- ------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1996
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 0-26194
SEER TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3556562
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
8000 Regency Parkway
Cary, North Carolina
27511
(Address of principal executive offices)
(Zip Code)
(919) 380-5000
(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 ........
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at February 7, 1997
Common Stock, $0.01 par value 11,687,465 shares
- ------------------------------------------------------------------------------
1
SEER TECHNOLOGIES, INC.
Index
Page
PART I. Financial Information Number
Item 1. Consolidated Financial Statements:
Consolidated balance sheets as of December 31, 1996
(unaudited)and September 30, 1996 3
Consolidated statements of operations (unaudited)
for the three months ended December 31,
1996 and 1995 4
Consolidated statements of cash flows (unaudited)
for the three months ended December 31, 1996 and 1995 5
Notes to consolidated financial statements (unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
PART II. Other Information 13
SIGNATURES 14
2
PART I. Financial Information
Item 1. Financial Statements
SEER TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
December 31, September 30,
1996 1996
( unaudited )
------------- -------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $1,775 $377
Trade accounts receivable, less allowance
for doubtful accounts 31,547 42,938
Prepaid expenses and other current assets 3,322 4,116
Deferred income taxes 4,618 4,621
----------- -----------
Total current assets 41,262 52,052
Trade accounts receivable, net 2,236 3,803
Property and equipment, net 5,988 6,459
Capitalized software costs, net 2,952 3,057
Deferred income taxes 12,971 12,971
Other assets 460 462
----------- -----------
Total assets $65,869 $78,804
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable, due on demand $14,722 $14,379
Accounts payable 2,791 3,487
Accrued expenses:
Compensation 2,907 3,920
Commissions 2,902 4,401
Other 8,226 8,463
Deferred revenue 8,186 10,853
Income taxes payable 2,974 2,586
---------- ----------
Total current liabilities 42,708 48,089
Deferred revenue 1,301 662
Stockholders' equity:
Series A convertible preferred stock,
$.01 par value 21 21
Common stock, $0.01 par value 117 116
Additional paid-in-capital -
preferred stock 12,281 12,281
Additional paid-in-capital -
common stock 57,750 57,544
Cumulative translation adjustments (585) (505)
Accumulated deficit (47,724) (39,404)
---------- -----------
Total stockholders' equity 21,860 30,053
---------- -----------
Total liabilities and stockholders' equity $65,869 $78,804
========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
SEER TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
1996 1995
-------- --------
<S> <C> <C>
Revenue:
Software products $6,146 $7,039
Maintenance 3,137 2,827
Services 13,842 10,777
-------- --------
Total operating revenue 23,125 20,643
Cost of revenue:
Software products 325 260
Maintenance 2,109 1,772
Services 10,761 8,642
-------- --------
Total cost of revenue 13,195 10,674
Gross profit 9,930 9,969
Operating expenses:
Sales and marketing 6,904 11,250
Research and product
development 3,398 4,165
General and administrative 6,732 2,763
Restructuring charges 500 -
-------- --------
Total operating expenses 17,534 18,178
-------- --------
Loss from operations (7,604) (8,209)
Other income (expense):
Interest income 154 228
Interest expense (411) -
-------- --------
Other income (expense), net (257) 228
-------- --------
Loss before provision
for income taxes (7,861) (7,981)
Income tax provision (benefit) 409 (2,558)
-------- --------
Net loss $(8,270) $(5,423)
======== ========
Primary loss per common share $(0.71) $(0.48)
======== ========
Weighted average common
shares outstanding 11,624 11,363
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
SEER TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
December 30,
1996 1995
------ ------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (8,270) $ (5,423)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 1,206 951
Deferred income taxes 3 (3,192)
Provision for uncollectible accounts 3,800 (158)
Changes in assets and liabilities:
Trade accounts receivable 9,062 4,431
Prepaid expenses and other assets 695 (333)
Accounts payable, accrued expenses,
and income taxes payable (3,057) (6,668)
Deferred revenue (2,028) 69
-------- --------
Net cash provided by (used in)
operating activities 1,411 (10,323)
Cash flows from investing activities:
Purchases of property and equipment (338) (910)
Capitalization of software development costs (190) (243)
-------- --------
Net cash used in investing activities (528) (1,153)
Cash flows from financing activities:
Issuance of common shares 256 164
Repurchase of common shares (100) -
Net borrowings under line of credit 343 1,000
-------- --------
Net cash provided by financing activities 499 1,164
Effect of exchange rate changes on cash 16 (12)
-------- --------
Net increase (decrease) in cash and
cash equivalents 1,398 (10,324)
Cash and cash equivalents:
Beginning of period 377 13,650
-------- --------
End of period $ 1,775 $3,326
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
SEER TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1. Interim Financial Statements
The accompanying unaudited financial statements for the first quarter of
fiscal year 1997 should be read in conjunction with the audited financial
statements and notes thereto contained in the Company's Annual Report on Form
10-K for fiscal year 1996. The Company's fiscal year ends September 30. The
results of operations for the interim periods shown in this report are not
necessarily indicative of results to be expected for other interim periods or
for the full fiscal year. In the opinion of management, the information
contained herein reflects all adjustments necessary for a fair statement of
the interim results of operations. All such adjustments are of a normal,
recurring nature, except for a write-down of $3.8 million for a receivable
which was determined to be uncollectible and a $.5 million restructuring
charge related primarily to employee severance benefits and the consolidation
of leased facilities.
