<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
XXX Quarterly report under Section 13 or 15 (d) of the Securities Exchange
Act of 1934
For the quarterly period ended December 31, 1996
--------------------
Transition report under Section 13 or 15 (d) of the Exchange Act
For the transition period from __________ to __________
Commission file number 0-28604
SOUND SOURCE INTERACTIVE, INC.
- ------------------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
DELAWARE 95-426046
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2985 E. HILLCREST DRIVE, SUITE A, WESTLAKE VILLAGE, CALIFORNIA 91362
- --------------------------------------------------------------------
(Address of Principal Executive Offices)
(805) 494-9996
- --------------
(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 file 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 ___XXX____ No ___________
The number of shares outstanding of the issuer's common stock as of
January 22, 1996 was 4,403,099
-----------
Transitional Small Business Disclosure Format (check one):
Yes _________ No ___XXX____
<PAGE>
SOUND SOURCE INTERACTIVE, INC. AND SUBSIDIARY
FOR THE THREE MONTH PERIODS ENDED
DECEMBER 31, 1996 AND 1995
INDEX
Page No.
--------
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheet - December 31, 1996 3
Condensed Consolidated Statements of Operations - Three month
periods ended December 31, 1996 and 1995, and the six month
periods ended December 31, 1996 and 1995 4
Condensed Consolidated Statements of Cash Flows - Six month
periods ended December 31, 1996 and 1995 6
Notes to the Condensed Consolidated Financial Statements 8
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Outlook 13
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings 14
ITEM 5. Other Information 14
ITEM 6. Exhibits and Reports on Form 8-K 14
Signature Page 15
Financial Data Schedule 16
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SOUND SOURCE INTERACTIVE, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996
ASSETS
Current Assets:
Cash and cash equivalents $1,687,433
Accounts receivable - net 1,356,187
Inventory - net 313,545
Prepaid royalties 730,389
Prepaid expenses 72,717
----------
Total current assets 4,160,271
Property and equipment - net 398,922
----------
TOTAL ASSETS $4,559,193
----------
----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 652,870
Accrued compensation and related taxes 227,992
Accrued royalties 686,905
Current portion of capital lease obligations 20,468
Deferred revenues 16,655
----------
Total current liabilities 1,604,890
----------
Capital lease obligations, net of current portion 7,119
----------
Accrued compensation, net of current portion 117,483
----------
Stockholder's Equity:
Common stock - $.001 par value, 20,000,000 shares
authorized, 4,377,824 shares issued and outstanding 4,378
Warrants 1,104,925
Additional paid-in capital 13,249,586
Accumulated deficit (11,529,188)
-----------
Total stockholders' equity 2,829,701
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,559,193
----------
----------
See notes to condensed consolidated financial statements.
3
<PAGE>
SOUND SOURCE INTERACTIVE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31,
1996 1995
----------- -----------
Net revenues $ 1,510,389 $ 624,418
Cost of sales 568,067 380,010
----------- -----------
Gross profit 942,322 244,408
----------- -----------
Operating costs and expenses:
Marketing and sales 413,049 376,778
Compensation in connection with
common stock and common stock
options issued for services
rendered 89,304
Other general and administrative 664,030 758,874
Research and development 293,772 182,553
----------- -----------
Total operating costs and expenses 1,460,155 1,318,205
Operating loss (517,833) (1,073,797)
Other income (expense) 24,747 (386,601)
----------- -----------
Loss before provision for income taxes (493,086) (1,460,398)
Provision for income taxes 800 800
----------- -----------
Net loss $ (493,886) $(1,461,198)
----------- -----------
----------- -----------
Net loss per common share $ (0.11) $ (0.78)
----------- -----------
----------- -----------
Weighted average number of common
shares outstanding 4,370,976 1,877,108
----------- -----------
----------- -----------
See notes to condensed consolidated financial statements.
