U.S. 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 June 30, 1998.
__ Transition report under Section 13 or 15(d) of the Exchange Act for the
transition period from __ to __
Commission file number: 0-17419
MENTORTECH INC.
---------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 13-3260705
-------- ----------
(State of Incorporation) (I.R.S. Employer Identification No.)
462 Seventh Avenue, New York, New York 10018
--------------------------------------------
(Address of Principal Executive Offices)
(212) 736-5870
--------------
(Issuer's Telephone Number, Including Area Code)
______________________________________________
(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
APPLICABLE ONLY TO CORPORATE ISSUERS
As of August 13, 1998, the Issuer had 3,446,163 shares of Common Stock, par
value $.01, outstanding.
Transitional Small Business Disclosure Format (check one): Yes No X
<PAGE>
MENTORTECH INC.
Form 10-QSB
INDEX
Page
----
Part I - Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets at June 30, 1998 and
December 31, 1997 3
Consolidated Statements of Operations for the three and
six months ended June 30, 1998 and 1997 5
Consolidated Statement of Cash Flows for the six months
ended June 30, 1998 and 1997 6
Notes to Consolidated Financial Statements 8
Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Part II - Other Information
Item 4. Submission of Matters to a Vote of Shareholders 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 16
2
<PAGE>
MENTORTECH INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
------------- -----------------
(unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 491 $ 1,659
Accounts receivable 4,382 3,503
Prepaid expenses 573 351
Inventory 33 34
------ ------
Total current assets 5,479 5,547
------ ------
Property and Equipment:
Property and equipment 4,347 3,900
Accumulated depreciation
and amortization (1,862) (1,536)
------- -------
Total property and equipment 2,485 2,364
------- -------
Other Assets:
Other assets, net 420 585
Goodwill (net of accumulated amortization
of $568 in 1998 and $446 in 1997) 4,807 5,001
----- -----
TOTAL ASSETS $13,191 $13,497
====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
MENTORTECH INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
(in thousands)
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
------------- -----------------
(unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $2,769 $ 2,831
Deferred revenue 2,136 2,155
Loans payable - others - current portion 592 601
Loans payable - affiliate - current portion 182 102
Capital equipment obligations -- 5
------ ------
Total current liabilities 5,679 5,694
Other Liabilities:
Loans payable -- 136
Accounts payable - long term 255 271
Other liabilities 690 556
----- -----
Total liabilities 6,624 6,657
----- -----
Stockholders' Equity:
Common stock 34 34
Additional paid in capital - common stock 8,698 8,722
Accumulated deficit (1,901) (1,771)
Cumulative foreign currency translation adjustment (264) (145)
------ ------
Total Stockholders' Equity 6,567 6,840
----- -----
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $13,191 $13,497
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
MENTORTECH INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except for per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
1998 1997 1998 1997
---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C>
Revenues $5,160 $4,420 $10,132 $8,687
Cost of revenues 3,215 2,746 6,343 5,375
------ ------ ------- ------
Gross profit 1,945 1,674 3,789 3,312
Selling and marketing 892 686 1,716 1,205
General and administrative 975 800 2,080 1,789
Research and development -- 127 -- 230
------ ----- ------ ------
Operating income (loss) 78 61 (7) 88
Gain on sale of subsidiary -- 16 -- 27
Financial income (expense), net (41) (69) (123) (97)
---- ---- ----- ---
Net income (loss) $ 37 $ 8 $ (130) $ 18
==== ==== ===== ====
Net income (loss) per share
Basic $ .01 $.002 $ (.04) $ .005
==== ==== ===== =====
Diluted $ .01 $.002 $ (.03) $ .005
==== ==== ====== =====
Number of shares used in computing
net income (loss) per share
Basic 3,446 3,446 3,446 3,446
===== ===== ===== =====
Diluted 3,866 3,834 3,866 3,834
===== ===== ===== =====
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
MENTORTECH INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------------
1998 1997
---- ----
(unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) for the period $(130) $ 18
Adjustments to reconcile net income (loss) to net
cash (used in) provided by operating activities
Depreciation and amortization 520 366
Increase (decrease) in accrued severance pay, net (8) 41
Increase in trade receivables (879) (199)
