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U.S. Securities and Exchange Commission
Washington, D.C. 20549
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FORM 10-QSB
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(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarterly period ended December 31, 1999
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act
For the transition period from _____________ to _______________
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Commission File Number 0-24217
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YP.NET, INC.
(Exact name of small business issuer as specified in its charter)
Nevada 85-0206668
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
4840 East Jasmine St. Suite 105
Mesa, Arizona 85205
(Address of principal executive offices)
(480) 654-9646
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes No X
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The number of shares of the issuer's common equity outstanding as of
September 30, 2000 was 41,450,798 shares of common stock, par value $.001.
Transitional Small Business Disclosure Format (check one):
Yes No X
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<PAGE>
YP.NET, INC.
INDEX TO FORM 10-QSB FILING
FOR THE QUARTER ENDED DECEMBER 31, 1999
TABLE OF CONTENTS
PART I
FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Balance Sheets
December 31, 1999 (unaudited) and September 30, 1999. . . . . 1
Statements of Operations
For the Three Months Ended December 31, 1999 (unaudited) . . . . . 2
Statements of Cash Flows
For the Three Months Ended December 31, 1999 (unaudited) . . . . . 3
Notes to the Consolidated Financial Statements. . . . . . . . . . 4-6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . . . . . . . 7-10
PART II
OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . 11
Item 2. Changes in Securities. . . . . . . . . . . . . . . . . . . . . . 11
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . 12
SIGNATURES
<PAGE>
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
YP.NET, INC.
CONSOLIDATED COMPARATIVE BALANCE SHEETS
AS OF DECEMBER 31, 1999 (UNAUDITED) AND SEPTEMBER 30, 1999
(UNAUDITED)
ASSETS
DECEMBER 31, 1999 SEPTEMBER 30, 1999
<S> <C> <C>
CURRENT ASSETS:
Cash and Cash Equivalents $ 164,570 $ 255,323
Trade Accounts Receivable 1,522,129 951,177
Prepaid Expenses 157,755 138,400
Other Assets - 77,182
Direct Response Marketing - Net 441,075 633,900
Deferred income taxes 91,172 91,172
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TOTAL CURRENT ASSETS 2,376,701 2,147,154
PROPERTY AND EQUIPMENT:
Furniture and Fixtures 152,261 -
Equipment & Computer Equipment 206,209 552,731
Leasehold Improvements 317,507 -
LESS: Accumulated Depreciation and Amortization (150,802) (116,833)
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TOTAL PROPERTY AND EQUIPMENT 525,174 435,898
OTHER ASSETS:
Intangible Assets 5,010,000 5,010,000
Deposits 13,287 13,287
LESS: Accumulated Amortization (279,166) (159,166)
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TOTAL OTHER ASSETS 4,744,121 4,864,121
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TOTAL ASSETS 7,645,997 7,447,173
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LIABILITIES
CURRENT LIABILITIES:
Trade Accounts Payable 38,842 55,000
Income Taxes Payable 331,292 260,427
Accrued Expenses 564,926 772,120
Finova Line of Credit - NOTE 1 1,570,304
Short-Term Notes Payable - NOTE 2 1,500,000 4,808,865
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TOTAL CURRENT LIABILITIES 4,005,364 5,896,412
LONG-TERM LIABILITIES:
Long-Term Note Payable - NOTE 3 2,000,000 7,241
Deferred income taxes 70,865 70,865
TOTAL LONG-TERM LIABILITIES 2,070,865 78,106
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TOTAL LIABILITIES 6,076,229 5,974,518
STOCKHOLDERS' EQUITY
Common Stock, $.001 par value, 50,000,000 shares; 40,051 39,157
40,050,748 and 39,156,853 issued and outstanding
for December 31, 1999 and September 30,1999
Additional Paid In Capital 5,629,322 4,892,538
Treasury Stock (69,822) (69,822)
Preferred Stock - Class B, $.001 par value, 1,500 1,700
2,500,000 shares designated, 1,500,000 and
1,700,000 issued and outstanding for December 31,
1999 and September 31, 1999.