Certain prior period amounts in the accompanying financial statements have
been reclassified to conform to the current period presentation.
Note 2. Loss Per Share
Primary loss per share is computed based upon the weighted average number of
common shares outstanding. Common equivalent shares consist of stock options
for the first quarter of fiscal year 1996 and stock options, restricted stock,
and Series A convertible preferred stock for the first quarter of fiscal year
1997. Common equivalent shares are not included in the per share calculations
since the effect of their inclusion would be antidilutive on the loss per
share calculations. Presentation of fully diluted earnings per share is not
required for the periods presented.
Note 3. Income Taxes
The Company's effective tax rate differs from the statutory rate primarily due
to the fact that an income tax benefit was not recorded for the net loss for
the first quarter of fiscal year 1997. It is the opinion of management that
the Company has recorded sufficient deferred tax assets to offset potential
future taxable income. The Company will continue to assess the
realization of deferred tax assets on an ongoing basis.
The provision expense for the first quarter of fiscal year 1997 is primarily
related to income taxes from profitable foreign operations and foreign
withholding taxes.
Note 4. Use of Accounting Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual amounts could differ from these estimates.
6
Note 5. Subsequent Event
In late January, 1997 the Company entered into an agreement with its former
Chief Technical Officer, whereby it transferred the technology for three
uncompleted products to a new corporation founded by the former Chief
Technical Officer. The technology transferred was not a part of the
Company's strategic plans, and it had been determined that the Company would
not spend any further development efforts on the products. The new
corporation intends to complete development of the products, after which they
may be sold through the Company's sales force. The Company owns a minority
interest in the new corporation.
7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
General
Seer Technologies, Inc. (the "Company"), designs, develops, markets and
supports software products and related services that enable its customers to
create, distribute and manage large-scale mission-critical information
processing applications that utilize client/server technologies. The
Company's application development tools, related software products and
consulting services reduce the time, cost and risk involved in developing,
deploying and maintaining complex client/server applications and enable
efficient integration of those applications with the customer's existing
systems.
The Company has three categories of revenue: software products, maintenance
and services. Software products revenue is comprised primarily of fees from
licensing the Company's proprietary software products and, to a lesser extent,
from product development contracts. Maintenance revenue is comprised of fees
for maintaining, supporting and providing periodic upgrades of the Company's
software products. Services revenue is composed primarily of fees for
consulting and training services.
Consistent with the American Institute of Certified Public Accountants
Statement of Position 91-1, "Software Revenue Recognition," the Company
allocates a portion of the software license fee to initial period maintenance
when the maintenance period is greater than three months. The remainder is
recognized as license fee revenue upon delivery of the software product to,
and acceptance by, the customer. Revenue from the initial period and
subsequently priced maintenance agreements is recognized ratably over the term
of the agreement. Consulting and training services revenue is recognized as
the services are performed.
The Company's revenues vary from quarter to quarter, with the largest portion
of revenue typically recognized in the last month of each fiscal quarter and
the third and fourth quarters of each fiscal year. The Company believes that
these patterns are partly attributable to the Company's sales commission
policies, which compensate sales personnel for meeting or exceeding quarterly
and annual quotas, and to the budgeting and purchasing cycles of customers.
Furthermore, as the size of individual sales is generally large, a single
customer may have a significant impact on a quarter. In addition, the
substantial commitment of executive time and financial resources historically
required of a potential customer to make a decision to purchase the Company's
products increases the risk of quarter-to-quarter fluctuations. The Company
typically does not have any material backlog of unfilled software orders, and
product revenue in any quarter is substantially dependent upon orders received
in that quarter. Because the Company's operating expenses are based on
anticipated revenue levels and are relatively fixed over the short term,
variations in the timing of recognition of revenue can cause significant
variations in operating results from quarter to quarter. Fluctuations in
operating results may result in volatility in the price of the Company's
common stock.
