<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1999
--------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from .................. to ..................
Commission file number 0-25957
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-----------------------
BIZNESSONLINE.COM, INC.
(Exact name of registrant as specified in its charter)
------------------------------
DELAWARE 06-1519132
--------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1720 ROUTE 34
P.O. BOX 1347
WALL, NEW JERSEY 07719
(732) 280-6408
(732) 280-6409 (FAX)
(Address and telephone number of principal executive offices and principal place
of business including zip code and telephone number)
------------------------
NONE
----
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) Y [X] N [ ], and (2) has been
subject to such filing requirements for the past 90 days. Yes [ ] No [X].
The number of shares outstanding of the Registrant's Common Stock as of
June 23, 1999 was 6,890,436.
<PAGE>
BiznessOnline.com, Inc.
Form 10-Q For the Quarterly Period Ended March 31, 1999
Index
Part I. - Financial Information
Item 1 Condensed Consolidated Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of
March 31, 1999 and December 31, 1998
Condensed Consolidated Statement of Operations
For the Three Months Ended March 31, 1999
Condensed Consolidated Statement of Cash Flows
For the Three Months Ended March 31, 1999
Condensed Consolidated Statement of Stockholder's (Deficit)
Equity For the Three Months Ended March 31, 1999
Notes to Condensed Consolidated Financial Statements
Item 2 Management's Discussion and Analysis of Financial Condition
And Results of Operations
Part II. - Other Information
Exhibit Index
Signatures
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (unaudited)
BiznessOnline.com, Inc.
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
---------- ------------
(unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 172,552 $ 147,736
Accounts receivable, net 169,666 --
----------- -----------
Total current assets 342,218 147,736
Property and equipment, net 231,341 --
Goodwill and intangibles, net 2,969,653 --
Deferred IPO costs 505,224 108,478
----------- -----------
$ 4,048,436 $ 256,214
----------- -----------
----------- -----------
Liabilities and Stockholders Equity
Current liabilities:
Line of credit $ 100,000 $ --
Accounts payable 160,457 98,648
Accrued expenses 93,048 --
Due to affiliates/shareholders 580,000 --
Deferred revenue 263,721 --
----------- -----------
Total current liabilities 1,197,226 98,648
Preferred stock subscriptions -- 100,000
Stockholders equity
Preferred stock 700 --
Common stock 34,192 31,472
Paid in capital 3,082,108 151,528
Retained earnings (deficit) (265,790) (125,434)
----------- -----------
Total stockholders equity 2,851,210 57,566
----------- -----------
Total liabilities and stockholders equity $ 4,048,436 $ 256,214
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
BiznessOnline.com, Inc.
Condensed Consolidated Statement of Operations (unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1999
-------------------
<S> <C>
Revenues $ 424,103
Operating expenses:
Connectivity and operations 140,869
Sales and marketing 148,252
General and administrative 147,164
Depreciation of intangibles 24,628
Amortization of intangibles 102,402
-----------
Total operating expenses 563,315
-----------
Loss from operations (139,212)
Interest expense (net) (1,144)
-----------
Income taxes --
Net loss $ (140,356)
-----------
-----------
Net loss per share, basic and diluted $ (.04)
Weighted average shares outstanding basic and diluted 3,325,497
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
BiznessOnline.com, Inc.
Condensed Consolidated Statement of Cash Flows (unaudited)
<TABLE>
<CAPTION>
Three Ended
March 31,
1999
-------------
<S> <C>
Net loss $ (140,356)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 127,030
Changes in net assets and liabilities:
Increase in accounts receivable-trade (47,688)
Increase in accounts payable 61,809
Increase in accrued expenses (50,112)
Increase in deferred revenue (14,457)
-------------
Net cash used for operating activities (63,774)
Cash flows from investing activities
Capital expenditures (15,713)
Acquisition of businesses, net of cash required 141,630
-------------
Net cash provided by investing activities 125,918
Cash flows from financing activities:
Proceeds from line of credit 100,000
Proceeds from sale of preferred stock 250,000
Increase in deferred costs (387,238)
-------------
Net cash used for financing activities 37,328
Net increase in cash and cash equivalents 24,816
Cash and cash equivalents at beginning of period 147,736
-------------
Cash and cash equivalents at end of period $ 172,552
-------------
Cash paid for interest 1,144
Non cash investing and financing
Notes payable $ 580,000
Issuance of common stock for acquisitions 2,584,000
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
BiznessOnline.com, Inc.
