10-Q

QuickLinks -- Click here to rapidly navigate through this document

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-Q

/x/ Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934

For the Quarterly Period Ended June 30, 2000
Commission File Number 0-22081

EPIQ SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

Missouri
(State or other jurisdiction of incorporation or organization) 48-1056429
(IRS Employer Identification No.)

501 Kansas Avenue, Kansas City, Kansas 66105-1300
(Address of principal executive offices)

913-621-9500
(Registrant's telephone number)

ELECTRONIC PROCESSING, INC.
(Former name, 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 / /

    The number of shares outstanding of registrant's common stock at June 30, 2000:

Class	Outstanding
Common Stock, $.01 par value	4,646,068

EPIQ SYSTEMS, INC.
FORM 10-Q
QUARTER ENDED JUNE 30, 2000

CONTENTS

		Page
PART I—FINANCIAL INFORMATION
Item 1.	Financial Statements	2
	Statements of Income—Three months and six months ended June 30, 2000 and 1999	2
	Balance Sheets—June 30, 2000 and December 31, 1999	3
	Statements of Cash Flows—Six months ended June 30, 2000 and 1999	5
	Notes to Financial Statements—December 31, 1999 and June 30, 2000 and 1999	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	10
PART II—OTHER INFORMATION
Item 4.	Submission of Matters to a Vote of Security Holders	14
Item 6.	Exhibits and Reports on Form 8-K	14
Signatures		15

1

PART I—FINANCIAL INFORMATION

ITEM 1.  Financial Statements.

EPIQ SYSTEMS, INC.

STATEMENTS OF INCOME

FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2000 AND 1999

(Unaudited)

		Six months ended June 30						Three months ended June 30
		2000			1999			2000			1999
OPERATING REVENUES		$	10,752,772		$	7,059,149		$	5,764,795		$	3,629,239
COST OF GOODS SOLD AND DIRECT COSTS
	Processing costs		2,701,211			2,397,902			1,456,956			1,257,764
	Depreciation and amortization		1,455,913			982,289			783,589			518,828
			4,157,124			3,380,191			2,240,545			1,776,592
GROSS PROFIT			6,595,648			3,678,958			3,524,250			1,852,647
OPERATING EXPENSES
	General and administrative		3,798,648			2,394,116			2,013,116			1,143,916
	Depreciation		106,394			72,573			55,452			38,011
	Amortization—goodwill/intangibles		543,457			1,007			334,089			503
	Acquisition related		436,157			0			78,501			0
	Purchased in-process research & development		363,738			0			0			0
			5,248,394			2,467,696			2,481,158			1,182,430
INCOME FROM OPERATIONS			1,347,254			1,211,262			1,043,092			670,217
OTHER INCOME (EXPENSE)
	Interest income		98,109			263,478			31,445			128,147
	Interest expense		(137,061	)		(12,114	)		(105,994	)		(5,063	)
	Other		(28,307	)		(15,371	)		(35,919	)		(15,443	)
			(67,259	)		235,993			(110,468	)		107,641
INCOME BEFORE TAXES			1,279,995			1,447,255			932,624			777,858
PROVISION FOR INCOME TAXES			503,955			557,951			363,563			300,146
NET INCOME		$	776,040		$	889,304		$	569,061		$	477,712
NET INCOME PER SHARE INFORMATION
	Basic	$	0.17		$	0.19		$	0.12		$	0.10
	Diluted	$	0.16		$	0.19		$	0.12		$	0.10
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
	Basic		4,644,399			4,634,748			4,645,984			4,635,371
	Diluted		4,806,845			4,805,047			4,797,143			4,793,086

See Notes to Financial Statements.

2

EPIQ SYSTEMS, INC.

BALANCE SHEETS

JUNE 30, 2000 AND DECEMBER 31, 1999

(Unaudited)

			June 30, 2000		December 31, 1999
CURRENT ASSETS
	Cash and cash equivalents		$	2,058,702	$	1,642,848
	Short-term investments			0		3,850,000
	Accounts receivable, trade, less allowance for doubtful accounts of $30,560 and $5,000			3,265,591		1,954,806
	Prepaid expenses and other			131,611		167,990
	Deferred income taxes			126,100		85,700
	Refundable income taxes			164,629		107,063
		Total Current Assets		5,746,633		7,808,407
PROPERTY AND EQUIPMENT, At cost
	Furniture and fixtures			602,831		667,905
	Computer equipment			9,255,354		7,753,615
	Office equipment			292,683		269,961
	Leasehold improvements			972,457		941,393
	Transportation equipment			14,969		14,969
				11,138,294		9,647,843
	Less accumulated depreciation			4,210,393		3,338,323
				6,927,901		6,309,520
SOFTWARE DEVELOPMENT COSTS, Net				2,654,596		2,252,917
OTHER ASSETS
	Excess of cost over fair value of net assets acquired, net			14,946,675		9,599,893
	Intangibles, net			267,188		245,833
	Other			18,076		5,584
				15,231,939		9,851,310
			$	30,561,069	$	26,222,154

See Notes to Financial Statements.

3

EPIQ SYSTEMS, INC.

BALANCE SHEETS

LIABILITIES AND STOCKHOLDERS' EQUITY

(Unaudited)

			June 30, 2000		December 31, 1999
CURRENT LIABILITIES
	Current maturities of capital lease obligations		$	53,973	$	42,406
	Current credit line			3,500,000		0
	Current maturity of obligation under purchase agreement			168,674		0
	Deferred revenue			1,504,477		2,067,566
	Accounts payable			1,093,324		762,958
	Accrued expenses			473,594		588,189
		Total Current Liabilities		6,794,042		3,461,119
DEFERRED REVENUE				939,924		1,176,458
CAPITAL LEASE OBLIGATIONS				64,726		66,894
PRESENT VALUE OF OBLIGATION INCURRED UNDER PURCHASE AGREEMENT				628,555		0
DEFERRED INCOME TAXES				418,000		592,700
STOCKHOLDERS' EQUITY
	Common stock, $.01 par value; authorized 20,000,000 Shares at June 30, 2000 and 10,000,000 at December 31, 1999; issued and outstanding—4,646,068 and 4,642,068 shares at 2000 and 1999, respectively			46,461		46,421
	Additional paid-in capital			17,713,725		17,698,965
	Retained earnings			3,955,636		3,179,597
		Total Stockholders' Equity		21,715,822		20,924,983
			$	30,561,069	$	26,222,154

See Notes to Financial Statements.

4

EPIQ SYSTEMS, INC.

STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999

(Unaudited)

				2000			1999
CASH FLOWS FROM OPERATING ACTIVITIES
	Net income (loss)			$	776,040		$	889,304
	Items not requiring (providing) cash:
		Provision deferred income taxes			(215,100	)		72,860
		Depreciation			1,185,278			826,411
		Amortization of software development costs			377,029			228,451
		Amortization of intangible assets			543,457			1,007
		In-process research and development acquired			363,738			0
		(Gain) on disposal of equipment			28,308			15,503
	Changes in:
		Accounts receivable			(1,072,547	)		(1,102,896	)
		Prepaid expenses and other assets			45,959			75,187
		Accounts payable and accrued expenses			110,573			(322,549	)
		Decrease in deferred revenue			(1,508,505	)		0
		Income taxes payable/refundable			(57,566	)		23,437
			Net cash provided (used) by operating activities		576,664			706,715
CASH FLOWS FROM INVESTING ACTIVITIES
	Purchase of property and equipment				(1,821,866	)		(1,433,178	)
	Software development costs				(417,013	)		(325,657	)
	Cash paid for acquisition of business, net of cash acquired				(5,310,388	)		0
	Proceeds from sale of property and equipment				50,787			11,292
	Proceeds from sale of investments				3,850,000			1,100,000
			Net cash (used) in investing activities		(3,648,480	)		(647,543	)
CASH FLOWS FROM FINANCING ACTIVITIES
	Proceeds from borrowings on line-of-credit				3,500,000			0
	Principal payments under capital lease obligations				(27,130	)		(114,501	)
	Principal payments on long-term debt				0			(6,718	)
	Proceeds from stock issuance				14,800			10,575
			Net cash provided (used) in financing activities		3,487,670			(110,644	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS					415,854			(51,472	)
CASH AND CASH EQUIVALENTS, BEGINNING PERIOD					1,642,848			820,256
CASH AND CASH EQUIVALENTS, END OF PERIOD				$	2,058,702		$	768,784

See Notes to Financial Statements.

