<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 1997
or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from __________ to __________
Commission File No. 0-17909
PHOENIX NETWORK, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 84-0881154
- ------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1687 Cole Boulevard, Golden, Colorado 80401
-----------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 205-3500
----------------
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.
(1) Yes [X] (2) No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Shares outstanding at
Class November 1, 1997
- ----------------------------- ---------------------
Common Stock, $.001 par value 32,540,645
<PAGE> 2
PHOENIX NETWORK, INC.
I N D E X
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated 3
Balance Sheets
Condensed Consolidated 5
Statements of Operations
Condensed Consolidated 6
Statements of Cash Flow
Notes to Condensed Consolidated 7
Financial Statements
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 8
Item 5. Recent Developments 10
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
PHOENIX NETWORK, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
December 31, 1996 September 30, 1997
----------------- ------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,548,061 $ 1,068,102
Accounts receivable, net of allowance for
doubtful accounts of $3,600,830 at
December 31, 1996 and $756,311 at
September 30, 1997
14,419,829 12,164,638
Deferred commissions 969,940 475,038
Other current assets 686,271 476,122
------------- -------------
Total current assets 17,624,101 14,183,900
Furniture, equipment and data processing
systems, at cost less accumulated
depreciation 5,522,771 6,228,258
Deferred commissions 414,873 144,827
Customer acquisition costs, less accumulated
amortization 2,725,275 1,608,255
Goodwill, less accumulated amortization 18,553,332 17,935,757
Other assets 953,831 864,456
------------- -------------
$ 45,794,183 $ 40,965,453
============= =============
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 4
PHOENIX NETWORK, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
December 31, 1996 September 30, 1997
----------------- ------------------
<S> <C> <C>
Current liabilities:
Line of Credit - Finance Company $ 4,698,645 $ 4,677,920
Current Maturities - Finance Company Note 444,839 470,483
Current Maturities - Stockholder Note -- 231,414
Current Maturities - Capital Lease -- 138,504
Note Payable to vendor 1,161,148 --
Accounts payable and accrued liabilities 19,105,317 17,207,989
-------------- --------------
Total current liabilities 25,409,949 22,726,310
Notes payable to stockholder - long term 1,388,206 1,156,792
Capital Leases -- 66,431
Finance Company Note, less current maturities 824,306 481,092
Stockholders' equity:
Preferred stock, $.001 par value; authorized,
5,000,000 shares; issued and outstanding,
546,458 shares at December 31, 1996 and
165,500 at September 30, 1997 546 165
Common stock, $.001 par value authorized,
50,000,000 shares issued and outstanding,
25,851,894 shares at December 31, 1996
and 30,304,195 shares
at September 30, 1997
25,851 30,304
Additional paid-in capital 45,225,554 52,218,118
Treasury stock - 1,300 shares at cost (2,522) (2,522)
Accumulated deficit from May 1, 1989 (27,077,707) (35,711,237)
-------------- --------------
Total stockholders' equity 18,171,722 16,534,828
-------------- --------------
$ 45,794,183 $ 40,965,453
============== ==============
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
PHOENIX NETWORK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three months ended September 30, Nine months ended September 30,
-------------------------------- --------------------------------
1996 1997 1996 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ 24,632,336 $ 18,652,168 $ 78,234,398 $ 59,932,214
Cost of revenues 17,772,764 13,550,479 56,676,168 43,941,792
------------ ------------ ------------ ------------
Gross profit 6,859,572 5,101,689 21,558,230 15,990,422
Operating expenses:
Selling, general &
administrative expenses 7,153,366 5,895,136 22,103,668 20,010,367
Depreciation and amortization
1,040,978 1,026,804 3,240,167 2,960,668
Relocation 172,972 -- 982,146 --
------------ ------------ ------------ ------------
8,367,316 6,921,940 26,325,981 22,971,035
Income (loss) from operations (1,507,744) (1,820,251) (4,767,751) (6,980,613)
Net interest expense (222,950) (252,918) (398,948) (797,096)
------------ ------------ ------------ ------------
Net income (loss) (1,730,694) (2,073,169) (5,166,699) (7,777,709)
Preferred stock dividends (315,702) (47,343) (940,775) (163,853)
------------ ------------ ------------ ------------
Net income (loss) attributable to
common shares $ (2,046,396) $ (2,120,512) $ (6,107,474) $ (7,941,562)
============ ============ ============ ============
Net income (loss) per common share
$ (0.10) $ (0.07) $ (0.30) $ (0.29)
============ ============ ============ ============
Weighted average number of shares
