<PAGE> 1
United States
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
[X] Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange
Act of 1934 For the Period Ended June 30, 1999.
or
[ ] Transition Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 For the Transition Period From _____________to____________.
Commission file number 333-25937
Crosswalk.com, Inc.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 54-1831588
- ---------------- ------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
4206F Technology Court
Chantilly, VA 20151
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices)
(703-968-4808)
- --------------------------------------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
DIDAX INC.
- --------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter periods that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days.
Yes X No
-------------- -------------
Applicable Only to Corporate Issuers
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practical date:
Common Stock, $ .01 Par Value: 7,011,843 shares outstanding as of June 30, 1999
Transitional Small Business Disclosure Format (check one):
Yes No X
-------------- --------------
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
Part I. FINANCIAL INFORMATION PAGE
<S> <C> <C>
Item 1. Consolidated Financial Statements
Balance Sheet--June 30, 1999 3
Statements of Operations--Three Months Ended and Six Months Ended
June 30, 1998 and 1999 4
Statements of Cash Flows--Six Months Ended June 30, 1999 5
Notes to Financial Statements--June 30, 1999 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations 10
Part II. OTHER INFORMATION
Items 1-6 Including Exhibits and Reports on Form 8-K 17
Signatures 19
</TABLE>
<PAGE> 3
CROSSWALK.COM, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
AT JUNE 30, 1999 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 6,850,547
Short-term investments 4,812,866
Accounts receivable including unbilled of $776,735 1,689,700
at June 30, 1999
Prepaid expenses 3,172
Inventory 13,841
Deferred costs 184,188
Notes receivable from officers 93,000
-------------------
Total current assets 13,647,314
LONG TERM INVESTMENTS 5,270,927
PROPERTY AND EQUIPMENT, net 1,295,690
OTHER ASSETS:
Deposits 60,209
Deferred costs 18,216
Intangible assets, net 141,500
-------------------
Total other assets 219,925
-------------------
$ 20,433,856
===================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 470,480
Accrued liabilities 559,279
Deferred revenue 53,754
-------------------
Total current liabilities 1,083,513
OTHER LIABILITIES:
Accounts payable 59,822
-------------------
Total liabilities 1,143,335
COMMITMENTS AND CONTINGENCIES -
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value, 5,000,000 shares authorized, no shares -
issued and outstanding at June 30, 1999
Common stock, $.01 par value, 20,000,000 shares
authorized, 7,011,843 shares issued and outstanding at June 30, 1999 70,118
Common stock warrants 127,659
Additional paid-in capital 33,054,881
Accumulated deficit (13,908,387)
Accumulated other comprehensive income/(loss):
Net unrealized loss on available-for-sale securities (53,750)
-------------------
Total stockholders' equity 19,290,521
-------------------
$ 20,433,856
===================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements. Page 3
<PAGE> 4
CROSSWALK.COM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1998 1999 1998 1999
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Sponsorship/Advertising sales $ 99,710 $ 1,501,214 $ 115,440 $ 2,474,683
Retail sales 33,790 77,558 59,910 125,745
Consulting services 32,809 60,397 80,762 113,797
--------------------------------------------------------- -----------------
Total operating revenues 166,309 1,639,169 256,112 2,714,225
OPERATING EXPENSES:
Cost of goods and services 58,862 848,593 98,263 1,502,082
Crosswalk operations 321,952 892,908 558,473 1,661,693
Sales and marketing 228,121 832,123 477,750 1,492,027
General and administrative 367,195 529,198 739,547 919,767
------------------- ----------------- ----------------- -----------------
Total operating expenses 976,130 3,102,822 1,874,033 5,575,569
------------------- ----------------- ----------------- -----------------
LOSS FROM OPERATIONS (809,821) (1,463,653) (1,617,921) (2,861,344)
OTHER INCOME (EXPENSE):
Interest income 62,223 212,270 120,355 351,717
Loss on sale of assets - - - (2,554)
Interest expense - - (1,752) -
------------------- ----------------- ----------------- -----------------
Total other income (expense) 62,223 212,270 118,603 349,163
------------------- ----------------- ----------------- -----------------
NET LOSS $ (747,598) $ (1,251,383) $ (1,499,318) $ (2,512,181)
=================== ================= ================= =================
Net loss per common share (basic) $ (0.20) $ (0.18) $ (0.44) $ (0.41)
=================== ================= ================= =================
Weighted average number of common
shares outstanding 3,651,630 6,893,720 3,413,241 6,198,279
=================== ================= ================= =================
Net loss per common share (diluted) $ (0.20) $ (0.18) $ (0.44) $ (0.41)
=================== ================= ================= =================
Weighted average number of common
shares outstanding 3,651,630 6,893,720 3,413,241 6,198,279
=================== ================= ================= =================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements. Page 4
<PAGE> 5
CROSSWALK.COM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30,
----------------------------------------
1998 1999
------------------- -------------------
<S> <C> <C>
CASH FLOWS FOR OPERATING ACTIVITIES:
Net loss $ (1,499,318) $ (2,512,181)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 55,317 133,502
Disposal of fixed assets - 2,554
Changes in assets and liabilities affecting operations:
Accounts receivable (51,850) (1,337,292)
Prepaid expenses 8,123 (952)
Inventory - (6,022)
Deferred costs - (157,474)
Deposits - (4,146)
Accounts payable 99,245 373,384
Accrued liabilities 15,874 17,838
Deferred revenue (7,328) 29,024
------------------- -------------------
Net cash used in operating activities (1,379,937) (3,461,765)
------------------- -------------------
CASH FLOWS FOR INVESTING ACTIVITIES:
Purchases of property and equipment (129,328) (1,107,331)
Purchase of intangible asset (97,500)
Sales and maturities of investments - 2,100,000
Purchase of investments - (9,494,266)
------------------- -------------------
Net cash used in investing activities (129,328) (8,599,097)
------------------- -------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock and warrants - 17,676,958
Repayment of notes payable (82,230) -
Deferred costs (7,205) -
------------------- -------------------
Net cash (used in) provided by financing activities (89,435) 17,676,958
------------------- -------------------
NET CHANGE IN CASH AND CASH EQUIVALENTS (1,598,700) 5,616,096
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 5,443,781 1,234,451
------------------- -------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3,845,081 $ 6,850,547
================== ===================
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS
INFORMATION:
Interest paid $ 3,508 $ -
================== ===================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements. Page 5
<PAGE> 6
CROSSWALK.COM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1999
A. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles 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 of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and the six month periods ended
June 30, 1999 are not necessarily indicative of the results that may be expected
for the year ended December 31, 1999. For further information, refer to the
consolidated financial statements and footnotes thereto included in DIDAX INC's
("DIDAX") 1998 Form 10-KSB.
B. THE COMPANY
On May 13, 1999, DIDAX effected a legal name change to Crosswalk.com, Inc.
Accordingly, all references to Crosswalk.com, Inc. ("Crosswalk") herein are
discussing the company formerly known as DIDAX.
On February 23, 1998, Crosswalk purchased all of the outstanding shares of
gofishnet.com, inc. for 130,292 shares of Crosswalk's common stock.
gofishnet.com, inc. ("gofishnet"), an Internet retailer of Christian music and
videos, operates as a wholly owned subsidiary of Crosswalk. Crosswalk accounted
for the merger as a pooling of interests based on the guidelines described in
Accounting Principles Board ("APB") No. 16, "Business Combinations".
