<PAGE>
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(x) QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended June 30, 1996.
Commission file number: 0-25338
INTIME SYSTEMS INTERNATIONAL, INC.
(Name of small business issuer in its charter)
DELAWARE 65-0480407
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
1601 Forum Place, Suite 500, West Palm Beach,FL 33401
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (407) 478-0022
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
Number of shares outstanding of each of the issuer's classes of common equity as
of August 6, 1996.
Class A Common Stock 1,759,930 Shares
Class B Common Stock 2,746,250 Shares
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
The consolidated financial information herein is unaudited. However, in the
opinion of management, such information reflects all adjustments (consisting
only of normal recurring accruals) necessary for a fair presentation of the
results of operations for the periods being reported. Additionally, it should be
noted that the accompanying condensed consolidated financial statements do not
purport to contain complete disclosures in conformity with generally accepted
accounting principles.
The consolidated results of operations for the six months ended June 30, 1996
are not necessarily indicative of the results of operations for the year ending
December 31, 1996.
The consolidated balance sheet at December 31, 1995 was condensed from the
audited consolidated balance sheet appearing in the Company's Form 10-KSB dated
March 29, 1996.
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INTIME SYSTEMS INTERNATIONAL, INC.
Condensed Consolidated Balance Sheet
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
(Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $1,236,024 $1,888,574
Accounts receivable net of
allowance for doubtful accounts 2,139,109 1,336,519
Other current assets 134,568 79,184
------------ -------------
Total current assets 3,509,701 3,304,277
Fixed assets less accumulated
depreciation 697,348 798,233
Software development costs net
of accumulated amortization 390,491 468,491
Other assets 33,364 -0-
------------- ----------------
Total assets $4,630,904 $4,571,001
========== ==========
Current Liabilities:
Accounts payable and accrued expenses $ 312,775 $290,454
Deferred revenue 73,622 73,622
Other current liabilities (-0-) 8,452
------------- --------------
Total current liabilities 386,397 372,528
------------ -------------
Lease obligation 335,439 -0-
Other non-current liabilities 17,369 15,002
------------- ---------------
Total liabilities 739,205 387,530
------------ --------------
Stockholders' Equity:
Preferred stock: $1 par value; 5,000,000
shares authorized: none issued or outstanding
Common stock:
Class A par value $.01; 16,905,278 shares
authorized;
1,759,930 shares issued and outstanding 17,599
1,610,000 shares issued and outstanding 16,100
Class B par value $.01; 3,094,721 shares
authorized;
2,746,250 shares issued and outstanding 27,462 28,847
Additional paid-in-capital 6,180,650 6,160,599
Retained (deficit) (2,334,012) (2,022,075)
----------- -------------
Total equity 3,891,699 4,183,471
----------- -------------
$4,630,904 $4,571,001
============ ===========
</TABLE>
Attention is directed to the accompanying notes to the condensed financial
statements.
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INTIME SYSTEMS INTERNATIONAL, INC.
Condensed Consolidated Income Statement
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenues:
Consulting services $ 2,798,674 $ 1,639,199 $ 5,073,317 $ 3,649,934
Software related revenue 148,172 240,711 234,282 358,462
Other 14,497 62,685 15,225 96,293
----------- ----------- ----------- -----------
2,961,343 1,942,595 5,322,824 4,104,689
Costs and expenses:
Cost of consulting services 1,391,181 1,093,115 2,788,332 2,321,063
Cost of software services 32,568 259,695 188,521 333,029
Sales and marketing 692,088 436,070 1,463,390 842,107
Computer software research
and development 151,234 223,427 511,314 303,190
General and administrative 399,129 237,240 683,204 451,710
----------- ----------- ----------- -----------
Income (loss) before provision for
income taxes 295,143 (306,952) (311,937) (146,410)
(Provision) benefit for income taxes
(Note 1) -0- 62,659 -0- 54,040
----------- ----------- ----------- -----------
Net income (loss) $ 295,143 $ (244,293) $ (311,937) $ (92,370)
=========== =========== =========== ===========
Net income (loss) per share (Note 2) $ .11 $ (.10) $ (.12) $ (.04)
=========== =========== =========== ===========
</TABLE>
Attention is directed to the accompanying notes to the condensed financial
statements.
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INTIME SYSTEMS INTERNATIONAL, INC.
Consolidated Statement of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 295,143 $ (244,293) $ (311,937) $ (92,370)
Adjustments to reconcile net income
(loss) to net cash provided by operating
activities:
Depreciation and amortization 88,543 35,313 169,543 68,626
Increase in provision for doubtful
accounts -0- -0- -0-
15,600
Changes in assets and liabilities:
Accounts receivable (147,633) 139,794 (802,590) 207,563
Other assets (25,873) 19,191 (58,502) (90,343)
Accounts payable/accrued expenses (142,619) (209,269) (2,348) (278,353)
Deferred revenue -0- (2,751) -0- 7,332
Deferred taxes -0- (62,667) -0- (54,745)
Other liabilities (5,577) (1,349) (5,577) (4,990)
----------- ----------- ----------- -----------
Net cash provided by
(used in) operating activities 61,984 (326,031) (1,011,411) (221,680)
----------- ----------- ----------- -----------
Cash flows from investing activities:
Purchase of property and equipment (38,282) (50,072) (57,336) (129,601)
Software development costs capitalized -0- -0- -0- -0-
Capital lease 66,679 -0- 66,679 -0-
----------- ----------- ----------- -----------
Net cash used in investment activities 28,397 (50,072) 9,343 (129,601)
----------- ----------- ----------- -----------
Cash flows from financing activities:
Prepaid IPO costs -0- (750) -0- 583,020
Lease obligations 335,439 -0- 335,439 -0-
Payments on capital leases (2,640) (1,638) (6,085) (4,145)
Payment on bridge notes -0- -0- -0- (1,500,000)
Issuance of notes payable to stockholders -0- (300,000) -0- (500,000)
Issuance of common stock -0- (65,916) 20,164 5,362,753
----------- ----------- ----------- -----------
Net cash provided by financing
activities 332,799 (368,304) 349,518 3,941,628
----------- ----------- ----------- -----------
Increase (decrease) in cash and cash 423,180 (744,407) (652,550) 3,590,347
equivalents
Cash and cash equivalents at beginning
of period 812,844 5,500,280 1,888,574 1,165,526
----------- ----------- ----------- -----------
Cash and cash equivalents at end
of period $ 1,236,024 $ 4,755,873 $ 1,236,024 $ 4,755,873
=========== =========== =========== ===========
</TABLE>
Attention is directed to the accompanying notes to the condensed financial
statements.
