================================================================================
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, 2000
Commission File No. 0-27994
___________________________
ATTORNEYS.COM, INC.
-------------------
(Exact name of small business issuer as specified in its charter)
FLORIDA 59-3203301
------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
186 P.C.N.A. PARKWAY
LAKE HELEN, FL 32744
904-228-1000
------------
(Address and telephone number
of principal executive offices)
THE PUBLISHING COMPANY OF NORTH AMERICA, INC.
---------------------------------------------
(Former name or former address, if changed since last report)
Indicate by check mark 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:
X Yes No
--- ---
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Class Outstanding at July 31, 2000
--------------------------- ----------------------------
Common Stock: no par value 4,884,531
Transitional Small Business Disclosure Format (check one): Yes X No
--- ---
================================================================================
<PAGE>
ATTORNEYS.COM, INC.
FORM 10-QSB - JUNE 30, 2000
INDEX
Page
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Balance Sheets
as of June 30, 2000 (unaudited) and December 31, 1999 3
Consolidated Statements of Operations
for the three and six months ended June 30, 2000
and 1999 (unaudited) 4
Consolidated Statements of Cash Flows
for the six months ended June 30, 2000 and 1999 (unaudited) 5 - 6
Notes to unaudited consolidated interim financial statements 7 - 10
ITEM 2. Management's Discussion and Analysis of Interim Financial
Condition and Results of Operations 11 - 14
PART II - OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Securities Holders 15
ITEM 5. Other Information 15
ITEM 6. Exhibits and Reports on Form 8-K 15
2
<PAGE>
ATTORNEYS.COM, INC.
FORM 10-QSB - JUNE 30, 2000
CONSOLIDATED BALANCE SHEETS
<TABLE><CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
----------------------------------------
ASSETS (UNAUDITED)
Current assets:
<S> <C> <C>
Cash and cash equivalents $3,550,514 $2,095,866
Accounts receivable, less allowance for doubtful
accounts of $132,117 at June 30, 2000
and $153,901 at December 31, 1999 263,638 246,952
Directories in progress 220,058 164,309
Other current assets 210,972 175,067
-----------------------------------------
Total current assets 4,245,182 2,682,194
Property and equipment, net 1,204,522 1,217,894
Investment in AroundCampus, Inc. 200,000 200,000
Intangible assets 913,067 116,667
Other assets 91,249 97,009
-----------------------------------------
Total assets $6,654,020 $4,313,764
=========================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $269,797 $247,827
Accrued expenses 307,990 169,999
Deferred revenue 580,715 492,574
Mortgage payable 53,333 53,333
-----------------------------------------
Total current liabilities 1,211,835 963,733
Notes payable 100,000 100,000
Mortgage payable after one year 560,000 586,667
-----------------------------------------
Total liabilities 1,871,835 1,650,400
Shareholders' equity:
Common shares, no par value:
15,000,000 shares authorized; 6,528,431 shares
issued at June 30, 2000; 4,925,020 shares
issued at December 31, 1999 9,522,385 5,914,416
Paid-in capital for stock warrants 180,435 26,208
Accumulated deficit (3,740,614) (2,115,871)
Unearned compensation, net (1,064) (2,687)
Treasury stock, at cost; 1,644,300 shares at June 30,
2000; 1,634,300 shares at December 31, 1999 (1,178,957) (1,158,702)
-----------------------------------------
Total shareholders' equity 4,782,185 2,663,364
-----------------------------------------
Total liabilities and shareholders' equity $6,654,020 $4,313,764
=========================================
</TABLE>
See accompanying notes.
3
<PAGE>
ATTORNEYS.COM, INC.
