<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(MARK ONE)
[X] QUARTERLY REPORT UNDER SECTIONS 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
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: 0-25940
VIEW TECH, INC.
(Exact name of small business issuer as specified in its charter)
CALIFORNIA 77-0312442
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
950 FLYNN ROAD
CAMARILLO, CA 93012
(Address of Principal Executive Offices) (Zip Code)
Issuer's Telephone Number, Including Area Code: (805) 482-8277
N/A
(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)
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 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 of the registrant's Common Stock outstanding, as of May 9,
1996, was 2,885,200.
Transitional Small Business Disclosure Format (Check one): Yes ___ No X
---
================================================================================
<PAGE>
VIEW TECH, INC.
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE REFERENCE
--------------
<S> <C> <C>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Balance Sheets
March 31, 1996 and June 30, 1995 1
Statements of Operations
Three Months and Nine Months Ended March 31, 1996 and 1995 2
Statements of Cash Flows
Nine Months Ended March 31, 1996 and 1995 3
Notes to Financial Statements 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION 6
PART II OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
</TABLE>
i
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VIEW TECH, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
March 31, June 30,
1996 1995
----------- ----------
<S> <C> <C>
(Unaudited)
Current Assets:
Cash and cash equivalents $1,472,243 $4,987,939
Accounts receivable (net allowance for doubtful
accounts of $17,756 and $0, respectively) 4,143,106 2,344,544
Note receivable 265,000 --
Inventory 1,006,153 492,098
Other current assets 735,464 74,210
---------- ----------
Total Current Assets 7,621,966 7,898,791
Property and equipment, net 754,060 141,556
Other assets 30,865 18,483
---------- ----------
$8,406,891 $8,058,830
========== ==========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities:
Accounts payable $2,505,856 $1,607,788
Income tax payable -- 252,924
Note payable -- 331,466
Other current liabilities 397,191 283,413
---------- ----------
Total Current Liabilities 2,903,047 2,475,591
---------- ----------
Long-Term Liabilities 272,416 4,356
---------- ----------
Stockholders' Equity:
Preferred stock, par value $.01, authorized
5,000,000 shares, none issued or outstanding -- --
Common stock, par value $.01, authorized
10,000,000 shares, issued and outstanding
2,885,200 and 2,856,000 shares at
March 31, 1996 and June 30, 1995, respectively 28,852 28,560
Paid-in capital 5,251,410 5,285,494
Retained earnings (48,834) 264,829
---------- ----------
5,231,428 5,578,883
---------- ----------
$8,406,891 $8,058,830
========== ==========
</TABLE>
See accompanying notes to financial statements.
1
<PAGE>
VIEW TECH, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------- -------------------------
March 31, March 31, March 31, March 31,
1996 1995 1996 1995
----------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
Revenues $3,881,894 $1,437,039 $8,547,200 $4,812,550
Cost of Revenues 2,615,990 866,003 5,768,677 3,001,498
---------- ---------- ---------- ----------
Gross Profit 1,265,904 571,036 2,778,523 1,811,052
---------- ---------- ---------- ----------
Operating Expenses:
Selling expenses 416,312 184,779 1,039,880 479,302
General and administrative 887,167 300,223 2,322,467 867,407
---------- ---------- ---------- ----------
1,303,479 485,002 3,362,347 1,346,709
---------- ---------- ---------- ----------
Income (Loss) from Operations (37,575) 86,034 (583,824) 464,343
Other Income 20,274 12,730 105,978 17,251
---------- ---------- ---------- ----------
Income (Loss) Before Income Taxes (17,301) 98,764 (477,846) 481,594
Provision for Income Taxes 3,697 (49,113) 164,183 (179,980)
---------- ---------- ---------- ----------
Net Income (Loss) $ (13,604) $ 49,651 $ (313,663) $ 301,614
========== ========== ========== ==========
Earnings (Loss) Per Share $ (0.00) $ 0.03 $ (0.11) $0.18
========== ========== ========== ==========
Weighted Average
Shares Outstanding 2,873,683 1,714,960 2,864,978 1,714,960
========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
2
<PAGE>
VIEW TECH, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended March 31,
---------------------------
1996 1995
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (313,663) $ 301,614
Adjustments to reconcile net income (loss) to
net cash from operating activities:
Depreciation and amortization 105,097 48,851
Provision for bad debts 17,756 --
Changes in assets and liabilities:
Accounts receivable (1,816,318) (372,703)
Inventory (514,055) (235,452)
Prepaids and other assets (673,639) (133,298)
Accounts payable 898,068 139,394
Other accrued liabilities (220,084) 168,417
----------- ---------
Net cash used by operating activities (2,516,838) (83,177)
----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (322,161) (49,548)
Short-term loan to PDS (265,000) --
----------- ---------
Net cash used by investing activities (587,161) (49,548)
----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments on capital lease obligations (46,442) (44,440)
Repayment of long-term debt (331,466) (20,972)
Issuance of common stock 9,641 --
Draw on line of credit -- 200,000
Additional costs for initial public offering
of common stock (43,430) --
----------- ---------
Net cash provided (used) by financing activities (411,697) 134,588
----------- ---------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (3,515,696) 1,863
CASH AND CASH EQUIVALENTS, beginning of period 4,987,939 187,268
CASH AND CASH EQUIVALENTS, end of period $ 1,472,243 $ 189,131
=========== =========
SUPPLEMENTAL DISCLOSURES:
Operating activities reflect:
Interest paid $ 32,006 $ 38,137
=========== =========
Income taxes paid $ 116,028 $ 800
=========== =========
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
VIEW TECH, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - GENERAL
- - ----------------
View Tech, Inc. markets, integrates and installs video communications
systems and provides continuing services related to installed systems.
The information for the three and nine month periods ended March 31, 1996
and 1995 have not been audited by independent accountants, but includes all
adjustments (consisting of normal recurring accruals) which are, in the opinion
of management, necessary for a fair presentation of the results for such
periods.