Retained Deficit (4,031,283) (3,390,918)
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TOTAL STOCKHOLDERS' EQUITY 1,569,768 1,472,655
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 7,645,997 $ 7,447,173
============ ============
</TABLE>
See the accompanying notes to these unaudited financial statements
1
<PAGE>
YP.NET, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THREE MONTHS ENDED DECEMBER 31, 1999
(UNAUDITED)
FISCAL QUARTER 1999
1ST QUARTER
INCOME
Revenue $ 2,297,480
COST OF SALES 1,075,485
GROSS PROFIT 1,221,995
SELLING EXPENSES 19,798
GENERAL AND ADMINISTRATIVE 1,534,859
DEPRECIATION AND AMORTIZATION 155,248
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TOTAL EXPENSES 1,709,905
LOSS FROM OPERATIONS (487,910)
OTHER INCOME (EXPENSE)
Other Income 22,043
Interest Income/(Expense) (171,648)
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TOTAL OTHER INCOME (149,605)
NET LOSS BEFORE INCOME TAXES (637,515)
Provisions for Income Taxes -
NET LOSS $ (637,515)
===============
EARNINGS PER SHARE:
BASIC LOSS PER SHARE $ (0.02)
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WEIGHTED AVERAGE NUMBER OF COMMON 40,050,748
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SHARES OUTSTANDING
DILUTED LOSS PER SHARE $ (0.02)
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WEIGHTED AVERAGE NUMBER OF COMMON 40,050,748
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AND COMMON SHARE EQUIVALENTS OUTSTANDING
See the accompanying notes to these unaudited financial statements
2
<PAGE>
<TABLE>
<CAPTION>
YP.NET, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THREE MONTHS ENDED DECEMBER 31, 1999
(UNAUDITED)
1999
1ST QUARTER
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $(637,515)
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH USED BY OPERATING
ACTIVITIES.
Depreciation and amortization 35,248
Consultants paid with common stock 737,478
Loss on disposal of assets -
Amortization of intellectual property 120,000
(Increase) decrease in assets
Trade accounts receivable (570,952)
Customer acquistion costs 192,825
Other recievables 77,182
Prepaid and other current assets (116,231)
Other assets 34,449
Increase (decrease) in liabilities
Trade accounts payable 16,158
Accrued liabilities (126,004)
Deferred revenue (81,190)
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NET CASH USED IN OPERATING ACTIVITIES (318,551)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of intellectural property -
Purchases of property and equipment (153,245)
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NET CASH USED BY INVESTING ACTIVITIES (153,245)
CASH FLOWS FROM FINANCING ACTIVITIES
Advances from line of credit 831,708
Principal repayments on notes payable (450,665)
Advances to shareholder -
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NET CASH PROVIDED BY FINANCING ACTIVITIES 381,043
NET DECREASE IN CASH (90,753)
CASH AT BEGINNING OF PERIOD 255,323
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CASH AT END OF PERIOD $ 164,570
==========
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid 37,301
</TABLE>
See the accompanying notes to these unaudited financial statements
3
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1999
1. Basis of Presentation
The accompanying unaudited financial statements represent the consolidated
financial position of YP.Net, Inc. ("Company") as of December 31, 1999 and
include results of operations of the Company and Telco Billing, Inc. ("Telco"),
its wholly owned subsidiary, and cash flows for the three months ended December
31, 1999. These statements have been prepared in accordance with generally
accepted accounting principles for interim financial information and the
instructions for Form 10-QSB. Accordingly, they do not include all the
information and footnotes required by generally accepted accounting principles
("GAAP") for complete financial statements. In the opinion of management, all
adjustments to these unaudited financial statements necessary for a fair
presentation of the results for the interim period presented have been made.
The results for the three month period ended December 31, 1999 may not
necessarily be indicative of the results for the entire fiscal year. These
financial statements should be read in conjunction with the Company's Form
10-KSB for the year ended September 30, 1999, including specifically the
financial statements and notes to such financial statements contained therein.