5

EPIQ SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 1999
AND JUNE 30, 2000 AND 1999

NOTE 1:  NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
          POLICIES

Nature of Operations

    EPIQ Systems, Inc. develops, markets and licenses proprietary software products and provides support services for e-Workflow, e-Banking and e-Commerce that are directed to a variety of markets including bankruptcy management and financial services. The Company serves a national client base with specialty products developed in current technologies that streamline the internal business operations of its customers. The products are accompanied by a high level of coordinated support including network integration, post-installation support and value added services.

Use of 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 results could differ from those estimates.

Property and Equipment

    Property and equipment are depreciated on a straight-line basis over the estimated useful life of each asset as follows:

Furniture and fixtures	5-10 years
Computer equipment	3-5 years
Office equipment	3-10 years
Transportation equipment	3-5 years

    Leasehold improvements are depreciated over the shorter of the lease term or the estimated useful lives (5-10 years) of the improvements.

Software Development Costs

    Certain internal software development costs incurred in the creation of computer software products are capitalized once technological feasibility has been established. Prior to the completion of a detailed program design, development costs are expensed. Capitalized costs are amortized based on current and future revenue for each product with an annual minimum equal to the straight-line amortization over the remaining estimated economic life of the product, not to exceed five years.

Intangible Assets

    The excess of cost over fair value of net assets acquired in the PHiTECH, Inc. and DCI Chapter 7 Solutions, Inc., acquisitions are being amortized on a straight-line basis over 10 years and 14 years, respectively. The agreements not to compete for PHiTECH and DCI are amortized over 4 and 5 years, respectively.

6

Revenue Recognition

    For the Company's Chapter 7 bankruptcy software product, monthly fees are received from a national financial institution after the product is installed and deposits are transferred based on the level of trustees' deposits with that institution. Revenues for Chapter 13 processing and noticing are recorded monthly at the completion of the services based on the trustees' month-end caseloads. All ancillary fees are recognized as the services are provided.

    With the purchase of assets from PHiTECH, Inc., the Company recorded $708,882 of deferred revenue related to maintenance services provided. The revenue will be recognized on a straight-line basis over the maintenance period, generally one year.

    At the time of the acquisition of the assets of DCI Chapter 7 Solutions, Inc., the Company received $4,500,000 from a national financial institution for various technology and general integration services. The Company has accounted for this payment as a multiple element project with the revenues being recorded as such elements are completed and delivered.

    At June 30, 2000, deferred revenues totaled $2,444,401 with $939,924 being classified as long-term.

Income Taxes

    Deferred tax liabilities and assets are recognized for the tax effects of differences between the financial statement and tax bases of assets and liabilities. A valuation allowance is established to reduce deferred tax assets if it is more likely than not that a deferred tax asset will not be realized.

Cash Equivalents

    The Company considers all liquid investments with original maturities of three months or less (primarily money market accounts) to be cash equivalents.

Interim Financial Statements

    The balance sheet as of June 30, 2000, and the statements of income, shareholders' equity and cash flows for the six-month periods ended June 30, 2000 and 1999, have been prepared by the Company without audit. In the opinion of management, all adjustments (which included only normal, recurring adjustments) necessary for fair presentation have been made. The results for these periods are not necessarily indicative of the results to be expected for the full year. The balance sheet as of December 31, 1999 has been derived from the audited balance sheet of the Company as of that date.

    Certain information and note disclosures normally included in the Company's annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Form 10-K annual report for 1999 filed with the Securities and Exchange Commission.

7

NOTE 2:  ADDITIONAL CASH FLOW INFORMATION

				Six Months Ended June 30,
		December 31, 1999
				2000			1999
				(Unaudited)
Noncash Investing and Financing Activities
	Capital lease obligation and notes payable incurred for equipment	$	0	$	0		$	66,926
The Company acquired substantially all business assets of PHiTECH, Inc. (See Note 3). In conjunction with the acquisition, liabilities were assumed as follows:
Fair value of assets acquired (including cash of $3,968)					6,596,007
Cash paid, net of In-Process Research and Development					(4,950,618	)
					1,645,389
Deferred obligation incurred in purchase transaction					(797,229	)
Liabilities Assumed				$	848,160
Additional Cash Information
	Interest paid		18,167		137,061			12,114
	Income taxes paid	$	1,034,899	$	755,276		$	430,000

NOTE 3:  BUSINESS ACQUISITION

    On March 17, 2000, the Company acquired substantially all business assets of PHiTECH, a California corporation that provided software-based solutions that enable corporate customers to route, secure and format business-critical data over the Internet and private networks using a wide variety of web-based and legacy communications protocols. The Company plans to further develop the next-generation software product.

    The acquisition has been accounted for using the purchase method of accounting with the operating results of PHiTECH included in the Company's statement of earnings since the date of acquisition. Of the purchase price, $363,738 was treated as a one-time charge to earnings related to purchased research and development, reducing after tax income for the first quarter of 2000 by $216,788 or $.045 per share on a diluted basis.

    The purchase price of this acquisition totaled $6,111,585, of which $5,314,356 was paid in cash and $797,229 is deferred and will be paid over four years, beginning one year after the date of acquisition. The purchase price was allocated to net tangible assets of $322,719, software $361,694, other intangible assets $50,000 and the Company assumed liabilities of $848,160, of which approximately $709,000 relates to deferred revenue. The remainder of the purchase price, $5,861,594, was allocated to excess of cost over fair value of the net assets acquired. The acquired in-process research and development related to PHiTECH's

8

next-generation, platform-independent product (jDX), which will be available in 2000. jDX was approximately 80% complete at the time of the acquisition.

    The operations of the Company include the operations of the acquired business from the acquisition date. Unaudited Pro Forma operations assuming the purchase was made at the beginning of each period are shown below:

		Six Months Ended June 30, 2000		Six Months Ended June 30, 1999
	Operating Revenues	$	11,046,463	$	8,135,555
	Net Income		608,799		643,485
Net Income Per Share:
Basic		$	0.13	$	0.14
Diluted		$	0.13	$	0.13

    The Pro Forma information is not necessarily indicative of what would have occurred had the acquisition been completed on those dates, nor is it necessarily indicative of future operations.

    Pro Forma data reflect the difference in amortization expense between the two companies as well as a reduction in interest income based on the utilization of interest-bearing investments to purchase the acquiree and interest expense related to additional borrowings to finance the acquisition.

9

ITEM 2.  Management Discussion and Analysis of Financial Condition and Results of Operations.

Six Months Ended June 30, 2000 Compared With Six Months Ended June 30, 1999

    Operating revenues increased 52.3%, or $3,693,623 to $10,752,772 in the six-month period ended June 30, 2000, compared to $7,059,149 in the six-month period ended June 30, 1999. The growth in operating revenues was attributable to revenues generated by Chapter 7 bankruptcy services and from the new revenues generated from the e-commerce services (March 17, 2000 acquisition of PHiTECH). Chapter 7 revenues increased 85.1%, or $3,476,695 to $7,560,073 in the six-month period ended June 30, 2000, compared to $4,083,377 in the six-month period ended June 30, 1999. The increase in Chapter 7 revenue was due in part to the fees generated from growth in new Chapter 7 trustee business as a result of the November 1999 DCI Chapter 7 Solutions, Inc. (DCI) acquisition, additional new customer growth, fees originating from technology integration relating to former DCI customers and upgrade fees from the release of the TCMS 2000. Of this increase, 33.2% relates to technology integration fees. Chapter 13 revenue decreased 20.2%, or $600,616 to $2,375,156 in the six-month period ended June 30, 2000, compared to $2,975,156 in the six-month period ended June 30, 1999. The decrease in Chapter 13 was mainly a result of non-recurring hardware sales in the first half of 1999 that related to Chapter 13 Trustees upgrading to CasePower from a legacy product.

