UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996.
|_| TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO __________.
Commission file number __________
KAYE KOTTS ASSOCIATES INC.
(Exact name of small business issuer as specified in its charter)
Delaware 95-4248310
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
15490 VENTURA BOULEVARD
SHERMAN OAKS, CALIFORNIA 91403
(Address of principal executive offices, zip code)
(818) 382-6300
(Issuer's telephone number)
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
--- ---
As of September 30, 1996, the Registrant had 2,394,400 shares of Common Stock
outstanding.
Transitional Small Business Disclosure Format (Check One): Yes No X
--- ---
<PAGE>
FORM 10-QSB
For the Three Month Period Ended September 30, 1996
TABLE OF CONTENTS Page
----
Part 1 Financial Information
Item 1. Financial Statements 3
Balance Sheets 3
Statements of Operations 4
Statement of Changes in Shareholders' Equity 5
Statements of Cash Flows 6
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 8-10
Part II Other Information 11-12
2
<PAGE>
KAYE KOTTS ASSOCIATES INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Kaye Kotts Associates, Inc.
Balance Sheets
September 30, December 31,
------------- ------------
1996 1995
------------- ------------
Assets
Current Assets:
Cash $ 35,366 $ 18,642
Short-term investments 1,876,030 --
Accounts receivable, net of allowance for
doubtful accounts of $175,791 and
$275,000 at September 30, 1996 and
December 31, 1995 respectively 918,635 1,131,206
Prepaid expenses and other current assets 273,683 196,574
Deferred offering costs -- 315,619
---------- ----------
Total Current Assets 3,103,713 1,662,041
---------- ----------
Property and Equipment- Net of accumulated
depreciation of $197,593 and $195,415 at
September 30, 1996 and December 31, 1995
respectively 243,392 159,041
Other Receivables (Note 5) 191,550 18,443
Deferred Financing Costs -- 75,000
---------- ----------
$3,538,656 $1,914,525
========== ==========
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable-trade $ 176,902 $ 217,773
Accrued payroll and payroll taxes 143,121 273,466
Loans payable 523,943 1,062,313
Other accrued liabilities 476,598 145,066
Deferred revenues 524,184 226,979
---------- ----------
Total Current Liabilities 1,844,748 1,925,597
========== ==========
Stockholders' Equity (Note 2) Common Stock,
$0.01 par value; 10,000,000 shares
authorized: 2,394,400 and 1,237,400 shares
issued and outstanding at September 30, 1996
and December 31, 1996, respectively 23,944 12,374
Additional paid-in-capital - common stock 4,683,373 168,455
Retained earnings (3,013,409) (191,901)
---------- ----------
1,693,908 (11,072)
---------- ----------
$3,538,656 $1,914,525
========== ==========
3
<PAGE>
Kaye, Kotts Associates, Inc.
Statements of Operations
<TABLE>
<CAPTION>
Three Months Nine Months
ended September 30, ended September 30,
------------------------- -------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Fee Income (Note 4) $ 965,127 $ 1,511,181 $ 3,683,463 $ 4,264,601
Selling, General And Administrative
Expenses 2,260,750 1,517,658 6,452,780 4,094,945
----------- ----------- ----------- -----------
Operating (Loss)/Income (1,295,623) (6,477) (2,769,317) 169,656
Interest (Income)/Expense, Net (28,621) 13,675 (43,643) 38,241
Amortization of Debt Discount -- 35,923 -- 88,000
Other Income (3,745) (16,964)
(10,231) (20,453)
----------- ----------- ----------- -----------
(Loss)/Income Before Income Taxes
And Extraordinary Item (1,263,257) (45,844) (2,708,710) 63,868
----------- ----------- ----------- -----------
Extraordinary Item: Write Off
of Deferred Finance
Charge and Unamortized Debt Discount
Upon Repayment of Debt -- -- 112,797 --
----------- ----------- ----------- -----------
(Loss)/Income Before Income Taxes (1,263,257) (45,844) (2,821,507) 63,868
----------- ----------- ----------- -----------
Provision for Income Taxes -- (20,041) -- 23,844
Net (Loss)/Income ($1,263,257) ($ 25,803) ($2,821,507) $ 40,024
----------- ----------- ----------- -----------
(Loss)/Income Per Common And Common
Equivalent Share ($ 0.53) ($ 0.02) ($ 1.31) $ 0.03
=========== =========== =========== ===========
Weighted Average Number Of Common
And Common Equivalent Shares Outstanding 2,394,400 1,237,400 2,151,196 1,237,400
=========== =========== =========== ===========
</TABLE>
4
<PAGE>
Kaye, Kotts Associates, Inc.
