Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________to _________________
For Quarter Ended December 31, 1999
TRANSNET CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 22-1892295
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
45 Columbia Road, Somerville, New Jersey 08876-3576
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, Including Area Code:908-253-0500
- ----------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last Report
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No ______
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of February 2, 2000: 4,884,304.
<PAGE>
TRANSNET CORPORATION
FORM 10-Q
TABLE OF CONTENTS
Page No.
PART I. FINANCIAL INFORMATION
Consolidated Balance Sheets
December 31, 1999 and June 30, 1999 1
Consolidated Statements of Operations
Three Months Ended December 31, 1999 and 1998 2
Six Months Ended December 31, 1999 and 1998 3
Consolidated Statements of Cash Flows
Six Months Ended December 31, 1999 and 1998 4
Notes to Consolidated Financial Statements 5
Management's Discussion and Analysis 6 - 8
PART II. OTHER INFORMATION 9
i.
<PAGE>
TRANSNET CORPORATION AND SUBSIDIARY
- ------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
- ------------------------------------------------------------------------------
December 31, June 30,
1 9 9 9 1 9 9 9
[Unaudited]
Assets:
Current Assets:
Cash and Cash Equivalents $6,127,446 $7,617,241
Accounts Receivable - Net 8,455,365 6,736,351
Inventories 666,277 886,936
Other Current Assets 81,754 56,030
Deferred Tax Asset 249,000 249,000
---------- ----------
Total Current Assets 15,579,842 15,545,558
Property and Equipment - Net 611,480 745,703
Mortgage Receivable - Related Party 250,000 250,000
Other Assets 471,675 577,619
---------- ----------
Total Assets $16,912,997 $17,118,880
=========== ===========
Liabilities and Stockholders' Equity:
Current Liabilities:
Accounts Payable $1,327,422 $1,160,978
Accrued Expenses 287,965 374,064
Accrued Payroll 218,581 258,858
Floor Plan Payable 1,940,167 1,200,441
Deferred Income 40,579 --
Income Taxes Payable 78,947 664,167
Other Current Liabilities -- --
---------- ----------
Total Current Liabilities 3,893,661 3,658,508
---------- ----------
Deferred Tax Liability 11,100 11,100
---------- ----------
Stockholders' Equity:
Capital Stock - Common, $.01 Par Value, Authorized
15,000,000 Shares; Issued 7,469,524 Shares
[of which 2,585,220 are in Treasury] 74,695 74,695
Paid-in Capital 10,686,745 10,686,745
Retained Earnings 9,399,692 9,252,475
---------- ----------
Totals 20,161,132 20,013,915
Less: Treasury Stock - At Cost (7,152,896) (6,564,643)
---------- ----------
Total Stockholders' Equity 13,008,236 13,449,272
---------- ----------
Total Liabilities and Stockholders' Equity $16,912,997 $17,118,880
=========== ===========
See Notes to Consolidated Financial Statements.
1
<PAGE>
TRANSNET CORPORATION AND SUBSIDIARY
- ------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
[UNAUDITED]
- ------------------------------------------------------------------------------
Three months ended
December 31,
1 9 9 9 1 9 9 8
------- -------
Revenue:
Sales $7,314,470 $7,190,001
Service 3,169,062 3,785,139
---------- ----------
10,483,532 10,975,140
Cost of Revenue:
Sales 6,771,315 6,532,556
Service 2,580,261 2,268,860
---------- ----------
9,351,576 8,801,416
Gross Profit 1,131,956 2,173,724
---------- ----------
Expenses:
Selling, General and Administrative Expenses 1,469,160 1,784,809
Bad Debt Expense 15,000 7,500
---------- ----------
1,484,160 1,792,309
Operating Income (352,204) 381,415
---------- ----------
Other Income [Expense]:
Interest Income 74,405 64,142
Interest Income - Related Party 5,672 8,872
Interest Expense -- --
---------- ----------
Total Other Income - Net 80,077 73,014
---------- ----------
[Loss] Income Before Provision for Income Taxes (272,127) 454,429
Provision (Benefit) for Income Taxes (88,192) 153,000
---------- ----------
Net [Loss] Income $ (183,935) $ 301,429
========== ==========
Basic Net [Loss] Income Per Common Share $ (0.04) $ 0.06
========== ==========
Diluted Net [Loss] Income Per Common Share $ (0.04) $ 0.06
========== ==========
Weighted Average Common Shares Outstanding - Basic 4,900,864 5,216,804
========== ==========
Weighted Average Common Shares Outstanding - Diluted 4,900,864 5,216,804
========== ==========
See Notes to Consolidated Financial Statements.