This report contains forward-looking statements relating to such matters as
anticipated financial performance, business prospects, technological
developments, new products, research and development activities and similar
matters. The Private Securities Litigation Reform Act of 1995 provides a safe
harbor for forward-looking statements. In order to comply with the terms of
the safe harbor, the Company notes that a variety of factors could cause its
actual results and experience to differ materially from the anticipated
results or other expectations expressed in the Company's forward-looking
statements. The Company's performance, development and results of operations
may be affected by the risks presented by: (i) continued market acceptance of
the Company's technology; (ii) fluctuations in quarterly operating results and
volatility of the price of the Company's common stock; (iii) competition; (iv)
the Company's reliance on its relationship with IBM; (v) customer
concentration; (vi) the potential failure to meet product delivery dates;
matters relating to international operations; and (viii) intellectual
property and proprietary rights. Other risks are also presented. The
Company's Registration Statement on Form S-1 (Registration N. 33-92050)
contains a full description of the risks presented by the Company's
operations.
8
Results of Operations
The following table sets forth, for the periods indicated, the Company's
unaudited results of operations expressed as a percentage of revenue:
<TABLE>
<CAPTION>
Three months ended
December 31,
1996 1995
-------- --------
<S> <C> <C>
Revenue:
Software products 26.6 % 34.1 %
Maintenance 13.5 % 13.7 %
Services 59.9 % 52.2 %
-------- --------
Total 100.0 % 100.0 %
Cost of revenue:
Software products 1.4 % 1.3 %
Maintenance 9.1 % 8.6 %
Services 46.5 % 41.9 %
-------- --------
Total 57.0 % 51.8 %
Gross profit 43.0 % 48.2 %
Operating expenses:
Sales and marketing 29.9 % 54.5 %
Research and product development 14.7 % 20.2 %
General and administrative 29.1 % 13.4 %
Restructuring charges 2.2 % -
-------- --------
Total 75.9 % 88.1 %
Other income (expense), net (1.1)% 1.1 %
-------- --------
Loss before taxes (34.0)% (38.8)%
Income tax provision (benefit) 1.8 % (12.4)%
-------- --------
Net loss (35.8)% (26.4)%
======== ========
</TABLE>
The following table sets forth unaudited data for total revenue by country of
origin as a percentage of total revenue for the periods indicated:
<TABLE>
<CAPTION>
Three months ended
December 31,
1996 1995
-------- --------
<S> <C> <C>
United States 30.5% 24.9%
Mexico/Canada 2.4% 18.6%
South America 5.7% 2.6%
Europe 53.5% 42.8%
Middle East/Africa 2.5% 6.4%
Asia Pacific 5.4% 4.7%
-------- --------
100.0% 100.0%
======== ========
</TABLE>
9
Revenue. The Company's total revenue increased 12% compared to the first
quarter of fiscal year 1996. The increase was primarily attributable to an
increase in services and maintenance revenues, which were somewhat offset by a
decrease in software revenue.
Software products. Software products revenue decreased 13% or $900,000 from
the first quarter of fiscal year 1996. However, software product sales to new
customers as a percentage of total software products revenue increased from 3%
in the first quarter of fiscal year 1996 to 75% for the same period of fiscal
year 1997. Management is implementing changes in its business practices which
include attempting to better align products to customer needs and the
establishment of long-term "partnerships" between the Company and its
customers. It is the opinion of management that these changes may lead to
lower software revenue in the near-term but should enhance the Company's long-
term prospects for profitability.
Maintenance. Maintenance revenue increased 11% for the first quarter of
fiscal year 1997 as compared to the same quarter of fiscal year 1996. The
increase is primarily a result of software sold to both new and existing
customers during fiscal year 1996.
Services. Services revenue for the first quarter of fiscal year 1997
increased 28% compared to the first quarter of fiscal year 1996, primarily as
a result of an increase in customer demand for consulting services related to
license sales made in prior fiscal years.
Gross Profit. Total gross profit for the first quarter of fiscal year 1997
remained relatively unchanged from the first quarter of fiscal year 1996.
Total gross margin decreased to 43% for the first quarter of fiscal year 1997
as compared to 48% for the comparable period in fiscal year 1996. The
decrease in gross margin is primarily due to the decrease in software revenue
as a percentage of total revenue from the 1996 period.
