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 March 31, 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 May 12, 1998, the Issuer had 3,446,166 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 March 31, 1998 and
December 31, 1997 3
Consolidated Statements of Operations for the Quarter
Ended March 31, 1998 and 1997 5
Consolidated Statement of Cash Flows for the Quarter
Ended March 31, 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>
March 31, December 31,
1998 1997
---- ----
(unaudited)
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $1,631 $1,659
Accounts receivable 3,331 3,503
Prepaid expenses 662 351
Inventory 7 34
----- -----
Total current assets 5,631 5,547
----- -----
Property and Equipment:
Property and equipment 4,070 3,900
Accumulated depreciation and amortization (1,724) (1,536)
------ ------
Total property and equipment 2,346 2,364
------ -----
Other Assets:
Other assets, net 505 585
Investment in affiliate -- --
Goodwill (net of accumulated amortization of
$217 in 1998 and $287 in 1997) -- --
------ ------
TOTAL ASSETS $13,387 $13,497
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
MENTORTECH INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (continued)
(in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
---- ----
(unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current Liabilities:
Accounts payable and accrued expenses $ 2,706 $2,831
Deferred revenue 2,381 2,155
Loans payable - others - current portion 565 601
Loans payable - affiliate - current portion 83 102
Capital equipment obligations 0 5
----- -----
Total current liabilities 5,735 5,694
----- -----
Other Liabilities:
Loans payable 212 136
Accounts Payable - Long Term 271 271
Other liabilities 58 556
----- -----
Total liabilities 6,776 6,657
----- -----
Stockholders' Equity:
Common stock 34 34
Additional paid in capital - common stock 8,698 8,722
Accumulated deficit (1,938) (1,771)
Cumulative foreign currency
translation adjustment (183) (145)
Total Stockholders' Equity 6,611 6,840
----- -----
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $13,387 $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>
For the three months ended March 31,
------------------------------------
1998 1997
---- ----
(unaudited)
<S> <C> <C>
Revenues $4,972 $4,267
Cost of revenues 3,128 2,629
----- ------
Gross profit 1,844 1,638
Selling and marketing 824 519
General and administrative 1,105 989
Research and development 0 103
--- ---
Operating income (loss) (85) 27
--- ---
Gain on sale of subsidiary 0 11
Financial expense, net 82 28
--- ---
Net income (loss) $(167) $10
===== ===
Net income (loss) per share
Basic ($0.05) $0.004
====== ======
Diluted ($0.04) $0.004
====== ======
Number of shares used in computing net
income (loss) per share
Basic 3,446 2,698
===== =====
Diluted 3,834 2,698
===== =====
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
MENTORTECH INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
March, 31
----------------------
1998 1997
---- ----
(unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) for the period ($167) $10
Adjustments to reconcile net (loss)
to net cash (used in) provided by operating activities
Depreciation and amortization 284 251
Increase in accrued severance pay, net 2 21
Increase in trade receivables 172 316
Decrease in prepaid expenses (311) (180)
Decrease (increase) in other receivables 0 56
Decrease (increase) in other assets 80 (5)
Decrease (increase) in inventories 27 56
Increase (decrease) in related parties (19) (340)
Increase in deferred revenue 226 203
Increase (decrease) in accounts payable and accrued expenses (125) (769)
---- ----
Net cash (used in) provided by operating activities 169 (377)
--- ----
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (170) (385)
Proceeds from sales of property and equipment 0 9
Purchase of subsidiary 0 (45)
Cash acquired in acquisition 0 1,217
--- -----
Net cash provided by (used in) investing activities (170) 796
---- ---
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
MENTORTECH INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(in thousands)
<TABLE>
<CAPTION>
March 31,
----------------------
1998 1997
---- ----
(unaudited)
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital equipment obligation repayments (5) (15)
Loans Payable 76 0
Additional Costs of Issuance of Common Shares (24) 0
--- ---
Increase in short-term bank credit (36) (42)
--- ---
Net cash provided by financing activities 11 (57)
-- ---
Net increase (decrease) in cash and cash equivalents 10 362
Effect of exchange rate changes on cash and cash equivalent (38) 0
Cash and cash equivalents at the beginning of the period 288 384
--- ---
Cash and cash equivalents at the end of the period $1,631 $746
------ ----
Supplemental disclosure of cash flow information:
Cash paid during the period for
Income taxes $ 0 $20
Interest $ 88 $411
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 (the "Commission") See Management's Discussion and Analysis,
"Overview" 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, 1998. Results for the interim period are not necessarily
indicative of results for the entire year.
