2,681,500 Commonshares at $5 Per Share
$3,000,000 of Bonds in $1,000 Increments
Minimum Investment - $1,000
The Murdock Group Career Satisfaction Corporation
This is our initial public offering, consisting of 2,500,000 shares at $5
per share for $12,500,000, and $3,000,000 of bonds. In addition, four of our
shareholders seek to sell 181,500 of their shares.
There is currently no public market for our shares or bonds. Investing in
our shares and bonds involves a high degree of risk; you should purchase only if
you can afford a complete loss of your investment.
See "Risk Factors" beginning on page 3.
10% Sales Proceeds to
Price to Public Commission Murdock Group
Per share $ 5.00 $ .50 $ 4.50
Per bond increment $ 1,000.00 $ 100.00 $ 900.00
Total $ 15,500,000.00 $ 1,550,000.00 $ 13,950,000.00
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
We are making this offering through our own officers. This offering will
continue until subscriptions for all shares and bonds are received, until
October 28, 1999, or until we terminate the offering, whichever first occurs.
Prospectus dated January 28, 1999
<PAGE>
Notices About This Offering
This prospectus contains the important facts about these securities. You
should not rely on any other information or claims. Because the shares have not
been publicly traded before this offering, we have arbitrarily determined the
offering price. We cannot guarantee that any active trading market will exist
after the offering.
In addition to registering with the Securities and Exchange Commission, we
have filed registration materials in the following states: Arizona, California,
Colorado, Idaho, Illinois, Nevada, New Mexico, Oregon, Utah, Washington, West
Virginia, Wyoming.
If you live in another state, you may not purchase these securities during
this offering. You may, however, be able to purchase the shares from your
stockbroker if the shares are listed for public trading after the offering is
complete.
Arizona residents must (1) have a minimum of $100,000, or $150,000 when
combined with spouse, in gross income during the prior year and a reasonable
expectation that the investor will have such income in the current year; or (2)
a minimum net worth of $250,000, or $400,000 when combined with spouse,
exclusive of home, home furnishings and automobiles, with the investment not
exceeding 10% of the net worth of the investor, together with spouse, if
applicable.
Idaho, Oregon, and West Virginia residents must have (1) a minimum annual
gross income of $65,000 and a minimum net worth of $65,000, exclusive of
automobile, home and home furnishings; or (2) a minimum net worth of $150,000,
exclusive of automobile, home and home furnishings.
Bonds are not available for purchase by residents of California or Oregon.
The names of any broker-dealers participating in this offering, and
additional disclosures required by any state in which these securities may be
sold, are set forth on stickers on the back cover of this prospectus.
Table Of Contents
Offering Overview ......................................................... 1
Risk Factors .............................................................. 3
Use of Proceeds ........................................................... 6
Capitalization ............................................................ 7
Management's Discussion and Analysis of
Financial Condition and Results of Operations ............................. 8
The Murdock Group ......................................................... 11
Business Operations ....................................................... 12
Management ................................................................ 22
The Shares ................................................................ 26
The Bonds ................................................................. 29
Plan of Distribution ........................................................ 30
Experts ................................................................... 31
Financial Statements .........................................................33
Subscription Agreement .................................................... 59
<PAGE>
Offering Overview
The table below contains a very brief outline of the information contained
in this prospectus. Please read the entire prospectus before you decide whether
and how much to invest in our shares or bonds.
The Murdock Group The Murdock Group Career Satisfaction Corporation is a
Utah corporation. We plan to expand rapidly, establishing
offices coast-to-coast over the next two decades. We are
located at 5295 South Commerce Drive, Suite 300, Salt
Lake City, Utah 84107. Our telephone numbers are (801)
268-3232 and 1-888-888-0892; the fax number is (801)
268-3289, and our web site is www.themurdockgroup.com
Our Business We provide employment-related services to two types of
clients:
Individual clients seeking to advance their careers by
finding "the fastest way to a better job"a through
counseling, training, and comprehensive job search
resources; and
Business clients seeking assistance with employee
hiring, training, and outplacement.
We advertise career advancement in radio and newspaper
ads, target mid-level professionals, and offer financing
to our clients. Most of our revenue is generated by our
primary intellectual property - the "TMG Job Search
System" and related programs and materials.
Shares We offer 2,500,000 shares at $5 per share. The shares
offered are Class A common voting shares, the only class
of shares currently outstanding.
Selling Shareholders Four of our current shareholders are offering 181,500 of
their own shares for sale as part of this offering. If
all of these shares are sold, these officers will receive
$907,500. We will sell these shares along with the
Murdock Group's shares, at the rate of 68 selling
shareholder's shares for each 1,000 Murdock Group shares,
calculated monthly. When 1,000,000 Murdock Group shares
have been sold, we will sell all unsold shares of selling
shareholders before the sale of Murdock Group shares
recommences.
Bonds We offer $3,000,000 in bonds in increments of $1,000.
Bonds mature in 4 years, when we will repay the principal
plus interest at 15% compounded annually. We have not
provided any security for the bonds, and will not
establish a sinking fund for repayment of the bonds. We
may prepay the bonds at any time.
Sales of Shares & We are making this offering through our own officers, and
Bonds seeking the participation of NASD-licensed selling
agents, who will not be required to sell any specific
amount of securities.
Shares to be Sold to We will allow our employees and their immediate families
Employees at a to purchase as many shares offered by this prospectus as
Discount they wish at a discount of 10% from the sales price. They
will pay $4.50 per share rather than the $5 per share
paid by other investors. Since we will not pay any sales
commissions on these shares, the net proceeds to the
Murdock Group will be the same as with shares sold to
other investors by participating brokers.
- --------------------------------------------------------------------------------
-1-
<PAGE>
Offering Period This offering will continue until subscriptions for all
shares and bonds are received, until October 28, 1999, or
until we terminate the offering, whichever event first
occurs.
How to Invest in A minimum investment of $1,000 is required for the
our Shares or Bonds purchase of either shares or bonds. If you decide to
invest, send us your check and a completed subscription
agreement which you will find at the back of this
prospectus, or give your funds and subscription agreement
to a broker participating in this offering. We will mail
your shares or bonds to you or your broker as requested.
Dividends We plan to reinvest all profits, if any, in the Murdock
Group for a period of at least 5 years. We will not pay
dividends during this period.
Dilution The net tangible book value per share on the date of this
prospectus is a negative $.57. Investors in the shares
will pay $5 per share for 22.75% of ownership of the
Murdock Group if all shares are sold. Investors will
experience dilution of 88.6% of their investment.
Use of Proceeds We will spend the proceeds of this offering to open
several offices in the Western States over the next 12
months, retire and restructure debt, and meet normal
operating expenses. There is no minimum amount which must
be raised before we will begin spending the proceeds.
Trading Market Our shares are not currently listed for trading on any
exchange.
Financial Condition Detailed audited financial statements are set forth in
the section "Financial Statements." Because of our
history of losses and current negative net worth, our
auditor, David T. Thomson, P.C., states in his report
that there is substantial doubt about our ability to
continue as a going concern. We believe we are overcoming
losses by moving Salt Lake City staff to other offices,
dividing headquarters expenses among more branch offices,
reducing charge-off expense, and reducing interest
expense. Our ratio of earnings to fixed charges is a
negative 4.4:1.
-2-
<PAGE>
Risk Factors
An investment in our shares or bonds involves a high degree of risk; you
should purchase these securities only if you can afford to lose your entire
investment. Before making a decision to invest, consider carefully the following
risk factors, in addition to the other information in this prospectus.
Because we are a relatively new company, we have an extremely limited operating
history upon which you can evaluate our prospects
Because we did not commence operation until August, 1996, we have a
limited operating history upon which you can evaluate our prospects.
Most of our activity since that date has been developing our
career-related services and refining our marketing approach, in addition to
capital raising activities.
To invest, you must be willing to assume virtually all the risks of a
"startup" company. We have not experienced any months of profitability. See
"Financial Statements." Until we achieve profitability, we are dependent on
raising capital by sales of shares or borrowing to continue operations.
Our auditor has expressed doubt about our ability to continue as a going
concern. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
You must consider our prospects in light of the risks, expenses, and
difficulties frequently encountered in the establishment of a new business in an
emerging industry, and in the development and commercialization of a new
service.
We must compete against firms with far greater resources, experience, and market
share than we have
We may not be able to successfully compete against other firms in our
industry.
The employment industry is highly competitive, and most of our competitors
are established companies having far more financial resources, experience, and
market share than we do.
Most companies in the employment industry are temporary employment
agencies and recruitment firms. We work for the job seeker, who pays us an
up-front flat fee which may be financed.
We believe we have developed a unique market niche by using broad-based
media to promote our career advancement and job search training services to
people in the middle income range. We cannot guarantee that this business
concept will prove successful.
Any of our competitors, most of whom have far greater resources than we,
might independently develop services that are substantially equivalent or
superior to ours. These competitors potentially include the nationwide firms of
Bernard Haldane and Cornell Business Associates.
Although we have taken steps to protect our intellectual property rights,
and continually develop innovative services, we believe our future success will
depend primarily on our ability to expand rapidly throughout the United States,
deterring potential competition by establishing widespread name recognition for
"The Murdock Group."
Managing rapid expansion may severely strain our resources
If we expand rapidly as planned, we could significantly strain on our
limited managerial, operational, and financial resources, possibly causing
inefficiencies which may result in operating losses.
Specifically, we anticipate the opening of several new offices in major
cities in the Western United States within the year following the date of this
prospectus.
We cannot be sure that we will be able to manage this expansion
effectively, that new employees required to staff these offices will work
together effectively, that we can attract and retain qualified personnel, or
that our systems, procedures, and controls will be adequate to support business
operations.
We estimate that each office will require expenditures of approximately
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<PAGE>
$500,000 before it can cover its own operating costs, but since our first branch
office in Seattle has been opened for such a short period, we cannot be sure of
these estimates.
Delays, budget overruns, failure to attract customers in the new market,
inability to produce sales or successfully deliver our services, and numerous
other factors could keep us from generating a profit. See "Business Operations."
We may not be able to protect our proprietary method of doing business
If our competitors copy the TMG Job Search System or develop similar
systems, we may lose our primary competitive advantage.
We rely primarily on copyright laws to protect the intellectual property
used in our products and services, but we do not register copyrights in any of
our materials. We could be damaged by a significant amount of unauthorized
copying of our products and services.
Although we are not aware that any of our products and services are
materially infringing the rights of others, it is possible they are. If so, we
could be forced to modify our products and services, possibly at substantial
cost. We might be subject to lawsuits alleging that we are infringing on the
property rights of others.
We have applied for trademark protection for our name, the names of our
principal current services, and the phrase "The Fastest Way to a Better Job." It
is possible, however, that third parties will infringe or misappropriate our
registered trademarks or similar proprietary rights.
Competitors may employ a strategy of non-meritorious litigation as a
method of direct competition, and our limited financial resources could prove
insufficient to mount a successful defense against these tactics.
Our computer systems may fail to work in the year 2000
Our computers or the software they run might fail on January 1, 2000,
significantly disrupting our business operations.
Some early mainframes and computer programs used only the final two digits
for the year in the date field while maintaining the first two digits of each
year constant.
As a result, some computer applications may be unable to interpret the
change from the year 1999 to the year 2000, commonly referred to as the "Year
2000 Problem."
Our computer needs are met by a network of desktop personal computers, and
to the best of our knowledge after substantial testing, none of our software
applications will experience year 2000 problems.
We have had substantial losses in the past, and could again in the future
We lost $139,780 in 1996, $1,728,372 in 1997, and $3,728,106 during the
first 9 months of 1998. If we do not reverse this trend, our business will fail.
Although we had net revenues during each of these periods, $27,456,
$551,830 and $1,428,308 respectively, we spent more than we made primarily to
cover the costs of research and development associated with new intellectual
property and delivery of our services. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
While we believe that we can operate profitably if each of our offices can
generate the same relative revenue our Salt Lake City office has produced in
1998 to date, we cannot be sure that our operations will be profitable.
We believe that a major contribution of losses to date were incurred while
developing our proprietary job-search technology into a training system capable
of servicing a larger volume of customers. This system is now operating.
We are deeply in debt and have no certain way of meeting these obligations
If we fail to meet our heavy financial obligations as they fall due, we
cannot remain in business.
We have financed our operations to date primarily by borrowing money,
often at above normal rates of interest. As of September 30, 1998, this debt
totals approximately $5,968,983. These obligations will mature over the next 60
months beginning in May 31, 1999.
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<PAGE>
Unless we can meet these obligations, possibly by improving net earnings,
raising capital through this or other offerings, refinancing, or otherwise, we
may become insolvent and lose all invested capital.
Depending upon the amount of capital raised in this offering, we plan to
substantially reduce or eliminate these liabilities, along with the interest
payment burdens they impose.
On September 30, 1998, we had an accumulated deficit of approximately
$4,797,473 and a working capital deficit of approximately $3,669,405. We have
incurred losses ever since we began business.
These losses have resulted principally from limited operations revenue and
costs associated with the design, development and implementation of our
services, including general and administrative expenses and marketing
activities.
We plan to increase our level of operating expenses significantly to
continue to enhance services and finance expansion to additional cities. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Our clients may be unable or unwilling to make payments they owe to us
If the clients who owe us money fail to pay, we cannot operate profitably.
A majority of our clients agree to pay the fees due to us by executing a
promissory note. To generate cash to meet our operating expenses, we generally
borrow against these notes at an average discount of 4%. See "Business
Operations."
These notes are for a term of 2 years, and bear interest at 19.9%
compounded annually. If our clients are dissatisfied with our services, or if
they become unemployed and are not able to find work, they may be unwilling or
unable to make note payments.
We may not be able to obtain necessary capital in the future
Without a significant capital infusion this year, we may be unable to meet
our operating require- ments.
Based on current plans and assumptions relating to our operations, we
estimate that the net proceeds of this offering, together with anticipated
revenue from operations, should be sufficient to fund our contemplated cash
requirements for approximately 12 months.
If our plans change, our assumptions prove to be inaccurate, or our funds
from operations prove to be insufficient, we could be required to seek
additional financing before this 12-month period is over.
Because of our plans for rapid expansion, we expect that we will need
additional capital at the end of this 12-month period. We have no commitments
from any third parties for any future funding and cannot be sure that we will be
able to obtain financing in the future.
We cannot guarantee that sufficient funding will be available from this
offering to fund all our development, debt retirement, and operational needs. If
we require additional financing, we may seek it through bank borrowing, other
debt, additional equity financing, or otherwise.
Any additional equity financing may be dilutive to our shareholders. Debt
financing, if available, may involve restrictive covenants with respect to
dividends, raising future capital and other financial and operational matters.
If we cannot obtain additional financing as needed, we may be required to
curtail growth plans, significantly reduce operating costs, or cease operations
completely. See "Use of Proceeds."
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<PAGE>
Use of Proceeds
The table below shows how we plan to spend the proceeds of this offering
if all shares and bonds are sold, if an intermediate number of shares and bonds
are sold, and if a low number of shares and bonds are sold.
There is no minimum amount which must be raised before we begin spending
the proceeds. Except as may be required by individual states where this offering
may be sold, we will not establish an escrow account.
Offering expenses are estimated to be $200,000; if we receive less than
this amount in proceeds, we will pay the amount of any shortfall. If more than
$200,000 but less than $2,000,000 is raised, we will use these proceeds to
reduce debt.
We may use a portion of the proceeds to acquire other businesses or
products which will help us expand operations more effectively.
We will seek to contract with broker-dealers to help market our securities
for a cash sales commission of 10%. No sales commissions will be paid on sales
made by our officers.
Because we cannot predict how many shares will be sold by the
broker-dealers and how many by our officers, we have deducted 10% from all sales
illustrated in the table. Actual commissions paid may be less and proceeds to
the company may consequently be more.
Our offering expenses include the costs of registration fees, accounting
fees, costs of printing, fees associated with listing the shares for trading,
fees to the transfer agent, and other offering costs.
The legal work for this offering was performed by in-house General
Counsel, Stanford Smith, who will receive no compensation beyond his salary.
Our selling shareholders will pay all sales commissions paid to brokers in
connection with the sale of their shares, and a proportionate share of the
expenses of this offering, such as professional fees and printing costs.
We plan to open offices in several major cities in the Western United
States over the next 24 months, with estimated cash needs of $500,000 per
office. The number of offices opened will depend on the total proceeds raised in
this offering.
<TABLE>
<CAPTION>
Item High Intermediate Low
Offering Proceeds
<S> <C> <C> <C>
Proceeds from Sale of Company Shares $12,500,000 $ 6,500,000 $ 1,000,000
Proceeds from Sale of Shareholders Shares 907,500 471,900 72,600
Proceeds from Sale of Bonds 3,000,000 2,000,000 1,000,000
----------- ----------- -----------
Total Gross Proceeds 16,407,500 8,971,900 2,072,600
Less Sales Commissions 1,640,750 897,190 207,260
Less Expenses of Offering 200,000 200,000 200,000
Less Proceeds to Selling Shareholders 816,750 424,710 65,340
----------- ----------- -----------
Net Proceeds to Company 13,750,000 7,450,000 1,600,000
Use of Proceeds:
Opening Additional Offices 5,000,000 2,000,000 0
Debt Retirement 5,000,000 5,000,000 1,600,000
Working Capital 3,750,000 450,000 0
----------- ----------- -----------
Total Application of Net Proceeds $13,750,000 $ 7,450,000 $ 1,600,000
</TABLE>
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<PAGE>
As an approximation, $70,000 will be used for leasing office space,
$50,000 for the purchase and lease of furniture and equipment, $20,000 for
advertising, $40,000 for employment fees and training, $300,000 for payroll for
12-15 people for approximately 6 months, and $20,000 for miscellaneous expenses.