Accordingly, the financial statements presented for the three months and the six
months ended June 30, 1998 and 1999, respectively are presented on a
consolidated basis.
Crosswalk's and gofishnet's (collectively "the Company") business includes the
development and aggregation of Internet content and services; advertising,
sponsorship and royalty sales; and the resale of products specifically designed
to meet the needs of Christian users of the Internet and the World Wide Web. The
Company intends to increase expenditures in connection with marketing and
product development activities. The Company anticipates that losses will
continue until such time as the Company is able to build market awareness and
acceptance of its product, the website www.crosswalk.com(TM) ("crosswalk.com"),
through marketing and sales initiatives planned by the Company.
Prior to January 1, 1999, the Company was considered a development stage entity
according to Statement of Financial Accounting Standard ("SFAS") No. 7,
"Accounting and Reporting by Development Stage Enterprises." SFAS No. 7 states
that a development stage enterprise is one in which either the "planned
principal operations have not commenced" or "planned principal operations have
commenced, but there has been no significant revenues therefrom." The Company
was previously categorized as a development stage entity based on the second
criterion. In the first quarter of 1999, management determined that the Company
no longer met the criteria of SFAS No. 7 and therefore should no longer be
considered a development stage enterprise. Accordingly, the Company's
consolidated financial statements no longer include the cumulative-to-date
information that is required to be disclosed by development stage companies.
C. CASH AND CASH EQUIVALENTS, SHORT AND LONG-TERM INVESTMENTS
The Company invests in U.S. government bonds and treasury notes and corporate
bonds. All highly liquid instruments with an original maturity of three months
or less are considered cash equivalents, those with original maturities greater
than three months and current maturities less than twelve months from the
balance sheet date are considered short-term investments, and those with
maturities greater than twelve months from the balance sheet date are considered
long-term investments.
The Company's marketable securities are classified as available-for-sale as of
the balance sheet date and are reported at fair value, with unrealized gains and
losses, net of tax, recorded in shareholders' equity. Realized gains or losses
and permanent declines in value, if any, on available-for-sale securities are
reported in other income or expense as incurred.
Securities available-for-sale in the accompanying balance sheet at June 30, 1999
include $12,284,433, of which $2,200,640 are included in Cash and Cash
Equivalents since they have original maturities of three months or less,
$4,812,866 with contractual maturities of one year or less, and $5,270,927 with
contractual maturities of one through five years. Expected maturities may differ
from contractual maturities as a result of the Company's intent to sell these
securities prior to maturity. The Company incurred realized losses of $4,253 and
$4,253 in the three months and the six months ended June 30, 1999, respectively.
The Company's has recorded unrealized losses of $53,750 as of June 30, 1999.
6
<PAGE> 7
CROSSWALK.COM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1999
C. CASH AND CASH EQUIVALENTS, SHORT AND LONG-TERM INVESTMENTS (CONTINUED)
The aggregate market value, cost basis, and unrealized gains and losses of
securities available for sale, by major security type, as of June 30, 1998 and
1999, are as follows:
<TABLE>
<CAPTION>
Gross Unrealized Gross Unrealized
Market Value Cost Basis Gains Losses
------------ ---------- ----- ------
<S> <C> <C> <C> <C>
U.S. Govt. Debt Securities $ 5,574,237 $ 5,583,670 $ --- $ (9,433)
Corporate Debt Securities 6,710,196 6,754,513 --- (44,317)
------------ ------------ ------- ----------
Total at June 30, 1999 $ 12,284,433 $ 12,338,183 $ --- $ (53,750)
============ ============ ======= ==========
</TABLE>
The above table discloses the values of the Company's total investment portfolio
at June 30, 1999, which is comprised of $2,200,640 in Cash and Cash Equivalents,
$4,812,866 in Short-term Investments, and $5,270,927 in Long-Term Investments,
for a total fair value of $12,284,433.
D. INTANGIBLE ASSETS
TRINITYZONE
In May 1999, the Company purchased the proprietary databases and methodology
underlying the online Christian bookstore known as TrinityZone.com, the
TrinityZone.com trade name, and the website by the same title
(www.trinityzone.com), for 10,000 five year options to purchase shares of the
Company's common stock at the then market price of $15.34 per share. In
addition, the Company has executed an employment agreement with a principal of
TrinityZone.com.
GRACEWEB AND LISTFARM
In June 1999, the Company purchased the proprietary databases and methodology
underlying the online marketing services known as GraceWeb and ListFarm, the
GraceWeb and ListFarm trade names, and the websites (referred to collectively as
"GraceWeb") by the same titles (www.graceweb.org and www.listfarm.com) for
10,000 restricted and unregistered shares of the Company's common stock.
Based on the guidance provided in SFAS No. 123 "Accounting of Stock Based
Compensation," the Company determined the value of GraceWeb at $97,500, using
the Company's closing stock price on June 30, 1999 of $9.75, the transaction's
closing date. GraceWeb will be amortized over five years.
E. COMPREHENSIVE INCOME
According to the provisions of SFAS No. 130, "Reporting Comprehensive Income,"
the Company presents the elements of comprehensive income, which included net
income and unrealized losses on available-for-sale securities. For the three
months and the six months ended June 30, 1999, the Company recorded
comprehensive losses of $1,267,819 and $2,565,931, respectively.
F. BARTER TRANSACTIONS
Barter transactions, amounting to fifty-two percent and fifty-one percent of
revenues for the three months and the six months ended June 30, 1999,
respectively, are recorded at the lower of the estimated fair value of the goods
or services received or the estimated fair value of the services given. Barter
transactions consist of providing hosting services in return for product price
discounts, web development services in return for advertising space in the
customer's magazine, and website presence on crosswalk.com in exchange for
advertising space on the customer's website, other web related services,
magazine advertisements, promotions at conferences or other related marketing
services. The revenues and equivalent cost of sales from these barter
transactions are recorded in the period in which the services are provided
and/or received and are recorded in the revenue category commensurate with the
product or service rendered.
7
<PAGE> 8
CROSSWALK.COM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1999
G. NOTES PAYABLE
In the first quarter of 1997, gofishnet borrowed $37,230 at an interest rate of
7% from a former principal. gofishnet borrowed an additional $45,000 at an
interest rate of 10% from the same source during the third and fourth quarters
of 1997. gofishnet recognized $0 and $1,756 interest expense for the three
months and the six months ended June 30, 1998, respectively, in connection with
these notes. Both notes were due and repaid in full on April 1, 1998.
H. RELATED PARTY TRANSACTIONS
At June 30, 1999, the Company had notes receivable due from officers of the
Company totaling $93,000. The Company is collecting interest on these notes
through payroll deductions at the minimum federal statutory rate at the time of
issuance of 5.7%. The notes are due to be repaid on October 31, 1999.
In the first quarter of 1997, gofishnet borrowed $37,230 at an interest rate of
7% from a former majority shareholder. gofishnet borrowed an additional $45,000
at an interest rate of 10% from the same individual during the third and fourth
quarters of 1997. Both notes were due and repaid in full on April 1, 1998. See
Note G.