Software gross margin decreased to 95% for the first quarter of fiscal year
1997 as compared to 96% for the comparable periods in fiscal year 1996 due to
an increase in the amortization of capitalized software costs.
Maintenance gross margins decreased approximately 4% (33% for the first
quarter of fiscal year 1997 compared to 37% for the comparable period in
fiscal year 1996). The decline in maintenance gross margins from the first
quarter of fiscal year 1996 was primarily due to the Company's focus on
customer satisfaction which resulted in increases in costs associated with
headcount and other expenses to support this initiative.
Services margins for the first quarter of fiscal year 1997 increased to 22% as
compared to 20% for the comparable period of fiscal year 1996. The increase
in services margin is primarily a result of better utilization of billable
resources, which increased services revenue with a smaller increase in related
expenses.
Sales and Marketing Expense. Sales and marketing expense decreased 39% for
the first quarter of fiscal year 1997 as compared to the same period of fiscal
year 1996. The decrease is the result of the reduction of the Company's sales
force, primarily in Europe and the Americas, to reflect progressive changes in
the Company's business model as well as make the sales process more
efficient. Average sales and marketing headcount has decreased 32% from the
first quarter of fiscal year 1996. Additionally, sales expense for the first
quarter of fiscal year 1996 included $1.1 million in commissions to IBM for
sales of the Company's software products made by IBM in Latin and South
America. Sales in Latin and South America made during the first quarter of
fiscal year 1997 were on a direct basis, and therefore, no commissions
were payable to IBM.
Research and Product Development Expense. Research and development expense
decreased 18% in the first quarter of fiscal year 1997 compared to the same
period of the prior fiscal year. This decrease is primarily a result of a
15% decrease in personnel and a reduction in costs associated with the use
of certain computer equipment.
General and Administrative Expense. General and administrative expenses for
the first quarter of fiscal year 1997 were most significantly impacted by the
recording of a $3.8 million reserve of accounts receivable for an account
which was determined to be uncollectible. Excluding this adjustment, general
and administrative expenses for the first quarter of fiscal year 1997
increased 6% over the comparable period of fiscal year 1996. This change was
caused by an increase in costs for professional services and computer
equipment which were offset by savings in personnel-related costs due to a
decrease in headcount.
10
Restructuring Charges. The Company recorded $.5 million of restructuring
expenses related primarily to severance benefits and the consolidation of
leased facilities.
Income Taxes. Income taxes increased from a benefit of ($2.6) million for the
first quarter of fiscal year 1996 to an expense of $.4 million for the same
period of fiscal year 1997, primarily because an income tax benefit was not
recorded for the net loss for the first quarter of fiscal year 1997.
Additionally, there was a 10% increase in the level of foreign taxes withheld
from the first quarter of fiscal year 1996 to the same period in fiscal
year 1997. The Company believes that sufficient deferred tax assets are
reflected in the Consolidated Balance Sheet to offset future potential taxable
income. The Company will continue to assess the realization of existing
deferred tax assets on an ongoing basis.
Liquidity and Capital Resources
Cash flow provided by operations for the first quarter of fiscal year 1997
increased significantly in comparison to the prior year period due to the
Company's focus on reducing spending and improving collection of outstanding
accounts receivable. Expenses have been reduced through a decrease in
personnel since the third quarter of fiscal year 1996, a reevaluation of
existing leased office space, and a concerted effort to reduce other types of
spending.
Due to the payment terms of certain software contracts, a portion of the
related receivables are classified as non-current assets. As of December 31,
1996, the Company has evaluated the collectibility of the non-current
receivables based upon the customers' prior payment history and determined
that the receivables are collectible.
During the first quarter of fiscal year 1996, $3.2 million in current
deferred tax assets were recorded for the future realization of the
operating loss of approximately $8 million. No deferred tax assets were
recorded in the current period due to uncertainty of their realization. The
Company will continue to assess the realization of existing deferred tax
assets on an ongoing basis.
Cash used by investing activities decreased 54% for the first quarter of 1997
compared to the same period of fiscal year 1996. This decrease is primarily a
result of a decrease in the purchases of property and equipment due to a focus
on reducing spending. As of December 31, 1996, the Company did not have any
material commitments for capital expenditures.
The 57% decrease in cash provided by financing activities for the first
quarter of 1997 compared to the same period of fiscal year 1996 resulted
primarily from an decrease in net borrowings under the Company's line of
credit afforded by the increased collections on accounts receivable and
reduced spending.
