U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended June 30, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO __________.
Commission File No. 0-20747
IMAGEMATRIX CORPORATION
-----------------------
(Exact name of small business issuer as specified in its charter)
COLORADO 84-1313108
(State or jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
400 S. COLORADO BLVD. - SUITE 500, DENVER, COLORADO 80246
(Address of principal executive offices) (Zip code)
(303) 399-3700
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act of 1934 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 small business issuer had 4,922,834 shares of common stock outstanding as of
August 8, 1997.
Transitional Small Business Disclosure Format:
Yes No X
---- ----
ITEM 1 FINANCIAL STATEMENTS
IMAGEMATRIX CORPORATION
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
June 30,
1997
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ASSETS
Current assets
Cash $ 1,467
Accounts receivable, net of allowance of $7 924
Unbilled revenues 1,464
Inventory 30
Prepaid expenses and other current assets 223
---------
Total current assets 4,108
Property and equipment at cost, less accumulated
depreciation of $281 534
Software development costs, net of accumulated
amortization of $205 211
Other assets, net of accumulated amortization of $61 39
---------
TOTAL ASSETS $ 4,892
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 1,029
Deferred revenue 68
Other current liabilities 458
---------
Total current liabilities 1,555
Stockholders' equity
Preferred stock, no par value, 5,000,000 shares
authorized, no shares issued or outstanding 3,771
(liquidation preference of $3,300,000)
Common stock, no par value, 20,000,000 shares
authorized, 4,922,834 shares issued or outstanding 5,604
Deferred compensation, net of accumulated amortization of $75 (25)
Accumulated deficit (6,013)
---------
Total stockholders' equity 3,337
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,892
=========
See notes to consolidated financial statements.
2
IMAGEMATRIX CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- ------------------
1997 1996 1997 1996
------------------- ------------------
REVENUE:
System sales $ 1,856 $ 636 $ 3,082 $ 1,433
Service contracts and other 79 118 197 228
------- ------ ------- -------
Total revenue 1,935 754 3,279 1,661
COST OF REVENUE:
Cost of system sales 1,259 421 1,845 883
Cost of service contracts and other 73 88 175 386
------- ------ ------- -------
Total cost of revenue 1,332 509 2,020 1,269
------- ------ ------- -------
GROSS PROFIT 603 245 1,259 392
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 1,467 1,024 2,675 1,601
------- ------ ------- -------
OPERATING LOSS (864) (779) (1,416) (1,209)
Other expense:
Interest (4) (61) (4) (146)
Other nonoperating (5) (2) (1) (9)
------- ------ ------- -------
NET LOSS (873) (842) (1,421) (1,364)
Preferred stock dividends:
Imputed (Note 3) (833) - (833) -
Accrued (48) - (48) -
------- ------ ------- -------
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS $(1,754) $ (842) $(2,302) $(1,364)
======= ====== ======= =======
NET LOSS PER COMMON SHARE $ (0.36) $(0.22) $ (0.47) $ (0.37)
======= ====== ======= =======
COMMON SHARES USED IN COMPUTING NET LOSS
PER COMMON SHARE 4,923 3,891 4,902 3,733
======= ====== ======= =======
See notes to consolidated financial statements.
3
IMAGEMATRIX CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
SIX MONTHS ENDED
JUNE 30,
------------------
1997 1996
------- -------
OPERATING ACTIVITIES
Net loss $(1,421) $(1,364)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation and amortization 228 146
Changes in operating assets and liabilities:
Accounts receivable (601) 591
Unbilled revenues (1,162) (279)
Inventory 95 171
Prepaid expenses and other current assets (96) (78)
Accounts payable and accrued expenses 491 (10)
Deferred revenue and other current
liabilities 313 -
Other assets (23) (2)
------- -------
NET CASH USED BY OPERATING ACTIVITIES (2,176) (825)
INVESTING ACTIVITIES
Software development costs - (239)
Purchases of computer equipment and furniture (84) (211)
------- -------
NET CASH USED BY INVESTING ACTIVITIES (84) (450)
FINANCING ACTIVITIES
Issuance of preferred stock, net of
offering costs of $363 2,938 -
Issuance of common stock, net of
offering costs of $36 465 -
Issuance of common stock - 6,339
Repayment of notes payable - (2,644)
Repayment of amount due to principal
stockholder - (38)
------- -------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 3,403 3,657
------- -------
Net increase in cash and cash equivalents 1,143 2,382
Cash and cash equivalents at beginning of period 324 550
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,467 $ 2,932
======= =======
See notes to consolidated financial statements.
