UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
( ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended __________________________________
OR
( X ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from September 29, 1996 to December 31, 1996
Commission File Number 333-12091
INTERoACT SYSTEMS, INCORPORATED
(Exact name of registrant as specified in its charter)
North Carolina 56-1817510
(State of other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
14 Westport Avenue
Norwalk, Connecticut 06851
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (203) 750-0300
Former fiscal year September 28, 1996
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act 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 No X
The number of shares of the registrant's common stock outstanding on
February 13, 1997 was 7,668,555.
<PAGE>
INTERoACT SYSTEMS, INCORPORATED
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets - I-1
December 31, 1996 and September 28, 1996
Consolidated Statements of Operations - Three months ended I-2
December 31, 1996 and December 30, 1995 and for the period from
February 25, 1993 (Date of Inception) to December 31, 1996
Consolidated Statements of Cash Flows - Three months ended I-3
December 31, 1996 and December 30, 1995 and for the period from
February 25, 1993 (Date of Inception) to December 31, 1996
Notes to Financial Statements I-5
Item 2. Management's Discussion and Analysis of Financial Condition I-6
and Results of Operations
PART II. OTHER INFORMATION
Item 5. Other Information II-9
Item 6. Exhibits and Reports on Form 8-K II-10
SIGNATURES II-11
<PAGE>
INTERoACT SYSTEMS, INCORPORATED
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
PART I
Item 1. Financial Statements
<TABLE>
<CAPTION>
December 31, September 28,
1996 1996
---------------------------------------------
(unaudited) (See Note)
<S> <C> <C>
Assets
CURRENT ASSETS:
Cash and cash equivalents $88,306,387 $93,479,584
Accounts Receivable, net of allowance for doubtful
accounts of $10,000 616,686 243,848
Prepaid expenses and other 1,007,040 253,885
------------------------------------
Total current assets 89,930,113 93,977,317
------------------------------------
PROPERTY AND EQUIPMENT, net 12,104,965 9,858,111
------------------------------------
OTHER ASSETS:
Bond issuance costs. net of accumulated amortization
of $169,216 and $67,422, respectively 3,719,872 3,723,656
Deposits 37,117 35,000
Organization costs (net of accumulated amortization of
$30,123 and $28,158, respectively 9,167 11,132
Patents, licenses and trademarks (net of accumulated
amortization of $33,630 and $24,202, respectively 227,204 126,175
Other intangibles, net of accumulated amortization of
$9,411 and $8,836, respectively 25,102 25,677
------------------------------------
Total other assets 4,018,462 3,921,640
------------------------------------
Total assets $106,053,540 $107,757,068
====================================
Liabilities and Stockholders' Equity (Deficit)
CURRENT LIABILITIES:
Current portion of long-term debt $96,835 $67,709
Accounts payable 1,242,830 1,285,919
Accrued expenses 1,691,180 509,119
Deferred revenue 479,030 229,023
Note Payable 50,000 50,000
------------------------------------
Total current liabilities 3,559,875 2,141,770
------------------------------------
Notes Payable to Stockholders 236,500 236,500
------------------------------------
Long-Term Debt, net of discount 77,095,064 72,922,617
------------------------------------
Other Long Term Liabilities 55,004 58,124
------------------------------------
Total liabilities 80,946,443 75,359,011
------------------------------------
Common Stock Purchase Warrants 24,463,760 24,463,760
------------------------------------
Stockholders' Equity (Deficit)
Common stock, no par value; 20,000,000 shares
authorized; 7,668,555 shares issued and outstanding 27,651,071 27,651,071
Additional paid-in capital 768,000 768,000
Deferred compensation (723,200) (761,600)
Deficit accumulated during development stage (27,052,534) (19,723,174)
------------------------------------
Total stockholders' equity (deficit) 643,337 7,934,297
------------------------------------
Total liabilities and stockholders' equity
(deficit) $106,053,540 $107,757,068
====================================
</TABLE>
Note: The balance sheet information at September 28, 1996, has been derived from
the audited financial statments at that date.