Condensed Consolidated Statement of Stockholders' Equity (unaudited)
Three Months Ended March 31, 1999
<TABLE>
<CAPTION>
Common Stock Preferred Stock Total
------------ --------------- Additional Accumulated Stockholders
Shares Amount Shares Amount Paid in Capital Deficit Equity
---------- ----------- ---------- ---------- --------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance December 31, 1998 3,147,186 $ 31,472 -- $ -- 151,528 (125,434) 57,566
Issuance of Preferred Stock -- -- 70,000 700 349,300 -- 350,000
Issuance of common stock for 272,000 2,720 -- 2,581,280 -- 2,584,000
acquisition
Net loss -- -- -- -- -- (140,356) (140,356)
-----------------------------------------------------------------------------------------------------
Balance March 31, 1999 3,419,186 $ 34,192 70,000 $ 700 3,082,108 (265,790) 2,851,210
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
BiznessOnline.com, Inc.
Notes to Condensed Consolidated Financial Statements
1) Basis of Presentation
The accompanying consolidated consolidated condensed financial statements
include the accounts of BiznessOnline.com, Inc. and its wholly-owned subsidiary,
together the Company. The financial statements have been prepared pursuant to
the rules and regulations of the Securities and Exchange Commission for interim
financial information, including the instructions to Form 10-Q and rule 10-01 of
Regulation S-X. Accordingly, certain information and footnote disclosures
normally required in complete financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted. In the
opinion of management these financial statements include all adjustments
necessary for a fair presentation of the results of operations for the interim
periods presented. Results of operations for interim periods are not necessarily
indicative of the results that may be expected for the year ended December 31,
1999.
<TABLE>
<CAPTION>
1998 1999
<S> <C> <C>
Total revenues $1,433,922 $1,873,436
Net loss $ (576,492)) $ (531,091)
Pro forma basic and diluted net loss per share $ ( .08) $ ( .08)
</TABLE>
2) Unaudited Pro Forma Combined Financial Information
The following unaudited pro forma combined financial information does not
purport to represent what our financial position or results of operations would
actually have been if such transactions and events had in fact occurred on those
dates or to project our results of operations for any future period.
3) Commitments and Contingencies
We entered into a lease for approximately 2,800 square feet of office space for
our executive offices in Wall, New Jersey at approximately $11 per square foot
under a lease expiring December 31, 2001.
We currently have commitments under employment agreements for our executive
officers and the managers of Global 2000 Communications, Inc. in the aggregate
amount of $540,000 per year.
4) Property, Equipment and Intangible Assets
Accumulated depreciation and amortization on property and equipment totaled
$24,628 at March 31, 1999. Accumulated amortization on intangible assets totaled
$102,402 at March 31, 1999.
6) Acquisition of Global 2000 Communications, Inc.
Effective January 31, 1999, the Company acquired substantially all assets and
assumed substantially all liabilities of Global 2000 Communications, Inc., a New
York corporation for $2,720,000 in stock of the Company and a promissory note in
the amount of $580,000, which was repaid with proceeds from the Company's
initial public offering. Global 2000 Communications, Inc. is an Internet service
provider based in Albany, New York.
In accordance with generally accepted accounting principles, the total purchase
price has been preliminarily allocated to the fair value of assets purchased and
liabilities assumed as shown in the following table. The excess of purchase
price over fair value of net assets acquired has been recorded as goodwill and
is being amortized over 5 years. A final allocation of purchase price will be
determined during 1999 and changes, if any, will result in a change to the
amount of goodwill recorded in connection with the acquisition.
