SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended March 31, 2000
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from _________ to ________
Commission file number 1-13469
MediaBay, Inc.
- -------------------------------------------------------------------------------
(Exact name of Small Business Issuer as specified in its charter)
Florida 65-0429858
- -------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employment
incorporation or organization) Identification No.)
20 Community Place, Morristown, New Jersey 07960
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (973) 539-9528
--------------
Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for shorter period
that the registrant was required to file such report) and (2) has been subject
to such filing requirement for the past 90 days.
Yes __X__ No _____
As of May 10, 2000, there were 13,421,866 shares of the Issuer's Common Stock
outstanding.
Transitional Small Business Disclosure Format (check one)
Yes _____ No __X__
<PAGE>
MEDIABAY, INC.
Quarter ended March 31, 2000
Form 10-QSB
Index
Page
----
PART I: Financial Information
Item 1: Financial Statements
Consolidated Balance Sheet at March 31, 2000 (unaudited) 3
Consolidated Statements of Operations for the three months
ended March 31, 1999 and 2000 (unaudited) 4
Consolidated Statements of Cash Flows for the three months ended
March 31, 1999 and 2000 (unaudited) 5
Notes to Consolidated Financial Statements (unaudited) 6
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations. 9
PART II: Other information
Item 2: Changes in Securities and Use of Proceeds 13
Item 6: Exhibits and Reports on Form 8-K 13
Signatures 14
Financial Data Schedule 15
2
<PAGE>
MEDIABAY, INC.
Consolidated Balance Sheet
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
March 31, 2000
--------------
<S> <C>
Assets
Current assets:
Cash and cash equivalents $ 27,858
Short-term investments 100
Accounts receivable, net of allowances for sales returns and doubtful
accounts of $3,756 7,031
Inventory 7,807
Prepaid expenses and other current assets 1,682
Deferred financing costs - current 2,135
Royalty advances 4,890
Deferred member acquisition cost - current 4,760
---------
Total current assets 56,263
Fixed assets, net of accumulated depreciation of $1,067 1,564
Deferred member acquisition costs - non-current 4,846
Non-current prepaid expenses 202
Other intangibles, net 10,424
Goodwill, net 47,271
---------
$ 120,570
=========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses $ 16,069
Current portion - long-term debt 27,373
---------
Total current liabilities 43,442
---------
Long-term debt 9,976
---------
Preferred stock, no par value, authorized 5,000,000 shares; no shares
issued and outstanding --
Common stock subject to contingent put rights 3,639
Common stock; no par value, authorized 75,000,000 shares; issued and
outstanding 13,421,866 93,701
Contributed capital 3,455
Accumulated deficit (33,643)
---------
Total common stockholders' equity 63,513
---------
$ 120,570
=========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
MEDIABAY, INC.
Consolidated Statements of Operations
(Dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
1999 2000
-------- --------
<S> <C> <C>
Sales $ 12,827 $ 16,127
Returns, discounts and allowances 2,898 5,181
-------- --------
Sales, net 9,929 10,946
Cost of sales 4,626 5,750
-------- --------
Gross profit 5,303 5,196
Expenses:
Advertising and promotion 1,486 2,440
General and administrative 2,015 3,182
Depreciation and amortization 1,414 1,983
-------- --------
Operating income (loss) 388 (2,409)
Interest expense, net of interest income of $23 and
$54 in 1999 and 2000, respectively 1,053 1,068
-------- --------
Net loss $ (665) $ (3,477)
======== ========
Net loss per share of common stock
(basic and diluted) $ (.09) $ (.34)
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
MEDIABAY, INC.
Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
1999 2000
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (665) $ (3,477)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 1,414 1,983
Amortization of deferred member costs 74 1,117
Amortization of deferred financing fees 76 136
Changes in asset and liability accounts:
(Increase) decrease in accounts receivable, net (728) 1,860
(Increase) in inventory (9) (570)
(Increase) in prepaid expenses (925) (601)
(Increase) in royalty advances (364) (1,109)
(Increase) in deferred member acquisition costs (1,651) (1,427)
Increase (decrease) in accounts payable and accrued
expenses 149 (486)
-------- --------
Net cash used in operating activities (2,629) (2,574)
-------- --------
Cash flows from investing activities:
Acquisition of fixed assets (49) (221)
Additions to goodwill relating to acquisitions (741) (97)
-------- --------
Net cash used in investing activities (790) (318)
-------- --------
Cash flows from financing activities:
Net proceeds from issuance of common stock -- 29,491
Increase in borrowings under revolving credit agreements 3,000 --
Procceds from issuance of long-term debt -- 2,000
Payment of long-term debt (1,250) (930)
Increase in deferred financing costs -- (9)
-------- --------
Net cash provided by financing activities 1,750 30,552
-------- --------
Net (decrease) increase in cash and cash equivalents (1,669) 27,660
Cash and cash equivalents at beginning of period 2,686 198
-------- --------
Cash and cash equivalents at end of period $ 1,017 $ 27,858
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
MEDIABAY, INC.
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share data)
(Unaudited)
(1) Organization
MediaBay, Inc. (the "Company"), a Florida corporation, was formed on August
16, 1993. MediaBay, Inc. is a leading marketer of premium spoken word content,
including audiobooks and old time radio, and classic video programs. The Company
markets audiobooks primarily through its Audio Book Club. Its old time radio and
classic video programs are marketed through direct-mail catalogues and, on a
wholesale basis, to major retailers. All of the Company's products are also
available for purchase over the Internet through its content-rich media portal
at MediaBay.com and its channels and audiobookclub.com.
(2) Significant Accounting Policies
Basis of Presentation
The interim unaudited financial statements should be read in conjunction
with the Company's audited financial statements contained in its Annual Report
on Form 10-KSB for the year ended December 31, 1999. The preparation of
financial statements in accordance with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported amounts of
revenue and expenses during the reporting period. Actual results could differ
from these estimates. On an ongoing basis, management reviews its estimates
based on current available information. Changes in facts and circumstances may
result in revised estimates. In the opinion of management, the interim unaudited
financial statements include all material adjustments, all of which are of a
normal recurring nature, necessary to present fairly the Company's financial
position, results of operations and cash flows for the periods presented. The
results for any interim period are not necessarily indicative of results for the
entire year or any other interim period.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current
year presentation.
(3) Long-term Debt
In January and February 2000, Norton Herrick sold an additional $4,224
principal amount of the note issued to him in December 1998 to two unaffiliated
third parties which was converted into 379,662 shares of the Company's common
stock. Under the December 1998 letter agreement, the Company issued to Norton
Herrick warrants to purchase an additional 98,554 shares of its common stock at
an exercise price of $8.41 per share. No compensation has been recognized in
relation to this transaction.
6
<PAGE>
In January and February 2000, Evan Herrick, son of the Company's Chairman,
loaned the Company an additional $2,000 for which he received $2,000 principal
amount 9% convertible promissory notes due December 31, 2004. The notes were
initially convertible into shares of the Company's common stock at $11.125 per
share, which was the market value on the date the note was issued. The loans
evidenced by the notes were intended to be short-term and serve as a "bridge" to
replacement financing. At the time of issuance of the convertible notes, the
Company's board of directors resolved to seek to replace or refinance the
convertible notes and accept a proposal for refinancing, whether or not (i) as
favorable as the convertible notes including, without limitation, providing for
a higher interest rate or lower conversion price, (ii) requiring the issuance of
equity securities and/or (iii) requiring the payment of fees.
In February 2000, the unaffiliated third-party holder of the $4,800 9%
promissory note converted $600 of the note into 53,932 shares of the Company's
common stock.
(4) Stockholders' Equity and Stock Options and Warrants
Sale of Equity
The Company's Registration Statement on Form SB-2 for a follow-on primary
offering was declared effective by the Securities and Exchange Commission on
March 15, 2000. On March 20, 2000, the Company closed its offering of 3,650,000
shares of Common Stock at a price of $9.00 per share for gross proceeds of
$32,850. The Company incurred expenses of $3,359 related to the offering,
including the underwriting discount and accountable expenses, legal and
accounting fees and printing expenses.