4
<PAGE>
SOUND SOURCE INTERACTIVE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31,
1996 1995
----------- -----------
Net revenues $ 2,430,246 $ 1,120,691
Cost of sales 953,002 682,510
----------- -----------
Gross profit 1,477,244 438,181
----------- -----------
Operating costs and expenses:
Marketing and sales 692,752 572,778
Compensation in connection with
common stock and common stock
options issued for services
rendered 178,607
Other general and administrative 1,014,853 1,208,838
Research and development 568,874 266,153
----------- -----------
Total operating costs and expenses 2,455,086 2,047,769
Operating loss (977,842) (1,609,588)
Other income (expense) 37,007 (399,584)
----------- -----------
Loss before provision for income taxes (940,835) (2,009,172)
Provision for income taxes 800 1,200
----------- -----------
Net loss $ (941,635) $(2,010,372)
----------- -----------
----------- -----------
Net loss per common share $ (0.22) $ (1.08)
----------- -----------
----------- -----------
Weighted average number of common
shares outstanding 4,318,096 1,868,145
----------- -----------
----------- -----------
See notes to condensed consolidated financial statements.
5
<PAGE>
SOUND SOURCE INTERACTIVE, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTH PERIODS ENDED DECEMBER 31,
1996 1995
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (941,636) $(2,010,372)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization 44,453 282,169
Allowance for sales returns 144,420 407,310
Allowance for bad debt reserves (64,250)
Allowance for inventories
Common stock and common stock options
issued for services rendered 178,607
Changes in operating assets and liabilities:
Accounts receivable (587,103) (687,511)
Inventories (50,887) (306,912)
Prepaid royalties (101,713) (192,091)
Prepaid expenses and other (43,953) (104,222)
Accounts payable and accrued expenses (359,775) 210,384
Accrued compensation and related taxes 270,573 (190,353)
Accrued interest (367,695) 118,176
Commissions payable (124,038)
Accrued royalties 144,100 (105,389)
Deferred revenues (67,704) 2,000
----------- -----------
Net cash used by operating activities (1,738,313) (2,765,099)
----------- -----------
Cash flows from investing activities-
Purchases of property and equipment (266,308) (81,152)
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of common stock 7,948,373
Proceeds from issuance of warrant 341,575 263,350
Repayment of notes payable (4,987,500)
Issuance of notes payable 4,987,500
Repayment of notes payable to officer (13,500)
Deferred offering costs 620,904 (106,160)
Deferred financing costs (993,600)
Payments on capital lease obligations (13,283) (12,562)
Repayment of short term advance (400,000)
----------- -----------
Net cash provided by financing activities 3,510,069 4,125,028
Net change in cash and cash equivalents 1,505,448 1,278,777
Cash and cash equivalents, beginning of period 181,985 213,730
----------- -----------
Cash and cash equivalents, end of period $ 1,687,433 $ 1,492,507
----------- -----------
----------- -----------
6
<PAGE>
SOUND SOURCE INTERACTIVE, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
FOR THE SIX MONTH PERIODS ENDED DECEMBER 31,
1996 1995
----------- -----------
Supplement disclosure of cash flow information -
Cash paid during the period for:
Interest $ 381,430 $ 13,120
----------- -----------
----------- -----------
Income taxes $ 0 $ 1,600
----------- -----------
----------- -----------
Supplemental disclosure of noncash investing
and financing activities:
During the six-month period ended December 31, 1995, the Company purchased
property and equipment valued at $34,150 through the issuance of capital leases.
During the six-month period ended December 31, 1996, the Company issued
2,016,657 warrants in connection with the conversion of a note payable to
related party in the amount of $500,000 and accrued interest thereon in the
amount of $4,164.
See notes to condensed consolidated financial statements.
7
<PAGE>
SOUND SOURCE INTERACTIVE, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTH PERIODS ENDED DECEMBER 31, 1996 AND 1995
Note A - Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with the instructions to Form 10-QSB and
therefore do not include all information and notes necessary for a fair
presentation of financial position, results of operations, and cash flows in
conformity with generally accepted accounting principles. The unaudited
condensed consolidated financial statements include the accounts of Sound
Source Interactive, Inc. and its wholly-owned subsidiary (collectively
referred to as the Company). The operating results for interim periods are
unaudited and are not necessarily an indication of the results to be expected
for the full fiscal year. In the opinion of management, the results of
operations as reported for the interim period reflect all adjustments which
are necessary for a fair presentation of operating results.
