<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
|X| QUARTERLY REPORT ON UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE OF 1934
For the quarterly period ended June 30, 2000.
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from..................to....................
Commission file number: 0-27331
FINDWHAT.COM
(Exact name of registrant as specified in its charter)
Nevada 88-0348835
(State of Incorporation) (I.R.S. Employer Identification No.)
121 West 27th Street, Suite 903
New York, New York 10001
(212) 255-1500
(Address and telephone number of registrant's principal executive offices and
principal place of business)
State the number of shares outstanding of each of the Issuer's
classes of common equity, as of the latest practicable date. 13,715,363 shares
of common, $.001 par value as of June 30, 2000.
<PAGE>
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FindWhat.com
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, December 31,
2000 1999
------------ ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 344,233 $ 906,931
Accounts receivable, net of allowance for doubtful accounts
of $22,136 and $0 at June 30, 2000 and December 31,
1999, respectively 172,816 97,675
Prepaid expenses and other current assets 19,298 17,250
------------ ------------
Total current assets 536,347 1,021,856
EQUIPMENT, FURNITURE AND FIXTURES - NET 797,639 242,429
OTHER ASSETS 42,240 2,595
------------ ------------
Total assets $ 1,376,226 $ 1,266,880
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 892,546 $ 134,773
Current portion of capital lease obligation 41,582 7,025
Deferred income 150,850 31,402
Due to affiliate 14,675 59,781
------------ ------------
Total current liabilities 1,099,653 232,981
CAPITAL LEASE OBLIGATION, less current portion 25,517 6,363
------------ ------------
Total liabilities 1,125,170 239,344
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value; authorized, 500,000 shares;
none issued and outstanding
Common stock, $.001 par value; authorized, 50,000,000 shares; issued and
outstanding, 13,715,363 shares at June 30, 2000
and 12,591,750 shares at December 31, 1999 13,715 12,592
Additional paid-in capital 20,345,498 3,273,267
Deferred service costs (11,149,200) (401,491)
Accumulated deficit (8,958,957) (1,856,832)
------------ ------------
Total stockholders' equity 251,056 1,027,536
------------ ------------
Total liabilities and stockholders' equity $ 1,376,226 $ 1,266,880
============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
2
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FindWhat.com
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the six months ended For the three months ended
June 30, June 30,
------------------------------ ------------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
(UNAUDITED) (unaudited) (UNAUDITED) (unaudited)
<S> <C> <C> <C> <C>
Revenues $ 590,528 $ 217,504 $ 373,804 $ 130,047
Cost of revenues 411,464 56,444 257,976 32,813
------------ ------------ ------------ ------------
Gross profit 179,064 161,060 115,828 97,234
Operating expenses
Sales and marketing 5,033,105 71,763 4,157,927 59,081
General and administrative 2,027,567 306,464 867,126 283,849
Product development 252,208 61,308 152,088 36,385
------------ ------------ ------------ ------------
Total operating expenses 7,312,880 439,535 5,177,141 379,315
------------ ------------ ------------ ------------
Loss from operations (7,133,816) (278,475) (5,061,313) (282,081)
Interest income, net 31,691 3,941 13,039 3,941
------------ ------------ ------------ ------------
NET LOSS $ (7,102,125) $ (274,534) $ (5,048,274) $ (278,140)
============ ============ ============ ============
Loss per share - basic and diluted $ (0.53) $ (0.03) $ (0.37) $ (0.03)
============ ============ ============ ============
Unaudited pro forma information (i):
Increase in officer salaries $ 180,000 $ 90,000
============ ============
Pro forma net loss after increase in officer salaries $ (454,534) $ (368,140)
============ ============
Pro forma loss per share after increase
in officer salaries $ (0.05) $ (0.04)
============ ============
Weighted-average number of common
shares outstanding 13,526,010 9,019,337 13,705,286 9,285,714
============ ============ ============ ============
</TABLE>
(i) The supplemental pro forma information is provided to show the impact of
the addition of salaries with three officers of the Company effective
July 1, 1999. The pro forma adjustments reflect salary increases
effective July 1, 1999 as if the salaries had been effective March 27,
1998 (date of inception).
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
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FindWhat.com
CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock
$.001 par value Additional Deferred
--------------------- paid-in service Accumulated
Shares Amount Capital Cost Deficit Total
---------- -------- ------------ ------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1999 12,591,750 $ 12,592 $ 3,273,267 $ (401,491) $(1,856,832) $ 1,027,536
Issuance of common stock in connection
with private placement 500,000 500 1,993,832 1,994,332
Issuance of common stock for advertising
Services 600,000 600 4,424,400 (3,407,275) 1,017,725
Issuance of warrants for metasearch
services 10,200,000 (7,650,000) 2,550,000
Issuance of common stock for consulting
and other advertising services 23,613 23 140,119 (78,125) 62,017
Fair value of stock options granted to
consultants and nonemployees 288,580 288,580
Fair value of options issued for services 25,300 (13,800) 11,500
Deferred service cost 401,491 401,491
Net loss (7,102,125) (7,102,125)
------------ ---------- ------------ ------------- ------------ ------------
Balance at June 30, 2000 (unaudited) 13,715,363 $ 13,715 $20,345,498 $ (11,149,200) $(8,958,957) $ 251,056
============ ========== ============ ============= ============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS STATEMENT.