2
<PAGE>
TRANSNET CORPORATION AND SUBSIDIARY
- ------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
[UNAUDITED]
- ------------------------------------------------------------------------------
Six months ended
December 31,
1 9 9 9 1 9 9 8
------- -------
Revenue:
Sales $14,740,162 $15,838,053
Service 6,998,230 8,056,524
---------- ----------
21,738,392 23,894,577
Cost of Revenue:
Sales 13,532,531 14,810,760
Service 5,211,003 4,738,513
---------- ----------
18,743,534 19,549,273
Gross Profit 2,994,858 4,345,304
---------- ----------
Expenses:
Selling, General and Administrative Expenses 2,909,181 3,596,546
Bad Debt Expense 30,000 15,000
---------- ----------
2,939,181 3,611,546
Operating Income 55,677 733,758
---------- ----------
Other Income [Expense]:
Interest Income 162,916 141,613
Interest Income - Related Party 11,344 17,744
Interest Expense -- --
---------- ----------
Total Other Income - Net 174,260 159,357
---------- ----------
Income Before Provision for Income Taxes 229,937 893,115
Provision for Income Taxes 82,720 292,998
---------- ----------
Net Income $ 147,217 $ 600,117
========== ==========
Basic Net Income Per Common Share $ 0.03 $ 0.12
========== ==========
Diluted Net Income Per Common Share $ 0.03 $ 0.12
========== ==========
Weighted Average Common Shares Outstanding - Basic 4,900,864 5,216,804
========== ==========
Weighted Average Common Shares Outstanding - Diluted 4,900,864 5,216,804
========== ==========
See Notes to Consolidated Financial Statements.
3
<PAGE>
TRANSNET CORPORATION AND SUBSIDIARY
- ------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
[UNAUDITED]
- ------------------------------------------------------------------------------
Six months ended
December 31,
1 9 9 9 1 9 9 8
------- -------
Operating Activities:
Net Income $ 147,217 $ 600,117
---------- ----------
Adjustments to Reconcile Net Income to Net Cash:
Depreciation and Amortization 240,167 148,407
[Gain] Loss on Sale -- 2,921
Provision for Doubtful Accounts 30,000 15,000
Changes in Assets and Liabilities:
[Increase] Decrease in:
Accounts Receivable (1,749,014) (955,809)
Inventory 220,659 362,089
Other Current Assets (25,724) 2,698
Other Assets -- (2,167)
Mortgage Receivable - Related Party -- 24,423
Increase [Decrease] in:
Accounts Payable and Accrued Expenses 40,068 553,601
Deferred Income 40,579 (45,649)
Other Current Liabilities -- (106,519)
Income Taxes Payable (585,220) 238,715
---------- ----------
Total Adjustments (1,788,485) 237,710
---------- ----------
Net Cash - Operating Activities (1,641,268) 837,827
Investing Activities:
Treasury Stock Purchases (588,253) (106,769)
Financing Activities:
Floor Plan Payable 739,726 (55,806)
---------- ----------
Net [Decrease] Increase in Cash and Cash Equivalents (1,489,795) 675,252
Cash and Cash Equivalents - Beginning of Periods 7,617,241 5,378,846
---------- ----------
Cash and Cash Equivalents - End of Periods $6,127,446 $6,054,098
========== ==========
See Notes to Consolidated Financial Statements.
4
<PAGE>
TRANSNET CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[UNAUDITED]
- ------------------------------------------------------------------------------
[1] Summary of Significant Accounting Policies
[A] Consolidation - The consolidated financial statements include the accounts
of the Corporation and its wholly-owned subsidiary, Century American
Corporation. Intercompany transactions and accounts have been eliminated in
consolidation.