To enhance process and achieve product efficiencies, the Company hired Corporate
Resource Development, Inc. ("CRD") in February 1998, for consulting services for
the period March 1, 1998 through May 31, 1998. A member of Crosswalk's board of
directors is CRD's Chairman and CEO. The Company paid out a total of $62,500,
plus out of pocket expenses and granted options to purchase a total of 17,145
shares of the Company's Common Stock at $2.185 per share, which was the market
price at the time of the grant.
Throughout 1998, gofishnet rented office space and equipment from a company
whose principals are also former principals of gofishnet and current
shareholders of Crosswalk. The Company believes that the cost incurred for the
use of this office space and equipment was at fair market value.
I. NET LOSS PER COMMON SHARE
As required by SFAS No. 128, the following is a reconciliation of the basic and
diluted EPS calculations for the periods presented:
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
--------------- --------------
1998 1999 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net loss (numerator) $ (747,598) $(1,251,383) $(1,499,318) $(2,512,181)
Weighted average shares (denominator) 3,651,630 6,893,720 3,413,241 6,198,279
Basic net loss per share $ (0.20) $ (0.18) $ (0.44) $ (0.41)
----------- ------------ ------------ ------------
Dilutive shares (denominator) 3,651,630 6,893,720 3,413,241 6,198,279
Diluted net loss per share $ (0.20) $ (0.18) $ (0.44) $ (0.41)
=========== ============ ============ ============
</TABLE>
As required by Securities and Exchange Commission (SEC) Staff Accounting
Bulletin No. 98, the above calculation of EPS is based on SFAS No. 128 "Earnings
Per Share." Thus, 55,414 stock options and purchase warrants granted at below
market prices outstanding in the three months and the six months ended June 30,
1998, and 1999, are not included in the calculation of diluted EPS as their
inclusion would be anti-dilutive.
8
<PAGE> 9
CROSSWALK.COM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1999
J. SUBSEQUENT EVENTS
RELOCATION
On July 21, 1999, the Company signed a letter of intent to move the Company to a
new 10,585 square feet location due to the Company's expansion. Under the new
lease, the Company will provide a $100,000 letter of credit to the lessor and
will prepay the first month's rent. The Company's new monthly rent amount will
be approximately $16,759. The Company is currently paying $8,663 per month.
The Company will continue to be located in Chantilly, Virginia.
ACQUISITION
On July 30, 1999, the Company signed a definitive agreement to purchase Wike
Associates (dba "Media Management"), proprietors of the GOSHEN.net Web site for
an aggregate purchase price of $6,800,000, payable in 494,845 restricted and
non-registered shares of the Company's common stock and $2,000,000 cash at
closing. The transaction will be accounted for as a purchase based on the
provisions outlined in APB No. 16, "Business Combinations". The purchase
consists of primarily intangible assets which will be amortized over five to ten
years. The Company anticipates that the transaction will close on August 13,
1999. Pursuant to the terms of the agreement, Mr. Stephen Wike, President of
Wike Associates will join the Company as Editor-in-Chief of Crosswalk.com and
has also been appointed a member of the Company's Board of Director. The Company
also anticipates that employee agreements will be executed with Mr. Stephen Wike
and other key employees.
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
BACKGROUND
Crosswalk.com, Inc. and gofishnet.com, inc. (collectively "the Company") is
primarily known as the creator of crosswalk.com(TM) (WWW.CROSSWALK.COM).
Crosswalk.com(TM) ("crosswalk.com") is an interactive Web site, which provides
information and resources that the Company believes generally appeal to the
Christian community. The information and resources are developed and made
available both by the Company and by Christian and secular retailers,
publishers, charities and ministries. The Company generates revenues through the
sale of sponsorships and advertising; the online retailing of Christian and
family-friendly products manufactured or developed by others (primarily CDs,
tapes, and other articles generally appealing to the Christian marketplace);
royalties and referral fees from co-marketing relationships; and to a lesser
extent, the continuing provision of technology services, including services
related to Web site development and hosting, to Christian organizations (the
"Consulting Services"). On Wednesday, May 5, 1999, the Company's shareholders of
record, as of the close of business on March 19, 1999, approved an amendment to
the Company's Certificate of Incorporation to change the name of the Company
from DIDAX INC. to Crosswalk.com, Inc.
The Company has transitioned from deriving the majority of its revenues from
providing Consulting Services to Christian organizations as mentioned above, to
revenue generation through: the sale of sponsorship and advertising
opportunities on crosswalk.com, direct retail sales, and royalties/fees from the
sale of Christian interest products manufactured or developed by others
(primarily CDs, tapes, and other articles generally appealing to the Christian
marketplace). The Company's strategy going forward is one of making
crosswalk.com a community portal with deep Channel content and a breadth of
information for Christians, not just Christian information. It is the Company's
belief that this strategy, coupled with crossmedia marketing and promotional
activities, will accelerate traffic resulting in revenue growth over time. The
Company plans to continue enhancing crosswalk.com in order to become the
preferred online resource for Christians in search of information, interaction
and involvement opportunities that help them apply a Christian world view across
the breadth of their life and interests.
Ninety-six percent (96%) of the Company's second quarter 1999 revenue was
generated from Sponsorship/advertising and Retail sales, as compared to 80% in
the second quarter of 1998. Sponsorship/advertising sales in the first six
months of 1999 has grown from $115,440 in 1998 to $2,474,683 in 1999. In the
same period Retail sales have grown 110% to $125,745 in 1999 from $59,910 in
1998. In the first six months of 1999, Consulting services have grown 41% to
$113,797 from $80,762 in 1998. However, in this six month period, Consulting
services as a portion of total revenue has decreased from 32% in 1998 to 4% in
1999. Additionally, the Company's progress in developing crosswalk.com is
evidenced by the growth in membership and page views. Membership in
crosswalk.com is free and simply requires filling out an online registration
form with one's name, e-mail address, and in some areas of the Web site, limited
demographic data. Page views are a measure of total pages viewed by visitors to
crosswalk.com in a month. At June 30, 1999, the Company had 300,043 members as
compared to 100,586 members at June 30, 1998, an annual growth rate of 198%.
Average monthly page views tallied in the second quarter of 1999 reached
6,530,000, up from 923,900 for the comparable quarter a year earlier, for a
growth of 607% from second quarter 1998 to second quarter 1999. To the extent
membership in crosswalk.com continues to increase, and the Company continues to
generate sponsorships and place advertisements on crosswalk.com, management
believes that crosswalk.com's Sponsorship/advertising sales should increase. The
opportunity for the Company to begin generating significant
Sponsorship/advertising and Retail sales is predicated upon increasing
membership and traffic in the form of page views on crosswalk.com.