4
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FindWhat.com
CONDENSED STATEMENTS OF CASH FLOWS
For the six months ended June 30, 2000
(unaudited)
<TABLE>
<CAPTION>
<S> <C>
Cash flows from operating activities
Net loss $ (7,102,125)
Adjustments to reconcile net loss to net cash used in
operating activities
Allowance for doubtful accounts 22,136
Depreciation 120,558
Common stock and warrants issued for services, net 4,031,333
Stock options granted to nonemployees 288,580
Options issued for services, net 11,500
Changes in operating assets and liabilities
Accounts receivable (97,277)
Other current assets (2,048)
Other assets (39,645)
Accounts payable and accrued expenses 757,774
Deferred income 119,448
Due to affiliate (45,106)
------------
Net cash used in operating activities (1,934,832)
------------
Cash flows from investing activities
Purchase of equipment (605,577)
------------
Cash flows from financing activities
Gross proceeds from private placement 2,000,000
Payment of financing costs (5,669)
Payments made on capital leases (16,620)
------------
Net cash provided by financing activities 1,977,711
------------
DECREASE IN CASH AND CASH
EQUIVALENTS (562,698)
Cash and cash equivalents at beginning of period 906,931
------------
Cash and cash equivalents at end of period $ 344,233
============
Supplemental noncash investing and financing activities
Capital lease obligations for purchase of equipment $ 70,330
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
5
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FindWhat.com
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE A - NATURE OF BUSINESS
BeFirst.com was organized under the laws of the State of Nevada under the
name Collectibles America, Inc. and, beginning June 17, 1999, conducted
its operations through its wholly-owned subsidiary, BeFirst Internet
Corporation. On June 17, 1999, the Company changed its name from
Collectibles America, Inc. to BeFirst.com. In September 1999, the Company
changed its name from BeFirst.com to FindWhat.com ("FindWhat" or the
"Company").
FindWhat.com is a developer and marketer of performance-based advertising
services for the Internet. FindWhat offers two services: FindWhat.com, a
pay-for-position search engine which launched in September 1999 and
BeFirst.com, a search engine optimization service. The Company operates in
one reportable business segment.
NOTE B - BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited financial
statements contain all adjustments necessary to present fairly
FindWhat.com's financial position as of June 30, 2000 and the results of
its operations and its cash flows for the six and three months ended June
30, 2000 and 1999. Certain financial information which is normally
included in financial statements prepared in accordance with generally
accepted accounting principles, but which is not required for interim
reporting purposes, has been condensed or omitted. The accompanying
financial statements need to be read in conjunction with the audited
financial statements and notes for the year ended December 31, 1999, which
were included in the Company's Form 10-K, as filed with the Securities and
Exchange Commission (the "SEC") on March 30, 2000.
Results of the interim period are not necessarily indicative of results
that may be expected for the entire year.
NOTE C - LIQUIDITY
The Company has incurred substantial losses from operations, had used
rather than provided cash in its operations during the six months ended
June 30, 2000 and has negative working capital at June 30, 2000.
The Company's principal sources of liquidity consisted of approximately
$344,000 of cash and cash equivalents as of June 30, 2000. Although the
Company has no material long-term commitments for capital expenditures, it
anticipates an increase in capital expenditures consistent with
anticipated growth of operations, infrastructure and personnel. The
Company is currently in the process of attempting to secure additional
financing and will require such additional financing to meet anticipated
liquidity needs over the next 12 months. There can be no assurance that
any anticipated or future financing arrangements will be available in
amounts or on terms acceptable, if at all.
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NOTE D - EQUIPMENT, FURNITURE AND FIXTURES
Equipment, furniture and fixtures consist of the following:
<TABLE>
<CAPTION>
JUNE 30, December 31,
2000 1999
------------ ------------
<S> <C> <C>
Computer equipment $ 755,087 $ 193,921
Furniture and fixtures 135,355 67,835
Leased equipment 61,500 14,418
------------ ------------
951,942 276,174
Less accumulated depreciation (154,303) (33,745)
------------ ------------
$ 797,639 $ 242,429
============ ============
</TABLE>
NOTE E - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following:
<TABLE>
<CAPTION>
JUNE 30, December 31,
2000 1999
------------ ------------
<S> <C> <C>
Accounts payable and other $ 126,733 $ 64,818
Professional fees 298,030 24,955
Database license 45,000 45,000
Internet costs 422,783
------------ ------------
$ 892,546 $ 134,773
============ ============
</TABLE>
7
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NOTE F - DEFERRED INCOME
Deferred income represents advance deposits made by the Company's clients
against future click-throughs for search listing advertisements on the
FindWhat.com search engine. Revenue will be recognized as click-throughs
are made to a client's website. Total deferred revenue recorded for the
six-month period ended June 30, 2000 and for the year ended December 31,
1999 was approximately $414,000 and $35,000, respectively, of which
approximately $295,000 was recognized for the six-month period ended June
30, 2000.