FORM 10-QSB - JUNE 30, 2000
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE><CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
2000 1999 2000 1999
------------------------------------- ----------------------------------
<S> <C> <C> <C> <C>
Net sales $1,201,910 $1,446,711 $2,371,277 $2,874,978
Costs and expenses:
Production 514,421 331,540 907,614 664,269
Marketing and selling 629,881 626,718 1,139,486 1,250,024
Depreciation 28,956 32,020 58,389 65,178
Amortization 36,643 5,827 51,986 12,007
General and administrative 1,055,484 436,273 1,910,318 851,452
------------------------------------- ----------------------------------
2,265,385 1,432,378 4,067,793 2,842,930
------------------------------------- ----------------------------------
Income (loss) from operations (1,063,475) 14,333 (1,696,516) 32,048
Interest income, net of expense 43,121 14,379 71,773 24,980
------------------------------------- ----------------------------------
Income (loss) before provision
for income taxes (1,020,354) 28,712 (1,624,743) 57,028
Provision for income taxes --- (2,204) --- (2,204)
------------------------------------- ----------------------------------
Net income (loss) ($1,020,354) $26,508 ($1,624,743) $54,824
===================================== ==================================
Net income (loss) per common
share
Basic ($0.22) $0.01 ($0.39) $0.02
====================================== ==================================
Diluted ($0.22) $0.01 ($0.39) $0.02
====================================== ==================================
Shares used in computing net
income (loss) per share
Basic 4,591,349 3,263,949 4,160,645 3,258,810
===================================== ==================================
Diluted 4,591,349 3,462,418 4,160,645 3,445,427
===================================== ==================================
</TABLE>
See accompanying notes.
4
<PAGE>
ATTORNEYS.COM, INC.
FORM 10-QSB - JUNE 30, 2000
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE><CAPTION>
SIX MONTHS ENDED
JUNE 30, JUNE 30,
CASH FLOWS FROM OPERATING ACTIVITIES 2000 1999
--------------------------------------
<S> <C> <C>
Net (loss) income ($1,624,743) $54,824
Adjustments to reconcile net (loss) income to net cash
used in operating activities:
Depreciation and amortization 110,375 77,185
Accretion of unearned compensation 1,623 1,831
Bad debt expense 96,645 196,666
Exchange of common stock for goods and services 581,971 6,299
Exchange of stock warrants for goods and services 41,977 ---
Increase in accounts receivable (113,331) (109,853)
(Increase) decrease in directories in progress (55,749) 144,756
Increase in intangible and other assets (41,529) (25,367)
Increase (decrease) in accounts payable 21,970 (29,031)
Increase (decrease) in accrued expenses 137,991 (6,082)
Decrease in income taxes payable --- (70,296)
Increase (decrease) in deferred revenue 88,141 (417,252)
---------------------------------------
Net cash used in operating activities (754,659) (176,320)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (44,009) (16,488)
---------------------------------------
Net cash used in investing activities (44,009) (16,488)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of mortgage principal (26,667) (26,666)
Proceeds from the sale of common stock 2,251,620 ---
Proceeds from the exercise of stock options 48,618 4,400
Purchase of treasury stock (20,255) (29,218)
---------------------------------------
Net cash provided by (used in) financing activities 2,253,316 (51,484)
Net increase (decrease) in cash and cash equivalents 1,454,648 (244,292)
Cash and cash equivalents at beginning of period 2,095,866 2,331,633
---------------------------------------
Cash and cash equivalents at end of period $3,550,514 $2,087,341
=======================================
</TABLE>
5
<PAGE>
ATTORNEYS.COM, INC.
FORM 10-QSB - JUNE 30, 2000
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
<TABLE><CAPTION>
SIX MONTHS ENDED
JUNE 30, JUNE 30,
SUPPLEMENTAL CASH FLOW INFORMATION 2000 1999
---------------------------------------
<S> <C> <C>
Cash paid during the period for:
Interest $27,447 $25,585
=======================================
Supplemental noncash activities:
Exchange of advertising for supplies and equipment $15,506 $15,053
=======================================
Issuance of stock warrants in exchange for intangible property $101,000 ---
=======================================
Issuance of common stock in exchange for intangible property $737,010 ---
=======================================
Reduction of accounts payable by issuance of common stock --- $33,950
=======================================
</TABLE>
See accompanying notes.
6
<PAGE>
ATTORNEYS.COM, INC.
FORM 10-QSB - JUNE 30, 2000
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying unaudited consolidated financial statements of Attorneys.com,
Inc. (formerly The Publishing Company of North America, Inc. until June 5, 2000)
and subsidiaries (the "Company") have been prepared in accordance with
accounting principles generally accepted in the United States for interim
financial information and with the instructions to Form 10-QSB and Item 310(b)
of Regulation S-B. Accordingly, they do not include all the information and
footnotes required by accounting principles generally accepted in the United
States for complete financial statements. It is recommended that these financial
statements be read in conjunction with the Company's audited financial
statements as of December 31, 1999. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included in the accompanying unaudited consolidated
financial statements. The results of operations of any interim period are not
necessarily indicative of the results of operations for the fiscal year. Certain
amounts in the 1999 financial statements have been reclassified to conform to
the presentation adopted in 2000.