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INTIME SYSTEMS INTERNATIONAL, INC.
Notes to Condensed Consolidated Financial Statements
Note 1 - Provision for Income Taxes:
As of June 30, 1996, the Company has a net deferred tax asset
consisting primarily of a net operating loss carryforward in the amount of
$2,840,894. The Company has provided a valuation allowance against the net
deferred tax asset since utilization of the net operating loss is not assured in
1996. Therefore, no tax benefit is provided as of June 30, 1996.
Note 2 - Earnings Per Share:
Earnings per share are based on the weighted average number of common
shares and common share equivalents which would arise from the exercise of stock
options using the treasury stock method. Fully diluted per share amounts are not
presented, as the effect is anti-dilutive.
Three Months Ended Six Months Ended
June 30, June 30,
Weighted Average Shares: 1996 1995 1996 1995
---- ---- ---- ----
Common Stock 2,614,571 2,560,515 2,602,670 2,204,714
========= ========= ========= =========
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Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
The following table sets forth expense items as a percentage of net revenues for
the periods indicated:
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
---- ---- ---- ----
Net Revenues 100.0% 100.0% 100.0% 100.0%
Consulting Services Costs 47.0 56.3 52.4 56.5
Software Services Costs 1.1 13.4 3.5 8.1
Sales/Marketing Expenses 23.4 22.4 27.5 20.5
Software Development 5.1 11.5 9.7 7.4
General and Administrative Expenses 13.5 12.2 12.8 11.1
----- ----- ----- -----
Income (Loss) from Operations 9.9% (15.8%) (5.9%) (3.6%)
===== ===== ===== =====
Revenues
Consulting services revenue increased by $1,423,383 for the first six
months of 1996 over the same period in 1995 or 39%. For the three month period
ended June 30, consulting services revenue increased by 70.7% in 1996 over 1995.
This continues a positive trend in consulting services revenue which began in
September of 1995. Management anticipates that demand for consulting services
will remain strong throughout the remainder of 1996. However, there can be no
assurances that existing customers will continue to require consulting services
or that the demand for such services will remain strong. Consulting services
revenue is generated from ad hoc consulting on human resource and payroll
systems for clients.
Software related revenue includes all revenue related to the Company's
Time and Attendance Management Systems (TAMS) including: license, installation,
customization and maintenance fees. Software related revenues decreased by
$124,180 for the six months ended June 30, 1996 or 34.6% compared to the same
period in 1995. For the three month period then ended, such revenue decreased by
$92,539 or 38.4% over the same period in 1995.
The initial Oracle version of TAMS, licensed to the Douglas County
School District in the third quarter of 1995, has not yet been installed.
Installation of the system has been delayed several times by the School District
and the Company has not, at this time, been given a revised date for the
installation. According to the terms of the contract with the District, 25% of
the $60,000 license fee (i.e.$15,000) was billed in the second quarter of 1996.
The Company is currently discussing with Oracle Corporation ("Oracle"),
a proposed agreement which would make more formal the Company's relationship
with Oracle as it relates to its TAMS/O software product. Based on various
discussions, meetings and written correspondence between the respective
companies, it appears that the general structure of any agreement may include
the following provisions: advanced royalty payments; minimum royalties per sale;
separate maintenance fee participation; primary product sales and sales support
responsibility; product maintenance responsibility; and an optional buyout,
which provides for a perpetual "no fee" license to use and sell the product,
after five years. However, there can be no assurances that a definitive
agreement with Oracle will be reached.
In addition, the Company signed a license agreement and recognized
income on a TAMS/O sale with the Washington Suburban Sanitary Commission
for $62,330 in June. This license agreement is noteworthy because the Company
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played a minor role in the sale process. Oracle sales personnel took the lead in
the sales effort to its successful conclusion.
Other revenues in 1996 decreased by $81,068 over the comparable six
month period in 1995 and decreased by $48,188 over the comparable three month
period in 1995. This is a result of a reduction in excess cash available for
short-term investment due to the Company's investment in its TAMS/O
product and Oracle relationship.
Cost of Consulting Services
For the six months ended June 30, 1996 consulting expenses were 52.4%
of net revenues and 55% of consulting services revenue. For the same six month
period in 1995, consulting expenses were 56.5% and 63.6% of net revenues and
consulting services revenue, respectively. For the three month period ended June
30, 1996 consulting expenses were 47% of net revenues compared to 56.3% for the
same period in 1995. As a percent of consulting services revenue, such costs
were 49.7% and 66.7% in the second quarter of 1996 versus the comparable 1995
quarter. These improved results are primarily due to the following:
1) Over the past twelve months, the mix of the Company's consulting
business has changed significantly from consulting on main-frame
based systems to consulting on client/server based systems. The
investments the Company made in 1995 and will continue to make in
1996, to strengthen (and grow) its presence in the client/server
area, are paying off.
2) Generally, higher profit margins are attained on client/server
consulting compared to traditional main-frame system
consulting.
3) The overall utilization (i.e. billable hours per consultant) has
improved.
As a result, the gross margin for consulting services has improved to
45% and 50.3% for the six and three-month periods ended June 30, 1996 compared
to 36.4% and 33.3% for the same periods in 1995.
The gross margin percentages achieved during the first six months and
over the second quarter of 1996 are not necessarily indicative of the gross
margins that will be achievable throughout the remainder of 1996. Management
anticipates that gross margins for consulting services will be in the 42% - 47%
range during the second half of 1996, due to the company's ongoing training of
new consultants. However, there can be no assurances that these results can be
achieved.
Software Service Costs
Software service costs are direct costs associated with the Company's
proprietary software product TAMS including; salaries, wages, travel, and other
expenses incurred during installation, customization, training and maintaining
the software.
