.03) $ (0.16) $ (0.06)
============= ============= ============= =============
DILUTED
Net income available to common shareholders $ 323,191 $ * $ * $ *
Preferred stock dividends 51,596 * * *
------------- ------------- ------------- -------------
Net income available to common shareholders
plus assumed conversion $ 374,787 $ * $ * $ *
============= ============= ============= =============
Weighted average number of common shares 18,537,128 * * *
Common stock equivalent shares representing
assumed conversion of Preferred Stock Series C 2,645,872 * * *
Common stock equivalent shares representing
shares issuable upon exercise of stock options 1,006,866 * * *
Common stock equivalent shares representing
shares issuable upon exercise of warrants 377,624 * * *
------------- ------------- ------------- -------------
Weighted average number of shares used in
calculation of diluted earnings per common share 22,567,490 * * *
============= ============= ============= =============
Diluted earnings per common share $ .02 * * *
============= ============= ============= =============
</TABLE>
*Not applicable as effect would be anti-dilutive
NOTE 4: Cautionary Statement for Purposes of the "Safe Harbor"
Provisions of the Private Securities Litigation Reform Act
of 1995. With the exception of historical facts stated
herein, the matters discussed in this quarterly report are
"forward looking" statements that involve risks and
uncertainties that could cause actual results to differ
materially from projected results. The "forward looking"
<PAGE>6
statements contained herein are cross-referenced to this
paragraph. Such "forward looking" statements include, but
are not necessarily limited to, statements regarding
anticipated levels of future revenue and earnings from
operations of the Company, projected costs and expenses
related to the Company's energy services agreements, and
the availability of future debt and equity capital on
commercially reasonable terms. Factors that could cause
actual results to differ materially include, in addition
to the other factors identified in this report, the
cyclical and volatile price of energy, the inability to
continue to contract sufficient customers to replace
contracts as they become completed, unanticipated delays
in the approval of proposed energy efficiency measures by
the Company's customers, delays in the receipt of, or
failure to receive necessary governmental or utility
permits or approvals, or the renewals thereof, risks and
uncertainties relating to general economic and political
conditions, both domestically and internationally, changes
in the law and regulations governing the Company's
activities as an energy services company and the
activities of the state's regulators and public utilities
seeking energy efficiency as a cost effective alternative
to constructing new power generation facilities, results
of project specific and company working capital and
financing efforts and market conditions, and other risk
factors detailed in the Company's Securities and Exchange
Commission filings including the risk factors set forth in
the Company's Form 10KSB for the fiscal year ended June
30, 1998. Readers of this report are cautioned not to put
undue reliance on "forward looking" statements which are,
by their nature, uncertain as reliable indicators of
future performance. The Company disclaims any intent or
obligation to publicly update these "forward looking"
statements, whether as a result of new information, future
events or otherwise.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Background
The Company, which is the largest U.S. independent accredited energy efficiency
services company (ESCO), develops, designs, constructs, finances and operates
comprehensive energy services projects and assists customers in reducing the
cost of purchased electricity and fuel. The Company also offers professional
consulting services in the areas of market assessment, business strategies,
public policy analysis, environmental studies and utility deregulation. It is
the Company's mission to save its customers money and improve the quality of the
environment through independent energy solutions.
In October 1997, the Company acquired Westar Business Services, Inc., which was
renamed Onsite Business Services, Inc. at the time of acquisition and then
recently renamed Onsite Energy Services, Inc. in April, 1999 ("OES"). OES
provides high voltage electrical construction and engineering services and
industrial water services primarily in the states of Kansas, Missouri and
Oklahoma.
In February 1998, OES acquired the operating assets of Mid-States Armature
Works, Inc. through a newly-formed subsidiary, Onsite/Mid-States, Inc. ("OMS").
OMS provides specialized medium and high voltage electrical fabrication,
installation, maintenance and repair services to municipal utility customers and
others, primarily in the states of Kansas, Nebraska, Missouri, Iowa and
Oklahoma.
In April 1998, the Company formed Onsite Energy de Panama, S.A., a Panamanian
corporation, to facilitate the development and acquisition of potential projects
in Panama and Latin America.
In June 1998, the Company acquired Lighting Technology Services, Inc. ("LTS").
LTS provides energy efficiency projects through retrofits of lighting and
controls either independently or as a subcontractor to other energy services
companies primarily in Southern California.