2. Summary of Significant Accounting Policies
The accounting policies followed by the Company, and the methods of applying
those policies, which affect the determination of its financial position,
results of operations or cash flows are summarized below:
Cash and Cash Equivalents
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Cash and cash equivalents include all short-term liquid investments that are
readily convertible to known amounts of cash and have original maturities of
three months or less. At times cash deposits may exceed government insured
limits.
Principles of Consolidation
-----------------------------
The consolidated financial statements include the Company and its wholly owned
subsidiary, Telco Billing, Inc. All intercompany accounts in consolidation have
been eliminated.
Revenue Recognition
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The Company's revenue is generated by customer subscription of directory and
advertising services. Revenue is recognized monthly for services subscribed in
that specific month. The Company utilizes outside billing companies to transmit
billing data that is forwarded to Local Exchange Carriers ("LECs"). Monthly
subscription fees are included on the telephone bills of the LEC customers. The
Company recognizes revenue based on net billings accepted by the LECs.
Fair Value of Financial Instruments
---------------------------------------
The carrying amounts for cash, investments in marketable securities, trade
accounts receivable, trade accounts payable, accrued liabilities and notes
payable, approximate their fair value due to the short maturity of these
instruments. The Company has determined that the recorded amounts approximate
fair value.
4
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Net Loss Per Share
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Net loss per share is calculated using the weighted average number of shares of
common stock outstanding during the year. The Company has adopted the
provisions of Statement of Financial Accounting Standards No. 128, Earnings Per
Share.
Use of Estimates
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The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions.
This may affect the reported amounts of assets and liabilities and disclosure of
assets and liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Stock-Based Compensation
-------------------------
Statements of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation ("SFAS 123"), established accounting and disclosure requirements
using a fair-value based method of accounting for stock-based employee
compensation. In accordance with SFAS 123, the Company has elected to continue
accounting for stock based compensation using the intrinsic value method
prescribed by Accounting Principles Board Opinion No. 25.
3. Business Combination
On June 16, 1999, the Company exchanged 17,000,000 shares of common stock for
all of the common stock of Telco. Prior to the acquisition, the Company had not
yet commenced material operations. For financial accounting purposes, the
acquisition was accounted for as a reverse merger and was treated as a
recapitalization with Telco as the acquirer. The accompanying financial
statements present the historical cost bases of assets and liabilities and
results of operations of Telco. Subsequent to the merger, the Company ceased
its previous operations and abandoned assets related to those operations. The
remaining Company assets are recorded at their historical cost. The
recapitalization of Telco reflects the book value of the net assets of RIGL as
of the date of the merger as of June 16, 1999 of $1,722,563.
4. Intangible Asset
In connection with the Company's acquisition of Telco, the Company is required
to provide payment of licensing fees for the use of the Internet domain name or
Universal Resource Locator ("URL") Yellow-Page.Net. The URL is recorded at its
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cost net of accumulated amortization. Management believes that the Company's
business is dependent on its ability to utilize this URL given the recognition
of the "yellow page" term. Management believes that the current revenue and
cash flow generated through the use of the URL Yellow-Page.Net substantiates the
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net book value of the asset. The Company will periodically analyze the net book
value of this asset and determine if an impairment has incurred. The URL is
amortized on an accelerated basis over the twenty-year term of the licensing
agreement.
5. Notes Payable and Line of Credit
Notes payable are recorded and interest is accrued in accordance with the
individual terms of each note. Notes payable at December 31, 1999 were as
follows:
5
<PAGE>
Note 1: The Company entered into an agreement with Finova Capital Corporation
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for a $3,000,000 revolving line of credit with interest payable at the prime
rate plus three percent. The amount available to be drawn under the facility is
limited to 80% of eligible accounts receivable. At December 31, 1999 the credit
facility had an outstanding balance of $1,570,304. Assets of the Company,
specifically accounts receivables, collateralize the credit facility. The
credit facility expires on August 31, 2003, and the institution may withdraw the
line with a notification within 90 days.
