UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
(Mark one)
[X] Quarterly report under section 13 or 15(d) of the Securities
Exchange Act of 1934 For the quarterly period ended September 30, 2000
[ ] Transition report under section 13 or 15(d) of the Securities Exchange Act
of 1934
Commission file number 0-29705
THE MURDOCK GROUP CAREER SATISFACTION CORPORATION
(Exact name of small business issuer as specified in its charter)
UTAH 87-0574421
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
5295 SOUTH COMMERCE DRIVE, SUITE 475, SALT LAKE CITY, UTAH 84107
(Address of principal executive offices) (Zip Code)
(801) 268-3232
(Issuer's telephone number)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for past 90 days. Yes [X] No [ ] As of
October 31, 2000, the issuer had 54,174,384 outstanding shares of class A common
voting shares and no outstanding shares of class B common non-voting shares.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
1
<PAGE>
Table of Contents
Part I - Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statement of Operations 5
Condensed Consolidated Statement of Cash Flow 6
Notes to Condensed Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis or Plan of Operation 11
Part II - Other Information
Item 2. Changes in Securities and Use of Proceeds 13
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 16
2
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THE MURDOCK GROUP CAREER SATISFACTION CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
---- ----
Current Assets
<S> <C> <C>
Cash $ 180 $ 1,907
Current portion of contracts receivable, net 652,526 712,219
Accounts receivable - related parties 217,486 361,147
Accrued interest receivable 200,354 120,820
Prepaid and other current assets 98,209 59,884
----------------- -----------------
Total Current Assets 1,168,755 1,255,977
----------------- -----------------
Property and Equipment, at cost
Computer equipment 487,015 972,026
Software 85,061 384,998
Furniture and fixtures 382,038 364,685
Leasehold improvements 75,357 77,574
----------------- -----------------
1,029,471 1,799,283
Less: accumulated depreciation and amortization (464,941) (369,849)
----------------- -----------------
Net Property and Equipment 564,530 1,429,434
----------------- -----------------
Other Assets
Contracts receivable - less current portion, net 332,295 507,844
Deposit and other assets 109,995 96,854
Investments in real estate 20,688,410 11,067,850
----------------- -----------------
Total Other Assets 21,130,700 11,672,548
----------------- -----------------
Total Assets $ 22,863,985 $ 14,357,959
================= =================
</TABLE>
The notes to condensed consolidated financial statements are an
integral part of these financial statements.
3
<PAGE>
THE MURDOCK GROUP CAREER SATISFACTION CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED) (CONTINUED)
LIABILITIES & STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
----------------------- -----------------------
Current Liabilities
<S> <C> <C>
Short-term notes payable $ 16,708,698 $ 12,521,900
Short-term notes payable - related parties 2,080,745 418,196
Current portion of notes payable 1,425,757 951,963
Current portion of notes payable - related parties 15,000 15,000
Current portion of obligations under capital leases 98,913 554,431
Accounts payable 2,017,743 2,676,957
Accrued liabilities 2,548,990 590,564
Unearned revenue -- 50,000
----------------------- -----------------------
Total Current Liabilities 24,895,846 17,779,011
----------------------- -----------------------
Notes Payable -- less current portion 3,800,583 2,915,083
Obligations Under Capital Leases - less current portion 70,717 642,754
----------------------- -----------------------
Total Long-Term Liabilities 3,871,300 3,557,837
----------------------- -----------------------
Redeemable Common Stock
Common Stock - Class A, no par value, 775,440 shares
issued and outstanding, respectively; redeemable at $1.50
per share
1,163,160 1,163,160
----------------------- -----------------------
Stockholders' Deficit
Common Stock - Class A, no par value, 100,000,000 shares
authorized; 31,431,454 shares and 18,174,637 shares issued
and outstanding respectively 25,409,960 13,536,661
Common Stock - Class B, no par value, 100,000,000 shares
authorized; no shares issued or outstanding -- --
Accumulated deficit (32,476,281) (21,678,710)
----------------------- -----------------------
Total Stockholders' Deficit (7,066,321) (8,142,049)
----------------------- -----------------------
Total Liabilities and Stockholders' Deficit $ 22,863,985 $ 14,357,959
======================= =======================
</TABLE>
The notes to condensed consolidated financial statements are an
integral part of these financial statements.