Working capital $(157,730)
Property and equipment 240,257
Other assets 9,418
Goodwill 3,072,055
<PAGE>
The acquisition was accounted for as a purchase and, accordingly, operating
results of global 2000 Communications, Inc. have been including in the
accompanying financial statements of the Company since February 1, 1999. The pro
forma results of operations for Global 2000 Communications have been included
with the pro forma results of operations included on Page ______.
(7) Subsequent Events
Initial Public offering
On May 12, 1999, BiznessOnline.com, Inc. sold 2,900,000 shares of common stock
in its initial public offering for gross proceeds of $29,000,000, before
underwriting discounts and offering expenses. Simultaneously with the closing of
the public offering, all 70,000 shares of Series A Preferred Stock were
converted into 61,250 shares of common stock. On May 17, 1999 BiznessOnline.com,
Inc. completed the acquisition of an additional four Internet service providers
as described in the final prospectus for the initial public offering which was
filed with the Securities and Exchange Commission on May 12, 1999, for 510,000
shares of common stock and the payment of $5,730,000 in cash.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This filing contains forward looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended and Section 21E of the Securities
Act of 1934, as amended. Those statements reflect the intent, belief or current
expectations of BiznessOnline.com, Inc. and members of its management team.
Prospective investors are cautioned that any forward-looking statements are not
guarantees of future performance, involve uncertainties, and that actual results
may differ materially from those contemplated by the forward-looking statements
as a result of, among other things, reflecting changed assumptions, the
occurrence of unanticipated events or changes to future operating results over
time.
Introduction
The following discussion of results of operations and of its liquidity and
capital resources of BiznessOnline.com, Inc. should be read in conjunction with
our unaudited condensed consolidated financial statements and the related notes
thereto appearing in this filing.
Overview
We derive Internet access revenues primarily from subscriptions from individuals
and small to medium sized businesses for dial-up and dedicated access to the
Internet. Subscription fees vary between $9.95 and $24.95 per month among our
Internet service providers and by the billing plans for a particular Internet
service provider. The subscription rates vary among Internet service providers
due to competitive and economic factors. Most of our subscribers pay us by
credit card automatically on a monthly basis. In addition, we host commercial
and individual web sites and provide commercial web site design services, as
well as e-commerce, advertising and interactive web site support. These services
are predominantly utilized by small to medium sized businesses looking to
establish a presence on the world wide web. We also earn revenue by providing
dedicated access services via telephone lines.
Results of Operations
We were formed in June 1998, and conducted no significant operations between
then and January 31, 1999, the date we acquired Global 2000 Communications, Inc.
an internet service provider located in Albany, New York.
We recorded revenue of $424,103 during the quarter. We also incurred $140,869
of connectivity and operations expenses, $148,252 of sales and marketing
expenses, $147,164 of general and administrative expenses, $24,628 of
depreciation, $102,402 of amortization costs, and $1,144 of interest expense,
net. We had a net loss of $(140,356), or $(.04) per share for the three
months ended March 31, 1999. These costs include $145,617 of corporate
expenses, primarily salaries. The acquisition of Global 2000 Communications,
Inc. has been accounted for using the purchase method of accounting.
<PAGE>
Liquidity and Capital Resources
At March 31, 1999, we had $172,552 of cash and cash equivalents, an increase of
$24,816 from December 31, 1998. Net cash used by operating activities was
$63,774. Net cash provided by investing activities was $923,918, primarily as a
result of the acquisition of Global 2000 Communications, Inc. Net cash provided
by financing activities was $37,328.
We expect our capital expenditures to increase as our operations continue to
expand. It is anticipated that financial resources will be utilized in acquiring
additional communications equipment and improvements to technology at our new
data center planned for the Albany, NY area. These investments will allow us to
support our current subscribers and newly acquired subscribers. We plan to
integrate our billing and financial reporting systems. These capital
expenditures are anticipated to be less than the cash requirements related to
our planned acquisition program.