    Total cost of goods sold and direct costs increased 23.0%, or $776,932 to $4,157,123 in the six-month period ended June 30, 2000, compared to $3,380,191 in the six-month period ended June 30, 2000. Total cost of goods sold and direct costs as a percentage of operating revenues decreased to 38.7% in the six-month period ended June 30, 2000 compared to 47.9% in the six-month period ended June 30, 1999 mainly due to the receipt of the one-time technology integration fee noted above. Processing costs increased 12.6%, or $303,308 to $2,701,210 in the six-month period ended June 30, 2000, compared to $2,397,902 in three-month period ended June 30, 1999. The increase in 2000 resulted principally from an increase in operational wages and contract labor to support the growth in Chapter 7 sales and services and the recently acquired e-commerce business. Processing costs, as a percentage of operating revenues were 25.1% in the six-month period ended June 30, 2000 compared to 33.4% in the six-month period ended June 30, 1999. Depreciation and amortization increased 48.2%, or $473,624, to $1,455,913 in the six-month period ended June 30, 2000, compared to $982,289 in the six-month period ended June 30, 1999, primarily due to the additional equipment acquired with the DCI acquisition and the purchase of computer equipment as new trustees were added for the Company's Chapter 7 product and to a lesser extent additional depreciation related to the recently acquired e-commerce business.

    Operating expenses increased 112.7%, or $2,780,699 to $5,248,394 in the six-month period ended June 30, 2000, compared to $2,467,696 in the six-month period ended June 30, 1999. Operating expenses, as a percentage of operating revenues were 48.8% in the six-month period ended June 30, 2000 compared to 35% in the six-month period ended June 30, 1999. The dollar increase in operating expenses was due to increases in general and administrative infrastructure necessary to support a higher level of revenues, including additional sales and marketing expenses related to growth of the Company's Chapter 7 product and e-commerce products and acquisition related expenses and the purchased in-process research and development. Sales and marketing expenses include sales and marketing salaries, trade shows costs, travel associated with Chapter 7 installations, and advertising costs. Sales and marketing expenses increased 70.0%, or $356,628 to $821,827 in the six-month period ended June 30, 2000, compared to $483,659 in the six-month period ended June 30, 1999. Included in operating expenses in the six-months ending June 30, 2000 were acquisition related expenses of $436,157 and a one-time write-off for acquired in-process research and development of $363,738; the two one-time charges represent 28.8% of the increase.

    Other income (expense) which includes interest income and interest expense, was ($67,259) in the six-month period ended June 30, 2000 compared to $235,993 in the six-month period ended June 30, 1999. This decrease resulted in part from a reduction in interest income for the quarter ending June 30, 2000 due to the use of cash to expand the business through the DCI and PHiTECH acquisitions. The decrease was

10

also due to an increase in interest expense as a result of using the Company's $3,500,000 line of credit, to finance a portion of the PHiTECH acquisition cost.

    The Company's effective tax rate was 39.4% for the six-month period ended June 30, 2000, compared to 38.6% for the six-month period ended June 30, 1999.

    Net income as a percentage of operating revenues decreased to 7.2% in the six-month period ended June 30, 2000 from 12.6% in the six-month period ended June 30, 1999. The decrease in net income was largely due to the acquisition related charges and the purchased in-process research and development. Excluding those items, net income for the six-month period ended June 30, 2000 would have been $1,253,777. Excluding the acquisition related charges and the purchased in-process R&D, net income increased $364,473 or 41% in the six-month period ended June 30, 2000, compared to the six-month period ended June 30, 1999. Excluding the acquisition related charges and the purchased in-process R&D, net income as a percentage of operating revenues, was 11.7% for the six-month period ended June 30, 2000 compared to 12.6% at June 30, 1999.

Three Months Ended June 30, 2000 Compared With Three Months Ended June 30, 1999

    Operating revenues increased 58.9%, or $2,138,556 to $5,764,795 in the three-month period ended June 30, 2000, compared to $3,629,239 in the three-month period ended June 30, 1999. The growth in operating revenues was attributable to revenues generated by Chapter 7 bankruptcy services and the recently acquired e-commerce services. Chapter 7 revenues increased 92.1%, or $1,847,594 to $3,854,726 in the three-month period ended June 30, 2000, compared to $2,007,132 in the three-month period ended June 30, 1999. The increase in Chapter 7 revenue was due in part to the fees generated from growth in new Chapter 7 trustee business as a result of the DCI Chapter 7 Solutions, Inc. (DCI) acquisition, additional new customer growth, fees originating from technology integration relating to former DCI customers and upgrade fees from the release of TCMS 2000. Of this increase, 26.4% relates to the technology integration fees. Chapter 13 revenue decreased 29.7%, or $481,380 to $1,140,727 in the three-month period ended June 30, 2000, compared to $1,622,106 in the three-month period ended June 30, 1999. The decrease in Chapter 13 was mainly a result of non-recurring hardware sales and conversion fees in the second quarter of 2000 that related to Chapter 13 trustees upgrading to CasePower from a legacy product.

    Total cost of goods sold and direct costs increased 26.1%, or $463,953 to $2,240,545 in the three-month period ended June 30, 2000, compared to $1,776,592 in the three-month period ended June 30, 1999. Total cost of goods sold and direct costs as a percentage of operating revenues decreased to 38.9% in the three-month period ended June 30, 2000 compared to 49.0% in the three-month period ended June 30, 1999 due in-part to the receipt of the one-time technology integration fee noted above. Processing costs increased 15.8%, or $199,192 to $1,457,956 in the three-month period ended June 30, 2000, compared to $1,257,764 in three-month period ended June 30, 1999. The increase in the second quarter of 2000 resulted principally from an increase in operational wages and contract labor resulting from the acquisition of PHiTECH and to support the growth in Chapter 7 sales and services. Processing costs, as a percentage of operating revenues were 25.3% in the three-month period ended June 30, 2000 compared to 34.7% in the three-month period ended June 30, 1999. Depreciation and amortization increased 51.0%, or $264,761, to $783,589 in the three-month period ended June 30, 2000, compared to $518,828 in the three-month period ended June 30, 1999, primarily due to the additional equipment and software acquired with the DCI and PHiTECH acquisition and the purchase of computer equipment as new trustees were added for the Company's Chapter 7 product.

    Operating expenses increased 109.9%, or $1,298,728 to $2,481,158 in the three-month period ended June 30, 2000, compared to $1,182,430 in the three-month period ended June 30, 1999. Operating expenses, as a percentage of operating revenues were 43.0% in the three-month period ended June 30, 2000 compared to 32.6% in the three-month period ended June 30, 1999. The dollar increase in operating expenses was due to increases in general and administrative infrastructure necessary to support a higher

11

level of revenues, including additional sales and marketing expenses related to the recent acquisition of PHiTECH, growth of the Company's Chapter 7 product, and acquisition related expenses. Sales and marketing expenses include sales and marketing salaries, trade shows costs, travel associated with Chapter 7 installations, and advertising costs. Sales and marketing expenses increased 104.8%, or $224,550 to $438,842 in the three-month period ended June 30, 2000, compared to $214,292 in the three-month period ended June 30, 1999. Included in operating expenses in the quarter ending June 30, 2000 were acquisition related expenses of $78,501.

    Other income (expense) which includes interest income and interest expense, was ($110,468) in the three-month period ended June 30, 2000 compared to $107,641 in the three-month period ended June 30, 1999. This decrease resulted in part from a reduction in interest income for the quarter ending June 30, 2000 due to the use of cash to expand the business through the DCI and PHiTECH acquisitions. The decrease was also due to an increase in interest expense as result of using the Company's $3,500,000 line of credit, to finance a portion of the PHiTECH acquisition cost.

    The Company's effective tax rate was 39.0% for the three-month period ended June 30, 2000, compared to 38.6% for the three-month period ended June 30, 1999.

    Net income as a percentage of operating revenues decreased to 9.9% in the three-month period ended June 30, 2000 from 13.2% in the three-month period ended June 30, 1999. The decrease in net income was due in part to the acquisition related charges, increased interest expense and reduction of interest income.

Liquidity and Capital Resources

    The Company's cash, cash equivalents and short-term investments decreased to $2,058,702 as of June 30, 2000 compared to $5,492,848 as of December 31, 1999. The decrease in cash was mainly attributable to the PHiTECH acquisition in March 2000 and to a lesser extent the purchase of computer equipment and software.

