<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996 COMMISSION FILE NO. 0-21527
MEMBERWORKS INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE 06-1276882
(State of Incorporation) (I.R.S. Employer Identification No.)
680 WASHINGTON BLVD.; SUITE 1100; STAMFORD, CONNECTICUT 06901
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 324-7635
INDICATE BY CHECKMARK 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, AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS
FOR THE PAST 90 DAYS.
YES NO X
----- -----
THE NUMBER OF SHARES OUTSTANDING OF EACH THE REGISTRANT'S CLASSES OF CAPITAL
STOCK: 14,550,177 SHARES OF COMMON STOCK, $0.01 PAR VALUE AS OF OCTOBER 31,
1996.
<PAGE> 2
MEMBERWORKS INCORPORATED
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of September 30, 1996
and June 30, 1996. 3
Condensed Consolidated Statements of Operations for the three
month period ended September 30, 1996 and 1995. 4
Condensed Consolidated Statements of Cash Flows for the three
month period ended September 30, 1996 and 1995. 5
Notes to Condensed Consolidated Financial Statements. 6 - 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 8 - 9
Certain Factors That May Affect Future Results 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 6. Exhibits and Reports on Form 8-K 11
</TABLE>
<PAGE> 3
MEMBERWORKS INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
Pro Forma at
June 30, September 30, September 30,
1996 1996 1996
---- ---- ----
(Unaudited) (Unaudited)
ASSETS
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 4,312 $ 3,460 $ 38,925
Accounts receivable 6,439 4,398 4,398
Prepaid membership materials 1,065 1,234 1,234
Prepaid expenses 204 670 116
Membership solicitation and other deferred costs 25,686 26,981 26,981
-------- -------- --------
Total current assets 37,706 36,743 71,654
Fixed assets, net 3,261 4,443 4,443
Other assets 960 989 989
-------- -------- --------
$ 41,927 $ 42,175 $ 77,086
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 675 $ 665 $ 665
Current maturities of capital lease obligations 316 478 478
Accounts payable 10,433 7,261 7,261
Accrued liabilities 14,631 15,850 16,734
Deferred membership fees 30,628 33,868 33,868
-------- -------- --------
Total current liabilities 56,683 58,122 59,006
Long-term capital lease obligations 456 862 862
Notes payable 633 547 547
-------- -------- --------
Total liabilities 57,772 59,531 60,415
Redeemable preferred stock 20,487 20,889 __
-------- -------- --------
Total liabilities and redeemable preferred stock 78,259 80,420 60,415
-------- -------- --------
Stockholders' equity:
ClassA common stock, $0.01 par value -- 8,000,000 shares authorized;
5,598,870 shares issued and
outstanding; Pro forma: no shares issued and outstanding 56 56 __
Common stock, $.01 par value -- 32,000,000
shares authorized; 258,235 shares issued and
outstanding; Pro forma: 14,724,007 shares issued and outstanding 3 3 147
Capital in excess of par value 3,602 3,602 58,888
Deferred compensation (1,400) (1,313) (1,313)
Accumulated deficit (38,320) (40,320) (40,778)
Treasury stock, 173,830 shares at cost (273) (273) (273)
-------- -------- --------
Total stockholders' equity (deficit) (36,332) (38,245) 16,671
-------- -------- --------
$ 41,927 $ 42,175 $ 77,086
======== ======== ========
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE> 4
MEMBERWORKS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three months ended September 30,
(In thousands, except per share data)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Revenues
Membership fees $ 17,196 $ 12,679
Expenses
Operating 3,777 2,488
Marketing 11,224 9,127
General and Administrative 3,801 2,060
Interest (income) expense, net (8) 300
--------- ---------
Total expenses 18,794 13,975
--------- ---------
Loss before income taxes (1,598) (1,296)
Provision for income taxes - -
--------- ---------
Net loss $ (1,598) $ (1,296)
========= =========
Pro forma net loss per share $ (0.13) $ (0.11)
========= =========
Pro forma weighted average common and common 12,741 12,741
equivalent shares outstanding ========= =========
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE> 5
MEMBERWORKS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
Three months ended September 30,
--------------------------------
1996 1995
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (1,598) $ (1,296)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Membership solicitation and other deferred costs (14,166) (11,238)
Amortization of membership solicitation and other deferred costs 12,870 10,434
Deferred membership fees 3,240 989
Depreciation and amortization 258 191
Other 87 417
Change in assets and liabilities affecting operating cash flows:
Accounts receivable 3,358 453
Prepaid membership materials (169) (174)
Prepaid expenses (466) 9
Other assets (67) (32)
Accounts payable (3,172) 64
Accrued liabilities (98) (588)
