<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
_________________________
For the Quarterly Period Ended April 30, 1996
Commission File No. 0-23168
GameTek, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
65-0007710
(I.R.S. Employer Identification No.)
Three Harbor Drive
Suite 110
Sausalito, California 94965
(Address of principal executive offices and zip code)
(415) 289-0220
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No __
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Outstanding
Class of Common Stock at July 1, 1996
_________________
$0.01 par value per share 10,367,853
<page 2>
GAMETEK, INC. AND SUBSIDIARIES
INDEX
Part I - Financial Information Page
Item 1. Consolidated Financial Statements .................... 3
Consolidated Statements of Operations for the
Three and Nine Months Ended April 30, 1996
and 1995 ............................................ 3
Consolidated Balance Sheets at
April 30, 1996 and July 31, 1995 .................... 4
Consolidated Statements of Cash Flows for the
Nine Months Ended April 30, 1996 and 1995 ........... 5
Notes to Consolidated Financial Statements .......... 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations ......... 8
Part II - Other Information
Item 1. Legal Proceedings ..................................... 11
Item 6. Exhibits and Reports on Form 8-K ...................... 12
Signatures .................................................... 13
<page 3>
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
GameTek, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
April 30, April 30,
___________ ____________ ____________ ___________
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net revenues $ 3,268,774 $ 6,226,485 $ 10,620,308 $ 31,850,625
Cost of revenues 2,824,356 6,031,922 8,023,288 24,999,755
__________ __________ ___________ ___________
Gross profit 444,418 194,563 2,597,020 6,850,870
__________ __________ __________ ____________
Operating expenses:
Selling, general and
administrative 2,266,343 2,913,033 6,849,709 9,824,003
Product development 722,252 2,623,184 1,541,749 3,954,267
__________ __________ __________ ___________
Total operating expenses 2,988,595 5,536,217 8,391,458 13,778,270
__________ __________ __________ ___________
Loss from operations (2,544,177) (5,341,654) ( 5,794,438) ( 6,927,400)
----------- ----------- ----------- ------------
Interest expense:
Interest expense --
related party 217,681 91,822 691,833 239,596
Interest expense -- other 65,617 163,667 203,596 284,203
--------- --------- ----------- ----------
Total interest expense 283,298 255,489 895,429 523,799
Other income (expense) ( 32,064) 83,476 544,695 345,197
----------- -------- ---------- ---------
Loss before income tax provision
and minority interest (2,859,539) (5,513,667) ( 6,145,172) ( 7,106,002)
Income tax provision 89,857 211,952 216,094 76,682
---------- ----------- ---------- ------------
Loss before minority
interest (2,949,396) (5,725,619) ( 6,361,266) ( 7,182,684)
Minority interest --- ( 67,986) --- ( 125,432)
----------- ----------- ------------ ------------
Net loss (2,949,396) (5,657,633) ( 6,361,266) ( 7,057,252)
=========== =========== ============ ===========
Loss per share ( $0.30) ( $0.75) ( $0.73) ( $0.94)
=========== =========== ============ ============
Weighted average number of
common shares outstanding 9,730,816 7,534,520 8,765,055 7,534,520
=========== ========= =========== ===========
</TABLE>
See notes to consolidated financial statements.