As of September 30, 1998, we have incurred more than $5 million in debt.
Substantially all of this debt has been used for working capital to fund
operations since inception of the Company. We plan to retire as much of this
debt as possible, giving priority to obligations bearing the highest interest.
Future conditions may prompt us to change these proposed uses of proceeds
if unanticipated events or opportunities arise.
Capitalization
The following table sets forth the capitalization of the Murdock Group as
of September 30, 1998, and on a pro forma as adjusted basis after giving effect
to the sale of 2,500,000 shares of common stock.
This table should be read in conjunction with the historical Financial
Statements of the Company and the Notes thereto, and the other financial
information appearing elsewhere in this prospectus.
It reflects sale of the maximum amount of offering proceeds, and expenses
of $1,250,000 in sales commissions and $200,000 of offering expenses.
<TABLE>
<CAPTION>
As of September 30, 1998
Pro Forma As Pro Forma As
Actual Adjusted (High) Adjusted (Low)
<S> <C> <C> <C>
Short-term debt including current portion of long-term debt $ 3,858,662 -0- 2,258,662
Long-term debt 2,110,321 3,000,000 3,110,321
Shareholders' Equity:
Common Stock - Class A, no par value; 8,488,740 shares
issued and outstanding actual; 10,988,740 shares issued and outstanding
pro forma as adjusted 1,012,830 12,062,830 1,712,830
Common Stock - Class B, no par value; no shares issued or outstanding -0- -0- -0-
Treasury Stock - Class A, 2,000,000 shares (45) -0- -0-
Subscription Receivable - Common Stock - Class A (160,000) (160,000) (160,000)
Accumulated deficit (5,650,258) (5,650,258) (5,650,258)
Total Shareholders' Equity (4,797,473) 6,252,572 (4,097,428)
Total Capitalization $ 1,171,510 $ 9,252,572 1,271,555
</TABLE>
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<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
The Murdock Group Career Satisfaction Corporation is a career advancement
and employment consulting company with offices in Salt Lake City, Utah, and
Seattle, Washington.
We provide services to professionals with several years of experience who
are seeking to clarify their career direction or their current job situation.
Our system utilizes job-search training workshops, consultants, and access
to a comprehensive job-search resource center. We also provide full-service
hiring assistance to corporations, which includes training and outplacement.
Losses to date were incurred while we developed our proprietary job-search
technology into a training system that can service a larger volume of customers.
We have completed development of this system and believe that we now have a
product that can be marketed profitably.
On September 14, 1998, we relocated 14 employees from the Salt Lake City
office to open an office in Seattle. We plan to open additional offices in 1999.
We plan to allocate administrative costs across multiple locations,
thereby reducing the financial impact of our investment to date in
infrastructure items such as computer technology and human resources,
accounting, and operations staff.
We anticipate a reduction in charge-off expense with the new product, and
expect that completion of the public offering will enable us to restructure or
pay off most of our high-interest debts, thereby reducing monthly interest
expense.
In summary, our plan for overcoming losses includes moving Salt Lake City
staff to other offices, allocating infrastructure investment across multiple
locations, reducing charge-off expense, and reducing interest expense.
Results of Operations
September 30, 1998 compared to September 30, 1997
Net service revenues increased to $1,428,308 for the nine months ended
September 30, 1998, compared to $262,212 for the corresponding period of the
prior fiscal year.
The increase in revenues was primarily a result of enhanced service
products from new research and development efforts, new sales techniques,
increased marketing through radio and newspaper campaigns, new proprietary
systems that permit delivery of products and services in volume, and increased
market place recognition.
Contract cancellations and discounts increased to $920,112 for the nine
months ended September 30, 1998, compared to $80,184 for the corresponding
period of the prior fiscal year.
The cancellations and write-offs were the result of concessions made to
customers while pilot testing and implementing the Murdock Group's new
intellectual property. The cancellations and discounts have decreased as a
result of the new product.
Direct cost of services increased to $1,454,086 for the nine months ended
September 30, 1998, compared to $338,798 for the corresponding period of the
prior fiscal year.
Gross profit as a percentage of service revenues improved to a negative
1.8% for the nine months ended September 30, 1998, compared to a negative gross
profit of 29.2% for the corresponding period of the prior fiscal year.
The improvement in gross profit as a percent of sales was primarily a
result of increased sales, which served to reduce the per-sale overhead.
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<PAGE>
General and administrative expenses, which include selling expense,
increased to $1,941,480 for the nine months ended September 30, 1998, compared
to $360,817 for the corresponding period of the prior fiscal year.
General and administrative expenses, as a percentage of sales, decreased
to 136% for the nine months ended September 30, 1998, compared to 138% for the
corresponding period of the prior fiscal year.
Topic 4d of the Staff Accounting Bulletins issued by the Securities and
Exchange Commission requires the recording of expense by the Murdock Group for
stock issued to related parties at a price less than market or less than a price
used in similar transactions to non-related parties.
Accordingly, the Murdock Group recorded $510,712 as general and
administrative expense related to the issuance of 384,000 shares of common stock
to two officers as incentive for the nine-month period ended September 30, 1998.
The issuance of these shares and the recording of the related expense is
non-cash and nonrecurring and will not have an impact on future operations.
General and administrative expenses should continue to decrease as a
percentage of sales during fiscal 1998 and thereafter as a result of increased
sales and a reduction in G & A expenses.
New products research and development expenses increased to $718,701 for
the nine months ended September 30, 1998, compared to $274,667 for the
corresponding period of the prior fiscal year.
The increase in research and development expenses for the nine months
ended September 30, 1998 was a result of expenses related to the development of
new intellectual property and training systems that allow the mainstream
professional to access previously elitist job-search concepts and techniques.
This systematization also enables us to efficiently service a larger
volume of customers with fewer costs than could be serviced in the year.
Interest expense increased to $702,864 for the nine months ended September
30, 1998, compared to $138,252 for the corresponding period of the prior fiscal
year. The increase in interest expense was a result of higher outstanding debt
balances and increased rates on moneys borrowed for the nine months ended
September 30, 1998, compared to the corresponding period of the prior fiscal
year.
December 31, 1997 compared to December 31, 1996
We began operations August 5, 1996 as a startup and development-stage
entity. Operating results for the five-month period ended December 31, 1996 are
not representative of or comparable to the first full year of operations, which
ended December 31, 1997.
Financial Condition
Liquidity and capital resources
We have suffered recurring losses from operations since our inception in
1996, and as of September 30, 1998, had an accumulated deficit of $5,650,258.
The accumulated deficit reflects losses associated with the development
and startup of operations and significant costs for research and development for
our proprietary 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 the operations into other locations.
On September 30, 1998, we had a working capital deficit of approximately
$3,669,405. This working capital deficit is a result of our need to fund our
operating losses primarily through short-term borrowings. The interest rates
associated with these short-term borrowings are significantly higher than prime
interest rates.
We sell a majority of our products in exchange for contracts receivable
which typically are due in monthly installments over twenty four months. During
late fiscal 1997 and early fiscal 1998, we provided a product whereby the
customer was guaranteed to secure employment upon completion of services by the
Murdock Group.
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<PAGE>
Total revenues associated with the guarantee service for the nine months
ended September 30, 1998 were $730,000 or approximately 33% of revenues. While
the sales impact associated with the guaranteed service was positive, the
ability to provide the service of securing employment for the client was
extremely difficult, and resulted in approximately $553,000 in cancellations and
$85,000 in discounts related to the above guarantee-type revenues.
The guaranteed services were discontinued in July 1998. On September 30,
1998, we had $36,000 in accounts receivable from the guaranteed service. The
entire $36,000 has been reserved as of September 30, 1998. We experienced a
significant reduction in the amount of contract cancellations and write-offs
subsequent to the guaranteed service.
The Murdock Group believes that the new technology and service product
described above, compared to the guaranteed service, will result in a
significant improvement in our cancellation and collection rate. On September
30, 1998, approximately 25% of our contracts receivable had receipts which were
past due.
As contained in the report of our Independent Auditor dated December 28,
1998, covering the nine months ended May 31, 1998 and prior two fiscal years
ended December 31, 1997 and 1996, there is substantial doubt of the Murdock
Group's ability to continue as a going concern.
The current portion of amounts due from related parties increased on
September 30, 1998, compared to December 31, 1997 as a result of certain
financing transactions.
Property and equipment increased on September 30, 1998, compared to
December 31, 1997 as a result of expenditures related to expanding offices to
accommodate growth. In September 1998, we opened an office in Seattle,
Washington, which required approximately $150,000 in new property and equipment.
In addition we continued to develop our infrastructure for computer
networking and communications to accommodate growth into other locations.
Accounts payable increased on September 30, 1998, compared to December 31,
1997 as a result of growth and as a result of extending the payment terms on
payables.
Current portion of amounts due from related parties increased on September
30, 1998, compared to December 31, 1997 as a result of certain financing
transactions. These amounts were repaid to the Murdock Group subsequent to
September 30, 1998.
Short-term and long-term debt increased as a result of working capital
needs related to our current operating losses experienced through September 30,
1998.
Capital expenditures
We incurred capital expenditures of approximately $344,000 for the nine
month period ended September 31, 1998, compared to $360,000 for the
corresponding period of the prior fiscal year. The majority of these
expenditures were related to expanding offices to accommodate growth.
Research and development
Research and Development expenditures amounted to $718,701 from January 1,
1998, through September 30, 1998, compared to $274,667 for the same period in
1997. The majority of theR & D expenses were incurred while developing our
proprietary job-search technology into a training system that serviced a larger
volume of customers.
We believe that most of our significant R & D projects are now completed
and that the R & D projects in the future will be smaller and require less
expenditures.
Inflation and year 2000 problems
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.
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The Murdock Group
History
We are The Murdock Group Career Satisfaction Corporation, a Utah
corporation organized November 5, 1997, to carry on an existing business
concept.
In 1983, Denis Murdock formed a sole proprietorship called "The Murdock
Group" in Virginia to provide job search assistance to senior executives. He
moved the business to Salt Lake City, Utah in 1987. The assets of this business,
including all intellectual property rights, were purchased in June 1996 by
Envision Career Services, L.L.C., a company formed by our founders KC Holmes and
Heather Stone.
Envision conducted its operations under the name "The Murdock Group." We
purchased all membership interests of Envision by the issuance of 8,205,800
shares on May 31, 1998, and Envision was dissolved.
Our approach to the career consulting business
We have built our business on three major approaches:
Bypassing the competitive top-level corporate executive market and
targeting instead mid-range business professionals with several years of
experience;
Popularizing career services through broad-based media including radio and
newspaper advertising; and
Pricing career consulting services affordably, and making financing
available.
Our mission Sment is "The Murdock Group will be the finest and largest job
search and employment consulting service in the world-- helping millions make
better money doing something they care about."
Expansion plans
Our headquarters and primary business office are located in Salt Lake
City, Utah. The combined offices occupy 30,000 square feet of office space.
We opened our Seattle office on September 18, 1998, with 5,700 square feet
of office space. Headquarters employs 17 people; the Salt Lake City office, 16;
and the Seattle office, 13.
We plan to open additional offices across the United States, beginning in
the West. We also plan to create and market over the internet a number of
products and services related to the employment industry.
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Business Operations
The information below summarizes our current business operations; future
operations may differ.
We provide our clients with two major types of service:
Career Satisfaction. These services target individuals, providing the TMG
Job Search System and CareerChoice System to train clients how to make
wise career choices and find a great job. The core purpose is to help
individuals achieve tangible improvement in their work situations by
choosing the right career and finding employment quickly in that field.
Corporate Productivity. These services target companies, providing hiring
training, outplacement and other services that improve the employment and
termination processes. The core purpose of these services is to help
companies improve productivity by teaching them how to hire the right
people to do the right jobs.
We have spent two years developing a comprehensive job search system that
is deliverable to mainstream professionals on a large scale.
At a cost of $37,904 in 1996, $556,854 in 1997, and $718,701 for 9 months
of 1998, we have conducted extensive research and development, and field-tested
multiple products to develop a sales and delivery system that is duplicable on a
national level. The product offering is now ready for delivery.
Products
Each of our offices currently offers four employment-related products:
1. TMG Job Search System
The TMG Job Search System accounts for nearly all of our revenue. It sells
for $2,995 - $3,495 and can be financed over 2 years. It includes a full-service
job search training, career advancement, and motivation system taught in small
groups.
The package also includes access to a fully staffed resource center
containing job leads, computer workstations, publications, and other job search
tools.
The Job Search system includes the following features:
30 days of access to Career Insight Sessions which enable clients to learn
and practice key aspects of the system including networking, interviewing,
and negotiating.
4 months of access to one-on-one coaching from our job search
professionals, including interview coaches, marketing specialists, and
others.
4 months of access to career counseling from experienced career
consultants who provide personalized attention to each client's specific
needs.
4 months of access to 1-hour follow-up sessions to reinforce skills,
troubleshoot problems, or ask specific questions.
4 months of access to our extensive Resource Center, which includes
on-call specialists to assist clients with job search advice, job board
postings, contact databases, business databases, training center, and job
search publications, a computer center for on-line research, database
access, and job search document creation, and a phone/fax center.
We invite clients and their spouses or partners to attend an orientation
Launch meeting that provides an overview of the TMG Job Search System. Clients
are also introduced to the Resource Center and its databases, internet recruiter
lists, job postings board, and career library.
We explain to clients that their efforts will directly impact the success
of their search, and require them to dedicate productive time each week to their
program.
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The Career Insight Sessions noted above are small seminars consisting of
5-12 participants which cover the following topics:
Launch (2 hours). Provides an introduction to career management and an
overview of the entire Job Search System, which will form the foundation
of the client's job search.
Defining the Target (4 hours). Helps clients clarify their career
objectives.
Creating a Powerful Resume (4 hours). Produces resumes and provides
techniques for getting results.
Making the Right Connections (4 hours). Enables clients to access the
unadvertised job market by connecting with decision makers.
Direct Approaches that Get Interviews (4 hours). Teaches methods for
turning more of a client's contacts and leads into interviews.
Interviews that Get Job Offers (4 hours). Improves the client's ability to
convert interviews into job offers.
Negotiating a Better Job Offer (4 hours). Hones a client's ability to
negotiate better terms in a job offer.
2. CareerChoice system
The CareerChoice System sells for $1,395 which can be financed. It targets
customers who typically have been working in the same position for several
years, and now feel stuck in a job, a company, or an entire line of work that is
not fulfilling.
These individuals often cannot afford to start over in their careers, and
wonder if they are qualified to do anything else. The CareerChoice System also
helps people just entering the workforce and seeking direction.
CareerChoice clients spend 8-10 hours with a personal career consultant
who administers a variety of tests and helps clients understand their career
options and plan specific, tangible career change. Activities include the
following:
Diagnosing career situations, concerns, needs, expectations, goals, and
objectives.
Analyzing Meyers-Briggs Type Indicator, Strong-Campbell Interest
Inventory, Entrepreneurial Test, and personality assessments.
Assessing qualifications: education, experience, strengths, weaknesses,
skills, interests, financial requirements, geographical preferences, and
overall marketability.
Determining long-term career direction.
Determining short-term job market positioning, job functions, level of
income, responsibility and authority; and target industries.
Developing a career mission statement that incorporates long-term
direction and short-term job market positioning.
Understanding salary data and job availability.
3. Outplacement services
We offer full and partial outplacement services to companies who lay off
employees and wish to help employees find new jobs as quickly as possible.
Outplaced employees are provided with selected training and resources from
the TMG Job Search system. We quote prices based upon the number of employees
serviced and the type of services to be performed.
We offer employers a variety of programs to train laid-off workers in job
search skills:
The Full-Service Program costs $2,995 per person and includes four months
of personal coaching, workshops, resume preparation, and access to our
Resource Center.
The Quick Start Program costs $1,195 per person and includes the above
services for one month.
A 3-day Training Program on the employer's site costs $4,500 per group of
up to 15 people, and includes our workshops.
A 3-day Training Program in our offices costs $395 per person and includes
our workshops.
4. Hiring training
We teach a series of "Hiring Basics" courses to the companies who wish to
upgrade the hiring skills of their management team.
There are four separate half-day courses, taught for $125 each. Courses
rotate weekly and are taught either at our offices or the client's site.
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Marketing
The market
We believe that the market for career-related services will continue to
grow as job insecurity and changes in the employment market compel individuals
to take control of their own careers.
We believe that the desire of individuals to seek satisfaction in their
employment has created a significant market for the types of products and
services we provide.
Target customers
The target customers for Career Satisfaction products are individual
employees-whether they are currently working for themselves or others, preparing
to work, or searching for work.