Statement of Changes in Shareholders' Equity
For The Nine Months Ended September 30, 1996
<TABLE>
<CAPTION>
Common Stock Additional
------------ Paid-in Retained Treasury
Shares Amount Capital Earnings Stock Totals
------ ------ ------- -------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Balance - December 31, 1995 1,237,400 $ 12,374 $ 168,455 ($ 191,902) $0 (11,073)
Net (Loss) (Unaudited) (2,821,507) (2,821,507)
Issuance of common stock in Public Offering 1,150,000 11,500 5,163,500 5,175,000
Issuance of common stock purchase warrants
in Public Offering 170,775 170,775
Underwriter, Legal, and Consulting Fees (297,018) (297,018)
Public Offering Costs (442,269) (442,269)
Expenses pertaining to issuance of common stock 0
warrants 7,000 70 (80,070) (80,000)
------------------------------------------------------------------------
Balance - September 30, 1996 2,394,400 $ 23,944 $ 4,683,373 ($3,013,409) $0 1,693,908
========================================================================
</TABLE>
5
<PAGE>
Kaye Kotts Associates, Inc.
Statements of Cash Flows
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
----------------------- -----------------------
1996 1995 1996 1995
----------- --------- ----------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (Loss)/ Income ($1,263,257) ($ 25,803) ($2,821,507) $ 40,024
----------- --------- ----------- ---------
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation 22,277 129,558 61,624 166,991
Issuance of common shares for services provided 0 9,300 9,930 9,624
Changes in assets and liabilities:
Decrease/(increase) in accounts receivable-trade 55,941 (93,675) 212,571 (542,034)
(Increase)/decrease in prepaid assets 10,662 (11,359) (77,109) (68,925)
(Increase)/decrease in other current assets (148,365) (6,574) 0 (3,785)
Increase/(decrease) in accounts payable-trade (133,456) (123,237) (40,871) 36,039
(Decrease)/increase in accrued expenses 12,936 (136,621) (130,345) 47,789
Increase/(decrease) in other accrued liabilities 112,893 10,593 331,532 38,988
Increase/(Decrease) in other deferred revenues 356,301 (31,000) 297,205 (31,000)
(Decrease) in deferred income taxes -- 12,976 -- 25,944
----------- --------- ----------- ---------
Total Adjustments 289,189 (240,039) 664,538 (320,369)
Net Cash Provided/(Used) by Operating Activities (974,068) (265,842) (2,156,970) (280,345)
----------- --------- ----------- ---------
Cash Flows From Investing Activities:
Capital expenditures (36,861) (3,024) (125,144) (22,921)
----------- --------- ----------- ---------
Cash Flows From Financing Activities
Increase in restricted cash -- 25,000 25,000
Payments on loans payable -- (56) (1,077,578) (7,000)
Proceeds from loans payable -- 404,055 499,943 543,055
Issuance of common stock and warrants
net of $288,436 of expenses -- -- 5,057,339 --
Proceeds from issuance of warrants -- 100,000 100,000
Increase in deferred offering costs -- (176,920) -- (274,576)
Printing of Prospectus (90,000) (90,000)
Repayment of legal fees (9,930) (9,930)
Payments on capital equipment leases (31,800) (31,800)
----------- --------- ----------- ---------
Net Cash Provided By Financing Activities (131,730) 352,079 4,347,974 386,479
----------- --------- ----------- ---------
Net Increase/(Decrease) In Cash (1,142,659) 83,213 2,065,861 83,213
Cash At Beginning Of Period 2,944,510 32,634 18,642 32,634
----------- --------- ----------- ---------
Cash And Short Term Investments At End of Period $ 1,801,851 $ 115,847 $ 2,084,503 $ 115,847
=========== ========= =========== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for interest $ 14,056 $ 6,316 $ 44,779 $ 6,316
=========== ========= =========== =========
Issuance of warrants in connection with debt financing -- 36,000 -- 36,000
=========== ========= =========== =========
</TABLE>
6
<PAGE>
KAYE KOTTS ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
1. LITIGATION
On November 22, 1995, the Company and its Chief Executive Officer, among
others, were served with a lawsuit by two former employees whose services
had been terminated by the Company in May and June 1995, respectively, for