We believe that our cash flow from operations and proceeds from our initial
public stock offering which was completed on May 12, 1999 will provide the cash
required to fund existing operations through the remainder of the fiscal year.
However, we intend to pursue our strategy of acquiring additional Internet
service providers, web hosts and e-commerce service companies through the use of
cash on hand, and the issuance of additional common stock, notes payable and
cash flow from operations. Any significant acquisitions or increases in our
growth rate could materially affect our operating and financial expectations and
results, liquidity and capital resources.
Year 2000 Disclosure
With the new millennium approaching, many businesses and institutions are
reviewing and modifying their computer systems to ensure they accurately process
transactions relating to the Year 2000 and beyond. This effort is necessary
because many existing computer systems and microprocessors with data functions,
including those in non-information technology equipment and systems, use only
two digits to identify a year in the date field and assume that the first two
digits of the year are always "19." Consequently, on January 1, 2000, computers
that are not Year 2000 compliant may read the year of 1900. Computer systems
that calculate, compare or sort using the incorrect date may malfunction causing
disruptions in operation, including a temporary inability to process
transactions, send invoices or engage in other normal business activities. Our
failure to address potential Year 2000 malfunctions in our computer and
non-information technology equipment and systems could result in our suffering
business interruption, financial loss, reputational harm and legal liability.
We do not have any significant non-information technology equipment or systems.
As a result, our Year 2000 readiness efforts have primarily addressed computer
hardware and software performance.
The former owners of the Internet service providers (ISPs) that we acquired in
1999 have represented to us that they have taken all necessary action to assess,
evaluate, test and correct all of the hardware, software, microchips and other
processing capabilities of the computer and telecommunications systems used in
their ISP operations to be sure that such systems are Year 2000 compliant.
However, since acquiring such ISPs, we have not conducted our own internal audit
of their operations to confirm that these representations are true. To the
extent these representations are breached and we suffer damages relating to Year
2000 malfunctions, our reputation, operating results and financial conditions
may be adversely affected.
Some of our ISPs have contacted their major vendors to evaluate their Year 2000
readiness, and we intend to continuing to assess our Year 2000 risks relating to
our external vendors and third-party network service providers. To the extent
that we rely on external vendors or third-party network service providers with
Year 2000 exposures, any failure by these vendors or third-party network service
providers to resolve any Year 2000 issues on a timely basis or in a manner that
is compatible with our systems could also have a material adverse effect on our
financial condition.
Based upon the information currently available to us, we do not anticipate costs
associated with the Year 2000 issue to have a material financial impact on us.
However, we may experience interruptions or other limitations of the functioning
of our financial and operating systems, and we may incur additional costs to
avoid these interruptions or limitations should they occur. Our expectations
about future costs associated with the Year 2000 issue are limited by
uncertainties that could cause actual results to have a greater financial impact
than currently anticipated. Factors that could influence the amount and timing
of future costs include:
- our success in identifying systems and programs that contain two-digit
year codes;
- the nature and amount of programming required to upgrade or replace
each of the affected programs;
- the rate and magnitude of related labor and consulting costs; and
- our success in addressing Year 2000 issues with third-parties with
which we do business.
<PAGE>
We have not developed a contingency plan to address situations that may result
if we are unable to achieve Year 2000 compliance. If we believe it becomes
necessary, we will develop a contingency plan. The costs of developing and
implementing a contingency plan, if necessary, could be material.
Results of Operations - Pro Forma
The following unaudited pro forma combined financial information for the three
months ended March 31, 1999 and March 31, 1998, includes the results of
BiznessOnline.com, Inc. combined with the results of the Internet Service
provider acquired in January 1999, and the additional four Internet service
providers acquired in May 1999, as if the acquisitions had occurred on January
1, 1998. This unaudited pro forma combined financial information includes the
effects of (a) the acquisitions, (b) our initial public stock offering, and (c)
the amortization of goodwill and other intangibles resulting from the
acquisitions.