outstanding 20,391,247 29,785,952 20,097,390 27,580,741
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 6
PHOENIX NETWORK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended September 30,
<TABLE>
<CAPTION>
1996 1997
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers $ 75,763,864 $ 60,293,545
Interest received 39,777 2,522
Cash paid to suppliers and employees (77,069,289) (62,980,530)
Interest paid (394,027) (799,618)
------------ ------------
Net cash used in operating activities (1,659,675) (3,484,081)
Cash flows from investing activities:
Purchases of furniture, equipment and DP systems (680,355) (1,660,488)
Business acquisitions, net of cash acquired (4,085,093) --
Change in other assets (389,069) 89,375
------------ ------------
Net cash used in investing activities (5,154,517) (1,571,113)
Cash flows from financing activities:
Payments on line of credit -- (20,725)
Proceeds from (payment on) note payable to finance company
1,180,604 (317,570)
Payment on notes payable to vendor (1,494,033) (1,161,148)
Payments on capital lease -- (66,137)
Proceeds from issuance of preferred stock -- 5,225,000
Proceeds from exercise of common stock options and warrants
1,209,453 915,815
------------ ------------
Net cash provided by (used in) financing activities 896,024 4,575,235
------------ ------------
Net increase (decrease) in cash (5,918,168) (479,959)
Cash and cash equivalents at beginning of period 8,298,003 1,548,061
------------ ------------
Cash and cash equivalents at end of period $ 2,379,835 $ 1,068,102
============ ============
Reconciliation of net income (loss) to net cash provided by
(used in) operating
activities:
Net income (loss) $ (5,166,699) $ (7,777,709)
Adjustments
Provision for doubtful accounts 1,731,429 1,893,860
Depreciation and amortization 3,240,167 2,960,668
Changes in assets and liabilities
Accounts receivable (4,010,313) 361,331
Deferred commissions 893,320 764,948
Other assets (208,547) 210,149
Accounts payable and accrued liabilities 1,860,968 (1,897,328)
------------ ------------
Net cash provided by (used in) operating activities $ (1,659,675) $ (3,484,081)
============ ============
Schedule of noncash activity
Noncash components of consideration issued in connection
with business
combination:
Common stock 10,500,000 --
Note payable to stockholder 1,314,056 --
Assumption of net liabilities 1,606,976 --
Conversion of preferred stock into common stock 32,330 853,242
Purchase of DP system and issuance of note payable 1,403,181 --
Equipment acquired with capital lease -- 271,072
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE> 7
PHOENIX NETWORK, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - FINANCIAL STATEMENTS
The accompanying unaudited financial statements have been prepared in accordance
with the instructions to Form 10-Q and 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. These statements should be read in conjunction with the financial
statements and notes thereto included in the Registrant's Form 10-K for year
ended December 31, 1996.
The accompanying unaudited financial statements have also been prepared assuming
that the Company will continue as a going concern. The company has incurred
recurring operating losses and has an accumulated deficit. These conditions
raise concerns about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are described in the Liquidity and
Capital Resources section of the Form 10-Q. The unaudited financial statements
do not include any adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and classification of
liabilities that may result from the outcome of this uncertainty.
7
<PAGE> 8
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
For the quarter ended September 30, 1997 revenues decreased to $18,652,168
compared with revenues of $24,632,336 for the comparable period of the prior
year. The decrease was due to an overall decrease in billed minutes of 16% and a
drop in the average revenue per minute of approximately 9.9%. As a result of an
overall decline in retail rates and price sensitivity in the telecommunications
industry the Company has had to offer more competitively priced services to its
customers. For the nine month period billed minutes decreased by 14.8% from the
comparable period of the prior year, with the average rate per minutes down by
10%.
Cost of revenues for the three months ended September 30, 1997 decreased to
$13,550,479 from $17,772,764 in the prior year's period which, as a percentage
of revenue, increased slightly to 72.6% compared to 72.2% for the prior year's
period. For the nine month period, cost of revenues increased as a percentage of
revenue to 73.3% from 72.4% for the comparable period of the prior year.
Selling, general and administrative (SG&A) expenses decreased from $7,153,366
for the third quarter of 1996 to $5,895,136 for the third quarter of 1997. For
the nine month period ending September 30, 1997, SG&A expenses also decreased to
$20,010,367 as compared to $22,103,668 for the comparable period last year.