<Page 4>
GameTek, Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
April 30, July 31,
1996 1995
(unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash $ 23,468 $ 110,102
Accounts receivable, net 5,304,589 5,140,701
Inventories 2,246,495 2,680,852
Prepaid expenses and other current assets 851,062 823,204
Refundable income taxes 935,244 957,716
---------- ----------
Total current assets 9,360,858 9,712,575
Property and equipment, net 1,406,261 1,581,261
Capitalized masters and software
development costs, net 2,383,844 1,134,162
Royalty advances 2,882,082 2,577,113
Other assets 280,968 280,966
---------- ----------
Total assets $16,314,013 $15,286,077
========== ==========
LIABILITIES AND CAPITAL DEFICIENCY
Current liabilities:
Accounts payable $ 2,615,486 $ 1,753,705
Royalties payable 366,143 789,894
Accrued expenses 162,785 763,549
Income taxes payable 721,407 542,128
Short-term borrowings and bankers'
acceptances 1,523,028 679,670
Current portion of long-term debt 3,272,044 ---
__________ __________
Total current liabilities 8,660,893 4,528,946
__________ __________
Long-term debt:
Bank borrowings --- 2,596,504
Related party debt 9,200,000 8,250,000
__________ __________
Total long-term debt 9,200,000 10,846,504
---------- ----------
Capital deficiency:
Common stock, $0.01 par value, 20,000,000
shares authorized, 10,367,853 shares
issued and outstanding (7,534,520 in 1995) 103,680 75,345
Additional paid-in capital 18,851,864 13,880,197
Accumulated deficit (20,464,422) (14,103,159)
Foreign currency translation ( 38,002) 58,244
----------- ----------
Total capital deficiency (1,546,880) (89,373)
Total liabilities and capital
deficiency $16,314,013 $15,286,077
</TABLE>
See notes to consolidated financial statements.
<page 5>
GameTek, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
April 30,
1996 1995
<S> <C> <C>
Operating activities:
Net loss $(6,361,263) $(7,057,252)
Adjustments to reconcile net loss to net
cash used in operating activities:
Amortization of capitalized masters and
software development costs 559,144 529,206
Depreciation 601,715 370,201
Foreign exchange loss 40,559 ---
Minority interest in net earnings --- (125,432)
Change in assets and liabilities:
Accounts receivable (174,250) 3,246,774
Inventories 434,357 1,296,690
Income taxes 201,751 661,559
Royalty advances (304,969) 938,468
Other assets (27,860) 312,634
Accounts payable and accrued liabilities (203,860) (1,579,804)
Royalties payable (423,751) 113,281
Accrued bonus payable --- ( 118,757)
---------- ----------
Net cash used in operating activities (5,658,427) (1,412,432)
__________ __________
Investing activities:
Purchases of property and equipment (426,714) (814,892)
Capitalized masters and software development
costs (1,808,826) (928,084)
Investment in limited liability corporation --- (200,040)
Restricted cash --- 500,000
__________ ___________
Net cash used in investing activities (2,235,540) ( 1,443,016)
__________ ___________
Financing activities:
Borrowings under revolving credit agreements 5,950,000 3,300,000
Repayments under revolving credit agreements --- ( 5,050,000)
Net borrowings under banker's acceptances and
loan agreements 675,540 3,850,823
Short term borrowings 843,358 ---
Cash overdraft 475,238 ---
Repayment of bank debt --- ---
_________ ___________
Net cash provided by financing activities 7,944,136 2,100,823
Effect of foreign currency translation on
cash (136,803) 105,070
Net decrease in cash (86,634) (649,555)
Cash, beginning of period 110,102 794,032
_________ ___________
Cash, end of period $23,468 $144,477
========= ===========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 345,083 $ 216,059
--------- ----------
Cash paid for income taxes $ 0 $ 0
--------- ----------
</TABLE>
Supplemental schedule of noncash investing and
financing activities:
1995
----
Fair value of assets contributed by minority
interest in limited liability corporation, $199,960.
See notes to consolidated financial statements.
<page 6>
GameTek, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
1. GENERAL
The consolidated financial statements of GameTek, Inc. and Subsidiaries (the
"Company") included herein are not audited and do not include all footnote
disclosures normally included in the annual consolidated financial statements
and notes. These financial statements should be read in conjunction with the
consolidated financial statements in the Company's annual report on Form 10-K
for the year ended July 31, 1995. Certain amounts in prior periods have been
reclassified to conform to current presentation.
The unaudited financial statements for the nine months ended April 30, 1996
and 1995 reflect, in the opinion of management, all adjustments necessary to
present fairly the results for such periods. All such adjustments are solely
of a normal recurring nature. The operating results for the nine month period
ended April 30, 1996 are not necessarily indicative of the results to be
expected for the full fiscal year ending July 31, 1996.
