\) million in fiscal year 1996. The increase in cash flow from operating activities resulted from increases in net income for each period which have been achieved principally through purchases of merchant portfolios and internal generation of new merchant accounts. The effect of net income increases is partially offset by increases in working capital needs.

At July 31, 1996, the Company had working capital of \(\$ 106.7\) million, as compared to negative working capital of \(\$ 634,000\) at July 31, 1995. This increase in working capital primarily reflects the net proceeds from the Company's third public offering in April 1996.

Accounts receivable increased \(\$ 2,670,000\) from July 31,1995 to July 31,1996 . This increase was the result of increases in the number of merchant accounts acquired through purchases of merchant portfolios and, to a lesser extent, the internal generation of new merchant accounts. Additionally, at July 31, 1996, the Company had a current accounts receivable of \(\$ 1.0\) million for the proceeds from a life insurance policy on the Company's former Chief Financial Officer.

Other assets, excluding non-competition agreements and deferred processing costs, at July 31, 1995, increased from July 31, 1994 because of the restricted cash balance of \(\$ 500,000\) required to be maintained in connection with an acquisition. Additionally, in June 1995 when certain acquired merchant accounts were converted to the Company's primary processing bank, the bank required a restricted cash balance of \(\$ 1.5\) million to be maintained for six months. These funds were released to the Company in fiscal year 1996. Additionally, other assets increased as a result of deferred financing costs incurred in fiscal year 1995 as a result of amendments to the Company's credit agreement.

Accounts payable at July 31, 1996 increased \(\$ 588,000\) as compared to July 31, 1995, as a result of increased processing costs related to MHA's increase in merchant accounts. Accrued liabilities increased \(\$ 621,000\) from July 31, 1995, to July 31, 1996, primarily as a result of increased income and state franchise taxes.

\section*{Capital Expenditures and Investing Activities}

Capital expenditures were approximately \(\$ 1.8\) million for fiscal year 1996 as compared to \(\$ 1.9\) million for fiscal year 1995 and \(\$ 1.5\) million for fiscal year 1994. The increase in capital expenditures was primarily the result of additional expenditures related to the Company's management information system, the purchase of additional credit card terminals, the Company's relocation of its office facilities and the

purchase of peripheral equipment for lease to merchants. In addition to the increase in capital expenditures, the Company used \(\$ 8.4\) million, \(\$ 24.6\) million and \(\$