Note 2: The Company entered into a loan agreement with Mr. Joseph Van Sickle
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during the acquisition of Telco under which Mr. Van Sickle lent $2,000,000 to
the Company. At December 31, 1999 this note payable had an outstanding balance
of $1,500,000. Mr. Van Sickle is a shareholder of the Company and owns
approximately one percent of the Company's outstanding stock. Mr. Van Sickle is
not a member of management and currently has no position on the Board of
Directors of the Company.
Note 3: The Company entered into an agreement with Matthew & Markson, Ltd., an
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Antigua corporation ("M&M"), in conjunction with the acquisition of Telco for
the license of the URL Yellow-Page.Net. The Company agreed to pay M&M
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$5,000,000 for the licensing agreement of the URL Yellow-Page.Net. At December
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31, 1999 the M&M note payable had an outstanding balance of $2,000,000. M&M
owns approximately 18% of the Company's outstanding stock.
6. Common Stock
Transactions in the Company's common stock issued for the acquisition of assets,
products or services are accounted for at 90% of fair value. Fair value is
determined based on the traded closing price of the Company's common stock on
the date of the transaction, or the fair value of the asset, product, or service
received, whichever is more readily determinable.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Except for historical information contained herein, the following
discussion contains forward-looking statements that involve risks and
uncertainties. Such forward-looking statements include, but are not limited to,
statements regarding future events and our plans and expectations. Our actual
results could differ materially from those discussed herein. Factors that could
cause or contribute to such differences include, but are not limited to, those
discussed elsewhere in this Form 10-QSB or incorporated herein by reference.
See "Special Note on Forward-Looking Statements" below.
OVERVIEW
We provide Internet-based yellow page listing services on our
Yellow-Page.Net and yp.net Web sites. We acquired Telco Billing, Inc. in June
--------------- ------
1999, and as a result of this acquisition changed our primary business focus to
become an electronic yellow page listing service. Our Web sites serve as a
search engine for yellow page listings in the United States and Canada. We
charge our customers for a preferred listing of their businesses on searches
conducted by consumers through our Web sites.
With the acquisition of Telco, we discontinued our prior operations in the
multi-media software and medical billing and practice management areas. We
completed closing down our operations in these areas in the three months ended
December 31, 2000. We anticipate continued operations in our Internet yellow
page listings business and in other Internet-based product areas. We have
experienced continued increases in competition in the electronic yellow page
market, and continue to seek joint venture and investment acquisition
opportunities to potentially lessen the effects of competition in the electronic
yellow page markets.
During the three months ended December 31, 1999, we utilized direct
mailings as our primary marketing program. At October 1, 1999, we had 103,133
customers subscribing to our services. At December 31, 1999, we had 114,409
customers. We believe the increase in our customer base for this period was
primarily a result of our marketing efforts. In March 2000, we implemented a
customer contact program to attempt to increase our customer satisfaction and
decrease customer attrition. We believe that this program has and will continue
to provide these results.
Expenditures related to professional and consulting fees were significant
in the quarter ended December 31, 1999 and have adversely affected our earnings
in this period. Existing management believes that these expenditures will no
longer be as significant. Management is actively pursuing rescission and
cancellation of certain common and preferred stock that was previously issued
for services. This action may adversely affect our future earnings due to costs
of potential litigation that may result from management pursuing recession.
However, if we are successful in cancelling some or all of these shares, our
total outstanding shares will decrease which will positively affect our per
share operating results in the future.
On December 6, 1999, prior management entered into an engagement with
McGladry & Pullen, LLP ("M&P") to conduct the audit of our financial statements
for the fiscal year ended September 30, 1999. M&P estimated the cost to prepare
the fiscal year end audit to be from $75,000 to $150,000 with an estimated
completion date of January 28, 2000. We paid audit fees of $150,000 as of
December 31, 1999. Subsequently, we paid additional audit fees of $150,000. In
January 2000 M&P informed management that the estimated cost to complete the
audit would be an additional $200,000. In February 2000 a new Board of
Directors was appointed and M&P was dismissed as our auditors. The Board of
Directors appointed a new independent auditor, King, Weber & Associates, P.C.