The unaudited pro forma combined financial information does not purport to
represent what our financial position or results of operations would actually
have been if such transactions and events in fact had actually occurred on those
dates or to project our results of operations for any future period.
BiznessOnline.com. Inc.
Pro Forma condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
March 31
1999
-----------
<S> <C>
ASSETS
Current Assets:
Cash and cash equivalents $19,221,352
Accounts receivable, net 422,341
Deferred tax assets 231,745
Other current assets 5,656
-----------
Total current assets 19,881,094
Property and equipment, net 794,215
Goodwill and intangibles, net 13,724,404
Deferred IPO costs 505,224
-----------
$34,390,542
Liabilities and Stockholders Equity
Current liabilities:
Line of credit $ 253,830
Current maturities of long term debts 46,698
Current portion of capital lease obligations 111,371
Accounts payable 207,142
Income taxes payable 13,402
Accrued expenses 181,586
Deferred taxes 139,162
Deferred revenues 612,555
-----------
Total current liabilities 1,565,746
Long term debt, net of current portion 11,271
Capital lease obligations, net of current portion 119,338
Stockholders equity
Common stock 68,904
Paid in capital 32,769,549
Retained earnings (deficit) (144,266)
-----------
Total stockholders equity 32,694,187
Total liabilities and stockholders equity $34,390,542
-----------
-----------
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended March 31,
1999 1998
---------------------------
<S> <C> <C>
Revenues $ 1,873,436 $ 1,433,922
----------- ------------
Costs and expenses:
Connectivity and operations 917,605 764,253
Sales and marketing 441,085 297,820
General and administrative 242,478 168,630
Depreciation 122,503 97,911
Amortization of intangibles 670,583 670,583
----------- ------------
Total costs and expenses 2,394,254 1,999,197
----------- ------------
Loss from operations (520,818) (565,275)
Interest expense, net (10,274) (11,217)
----------- ------------
Income taxes -- --
----------- ------------
net loss $ (531,091) $ (576,492)
----------- ------------
----------- ------------
Pro forma net loss per share, basic and fully diluted $ (.08) $ (.08)
Shares used in the calculation of basic and fully diluted
Net loss per share 6,890,436 6,890,436
Subscribers at end of period 22,262 16,626
</TABLE>
See accompanying notes to condensed consolidated financial statements.
Revenues:
Pro forma revenues increased $439,514, or 30.7% from $1,433,922 to $1,873,436,
primarily as a result of an increase in subscribers. The number of subscribers
increased from 16,626 at March 31, 1998 to 22,262 at March 31, 1999, an increase
of 33.9%.
The following table provides a comparison of pro forma connectivity and
operations, sales and marketing and general and administrative expenses as a
percentage of pro forma total revenues:
<TABLE>
<CAPTION>
Three Months Ended March 31,
1999 1998
---------- ----------
<S> <C> <C>
Connectivity and Operations 49.0% 53.3%
Sales and Marketing 23.5% 20.85
General and Administrative 12.9% 11.8%
</TABLE>
<PAGE>
Connectivity and Operations:
Connectivity and operations expenses increased $153,352, or 20.1%, from $764,253
to $917,605, primarily as a result of the increase in the number of subscribers.
Connectivity and operations expenses consist of the cost of non-capital
equipment and the recurring telecommunication costs associated with providing
services to subscribers, including the cost of local telephone lines and the
cost of leased lines connecting the Internet and our operations centers. We
expect these expenses to increase over time to support our growing subscriber
base. Connectivity and operations expenses also include the salaries and
employee benefits of our personnel providing installation, web development and
technical services, the cost of the equipment to provide these services, rent
and utilities for our Internet service providers offices, and customer service
and technical support personnel costs. We expect customer service and support
expenses to increase over time to support new and existing subscribers. New
subscribers tend to be particularly heavy users of customer service and
technical support.
Sales and Marketing:
Sales and Marketing expenses increased $143,265, or 48.1%, from $297,820 to
$441,085. The increase was primarily the result of increased advertising
expenses.