I-1
<PAGE>
INTERoACT SYSTEMS, INCORPORATED
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the For the For the Period from
Three-Month Period Three-Month Period February 25, 1993
Ended Ended (Date of Inception)
December 31, 1996 December 30, 1995 to December 31, 1996
------------------ ------------------ --------------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C>
Gross Sales $408,376 $77,512 $1,172,702
Less: Retailer reimbursements (239,726) (44,809) (674,993)
--------------------------------------------------------------------------
Net sales 168,650 32,703 497,709
Direct operating expenses (1,216,176) (275,351) (5,018,259)
--------------------------------------------------------------------------
Gross deficit (1,047,526) (242,648) (4,520,550)
Selling, general and administrative
expenses (2,763,172) (1,409,198) (15,978,466)
Depreciation and amortization (467,624) (87,395) (1,518,622)
--------------------------------------------------------------------------
Loss from operations (4,278,322) (1,739,241) (22,017,638)
Interest expense (4,263,049) (58,257) (7,281,542)
Interest and dividend income 1,249,130 6,979 2,301,485
Other income (expense), net (37,119) (43,231) (54,839)
--------------------------------------------------------------------------
Net loss $(7,329,360) $(1,833,750) $(27,052,534)
==========================================================================
PER SHARE INFORMATION:
Net loss per share $(0.96) $(0.44)
===============================================
Weighted average common shares
outstanding 7,668,555 4,125,626
===============================================
</TABLE>
I-2
<PAGE>
INTERoACT SYSTEMS, INCORPORATED
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the For the For the Period from
Three-Month Period Three-Month Period February 25, 1993
Ended Ended (Date of Inception)
December 31, 1996 December 30, 1995 to December 31, 1996
-----------------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C>
Net loss (7,329,360) (1,833,750) (27,052,534)
Adjustments to reconcile net loss
to net cash used in operating
activities
Issuance of convertible note payable
to related party in payment of
royalties - 375,000 375,000
Non-cash interest on discounted bonds 4,216,735 - 6,842,896
Amortization of deferred compensation 38,400 - 44,800
Depreciation and amortization 467,624 87,395 1,518,622
Loss on asset disposal - - 84,731
Issuance of note payable to settle
litigation - - 50,000
Acquired research and development
expenses - - 611,471
Expiration of acquired prepaid expenses - - 30,000
Stock issued in payment of investment
service fees - - 32,582
Increase in accounts receivable and
accrued interest receivable (372,839) (48,103) (616,687)
Increase in prepaid expenses and other (748,388) 14,618 (947,178)
Increase in other assets (117,340) (16,980) (304,030)
Increase in accounts payable (43,088) (111,454) 1,242,831
Increase in accrued expenses 1,178,942 53,007 1,802,713
Increase in deferred revenue 250,006 77,285 479,029
Decrease in other long-term liabilities - 58,124
-------------------------------------------------------------------------
Net cash used in operating
activities (2,459,308) (1,402,982) (15,747,630)
Cash Flows From Investing Activities
Organization costs incurred - - (39,290)
Patents and licensing agreements - - (18,700)
Purchases of property and equipment (461,491) (117,677) (1,823,635)
Increase in product equipment in
process of manufacturing (707,014) (134,803) (2,774,310)
Cost of manufacturing product and test
equipment (1,415,785) (330,135) (8,708,613)
Proceeds from sale of property and
equipment - - 56,908
-------------------------------------------------------------------------
Net cash used in investing
activities (2,584,290) (582,615) (13,307,640)
</TABLE>
I-3
<PAGE>
INTERoACT SYSTEMS, INCORPORATED
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the For the For the Period from
Three-Month Period Three-Month Period February 25, 1993
Ended Ended (Date of Inception)
December 31, 1996 December 30, 1995 to December 31, 1996
----------------- ----------------- --------------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C>
Cash Flows From Financing Activities:
Repayment of convertible notes not
converted to equity - - (35)
Proceeds from private placement - - 94,655,780
Payment of bond issuance costs (98,010) - (3,889,088)
Payment of notes payable to
related party - (100,000) (200,000)
Payment of notes payable - - (4,575)
Proceeds from repayment of notes
receivable from stockholders - - 70,474
Proceeds from notes payable to
related party - 175,000 200,000
Proceeds from notes payable to
stockholders - - 1,060,474
Repayment of long-term debt (31,589) - (51,246)
Payment of assumed liabilities - - (40,000)
Repayment of convertible notes
payable to related parties - - (138,500)
Proceeds from common stock
issuance, net of forteitures - 1,921,007 24,717,287
Repayment of notes payable to
stockholders - - (70,474)
Repayment of accounts receivable
from stockholders - - 1,051,560
Net Cash Provided by Financing
Activities (129,599) 1,996,007 117,361,657
-----------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and
Cash Equivalents (5,173,197) 10,410 88,306,387
Cash and Cash Equivalents at Beginning
of Period 93,479,584 65,675 -
Cash and Cash Equivalents at End of
Period $88,306,387 $76,085 $88,306,387
===================================================================================