what, in management's opinion, was cause. The plaintiffs alleged wrongful
discharge in contravention of public policy, fraud, misrepresentation and
intentional infliction of emotional distress. There is an agreement in
principle to settle this lawsuit for a payment by the Company of $50,000.
2. INITIAL PUBLIC OFFERING OF THE COMPANY'S COMMON SHARES
The Company completed an Initial Public Offering on February 22, 1996,
selling a total of 1,150,000 shares of common stock for $5.00 per share,
and 1,275,000 Class A Redeemable Warrants (the "Warrants") at $.15 per
warrant. The warrants entitle the holder to purchase one share of common
stock at $6.00 per share through February 22, 2001. Warrants are redeemable
by the Company commencing one year after issuance, on not less than 30 days
written notice, at a price of $.08 per warrant, at any time that the
average closing bid price of the common stock exceeds $10.00 per share for
thirty consecutive business days. Consent of the underwriters is also
needed to redeem the warrants for up to eighteen months after the
completion of the initial public offering.
3. INTERNAL REVENUE SERVICE INVESTIGATION
In April 1996 the Internal Revenue Service subpoenaed certain of the
Company's records as part of an investigation concerning the related
activities of three employees one of whom has been terminated and two of
whom have been suspended pending the results of the investigation. The
Government's attorney has indicated to the Company's counsel that no
substantial evidence exists linking the Company and its officers to these
activities; however, since these activities involved Company employees, the
Company and its officers' conduct are within the scope of the
investigation. In the opinion of management, the conduct of these
employees, who are allegedly engaged in these activities, is neither
condoned nor encouraged by the Company, nor overtly displayed by other
employees. Direct legal and other expenses of approximately $261,000 were
incurred through September 30, 1996 in connection with this investigation.
4. REVENUE RECOGNITION
The company recognizes revenues as income as services are performed. Upon
review of current operations the company has changed its estimate of the
period over which revenues should be recognized resulting in an increase in
deferred revenue of approximately $375,000.
5. OTHER RECEIVABLES
Other receivables consists of a loan to the President of the Company which
will be repaid over a three year period.
6. BANK BORROWINGS
In April 1996, the Company borrowed $500,000 under a line of credit with a
lending institution. Interest is payable on the loan at 1% over the prime
rate. The loan is secured by the Company's short term investments.
7
<PAGE>
COMPARISON OF THE THREE MONTHS PERIODS ENDED
SEPTEMBER 30, 1996 AND 1995
RESULTS OF OPERATIONS
For the three month period ended September 30, 1996, the Company had a loss
before income taxes and extraordinary item of ($1,263,257) compared with a loss
of ($45,844) during the same period in 1995. The increase in the loss of
($1,217,413) resulted primarily from staffing, facility and marketing costs
incurred in order to build the organization required to support an anticipated
increase in sales and the Company's planned national expansion, increases in
marketing and sales promotion expenditures, costs associated with the
consolidation of branch offices in California, an increase in the provision for
doubtful accounts, and a change in the estimate of the period over which
revenues are recognized. The national expansion has been temporarily deferred
while the company consolidates its California operations. The loss was also
increased by approximately $118,000 of costs related to the Internal Revenue
Service investigation and litigation related to matters described in the Notes
to Financial Statements. The Company had a net loss of ($1,263,257) for the 1996
period compared with a net loss of ($25,803) for the three months ended
September 30, 1996. The 1996 loss was ($0.53) per share compared with a loss of
($0.02) per share for the three months ended September 30, 1995.