Sales and marketing expenses include the costs associated with acquiring
subscribers, including bonuses, sales commissions and advertising. Sales and
marketing expenses are expected to increase with the expected growth of the
subscriber base. We plan to increase advertising in new markets we enter as we
acquire new Internet service providers. We also plan to hire additional sales
and marketing personnel in each market we enter.
General and Administrative:
General and administrative expenses increased $73,848, or 43.8%, from $168,630
to $242,478, primarily as a result of the increased personnel costs associated
with combining the acquired companies.
General and administrative expenses consist primarily of administrative staff
and related benefits, as well as the cost of travel and entertainment. General
and administrative costs are expected to increase to support our growth,
primarily the implementation of a common billing and financial reporting system.
Depreciation:
Depreciation expenses increased $24,592, or 25.1%, from $97,911 to $122,503,
primarily as a result of the capital equipment purchased during the latter part
of 1998.
Depreciation expense relates primarily to our equipment and is based on the
estimated useful lives of the assets ranging from three to five years using the
straight-line and accelerated methods for the equipment. Depreciation expense is
expected to increase as our Internet service providers increase their networks
to support new and existing subscribers and as we build a centralized data
center and billing and financial reporting system
Amortization:
Amortization expenses were $670,583 for both periods.
Amortization expense primarily relates to the amortization of goodwill acquired
in the acquisitions, and on a pro forma basis, is based upon the useful lives of
these intangibles. Amortization expense is expected to increase as additional
acquisitions are made and will vary according to purchase prices and intangible
assets. Our policy in future acquisitions will be to amortize the portion of the
purchase price attributable to goodwill and other intangibles over the
appropriate period.
Income Taxes:
We recorded no income tax expense or benefit for the three month periods ended
March 31, 1999 and March 31, 1998.
Shares:
The number of shares used in calculating pro forma basic and fully diluted net
loss per share were 6,890,436, representing the outstanding shares after the
initial public offering and the acquisitions.
Effects of Inflation
<PAGE>
We do not believe that inflation has had a material impact on our results of
operations during the three months ended March 31, 1999.
Recent Accounting Pronouncements
In March 1998, the Accounting Standards Executive Committee issued AICPA
Statement of Position 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use." Statement 98-1 provides guidance on
accounting for the costs of computer software developed or obtained for internal
use and assists in determining when computer software is for internal use.
Statement 98-1 is effective for fiscal years beginning after December 15, 998,
with earlier application permitted. We have not determined the impact of the
adoption of Statement 98-1 as this is highly dependent upon the nature, timing
and extent of future internal use software development.
In March 1998, the Accounting Standards Executive Committee issued AICPA
Statement of Position 98-5, "Reporting on the Costs of Start-up Activities."
Statement 98-5 provides guidance on the financial reporting of start up costs
and organization costs. It requires start up and organization costs to be
expensed as incurred. Statement 98-5 is effective for financial statements for
fiscal years beginning after December 15, 1998. We have implemented Statement
98-5 during 1998 and do not expect it to have a material impact on our financial
position or results of operations.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131 " Disclosure About Segments of an
Enterprise and Related Information." Statement 131 supersedes Statement 14,
"Financial Reporting for Segments of a Business Enterprise", and is effective
for years beginning after December 31, 1997. Statement 131 establishes standards
for the way that public business enterprises report selected information about
operating segments in financial reports. Statement 131 also establishes
standards for related disclosures about products and services, geographic areas
and major customers. We have not yet determined the impact of the adoption of
Statement 131.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities." Statement 133 changes the previous accounting
definition of "derivative" which focused on freestanding contracts like options
and forwards, including futures and swaps, expanding it to include embedded
derivatives and many commodity contracts. Under Statement 133, every derivative
is recorded in the balance sheet as either an asset or liability measured at its
fair value. Statement 133 requires that changes in the derivative fair value be
recognized currently in earnings unless specified hedge accounting criteria are
met. Statement 133 is effective for fiscal years beginning after June 15, 2000.