Stock Options and Warrants
In the first quarter of 2000, in addition to the 98,554 warrants described
in note 3 above, the Company granted plan options and warrants to purchase a
total of 926,000 shares of the Company's common stock to officers, employees and
consultants. The options and warrants vest at various times and have exercise
periods of five and ten years. Exercise prices range from $8.125 to $14.875 per
share. The Company canceled five-year plan options to purchase a total of 6,900
shares of the Company's common stock. The Company also issued and subsequently
canceled prior to March 31, 2000 warrants to purchase 640,000 shares of its
common stock.
Termination of Contingent Put Rights
In January 2000, rights to sell back to the Company 50,000 shares, valued
at $644, issued to one of the sellers in connection with the acquisitions,
terminated due to the Company's common stock exceeding the price agreed to in
the acquisition agreement for the period specified in the acquisition agreement.
(5) Net Loss Per Share of Common Stock
The weighted average number of common shares used in the net loss per share
computations for the three months ended March 31, 1999 and 2000 were 7,078,920
and 10,253,079, respectively.
Common equivalent shares, as calculated under the treasury stock method,
that could potentially dilute basic earnings per share in the future and that
were not included in the computation of diluted loss per share because they
would have been antidilutive
7
<PAGE>
were 963,447 for the three months ended March 31, 1999 and 1,036,127 for the
three months ended March 31, 2000.
(6) Supplemental Cash Flow Information
Cash paid for interest expense was $1,092 and $920 for the three months
ended March 31, 1999 and 2000, respectively.
(7) Subsequent Events
In April 2000, the Company repaid $20,293 of its bank debt out of the net
proceeds from the follow-on primary offering, representing the remaining term
portion of such debt. As a result, the Company will expense deferred financing
fees in the amount of $2,135 and will classify such expense as an extraordinary
item arising from the early extinguishment of debt. The Company also amended the
terms of its remaining revolving debt with its lenders to calculate the amount
available to be borrowed based on a formula of eligible receivables and
inventory, as defined. The revolving credit facility bears interest at 11.50%
and matures on June 30, 2000. The Company is currently working to replace this
revolving credit facility and believes it can do so on favorable terms.
Subsequent to March 31, 2000, the Company granted plan options and warrants
to purchase a total of 330,250 shares of the Company's common stock to officers,
employees and consultants. The options vest at various times and have an
exercise period of five years. Exercise prices range from $4.00 to $7.50. In
addition, the Company cancelled options and warrants to purchase 1,250 shares of
the Company's common stock.
In April 2000, the Company's Board of Directors determined that reducing
the conversion price of the $3,000 principal amount 9% convertible notes due
December 31, 2004 issued to Evan Herrick to the then current market value of the
Company's common stock would be more favorable to the Company than accepting the
alternatives available to the Company to refinance or replace the notes. The
Company revised the terms of the $3,000 principal amount 9% convertible
promissory notes due December 31, 2004 to Evan Herrick. The note is currently
convertible into shares of the Company's common stock at $4.00 per share, which
was the market value on the date the terms were revised.
8
<PAGE>
ITEM 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations (Dollars in thousands)
Introduction
"Safe Harbor" Statement under the Private Securities Litigation Reform Act
of 1995: The statements which are not historical facts contained in this
Quarterly Report are forward looking statements that involve risks and
uncertainties, including but not limited to, the Company's ability to
successfully implement a strategy of continued growth and other risks described
in the Company's Registration Statement on Form SB-2 (No. 333-95793). The
Company's actual results may differ materially from the results discussed in any
forward looking statement.