The Company currently operates in one reportable business segment, the
publishing of membership directories for bar associations and the selling of
advertising in those directories, with respect to the segment disclosure
requirement of FAS 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED
INFORMATION. The Company is currently designing and developing an Internet
business. Once operational, management anticipates reporting this business as a
separate reportable segment.
2. Consolidation
The consolidated financial statements include the accounts of Attorneys.com,
Inc., and its wholly-owned subsidiaries PCNA Communications Corporation since
its incorporation on October 14, 1998 and Attorneys Online, Inc. since its
incorporation on February 15, 1999 (collectively, the Company). Intercompany
transactions have been eliminated in consolidation.
3. Cash and Cash Equivalents
The Company considers all highly-liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
4. Accounts Receivable
Accounts receivable are comprised primarily of amounts due from advertisers in
bar association directories and the online vendor directory. The Company's
allowance for doubtful accounts is estimated by management as a percentage of
sales. All amounts outstanding in excess of six months are written off.
7
<PAGE>
ATTORNEYS.COM, INC.
FORM 10-QSB - JUNE 30, 2000
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. Investment in AroundCampus, Inc.
The investment in AroundCampus, Inc. ("ACI") (formerly College Directory
Publishing Corporation) is accounted for on the cost basis as the Company has a
non-controlling interest in ACI.
6. Intangible Assets and Amortization
Intangible assets, which are comprised of Internet web site addresses and rights
to use of particular toll-free telephone numbers, are recorded at cost. The cost
is amortized over an estimated useful life of five years using the straight-line
method.
7. Revenue Recognition
Revenues and related costs are recorded by the Company upon shipment of
directories. Up-front non-refundable payments received for Internet advertising
and costs are recognized upon the release of the advertisement on the web site.
Costs accumulated under directories in progress are stated at estimated costs,
not in excess of estimated realizable value. Deferred revenue represents amounts
received from advertisers prior to shipment of the related directories.
Staff Accounting Bulletin No. 101 (SAB101), "Revenue Recognition", was issued in
December 1999. SAB 101 will require companies to recognize certain upfront
non-refundable fees over the life of the related contract. The Company is
required to adopt this new accounting principle through a cumulative charge to
the statement of operations, in accordance with Accounting Principles Board
Opinion (APB) No. 20, "Accounting Changes", no later than the fourth quarter of
fiscal 2000. The Company believes that the adoption of SAB 101 will have an
impact on its future operating results as it relates to the up-front
non-refundable payments received in connection with Internet advertising
contracts. The historical financial statements reflect revenues of approximately
$389,000 beginning August 3, 1999 (when the web site was launched) through
December 31, 1999, and $69,000 in the first half of 2000. Upon adoption of SAB
101, the Company will be required to record these revenues over the life of the
related agreement. The impact of SAB 101 will be to reduce 1999 revenues to
approximately $119,000 and to increase revenues for the first half of 2000 to
approximately $217,000. The cumulative difference of $122,000 will be amortized
over future periods.
8. Stock-based Compensation
The Company accounts for employee stock-based compensation under the provisions
of Accounting Principles Board (APB) Opinion No. 25, ACCOUNTING FOR STOCK ISSUED
TO EMPLOYEES. Accounting for the issuance of stock options under the provisions
of APB No. 25 typically does not result in compensation expense for the Company
as the exercise price of options are normally established at a price which
approximates the fair market value of the Company's common stock on the date of
grant.
8
<PAGE>
ATTORNEYS.COM, INC.