NOTE G - DEFERRED SERVICE COSTS
Deferred service costs, which are shown as a reduction to stockholders'
equity, consist of the value of common stock and stock options issued for
services that will be provided to the Company in future periods.
NOTE H - PRIVATE PLACEMENT
In February 2000, the Company completed a private placement to offer
500,000 shares of common stock for $2 million and a warrant to purchase an
additional 125,000 shares of common stock at a price of $5.50 per share.
These warrants expire on February 11, 2005 and have a fair value of
$628,750.
NOTE I - COMMON STOCK AND STOCK OPTIONS ISSUED FOR SERVICES
In January 2000, the Company entered into an advertising agreement with
Beasley Internet Ventures LLC ("Beasley") whereby the Company issued
600,000 shares of common stock to Beasley. Under the terms of the
contract, Beasley will provide $3,000,000 of advertising to the Company
over a two-year period. The Company is recording the noncash advertising
charge of $4,425,000 over the term of the contract.
8
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NOTE I (CONTINUED)
In March 2000, the Company entered into an agreement with Go2Net, Inc.
("Go2Net") whereby Go2Net will provide metasearch services to the Company
through its network of web sites. The term of the agreement is for one
year. Pursuant to the agreement, Go2Net will receive warrants to purchase
725,000 shares of the Company's common stock at a price of $5.50 per
share. These warrants have a fair value of $10,200,000 and will be
expensed over a one-year period.
In April 2000, the Company issued 7,000 shares of common stock for
services at a closing market price of $9.00 per share. In June 2000, the
Company issued 5,000 shares and 8,000 shares of common stock for services
at a closing market price of $3.00 per share and $2.8125 per share,
respectively.
NOTE J - STOCK INCENTIVE PLAN
In January 2000, the Board of Directors of the Company amended its 1999
Stock Incentive Plan to increase the total number of shares reserved and
available for distribution to the Company's key employees, officers,
directors, consultants and other agents to 1,900,000 shares. It was
approved by the shareholders in July 2000.
9
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
This management's discussion and analysis of financial condition
contains forward-looking statements, the accuracy of which involve risks and
uncertainties. We use words such as "anticipates," "believes," "plans,"
"expects," "future," "intends" and similar expressions to identify
forward-looking statements. This management's discussion and analysis also
contains forward-looking statements attributed to certain third parties relating
to their estimates regarding the growth of the Internet, Internet advertising
and online commerce markets and spending. Prospective investors should not place
undue reliance on these forward-looking statements, which apply only as of the
date of this report. Our actual results could differ materially from those
anticipated in these forward-looking statements for many reasons.
OVERVIEW
We are a developer and marketer of performance-based advertising
services for the Internet. Currently, we offer two proprietary services:
FindWhat.com, a pay-for-performance search engine and BeFirst.com, a web site
optimization service. Our focus is:
- to drive qualified traffic to Internet web sites and
- to ensure that Internet users find what they are looking for
when "surfing the web."
Our services are designed to connect consumers who are most likely to purchase
specific goods and services to businesses that provide those specific goods and
services.
The FindWhat.com search engine, which launched in September 1999,
allows Internet users to enter a word or phrase describing what they want,
called a keyword or search word, and click on "Find." Our search engine then
displays a selection of web sites related to that keyword. Advertisers can
determine where on the results page their web site link will appear on any given
keyword search through an open, automated bidding process. Advertisers submit
bids for the amount they will pay for each consumer who clicks-through to their
web sites. Advertisers can change their bids at any time. The highest bidder
receives the first listing with all other bidders listed in descending order.
Each advertiser pays us the amount of its bid whenever a consumer clicks on the
advertiser's listing in the FindWhat.com search results. Advertisers must pay
for each click-through, so they bid only on keywords relevant to their
offerings. We believe that the FindWhat.com search engine is an efficient system
for advertisers - they pay only for prospects that come to their site. They can
insure that those prospects are qualified by picking only those keywords that
are most relevant to their business. Advertisers can choose exactly how much
they are willing to pay per prospect, thereby maintaining precise control over
the placement of their listings in the FindWhat.com search results and their
cost of customer acquisition.