However, as a percentage of revenue, SG&A costs have increased by 2.6 percentage
points between third quarter 1996 and third quarter 1997. For the nine month
period ended September 30, 1997, these costs as a percentage of revenue have
increased by 5.1 percentage points over the comparable period of the prior year.
Depreciation and amortization expense decreased from $1,040,978 in the quarter
ended September 30, 1996 to $1,026,804 in the quarter ended September 30, 1997.
These costs also decreased from $3,240,167 in the nine month period ended
September 30, 1996 to $2,960,668 in the nine month period ended September 30,
1997. The decrease resulted primarily from the writedown of prepaid
telemarketing commissions at year end. However, as a percentage of revenue these
costs increased slightly from the prior year periods by 1.3% for the quarter and
by 0.8 percent for the nine month period.
8
<PAGE> 9
Liquidity and Capital Resources
Cash flow from operations for the nine months ended September 30, 1997 resulted
in a net negative cash flow of $3,484,081 compared with a negative cash flow of
$1,659,675 for the same period of the prior year.
During 1997, the Company has been financing its operating losses through the
sale and issuance of convertible preferred stock and the use of a bridge loan
and over-advance from its lender. Year to date, the Company has raised
$5,225,000 in two separate convertible preferred stock sales occurring in April
and July. The Company has a line of credit available through a finance company
allowing for borrowings of up to $10,000,000 based on the Company's trade
receivables. As of September 30, 1997, there was a total of $4,677,920
outstanding under the revolving line, the bridge loan and the over-advance.
Given its history of operating losses and the expectation that the losses will
continue for the forseeable future, the Company will need to raise additional
money to cover its operating losses and continue to support its business. The
Company will attempt to raise the money by either selling additional stock,
expanding its borrowings from its lender or arranging for more flexible payment
terms with its major vendors. There can be no assurance that the Company will be
successful in any of these fundraising efforts.
9
<PAGE> 10
Item 5. Recent Developments
On August 13, 1997 the Company signed a definitive agreement to merge with
MidCom Communications, a publicly traded, Michigan based telecommunications
company. Effective November 5, 1997 Phoenix formally terminated its merger
agreement with MidCom due to contractual breaches and material adverse changes
in MidCom's business. The Company believes that it has no on-going relationship
with or obligation to MidCom. On November 7, 1997 MidCom announced that it had
filed for protection from its creditors under Chapter 11 of the United States
Bankruptcy Code.
On October 31, 1997 the Company terminated seventy of its temporary employees,
contractors and employees, shutting down four sales offices and shrinking its
corporate staff in all departments. The Company made the headcount reductions in
an effort to stem its operating losses and maximize cash flow. The Company
believes that it can sufficiently maintain operations using the reduced staff.
The Company has publicly announced that it is actively seeking a merger partner
and hopes to sign a definitive agreement as soon as possible and close the
transaction as soon as practical.
10
<PAGE> 11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
<TABLE>
<S> <C>
3.1 -- Restated Certificate of Incorporation of the Company(1)
3.2 -- Bylaws of the Company(1)
10.1 -- 1989 Stock Option Plan(2)
10.2 -- Forms of option grant pursuant to the 1989 Stock Option Plan(3)
10.3 -- 1992 Non-Employee Directors' Stock Option Plan, as Amended(5)
10.4 -- Form of option grant pursuant to the 1992 Non-Employee Directors' Stock Option Plan(5)
10.5 -- Sublease and Consent between the Company and Richard Goldman & Co. relating to the
premises at One Maritime Plaza, San Francisco, CA(4)