During the second quarter of 1999, the Company's accomplishments included the
introduction of new and enhanced services on crosswalk.com, new features
throughout the Web site and on the topical segments within crosswalk.com herein
described as "Channels", and asset ascquisitions to better equip the Company for
continued growth. The services consisted of the launching of My.Crosswalk(TM)
which allows members to create a personalized homepage, an enhancement to the
CrossingGuard(TM) filtering product to enable InternetExplorer 5 compatability,
the launching of subscriptions for MovieGuide on crosswalk.com, and expansion of
chat/forum services. In the second quarter, the Company launched a curriculum
guide on the crosswalkHomeschool(TM) Channel. The HomeSchool(TM) Channel
includes reviews of curriculums; the sale of curriculums; information explaining
how to start homeschooling, including access to state and federal home school
organizations; an online support group; and continuously fresh
10
<PAGE> 11
content such as the Backyard Scientist, a column describing science experiments
that can be performed at home with household elements. The Company welcomed the
Coalition of Christian Colleges & Universities to the crosswalkCareers(TM)
Channel as a sponsor and began marketing job posting services for a fee. This
adds to the career counseling services, resume posting opportunities, and
personalized counseling services offered on crosswalkCareers(TM). The
crosswalkHealth&Wellness(TM) Channel was launched in the second quarter. The
Channel will serve as a Web retail presence for Lean Bodies' "Anywhere Bars," a
low-fat protein/carbohydrate based energy snack, and the upcoming Lean Bodies
"Anywhere Meals" infomercial campaign. Anywhere Meals are a unique new
collection of "real food" meals that are shelf-stable and heat up in the box
with no electricity required, making them attractive to consumers focused on
healthy diets, convenience, and energy conservation, as well as on year 2000
preparations. CrosswalkMoney(TM) which provides members with information for
Biblical financial stewardship and opportunities to invest their money
consistent with Christian values added new sponsorships and services including:
online trading from Ameritrade, privately managed investment opportunities
provided by Genesis Social Fund Management, Inc. ("Genesis"), and financial
advice from Christian Financial Concepts ("CFC"). The Investigator(TM) product
which enables members to ascertain whether companies within their mutual fund
portfolio are offering products or behaving in a manner consistent with several
values-based criteria, while providing alternative mutual funds with like
returns, became available via subscription in the second quarter. The Company
was also pleased to receive recognition for crosswalkMoney(TM) from "Online
Investor", a monthly investment magazine published by StockTrends, Inc., as
being one of the top financial Web sites. CrosswalkMusic(TM), the number one
Christian music site on the Web as rated by the Mining Company, an independent
content Web site, added nine new advertisers to the site in the second quarter.
The Company was also pleased to announce a site wide sponsorship with
FamilyLife, a division of Campus Crusade for Christ that has hosted more than
875,000 people at conferences designed to improve marriage relationships and
parenting skills. In addition FamilyLife has a daily radio program "Family Life
Today" which is broadcast in more than 450 markets nationwide. In the second
quarter, the Company also purchased the TrinityZone.com and hired its principal
to run ecommerce operations on crosswalk.com. The Web site provides visitors
with a broad selection of Christian books, music, software, videos and home
education material, plus personalization features which allow members to track
favorite authors and topics and receive targeted discounts. At the end of the
second quarter, the Company also purchased the GraceWeb.org and ListFarm.com Web
sites and hired the principal to assist the Company in concentrating on
membership growth. The Web site brings to Crosswalk.com, a system of over 200
family friendly email lists with over 300,000 subscriptions, which the Company
believes will provide enhanced awareness and traffic to crosswalk.com.
The Company has an extremely limited operating history upon which an evaluation
of the Company and its business can be based. The Company's business must be
considered in light of the risks, expenses and problems frequently encountered
by companies in their early stage of development, particularly companies in new
and rapidly evolving markets, such as the Internet. The market for the Company's
services and products has only very recently begun to develop, is rapidly
evolving and is characterized by an increasing number of market entrants who
have introduced or developed services and products for use on the Internet. As a
result, the Company's mix of services and products may undergo substantial
changes as the Company reacts to competitive and other developments in the
overall Internet market. The Company has achieved only limited revenues to date,
has incurred net losses since inception and expects to continue to operate at a
loss until sufficient revenues are generated to cover expenses. As of June 30,
1999, the Company had an accumulated deficit of $13,908,387.
As a result of the Company's extremely limited operating history, the Company
has no meaningful historical financial data upon which to base future operating
expenses. Accordingly, the Company's expense levels are based in part on
possible future revenues, of which there can be no assurance. A shortfall in
revenues may have an immediate adverse impact on the Company's business, results
of operations and financial condition. The Company has just recently begun to
generate revenue from the commercial sale of sponsorships and advertising space
on crosswalk.com and very limited sales of products via crosswalk.com. The
Company plans to significantly increase its sales and marketing efforts and fund
greater levels of crosswalk.com operations. The Company expects to experience
significant fluctuations in future quarterly operating results and believes that
period-to-period comparisons of its results of operations are not necessarily
meaningful and should not be relied upon as any indication of future
performance.
11
<PAGE> 12
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999 AND 1998 (UNAUDITED)
NET LOSS
For the six months ended June 30, 1999, the Company incurred a net loss of
$2,512,181 as compared to a net loss of $1,499,318 for the same period ended
June 30, 1998. This increased loss of $1,012,863 (68%) was due primarily to an
increase in expenditures, the details of which follow, offset to an extent by an
increase in gross margin and other income. The increased loss consisted of a
$3,701,536 (198%) increase in Operating Expenses for the six months ended June
30, 1999 ($5,575,569) as compared to the six months ended June 30, 1998
($1,874,033), offset to an extent by a $1,054,294 (668%) increase in gross
margin and a $230,560 (194%) increase in Other Income. Other Income increased
primarily as a result of a $231,362 (192%) increase in interest income resulting
from the investment of funds generated from the redemption of Purchase Warrants
and exercise of Underwriter Warrants issued in the Company's initial public
offering.
REVENUES
The Company earned $2,458,113 or 960% more revenue in the six months ended June
30, 1999 than in the same period in 1998. The $2,714,225 of revenue earned in
the first six months of 1999 consisted of $2,474,683 from
Sponsorship/advertising sales, $125,745 from Retail sales, and $113,797 from
Consulting services while the $256,112 of revenue earned in the first six months
of 1998 consisted of $115,440 from Sponsorship/advertising sales, $59,910 from
Retail sales, and $80,762 from Consulting services. The year on year change in
revenue mix is a 2,044% ($2,359,243) increase in Sponsorship/advertising sales,
a 110% ($65,835) increase in Retail sales, and a 41% ($33,035) increase in
Consulting services. Barter agreements which allow for the exchange of goods and
services such as advertising, marketing, and content services on the Company's
and the customer's Internet Web sites, amounted to fifty-one percent of the
revenue earned in the six months ended June 30, 1999 versus less than 5% of
revenues for the same period in 1998. Sponsorship/advertising sales increased
due to the Company's growing traffic and membership on the crosswalk.com Web
site which is generally believed by the Company, to be of interest to the
Christian market niche. According to the Company's business model, the Company
plans to increase the number of channels to cover all of life from the Christian
perspective. In the six month period ended June 30, 1999, crosswalkMoney(TM)
earned $1,326,926 of revenue, crosswalkCareers(TM) earned $208,171 of revenue,
and crosswalkMusic(TM) earned $140,798 of revenue. Retail sales increased in the
six months ended June 30 1999 as compared to the six months ended June 30 1998,
due to increased marketing efforts, product offerings, and revenue sharing
arrangements associated with many of the sponsorships. Consulting services
increased in the six months ended June 30, 1999, due to an increase in Web site
enhancements for several organizations whose Web sites the Company maintains.