The Company has reclassified travel expenses relating to technical services
of $15,111 and $38,998, respectively, to cost of revenues from general and
administrative expenses for the three and nine month periods ended March 31,
1995 to conform to the current year's presentation.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted pursuant to the rules of the Securities and Exchange
Commission, although the Company believes that the disclosures included in these
financial statements are adequate to make the information not misleading. The
financial statements presented herein should be read in conjunction with the
audited financial statements and notes thereto included in the Company's Annual
Report on Form 10-KSB for the fiscal year ended June 30, 1995.
NOTE 2 - NET INCOME PER SHARE
- - -----------------------------
Net income per share is computed by dividing net income by the weighted
average number of shares of common stock outstanding during the period,
including common stock options and common stock purchase warrants when dilutive.
NOTE 3 - NOTE RECEIVABLE
- - ------------------------
During February and March 1996, the Company advanced an aggregate of
$265,000 to Power-Data Services, Inc. ("PDS") to meet some of its working
capital needs (see Note 5). The note is unsecured and provides for interest at
10% per annum. The principal and accrued interest are due on May 31, 1996,
although the Company is in the process of amending the note to extend the due
date to July 31, 1996.
4
<PAGE>
VIEW TECH, INC.
NOTES TO FINANCIAL STATEMENTS
(continued)
NOTE 4 - LINE OF CREDIT
- - -----------------------
In June 1995, the Company established a $500,000 credit facility (the
"Note") to meet its working capital needs, if required. The Note expires on
November 1, 1996 and provides for interest at the prime rate plus one and one-
half percent per year. Funds available under the Note are reduced by outstanding
standby letters of credit issued on behalf of the Company. No amounts were
outstanding under the Note at March 31, 1996, although the Company had as of
March 31, 1996, four outstanding standby letters of credit aggregating $250,000,
issued in favor of one leasing company in order to obtain more favorable
financing rates in connection with certain capital lease transactions relating
to the purchase of computer equipment and furniture. The leasing company may
draw against the letters of credit if the Company fails to make timely payments
or fails to renew such letters of credit in an amount equal to 80% of the
principal amount outstanding under such leases. In connection with the four
standby letters of credit, the balance available under the Note has been reduced
to $250,000.
NOTE 5 - POTENTIAL BUSINESS ACQUISITION
- - ---------------------------------------
On October 31, 1995, the Company signed a letter of intent to acquire PDS.
PDS, a Texas based company, specializes in the design, integration, and support
of video and data-based communications products and services. Although the
initial letter of intent has expired, the Company and PDS are continuing to
negotiate the terms, conditions and structure of this business combination.
Completion of this business combination is subject to the approval of the
Company's shareholders, the Company's and PDS's respective boards of directors,
and execution of a definitive agreement.
5
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The following discussion should be read in conjunction with the financial
statements and the notes thereto appearing elsewhere in this Form 10-QSB.
GENERAL
The Company markets, integrates and installs video communications systems
and provides continuing services relating to installed systems.
In August 1995, the Company reached a new sales and service agreement with
its primary supplier, PictureTel Corporation ("PictureTel"), a leading
manufacturer of videoconferencing equipment. The agreement substantially
expanded the scope of the Company's business and its existing sales territory.
The agreement has a term of five years and allows the Company to market and
service PictureTel products in the states of Georgia, Texas, Mississippi,
Tennessee, Colorado, Oklahoma, Alabama, Louisiana and Arkansas. Prior to August
1995, the Company operated under a sales and service dealer agreement covering
Los Angeles, Orange, San Diego, Ventura, Riverside, San Bernardino, Kern, San
Luis Obispo, and Santa Barbara counties in the State of California.
In connection with the new agreement, the Company has established full-
service offices in Atlanta, Georgia; Denver, Colorado; and Dallas, Texas and a
sales office in Nashville, Tennessee. The costs of staffing and operating the
full service offices during fiscal 1996 is expected to range from $300,000 to
$600,000, depending on the levels of personnel and other business
considerations. The Company has increased its staffing levels at its various
locations and has experienced an overall increase in operating expenses over the
past several months in connection with its expansion program. This condition has
resulted, in part, in the Company incurring a net loss of $13,604 and $313,663
for the three and nine month periods ended March 31, 1996, respectively. In
connection with the Company's expansion program, the Company hired 27 additional
employees with related aggregate payroll costs and expenses for the three and
nine month periods ended March 31, 1996 of approximately $465,000, and $1.026
million, respectively, excluding commissions, and has incurred additional
marketing costs and general and administrative expenses. Although management
anticipates that the revenues generated by such offices will exceed such costs
for the fiscal year ending June 30, 1996, there can be no assurance that such
results will be achieved. To the extent the Company experiences delays in order
deliveries by vendors and/or competitive pressures relating to the pricing of
the Company's products and services then, sales, gross margins and profitability
will be adversely affected.
On October 31, 1995, the Company signed a letter of intent to acquire Power-Data
Services, Inc. ("PDS"). PDS, a Texas based company, specializes in the design,
integration, and support of video and data-based communications products and
services. Although the initial letter of intent has expired, the Company and
PDS are continuing to negotiate the terms, conditions and structure of this
business combination. Completion of this transaction is subject to the approval
of the Company's shareholders, the Company's and PDS's respective boards of
directors, and execution of a definitive agreement.
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION
(continued)
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, information
derived from the Company's financial statements expressed as a percentage of the
Company's revenues:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
------------------ ------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues............................... 100.0% 100.0% 100.0% 100.0%
Cost of revenues....................... 67.4 60.2 67.5 62.4
----- ----- ----- -----
Gross profit........................... 32.6 39.8 32.5 37.6
----- ----- ----- -----
Operating expenses:
Selling expenses..................... 10.7 12.9 12.2 10.0
General and administrative expenses.. 22.9 20.9 27.2 18.0
----- ----- ----- -----
Total operating expenses............... 33.6 33.8 39.4 28.0
----- ----- ----- -----
Income (loss) from operations.......... (1.0) 6.0 (6.9) 9.6
Other income (expense)................. 0.5 0.9 1.2 0.4
----- ----- ----- -----
Income (loss) before income taxes...... (0.5) 6.9 (5.7) 10.0
Provision for income taxes............. 0.1 (3.4) 1.9 (3.7)
----- ----- ----- -----
Net income (loss)...................... (0.4)% 3.5% (3.8)% 6.3%
===== ===== ===== =====
</TABLE>
Three Months Ended March 31, 1996 Compared to Three Months Ended March 31, 1995
Revenues for 1996 increased $2.445 million or 170.1% to $3.882 million from
$1.437 million in 1995. The increase in revenues was primarily related to
increased marketing efforts, including expansion of the sales and marketing
forces to 14 compared to nine people at March 31, 1995 and an increase in
installation and maintenance revenues of $228,662 for 1996.