For the six months ended June 30, 1996 such costs were 3.5% of net
revenues and 80.5% of software related revenue. For the comparable period in
1995, such costs represented 8.1% of net revenues and 92.9% of software related
revenues. For the three month period ended June 30, 1996 such costs were 1.1% of
net revenues and 22% of software related revenues. For the same period in 1995
software service costs were 13.4% of net revenues and 108% of software related
revenues.
As noted previously, license fees of $77,330 were recognized in June
1996. Because license fees traditionally have less direct costs associated with
earning the revenues, the revenue to cost ratios will improve when license fees
are recognized. Additionally, management's efforts to make software services a
profit center exclusive of license fees contributed to the improved results.
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Sales and Marketing Expenses
Sales and marketing expenses increased for the six months ended June
30, 1996 by $621,283 or 73.8% over the same period in 1995. As a percentage of
net revenues, sales and marketing expenses were 27.5% for the six month period
in 1996 compared to 20.5% for the same period in 1995. For the three month
period ended June 30, 1996 sales and marketing expenses increased by $256,018
over the same period in 1995. As a percent of net revenues, such expenses were
23.4% compared to 22.4% for the quarter ended June 30, 1996 compared to the same
quarter in 1995.
The increase in sales expenses are a direct result of the 39% increase
in consulting sales experienced during the first six months of 1996 compared to
1995 (70.7% increase for the three month period ended June 30, 1996 versus the
same period in 1995). In addition, during the first six months of 1995, little
investment was made by the Company in the sales and sales support infrastructure
to support the TAMS/O and Oracle relationship. This investment accelerated in
the second half of 1995 and continued into 1996.
Software Development Expenses
Software development costs, which are currently being expensed, were
$511,314 for the six month period ended June 30, 1996. For the comparable period
in 1995, such costs expensed were $303,190. For the three month period ended
June 30, software development costs decreased by $72,193 or 32.3% when compared
to the same period in 1995.
The increases for the comparable six month periods are primarily due to
the development of the TAMS/O, Oracle client/server version of TAMS. The bulk of
these investments were made in the last two quarters of 1995 and the first
quarter of 1996. Software costs in the first quarter of 1996 were $360,080
compared to $151,234 during the second quarter, or a reduction of $208,846 or
58%.
The Company's current expenditures for research and development are
primarily focused on TAMS/O enhancements and release upgrades.
General and Administrative Expenses
General and administrative expenses increased by $231,494 or 51.2% for
the six month period ended June 30, 1996 compared to the same period in 1995.
For the three month period then ended general and administrative expenses
increased by $161,889 or 68% over the same period in 1995. During the second
quarter of 1996, a one-time charge of $66,679 was recognized relating to the
differences in depreciable lives of assets for financial book purposes and those
used for a sale/leaseback transaction the Company entered into.
Overall in comparing 1996 to the same period in 1995: employee related
costs (i.e. insurance) have increased due to an increased employee complement;
depreciation has increased due to a significant growth in fixed asset
investments; and legal and accounting costs have increased associated with being
a public reporting entity.
Liquidity and Capital Resources
Net cash used in operating activities was $1,011,411 for the six months
ended June 30, 1996 and $221,680 for the same period in 1995. Net cash provided
by (used in) operating activities for the three month period ended June 30, 1996
was $61,984 compared to $(326,031) in 1995. Capital expenditures for equipment
were $(9,343) and $129,601 for the periods ending June 30, 1996 and 1995
respectively. Cash provided by financing activities was $349,518 for the first
six months of 1996 and $3,941,628 for the same period in 1995.
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As of June 30, 1996, the Company had cash and cash equivalents of
$1,236,024 and working capital of $3,123,304.
During June 1996, the Company entered into a sale/leaseback of its
computer equipment and peripheral equipment with Leasing Technologies
International, Inc. The Company received approximately $362,000 before deduction
for deposits and fees. The lease is for a period of two years with a fair market
value buyback of the equipment at that time. The monthly lease payments are
$16,080 for total lease payments of $385,920 over the life of the lease.
Forward-Looking Statements
The statements made above under "Results of Operations" relating to a
continuing positive trend in consulting services and anticipated strong demand
for consulting services throughout 1996; a proposed agreement to make more
formal the Company's relationship with Oracle as it relates to its TAMS/O
software product; the ability to grow, strengthen, maintain higher margins and
improved utilization on client/server consulting; the ability to achieve a 42% -
47% gross margin on consulting services during the second half of 1996; and
management's ability to make software services a profit center exclusive of
license fees 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. As discussed above, the results anticipated by any or all of these
forward-looking statements may not occur. Important factors that may cause
actual results to differ materially from the forward-looking statements include
the following: (1) general competition for consulting services; (2) the ability
to maintain and attract qualified consultants with the skill sets to meet market
demands; (3) the continued availability of systems and consulting budgets within
large corporations which tend to be susceptible to reduction during economic
downturns and for other reasons; (4) failure to reach a contractual agreement
with Oracle at mutually acceptable terms; (5) Oracle's ability to capture market
share and sell TAMS/O with its system; and (6) the continued demand for
customization and maintenance on the Company's existing TAMS installations.
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
10. Master Lease Agreement between the registrant and LTI, Inc.
27. Financial Data Schedule
(b) Reports on Form 8-K.
(1) Form 8-K filed July 11, 1996, disclosing current
discussions with Oracle Corporation on a proposed
agreement.
(2) Form 8-K filed July 25, 1996, to update the status of
negotiations with Oracle Corporation.
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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 on August
13, 1996 by the following persons, thereunto duly authorized.
InTime Systems International, Inc.
By: /S/ William E. Berry
William E. Berry
President, Chief Executive Officer
By: /S/ Mark Murphy
Mark Murphy
Chief Financial Officer
(Principal Financial and
Accounting Officer)
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MASTER LEASE AGREEMENT
This Master Lease Agreement (the "Lease") is made the 8th day of April, 1996
between Leasing Technologies International, Inc., with its principal office at
Soundview Plaza, 1266 Main Street, Stamford, CT 06902 (the "Lessor"), and InTime
Systems International, Inc., with its principal office at 1655 Palm Beach Lakes
Boulevard, West Palm Beach, FL 33401 (the "Lessee"). The parties hereto agree as
follows:
1. Lease:
This Lease establishes the general terms and conditions by which Lessor
may lease to Lessee the Equipment (the "Equipment") listed on each Equipment
Schedule executed periodically pursuant to this Lease. Each such Equipment
Schedule shall incorporate by reference the terms of this Lease, and shall be a
separate lease agreement as to the Equipment listed thereon for all purposes,
including default. If the provisions of an Equipment Schedule conflict with the
provisions of this Lease, the provisions of such Equipment Schedule shall
prevail.