4
IMAGEMATRIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 BASIS OF PRESENTATION
These statements should be read in conjunction with the financial statements and
notes thereto included in the Company's Form 10-KSB/A for the year ended
December 31, 1996. The accompanying financial statements have been prepared in
accordance with generally accepted auditing standards and in the opinion of the
Company's management, such financial statements include all adjustments
necessary to summarize fairly the Company's financial position and results of
operations. All adjustments made to the interim financial statements presented
are of a normal, recurring nature. The results of operations for the six months
ended June 30, 1997, may not be indicative of results that may be expected for
the year ending December 31, 1997.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Software Development Costs
The Company recognizes software and system development expenses at the time of
occurrence for all software and system conceptual design, writing, programming,
and production prior to a Beta-site test at a customer site. Once a product has
been installed at a customer Beta-site and functionality and conceptual design
have been proved, the Company capitalizes all expenses associated with the
development of that software until general release to the public. Immaterial
costs incurred during this time are expensed in that period.
Amortization of computer software development costs begins when the product is
available for use by customers. Amortization is recorded using the greater of:
(1) the amount computed using the ratio of current product revenue to the total
of current and anticipated revenue or (2) the amount determined using the
straight-line method over two years. During second quarter 1997, management of
the Company reviewed the life used in this calculation and determined that based
upon the life and history of the related products, a two year life more
accurately reflects the remaining life of the product. The impact of this
change was immaterial to the current quarter.
NOTE 3 PREFERRED STOCK
On April 14, 1997, the Company sold 3,300,000 shares of non-voting, Series A
Preferred Stock (Preferred Stock) for gross proceeds of $3,300,000. In
connection with the sale, the Company agreed to pay commissions of $330,000 and
issue warrants to purchase 1,550,000 shares of Common Stock to certain placement
agents. Of the 1,550,000 warrants, 1,050,000 are exercisable at $2.25 per share
and 500,000 are exercisable at $3.00 per share. All such warrants may be
exercised for a period of three years from the date of grant. The Preferred
Stock yields a 7% dividend, which the Company can elect to pay in cash or Common
Stock. Such amounts are accrued and are included in the other current
liabilities portion of the June 30, 1997 balance sheet. The Preferred Stock can
be converted into Common Stock at the lesser of $2.25 per share or 75% of the
average closing price for the previous eight trading days prior to conversion.
The Company can decline to convert the shares and can instead redeem the shares
by payment of 125% of the purchase price paid by the holders and accrued but
unpaid dividends on that portion.
Recently a Securities and Exchange Commission interpretation was published
whereby net loss applicable to common stockholders must reflect as a dividend
the amount of any specified discount to the market price of Common Stock into
which the Preferred Stock is convertible. Because the Preferred Stock described
above contains a conversion feature, the net loss applicable to common
stockholders was increased by $833,000 for an imputed Preferred Stock dividend
equivalent to the discount from 75% of the fair market value of the Common Stock
for the eight trading days prior to April 14, 1997 times the number of common
shares reserved for conversion.
5
NOTE 4 COMMON STOCK
In January 1997, the Company sold 257,000 shares of Common Stock at a price of
$1.95 per share. Net proceeds to the Company, relating to this transaction
totaled $465,000.