While we only launched our FindWhat.com search engine in September
1999, we have made significant progress in growing the number of advertisers
bidding to be listed on our search engine. As of June 30, 2000, consumers could
find relevant search listings for information, products and services from over
5,000 advertiser accounts, which had placed approximately 3.2 million bids on
search keywords or key phrases, up from approximately 2,350 advertiser accounts
and 1.4 million bids at the end of March 2000. FindWhat.com ended 1999 with
approximately 1,200 advertiser accounts and 750,000 bids. It is important to
note that some advertiser accounts are managed by advertising agencies, or other
agents for multiple advertisers, which prefer to manage more than one advertiser
in a single account, rather than open a separate account for each advertiser. As
a result, the 5,000 advertiser accounts as of June 30, 2000 actually represent a
larger number than 5,000 advertisers.
We have also substantially increased the number of consumers
accessing our search results and clicking on our paid listings. Our searches
more than quadrupled to over 2.2 million per day in the second quarter of 2000,
from 525,000 in the first quarter of 2000. And for the quarter ending June 30,
2000, the FindWhat.com search engine had approximately 3.8 million paid
click-throughs with an average price per paid click-through of $0.07, up from
approximately 1.2 million paid click-throughs with an average price per paid
click-through of $0.06 in the first quarter of 2000. In all of 1999, the
FindWhat.com search engine had approximately 35,000 paid click-throughs.
The FindWhat.com search engine generates revenue consisting of search
listing paid click-through fees and banner advertising. For the year ended
December 31, 1999, revenue from the FindWhat.com search engine was
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immaterial. In order to generate significant revenues, we must continue to
increase substantially the number of advertisers we service and the volume of
click-throughs to our clients' web sites. FindWhat.com search listing paid
click-through revenue is determined by multiplying the number of
click-throughs on paid search results by the amounts bid for applicable
keywords. Search listing paid click-through revenue is recognized when earned
based on click-through activity to the extent that the advertiser has
deposited sufficient funds with us or collection is probable. FindWhat.com
banner advertisement revenue is recognized when earned under the terms of the
contractual arrangement with the advertiser or advertising agency, provided
that collection is probable.
We believe that our FindWhat.com search engine will be more
attractive to advertisers as more consumers use it for their search needs and
more attractive to consumers as more advertisers bid for placement in our search
results. A significant component of our expenses consists of costs incurred to
attract consumers to our search listings. To date, we have primarily attracted
consumers through our affiliates, who list some or all of our search listings on
their web sites, as well as through marketing to attract consumers to our web
site, including radio and outdoor advertising as well as advertising on the
Internet. We expect to continue to rely upon these sources for a significant
proportion of consumer searches conducted on our service. Our future success is
dependent upon reducing our consumer acquisition costs and increasing the
revenue we derive from this traffic. In order to significantly increase revenues
we will be required to incur a significant expansion of our operations,
including hiring additional management and staff. These actual and proposed
increases in marketing and personnel will significantly increase our operating
expenses.
Our BeFirst.com web optimization service generates revenue from
initial set-up fees charged to new clients and from click-through fees our
clients pay for consumers who get to their web sites as a result of our
efforts. BeFirst.com set-up fee charges are recognized at the time a new
client signs up for the service and pays such fee. BeFirst.com click-through
fees are determined by multiplying the number of click-throughs to a client's
web sites as a result of our efforts by the amount we charge per
click-through. BeFirst.com's clients include eBay, Avenue A, and Morningstar.
We were organized under the laws of the State of Nevada under the
name Collectibles America, Inc. in October 1995. We discontinued our business
operations and transferred our assets to satisfy liabilities in 1997. In June
1999, we acquired 1,000 shares of common stock of BeFirst Internet Corporation,
which was organized under the laws of the State of Delaware in March 1998,
representing all of its outstanding capital stock. These shares were acquired
from the holders of such stock in exchange for our issuance to such stockholders
of 8,750,000 shares of our common stock. As the result of such exchange of
stock, the stockholders of BeFirst Internet Corporation acquired control of us
and BeFirst Internet Corporation became our wholly owned subsidiary. We changed
our corporate name to BeFirst.com at the time of the acquisition. Therefore, the
following discussion is a discussion of the business of BeFirst Internet
Corporation through the time of the acquisition. In September 1999, we changed
our corporate name to FindWhat.com.
We have a limited operating history. We began offering our
BeFirst.com service in March 1998. Our FindWhat.com search engine was
commercially launched in September 1999, but generated immaterial revenues in
the fiscal year ended December 31, 1999. Our services have achieved only limited
market acceptance to date. Our losses for the six months ended June 30, 2000 and
the year ended December 31, 1999 were $7,102,125 and $1,789,667, respectively.
Our limited operating history and the uncertain nature of the markets
we address or intend to address make prediction of our future results of
operations difficult. Our operations may never generate significant revenues and
we may never achieve profitable operations.
RESULTS OF OPERATIONS
Our fiscal year runs from January 1 through December 31. We began
offering our BeFirst.com(SM) search engine optimization service in March 1998
and we commercially launched our FindWhat.com(SM) search engine in September
1999. As a result of these factors, comparisons between the three and six months
ended June 30, 2000 and the three and six months ended June 30, 1999 have
limited meaning.