2. Definitions:
(a) The "Installation Date" means the date determined in accordance
with the applicable Equipment Schedule.
(b) The "Commencement Date" means, as to any item of the Equipment
designated on any Equipment Schedule where the Installation Date for such item
of Equipment falls on the first day of the month, that date, or, in any other
case, the first day of the month following the month in which such Installation
Date falls.
(c) The "Daily Rental" means 1/30th of the amount set forth as the
monthly rental in the applicable Equipment Schedule.
3. Term of Lease:
The term of this Lease, as to all Equipment designated on any Equipment
Schedule, shall commence on the Installation Date for such Equipment, and shall
continue for an initial period ending that number of months as is specified on
the applicable Equipment Schedule from the Commencement Date for the last item
of Equipment to be installed (the "Initial Term"). The term of this Lease for
all such Equipment shall be automatically extended for successive monthly
periods until terminated in accordance with this Lease. Any termination shall be
effective only on the last day of the Initial Term or the last day of any such
successive period.
4. Rental:
The monthly rental payable hereunder is as set forth in the Equipment
Schedule(s). Rental shall begin to accrue on the Installation Date for each item
of Equipment and shall be due and payable by Lessee in advance on the first day
of each month. If the Installation Date does not fall on the first day of a
month, the rental for that period of time from the Installation Date until the
Commencement Date shall be an amount equal to the Daily Rental multiplied by the
number of days from (and including) the Installation Date to (but not including)
the Commencement Date and shall be due and payable on the Installation Date. In
addition to the monthly rental set forth in the Equipment Schedule(s), Lessee
shall pay to Lessor an amount equal to all taxes paid, payable or required to be
collected by Lessor, however designated, which are levied or based on the
rental, on the Lease or on the Equipment or on its purchase for lease hereunder,
or on its use, lease, operation, control or value (including, without
limitation, state and local privilege or excise taxes based on gross revenue),
any penalties or interest in connection therewith which are attributable to
Lessee's negligence
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or taxes or amounts in lieu thereof paid or payable by Lessor in respect of the
foregoing, but excluding taxes based on Lessor's net income. Personal property
taxes assessed on the Equipment during the term hereof shall be paid by Lessee.
Lessee agrees to file, on behalf of Lessor, all required property tax returns
and reports concerning the Equipment with all appropriate governmental agencies,
and, within not more than thirty (30) days after the due date of such filing to
send Lessor confirmation of such filing. Lessee agrees that Lessor, or Lessor's
agent may file all required property tax returns and reports and pay all taxes
thereon pertaining to the Equipment. In such event, Lessee shall reimburse
Lessor for all costs and expenses incurred in connection therewith, provided
that such costs and expenses (including property taxes) shall not exceed the
property taxes pursuant to statutory tax rates and regulations.
Interest on any past due payments, including but not limited to
administrative charges and any other charges or fees arising out of or related
to this Lease, shall accrue at the rate of 1 1/2% per month, or if such rate
shall exceed the maximum rate allowed by law, then at such maximum rate, and
shall be payable on demand. Charges for taxes, penalties and interest shall be
promptly paid by Lessee when invoiced by Lessor.
As security for the full performance of all of the Lessee's obligations
under each Equipment Schedule, Lessee shall, simultaneously with the execution
and delivery of each Equipment Schedule, deposit with Lessor the amount set
forth on such Equipment Schedule. The security deposit shall be promptly
returned to the Lessee by the Lessor upon the expiration of such Equipment
Schedule and return of all Equipment, provided that all Lessee obligations under
such Equipment Schedule have been fulfilled.
5. Installation, Use and Quiet Possession of Equipment:
(a) Lessee, at its own expense, will provide the required suitable
electric current to operate the Equipment and appropriate installation
facilities as specified by the manufacturer.
(b) Any equipment, cards, disks, tapes or other items not specified in
the Equipment Schedule(s) which are used on or in connection with the Equipment
must meet the specifications of the manufacturer and shall be acquired by Lessee
at its own expense.
(c) Lessee shall use the Equipment solely in connection with Lessee's
business and for no other purpose. Subject to the preceding sentence, Lessee
shall be entitled to unlimited usage of the Equipment without extra charge by
Lessor.
(d) Unless otherwise set forth in the applicable Equipment Schedule,
Lessee will at all times keep the Equipment in its sole possession and control.
The Equipment shall not be moved from the location stated in the applicable
Equipment Schedule without the prior written consent of Lessor.
(e) After prior notice to Lessor, Lessee may, at its own expense, make
alterations in or add attachments to the Equipment, provided such alterations or
attachments do not interfere with the normal and satisfactory operation or
maintenance of the Equipment or with Lessee's ability to obtain and maintain the
maintenance contract required by Section 5(h) hereof. The manufacturer or other
organization selected by Lessee and approved in writing by Lessor to maintain
the Equipment ("Maintenance Organization") may incorporate engineering changes
or make temporary alterations to the Equipment upon request of Lessee. All such
alterations and attachments shall be and become the property of Lessor or, at
the option of Lessee, shall be removed by Lessee and the Equipment restored, at
Lessee's expense, to its original condition as of the Installation Date thereof,
reasonable wear and tear only excepted, and upon the removal and restoration,
the alteration and/or attachment which was made by Lessee shall become the
property of Lessee.
(f) So long as Lessee is not in default hereunder, neither Lessor nor
any party claiming through or under Lessor shall interfere with Lessee's use or
possession of any Equipment during the term of this Lease.
(g) Lessee shall, during the term of this Lease, at its expense, keep
the Equipment in good working order and condition and make all necessary
adjustments, repairs and replacements and shall not use or permit
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the Equipment to be used in any manner or for any purpose for which, in the
opinion of the manufacturer, the Equipment is not designed or reasonably
suitable.
(h) Unless otherwise set forth in the applicable Equipment Schedule,
Lessee shall, during the term of this Lease, at its own expense, enter into and
maintain in force a contract with the manufacturer or the Maintenance
Organization covering at least prime shift maintenance of each item of
Equipment. Such contract shall commence upon expiration of the manufacturer's
warranty period, if any, relating to such item. Lessee shall furnish Lessor with
a copy of such contract(s).