At December 31, 1996, the Company maintained two credit facilities (the
"Revolving Facility" and the "Guaranteed Facility") which provide for combined
borrowings of up to $32.5 million for working capital purposes based on the
Company's eligible accounts receivable, as defined in the loan agreements.
The Revolving Facility allows for borrowings of up to $20 million, bears
interest at the London Interbank Offered Rate ("LIBOR") plus 3.0% and is
collateralized by the Company's accounts receivable and other assets. The
Guaranteed Facility allows for borrowings of up to $12.5 million and bears
interest at LIBOR plus 1.25% or the higher of .5% plus the prime rate quoted
by the Federal Reserve, depending on the type of advance, as defined in the
loan agreement. The Guaranteed Facility is guaranteed by the Company's
principal stockholder, Welsh, Carson, Anderson, & Stowe VI, L.P. ("WCAS"),
pursuant to an agreement with the Company. Borrowings are made under the
facilities based upon a ratio, defined in the loan agreements, which varies
with the Company's tangible net worth. The facilities require the Company's
compliance with various covenants, which among other things, require the
Company to maintain a minimum tangible net worth and limit the amount of
dividends and other payments by the Company. As of December 31, 1996, the
Company had outstanding borrowings of $7.9 million under the Revolving
Facility and $6.8 million under the Guaranteed Facility. The interest rates
for the Revolving Facility and the Guaranteed Facility were 8.5% and 8.25%,
respectively, at December 31, 1996. The facilities expire on September 30,
1997. The Company intends to renegotiate and extend the credit facilities;
however, there can be no assurance that the credit facilities can be extended
on acceptable terms.
11
In addition, the Company had a line of credit as of December 31, 1996 of up
to $3.5 million available to enter into foreign exchange contracts. The
aggregate notional amount of foreign exchange contracts outstanding under this
facility cannot exceed $23.3 million. At December 31, 1996 the aggregate
notional amount of foreign exchange contracts outstanding was $9.6 million.
The Company believes that existing cash on hand and additional borrowings
under the line of credit will be sufficient to finance its operations and
expected working capital and capital expenditure requirements for at least the
next twelve months. Thereafter, the Company's liquidity will depend upon the
results of future operations, as well as available sources of financing.
There can be no assurance that the Company will be able to meet its loan
covenants, achieve its operating plan or, if needed, obtain additional
financing on acceptable terms, and the failure to do so may have an adverse
impact on the Company's business and operations.
12
PART II. Other Information
Item 1. Legal Proceedings
In November 1996, the Company filed a lawsuit against IBM de Mexico S.A.
de C.V.("IBM Mexico") seeking to collect amounts due for software and
services purchased by IBM Mexico for its customer Instituto Mexicano Del
Seguro Social. In early January, IBM Mexico served the Company with its
answer and defenses to the lawsuit and a counterclaim against the
Company. IBM Mexico alleges in its counterclaim that the Company failed
to deliver proper services under its contract with IBM Mexico. The
Company has responded to the counterclaim and the suits have now moved
into the evidence gathering stage. It is too early in the cases to
determine the likelihood of success on the suit or the counterclaim. The
Company intends to vigorously pursue its case against IBM Mexico and
vigorously defend against the counterclaim.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None
13
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.
SEER TECHNOLOGIES, INC.
/s/ Thomas A. Wilson
Date: February 14, 1997 ..............................................
Thomas A. Wilson
President and Chief Executive Officer
/s/ Steven Dmiszewicki
Date: February 14, 1997 ..............................................
Steven Dmiszewicki
Senior Vice President and Chief
Financial Officer
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF INCOME FILED AS PART OF
THE QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,775
<SECURITIES> 0
<RECEIVABLES> 42,647
<ALLOWANCES> 8,864
<INVENTORY> 0
<CURRENT-ASSETS> 41,262
<PP&E> 20,387
<DEPRECIATION> 14,399
<TOTAL-ASSETS> 65,869
<CURRENT-LIABILITIES> 42,708
<BONDS> 0
0
21
<COMMON> 117
<OTHER-SE> 21,722
<TOTAL-LIABILITY-AND-EQUITY> 65,869
<SALES> 0
<TOTAL-REVENUES> 23,125
<CGS> 0
<TOTAL-COSTS> 13,195
<OTHER-EXPENSES> 13,734
<LOSS-PROVISION> 3,800
<INTEREST-EXPENSE> 411
<INCOME-PRETAX> (7,861)
<INCOME-TAX> 409
<INCOME-CONTINUING> (8,270)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,270)
<EPS-PRIMARY> (.71)
<EPS-DILUTED> (.71)
</TABLE>