Decrease (increase) in prepaid expenses (222) 211
Decrease in other receivables -- 154
Decrease in other assets 165 79
Decrease in inventories 1 65
Increase (decrease) in related parties 80 (452)
Decrease in deferred revenue (19) (125)
Increase in deferred income taxes -- (72)
Capital gain -- (2)
Decrease in accounts payable and accrued expenses (78) (594)
---- -----
Net cash (used in) operating activities (570) (510)
--- ---
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (576) (657)
Proceeds from sales of property and equipment 129 35
Purchase of subsidiary -- (45)
Cash acquired in acquisition -- 1,217
------ -----
Net cash (used in) provided by investing
activities (447) 550
------ -----
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
MENTORTECH INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------------
1998 1997
---- ----
(unaudited)
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital equipment obligation repayments $ (5) $ (52)
Decrease in loans payable -- (480)
Additional costs of issuance of common stock (24) --
Increase in short-term bank credit (3) 331
---
Net cash provided by (used in) financing activities (32) (201)
---- -----
Net (decrease) in cash and cash equivalents (1,049) (161)
Effect of exchange rate changes on cash
and cash equivalents (119) --
Cash and cash equivalents at the beginning of the period 1,659 282
------ ----
Cash and cash equivalents at the end of the period $491 $121
====== ======
Supplemental disclosure of cash flow information:
Cash paid during the period for
Income taxes $ 3 $ 28
Interest $123 $ 98
Supplemental disclosure of non-cash and financing activities:
Two shareholder loans in the amount of $2,578
and $438 were converted to equity in 1997
Effective March 3, 1998 an 8:1 reverse stock split
was effectuated
</TABLE>
See accompanying notes to consolidated financial statements.
7
<PAGE>
MENTORTECH INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Interim Financial Statements
The accompanying financial information is unaudited, but in the opinion of
management, reflects all adjustments (which include only normal recurring
adjustments) necessary to present fairly the Company's financial position,
operating results and cash flows for those periods presented. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to the rules and regulation of the Securities and
Exchange Commission. See Management's Discussion and Analysis and Financial
Reporting. The financial information should be read in conjunction with the
audited financial statements and notes thereto for the year ended December 31,
1997. Results for the interim period are not necessarily indicative of results
for the entire year.
Note 4. Accounting Policy
For purposes of the Statements of Cash Flows, the Company considers all
highly liquid instruments with maturity of one year or less when purchased to be
cash equivalents.
8
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
This Report contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 which are subject to risks and
uncertainties. Actual results could differ materially from the forward-looking
statements in this report. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed elsewhere in this
Report. The following discussion and analysis should be read in conjunction with
the Company's financial statements and notes thereto included elsewhere in this
report.
Overview
Effective February 13, 1997, the Company's predecessor, PC Etcetera, Inc.
("PCE U.S.") underwent a change of control pursuant to the Stock Purchase
Agreement between PCE U.S. and Mashov Computers Marketing Ltd. ("MCM"), whose
shares are publicly traded on the Tel-Aviv Stock Exchange (the "TASE"). MCM is a
majority-owned subsidiary of Mashov Computers Ltd., whose shares are also
publicly traded on the TASE. Based on the Stock Purchase Agreement, MCM acquired
1,054,865 shares of Common Stock and 658,412 shares of Series C Preferred Stock
of PCE U.S. (collectively, the "Sale Stock"), with each share of Series C
Preferred Stock convertible into 1.25 shares of Common Stock. In consideration
for the Sale Stock, PCE U.S. acquired two of MCM's subsidiaries, Sivan and
Mashov CBT. Pursuant to the Stock Purchase Agreement, MCM acquired 69% of PCE
U.S.'s equity and voting securities on a fully diluted basis, subject to an
adjustment based upon the fiscal year 1996 audited balance sheets of PCE U.S.,
Sivan and Mashov CBT. Such adjustment was made on August 4, 1997 when MCM
contributed 43,199 shares of Common Stock to the capital of the Company. In
addition, on August 4, 1997, the 658,412 shares of Series C Preferred Stock were
converted by MCM into 823,015 shares of Common Stock.