(i) At the termination of the applicable Equipment Schedule, Lessee
shall, at its expense, return not less than all the Equipment subject thereto to
Lessor (at the location designated by Lessor within the Continental United
States) in the same operating order, repair, condition and appearance as on the
Installation Date, reasonable wear and tear only excepted, with all engineering
and safety changes prescribed by the manufacturer or Maintenance Organization
incorporated therein. Lessee shall, prior to such termination, arrange and pay
for any repairs, changes and manufacturer's certifications as are necessary for
the manufacturer or Maintenance Organization to accept the Equipment under
contract maintenance at its then standard rates. Lessee shall return all
accessories supplied with the Equipment, including but not limited to all
manuals, cables and software diskettes. Lessee shall promptly pay, after receipt
of an invoice therefore, all costs and expenses pertaining to the replacement of
any missing items and for the repair of any Equipment, together with any audit,
inspection or certification charges reasonably incurred by Lessor.
6. Leasehold Rights and Inspection:
(a) Lessee shall have no interest in the Equipment other than the
rights acquired as a lessee hereunder and the Equipment shall remain personalty
regardless of the manner in which it may be installed or attached. Lessee shall,
at Lessor's request, affix to the Equipment, tags, decals or plates furnished by
Lessor, indicating Lessor's ownership and Lessee shall not permit their removal
or concealment. Lessee shall replace any such tag, decal or plate which may be
removed or destroyed or become illegible. Lessee shall keep all Equipment free
from any marking or labeling which might be interpreted as a claim of ownership
thereof by Lessee or any party other than Lessor or anyone claiming through
Lessor.
(b) Lessee shall keep the Equipment free and clear of all liens and
encumbrances except liens or encumbrances arising through the actions or
omissions of Lessor. Lessee shall not assign or otherwise encumber this Lease or
any of its rights hereunder or sublease the Equipment without the prior written
consent of Lessor except that Lessee may assign this Lease or sublease the
Equipment to its parent or any subsidiary corporation, or to a corporation which
shall have acquired all or substantially all of the property of Lessee by
merger, consolidation or purchase. No permitted assignment or sublease shall
relieve Lessee of any of its obligations hereunder.
(c) Lessor or its agents shall have free access to the Equipment at all
reasonable times for the purpose of inspection and for any other purpose
contemplated by this Lease.
(d) Lessee shall immediately notify Lessor of all details concerning
any damage to, or loss of, the Equipment arising out of any event or occurrence
whatsoever, including but not limited to, the alleged or apparent improper
manufacture, functioning or operation of the Equipment.
7. No Warranties By Lessor:
Lessee represents that, at the Installation Date thereof, it shall have
(a) thoroughly inspected the Equipment; (b) determined for itself that all items
of Equipment are of a size, design, capacity and manufacture selected by it; and
(c) satisfied itself that the Equipment is suitable for Lessee's purposes.
LESSOR SUPPLIES THE EQUIPMENT AS IS AND NOT BEING THE MANUFACTURER OF THE
EQUIPMENT, THE MANUFACTURER'S AGENT OR THE SELLER'S AGENT, MAKES NO WARRANTY OR
REPRESENTATION, EITHER EXPRESS OR IMPLIED AS TO THE EQUIPMENT'S MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE, DESIGN, CONDITION, QUALITY,
3
<PAGE>
CAPACITY, MATERIAL OR WORKMANSHIP OR AS TO PATENT INFRINGEMENT OR THE LIKE, it
being agreed that all such risks, as between Lessor and Lessee, are to be borne
by Lessee. Lessee agrees to look solely to the manufacturer or to suppliers of
the Equipment for any and all warranty claims and any and all warranties made by
the manufacturer or the supplier of Lessor are, to the extent to which the same
may be assignable, hereby assigned to Lessee for the term of the applicable
Equipment Schedule. Lessee agrees that Lessor shall not be responsible for the
delivery, installation, maintenance, operation or service of the Equipment or
for delay or inadequacy of any or all of the foregoing. Lessor shall not be
responsible for any direct or consequential loss or damage resulting from the
installation, operation or use of the Equipment or otherwise. Lessee will
defend, indemnify and hold Lessor harmless against any and all claims, demands
and liabilities arising out of or in connection with the design, manufacture,
possession or operation of the Equipment.
8. Risk of Loss on Lessee:
(a) Beginning on the Installation Date thereof and continuing until the
Equipment is returned to Lessor as provided in this Lease, Lessee relieves
Lessor of responsibility for all risks of physical damage to or loss or
destruction of the Equipment, howsoever caused. During the term of this Lease as
to any Equipment Schedule, Lessee shall, at its own expense, keep in effect "all
risk" property insurance and public liability insurance policies covering the
Equipment designated in each Equipment Schedule. The public liability insurance
policy shall be in such amount as is reasonably acceptable to Lessor. The "all
risk" property insurance policy shall be for an amount not less than the
replacement cost of the Equipment. Lessor, its successors and assigns and/or
such other party as may be designated by any thereof to Lessee, in writing,
shall be named as additional insureds and loss payees on such policies, which
shall be written by an insurance company of recognized responsibility which is
reasonably acceptable to Lessor. Evidence of such insurance coverage shall be
furnished to Lessor no later than the Installation Date set forth in the
Equipment Schedule(s) and, from time to time, thereafter as Lessor may request.
Such policies shall provide that no less than ten days written notice shall be
given Lessor and any other party named as loss payee prior to cancellation of
such policies for any reason. To the extent of Lessor's interest therein, Lessee
hereby irrevocably appoints Lessor or any other party named as loss payee as
Lessee's attorney-in-fact coupled with an interest to make claim for, receive
payment of, and execute any and all documents that may be required to be
provided to the insurance carrier in substantiation of any such claim for loss
or damage under said insurance policies, and to endorse Lessee's name to any and
all drafts or checks in payment of the loss proceeds.