--------- --------
Net cash provided by (used in) operating activities 77 (771)
--------- --------
INVESTING ACTIVITIES
Acquisition of fixed assets (755) (239)
--------- --------
Net cash used in investing activities (755) (239)
--------- --------
FINANCING ACTIVITIES
Payments of notes payable (96) (6,894)
Payments of capital lease obligations (78) (37)
Proceeds from issuance of preferred stock - 12,887
Redemption of preferred stock - (4,000)
Preferred stock dividends - (402)
--------- --------
Net cash (used in) provided by financing activities (174) 1,554
--------- --------
Net (decrease) increase in cash and cash equivalents (852) 544
Cash and cash equivalents at beginning of period 4,312 5,323
--------- --------
Cash and cash equivalents at end of period $ 3,460 $ 5,867
========= ========
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE> 6
MEMBERWORKS INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three months ended September 30, 1996
are not necessarily indicative of the results that may be expected for the
fiscal year ending June 30, 1997. For further information, refer to the
financial statements and footnotes thereto included in the Company's
Registration Statement on Form S-1 with respect to the fiscal year ended June
30, 1996.
NOTE 2 - EARNINGS PER SHARE
Pro forma earnings per share is determined by dividing net loss, after adding
back preferred stock dividends paid when applicable, by the weighted average
number of common stock and common stock equivalents outstanding during the
period. Common stock equivalents include stock options, warrants and preferred
stock which were converted into common stock upon the closing of the initial
public offering of the Company's Common Stock. Refer to Note 5 - Subsequent
Events.
The weighted average number of shares has been adjusted to reflect as
outstanding all common stock and common stock equivalents issued during the
twelve month period preceding the initial public offering of the Company's
Common Stock using the treasury stock method, as well as the number of shares
which would be necessary in order to redeem the Series E and F preferred stock.
NOTE 3 - ALLOWANCE FOR MEMBERSHIP CANCELLATIONS
The allowance for membership cancellations set forth in the accompanying
condensed consolidated balance sheets as of June 30, 1996 and September 30, 1996
were $10,117,000 and $10,812,000, respectively.
NOTE 4 - STOCKHOLDERS' EQUITY
Changes in stockholders' equity for the quarter ended September 30, 1996 were as
follows:
<TABLE>
<CAPTION>
Class A Common Stock Common Stock Capital in
-------------------- ---------------- Excess of Accumulated Deferred Treasury
Shares Amount Shares Amount Par Value Deficit Compensation Stock Total
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance - June 30, 1996 5,598,870 $56 258,235 $3 $3,602 $(38,320) $(1,400) $(273) $(36,332)
Preferred Stock:
Accretion of discount (51) (51)
Accretion to redemption value (310) (310)
Accumulated dividends (41) (41)
Deferred compensation 87 87
Net Loss (1,598) (1,598)
----------------------------------------------------------------------------------------------------
5,598,870 $56 258,235 $3 $3,602 $(40,320) $(1,313) $(273) $(38,245)
====================================================================================================
</TABLE>
<PAGE> 7
On August 15, 1996, the Company amended its certificate of incorporation to
increase the authorized number of shares of capital stock to 41,000,000. A total
of 32,000,000 shares were designated as Common Stock, par value $0.01, 8,000,000
shares were designated as Class A common stock, par value $0.01 and 1,000,000
shares were designated as Preferred Stock, par value $0.01.
On August 13, 1996, the Board of Directors authorized the automatic
reclassification and conversion of Class A Common Stock into Common Stock upon
the closing of the Company's initial public offering and the elimination of
Class A common stock.
On August 13, 1996, the Board of Directors authorized the automatic
reclassification and conversion of Class B common stock into Common Stock.
On September 11, 1996, the Board of Directors approved a 7.2 for 1 stock split
of the Company's common stock which became effective on September 25, 1996.
NOTE 5 - SUBSEQUENT EVENTS
Effective October 18, 1996, the Company sold 2,400,000 shares of its Common
Stock at $17.00 per share in an initial public offering. Net proceeds of the
offering, after deducting underwriting discounts and commissions and estimated
offering expenses, aggregated approximately $36,500,000. Approximately
$2,500,000 of the proceeds of the offering were used to redeem all outstanding
shares of Series E and Series F Preferred Stock. The remaining $34,000,000 was
retained for general corporate purposes including acquisition of new members,
program development, capital expenditures and working capital.