In October 1997, the Company acquired the assets of GLTN Computer
Consultants, Inc., a Long Island, New York, ILT training company in
consideration of $130,000 and the issuance of 15,909 shares of Common Stock. On
March 3, 1998, an 8 for 1 reverse stock split of the Company's Common Stock was
effectuated.
Financial Reporting
The unaudited financial statements for the three and six months ended June
30, 1997 included in this report reflect the operations of Sivan and Mashov CBT
(currently operating through Mentortech TBT) for such periods and the operations
of PCE U.S. and Mentortech TBT (formerly PC Etcetera Israel) since February 13,
1997, the date of the stock purchase transaction. All per share data have been
revised to reflect an 8 for 1 reverse stock split that was effectuated on March
3, 1998.
Three and six months ended June 30, 1998 as compared to three and six months
ended June 30, 1997.
Revenues. The Company's revenues are derived from instructor-led training
("ILT") services, contractual consulting and staff augmentation services, and
technology-based training
9
<PAGE>
("TBT") product sales. The Company's ILT revenues are recognized over the life
of the training course. Franchise revenues from centers operating with the Sivan
trade name in Israel and utilizing Sivan's training materials are included in
ILT revenues. Contract consulting and staff augmentation revenues are recognized
as the services are performed. TBT revenues are recognized upon shipment of the
software provided that no significant vendor obligations remain and collection
of the related receivable is probable. The Company's refund policy provides that
dissatisfied trainees may either attend the same course without charge or the
trainee's employer may request a full refund. An allowance for refunds has not
been established, because historically minimal refunds have been issued. Retakes
of a course are provided on a seat available basis. Accordingly, the Company
believes that it does not incur any financial exposure with respect to such
retakes.
The Company's revenues for the three months ended June 30, 1998 increased
17% to $5.2 million from $4.4 million in the comparable 1997 period. Revenues
for the six months ended June 30, 1998 also rose 17% to $10.1 million from $8.7
million for the six months ended June 30, 1997. Sivan's ILT revenues increased
by $480,000 and $1.0 million respectively, for the three and six months ended
June 30, 1998 to $3.1 million and $6.5 million compared to $2.6 million and $5.5
million for the same periods in 1997. The increase in Sivan's revenues in 1998
was due primarily to its success in offering more profitable technical courses
as well as an increase in the number of vocational courses offered. TBT revenues
for the three and six months ended June 30, 1998 were $241,000 and $359,000,
respectively, compared to $183,000 and $438,000 for the same periods in 1997.
The revenues of the Company's U.S. operation were $1.7 million and $3.2
million for the three and six months ended June 30, 1998. This represents no
change for the three months ended June 30, 1998 and a decrease of 4% compared to
revenues of $1.7 million and $3.4 million, respectively, for the three and six
months ended June 30, 1997. Consulting revenues for the New York metropolitan
area totaled $1.0 million and $2.0 million for the three and six months ended
June 30, 1998, a decline of 15% and 19%, respectively, compared to revenues of
$1.1 million and $2.5 million for the three and six months ended June 30, 1997.
The decrease in consulting revenues is primarily due to increased competition
and the completion of assignments performed by the Company.
The Company experienced growth in the ILT business in the United States in
1998. Revenues for the three and six months ended June 30, 1998 rose to $746,000
and $1.2 million, respectively, which represents increases of 6% and 5%,
respectively, when compared to revenues of $474,000 and $919,000 for the same
periods in 1997. Management attributes the increase in ILT revenues to the
adoption of new messaging systems by its clients which resulted in increased
demand for training. The Company's U.S. operation had anticipated that the
release of a new application software entitled Office 97 would have a positive
impact on ILT revenues in previous periods. Management believes that this
transition has begun.