7
<PAGE>
On December 15, 1999, prior management entered into a consulting agreement
with International Profits Associates, Inc. ("IPA"). IPA agreed to review our
business operations, polices and procedures, to advise on determining management
responsibilities and authorities, and to develop and implement a plan for
achieving potential investor awareness. IPA agreed to advise and train Mr.
William O'Neal on the duties and responsibilities of acting as President of
YP.Net. The agreement was entered into until such time that Mr. William O'Neal
was prepared to assume the position of President. We paid approximately $65,000
for these consulting services in the three month period ended December 31, 1999.
Subsequently, new management and the Board of Directors has terminated all
agreements with IPA.
Common stock has been issued to prior officers and consultants for services
rendered. The value of those shares was determined based on the trading value
of the stock at the dates on which the agreements were made for the services.
The expense for that consideration is stated at 90% of the trading value of the
shares to reflect a discount for the regulatory restrictions on trading of those
shares. During the quarter ended December 31, 1999, 856,951 common shares were
issued to officers and consultants valued at $737,478, by prior management.
YP.Net was originally incorporated in Nevada in 1996 as Renaissance Center,
Inc. Renaissance Center and Nuclear Corporation merged in 1997. Our articles
of incorporation were restated in July 1997 and our name was changed to
Renaissance International Group, Ltd. Our name was later changed to RIGL
Corporation in July, 1998. With the acquisition of Telco and shift of the focus
of our business, our corporate name was again changed to YP.Net, Inc., effective
October 1, 1999. The new name was chosen to reflect our focus on our
Internet-based yellow page services.
The acquisition of Telco was treated as a reverse merger for financial
accounting purposes. As a result, Telco was deemed to be the acquiring entity.
For financial accounting purposes, Telco was considered to have engaged in a
recapitalization and acquired the net assets of RIGL as of June, 1999.
Financial statements of Telco for the three months ended December 31, 1998 are
not included in this Form 10-QSB due to such statements not being available.
RESULTS OF OPERATIONS
With the acquisition of Telco, our business focus shifted to the Internet
yellow page services business and this business is currently the sole source of
revenue. All operations conducted by RIGL prior to the acquisition of Telco
have been discontinued. Revenues for the quarter ended December 31, 1999 were
$2,297,480. Until other sources of revenue are developed, our total revenues
will be directly dependent upon the number of customers subscribing to our
preferred listing service.
Cost of sales for the quarter ended December 31, 1999 was $1,075,485. Cost
of sales is comprised of dilution expenses, direct mailer marketing costs,
allowances for bad debt and our billing costs. Dilution expenses include
customer credits and any other receivable write downs. Billing costs include
fees for services provided by LECs and other outside parties to transfer and
organize our customer acquisition, billing and collection data.
Selling expenses for the quarter ended December 31, 1999 were $19,798.
Selling expenses were primarily the costs associated with the use of the direct
mailers.
General and administrative expenses for quarter ended December 31, 1999 was
$1,534,859. These costs are primarily related to customer service staffing
which we believe provides better service to our customers. Our consulting
expenses were $737,478. This expense was primarily a result of the issuance of
common stock by prior management as consideration under several consulting
contracts and is not expected to be recurring.
8
<PAGE>
Interest expense net of interest income for the quarter ended December 31,
1999 was $171,648. Interest expense was a result of our debt outstanding. This
debt outstanding included debt incurred in connection with the acquisition of
the URL Yellow-Page.Net and due to an increase in the amount outstanding under
---------------
our credit facility with Finova Capital Corporation.
Net losses for the quarter ended December 31, 1999 were $637,515 or $.02
per diluted share.
LIQUIDITY AND CAPITAL RESOURCES
Cash used by operating activities for the quarter ended December 31, 1999,
was $318,551. Revenue was generated principally from providing electronic
yellow page preferred listing advertising. Cash flow from operating activities
was adversely affected by certain non-recurring expenses, an increase in our
accounts receivable and prepaid assets and a decrease in liabilities.