    The Company generated cash of $576,664 and $706,715 from operations for the six months ended June 30, 2000 and 1999, respectively. The cash flow generated from operations in the six months ending June 30, 2000, primarily consisted of revenues generated from net income plus depreciation and amortization which were offset by the increase in accounts receivable and decrease in deferred revenue. The cash flow generated from operations in the six months ended June 30, 1999, consisted of net income plus depreciation and amortization less an increase in accounts receivable and a decrease in accounts payable.

    The Company invested in property and equipment totaling $1,821,866 and $1,433,178 for the six-month periods ended June 30, 2000, and June 30, 1999, respectively, which related principally to the installation of computer equipment for the Company's Chapter 7 product.

    The Company incurred expenditures for software costs totaling $417,013 and $325,657 for the six-months ended June 30, 2000, and June 30, 1999, respectively. In addition, on March 17, 2000 with the purchase of PHiTECH, the Company acquired a software product to support the e-commerce business, which is not reflected in the 2000 software expenditures. This expenditure is capitalized and is being amortized on a straight-line basis over a three-year period. Internal software costs incurred in the creation of computer software products are capitalized as soon as technological feasibility has been established. Prior to the completion of a detailed program design, development costs are expensed. Capitalized costs are amortized based on current and future revenue for each product with an annual minimum equal to straight-line amortization over the remaining estimated economic life of the product, not to exceed five years. Additionally, the Company anticipates future investments in software development will be at or above levels in previous periods.

    On March 17, 2000, the Company completed the acquisition of PHiTECH Inc., of San Francisco, California, a provider of software and servicing for B2B e-commerce and enterprise open file delivery (see

12

Note 3). The Company paid the purchase price from available cash and $3,500,000 of borrowings under the Company's previously unused line of credit. The maximum borrowing under the line of credit is $3,500,000, all of which is currently outstanding. No amounts were borrowed under this line of credit in 1999. The line of credit was renewed on June 20, 2000 and expires on June 20, 2001, unless renewed, and principal on the line is due upon demand, and if no demand is made at maturity of the line.

    The Company also maintains a $2,500,000 credit agreement to finance certain computer equipment purchases, which also matures on June 20, 2001. There have been no borrowings under this equipment line of credit.

    The Company believes that the funds generated from operations plus amounts available under the Company's equipment line of credit will be sufficient to finance the Company's currently anticipated working capital and property and equipment expenditures for the foreseeable future.

Forward-Looking Statements

    In this report, the Company makes statements that plan for or anticipate the future. These forward-looking statements include statements about EPI's future business plans and strategies, and other statements that are not historical in nature. These forward-looking statements are based on the Company's current expectations.

    Forward-looking statements may be identified by words or phrases such as "believe," "expect," "anticipate," "should," "planned," "may," "estimated" and "potential." Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended, provide a "safe harbor" for forward-looking statements. In order to comply with the terms of the safe harbor, and because forward-looking statements involve future risks and uncertainties, listed below are a variety of factors that could cause actual results and experience to differ materially from the anticipated results or other expectations expressed in the Company's forward-looking statements. These factors include, but are not limited to, (1) any material changes in the total number of Chapter 7 Trustees or Chapter 7 deposits served by the Company, (2) any material changes in the number of Chapter 13 Trustees or material changes in the number of cases processed by Chapter 13 Trustees of the Company, (3) changes in the number of bankruptcy filings each year, (4) changes in bankruptcy legislation, (5) the Company's reliance on its marketing arrangement of Chapter 7 revenue, (6) the Company's ability to achieve or maintain technological advantages, (7) uncertainties related to the recently completed PHiTECH acquisition and the future operations and planned expansions of that business by the Company, and (8) other risks detailed from time to time in the Company's filings with the Securities and Exchange Commission, including its Annual Report on Form 10-KSB for the year ended December 31, 1999. In addition, there may be other factors not included in the Company's Securities and Exchange Commission filings that may cause actual results to differ materially from any forward-looking statements. The Company undertakes no obligations to update any forward-looking statements contained herein to reflect future events or developments.

13

EPIQ SYSTEMS, INC.
JUNE 30, 2000 FORM 10-Q

PART II—OTHER INFORMATION

ITEM 4:  Submission of Matters to a Vote of Security Holders

    The Annual Meeting of the Shareholders of the Company was held on June 7, 2000, to consider the election of directors, a proposal to amend the Company's Articles of Incorporation to increase the authorized shares of common stock from 10,000,000 to 20,000,000, a proposal to change the Company's name to EPIQ Systems, Inc., and a proposal to amend the 1995 Stock Option Plan to increase the number of shares of common stock available for issuance under the plan from 500,000 to 800,000. The results of the voting at the Annual Meeting were as follows:

		For	Against	Abstain
Election of Directors
	Tom W. Olofson	4,357,069	19,900	0
	Christopher E. Olofson	4,372,069	4,900	0
	W. Bryan Satterlee	4,371,769	5,200	0
	Robert C. Levy	4,371,569	5,400	0
Amend the Company's Articles of Incorporation to increase the number of authorized shares of common stock to 20,000,000		4,322,919	51,247	2,803
Amend the Company's Articles of Incorporation to change the Company's name to EPIQ Systems, Inc.		4,354,446	17,500	5,023
Amend the Company's 1995 Stock Option Plan to increase the number of shares of common stock available for issuance under the Plan		3,017,372	86,848	6,553

    No other matters were submitted to a vote of the shareholders at the Annual Meeting.

ITEM 6.  Exhibits and Reports on Form 8-K.

    (a) Exhibits.

    The following Exhibits are filed with this Form 10-Q:

Exhibit Number	Description of Exhibit
3.1	Articles of Incorporation, as amended.
27	Financial Data Schedule

    (b) Reports on Form 8-K.

    The registrant filed the following reports on Form 8-K during the quarter ended June 30, 2000:

Date	Description
May 26, 2000	Amendment to the Form 8-K filed March 30, 2000, announcing the completion of the PHiTECH acquisition, which amendment included certain financial statements and pro forma financial statements relating to the PHiTECH acquisition.

14

SIGNATURES

    Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	EPIQ SYSTEMS, INC.
Date: August 9, 2000	/s/ TOM W. OLOFSON Tom W. Olofson Chairman of the Board Chief Executive Officer Director (Principal Executive Officer)
Date: August 9, 2000	/s/ JANICE E. KATTERHENRY Janice Katterhenry Vice President, Chief Financial Officer and Corporate Secretary
Date: August 9, 2000	/s/ MICHAEL A. RIDER Michael A. Rider Controller (Principal Accounting Officer)

15

QuickLinks

EPIQ SYSTEMS, INC. FORM 10-Q QUARTER ENDED JUNE 30, 2000
CONTENTS
PART I—FINANCIAL INFORMATION
EPIQ SYSTEMS, INC. JUNE 30, 2000 FORM 10-Q
PART II—OTHER INFORMATION
SIGNATURES

EX-3.1

Exhibit 3.1

ARTICLES OF INCORPORATION
OF
NEWCO RGLG 1, INC.

    The undersigned, being a natural person of the age of eighteen years or more, for the purpose of forming a corporation under "The General and Business Corporation Law of Missouri", does hereby adopt the following Articles of Incorporation:

    FIRST. The name of the corporation is: Newco RGLG 1, Inc.

    SECOND. The address of its initial registered office in the State of Missouri is 2300 City Center Square, P. 0. Box 26278, Kansas City, Missouri 64196, and the name of its initial registered agent at such address is Marvin L. Rich.

    THIRD. The aggregate number of shares which the corporation shall have authority to issue shall be one million (1,000,000) shares of common stock, each of the par value of one cent ($.01) per share.

    FOURTH. The name and place of residence of the incorporator are as follows:

Name	Residence
Marvin L. Rich	6632 Wenonga Road Mission, Kansas 66208

    FIFTH. The number of directors to constitute the first board of directors of the corporation is five (5). Thereafter the number of directors shall be fixed by, or in the manner provided in, the bylaws of the corporation. Any change in the number of directors shall be reported to the Secretary of State within thirty (30) calendar days of such change. Directors need not be shareholders unless the bylaws require them to be shareholders.