Gross profit for 1996 increased $694,868 or 121.7% to $1.266 million from
$571,036 in 1995. Gross profit as a percentage of revenues, or gross
margin, decreased to 32.6% in 1996 from 39.8% in 1995. The decrease in gross
margin is directly related to a decrease in profit margin on equipment sales of
approximately 3.4%, increases in salaries and related expenses of $134,653 for
technical services personnel and freight costs of $16,446 for 1996. The decrease
in profit margin on equipment sales primarily relates to increased competitive
pressures within the industry resulting in lower selling prices. The technical
services and training staff increased from five at March 31, 1995 to 16 at March
31, 1996. In addition, technical service costs increased at a greater rate than
technical service revenues during the period. Service and other revenues, as a
percentage of total revenues, decreased from 20% in 1995 to 14.7% in 1996.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION
(continued)
Selling expenses increased $231,533 or 125.3% to $416,312 in 1996 from
$184,779 in 1995. Selling expenses as a percentage of revenues decreased from
12.9% in 1995 to 10.7% in 1996. The dollar increase in selling expenses is
primarily due to the increase in the number of sales personnel from nine at
March 31, 1995 to 14 at March 31, 1996, resulting in increased salaries and
commission expenses associated with higher levels of sales. The decrease in
selling expenses as a percentage of revenues is due to the fact that selling
expenses grew at a lesser rate than the Company's revenues.
General and administrative expenses increased $586,944 or 195.6% to
$887,167 in 1996 from $300,223 in 1995. General and administrative expenses as a
percentage of total revenues increased to 22.9% in 1996 from 20.9% in 1995. The
dollar increase in general and administrative expenses was primarily
attributable to increases in administrative salaries and related costs of
$174,795, office and equipment rents of $115,376, telephone and electronic
communication costs of $75,483, professional fees of $47,054, and an overall
increase in other general office expenses, primarily related to the Company's
expansion program and to higher sales volume. These expenses increased as a
percentage of revenues because the rate of increase in such expenses was greater
than the rate of increase in revenues primarily as a result of the Company's
expansion program discussed above.
Income (loss) from operations decreased $123,609 to a loss of $37,575 in
1996 compared to operating income of $86,034 in 1995. Income (loss) from
operations as a percentage of revenues decreased to (1.0)% for 1996 compared to
6.0% for 1995. The overall decrease in income from operations for 1996 is
primarily attributable to the increase in expenses related to the Company's
expansion program discussed above.
Other income (expense) increased $7,544 to $20,274 in 1996 from $12,730 in
1995. The increase was primarily due to an increase in interest income related
to investments in short-term securities during 1996.
Provision for income tax expense decreased $52,810 to a tax benefit of
$3,697 in 1996 from a tax expense of $(49,113) for 1995. The decrease in income
tax expense relates to the pre-tax loss of $17,301 for 1996. The Company expects
to fully realize the $3,697 tax benefit in future periods.
Net income (loss) decreased $63,255 to a loss of $13,604 in 1996 from net
income of $49,651 for 1995. Net income as a percentage of revenues decreased to
(0.4)% for 1996 compared to net income of 3.5% for 1995. Net income (loss) per
share decreased to $(0.00) for 1996 compared to net income of $0.03 for 1995.
The weighted average number of shares outstanding increased to 2,873,683 for
1996 from 1,714,960 in 1995.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION
(continued)
Nine Months Ended March 31, 1996 Compared to Nine Months Ended March 31, 1995
Revenues for 1996 increased $3.735 million or 77.6% to $8.547 million from
$4.813 million in 1995. The increase in revenues was primarily related to
increased marketing efforts, including expansion of the sales and marketing
forces to 14 compared to nine people at March 31, 1995 and an increase in
installation and maintenance revenues of $563,612 for 1996.
Gross profit for 1996 increased $967,471 or 53.4% to $2.779 million from
$1.811 million in 1995. Gross profits as a percentage of revenues, or gross
margin, decreased to 32.5% in 1996 from 37.6% in 1995. The decrease in gross
margin is directly related to a decrease in profit margin on equipment sales of
approximately 2.1%, increases in salaries and related expenses of $274,884 for
technical services personnel and freight costs of $59,453 for 1996. The decrease
in profit margin or equipment sales primarily relates to increased competitive
pressures within the industry resulting in lower selling prices. In addition,
technical service costs increased at a greater rate than service revenues during
the period. The technical services and training staff increased from five at
March 31, 1995 to 16 at March 31, 1996. Service and other revenues as a
percentage of total revenues increased from 15.5% in 1995 to 16.7% in 1996.
Selling expenses increased $560,578 or 117.0% to $1.040 million in 1996
from $479,302 in 1995. Selling expenses as a percentage of revenues increased to
12.2% in 1996 from 10.0% in 1995. The dollar increase in selling expenses is
primarily due to the increase in the number of sales personnel from nine at
March 31, 1995 to 14 at March 31, 1996, resulting in increased salaries and
commission expenses associated with higher level of sales. The increase in
selling expenses as a percentage of revenues is due to the fact that selling
expenses grew at a greater rate than revenues primarily as a result of the
Company's expansion program discussed above.
General and administrative expenses increased $1.455 million or 167.8% to
$2.322 million in 1996 from $867,407 in 1995. General and administrative
expenses as a percentage of total revenues increased to 27.2% for 1996 compared
to 18.0% for 1995. The dollar increase in general and administrative expenses
was primarily attributable to increases in administrative salaries and related
costs of $395,687, professional fees of $148,110, office and equipment rents of
$236,463, telephone and electronic communication costs of $172,743, and to an
overall increase in other general office expenses, primarily related to the
Company's expansion program. These expenses increased as a percentage of
revenues because the rate of increase in such expenses was greater than the rate
of increase in revenues primarily as a result of the Company's expansion program
discussed above.