NOTE 5 IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARD
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, Earnings Per Share, which is required to be adopted for periods ending
after December 15, 1997. At that time, the Company will be required to change
the method currently used to compute earnings per share and to restate all prior
periods. Under the new requirements for calculating primary earnings per share,
the dilutive effect of stock options will be excluded. The expected impact of
Statement No. 128 on these quarters is not expected to be material.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
ImageMatrix Corporation (the Company) was incorporated in July 1995. The
Company designs, sells and installs document imaging and work flow systems which
improve productivity and customer service for health maintenance organizations
(HMOs), health insurance companies, third-party administrators (TPAs), workers
compensation organizations, dental providers and preferred provider
organizations. These organizations are collectively known as Managed Care
Organizations (MCOs). The Company's systems utilize the Company's proprietary
software as well as components manufactured by third party software, hardware
and peripheral vendors. The Company has developed a suite of software products
including CaptureMatrix TM, ClaimMatrix TM and ServiceMatrix TM. CaptureMatrix
TM is a document capture, storage and retrieval system. ClaimMatrix TM performs
imaging-based workflow claims processing. ServiceMatrix TM was released on June
30, 1997 and enables customer service departments to resolve customer inquiries
in a rapid, cost-efficient manner. Installation of the first ClaimMatrixTM
system was successfully completed in October 1996. The second ClaimMatrix TM
system entered the installation stage in December 1996 and that installation was
completed in second quarter 1997.
In June 1996, the Company raised $6,247,000, net of offering costs, from its
initial public offering of 1,400,000 units consisting of 1,400,000 shares of
Common Stock and warrants to purchase 750,000 shares of Common Stock. In
January 1997, the Company raised $465,000, net of offering costs, from the sale
of 257,000 shares of its Common Stock. During April and May 1997, the Company
raised $2,938,000, net of offering costs, from the sale of Series A, non-voting
Preferred Stock.
RESULTS OF OPERATIONS
REVENUE
Total revenue for the quarter ended June 30, 1997, was $1,935,000 an increase of
157% or $1,181,000 over the same period in 1996; total revenue for the six month
period ending June 30, 1997 was $3,279,000 an increase of 97% or $1,618,000 over
the same period in 1996. For the second quarter of 1997 revenue from system
sales was $1,856,000, an increase of $1,220,000 or 192% over that reported in
1996. For the six-month period ending June 30, 1997, revenue from system sales
was $3,082,000, an increase of $1,649,000 or 115% over that reported in the 1996
period. Total revenue and revenue from system sales increased in both second
quarter and the first half of 1997 due to more customers. The Company believes
its significant focus on sales and marketing efforts for its proprietary
software continue to increase revenue. Sales to the MCO industry during the
second quarter 1997 totaled $1,859,000 compared to $461,000 during the second
quarter 1996; an increase of $1,398,000 or 303%. During the first half of 1997
sales to the MCO industry were $3,061,000; compared to $640,000 in the 1996
period; an increase of $2,421,000 or 378%. Offsetting these increases was a
decline in sales to other industries caused by the sales focus shift to the MCO
industry during 1997. Revenue from sales into the MCO industry as a percentage
of total revenue for the second quarter 1997 was 96% compared to 61% in the 1996
period and for the first half of 1997 the percentage of these sales to total
revenue was 93% versus 39% in the first half of 1996.
6
In comparison to the 1996 second quarter, revenue from service contracts and
other decreased to $79,000 from $118,000 during second quarter 1997, a change of
$39,000 or 33%. During the first six months of 1997, revenue from service
contracts and other declined $31,000 or 14% from $228,000 to $197,000. The
decline in both periods was attributable to an increased focus on sales of the
Company's proprietary software during 1997 which resulted in the discontinuance
of service contracts on non-proprietary software sales. In addition, a large
percentage of the 1997 system sales are not yet under service contracts.