4
<PAGE>
THE MURDOCK GROUP CAREER SATISFACTION CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
------------------------------------ --------------------------------
2000 1999 2000 1999
----------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
SERVICE REVENUE, inclusive of interest charge $ 604,816 $ 398,826 $ 2,019,040 $ 1,884,921
Less contract discounts and cancellations (51,002) (46,983) (166,385) (181,455)
----------------- --------------- -------------- ---------------
Net Service Revenues 553,814 351,843 1,852,655 1,703,466
COST OF REVENUE 145,576 100,126 470,669 591,068
----------------- --------------- -------------- ---------------
GROSS PROFIT 408,238 251,717 1,381,986 1,112,398
----------------- --------------- -------------- ---------------
OPERATING EXPENSES
Selling, general and administrative 763,909 1,005,284 4,449,930 4,516,060
New products research and development -- 424,359 795,310 605,775
Loss on disposal of investments 657,218 -- 657,218 --
Depreciation and amortization 20,552 56,336 62,232 157,521
----------------- --------------- -------------- ---------------
Total Operating Expenses 1,441,679 1,485,979 5,964,690 5,279,356
----------------- --------------- -------------- ---------------
LOSS FROM OPERATIONS (1,033,441) (1,234,262) (4,582,704) (4,166,958)
----------------- --------------- -------------- ---------------
OTHER INCOME (EXPENSE)
Interest expense (5,981,138) (1,070,269) (10,646,883) (3,374,004)
Write-off of non-trade receivables -- -- -- (110,128)
Equity in Loss from unconsolidated -- -- (524,387) --
subsidiary
Other income 13,783 256,273 26,773 369,100
Gain on issuance of securities by -- -- 1,961,247 --
consolidated subsidiary
Gain on sale of securities of subsidiary 2,725,000 -- 2,725,000 --
----------------- --------------- -------------- ---------------
Total Other Income (expense) (3,242,355) (813,996) (6,458,250) (3,115,032)
----------------- --------------- -------------- ---------------
LOSS BEFORE MINORITY INTERST (4,275,796) (2,048,258) (11,040,954) (7,281,990)
MINORITY INTEREST -- -- 875,349 --
EXTRAORDINARY GAIN (631,966) -- (631,966) --
---------------------------------------------------------------------------
NET LOSS $ (4,907,762) $ (2,048,258) $ (10,797,571) $ (7,281,990)
================= =============== ============== ===============
BASIC AND DILUTED NET LOSS PER CLASS A
COMMON SHARE
$ (0.27) $ (0.13) $ (0.53) $ (0.66)
================= =============== ============== ===============
WEIGHTED AVERAGE SHARES OUTSTANDING 18,331,568 15,245,233 20,522,749 11,017,873
================= =============== ============== ===============
</TABLE>
The notes to condensed consolidated financial statements are an integral
part of these financial statements.