Income (loss) from operations decreased $1.048 million to a loss of
$583,824 in 1996 compared to operating income of $464,343 in 1995. Income (loss)
from operations as a percentage of revenues decreased to (6.9)% for 1996
compared to 9.6% for 1995. The overall decrease in income from operations for
1996 is primarily attributable to the increase in expenses related to the
Company's expansion program discussed above.
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION
(continued)
Other income (expense) increased $88,727 to $105,978 in 1996 from $17,251
in 1995. The increase was primarily due to an increase in interest income of
$102,469 related to investments in short term securities during 1996.
Provision for income tax expense decreased $344,163 to a tax benefit of
$164,183 in 1996 from a tax expense of $179,980 for 1995. The decrease in income
tax expense relates to the pre-tax loss of $477,846 during 1996. The Company
expects to fully realize the $164,183 tax benefit in future periods.
Net income decreased $615,277 to a loss of $313,663 in 1996 from net income
of $301,614 for 1995. Net income as a percentage of revenues decreased to (3.8)%
for 1996 compared to income of 6.3% for 1995. Net income (loss) per share
decreased to $(0.11) for 1996 compared to net income of $0.18 per share for
1995. The weighted average number of shares outstanding increased to 2,864,978
in 1996 from 1,714,960 for 1995.
LIQUIDITY AND CAPITAL RESOURCES
Prior to the completion of the initial public offering in June 1995, the
Company had financed its activities with a combination of long-term borrowings,
cash flow from operations, vendor credit arrangements, and a short-term line of
credit.
Net cash used for operating activities in 1996 and 1995 was $2,516,838 and
$83,177, respectively. The primary uses of cash in 1996 were increases in
accounts receivable, inventories, and prepaids and other assets of $1,816,318,
$514,055, and $673,639, respectively, and a decrease in accrued liabilities of
$220,084. The uses of cash, in part, reflect the Company's higher sales volume
during 1996 compared to 1995. Sources of cash from operating activities were
related to an increase in accounts payable of $898,068.
Net cash used for investing activities in 1996 was $587,161, relating to
the purchase of office furniture and computer equipment for $322,161 and a
short-term working capital loan of $265,000 to PDS. The Company presently
anticipates that its capital expenditures for the remainder of 1996 will be
approximately $150,000, principally for demonstration and computer equipment.
Net cash used for financing activities in 1996 was $411,697, primarily
representing the repayment of debt and capital lease obligations of $377,908 and
the payment of additional costs of $43,430 related to the Company's initial
public offering in June 1995.
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION
(continued)
In June 1995, the Company established a $500,000 credit facility (the
"Note") to meet its working capital needs, if required. The Note expires on
November 1, 1996 and provides for interest at the prime rate plus one and one-
half percent per year. Funds available under the Note are reduced by outstanding
standby letters of credit issued on behalf of the Company. No amounts were
outstanding under the Note at March 31, 1996, although the Company had as of
March 31, 1996, four outstanding standby letters of credit aggregating $250,000,
issued in favor of one leasing company in order to obtain more favorable
financing rates in connection with certain capital lease transactions relating
to the purchase of computer equipment and furniture. The leasing company may
draw against the letters of credit if the Company fails to make timely payments
or fails to renew such letters of credit in an amount equal to 80% of the
principal amount outstanding under such leases. In connection with the four
standby letters of credit, the balance available under the Note has been reduced
to $250,000.
The Company's primary supplier, PictureTel Corporation, provides the
Company with a purchasing line of credit and requires the Company to maintain a
letter of credit for $250,000 in favor of PictureTel in connection with this
arrangement.
On October 31, 1995, the Company signed a letter of intent to acquire PDS.
PDS, a Texas based company, specializes in the design, integration, and support
of video and data-based communications products and services. Although the
initial letter of intent has expired, the Company and PDS are continuing to
negotiate the terms, conditions and structure of this business combination.
Completion of this business combination is subject to the approval of the
Company's shareholders, the Company's and PDS's respective boards of directors
and execution of a definitive agreement.
During February and March 1996, the Company advanced an aggregate of
$265,000 to PDS to meet some of its working capital needs. The note is unsecured
and provides for interest at 10% per annum. The principal and accrued interest
are due on May 31, 1996, although the Company is in the process of amending the
note to extend the due date to July 31, 1996.
The Company believes that its existing cash balances, combined with
anticipated operating cash flow and borrowings under existing and anticipated
credit facilities, will be adequate to meet the Company's on-going cash needs,
excluding the cash required to complete the business combination with PDS, for
the next twelve months. The Company is currently seeking private debt and/or
equity financing for purposes of meeting anticipated cash needs, primarily to
provide working capital to PDS, in connection with this business combination.
There can be no assurance that the Company will be able to raise additional
financing on favorable terms, if at all, or that it will be able to do so on a
timely basis. Inability to obtain required additional financing could limit the
Company's ability to complete this business combination and/or to efficiently
operate the combined companies.
11
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.13 Revolving Note with City National Bank, dated February 20,
1996.
10.14 Loan Agreements with Power-Data Services, Inc., dated
February 15, 1996 and March 22, 1996.
(b) Reports on Form 8-K
None
12
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
VIEW TECH, INC.
Date: May 13, 1996 By: /s/ William M. McKay
--------------------------
William M. McKay
Chief Financial Officer
(Principal Financial and
Accounting Officer)
13
<PAGE>
SUPPLEMENTAL TERMS LETTER
February 20, 1996
VIEW TECH, INC.