In the first six months of 1997, the Company has experienced revenue growth of
97% over the first six months of 1996, as well as sequential quarterly revenue
growth. The Company, however, does not believe that it has reached the point
where it can reliably predict continued, sequential growth. The Company believes
it will continue to experience significant quarterly variations in revenue,
either positively or negatively, until the number of system sales increases to
the point where the presence or absence of a large order, or the timing of
revenue recognition of portions of such orders, will not significantly impact
revenues from period to period.
GROSS PROFIT
Gross profit for second quarter 1997 increased $358,000 or 146% to $603,000 from
$245,000 reported in second quarter 1996. For the six months ending June 30,
1997, gross profit rose to $1,259,000 from $392,000, an increase of $867,000 or
221%. The increases in both 1997 periods were directly related to increased
sales of the Company's proprietary software.
GROSS MARGIN
Gross margin (gross profit as a percent of sales) during second quarter 1997
declined slightly to 31.2% from 32.5% for the 1996 period and from 48.8% in
first quarter 1997. This decrease was the result of a competitive pricing
tactic applied for a specific contract during second quarter 1997 and longer
than anticipated installation periods experienced on less significant projects
mainly from contracts entered into by the Company in first quarter 1997. These
smaller projects were undertaken during first quarter 1997 in order to achieve
market penetration. The Company foresees its average project size increasing
throughout the remainder of 1997.
Gross margin during the first half of 1997 improved to 38.4% from 23.6% in the
first half of 1996. This growth was due to the additional revenue generated
from sales of the Company's proprietary software recorded in 1997 compared to
the 1996 period. However, the increase experienced from additional sales was
partially offset by the competitive pricing tactic and longer than anticipated
installation periods discussed above.
During second quarter 1997 the Company experienced longer than anticipated
installation time lines on many of its projects. The negative impacts of this
are: (1) additional costs and (2) longer periods to achieve billing milestones
on the related contracts. The Company believes that it is important to
accelerate its installation time lines. Consequentially, the Company has taken
steps to add additional experienced project managers. The Company believes that
as it completes installations of more systems, the related times lines should be
reduced.
SELLING, GENERAL AND ADMINISTRATIVE COSTS
In the second quarter of 1997, selling, general and administrative costs rose
$443,000 or 43% from $1,024,000 in second quarter of 1996 to $1,467,000. These
same costs increased $1,074,000 or 67% from $1,601,000 in the first six months
of 1996 compared to $2,675,000 in the same 1997 period. In both periods,
selling expense increased the most: by $315,000 in second quarter 1997 and by
$626,000 in the first half of 1997. Expansion of the Company's sales force and
costs associated with related office space accounted for the majority of the
increase in selling expense. In both periods, research and development costs
increased: by $190,000 in second quarter 1997 and by $381,000 in the first half
of 1997. The increase in research and development expenses was due to
additional personnel combined with the absence of capitalizable development
projects in 1997.
7
INTEREST EXPENSE
Interest expense was $4,000 for the second quarter of 1997 compared to $61,000
for the 1996 period and interest expense for the first six months of 1997 was
$4,000 while it was $146,000 for the 1996 period. The decrease relates to the
repayment of the debt that was outstanding during the first half of 1996. The
minor amount that was reported in 1997 related to the use of the line of credit
discussed in liquidity and capital resources below.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity is generated from both internal and external sources and
is used to fund short-term working capital needs. Internally generated
liquidity is measured by operating cash flow as discussed below and working
capital. At June 30, 1997, working capital was $2,553,000. In addition, the
Company received gross proceeds of $3,300,000 in April and May 1997 from the
sale of 3,300,000 shares of non-voting, Series A Preferred Stock (Preferred
Stock). The Company believes that the cash generated from the sale of the
Preferred Stock and its $2,000,000 line of credit (whereby the Company is
allowed to borrow up to 80% of approved accounts receivable balances) is
sufficient to finance its short-term working capital needs for fiscal year 1997.