[B] Inventory - Inventory consists of finished goods. The Corporation's
inventory is valued at the lower of cost [determined on the average cost basis]
or market.
[C] Cash and Cash Equivalents - For the purposes of the statement of cash flows,
the Corporation considers highly liquid debt instruments, purchased with a
maturity of three months or less, to be cash equivalents.
[D] Earnings Per Share - Basic earnings per share is based on the weighted
average number of common shares outstanding without consideration of common
stock equivalents. Diluted earnings per share is based on the weighted average
number of common and common equivalent shares outstanding. Diluted earnings per
share takes into account the shares that may be issued upon exercise of stock
options, reduced by the shares that may be purchased with the funds received
from the exercise, based on the average price during the year. Prior periods
earnings per share data have been recalculated and no adjustment was necessary.
[2] Income Taxes
The Corporation has a deferred tax asset of $249,000and a deferred tax liability
of $11,100 based upon temporary timing differences including inventory
capitalization, allowance for doubtful accounts, vacation pay accruals and
depreciation.
[3] Reclassification
Certain items from the prior year's financial statements have been reclassified
to conform to the current year's presentation.
In the opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments consisting only of normal recurring
adjustments necessary to present fairly the financial position, the results of
operations and cash flows for the periods presented.
These statements should be read in conjunction with the summary of significant
accounting policies and notes contained in the Corporation's annual report on
Form 10-K for the year ended June 30, 1999.
. . . . . . . . . .
5
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- ------------------------------------------------------------------------------
Results of Operations
Revenues for the three months ended December 31, 1999 were $10,483,532 as
compared with $10,975,140 for the quarter ended December 31, 1998. For the
quarter ended December 31, 1999 the Corporation reported a net loss of $183,935
as compared with net income of $301,429 for the similar period in the prior
fiscal year. For the six months ended December 31, 1999, revenues were
$21,738,392, as compared to $23,894,577 reported for the similar period in the
prior fiscal year, with net income of $147,217 for the period ended December 31,
1999, compared with net income of $600,117 for the same period in the prior
fiscal year. The decrease in revenues for the quarter and six-month period ended
December 31, 1999, was primarily attributable to deferrals by major clients of
initiating technical service projects due to their concerns with potential Y2K
problems. Management believes that this type of deferral was widespread and
affected the industry as a whole.
The net loss for the quarter and the decrease in earnings for the six-month
period ended December 31, 1999, were the result of the deferrals of technical
service, technical support and training services, combined with the associated
under-utilization of technical personnel. Results were also negatively impacted
by the increased cost of services, including increased labor costs and increased
costs of parts. Service and training related revenues are significant in their
contributions to earnings because these operations yield a higher profit margin
than equipment sales. For the six-month period ended December 31, 1999, revenues
from the provision of service, support, outsourcing and network integration were
largely the result of the Corporation renewing and/or entering into service
contracts with a number of large corporate clients. Most of these contracts are
short-term, usually twelve months or less, and contain provisions which permit
early termination. Although the contracts generally contain renewal terms, there
is no assurance that such renewals will occur.
Although service revenues decreased for the quarter, hardware sales increased
slightly due to increased order volume. For the six-month period ended December
31, 1999, hardware sales decreased as compared to the same period in the prior
year. In addition to the Corporation's shift in focus to technical services,
this decrease is attributable in part to the Corporation's implementation of
its' agency model. Under this program, computer manufacturers ship products to
and bill the Corporation's clients directly, and pay the Corporation a fee of
approximately 5% of the aggregate amount billed. Management continues its
concentration on sales of network and system integration products which yield
higher profit margins, and continues adherence to and implementation of cost
control measures
The computer industry continually faces a trend of decreasing prices for
computers and related equipment. Management believes that this trend will
continue. Industrywide, the result of price erosion has been lower profit
margins on hardware sales, which require businesses to sell a greater volume of
equipment to maintain past earning levels. Another result of the price decreases
has been intensified competition within the industry, including the
consolidation of businesses through merger or acquisition and the entrance of
manufacturers into technical services business. Management believes that the
adoption of policies by many larger corporate clients to limit the number of
vendors permitted to provide goods and services for specified periods of time
has further increased price competition.