The Company's U.S. operation is pursuing a move into the higher end
training market as many organizations require certification training for
Microsoft and Lotus back office applications and operating systems. Management
believes that this higher technical training environment will have a better
synergy with the U.S. operation's consulting business. The U.S. operation has
been authorized as a Lotus Authorized Education Center, and its status has been
upgraded to Premium Business partner and has received Microsoft Authorized
Technical Education Center status.
10
<PAGE>
The cost of ILT revenues consists primarily of the expenses of instructors,
classroom space costs as well as depreciation of classroom equipment. Cost of
revenues for consulting services consists primarily of the labor costs of the
consultants performing the work at clients' facilities. Cost of revenues for TBT
revenues include packaging and manufacturing costs of the products as well as
design expenses for custom TBT projects. Cost of revenues for the Company was
62% and 63% of revenues for the three and six months ended June 30, 1998,
respectively, compared to 62% and 62% of revenues for the three and six months
ended June 30, 1997. Cost of revenues for Sivan was 61% and 58%, respectively,
for the three and six months ended June 30, 1998 compared to 59% of revenues for
the three and six months ended June 30, 1997. Cost of revenues for the U.S.
operation was 64% and 70%, respectively, for the three and six months ended June
30, 1998, compared to 69% and 70% for the same periods of 1997. During the
second quarter of 1998, the Company reduced its fixed costs. Management expects
a significant reduction in the cost of goods sold as a percentage of sales for
the remainder of 1998.
Sales and marketing expenses consist primarily of costs relating to
promotion, advertising, trade shows and exhibitions. Such expenses also include
compensation of sales support, travel and related expenses. Sales and marketing
expenses increased by $206,000 and $511,000 to $892,000 and $1.7 million,
respectively, for the three and six months ended June 30, 1998 from $686,000 and
$1.2 million for the three and six months ended June 30, 1997. Sales and
marketing expenses in Israel totaled $589,000 and $1.0 million for the three and
six months ended June 30, 1998 as compared to $491,000 and $884,000 for the
three and six months ended June 30, 1997. Sales and marketing expenses in the
U.S. totaled $306,000 and $703,000 for the three and six months ended June 30,
1998, up from $195,000 and $396,000 for the comparable periods of 1997.
General and administrative expenses include compensation costs for
administration, finance and general management personnel and office maintenance
and administrative costs. General and administrative costs for the Company
increased to $1.0 million and $2.1 million, respectively, for the three and six
months ended June 30, 1998, from $800,000 and $1.8 million, respectively, for
the three and six months ended June 30, 1997. General and administrative
expenses were $673,000 for the U.S. operation and $1.4 million for Sivan for the
six months ended June 30, 1998. Management is continuing its efforts to reduce
general and administrative expenses. In the United States, all duplicate
administrative functions arising from the acquisition of GLTN have been
eliminated.
Research and development expenses consist primarily of salaries of the
employees who are engaged in ongoing research and development activities of TBT
materials and other related costs. Research and development expenses amounted to
$127,000 and $230,000, respectively, for the three and six months ended June 30,
1997. Due to a change in Accounting Principles in Israel, the Company can no
longer charge expenses to research and development without a permit from the
Israeli Government's Chief Scientist. Management has decided not to apply for
such permit.
As a result of the foregoing, the Company had operating income of $78,000
and an operating loss of $7,000, respectively, for the three and six months
ended June 30, 1998 compared to operating income of $61,000 and $88,000,
respectively, for the comparable periods of 1997. Management has devoted
substantial efforts to an aggressive cost containment plan. Management believes
once the cost containment plan is fully implemented, the Company's increased
investment in sales and marketing will permit the Company to attain
profitability in 1998.
11
<PAGE>
Interest expenses, net, consists primarily of bank charges and interest
expenses offset by interest income. Interest expenses were $41,000 and $123,000
for the three and six month periods ended June 30, 1998 as compared to $69,000
and $97,000 in the comparable periods in 1997.
Sivan's operations had net income of $449,000 in 1998 compared to a net
loss of $92,000 in 1997. The Company's U.S. operation incurred a loss of
$390,000 during the six months ended June 30, 1998 and Mentortech TBT incurred a
loss of $189,000. As a result of the foregoing, the Company had net income of
$37,000 for the three months ended June 30, 1998 and a net loss of $130,000 for
the six months ended June 30, 1998 as compared to net income of $8,000 and
$18,000 for the three and six month periods ended June 30, 1997.