The Company is dependent upon the continued long term financial support of a
related party lender. Should this lender withdraw its financial support by
failing to provide additional credit as needed, it is unlikely that the
Company would be able to secure financing from other sources. In such a case,
the Company's liquidity would be materially adversely affected and it would
likely be rendered insolvent.
2. INVENTORIES
Inventories consist of the following as of:
April 30, 1996 July 31, 1995
-------------- -------------
Raw materials $ 1,412,314 $ 857,820
Finished goods 834,181 1,823,032
---------- ----------
Total $ 2,246,495 $ 2,680,852
========== ==========
3. DEBT
Short term borrowings and bankers' acceptances at April 30, 1996 includes
$1,215,417 of borrowings by the Company's UK subsidiary under a revolving
credit facility which provides a line of credit for 1,000,000 pounds and bears
interest at the rate of 2% over LIBOR (8.0% at April 30, 1996). This facility
is due on demand and all assets of the UK subsidiary have been pledged as
collateral.
The Company has a domestic facility which provides for a line of credit of
$10,000,000 with a sublimit of up to $6,000,000 for direct loans and bears
interest at a rate of prime + 2% (10.25% at April 30, 1996). In May 1995, this
facility was converted from a demand basis to a term basis due in full on
August 1, 1996. This facility is collateralized by substantially all of the
Company's North American assets. The balance at April 30, 1996 was $3,272,044.
There was no availability at April 30, 1996.
<page 7>
4. BORROWINGS - RELATED PARTY
In August 1994, the Company and an affiliate of a related party shareholder
entered into a $6,000,000 revolving credit facility which was due on demand
and accrued interest at prime plus 1%. As of August 1, 1995, the revolving
credit facility was amended to increase the maximum principal amount available
to the Company to $12,000,000 and was converted from a demand facility to a
facility that matures August 1, 1997. At April 30, 1996 the outstanding
balance was $9,200,000.
On October 31, 1995 and March 14, 1996, the Company's major shareholder, at
the request of the Board of Directors, contributed a total of $5,000,000 in
exchange for a total of 2,833,333 shares of common stock. These contributions
were funded through a reduction in the then outstanding balance of the
revolving credit facility. These exchanges have been treated as non-cash
transactions for the purposes of the statement of cash flows.
5. OTHER INCOME
Other income for the nine months ended April 30, 1996 consists solely of the
proceeds of the settlement of litigation in the Company's favor.
6. INCOME TAXES
The Company maintains a full valuation allowance against its deferred tax
assets based on management's belief that it is more likely than not that such
future tax benefits will not be realized. The provision for income taxes for
the nine months ended April 30, 1996 does not bear a customary relationship to
the pre-tax accounting loss due principally to the valuation allowance on
deferred tax assets and income taxes on foreign income.
7. SUBSEQUENT EVENTS
Effective as of July 8, 1996, the Company's principal stockholder, at the
request of the Board of Directors, contributed $2,650,000 in exchange for a
total of 1,060,000 shares of common stock. These contributions were funded
through a reduction in the outstanding balance of the Company's related party
revolving credit facility. This exchange will be treated as a non-cash
transaction for purposes of the statement of cash flows for the Company's
fourth fiscal quarter.
[Balance of page left blank intentionally.]
<page 8>
ITEM 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations.
GENERAL:
The Company has incurred substantial losses over the last several fiscal
years, due primarily to a lack of strong new product offerings and extremely
high levels of product returns and allowances. These losses have seriously
impaired the Company's liquidity. Management has responded to these problems
by reducing costs through staff reductions, closure of the Company's San
Francisco, California and Aventura, Florida offices, and the termination of
certain development projects. The Company is also seeking a distribution
arrangement for certain of its new products to reduce future working capital
requirements by, among other things, requiring the distributor to fund the
purchase of certain cartridge products from the manufacturer and intends to
release a variety of new products during the coming fiscal year.