    The persons to constitute the first board of directors, each of whom shall hold office until the first annual meeting of the shareholders or until his successor shall have been elected and qualified, are as follows:

Rex Wiggins
Tom Olofson
Terry Matlack
Max Muller

    SIXTH. The duration of the corporation is perpetual.

    SEVENTH. This corporation is formed for the following purposes:

              (a) To engage in every aspect of data processing, creation of data bases, communications and other computer related activities.

              (b) To buy, lease, rent or otherwise acquire, own, hold, use, divide, partition, develop, improve, operate and sell, lease, mortgage or otherwise dispose of, deal in and turn to account real estate, leaseholds and any and all interests or estates therein or appertaining thereto; and to construct, manage, operate, improve, maintain and otherwise deal with buildings, structures and improvements situated or to be situated on any real estate or leasehold.

              (c) To engage in any mining, manufacturing, chemical, metallurgical, processing or related business, and to buy, lease, construct or otherwise acquire, own, hold, use, sell, lease, mortgage or otherwise dispose of, plants, works, facilities and equipment therefor.

1

              (d) To buy, utilize, lease, rent, import, export, manufacture, produce, design, prepare, assemble, fabricate, improve, develop, sell, lease, mortgage, pledge, hypothecate, distribute and otherwise deal in at wholesale, retail or otherwise, and as principal, agent or otherwise, all commodities, goods, wares, merchandise, machinery, tools, devices, apparatus, equipment and all other personal property, whether tangible or intangible, of every kind without limitation as to description, location or amount.

              (e) To apply for, obtain, purchase, lease, take licenses in respect of or otherwise acquire, and to hold, own, use, operate, enjoy, turn to account, grant licenses in respect of, manufacture under, introduce, sell, assign, mortgage, pledge or otherwise dispose of:

    1.  Any and all inventions, devices, processes and formulae and any improvements and modifications thereof;

    2.  Any and all letters patent of the United States or of any other country, state or locality, and all rights connected therewith or appertaining thereto;

    3.  Any and all copyrights granted by the United States or any other country, state or locality;

    4.  Any and all trademarks, trade names, trade symbols and other indications of origin and ownership granted by or recognized under the laws of the United States or of any other country, state or locality; and to conduct and carry on its business in any or all of its various branches under any trade name or trade names.

              (f)  To engage in, carry on and conduct research, experiments, investigations, analyses, studies and laboratory work, for the purpose of discovering new products or to improve products, articles and things, and to buy, construct or otherwise acquire, own, operate, maintain, lease, sell, mortgage or otherwise dispose of, laboratories and similar facilities, plants and any and all other establishments, and to procure, construct, own, use, hold and dispose of all necessary equipment in respect thereof, for the purposes aforesaid.

              (g) To enter into any lawful contract or contracts with persons, firms, corporations, other entities, governments or any agencies or subdivisions thereof, including guaranteeing the performance of any contract or any obligation of any person, firm, corporation or other entity.

              (h) To purchase and acquire, as a going concern or otherwise, and to carry on, maintain and operate all or any part of the property or business of any corporation, firm, association, entity, syndicate or person whatsoever, deemed to be of benefit to the corporation, or of use in any manner in connection with any of its purposes; and to dispose thereof upon such terms as may seem advisable to the corporation.

              (i)  To purchase or otherwise acquire, hold, sell, pledge, reissue, transfer or otherwise deal in, shares of the corporation's own stock provided that it shall not use its funds or property for the purchase of its own shares of stock when such use would be prohibited by law, by the articles of incorporation or by the bylaws of the corporation; and, provided further, that shares of its own stock belonging to it shall not be voted upon directly or indirectly.

              (j)  To invest, lend and deal with moneys of the corporation in any lawful manner, and to acquire by purchase, by the exchange of stock or other securities of the corporation, by subscription or otherwise, and to invest in, to hold for investment or for any other purpose, and to use, sell, pledge or otherwise dispose of, and in general to deal in any interest concerning or enter into any transaction with respect to (including "long" and "short" sales of) any stocks, bonds, notes, debentures, certificates, receipts and other securities and obligations of any government, state, municipality, corporation, association or other entity, including individuals and partnerships and, while owner thereof, to exercise all of the rights, powers and privileges of ownership, including, among other things, the right to vote thereon for any and all purposes and to give consents with respect thereto.

2

              (k) To borrow or raise money for any purpose of the corporation and to secure any loan, indebtedness or obligation of the corporation and the interest accruing thereon, and for that or any other purpose to mortgage, pledge, hypothecate or charge all or any part of the present or hereafter acquired property, rights and franchises of the corporation, real, personal, mixed or of any character whatever, subject only to limitations specifically imposed by law.

              (l)  To do any or all of the things hereinabove enumerated alone for its own account, or for the account of others, or as the agent for others, or in association with others or by or through others, and to enter into all lawful contracts and undertakings in respect thereof.

              (m) To have one or more offices, to conduct its business, carry on its operations and promote its objects within and without the State of Missouri and anywhere in the world, without restriction as to place, manner or amount, but subject to the laws applicable thereto: and to do any or all of the things herein set forth to the same extent as a natural person might or could do and in any part of the world, either alone or in the company with others.

              (n) In general, to carry on any other business in connection with each and all of the foregoing or incidental thereto, and to carry on, transact and engage in any and every lawful business or other lawful thing calculated to be of gain, profit or benefit to the corporation as fully and freely as a natural person might do, to the extent and in the manner, and anywhere within and without the State of Missouri, as it may from time to time determine; and to have and exercise each and all of the powers and privileges, either direct or incidental, which are given and provided by or are available under the laws of the State of Missouri in respect of general and business corporations organized for profit thereunder; provided, however, that the corporation shall not engage in any activity for which a corporation may not be formed under the laws of the State of Missouri.

    None of the purposes and powers specified in any of the paragraphs of this Article SEVENTH shall be in any way limited or restricted by reference to or inference from the terms of any other paragraph, and the purposes and powers specified in each of the paragraphs of this Article SEVENTH shall be regarded as independent purposes and powers. The enumeration of specific purposes and powers in this Article SEVENTH shall not be construed to restrict in any manner the general purposes and powers of this corporation, nor shall the expression of one thing be deemed to exclude another, although it be of like nature. The enumeration of purposes or powers herein shall not be deemed to exclude or in any way limit by inference any purposes of powers which this corporation has power to exercise, whether expressly by the laws of the State of Missouri, now or hereafter in effect, or impliedly by any reasonable construction of such laws.

    EIGHTH. (a) Except as may be otherwise specifically provided by statute, or the articles of incorporation or the bylaws of the corporation, as from time to time amended, all powers of management, direction and control of the corporation shall be, and hereby are, vested in the board of directors.

              (b) The bylaws of the corporation may from time to time be altered, amended, suspended or repealed, or new bylaws may be adopted, in any of the following ways: (i) by the affirmative vote, at any annual or special meeting of the shareholders, of the holders of a majority of the outstanding shares of stock of the corporation entitled to vote; or (ii) by resolution adopted by a majority of the full board of directors at a meeting thereof, or adopted by a majority of the full board of directors at a meeting thereof; or (iii) by unanimous written consent of all the shareholders or all the directors in lieu of a meeting; provided, however, that the power of the directors to alter, amend, suspend or repeal the bylaws or any portion thereof may be denied as to any bylaws or portion thereof enacted by the shareholders if at the time of such enactment the shareholders shall so expressly provide.

              (c) The corporation may agree to the terms and conditions upon which any director, officer, employee or agent accepts his office or position and in its bylaws or otherwise may agree to

3

indemnify and protect any director, officer, employee or agent to the extent permitted by the laws of Missouri.

    NINTH. Insofar as it is permitted under the laws of Missouri and except as may be otherwise provided by the bylaws of the corporation, no contract or other transaction between this corporation and any other firm or corporation shall be affected or invalidated solely by reason of the fact that any director or officer of this corporation is interested in, or is a member, shareholder, director or officer of such other firm or corporation; and any director or officer of this corporation, individually or jointly with one or more other directors or officers of this corporation, may be a party to, or may be interested in, any contract or transaction of this corporation or in which this corporation is interested, and no such contract or transaction shall be invalidated thereby.