950 Flynn Road, Suite F
Camarillo, CA 93012
Attention: Robert Hatfield, CEO
RE: REVOLVING NOTE DATED FEBRUARY 20, 1996, IN THE ORIGINAL PRINCIPAL SUM
OF $500,000.00 ("NOTE") EXECUTED BY VIEW TECH, INC., A CALIFORNIA
CORPORATION ("BORROWER") IN FAVOR OF CITY NATIONAL BANK, A NATIONAL
BANKING ASSOCIATION ("CNB")
Dear Robert:
This is to confirm that CNB will extend the credit facility more completely
described in the enclosed Note, subject to the additional terms and conditions
set forth herein. Capitalized terms not defined in this letter have the meanings
given them in the Note. This letter is hereby incorporated into the Note (this
letter and the Note, collectively, the "Note").
A. ADDITIONAL EVENTS OF DEFAULT.
The following shall constitute additional Events of Default under the Note:
1. Failure of Borrower to furnish CNB, within the times specified, the
following statements:
1.1 Within forty-five (45) days after the end of each quarterly
accounting period of each fiscal year, a financial statement
consisting of not less than a balance sheet, and income
statement, with notes thereto, prepared in accordance with
generally accepted accounting principles consistently applied,
which financial statement may be internally prepared;
1.2 Within ninety (90) days after the close of each fiscal year, a
copy of the annual audit report for such year for Borrower and
the Subsidiaries including therein a balance sheet, income
statement, reconciliation of net worth and statement of cash
flows, with notes thereto, the balance sheet, income statement
and statement of cash flows to be audited by a certified public
accountant acceptable to CNB, and certified by such accountants
to
<PAGE>
Robert Hatfield, CEO
View Tech, Inc.
February 20, 1996
Page 2
have been prepared in accordance with generally accepted
accounting principles consistently applied and accompanied by
Borrower's certification as to whether any event has occurred
which constitutes an Event of Default, and if so, stating the
facts with respect thereto;
1.3 Quarterly reports of agings of Borrower's accounts payable and
accounts receivable, as soon as available, but in no event
later than forty-five (45) days after the end of each fiscal
quarter; and
1.4 Such additional information, reports and/or statements as CNB
may, from time to time, reasonably request;
2. Failure of Borrower to furnish current financial statements of each
guarantor of this Note on CNB's form or in such other form acceptable
to CNB, certified by such guarantor to be true and correct, delivered
within ninety (90) days after Borrower's fiscal year end of each year;
or
2.1 The Federal Income Tax Return and each guarantor of this Note,
within ten (10) days after its filing of each Return,
respectively;
3. Failure of Borrower to maintain the following:
3.1 Tangible Net Worth plus Subordinated Debt of not less than
$5,000,000.00 at all times;
3.2 A ratio of Total Senior Liabilities to Tangible Net Worth plus
Subordinated Debt of not more than 0.75 to 1 at all times; and
3.3 Working Capital of not less than $3,500,000.00 at all times.
B. DEFINITIONS.
For purposes of the Note, the following terms have the following meanings:
"SUBORDINATED DEBT" shall mean indebtedness of Borrower or any Subsidiary,
the repayment of principal and interest of which is subordinated to CNB, on
terms satisfactory to CNB.
"SUBSIDIARY" shall mean any corporation, the majority of whose voting
shares are at any time owned, directly or indirectly by Borrower and/or by one
or more Subsidiaries.
<PAGE>
Robert Hatfield, CEO
View Tech, Inc.
February 20, 1996
Page 3
"TANGIBLE NET WORTH" shall mean the total of all assets appearing on a
balance sheet prepared in accordance with generally accepted accounting
principles consistently applied for Borrower and the Subsidiaries on a
consolidated basis, minus (a) all intangible assets, including, without
limitation, unamortized debt discount, affiliate, employee and officer
receivables or advances, goodwill, research and development costs, patents,
trademarks, the excess of purchase price over underlying values of acquired
companies, any covenants not to compete, deferred charges, copyrights,
franchises and appraisal surplus; minus (b) all obligations which are required
by generally accepted accounting principles consistently applied to be reflected
as a liability on the consolidated balance sheet of Borrower and the
Subsidiaries; minus, (c) the amount, if any, at which shares of stock of a non-
wholly owned Subsidiary appear on the asset side of Borrower's consolidated
balance sheet, as determined in accordance with generally accepted accounting
principles consistently applied; minus (d) minority interests; and minus (e)
deferred income and reserves not otherwise reflected as a liability on the
consolidated balance sheet of Borrower and the Subsidiaries.
"TOTAL SENIOR LIABILITIES" shall mean, as of any date of determination, the
amount of all obligations that should be reflected as a liability on a
consolidated balance sheet of Borrower and the Subsidiaries prepared in
accordance with generally accepted accounting principles consistently applied,
less Subordinated Debt.
"WORKING CAPITAL" shall mean Current Assets minus Current Liabilities.
C. ADDITIONAL TERMS AND CONDITIONS.
The following additional terms and conditions shall also apply to the Note:
1. SWEEP ACCOUNT. Borrower shall grant to CNB a security interest in that
certain City National Bank SEI Government Fund Account No. 82211501 (the "Sweep
Account") by signing that certain Security Agreement (General) of even date
herewith, by Borrower for the benefit of CNB. Within forty-five (45) days
following receipt by CNB of a financial statement of a quarterly accounting
period from Borrower that shows CNB (in the exercise of its reasonable judgment)
that Borrower has made a profit (on a year-to-date basis) for the fiscal year in
which such quarterly accounting period occurs, and provided that no Event of
Default has occurred and remains uncured, CNB shall release its security
interest in the Sweep Account.
2. ENVIRONMENTAL INDEMNIFICATION. Due to the environmentally sensitive
nature of the industry in which Borrower is principally engaged and upon which
CNB will rely as its primary source of repayment, and in consideration of CNB
extending credit to Borrower,
<PAGE>
Robert Hatfield, CEO
View Tech, Inc.
February 20, 1996
Page 4
Borrower has agreed to indemnify CNB against any claims that may arise as a
result of Borrower's business activities that are environmental in nature and
for which CNB may be named as a liable party.