FEE INCOME.
During the three months ended September 30, 1996, the Company had $965,127
in fee income compared with $1,511,181 for the same period in 1995, reflecting a
decrease of $546,054 or approximately 36%. The decrease in fees resulted
primarily from a change in the estimate of the period over which revenues should
be recognized resulting in an increase in deferred revenue of approximately
$375,000. Fees were also adversely affected by the shift in personnel and office
locations resulting from the Internal Revenue Service investigation described in
Notes to Financial Statements.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Operating costs increased by $743,092 to $2,260,750 for the three months
ended September 30,1996, or approximately 49% from $1,517,658 in 1995. The
increase results from the costs involved in building the organization and
infrastructure necessary to support the Company's planned growth. Of this
increase, $126,497 or approximately 17% of the increase was concentrated in
staffing and employee benefits, which grew from $946,730 in 1995 to $1,073,227
in 1996 resulting from an increase in the Company's staffing levels to increase
management personnel and quality control to support the Company's planned
expansion.
Facility costs grew by $18,218 for the three months ended September 30,
1996, from $203,861 in 1995 to $222,079 in 1996. Rent and related expenses
increased by $14,571 from $131,829 in 1995 to $146,400 in 1996.
Marketing, and promotional expense increased for the three months ended
September 30, 1996, by $72,317 from $176,755 for 1995 to $249,072 for 1996,
primarily resulting from the cost of market research, developing and testing new
media and direct mail advertisements, and providing media exposure for the Texas
office which was opened in October, 1996.
The provision for doubtful accounts and cancellations increased by $105,822
for the three months ended September 30, 1996 from $166,833 in 1995 to $272,655
in 1996.
Professional fees and legal settlements increased to $193,351 from $11,748
in 1995 primarily resulting from the litigation, the settlement of said
litigation, and the Internal Revenue Service investigation described in the
Notes To Financial Statements, and the cost of compliance with Securities and
Exchange Commission requirements for public companies.
8
<PAGE>
COMPARISON OF THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 1996 AND 1995
RESULTS OF OPERATIONS
For the nine month period ended September 30, 1996, the Company had a loss
before income taxes and extraordinary items of approximately ($2,708,711)
compared with operating income of $63,868, in the 1995 period. The increase in
the loss of ($2,772,579), resulted primarily from staffing, facility and
marketing costs incurred in order to build the organization required to support
an anticipated increase in sales and the Company's planned national expansion,
increases in marketing and sales promotion expenditures, costs for the Company's
new media and direct mail advertising program, costs associated with the
consolidation of branch offices in California, an increase in the provision for
doubtful accounts, and a change in the estimate of the period over which
revenues are recognized. The national expansion has been temporarily deferred
while the company consolidates its California operations. The loss was also
increased by approximately $498,000 of costs related to the Internal Revenue
Service investigation and litigation described in Notes to Financial Statements.
The Company had a net loss of ($2,821,508), for the 1996 period compared with
net income of $40,024, for the nine months ended September 30, 1996. The 1996
loss was ($1.31) per share compared with income of $0.03 per share for the nine
months ended September 30, 1995. The net loss for 1996 includes an extraordinary
charge of $112,797 for the write-off of deferred financing charges and
unamortized debt discount.