5
<PAGE>
THE MURDOCK GROUP CAREER SATISFACTION CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30,
-------------------------------------
-------------------------------------
2000 1999
---------------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net Loss (10,797,571) (7,281,990)
Adjustment to reconcile net loss to net cash used in operating activities
Depreciation and amortization 142,822 157,521
Expenses paid with common stock, options and
notes payable 1,995,245 798,000
Loss from subsidiary (consolidated and equity portion) 1,589,945 --
Gain on issuance of securities in consolidated subsidiary (1,961,247) --
Extraordinary gain on settlement of debt 631,966 --
Loss on sale/foreclosure of assets 657,218 --
Gain on disposal of equity shares in settlement of debt (2,625,000) --
Change in operating assets and liabilities:
Contracts receivable 235,242 (676,422)
Related party receivables (1,520,312) --
Deferred offering costs -- 153,659
Deposits -- (41,261)
Other current assets (43,643) (649,124)
Accounts payable (430,138) 186,081
Accrued liabilities 4,031,024 (686,982)
Other liabilities -- (106,738)
---------------- ---------------
Net cash used in operating activities (8,044,419) (8,147,256)
---------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (16,822) (154,439)
Proceeds from disposition of investments 70,000 --
Increase in other assets (16,970) --
---------------- ---------------
Net cash used in investing activities 36,208 (154,439)
---------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable and related party note payable 17,804,167 16,823,178
Payments on notes payables, related party notes payable and capital lease obligations (9,747,683) (11,368,718)
Proceeds from sale of stock -- 2,830,382
---------------- ---------------
Net cash provided by financing activities 8,056,484 8,284,842
---------------- ---------------
NET INCREASE (DECREASE) IN CASH (1,727) (16,853)
---------------- ---------------
CASH -- BEGINNING OF PERIOD 1,907 17,258
---------------- ---------------
CASH -- END OF PERIOD 180 405
================ ===============
</TABLE>
The notes to condensed consolidated financial statements are an
integral part of these financial statements.
6
<PAGE>
THE MURDOCK GROUP
CAREER SATISFACTION CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Nine Months For the Nine Months
Ended September 30, Ended September 30,
2000 1999
--------------------- ---------------------
Supplemental Cash Flow Information
<S> <C> <C>
Cash paid during period for interest $ 3,100,699 $ 3,440,712
Supplemental Disclosures of Noncash Investing and
Financing Activities
Stock issued for investments in real estate 9,179,262 --
Debt issued for investments in real estate 1,849,298 --
Conversion of related party receivable into --
investment in subsidiary 1,800,000
Eliminate prior years' equity in subsidiary 2,171,302 --
Common shares received in satisfaction of a 33,000 --
receivable
Common shares received in satisfaction of an 297,000 --
investment
Shares issued for earnest money 25,000 --
Debt and accrued expenses relieved in sale of 383,782 --
investment
Transfer of Notes Payable-related Party to 1,250,000 --
accounts payable
Shares issued for debt and accrued interest 5,418,368 --
</TABLE>
The notes to condensed consolidated financial statements are an integral
part of these financial statements.
7
<PAGE>
THE MURDOCK GROUP CAREER SATISFACTION CORPORATION
Notes To Condensed Consolidated Financial Statements
(Unaudited)
Note 1 - Nature of Operations and Principles of Consolidation
The accompanying interim condensed consolidated financial statements are
unaudited and have been prepared consistent with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-QSB and Item 310(b) of Regulation S-B. Accordingly, they do not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements. These statements should be read in
conjunction with the audited financial statements and notes thereto included in
the Company's annual report on Form 10-KSB for the fiscal year ended December
31, 1999. Unless the context otherwise requires, reference to "the Company" or
"The Murdock Group" includes The Murdock Group Career Satisfaction Corporation,
a Utah corporation, and its subsidiary, CareerWebSource.com, Inc., formerly
myjobsearch.com, inc., a Delaware corporation.
In the opinion of management, the accompanying unaudited condensed financial
statements contain all adjustments (consisting only of normal recurring
adjustments) necessary to fairly present the Company's financial position,
results of operations and cash flows. The results of operations for the three
months and nine months ended September 30, 2000 are not necessarily indicative
of the results that may be expected for the year ending December 31, 2000.
Note 2 - Operations
On April 17, 2000, the Company converted a $1,800,000 note receivable from
CareerWebSource ("CWS") into 720,000 shares of CWS voting convertible preferred
stock. On that same date, CWS issued 1,632,800 shares of voting convertible
preferred stock for $5.2 million after offering costs. As a result of the
issuance of voting preferred stock by CWS, the Company recognized a gain on
issuance of securities by CWS in the amount of $1,961,247. This transaction
resulted in the Company's ownership interest in CWS decreasing to 45% of the
total voting shares.
During the quarter ending September 30, 2000, the percentage of ownership in CWS
decreased to 22% due to the transfer of 1,050,000 shares of the Company's
2,000,000 CWS shares to a creditor that had been pledged as collateral on a
note.