FORM 10-QSB - JUNE 30, 2000
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. Stock-based Compensation (continued)
In April 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44, Accounting for Certain Transactions Involving Stock
Compensation, an interpretation of APB Opinion No. 25. Among other issues, that
interpretation clarifies the definition of employees for purposes of applying
Opinion No. 25, the criteria for determining whether a plan qualifies as a
non-compensatory plan, the accounting consequence of various modifications to
the terms of a previously fixed stock option or award and the accounting for an
exchange of stock compensation awards in a business combination. This
interpretation is effective July 1, 2000, but certain conclusions in the
interpretation cover specific events that occur after either December 15, 1998
or January 12, 2000. To the extent that this interpretation covers events
occurring during the period after December 15, 1998, or January 12, 2000, but
before the effective date of July 1, 2000, the effect of applying this
interpretation is recognized on a prospective basis from July 1, 2000. The
Company is currently reviewing stock grants to determine the impact, if any,
that may arise from implementation of this interpretation, although the Company
does not expect the impact, if any, to be material to its financial statements.
9. Use of Estimates
The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Actual results could differ
from those estimates.
10. Common Stock Outstanding at June 30, 2000
During 2000 the Company entered into a number of contracts for professional
services which provide for a portion of the fees to be paid as shares of the
Company's common stock. As of June 30, 2000 a total of 171,098 shares had been
earned but not yet issued primarily because the computation could be made only
after that date. The shares are shown as outstanding on the cover page of this
report and on the Company's consolidated balance sheet as of June 30, 2000. They
also are included in the calculation of the basic and diluted loss per share for
the most recent period (see Note 11. Earnings Per Share).
9
<PAGE>
ATTORNEYS.COM, INC.
FORM 10-QSB - JUNE 30, 2000
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per
share in accordance with SFAS Number 128, "Earnings Per Share":
<TABLE><CAPTION>
Three months ended June 30, Six months ended June 30,
2000 1999 2000 1999
----------------------------- ------------------------------
Numerator:
<S> <C> <C> <C> <C>
Net income (loss) from continuing operations ($1,020,354) $26,508 ($1,624,743) $54,824
----------------------------- ------------------------------
Numerator for basic earnings per share - income
(loss) available to common shareholders ($1,020,354) $26,508 ($1,624,743) $54,824
Effect of dilutive securities --- --- --- ---
----------------------------- ------------------------------
Numerator for diluted earnings per share -
income (loss) available to common
shareholders after assumed conversions ($1,020,354) $26,508 ($1,624,743) $54,824
Denominator:
Denominator for basic earnings per share -
weighted-average shares 4,591,349 3,263,949 4,160,645 3,258,810
Effect of dilutive securities - stock options --- 198,469 --- 186,617
----------------------------- ------------------------------
Denominator for diluted earnings per share -
Adjusted weighted-average shares and
assumed conversions 4,591,349 3,462,418 4,160,645 3,445,427
Basic earnings per share ($0.22) $0.01 ($0.39) $0.02
============================= ==============================
Diluted earnings per share ($0.22) $0.01 ($0.39) $0.02
============================= ==============================
</TABLE>
In computing diluted loss per share for the three months ended June 30, 2000,
353,236 common share equivalents were excluded from the diluted loss per share
computation because their effect would have been antidilutive. For the six
months ended June 30, 2000, 416,640 common share equivalents were excluded from
the computation for the same reason.
10
<PAGE>
ATTORNEYS.COM, INC.