Supplemental Disclosure of Non-Cash
Activities:
Conversion of debt to common stock - - $1,599,965
===================================================================================
Conversion of accrued interest to
common stock - - $67,958
===================================================================================
Conversion of notes payable to
stockholders and related accrued
interest to common stock - - $417,824
===================================================================================
Issuance of common stock in
payment of consulting fees - - $55,000
===================================================================================
Deferred compensation related to
stock options granted - - $768,000
===================================================================================
Capital leased obligations incurred $118,223 - $377,447
===================================================================================
</TABLE>
I-4
<PAGE>
Notes to the Financial Statements
In the opinion of the management of InteroAct Systems, Incorporated
(the "Company"), the accompanying unaudited financial statements contain all
adjustments necessary to present fairly the company's financial position as of
December 31, 1996 and the results of operations and cash flows for the three
months ended December 31, 1996 and December 30, 1995. Additionally, it should be
noted that the accompanying financial statements do not purport to be a complete
disclosure in conformity with generally accepted accounting principles. These
statements should be read in conjunction with the Company's audited financial
statements for the fiscal year ended September 28, 1996 and included in the
Annual Report on Form 10-K.
In January 1997, the company consummated an exchange offer (the
"Exchange Offer"), whereby the holders of the Notes issued in the Private
Placement exchanged such Notes for new Notes (the "Exchange Notes") that were
registered under the Securities Act of 1933, as amended. The Exchange Notes do
not bear legends restricting the transfer thereof.
I-5
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Company Overview
The Company develops, owns and operates proprietary electronic
marketing systems that are designed to give consumer products manufacturers (the
"Manufacturers") and retailers the ability to influence the purchasing behavior
of consumers moments before shopping begins and to track and analyze individual
consumer purchasing behavior on an ongoing basis. The Company's current
commercial product offering utilizes interactive "touch-screen" terminals inside
the entrance of retail supermarkets that issue individually targeted, and
immediately usable, coupons and other promotional incentives based on each
consumer's cumulative purchasing history.
The Company had an accumulated deficit as of December 31, 1996 of
$27,052,534 with net losses of $11,558,890 and $4,525,722 for the years ended
September 28, 1996 and September 30, 1995, respectively and net losses of
$7,329,360 and $1,833,750 for the three months ended December 31, 1996 and
December 30, 1995, respectively. Comparisons of operating results for the
quarters ended December 31, 1996 and December 30,1995 can be misleading given
that the company's principal activities during the period from inception
(February 25, 1993) through December 30, 1995 were related to the development,
testing and initial installation of the InteroAct Promotion Network ("IPN") and
were limited by the Company's relatively small capital base. The average number
of stores in commercial test during the quarter ended December 31, 1995 was 30.
During 1996, the company raised in excess of $125 million in the form of common
stock and senior discount notes with common stock purchase warrants and embarked
upon a larger-scale installation of the IPN. As of December 31, 1996 the company
had 623 terminals installed in 335 stores across four grocery chains and
approximately 2,700 additional stores under contract or letter of intent,
compared to 96 terminals in 51 stores across one chain and approximately 300
additional stores under contract as of December 31, 1995.
Recent Developments
As of February 13, 1997, the Company has an installed base of supermarket
stores offering the IPN in 467 stores across eight divisions in four retail
chains, with the completion of the Grand Union North installation (79 stores)
and the recent installation of the Superfresh division of A&P (68 stores). Along
with the ACME retail chain of 183 stores, Superfresh gives InteroAct a 37%
all-commodities-volume (ACV) reach in the Philadelphia market. The Company is
continuing the IPN's commercial rollout in other A&P divisions in the Northeast
and Mid-Atlantic regions. Initial rollout in Food Lion (more than 1,000 stores
under contract) is expected to begin in March.
In the past 60 days, InteroAct has received contractual commitments from
eight new major U.S. consumer products manufacturers representing 22 new brands
to be promoted on the company's IPN. These new contracts represent an
approximately $1.2 million increase in gross promotion dollars under contract
during this period. Revenue to the Company is typically one-third of this
amount. Manufacturers currently promoting products on the IPN include, among
others, Lever Brothers, James River, Dial, Keebler, Pepsi, CPC/Best Foods,
Disney Publications, Borden, Georgia-Pacific, and Con Agra.