Cash used by investing activities was $153,245 for the three months ended
December 31, 1999. We purchased additional computer equipment of approximately
$65,000 and performed tenant leasehold improvements of approximately $88,245 in
the three months ended December 31, 1999.
Cash provided from financing activities was $381,043 in the quarter ended
December 31, 1999. This cash inflow was attributed to advances on our credit
facility of $831,708. We paid $450,665 on our notes payable on terms negotiated
with the note holders. This amount represents the total payments made to reduce
the outstanding balances of the our outstanding notes.
We have an existing asset-based collateralized line of credit with Finova.
As a result of certain technical defaults under the terms of the loan agreement
which occurred under prior management, Finova exercised its right to terminate
the agreement. Our line of credit has been reduced from $3,000,000 to
$1,800,000 as of August 2000. We have entered into letter agreements whereby
Finova has agreed to forbear the exercise any of its available remedies through
November 2, 2000. Based upon our discussions, we anticipate that these
agreements will be extended or modified to allow us to transfer to a new credit
facility. Management is seeking other potential lenders that specialize in
financing businesses utilizing LEC billings. We do not anticipate these changes
to have an adverse affect on our ability to continue operating at our current
levels.
OTHER CONSIDERATIONS
There are numerous factors that affect our business and the results of its
operations. Sources of these factors include general economic and business
conditions, federal and state regulation of our business activities, the level
of demand for our services, the level and intensity of competition in the
electronic yellow page industry and the pricing pressures that may result, our
ability to develop new services based on new or evolving technology and the
market's acceptance of those new services, our ability to timely and effectively
manage periodic product transitions, the services, customer and geographic sales
mix of any particular period, and our ability to continue to improve our
infrastructure (including personnel and systems) to keep pace with the growth in
its overall business activities.
We are delinquent in our filings under the Securities Exchange Act of 1934
("Exchange Act"). Our most recent filing was the September 30, 1999 Form
10-KSB. While trading of our stock has occurred during the periods before and
after this filing, sales under Rule 144 are not allowed until our filings are
current. It is management's intent to complete all past due filings and to
cause all required filings to be timely made in the future. Management also
intends to take actions to cause YP.Net's common stock to be relisted on the OTC
Bulletin Board as soon as possible. It is not possible to determine the effect,
if any, on the actions of current of former shareholders of bringing current the
required Exchange Act filings, and the financial statements and disclosures
contained therein.
9
<PAGE>
We have attempted to keep the public informed through press releases and
Form 8-K filings while making a concerted effort to become current with our
filings. We are currently unable to determine the materiality of the affect of
the delinquent filings, if any, or the potential impact any such delinquencies
may have on our operations.
SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS
Except for historical information contained herein, this Form 10-QSB
contains express or implied forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act.
We intend that such forward-looking statements be subject to the safe harbors
created thereby. We may make written or oral forward-looking statements from
time to time in filings with the SEC, in press releases, quarterly conference
calls or otherwise. The words "believes," "expects," "anticipates," "intends,"
"forecasts," "project," "plans," "estimates" and similar expressions identify
forward-looking statements. Such statements reflect our current views with
respect to future events and financial performance or operations and speak only
as of the date the statements are made.
Forward-looking statements involve risks and uncertainties and readers are
cautioned not to place undue reliance on forward-looking statements. Our actual
results may differ materially from such statements. Factors that cause or
contribute to such differences include, but are not limited to, those discussed
elsewhere in this Form 10-QSB, as well as those discussed in our Form 10-KSB
which are incorporated by reference in this Form 10-QSB.