11
<PAGE>
REVENUE
Revenue for the three months ended June 30, 2000 increased to
$373,804 compared to $130,047 for the three months ended June 30, 1999. Revenue
for the six months ended June 30, 2000 increased to $590,528 compared to
$217,504 for the six months ended June 30, 1999. The increase was primarily the
result of revenue from the FindWhat.com search engine, which was not operational
during the first half of 1999, and thus generated no revenue. Revenue from the
FindWhat.com search engine represented approximately 66% of total revenue for
the three months ended June 30, 2000, and approximately 57% of total revenue for
the six months ended June 30, 2000. We expect that revenue from the FindWhat.com
search engine will represent an increasing percentage of total revenue in future
periods.
COST OF REVENUES
Cost of revenues consists primarily of costs associated with
designing and maintaining our web sites and providing the BeFirst.com service,
fees paid to outside service providers like Inktomi that provide our unpaid
listings, credit card processing fees, and fees paid to telecommunications
carriers for Internet connectivity. Costs associated with maintaining our web
sites include salaries of related personnel, depreciation of web site equipment,
co-location charges for our web site equipment and software license fees. Costs
associated with providing the BeFirst.com service include salaries of related
personnel, payments to consultants, and web site domain registration expenses
for clients.
Cost of revenues increased to $257,976 for the three months ended
June 30, 2000 from $32,813 for the three months ended June 30, 1999. Cost of
revenues was $411,464 for the six months ended June 30, 2000, compared to
$56,444 for the six months ended June 30, 1999. The increase was primarily due
to the launch of the FindWhat.com search engine in September 1999 and increased
costs related to our BeFirst.com service, including an increase in personnel
associated with providing the BeFirst.com service. We anticipate cost of
revenues will continue to increase as our traffic and number of advertisers
increase.
OPERATING EXPENSES
SALES AND MARKETING. Sales and marketing expenses consist primarily
of:
- revenue-sharing or other arrangements with our FindWhat.com
affiliates,
- advertising expenditures for the FindWhat.com search engine,
such as radio, outdoor and banner advertising campaigns and
sponsorships,
- promotional expenditures, including proprietary contests to
attract consumers to the FindWhat.com web site and
sponsorships of seminars, trade shows and expos,
- tele-marketing and other expenses to attract advertisers to
our services,
- fees to marketing and public relations firms, and
- payroll and related expenses for personnel engaged in
marketing, customer service and sales functions.
With the exception of sales personnel salaries, most of our sales and marketing
expenses relate to the FindWhat.com search engine.
Our sales and marketing expense was $4,157,927 for the three months
ended June 30, 2000 compared to $59,081 for the three months ended June 30,
1999. Sales and marketing expense was $5,033,105 for the six months ended June
30, 2000 compared to $71,763 for the six months ended June 30, 1999. Until June
30, 1999, an affiliate employed our sales force and we reimbursed the affiliate
by paying a commission. As of July 1, 1999, the members of our sales force
became our direct employees. The increase in sales and marketing expense was
related primarily to an increase in sales force compensation due to hiring our
sales force directly and expanding the number of marketing, customer service,
and sales employees, along with expenses not incurred during the six months
ended June 30, 1999, including spending to advertise and promote the
FindWhat.com search engine, costs to attract advertisers to our services, fees
to our public relations firm, non-cash stock compensation expense, and
revenue-
12
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sharing and other fees paid to affiliates. Revenue-sharing and other fees
paid to affiliates represents the largest component of our operating
expenses. We have issued shares of common stock or warrants to purchase
shares of common stock to several of our advertising vendors and affiliates
in lieu of cash payments. We record non-cash charges over the terms of our
contracts with these vendors and affiliates. These non-cash charges, along
with non-cash stock compensation expense, totaled $3,304,688 for the three
months ended June 30, 2000, and $3,896,802 for the six months ended June 30,
2000, consisting primarily of warrant grants to our largest affiliate,
Go2Net, Inc., as well as stock grants to national outdoor and radio companies
for billboards and radio commercial time during the period, and option grants
to individuals who have assisted us with relationships with affiliates and
media companies. We did not have any non-cash charges for the six months
ended June 30, 1999, except for $38,300 in non-cash stock option compensation
expense, which was expensed in the month of June 1999. We believe that
continued investment in sales and marketing, including attracting consumers
and advertisers to utilize the FindWhat.com search engine and attracting
affiliates to display our search engine's results, is critical to attaining
our strategic objectives. As a result, we expect these costs to continue
increasing in the future.