The Company recently has hired four executives in the areas of technical
services, retailer sales, and brand sales. Ray Hamilton, 41, has joined the
company as Vice President, Chief Technical Officer. Mr. Hamilton comes to
InteroAct from Sutton Place Gourmet where he was a senior officer responsible
for all aspects of information systems as well as a member of the company's
operating committee. Prior to Sutton Place Gourmet, Mr. Hamilton worked for 20
years at Albertson's, one of the nation's largest supermarket retailers with
approximately 750 stores, most recently as Director of Retail Systems
Development. Mr. Hamilton has direct experience with major point-of-sale
platforms including IBM, NCR, and ICL systems. He has also managed in-store
radio frequency systems, software development and implementation of various POS
applications in a large chain environment. Roy Quiroga will also join InteroAct
in the technology area as Manager of Manufacturing Control, reporting to Mr.
Hamilton. Mr. Quiroga will serve as the liaison between InteroAct and its IPN
system vendors, principally Coleman Interactive Media Systems, a subsidiary of
Thermoelectron Corporation, which currently manufactures InteroAct terminals and
server systems. Mr. Quiroga has over 20 years of experience in the areas of
manufacturing and systems integration/development, including various director
and managerial positions with Micros Systems, Inc., Digital Equipment
Corporation, and Westinghouse Electric Corporation.
I-6
<PAGE>
The Company is also expanding its sales and marketing efforts in both
the brand and retailer sales areas. Jeff Kline has joined the company as West
Coast Regional Director of Sales. Mr. Kline has over 11 years of experience in
selling in-store promotional systems to leading supermarket retailers. Knut
Bjorvatn joins the Company as Regional Director of Brand Sales. Mr. Bjorvatn has
11 years experience in packaged goods and retail chain sales, including five
years at Catalina Marketing and four years at Procter & Gamble.
Results of Operations
Three months ended December 31, 1996 and December 30, 1995
Revenue. Revenue was $168,650 and $32,703 in the 1996 and 1995 periods,
respectively. The increase was primarily attributable to the addition of IPN
terminals installed in stores in the 1996 period. As of December 31, 1996 and
December 30, 1995, 335 and 51 stores contained IPN terminals, respectively.
Revenue did not increase proportionately with the increase in installed stores.
The number of Manufacturers promoting on the IPN for at least one week during
the 1996 and 1995 periods increased, to 25 from 22, respectively, while total
brand offerings promoted decreased to 75 from 82. Average total
redemptions/day/store decreased to 93 from 115 in the 1996 and 1995 periods,
respectively, while average paid redemptions/day/store decreased to 17 from 30.
This was principally a result of IPN terminals in the 1996 period being
supported through a higher number of non-paid incentives than were promoted in
the 1995 period.
Direct Operating Expenses. Direct operating expenses were $1,216,176
and $275,351 in the 1996 and 1995 periods, respectively. The increase was
primarily due to (i) increased employee headcount to support continued store
roll-out and maintain quality operations at current stores ($546,001) and
increased supplies and other expenses related to IPN usage ($394,824).
Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $2,763,172 and $1,409,198 in the 1996 and 1995
periods, respectively. Selling and marketing expenses increased $1,200,598,
primarily attributable to (i) marketing costs associated with selective brand
promotions sponsored by the Company increasing from $134,396 in 1995 to
$1,088,423 in 1996 and (ii) the hiring of additional marketing and sales force
personnel. General and administrative expenses were $1,184,972 and $1,031,596 in
the 1996 and 1995 periods, respectively. A one time consulting fee of $375,000,
pursuant to an agreement with CSI, was charged to general and administrative
expenses in the three month period ended December 30, 1995. Research and
development, primarily the development of hardware and software to support the
IPN terminals, accounted for approximately $366,000 in 1996 and $159,000 in the
1995 period. The balance of the increases in the 1996 period was due to
additional personnel and professional costs required to support the Company's
rapid growth.
Depreciation and Amortization. Depreciation and amortization was
$467,624 and $87,395 in the 1996 and 1995 periods, respectively. The increase
was due to the increased installed base of IPN terminals, as well as computer
equipment, office equipment and field service vehicle additions.
Interest Expense. Interest expense was $4,263,049 and $58,257 in the
1996 and 1995 periods, respectively. The increase was primarily attributable to
the issuance of $142,000,000 of senior discount notes on August 2, 1996, as
described below.