Liquidity and Capital Resources
At June 30, 1998, the Company had cash and cash equivalents of
approximately $500,000 and a working capital deficiency of $200,000 compared to
cash and cash equivalents of approximately $1.7 million and a working capital
deficiency of approximately $150,000 at December 31, 1997.
The Company completed a private placement of securities in December 1997,
wherein it issued and sold 511,364 shares of Common Stock and warrants to
purchase 255,682 shares of Common Stock. The Company obtained net proceeds of
approximately $2 million from the private placement. The Company's financial
position was further improved by Mashov's conversion of $1,162,000 of debt into
264,090 shares of Common Stock and warrants to purchase 132,045 shares of Common
Stock.
In 1997, the Company obtained an oral commitment from its Israeli bank to
provide Sivan up to $1.1 million in working capital loans. As of June 30, 1998,
Sivan had borrowed approximately $700,000 from such bank.
The Company's operating activities used approximately $570,000 net cash in
the six months ended June 30, 1998. Accounts receivable increased by
approximately $879,000 during the same period. This increase was due primarily
to higher accounts receivable due to the increase in sales volume. Accounts
payable and accrued expenses decreased by $78,000 during the same period. The
Company's investing activities used approximately $447,000, primarily for the
purchase of fixed assets.
Based on its improved financial condition, a working capital loan
commitment and cash expected to be generated from operations, the Company
believes that it has sufficient working capital to fund its operational and
capital requirements through 1998. The Company does not have any material
capital commitments for 1998. To the extent the Company increases the scope of
its activities significantly, it may be required to obtain additional financing.
Seasonality
While the Company's revenues have not been substantially affected by
seasonal variations, the revenues of the Company's Israeli subsidiary, Sivan,
are affected by the timing of the national holidays, when classes are suspended.
12
<PAGE>
The Year 2000 Issue
Some of the Company's older computer programs were written using two digits
rather than four to define the applicable year. As a result, those computer
programs have time-sensitive software that recognize a date using "00" as the
year 1900 rather than the year 2000. This could cause a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices, or engage
in similar normal business activities.
The Company has completed an assessment and will have to modify or replace
portions of its software so that its computer systems will function properly
with respect to dates in the year 2000 and thereafter. The total Year 2000
project cost is estimated at approximately $75,000. The costs the Company has
incurred to date primarily for assessment of the Year 2000 issues have not been
significant.
13
<PAGE>
PART II-OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Shareholders
None.
Item 6. Exhibits and Reports on Form 8-K.
Exhibits.
3.1 Certificate of Incorporation, as amended (1)
3.2 Certificate of Amendment of Certificate of Incorporation with regard to the
change of the Company's name and the increase in the Company's authorized
capital stock (2)
3.3 Certificate of Amendment of Certificate of Incorporation with regard to a
reverse stock split (3)
3.4 By-Laws (4)
10.1 Lease for premises situated at 462 Seventh Avenue, 4th Floor, New York, New
York (5)
10.2 Lease for premises situated at 462 Seventh Avenue, 18th Floor, New York,
New York (6)
10.3 1997 Stock Option Plan (7)
10.4 Employment Agreement of Roy Machnes (8)
10.5 Employment Agreement of Elan Penn (8)
10.6 Employment Agreement of Terry I. Steinberg (8)
27 Financial Data Schedule
_____________________
(1) Filed as an exhibit to the Company's Annual Report on Form 10-K for the
year ended December 31, 1989 and hereby incorporated by reference thereto,
as amended by document filed as an exhibit to the Company's Annual Report
on Form 10-KSB for the year ended December 31, 1993.
(2) Filed as an exhibit to the Company's Quarterly Report on Form 10-QSB for
the quarter ended September 30, 1997 and hereby incorporated by reference
thereto.
(3) Filed as an exhibit to the Company's Annual Report on Form 10-KSB for the
year ended December 31, 1997 and hereby incorporated by reference thereto.