FORM 10-QSB - JUNE 30, 2000
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF INTERIM FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
---------------------
Our results of operations for the three and six months ended June 30,
2000 were heavily affected by expenses relating to the design and development of
our new Internet business which is planned for launch later this year. In
contrast to the consolidated statements of operations on page four of this
report, the table below shows our operating results in which the costs relating
to the development of the new Internet business are shown separately:
<TABLE><CAPTION>
Quarter ended Quarter ended Change Change
June 30, 2000 June 30, 1999 in $s as %
-------------------------- ------------------------- ------------------------
<S> <C> <C> <C> <C> <C> <C>
Net sales $1,201,910 100.0% $1,446,711 100.0% ($244,801) (16.9%)
Costs and expenses:
Production 411,560 34.3% 331,540 22.9% 80,020 24.1%
Marketing and selling 573,552 47.7% 626,718 43.3% (53,166) (8.5%)
Depreciation 28,956 2.4% 32,020 2.2% (3,064) (9.6%)
Amortization 4,983 0.4% 5,827 0.4% (844) (14.5%)
General and administration 474,868 39.5% 436,273 30.2% 38,595 8.8%
New Internet business devpt. 771,466 64.2% --- 0.0% 771,467
-------------------------- ------------------------- -------------------------
2,265,385 188.5% 1,432,378 99.0% 833,008 58.2%
-------------------------- ------------------------- -------------------------
Income (loss) from operations (1,063,475) (88.5%) 14,333 1.0% (1,077,809)
Other income, net 43,121 3.6% 14,379 1.0% 28,742
-------------------------- ------------------------- ---------------
Income (loss) before taxes (1,020,354) (84.9%) 28,712 2.0% (1,049,067)
Six months ended Six months ended Change Change
June 30, 2000 June 30, 1999 in $s as %
--------------------------- ------------------------- --------------------------
Net sales $2,371,277 100.0% $2,874,978 100.0% ($503,701) (17.5%)
Costs and expenses:
Production 804,753 33.9% 664,269 23.1% 140,484 21.1%
Marketing and selling 1,083,157 45.7% 1,250,024 43.5% (166,867) (13.3%)
Depreciation 58,389 2.5% 65,178 2.3% (6,789) (10.4%)
Amortization 10,276 0.4% 12,007 0.4% (1,731) (14.4%)
General and administration 737,440 31.1% 851,452 29.6% (114,012) (13.4%)
New Internet business devpt. 1,373,778 57.9% --- 0.0% 1,373,778
--------------------------- ------------------------- --------------------------
4,067,793 171.5% 2,842,930 98.9% 1,224,863 43.1%
--------------------------- ------------------------- --------------------------
Income (loss) from operations (1,696,516) (71.5%) 32,048 1.1% (1,728,564)
Other income, net 71,773 3.0% 24,980 0.9% 46,793
--------------------------- ------------------------- ---------------
Income (loss) before taxes (1,624,743) (68.5%) 57,028 2.0% (1,681,771)
</TABLE>
In addition to the expenses related to our Internet business
development, expenses relating to our traditional print directory business
accounted for 27% and 19% of the loss from operations for the most recent three
and six months, respectively. Our traditional print directory business was
marginally profitable in the same periods in 1999.
11
<PAGE>
ATTORNEYS.COM, INC.
FORM 10-QSB - JUNE 30, 2000
RESULTS OF OPERATIONS (CONTINUED)
---------------------
In the second quarter of 2000 we published 24 directories with average
advertising revenues per directory of $49,464. In the same period a year
earlier, we published 21 directories with average advertising revenues per
directory of $68,891. Revenues for the online vendor directory that we started
in mid-1999 were $14,776 in the most recent quarter; we had no online vendor
directory revenues in the same period last year. Sales of directories accounted
for $73,728 of our second quarter 2000 revenues, compared to $84,163 for the
same period a year earlier. During the most recent quarter, six of the
directories we published were independent of any official bar association
sponsorship. Advertising in these is somewhat more difficult to sell, at least
initially, because of the lack of being an "official" bar association directory;
these had average advertising revenues per directory of $37,773 in their first
year of publication. Survey cards were included in the directories; the surveys
that have been returned to us indicate a very favorable evaluation of the
directories. We believe that as our independent proprietary directories become
known in their respective communities, their revenues will increase over that of
the first year's publication. We also believe that we will be able to more
effectively brand and market our future Internet products in these independent
directories. Also affecting the most recent quarter were four "official"
directories that had average revenues of only $12,163; we cancelled these
directories from future publication. We will replace them in our schedule with
our own additional proprietary directories in geographic areas having more
favorable demographics.
In the first half of 2000 we published 44 directories with average
advertising revenues per directory of $52,326, compared to the first half of
1999 in which we published 37 directories with average advertising revenues per
directory of $77,702. Revenues for our online vendor directory were $68,912 in
the first half of 2000; there were no such revenues in the first half of 1999.
Sales of directories accounted for $186,869 of revenues in the first half of
2000, compared to $156,134 for the same period a year earlier.