Note B - Initial Public Offering (IPO)
On July 1, 1996, the Company issued 2,400,000 shares of common stock at $4.00
per share and 1,200,000 redeemable warrants at $.25 per warrant. Net proceeds
totalled $7,973,305, net of offering costs of $1,926,695. On August 14, 1996,
the underwriters exercised a portion of their overallotment option, pursuant
to the underwriting agreement, which resulted in the Company issuing an
additional 160,000 shares of common stock at $4.00 per share and 171,775
redeemable warrants at $.25 per warrant. Net proceeds totalled $594,161, net of
offering costs of $88,783.
Note C - Notes Payable and Notes Payable to Related Party
On July 7, 1996, in connection with the IPO, the Company repaid notes payable
issued during fiscal 1996 aggregating $4,987,500 plus accrued interest of
$373,753.
On July 7, 1996, in connection with the IPO, the Company issued 2,016,657
redeemable warrants in connection with the conversion of a note payable to
related party of $500,000, plus accrued interest of $4,164.
Note D - Accounts Receivable and Short Term Advance
In June, 1995, the Company entered into a sales and distribution agreement with
a subsidiary of Acclaim Entertainment, Inc. (Acclaim). Under the terms of the
agreement, Acclaim was responsible for the distribution of the Company's
products on a world-wide basis to retail accounts. Effective April 1, 1996,
such agreement was terminated.
In July, 1996, Acclaim submitted certain information to the Company together
with payment of $256,067 and a promissory note with a principal amount of
$256,067, maturing August 26, 1996 and bearing interest at 10% per annum. Such
represented the balances of all amounts due to the Company under the
distribution agreement, as determined by Acclaim. Included in the information
provided by Acclaim, it was noted that the Company was not obligated to repay a
short-term advance totaling $400,000 previously made by Acclaim to the Company.
On August 28, 1996, the Company received $256,067 plus accrued interest of
$2,175 pursuant to the terms of the promissory note. As of December 31, 1996,
the Company has recorded additional amounts which it believes are due from
Acclaim. Such amounts are fully reserved, due to disputes and discrepancies in
the information as reported by Acclaim.
8
<PAGE>
As of December 31, 1996, $706,497 of the accounts receivable balance is
due from Simon & Schuster Interactive Distribution Services (SSIDS). SSIDS
is the consumer software distribution unit of Simon & Schuster, Inc., the
publishing operations of Viacom, Inc. Pursuant to a distribution agreement
between the Company and SSIDS, SSIDS will provide distribution, warehousing
and order fulfillment services for all of the Company's products throughout
the United States and Canada.
Note E - Cash and Cash Equivalents
The Company invests all excess cash in working capital asset management accounts
with Merrill Lynch and Company. All such amounts are 100% federally insured at
all times.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Three Months Ended December 31, 1996 Compared to the Three Months Ended
December 31, 1995
Net Sales. Net sales increased by 141.9 percent from $624,418 for the three
months ended December 31, 1995 to $1,510,389 for the three months ended December
31, 1996. This increase is primarily attributable to increased distribution by
the Company's North American distributor, Simon and Schuster Interactive
Distribution Services, Inc. (SSIDS), sales by the Company to its foreign
distributors, and other direct sales in North America. Sales to international
distributors for the three months ended December 31, 1996 were approximately
$419,268, as compared to no international sales during the same period in 1995.
Sales to SSIDS for the three month period ended December 31, 1996, were
approximately $706,034. No sales during the comparable period in 1995 were to
SSIDS.
Cost of Sales. Cost of sales increased by 49.5 percent from $380,010 for the
three months ended December 31, 1995 to $568,067 for the three months ended
December 31, 1996. However, cost of sales as a percentage of sales decreased
from 60.9 percent to 37.6 percent during these respective periods. The increase
in total cost of sales is due to the above noted 141.9 percent increase in net
revenues. The decrease in cost of sales as a percentage of revenues is
primarily due to changes in product mix to higher priced items and the sale of
certain end of life inventory which had been previously written-off as
slow-moving. Although the Company will attempt to continue to reduce cost of
sales as a percentage of revenues, it does not believe that the gross margin
earned during the three months ended December 31, 1996 is indicative of future
periods. This is primarily due to the Company's belief that it has
substantially sold, as of December 31, 1996, all inventory which had been
previously written-off as slow-moving.
