Note 1. Operations and Significant Accounting Policies:
The accompanying condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such regulations. Certain prior period balances have been reclassified to conform with the current period presentation. The condensed consolidated financial statements reflect all adjustments and disclosures which are, in the opinion of management, necessary for a fair presentation. All such adjustments are of a normal recurring nature. The condensed consolidated financial statements in this Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements and notes thereto for the fiscal year ended September 30, 1996 that are contained in the Company's 1996 Annual Report on Form 10-K.

Note 2. Common Stock
On December 16, 1996, the Company paid a 50% stock dividend to all holders of its Common Stock, $.0001 Par Value ("Common Stock"). All share and per share amounts in the accompanying financial statements and footnotes have been retroactively restated to reflect the stock dividend.

On March 7, 1997, the Company's shareholders approved an increase in the number of authorized shares of Common Stock from 25,000,000 shares to 75,000,000 shares.

Note 3. Computation of Net Income per Common Share and Common Equivalent Share:
Net income per common share and common equivalent share is computed using the weighted average number of shares of Common Stock outstanding during the period. For fiscal 1996, the weighted average number of common and common equivalent shares outstanding was computed pursuant to the rules of the Securities and Exchange Commission. Such rules require that common stock and common stock equivalents issued by the Company during the twelve months preceding the Company's initial public offering, at prices below the public offering price (654,000 shares), be included in the calculation of the shares outstanding for all periods presented using the treasury stock method.

Note 4. Stock Option Plan
In October 1995, the Company and its stockholders adopted the 1995 Stock Option Plan (the "Stock Option Plan"), which provides for the issuance of both incentive stock options and non-qualified stock options for the purchase of an aggregate of 2,250,000 shares of the Common Stock of the Company. The Stock Option Plan permits the grant of options to officers, employees, directors and consultants of the Company. The exercise price of incentive stock options granted must be greater than or equal to the fair market value of the Common Stock on the date of grant and the exercise price of non-qualified stock options must be greater than or equal to 75% of the fair market value of the Common Stock on the date of the grant. The maximum term of all options may not exceed ten years. The vesting schedule and the period required for full exercisability of the stock options are at the discretion of the Board of Directors but in no event can they be less than six months.

On October 1, 1996 and January 1, 1997, non-qualified options for approximately 654,000 shares and 86,000 shares, respectively, were granted under the Stock Option Plan to substantially all employees with at least one year of service with the Company. The exercise prices of options granted were equal to the fair market values of the Common Stock at the dates of grant and the terms of the options are five years. The options are subject to a four year vesting schedule at 25 percent per year on each anniversary date. As of March 31, 1997, options for approximately 722,000 shares were outstanding under the Stock Option Plan.