The Company anticipates a decline in Consulting services in future quarters
due to the transition to being a community builder from being a web development
services provider in 1998.
COST OF GOODS AND SERVICES
Cost of goods and services, consisting of costs related to the development and
integration of client services and content on crosswalk.com; retailing Christian
interest products on crosswalk.com; and development, maintenance, and support of
customer Web sites; was $1,502,082 and $98,263 for the six months ended June 30,
1999 and 1998, respectively. The Company's gross margin for the six months ended
June 30, 1999 decreased to 45% from 62% for the same period in 1998. This
decrease is due primarily to the increase in barter transactions, which
accounted for fifty-one percent of revenues in the six months ended June 30,
1999.
CROSSWALK.COM OPERATIONS
In the first quarter of 1999, the Company combined Product Development and
Crosswalk Operations under the management of one individual. As a result, the
two departments are being reported externally under Crosswalk Operations.
Crosswalk.com operational expenses, consisting primarily of costs related to the
Company's development, maintenance, and enhancements for the Company's
intractive Web site (crosswalk.com), increased to $1,661,693 for the six months
ended June 30, 1999, as compared to $558,473 for the same period in 1998. The
cost
12
<PAGE> 13
of Crosswalk.com operations increased by 198% ($1,103,220) due to the Company's
shift from being a consulting services company to being a consumer focused
community portal and increased headcount related to the growth in crosswalk.com.
The largest portion of the increase ($705,126 or 64%) is due to increases in
staffing and associated costs of fringe benefits. The Company has greatly
expanded its development staff in order to provide continuous improvements of
crosswalk.com's products and services. The next largest increase in costs
($128,635 or 12%) was due to the increase in content expenses as the Company now
purchases a larger amount of content from a wider variety of sources and on many
more topics due to the increased number of channels and the depth of those
channels on crosswalk.com. Also ($80,739 or 7%) of this increase was in
depreciation and amortization related expenses primarily resulting from capital
acquisitions underlying the Company's migration to an Oracle/Sun server
architecture, and the increase in headcount.
SALES AND MARKETING
In the first half of 1999, sales and marketing expenses were $1,492,027 as
compared to $477,750 for the first half of 1998. Sales and marketing expenses
increased 212% ($1,014,277) almost entirely due to the Company's continued
investment in its cross-media marketing campaign to promote crosswalk.com which
did not commence until the fourth quarter of 1998. The marketing campaign
consisted of advertising and promotion in 150 Christian radio markets, rotating
ads on the Dr. Laura and Rush Limbaugh radio shows and mention in Christian
periodicals. The Company believes that it will continue to incur increasingly
more substantial marketing expenses as it seeks to increase market awareness of
crosswalk.com.
GENERAL AND ADMINISTRATIVE
The Company increased its general & administrative (G&A) costs by 24% or
$180,220 in the six months ended June 30, 1999 versus the same period in 1998
largely due to increased investor relations expenditure of $140,993, increased
facility related expenses of $64,113, and salaries of $43,925 offset by a
reduction in consulting expenses of $58,525.
INTEREST INCOME AND INTEREST EXPENSE
Interest income increased 192% to $351,717 from $120,355 for the six months
ended June 30, 1999 and 1998, respectively. This $231,362 increase is due
primarily to the investment of the proceeds from the redemption of warrants
issued as part of the Company's initial public offering. Interest expense was $0
and $1,752 for the six months ended June 30, 1999 and 1998, respectively.
THE THREE MONTHS ENDED JUNE 30, 1999 AND 1998 (UNAUDITED)
NET LOSS
For the quarter ended June 30, 1999, the Company incurred a net loss of
$1,251,383 as compared to a net loss of $747,598 for the same quarter in 1998.
This increased loss of $503,785 (67%) was due primarily to an increase in
Operating Expenses, offset in part by increases in revenues and other income.
The increased loss consisted of a $2,126,692 (218%) increase in Operating
Expenses for the three months ended June 30, 1999 as compared to the three
months ended June 30, 1999, offset to an extent by $683,129 (636%) increase in
gross margin and an $150,047 (241%) increase in Other Income, as a result of an
increase in interest income.
REVENUES
The Company generated $1,472,860 or 886% more revenue in the three months ended
June 30, 1999 than in the same period in 1998. The $1,639,169 of revenue earned
in the second quarter of 1999 consisted of $1,501,214 from
Sponsorship/advertising sales, $77,558 from Retail sales, and $60,397 from
Consulting services, while the $166,309 of revenue earned in the second quarter
of 1998 consisted of $99,710 from Sponsorship/advertising sales, $33,790 from
Retail sales, and $32,809 from Consulting services. The quarter on quarter
change in revenue mix is a 1,406% ($1,401,504) increase in
Sponsorship/advertising sales, a 130% ($43,768) increase in Retail sales, and an
84% ($27,588) increase in Consulting services. Barter agreements which allow for
the exchange of goods and services
13
<PAGE> 14
such as advertising, marketing, and content services on the Company's and the
customer's Internet Web sites, amounted to fifty-two percent of the revenue
earned in the second quarter of 1999. Sponsorship/advertising sales increased
due to the Company's growing traffic and membership on the crosswalk.com Web
site which is generally believed by the Company, to be of interest to the
Christian market niche. According to the Company's business model, the Company
plans to increase the number of channels to cover all of life from the Christian
perspective. In the quarter ended June 30, 1999, crosswalkMoney(TM) earned
$797,621 of revenue, crosswalkCareers(TM) earned $155,271 of revenue, and
crosswalkMusic(TM) earned $84,945 of revenue. Retail sales increased in the
second quarter of 1999 due to increased marketing efforts, product offerings,
and revenue sharing arrangements associated with many of the sponsorships.
Consulting services increased in the three months ended June 30, 1999, due to an
increase in Web site enhancements for several organizations whose Web sites the
Company maintains. The Company anticipates a decline in Consulting services
in future quarters due to the transition to being a community builder from being
a web development services provider in 1998. With continued growth in site
traffic, service enhancements, and marketing resources dedicated to retail,
sponsorship, and advertising revenue opportunities, the Company hopes to achieve
continued progress in these revenue streams.
COST OF GOODS AND SERVICES
Cost of goods and services, consisting of costs related to the development and
integration of client services and content on crosswalk.com; retailing Christian
interest products on crosswalk.com; and development, maintenance, and support of
customer Web sites; was $848,593 and $58,862 for the quarters ended June 30,
1999 and 1998, respectively. The Company's gross margin for the quarter ended
June 30, 1999 decreased to 48% from 65% for the same period in 1998. This
decrease is due primarily to the increase in barter transactions, which
accounted for fifty-two percent of revenues in the three months ended June 30,
1999.
CROSSWALK.COM OPERATIONS
In the first quarter of 1999, the Company combined Product Development and
Crosswalk Operations under the management of one individual. As a result, the
two departments are being reported externally under Crosswalk Operations.