The accompanying condensed consolidated financial statements include the
operations of CWS through April 16, 2000 on a consolidated basis and from April
17, 2000 by the equity method of accounting. Intercompany accounts and
transactions were eliminated through the date consolidation was discontinued.
The Company is a job-search and employment training company. In addition, the
Company has significant leveraged instruments in real estate. The Company
focuses on providing services to 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.
On June 30, 2000, the Company acquired a total of 750.68 acres of raw land in
Eagle Mountain, Utah in exchange for 6,070,308 Class A common voting shares and
$1,612,684 in cash. The Company plans to improve the property, complete concept
planning and rezoning, and sell the property to one or more developers over the
next two years. The seller leased back from the Company the right to farm the
property until the property is sold.
Note 3 - Investment in CareerWebSource
As described in Note 2, the Company's investment in CareerWebSource ("CWS") is
accounted for using the equity method of accounting from April 17, 2000.
8
<PAGE>
Operations of CWS for the three and nine months ended September 30, 2000 were as
follows:
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
2000 2000
------------------------- -------------------------
<S> <C> <C>
Net contract revenue $ 45,172 $ 51,736
Gross profit (112,290) (570,995)
Loss from operations (666,150) (4,012,696)
Net loss (674,887) (4,048,266)
</TABLE>
The Company's share of CWS' loss from April 17, 2000 through September 30, 2000
was $1,924,066, of which $524,387 was recorded on the Company's books in the
quarter ended June 30, 2000, reducing the Company's investment in CWS to zero.
Note 4 - Net Loss Per Class A Common Share
Basic net loss per Class A common share ("Basic EPS") is computed by dividing
net loss by the weighted average number of Class A common shares outstanding
during the period. Diluted net loss per Class A common share ("Diluted EPS")
reflects the potential dilution that could occur if stock options or other
contracts to issue Class A common stock were exercised or converted into common
stock. The computation of Diluted EPS does not assume exercise or conversion of
securities that would have an anti-dilutive effect in net loss per Class A
common share.
At September 30, 2000, there were outstanding options to purchase 4,012,289
shares of Class A common stock.
Note 5 - Segment Information
The Company has two operating segments: career services and real estate. To date
all revenues from operations have been derived from the career development
services segment of the Company.
Note 6 - Revenue Recognition
The Company's career development program provides the participant an opportunity
to attend training classes and the optional use of other resources of the
Company such as its career library, job search software, personal coaching and
referral services. Revenue from job training services is recognized by the
Company upon the participant's completion of the training classes.
Revenue is recognized completely in the month it is earned for those services
requiring less than one month to complete. Cash discounts, cancellations, and
write-offs are recognized based on certain criteria such as time since last
payment made, cancellation requests negotiated and granted, and contract price
reduction due to early cash payment.
Note 7 - Stock Options
At September 30, 2000 stock options outstanding were comprised of:
o Employee options totaling 2,577,755 shares with various vesting schedules.
During the nine months ended September 30, 2000, 1,841,255 options were
issued to employees with no compensation expense required.
o Non-employee options totaling 1,434,534, of which 1,284,534 shares were
issued during the nine months ended September 30, 2000 with immediate
vesting. During the nine months ended September 30, 2000, interest expense
and settlement charges relating to these options have been recognized in
the amounts of $402,787 and $163,038 respectively.
9
<PAGE>
Note 8 - Subsequent Event
Subsequent to September 30, 2000 the Company has entered into a number of
transactions to reduce substantial amounts of debt. In many instances, the
Company issued shares of its common stock in full or partial satisfaction of
outstanding obligations.
In October 2000, the Company exchanged a total of 25,107,968 shares of its
common stock in satisfaction of $3,167,495.15 of notes payable and accrued
interest. The shares of common stock issued in these transactions were valued by
the parties at prices ranging from $0.10 to $0.20 per common share.
In October 2000, the Company exchanged real estate located in Utah with a book
value of $1,447,150 in satisfaction of $916,500 of notes payable and accrued
interest.
A default judgment has been entered court against the Company in the amount of
$526,000 for failure to make the required payments on a note payable in the
principal amount of $263,000. The Company has not yet satisfied this judgment.
