UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
(Mark one) [X] Quarterly report under section 13 or 15(d) of the Securities
Exchange Act of 1934 For the quarterly period ended March 31,
1999
[ ] Transition report under section 13 or 15(d) of the Securities
Exchange Act of 1934
333-65319
(Commission file number)
THE MURDOCK GROUP CAREER SATISFACTION CORPORATION
(Name of small business issuer in its charter)
UTAH 87-0562244
(State or other jurisdiction of (IRS Employer Classifi-
incorporation or organization) cation Code Number)
736104
(Primary Standard
Industrial ID number)
5295 SOUTH COMMERCE DRIVE, SUITE 300, SALT LAKE CITY, UTAH 84107
(Address of principal executive offices)
(801) 268-3232
(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 past 90 days. Yes [X] No [ ]
As of April 1, 1999, the issuer had 8,727,141 outstanding shares of class A
common voting shares and -0- outstanding shares of class B common non-voting
shares.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
<PAGE>
Table of Contents
Part I
Item 1. Financial Statements
Condensed Consolidated Balance Sheets 3
Condensed Consolidates Statement of Operations 5
Condensed Consolidated Statement of Cash Flow 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis or Plan of Operation 9
Part II
Item 1. Legal Proceedings 11
Item 2. Changes in Securities and Use of Proceeds 11
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
2
<PAGE>
Part I. Item 1. Financial Statements
THE MURDOCK GROUP
CAREER SATISFACTION CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
- --------------------------------------------------------------------------------
ASSETS
March 31, December 31,
1999 1998
----------- -----------
CURRENT ASSETS:
Cash and cash equivalents $ 7,954 $ 4,289
Current portion of contracts receivable 741,305 543,344
Deferred offering costs 217,516 153,659
Other current assets 255,736 110,933
----------- -----------
Total current assets 1,222,511 812,225
----------- -----------
PROPERTY AND EQUIPMENT:
Computer equipment 284,653 247,573
Equipment, furniture and fixtures 186,279 162,014
Leasehold improvements 86,815 75,506
Capital leases for property and equipment 416,457 362,208
----------- -----------
974,204 847,301
Less: accumulated depreciation and amortization (208,365) (161,545)
----------- -----------
Net property, plant and equipment 765,839 685,756
----------- -----------
OTHER ASSETS:
Contracts receivable net of current portion 333,050 170,958
Deposits 200,502 311,378
Other assets 199,994 79,637
----------- -----------
Total other assets 733,546 561,973
----------- -----------
TOTAL ASSETS $ 2,721,896 $ 2,059,954
=========== ===========
The accompanying notes to condensed consolidated financial statements
Are an integral part of these condensed consolidated balance sheets.
3
<PAGE>
<TABLE>
THE MURDOCK GROUP
CAREER SATISFACTION CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
- -------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
<CAPTION>
March 31, December 31,
1999 1998
----------------------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 602,449 $ 349,168
Accrued liabilities 917,668 1,218,451
Short-term Debt 4,948,957 3,466,700
Current portion of long-term debt 1,518,000 858,316
Debt with related parties 841,653 845,389
Other current liabilities 154,678 274,773
------------ ------------
Total current liabilities 8,983,405 7,012,797
------------ ------------
LONG-TERM DEBT 2,149,449 2,578,600
SHAREHOLDERS' EQUITY (DEFICIT):
Common Stock - Class A, no par value, 100,000,000 shares authorized,
8,712,942, and 8,488,240 shares issued and outstanding, respectively 1,788,612 913,460
Common Stock - Class B, no par value, no share issued or outstanding -- --
Treasury Stock - Class A Common; 2,000,000 shares held (45) (45)
Accumulated deficit (10,199,525) (8,444,858)
------------ ------------
Total Shareholders' equity (deficit) (8,410,958) (7,531,443)
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,721,896 $ 2,059,954
============ ============
</TABLE>
The accompanying notes to condensed consolidated financial statements
Are an integral part of these condensed consolidated balance sheets.