To meet these competitive challenges and to maximize the Corporation's profit
margin, management has modified its marketing strategy and has enforced expense
controls. Management's current marketing strategy is designed to increase sales
of lower revenue/higher profit margin products related to service, technical
support and training operations. Management's efforts include targeting
commercial, educational and governmental clients which provide marketplaces for
a wide range of products and services at one time, a cost-effective approach to
sales. With respect to hardware sales, the Corporation has adopted its agency
model. In addition, management believes it maximizes profits through
concentration on sales of value-added applications; promotion of the
Corporation's service and support operations; and adherence to cost-cutting
controls. In light of the above, management emphasizes and continues the
aggressive pursuit of an increased volume of technical service and support
programs and promotion of its training services.
6
<PAGE>
Selling, general and administrative expenses decreased to approximately 14% of
revenue for both the quarter and six months ended December 31, 1999, due to
management's efforts to control and reduce administrative expenses, which
included reduction in items such as personnel related costs and distribution
expenses. Selling, general and administrative expenses were approximately 15% of
revenues for the same periods in fiscal 1998.
Interest income remained relatively constant in the quarter and six-month period
ended December 31, 1999, as compared to similar periods in the prior fiscal
year.
Liquidity and Capital Resources
There are no material commitments of the Corporation's capital resources.
The Corporation currently finances a portion of its accounts receivable and
finances purchases of portions of its inventory through floor-planning
arrangements under which such inventory secures the amount outstanding. The
amount due under this financing increased for the quarter ended December 31,
1999 due to an increase in order volume during the month of December. Inventory
decreased in the quarter and six-month periods ended December 31, 1999 as
compared to the corresponding periods in the prior fiscal year in response to
the Corporation's agency model of sales.
Accounts receivable increased for the quarter and six-month period ended
December 31, 1999, as compared to the same periods in the prior fiscal year as a
result of slower payable cycles from certain customers, several of whom
forwarded payment since the end of the quarter. Accounts payable increased for
the quarter and six-month period ended December 31, 1999, compared with the same
periods in the prior fiscal year as a result of increased hardware sales volume
in the December 1999 quarter. Cash levels decreased in the three and six-month
periods ended December 31, 1998, as compared to the corresponding periods in
fiscal 1998 due to the slower receivable cycles.
For the fiscal quarter and six months ended December 31, 1999, as in the similar
periods in the prior year, the internal resources of the Corporation were
sufficient to enable the Corporation to meet its obligations.
In the first quarter of fiscal 1998, management was apprised of an unasserted
possible claim or assessment involving the Corporation's Pension Plan. The Plan
was adopted in 1981 as a defined benefit plan. In 1989, various actions were
taken by the Corporation to terminate the Plan, to convert it to a defined
contribution plan and to freeze benefit accruals. No filing for plan termination
was made with the Pension Benefit Guaranty Corporation (the "PBGC").
Additionally, a final amended and restated plan document incorporating the
foregoing amendments and other required amendments including those required by
the Tax Reform Act of 1986 do not appear to have been properly adopted. In
addition, since 1989, it appears that certain operational violations occurred in
the administration of the Plan including the failure to obtain spousal consent
in certain instances where it was required.
The Corporation decided to (i) take corrective action under the IRS Walk-in
Closing Agreement Program ("CAP"), (ii) apply for a favorable determination
letter with respect to the Plan from the IRS, and (iii) terminate the Plan. The
CAP program provides a correction mechanism for "non-amenders" such as the
Corporation. Under CAP, the Corporation will be subject to a monetary sanction
(which could range from $1,000 to approximately $40,000). In addition, the
Corporation will be required to correct, retroactively, operational violations,
and to pay any resulting excise taxes and PBGC premiums and penalties that may
be due. Special counsel has advised the Corporation that although it believes
that the Corporation will incur some liability in connection with the correction
of such operational violations, any estimate in dollar terms of the range of
such liability at this time would be speculative and potentially misleading.