Production costs, excluding items relating to our Internet business
development, rose in the most recent quarter from the same quarter in 1999 due
largely to an increase in our printing costs. These costs rose primarily because
of an increase in average printing costs per directory and secondarily due to
the three additional directories published in the most recent quarter as
compared to the second quarter in 1999. Average printing costs per directory in
the second quarter of 2000 were $9,510 compared to $7,215 in the second quarter
of 1999. Our new independent directories bore a higher average printing cost
than those directories they replaced from the second quarter in 1999 for several
reasons. We printed and distributed greater quantities of these in order to gain
a larger user base. Our attorney listings were not limited only to members of
the bar association; and we added more information that we believe is useful to
attorneys. We believe that greater circulation and expanded content will provide
for higher product recognition and usage that will translate into increased
future revenues that will more than offset the higher printing costs. These same
reasons were the basis for the increase in production costs in the six-month
periods.
Marketing and selling expenses, excluding items relating to our
Internet business development, decreased in both the three and six months ended
June 30, 2000 from the respective periods in 1999, but not in proportion to the
decrease in revenues. Higher revenues allow for economies of scale as certain
12
<PAGE>
ATTORNEYS.COM, INC.
FORM 10-QSB - JUNE 30, 2000
RESULTS OF OPERATIONS (CONTINUED)
---------------------
costs are fixed or only semi-variable with revenues. A decrease in revenues can
be expected to cause diseconomies of scale.
Amortization expense, excluding items relating to our Internet business
development, decreased in both the three and six months ended June 30, 2000 from
the respective periods in 1999. Since November 1999 we have acquired certain
intangible assets valued at $940,610 to have the assets available for use as
part of our future Internet strategy. All of these assets were acquired
entirely, except for incidental expenses such as legal fees, through the
issuance of unregistered common stock or warrants for unregistered common stock.
Their cost is being amortized over an estimated useful life of five years. The
amortization of these intangible assets accounted for non-cash charges of
$31,660 and $41,710 in the three and six months ended June 30, 2000,
respectively. A non-cash charge of $47,030 per quarter will be incurred until
the costs of the intangibles is fully amortized or until the intangibles are
deemed no longer useful, at which time their costs will be fully written off.
General and administrative expense, excluding items relating to our
Internet business development, rose slightly for most recent quarter but
decreased somewhat for the most recent six months when compared to the
respective periods a year earlier. The item having the most effect upon changes
in G&A expense was bad debt, which was $66,343 and $96,645 for the most recent
three and six months, compared to $94,874 and $196,666, respectively, a year
earlier.
As stated above, a significant amount of our expense in 2000 was
directly related to the development of our future Internet strategy. We incurred
related expenses of approximately $771,000 in the most recent quarter and
$1,374,000 in the first half of 2000. Of the six-month amount, approximately
$905,000 relates to management consulting and other professional services,
$203,000 relates to payroll and related expenses, $103,000 relates to the design
and development of our new web site, $56,000 relates to the development of our
advertising strategy, $42,000 relates to the amortization of the cost of certain
intangible assets; the balance of $65,000 is primarily legal expense relating to
the numerous contracts that have been required. More than half of the expense
for the six-month period was or will be paid in the form of unregistered company
stock or warrants to purchase unregistered company stock. Based upon information
at this time, we estimate third quarter expense for this project to be
approximately $1,000,000.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Our balance of cash and cash equivalents at June 30, 2000 was
$1,454,648 higher than at December 31, 1999 primarily because of two private
sales of our unregistered common stock that raised $2,251,620 during the first
quarter of this year. These transactions were discussed in our last report on
Form 10-QSB. During the most recent quarter, our balance of cash and cash
equivalents decreased $670,762. Of this, $360,000 was paid to a management
consulting firm who provided services relating to the planning for our Internet
business development. Another $164,577 was paid to a firm who is providing
services relating to the design and development of our new web site that is
planned for launch later this year. Most of the balance of the decrease in cash
and cash equivalents in the most recent quarter related to our operating loss.
13
<PAGE>
ATTORNEYS.COM, INC.
FORM 10-QSB - JUNE 30, 2000
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
-------------------------------
Most of our June 30, 2000 balance of cash and cash equivalents was
invested in money market funds.
Our net loss of $1,624,743 in the first half of 2000 has not affected
our cash balance commensurately primarily because we have issued unregistered
common stock and warrants for common stock in exchange for approximately
$624,000 of the expenses we have incurred.