Crosswalk.com operational expenses, consisting primarily of costs related to the
Company's development, maintenance, and enhancements for the Company's
intractive Web site (crosswalk.com), increased to $892,908 for the three months
ended June 30, 1999, as compared to $321,952 for the same period in 1998. The
cost of Crosswalk.com operations increased by 177% ($570,956) due to the
Company's shift from being a consulting services Company to being a consumer
focused community portal. The largest portion of the increase ($407,939 or 71%)
is due to increases in staffing and associated costs of fringe benefits. The
Company has greatly expanded its development staff in order to provide
continuous improvements of crosswalk.com's products and services. The next
largest increase in costs ($62,457 or 11%) was in depreciation expense primarily
resulting from capital acquisitions underlying the Company's migration to an
Oracle/Sun server architecture. In addition, ($58,280 or 10%) of the increase
consisted of content expenses as the Company now purchases a larger amount of
content from a wider variety of sources and on many more topics due to the
increased number of channels and the depth of those channels on crosswalk.com.
In addition, there were increases in software and maintenance, training, travel,
and communications expense.
SALES AND MARKETING
In the second quarter of 1999, sales and marketing expenses were $832,132 as
compared to $228,121 for the second quarter of 1998. Sales and marketing
expenses increased 265% ($604,002) largely due to the Company's continued
investment in its cross-media marketing campaign to promote crosswalk.com. The
marketing campaign consisted of advertising and promotion in 150 Christian radio
markets, rotating ads on the Dr. Laura and Rush Limbaugh radio shows and mention
in Christian periodicals. The Company believes that it will continue to incur
increasingly more substantial marketing expenses as it seeks to increase market
awareness of crosswalk.com.
14
<PAGE> 15
GENERAL AND ADMINISTRATIVE
The Company increased its general & administrative (G&A) costs in the second
quarter or 1999, to $529,198 from $367,195 in the second quarter of 1998. This
44% increase ($162,003) is due largely to increases in office operating costs
due to increases in investor relations expenses, satellite locations, and
bandwidth required to support traffic growth on crosswalk.com.
INTEREST INCOME AND INTEREST EXPENSE
Interest income increased 241% to $212,270 from $62,223 for the quarters ended
June 30, 1999 and 1998, respectively. This $150,047 increase is due primarily to
the investment of the proceeds from the redemption of warrants issued as part of
the Company's initial public offering. The Company is debt free and thus
incurred no interest expense.
LIQUIDITY AND CAPITAL RESOURCES
During the six months ended June 30, 1999 and 1998, net cash used in operating
activities was $3,461,765 and $1,379,937, respectively. Net cash used in
investment activities was $8,599,097 and $129,328 for the six months ended June
30, 1999 and 1998, respectively. In the six months ended June 30, 1999, cash
provided by financing activities consists of the receipt of $17,676,958 from the
exercise of 2,561,400 Common Stock Purchase Warrants, 317,500 Underwriter
Warrants and 112,139 Common Stock Options. The Common Stock Purchase Warrants
were exercised after the Company exercised its right to call them based on the
term's of the Purchase Warrant Agreement. The redemption date was February 12,
1999. In the six months ended June 30, 1999, the Company invested these proceeds
in U.S. government bonds and treasury notes and Standard and Poors A-1 or AA
rated corporate bonds. Net cash used by financing activities was $89,435 for the
six months ended June 30, 1998. This usage consisted of the Company's repayment
of $82,230 of long term debt plus accrued interest of $7,205.
The Company currently anticipates that its $12,563,801 working capital balance
at June 30, 1999, consisting primarily of the proceeds from the exercise of
Warrants, as previously described, and the remaining proceeds from the Company's
initial public offering after the debt liquidation and liquidation of accrued
offering costs, will be sufficient to meet the Company's anticipated working
capital, lease commitments, and capital expenditure requirements for the next
twelve months. However, the Company anticipates that it may seek to raise
additional funds in order to expand its marketing campaign and crosswalk.com
Channel deployment, and to pursue potential leveraged joint marketing
opportunities or acquisitions, or in the event that the Company's estimates of
operating losses and capital requirements change or prove inaccurate or in order
that the Company may respond to increased demand or to take advantage of other
unanticipated opportunities. There can be no assurance that additional financing
will be available to the Company or that such financing will be available on
acceptable terms.
POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS
As a result of the Company's extremely limited operating history and the rapid
technological change experienced in the Internet industry generally, the Company
has no meaningful historical financial data upon which to base future operating
expenses. Accordingly, the Company's expense levels are based in part on its
expectations as to future revenues, of which there can be no assurance. There
can be no assurance that the Company will be able to accurately predict the
levels of future revenues, if any, and the failure to do so would have a
materially adverse effect on the Company's business, results of operations and
financial condition.
The Company expects to experience significant fluctuations in future quarterly
operating results that may be caused by multiple factors. Causes of such
significant fluctuations may include, among other factors, demand for the
Company's services, the number, timing and significance of new service
announcements by the Company and its competitors, acceptance of its marketing
initiatives, the ability of the Company to develop, market and introduce new and
enhanced versions of its services on a timely basis, the level of product and
price competition, changes in operating expenses, changes in service mix,
changes in the Company's sales incentive strategy, and general economic factors.
15
<PAGE> 16
The Company's operating expense levels are based, in significant part, on the
Company's expectations of future revenue on a quarterly basis. If actual revenue
levels on a quarterly basis are below management's expectations, both gross
margins and results of operations are likely to be adversely affected because a
relatively small amount of the Company's costs and expenses varies with its
revenue in the short term.
YEAR 2000 COMPLIANCE STATUS
Many existing computer programs use only two digits to identify a year in the
date field. These programs, which were developed without considering the impact
of the upcoming change in the century, could fail or create erroneous results by
or at the year 2000. The Company has reviewed its internal programs, and has
determined to the best of its knowledge, that there are no material year 2000
issues within the Company's current systems or services. The Company continues
to solicit replies from its customers, vendors and financial service providers
to determine any risk of year 2000 issues with all such organizations which the
Company deems to be critical having favorably responded. As of the date herein,
no material year 2000 issues have been identified, however, the Company cannot
be certain that its customers, vendors or financial services providers will not
have year 2000 issues. Should the issues as noted above, or any other year 2000
related issues that are currently unknown to the Company occur, they could have
a material adverse effect on the Company's business, operating results and
financial condition.
FORWARD LOOKING STATEMENTS
Certain information in this quarterly report on Form 10-QSB may contain
forward-looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended. All statements other than statements of
historical fact are forward-looking statements for purposes of these provisions,
including any projections of earnings, revenues or other financial items, any
statements of the plans and objectives of management for future operations, any
statements concerning proposed new products or services, any statements
regarding future economic conditions or performance, and any statement of
assumptions underlying any of the foregoing. In some cases, forward-looking
statements can be identified by the use of terminology such as "may," "expects,"
"believes," "plans," "anticipates," "estimates," "potential," or "continue," or
the negative thereof or other comparable terminology. Although the Company
believes that the expectations reflected in its forward-looking statements are
reasonable, it can give no assurance that such expectations or any of its
forward-looking statements will prove to be correct, and actual results could
differ materially from those projected or assumed in the Company's
forward-looking statements.
16
<PAGE> 17
PART II
ITEM 1. LEGAL PROCEEDINGS
None to report.