Our typical customer works full time and has some college or professional
training. Usually, customers have at least 5 years of experience in the work
force and are not top executives in an organization. The target customers for
the Corporate Productivity products are companies requiring assistance with
employment issues.
Advertising
We attract clients through a variety of advertising methods. Approximately
25% of individuals who come in to the office for a sales appointment purchase
the service.
Direct mail. We have experimented with direct mail for the Career
Satisfaction products in the Salt Lake City area.
Internet World Wide Web Site www.themurdockgroup.com: We use the website
to advertise our products and services.
Radio. We use 60-second radio spots to advertise our services.
Newspaper. We advertise in the classified section of the local newspapers
weekly.
Referrals from Satisfied Job Seekers. Our current customers are one of our
best referral sources. As we acquire more customers, we increase our
potential for profitability.
Referrals from Satisfied Employers. Leads for the Corporate Productivity
services are generated from companies who are satisfied with the job
applicants we have sent to them. We offer employers a free Job Postings
Membership which gives them access to our database of qualified
professionals. Companies who subscribe receive discounts on hiring
training, and outplacement.
Steps in the sales process
Individuals who respond to our Career Satisfaction advertising are handled
as follows:
Pre-Qualification of Callers. We interview callers, explain our approach
and fee structure, and set an appointment with a career advisor. Callers
are pre-qualified over the phone to verify that they have a college degree
or marketable work experience and financial resources to pay our fees.
Meeting with Career Advisor. The client visits our offices for the
scheduled appointment, and spends an hour with a career advisor. The
advisor explains our services and takes the client on a tour of the
facility to meet various specialists and examine resources such as the
training rooms, job postings board, computerized databases, and career
library.The advisor emphasizes that we are working for the client, not for
any potential employer and that we charge a flat fee. We do not charge
based upon future wages, as do many employment agencies.
Our Corporate Productivity sales representatives visit companies who
respond to our direct mailings or telephone calls.
Financing
Clients unable to pay in cash or by credit card are given the opportunity
to pay a deposit and execute a promissory note to the Murdock Group. We perform
credit checks on each. Currently, approximately 90% of our clients execute a
note.
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Competition
In our view, the job acquisition industry is large and fragmented into
many niches with some competitors being successful only in certain niches, and
with no company having acquired dominance in the industry.
Many competitors have products and services that are marketed as being
similar to ours, but we believe that our customers can quickly distinguish the
difference between our products and services and those of our competitors.
We compete primarily with a large number of privately-owned companies.
Some of our competitors have greater financial, marketing, distribution,
technical and other resources than we do.
Our two major competitors for career consulting services are well
established nationally. Both were founded by career industry experts who still
run the company:
Bernard Haldane was founded in 1945 after World War II to assist returning
veterans in the job market. Bernard Haldane primarily services executives
who earn over $100,000 per year, and charges a fee of 8% of the
executive's salary, generally more than twice our fee.
Cornell Business Associates was founded in the 1980's and also primarily
services executives. It too charges an 8% fee. CBA has sales offices
around the country, but flies customers to a California location for 1-2
days of consulting.
In addition, Robert Half offers staffing, permanent placement, recruiting,
and consulting services. Right Management Consulting is involved in career
development/management and consulting. Provant provides training, career
development, and product sales.
The principal competitive factors in obtaining customers appear to be a
strong sales and marketing program, life-changing and unique principles,
competitive pricing, and good customer service. We believe our strong emphasis
on these factors will be an important competitive advantage.
Operations
Property
We lease class A office space for all our operations, believing that a
professional appearance is important when providing services to professionals.
Our headquarters and Salt Lake City office are located at 5295 So.
Commerce Drive, Suite 400, Salt Lake City, Utah 84107. We occupy 30,000 square
feet, for which we pay $41,000 per month.
The lease term expires on roughly 2/3 of this space in June, 1999, at
which time we plan to renegotiate. The lease term for the remainder of the space
expires in 5 years.
The Seattle office located at 10900 NE 8th Street, Suite 810, Bellevue,
Washington 98004-4405 has 5,700 square feet for which we currently pay $13,000
per month. The lease term expires on September 30, 2003.
Employees
As of September 30, 1998, we had 46 full-time employees. Our employees are
not represented by a labor union and are not subject to any collective
bargaining arrangement. We have never experienced a work stoppage and believe
that we have good relations with our employees.
Our headquarters operations, located in the same building as the Salt Lake
City office, employs 17 people. The Salt Lake City office employs 16 people, and
the Seattle office employs 13 people.
Intellectual property and proprietary rights
We rely on a combination of copyright and trademark laws and contractual
provisions to protect our proprietary rights. We have applied for trademark
registration for "The Murdock Group," "The Murdock Group Career Satisfaction
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Corporation," and "The Fastest Way to a Better Job." We will continue to
evaluate the registration of additional service marks and trademarks, as
appropriate.
Litigation may be necessary to protect our proprietary technology.
Litigation may be time-consuming and costly. Despite our efforts to protect our
proprietary rights, unauthorized parties may attempt to copy aspects of our
services or to obtain and use information that we regard as proprietary.
In addition, there are few barriers to entry into the market for our
services. It is possible that one or more of our competitors, most of whom have
far greater resources than we do, will independently develop technologies that
are substantially equivalent or superior to ours.
Litigation
As of the date of this prospectus there is no litigation pending or
threatened against us.
We are controlled by two major shareholders
Your investment will be subject to control by a small group of insiders
who may not share your views.
Even if all of the shares offered by this prospectus are sold, chief
operating officer KC Holmes and president Heather Stone, brother and sister,
will own 54% of the voting stock.
They can elect all Directors, perpetuate themselves in office, and
otherwise exercise control of the Murdock Group. There are no cumulative voting
rights for directors. See "Management."
Our management has controlled all company business operations to date and is
subject to conflicts of interest
Investors are subject to the risk that our current managers have placed or
will place their personal interests ahead of the interest of all shareholders.
Our management is subject to various conflicts of interest arising out of
their relationship with the Murdock Group. All agreements and arrangements
between our management and us are not the result of arms' length negotiations.
This prospectus was prepared, and an opinion of counsel rendered, by our
in-house General Counsel Stanford Smith. He is also a shareholder.
Rapid expansion of our business is important to our success, but may impose
business risks we would not otherwise face
We believe that rapidly expanding our operations by opening offices
throughout the Western United States, and eventually the entire country, is
important to our success for the following reasons:
Additional offices may provide additional revenue from which we can cover
our administrative expenses, recoup our research and development costs,
and generate greater profits;
Widespread advertising and name recognition will improve our marketing and
may deter others from competing with us.
Managing rapid expansion will pose many challenges to our business. We
will face greater overhead, increased marketing and support costs, exposure to
legal risk, and exposure to other general hazards associated with entry into new
markets.
In order to manage this growth, we must improve and expand our operating
systems, augment financial and management systems, and hire, train, and manage
new employees. We may not be able to manage these changes effectively, which
could result in significant losses.
We cannot be certain that our expansion plans will succeed, and even if we
do open more offices they may not be profitable.
The loss of our president and chief executive officer could reduce our chances
for success
We are highly dependent upon the skills of our present executive officers,
even though none of them has managed a company in the employment business. See
"Management."
In particular, our CEO, KC Holmes, and our President, Heather Stone, have
played a substantial role in the development and management of our business.
Their services will be crucial for the successful management of our expansion
plans.
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If they leave us, or if they are unable to perform their duties, our
chances for success could be significantly reduced. We do not have employment
agreements with them, but we believe that their ownership stake in the Murdock
Group will motivate them to remain with us.
Even if all the shares we are offering are sold, they will own 54% of our
stock.
Our agreement to indemnify our officers and directors to the maximum extent
permitted by law could affect our profitability
Our bylaws say we will indemnify our officers and directors against all
claims arising out of our business operations to the maximum extent permitted by
law, so long as there is no intentional wrongdoing.
This provision could cost the Murdock Group a substantial sum if
financially significant claims are made against our officers and directors.
The Securities and Exchange Commission and state securities regulators
believe that this provision violates public policy and should not be enforced.
The price of our shares was arbitrarily determined by our board of directors
Our share price was arbitrarily determined by our Board of Directors based
upon its estimate of future operating results, and bears no relationship to our
current operating results, book value, net worth, or financial statements.
The Board considered several factors, including an evaluation by
management of the history of and prospects for the industry in which we compete,
and our prospects for earnings.
These factors are largely subjective, and we make no representation as to
any objectively determinable value of the shares. We cannot be sure that any
subsequent purchaser of shares will be willing to pay this price or more for
shares.
Shareholders are subject to the risk that the shares have a value
substantially less than the purchase price.
Shareholders will not receive dividends in the near future, if at all
We have never declared a dividend and do not presently intend to pay any
dividends.
Future dividends, if any, will depend on our profitability, financial
condition, capital requirements and other considerations determined by the Board
of Directors. Any future agreements with lenders may also restrict our ability
to pay dividends.
We presently intend to retain earnings, if any, for use in the operation
and expansion of the business, and therefore do not anticipate paying any cash
dividends in the foreseeable future.
We will not pay dividends until the bonds are repaid, and other future
debt or other covenants may restrict the payment of dividends. Shareholders are
subject to the risk that they will receive no return on their investment in the
near future, if at all.
Shareholders are subject to the risk that the value of shares may never equal
the price they have paid for them
The share you pay $5 for will be worth only 57 cents in book value
immediately after your purchase.
Our book value is a negative $.57 per share as of September 30, 1998. This
figure is calculated by subtracting our liabilities from our assets, and
dividing the difference by the number of shares outstanding.
This due in part to the fact that current shareholders paid much less than
$5 for their shares. If all shares offered by this prospectus are sold, the book
value will increase to $.5690 per share.
We are asking $5 for each share you buy. The percentage difference between
your $5 before the purchase of a share, and the book value of your share
immediately after purchase, is called "dilution."
If all shares offered by this prospectus are sold, you will experience
dilution of 88.6%; your $5 will decline in value by $ 4.4310. The value of your
shares is diluted by the past issuance of shares at prices lower than you are
paying and the business losses incurred by the Murdock Group.
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This means that for each dollar you invest you will bear a
disproportionately larger share of any Murdock Group loss, and receive a
disproportionately smaller share of any gain.
In addition, your proportionate ownership of the Murdock Group can be
further diluted by the issuance of more shares at prices below what you will
have paid.
We have granted options to certain people to acquire shares at less than
the public trading price, if in fact the shares become publicly tradeable. See
"The Shares." Exercise of these options will further dilute your shares.
Without significant help from broker-dealers we may not be able to raise enough
capital through this offering
Shareholders are subject to the risk that without significant help from
broker-dealers we may not be able to raise enough capital through this offering
to carry our out business plans and operate profitably.
This offering will be sold primarily by our officers. We will attempt to
recruit members of the National Association of Security Dealers to participate
in the offering but may not succeed.
Even if we are able to recruit brokers, they may not be able to sell any
of the shares or bonds. See "Plan of Distribution."
We will not seek to reduce share trading price fluctuations through stabilizing
transactions
In the absence of transactions that stabilize the price, our share price
could be hurt by adverse market conditions. See "Plan of Distribution."
We have not engaged anyone to stabilize, maintain or otherwise affect the
price of shares including generating stabilizing bids.
In general, purchases of shares for the purposes of stabilization could
cause the share price to be higher than it might be if these purchases were not
made.
Interruption in the sale of our shares will reduce the probability of selling
all 2,500,000 shares
Shareholders are subject to the risk that an interruption in the sale of
our shares will reduce the probability of selling all 2,500,000 shares, thus
reducing the capital available to the Murdock Group.
Four of our current shareholders are selling a total of 181,500 shares for
their own account, representing 6.8% of the total shares to be sold in this
offering. The Murdock Group will not receive any proceeds from the sale of their
shares.
We will sell these shares along with the Murdock Group's shares, at the
rate of 68 selling shareholder's shares for each 1,000 Murdock Group shares.
When 1,000,000 Murdock Group shares have been sold, we will sell all
unsold shares of selling shareholders before the sale of Murdock Group shares
recommences.
If our trading price drops to less than $5 per share, market liquidity could be
reduced
If our shares become subject to the "penny stock rules" adopted under
Section 15(g) of the Securities Exchange Act of 1934, our shares would probably
experience reduced levels of trading activity.
The "penny stock rules" apply to companies whose shares trade at less than
$5 per share or whose tangible net worth is less than $5,000,000, or $2,000,000
if the company has been operating for three or more years.
These rules require, among other things, that brokers who trade penny
stock to persons other than established customers must complete certain
documents before any penny-stock transaction can occur.
Specifically, the broker must determine whether the investor can bear the
potential financial loss and must provide the investors with SEC documentation
about the risks associated with penny stocks.
Additionally, a broker-dealer must provide the customer with current bid
and offer quotations for the penny stock, the compensation of the broker-dealer
and its salesperson in the transaction, and monthly account statements showing
the market value of each penny stock held in the customer's account.
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Many broker-dealers deem these precautions burdensome and choose not to
trade penny stocks. This could result in reduced trading activity in the
secondary market, which might make the shares difficult or impossible to sell.
If we sell approximately 2,000,000 shares offered by this prospectus, we
believe we can qualify our shares for listing on the Nasdaq SmallCap Market. If
we succeed, our shares will not be subject to the penny stock rules.
Holders of these securities are subject to the risk that they may be unable to
liquidate their investment
Because there is no public market for our shares or bonds, holders of
these securities may be unable to liquidate their investment in the event of
emergency or for any other reason.
These securities may not be acceptable as collateral for loans.
Consequently, you must consider the shares and bonds to be a long-term
investment.
If we fail to arrange for public trading of the shares, or sell the
Murdock Group for cash or merge with a nonpublic company, your investment may be
illiquid indefinitely.
While we do not currently meet the requirements to have our shares listed
on the Nasdaq SmallCap Market, we hope to qualify if we can sell approximately
2,000,000 shares.
If we fail to meet these standards, we plan to apply for a listing of our
shares on the NASD OTC Bulletin Board. Until any listing, we believe we can
arrange with an NASD broker-dealer to provide a matching service for persons
wishing to buy or sell shares when this offering has ended.
Persons interested in buying or selling our shares would provide a
participating broker-dealer with information about the number of shares and
desired price, and the broker-dealer would notify both sides if and when there
was a match and would assist in closing the transaction.
At present, however, there is no agreement between us and a registered
securities broker-dealer. If we are unable to arrange for some type of market
for exchange of the shares, shareholders will be subject to the risk that they
cannot easily sell their shares.
Even if we are successful in arranging a trading market for the shares,
shareholders are subject to the risk that the trading price may be substantially
less than the price paid for the shares.
The price of the shares after the completion of this offering can vary due
to general economic conditions and forecasts, our general business condition,
the release of our financial reports, and sales of shares that were outstanding
prior to this offering.
See "The Shares."
Earlier investors might sell shares, possibly reducing the trading price
Whenever any shares are sold, it could cause the price of your shares to
keep from rising, or to go down.
As of September 30, 1998, 10,488,740 shares were outstanding. We sold
these shares in private transactions relying on exemptions from registration
under the Securities Act. We repurchased 2,000,000 of these shares and hold them
in our treasury.
These shares are all "restricted securities" within the meaning of Rule
144 adopted under the Securities Act of 1933, and can be resold only after
registration, or compliance with this rule or another exemption from
registration. Rule 144 permits the sale of these restricted shares, but only if
all the following qualifications are met:
They have been held for at least 1 year;
They are sold a little at a time, no more than the greater of 1% of the
number of shares outstanding, or the average weekly trading volume of the
shares during the 4 weeks preceding the sale, within a 3 month period;
We have made current information about the Murdock Group publicly
available;
The shares are sold through a broker-dealer; and
The seller files Form 144 with the Securities and Exchange Commission if
more than 500 shares or $10,000 of shares are sold.
Rule 144 has many other provisions, and we suggest that you discuss it
with your attorney if you have any questions.
The 1-year holding period has expired for most of the currently
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outstanding shares, and the owners of these shares could begin selling
immediately, potentially depressing the market price. See "The Shares."
We may be unsuccessful in our attempts to list our shares for public trading
If our shares are not accepted for trading on a public exchange, they may
be worth substantially less and you will have a more difficult time selling
them.
There has been no public market for the shares prior to this offering, and
we have not yet applied to list our shares for trading on the Nasdaq SmallCap
Market because we do not yet meet any of the listing requirements set forth
below.
Although we expect to apply for listing of the shares on the Nasdaq
SmallCap Market at the conclusion of this offering, there can be no assurance
that we will be able to qualify for this listing or that an active public market
for our shares will develop or be sustained.
Listing standards include, with other requirements, the following:
$4,000,000 in net tangible assets;
A public float of 1,000,000 shares, with a minimum market value of
$5,000,000; and
A number of qualitative corporate governance requirements.
Because of our current debt, we must sell approximately 2,000,000 shares
to meet the net tangible asset requirement.
If the Murdock Group fails to be listed on, or maintain qualification for
its shares to trade on the Nasdaq SmallCap Market, the shares could be subject
to certain rules of the Securities and Exchange Commission relating to "penny
stocks."
These rules require broker-dealers to make a suitability determination for
purchasers and to receive the purchaser's prior written consent for a purchase
transaction, thus restricting the ability of purchasers and broker-dealers to
sell the stock in the open market.