The Company is a leading provider of premium spoken word content and
products in hard goods and digital download formats via the Internet and various
offline methods. The Company markets its audiobooks through Audio Book Club, the
largest membership-based club of its kind with approximately 1.8 million
members, and the Company's audiobookclub.com web site. The Company sells
audiobooks in a club format through its Audio Book Club and via the Internet
through its audiobookclub.com site, and on a retail basis through the audiobook
channel on MediaBay.com. The Company sells its old time radio and classic video
programs on a retail basis through direct marketing and via the Internet through
the old time radio and classic video channels on MediaBay.com, as well as on a
wholesale basis to major retailers.
As a result of the timing of the Company's marketing activities within
a given year or quarter, the impact of capitalizing new member direct response
marketing costs and the timing of acquisitions and related costs, including
increased interest expense and goodwill and other intangible asset amortization
expense, comparisons of the Company's historical operating results from period
to period may not be meaningful.
Results of Operations
(Dollars in thousands, except per share data)
Three Months Ended March 31, 2000 Compared to Three Months Ended
March 31, 1999
Gross sales for the three months ended March 31, 2000 were $16,127 an
increase of $3,300 or 25.7%, as compared to $12,827 for the three months ended
March 31, 1999. The increase in gross sales was primarily attributable to
increased sales of audiobooks resulting from the continued expansion of Audio
Book Club's membership base and sales from members of Doubleday Direct's
Audiobooks Direct for the three months ended March 31, 2000. Doubleday Direct's
Audiobooks Direct was acquired in June 1999.
Returns, discounts and allowances for the three months ended March 31, 2000
were $5,181 as compared to $2,898 for the prior comparable period. The increase
in returns, discounts and allowances was primarily due to the increase in Audio
Book Club gross sales which has a historically higher return rate than the
Company's radio and video products.
9
<PAGE>
Principally as a result of higher gross sales, net sales for the three
months ended March 31, 2000 increased $1,017 to $10,946.
Cost of sales for the three months ended March 31, 2000 increased $1,124 to
$5,750 from $4,626 in the prior comparable period. Cost of sales as a percentage
of net sales increased to 52.5% from 46.6% principally due to a change in the
product and customer mix of sales among the Company's product lines. As a
result, gross profit was relatively constant for the three months ended March
31, 2000 as compared to the prior comparable period.
Advertising and promotion expenses (for acquisition and retention of new
members) increased $954 or 64.2% to $2,440 for the three months ended March 31,
2000 as compared to $1,486 in the prior comparable period. Beginning in January
1999, the Company was required to capitalize direct response marketing costs for
the acquisition of new members in accordance with AICPA Statement of Position
93-7 "Reporting on Advertising Costs" and amortize these costs over the period
of future benefit which was estimated at 30 months based on the Company's
historical experience over the preceding five years. The increase in advertising
and promotion expenses resulted primarily from the increased amortization
expense related to previously capitalized advertising costs resulting from the
change in accounting.
General and administrative expenses for the three months ended March 31,
2000 increased $1,167 to $3,182 from $2,015 for the three months ended March 31,
1999. General and administrative expense increases are principally attributable
to the increase in sales and a corresponding increase in bad debt expense and
increased personnel and related costs as the Company continues to grow and
expand MediaBay.com and its commitment to the digital age of spoken word
delivery.
Depreciation and amortization expenses for the three months ended March 31,
2000 were $1,983, an increase of $569, as compared to $1,414 for the prior
comparable period. The increase in depreciation expense relates to computer
equipment and amortization of web development costs as the Company continues to
increase its web presence and expand its digital download capabilities. The
increase in amortization is attributable to the amortization of goodwill and
other intangible assets in connection with the Company's acquisition of
Doubleday Direct's Audiobooks Direct.
Net interest expense for the three months ended March 31, 2000 was $1,068
as compared to $1,053 for the three months ended March 31, 1999.
Primarily due to increased amortization expense for capitalized advertising
costs, increases in general and administrative expenses due to sales increases
and the Company's continued growth including the expansion of MediaBay.com and
increased amortization of goodwill and intangible costs relating to the
acquisition of Doubleday Direct's Audiobooks Direct, the net loss for the three
months ended March 31, 2000 increased $2,812 to $3,477, or $.34 per share, as
compared to a net loss of $665 or $.09 per share for the three months ended
March 31, 1999.