GENERAL AND ADMINISTRATIVE. General and administrative expenses
consist primarily of payroll and related expenses for executive and
administrative personnel; costs related to leasing, maintaining and operating
our facilities; insurance; recruiting fees; bad debt; fees for professional
services, including consulting, legal, and accounting fees; expenses and fees
associated with the reporting and other obligations of a public company; travel
costs; depreciation of furniture and equipment for non-technical employees;
non-cash stock compensation expense for the issuance of stock and stock options
to non-employees, and other general corporate expenses; as well as fees to
affiliates which provide office space and other general and administrative
services. Our Chairman and our Chief Executive Officer did not receive salaries
until July 1, 1999. General and administrative expenses increased to $867,126
for the three months ended June 30, 2000 from $283,849 for the three months
ended June 30, 1999. General and administrative expenses increased to $2,027,567
for the six months ended June 30, 2000 from $306,464 for the six months ended
June 30, 1999. The increase in general and administrative expenses was primarily
due to increases in administrative and executive headcount and salaries along
with related expenses associated with the hiring of personnel; increased rent,
insurance and professional services; increased costs associated with being a
public company, including the cost of investor public relations and the cost of
directors' and officers' liability insurance expense; increases in general
corporate expenses; increased non-cash stock compensation expense; increased
depreciation; and increased services provided by our affiliates. We have issued
shares of common stock or warrants to purchase shares of common stock to several
of our general and administrative service providers in lieu of cash payments. We
record non-cash charges over the terms of our contracts with these service
providers or at the time they are engaged. These non-cash charges, along with
non-cash stock compensation expense, totaled $15,000 for the three months ended
June 30, 2000, and $123,281 for the six months ended June 30, 2000, consisting
primarily of warrant and option grants to financial advisors and an investor
public relations firm. We also recorded $217,580 in other non-cash stock option
compensation expense for the six months ended June 30, 2000, which was expensed
in the month of January 2000. We did not have any such non-cash charges for the
six months ended June 30, 1999, except for $172,700 in non-cash stock option
compensation expense, which was expensed in the month of June 1999. We expect
general and administrative expenses to continue to increase as we expand our
staff and incur additional costs related to the growth of our business and
compliance with the reporting obligations of a public company.
PRODUCT DEVELOPMENT. Product development expenses consist primarily
of payroll and related expenses for personnel responsible for development of
features and functionality for our BeFirst.com and FindWhat.com services,
consulting fees to a technical consultant, depreciation for related equipment,
and license fees for software used in product development. Product development
was $152,088 for the three months ended June 30, 2000 compared to $36,385 for
the three months ended June 30, 1999. Product development was $252,208 for the
six months ended June 30, 2000 compared to $61,308 for the six months ended June
30, 1999. The increase was a result of increases in compensation expense, as
well as expenses not incurred during the six months ended June 30, 1999,
including technical consulting services and depreciation. In November 1999, we
issued shares of common stock to a technical consultant. As a result, we
recorded $46,875 in non-cash product development charges for the three months
ended June 30, 2000 and $93,750 in non-cash product development charges for the
six months ended June 30, 2000. We believe that continued investment in product
development is critical to attaining our strategic objectives and as a result,
expect product development expenses to continue increasing in the future.
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INTEREST INCOME, NET
Interest income, net, consists primarily of earnings on our cash and
cash equivalents, net of interest expense attributable to equipment leases and
any taxes. Net interest income was $13,039 for the three months ended June 30,
2000 compared to $3,941 for the three months ended June 30, 1999. Net interest
income was $31,691 for the six months ended June 30, 2000 compared to $3,941 for
the six months ended June 30, 1999. The increase in our interest income was
primarily due to an increase in our average cash and cash equivalent balances
following the receipt of funds from our June 1999 and February 2000 private
placements of common stock. Our interest expense during the first six months of
2000 consisted of interest on leases of computer equipment. We did not have
interest expense during the first six months of 1999.
NET LOSS
As a result of the factors described above, we incurred a net loss of
$5,048,274 for the three months ended June 30, 2000 compared to a net loss of
$278,140 for the three months ended June 30, 1999. The net loss for the three
months ended June 30, 2000 included $3,366,563 of non-cash stock option
compensation expense and non-cash charges other than depreciation, compared to
$211,000 in non-cash stock option compensation expense and non-cash charges
other than depreciation for the three months ended June 30, 1999. We incurred a
net loss of $7,102,125 for the six months ended June 30, 2000 compared to a net
loss of $274,534 for the six months ended June 30, 1999. The net loss for the
six months ended June 30, 2000 included $4,331,413 of non-cash stock option
compensation expense and non-cash charges other than depreciation, compared to
$211,000 in non-cash stock option compensation expense and non-cash charges
other than depreciation for the six months ended June 30, 1999.
LIQUIDITY AND CAPITAL RESOURCES
We have historically satisfied our cash requirements primarily
through private placements of equity securities and the reliance on affiliated
businesses owned by our executive officers. Through June 2000, we have raised
$4.5 million through private equity financings. To date, space and support
services in New York City have been provided to us by WPI Advertising, Inc., an
affiliate of our Chief Executive Officer, Robert D. Brahms. We have been billed
for these services at competitive rates.