Note 9 - Extra Ordinary Items
In September 2000, the Company defaulted on loans in the amount of
$3,464,973 plus $1,801,396 of accrued interest to a financing company. In
connection with the default the Company transferred certain assets to the
finance company. In addition, certain officers of the Company acting as
guarantors transferred personal assets for payment of the notes and accrued
interest.
In connection with the default, certain officers of the Company transferred
5,038,842 shares of Company common stock valued at $0.10 per share and 1,050,000
shares of CWS common stock valued at $2.50 per share. The Company issued
5,038,842 shares of its common stock to the officers, for replacement of their
shares transferred. An officer advanced $1,500,000 of personal assets, which has
been netted against amounts due from the officer and the net amount has been
recorded as a related party payable. In addition, officers of the Company
transferred personal assets to repay the remaining balance owing. These officers
transferred 507,770 shares of CWS common stock valued $2.50 per share, which has
been recorded on the books of the Company as contributed capital.
These transactions resulted in the recognition of $2,625,000 of income
from the sale of CWS common stock, as the Company's investment was at zero. A
$631,941 extraordinary loss was also recorded, as more consideration was given
in repayment than the total amount owing.
10
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
The following discussion and analysis should be read in conjunction with the
Company's unaudited condensed consolidated financial statements and the notes
thereto contained elsewhere in this report. The discussion of these results
should not be construed to imply any conclusion that any condition or
circumstance discussed herein will necessarily continue in the future. Results
for the periods indicated are not necessarily indicative of the results that may
actually accrue for the year ending December 31, 2000. When used in this report,
the words "believes," "anticipates," "expects," and similar expressions are
intended to identify forward-looking statements. Those statements are subject to
certain risks and uncertainties that could cause actual results to differ
materially from those that are modified by such statements. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date hereof. The Company undertakes no obligation to
publicly release the results of any revisions to these forward-looking
statements that may be made to reflect events or circumstances after the date of
this report, or to reflect the occurrence of unanticipated events.
The Company has incurred significant losses to date developing its proprietary
job-search technology into a training system that can service a larger volume of
customers than its original one-on-one coaching. The Company completed
development of this system and has marketed it to the public since May 1998.
The Company plans to refine its operating model and open additional branches in
the future. Additional profitable branches will allow the Company to allocate
administrative costs across multiple locations, thereby improving the
utilization of its infrastructure. With the completion of the new proprietary
job-search technology training system the Company has experienced a reduction in
client cancellations and discounts and improved collection of client
receivables.
On June 22, 1999, the Company formed CareerWebSource (formerly myjobsearch.com),
an Internet subsidiary that aggregates much of the job-search information on the
Internet into one location for the job seeker. CWS also provides tools for the
job seeker to enhance the job search process.
In September 1999, the Company formed a Real Estate Division to provide
operating capital by acquiring real property, generally undeveloped, in exchange
for shares of the Company's common stock, and pledging the property as
collateral for loans while seeking to sell the property to developers at a
profit.
Results of Operations
Three and nine months ended September 30, 2000 compared to three and nine months
ended September 30, 1999.
Net service revenues increased to $1,852,655 during the nine months ended
September 30, 2000, compared to $1,703,466 for the same period in the prior
year. The increase in service revenue was primarily a result of a more robust
sale and marketing strategy as well as the inclusion of Career Fairs,
outplacement, and Corporate Services.
In August 2000, the Company decided to tighten its credit policy with a focus on
selling to those customers with the ability to pay for the services.
Direct cost of services increased to $145,576 during the quarter ended September
30, 2000, compared to $100,126 during the quarter ended September 30, 1999. The
increase in direct cost of services is a result of increased sales and
additional services provided by the Company. The Company has also focused on
costs associated with the delivery of the product to the client and reduced such
costs where possible. Gross profit as a percentage of net service revenues was
74% during the third quarter of 2000, compared to 72% during the third quarter
of 1999. The improvement in gross profit as a percentage of net service revenues
was primarily a result of the delivery of the Company's new product in a group
setting, the target reduction of expenses where possible and the
reclassification of certain indirect costs associated with advertising in 2000.