Nasdaq has reserved for us the ticker symbol "JOBS." This reservation will
expire on April 6, 1999, unless we are successful in listing our shares by that
date.
Even if listed on the smallcap market, our shares may be delisted
Even if our shares initially qualify for trading on the Nasdaq SmallCap
Market, we may not be able to maintain certain minimum requirements for
continued listing.
Continued inclusion requires that we meet the following minimum
requirements:
$2,000,000 in net tangible assets, a $35,000,000 market capitalization, or
net income of $500,000 in two of the three prior years;
500,000 shares in the public float valued at $1,000,000 or more;
Two active market makers for the shares;
At least 300 shareholders; and
Other qualitative requirements.
If we are unable to meet Nasdaq's maintenance requirements, our shares may
be delisted from Nasdaq. If so, we would seek to conduct trading in the
over-the-counter markets in the so-called "pink sheets" or the NASD's
"Electronic Bulletin Board."
As a result, the liquidity of the shares could be impaired, not only in
the number of securities which could be bought and sold, but also through delays
in the timing of the transactions, reductions in security analysts' and the news
media's coverage of the Murdock Group, and lower prices for our securities than
might otherwise be reached.
Shareholders are subject to the risk that the value of shares may never
equal the price they have paid for them.
The trading price of our shares may be highly volatile
If our operating results are poor, or below the expectations of public
market analysts and investors, it is probable that the price of the shares will
decline.
The stock market has recently experienced significant price and volume
fluctuations. These have affected the market prices of stocks of many companies,
and have often been unrelated to the operating performance of these companies.
General market fluctuations may also adversely affect the market price of our
shares.
-20-
<PAGE>
Our shares may well fall below the initial public offering price.
Factors such as quarterly fluctuations in financial results, announcements
of new products and services by us or our competitors, and changes in financial
estimates by securities analysts, may cause the market price of our shares to
fluctuate, perhaps substantially.
We may not be able to repay the bonds
We must retire the bonds, together with interest compounded annually at
15%, 4 years from the date of sale. This will create an additional liability on
our balance sheet and impose a burden on our cash flow as the maturity date
nears.
Since we are not establishing a sinking fund to finance repayment of the
bonds, it is possible that we will not have enough income, or the ability to
raise or borrow enough money, to repay the principal and interest as the bonds
become due.
No trading market will exist for our bonds
We will not seek to list the bonds for trading in any public market. Bonds
are an illiquid investment which you must hold for 4 years, receiving no
interest or principal until the maturity date.
Information Available to You
You can obtain a copy of the full securities registration statement on
Form SB-2, of which this prospectus is a part, at the public reference
facilities maintained by the Securities and Exchange Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates.
This information is also available on the Commission's World Wide Web site
at www.sec.gov.
You may also request these documents, free of charge, from us at our
headquarters located at 5295 South Commerce Drive, Salt Lake City, Utah 84107.
Our telephone number is (801) 268-3232, our fax number is (801) 268-3289, and
our web site address is www.themurdockgroup.com.
Although we do not currently file reports with the Securities and Exchange
Commission, once this offering is concluded the Securities Exchange Act of 1934
requires us to file reports, proxy statements and other information with the
Securities and Exchange Commission at least quarterly.
We will send purchasers of our shares and bonds an annual report
containing audited financial statements approximately five months after the
close of each fiscal year.
All our SEC reports will be available on our web site. This information is
also available to you at the Commission's reference library and web site, and at
our offices. We are changing rapidly and the information in this prospectus will
soon be out of date.
If we succeed in listing our shares for trading on the Nasdaq SmallCap
Market, you can inspect and copy the reports, proxy and information statements
and other information which we may file at the public reference facilities
maintained by the Nasdaq Stock Market at 1735 K Street, N.W., Washington, D.C.
20006.
-21-
<PAGE>
Management
The table below provides the names, ages, and current positions of our
officers and directors. Brief biographies are set forth for each.
<TABLE>
<CAPTION>
Name Age Company Office Board of Directors
- ---- --- -------------- ------------------
<S> <C> <C> <C>
KC Holmes 31 Chief Executive Officer Director
Heather J. Stone 29 President, Secretary Chairman of the Board, Director
Richard O. Flack 54 VP of Operations
Chris L. Kenney 36 General Manager, SLC Office
Christopher E. Leonard 25 Chief Info. Systems Officer
Brad L. Stewart 41 Financial Officer*
Stanford S. Smith 54 In-House General Counsel
</TABLE>
Directors
Our current directors are:
KC Thane Holmes, Director, Chief Executive Officer, age 31. Mr. Holmes
received a B.A. degree from Brigham Young University in Psychology with a minor
in Business and Accounting in 1992.
Prior to founding Envision Career Services, L.L.C. and acquiring The
Murdock Group in 1996, he served as a technical sales representative for
Provider Solutions, an Elk Ridge, Utah based software developer from 1995 to
1996, and an account executive and technical engineer for Ameritech Library
Services of Provo, Utah, a creator of custom software for America's largest
libraries, from 1991 to 1995.
He is an owner of Open Seas Trading Company, a marketing business, a
former owner of a Provo-based real estate investment firm, and a former owner of
Classic Coupons, a Provo-based coupon business. He is a licensed real estate
agent and certified Oracle Database Developer.
Heather J. Stone, Director, President, age 29. Ms. Stone received an
M.B.A. from the University of Phoenix with a focus on marketing and strategic
planning in 1992, and a B.A. in English from Brigham Young University in 1990.
She served as Director of Product Management for ViewSoft, Inc., a
Provo-based software firm, from 1994 to 1996, and a Product Line Manager for
Novell, Inc., a networking software firm, for several years. She was a technical
writer for Clyde Digital Systems (RAXCO), an Orem, Utah-based software company,
from 1987 to 1991. She has contributed articles to technical journals and won
several writing awards.
Mr. Holmes and Ms. Stone are brother and sister.
We plan to add additional members to our Board of Directors to meet the
Nasdaq SmallCap Market requirement for two outside directors. We are working to
obtain insurance coverage for our directors and officers, and will add these
directors when coverage is available. Directors are elected annually.
Executive officers
The backgrounds of our CEO, KC Holmes, and our President, Heather Stone,
appear in "Directors" above. Additional officers include the following:
O. Richard Flack, Vice President of Operations, age 54. Prior to joining
The Murdock Group, Mr. Flack received a B.A. in Marketing in 1966 from the
University of Utah, and served as General Manager of Valley Fair Mall from 1968
to 1997. He served as the president of the West Valley Area Chamber of Commerce.
Mr. Flack joined The Murdock Group in June, 1997, after going through The
Murdock Group program as a client.
-22-
<PAGE>
Chris L. Kenney, General Manager of Salt Lake City Office, age 36. Mr.
Kenney earned degrees in Data Processing from Utah Technical College in 1984,
and Information Management from Brigham Young University in 1987. He managed
operations in customer support and third-party sales for Clyde Digital Systems
from 1987 to 1990, in sales for Fresh Technology Group from 1990 to 1991, in
product management for Raxco/Axent Technologies from 1993 to 1995, and in
product line management and network engineering for Ameritech Library Services
from 1995 to 1998.
Brad L. Stewart, Financial Officer, age 41. From 1996 to 1998 he served as
Executive Vice President and Chief Operating Officer of Marker International, a
public company. He directed Marker's initial public offering and a secondary
offering while serving as its Vice President and Chief Financial Officer from
1991 to 1996. From 1986 to 1991 he was a manager of the audit department in the
Phoenix, Arizona office of Arthur Andersen, after serving as a senior accountant
in its Atlanta, Georgia office from 1983 to 1986. He received a B.S. in
accounting from Brigham Young University in 1983. Mr. Stewart began work at the
Murdock Group on October 16, 1998, and will assume the responsibility of the
Murdock Group's principal financial officer on February 1, 1999.
Christopher E. Leonard, Chief Information Systems Officer, age 25. Mr.
Leonard received a B.S. in English with a minor in Philosophy from the
University of Puget Sound in Tacoma, Washington in 1995. He co-founded Coastlink
Corporation, a corporate Internet Service Provider in Salt Lake City, Utah, in
1996. Later that year he began Coastlink Consulting, a network consulting
company. He specializes in the use of technology to gather, organize, store and
distribute all types of information.
Stanford S. Smith, In-house General Counsel, age 54. Mr. Smith obtained
his J.D. degree from the University of Utah College of Law in 1971, and has
practiced corporate law in the Salt Lake City, Utah area since that time, with
an emphasis in the legal issues related to high-growth companies. He has served
as a lecturer in strategic planning for the international consulting firms
Shipley Associates and James A. Bent & Associates. Mr. Smith is a former member
of the Utah House of Representatives, and a former adjunct professor of business
law at the University of Utah College of Business.
Executive compensation
Our Chief Executive Officer, KC Holmes, and our President, Heather Stone,
each received total compensation of $72,000 during our last fiscal year, which
ended on December 31, 1997. No officer or director received compensation in
excess of $100,000 during 1997.
We have not paid bonuses or granted perquisites to our executive officers.
Brad Stewart is the only employee who has been granted stock options. All our
employees, including the officers and directors, receive medical, dental, and
disability insurance paid by the Murdock Group.
Director compensation
Our Board of Directors consists of two members, KC Holmes and Heather
Stone, who serve without special compensation. During the next 90 days we plan
to add two outside directors, and one officer, to our Board. We plan to hold
board meetings quarterly, paying outside directors approximately $2,500 per
meeting.
Standing committees of directors
After we have added two outside directors to the Board, we plan to
establish an Audit Committee and Compensation Committee, each to be composed of
one inside director and two outside directors.
The Audit Committee will make annual recommendations to the Board of
Directors respecting the appointment of our independent public accountants,
discuss and review the scope and the fees of the prospective annual audit and
review the results thereof with the independent public accountants.
It will also review and approve non-audit services of the independent
public accountants, review compliance with existing major accounting and
financial policies, review the adequacy of our financial organization and review
management's procedures and policies relative to the adequacy of our internal
accounting controls.
-23-
<PAGE>
The Compensation Committee will review and approve annual salary and bonus
ranges for all executive officers, and recommend to the Board of Directors the
terms and conditions of employee benefit plans.
Related party transactions
KC Holmes, a director and officer of the Murdock Group, owed the Murdock
Group $9,440, $66,358 and $240,286 as of December 31, 1996 and 1997, and
September 30, 1998, respectively. This open loan bears interest at 8%, has no
maturity date, and is based on an oral agreement. We have provided an allowance
for these receivable amounts.
Heather Stone, a director and officer of the Murdock Group, owed the
Murdock Group $0, $19,737 and $91,208 as of December 31, 1996 and 1997 and
September 30, 1998, respectively. This open loan bears interest at 8%, has no
maturity date, and is based on an oral agreement. We have provided an allowance
for these receivable amounts.
During the nine months ended September 30, 1998, we borrowed $70,000 from
Scott Holmes, a brother to both KC Holmes and Heather Stone, who are directors
and officers of the Murdock Group. In addition, during the nine months ended
September 30, 1998, the Company advanced Scott Holmes $75,000. Both amounts were
outstanding at September 30, 1998, and bear interest at approximately 18%.
We regularly purchase computer hardware, software, and services from
Coastlink Consulting, which is a sole proprietorship registered in the State of
Utah. The owner of Coastlink Consulting is Chris Leonard who is also an officer
and employee of the Murdock Group.
The amounts paid to Coastlink Consulting for the years ended December 31,
1996, December 31, 1997 and for the nine months ended September 30, 1998, were
$0, $68,495 and $7,102, respectively.
We have a consulting agreement with an owner of The Pinebrook Group, which
is a sole proprietorship registered in the State of Utah. The owner of Pinebrook
is Martin Collins, who was also a shareholder in The Murdock Group Career
Satisfaction Corporation, until the Murdock Group repurchased all of the shares
owned by Mr. Collins.
As part of the agreement Mr. Collins is allowed to borrow approximately
$10,000 per month from the Company at 6% interest. The amounts outstanding for
the periods December 31, 1996, December 31, 1997 and September 30, 1998 were $0,
$0, and $79,299. The balance will be repaid by Mr. Collins based on the future
profitability of the Pinebrook Group.
Interest paid to related parties for the years ended December 31, 1996 and
1997, and for the nine months ended September 30, 1998 was approximately $3,521,
$23,670 and $50,564, respectively.
We have a revolving line of credit with interest at a rate of 10% annually
calculated on month end outstanding balances, with Open Seas Trading Company, a
Utah corporation.
Open Seas is owned 38% by KC Holmes who is a director and officer of the
Murdock Group. As of December 31, 1996, December 31, 1997 and September 30, 1998
Open Seas owed the Murdock Group $0, $28,846, and $298,024. Open Seas repaid all
outstanding amounts in October, 1998.
Principal shareholders
The following table shows certain information known to us regarding the
beneficial ownership of the shares as of September 30, 1998. It illustrates
share ownership as adjusted to reflect the sale of the shares being offered for
the following:
Each Shareholder we know to own beneficially 5% or more of the outstanding
shares;
Each director; and
All directors and executive officers as a group.
We believe that these beneficial owners, based on information they have
furnished, have sole investment and voting power with respect to their shares,
subject to community property laws where applicable.
Indemnification of officers and directors
As allowed by the Utah Business Corporations Act, our bylaws provide that
the liability of the officers and directors of the Murdock Group for monetary
damages shall be eliminated to the fullest extent permissible under Utah law.
-24-
<PAGE>
<TABLE>
<CAPTION>
Directors, Executive Shares Owned Percentage of Shares Owned Percentage of Shares
Officers, and Owners of Before Offering Shares Before After Offering (3) After the Offering (4)
5% or More of the the Offering (2)
Shares (1)
<S> <C> <C> <C> <C>
KC Holmes* 3,038,842 35.80% 2,963,842 26.97%
Heather Stone* 3,038,842 35.80% 2,963,842 26.97%
Richard Flack 12,000 0.14% 12,000 0.11%
Chris Kenney 5,000 0.06% 5,000 0.05%
Christopher Leonard 12,800 0.15% 12,800 0.12%
Lance Heaton 300,000 3.53% 300,000 2.73%
Brad Stewart* 84,000 .99% 70,000 .64%
Stanford S. Smith* 612,718 7.22% 595,218 5.42%
------- ----- ------- -----
All Directors and Officers
as a Group 7,104,202 83.69% 6,922,702 63.01%
</TABLE>
*Selling Shareholders
We did this to eliminate the personal liability of an officer or director
for monetary damages in an action brought by or in the right of the Murdock
Group for breach of duty to the Murdock Group or its shareholders.
It does not, however, indemnify directors for intentional wrongdoing. This
provision does not limit or eliminate our rights or the rights of any
shareholder to seek non-monetary relief such as an injunction or rescission in
the event of a breach of a director's duty of care.
We understand that the Securities and Exchange Commission takes the
position that insofar as the foregoing provision may be invoked to disclaim
liability for damages arising under the Securities Act of 1933, the provision is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
This limitation of liability also does not affect the availability of
equitable remedies such as injunctive relief or rescission. We are now working
to obtain directors' and officers' liability insurance. When this is in place,
we will add two outside directors.
Legal proceedings
We are not aware of any legal proceedings within the last 5 years against
any director, officer, significant employee, or candidate for any of these
positions, which involve a petition under the Bankruptcy Act or any State
insolvency law or of any receiver, fiscal agent or similar officer appointed by
a court:
For the business or property of any of these people or any partnership in
which any of them was general partner or within 2 years before the time of
this kind of filing, or
For any corporation or business association for which any of them served
as an executive officer within 2 years before the time of this kind of
filing.
Nor are we aware of any of any officer or director being convicted in a
criminal proceeding.
-25-
<PAGE>
The Shares
Shares
The authorized capital stock of the Murdock Group consists of 100,000,000
shares class A common stock at no par value. Our Articles of Incorporation also
authorize us to issue 100,000,000 shares of class B non-voting common stock, but
we have not issued any of these shares.
As of September 30, 1998, we had 30 shareholders, holding a total of
8,488,740 shares. The Class A shares have the following characteristics:
Holders are entitled to one vote per share on all matters submitted to a
vote of our shareholders and may not cumulate votes for the election of
directors.
Holders have the right to receive dividends when, as, and if declared by
the Board of Directors from funds legally available for this purpose.
Upon liquidation of the Murdock Group, holders are entitled to share
proportionately in any assets available for distribution to shareholders
after payment of all Murdock Group obligations, including the bonds.
Holders have no preemptive rights, i.e., the first rights to acquire any
additional shares issued by the Murdock Group, and have no rights to
convert their shares into any other securities.
All shares now outstanding are fully paid for and nonassessable.
Shares are not redeemable.
Determination of offering price
Prior to this offering there has been no market for our shares. The
offering price has been determined by our Board of Directors based upon its
estimate of future earnings prospects, and not upon any determination of current
value. See "Plan of Distribution."
Dilution
On the date of this prospectus, we had a net tangible book value of a
negative $4,855,069, or a negative .57 per share. The book value per share is
equal to a company's total assets, less its total liabilities, divided by its
total number of shares of shares outstanding.
If we sell all 2,500,000 shares we are offering, our net tangible book
value at the conclusion of the offering will be approximately $6,194,976, or
$.56 per share. This represents an immediate increase in book value of $1.13 per
share to existing shareholders and an immediate dilution of $4.44 per share to
new investors purchasing shares in this offering.