(4) Filed as an exhibit to the Company's Form S-18 (File No. 33-19521) and
hereby incorporated by reference thereto.
(5) Filed as an exhibit to the Company's Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1993 and hereby incorporated by reference
thereto.
14
<PAGE>
(6) Filed as an exhibit to the Company's Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1992 and hereby incorporated by reference
thereto.
(7) Filed as an exhibit to the Company's Quarterly Report on Form 10-QSB for
the quarter ended June 30, 1997 and hereby incorporated by reference
thereto.
(8) Filed as a "Related Agreement" to the Stock Purchase Agreement, which
Related Agreement was filed as an exhibit to the Company's Current Report
on Form 8-K for an event dated February 13, 1997 and hereby incorporated by
reference thereto.
Reports on Form 8-K.
No Current Reports on Form 8-K have been filed since June 30, 1997.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
MENTORTECH, INC.
By:/s/Roy Machnes
-----------------
Roy Machnes
President and Chief Executive Officer
By:/s/Elan Penn
---------------
Elan Penn
Chief Financial Officer
Date: August 14, 1998
16
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
--- -----------
3.1 Certificate of Incorporation, as amended (1)
3.2 Certificate of Amendment of Certificate of Incorporation with regard to the
change of the Company's name and the increase in the Company's authorized
capital stock (2)
3.3 Certificate of Amendment of Certificate of Incorporation with regard to a
reverse stock split (3)
3.4 By-Laws (4)
10.1 Lease for premises situated at 462 Seventh Avenue, 4th Floor, New York, New
York (5)
10.2 Lease for premises situated at 462 Seventh Avenue, 18th Floor, New York,
New York (6)
10.3 1997 Stock Option Plan (7)
10.4 Employment Agreement of Roy Machnes (8)
10.5 Employment Agreement of Elan Penn (8)
10.6 Employment Agreement of Terry I. Steinberg (8)
27 Financial Data Schedule
___________
(1) Filed as an exhibit to the Company's Annual Report on Form 10-K for the
year ended December 31, 1989 and hereby incorporated by reference thereto,
as amended by document filed as an exhibit to the Company's Annual Report
on Form 10-KSB for the year ended December 31, 1993.
(2) Filed as an exhibit to the Company's Quarterly Report on Form 10-QSB for
the quarter ended September 30, 1997 and hereby incorporated by reference
thereto.
(3) Filed as an exhibit to the Company's Annual Report on Form 10-KSB for the
year ended December 31, 1997 and hereby incorporated by reference thereto.
(4) Filed as an exhibit to the Company's Form S-18 (File No. 33-19521) and
hereby incorporated by reference thereto.
(5) Filed as an exhibit to the Company's Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1993 and hereby incorporated by reference
thereto.
(6) Filed as an exhibit to the Company's Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1992 and hereby incorporated by reference
thereto.
(7) Filed as an exhibit to the Company's Quarterly Report on Form 10-QSB for
the quarter ended June 30, 1997 and hereby incorporated by reference
thereto.
(8) Filed as a "Related Agreement" to the Stock Purchase Agreement, which
Related Agreement was filed as an exhibit to the Company's Current Report
on Form 8-K for an event dated February 13, 1997 and hereby incorporated by
reference thereto.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 491
<SECURITIES> 0
<RECEIVABLES> 4,382
<ALLOWANCES> 0
<INVENTORY> 33
<CURRENT-ASSETS> 5,479
<PP&E> 4,347
<DEPRECIATION> 1,862
<TOTAL-ASSETS> 13,191
<CURRENT-LIABILITIES> 5,679
<BONDS> 0
0
0
<COMMON> 34
<OTHER-SE> 6,533
<TOTAL-LIABILITY-AND-EQUITY> 13,191
<SALES> 10,132
<TOTAL-REVENUES> 10,132
<CGS> 6,343
<TOTAL-COSTS> 10,139
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 123
<INCOME-PRETAX> (130)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (130)
<EPS-PRIMARY> (0.04)
<EPS-DILUTED> (0.03)
</TABLE>