Concurrent with the closing of the initial public offering, the Company
settled litigation with a former executive and co-founder of the Company
pursuant to the terms of an agreement dated September 13, 1996 and paid
the former executive $165,000, representing severance, bonus and legal expenses.
NOTE 6 - PRO FORMA BALANCE SHEET AS OF SEPTEMBER 30, 1996
The accompanying pro forma balance sheet as of September 30, 1996 gives effect
to approximately $36.5 million in net proceeds from the sale of 2,400,000
shares of Common Stock in the initial public offering. Additionally, the pro
forma balance sheet as of September 30, 1996 gives effect to the automatic
conversion of all Series A, B, C, D and H convertible preferred stock into
Common Stock, the automatic reclassification and conversion of Class A common
stock into Common Stock and the redemption of Series E and F redeemable
preferred stock for approximately $2,500,000.
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1996 VS. THREE MONTHS ENDED SEPTEMBER 30, 1995
REVENUES. Revenues increased 36% to $17.2 million for the quarter ended
September 30, 1996 from $12.7 million for the quarter ended September 30, 1995
due to an increase in the Company's membership base and an increase in the
weighted average program fee. The Company's membership base increased to 1.6
million members at September 30, 1996 from 1.2 million members at September 30,
1995. The increase in the Company's membership base was due to an increase in
the members enrolled in existing programs and the continued roll-out of new
programs introduced in fiscal 1996. The increase in the weighted average
program fee was due to an increase in the percentage of members enrolled in
programs with higher fees. Revenues from renewals increased to $7.4 million in
1996 from $5.1 million in 1995. As a percentage of individual membership
revenues, these amounts represented 44% in 1996 and 41% in 1995.
OPERATING EXPENSES. Operating expenses consist of costs incurred in
servicing the Company's membership base, including personnel, telephone and
computer processing costs, as well as expenses associated with the production
and distribution of membership information kits. Operating expenses increased
52% to $3.8 million in 1996 from $2.5 million in 1995. As a percentage of
revenues, operating expenses increased to 22.0% in 1996 from 19.6% in 1995.
These increases were primarily due to the new membership service facility in
Houston, Texas which commenced operations during the June 1996 quarter.
MARKETING EXPENSES. Marketing expenses consist of fees to
telemarketers to solicit potential members, royalties to clients, direct mail
costs and other solicitation expenses. Marketing expenses increased 23% to
$11.2 million in 1996 from $9.1 million in 1995. The increase was due primarily
to increased solicitation costs and increased royalty expense associated with
the larger membership base. As a percentage of revenues, marketing expenses
decreased to 65.3% in 1996 from 72.0% in 1995. The decrease was due to the
favorable effect of an increase in the weighted average program fee and an
increase in renewal revenues as a percentage of total revenues.
In addition to marketing expenses, the Company also monitors overall
membership solicitation and other deferred costs, which are amortized ratably
over the membership period. These costs increased 26% to $14.2 million in 1996
from $11.2 million in 1995 primarily due to increased marketing efforts
incurred to grow the membership base.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses consist of personnel and facilities expenses associated with the
Company's executive, sales, marketing, finance, product and account management
functions. General and administrative expenses increased 85% to $3.8 million
in 1996 from $2.1 million in 1995. As a percentage of revenues, general and
administrative expenses increased to 22.1% from 16.2%. The increase was
attributable to the costs incurred for additional personnel in all areas and
related facilities costs. The additional personnel were necessary to support
the Company's growth and expansion.
INTEREST (INCOME) EXPENSE, NET. Interest (income) expense, net is
primarily composed of interest income from cash and cash equivalents, partially
offset by financing charges relating to notes payable, equipment leases and
other debt. Net interest income of $8,000 was reported in 1996 compared to net
interest expense of $300,000 reported in 1995. The decrease in interest expense
was due to the reduction of notes payable in September 1995. The September 1995
quarterly results also included approximately $100,000 in debt issuance costs.
The Company invests in short- term, investment- grade, interest bearing
securities, and the amount of interest income fluctuates based upon the amount
of funds available for investment and prevailing interest rates.