Net cash used in operating activities totaled approximately
$1,935,000 for the six months ended June 30, 2000. The net cash used in the six
months ended June 30, 2000 was primarily attributable to cash used in marketing
and sales efforts as well as for general and administrative and product
development expenses, along with increases in accounts receivable, other assets,
and amounts owed to affiliates, partially offset by increases in accounts
payable, deferred income, and non-cash charges, including non-cash stock option
compensation.
Net cash used in investing activities totaled approximately $606,000
for the six months ended June 30, 2000, and consisted of capital expenditures
for equipment.
Net cash provided by financing activities totaled approximately
$1,980,461 for the six months ended June 30, 2000. In February 2000, the Company
completed a private placement of our common stock with an accredited investor.
The Company issued 500,000 shares of common stock for $4.00 per share and
received gross proceeds of $2.0 million. We also issued the investor 125,000
warrants to purchase our common stock at an exercise price of $5.50 per share.
Our principal sources of liquidity consisted of approximately
$344,000 of cash and cash equivalents as of June 30, 2000. Although we have no
material long-term commitments for capital expenditures, we anticipate an
increase in capital expenditures consistent with anticipated growth of
operations, infrastructure and personnel. We are currently in the process of
attempting to secure additional financing. We will require such additional
financing to meet our anticipated liquidity needs over the next 12 months. If
such financing is not available when required or is not available on acceptable
terms, we may be unable to develop or enhance our products and services, take
advantage of business opportunities, respond to competitive pressures, meet
payment obligations to third parties, or satisfy the business obligations of our
company, any of which could have a material adverse effect on our business,
financial condition and results of operations. The sale of additional equity or
other securities convertible into equity
14
<PAGE>
will result in additional dilution to existing stockholders. Our future
liquidity and capital requirements will depend upon numerous factors. The
pace of expansion of our operations will affect our capital requirements. We
may also have increased capital requirements in order to respond to
competitive pressures. In addition, we may need additional capital to fund
acquisitions of complementary products, technologies or businesses. There can
be no assurance that any anticipated or future financing arrangements will be
available in amounts or on terms acceptable to us, if at all. Our forecast of
the period of time through which our financial resources will be adequate to
support our operations is a forward-looking statement that involves risks and
uncertainties and actual results could vary materially as a result of the
factors described above.
15
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
RECENT SALES OF UNREGISTERED SECURITIES
Set forth below in chronological order is information regarding the
numbers of shares of common stock sold by FindWhat.com, the number of options
and warrants issued by FindWhat.com, the consideration received by FindWhat.com
for such shares, options and warrants and information relating to the section of
the Securities Act or rules of the Securities and Exchange Commission under
which exemption from registration was claimed during the period covered by this
report. None of these securities was registered under the Securities Act.
In January 2000, we entered into an agreement to issue 600,000 shares
of our common stock to Beasley Broadcast Group in consideration of $3,000,000
worth of radio and on-line advertising. The certificates representing the shares
of common stock were appropriately legended. In the opinion of FindWhat.com the
issuance of these shares was exempt pursuant to Section 4(2) of the Securities
Act and the rules promulgated thereunder.
In January 2000, we issued Cyber Networks, Inc., a strategic partner,
a warrant to purchase 5,000 shares of our common stock at a purchase price of
$5.50 per share. The warrant was appropriately legended. In the opinion of
FindWhat.com the issuance of the warrant was exempt pursuant to Section 4(2) of
the Securities Act and the rules promulgated thereunder.
In January 2000, we issued options under our 1999 Stock Incentive
Plan to purchase up to an aggregate of 231,000 shares of our common stock to
certain employees and non-employees at a weighted average exercise price $5.50
per share.
In February 2000, we entered into an agreement to issue 500,000
shares of our common stock to Andrew Lessman and issued Mr. Lessman a warrant to
purchase up to 125,000 shares of our common stock at a purchase price of $5.50
per share in consideration of a $2,000,000 cash investment. The certificates
representing the shares of common stock and the warrant were appropriately
legended. In the opinion of FindWhat.com the issuance of these shares and the
warrant was exempt pursuant to Section 4(2) of the Securities Act and the rules
promulgated thereunder.
In February 2000, we issued options under our 1999 Stock Incentive
Plan to purchase up to an aggregate of 24,500 shares of our common stock to
certain employees and non-employee directors at a weighted average exercise
price of $6.03 per share.
In March 2000, we issued a warrant to Go2Net, Inc. to purchase up to
725,000 shares of our common stock at a purchase price of $5.50 per share in
connection with a strategic alliance. The warrant was appropriately legended. In
the opinion of FindWhat.com the issuance of the warrant was exempt pursuant to
Section 4(2) of the Securities Act and the rules promulgated thereunder.
In March 2000, we entered into an agreement to issue 3,613 shares of
our common stock to Van Wagner Communications LLC in consideration of $43,250 of
advertising space. The certificates representing the shares of common stock were
appropriately legended. In the opinion of FindWhat.com, the issuance of these
shares was exempt pursuant to Section 4(2) of the Securities Act and the rules
promulgated thereunder.