FEE INCOME:
During the nine months ended September 30, 1996, the Company had $3,683,463
in fee income compared with $4,264,601 for the 1995 period, reflecting a
decrease of $581,138 or approximately 13.6%. The decrease in revenue resulted
primarily from a change in the estimate of the period over which revenue should
be recognized resulting in a charge to income of $375,000. Fees were also
adversely affected by the shift in personnel and office locations resulting from
the Internal Revenue Service investigation described in Notes to Financial
Statements.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Operating costs increased by $2,357,835 to $6,452,780 for the nine months
ended September 30, 1996, or approximately 58% from $4,094,945 in 1995. The
increase results from the costs involved in building the organization and
infrastructure necessary to support the company's planned growth. Of this
increase, $645,312 or approximately 27% of the increase is concentrated in
staffing and employee benefits, which grew from $2,632,695 in 1995 to $3,276,007
in 1996, resulting from the opening of four new sales offices, and one new full
service office, as well as an increase in the Company's management staffing
levels to increase management personnel and quality control for the Company's
planned expansion.
Facility costs grew by $97,764 for the nine months ending September 30,
1996, from $517,012 in 1995 to $614,776 in 1996. Rent and related expenses
increased by $92,203 from $407,547 in 1995 to $499,750 in 1996.
Marketing, and promotional expense increased for the nine months ending
September 30, 1996, by $253,456 from $584,782 for 1995 to $838,238 for 1996,
primarily resulting from the cost of supporting new offices and developing and
testing a new media and direct mail advertising program for Texas the office
which was opened in October, 1996. . The provision for doubtful accounts and
cancellations increased by $299,111 for the nine months ended September 30, 1996
from $307,506 in 1995 to $606,617 in 1996.
Professional fees increased to $589,514 from $47,068 in 1995 primarily
resulting from the litigation and Internal Revenue Service investigation
described in the Notes to Financial Statements, and the cost of compliance with
Securities and Exchange Commission requirements for public companies.
CERTAIN BALANCE SHEET DATA
Net accounts receivable declined by $212,571 or approximately 23% from
December 31, 1995, to $918,635 at September 30, 1996. This amount represented
approximately 26% of the Company's total assets at September 30, 1996, and
approximately 28% of its current assets. The allowance for doubtful accounts was
charged with provisions of $606,617 and $307,506 for 1996 and 1995,
respectively. The Company reviews the provisions for uncollectible accounts
quarterly, and adjusts the provision based on actual write-offs and aging
analyses.
9
<PAGE>
The Company's typical client is in financial difficulty at the outset of
the Company's engagement. Under these circumstances, the Company usually
arranges extended payment terms ranging up to nine months in length. As a
safeguard, a substantial down payment of approximately 35% of the Company's
total fee from the client is required. Finally, it is the Company's policy to
obtain post dated checks for the balance of the Company's fee. During the nine
months ended September 30, 1996, approximately $379,000 or (13%) of the
Company's cash receipts, other than, initial payments did not come from post
dated checks.
At September 30, 1996, accounts receivable greater than 90 days old stood
at $93,149 which sum included $50,036 in accounts receivable greater than 120
days old. Accounts receivable greater than 90 and 120 days old represented
approximately 9% and 5% respectively, of total accounts receivable at September
30, 1996.
The Company's collection process can experience delays due to rescheduling
of installments, as well as insufficiency of available funds in the client's
bank account when an installment is due. When the client does not have a bank
account, the Company will accept a client without receiving post dated checks.
As a result, the Company may not have the necessary leverage to ensure payment
from the client. Management believes that there is no material risk in extending
the payment and, in fact, historical experience suggests that rescheduling of
payments occurs infrequently, perhaps up to 10% of the time, and that 90% of the
Company's clients generally honor the rescheduled payment plan.
Based upon the preceding paragraph, management believes that trade accounts
receivable as stated at $918,635 are collectible in the normal course of
business.