(b) If any item of Equipment is rendered unusable as a result of any
physical damage to, or destruction of, the Equipment, Lessee shall give to
Lessor immediate notice thereof and this Lease shall continue in full force and
effect without any abatement of rental. Lessee shall determine, within fifteen
(15) days after the date of occurrence of such damage or destruction, whether
such item of Equipment can be repaired. In the event Lessee determines that the
item of Equipment cannot be repaired, Lessee shall either, at its expense,
promptly replace such item of Equipment and convey title to such replacement to
Lessor free and clear of all liens and encumbrances, and this Lease shall
continue in full force and effect as though such damage or destruction had not
occurred, or pay Lessor therefor in cash the Stipulated Loss Value (defined
below) within thirty (30) days of such loss or damage. "Stipulated Loss Value,"
as used herein, shall be an amount as shown on Exhibit A to the applicable
Equipment Schedule. In the event Lessee determines that such item of Equipment
can be repaired, Lessee shall cause such item of Equipment to be promptly
repaired. All proceeds of insurance received by Lessor, the designated loss
payee, or Lessee under the policy referred to in the preceding paragraph of this
Section shall be applied toward the cost of any such repair or replacement so
long as Lessee shall not be in default of its obligations hereunder.
9. Events of Default and Remedies:
The occurrence of any one of the following shall constitute an Event of
Default hereunder:
(a) Lessee fails to pay an installment of rent on or before the date
when the same becomes due and payable and such failure continues for a period of
five days;
4
<PAGE>
(b) Lessee attempts to remove, sell, transfer, encumber, sublet or part
with possession of the Equipment or any items thereof, except as expressly
permitted herein.
(c) Lessee shall fail to observe or perform any of the other
obligations required to be observed or performed by Lessee hereunder and such
failure shall continue uncured for ten (10) days after written notice thereof to
Lessee by Lessor or the then assignee hereof.
(d) Lessee ceases doing business as a going concern, makes an
assignment for the benefit of creditors, admits in writing its inability to pay
its debts as they become due, files a voluntary petition of bankruptcy, is
adjudicated a bankrupt or an insolvent, files a petition seeking for itself any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar arrangement under any present or future statute, law or regulation or
files an answer admitting the material allegations of the petition filed against
it in any such proceeding, consents to or acquiesces in the appointment of a
trustee, receiver, or liquidator of it or of all or any substantial part of its
assets or properties, or if it or its shareholders shall take any action looking
to its dissolution or liquidation.
(e) Within thirty (30) days after the commencement of any proceedings
against Lessee seeking reorganization, arrangement, readjustment, liquidation,
dissolution or similar relief under any present or future statute, law or
regulation, such proceedings shall not have been dismissed, or if within thirty
(30) days after the appointment without Lessee's consent or acquiescence of any
trustee, receiver or liquidator of it or of all or any substantial part of its
assets and properties, such appointment shall not be vacated.
(f) Lessee defaults in the performance or observation of any term,
condition or covenant of any loan agreement, indenture, trust agreement, lease
or similar agreement to which Lessee is a party or by which Lessee is bound and
such default continues beyond any applicable cure period;
(g) Lessee enters into any transaction which adversely affects a
significant portion of the business value of Lessee and which affects the
ability of the Lessee to repay the Lessee's obligations under the Lease.
Upon the occurrence of an Event of Default, Lessor may at its option do
any one or more of the following: (i) by notice to Lessee terminate this Lease
as to any or all Equipment Schedules; (ii) whether or not this Lease is
terminated as to any or all Equipment Schedules, take possession on not less
than three (3) days' notice of any or all of the Equipment listed on any or all
Equipment Schedules, wherever situated, and for such purpose, enter upon any
premises without liability for so doing or Lessor may cause Lessee and Lessee
hereby agrees, to return said Equipment to Lessor as provided in this Lease;
(iii) recover from Lessee, as liquidated damages for loss of a bargain and not
as a penalty, all past due amounts as well as an amount equal to the present
value of all monies to be paid by Lessee during the remaining Initial Term or
any successive period then in effect, calculated by discounting at the rate of
six percent (6%) per annum compounded monthly, which payment shall become
immediately due and payable; and (iv) sell, dispose of, hold, use or lease any
Equipment as Lessor in its sole discretion may determine (and Lessor shall not
be obligated to give preference to the sale, lease or other disposition of the
Equipment over the sale, lease or other disposition of similar equipment owned
or leased by Lessor).
In the event that Lessee shall have first paid to Lessor or its assigns
the liquidated damages referred to in (iii) above, Lessee shall thereafter be
entitled to receive all rentals or proceeds received from any reletting of the
Equipment during the balance of the Initial Term (after deduction of Lessor's
expected residual value of the Equipment at the expiration of the Initial Term
or any extension thereof and of all expenses incurred in connection therewith)
said amount never to exceed the amount of the liquidated damages paid by Lessee.
Lessee agrees that Lessor shall have no obligation to sell the Equipment. Lessee
shall in any event remain fully liable for reasonable damages as provided by law
and for all costs and expenses incurred by Lessor or its assigns on account of
such default including but not limited to all court costs and reasonable
attorney's fees. Lessee hereby agrees that, in any event, it will be liable for
any deficiency after any lease or other disposition of the Equipment. The rights
afforded Lessor hereunder shall not be deemed to be exclusive, but shall be in
addition to any rights or remedies provided by law.
5
<PAGE>
10. Net Lease:
Except as otherwise specifically provided in this Lease, it is
understood and agreed that this is a net lease, and that, as between Lessor and
Lessee, Lessee shall be responsible for all costs and expenses of every nature
whatsoever arising out of or in connection with or related to this Lease or the
Equipment (including, but not limited to, transportation in and out, rigging,
manufacturer's approved packing, installation, certification costs and
disconnect charges). Lessee hereby agrees that in the event that Lessee fails to
pay or perform any obligation under this Lease, Lessor may, at its option, pay
or perform said obligation and any payment made or expense incurred by Lessor in
connection therewith shall become additional rent which shall be due and payable
by Lessee upon demand. Lessee acknowledges that Lessor may, from time to time,
and at Lessee's request, execute and deliver purchase orders pertaining to the
purchase of equipment to be leased pursuant to this Lease. Lessee agrees that it
will indemnify and hold Lessor harmless from and against any and all loss, cost,
liability and expense that Lessor may incur as a result of the execution and
delivery of such purchase orders.