Marketing and Sales. Marketing and sales expenses increased by 9.6 percent from
$376,778 for the three months ended December 31, 1995 to $413,049 for the three
months ended December 31, 1996, and decreased as a percentage of sales from 60.3
percent to 27.3 percent, respectively. The change in dollar amount is
principally related to increased marketing and sales efforts to support new
product releases during the quarter and increased salaries due to additional
sales personnel. The decrease as a percentage of sales is due to the above
noted 141.9 percent increase in sales, particularily international sales for
which a smaller percentage of marketing effort is required by the Company as
many of those functions are primarily performed by the individual distributors.
Research and Development. Research and Development costs increased 60.9 percent
from $182,553 during the three months ended December 31, 1995 to $293,772 for
the three months ended December 31, 1996, and decreased as a percentage of sales
from 29.2 percent to 19.5 percent, respectively. The increase in costs is
primarily associated with (i) the Company hiring programmers to bring product
development in-house, (ii) increased personnel and hardware/software costs
associated with the development of the Company's first interactive video game
and, (iii) the enhancement of its current product lines. The Company
anticipates that Research and Development costs will continue to increase as the
Company hires additional personnel to support an increase in the number of
products under development and to perform all development activities internally.
10
<PAGE>
General and Administrative. General and administrative expenses decreased
by 12.5 percent from $758,874 during the three months ended December 31, 1995
to $664,030 for the three months ended December 31, 1996, and decreased as a
percentage of sales from 121.5 percent to 44.0 percent, respectively.
Included in general and administrative expenses for the three months ended
December 31, 1996 is a one-time charge of $329,644 related to the departure
of the Company's former president/chief operating officer. Additionally,
during the three months ended December 31, 1996, the Company recorded
increased expenses associated with being a publicly held company, principally
printing, mailing and legal fees associated with the Company's annual report
and stockholder meeting. During the three months ended December 31, 1995,
the Company recorded an allowance for doubtful accounts receivable from its
former distributor, Acclaim Entertainment, Inc., in the amount of $409,810.
Compensation in Connection with Common Stock and Common Stock Options Issued
for Services Rendered. Expenses recorded by the Company in connection with
common stock and common stock options issued for services rendered amounted
to $89,304 for the three months ended December 31, 1996 and relate to the
vesting of common stock options issued during fiscal 1994. No such expense
was recorded in the three months ended December 31, 1995 as no vesting
occurred during that quarter.
Six Months Ended December 31, 1996 Compared to the Six Months Ended December
31, 1995
Net Sales. Net sales increased by 116.9 percent from $1,120,691 for the six
months ended December 31, 1995 to $2,430,246 for the six months ended
December 31, 1996. This increase is primarily attributable to increased
distribution by the Company's North American distributor, Simon and Schuster
Interactive Distribution Services, Inc. (SSIDS), sales by the Company to its
foreign distributors and other direct sales in North America. Sales to
international distributors for the six months ended December 31, 1996 were
approximately $435,131, as compared to no international sales during the same
period in 1995. Sales to SSIDS for the six month period ended December 31,
1996, were approximately $1,525,907. No sales during the comparable period
in 1995 were to SSIDS. During the six months ended December 31, 1995, the
Company recorded sales to its former distributor, Acclaim Entertainment,
Inc., in the amount of $819,619.
Cost of Sales. Cost of sales increased by 39.6 percent from $682,510 for the
six months ended December 31, 1995 to $953,002 for the six months ended
December 31, 1996. However, cost of sales as a percentage of sales decreased
from 60.9 percent to 39.2 percent during these respective periods. The
increase in total cost of sales is due to the above noted 116.9 percent
increase in net revenues. The decrease in cost of sales as a percentage of
revenues is primarily due to changes in product mix to higher priced items
and the sale of certain end-of-life inventory which had been previously
written-off as slow-moving. During the six months ended December 31, 1995,
the Company recorded reserves related to guaranteed royalties and slow-moving
inventories which also resulted in the higher percentage of cost of sales.