The Company's short-term and long-term capital requirements will depend on many
factors, including, but not limited to, product revenues from operations,
working capital requirements, research and development expenses, capital
expenditures, successful project management, timely system installations and
variability of quarterly operations. The Company's market development efforts
are still relatively young and changes in the anticipated business development
of the Company which extend the Company's time to achieve profitability could
cause the Company to issue debt, additional equity or a combination thereof.
There can be no assurance that additional financing will be available, or, if
available, the terms of such financing will be favorable to the Company or its
shareholders without substantial dilution of their ownership rights. If
adequate funds are not available, or are not available on terms acceptable to
the Company, the Company may be required to curtail its operations
significantly, forego market opportunities, or obtain funds through arrangements
with strategic partners or others that may require the Company to relinquish
material rights to certain of its technologies or potential markets. The
Company believes that with improved project management personnel and increased
installation and project management experience, it can shorten the installation
time lines, reduce unbilled revenue balances and thereby reduce working capital
needs. However, there can be no assurance that this will occur.
Net cash used in operating activities during the second quarter 1997 was
$2,128,000. Contributing to this usage was the loss experienced during the
first six months of 1997 and the increase in accounts receivable and unbilled
revenue related to the increase in sales volume. These increases were offset
partially by an increase in accounts payable and deferred revenue and other
current liabilities.
"SAFE HARBOR" STATEMENT UNDER PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The statements contained in this report which are not historical facts are
forward-looking statements that are subject to risks and uncertainties that
could cause actual results to differ materially from those set forth in or
implied by forward-looking statements, including, but not limited to, the risk
that the market for imaging-based claims processing may not develop as expected,
the degree of success of the Company's market initiatives, expansion of sales in
the MCO industry, the success of the Company in forecasting demand for the
ClaimMatrix(TM) system, the success of the Company in increasing ClaimMatrix(TM)
system sales as a percentage of overall revenues to increase gross profit
margins and decrease general, administration and sales costs as a percentage of
overall gross profit, the risk that the Company will not be able to achieve
pricing levels or installation time lines sufficient to increase gross margins,
the risk that the long length of the Company's sales cycle could delay revenues,
the risk of variablity of quarterly operations and those risks and uncertainties
discussed more completely in the Company's Form 10-KSB/A for the year ended
December 31, 1996 and the Company's Form S-3 Registration Statement dated August
8, 1997.
8
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The following matters were submitted to a vote of shareholders of the Company at
the Annual Meeting of Shareholders held May 16, 1997.
(a) The following members were elected to the Board of Directors to
hold office until the next Annual Meeting of Shareholders:
Elected to
Nominee For Withhold Term Ending
- ------- --- -------- -----------
Robert Beekman 2,430,000 106,000 2000
Bryan Finkel 2,430,000 106,000 1999
Dennis Hefter 2,430,000 106,000 2000
Beverly Sloan 2,430,000 106,000 2000
The terms of office of the directors of the Company are staggered. The terms of
office of the Company's other directors continue after the Annual Meeting, as
follows: Blair McNea and Jaidev Sugavanam have terms which expire at the 1998
Annual Meeting of Shareholders, and Gerald Henderson and David Seigle have terms
which expire at the 1999 Annual Meeting of Shareholders.
(b) The ImageMatrix Corporation 1996 Incentive Stock Option Plan was
amended to increase the number of share of common stock reserved
for issuance thereunder from 387,500 to 737,500 by a vote of
2,360,000 in favor, 54,000 against and 122,000 abstentions.
(c) Ernst & Young LLP, independent public accountants, were selected as
the auditors of the Company for the fiscal year ending December 31,
1997, by a vote of 2,507,000 in favor, 15,000 against and 14,000
abstentions.
9
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits:
3.1 Amended and Restated Articles of Incorporation. (1).
3.2 Bylaws of Registrant. (1).
3.3 Articles of Amendment to Articles of Incorporation, creating
Series A Convertible Preferred Stock. (2).