<PAGE>7
On June 30, 1998, the Company acquired the assets and certain liabilities of
SYCOM Enterprises, LLC, through a newly-formed subsidiary, SYCOM ONSITE
Corporation ("SO Corporation"). SO Corporation is also an ESCO with customers
primarily in the Mid-Atlantic region of the United States.
Unless the context indicates otherwise, reference to the Company shall include
all of its wholly owned subsidiaries.
Results of Operations
Nine Months Ended March 31, 1999 Compared to the Nine Months Ended March 31,
1998
Revenues for the nine months ended March 31, 1999 were $31,271,427 compared to
$8,994,035 for the nine months ended March 31, 1998, an increase of $22,277,392,
or 247.7 percent. The increase in revenues was primarily due to the inclusion of
revenues from the newly acquired subsidiaries, SO Corporation and LTS. After the
elimination of the subsidiaries not included in the previous year, revenues for
the nine month period ended March 31, 1999 were $14,372,781 compared to
$8,994,035 for the nine months ended March 31, 1998. The increase of $5,378,746,
or 59.8 percent is due to the addition of and further completion on several long
term energy turn-key design and construction projects for the Company. Revenue
recognition for these projects increased by approximately $3,700,000, or 69.3
percent in the nine months ended March 31, 1999 over the nine months ended March
31, 1998.
Cost of sales for the nine month period ended March 31, 1999 was $24,949,680,
compared to $6,819,570 for the nine month period ended March 31, 1998, an
increase of $18,130,110, or 265.9 percent. After elimination of the subsidiaries
not included in the previous year, cost of sales for the nine month period ended
March 31, 1999 were $11,942,181 compared to $6,819,570 for the same period in
1998, an increase of $5,122,611, or 75.1 percent. The increase is largely
attributed to the increase in project costs for the long term projects mentioned
above for Onsite and OES.
Gross margin for the nine months ended March 31, 1999 was $6,321,747, or 20.2
percent of revenues, compared to $2,174,465 or 24.2 percent of revenues, for the
nine months ended March 31, 1998. After elimination of gross margin from the
subsidiaries not included in the previous period, gross margin for the nine
months ended March 31, 1999 were $2,430,600, or 16.9 percent of revenues,
compared to $2,174,465, or 24.2 percent of revenues for the nine months ended
March 31, 1998. The Company typically engages in several different types of
business with substantially different margin results. The project types are as
follows: turn-key design and energy construction projects that produce a typical
margin in the 20 to 35 percent range; fee based projects, where the
subcontractors are hired by the customer and, as such, the costs and related
revenues do not flow through the Company and the margin can range anywhere from
30 to 80 percent; consulting contracts where the typical margins are
approximately 50 percent; and lighting installation projects, through LTS, where
the margins typically are lower, usually in the range of 10 to 20 percent. As a
result of the mix in margins, the gross margin for any given period can
fluctuate significantly and not necessarily be indicative of a trend. The
decrease in gross margin as a percentage of sales was primarily attributable to
lower than normal gross margins on several long term turn-key energy
construction contracts under implementation in the nine month period ended March
31, 1999.
Selling, General and Administrative ("SG&A") expenses were $8,953,975 for the
nine month period ended March 31, 1999, compared to $2,890,452 for the nine
months ended March 31, 1998. The increase of $6,063,523 is primarily
attributable to the addition of the subsidiaries mentioned previously. After
elimination of the SG&A expenses attributable to these subsidiaries, the SG&A
expense for the nine months ended March 31, 1999 were $4,009,423 compared to
$2,873,777, an increase of $1,135,646, or 39.5 percent. The increase is mainly
due to an increase in legal and accounting fees. The rise of legal and
accounting fees in the quarter ended March 31, 1999 is attributable to the due
diligence work for the new subsidiaries and a legal matter (settled in February
1999) with Westar Capital, Inc. and its related entities.
<PAGE>8
Net other expense was $110,492 for the nine months ended March 31, 1999 compared
to $44,784 in net other expense for the nine months ended March 31, 1998. The
increase is largely due to additional interest expense from the newly acquired
subsidiaries and their existing interest bearing debts partially offset by an
increase in interest income from SO Corporation. After elimination of the
subsidiaries not included in the previous year, net other income was $97,966 for
the period ended March 31, 1999 compared to net other expense of $44,784 for the
period ended March 31, 1998, an increase of $142,750, or 318.8 percent. The main
reason for the increase is the growth of interest income, offset by a smaller
increase of interest expense.