11. Assignment:
Lessee agrees that Lessor may transfer or assign all or any part of
Lessor's right, title, and interest in, under or to the Equipment and this Lease
and any or all sums due or to become due pursuant to any of the above, to any
third party (the "Assignee") for any reason and that the Assignee may so
re-assign and transfer. Lessee agrees that upon receipt of written notice from
Lessor or Assignee of such assignment, Lessee shall perform all of its
obligations hereunder for the benefit of Assignee and any successor assignee
and, if so directed, shall pay all sums due or to become due thereunder directly
to the Assignee or to any other party designated by the Assignee. Lessee hereby
covenants, represents and warrants as follows and agrees that the Assignee and
any successor assignee shall be entitled to rely on and shall be considered a
third party beneficiary of the following covenants, representations and
warranties: (i) Lessee's obligations hereunder are absolute and unconditional
and are not subject to any abatement, reduction, recoupment, defense, offset or
counterclaim available to Lessee for any reason whatsoever including operation
of law, defect in the Equipment, failure of Lessor or Assignee to perform any of
its obligations hereunder or for any other cause or reason whatsoever, whether
similar or dissimilar to the foregoing; (ii) Lessee shall not look to Assignee
or any successor assignee to perform any of Lessor's obligations hereunder;
(iii) Lessee will not amend or modify this Agreement without the prior written
consent of the Assignee and any successor assignee; and (iv) Lessee will send a
copy to Assignee and any successor assignee of each notice which Lessee sends to
Lessor.
12. Representations and Warranties of Lessee:
Lessee represents and warrants to Lessor and its assigns, as follows:
1. The execution, delivery and performance of this Lease has been duly
authorized and, upon execution by Lessor and Lessee, will constitute a valid
obligation binding upon and enforceable against Lessee in accordance with its
terms, subject to laws governing creditors' rights;
2. The performance by Lessee will not result in any breach, default or
violation of, Lessee's certificate of incorporation or by-laws or any agreement
to which Lessee is a party;
3. Lessee is in good standing in its jurisdiction of incorporation and
in any jurisdiction in which any of the Equipment is to be located; and
4. Any and all financial statements or other information with respect
to Lessee heretofore furnished by Lessee to Lessor was, when furnished, and
remains at the time of execution of this Lease, true and complete.
6
<PAGE>
Lessor represents and warrants to Lessee as follows:
1. The execution, delivery and performance of this Lease has been duly
authorized and, upon execution by Lessor and Lessee, will constitute a valid
obligation binding upon and enforceable against Lessor in accordance with its
terms, subject to laws governing creditors' rights; and
2. The performance by Lessor will not result in any breach, default or
violation of, Lessor's certificate of incorporation or by-laws or any agreement
to which Lessor is a party;
The foregoing representations and warranties shall survive the
expiration or termination of this Lease.
13. End of Lease:
Provided (i) no Event of Default has occurred and is continuing and
(ii) Lessee has made all payments in accordance with the Lease, upon written
notice furnished by Lessee no later than four (4) months prior to the expiration
of the Initial Term, Lessee may, with respect to each Equipment Schedule (if set
forth in such Equipment Schedule) either:
(a) Extend the Initial Term for not less than all the Equipment (i) for
the additional period set forth on the applicable Equipment Schedule, and (ii)
at the Monthly Rental set forth on the Equipment Schedule. Provided all payments
have been made in accordance with the Lease and there shall be no default under
the Lease by Lessee, title to the Equipment shall pass to Lessee at the
expiration of the 12 month extension and upon payment of $1.00.;
(b) Extend the Initial Term for not less than all the Equipment for an
additional 12 months at Fair Market Value rental;
(c) Purchase not less than all the Equipment at Fair Market Value for a
purchase price equal to the Fair Market Value thereof as of the end of the
Initial Term, plus any taxes applicable at the time of purchase. The purchase
price shall be paid by Lessee to Lessor at least thirty (30) days before the
expiration of the Initial Term;
(d) Terminate the applicable Equipment Schedule and return not less
than all the Equipment, subject to a remarketing charge equal to the percentage
set forth in the applicable Equipment Schedule of Lessor's original Purchase
Price for the Equipment; or
(e) Such other alternatives as may be set forth on the Equipment Schedule.
If, on or before a date which is sixty (60) days prior to the expiration of the
Initial Term, Lessor and Lessee are unable to agree upon a determination of the
Fair Market Value of the Equipment, the Fair Market Value (to be determined in
accordance with the definition set forth in this Section) shall be conclusively
established not less than thirty (30) days prior to the expiration of the
Initial Term by an independent appraiser selected by Lessor. Lessor shall notify
Lessee of the name and address of said appraiser. The costs of such appraiser
shall be paid by Lessee within ten (10) days after receipt of an invoice
therefor.
For purposes hereof, Fair Market Value shall mean the amount that would obtain
in a retail arm's length transaction between an informed and willing
lessee-buyer in possession and an informed and willing lessor-seller. Rental
charges previously paid pursuant to the applicable Equipment Schedule shall have
no effect on the determination of Fair Market Value. Unless otherwise stated in
the Equipment Schedule: the Fair Market Value for items set forth on the
Equipment Schedule which do not have a readily ascertainable market value,
(including but not limited to software, cabling and certain equipment) shall be
determined by multiplying the Lessor's acquisition cost of such items by a
fraction, the numerator of which shall be the Fair Market Value of the other
items and the denominator of which shall be the Lessor's acquisition cost of
such other items; and the
7
<PAGE>
determination of Fair Market Value shall be based upon the assumption that all
items set forth on the Equipment Schedule or included with the Equipment may be
transferred to, and used by, a third party user. In such determination, all
alternative uses in the hands of each buyer or lessee, including, without
limitation, the further leasing of the Equipment shall be taken into account in
making such determination.
If, for any reason, the parties are unable to agree on the Fair Market Value
with respect to said purchase or rental, then the Lease with respect to the
Equipment shall remain in full force and effect.