PROVISION FOR INCOME TAXES. The Company was not required to record a
provision for income taxes for the quarters ended September 30, 1996 and 1995
due to net operating losses.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has funded operations primarily through
private sales of securities. Total net proceeds from the private sale of
stock, warrants and notes through September 30, 1996 was $25.0 million.
The Company sold 2,400,000 shares of its common stock in an initial public
offering on October 18, 1996. Net proceeds of the offering (after deducting
underwriting discounts and commissions and estimated offering expenses)
approximated $36.5 million. Approximately $2.5 million of the net proceeds was
utilized to redeem all outstanding shares of Series E and Series F Preferred
Stock on October 23, 1996.
Net cash provided by operating activities was $77,000 in 1996 and
net cash used by operating activities was $771,000 in 1995. These results
were attributable to the Company's strategy to use substantially all of its
available cash to fund costs required to increase its membership base. The
Company's capital expenditures were $753,000 in 1996 and $239,000 in 1995.
The increased expenditures were primarily related to the Company's new
membership services facility opened in the June 1996 quarter.
<PAGE> 9
The Company currently has negative working capital and an
accumulated deficit due to its history of losses. Because of ongoing costs in
connection with soliciting new members, the Company expects to incur operating
and net losses at least through fiscal 1997. Pro forma working capital at
September 30, 1996 was $12.6 million, which gives effect to the receipt of
proceeds from the initial public offering and the redemption of the Series E and
F preferred stock. See Note 6 to the condensed consolidated financial statements
for a description of the adjustments included in the pro forma balance sheet as
of September 30, 1996. The Company believes that the net proceeds from the
initial public offering, together with its existing cash balances and funds
generated from operations will be sufficient to meet its capital requirements
for at least the next 18 months.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
This Quarterly Report contains forward-looking statements that involve
risks and uncertainties. The Company's actual results may differ significantly
from the results discussed in the forward-looking statements. A number of
uncertainties exist that could affect the Company's future operating results,
including, without limitation, the Company's history of losses, the Company's
ability to retain existing clients and attract new clients, the Company's
dependence on membership renewals, intense competition, the Company's
continuing ability to develop new programs which generate consumer interest,
and general economic factors.
The Company has incurred significant operating losses since its inception.
Although the Company has experienced revenue growth in recent periods, such
growth rates may not be sustainable and are not indicative of future operating
results. There can be no assurance that the Company will achieve or maintain
profitability in the future.
The Company obtains substantially all of the information necessary to
the Company's marketing efforts from customer lists supplied by its clients.
Clients provide the lists to the Company for use in marketing a single,
specific program which has been pre-approved by the client. As a result, the
Company's ability to market a new program to an existing customer base or an
existing program to a new customer base is dependent on first obtaining
approval from a client. There can be no assurance that one or more of the
Company's key or other clients will not terminate its relationship with the
Company or that clients will provide additional customer lists to the Company
for use in further marketing new or existing membership programs. Termination
or expiration of a key client relationship could have a material adverse effect
on the future revenues from existing programs of which such client's customers
are members and on the Company's ability to further market new or existing
programs through such client.
The Company generally incurs losses and negative cash flow during the
initial year of an individual membership program, as compared to renewal years,
due primarily to higher marketing costs associated with initial member
procurement. In addition, the Company experiences a higher percentage of
cancellations during the initial membership period as compared to renewal
periods. During an initial annual membership term or renewal term, a member may
cancel his or her membership in the program, generally for a complete refund of
the membership fee for that period. Accordingly, the profitability of each of
the Company's programs depends on recurring and sustained membership renewals.
Renewal rates are inherently uncertain and are subject to several factors, many
of which are outside of the Company's control, including changing member
preferences, competitive price pressures, general economic conditions, customer
satisfaction and credit card holder turnover. There can be no assurance that a
particular program will generate sufficient renewals to become profitable or
that memberships, if renewed, will not be canceled. Failure of one or more of
the Company's programs to generate recurring and sustained membership renewals
would have a material adverse effect on the Company's business, financial
condition and results of operations.
Competition in the membership services market for clients, such as
credit card issuers, is intense. Several of the Company's competitors offer
membership programs which provide services similar to, or which directly
compete with, those provided by the Company. Because contracts between clients
and program providers are often exclusive with respect to a particular service,
potential clients may be prohibited from contracting with the Company to
promote a program if the services provided by the Company's program are similar
to, or merely overlap with, the services provided by an existing program of a
competitor. Most of the Company's clients provide, either directly or through
third parties, programs offered by the Company's competitors, and the
Company's agreement with Sears, its principal client, permits Sears to offer
its customers programs that directly compete with those offered by the Company.