Net loss for the nine month period ended March 31, 1999 was $2,742,720, or $0.16
loss per basic common share, compared to a net loss of $760,771, or $0.06 loss
per basic common share for the nine month period ended March 31, 1998. After
elimination of the newly acquired subsidiaries not in the previous period, the
net loss for the nine month period ended March 31, 1999 was $1,486,419, compared
to $760,771 for the nine month period ended March 31, 1998, an increase in the
loss of 95.4 percent.
Three Months Ended March 31, 1999 Compared to the Three Months Ended March 31,
1998
Revenues for the three month period ended March 31, 1999 were $12,632,384
compared to $3,452,652 for the three months ended March 31, 1998, an increase of
$9,179,732, or 265.9 percent. The increase is primarily due to the additional
revenues of the newly acquired subsidiaries. After elimination of revenues from
the acquired subsidiaries not included in the previous period, revenues for the
three month period ended March 31, 1999 were $5,197,652 compared to $3,452,652
for the three month period ended March 31, 1998, an increase of $1,745,000, or
50.5 percent. Consulting income for the Company increased by 44.6 percent, which
was mainly attributable to the addition of a new service provided by the
Company. The other share of the increase in consulting income was due to new
contracts from government sponsored projects. Another area of revenue growth for
the Company occurred in the long term energy turn-key design and construction
projects for the Company. Revenue recognition for these projects increased by
117.3 percent from the quarter ended March 31, 1999 over the quarter ended March
31, 1998.
Cost of sales for the three month period ended March 31, 1999 was $9,299,313,
compared to $2,677,705 for the same period ended March 31, 1998, an increase of
$6,621,608, or 247.3 percent. After elimination of the subsidiaries not included
in the previous year, cost of sales for the quarter ended March 31, 1999 was
$4,519,036, compared to $2,677,705 for the comparable period in the previous
year, an increase of $1,841,331, or 68.8 percent. This increase is primarily
related to the increase in the revenue recognized for the long term projects
mentioned above.
Gross margin was $3,333,071, or 26.4 percent of revenues for the three month
period ended March 31, 1999, compared to $774,947, or 22.4 percent of revenues
for the three month period ended March 31, 1998. After the elimination of the
activity from the newly acquired subsidiaries, the gross margin for the three
month period ended March 31, 1999 was $678,616, or 13.1 percent of revenues
compared to $774,947, or 22.4 percent of revenues for the same period ended
March 31, 1998. The main reason for the decline in gross margin is a decrease in
margin on one large long term project for the Company for the quarter ended
March 31, 1999.
SG&A expenses were $2,950,054 for the three months ended March 31, 1999,
compared to $1,185,266 for the three months ended March 31, 1998. The increase
of $1,764,788, or 148.9 percent, was largely attributable to the additional SG&A
expenses acquired with the new subsidiaries, as well as increased SG&A expense
associated with a new office in Northern California. After the elimination of
the activity from the newly acquired subsidiaries, SG&A expense for the three
month period ended March 31, 1999 was $1,218,462 compared to $1,180,828 for the
same period in fiscal year 1998, an increase of $37,634, or 3.2 percent, which
is primarily associated with the new Northern California office.
Net other expense was $8,230 for the three month period ended March 31, 1999,
compared to $44,011 in net other expense for the three month period ended March
31, 1998, a decrease of $35,781, or 81.3 percent in net other expense. The
reason for this decline is the write off of $47,641 of uncollectible accounts
<PAGE>9
receivable in the quarter ended March 31, 1998. After elimination of the
contributions from subsidiaries acquired in the fourth quarter of fiscal year
end June 30, 1998, net other income was $47,644 for the quarter ended March 31,
1999, compared to net other expense of $44,011 for the comparable period in
1998. The net increase of $91,655, or 208.3 percent is primarily due to the
increase of interest income. The interest income is related to interest accrued
for loans to LTS and SO Corporation and related parties.
Net income for the three months ended March 31, 1999 was $374,787, or $0.02
earnings per basic common share, compared to a net loss of $454,330, or $0.03
loss per basic common share for the three month period ended March 31, 1998.
After the elimination of newly acquired subsidiaries, the net loss for the
quarter ended March 31, 1999 was $497,763 compared to $454,330 for the same
period in 1998, an increase of $43,433, or 9.6 percent.