    TENTH. The directors shall have power to hold their meetings and to keep the books (except any books required to be kept in the State of Missouri, pursuant to the laws thereof) at any place within or without the State of Missouri.

    ELEVENTH. The corporation shall be entitled to treat the registered holder of any shares of the corporation as the owner of such shares and of all rights derived from such shares for all purposes. The corporation shall not be obligated to recognize any equitable or other claim to or interest in such shares or rights on the part of any other person, including, but without limiting the generality of the term "person", a purchaser, pledgee, assignee or transferee of such shares or rights, unless and until such person becomes the registered holder of such shares, and the foregoing shall apply whether or not the corporation shall have either actual or constructive notice of the interest of such person.

    TWELFTH. The corporation reserves the right to alter, amend or repeal any provision contained in its articles of incorporation in the manner now or hereafter prescribed by the statutes of Missouri, and all rights and powers conferred herein are granted subject to this reservation; and, in particular, the corporation reserves the right and privilege to amend its articles of incorporation from time to time so as to authorize other or additional classes of shares (including preferential shares), to increase or decrease the number of shares of any class now or hereafter authorized, to establish, limit or deny to shareholders of any class the right to purchase or subscribe for any shares of stock of the corporation of any class, whether now or hereafter authorized or whether issued for cash, property or services or as a dividend or otherwise, or to purchase or subscribe for any obligations, bonds, notes, debentures, or securities or stock convertible into shares of stock of the corporation or carrying or evidencing any right to purchase shares of stock of any class, and to vary the preference, priorities, special powers, qualifications, limitations, restrictions and the special or relative rights or other characteristics in respect of the shares of each class, and to accept and avail itself of, or subject itself to, the provisions of any statutes of Missouri hereafter enacted pertaining to general and business corporations, to exercise all the rights, powers and privileges conferred upon corporations organized thereunder or accepting the provisions thereof and to assume the obligations and duties imposed therein, upon the affirmative vote of the holders of a majority of the shares of stock entitled to vote thereon, or, in the event the laws of Missouri require a separate vote by classes of shares, upon the affirmative vote of the holders of a majority of the shares of each class whose separate vote is required thereon.

    IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 13th day of July, 1988.

 
/s/ MARVIN L. RICH Marvin L. Rich
Incorporator

4

STATE OF MISSOURI	)
	) ss.
COUNTY OF JACKSON	)

    Subscribed and sworn to before me on this 13^th day of July, 1988.

 
/s/ BARBARA RAGANNotary Public

BARBARA RAGAN
Notary Public State of Missouri
Platte County

My Commission Expires: July 10, 1991

5

STATE OF MISSOURI—Office of Secretary of State
JAMES C. KIRKPATRICK, Secretary of State

Amendment of Articles of Incorporation
(To be submitted in duplicate by an attorney)

HONORABLE JAMES C. KIRKPATRICK
SECRETARY OF STATE
STATE OF MISSOURI
JEFFERSON CITY, MO. 65101

    Pursuant to the provisions of The General and Business Corporation Law of Missouri, the undersigned Corporation certifies the following:

    (1) The present name of the Corporation is Newco RGLG 1, Inc.

The name under which it was originally organized was Newco RGLG 1, Inc.

    (2) An amendment to the Corporation's Articles of Incorporation was adopted by the shareholders on July 29, 1988.

    (3) Article #1 is amended to read as follows:

The name of the corporation is: Electronic Processing, Inc.

    (4) Of the 300,000 shares outstanding, 300,000 of such shares were entitled to vote on such amendment.

The number of outstanding shares of any class entitled to vote thereon as a class were as follows:

Class	Number of Outstanding Shares
Common	300,000

    (5) The number of shares voted for and against the amendment was as follows:

Class	No. Voted For	No. Voted Against
Common	300,000	0

    (6) If the amendment changed the number or par value of authorized shares having a par value the amount in dollars of authorized shares having a par value as changed is: n/a.

    If the amendment changed the number of authorized shares without par value, the authorized number of shares without par value as changed and the consideration proposed to be received for such increased authorized shares without par value as are to be presently issued are: n/a.

    (7) If the amendment provides for an exchange, reclassification, or cancellation of issued shares, or a reduction of the number of authorized shares of any class below the number of issued shares of that class, the following is a statement of the manner in which such reduction shall be effected: n/a.

6

IN WITNESS WHEREOF, the undersigned, Max Muller, President, has executed this instrument and its Assistant Secretary, Peggy Mitchell, has affixed its corporate seal hereto and attested said seal on the 10^th day of August, 1988.

	NEWCO RGLG 1, INC. (Name of Corporation)
PLACE CORPORATE SEAL HERE (If no seal, state "None")	By:	/s/ MAX MULLERPresident
None
ATTEST:
/s/ PEGGY J. MITCHELLAsst. Secretary

7

STATE OF MISSOURI

Judith K Moriarty, Secretary of State

Corporation Division

STATEMENT OF CHANGE IN NUMBER OF DIRECTORS
Sections 351.055(6), 351.085,1(4) and 351.315.3 RSMo.
No filing fee—File one copy

Corporate Charter No. 00317180

1.

The name of the corporation is:

ELECTRONIC PROCESSING, INC.

    The name under which it was originally organized was:

NEWCO RGLG 1, INC.

2.

Effective June 15, 1993, the number of persons constituting its board of directors was changed from 5 to 3.

/s/ TOM W. OLOFSON Tom W. Olofson, Chairman July 15, 1993
Date

8

STATE OF MISSOURI

Judith K. Moriarty, Secretary of State

Corporation Division

STATEMENT OF CHANGE IN NUMBER OF DIRECTORS
Sections 351.055(6), 351.085,1(4) and 351.315.3 RSMo.
No filing fee—File one copy

Corporate Charter No. 00317180

1.

The name of the corporation is:

ELECTRONIC PROCESSING, INC.

    The name under which it was originally organized was:

NEWCO RGLG 1, INC.

2.

Effective July 15, 1994, the number of persons constituting its board of directors was changed from 3 to 2.

/s/ TOM W. OLOFSON Tom W. Olofson, Chairman August 11, 1994
Date

9

STATE OF MISSOURI

Corporation Division

STATEMENT OF CHANGE IN NUMBER OF DIRECTORS
Sections 351.055(6), 351.085,1(4) and 351.315.3 RSMo.
No filing fee—File one copy

Corporate Charter No. 00317180

1.

The name of the corporation is:

ELECTRONIC PROCESSING, INC.

    The name under which it was originally organized was:

NEWCO RGLG 1, INC.

2.

Effective December 30, 1994, the number of persons constituting its board of directors was changed from 2 to 3.

/s/ TOM W. OLOFSON Tom W. Olofson, Chairman October 26, 1995
Date

10

STATE OF MISSOURI

Corporation Division

STATEMENT OF CHANGE IN NUMBER OF DIRECTORS
Sections 351.055(6), 351.085,1(4) and 351.315.3 RSMo.
No filing fee—File one copy

Corporate Charter No. 00317180

1.

The name of the corporation is:

ELECTRONIC PROCESSING, INC.

    The name under which it was originally organized was:

NEWCO RGLG 1, INC.

2.

Effective October 16, 1995, the number of persons constituting its board of directors was changed from 3 to 4.

/s/ TOM W. OLOFSON Tom W. Olofson, Chairman October 26, 1995
Date

11

STATE OF MISSOURI...Office of Secretary of State
AMENDMENT OF ARTICLES OF INCORPORATION
(To be submitted in duplicate by an attorney)

SECRETARY OF STATE
STATE OF MISSOURI
P. O. BOX 778
JEFFERSON CITY, MO 65102

    Pursuant to the provisions of The General and Business Corporation Law of Missouri, the undersigned Corporation certifies the following:

1.

The present name of the Corporation is Electronic Processing, Inc.

The name under which it was originally organized was NEWCO RGLG, I, Inc.

2.

An amendment to the Corporation's Articles of Incorporation was adopted by the shareholders on October 12, 1995.



3.

Article Third is amended to read as follows:

Third; The aggregate number of shares, class and par value, if any, which the corporation shall have authority to issue shall be 3,000,000 shares of common stock, each with a par value of $.01.