4
<PAGE>
THE MURDOCK GROUP
CAREER SATISFACTION CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
- --------------------------------------------------------------------------------
For the Three Months
Ended March 31,
1999 1998
----------- -----------
SERVICE REVENUE, inclusive of interest charged $ 661,668 $ 794,775
Less: Contract cancellations 27,609 170,733
Contract discounts 25,239 98,455
----------- -----------
Net Service Revenues 608,820 525,587
DIRECT COST OF SERVICES 240,443 366,749
----------- -----------
GROSS PROFIT 368,377 158,838
----------- -----------
OPERATING EXPENSES:
Selling, general and administrative 1,319,161 711,405
New products research and development 72,001 214,074
Depreciation and amortization 48,874 21,753
----------- -----------
Total operating expenses 1,440,036 947,232
LOSS FROM OPERATIONS (1,071,659) (788,394)
----------- -----------
OTHER INCOME (EXPENSE)
Interest expense (673,797) (129,163)
Write-off of non-trade receivables (65,546) --
Other income 56,335 39,579
----------- -----------
Total other, net (683,008) (89,584)
NET LOSS (1,754,667) (877,978)
LOSS PER SHARE $ (0.20) $ (0.09)
=========== ===========
WEIGHTED AVERAGE CLASS A SHARES 8,600,591 9,967,000
=========== ===========
The accompanying notes to condensed consolidated financial statements
Are an integral part of these condensed consolidated balance sheets.
5
<PAGE>
<TABLE>
THE MURDOCK GROUP
CAREER SATISFACTION CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
- ----------------------------------------------------------------------------------------------------------
<CAPTION>
For the Three Months
Ended March 31,
1999 1998
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss (1,754,667) (877,978)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization 48,874 21,753
Change in operating assets and liabilities:
Contracts receivable (360,053) 121,503
Deferred offering costs (63,557) --
Deposits 110,878 22,985
Other assets (120,357) 108,600
Accounts payable 253,281 171,524
Accrued liabilities (300,783) 306,087
Other liabilities (120,095) (744,314)
----------- -----------
Net cash used in operating activities (2,306,479) (869,840)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (126,902) (34,541)
----------- -----------
Net cash used in investing activities (126,902) (34,541)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from debt 5,230,658 1,489,927
Principle payments on debt (3,668,764) (586,150)
Proceeds from sale of stock 875,152 --
----------- -----------
Net cash provided by financing activities 2,437,046 903,777
NET INCREASE (DECREASE) IN CASH 3,665 (604)
=========== ===========
CASH - BEGINNING OF PERIOD 4,289 1,604
=========== ===========
CASH - END OF PERIOD $ 7,954 $ 1,000
=========== ===========
</TABLE>
The accompanying notes to condensed consolidated financial statements
Are an integral part of these condensed consolidated balance sheets.
6
<PAGE>
THE MURDOCK GROUP
CAREER SATISFACTION CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Nature Of Operations
The accompanying condensed consolidated financial statements include the
accounts of The Murdock Group Career Satisfaction Corporation (the "Company").
The condensed consolidated financial statements have been prepared pursuant to
the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally required in financial statements,
prepared in accordance with generally accepted accounting principles, have been
omitted pursuant to such rules and regulations.
The financial statements reflect all adjustments (consisting only of normal
recurring adjustments) which, in the opinion of management, are necessary to
fairly present the financial position, results of operations and cash flows for
the periods presented.
The results of operations for the three months ended March 31, 1999 are not
necessarily indicative of the results to be expected for the full fiscal year.
It is suggested that these condensed consolidated financial statements be read
in conjunction with the financial statements and notes thereto included in the
Company's Form 10-K for the year ended December 31, 1998.
Note 2 - Nature Of Operations
The Murdock Group Career Satisfaction Corporation (the Company) is a job-search
and employment training company. The Company is focused to service professionals
with five or more years of experience who are dissatisfied with their career
direction or current job situation. The Company offers job-search training
workshops, consultants and coaches, and access to a job-search resource center.
The Company also provides full-service hiring assistance, including training,
recruiting, and outplacement to corporations. The Company's main office is
located in Salt Lake City, Utah. The Company also has offices in Seattle,
Washington and Portland, Oregon. Substantially all of the Company's revenue is
from the services described above. At its inception, the Company purchased
assets, a copyright, rights to the business name, and miscellaneous intangible
assets from an individual operating as a sole proprietorship DBA The Murdock
Group.
Envision Career Services LLC. DBA The Murdock Group (Envision), owned a majority
share of the corporation prior to the business combination with the Company and
Envision's dissolution. Envision originally conducted the business activities
explained above which now continue in the surviving corporate entity.
Note 3 - Revenue Recognition
The Company provides services under various types of contracts. Revenue is
recognized as service is rendered, based on the contract type. In August 1998,
the Company began the delivery of its new product, The Job Search System. The
Company delivers approximately 85% of its service within 30 days of the signed
contract for this service. The Company provides approximately 15% of its service
7
<PAGE>
equally over the next 90 days. Accordingly, the Company recognizes 85% of the
revenue on these contracts in the month of sale, and 5% each month for the
following three months.