The Company's future success and viability depends upon its ability to
implement these strategies effectively and on its ability to maintain adequate
sources of working capital. At present, the Company is dependent upon two
financing facilities, one with a commercial bank, and the other with a related
party lender. The facility with the commercial bank expires on August 1, 1996.
If this facility is not renewed or replaced, the Company will be required to
find alternative means to open the letters of credit used in purchasing
cartridge products or to prepay for the purchase of cartridge product, which
would require substantial additional working capital, or to enter into a
distribution arrangement under which a third party distributor would fund the
purchase of cartridge product. There can be no assurance that the Company
would be able to obtain alternate means of opening letters of credit, to
secure any such additional working capital or to obtain such a distribution
arrangement.
The Company is also dependent upon the continued long term financial support
of its related party lender. Should this lender withdraw its financial support
by failing to provide additional credit as needed, it is unlikely that the
Company would be able to secure financing from other sources. In such a case,
the Company's liquidity would be materially adversely affected and it would
likely be rendered insolvent.
RESULTS OF OPERATIONS:
Three Months Ended April 30, 1996 Compared to Three Months Ended April 30,
- - --------------------------------------------------------------------------
1995
- - ----
Net revenues for the period decreased $2.9 million (or 48%) from $6.2 million
to $3.3 million primarily as a result of sales of product for dedicated
platform systems and software for personal computers declining $2.2 million
and $3.2 million respectively. Allowances for returns and other credits
declined $2.2 million (but increased as a percentage of gross sales from 21%
to 25% of gross revenue) from the comparable period in fiscal 1995, partially
offsetting the decline in sales. This decline resulted primarily from
significant accruals recorded during the three months ended April 30, 1995.
The Company's international operations contributed $2.6 million for the
quarter ended April 30, 1996 as compared to $4.1 million for the quarter ended
April 30, 1995. These decreases were due to a combination of a decrease in the
number of units sold, due to a limited number of new product offerings by the
Company during the period, and a decrease in the average price per unit.
<page 9>
Cost of revenues includes the cost of manuals, packaging, diskettes,
cartridges, duplication, assembly and fulfillment charges, as well as
royalties paid to third party developers and intellectual property right
owners, inventory obsolescence reserves, and amortization of capitalized
software development costs. Gross profit for the third quarter of fiscal 1996
increased to $444,000 as compared to $195,000 for the comparable period in
fiscal 1995. As a percentage of net revenue, gross profit increased from 3% to
14% as a result of decreased royalty rates.
Selling, general and administrative expenses decreased from $2.9 million to
$2.3 million as a result of an $86,000 decrease in advertising expenses, a
$410,000 decrease in commissions and cooperative advertising, a $211,000
decrease in salary and consulting expenses and a $66,000 decrease in customer
service related expenses. These decreases in expenses are a result of the
decline in sales volume. As a percent of net sales, selling, general and
administrative expenses increased from 47% to 66% as a result of the decline
in sales volume.
Product development expenses decreased by $1.9 million (or 72%) from
approximately $2.6 million to approximately $722,000. During the three months
ended April 30, 1995, the Company either wrote off or established reserves
aggregating $1.9 million for abandoned development projects.
The income tax provision decreased by $122,000 for the quarter ended April 30,
1996 from the comparable period in fiscal 1995 due to lower foreign income.
Additionally, the Company will not recognize any benefit for domestic losses
in 1996.
Nine Months Ended April 30, 1996 Compared to Nine Months ended April 30, 1995
- - ------------------------------------------------------------------------------
Net revenues declined $21.2 million (or 67%) from $31.9 million to $10.6
million in the first nine months of fiscal 1996 as compared to the first nine
months of fiscal 1995. This decrease consisted of a $15.7 million decline in
sales of product for dedicated platform systems and a $9.7 million decline in
sales of product for personal computers, partially offset by a $3.7 million
decrease in the provision for returns and allowances. This decrease in
revenues reflects a lack of new product offerings by the Company during the
period, resulting in lower unit sales, as well as a lower price per unit.