ITEM 2. CHANGE IN SECURITIES
In June, 1999, in connection with the Company's acquisition of the proprietary
databases and methodology underlying the online marketing services known as
GraceWeb and ListFarm, the GraceWeb and ListFarm trade names, and the Web sites
GraceWeb and ListFarm, the Company issued an aggregate of 10,000 restricted and
unregistered shares of the Company's common stock in a private transaction
pursuant to Section 4(2) of the Securities Act of 1933.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None to report.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) On Wednesday, May 5, 1999, the Company held its Annual Meeting of
Stockholders. Proxies for the meeting were solicited pursuant to Regulation 14A
under the Exchange Act.
(b) The Company's shareholders of record, as of the close of business on March
19, 1999, approved the election of the following individuals to the Company's
Board of Directors, all of whom served as directors of the Company on the date
of the meeting and made up the entire Board of Directors. Each director will
hold office until the annual meeting of stockholders in the year 2000 or until
his successor is duly elected and qualified:
James G. Buick
William M. Parker
Dane B. West
William H. Bowers
Robert C. Varney, Ph.D.
Bruce E. Edgington
John J. Meindl, Jr.
Clay T. Whitehead
Earl E. Gjelde
W.R. 'Max' Carey
(c) The results of the vote on the election of nominees to the Company's Board
of Directors was 5,661,128 shares for all members with 80,915 shares
withholding, and there were 825,963 Broker non-votes. Thus by plurality of the
votes cast, the Board stands elected.
The second matter voted upon was an amendment to the Company's Certificate of
Incorporation to change the name of the Company to crosswalk.com. The result of
the election was 5,729,463 shares voting for the proposal, 5,329 shares voted
against, 7,151 shares voted to abstain, and there were 825,963 Broker
non-votes. Thus by majority of the votes cast, the amendment to the Company's
Certificate of Incorporation to change the name of the Company to crosswalk.com
was approved.
The third matter voted upon was an amendment to the 1998 Stock Option Plan
(the "1998 Plan") to add 400,000 shares to the 1998 Plan. The Common Stock (the
"shares") subject to the 1998 Plan that may be purchased (through the exercise
of options) shall not exceed in the aggregate 800,000 shares. If any stock
options granted under the 1998 Plan shall terminate, expire or be canceled as to
any shares, new stock options may thereafter be granted covering such shares. In
addition, any shares purchased under this 1998 Plan subsequently repurchased by
the Company pursuant to the terms hereof may again be granted under the 1998
Plan. The shares issued upon exercise of stock options under the 1998 Plan may,
in whole or in part, be either authorized but unissued shares or issued shares
reacquired by the Company. The 1998 Plan will be administered by the Board of
Directors or by the Compensation Committee, at the directive of the Board of
Directors. The result of the election was 2,605,235 shares
17
<PAGE> 18
voting for the proposal, 175,814 shares voted against, 35,185 shares voted to
abstain and 3,751,672 Broker non-votes. Thus by majority of the votes cast, the
amendment to the 1998 Stock Option Plan to add 400,000 shares to the 1998 Plan
was approved.
The fourth matter voted upon was an amendment to the Company's Certificate of
Incorporation to provide for an authorized class of Preferred Stock, consisting
of 5,000,000 shares of Preferred Stock, par value $.001 per share, with rights,
preferences, and designation of such shares to be determined by the Company's
Board of Directors. The result of the election was 2,249,329 shares voting for
the proposal, 523,428 shares voted against, 43,477 shares voted to abstain and
3,751,672 Broker non-votes. Thus by majority of the votes cast, the amendment to
the Company's Certificate of Incorporation to provide for an authorized class of
Preferred Stock, consisting of 5,000,000 shares of Preferred Stock, par value
$.001 per share, with rights, preferences, and designation of such shares to be
determined by the Company's Board of Directors was approved.
Lastly, the Stockholders ratified and approved the ratification of the
selection of Hoffman, Morrison and Fitzgerald, P.C. as the Company's independent
accountants. The result of the election was 5,618,085 shares voting for the
proposal, 62,715 shares voted against, 61,143 shares voted to abstain, and there
were 825,963 Broker non-votes. Thus by majority of the votes cast, the
selection of independent auditor was ratified.
(d) There were no settlements to report.
ITEM 5. OTHER INFORMATION
None to report.
ITEM 6. EXHIBITS, LIST AND REPORTS ON FORM 8-K
(a) EXHIBITS:
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
11 Computation of Earnings Per Share
27.1 Financial Data Schedules - For the Three Months Ended June 30, 1999
27.2 Financial Data Schedules - For the Six Months Ended June 30, 1999
(b) Reports on Form 8-K
None to report.
18
<PAGE> 19
SIGNATURES
In accordance with the requirements of Securities Act of 1934,
Crosswalk.com, Inc., the registrant, has caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
CROSSWALK.COM, INC.
August 12, 1999 By: /s/ William M. Parker
---------------------
William M. Parker
Chief Executive Officer and President
August 12, 1999 By: /s/ Gary A. Struzik
-------------------
Gary A. Struzik, Chief Financial Officer
and Secretary, Chief Accounting Officer
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------ ----------- ----
11 Computation of Earnings Per Share 1-2
27 Financial Data Schedule - For Three Months Ended June 30, 1999 3-5
27 Financial Data Schedule - For Six Months Ended June 30, 1999 6-8
19
<PAGE> 1
EXHIBIT 11
CROSSWALK.COM, INC.
COMPUTATION OF EARNINGS PER SHARE
30-JUN-99
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, 1999
Diluted Basic
BASIC EARNINGS PER SHARE: Net Shares Total Grant/Purch. Days Weighted Weighted
Added Shares Date Outstanding Shares Shares
----- ------ ---- ----------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Beginning balance 4,034,956 04/01/99 91 367,180,996 367,180,996
Stock sold during the quarter:
Issuance for Board compensation 2,492 2,492 05/04/99 58 144,536 144,536
AVI Asset Purchase 5,000 5,000 05/12/99 50 250,000 250,000
GraceWeb Stock Purchase 10,000 10,000 06/30/99 1 10,000 10,000
Employee Compensation 247 247 05/14/99 48 11,856 11,856
Employee Compensation 292 292 05/28/99 34 9,928 9,928
Employee Compensation 364 364 06/11/99 20 7,280 7,280
Employee Compensation 402 402 06/25/99 6 2,412 2,412
Grant/Exercise of warrants:
Assumed issued and outstanding -
beginning of period 55,414 55,414 01/01/98 91 5,042,674 -
Purchase & Underwriter Warrants Exercised: 2,528,451 2,528,451 04/01/99 91 230,089,041 230,089,041
22,000 22,000 04/08/99 84 1,848,000 1,848,000
20,000 20,000 04/09/99 83 1,660,000 1,660,000
27,000 27,000 04/12/99 80 2,160,000 2,160,000
2,000 2,000 04/13/99 79 158,000 158,000
3,500 3,500 04/14/99 78 273,000 273,000
15,000 15,000 04/23/99 69 1,035,000 1,035,000
1,000 1,000 04/26/99 66 66,000 66,000
3,000 3,000 04/28/99 64 192,000 192,000
220,000 220,000 04/30/99 62 13,640,000 13,640,000
2,000 2,000 05/01/99 61 122,000 122,000
2,000 2,000 05/26/99 36 72,000 72,000
Options Exercised: 24,948 24,948 04/01/99 91 2,270,268 2,270,268
9,250 9,250 04/08/99 84 777,000 777,000
21,875 21,875 04/09/99 83 1,815,625 1,815,625
2,950 2,950 04/13/99 79 233,050 233,050
6,000 6,000 04/14/99 78 468,000 468,000
5,450 5,450 04/16/99 76 414,200 414,200
25,000 25,000 04/22/99 70 1,750,000 1,750,000
5,500 5,500 05/07/99 55 302,500 302,500
6,666 6,666 05/12/99 50 333,300 333,300
2,000 2,000 06/16/99 15 30,000 30,000
2,500 2,500 06/30/99 1 2,500 2,500
--------------- ---------------
End of period 632,371,166 627,328,492
91 91
--------------- ---------------
7,011,843 6,949,134 6,893,720
(1,251,383) (1,251,383)
--------------- ---------------
(0.18) (0.18)
</TABLE>
<PAGE> 2
CROSSWALK.COM, INC.