14. Miscellaneous:
(a) During the term of this Lease, Lessee hereby agrees to deliver to
Lessor or Assignee and any successor assignee a copy of Lessee's monthly
unaudited financial statements, and the annual financial budget for the upcoming
year as soon as available and as it may be adjusted during the year. Lessee
shall also furnish, as soon as available and in any event within ninety (90)
days after the last day of Lessee's fiscal year, a copy of Lessee's annual
audited statements and consolidating and consolidated balance sheet, if any, as
of the end of such fiscal year, accompanied by the opinion of an independent
certified public accounting firm of recognized standing. The Lessee shall
furnish such other financial information as may be reasonably requested by
Lessor, including but not limited to any material changes in budgets or
financial reports furnished to the Lessee's Board of Directors or Shareholders.
(b) This Lease constitutes the entire agreement between Lessee and
Lessor with respect to the Equipment, and except as agreed upon in writing no
covenant, condition or other term or provision hereof may be waived or modified
orally.
(c) All notices hereunder shall be in writing and shall be delivered in
person or sent by registered or certified mail, postage prepaid, or by facsimile
transmission (confirmed by registered mail as set forth in this section) to the
address of the other party as set forth herein or to such other address as such
party shall have designated by proper notice.
(d) This Lease shall be binding upon and inure to the benefit of Lessor
and Lessee and their respective successors and assigns (including any subsequent
assignee of Assignee).
(e) If any term or provision of this Lease or the application thereof
to any person is, to any extent, invalid or unenforceable, the remainder of this
Lease, or the application of such provision to the person other than those to
which it is invalid or unenforceable, shall not be affected thereby, and each
provision of this Lease shall be valid and be enforced to the fullest extent
permitted by law.
(f) No waiver of any of the terms and conditions hereof shall be
effective unless in writing and signed by the party against whom such waiver is
sought to be enforced. Any waiver of the terms hereof shall be effective only in
the specific instance and for the specific purpose given. The subsequent
acceptance of rental payments hereunder by Lessor shall not be deemed a waiver
of any prior existing breach by Lessee regardless of Lessor's knowledge of such
prior existing breach at the time of acceptance of such rental payments. Where
permitted by law, Lessee authorizes any attorney of record, Clerk of Court or
Prothonotary of any state to appear for and confess judgment (a) against Lessee
for all amounts as to which Lessee is in default under this Agreement and (b)
against Lessee in any action for writ of replevin or possession of the
Equipment. No bond shall be required.
(g) Lessor is hereby authorized by Lessee to cause this Lease or other
instruments, including Uniform Commercial Code Financing Statements to be filed
or recorded for the purpose of showing Lessor's interest in the Equipment and
Lessee agrees that Lessor may execute such instruments for and on behalf of
Lessee. All filing fees reasonably incurred by Lessor in connection therewith
and filing fees incurred by Lessor's assignees in perfecting security interests
shall be paid by Lessee or reimbursed to Lessor by Lessee.
8
<PAGE>
(h) In the event of any conflict between the terms and conditions of
this Lease and the terms and conditions of any Equipment Schedule(s) or Rider(s)
thereto, the terms and conditions of such Equipment Schedule(s) or Rider(s)
shall prevail.
(i) No consent or approval provided for herein shall be binding upon
Lessor unless signed on its behalf by an officer of Lessor. THIS LEASE SHALL BE
DEEMED TO HAVE BEEN MADE IN THE STATE OF CONNECTICUT AND SHALL BE GOVERNED IN
ALL RESPECTS BY THE LAWS OF SUCH STATE. The Lessee accepts for itself the
non-exclusive jurisdiction of any Federal or State court of competent
jurisdiction in the State of Connecticut in any action, suit or proceeding of
any kind against it which arises out of or by reason of this Lease or any
Equipment Schedule.
(j) Lessee acknowledges that the late payment by Lessee to Lessor of
monthly rental and other sums due hereunder will cause Lessor harm and to incur
costs not contemplated by this Lease, the precise amount and severity of which
will be difficult to ascertain. Such costs include, but are not limited to,
administrative, accounting and legal charges which Lessor may incur due to such
late payment. Accordingly, if any monthly rent or any other sum due from Lessee
shall not be received by Lessor or Lessor's assignee within twenty (20) days
after the same is due, Lessee shall pay to Lessor or Lessor's assignee a late
charge equal to five per cent (5%) of such overdue amount monthly until such
overdue amount is paid. Lessee acknowledges that such late charge represents a
fair and reasonable estimate of the cost Lessor will incur by reason of a late
payment by Lessee. Acceptance of such late charge by Lessor shall in no event
constitute a waiver of Lessee's default, if any, with respect to such overdue
amounts, nor prevent Lessor from exercising any of the other rights and remedies
which Lessor may have pursuant to this Lease.
(k) The obligations which Lessee is required to perform during the term
of this Lease shall survive the expiration or other termination of this Lease.
(l) Lessee will promptly execute and deliver to Lessor such further
documents and assurances and take such further action as Lessor may reasonably
request in order to effectuate the intent and purpose of this Lease and to
establish and protect the rights, interests and remedies intended to be created
in favor of Lessor hereunder, including without limitation, the execution and
filing of financing statements and continuation statements with respect to this
Lease, the Equipment and any Equipment Schedule. Lessee authorizes Lessor to
effect any such filing and Lessor's reasonable expenses (together with the
reasonable expenses of Lessor's assignees in this regard) shall be payable by
Lessee on demand.
LESSOR: LESSEE:
Leasing Technologies International, Inc. InTime Systems International, Inc.
BY: BY:
NAME: NAME:
TITLE: TITLE:
DATE: DATE:
9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S UNAUDITED FINANCIAL STATEMENTS FOR THE PERIOD ENDED JUNE 30, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,236,024
<SECURITIES> 0
<RECEIVABLES> 2,211,109
<ALLOWANCES> (72,000)
<INVENTORY> 0
<CURRENT-ASSETS> 3,509,701
<PP&E> 909,471
<DEPRECIATION> (212,122)
<TOTAL-ASSETS> 4,630,904
<CURRENT-LIABILITIES> 386,397
<BONDS> 352,808
0
0
<COMMON> 45,061
<OTHER-SE> 3,846,638
<TOTAL-LIABILITY-AND-EQUITY> 4,630,904
<SALES> 0
<TOTAL-REVENUES> 5,322,824
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,976,853
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (311,937)
<INCOME-TAX> 0
<INCOME-CONTINUING> (311,937)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (311,937)
<EPS-PRIMARY> (.12)
<EPS-DILUTED> 0
<PAGE>
</TABLE>