Marketing and Sales. Marketing and sales expenses increase by 20.9 percent
from $572,778 for the six months ended December 31, 1995 to $692,752 for the
six months ended December 31, 1996, and decreased as a percentage of sales
from 51.1 percent to 28.5 percent, respectively. The change in dollar amount
is principally related to increased marketing and sales efforts to support
new product releases during the six month period and increased salaries due
to additional sales personnel. The decrease as a percentage of sales is due
to the above noted 116.9 percent increase in sales, particularly
international sales for which a smaller percentage of marketing effort is
required by the Company as many of those functions are primarily performed by
the individual distributors.
11
<PAGE>
Research and Development. Research and Development costs increased 113.7
percent from $266,153 during the six months ended December 31, 1995 to
$568,874 for the six months ended December 31, 1996, and decreased as a
percentage of sales from 23.7 percent to 23.4 percent, respectively. The
increase in costs is primarily associated with (i) the Company hiring
programmers to bring all product development in-house, (ii) increased
personnel and hardware/software costs associated with the development of the
Company's first interactive video game and, (iii) the enhancement of its
current product lines. The Company anticipates that Research and Development
costs will continue to increase as the Company hires additional personnel to
support an increase in the number of products under development and to
perform all development activities internally.
General and Administrative. General and administrative expenses decreased by
16.0 percent from $1,208,838 during the six months ended December 31, 1995 to
$1,014,853 for the six months ended December 31, 1996, and decreased as a
percentage of sales from 107.9 percent to 41.8 percent, respectively.
Included in general and administrative expenses for the three months ended
December 31, 1996 is a one-time charge of $329,644 related to the departure
of the Company's former president/chief operating officer. Additionally,
during the three months ended December 31, 1996, the Company recorded
increased expenses associated with being a publicly held company, principally
printing, mailing and legal fees associated with the Company's annual report
and stockholder meeting. During the six month period ended December 31,
1995, the Company recorded an allowance for doubtful accounts receivable from
its former distributor, Acclaim Entertainment, Inc., in the amount of
$409,810.
Compensation in Connection with Common Stock and Common Stock Options Issued
for Services Rendered. Expenses recorded by the Company in connection with
common stock and common stock options issued for services rendered amounted
to $178,607 for the six months ended December 31, 1996 and relate to the
vesting of common stock options issued during fiscal 1994. No such expense
was recorded for the six month period ended December 31, 1995 as no vesting
occurred during this period.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1996, the Company had working capital of $2,555,381 in
comparison with ($5,373,974) at June 30, 1996, an increase of $7,929,355.
Cash and cash equivalents increased $1,505,448 directly as a result of the
Company's IPO on July 1, 1996. Accounts receivable increased $442,683 due to
increased sales of products to the Company's North American distributor, it's
international distributors and other direct sales, partially off-set by the
collection of $912,134 from Acclaim Entertainment, Inc.
During the six months ended December 31, 1996, current liabilities decreased
by $6,392,074, from $7,996,964 at June 30, 1996 to $1,604,890 at December
31, 1996. This decrease is primarily attributable to the repayment of notes
payable, notes payable to related party and a short-term advance, as well as
accrued interest thereon, aggregating $6,255,195 at June 30, 1996.
The Company has experienced a significant increase in growth during the last
six month period, as compared to the same period of time in the prior fiscal
year. The Company continues to search for new opportunities to obtain
licenses, develop and sell products, and to purchase products that are at or
near completion of development. Additionally, the Company is seeking new and
innovative ways to deliver its products to consumers, some of which may
require large up-front cash resources. If the Company enters into agreements
in such business opportunities in the future, the Company may require
additional financing to fund its growth.