Interest and Dividend Income. Interest and dividend income was
$1,249,130 and $6,979 in the 1996 and 1995 periods, respectively. The increases
were due to increased cash balances from the Company's 1996 debt offering.
Other Income (Expense), Net. Other income (expense), net was $(37,119)
and $(43,231) in the 1996 and 1995 periods, respectively. The net expenses were
primarily due to disposals of certain assets and state income tax expense in the
1996 quarter and expenses associated with exploring other opportunities for the
Company's proprietary technology in the 1995 quarter.
I-7
<PAGE>
Liquidity and Capital Resources
From February 25, 1993, (Date of Inception) to December 31, 1996 the
net cash used in operating activities was $15,747,630 as the Company generated
minimal revenue yet incurred expenses related to the development of its IPN
technology, test marketing the product and recruiting personnel. In addition,
cash used in investing activities was $13,307,640, primarily related to
expenditures for IPN equipment. The Company has funded its operations
principally through equity contributed by its stockholders and through
convertible debt, which on February 1, 1996 was converted into equity. From its
inception through December 31, 1996, the Company's stockholders had contributed
$27,651,071 of equity. Of the aforementioned amount, $1,971,130 was originally
issued as debt and subsequently converted to equity. As of December 31, 1996,
the Company had cash and cash equivalents of $88,306,387 and working capital of
$86,370,238.
The Company consummated a private offering of securities (the "Private
Placement") on August 2, 1996 for which it received net proceeds of
approximately $90.9 million. The Private Placement consisted of 142,000 units
(the "Units") of $142,000,000 principal amount of 14% Senior Discount Notes Due
2003 (the "Notes") and warrants (the "Warrants") to purchase initially an
aggregate of 1,041,428 shares of common stock of the Company at $.01 per share.
If the Company has not completed a Qualifying Initial Public Offering (as
defined) by September 30, 1997, the Warrants that have not been exercised will
entitle the respective holders to purchase an aggregate of 1,338,918 shares of
common stock at $.01 per share. For a further description of the Notes and
Warrants, see Notes 1, 7 and 8 to the September 28, 1996 and September 30, 1995
Consolidated Financial Statements filed with the Company's Annual Report on Form
10-K for the fiscal year ended September 28, 1996.
In January 1997, the company consummated an exchange offer (the
"Exchange Offer"), whereby the holders of the Notes issued in the Private
Placement exchanged such Notes for new Notes (the "Exchange Notes") that were
registered under the Securities Act of 1933, as amended. The Exchange Notes do
not bear legends restricting the transfer thereof.
The Company will continue to use the net proceeds from the Private
Placement to fund capital expenditures, working capital requirements and
operating losses incurred with the increased commercialization of its IPN during
1997. As of February 13, 1997 the Company had contracts and letters of intent to
install and operate the IPN approximately 3,000 stores, of which 467 stores were
installed and operating. Installation costs associated with the stores to be
installed during calendar year 1997, as well as other capital investments in
technology relating to the operation of the IPN, are estimated to be
approximately $50 million. The Company also plans to offer product promotion for
which it will bear the full cost of each redemption without reimbursement from
Manufacturers of approximately $10 million during calendar year 1997. The
Company believes that the proceeds from the Private Placement will be sufficient
to meet the Company's currently anticipated operating and capital expenditure
requirements through calendar 1997. However, the Company may seek to raise
additional funds prior to the end of 1997 in order to maintain the planned pace
of IPN installations in 1998.
See "Item 5. Other Information" for a description of certain
information that should be read in conjunction with the foregoing discussion and
analysis.
I-8
<PAGE>
PART II
Item 5. Other Information
On February 13, 1997, the Registrant determined to change its fiscal year
end from the last Saturday in September to December 31, effective December 31,
1996. This Form 10-Q covers the transition period from September 29, 1996 to
December 31, 1996.