Note 2. 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 in "Description of
Business," as well as 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 Etcera, 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. The
results of GLTN are included in the results of the U.S. operations for the
quarter ended March 31, 1998. Due to the immateriality of GLTN to the Company as
a whole, they have not been broken out within this section.
Financial Reporting
The unaudited financial statements for the first quarter of 1997 included
in this report reflect the operations of Sivan and Mashov CBT (currently
operating through Mentortech TBT) for the quarter ended March 31, 1997 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 dollar
amounts referred to herein are in thousands, except for per share data. All per
share data have been revised to reflect an 8 for 1 reverse stock split that was
effectuated on March 3, 1998.
9
<PAGE>
Quarter ended March 31, 1998 as Compared with the Quarter ended March 31, 1997.
Revenues. The Company's revenues are derived from ILT services, contractual
consulting and staff augmentation services, and 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. It is Company policy to reserve for
potential refunds; however, 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 does not incur any
financial exposure with respect to such retakes.
The Company's revenues for the quarter ended March 31, 1998 increased 17%
to $5.0 million from $4.3 million in the comparable 1997 period. Sivan's ILT
revenues increased by 18% to $3.3 million in 1998 from $2.8 million in 1997. The
increase in Sivan's revenues in 1998 was due primarily to its success in
offering more profitable vocational courses. As discussed above, the results of
the quarter ended March 31, 1997 include the results of the U.S. operations
since February 13, 1997. Had the U.S. operations been included for the entire
three months ended March 31, 1997, revenues for the first quarter of 1998 would
have remained relatively flat compared to the comparable period in 1997.
The revenues of the Company's U.S. operations were $1.5 million in 1998, a
decrease of 13%, compared to revenues of $1.7 million in 1997. Consulting
revenues for the New York metropolitan area decreased to $1 million in 1998 from
$1.3 million in 1997, a decrease of 22%. The decrease in consulting revenues is
primarily due to termination of assignments and delays in the start dates of new
assignments.
During the quarter ended March 31, 1998, the Company continued to
experience declining ILT revenues in the U.S. ILT revenues in the U.S. decreased
by approximately 19% in 1998 compared to the same period in 1997. Management
attributes the decline in ILT revenues to increased competition and the slow
pace at which companies migrated their installed base to new applications and
product versions. 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. It appears as if this transition did occur and the decreases in
revenue are slowing. TBT revenues decreased by 50% for the quarter ended March
31, 1998 compared to the quarter ended March 31, 1997. This decrease is due
primarily to TBT's change of emphasis from the retail market to custom designed
projects.
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 rose slightly to 63%
of revenues in 1998 compared to 62% of revenues in 1997. Cost of revenues for
Sivan was 54% of revenues in 1998 compared to 58% in 1997. This decrease was
primarily due to the more efficient operation of classes
10
<PAGE>
at higher capacities which was offset by an increase in depreciation expense as
a result of a substantial investment in new classroom computer equipment.
Depreciation expense for classroom computers increased by 13% in 1998 as
compared to 1997. Cost of revenues for the U.S. operation was 77% in 1998 as
compared to 71% in 1997. As training revenues decrease, cost of revenues as a
percentage of sales has increased due to the fixed costs of classroom facilities
and depreciation. During the second quarter of 1998, the Company has undertaken
a program to reduce its fixed costs. Management expects a significant reduction
in the cost of revenues 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 to $824,000 during 1998 from $519,000 in 1997. Sales and
marketing expenses of Sivan, excluding Sivan Jerusalem, increased by 9% in 1998
compared to 1997. This increase was due to Management's decision to increase the
Company's sales and marketing budget in an attempt to obtain increased revenues.
Sivan's increase in sales and marketing expenses correlates with its increase in
revenue. Sales and marketing expenses in the U.S. increased to $397,000 in 1998
from $200,000 in 1997 as a result of Management's efforts to increase sales.