Liquidity and Capital Resources
Historically, the Company has funded its cash requirements through sales of
equity and debt securities and borrowings from financial institutions and our
principle
10
<PAGE>
shareholders. Our capital requirements have been and will continue to be
significant due to, among other things, expansion of operations, costs
associated with direct mail campaigns, other new member recruitment advertising
and promotion and brand building and expanding Internet operations.
Historically, the Company's cash requirements have exceeded cash flows from
operations.
For the three months ended March 31, 2000, the Company's cash increased by
$27,660 as the Company used net cash of $2,574 and $318 for operating and
investing activities, respectively, and had cash provided by equity raising and
financing activities of $30,552. Net cash used in operations principally
consisted of the net loss of $3,477, increases in inventories of $570, prepaid
expenses of $601, royalty advances of $1,109 and a net increase in deferred
member acquisition costs of $310. Net cash used in operations was partially
offset by depreciation and amortization expenses included in the net loss of
$1,983 and a decrease in accounts receivable of $1,860.
The increase in inventory is primarily due to the timing of purchases. The
increase in prepaid expenses is primarily related to direct mail activities
commencing in the second quarter. The increase in royalty advances is primarily
attributable to the renewal and expansion to include digital downloads of a
licensing agreement with one of the Company's significant publishers. The
decrease in accounts receivable was primarily attributable to the collection of
retail receivables from the holiday selling season from the Company's radio and
video programs.
Cash used in investing activities was for the acquisition of fixed assets,
principally for computer equipment and web development and additions to goodwill
for additional costs incurred in the acquisitions.
In March 2000, the Company closed its offering of 3,650,000 shares of its
Common Stock at a price of $9.00 per share for gross proceeds of $32,850. Net
proceeds after expenses of $3,359, including the underwriting discount and
accountable expenses, legal and accounting fees and printing expenses, were
$29,491.
In January and February 2000, two unaffiliated third parties converted
$4,224 principal amount of convertible promissory notes into 379,662 shares of
the Company's common stock.
In January and February 2000, Evan Herrick, the son of the Company's
chairman, loaned the Company an additional $2,000 in the form of 9% convertible
promissory notes due December 31, 2004. The loans evidenced by the notes were
intended to be short-term and serve as a "bridge" to replacement financing. At
the time of issuance of the convertible notes, the Company's board of directors
resolved to seek to replace or refinance the convertible notes and accept a
proposal for refinancing, whether or not (i) as favorable as the convertible
notes including, without limitation, providing for a higher interest rate or
lower conversion price, (ii) requiring the issuance of equity securities and/or
(iii) requiring the payment of fees.
In April 2000, the Company repaid $20,293 of its bank debt out of the net
proceeds from the follow-on primary offering, representing the remaining term
portion of such debt. As a result, the Company will expense deferred financing
fees in the amount of
11
<PAGE>
$2,135 and will classify such expense as an extraordinary item arising from the
early extinguishment of debt.
In April 2000, the Company amended the terms of its remaining revolving
debt with its lenders to calculate the amount available to be borrowed based on
a formula of eligible receivables and inventory, as defined. The revolving
credit facility bears interest at 11.50% and matures on June 30, 2000. The
Company is currently working to replace this revolving credit facility and
believes it can do so on favorable terms.
In April 2000, the Company's Board of Directors determined that reducing
the conversion price of the $3,000 principal amount 9% convertible notes due
December 31, 2004 issued to Evan Herrick to the then current market value of the
Company's common stock would be more favorable to the Company than accepting the
alternatives available to the Company to refinance or replace the notes. The
Company revised the terms of the $3,000 principal amount 9% convertible
promissory notes due December 31, 2004 to Evan Herrick. The note is currently
convertible into shares of the Company's common stock at $4.00 per share, which
was the market value on the date the terms were revised.