12
<PAGE>
OUTLOOK
The condensed consolidated financial statements contained in this report on
Form 10-QSB that are not purely historical are forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934, including statements regarding
the Company's expectations, hopes, intentions or strategies regarding the
future. Forward-looking statements include, but are not limited to:
statements regarding the Company's sales and future revenues, statements
regarding future research and development costs and products, and statements
regarding the future flexibility of the Company's cash reserves. All
forward-looking statements included in this document are based on information
available to the Company on the date hereof, and the Company assumes no
obligation to update any such forward-looking statement. It is important to
note that the Company's actual results could differ materially from those in
such forward-looking statements. Among the factors that could cause actual
results to differ materially are the factors detailed below. Please consult
the risk factors listed from time to time in the Company's reports on Form
10-QSB and 10-KSB and Annual Reports to Stockholders.
Sound Source Interactive, Inc. does not provide forecasts of potential future
financial performance. While management of the Company is optimistic about
the Company's long-term prospects, the following issues and uncertainties
among others, should be considered in evaluating its growth outlook.
Technological Developments. The personal computer software industry is
characterized by rapid technological advancement and the uncertainty of new
breakthroughs and developments in emerging areas such as the Internet.
Distribution Channels. Traditional retail distribution channels have been
experiencing a major restructuring and are fostering the development of
alternative distribution outlets.
Licensed Properties. There is a risk factor inherent in any venture
involving licensed properties. Not every licensed product is guaranteed
success; only the software consumer can ultimately determine the outcome.
Additionally, there is no guarantee that the Company can obtain future
licenses of either the quality or the quantity necessary for the Company to
reach its goals.
Product Ship Schedules. Delays in product ship schedules can cause problems
with product fulfillment, revenue recognition and retailer orders.
Research and Development. Research and development costs can very
significantly depending on the products currently in development and
potential products the Company may choose to develop.
Consumer Preferences. Consumers ultimately determine the success of software
products. Not every product will be a hit and residual inventory may exist
depending on actual sell through.
13
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company and its officers and directors are, and in the future may be,
involved in suits and actions incidental to the Company's business. The
Company does not believe that the resolution of any of the current suits or
actions will result in any material adverse effect on the financial condition
or operations of the Company.
On December 13, 1996, the Company filed suit in Superior Court for the County
of Los Angeles, California, against its former distributor, Acclaim
Entertainment, Inc. seeking compensatory damages of at least $2,124,259 and
consequential damages of at least $20,000,000 arising out of Acclaim's
alleged breach of its exclusive distribution agreement with the Company and
other related matters.
ITEM 5. OTHER INFORMATION
On February 3, 1997, the members of the Board of Directors of the Company
elected Robert S. Burke, principal with Robertson, Stephens & Company, to
fill a vacancy on the Board of Directors.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Exhibit No. Description of Exhibit
27 Financial Data Schedule, filed herewith
(b) Reports on Form 8-K
None.
14
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act,
the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SOUND SOURCE INTERACTIVE, INC.
By: /s/Vincent J. Bitetti Date: February 7, 1997
--------------------------------- ----------------
Vincent J. Bitetti
Chairman and Chief Executive Officer
(Principal Executive Officer)
By: /s/Ulrich E. Gottschling Date: February 7, 1997
--------------------------------- ----------------
Ulrich E. Gottschling
Chief Financial Officer, Treasurer and
Corporate Secretary
(Chief Financial Officer)
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> OCT-1-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,687,433
<SECURITIES> 0
<RECEIVABLES> 2,204,568
<ALLOWANCES> (848,381)
<INVENTORY> 313,545
<CURRENT-ASSETS> 4,160,271
<PP&E> 573,329
<DEPRECIATION> (174,407)
<TOTAL-ASSETS> 4,559,193
<CURRENT-LIABILITIES> 1,604,890
<BONDS> 0
0
0
<COMMON> 4,378
<OTHER-SE> 2,825,323
<TOTAL-LIABILITY-AND-EQUITY> 4,559,193
<SALES> 1,510,389
<TOTAL-REVENUES> 1,510,389
<CGS> 568,067
<TOTAL-COSTS> 2,028,222
<OTHER-EXPENSES> (24,747)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,518
<INCOME-PRETAX> (493,086)
<INCOME-TAX> 800
<INCOME-CONTINUING> (493,886)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (493,886)
<EPS-PRIMARY> (0.11)
<EPS-DILUTED> (0.11)
</TABLE>