Previously, the Company sold services using various types of contracts. These
contracts were One-Year Contracts, Flex Contracts, and Guarantee Contracts. At
March 31, 1999, all revenue associated with these various types of contracts had
been recognized.
Revenue is recognized completely in the month it is earned for those services
requiring less than one month to complete. Cash discounts, cancellations, and
write-offs are recognized based on certain criteria such as time since last
payment made, cancellation requests negotiated and granted, and contract price
reduction due to early cash payment.
Note 4 - Going Concern
The accompanying financial statements have been prepared based on continuation
of the Company as a going concern. However, the Company has sustained
substantial operating losses since inception. In addition, the Company has used
substantial amounts of working capital in its operations.
In view of these matters, realization of a major portion of the assets in the
accompanying balance sheet is dependent upon continued operations of the
Company, which in turn is dependent upon the Company's ability to meet its
financing requirements, and the success of its future operations.
Management believes that a major contribution of losses to date were incurred
while developing the Company's proprietary job-search technology into a training
system that serviced a larger volume of customers.
The Company has completed development on the training system and anticipates
that it now has a product that can operate profitably. In September 1998, the
Company opened an office in Seattle, and in February, 1999 an office in
Portland. Other offices are planned for 1999.
The Company intends to allocate administrative costs across multiple locations,
thereby reducing the financial impact of the Company's investment to date in
infrastructure items such as computer technology, human resources, accounting,
and operations staff. Management also anticipates a reduction in cancellations,
discounts, and write-offs with the new product.
To summarize, management's plan for overcoming losses includes increasing
revenues from new and existing offices, reducing expenses, allocating
infrastructure investment across multiple existing and new office locations,
reducing cancellations, discounts, and write-offs, and reducing interest
expense.
Note 5 - Proposed Public Offering
The Company filed a registration statement for an initial public offering of its
securities on October 6, 1998; it was declared effective by the Securities and
Exchange Commission (SEC) on January 28, 1999.
The offering consisted of the intended sale of 2,500,000 shares of class A
common stock at $5 per share, and $3,000,000 in 4-year term bonds. During the
period between the declaration of effectiveness and May 9, 1999, the Company
collected a total of $3,211,930 from sale of shares and $12,000 from the sale of
bonds. These proceeds were used to retire debt.
Based on these results, the Company did not believe that it would be able to
sell enough shares and bonds to pay off the majority of its debt or qualify its
shares for listing on the Nasdaq SmallCap Market, two of the primary goals of
the public offering. Consequently, the Company decided to terminate the offering
and may offer recission to investors in the public offering. The SEC declared
effective the Company's post-effective amendment no. 2 deregistering all unsold
securities on May 10, 1999, and the Company contemporaneously terminated its
offering in all states where it was registered.
8
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
General
The Murdock Group Career Satisfaction Corporation is a career advancement and
employment consulting company with offices in Salt Lake City, Utah, Seattle,
Washington, and Portland, Oregon.
The Company targets its services to professionals and others with several years
of experience who are seeking to clarify their career direction or their current
job situation.
The Company's system utilizes job-search training workshops, consultants, and
access to a comprehensive job-search resource center. It also provides full
service hiring assistance to corporations, which includes training and
outplacement.
The Company has incurred significant losses to date developing its proprietary
job-search technology into a training system that can service a larger volume of
customers than its original one-on-one coaching. The Company completed
development of this system and believes that it now has a product that can be
marketed profitably.
In September 1998, the Company opened its second branch office which is located
in Seattle, Washington. This is the first location outside of headquarters in
Salt Lake City, Utah. In February 1999, it opened its third branch office which
is located in Portland, Oregon. The Company plans to open other branch offices
in 1999. Additional branches will allow the Company to allocate administrative
costs across multiple locations, thereby improving the utilization of its
infrastructure.
With the completion of the new proprietary job-search technology training system
the Company expects a reduction in client cancellations and discounts and
improved collection of client receivables.
The Company filed a registration statement for an initial public offering of its
securities on October 6, 1998; it was declared effective by the Securities and
Exchange Commission (SEC) on January 28, 1999.
The offering consisted of the intended sale of 2,500,000 shares of class A
common stock at $5 per share, and $3,000,000 in 4-year term bonds. During the
period between the declaration of effectiveness and May 9, 1999, the Company
collected a total of $3,211,930 from sale of shares and $12,000 from the sale of
bonds. These proceeds were used to retire debt.