Although we believe that the assumptions underlying the forward-looking
statements are reasonable, any of the assumptions could prove inaccurate and,
therefore, there can be no assurance that the results contemplated in such
forward-looking statements will be realized. The inclusion of such
forward-looking information should not be regarded as a representation that the
future events, plans or expectations contemplated will be achieved. We
undertake no obligation to publicly update, review or revise any forward-looking
statements to reflect any change in our expectations or any change in events,
conditions or circumstances on which any such statements based. Our filings
with the SEC, including the Form 10-KSB, may be accessed at the SEC's Web site,
www.sec.gov.
------------
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF THE SECURITY HOLDERS
A majority of the shareholders consented to amend our articles of
incorporation to change our corporate name to YP.Net, Inc. Shareholders holding
a total of 26,395,000 shares, of the total then outstanding of 39,156,853
shares, submitted their written consents to the amendment, which was effective
October 1, 1999.
10
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The YP.Net is involved in various legal proceedings and claims as described
in our Form 10-KSB for the year ended September 30, 1999. No material
developments have occurred in any of these proceedings. The costs associated
with these legal proceedings could be significant and could adversely affect the
results of our future operations. An unfavorable result in any of these
proceedings could also adversely affect our operations.
ITEM 2. CHANGES IN SECURITIES
On October 25, 1999, prior management entered into a one-year advisory
agreement with BJM Consulting, Inc. ("BJM"). BJM agreed to advise in
acquisitions and strategic planning and also to assist the Interim President in
his duties as President until a new President was appointed. Prior management
agreed to pay a retainer fee of $5,000 per month and issue 500,000 shares of
common stock for those advisory services. The value of these shares was
recorded as $437,500. Subsequently, new management has terminated the agreement
and is making efforts to rescind the issuance of the shares of common stock to
BJM. The shares were issued in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act.
In November 1999 the prior Board of Directors authorized 200,000 shares of
Series B preferred stock to be converted to 200,000 shares of common stock for
the Interim President Mr. William O'Neal. This conversion was authorized in
exchange for a modification of his five-year employment agreement with YP.Net.
The modification of the employment agreement changed the agreement from a
five-year employment contract to an "at-will" employment agreement with no
severance pay provisions. The conversion of the preferred B shares to 200,000
shares of common stock voided provisions in the original employment agreement,
and was agreed to by the Board of Directors and Mr. William O'Neal. The value
of these shares was recorded as $90,000. The shares were issued in reliance on
the exemption from registrations provided by Section 4(2) of the Securities Act.
On December 13, 1999 prior management entered into a sublease agreement
with Empire Capital Group LLC ("Empire"). Empire agreed to sublease office
space in Phoenix, Arizona. Prior management had entered into a lease agreement
for the office space in fiscal 1998. YP.Net never utilized the space as
corporate offices, and subsequently Empire assumed the entire office space.
Prior management issued 100,000 shares of common stock to Empire for the
execution of the sublease agreement. The value of these shares was recorded as
$124,000. The shares were issued in reliance on the exemption from
registrations provided by Section 4(2) of the Securities Act.
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ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS
10.14 Advisory Agreement between BJM Consultants and Y.P.Net, Inc.
10.15 Authorization to Perform Business Valuation between IPA Advisory &
Intermediary Services and Y.P.Net, Inc.
10.16 International Profit Associates Organization for Management
10.17 Sublease Agreement between Y.P.Net, Inc. and Empire Capital Group, LLC
27.1 Financial Data Schedule
REPORTS ON FORM 8-K
Two reports on Form 8-K were filed in the fiscal quarter ended December 31,
1999. These reports are as follows:
Form 8-K filed on October 18, 1999 announced the change in the
corporation's name from RIGL Corporation, Inc, to YP.Net, Inc., the appointment
of a three new Board of Directors and the resignations of the Chairman of the
Board and two Board of Directors.
Form 8-K filed on December 3, 1999 disclosed the dismissal of Singer,
Lewak, Greenbaum and Goldstein LLP and the appointment of McGladry & Pullen LLP
as the YP.Net's new auditor.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on behalf by the undersigned
thereunto duly authorized.
YP.NET, INC.
Dated: ________________, 2000 By /s/ Angelo Tullo
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Angelo Tullo, Chairman of the Board
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