10.6 -- Amended and Restated Loan and Security Agreement, among the Company, Phoenix
Network Acquisition Corp., Americonnect, Inc. and Foothill Capital Corporation, dated
September 26, 1995 (the "Original Foothill Agreement")(10)
10.7 -- Amendment Number One to the Original Foothill Agreement, dated October 17, 1996(10)
10.8 -- Amendment Number Two to the Original Foothill Agreement, dated December 23, 1996(10)
10.9 -- Amendment Number Three to the Original Foothill Agreement, dated March 12, 1997(10)
10.10 -- Amendment Number Four to the Original Foothill Agreement, dated March 28, 1997(12)
10.11 -- Office Lease Agreement with Itel Rail Corporation, dated June 8, 1994(8)
10.12 -- Communications Services Agreement, between the Company and US ONE Communications
Corp., dated May 22, 1996 (the "Original US ONE Agreement")(6)
10.13 -- Amendment No. 1 to the Original US ONE Agreement, dated October 11, 1996(10)
10.14 -- Amendment No. 2 to the Original US ONE Agreement, dated October 11, 1996(10)
10.15 -- Amendment No. 3 to the Original US ONE Agreement, dated January 3, 1997(10)
10.16 -- Amendment No. 4 to the Original US ONE Agreement, dated December 30, 1996(10)
10.17 -- Amendment No. 5 to the Original US ONE Agreement, dated March 26, 1997(10)
10.18 -- Amendment No. 6 to the Original US ONE Agreement, dated June 21, 1997(12)
10.19 -- Telecommunications Services Agreement, between the Company and Comdisco Disaster
Recovery Services, a Division of Comdisco, Inc., dated March 25, 1996(6)
10.20 -- Employment Agreement, between the Company and Wallace M. Hammond, dated January
1, 1996(10)
10.21 -- Employment Agreement, between the Company and Jon Beizer, dated February 1, 1997(12)
10.22 -- Warrant to Purchase 200,000 Shares of Common Stock issued to Foothill Capital
Corporation, dated as of March 12, 1997(11)
11.1 -- Computation of earnings per share(9)
18.1 -- Letter re change in accounting principles(7)
27.1 -- Financial Data Schedule
</TABLE>
- ----------
(1) Filed as an Exhibit to the Company's Registration Statement on Form
S-3 (file no. 333-20923), as filed with the Commission on January 31,
1997, and amended on Form S-3/A on February 12, 1997, and incorporated
herein by reference.
(2) Filed as an Exhibit to the Company's Quarterly Report on Form 10-Q for
the quarter ended October 31, 1990, and incorporated herein by
reference.
(3) Filed as an Exhibit to the Company's Annual Report on Form 10-K for
the fiscal year ended April 30, 1990, and incorporated herein by
reference.
(4) Filed as an Exhibit to the Company's Quarterly Report on Form 10-Q for
the quarter ended July 31, 1990, and incorporated herein by reference.
(5) Filed as an Exhibit to the Company's Annual Report on Form 10-K for
the year ended December 31, 1992, and incorporated herein by
reference.
(6) Filed as an Exhibit to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1996, and incorporated herein by reference.
(7) Filed as an Exhibit to the Company's Annual Report on Form 10-K for
the year ended December 31, 1994, and incorporated herein by
reference.
(8) Filed as an Exhibit to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1994, and incorporated herein by reference.
(9) This data appears in the Consolidated Statement of Operations included
in the Company's Consolidated Financial Statements.
(10) Filed as an Exhibit to the Company's Annual Report on Form 10-K for
the year ended December 31, 1996, and incorporated herein by
reference.
(11) Filed as an Exhibit to the Company's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1997, and incorporated herein by
reference.
(12) Filed as an Exhibit to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1997, and incorporated herein by reference.
(b) Reports on Form 8-K: See the Company's Current Reports on Form
8-K as filed with the Securities and Exchange Commission on July 10, 1997, July
17, 1997 and September 2, 1997.
11
<PAGE> 12
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.
PHOENIX NETWORK, INC.