There are no preferences, qualifications, limitations, restrictions, or special or relative rights, including convertible rights, if any, with respect to the authorized shares of stock.

4.

Of the 300,000 shares outstanding, 300,000 of such shares were entitled to vote on such amendment.

The number of outstanding shares of any class entitled to vote thereon as a class were as follows:

Class	Number of Outstanding Shares
Common	300,000

5.

The number of shares voted for and against the amendment was as follows:

Class	No. Voted For	No. Voted Against
Common	300,000	-0-

6.

If the amendment changed the number of par value of authorized shares having a par value, the amount in dollars of authorized shares having a par value as changed is: $30,000.00.

If the amendment changed the number of authorized shares without par value, the authorized number of shares without par value as changed and the consideration proposed to be received for such increased authorized shares without par value as are to be presently issued are: N/A

7.

If the amendment provides for an exchange, reclassification, or cancellation of issued shares, or a reduction of the number of authorized shares of any class below the number of issued shares of that class, the following is a statement of the manner in which such reduction shall be effected:
N/A

    IN WITNESS WHEREOF, the undersigned, Tom W. Olofson, President, has executed this instrument and Robert C. Levy, its Secretary has affixed its corporate seal hereto and attested said seal on the 31st day of October, 1995.

12

PLACE CORPORATE
SEAL HERE

ELECTRONIC PROCESSING, INC.
By:	/s/ TOM W. OLOFSON Tom W. Olofson, President

ATTEST:
By:	/s/ ROBERT C. LEVY Robert C. Levy, Secretary

13

STATE OF MISSOURI...Office of Secretary of State
AMENDMENT OF ARTICLES OF INCORPORATION
(To be submitted in duplicate by an attorney)

SECRETARY OF STATE
STATE OF MISSOURI
P. O. BOX 778
JEFFERSON CITY, MO 65102

    Pursuant to the provisions of The General and Business Corporation Law of Missouri, the undersigned corporation hereby certifies the following:

1.

The present name of the Corporation is Electronic Processing, Inc.

The name under which it was originally organized was NEWCO RGLG I, Inc.

2.

An amendment to the corporation's Articles of Incorporation was adopted by the directors and shareholders on April 1, 1996.



3.

Article Third is amended to read as follows:

THIRD. The aggregate number of shares, class and par value, if any, which the corporation shall have authority to issue shall be 5,000,000 shares of common stock, each with a par value of $.01.

There are no preferences, qualifications, limitations, restrictions, or special or relative rights, including convertible rights, if any, with respect to the authorized shares of stock.

4.

Of the 300,000 shares of the corporation outstanding, 300,000 of such shares were entitled to vote on such amendment.

The number of outstanding shares of any class entitled to vote thereon as a class were as follows:

Class	Number of Outstanding Shares
Common	300,000

5.

The number of shares voted for and against such amendment were as follows:

Class	No. Voted For	No. Voted Against
Common	300,000	-0-

6.

If the amendment changed the number of par value of authorized shares having a par value, the amount in dollars of authorized shares having a par value as changed is: $50,000.00.

If the amendment changed the number of authorized shares without par value, the authorized number of shares without par value as changed and the consideration proposed to be received for such increased authorized shares without par value as are to be presently issued are: N/A

7.

If the amendment provides for an exchange, reclassification, or cancellation of issued shares, or a reduction of the number of authorized shares of any class below the number of issued shares of that class, the following is a statement of the manner in which such reduction shall be effected:
N/A

    IN WITNESS WHEREOF, the undersigned, Tom W. Olofson, President, has executed this instrument and Robert C. Levy, its Secretary has affixed its corporate seal hereto and attested said seal on the 1st day of April, 1996.

14

PLACE CORPORATE
SEAL HERE

ELECTRONIC PROCESSING, INC.
By:	/s/ TOM W. OLOFSON Tom W. Olofson, President

ATTEST:
By:	/s/ ROBERT C. LEVY Robert C. Levy, Secretary

15

STATE OF MISSOURI...Office of Secretary of State
AMENDMENT OF ARTICLES OF INCORPORATION
(To be submitted in duplicate by an attorney)

SECRETARY OF STATE
STATE OF MISSOURI
P. O. BOX 778
JEFFERSON CITY, MO 65102

    Pursuant to the provisions of The General and Business Corporation Law of Missouri, the undersigned Corporation certifies the following:

1.

The present name of the Corporation is Electronic Processing, Inc.

The name under which it was originally organized was NEWCO RGLG I, Inc.

2.

An amendment to the Corporation's Articles of Incorporation was adopted by the shareholders on June 3, 1997.



3.

Article Third is amended to read as follows:

THIRD. The aggregate number of shares, class and par value, if any, which the corporation shall have authority to issue shall be 10,000,000 shares of common stock, each with a par value of $.01.

4.

Of the 3,400,000 shares outstanding, 3,400,000 of such shares were entitled to vote on such amendment.

The number of outstanding shares of any class entitled to vote thereon as a class were as follows:

Class	Number of Outstanding Shares
Common	3,400,000

5.

The number of shares voted for and against the amendment was as follows:

Class	No. Voted For	No. Voted Against
Common	3,304,255	12,230

6.

If the amendment changed the number of par value of authorized shares having a par value, the amount in dollars of authorized shares having a par value as changed is: $100,000.

If the amendment changed the number of authorized shares without par value, the authorized number of shares without par value as changed and the consideration proposed to be received for such increased authorized shares without par value as are to be presently issued are: N/A

7.

If the amendment provides for an exchange, reclassification, or cancellation of issued shares, or a reduction of the number of authorized shares of any class below the number of issued shares of that class, the following is a statement of the manner in which such reduction shall be effected: N/A

    IN WITNESS WHEREOF, the undersigned, Tom W. Olofson, President, has executed this instrument and Robert C. Levy, its Secretary has affixed its corporate seal hereto and attested said seal on the 24th day of February, 1998.

16

PLACE CORPORATE
SEAL HERE

ELECTRONIC PROCESSING, INC.
By:	/s/ TOM W. OLOFSON Tom W. Olofson, President

ATTEST:
By:	/s/ ROBERT C. LEVY Robert C. Levy, Secretary

17

STATE OF MISSOURI—Office of Secretary of State
AMENDMENT OF ARTICLES OF INCORPORATION
(To be submitted in duplicate by an attorney)

SECRETARY OF STATE
STATE OF MISSOURI
P. O. BOX 778
JEFFERSON CITY, MO 65102

    Pursuant to the provisions of The General and Business Corporation Law of Missouri, the undersigned Corporation certifies the following:

1.

The present name of the Corporation is Electronic Processing, Inc.

The name under which it was originally organized was NEWCO RGLG I, Inc.

2.

An amendment to the Corporation's Articles of Incorporation was adopted by the shareholders on June 1, 1999.



3.

ARTICLE THIRD of the Corporation's Articles of Incorporation is amended in its entirety to read as follows:

Third: The total number of shares of all classes of stock which the corporation shall have the authority to issue is Twelve Million (12,000,000), consisting of Ten Million (10,000,000) shares of Common Stock, $0.01 par value per share, and Two Million (2,000,000) shares of Preferred Stock, $1.00 par value per share.

A.  COMMON STOCK

1.

General. The voting, dividend and liquidation rights of the holders of the Common Stock are subject to and qualified by the rights of the holders of the Preferred Stock of any series as may be designated by the Board of Directors upon any issuance of the Preferred Stock of any series.



2.

Voting. The holders of the Common Stock are entitled to one vote for each share held at all meetings of shareholders (and written actions in lieu of meetings). There shall be no cumulative voting.



3.

Dividends. Dividends may be declared and paid on the Common Stock from funds lawfully available therefor as and when determined by the Board of Directors and subject to any preferential dividend rights of any then outstanding series of Preferred Stock.



4.

Liquidation. Upon the dissolution or liquidation of the Corporation, whether voluntary or involuntary, holders of Common Stock will be entitled to receive all assets of the Corporation available for distribution to its shareholders, subject to any rights of any then outstanding series of Preferred Stock.