Earlier application is allowed as of the beginning of any quarter beginning
after issuance. We do not anticipate that Statement 133 will have a material
impact on our financial position or results of operations.
Item 3. Qualitative and Quantitative Disclosures about Market Risk
We provide internet access and related services to individuals and small to
medium sized businesses in northeastern New York state and Connecticut. We are
not subject to changes in foreign currency exchange rates or weak economic
conditions in foreign markets. Our interest income is subject to changes in the
general level of U.S. interest rates, particularly since the majority of our
investments are in short-term instruments. Due to the nature of our short-term
investments, we have concluded that there is no material market risk exposure.
Therefore, no quantitative tabular disclosures are required.
Our investment policy requires us to invest funds in excess of current operating
requirements in obligations of the U.S. government and its agencies and
investment grade obligations of state and local governments and U.S.
corporations.
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
Pursuant to Item 701 (f) of Regulation S-K, the following information is being
furnished to disclose certain information regarding the uses of proceeds by
BiznessOnline.com, Inc. in its initial public offering of common stock:
(1) The Registration Statement for the initial public offering (File Number
333-73067) was declared effective on May 11, 1999.
(2) The Offering commenced on May 12, 1999 and terminated when all of the shares
were sold on May 17, 1999.
(3) The managing underwriters for the initial public offering were Joseph
Stevens & Company, Inc., Schneider Securities, Inc., Neidiger, Tucker, Bruner,
Inc. and Royce Investment Group, Inc..
<PAGE>
(4) In the initial public offering, BiznessOnline.com sold an aggregate
2,900,000 shares of Common Stock, par value $.01 per share.
(5) The aggregate offering proceeds of the shares sold was $29,000,000.
(6) The following expenses were incurred in connection with the initial public
offering:
Underwriter's discounts and commissions $2,900,000
Accountants fees 350,000
Legal fees 450,000
Printing expenses 125,000
Miscellaneous filing fees and expenses 175,000
----------
Total $4,000,000
----------
----------
The payments referred to above were not made directly or indirectly to any
officers or directors of BiznessOnline.com, Inc. or their associates, or to any
person owning 10% or more of any class of securities of BiznessOnline.com, Inc.
(7) The net offering proceeds were approximately $25,000,000.
(8) From the effective date of the initial public offering registration through
June 23, 1999, the amount of net offering proceeds used for any purpose for
which at least 5% of the offering proceeds or $100,000 (whichever is less)
was used is as follows:
<TABLE>
<CAPTION>
<S> <C>
Repayment of promissory notes to the stockholders of Global 2000 Communications, Inc. $ 580,000
Payment of the cash portion of the purchase price due to the four Internet service providers
We acquired in May 1999. 5,730,000
Repayment of indebtedness of Internet service providers 212,000
-----------
Total $6,422,000
-----------
-----------
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
(27) Financial Data Schedule
(b) Reports on Form 8-K:
None
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Dated: June 25, 1999 BiznessOnline.com, Inc.
By /s/ Daniel J. Sullivan
-----------------------------------------------
Daniel J. Sullivan
Vice President and Chief Financial Officer
(Authorized Officer on behalf of Registrant and
Principal Financial and Accounting Officer)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 172,552
<SECURITIES> 0
<RECEIVABLES> 169,666
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 342,218
<PP&E> 365,570
<DEPRECIATION> 134,229
<TOTAL-ASSETS> 4,048,436
<CURRENT-LIABILITIES> 1,197,226
<BONDS> 0
0
700
<COMMON> 34,192
<OTHER-SE> 2,816,318
<TOTAL-LIABILITY-AND-EQUITY> 4,048,436
<SALES> 424,103
<TOTAL-REVENUES> 424,103
<CGS> 0
<TOTAL-COSTS> 563,315
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,144
<INCOME-PRETAX> (140,356)
<INCOME-TAX> 0
<INCOME-CONTINUING> (140,536)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (140,536)
<EPS-BASIC> (.08)
<EPS-DILUTED> (.08)
</TABLE>