COMPUTATION OF EARNINGS PER SHARE
30-JUN-99
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1999
BASIC EARNINGS PER SHARE: Diluted Basic
Net Shares Total Grant/Purch. Days Weighted Weighted
Added Shares Date Outstanding Shares Shares
----- ------ ---- ----------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Beginning balance 4,034,956 01/01/99 180 726,292,080 726,292,080
Stock sold during the year:
Issuance for Board compensation 2,492 2,492 05/04/99 58 144,536 144,536
AVI Asset Purchase 5,000 5,000 05/12/99 50 250,000 250,000
GraceWeb Stock Purchase 10,000 10,000 06/30/99 1 10,000 10,000
Employee Compensation 247 247 05/14/99 48 11,856 11,856
Employee Compensation 292 292 05/28/99 34 9,928 9,928
Employee Compensation 364 364 06/11/99 20 7,280 7,280
Employee Compensation 402 402 06/25/99 6 2,412 2,412
Grant/Exercise of warrants:
Assumed issued and outstanding -
beginning of period 55,414 55,414 01/01/98 180 9,974,520 -
Purchase & Underwriter Warrants Exercised: 112,850 112,850 01/14/99 168 18,958,800 18,958,800
24,200 24,200 01/15/99 167 4,041,400 4,041,400
19,000 19,000 01/19/99 163 3,097,000 3,097,000
215,595 215,595 01/20/99 162 34,926,390 34,926,390
96,600 96,600 01/21/99 161 15,552,600 15,552,600
11,850 11,850 01/26/99 156 1,848,600 1,848,600
300 300 01/28/99 154 46,200 46,200
8,800 8,800 01/29/99 153 1,346,400 1,346,400
7,197 7,197 02/02/99 149 1,072,353 1,072,353
186,751 186,751 02/03/99 148 27,639,148 27,639,148
35,878 35,878 02/05/99 146 5,238,188 5,238,188
37,185 37,185 02/08/99 143 5,317,455 5,317,455
104,000 104,000 02/09/99 142 14,768,000 14,768,000
164,377 164,377 02/10/99 141 23,177,157 23,177,157
274,230 274,230 02/11/99 140 38,392,200 38,392,200
55,954 55,954 02/12/99 139 7,777,606 7,777,606
123,259 123,259 02/16/99 135 16,639,965 16,639,965
908,663 908,663 02/18/99 133 120,852,179 120,852,179
120,307 120,307 02/22/99 129 15,519,603 15,519,603
21,455 21,455 02/25/99 126 2,703,330 2,703,330
22,000 22,000 04/08/99 84 1,848,000 1,848,000
20,000 20,000 04/09/99 83 1,660,000 1,660,000
27,000 27,000 04/12/99 80 2,160,000 2,160,000
2,000 2,000 04/13/99 79 158,000 158,000
3,500 3,500 04/14/99 78 273,000 273,000
15,000 15,000 04/23/99 69 1,035,000 1,035,000
1,000 1,000 04/26/99 66 66,000 66,000
3,000 3,000 04/28/99 64 192,000 192,000
220,000 220,000 04/30/99 62 13,640,000 13,640,000
2,000 2,000 05/01/99 61 122,000 122,000
2,000 2,000 05/26/99 36 72,000 72,000
Options Exercised: 4,500 4,500 1/12/99 170 765,000 765,000
3,785 3,785 3/25/99 98 370,930 370,930
3,973 3,973 3/26/99 97 385,381 385,381
3,250 3,250 3/29/99 94 305,500 305,500
9,440 9,440 3/31/99 92 868,480 868,480
9,250 9,250 04/08/99 84 777,000 777,000
21,875 21,875 04/09/99 83 1,815,625 1,815,625
2,950 2,950 04/13/99 79 233,050 233,050
6,000 6,000 04/14/99 78 468,000 468,000
5,450 5,450 04/16/99 76 414,200 414,200
25,000 25,000 04/22/99 70 1,750,000 1,750,000
5,500 5,500 05/07/99 55 302,500 302,500
6,666 6,666 05/12/99 50 333,300 333,300
2,000 2,000 06/16/99 15 30,000 30,000
2,500 2,500 06/30/99 1 2,500 2,500
--------------- ---------------
End of period 1,125,664,652 1,115,690,132
180 180
--------------- ---------------
7,011,843 6,253,693 6,198,279
(2,512,181) (2,512,181)
--------------- ---------------
(0.40) (0.41)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 6,850,547
<SECURITIES> 4,812,866
<RECEIVABLES> 1,689,700
<ALLOWANCES> 0
<INVENTORY> 13,841
<CURRENT-ASSETS> 13,647,314
<PP&E> 1,693,304
<DEPRECIATION> (397,614)
<TOTAL-ASSETS> 20,433,856
<CURRENT-LIABILITIES> 1,083,513
<BONDS> 0
0
0
<COMMON> 33,054,881
<OTHER-SE> 127,659
<TOTAL-LIABILITY-AND-EQUITY> 19,290,521
<SALES> 77,558
<TOTAL-REVENUES> 1,639,169
<CGS> 36,196
<TOTAL-COSTS> 848,593
<OTHER-EXPENSES> 2,254,229
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,251,383)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,251,383)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,251,383)
<EPS-BASIC> (0.18)
<EPS-DILUTED> (0.18)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 6,850,547
<SECURITIES> 4,812,866
<RECEIVABLES> 1,689,700
<ALLOWANCES> 0
<INVENTORY> 13,841
<CURRENT-ASSETS> 13,647,314
<PP&E> 1,693,304
<DEPRECIATION> (397,614)
<TOTAL-ASSETS> 20,433,856
<CURRENT-LIABILITIES> 1,083,513
<BONDS> 0
0
0
<COMMON> 33,054,881
<OTHER-SE> 127,659
<TOTAL-LIABILITY-AND-EQUITY> 19,290,521
<SALES> 125,745
<TOTAL-REVENUES> 2,714,225
<CGS> 56,938
<TOTAL-COSTS> 1,502,082
<OTHER-EXPENSES> 4,073,487
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,512,181)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,512,181)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,512,181)
<EPS-BASIC> (0.41)
<EPS-DILUTED> (0.41)
</TABLE>