However, management has been advised by counsel that the estimated liabilities
are significantly lower than originally anticipated.
7
<PAGE>
Year 2000
Since December 31, 1999, the Corporation has not experienced any significant Y2K
related problems in its own operations or those of any material supplier or
client.
The Corporation began preparing its computer-based systems for year 2000 ("Y2K")
computer software compliance issues in 1998. Many existing computer systems,
including certain of the Corporation's internal systems, use only the last two
digits to identify years in the date field. As a result, these computer systems
do not properly recognize a year that begins with "20" instead of the familiar
"19," or may not function properly with years later than 1999. If not corrected,
many computer applications could have failed or created erroneous results. This
is generally referred to as the "Year 2000" or "Y2K" issue. Computer systems
that are able to deal correctly with dates after 1999 are referred to as "Year
2000 compliant." The Corporation's Y2K project covered both traditional computer
systems and infrastructure ("IT Systems") and computer-based hardware and
software, facilities and equipment ("Non-IT Systems"), such as its telephone
system. The Corporation's Y2K project had the following phases: inventory;
assessment of action required to assure Y2K compliance; upgrading or
replacement; testing; and contingency planning.
Prior to December 31, 1999, the Corporation completed the assessment of its
critical IT systems and its main internal computer system in order to determine
whether its systems were Y2K compliant. By January 1, 2000, the Corporation
upgraded or replaced any non-compliant systems. The Corporation incurred
approximately $50,000 of Y2K project expenses.
The matters discussed in Management's Discussion and Analysis and throughout
this report that are forward-looking statements are based on current management
expectations that involve risk and uncertainties. Potential risks and
uncertainties include, without limitation: the impact of economic conditions
generally and in the industry for microcomputer products and services;
dependence on key vendors; continued competitive and pricing pressures in the
industry; product supply shortages; open- sourcing of products of vendors; rapid
product improvement and technological change, short product life cycles and
resulting obsolescence risks; technological developments; capital and financing
availability; and other risks set forth herein.
8
<PAGE>
PART II.
OTHER INFORMATION
Item 5. Other Information
On February 6, 1990, the Board of Directors of TransNet Corporation
declared a dividend distribution of one Right for each outstanding share of
common stock, par value $.01 per share (the "Common Stock") of the Corporation.
The distribution was payable to stockholders of record on February 16, 1990.
Each Right entitles the registered holder to purchase from the Company one share
of Common Stock at a price of $7.50 per share (the "Purchase Price"), subject to
adjustment. The terms of the Rights are set forth in a Rights Agreement (the
"Rights Agreement") between the Corporation and Continental Stock Transfer and
Trust Company. On February 4, 2000, the Board of Directors of TransNet
Corporation amended the Rights Agreement dated February 6, 1990 to extend the
expiration of the Rights Certificates, as defined in the Rights Agreement to
February 6, 2010.
As more fully described in the Corporation's prior filings with the
Commission, the Rights have certain anti-takeover effects. The Rights entitle
each Right holder, upon the occurrence of a specified triggering event to
purchase one share of common stock at an exercise price of $7.50 per share, or
in certain "take over" situations, to purchase common stock equal in value to
two times the exercise price. Examples of triggering events are: the acquisition
by a person or group of beneficial ownership of 20% or more of outstanding
shares; or the commencement of a tender offer for 20% or more of outstanding
shares, unless an offer is made for all outstanding shares at a price deemed by
the Continuing Board to be fair and in the best interest of stockholders; or the
determination by the Board that a person is an "Adverse Person," as defined in
the Rights Agreement. Subsequent to a triggering event, if the Corporation is
acquired in a merger or other business transaction in which the Corporation is
not the surviving corporation, unless Board approved, or if 50% or more of the
Corporation's assets or earning power is sold or transferred, each holder of a
Right shall have the right to receive upon exercise, common stock of the
acquiring company having a value equal to two times the exercise price of the
Right. The Rights may be redeemed by the Corporation for $.01 per Right at any
time prior to the determination of the Board that a person is an Adverse Person
or ten days following a public announcement of the acquisition of, or
commencement of a tender offer for, 20% of the outstanding common stock.