Quarterly Fluctuations
The Company's operating results vary from period to period as a result of
purchasing patterns of members, the timing, costs, magnitude and success of
direct mail campaigns and Internet initiatives and other new member recruitment
advertising, member attrition, the timing and popularity of new audiobook
releases and product returns.
The timing of new member enrollment varies depending on the timing,
magnitude and success of new member advertising, particularly Internet
advertising and direct mail campaigns. The Company's gross profit margin is
affected by the percentage of new Audio Book Club member enrollment purchases.
Initial purchases by new members are at substantially reduced prices to
encourage enrollment. These offers, which are typically four audiobooks for
either $.99 or $.01 plus shipping and handling, result in an initial loss to the
Company which is expected to be recovered through additional member purchases at
regular prices. New member enrollment purchases typically account for a higher
percentage of sales following significant Audio Book Club direct marketing
activities.
The Company believes that a significant portion of its sales of old-time
radio and classic video programs are gift purchases by consumers. Therefore, the
Company tends to experience increased sales of these products in the fourth
quarter in anticipation of the holiday season and the second quarter in
anticipation of Fathers' Day.
12
<PAGE>
Part II - Other Information
Item 2. Changes in Securities and Use of Proceeds.
In January 2000, the Company issued four-year warrants to
purchase 10,000 shares of Common Stock at an exercise price of $12.00
per share to a consultant pursuant to a consulting agreement.
In January 2000, the Company issued warrants to purchase 98,554
shares of Common Stock to its Chairman at an exercise price of $8.41
per share pursuant to a December 1998 letter agreement. These warrants
expire on December 31, 2003.
In January and February 2000, the Company issued 433,594 shares
of Common Stock to third parties upon conversion of convertible
promissory notes at a conversion price of $11.125 per share.
In January and February 2000, the Company issued $2,000 principal
amount convertible promissory notes due December 31, 2004 to the son
of our Chairman. The convertible notes bear interest at the rate of 9%
per year and are currently convertible into shares of Common Stock at
the rate of $4.00 of principal or interest outstanding per share,
subject to adjustment.
The Company also issued and subsequently canceled prior to March
31, 2000 warrants to purchase 640,000 shares of its common stock.
All of the foregoing securities were issued in private
transactions pursuant to an exemption from the registration
requirement offered by Section 4(2) of the Securities Act of 1933.
During the three months ended March 31, 2000, we issued options
under our 1999 Stock Incentive Plan to purchase 916,000 shares of
Common Stock to certain individuals, including officers and directors.
We relied on the exemptions provided Section 4(2) of the Securities
Act of 1933 in connection with the issuance of such options.
Item 6: Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K
None
13
<PAGE>
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, MediaBay, Inc. has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
MediaBay, Inc.
Dated: May 12, 2000 By: /s/ Michael Herrick
-------------------------------------
Michael Herrick
Chief Executive Officer and President
Dated May 12, 2000 By: /s/ John F. Levy
-------------------------------------
John F. Levy
Chief Financial and Accounting Officer
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial information extracted from the Company's
financial statements included in this quarterly report on Form 10-QSB, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 27,858
<SECURITIES> 100
<RECEIVABLES> 10,787
<ALLOWANCES> 3,756
<INVENTORY> 7,807
<CURRENT-ASSETS> 56,263
<PP&E> 2,631
<DEPRECIATION> 1,067
<TOTAL-ASSETS> 120,570
<CURRENT-LIABILITIES> 43,442
<BONDS> 9,976
0
0
<COMMON> 93,701
<OTHER-SE> (30,188)
<TOTAL-LIABILITY-AND-EQUITY> 120,570
<SALES> 10,946
<TOTAL-REVENUES> 10,946
<CGS> 5,750
<TOTAL-COSTS> 5,622
<OTHER-EXPENSES> 1,983
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,068
<INCOME-PRETAX> (3,477)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,477)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,477)
<EPS-BASIC> (.34)
<EPS-DILUTED> 0
</TABLE>