General and administrative expenses, which include selling expense, decreased to
$763,909 during the three-month period ended September 30, 2000, compared to
$1,005,284 during the three months ended September 30, 1999. The decrease in
general and administrative expense is a result of maintaining offices in Seattle
and Portland in 1999, which were closed for the year 2000.
11
<PAGE>
Interest expense increased to $5,981,138 during the quarter ended September 30,
2000, compared to $1,070,269 during the same quarter in the prior year. The
increase in interest expense was a result of higher outstanding debt balances,
increased rates on funds borrowed, non-employee stock options and certain costs
incurred with obtaining financing. See "Liquidity and Capital Resources." The
Company anticipates that the acquisition of real estate to be used as collateral
for loans will reduce the interest rates on its borrowings. The Company has also
commenced an aggressive program to reduce its debt load by converting debt to
equity.
On August 9, 2000, the Company transferred 10,000 shares of CWS common stock to
a lender as an inducement to extend credit to the Company. On September 28,
2000, the Company exchanged 200,000 shares of CWS stock and 1,000,000 shares of
its own common stock to reduce debt in a principal amount of $175,000. See, Item
2: "Changes in Securities and Use of Proceeds," below.
Also in September 2000, the Company defaulted on loans to a creditor in the
principal amount of $3,464,973, plus $1,801,396 of accrued interest to a
financing company. In connection with the default stocks were given by the
Company and by certain officers of the Company who had personally guaranteed the
obligations. To satisfy these obligations, the Company transferred to the
creditor 1,050,000 shares of CWS common stock previously owned by the Company.
In addition, the guarantors transferred to the creditor a total of 5,038,842
shares of the Company's common stock valued at $0.10 per share 507,770 shares of
CWS common stock valued at $2.50 per share, which was recorded on the books of
the Company as contributed capital. Pursuant to the terms of an indemnification
agreement with the guarantors, the Company has issued shares of its common stock
to replace the shares owned by these guarantors that were taken by the creditor
in satisfaction of the Company's obligations.
Liquidity and Capital Resources
The cash provided by operations is insufficient to meet the operating costs and
expenses of the Company. The Company has suffered recurring losses from
operations since its inception in 1996 and as of September 30, 2000, had an
accumulated deficit of $32,476,281 compared to an accumulated deficit of
$21,678,710 on December 31, 1999. The accumulated deficit reflects losses
associated with the development and startup of operations and significant costs
for research and development for the Company's propriety job-search technology
and training system and costs associated with the startup of the Company's Real
Estate Division and its Internet subsidiary. The Company has also experienced
losses from the substantial interest expense associated with the large amount of
debt the Company has incurred, which carries high interest rates.
Once the branch model is perfected, this technology should enable the Company to
effectively service a large volume of customers in each office and provide a
model to expand operations into other locations. During the nine month ended
September 30, 2000, the Company acquired a parcel of land primarily with its
common stock. Several other acquired parcels required cash down payments of
approximately 20% and the assumption of debt. During the quarter ended June 30,
2000, the Company acquired land with an estimated value of approximately
$10,745,000. To purchase this land the Company incurred additional debt totaling
approximately $1,990,000 in the form of cash down payments and closing costs,
debt assumptions or seller financing, and issued stock of the Company valued at
approximately $9,105,462. The Company intends to use the acquired land as
collateral to secure new favorable debt to replace the Company's existing
short-term, high interest rate debt.
On September 30, 2000, the Company had a working capital deficit of
approximately $23,727,091 compared to a deficit of $16,523,034 at December 31,
1999. This working capital deficit is a result of funding operating losses
primarily through short-term borrowings. The interest rates associated with
these short-term borrowings are significantly higher than prime interest rates.
The Company believes that with its recent land acquisitions, it can
significantly reduce the short term, high interest rate debt and replace it with
more favorable lower interest rate debt and negotiate with current creditors.