The following tables illustrates the per share dilution in net tangible
book value per share to new investors and other information about the shares:
Initial offering price per share $ 5.00
Net tangible book value before
offering (4,855,069)
Net tangible book value per share
before the offering$ (.57)
Increase in net tangible book value
per share attributable to the cash
payment by new investors $11,050,000
Net tangible book value per share
after offering $.56
Dilution per share to new investors $4.44
New Current
Investors Shareholders
Number of shares
purchased 2,500,000 8,448,740
Percentage of total
shares purchased 22.75% 77.25%
Total consideration
paid $12,500,000 $1,012,830
Percentage of total
consideration paid 92.5% 7.5%
Average price per
share paid $5.00 $0.12
-26-
<PAGE>
Trading market
The shares are not currently listed for trading on any exchange. If we
sell at least 2,000,000 of the shares offered by this prospectus, we will apply
to list our shares for trading on the Nasdaq SmallCap Market at the conclusion
of this offering, but we cannot guarantee that our application will be approved.
If we fail to meet Nasdaq's standards, we plan to apply for a listing of
our shares on the NASD OTC Bulletin Board. Our proposed trading symbol is
"JOBS."
Selling shareholders
Four of our current shareholders are offering 181,500 of their own shares
for sale as part of this offering. If all of these shares are sold, these
officers will receive $907,500, less a proportionate share of sales commissions
and offering expenses.
We will sell these shares along with the Murdock Group's shares, at the
rate of 68 selling shareholder's shares for each 1,000 Murdock Group shares,
calculated monthly. When 1,000,000 Murdock Group shares have been sold, we will
sell all unsold shares of selling shareholders before the sale of Murdock Group
shares recommences.
Shares eligible for future resale
Upon completion of this offering, assuming the sale of all shares, we will
have outstanding 10,988,740 shares.
Of these shares, the 2,681,500 shares sold in this offering will be freely
tradable without restriction or further registration under the Securities Act.
Any shares owned by an "affiliate" of the Murdock Group will be subject to the
resale limitations of Rule 144 adopted under the Securities Act.
In general, under Rule 144 a person who has beneficially owned shares for
at least one year, including "affiliates" as that term is defined under the
Securities Act, is entitled to sell, within any 3-month period, a number of
shares that does not exceed the greater of the following:
One percent (1%) of the then outstanding shares of the shares, or
The average weekly trading volume in the shares during the four calendar
weeks immediately preceding the date on which the notice of sale is filed
with the Commission.
Sales under Rule 144 are subject to certain requirements relating to
manner of sale, notice and availability of certain current public information
about the company.
A person who is not deemed to have been an "affiliate" of the company at
any time during the 90 days immediately preceding the sale and who has
beneficially owned shares for at least three years is entitled to sell such
shares under Rule 144(k) without regard to these limitations.
The postoffering fair value of our shares, whether or not any secondary
trading market develops, is variable and may be impacted by the business and
financial condition of the Murdock Group, as well as factors beyond our control.
Sales of substantial amounts of shares in any public market could cause
lower market prices and even make it difficult for us to raise capital through a
future offering of equity securities.
Stock options
As of September 30, 1998, options to acquire our shares were held by five
individuals and trusts.
Martin Collins, a former employee and founder of the Murdock Group, has an
option to acquire 800,000 shares. He may acquire these shares at a discount of
15% during 1999.
Reta Fawson, B&S Family Trust, and Argentum Family Trust, none of which
are affiliated with us, purchased our convertible bonds for an aggregate price
of $240,000 in May of 1998. This gave them the option of acquiring shares at a
discount of 20% from the public offering price if our shares were registered
with the SEC, but only during the offering period.
During a 6-month period following the listing of such shares on a public
exchange, these bonds may be converted to shares at a discount of 20% from the
average share trading price during the 30-day period prior to exercise of the
option.
-27-
<PAGE>
During the period from 7 to 18 months after the listing date, these bonds
may be converted to shares at a discount of 10% similarly calculated.
Brad Stewart, a Financial Officer, has an option to acquire 100,000 shares
at $5 per share, vesting at the rate of 25,000 per year for four years.
Transfer agent and registrar
The transfer agent and registrar for our shares is Interwest Transfer
Company, Inc., 1981 East Murray Holladay Road, Suite 100, Salt Lake City, Utah
84117, phone (801) 272-9294, fax (801) 277-3147.
-28-
<PAGE>
The Bonds
Bond characteristics
We are offering $3,000,000 in Murdock Group bonds to be sold in increments
of $1,000, with a minimum investment of $1,000. The bonds have a 4-year term,
and will bear interest at 15% per annum compounded annually and paid with the
principal at maturity.
We may prepay and retire the bonds at any time upon 30-day's written
notice to a bond holder. All principal and accrued interest with respect to a
called bond must be paid within 15 days of the call date.
Payment of the principal and interest on the bonds is secured solely by
our assets. We will not establish a sinking fund for retirement of the bonds. A
sinking fund is an accumulating pool of capital intended to repay bond principal
and interest.
Bondholders will be dependent upon our ability to generate income, or
otherwise obtain sufficient capital, to pay the principal and interest of the
bonds at the time of maturity.
No master indenture has been adopted in connection with the bonds and no
trustee has been appointed to protect the rights of bondholders.
If we default upon payment to any bondholder, such holder must proceed
individually, or join with other unpaid bondholders, to collect any damages from
us. We have not obligated ourselves to cover the expenses of such collection
efforts.
We will not seek to list the bonds for trading in any public market. Bonds
are an illiquid investment which you must hold for 4 years, receiving no
interest or principal until the maturity date.
We will not pay any dividends to our shareholders until all these bonds
have been retired. We will act as registrar for the bonds.
Rights in liquidation
There are no voting rights associated with the bonds. If you purchase
bonds, you will be a general unsecured creditor, not an owner, of the Murdock
Group.
In the event we dissolve, our creditors, including the bondholders, must
be fully paid before any liquidating distributions are made to Shareholders.
-29-
<PAGE>
Plan Of Distribution
Offering of securities
We are offering the shares and bonds at the offering price set forth on
the cover page of this prospectus, with a minimum investment of $1,000 required
for either shares or bonds.
We plan to seek the support of NASD member firms which are recognized
market makers with the intention of obtaining their assistance in the creation
of a viable market in the shares for the benefit of our shareholders.
Our Board of Directors has arbitrarily set the price at which the shares
are offered. The price has no relationship to our book value per share, our
current earnings, or other generally accepted measurements of value.
Agreements with broker-dealers
We plan to enter agreements with registered securities broker-dealers, in
which they will agree to use their best efforts to sell our shares and bonds in
exchange for a cash sales commission of 10% of the proceeds they raise.
We will agree to indemnify these firms against liabilities incurred as a
result of any untrue statement of a material fact contained in the prospectus,
or as a result of the omission of a material fact necessary in order to make the
statements in the prospectus, in light of the circumstances, not misleading.
In the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
Based on the number of unsold shares and bonds, we will periodically
allocate our securities among these participating broker-dealers.
There are no plans, proposals, arrangements or understandings with any
potential sales agent, other than our officers, with respect to participating in
the distribution of our securities. If such participation develops in the
future, we will amend this prospectus to identify such persons.
No stabilizing transactions
We have not engaged anyone to stabilize, maintain or otherwise affect the
price of shares including generating stabilizing bids.
In general, purchasing shares for the purposes of stabilization or to
reduce a short position could cause the share price to be higher than it might
be if no such purchases were made. In the absence of transactions that stabilize
the price, our share price could be hurt by market conditions.
Sales by our officers
As shown on the following table, some of our officers will also sell
shares and bonds. These officers are KC Holmes, Heather Stone, Lance Heaton, and
Randy Burnham.
They believe they qualify to participate in the marketing of our shares
and bonds under the terms of Rule 3a4-1 (a) of the Securities Exchange Act of
1934 because they-
Are not subject to any statutory disqualification;
<TABLE>
<CAPTION>
Name No. of Shares Proceeds of Sale % of Shares Owned After
to be Sold Completion of Offering
<S> <C> <C> <C>
KC Holmes, CEO 75,000 $375,000 26.97%
Heather Stone, President 75,000 $375,000 26.97%
Brad Stewart, Financial Officer 14,000 $ 70,000 .64%
Stanford Smith, General Counsel 17,500 $ 87,500 5.42%
-------- -------- --------
Total 181,500 $907,500 60.0%
</TABLE>
-30-
<PAGE>
Will not be compensated for sales services;
Are not associated persons of broker dealers;
Perform substantial duties for the issuer otherwise than in connection
with securities transactions;
Were not associated with a broker or dealer within the 12-month period
prior to this offering; and
Will not participate in selling a securities offering for any issuer more
than once every 12 months.
Shares to be sold by shareholders
As shown in the table above, four of our current shareholders are selling
a total of 181,500 shares for their own account, representing 6.8% of the total
shares to be sold in this offering.
The Murdock Group will not receive any proceeds from the sale of their
shares. KC Holmes, CEO, will sell 75,000 shares; Heather Stone, President and
Chairman of the Board, 75,000, Brad Stewart, Financial Officer, 14,000; and
Stanford Smith, In-house General Counsel, 17,500.
We will sell these shares along with the Murdock Group's shares, at the
rate of 68 selling shareholder's shares for each 1,000 Murdock Group shares,
calculated monthly. When 1,000,000 Murdock Group shares have been sold, we will
sell all unsold shares of selling shareholders before the sale of Murdock Group
shares recommences.
We will sell shares of selling shareholders only in the manner the Murdock
Group's shares will be sold as described in this offering. They will not be sold
through any specially negotiated transactions, block sales, or other means.
Offering period
The offering will continue until subscriptions for all shares and bonds
are received, until 9 months from the effective date of the offering, or until
we terminate the offering, whichever event first occurs.
Indemnification of officers, directors, and selling agents
Our bylaws provide that we shall indemnify any officer, director or former
officer or director, to the full extent permitted by law.
How to subscribe
Please mail your check or money order payable only to "The Murdock Group,"
together with a completed subscription agreement, directly to us at 5295 South
Commerce Drive, Suite 300, Salt Lake City, Utah 84107, attention: share
purchase.
We will deposit the proceeds from the sale of shares and bonds to our bank
account by noon of the business day following receipt.
We reserve the right to reject any subscription in whole or in part, or to
accept subscriptions in any order, for any or no reason. If we accept your
subscription, we will mail you your share or bond certificate within 30 days of
the day we receive your subscription.
Experts
The audited consolidated balance sheets of The Murdock Group Career
Satisfaction Corporation and Envision Career Services, L.L.C. as of September
30, 1998, and December 31, 1997 and 1996, and the related statements of
operations, stockholders' deficit and cash flows for each of these years,
included in this prospectus, have been included herein in reliance on the report
of David T. Thomson, P.C., independent certified public accountant, given on the
authority of that firm as experts in accounting and auditing.
All legal matters in connection with this prospectus have been passed upon
by Stanford Smith, a shareholder and our in-house General Counsel.
-31-
<PAGE>
The Murdock Group
Career Satisfaction Corporation
Financial Statements
September 30, 1998 and September 30, 1997 (unaudited)
and
December 31, 1997 and 1996
with
Independent Auditor's Report
Table or Contents
Independent Auditor's Report..................................................35
Consolidated Balance Sheets................................................36-37
Consolidated Statements of Operations.........................................38
Consolidated Statement of Stockholders' Equity................................39
Consolidated Statements of Cash Flows.........................................40
Notes to Consolidated Financial Statements.................................41-59
<PAGE>
Independent Auditor's Report
Board of Directors
The Murdock Group Career Satisfaction Corporation
I have audited the consolidated balance sheets of The Murdock Group Career
Satisfaction Corporation as of September 30, 1998 and December 31, 1997 and 1996
and the related consolidated statements of operations, stockholders' equity and
cash flows for the nine months ended September 30, 1998, for the year ended
December 31, 1997 and from inception (August 5, 1996) to December 31, 1996.
These financial statements are the responsibility of the Company's management.
My responsibility is to express an opinion on the financial statements based on
my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the consolidated financial position of The Murdock Group
Career Satisfaction Corporation, as of September 30, 1998, and December 31, 1997
and 1996, and the consolidated results of their operations and their cash flows
for the periods indicated, in conformity with generally accepted accounting
principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As shown in the consolidated
financial statements, the Company has experienced a consolidated net loss of
$3,782,106 for the nine month period ended September 30, 1998 and has incurred
substantial net losses since its inception. At September 30, 1998 and December
31, 1997, current liabilities exceed current assets by $3,669,405 and $1,140,334
respectively, and total liabilities exceed total assets by $4,797,473 and
$1,868,152, respectively. These factors, and the others discussed in Note 8,
raise substantial doubt about the Company's ability to continue as a going
concern. The consolidated financial statements do not include any adjustments
relating to the recoverability and classification of recorded assets, or the
amounts and classification of liabilities that might be necessary in the event
the Company cannot continue in existence.
David T. Thomson, P.C.