4.1 Form of Certificate for Shares of Common Stock. (1).
4.2 Form of Warrant Agreement and Redeemable Warrant. (1).
4.3 Form of Stock Purchase Warrant A. (2).
4.4 Form of Stock Purchase Warrant B. (2).
10.1 Employment Agreement dated December 29, 1995 by and between
ImageMatrix Corporation and Gerald E. Henderson. (1).
10.2 Severance Agreement dated December 29, 1995 by and between
ImageMatrix Corporation and Dennis C. Hefter. (1).
10.3 Letter Agreement dated December 21, 1995 by and between
ImageMatrix Corporation and Blair W. McNea. (1).
10.4 ImageMatrix Corporation Founders and Consultants Stock Option
Plan. (1).
10.5 ImageMatrix Corporation 1996 Stock Option Plan. (1).
10.6 ImageMatrix Corporation Stock Option Plan for Non-Employee
Directors. (1).
10.7 Asset Purchase Agreement dated August 30, 1995 by and among
Documatrix Acquisition Corporation, Random Access, Inc. and Gerald
E. Henderson. (1).
10.8 Authorized Reseller Agreement dated February 21, 1996 by and
between ImageMatrix Corporation and Optika Imaging Systems, Inc.
(1).
10.9 Reseller Agreement dated January 8, 1996 by and between
ImageMatrix Corporation and FileNet Corporation. (1).
10.10 Asset Purchase Agreement dated February 15, 1995 by and among
Random Access, Inc., Documatrix Corporation and Gerald E.
Henderson. (1).
10.11 Change in Terms Agreement dated December 27, 1995 by and among
Bank One Colorado, N.A., Gerald E. Henderson, Carolyn Lee
Henderson and Documatrix Corporation, as amended by Change in
Terms Agreement dated February 29, 1996 by and among Bank One
Colorado, N.A., Gerald E. Henderson, Carolyn Lee Henderson,
Documatrix Corporation and ImageMatrix Corporation. (1).
10
10.12 Form of Securities Purchase Agreement dated April 14, 1997. (2).
11 Statement Re Computation of Earnings Per Share
27 Financial Data Schedule
(1) Incorporated by reference from same exhibit to the Registrant's Registration
Statement on Form SB-2 (File No. 333-1990).
(2) Incorporated by reference from same exhibit to the Registrant's Form 10Q-SB
filed on May 15, 1997 (File No. 0-20704).
(b) Reports on Form 8-K
There were no reports filed on Form 8-K for the quarter ended
June 30, 1997.
11
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
IMAGEMATRIX CORPORATION
Date: August 13, 1997 By: /s/ Gerald E. Henderson
------------------------------------------------
Gerald E. Henderson, Chief Executive
Officer (Principal Executive Officer)
Date: August 13, 1997 By: /s/ Blair W. McNea
------------------------------------------------
Blair W. McNea, Chief Financial Officer, Senior Vice
President - Business Development, Treasurer,
Secretary (Principal Financial and Accounting
Officer)
12
IMAGE MATRIX CORPORATION
WEIGHTED AVERAGE SHARES OUTSTANDING
FOR THE SIX MONTHS ENDED JUNE 30, 1997
EXHIBIT 11
Days
----
Total shares issued and outstanding from
January 1, 1997 to June 30, 1997
4,665,897 15 69,988,455
4,922,834 166 817,190,444
887,178,899
Days 181
------------
WEIGHTED AVERAGE SHARES OUTSTANDING 4,901,541
============
FOR THE QUARTER ENDED JUNE 30, 1997
Days
----
Total shares issued and outstanding from
April 1, 1997 to June 30, 1997
4,922,834 91 447,977,894
447,977,894
Days 91
------------
WEIGHTED AVERAGE SHARES OUTSTANDING 4,922,834
============
Common stock equivalents have been excluded from the calculation from January 1,
1997 to December 31, 1997 due to the fact that exercise price is greater than
stock price in all cases.
13