We believe that our existing cash balances are sufficient to meet our
working capital needs for more than the next 12 months. We can not estimate at
this time how much of our existing cash resources we will use in our new
Internet business strategy; we do not plan to make any commitments that would
jeopardize our having sufficient cash balances for all of our operations. We
cannot assure you we will be able to raise additional capital at desirable
levels of dilution if we decide that we need additional capital to implement our
plans.
FORWARD-LOOKING STATEMENTS
--------------------------
The statements made above relating to our plans to launch our new
Internet business later this year, to future revenues of our independent
proprietary directories increasing over that of the first year's publication, to
our ability to more effectively brand and market our future Internet products in
our independent directories, to our existing cash balances being sufficient to
meet our working capital needs for more than the next 12 months, to our plans or
commitments not jeopardizing our having sufficient cash balances for all of our
operations, and to our raising additional capital in the future 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. The
statements that express the "belief", "anticipation", "plans", "expectations"
and similar expressions are intended to identify forward-looking statements. The
results anticipated by these forward-looking statements may not occur. While the
Company believes that these statements are accurate, the Company's business is
dependent upon general economic conditions and various conditions specific to
its industry and future trend results cannot be predicted with certainty.
Important factors that may cause actual results to differ materially from the
forward-looking statements include the following: 1) our ability to successfully
achieve the technical requirements of the site as intended; 2) our ability to
successfully gain recognition and usage of our new independent directories; 3)
the ability of our management to implement and expand our Internet strategy
without using all of our cash resources, 4) unexpected downturns in our print
directory business, including national and local economic factors that will
reduce advertising sales 5) our ability to successfully implement our plans with
the capital resources we already have on hand or are able to additionally raise
in the future, 6) whether the capital markets find our current business or our
plans for our new Internet business acceptable for investment, 7) the intense
competition we face both in our current and planned business and in the market
for raising additional capital, 8) and our ability to convince sources of
capital that our management is able to carry out its new business strategy.
14
<PAGE>
ATTORNEYS.COM, INC.
FORM 10-QSB - JUNE 30, 2000
PART II - OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Securities Holders
The annual meeting of our shareholders was held at our corporate
offices in Lake Helen, Florida, on June 2, 2000. At that time the shareholders,
by direct vote and by proxy, voted as shown in the following table:
<TABLE><CAPTION>
-----------------------------------------------
For Against Abstain
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Item 1 - Re-election of Messrs. Matt Butler and J. William
Wrigley as directors for three-year terms 3,270,451 - 12,825
----------------------------------------------------------------------------------------------------------------------------
Item 2 - Amendment to the Company's 1996 Stock Plan 2,019,198 29,131 2,600
----------------------------------------------------------------------------------------------------------------------------
Item 3 - Amendment to the Articles of Incorporation
changing the Company's name to Attorneys.com, Inc. 3,271,176 11,900 200
----------------------------------------------------------------------------------------------------------------------------
Item 4 - Sale of more than 19.9% of the Company's common
stock to a group of investment funds 2,031,047 15,875 4,007
----------------------------------------------------------------------------------------------------------------------------
Item 5 - Appointment of Ernst & Young LLP as independent
auditors 3,256,901 7,000 19,375
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
There was no other business brought at the meeting requiring a vote of
the shareholders.
ITEM 5. Other Information
None.
ITEM 6. Exhibits and Reports on Form 8-K
a. Exhibits, index
10.1 Amendment to consulting agreement
10.2 Web site development agreement dated May 24, 2000*
10.3 Letter of agreement dated June 1, 2000
27.0 Financial data schedule (filed electronically only
with the SEC)
* An application for confidential treatment of Exhibit A to this
agreement was filed with the Commission on August 14, 2000.
b. On June 7, 2000, we filed a report on Form 8-K to announce the
change of our company name to Attorneys.com, Inc. effective June
5, 2000.
15
<PAGE>
ATTORNEYS.COM, INC.
FORM 10-QSB - JUNE 30, 2000
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf on August 14, 2000 by
the undersigned, thereunto duly authorized.
ATTORNEYS.COM, INC.
/s/ Peter S. Balise
------------------------------------
President (Chief Executive Officer)
/s/ James M. Koller
-------------------------------
Chief Financial Officer (Principal
Financial and Accounting Officer)
16