Salt Lake City, Utah
December 28, 1998
-35-
<PAGE>
THE MURDOCK GROUP
CAREER SATISFACTION CORPORATION
CONSOLIDATED BALANCE SHEETS
As of May 31, 1998 and December 31, 1997 and 1996
<TABLE>
<CAPTION>
ASSETS
September 30
1998 1997 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 1,968 $ 1,604 $ 5,994
Current portion of contracts receivable - Note 3 557,678 381,955 25,768
Current portion of contracts receivable - related parties 5,423 5,273 --
Prepaid expenses and other 72,414 23,402 6,929
Current portion of amounts due from related parties - Note 9 449,949 1,800 --
Deferred offering costs 94,658 -- --
--------------- --------------- ---------------
Total current assets 1,182,090 414,034 38,691
--------------- --------------- ---------------
PROPERTY AND EQUIPMENT, at cost
Computer equipment 168,823 83,291 1,240
Equipment, furniture and fixtures 195,088 88,915 9,815
Leasehold improvements and other 69,274 4,195 2,035
Property and equipment held under capital leases 346,858 259,642 5,521
--------------- --------------- ---------------
780,043 436,043 18,611
Less: accumulated depreciation and amortization (120,030) (39,875) (859)
--------------- --------------- ---------------
Total property and equipment, net 660,013 396,168 17,752
--------------- --------------- ---------------
OTHER ASSETS
Contracts receivable - less current portion - Note 3 250,378 427,917 35,677
Contracts receivable - related party - less current portion 3,267 7,033 2,245
Intangible assets, net - Note 2 57,596 59,294 65,278
Deposits and other assets 247,670 36,618 5,030
Investments and other assets 25,000 25,000 --
Amounts due from related parties, net - Note 9 1,834 28,846 9,440
--------------- --------------- ---------------
Total Other Assets 585,745 586,708 117,670
--------------- --------------- ---------------
TOTAL ASSETS $ 2,427,848 $1,396,910 $ 174,113
=============== =============== ===============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
-36-
<PAGE>
THE MURDOCK GROUP
CAREER SATISFACTION CORPORATION
CONSOLIDATED BALANCE SHEETS
As of September 30, 1998 (Unaudited) and December 31, 1997 and 1996
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY
September 30,
1998 1997 1996
--------------- -------------- --------------
<S> <C> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 342,708 $ 249,346 23,977
Accrued payroll costs and wages payable 161,828 201,620 7,497
Short-term debt - Note 15 2,710,000 113,000 130,353
Short-term debt - related parties - Note 16 282,500 128,571 64,326
Current portion of long-term debt - Note 17 595,562 18,307 --
Current portion of long-term debt - related parties - Note 18 270,600 -- --
Current portion of obligation under capital leases - Note 7 90,681 59,066 4,559
Other accrued liabilities 150,442 40,144 6,135
Unearned revenue - Note 2 247,174 744,314 77,046
--------------- -------------- --------------
Total current liabilities 4,851,495 1,554,368 313,893
--------------- -------------- --------------
LONG-TERM LIABILITIES
Long-term debt - Note 17 1,751,832 1,563,420 --
Long-term debt-related parties - Note 18 118,489 -- --
Convertible debenture - Note 13 240,000 -- --
Obligations under capital leases - Note 7 263,505 147,274 --
--------------- -------------- --------------
Total long-term liabilities 2,373,826 1,710,694 --
--------------- -------------- --------------
COMMITMENTS AND CONTINGENCIES - Note 6
STOCKHOLDERS' EQUITY (DEFICIT)
Common Stock - Class A, no par value, 100,000,000 shares authorized;
8,488,740 (Unaudited),9,880,000 and 9,880,000 shares
issued and outstanding respectively 1,012,830 988 988
Common Stock - Class B, no par value, no shares issued and
outstanding -- -- --
Treasury Stock Class A-Common 2,000,000 Shares (45) -- --
Subscriptios Receivable-Common Stock-Class A (160,000) -- --
Accumulated Deficit (5,650,258) (1,869,140) (140,768)
--------------- -------------- --------------
Total stockholders' equity (deficit) (4,797,473) (1,868,152) (139,780)
--------------- -------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,427,848 $1,396,910 $ 174,113
=============== ============== ==============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
-37-
<PAGE>
THE MURDOCK GROUP
CAREER SATISFACTION CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Nine Months Ended September 30, 1998 and 1997, For the Year Ended
December 31, 1997, and From August 5, 1996 (Inception) to December 31, 1996
<TABLE>
<CAPTION>
September 30,
--------------------------
1998 1997 1997 1996
----------- ----------- ----------- -----------
(Unaudited)
<S> <C> <C> <C> <C>
SERVICE REVENUES, inclusive of interest charged $ 2,348,420 $ 342,396 $ 694,093 $ 33,662
Less: Contract cancellations (646,042) (47,671) (101,543) (3,665)
Contract discounts (274,070) (32,513) (40,720) (2,541)
----------- ----------- ----------- -----------
Total, net 1,428,308 262,212 551,830 27,456
DIRECT COST OF SERVICES 1,454,086 338,798 667,402 46,163
----------- ----------- ----------- -----------
Gross profit (loss) (25,778) (76,586) (115,572) (18,707)
----------- ----------- ----------- -----------
OPERATING EXPENSES
Selling, General and administrative 1,941,480 360,817 704,566 70,810
New products research and development 718,701 274,667 556,854 37,904
Depreciation and amortization 76,074 17,574 32,796 2,578
----------- ----------- ----------- -----------
Total operating expenses 2,736,255 653,058 1,294,216 111,292
----------- ----------- ----------- -----------
INCOME (LOSS) FROM OPERATIONS (2,762,033) (729,644) (1,409,788) (129,999)
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE)
Interest expense (702,864) (138,252) (248,387) (9,893)
Interest income 102,139 -- 126 112
Non-trade receivables write-off and other, net (419,348) (66,836) (70,323) --
----------- ----------- ----------- -----------
Total, net (1,020,073) (205,088) (318,584) (9,781)
----------- ----------- ----------- -----------
NET INCOME (LOSS) $(3,782,106) $ (934,732) $(1,728,372) $ (139,780)
=========== =========== =========== ===========
EARNINGS PER SHARE $ (0.41) $ (0.09) $ (0.17) $ (0.01)
=========== =========== =========== ===========
WEIGHTED AVERAGE CLASS A SHARES (9,184,370) 9,880,000 9,880,000 9,880,000
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
-38-
<PAGE>
THE MURDOCK GROUP
CAREER SATISFACTION CORPORATION
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the Nine Months Ended September 30, 1998 (Unaudited), For the Year Ended December 31, 1997,
and From August 5, 1996 (Inception) to December 31, 1996
Common Stock - Class A
----------------------------------------------
Number of Number of Stock
shares Amount shares held in Amount Subscription Amount
outstanding treasury Receivable Deficit
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE, August 5, 1996 (Inception) - $ - - $ - $ - $ -
* Shares issued to initial stockholders at incorporation 9,880,000 988 - - - (988)
Net loss - - - - - (139,780)
----------- ----------- ----------- ----------- ----------- -----------
BALANCE, December 31, 1996 9,880,000 988 - - - (140,768)
Net loss - - - - - (1,728,372)
----------- ----------- ----------- ----------- ----------- -----------
BALANCE, December 31, 1997 9,880,000 988 - - - (1,869,140)
* Shares issued pursuant to offering of promissory
notes at a value of $.01 per share during
January 1998 150,000 1,500 - - - -
* Cancellation of treasury shares, February 1998 at $.0001
per share (29,200) (3) - - - -
* Shares issued to two individuals for services rendered at
$.01 per share 48,000 200 - - - -
* Cancellation of treasury shares, March 1998 at $.0001
per share (20,000) (2) - - - -
* Shares issued to trusts at $.01 per share 25,000 250 - - - -
* Cancellation of treasury shares at $.0001
per share (25,000) (2) - - - -
* Issuance of shares in exchange for members
interest in LLC 8,205,800 - - - - -
* Cancellation of shares received and dissolution
of LLC (8,205,800) (821) - - - 988
Repurchase of shares from initial stockholder at $.0001
per share (800,000) - 800,000 (80) - -
Shares issued to employees as bonus at $.0001
per share 49,500 - (49,500) 5 - -
Shares issued to an induvidual at $.0001
per share 300,000 399,000 (300,000) 30 - -
Shares issued to an individual for cash and subscription
agreement at $1.33 per share 375,940 500,000 - - (160,000) -
Shares issued to an individual pursuant to employment
agreement at $1.33 per share 84,000 8 - - - -
Shares contributed to treasury by (1,549,500) - 1,549,500 - - -
initial stockholders
Net Loss - - - - - (3,271,394)
----------- ----------- ----------- ----------- ----------- -----------
BALANCE, September 30, 1998 (Unaudited) 8,488,740 $502,118 2,000,000 $ (45) $ (160,000) $(5,139,546)
=========== =========== =========== =========== =========== ===========
</TABLE>
* After the effect of recapitalization
The accompanying notes are an integral part of these
consolidated financial statements.
-39-
<PAGE>
<TABLE>
<CAPTION>
THE MURDOCK GROUP
CAREER SATISFACTION CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS For the Nine Months
Ended September 30, 1998 and 1997 (Unaudited), For the Year Ended
December 31, 1997, and From August 5, 1996 (Inception) to December 31, 1996
September 30,
------------------------------
1998 1997 1997 1996
----------- --------- ----------- ---------
(Unaudited)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(3,271,394) $ (934,732) $ (1,728,372) $ (139,780)
Adjustments to reconcile net loss to net cash used
in operating activities
Nonmonetary stock transactions for expenses and other 521,785 - - -
Depreciation and amortization 93,376 24,408 45,550 3,581
Change in operating assets and liabilities
Contracts receivable 1,816 (528,906) (748,427) (161,445)
Contracts receivable - related party 3,616 (2,695) (10,061) (2,245)
Prepaid expenses and other (49,012) (8,506) (16,473) (6,929)
Amounts due from related parties - current (448,149) - (1,800) -
Deferred Offering Costs (94,658)
Intangible assets (11,523) - (550) (68,000)
Deposits and other assets (209,052) (24,101) (33,588) (5,030)
Amounts due from related parties 27,012 (59,475) (19,406) (9,440)
Accounts payable 93,362 113,569 225,369 23,977
Accrued payroll costs and wages (39,792) 76,833 194,123 7,497
Other accrued liabilities 110,298 19,623 34,009 6,135
Unearned revenue (497,140) 481,334 667,268 77,046
----------- --------- ----------- ---------
Net cash used in operating activities (4,289,167) (842,648) (1,392,358) (274,633)
----------- --------- ----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (344,000) (359,968) (417,432) (18,611)
Investments in securities and investment trust - (25,000) (25,000) -
----------- --------- ----------- ---------
Net cash used in investing activities (344,000) (384,968) (442,432) (18,611)
----------- --------- ----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from debt 8,025,978 1,617,271 2,028,402 284,521
Principle payments on debt (3,732,447) (345,883) (198,002) (85,283)
Proceeds from sale of stock 340,000 - - -
----------- --------- ----------- ---------
Net cash provided by financing activities 4,633,531 1,271,388 1,830,400 199,238
----------- --------- ----------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 9,364 43,772 (4,390) (94,006)
CASH AND CASH EQUIVALENTS - BEG OF PERIOD 1,604 5,994 5,994 -
----------- --------- ----------- ---------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 10,968 $ 49,766 $ 1,604 $ (94,006)
----------- --------- ----------- ---------
SUPPLEMENTAL CASH FLOW INFORMATION Cash paid during the year for:
Interest $ 603,547 $ 123,009 $ 218,506 $ 26,632
----------- --------- ----------- ---------
Income taxes $ - $ - $ - $ -
----------- --------- ----------- ---------
SUPPLEMENTAL DISCLOSURES OF NONCASH
INVESTING AND FINANCING ACTIVITIES
Stock issued as compensation $ 510,925
-----------
Stock issued as debt issue cost $ 1,500
-----------
Debt exchange for corporate promissory notes $ 150,000
-----------
</TABLE>
The accompanying notes are an integral part of these
financial statements
-40-
<PAGE>
Notes To Consolidated Financial Statements
Note 1. Nature Of Operations
The Murdock Group Career Satisfaction Corporation (Company) is a
job-search and employment consulting 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 an office in
Seattle, Washington. 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 its dissolution. Envision originally conducted the business
activities explained above which now continue in the surviving corporate entity.
Note 2. Summary Of Significant Accounting Policies
Use of Estimates. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reported periods. Actual results could differ from those estimates.
Consolidation principles. The accompanying consolidated financial
statements include the accounts of the Companies as outlined in the business
combination as explained in note 4. Intercompany transactions and balances have
been eliminated in consolidation.
Net income per share. The computation of net income (loss) per share of
common stock is based on the weighted average number of shares outstanding
during the period presented.
Revenue Recognition. The Company provides most of its services under
various types of contracts for services to be rendered. Revenue for these
services is recognized as service is rendered, and the recognition is based on
contract type. One year contract revenue is amortized evenly by month over a 12
month period. The portion of revenue that is unrecognized remains as unearned
revenue until services have been rendered. A flex contract is amortized evenly
by month over a 4-month period, and the unrecognized portion of revenue remains
as unearned revenue until it has been earned. Revenue for 60-day guarantee and
90-day guarantee contracts is not recognized until the guarantee is fulfilled.
When the guarantee has been fulfilled, the entire portion of revenue is
recognized. Prior to fulfillment of the guarantee, it remains as unearned
revenue. Unearned revenue for the above contract types is $247,174, $744,314,
and $77,046 for the periods ending September 30, 1998, December 31, 1997 and
1996, respectively. 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.
-41-
<PAGE>
Note 2. Summary of Significant Accounting Policies - Continued
Cash and Cash Equivalents. The Company considers highly liquid investments
with an original maturity of three months or less to be cash and cash
equivalents. Cash and cash equivalents are recorded at cost, which approximates
market value.
Property and Equipment. Property and equipment are stated at cost and
depreciated using the straight-line method over their estimated useful lives.
Leasehold improvements are amortized over the terms of the respective leases or
the estimated economic lives of the assets, whichever is shorter. The
depreciation and amortization periods are as follows:
Computer equipment and software 3-5 years
Office equipment 5 years
Art, furniture and fixtures 7 years
Leasehold improvements and other 5 years
Certain art works are artist originals and may or may not be depreciated.
Upon retirement or other disposition of property and equipment, the cost
and related accumulated depreciation and amortization are removed from the
accounts. The resulting gain or loss is reflected in income. Major renewals and
betterments are capitalized while minor expenditures for maintenance and repairs
are charged to expense as incurred.
Intangible Assets. Intangible assets consist of the following amounts as
of September 30, 1998 and December 31, 1997 and 1996:
1998 1997 1996
---- ---- ----
Miscellaneous intangibles ............ $ 15,000 $ 15,000 $ 15,000
Copyright ............................ 53,000 53,000 53,000
Organization costs ................... 550 550 --
Debt issue costs ..................... 11,523 -- --
-------- -------- --------
Total ................................ 80,073 68,550 68,000
Less accumulated amortization ........ (22,477) (9,256) (2,722)
-------- -------- --------
$ 57,596 $ 59,294 $ 65,278
======== ======== ========
Goodwill and organization costs are amortized using the straight-line
method over 5 years. The copyright is amortized using the straight-line method
over 15 years. Debt issue costs are amortized using the straight-line method
over 2 years.
Accounting for the Impairment of Long-Lived Assets. The Company accounts
for impairment of long-lived assets in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of
long-lived Assets and for long-lived Assets to be Disposed of." SFAS 121
requires that long-lived assets be reviewed for impairment whenever events of
changes in circumstances indicate that the book value of the asset may not be
recoverable. The Company evaluates at each balance sheet date whether events and
circumstances have occurred that indicate possible impairment. In accordance
with SFAS No. 121, the Company uses an estimate of the future undiscounted net
cash flows of the related assets over the remaining life in measuring whether
the assets are recoverable.
-42-
<PAGE>
Note 2. Summary Of Significant Accounting Policies -Continued
Income Taxes. Income taxes are provided for the tax effects of
transactions reported in the financial statements and consist of taxes currently
due plus deferred income taxes related primarily to the difference between the
corporation reporting income on the cash basis for tax purposes and the
reporting of income on the accrual basis of accounting for financial statement
purposes. Deferred income taxes represent the future income tax consequence of
those timing differences, which will in the future be taxable or deductible when
the assets or liabilities are recovered or settled.
Concentrations of Credit Risk. The Company's financial instruments that
potentially subject the Company to concentrations of credit risk consist
principally of cash, contracts receivable, and loans to related parties. In the
normal course of business, the Company provides credit terms to its customers.
The Company performs on going credit evaluations of its customers and maintains
allowances for possible losses, but typically does not require collateral.
Unaudited and Audited Interim Information. In the opinion of management,
the unaudited financial statements reflect all adjustments, consisting only of
normal adjustments, necessary to present fairly the results of operations and
cash flows for the nine months ended September 30, 1997. The results of
operations and cash flows for the nine months ended September 30, 1998 and 1997
should not necessarily be taken as indicative of the results of operations and
cash flows for the entire year ending December 31, 1998, and 1997.
Research and Development Costs. Research and Development costs are
expensed as incurred.
Reclassification. Certain accounts have been reclassified to conform with
current presentations.
Note 3. Contracts Receivable - Non Related
Contracts receivable consists of the following:
September 30, December 31, December 31,
CURRENT 1998 1997 1996
--------- --------- ---------
Contracts Receivable $ 685,356 $ 457,732 $ 25,768
Write-Off Allowance (127,678) (75,777) --
--------- --------- ---------
Net $ 557,678 $ 381,955 $ 25,768
========= ========= =========
NON CURRENT
Contracts Receivable $ 307,700 $ 516,009 $ 35,677
Write-Off Allowance (57,322) (88,092) --
--------- --------- ---------
Net $ 250,378 $ 427,917 $ 35,677
========= ========= =========
TOTAL
Contracts Receivable $ 993,056 $ 973,741 $ 61,445
Write-Off Allowance (185,000) (163,869) --
--------- --------- ---------
Net $ 808,056 $ 809,872 $ 61,445
========= ========= =========
-43-
<PAGE>
Note 4. Business Combination
Effective May 31, 1998, the members of the limited liability company
(Envision) exchanged their membership interest for shares of stock in The
Murdock Group Career Satisfaction Corporation (Murdock), a Utah Corporation.
Envision's members conveyed all of their membership interest to Murdock in
exchange for 8,205,800 shares of Murdock stock. As a result of the transaction,
Envision's membership interests in Envision were terminated and Envision was
dissolved. As a result of the exchange, a majority of Murdock stock was owned by
Envision members and they assumed the operating control of the combined entity,
Murdock.
Where the ownership and operating control in the combined entity reside in
shareholders of the acquired corporation, generally accepted accounting
principles require that Envision be treated as the purchaser for accounting
presentation. The business combination of Murdock with Envision was accounted
for as a combination of entities under common control, similar to a pooling of
interests. No acquired assets or liabilities were adjusted to fair value.
Murdock had no operating or material assets or liabilities prior to May 31,
1998, and the financial statements are essentially the historical financial
statements of Envision. Envision's equity has been adjusted to reflect the above
accounting treatment, therefore, consolidated historical data of Envision from
inception has been combined and shown in these financial statements.
Note 5. Investments And Other Assets
The securities investments held by the Company have been classified as
available-for-sale securities. Securities are recorded at fair value and are
recorded in the investments and other assets section on the balance sheet. Any
change in the fair value of the securities during the periods shown is excluded
from earnings and is recorded as a separate component of equity. The Company
paid nothing for the securities held and it is believed that the fair value of
the securities at the periods shown was also zero, so no change in value has
been recorded in the financial statements and there are no unrealized holding
gains or losses.
The Company has a 10% interest in a trust that engages in investing
activities. It paid $25,000 for its ownership interest. Investments in companies
or entities in which the Company has less than a 20% interest are carried at
cost. Dividends received from those companies are included in other income.
Note 6. Noncancelable Operating Leases
The Company leases office facilities under noncancelable operating leases.
Future minimum lease payments under noncancelable operating leases are as
follows:
Calendar Year Ending September 30,
----------------------------------
1998 $ 399,068
1999 493,450
2000 352,107
2001 369,982
2002 386,407
Thereafter 202,885
----------
$2,203,899
==========
-44-
<PAGE>
Note 6. Noncancelable Operating Leases - Continued
Fiscal Year Ending December 31,
1998 $ 361,823
1999 343,036
2000 195,960
2001 208,108
2002 218,800
Thereafter 73,960
----------
$1,401,687
==========
Facility rental expense for the periods ending September 30, 1998 December
31, 1997 and 1996 totaled approximately $307,761, $135,146, and $7,735
respectively.
Note 7. Capital Leases
The Company is the lessee of computer software, hardware, and office
furniture and fixtures under capital leases. The assets and liabilities under
capital leases are recorded at the lower of the present value of the minimum
lease payments or the fair value of the asset. The assets are amortized (or
depreciated) over the lower of their related lease terms or their estimated
productive lives. Amortization (or depreciation) of assets under capital leases
is included in depreciation expense for September 30, 1998, December 31, 1997
and 1996.