B.  PREFERRED STOCK.

    Preferred Stock may be issued from time to time in one or more series, each of such series to have such terms as stated or expressed herein and in the resolution or resolutions providing for the issue of such series adopted by the Board of Directors of the Corporation as hereinafter provided. Authority is hereby expressly granted to the Board of Directors from time to time to issue the Preferred Stock in one or more series, and in connection with the creation of any such series, by resolution or resolutions providing for the issue of the shares thereof, to determine and fix such voting powers, full or limited, or no voting powers and such designations, preferences and relative, participating, optional or other special rights, and qualifications, limitations and restrictions thereof, including without limitation, dividend rights, conversion

18

rights, redemption privileges and liquidation preferences, as shall be stated and expressed in such resolutions, all to the full extent now or hereafter permitted by the General and Business Corporation Law of Missouri. Without limiting the generality of the foregoing, except as otherwise provided in the resolutions providing for the issuance of any series of Preferred Stock, the resolutions providing for issuance of any series of Preferred Stock may provide that such series shall be superior or rank equally or be junior to the Preferred Stock of any other series to the extent permitted by law. Except as otherwise provided in the resolutions providing for the issuance of any series of Preferred Stock, no vote of the holders of the Preferred Stock or Common Stock shall be a prerequisite to the issuance of any shares of any series of the Preferred Stock authorized by and complying with the conditions of these Articles of Incorporation.

C.  GENERAL.

    No shareholder shall be entitled as a matter of right to subscribe for, purchase or receive any part of any new or additional issue of stock of any class, whether now or hereafter authorized, or of any bonds, debentures or other securities convertible into stock of any class, and all such additional shares of stock, bonds, debentures or other securities convertible into stock may be issued by the Board of Directors to such person or persons, on such terms and for such consideration as the Board of Directors, in their discretion, may determine.

    ARTICLE TWELFTH of the Corporation's Articles of Incorporation is deleted in its entirety.

4.

Of the 4,635,068 shares outstanding, 4,635,068 of such shares were entitled to vote on such amendment.

The number of outstanding shares of any class entitled to vote thereon as a class were as follows:

Class	Number of Outstanding Shares
Common	4,635,068

5.

The number of shares voted for and against the amendment was as follows:

Class	No. Voted For	No. Voted Against
Common	2,391,709	361,958

6.

If the amendment changed the number of par value of authorized shares having a par value, the amount in dollars of authorized shares having a par value as changed is: N/A

If the amendment changed the number of authorized shares without par value, the authorized number of shares without par value as changed and the consideration proposed to be received for such increased authorized shares without par value as are to be presently issued are: N/A

7.

If the amendment provides for an exchange, reclassification, or cancellation of issued shares, or a reduction of the number of authorized shares of any class below the number of issued shares of that class, the following is a statement of the manner in which such reduction shall be effected:
N/A

    IN WITNESS WHEREOF, the undersigned, Christopher E. Olofson, President, has executed this instrument and Michael Rider, its Assistant Secretary has affixed its corporate seal hereto and attested said seal on the 19th day of July, 1999.

19

PLACE CORPORATE
SEAL HERE

ELECTRONIC PROCESSING, INC.
By:	/s/ CHRISTOPHER E. OLOFSON Christopher E. Olofson, President

ATTEST:
By:	/s/ MICHAEL RIDER Michael Rider, Assistant Secretary

20

STATE OF MISSOURI...Office of Secretary of State
AMENDMENT OF ARTICLES OF INCORPORATION
(To be submitted in duplicate by an attorney)

SECRETARY OF STATE
STATE OF MISSOURI
P. O. BOX 778
JEFFERSON CITY, MO 65102

    Pursuant to the provisions of The General and Business Corporation Law of Missouri, the undersigned Corporation certifies the following:

1.

The present name of the Corporation is Electronic Processing, Inc.

The name under which it was originally organized was NEWCO RGLG I, Inc.

2.

Amendments to the Corporation's Articles of Incorporation were adopted by the shareholders on June 7, 2000.



3.

ARTICLE FIRST of the Corporation's Articles of Incorporation is amended in its entirety to read as follows:

FIRST: The name of the corporation shall be: EPIQ Systems, Inc.

The first paragraph of ARTICLE THIRD of the Corporation's Articles of Incorporation is amended to read as follows:

THIRD: The total number of shares of all classes of stock which the corporation shall have the authority to issue is Twenty-two Million (22,000,000) consisting of Twenty Million (20,000,000) shares of Common Stock $0.01 par value per share, and Two Million (2,000,000) shares of Preferred Stock, $1.00 par value per share.

4.

Of the 4,645,868 shares outstanding, 4,645,868 of such shares were entitled to vote on such amendments.

The number of outstanding shares of any class entitled to vote thereon as a class were as follows:

Class	Number of Outstanding Shares
Common	4,645,868

5.

The number of shares voted for and against the amendment to ARTICLE FIRST were as follows:

Class	No. Voted Against	No. Voted For
Common	4,354,446	22,523

The number of shares voted for and against the amendment to ARTICLE THIRD were as follows:

Class	No. Voted For	No. Voted Against
Common	4,322,919	54,050

If the amendments changed the number of par value of authorized shares having a par value, the amount in dollars of authorized shares having a par value as changed is: 2,200,000

If the amendments changed the number of authorized shares without par value, the authorized number of shares without par value as changed and the consideration proposed to be received for such increased authorized shares without par value as are to be presently issued are: N/A

21

If the amendments provide for an exchange, reclassification, or cancellation of issued shares, or a reduction of the number of authorized shares of any class below the number of issued shares of that class, the following is a statement of the manner in which such reduction shall be effected:
N/A

    IN WITNESS WHEREOF, the undersigned, Christopher E. Olofson, President, has executed this instrument and Janice Katterhenry, its Secretary has affixed its corporate seal hereto and attested said seal on the 7^th day of June, 2000:

PLACE CORPORATE
SEAL HERE

"NONE"	ELECTRONIC PROCESSING, INC.
	By:	/s/ CHRISTOPHER E. OLOFSON Christopher E. Olofson, President

ATTEST:
By:	/s/ JANICE KATTERHENRY Janice Katterhenry, Secretary

22

STATE OF MISSOURI	)
	) ss.
COUNTY OF JACKSON	)

    I, the undersigned, a Notary Public, do hereby certify that on this 7^th day of June, 2000, Christopher E. Olofson personally appeared before me who, being by me first duly sworn, declared that he is the President of Electronic Processing, Inc., that he signed the foregoing document as President of the corporation, and that the statements therein contained are true.

 
/s/ CHRISTINE M. ESLINGERNotary Public

NOTARY SEAL

CHRISTINE M. ESLINGER
Notary Public—Notary seal
State of Missouri
County of Jackson
My Commission Expires 09/16/2002

My commission expires: 9/16/2002

23

EX-27

 


<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM EPIQ
SYSTEMS, INC. STATEMENT OF INCOME FOR THE THREE MONTHS ENDED JUNE 30, 2000, AND
BALANCE SHEET AS OF JUNE 30, 2000, QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.


                             
<PERIOD-TYPE>                   6-MOS
<FISCAL-YEAR-END>                          DEC-31-2000
<PERIOD-START>                             JAN-01-2000
<PERIOD-END>                               JUN-30-2000
<CASH>                                       2,058,702
<SECURITIES>                                         0
<RECEIVABLES>                                3,296,151
<ALLOWANCES>                                    30,560
<INVENTORY>                                          0
<CURRENT-ASSETS>                             5,746,633
<PP&E>                                      11,138,294
<DEPRECIATION>                               4,210,393
<TOTAL-ASSETS>                              30,561,069
<CURRENT-LIABILITIES>                        6,794,042
<BONDS>                                              0
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                        46,461
<OTHER-SE>                                  21,669,361
<TOTAL-LIABILITY-AND-EQUITY>                30,561,069
<SALES>                                     10,752,772
<TOTAL-REVENUES>                            10,752,772
<CGS>                                        4,157,124
<TOTAL-COSTS>                                4,157,124
<OTHER-EXPENSES>                             5,248,394
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                             137,061
<INCOME-PRETAX>                              1,279,995
<INCOME-TAX>                                   503,955
<INCOME-CONTINUING>                                  0
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                   776,040
<EPS-BASIC>                                        .17
<EPS-DILUTED>                                      .16