Subsequent to September 30, 2000, some of the land has been sold to reduce the
Company's total debt and fund future operations. The Company has also commenced
an aggressive program to reduce outstanding debt through the conversion of debt
to equity by the issuance of its common stock to creditors in satisfaction of
obligations of the Company.
The Company filed a registration statement for an initial public offering of its
securities on October 6, 1998, which was declared effective by the Securities
and Exchange Commission on January 28, 1999. The offering was undertaken by the
Company on a best efforts no minimum basis, without an underwriter. The proposed
offering consisted of the offer and sale of 2,500,000 shares of class A common
stock at $5 per share, and $3,000,000 in 4-year term bonds. During the period
between January 28, 1999 and May 9, 1999, the Company received subscriptions
totaling $3,211,930 for the sale of shares and $12,000 for the sale of bonds.
12
<PAGE>
These proceeds were initially intended to retire debt, however, in May 1999, the
Company terminated the offering and offered rescission to the initial investors.
By amendment to the registration statement, the Company deregistered all unsold
securities originally included in the offering and contemporaneously terminated
its offering in all states where it was registered.
During the quarter ended September 30, 2000, the Company made payments totaling
$291,399 and assumed debt of CWS in the amount of $1,250,880 in order to reduce
the amounts owed to CWS by the Company to $64,057. Accrued interest for the
three months ended September 30, 2000 was $38,857.
The Company commenced an aggressive debt reduction and corporate restructuring
program in the quarter ended September 30, 2000. Since beginning this program,
the Company has issued a significant number of shares of common stock in full or
partial satisfaction of debt. The Company has also sold or released real
property assets of the Company to creditors in full or partial satisfaction of
obligations owed to those creditors. Cash flows from operations continue to be
insufficient to cover all of the Company's operating expenses. If the Company is
not successful in completing its restructuring program, eliminating the
substantial debt load of the Company which carries higher than market interest
rates and punitive penalties for non-performance, and in acquiring additional
revenue generating assets or businesses, then the Company will be required to
seriously curtail or even cease operations.
Special Statement Concerning Forward-looking Statements
This Report, in particular the "Management's Discussion and Analysis or of
Operation" section, contains forward-looking statements concerning the
expectations and anticipated operating results of the Company. All such
forward-looking statements contained herein are intended to qualify for the safe
harbor protection provided by Section 21E of the Securities Exchange Act of
1934, as amended. The Company cautions the reader that numerous factors govern
whether events described by any forward-looking statement made by the Company
will occur. Any one of such factors could cause actual results to differ
materially from those projected by the forward-looking statements made in this
Report. These forward-looking statements include plans and objectives of
management for future operations, including plans and objectives relating to the
products and the future economic performance of the Company.
Assumptions involve judgments with respect to, among other things, future
economic, competitive and market conditions, future business decisions, and the
results of the clinical trials and the time and money required to successfully
complete those trials, all of which are difficult or impossible to predict
accurately and many of which are beyond the control of the Company. Although the
Company believes that the assumptions underlying the forward-looking statements
in this Report are reasonable, any of these assumptions could prove inaccurate.
Therefore, there can be no assurance that the results contemplated in any of the
forward-looking statements will be realized. Budgeting and other management
decisions are subjective in many respects and are susceptible to interpretations
and periodic revision based on actual experience and business developments, the
impact of which may cause the Company to alter its marketing capital expenditure
plans or other budgets. This will affect the Company's results of operations. In
light of the significant uncertainties inherent in the forward-looking
statements, any such statement should not be regarded as a representation by the
Company or any other person that the objectives or plans of the Company will be
achieved.
Part II - Other Information
Item 2. Changes in Securities and Use of Proceeds
Issuance of Restricted Securities
During the period covered by this report the Company issued a total of 7,367,175
class A voting shares, consisting of (i) 423,000 shares to two individuals and
300,000 shares to an entity for consulting services; (ii) 33,333 shares for
earnest money on a possible land business acquisition; (iii) 1,520,000 shares to
two trusts in satisfaction of debt and 52,000 shares as an inducement to extend
a loan to the Company; and (iv) 5,038,842 shares to certain officers in
connection with an indemnification agreement to replace securities taken by a
creditor under an obligation personally guaranteed by these officers. In
addition, the Company cancelled 66,000 shares received by the Company in
exchange for debt owed to the Company by an employee and 220,000 shares taken
back by the Company in connection with a sale of real estate that was cancelled.