This Form 10-Q should be read in conjunction with the Registrant's Form
10-K for the fiscal year ended September 28, 1996 (the "Form 10-K"). Except for
the historical information presented, the matters disclosed in this report
include forward-looking statements. These statements represent the Company's
current judgment on the future and are subject to risks and uncertainties that
could cause actual results to differ materially. Such factors include, without
limitation, the following: (i) the Company's limited operating history,
significant losses, accumulated deficit and expected future losses, (ii) the
dependence of the Company on its ability to establish, maintain and expand
relationships with Manufacturers to promote brands on the IPN, the lengthy sales
cycle in marketing the IPN to Manufacturers and the uncertainty of market
acceptance for the IPN, (iii) the pressure that rapid growth places on the
Company's managerial, operational and financial resources, the uncertainty as to
whether the Company will be able to manage its growth effectively, the early
stage of the Company's products and services and technical and other problems
that the Company has experienced and may experience with the accelerated
installation of the IPN, (iv) risks related to the Company's substantial
leverage and debt service obligations, (v) the effective subordination of the
Exchange Notes to the obligations of its subsidiaries, (vi) the consequences of
the Company's possible need for additional financing, (vii) the lack of product
diversification and the Company's dependence on the consumer products
advertising and promotional business and its expenditures, (viii) the Company's
dependence on third parties such as Coleman Resources, the manufacturer of IPNs,
(ix) the intensely competitive nature of the consumer product and promotional
industry and the greater resources of most of the Company's competitors, (x)
risks that the Company's rights related to patents, proprietary information and
trademarks may not adequately protect its business, (xi) the possible inability
of new management to perform their respective roles and the possible inability
of the Company to attract and retain needed managerial and technical employees
and (xii) the possible conflicts of interest of the Company's directors,
officers and principal shareholders in certain transactions with the Company.
See "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations - Risk Factors" of the Form 10-K for a more specific
description of these risks.
II-9
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) The exhibits to this Form 10-Q are listed in the accompanying Index
to Exhibits.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
INTERoACT SYSTEMS INCORPORATED
Date: February 14, 1997
By:
--------------------------------------
Stephen R. Leeolou, Chief Executive
Officer
Date: February 14, 1997 By:
--------------------------------------
Richard A. Vinchesi, Vice President
and Chief Financial Officer
II-10
<PAGE>
INDEX TO EXHIBITS
The following exhibits are filed as part of this report:
Exhibit No. Description
*4(a) Articles of Incorporation of the Registrant, as amended, filed as
Exhibit 3(a) to the Registrant's Registration Statement of Form S-4
(Registration 333-12091)
*4(b) Bylaws of the Registrant, as amended, filed as Exhibit 3(b) to the
Registrant's Registration Statement of Form S-4 (Registration
333-12091)
*4(c) Specimen Certificate of the Registrant's Common Stock, filed as Exhibit
4(a) to the Registrant's Registration Statement of Form S-4
(Registration 333-12091)
*4(d) Indenture, dated August 1, 1996, between the Company and Fleet National
Bank, as trustee, relating to $142,000,000 in principal amount of 14%
Senior Discount Notes due 2003, filed as Exhibit 4(b) to the
Registrant's Registration Statement of Form S-4 (Registration
333-12091)
27 Financial Data Schedule
- -------------------
*Incorporated by reference to the statement or report indicated.
II-11
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CURRENCY> U.S. DOLLARS
<S> <C> <C>
<PERIOD-TYPE> 3-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1996 SEP-28-1996
<PERIOD-START> SEP-29-1996 OCT-01-1995
<PERIOD-END> DEC-31-1996 SEP-28-1996
<EXCHANGE-RATE> 1 1
<CASH> 88,306,387 93,479,584
<SECURITIES> 0 0
<RECEIVABLES> 626,686 253,848
<ALLOWANCES> 10,000 10,000
<INVENTORY> 0 0
<CURRENT-ASSETS> 89,930,113 93,977,317
<PP&E> 13,518,390 10,815,880
<DEPRECIATION> 1,413,425 957,969
<TOTAL-ASSETS> 106,053,540 107,757,068
<CURRENT-LIABILITIES> 3,559,875 2,141,770
<BONDS> 0 72,750,759
0 0
0 0
<COMMON> 32,651,071 27,651,071
<OTHER-SE> (27,007,734) (19,716,774)
<TOTAL-LIABILITY-AND-EQUITY> 106,053,540 107,757,068
<SALES> 168,650 205,459
<TOTAL-REVENUES> 168,650 205,459
<CGS> 0 0
<TOTAL-COSTS> 4,446,972 9,949,428
<OTHER-EXPENSES> 37,119 74,180
<LOSS-PROVISION> 0 6,465
<INTEREST-EXPENSE> 4,263,049 2,743,436
<INCOME-PRETAX> (7,329,360) (11,558,890)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (7,329,360) (11,558,890)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (7,329,360) (11,558,890)
<EPS-PRIMARY> (.96) (1.91)
<EPS-DILUTED> 0 0
</TABLE>