Liquidity and Capital Resources
Cash flows used in operating activities during the nine months ended March 31,
1999 were $1,419,816 compared to cash flows used in operating activities of
$1,571,740 for the same period in 1998, a decrease of $151,924 or 9.7 percent.
This decrease was mainly attributable to the decline in prepaid expenses and
billings in excess of revenue. The Company has a working capital deficit of
$4,458,252 as of March 31, 1999, compared to a deficit of $2,693,367 as of June
30, 1998.
Cash flows used in investing activities were $1,901,064 during the nine months
ended March 31, 1999, compared to $327,597 during the same period in 1998. The
increase of $1,573,467, or 480.3 percent, is mainly attributable to the
acquisitions of loans to stockholders in the newly acquired subsidiaries.
Cash flows provided by financing activities were $1,806,615 during the nine
months ended March 31, 1999, compared to cash flows provided by financing
activities of $1,884,340 for the comparable period last year, a decrease of
$77,725, or 4.1 percent.
The Company has shown significant net losses for the year ended June 30, 1998 as
well as the nine months ended March 31, 1999. Management believes that it will
be able to generate additional revenues and achieve operating efficiencies
through sales generated through its recent acquisitions as well as by other
means to ultimately achieve profitable operations. The Company has entered into
several significant contracts that have begun contributing revenues in the third
fiscal quarter of the current year, and will continue over the next several
quarters. In addition, the Company anticipates the signing of several more
significant contracts that should begin to contribute to future fiscal quarters
as well. Management believes that all of the above actions will allow the
Company to continue as a going concern. Cash requirements beyond the next 12
months depend upon the Company's profitability, its ability to manage working
capital requirements and its rate of growth. (See Note 3 Cautionary Statement
for Purposes of the "Safe Harbor" Provisions of the Private Securities
Litigation Reform Act of 1995.)
Year 2000
The Company is developing plans to address issues related to the impact on its
computer systems of the year 2000. The Company believes that substantially all
software applications currently being used for the financial and operational
systems have adequately addressed any year 2000 issues. Most hardware systems
have been assessed and plans are being developed to address systems modification
requirements. The financial impact of making any required systems changes is not
expected to be material to the Company's consolidated financial position,
liquidity or results of operations. Any risks the Company faces are expected to
be external to ongoing operations. The Company has numerous alternative vendors
for critical supplies, materials and components and thus current vendors and
subcontractors who have not adequately prepared for the year 2000 can be
substituted in favor of those that have prepared. (See Note 3 Cautionary
Statement for Purposes of the "Safe Harbor" Provisions of the Private Securities
Litigation Reform Act of 1995.)
<PAGE>10
Part II - Other Information
Item 1. Legal Proceedings - None
Item 2. Changes in Securities - Not Applicable
Item 3. Defaults upon Senior Securities - Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders - Not Applicable
Item 5. Other - Not Applicable
Item 6. Exhibits and Reports on Form 8-K
Exhibit 27 Financial Data Schedule
<PAGE>11
SIGNATURES
In accordance with the requirements of the Securities Exchange Act , the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
ONSITE ENERGY CORPORATION
Date: May 14, 1999 By: \s\ Richard T. Sperberg
--------------------------------
Richard T. Sperberg
Chief Executive Officer
By: \s\ J. Bradford Hanson
--------------------------------
J. Bradford Hanson
Chief Financial Officer and
Principal Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> MAR-31-1999
<CASH> 578,741
<SECURITIES> 0
<RECEIVABLES> 6,554,083
<ALLOWANCES> 13,000
<INVENTORY> 189,018
<CURRENT-ASSETS> 9,838,046
<PP&E> 2,728,476
<DEPRECIATION> 1,143,879
<TOTAL-ASSETS> 14,809,199
<CURRENT-LIABILITIES> 14,296,298
<BONDS> 0
0
633
<COMMON> 18,552
<OTHER-SE> 28,357
<TOTAL-LIABILITY-AND-EQUITY> 14,809,199
<SALES> 31,271,427
<TOTAL-REVENUES> 31,271,427
<CGS> 24,949,680
<TOTAL-COSTS> 8,953,975
<OTHER-EXPENSES> (96,390)
<LOSS-PROVISION> 90,000
<INTEREST-EXPENSE> 206,882
<INCOME-PRETAX> (2,742,720)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,742,720)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,742,720)
<EPS-PRIMARY> (0.16)
<EPS-DILUTED> (0.16)
</TABLE>