Based on these results, the Company did not believe that it would be able to
sell enough shares and bonds to pay off the majority of its debt or qualify its
shares for listing on the Nasdaq SmallCap Market, two of the primary goals of
the public offering. Consequently, the Company decided to terminate the offering
and may offer recission to investors in the public offering. The SEC declared
effective the Company's post-effective amendment no. 2 deregistering all unsold
securities on May 10, 1999, and the Company contemporaneously terminated its
offering in all states where it was registered.
Results of Operations: March 31, 1999 compared to March 31, 1998
Net service revenues increased to $608,820 for the three month period ended
March 31, 1999, compared to $525,587 for the corresponding period of the prior
year. The increase in revenues was primarily a result of reduced cancellations
and discounts. During the three months ended March 31, 1998 the Company sold
services which guaranteed the client a job in an agreed amount of time. While
these guarantee contracts were helpful to gross sales they had a negative impact
on cancellations. More than fifty percent of these guarantee type contracts were
cancelled during 1998. The Company's new proprietary job-search training system,
introduced in 1998 has resulted in a significant reduction in cancellations and
discounts.
9
<PAGE>
Direct cost of services decreased to $240,443 for the three month period ended
March 31, 1999, compared to $366,749 for the corresponding period of the prior
fiscal year. Gross profit as a percentage of service revenues improved to 60.5%
for the three month period ended March 31, 1999, compared to 30.2% for the
corresponding period of the prior year. The improvement in gross profit as a
percentage of sales was primarily a result of the delivery of the Company's new
product which is delivered in a group setting as compared to the original
one-on-one coaching.
General and administrative expenses, which include selling expense, increased to
$1,319,161 for the three months ended March 31, 1999, compared to $711,405 for
the corresponding period of the prior fiscal year. The increase in general and
administrative expense relates to Company growth and branch expansion. Revenues
in the new Seattle and Portland branches are not at full operating levels due to
lack of name recognition in the new market place, new sales employees and other
start up type issues. Operating expenses for the new branch are near the full
operating levels because most branch expenses are fixed and not tied to sales
levels.
New products research and development expenses decreased to $72,001 for the
three months ended March 31, 1999, compared to $214,074 for the corresponding
period of the prior year. The decrease in research and development for 1999, was
a result of the Company completing its new job search system in 1998.
Interest expense increased to $673,797 for the three month period ended March
31, 1999, compared to $129,163 for the corresponding period of the prior year.
The increase in interest expense was a result of higher outstanding debt
balances and increased rates on moneys borrowed. See Liquidity and Capital
resources.
Liquidity and Capital Resources
The Company has suffered recurring losses from operations since our inception in
1996, and as of March 31, 1999, had an accumulated deficit of $10,199,525. The
accumulated deficit reflects losses associated with the development and startup
of operations and significant costs for research and development for our
propriety job-search technology and training system.
This technology will enable us to effectively service a large volume of
customers in each office and provide a model to expand operations into other
locations. We have also experienced losses from interest expense associated with
the large amount of debt the Company carries with high interest rates.
At March 31, 1999, the Company had a working capital deficit of approximately
$7,760,894. This working capital deficit is a result of funding operating losses
primarily through short-term borrowings. The interest rates associated with
these short-term borrowings are significantly higher than prime interest rates.
The Company filed a registration statement for an initial public offering of its
securities on October 6, 1998; it was declared effective by the Securities and
Exchange Commission (SEC) on January 28, 1999.
The offering consisted of the intended sale of 2,500,000 shares of class A
common stock at $5 per share, and $3,000,000 in 4-year term bonds. During the
period between the declaration of effectiveness and May 9, 1999, the Company a
collected a total of $3,211,930 from sale of shares and $12,000 from the sale of
bonds. These proceeds were used to retire debt.
Based on these results, the Company did not believe that it would be able to
sell enough shares and bonds to pay off the majority of its debt or qualify its
shares for listing on the Nasdaq SmallCap Market, two of the primary goals of
the public offering. Consequently, the Company decided to terminate the offering
and may offer recission to investors in the public offering. The SEC declared
effective the Company's post-effective amendment no. 2 deregistering all unsold
securities on May 10, 1999, and the Company contemporaneously terminated its
offering in all states where it was registered.
10
<PAGE>
As a result of the small amount of capital raised in the Company's initial
public offering, the Company will be required to fund its cash needs from
borrowings or other methods. There is no assurance that the Company will be able
to borrow additional funds or secure the cash necessary to cover its needs.