Gross profit decreased by $4.3 million (or 62%) from $6.9 million to $2.6
million primarily as a result of decreased sales volume. The gross profit
percentage increased from 21.5% to 24.4%, primarily as a result of a decrease
in royalty expense from 17% to 14%.
Selling, general and administrative expenses decreased $3.0 million (or 30%)
from $9.8 million to $6.8 million from the comparable period of fiscal 1995 as
a result of a $900,000 decrease in advertising expenditures, a $700,000
decrease in salaries, decreases totaling $375,000 relating to customer service
and creative activities and a $1.0 million decrease in commissions and
cooperative advertising expenses. These decreases are primarily a result of
the decrease in sales volume. As a percent of net revenues, selling, general
and administrative expenses increased from 31% to 64% as a result of the
decline in sales volume.
Product development expenses decreased $2.4 million (or 61%) from $4.0 million
to $1.6 million due primarily to the abandonment of a number of development
projects during the third quarter of fiscal 1995. Additionally, during the
fourth quarter of fiscal 1995, the Company dissolved a product development
<page 10>
joint venture with a software development company in which the Company had
incurred significant development expense in fiscal 1995.
Interest expense increased approximately $372,000 for the nine months ended
April 30, 1996 over the comparable period of fiscal 1995, as a result of
increased borrowings.
Other income for the nine months ended April 30, 1996 increased approximately
$199,000 over the comparable period in fiscal 1995 as a result of the
settlement of certain litigation.
QUARTERLY EARNINGS FLUCTUATION
The Company's quarterly earnings have fluctuated dramatically, and in the
future are likely to continue to fluctuate dramatically, as a result of a
variety of factors, the most important of which are the market acceptance and
timing of new product releases and, to a lesser extent, the holiday selling
season.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity are its credit facility with a
bank, and borrowings under its revolving credit facility with a related
entity. The bank facility provides an aggregate of $10 million for the
issuance of letters of credit, including the refinancing of such letters of
credit via bankers' acceptances at an interest rate of prime plus 2%. The
outstanding balance under this facility at April 30, 1996 was $3.6 million. As
discussed further below, the Company's related party lender converted a
portion of the debt owed to it by the Company into a capital contribution in
March 1996. The related party facility provides a maximum borrowing of $12
million at an interest rate of prime plus 1%. The outstanding balance at April
30, 1996 under this facility was $9.2 million. At April 30, 1996, unused
availability under existing credit facilities amounted to $2.8 million. The
Company's UK subsidiary has a revolving credit facility that provides a line
of credit of 1,000,000 pounds and bears interest at a rate of 2% over LIBOR.
The Company intends to seek an extension of its bank facility. If it is unable
to do so, and is unable to obtain a replacement facility, the Company may
require additional credit from its related party lender. There can be no
assurance that the Company will be able to obtain a renewal and/or extension
of its bank facility or that its related party lender will be willing to
extend the additional capital required to enable the Company to continue its
operations, in which case the Company's liquidity and its ability to continue
operations would be seriously adversely affected.
Net cash used in operations during the first nine months of fiscal 1996 was
$5.7 million as compared to $1.4 million during the first nine months of
fiscal 1995. Inventory decreased from $2.7 million to $2.2 million as a result
of declining cartridge sales, disposal of obsolete inventory and the ability
to build computer software inventory to order. The Company has experienced a
lengthening of the collection process as customers generally have been paying
more slowly, which has had a negative effect on the Company's liquidity.
Net cash used in investing activities for the nine months ended April 30, 1996
totaled $2.2 million as compared to $1.4 million for the nine months ended
April 30, 1995. This increase resulted from an increase in capitalized masters
and software development costs related to new development projects.
<page 11>
Net cash provided by financing activities totaled $7.9 million for the nine
months ended April 30, 1996, as compared to $2.1 million for the comparable
period in 1995. The primary source of funds for the first nine months of
fiscal 1996 was the Company's facility with a related party lender. During the
nine months ended April 30, 1995, the Company's primary source of funds was
its bank facility.