Borrower agrees that it shall indemnify and hold harmless CNB, its parent
company, subsidiaries and all of their respective directors, officers,
employees, agents, successors, attorneys, and assigns from and against any loss,
damage, cost, expense, or liability directly of indirectly arising out of or
attributable to the use, generation, manufacture, production, storage, release,
threatened release, discharge, disposal, or presence of a hazardous substance
on, under, or about Borrower's property or operations or property leased to
Borrower, including but not limited to attorneys' fees (including the reasonable
estimate of the allocated cost of in-house counsel and staff). For these
purposes, the term "hazardous substances" means any substance which is or
becomes designated as "hazardous" or "toxic" under any Federal, state, or local
law. This indemnity shall survive repayment of Borrower's obligations to CNB.
Except for documents and instruments specifically referenced herein or in
the Note, this letter and the Note constitute the entire agreement of the
parties hereto and supersedes any prior or contemporaneous oral or written
agreements, understandings, representations, warranties and negotiations, if
any, which are merged into this letter and the Note. If you agree to accept the
terms of this letter and the Note, please sign the enclosed acknowledgement copy
of this letter, as well as the enclosed Note, and return them to me on or before
March 1, 1996.
Sincerely,
CITY NATIONAL BANK, a national
banking association
By: /s/ BRAD SIMS
----------------------------------------
Brad Sims, Senior Vice President/Manager
By: /s/ GEORGE F. HILL
----------------------------------------
George F. Hill, Vice President
<PAGE>
Robert Hatfield, CEO
View Tech, Inc.
February 20, 1996
Page 5
Accepted and Agreed this 20th day of
-----
February , 1996.
- - -----------------------
VIEW TECH, INC., a
California corporation
By: /s/ ROBERT HATFIELD
----------------------------------------
Robert Hatfield, CEO
CONSENT OF GUARANTORS:
The undersigned have guaranteed the indebtedness of View Tech, Inc., a
California corporation owed to CNB. The undersigned confirms that their
respective guaranties and the security given in connection therewith, if any,
shall continue in full force and effect and that each such guaranty shall be a
separate and distinct obligation and apply to the indebtedness arising from the
Note as amended herein, subject to the overall limitation as to the amount
guaranteed.
/s/ ROBERT HATFIELD
------------------------------------
Robert Hatfield
/s/ JOHN HAMMON
------------------------------------
John Hammon
<PAGE>
Robert Hatfield, CEO
View Tech, Inc.
February 20, 1996
Page 6
The undersigned [has/have] previously guaranteed the indebtedness of [name
of Borrower] owed to CNB. The undersigned confirm[s] that [his/her/its
guaranty/their respective guaranties] and the security given in connection
therewith, if any, shall continue in full force and effect and that [each] such
guaranty shall [be a separate and distinct obligation and] apply to the
indebtedness arising from the [Note/Credit Agreement] as amended herein, subject
to the overall limitation as to the amount guaranteed.
/s/ ROBERT HATFIELD
------------------------------------
[Name of Guarantor No. 1]
/s/ JOHN HAMMON
------------------------------------
[Name of Guarantor No. 2]
CONSENT OF GUARANTORS:
<PAGE>
PROMISSORY NOTE
$200,000.00 Camarillo, California
March 22, 1996
FOR VALUE RECEIVED, POWER-DATA SERVICES, INC., a Texas corporation
(the "Borrower"), promises to pay to the order of VIEW TECH, INC., a California
corporation, its successors and assigns (the "Lender") at 950 Flynn Road,
Camarillo, California 93012, or at such other place as might be designated in
writing by the Lender, the principal sum of Two Hundred Thousand Dollars
($200,000) or so much thereof as has been disbursed by the Lender and remains
unpaid, together with interest thereon at a variable rate equal to the Note Rate
(as hereafter defined) then in effect. The "Note Rate" shall be equal to ten
percent (10%) per annum. Interest will be calculated on the basis of the actual
days elapsed based on a per diem charge computed over a year composed of three
hundred sixty (360) days.
Principal and interest will be paid as follows: Absent default, the
entire unpaid balance of principal and accrued but unpaid interest owing will be
due and payable on May 31, 1996.
Advances, readvances and payments under this Note may, at the option
of the Lender, be recorded on this Note or by deposits and withdrawals from an
account maintained by the Borrower on deposit with the Lender or under the
control of the Lender, either of which will be prima facie evidence of such
advances, payments and the unpaid balance of this Note.
The Borrower will have the right at any time and from time to time to
prepay the unpaid principal balance of this Note in whole or in part without
penalty, but with interest on the unpaid principal balance accrued to the date
of prepayment.
The Borrower agrees that if, and as often as, this Note is placed in
the hands of an attorney for collection or to defend or enforce any of the
Lender's rights under this Note or otherwise relating to the indebtedness hereby
evidenced, the Borrower will pay the Lender's reasonable attorneys' fees, all
court costs and all other expenses incurred by the Lender in connection
therewith. The Lender may collect a late charge equal to five percent (5%) of
each payment which is not received by the Lender within ten (10) days after the
due date of such payment. Such late charge represents the estimate of reasonable
compensation for the loss which will be sustained by the Lender arising from the
Borrower's failure to make timely payments and may be collected without
prejudice to the rights of the Lender to collect any other amounts arising from
the occurrence of an Event of Default. During the existence of any Event of
Default, the Lender may apply payments received on any amount due hereunder or
under the terms of any instrument now or hereafter evidencing or securing
payment of this indebtedness as the Lender determines from time to time.
This Note is issued by the Borrower and accepted by the Lender
pursuant to a lending transaction negotiated, consummated and to be performed in
the states of California and Texas. This Note is to be construed according to
the internal laws of the State of Texas. All actions with respect to this Note
or any other instrument securing payment of this Note will be instituted in a
state or federal court sitting in Ventura County, California subject to the
provisions on arbitration.
1
<PAGE>
Payment of the indebtedness hereby evidenced is secured by certain
security interests described in the Loan and Security Agreement. On the breach
by the Borrower of any provision of this Note or any other instrument now or
hereafter evidencing or securing payment of the indebtedness hereby evidenced or
on the default in payment or performance under any instrument governing,
evidencing or securing payment of a certain loan in the principal amount of Two
Hundred Thousand Dollars ($200,000) made by the Lender to the Borrower of even
date, at the option of the Lender, the entire indebtedness evidenced by this
Note will become immediately due, payable and collectible then or thereafter as
the Lender might elect, regardless of the date of maturity of this Note in
accordance with the provisions of this Note. Failure by the Lender to exercise
such option will not constitute a waiver of the right to exercise the same on
the occurrence of any subsequent Event of Default.