Following is a summary of property held under capital leases:
September 30, December 31 December 31,
1998 1997 1996
--------- --------- ---------
(Unaudited)
Computer equipment $ 92,617 $140,256 $ 5,521
Equipment, furniture and fixtures 205,811 70,956 --
Leasehold improvements and other 48,430 48,430 --
--------- --------- ---------
346,858 259,642 5,521
Less: accumulated amortization
(or depreciation) (53,373) (20,295) (184)
--------- --------- ---------
$ 293,485 $239,347 $ 5,337
========= ========= =========
Minimum future lease payments under capital leases for each of the next
five years and in the aggregate at September 30, 1998 and December 31, 1997 are:
Fiscal Year Ending December 31,
1998 $ 38,724
1999 150,618
2000 128,559
2001 51,863
-45-
<PAGE>
Note 7. Capital Leases - Continued
2002 28,321
Thereafter 11,374
----------
Total Minimum Lease Payments 409,459
Less: Executory costs -
----------
Net minimum lease payments 409,459
Less: Amount representing interest (55,273)
----------
Present value of net minimum lease payment 354,186
Less current portion (90,681)
----------
Long-term portion $ 263,505
==========
Fiscal year ending December 31,
-------------------------------
1998 $ 97,938
1999 70,674
2000 61,050
2001 39,106
2002 28,484
2003 -
----------
Total minimum lease payments 297,252
Less: Executory costs -
----------
Net minimum lease payment 297,252
Less: Amount representing interest (90,912)
----------
Present value of net minimum lease payments 206,340
Less current portion (59,066)
----------
Long-term portion $ 147,274
==========
Interest rates on capitalized leases average 28% to 32% and are imputed
based on the lower of Company's incremental borrowing rate at the inception of
each lease or the lessor's implicit rate of return.
Note 8. Going Concern
The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles, which contemplates 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. Further, at September
30, 1998 and December 31, 1997, current liabilities exceed current assets by
$3,669,405 and $1,140,334 respectively, and total liabilities exceed total
assets by $4,797,473 and $1,868,152, respectively.
-46-
<PAGE>
Note 8. Going Concern - Continued
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 moved 13
employees out of the Salt Lake City office to open an office in Seattle. The
additional staff was no longer needed to service the newer, more efficient
product. Other offices are planned beginning in the first quarter, 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 and human resources,
accounting, and operations staff. Management also anticipates a reduction in
cancellations, discounts, and write offs with the new product. Management
expects that completion of the public offering described in Note 11 will enable
the Company to restructure or pay off the majority of its high-interest debts,
thereby reducing monthly interest expense.
To summarize, management's plan for overcoming losses includes increasing
revenues from multiple offices, allocating infrastructure investment across
multiple new locations, reducing cancellations, discounts, and write offs, and
reducing interest expense.
Note 9. Due From Related Parties
Amounts due from related parties consists of the following:
<TABLE>
<CAPTION>
September 30, December 31, December 31,
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Loans to officers, directors and LLC
members. The loans are unsecured
with interest at 8% $ 331,494 $ 86,095 $ 9,440
Less allowance for uncollectibility
due to personal guarantees on other
Company debts (331,494) (86,095) --
Advance due from relative of stockholder,
director, and LLC member, repaid in
October, 1998 (Unaudited) $ 75,000 $ -- $ --
Loan due from employee at 6% interest,
due July 14, 2000, unsecured 4,000 -- --
Loan to an affiliated company through a
revolving line of credit dated November
30, 1996, loans carry interest at 10%,
loan balance is unsecured 298,024 28,846 --
Loan to employee, repaid in
October, 1998 (Unaudited) 67,000 -- --
Employee advances, no interest and
unsecured, paid by payroll deductions 7,759 1,800 --
--------- --------- ---------
Total 451,783 30,646 9,440
Less current portion (449,949) (1,800) --
--------- --------- ---------
Long-term portion $ 1,834 $ 28,846 $ 9,440
========= ========= =========
</TABLE>
-47-
<PAGE>
Note 10. Related Party Transactions
The Company regularly purchases computer hardware, software, and services
from Coastlink Consulting, which is a sole proprietorship registered in the
State of Utah. The owner of Coastlink Consulting is also an officer and employee
of the Company.
The Company has a consulting agreement with an owner and employee of The
Pinebrook Group, which is a sole proprietorship registered in the State of Utah.
The owner employee of Pinebrook was also a shareholder in The Murdock Group
Career Satisfaction Corporation until the Company repurchased all of the shares
owned by the individual (see note 21).
Interest paid to related parties for the years ended December 31, 1996 and
1997, and for the nine months ended September 30, 1998 was approximately $3,521,
$23,670 and $50,564, respectively.
Officers, directors and majority shareholders owed the Company $331,494,
$86,095, and $9,440 as of September 30, 1998 December 31, 1997 and December 31,
1996, respectively. The Company has provided an allowance for these receivable
amounts.
The Company was indebted to employees $340,000, $0, and $0 as of September
30, 1998, December 31, 1997 and December 31, 1996, respectively, relating to a
private placement offering (see note 18), and owed the parents of an employee
$49,089 for funds advanced to the Company under a line of credit arrangement as
of September 30, 1998.
Note 11. Proposed Public Offering
The Company is preparing a prospectus for an initial public offering,
consisting of the sale of Company shares and the issuance of bonds (repaying
principal and 15% interest compounded annually at the end of 4 years). In
addition, four of the corporations stockholders are seeking to sell shares. The
Company is planning to pay a sales commission on the sale of its shares and its
bonds. Direct costs of the offering are estimated to be $200,000. The shares and
bonds issued will be those of the corporation remaining after the business
combination (See Note 4).
Note 12. Employee Leasing Company
The Company is not the employer of record for the employees of the
Company. The Company uses an employee leasing company named Employers Solutions
Group (ESG). ESG is the official employer of record and all benefits are
administered on its plans. This includes, but is not limited to, medical and
dental insurance, flex days off, 401k plan, cafeteria plan, and all applicable
payroll taxes, filings and notifications. ESG bills the Company for the services
it provides.
Note 13. Convertible Bonds
The Company has sold $240,000 of Convertible Bonds, to various trusts
pursuant to a Regulation D Offering utilizing a Disclosure Memorandum dated
April 29, 1998. The bonds are convertible to Class A common shares of the
Company (the "Shares") upon the terms set forth below.
If and when a public offering of Shares is approved by an appropriate
securities regulatory agency, and upon Company receipt of the Bond holders'
notice(s) of intent to convert, the Bonds may be converted to Shares at a
discount of 20% from the offering price, but only until such date, if any, that
the Shares are listed for trading on a public exchange.
After the Listing Date, and upon Company receipt of a conversion notice
from the bondholder(s), the Bond(s) may be converted into Shares only upon the
following terms:
-48-
<PAGE>
Note 13. Convertible Bonds - Continued
During a 6-month period commencing on the Listing Date, the Bonds may be
converted to Shares at a discount of 20% from the average Share trading
price during the 30-day period prior to Company receipt of the conversion
notice.
During the period from 7 to 18 months after the Listing Date, the Bonds
may be converted to Shares at a discount of 10% from the average Share
trading price during the 30-day period prior to Company receipt of the
conversion notice.
The Bonds may be converted to Shares only in increments of $1,000. No
fractional Shares will be issued. Converted Bonds will be canceled upon issuance
of Shares to the converting Bond holder(s).
The Bonds are callable by the Company at any time upon 30-day written
notice (the "Exercise Period") to the Bond holder(s). During the Exercise Period
such Bond holder(s) may elect to convert the Bonds to Shares upon the discount
terms set forth above. If the Company does not receive a conversion notice from
such Bond holder(s) within the Exercise Period, the Company shall pay to such
holders all principal and accrued interest with respect to such Bond(s) within
30 days of the end of the Exercise Period.
As of the present date, the Company's shares have not been approved for
public sale. Accordingly, no conversion notices have been received.
Note 14. Income Taxes
Income tax provision consists of the following:
Current income taxes payable $ -
Deferred tax benefit (20,702)
Allowance for realization 20,702
----------
$ -
===========
Deferred income tax liability or benefit results from timing differences
in the recognition of revenues and expenses for tax and financial purposes. The
source of the timing differences is using the cash basis of accounting for
income tax and accrual accounting for the basis of financial income. The Company
has set up an $20,702 allowance for the tax benefit at September 30, 1998.
Losses prior to the business combination cannot be carried forward or
back. At September 30, 1998 the company had a tax loss which could be carried
forward. The company has also set up an allowance for this tax benefit at
September 30, 1998.
-49-
<PAGE>
<TABLE>
<CAPTION>
Note 15. Short Term Debt
Sept 30, Dec. 31, Dec. 31,
Short-term debt consists of the following: 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Note for purchase of Copyright, dated August 1, 1996, with no stated interest
rate, due April 1, 1997. Unsecured $ -- $ -- $ 53,000
Note with an Individual on September 6, 1996 with 22% interest. Due June 1,
1997. Secured by personal guarantee of officer, director and LLC member -- -- 20,000
Note with an individual dated October 18, 1996 with 20% interest. Due November
18, 1996, with option to extend for additional 30-day increments, secured by
personal guarantee of officer, director and LLC member -- -- 5,000
Note with an individual on November 1, 1996 with 18% interest. Due October 31,
1997. Secured by personal property and personal guarantee of officer,
director and LLC member -- -- 52,353
Note with an individual dated December 31, 1997 with interest of $1,000 per week
outstanding. Due January 5, 1998. Secured by a personal guarantee of
officer, director and LLC member -- 11,000 --
Note with a company dated December 20,1997 with 8% interest. Due date February
20, 1998. Unsecured -- 25,000 --
Note with an investment group dated December 30, 1997 with no interest rate or
due date stated. Unsecured -- 12,000 --
Note with a trust dated November 28, 1997 with 48% interest, due January 30,
1998. Unsecured -- 15,000 --
Note with Trust dated June 10, 1997, 24% interest. Interest only payments of
$1,000 per month for 12 months. Payment of $50,000 due June 10, 1998.
Secured by $50,000 in accounts receivable. Accounts receivable which
originally secured this loan may have been paid off, paid down,
renegotiated, or written off since the loan inception -- 50,000 --
Note with two individuals dated May 20, 1998 with 24% interest. Interest only
payments of $10,000 per month for 6 months. Payment of $500,000 due December
31, 1998. Secured by $500,000 in accounts receivable and personal guarantees
of officers, directors, and major shareholders of Company New accounts
receivable must be substituted every 4 to 6 weeks as accounts receivable
which originally secured the loan become paid off, paid down, canceled,
renegotiated or written off 500,000 -- --
Note with a Trust, dated April 28, 1998, 36% interest. Interest only payments of
$4,500 per month for 12 months. Payment of $150,000 due April 28, 1999
Secured by $150,000 in accounts receivable. Accounts receivable which
originally secured this loan may have been paid off, paid down,
renogotiated, or written off since the loan inception 150,000 -- --
</TABLE>
-50-
<PAGE>
<TABLE>
<CAPTION>
Note 15. Short-Term Debt - Continued Sept 30, Dec. 31, Dec. 31,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Note with a Trust dated January 19, 1998, 36% interest. Interest only payments
of $1,500 per month for 12 months. Payment of $50,000 due January 19, 1999.
Secured by $70,000 in accounts receivable. Accounts receivable which
originally secured this loan may have been paid off, paid down,
renegotiated, or written off since the loan inception. $ 50,000 $ -- $ --
Note with a Trust dated April 28, 1998, 24% interest. Interest only payments of
$800 per month for 12 months. Payment of $40,000 due April 28, 1999. Secured
by $40,000 in accounts receivable. Accounts receivable which originally
secured this loan may have been paid off, paid down, renegotiated, or
written off since the loan inception. 40,000 -- --
Note with a Trust dated May 8, 1998, 24% interest. Interest only payment of
$1,000 per month for 12 months. Payment of $50,000 due May 8,1999. Secured
by $50,000 in accounts receivable. Accounts receivable which originally
secured this loan may have been paid off, paid down, renegotiated, or
written off since the loan inception. 50,000 -- --
Note with a Trust dated May 8, 1998, 24% interest. Interest only payments of
$1,000 per month for 12 months and payment of $25,000 due May 8, 1999.
Secured by $25,000 in accounts receivable. Accounts receivable which
originally secured this loan may have been paid off, paid down,
renegotiated, or written off since the loan inception. 25,000 -- --
Note with a Trust dated May 13, 1998, 24% interest. Interest only payments of
$500 per month for 12 months. Payment of $25,000 due May 13, 1999 Secured by
$25,000 in accounts receivable. Accounts receivable which originally secured
this loan. may have been paid off, paid down, renegotiated, or written off
since the loan inception. 25,000 -- --
Note with a Trust dated April 3, 1998, 36% interest. Interest only payments of
$4,500 per month for 12 months. Payment of $150,000 due April 3,1999.
Secured by $150,000 in accounts receivable. Accounts receivable which
originally secured this loan may have been paid off, paid down,
renegotiated, or written off since the loan inception. 150,000 -- --
Note with a Trust dated April 3, 1998, 36% interest. Interest only payments of
$4,500 per month for 12 months. Payment of $150,000 due April 3, 1999.
Secured by $150,000 in accounts receivable. Accounts receivable which
originally secured this loan may have been paid off, paid down,
renegotiated, or written off since the loan inception. 150,000 -- --
Note with individual dated August 24, 1998 with 24% interest. Interest only
payments of $1,000 per month for 12 months. Payment of $50,000 due August
24, 1999. Secured by $50,000 in accounts receivable and a personal guarantee
of officer, director, and major shareholder of Company. New accounts
receivable must be substituted every 30 days as accounts receivable which
originally secured the loan become paid off, paid down, canceled,
renegotiated, or written off. 50,000 -- --
Note with an Individual dated September 14, 1998 with principal and interest
payment of $44,000 due on October 14, 1998. Unsecured. 40,000 -- --
</TABLE>
-51-
<PAGE>
<TABLE>
<CAPTION>
Note 15. Short-Term Debt - Continued Sept 30, Dec. 31, Dec. 31,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Note with a Company on September 11, 1998 with principal and interest payments
of $210,000 due on October 1, 1998. Unsecured. $ 200,000 $ -- $ --
Note with an Individual dated August 27, 1998 with 36% interest. Due October 27,
1998. Secured by $50,000 in accounts receivable contracts. Accounts
receivable which50,000 originally secured this loan may have been paid off,
paid down, renegotiated, or written off since the loan inception. 50,000 -- --
Note with a Company dated September 21, 1998 with 36% interest. Due December 21,
1998. Unsecured. The Company is currently negotiating an extension of the
due date. 300,000 -- --
Note with an Individual dated September 14, 1998 with 30% interest. Due March
14, 1999. Unsecured. 10,000 -- --
Note with a Trust dated August 26 with 1998, 36% interest. Interest only
payments of $6,000 per month for 4 months. Payment of $200,000 due December
26, 1998 Secured by $200,000 in accounts receivable. Accounts receivable
which originally secured this loan may have been paid off, paid down,
renegotiated, or written off, since the loan inception. Personally
guaranteed by an officer, director and major shareholder of the Company. The
Company is currently negotiating an extension of the due date. 200,000 -- --
Note with a Trust dated September 9, 1998 with 36% interest. Interest only
payments of $3,000 per month for 3 months. Payment of $100,000 due December
9, 1998 Secured by $100,000 in accounts receivable. Accounts receivable
which originally secured this loan may have been paid off, paid down,
renegotiated, or written off, since the loan inception. Personally
guaranteed by an officer, director and major shareholder of the Company. The
company is currently negotiating an extension of the due date. 100,000 -- --
Note with a Company dated September 28, 1998 with 36% interest. Due September
28, 1998. Interest only payments of $2,100 per month for 12 months. Payment
of $70,000 due September 28, 1999. Secured by $70,000 in accounts
receivable. Accounts receivable which originally secured this loan may have
been paid off, paid down, renegotiated, or written off since the loan
inception. 70,000 -- --
Note with an Individual dated August 11, 1998 with 30% interest. Due August 11,
1999. Interest only payments of $550 per month for 12 months. Payment of
$22,000 due August 11, 1999. Secured by $22,000 in accounts receivable.
Accounts receivable which originally secured this loan may have been paid
off, paid down, renegotiated, or written off since the loan inception. 22,000 -- --
Note with an Individual dated August 24, 1998 with 24% interest. Interest only
payments of $778 per month for 12 months. Payment of $38,900 due August 24,
1999. Secured by $38,900 in accounts receivable. New accounts receivable
must be substuted every 4 to 6 weeks as accounts receivable which originally
secured this loan become paid down, paid off, canceled, renegotiated, or
written off; 38,900 -- --
Note with an individual dated September 21, 1998 with 24% interest. Interest
only payments of $1,200 per month for 12 months. Payment of $60,000 due
September 21, 1999. Secured by $60,000 in accounts receivable. New Accounts
receivable must be substituted every 30 days as accounts receivable which
originally secured this loan become paid down, paid off, canceled,
renegotiated, or written off. Personally guaranteed by officers, directors,
and major shareholders of the Company. 60,000 -- --
Note with an Individual dated September 25, 1998 with 30% interest. Due March
25, 1999. Interest only payments of $250 per month. Payment of $10,000 due
March 25, 1999. Unsecured. 10,000 -- --
Note with an induvidual dated July 16, 1998 with 24% interest. Interest only
payments of $222 per month for 12 months. Payment of $11,100 due July 15,
1999. New accounts receivable must be substituted every 4 to 6 weeks as
accounts receivable which originally secured this loan become paid down,
paid off, canceled, renegotiated, or written off. 11,100 -- --
</TABLE>
-52-
<PAGE>
<TABLE>
<CAPTION>
Note 15. Short-Term Debt - Continued Sept 30, Dec. 31, Dec. 31,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Note with an individual dated September 22, 1998 with 24% interest. Interest
only payments of $300 per month for 12 months. Payment of $15,000 due
September 22, 1999 Secured by $15,000 in accounts receivable. Personally
guaranteed by officers, directors, and major shareholders of the Company.