In March 2000, we issued options under our 1999 Stock Incentive Plan
to purchase up to an aggregate of 5,000 shares of our common stock to an
employee at $12.00 per share.
16
<PAGE>
In April 2000, we issued options under our 1999 Stock Incentive Plan
to purchase up to an aggregate of 67,000 shares of our common stock to certain
employees and a non-employee director at a weighted average exercise price of
$6.73 per share.
In April 2000, we entered into an agreement to issue 7,000 shares of
our common stock to Mamma.com in consideration of an outstanding account payable
of $63,000. The certificates representing the shares of common stock were
appropriately legended. In the opinion of FindWhat.com, the issuance of these
shares was exempt pursuant to Section 4(2) of the Securities Act and the rules
promulgated thereunder.
In May 2000, we issued options under our 1999 Stock Incentive Plan to
purchase up to an aggregate of 28,000 shares of our common stock to certain
employees and non-employees at a weighted average exercise price of $3.10 per
share.
In June 2000, we issued options under our 1999 Stock Incentive Plan
to purchase up to an aggregate of 1,500 shares of our common stock to certain
employees at a weighted average exercise price of $2.98 per share.
In June 2000, we entered into an agreement to issue 8,000 shares of
our common stock to Van Wagner Communications LLC in consideration of $40,000 of
advertising space. The certificates representing the shares of common stock were
appropriately legended. In the opinion of FindWhat.com, the issuance of these
shares was exempt pursuant to Section 4(2) of the Securities Act and the rules
promulgated thereunder.
In June 2000, we entered into an agreement to issue 5,000 shares of
our common stock to Millenium Capital Resources LLC in consideration of an
outstanding account payable of $15,000. The certificates representing the shares
of common stock were appropriately legended. In the opinion of FindWhat.com, the
issuance of these shares was exempt pursuant to Section 4(2) of the Securities
Act and the rules promulgated thereunder.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Report.
<TABLE>
<CAPTION>
Number Exhibit
<S> <C>
2.1* Agreement and Plan of Reorganization dated June 17, 1999
by and among BeFirst Internet Corporation, Collectibles
America, Inc. and Mick Jardine.
3.1* Articles of Incorporation of FindWhat.com (f/k/a
Collectibles America, Inc.)
3.2* By-laws of FindWhat.com
3.3*** Audit Committee Charter
10.1* Portal Services Agreement dated June 18, 1999 between
Inktomi Corporation and BeFirst Internet Corporation.
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10.2* Lease Agreement by and between Cambridge Management
Associates and BeFirst.com Inc.
10.3* Agreement dated August 18, 1999 between Michigan
Internet Communication Association and BeFirst.com Inc.
10.4* BeFirst 1999 Stock Incentive Plan
10.5* Form of Incentive Stock Option Agreement
10.6* Form of Non-Qualified Stock Option Agreement
10.7(R)**** Search Result Agreement, dated March 29, 2000, between
the Registrant and Mamma.com.
10.8(R)*** Search Services Agreement, dated March 15, 2000, between
the Registrant and Go2Net, Inc.
10.9*** Advertising Agreement, dated January 14, 2000, between
the Registrant and Beasley Internet Ventures, LLC.
10.10*** Merchant Agreement, dated July 13, 1999, between the
Registrant and LinkShare Corporation.
10.11**** Executive Employment Agreement between FindWhat.com and
Phillip R. Thune.
10.12**** Executive Employment Agreement between FindWhat.com and
Peter Neumann.
27 Financial Data Schedule
</TABLE>
* Incorporated by reference to the exhibit previously filed on September 14,
1999 with prior Form 10 of FindWhat.com (file no. 0-27331).
** Incorporated by reference to the exhibit previously filed on November 1, 1999
with Amendment No. 1 to FindWhat.com's prior Form 10 (file no 0-27331).
*** Incorporated by reference to the exhibit previously filed on March 30, 2000
with Amendment FindWhat.com's Form 10-K for the fiscal year ended December 31,
1999.
****Incorporated by reference to the exhibit previously filed on May 15, 2000 to
FindWhat.com's Form 10-QSB for the fiscal quarter ended March 31, 2000.
(R) Please note that certain confidential commercial information has been
redacted from some of the exhibits incorporated into this Form 10-QSB in order
to preserve the confidentiality of such information. All of the confidential
information which has been redacted is on file with the Securities and Exchange
Commission. Exhibits to this Form 10-QSB which have had confidential information
redacted are indicated as follows on the exhibit list above: (R). Within the
exhibits to this Form 10-QSB, redacted material is indicated by the following
sign where such redacted text would have appeared in the relevant exhibit:
(**REDACTED**)
(b) Reports on Form 8-K
None
18
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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.
FINDWHAT.COM
Date: August 14, 2000 By: /s/ Phillip R. Thune
--------------------
Phillip R. Thune
(Duly Authorized Officer and Principal
Financial and Accounting Officer)
19