--------------------------------
(Registrant)
Date 11/14/97 /s/ Wallace M. Hammond
--------------------------------
Wallace M. Hammond
Chief Executive Officer
Date 11/14/97 /s/ Jon Beizer
--------------------------------
Jon Beizer
Chief Financial Officer
(Chief Accounting Officer)
12
<PAGE> 13
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<S> <C>
3.1 -- Restated Certificate of Incorporation of the Company(1)
3.2 -- Bylaws of the Company(1)
10.1 -- 1989 Stock Option Plan(2)
10.2 -- Forms of option grant pursuant to the 1989 Stock Option Plan(3)
10.3 -- 1992 Non-Employee Directors' Stock Option Plan, as Amended(5)
10.4 -- Form of option grant pursuant to the 1992 Non-Employee Directors' Stock Option Plan(5)
10.5 -- Sublease and Consent between the Company and Richard Goldman & Co. relating to the
premises at One Maritime Plaza, San Francisco, CA(4)
10.6 -- Amended and Restated Loan and Security Agreement, among the Company, Phoenix
Network Acquisition Corp., Americonnect, Inc. and Foothill Capital Corporation, dated
September 26, 1995 (the "Original Foothill Agreement")(10)
10.7 -- Amendment Number One to the Original Foothill Agreement, dated October 17, 1996(10)
10.8 -- Amendment Number Two to the Original Foothill Agreement, dated December 23, 1996(10)
10.9 -- Amendment Number Three to the Original Foothill Agreement, dated March 12, 1997(10)
10.10 -- Amendment Number Four to the Original Foothill Agreement, dated March 28, 1997(12)
10.11 -- Office Lease Agreement with Itel Rail Corporation, dated June 8, 1994(8)
10.12 -- Communications Services Agreement, between the Company and US ONE Communications
Corp., dated May 22, 1996 (the "Original US ONE Agreement")(6)
10.13 -- Amendment No. 1 to the Original US ONE Agreement, dated October 11, 1996(10)
10.14 -- Amendment No. 2 to the Original US ONE Agreement, dated October 11, 1996(10)
10.15 -- Amendment No. 3 to the Original US ONE Agreement, dated January 3, 1997(10)
10.16 -- Amendment No. 4 to the Original US ONE Agreement, dated December 30, 1996(10)
10.17 -- Amendment No. 5 to the Original US ONE Agreement, dated March 26, 1997(10)
10.18 -- Amendment No. 6 to the Original US ONE Agreement, dated June 21, 1997(12)
10.19 -- Telecommunications Services Agreement, between the Company and Comdisco Disaster
Recovery Services, a Division of Comdisco, Inc., dated March 25, 1996(6)
10.20 -- Employment Agreement, between the Company and Wallace M. Hammond, dated January
1, 1996(10)
10.21 -- Employment Agreement, between the Company and Jon Beizer, dated February 1, 1997(12)
10.22 -- Warrant to Purchase 200,000 Shares of Common Stock issued to Foothill Capital
Corporation, dated as of March 12, 1997(11)
11.1 -- Computation of earnings per share(9)
18.1 -- Letter re change in accounting principles(7)
27.1 -- Financial Data Schedule
</TABLE>
- ----------
(1) Filed as an Exhibit to the Company's Registration Statement on Form
S-3 (file no. 333-20923), as filed with the Commission on January 31,
1997, and amended on Form S-3/A on February 12, 1997, and incorporated
herein by reference.
(2) Filed as an Exhibit to the Company's Quarterly Report on Form 10-Q for
the quarter ended October 31, 1990, and incorporated herein by
reference.
(3) Filed as an Exhibit to the Company's Annual Report on Form 10-K for
the fiscal year ended April 30, 1990, and incorporated herein by
reference.
(4) Filed as an Exhibit to the Company's Quarterly Report on Form 10-Q for
the quarter ended July 31, 1990, and incorporated herein by reference.
(5) Filed as an Exhibit to the Company's Annual Report on Form 10-K for
the year ended December 31, 1992, and incorporated herein by
reference.
(6) Filed as an Exhibit to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1996, and incorporated herein by reference.
(7) Filed as an Exhibit to the Company's Annual Report on Form 10-K for
the year ended December 31, 1994, and incorporated herein by
reference.
(8) Filed as an Exhibit to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1994, and incorporated herein by reference.
(9) This data appears in the Consolidated Statement of Operations included
in the Company's Consolidated Financial Statements.
(10) Filed as an Exhibit to the Company's Annual Report on Form 10-K for
the year ended December 31, 1996, and incorporated herein by
reference.
(11) Filed as an Exhibit to the Company's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1997, and incorporated herein by
reference.
(12) Filed as an Exhibit to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1997, and incorporated herein by reference.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,068,102
<SECURITIES> 0
<RECEIVABLES> 12,920,949
<ALLOWANCES> 756,311
<INVENTORY> 0
<CURRENT-ASSETS> 14,183,900
<PP&E> 9,665,496
<DEPRECIATION> 3,437,238
<TOTAL-ASSETS> 40,965,453
<CURRENT-LIABILITIES> 22,726,310
<BONDS> 0
165
0
<COMMON> 30,304
<OTHER-SE> 16,504,359
<TOTAL-LIABILITY-AND-EQUITY> 40,965,453
<SALES> 0
<TOTAL-REVENUES> 18,652,168
<CGS> 13,550,479
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 6,262,732
<LOSS-PROVISION> 659,208
<INTEREST-EXPENSE> 252,918
<INCOME-PRETAX> (2,073,169)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,073,169)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,073,169)
<EPS-PRIMARY> 0
<EPS-DILUTED> (0.07)
</TABLE>