As contained in the report of our Independent Auditor dated April 22, 1999, and
filed with our Form 10-K for the year ended December 31, 1998 and 1997, there is
substantial doubt of The Murdock Group's ability to continue as a going concern.
Although the Company is looking at various alternatives which, among other
things, include restructuring the Company, obtaining new financing and looking
for equity partners, there can be no assurance that the Company will be
successful in such endeavors.
Inflation and year 2000 issues
Inflation has not had and is not expected to have a significant impact on our
operations.
We have evaluated our information technology for Year 2000 issues and do not
anticipate any material disruption in our operations.
"Safe Harbor" Statement Under the Private Securities Litigation Reform Act of
1995
With the exception of historical information (information relating to the
Company's financial condition and results of operations at historical dates or
for historical periods), the matters discussed in the Management's Discussion
and Analysis of Financial Condition and Results of Operations are
forward-looking statements that necessarily are based on certain assumptions and
are subject to certain risks and uncertainties.
These forward-looking statements are based on management's expectations as of
the date hereof, and the Company does not undertake any responsibility to the
date hereof, and the Company does not undertake any responsibility to update any
of these statements in the future.
Actual future performance and results could differ from those contained in or
suggested by these forward-looking statements as a result of the factors set
forth in this Management's Discussion and Analysis of Financial Condition and
Results of Operations, the Business Risks described in this Form 10-QSB and
elsewhere in the Company's filings with the Securities and Exchange Commission.
Part II
Item 1. Legal Proceedings
As of the date of this report there is no material litigation pending or
threatened against us.
Item 2. Changes in Securities and Use of Proceeds
The company sold no unregistered securities during the period covered by this
report.
The Company filed a registration statement for an initial public offering of its
securities on October 6, 1998; it was declared effective by the Securities and
11
<PAGE>
Exchange Commission (SEC) on January 28, 1999. The offering consisted of the
sale of 2,500,000 shares at $5 per share, and $3,000,000 in 4-year term, 15%
bonds. In addition, four of the corporation's shareholders sought to sell
181,500 shares at $5 per share. No underwriter participated in the offering.
During the period between the declaration of effectiveness and May 9, 1999, the
Company received from 44 investors a total of $3,211,930 from sale of shares and
$12,000 from the sale of bonds. These proceeds were used to retire debt.
Based on these results, the Company did not believe that it would be able to
sell enough shares and bonds to pay off the majority of its debt or qualify its
shares for listing on the Nasdaq SmallCap Market, two of the primary goals of
the public offering.
Consequently, the Company decided to terminate the offering and offer recission
to investors in the public offering. The SEC declared effective the Company's
post-effective amendment no. 2 deregistering all unsold securities on May 10,
1999, and the Company contemporaneously terminated its offering in all states
where it was registered.
Item 3. Defaults Upon Senior Securities
There have been no defaults with respect to senior securities.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
Item 5. Other information
None.
Item 6. Exhibits and Reports on Form 8-K
No reports on Form 8-K were filed during the quarter for which this report is
filed.
<PAGE>
Signatures
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
The Murdock Group Career Satisfaction Corporation
Dated this 20th day of May, 1999
/s/ KC Holmes
- -----------------------------------------------
By KC Holmes, CEO
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
Dated this 20th day of May, 1999
/s/ KC Holmes
- -----------------------------------------------
By KC Holmes, CEO
/s/ Heather Stone
- -----------------------------------------------
By Heather Stone, President
/s/ Brad Stewart
-----------------------------------------------
By Brad Stewart, CFO
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 7954
<SECURITIES> 0
<RECEIVABLES> 1305195
<ALLOWANCES> 230840
<INVENTORY> 0
<CURRENT-ASSETS> 1222511
<PP&E> 974204
<DEPRECIATION> 208365
<TOTAL-ASSETS> 2721896
<CURRENT-LIABILITIES> 8983405
<BONDS> 262000
0
0
<COMMON> 1788612
<OTHER-SE> (45)
<TOTAL-LIABILITY-AND-EQUITY> 2721896
<SALES> 661668
<TOTAL-REVENUES> 608820
<CGS> 240443
<TOTAL-COSTS> 1440036
<OTHER-EXPENSES> 9211
<LOSS-PROVISION> 91369
<INTEREST-EXPENSE> 673797
<INCOME-PRETAX> (1754667)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1754667)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1754667)
<EPS-PRIMARY> (0.20)
<EPS-DILUTED> (0.20)
</TABLE>