Competition for new members is also intense, particularly as the market becomes
saturated with customers who are already members of competing programs. There
can be no assurance that the Company's current or potential competitors will
not provide programs comparable or superior to those provided by the Company at
lower membership prices or adapt more quickly than the Company to evolving
industry trends or changing market requirements. In addition, alliances among
competitors may emerge and rapidly acquire significant market share. Increased
competition may result in price reductions, reduced gross margins and loss of
market share, any of which could materially adversely affect the Company's
business, financial condition and results of operations. There can be no
assurance that the Company will be able to compete effectively against current
and future competitors.
The Company's business is substantially dependent on its ability to develop
and successfully introduce new programs which generate consumer interest.
Failure to introduce new programs in a timely manner could result in the
Company's competitors acquiring additional market share for a program in a
particular area of consumer interest. The announcement or introduction of new
programs by the Company or others, or the failure by the Company to introduce
new programs which have broad consumer appeal, could have a material adverse
effect on the Company's business, financial condition and results of operations.
<PAGE> 10
MEMBERWORKS INCORPORATED
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Refer to Note 5 to the condensed consolidated financial statements.
Item 2. Changes in Securities
Refer to Note 4 and Note 5 to the condensed consolidated financial
statements.
Item 4. Submission of Matters to a Vote of Security Holders
The Shareholders of the Company, acting by written consents dated
August 13 and August 14, 1996, approved the amendment of the Company's
Certificate of Incorporation to change the name of the Company from CardMember
Publishing Corporation to MemberWorks Incorporated, to increase the number of
shares of stock to 41,000,000, of which 32,000,000 shares were designated as
Common Stock, par value $0.01, 8,000,000 shares were designated as Class A
Common Stock, par value $0.01 and 1,000,000 shares were designated as Preferred
Stock, par value $0.01.
The Shareholders of the Company, acting by written consents dated
September 24, 1996, approved the amendment of the Company's Certificate of
Incorporation to provide for a 7.2 for one stock split of the Company's Common
Stock.
Written consents from holders of 10,297,965 shares were received by
the Company for the matters in August 1996 and written consents from the
holders of 8,239,197 shares were received by the Company for the matter in
September 1996.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11 - Statement re: Computation of Per Share Earnings
(Unaudited)
27 - Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during
the quarter ended September 30, 1996.
<PAGE> 11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
MEMBERWORKS INCORPORATED
(Registrant)
Date: November 14, 1996 By: /s/ Gary A. Johnson
-------------------
Gary A. Johnson, President, Chief
Executive Officer and Director
Date: November 14, 1996 By: /s/ James B. Duffy
------------------
James B. Duffy, Senior Vice
President, Chief Financial Officer
<PAGE> 1
MEMBERWORKS INCORPORATED
EXHIBIT 11 - Statement re computation of per share earnings (unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three months ended
September 30,
------------------
1996 1995
---- ----
<S> <C> <C>
Net Loss $(1,598) $(1,296)
Preferred stock dividends - (154)
------- -------
Net loss attributable to common stock $(1,598) $(1,450)
======= =======
Weighted average number of shares of Class A common
stock and Common Stock outstanding 5,683 5,683
Automatic conversion of Series A, B, C, D and H preferred
stock and redemption of Series E and F preferred stock 6,610 6,610
Stock options granted one year prior to filing 448 448
------- -------
Weighted average number of common shares outstanding as adjusted 12,741 12,741
======= =======
Pro forma net loss per share $ (0.13) $ (0.11)
======= =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 3,460,000
<SECURITIES> 0
<RECEIVABLES> 4,398,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 36,743,000
<PP&E> 6,176,000
<DEPRECIATION> 1,733,000
<TOTAL-ASSETS> 42,175,000
<CURRENT-LIABILITIES> 58,122,000
<BONDS> 0
20,889,000
0
<COMMON> 59,000
<OTHER-SE> (38,304,000)
<TOTAL-LIABILITY-AND-EQUITY> 42,175,000
<SALES> 0
<TOTAL-REVENUES> 17,196,000
<CGS> 0
<TOTAL-COSTS> 18,802,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (8,000)
<INCOME-PRETAX> (1,598,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,598,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,598,000)
<EPS-PRIMARY> (.13)
<EPS-DILUTED> 0
</TABLE>