This Note is intended to strictly conform with all usury laws to the
extent applicable to the transactions contemplated hereby. The provisions of
this Note and of all agreements between the Borrower and the Lender are hereby
expressly limited so that in no contingency or event whatsoever, shall the
amount contracted for, charged, paid or agreed to be paid to the Lender for the
use, forbearance or retention of money or credit hereunder or otherwise exceed
the maximum rate permitted by law therefor. If, from any circumstance
whatsoever, performance or fulfillment of any provision hereof or of any
agreement between the Borrower and the Lender shall, at the time of the
execution and delivery thereof, or at the time or performance of such provision
shall be due, involve or purport to require any payment in excess of the limits
prescribed by law, the obligation to be performed or fulfilled shall be reduced
automatically to the limit prescribed by law without the necessity of the
execution of any amendment or new document.
The following events shall be deemed "Events of Default":
A. Nonpayment. The nonpayment when due of any installment of
----------
interest or principal owing under this Note.
B. Breach of Agreement. The failure by the Borrower to perform or
-------------------
observe any written representation, warranty or agreement provided to Lender.
C. Representations and Warranties. Any representation, statement,
------------------------------
certificate, schedule or report made or furnished to the Lender by or on behalf
of the Borrower proves to be false or erroneous in any material respect at the
time of the making thereof or any representation.
D. Insolvency; Bankruptcy. The insolvency (meaning an inability to
----------------------
pay debts as the same become due or the existence of liabilities in excess of
assets) of Borrower, or the institution of bankruptcy, reorganization,
liquidation, receivership or conservatorship proceeding by or against Borrower.
E. Judgment. Entry by any court of a final uninsured judgment
--------
against Borrower which is not discharged or stayed to the satisfaction of the
Lender.
F. Other Debt. The default in payment or acceleration of the
----------
maturity of any indebtedness of Borrower owing to any person, including the
Lender.
G. Adverse Change. The occurrence of a material adverse change in
--------------
the financial condition of Borrower.
H. Ownership and Management. A change in the controlling ownership
------------------------
or management of Borrower shall occur which is unsatisfactory to Lender.
2
<PAGE>
I. Corporate Existence. Any act or omission (formal or informal) of
-------------------
Borrower or their officers, directors or shareholders leading to, or resulting
in, the termination, invalidation (partial or total), revocation, suspension,
interruption or unenforceability of their corporate existences, rights,
licenses, franchises or permits, or the transfer or disposition (whether by
sale, lease or otherwise) to any person of all or a substantial part of their
property.
Lender and Borrower agree that all disputes, claims and controversies
between them, whether individual, joint, or class in nature, arising from this
Note or otherwise, including without limitation contract and tort disputes,
shall be arbitrated pursuant to the Rules of the American Arbitration
Association, upon request of either party, in the County of Ventura, State of
California. Judgment upon any award rendered by any arbitrator may be entered in
any court having jurisdiction. The statute of limitations, estoppel, waiver,
laches, and similar doctrines which would otherwise be applicable in an action
brought by a party shall be applicable in any arbitration proceeding, and the
commencement of an arbitration proceeding shall be deemed the commencement of an
action for these purposes.
IN WITNESS WHEREOF, the Borrower has executed this instrument
effective the date first above written.
Borrower: POWER-DATA SERVICES, INC.
By /s/ MILES KOON
----------------------
Its: CEO
3
<PAGE>
PROMISSORY NOTE
$65,000.00 Camarillo, California
February 15, 1996
FOR VALUE RECEIVED, POWER-DATA SERVICES, INC., a Texas corporation
(the "Borrower"), promises to pay to the order of VIEW TECH, INC., a California
corporation, its successors and assigns (the "Lender") at 950 Flynn Road,
Camarillo, California 93012, or at such other place as might be designated in
writing by the Lender, the principal sum of Sixty Five Thousand Dollars
($65,000) or so much thereof as has been disbursed by the Lender and remains
unpaid, together with interest thereon at a variable rate equal to the Note Rate
(as hereafter defined) then in effect. The "Note Rate" shall be equal to ten
percent (10%) per annum. Interest will be calculated on the basis of the actual
days elapsed based on a per diem charge computed over a year composed of three
hundred sixty (360) days.
Principal and interest will be paid as follows: Absent default, the
entire unpaid balance of principal and accrued but unpaid interest owing will be
due and payable on May 31, 1996.
Advances, readvances and payments under this Note may, at the option
of the Lender, be recorded on this Note or by deposits and withdrawals from an
account maintained by the Borrower on deposit with the Lender or under the
control of the Lender, either of which will be prima facie evidence of such
advances, payments and the unpaid balance of this Note.
The Borrower will have the right at any time and from time to time to
prepay the unpaid principal balance of this Note in whole or in part without
penalty, but with interest on the unpaid principal balance accrued to the date
of prepayment.
The Borrower agrees that if, and as often as, this Note is placed in
the hands of an attorney for collection or to defend or enforce any of the
Lender's rights under this Note or otherwise relating to the indebtedness hereby
evidenced, the Borrower will pay the Lender's reasonable attorneys' fees, all
court costs and all other expenses incurred by the Lender in connection
therewith. The Lender may collect a late charge equal to five percent (5%) of
each payment which is not received by the Lender within ten (10) days after the
due date of such payment. Such late charge represents the estimate of reasonable
compensation for the loss which will be sustained by the Lender arising from the
Borrower's failure to make timely payments and may be collected without
prejudice to the rights of the Lender to collect any other amounts arising from
the occurrence of an Event of Default. During the existence of any Event of
Default, the Lender may apply payments received on any amount due hereunder or
under the terms of any instrument now or hereafter evidencing or securing
payment of this indebtedness as the Lender determines from time to time.