Item 6: Exhibits and Reports on Form 8-K
A. Exhibits -
4.1.Amendment to Rights Agreement dated February 6, 1990 between TransNet
Corporation and Continental Stock Transfer Company
4.2 Form of Rights Agreement dated Incorporated by Reference from:
as of February 6, 1990 between Exhibit to Current Report on Form
TransNet and The Trust Company of 8-K for January 25, 1990
New Jersey, as Rights Agent
(predecessor to Continental Stock
Transfer and Trust Company.)
B. Reports on Form 8-K - None filed during the quarter for which this
report is submitted.
9
<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.
TRANSNET CORPORATION
(Registrant)
/s/ Steven J. Wilk
Steven J. Wilk, President
/s/ John J. Wilk
John J. Wilk,
Principal Financial and Accounting Officer
and Chairman of the Board of Directors
DATE: February 14, 2000
10
Exhibit 4.1
RIGHTS AGREEMENT
The following is the First Amendment to the Rights Agreement, dated as of
February 4, 2000 (the "Amendment"), between TransNet Corporation (the "Company")
and Continental Stock Transfer and Trust Company, as Rights Agent:
WHEREAS, the undersigned Rights Agent and TransNet Corporation are parties to a
Rights Agreement dated as of February 6, 1990, and
WHEREAS the Company desires to amend the Rights Agreement pursuant to Section 27
of the Rights Agreement.
NOW THEREFORE, the amendment shall be as follows:
1. Section 7. Amendment to Section 7 of the Rights Agreement: Section 7(a)(i) is
hereby amended by deleting the reference to "February 6, 2000" and replacing it
with "February 6, 2010".
2. Exhibit A. Amendment to Exhibit A of the Rights Agreement: SUMMARY OF RIGHTS
TO PURCHASE COMMON STOCK is hereby amended by deleting the references to
"February 6, 2000" and replacing them with "February 6, 2010".
3. Exhibit B. Amendment to Exhibit B of the Rights Agreement: FORM OF RIGHTS
CERTIFICATE. The heading paragraph is hereby amended by deleting the references
to "February 6, 2000" and replacing them with "February 6, 2010". The first
paragraph is hereby amended by deleting the references to "February 6, 2000" and
replacing them with "February 6, 2010".
4. Governing Law. This Amendment, the Rights Agreement, each Right and each
Rights Certificate issued hereunder shall be governed by, and construed in
accordance with the laws of the State of Delaware applicable to contracts
executed in and to be performed entirely in such State.
5. Counterparts. This Amendment may be executed in any number of counterparts
and each of such counterparts shall for all purposes be deemed to be an
original, and all such counterparts shall together constitute one and the same
instrument.
6. Effect of Amendment. Except as expressly modified herein, the Rights
Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have caused this amendment to be duly executed
as of February 4, 2000.
TRANSNET CORPORATION
Attest:
By: By:
Name: Name:
Title: Title:
CONTINENTAL STOCK TRANSFER AND
TRUST COMPANY
Attest:
By: By:
Name: Name:
Title: Title:
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet and the consolidated statement of operations, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> jun-30-2000
<PERIOD-END> Dec-31-1999
<CASH> 6,127,446
<SECURITIES> 0
<RECEIVABLES> 8,455,365
<ALLOWANCES> 0
<INVENTORY> 666,277
<CURRENT-ASSETS> 81,754
<PP&E> 611,480
<DEPRECIATION> 0
<TOTAL-ASSETS> 16,912,997
<CURRENT-LIABILITIES> 3,893,661
<BONDS> 0
0
0
<COMMON> 74,695
<OTHER-SE> 10,686,745
<TOTAL-LIABILITY-AND-EQUITY> 16,912,997
<SALES> 21,738,392
<TOTAL-REVENUES> 21,738,392
<CGS> 2,994,858
<TOTAL-COSTS> 5,934,039
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 229,937
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 147,217
<EPS-BASIC> 0.03
<EPS-DILUTED> 0.12
</TABLE>