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 10% to $1.1 million during 1998, from $1 million in 1997. Had PCE
U.S.'s operations been included for the entire three month period ended March
31, 1997, the general and administrative expenses incurred in 1998 would have
been 11% lower than those incurred during the comparable period in 1997. General
and administrative expenses were approximately $343,000 for the U.S. operation,
$698,000 for Sivan, and $48,000 for Mentortech TBT in 1998. Management is
continuing its efforts to reduce general and administrative expenses. In the
U.S. all duplicate administrative functions initially taken on with the
acquisition of GLTN have now been eliminated.
Research and development expenses consisted 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
$150,000 in 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 and has classified such expenses as costs of sales.
The Company incurred an operating loss of $85,000 in 1998 compared to
operating income of $27,000 in 1997. The Company's operating loss in 1998 was
principally due to decreased revenues in the U.S., coupled with increased sales
and marketing expenses, offset by increased profits in Israel. Management has
devoted substantial efforts to an aggressive cost containment plan in the U.S.
Management believes that once the cost containment plan is fully implemented,
the increased investment in sales and marketing will allow the Company to attain
profitability in 1998.
Interest expenses, net, consists primarily of bank charges and interest
expenses offset by interest income. Interest expenses increased to $82,000 in
1998 from $28,000 in 1997. This increase was due principally to the short term
borrowings.
11
<PAGE>
As a result of the foregoing, the Company incurred a net loss of $167,000
in 1998 compared to net income of $10,000 in 1997. Had the Company's 1997
financials included all of PCE U.S.'s losses, the Company would have incurred a
loss of $126,000. Sivan's operations achieved a profit of $419,000 in 1998
compared to $74,000 in 1997. The Company's U.S. operations incurred a loss of
$394,000 during the quarter ended March 31, 1998 and Mentortech TBT incurred a
loss of $192,000.
Liquidity and Capital Resources
At March 31, 1998, the Company had $1.6 million in cash and cash
equivalents and its working capital deficiency decreased to $104,000 compared to
a working capital deficiency of $147,000 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 MCM'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 with up to $1.1 million in working capital loans. As of March 31,
1998, Sivan had borrowed approximately $527,000 from such bank.
The Company's operating activities provided $169,000 net cash in the
quarter ended March 31, 1998. Accounts receivable increased by $172,000 during
the same period. This increase was due primarily to the increased collections of
outstanding invoices. Accounts payable and accrued expenses decreased by
$125,000 during the same period. The Company's investing activities used
$170,000 for the purchase of fixed assets. Financing activities provided
$11,000.
Based on its improved financial condition and Sivan's working capital
commitment, 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.
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
12
<PAGE>
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
The Company held a Special Meeting of Stockholders on February 26, 1998.
The number of shares of the Company's Common Stock outstanding and entitled to
vote at the Special Meeting of Stockholders was 26,721,240 shares of New Common
Stock and 4,240,818 shares of old Common Stock. At the meeting the shareholders
voted for:
1. Approval to amend the Certificate of Incorporation to (i) effect a
reverse split of the shares of the Company's common stock, par value $.01 per
share (the "Common Stock") in which eight shares of Common Stock would be
combined into one share of new Common Stock and (ii) decrease the number of
authorized shares of capital stock of the Company from 45,000,000 to 25,000,000
comprised of 20,000,000 shares of Common Stock and 5,000,000 shares of preferred
stock of the Company, par value of $.001 per share.
For Against Abstain
--- ------- -------
22,831,483 2,960 2,900
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)
14
<PAGE>
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.
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: May 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,631
<SECURITIES> 0
<RECEIVABLES> 3,331
<ALLOWANCES> 0
<INVENTORY> 7
<CURRENT-ASSETS> 5,631
<PP&E> 4,070
<DEPRECIATION> 1,724
<TOTAL-ASSETS> 13,387
<CURRENT-LIABILITIES> 2,706
<BONDS> 0
0
0
<COMMON> 34
<OTHER-SE> 6,577
<TOTAL-LIABILITY-AND-EQUITY> 13,387
<SALES> 4,972
<TOTAL-REVENUES> 4,972
<CGS> 3,128
<TOTAL-COSTS> 5,057
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 82
<INCOME-PRETAX> (167)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (167)
<EPS-PRIMARY> (0.05)
<EPS-DILUTED> (0.04)
</TABLE>