1
<PAGE>
This Note is issued by the Borrower and accepted by the Lender
pursuant to a lending transaction negotiated, consummated and to be performed in
the states of California and Texas. This Note is to be construed according to
the internal laws of the State of Texas. All actions with respect to this Note
or any other instrument securing payment of this Note will be instituted in a
state or federal court sitting in Ventura County, California subject to the
provisions on arbitration. By the execution of this Note, the Borrower
irrevocably and unconditionally submits to the jurisdiction (both subject matter
and personal) of each such court and irrevocably and unconditionally waives: (a)
any objection the Borrower might now or hereafter have to the venue in any such
court; and (b) any claim that any action or proceeding brought in any such court
has been brought in an inconvenient forum.
On the breach by the Borrower of any provision of this Note or any
other instrument now or hereafter evidencing or securing payment of the
indebtedness hereby evidenced or on the default in payment or performance under
any instrument governing, evidencing or securing payment of a certain loan in
the principal amount of Sixty Five Thousand Dollars ($65,000) made by the Lender
to the Borrower of even date, at the option of the Lender, the entire
indebtedness evidenced by this Note will become immediately due, payable and
collectible then or thereafter as the Lender might elect, regardless of the date
of maturity of this Note in accordance with the provisions of this Note. Failure
by the Lender to exercise such option will not constitute a waiver of the right
to exercise the same on the occurrence of any subsequent Event of Default.
This Note is intended to strictly conform with all usury laws to the
extent applicable to the transactions contemplated hereby. The provisions of
this Note and of all agreements between the Borrower and the Lender are hereby
expressly limited so that in no contingency or event whatsoever, shall the
amount contracted for, charged, paid or agreed to be paid to the Lender for the
use, forbearance or retention of money or credit hereunder or otherwise exceed
the maximum rate permitted by law therefor. If, from any circumstance
whatsoever, performance or fulfillment of any provision hereof or of any
agreement between the Borrower and the Lender shall, at the time of the
execution and delivery thereof, or at the time or performance of such provision
shall be due, involve or purport to require any payment in excess of the limits
prescribed by law, the obligation to be performed or fulfilled shall be reduced
automatically to the limit prescribed by law without the necessity of the
execution of any amendment or new document.
The following events shall be deemed "Events of Default:"
A. Nonpayment. The nonpayment when due of any installment of
----------
interest or principal owing under this Note.
B. Breach of Agreement. The failure by the Borrower to perform or
-------------------
observe any written representation, warranty or agreement provided to Lender.
C. Representations and Warranties. Any representation, statement,
------------------------------
certificate, schedule or report made or furnished to the Lender by or on behalf
of the Borrower proves to be false or erroneous in any material respect at the
time of the making thereof or any representation.
2
<PAGE>
D. Insolvency; Bankruptcy. The insolvency (meaning an inability to
----------------------
pay debts as the same become due or the existence of liabilities in excess of
assets) of Borrower, or the institution of bankruptcy, reorganization,
liquidation, receivership or conservatorship proceeding by or against Borrower.
E. Judgment. Entry by any court of a final uninsured judgment
--------
against Borrower which is not discharged or stayed to the satisfaction of the
Lender.
F. Ownership and Management. A change in the controlling ownership
------------------------
or management of Borrower shall occur which is unsatisfactory to Lender.
G. Corporate Existence. Any act or omission (formal or informal) of
-------------------
Borrower or their officers, directors or shareholders leading to, or resulting
in, the termination, invalidation (partial or total), revocation, suspension,
interruption or unenforceability of their corporate existences, rights,
licenses, franchises or permits, or the transfer or disposition (whether by
sale, lease or otherwise) to any person of all or a substantial part of their
property.
Lender and Borrower agree that all disputes, claims and controversies
between them, whether individual, joint, or class in nature, arising from this
Note or otherwise, including without limitation contract and tort disputes,
shall be arbitrated pursuant to the Rules of the American Arbitration
Association, upon request of either party, in the County of Ventura, State of
California. Judgment upon any award rendered by any arbitrator may be entered in
any court having jurisdiction. The statute of limitations, estoppel, waiver,
laches, and similar doctrines which would otherwise be applicable in an action
brought by a party shall be applicable in any arbitration proceeding, and the
commencement of an arbitration proceeding shall be deemed the commencement of an
action for these purposes.
IN WITNESS WHEREOF, the Borrower has executed this instrument
effective the date first above written.
Borrower: POWER-DATA SERVICES, INC.
By /s/ MILES KOON
----------------------
Its CEO
3
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10 QSB
FOR THE PERIOD ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> JUN-30-1996 JUN-30-1996
<PERIOD-START> JAN-01-1996 JUL-01-1995
<PERIOD-END> MAR-31-1996 MAR-31-1996
<CASH> 1,472,862 2,472,243
<SECURITIES> 0 0
<RECEIVABLES> 4,160,862 4,160,860
<ALLOWANCES> (17,756) (17,756)
<INVENTORY> 1,006,153 1,006,153
<CURRENT-ASSETS> 7,621,966 7,621,966
<PP&E> 960,109 960,109
<DEPRECIATION> (206,049) (206,049)
<TOTAL-ASSETS> 8,406,891 8,406,891
<CURRENT-LIABILITIES> 2,903,047 2,903,047
<BONDS> 0 0
0 0
0 0
<COMMON> 28,852 28,852
<OTHER-SE> 5,202,576 5,202,576
<TOTAL-LIABILITY-AND-EQUITY> 8,406,891 8,406,891
<SALES> 3,881,894 8,547,200
<TOTAL-REVENUES> 3,881,894 8,547,200
<CGS> 2,615,990 5,768,677
<TOTAL-COSTS> 2,615,990 5,768,677
<OTHER-EXPENSES> 1,303,479 3,362,347
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 3,475 32,006
<INCOME-PRETAX> (17,301) (477,846)
<INCOME-TAX> 3,697 164,183
<INCOME-CONTINUING> (13,604) (313,663)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (13,604) (313,663)
<EPS-PRIMARY> (0.00) (0.11)
<EPS-DILUTED> (0.00) (0.00)
</TABLE>