New accounts receivable must be substituted every 30 days as accounts
receivable which originally secured this loan become paid down, paid off,
canceled, renegotiated, or written off. $ 15,000 $ -- $ --
Note with an Individual dated September 9, 1998 with 30% interest. Due March 9,
1999. Interest only payments of $400 per month. Payment of $16,000 due March
9, 1999. Unsecured. 16,000 -- --
Note with a Trust dated June 1, 1998, 36% interest. Interest only payments of
$3,000 per month for 12 months. Payment of $100,000 due June 1, 1999 Secured
by $100,000 in accounts receivable. New accounts receivable must be
substituted as accounts receivable which originally secured the loan become
paid off, paid down, canceled, renegotiated, or written off. Personally
guaranteed by officers, directors and major shareholders of the Company. 100,000 -- --
Advances from Trusts during September 1998, No stated interest. Principal
payment due within 30 days. Unsecured 37,000 -- --
Advances from Individuals during September 1998 with no stated interest. Due
within 30 days. Unsecured. 40,000 -- --
Note with an individual dated September 14, 1998 with 30 % interest. Payment of
$59,125 principal and interest due at maturity, December 14, 1998.
Unsecured. Company in process of negotiating extension of due date. 55,000 -- --
Note with individual dated September 14, 1998 with 30% interest. Payment of $48,
375 principal and interest due at maturity, December 14, 1998. Unsecured.
Company in process of negotiating extension of due date. 45,000 -- --
Note with a trust dated August 13, 1998 with 30% interest. Payment of $45, 900
principal and interest due at maturity, September 13, 1998. Unsecured. Note
paid in full subsequent to audit date. 45,000 -- --
Note with a trust dated August 13, 1998 with 30% interest. Payment of $56,100
principal and interest due at maturity, September 13, 1998. Unsecured. Note
paid in full subsequent to audit date. 55,000 -- --
---------- ---------- ----------
Total short-term debt $2,710,000 $113,000 $130,353
---------- ---------- ----------
</TABLE>
-53-
<PAGE>
<TABLE>
<CAPTION>
Note 16. Short-Term Debt with Related Parties
Sept30, Dec. 31, Dec. 31,
Related party short-term debt consists of the following: 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Note with LLC Members' personal relation dated August 1, 1996 $ -- $ -- $ 10,000
with 10% interest. Due February 7, 1997. Unsecured
Note with LLC Members' personal relation dated August 1, 1996 -- -- 5,000
with 10% interest. Due July 30, 1997. Unsecured
Loan with individual, no stated interest rate or due date, secured by -- -- 15,000
personal guarantee by officer, director and LLC member
Loan with a corporate officer and LLC member, with interest of 8%, -- -- 13,090
Unsecured
Note with an individual on August 1, 1996 with 20% interest. Due March 1997, -- -- 20,000
Unsecured
Revolving line of credit with an affiliated company, with 12% interest on -- -- 1,236
month end balance. Unsecured
Note with an employee dated November 28, 1997 with interest at 25%, -- 20,000 --
and no due date stated. Unsecured
Note with an employee dated November 20, 1997, no interest rate or due -- 15,101 --
date stated. Unsecured
Note with an employee dated October 16, 1997 with no interest rate or -- 5,655 --
due date stated. Unsecured
Note with an employee dated December 31, 1997, no interest rate or due -- 19,000 --
date stated. Unsecured
Note with LLC Member's personal relation dated November 3, 1997 with -- 5,000 --
10% interest, no due date stated. Unsecured
Note with LLC Member's personal relation dated November 20, 1997, -- 10,000 --
with 10% interest, no due date stated. Unsecured
Short-term line of credit with an employee's parents, with 10 112% interest, -- 36,683 --
due December 30, 1998. Unsecured
Short-term note with employee and employee's parents, dated May 21, 1997
with 22% interest. Per agreement, interest is reinvested monthly -- 17,132 --
Payment of principal and interest due at end of agreement
Note with an employee dated July 16, 1998, no interest rate or due 25,000 -- --
date stated. Unsecured
Note with an employee dated July 28, 1998, with 24% interest rate 16,500 -- --
Due May 13,1999. Unsecured
Note with an employee dated September 1, 1998, no interest rate or due
date stated. Unsecured 25,000 -- --
Advance from personal relation of officer, director, and shareholder
dated July 29, 1998 with no interest rate or due date stated 19,000 -- --
Advances from related parties dated September 22-30, 1998
with no stated interest, due in less than 30 days 197,000 -- --
-------- -------- --------
Total short-term debt with related parties $282,500 $128,571 $ 64,326
-------- -------- --------
</TABLE>
-54-
<PAGE>
<TABLE>
<CAPTION>
Note 17. Long-term Debt
Sept 30, Dec. 31, Dec. 31,
Long-term debt consists of the following: 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Note with a Trust dated June 1, 1997 18% interest. Interest only payments of
$900 per month for 36 months. Payment of $60,000 due June 1, 2000. Secured
by $60,000 in accounts receivable. Accounts receivable which originally
secured this loan may have been paid off, paid down, cancelled,
renegotiated, or written off, since the loan inception. $ 60,000 $ 60,000 $ --
Note with a Trust dated July 28, 1997, 18% interest. Interest only payments of
$5,625 per month for 24 months. Payment of $375,000 due August 1, 1999.
Secured by $375,000 in accounts receivable. Accounts receivable which
originally secured this loan may have been paid off, paid down, cancelled,
renegotiated, or written off since the loan inception. 375,000 375,000 --
Note with a finance group dated December 24, 1997, 30% interest. Interest only
payments of $1,250 per month for 24 months. Payment of $50 000 due December
24, 1999. Secured by personal guarantee of officer, director, and major
shareholder of the Company. 50,000 50,000 --
Note with a finance group dated December 22, 1997, 30% interest. Interest only
payments of $1,250 per month for 24 months. Payment of $50,000 due December
22, 1999. Secured by personal guarantee of officer, director, and major
shareholder of the company. 50,000 50,000 --
Note with a Trust, dated February 1, 1997, 24% interest. Interest only payments
of $2,000 per month for 36 months. Payment of $100,000 due February 1, 2000.
Secured by $100,000 in accounts receivable. Accounts receivable which
originally secured this loan may have been paid off, paid down, cancelled,
renegotiated, or written off since the loan inception. 100,000 100,000 --
Note with a Trust, dated March 1, 1997, 24% interest. Interest only payments ,of
$2000 per month for 36 months. Payment of $100,000 due March 1 , 2000
Secured by $100,000 in accounts receivable. Accounts receivable which
originally secured this loan may have been paid off, paid down, cancelled,
renegotiated, or written off since the loan inception. 100,000 100,000 --
Note with a Trust, dated March 1, 1997, 24% interest. Interest only payments of
$2,000 per month for 36 months. Payment of $100,000 due April 1, 2000.
Secured by $100,000 in accounts receivable. Accounts receivable which
originally secured this loan may have been paid off, paid down, cancelled,
renegotiated, or written off since the loan inception. 100,000 100,000 --
Note with a Trust dated April 10, 1997, 30% interest. Interest only payments of
$2,500 per month for 36 months. Payment of $100,000 due May 1, 2000. Secured
by $100,000 in accounts receivable. Accounts receivable which originally
secured this loan may have been paid off, paid down, cancelled,
renegotiated, or written off since the loan inception. 100,000 100,000 --
Note with a Trust dated July 15, 1997, 18% interest. Interest only payments of
$975 per month for 36 months. Payment of $65,000 due July 15, 2000. Secured
by $65,000 in accounts receivable. Accounts receivable which originally
secured this loan may have been paid off, paid down, renegotiated, or
written off since the loan inception. 65,000 65,000 --
</TABLE>
-55-
<PAGE>
<TABLE>
<CAPTION>
Note 17. Long-Term Debt - Continued Sept 30, Dec. 31, Dec. 31,
1998 1997 1996
---- ---- ----
<S> <C> <C>
Note with a Trust dated August 15, 1997, 18% interest. Interest only payments of
$1,350 per month for 36 months. Payment of $90,000 due August 15, 2000.
Secured by $90,000 in accounts receivable. Accounts receivable which
originally secured this loan may have been paid off, paid down,
renegotiated, or written off since the loan inception. $ 90,000 $ 90,000 --
Note with Trust dated September 25, 1997, 18% interest. Interest only payments
of $2,625 per month for 24 months. Payment of $175,000 due September 25,
1999. Secured by $175,000 in accounts receivable. Accounts receivable which
originally secured this loan may have been paid off, paid down,
renegotiated, or written off since the loan inception. 175,000 175,000 --
Note with Trust dated October 21, 1997, 18% interest. Interest only payments of
$2,475 per month for 24 months. Payment of $165,000 due October 21, 1999.
Secured by $165,000 in accounts receivable. Accounts receivable which
originally secured this loan may have been paid off, paid down,
renegotiated, or written off since the loan inception. 165,000 165,000 --
Note with an individual dated February 26, 1997, 18% interest. Monthly principal
and interest payments of $362 per month for 36 months with a maturity date
of February 26, 2000. Secured by $20,000 in accounts receivable and by
personal guarantees of officers, directors, and major shareholders of the
Company. Accounts receivable which originally secured this loan may have
been paid off, paid down, renegotiated, or written off since the loan
inception. 5,387 7,736 --
Note with a Trust dated July 21, 1997, 24% interest. Interest only payments of
$720 per month for 24 months. Payment of $36,000 due August 1, 1999. Secured
by $36,000 in accounts receivable. Accounts receivable which secured this
loan may have been paid off, paid down, renegotiated, or written off since
the loan inception. 31,000 36,000 --
Note with a finance group, dated February 13, 1998, 30% interest. Interest only
payments of $1,250 per month for 24 months. Payment of $50,000 due February
13, 2000. Secured by personal guarantees of officers, directors, and major
shareholders of the Company. 50,000 -- --
Note with a finance group , dated February 5, 1998, 30% interest. Interest only
payments of $2,500 per month for 24 months. Payment of $100,000 due February
5, 2000. Secured by personal guarantees of officers, directors, and major
shareholders of the Company. 100,000 -- --
Note with a finance group, dated March 23, 1998, 30% interest. Interest only
payments of $3,750 per month for 24 months. Payment of $150,000 due March
23, 2000. Secured by personal guarantees of officers, directors, and major
shareholders of the company. 150,000 -- --
Note with a finance group, dated April 17, 1998, 30% interest. Interest only
payments of $5,250 per month for 24 months. Payment of $210,000 due April
17, 2000. Secured by personal guarantees of officers, directors, and major
shareholders of the company. 210,000 -- --
Note with a finance group, dated August 15, 1997. No stated interest rate.
Monthly princpal and interest payments of $999 per month for 60 months.
Secured by various furniture and computer equipment. -- 30,012 --
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Note 17. Long-Term Debt - Continued Sept 30, Dec. 31, Dec. 31,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Notewith a finance group, dated October 1, 1997. No stated interest rate.
Monthly principal and interest payments of $1,987 per month for 60 months.
Secured by various computer equipment. $ -- $ 77,979 $ --
Note with a finance group, dated May 8, 1998, 18% interest. Monthly principal
and interest payments of $667 per month for 72 months. Secured by computer
software. 27,476 -- --
Note with a finance group, dated May 26, 1998. 18% interest. Monthly principal
and interest payments of $690 per month for 72 months. Secured by artwork. 28,650 -- --
Note with a finance group dated May 1, 1998. 18% interest. Monthly principal and
interest payments of $6,662 per month ($948 of which is applied to capital
leases payable) for 72 months. Secured by various furniture, computer
equipment, software, and artwork. 247,013 -- --
Note with a finance group, dated July 15, 1998, 18% interest. Interest plus
principal payments of $475 per month for 68 months. Secured by various
furniture items and artwork. 19,470 -- --
Note with a finance group, dated August 15, 1998, 18% interest. Interest plus
principal payments of $1,188 per month for 67 months. Partially secured by
various furniture items and artwork. 48,398 -- --
---------- ---------- ----------
TOTAL LONG TERM DEBT 2,347,394 1,581,727 --
LESS CURRENT PORTION (595,562) (18,307) --
---------- ---------- ----------
LONG-TERM DEBT $1,751,832 $1,563,420 --
========== ========== ==========
</TABLE>
Following are maturieties of long-term debr for each of the five years
ending December 31,
1998 $ 10,679
1999 893,144
2000 1,177,742
2001 62,514
2002 75,109
Thereafter 128,206
----------
Total long term debt $2,347,394
----------
Note 18 - Long-Term Debt With Related Parties
Pursuant to a private offering, the Company sold 375 units to related
parties. Each unit consisted of a promissory note and 400 shares of the
Company's Class A common stock. The promissory note has an interest of 16% and
matures 1 year from the date of issuance. The holder has an option to extend the
maturity date for an additional year. If the option is exercised, the Company is
obligated to pay the holder interest of 18% for the two-year period. As of
September 30, 1998, the Company's long term obligations with related parties are
as follow:
Promissory notes issued in conjunction with offering $375,000
Less repayment during 1998 (35,000)
Line of credit with an employee's parents, with
10 1/2% interest, no specified due date - Unsecured 49,089
---------
Total 389,089
Less current portion (270,600)
---------
Long-term debt to related parties $ 118,489
=========
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<PAGE>
Note 19. Assets Used As Collateral
At September 30, 1998 and December 31, 1997 and 1996, $345,375, $68,375
and $0 respectively of fixed assets not held under capital leases were
collateral for debt. Substantially all of the Company's contracts receivable are
used to secure borrowings.
Note 20. Fair Value Of Financial Instruments
The book value of the Company's financial instruments approximates fair
value. The estimated fair values of financial instruments have been determined
using appropriate market information and valuation methodologies.
Note 21. Common Stock Transactions
The Company purchased 800,000 shares of Class A common stock from an
individual who is a former employee and founder at the founder's price of $80
that he originally paid for those shares. In conjunction with this purchase, the
Company has granted him an option to acquire up to 800,000 Company shares of
Class A Common Stock as follows:
During 1998, The option may be exercised to acquire shares from the
Company at a discount of 20% from the market trading price, if any.
During 1999, The option may be exercised to acquire shares from the
Company at a discount of 15% from the market trading price, if any.
The Company has issued 49,500 shares of Class A common stock out of
treasury stock as a bonus.
The Company issued 384,000 shares of class A common stock as incentives
for two officers. To comply with Topic 4 D of the Staff Accounting Bulletins
issued by the Securities and Exchange Commission, the Company has recorded in
selling, general, and administrative, an expense of $510,712 related to this
stock issuance. 300,000 shares of the above came out of treasury shares.
Existing shareholders are contributing up to 1,545,900 shares of their
Class A common stock to the Company. These shares along with the 450,500 shares
mentioned above will be sold by the Company in its initial public offering.
The company has issued 375,940 shares of its Class A common stock in a
private placement in exchange for $500,000 of existing corporate debt and cash.
$160,000 has yet to be received and is being shown as a charge to the equity
section under the heading, "Stock Subscription Receivable - Common A", in the
balance sheet.
An employee has acquired the right to receive 100,000 shares of common
class A stock at $5 each, with vesting at 25,000 shares per year at issue date.
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<PAGE>
Subscription Agreement
Please issue shares and/or bonds in the amount(s) and name(s) shown below.
My signature acknowledges that I have received the prospectus by which the
shares are offered and that I am purchasing for investment. (Please fill out
completely.)
Date & Time: ______________________ Signature of Purchaser: _________________
Purchaser's Phone: ________________ Purchaser's Address: ____________________
Issuer's Agent: ___________________ Information provided: ___________________
Enclosed please find payment for -
$__________________ for shares at $5 per share (minimum investment -
$1,000, but any amount if purchased with bonds),
and/or
$__________________ in 15% 4-year bonds (sold in increments of $1,000)
$__________________ Total investment
Please register the shares and/or bonds in the following names (attach
additional sheets ifnecessary):
Name (printed): ____________________________________________
Mailing Address: ____________________________________________
City, State, and Zip Code: ____________________________________________
Telephone, including area code: ____________________________________________
Social Security or Taxpayer ID No:____________________________________________
As (check one): ___ Individual; ___ Joint Tenants; ___ Trust; ___ Tenants in
Common;___ Corporation; ___ Partnership; ___ Other (specify)
Please attach any special mailing instructions other than shown above. No
subscription is effective until we accept it. We will mail you a signed copy of
this agreement for your records.
Subscription accepted on the ___ day of ___________, 1999
----------------------------------------------------
By The Murdock Group Career Satisfaction Corporation
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