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In connection with all issuances of restricted stock described above, the
Company relied upon exemptions from the registration requirements of the
Securities Act of 1933, including the exemptions afforded by Rule 506 and
Section 4(2) under the Securities Act for offers and sales of securities not
involving any public offering. The purchasers of such shares represented and
warranted to the Company that they were acquiring the shares for their own
account and for investment and not with a view to the public resale or
distribution thereof. In addition, the purchasers were advised that the
securities issued in these transactions are restricted securities and that there
are significant restrictions on transferability applicable to the securities by
reason of federal and state securities laws and that the purchasers could not
sell or otherwise transfer the securities except in accordance with the
applicable securities laws.
In each case the purchasers were provided with access to all material
information (and with the opportunity to ask questions and receive answers)
regarding the Company and the securities, and the purchasers represented that
they were accredited investors under Rule 501 of Regulation D or they have such
knowledge and experience in financial and business matters that they are capable
of evaluating the merits and risks of the acquisition and holding of the
securities issued in these transactions.
A legend was placed on all certificates and instruments representing these
securities stating that the securities evidenced by such certificates or
instruments have not been registered under the Securities Act and setting forth
the restrictions on their transfer and sale.
Item 6. Exhibits and Reports on Form 8-K
(a) The Company has filed the following exhibits as required under Item 601 of
Regulation S-B.
Exhibit Index
<TABLE>
<CAPTION>
Exhibit No. Description Page
<S> <C> <C>
3.1 Articles of Incorporation dated November 5, 1997 Previously filed
3.2 Bylaws dated November 5, 1997 Previously filed
3.3 Amended Bylaws of The Murdock Group Career Satisfaction Corporation dated Previously filed
January 3, 2000
4.1 Form of Stock certificate Previously filed
4.2 Form of Bond certificate Previously filed
10.1 Purchase of The Murdock Group by Envision Career Services, LLC dated July 26, Previously filed
1996.
10.2 Exchange Agreement between The Murdock Group and Envision dated May 31, 1998. Previously filed
10.3 Lease of Office Space by Corporate Headquarters Previously filed
10.4 License Agreement with myjobsearch.com, inc. Previously filed
10.5 1999 Stock Option Plan Previously filed
10.6 Stock Option Form of Award Previously filed
10.7 Contract for Purchase of Real Property Previously filed
10.8 Contract for Purchase of Real Property Previously filed
10.9 Contract for Purchase of Real Property Previously filed
10.10 Contract for Purchase of Real Property Previously filed
10.11 Contract for Purchase of Real Property Previously filed
10.12 Contract for Purchase of Real Property Previously filed
10.13 Contract for Purchase of Real Property Previously filed
10.14 Contract for Purchase of Real Property Previously filed
10.15 Contract for Purchase of Real Property Previously filed
10.16 Contract for Purchase of Real Property Previously filed
10.17 Contract for Purchase of Real Property Previously filed
10.18 Contract for Purchase of Real Property Previously filed
10.19 Agreement and Plan of Merger with G&J Farms, Inc Previously filed
10.20 Agreement and Plan of Merger with G.F.S., Inc. Previously filed
10.21 Farm Lease Agreement Previously filed
10.22 Indemnification Agreement Filed herewith
14
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27 Financial Data Schedule Filed herewith
</TABLE>
(b) On September 8, 2000, the Company announced a restructuring plan that
included its plans regarding the conversion of debt to equity and corporate
downsizing. This announcement was filed as part of a current report on Form 8-K.
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Signatures
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
The Murdock Group Career Satisfaction Corporation
Dated this 21st day of November, 2000
/S/ KC Holmes
-----------------------------------------------
KC Holmes, CEO
/s/ Chet Nichols
-----------------------------------------------
Chet Nichols, Controller (Principal Accounting Officer)