On October 31, 1995, the Company's majority shareholder, at the request of the
Board of Directors, purchased 1,500,000 additional shares of stock at a price
of $2.00 per share. The entire $3 million in net proceeds of such sales was
applied to reduce the Company's related party debt. On March 14, 1996, the
Company's major shareholder, again at the request of the Board of Directors,
contributed an additional $2,000,000 in exchange for 1,333,333 shares of
common stock.
At April 30, 1996, management believes that the continuation of the Company's
present financing arrangements should be adequate to provide for the Company's
liquidity and capital needs for the remainder of the fiscal year. The
Company's bank credit facility with a bank expires August 1, 1996. At this
time, management believes the credit facility will be renewed without
significant modification of the terms.
FUTURE OPERATING RESULTS
The Company's future operating results are subject to a number of
uncertainties, including its ability to develop and introduce new products,
the number and quantity of products introduced by competitors, the success of
new hardware platforms and general economic and industry conditions. In
addition, the Company expects the level of competition in the entertainment
software industry to become more intense and that companies with greater
access to capital, new products and retail shelf space may enter the market.
The Company may plan to seek acquisitions of products or technologies in the
future that are complementary to its current business. There can be no
assurance that the Company will be successful in such acquisitions or that it
will not encounter difficulties in integrating any such products or
technologies into its existing operations.
RECENTLY ISSUED ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board issued Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of". This statement requires that long-lived assets and
certain identifiable intangibles be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable based on estimated future cash flows expected to result from
the use of the asset and its eventual disposition. The Company is required to
adopt this standard for the fiscal year beginning August 1, 1996. Management
has not yet determined the impact this standard will have on the Company's
financial statements.
Financial Accounting Standards Board Statement No. 123, "Accounting for Stock-
Based Compensation", becomes effective for years beginning after December 15,
1995. This pronouncement encourages, but does not require, companies to
recognize compensation expense for grants of stock, stock options, and other
equity instruments to employees based on the new fair value accounting rules.
Additional disclosures are required under the new pronouncement regardless of
which method is used to measure compensation. The Company does not expect to
<page 12>
adopt the non-mandatory provisions of this statement. Accordingly, the
standard will not impact the Company's financial position or results of
operations.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not presently a defendant in any litigation, and is not a party
to any material litigation of any kind.
In January 1996, the Company settled certain litigation that it had instituted
against a former lender on terms favorable to the Company.
<page 13>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GAMETEK, INC.
Dated: July 10, 1996 s/Max R. Rudminat
-----------------
Max R. Rudminat
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet at April 30, 1996 (Unaudited) and the Consolidated
Statement of Cash Flows for the Nine Months Ended April 30, 1996 (Unaudited) and
the Consolidated Statement of Operations for the Nine Months Ended April 30,
1996 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> AUG-01-1995
<PERIOD-END> APR-30-1996
<CASH> 23,468
<SECURITIES> 0
<RECEIVABLES> 5,304,589
<ALLOWANCES> 424,230
<INVENTORY> 2,246,495
<CURRENT-ASSETS> 9,360,858
<PP&E> 1,406,261
<DEPRECIATION> 601,715
<TOTAL-ASSETS> 16,314,013
<CURRENT-LIABILITIES> 8,660,893
<BONDS> 0
0
0
<COMMON> 103,680
<OTHER-SE> 18,851,864
<TOTAL-LIABILITY-AND-EQUITY> 16,314,013
<SALES> 10,620,308
<TOTAL-REVENUES> 10,620,308
<CGS> 8,023,288
<TOTAL-COSTS> 8,023,288
<OTHER-EXPENSES> 8,391,458
<LOSS-PROVISION> 148,076
<INTEREST-EXPENSE> 895,429
<INCOME-PRETAX> (6,145,172)
<INCOME-TAX> 216,094
<INCOME-CONTINUING> (6,361,266)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,361,266)
<EPS-PRIMARY> (.73)
<EPS-DILUTED> (.73)
</TABLE>