Management expects its investment in client accounts receivable to remain
consistent or increase in proportion to the Company's growth. Trade accounts
payable, accrued expenses and other accrued liabilities increased by $160,317
from $636,304 at December 31, 1995 to $796,621 at September 30, 1996. The
increase results primarily from capitalized equipment leases of $123,192.
Loans payable decreased from $1,062,313 at December 31, 1995, to $523,943
at September 30, 1996. This decrease of $538,370 resulted from the use of some
of the proceeds from the Company's public offering of Common Stock and Warrants
in February 1996 to repay loans. Additionally, the Company established a Credit
Line of $500,000 with a local bank and has used the entire amount at September
30, 1996.
The Company completed an Initial Public Offering on February 22, 1996,
selling a total of 1,150,000 shares of common stock for $5.00 per share, and
1,265,000 Class A Redeemable Warrants (the "Warrants") at $.15 per warrant. The
warrants entitle the holder to purchase one share of common stock at $6.00 per
share through February 22, 2001. Warrants are redeemable by the Company
commencing one year after issuance, on not less than 30 days written notice, at
a price of $.08 per warrant, at any time the average closing bid price of common
stock exceeds $10.00 per share for thirty consecutive business days. Consent of
the underwriters is also needed to redeem the warrants for up to eighteen months
after the completion of the initial public offering. The net proceeds of the
offering amounting to $5,048,757 was credited to common stock and paid in
capital. In addition, $532,269 of expenses related to the offering were charged
to paid-in capital.
10
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On November 22, 1995, the Company and its Chief Executive Officer, among
others, were served with a lawsuit by two former employees whose services had
been terminated by the Company in May and June 1995, respectively, for what, in
management's opinion, was cause. The plaintiffs alleged wrongful discharge in
contravention of public policy, fraud, misrepresentation and intentional
infliction of emotional distress. There is an agreement in principle to settle
this lawsuit for a payment by the Company of $50,000.
In April 1996 the Internal Revenue Service subpoenaed certain of the
Company's records as part of an investigation concerning the related activities
of three employees one of whom has been terminated and two of whom have been
suspended pending the results of the investigation. The Government's attorney
has indicated to the Company's counsel that no substantial evidence exists
linking the Company and its officers to these activities; however, since these
activities involved Company employees, the Company and its officers' conduct are
within the scope of the investigation. In the opinion of management, the conduct
of these employees, who are allegedly engaged in these activities, is neither
condoned nor encouraged by the Company, nor overtly displayed by other
employees. Direct legal and other expenses of approximately $261,000 were
incurred through September 30, 1996 in connection with this investigation.
Item 2. Changes in Securities
Not Applicable
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Not applicable
(b) Not applicable
(c) Exhibit 27
11
<PAGE>
KAYE KOTTS ASSOCIATES INC
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
KAYE KOTTS ASSOCIATES INC.
November 12, 1996 By: /s/ David Kaye
---------------------------
David Kaye
Chief Executive Officer
President
Treasurer
November 12, 1996 By: /s/ /s/ Arnold Levitt
---------------------------
Arnold Levitt
Chief Financial Officer
Assistant Treasurer
12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 35,366
<SECURITIES> 1,876,030
<RECEIVABLES> 1,094,426
<ALLOWANCES> 175,791
<INVENTORY> 0
<CURRENT-ASSETS> 3,103,713
<PP&E> 440,985
<DEPRECIATION> 197,593
<TOTAL-ASSETS> 3,538,656
<CURRENT-LIABILITIES> 1,844,748
<BONDS> 0
0
0
<COMMON> 23,944
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 3,538,656
<SALES> 3,683,463
<TOTAL-REVENUES> 3,792,831
<CGS> 0
<TOTAL-COSTS> 6,452,780
<OTHER-EXPENSES> 161,558
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 48,761
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,708,710)
<DISCONTINUED> 0
<EXTRAORDINARY> 112,797
<CHANGES> 0
<NET-INCOME> (2,821,507)
<EPS-PRIMARY> (1.31)
<EPS-DILUTED> 0
</TABLE>
