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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: DECEMBER 10, 1999
COMMISSION FILE NUMBER 1-07149
INTERNET LAW LIBRARY, INC.
(Exact name of Company as specified in charter)
DELAWARE 82-0277987
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
4301 WINDFERN ROAD, SUITE 200, HOUSTON, TEXAS 77041
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (281) 600-6000
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<PAGE>
ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
Inapplicable.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On December 10, 1999, the Board of Directors of Internet Law Library, Inc.
(the "Company") approved the Company's purchase of all of the outstanding
interests of Brief Reporter, LLC, a Virginia limited liability company ("Brief
Reporter"), in exchange for 483,325 shares of the Company's common stock
valued at $1,000,000. The outstanding interests of Brief Reporter were
purchased directly from five individuals, specifically, David P. Harriman,
Andrew Wyszkowski, Eugene Meyung, Suzanne Meyung, and Christina Brown. Under
the terms of this transaction, these individuals may have up to twenty-five
(25%) percent of their shares of the Company's common stock registered in a
public offering prior to July 1, 2000, provided there is such an offering and
the registration of their shares is not detrimental to the offering. If there
is no public offering or if none of these shares are registered in such an
offering, then the Company is obligated to repurchase an aggregate of $125,000
of these shares at a then prevailing market price.
The consideration and terms for the acquisition were determined through arm's
length negotiations between the Company and the members of Brief Reporter. The
consideration was determined by reference to management's estimate of the
value of merging Brief Reporter's database and management into National Law
Library, Inc., a wholly owned subsidiary of the Company.
Brief Reporter owns and operates an Internet site (WWW.BRIEFREPORTER.COM) and
a connected database containing appellate briefs and trial memoranda written
by attorneys for significant cases in all federal and state jurisdictions.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP.
Inapplicable.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.
Inapplicable.
ITEM 5. OTHER EVENTS.
Inapplicable.
ITEM 6. RESIGNATIONS OF REGISTRANT'S DIRECTOR.
Inapplicable.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired.
The appropriate financial statements are filed herewith as Annex A.
(b) Pro forma Financial Information.
The appropriate pro forma financial information relating to the
acquisition is filed herewith as part of Annex A.
ITEM 8. CHANGE IN FISCAL YEAR.
Inapplicable.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
INTERNET LAW LIBRARY, INC.
Date: February 18, 2000 By: /s/ HUNTER M. A. CARR
-------------------------------
Hunter M. A. Carr
President and
Chief Executive Officer
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<TABLE>
<CAPTION>
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
- --- -----------
<S> <C>
2.7 * Contract for Sale of Stock, dated December 8, 1999, by and between
David P. Harriman, Andrew Wyszkowski, Eugene Meyung, Suzanne Meyung,
and Christina Brown, as Sellers, and Internet Law Library, Inc., as
Buyer.
2.8 * Unanimous Written Consent of Directors of Internet Law Library, Inc.,
dated December 10, 1999.
* Previously filed as an exhibit to the Company's Current Report on Form 8-K
filed with the Securities and Exchange Commission on December 23, 1999,
and incorporated herein by reference.
</TABLE>
<PAGE>
ANNEX A
<TABLE>
<CAPTION>
C 0 N T E N T S
Page
----
<S> <C>
Independent Accountant's Report.................................................................................A-2
Balance Sheets..................................................................................................A-3
Statements of Operations........................................................................................A-4
Statements of Changes in Members' Equity........................................................................A-5
Statements of Cash Flows........................................................................................A-6
Notes to Financial Statements...........................................................................A-7 to A-12
</TABLE>
<PAGE>
INDEPENDENT ACCOUNTANT'S REPORT
To the Members of
Brief Reporter, LLC
We have compiled the accompanying balance sheet of Brief Reporter, LLC as of
September 30, 1999, the related statement of changes in members' equity for
the three months then ended and the related statements of operations and cash
flows for the three months ended September 30, 1999 and 1998 in accordance
with Statements on Standards for Accounting and Review Services issued by the
American Institute of Certified Public Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited or
reviewed the accompanying financial statements as of September 30, 1999 and
for the three months ended September 30, 1999 and 1998, and, accordingly, do
not express an opinion or any other form of assurance on them.
We have audited the accompanying balance sheet of Brief Reporter, LLC as of
June 30, 1999 and the related statements of operations, changes in members'
equity and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to in the third paragraph
present fairly, in all material respects, the financial position of Brief
Reporter, LLC as of June 30, 1999, and the results of its operations and its
cash flows for the year then ended, in conformity with generally accepted
accounting principles.
/s/ Harper & Pearson Company
Houston, Texas
February 9, 2000
A-2
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<TABLE>
<CAPTION>
BRIEF REPORTER, LLC
BALANCE SHEETS
September 30,
ASSETS 1999 June 30, 1999
(Unaudited) (Audited)
-------------- --------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 40,936 $ 17,979
Accounts receivable, trade 7,655 3,721
-------------- --------------
TOTAL CURRENT ASSETS 48,591 21,700
-------------- --------------
COMPUTERS AND OFFICE EQUIPMENT
Computers 19,989 19,989
Office equipment 1,895 1,895
Less accumulated depreciation (12,789) (11,719)
-------------- --------------
9,095 10,165
OTHER ASSETS 1,525 724
-------------- --------------
$ 59,211 $ 32,589
============== ==============
LIABILITIES AND MEMBERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ - $ 2,225
Unearned income 2,500 -
-------------- --------------
TOTAL CURRENT LIABILITIES 2,500 2,225
MEMBERS' EQUITY 56,711 30,364
-------------- --------------
$ 59,211 $ 32,589
============== ==============
</TABLE>
See independent accountant's report.
See accompanying notes.
A-3
<PAGE>
<TABLE>
<CAPTION>
BRIEF REPORTER, LLC
STATEMENTS OF OPERATIONS
For the three months ended
September 30, For the year
----------------------------------------- ended
1999 1998 June 30, 1999
(Unaudited) (Unaudited) (Audited)
------------------ ---------------- -----------------
<S> <C> <C> <C>
REVENUES $ 11,243 $ 4,710 $ 28,862
------------------ ---------------- -----------------
EXPENSES
Production 25,008 44,348 118,982
General and administrative 4,891 7,728 28,883
Sales and marketing 4,144 1,920 12,793
Depreciation 1,070 1,070 4,279
------------------ ---------------- -----------------
35,113 55,066 164,937
------------------ ---------------- -----------------
INTEREST INCOME 217 320 662
------------------ ---------------- -----------------
NET LOSS $ (23,653) $ (50,036) $ (135,413)
================== ================ =================
</TABLE>
See independent accountant's report.
See accompanying notes.
A-4
<PAGE>
<TABLE>
<CAPTION>
BRIEF REPORTER, LLC
STATEMENTS OF CHANGES IN MEMBERS' EQUITY
Members' Retained
Capital Deficit Total
-------------- ---------------- ----------------
<S> <C> <C> <C>
BALANCE, June 30, 1998 $ 449,000 $ (380,723) $ 68,277
CAPITAL CONTRIBUTIONS:
Cash contributions 50,000 - 50,000
Contributed services 47,500 - 47,500
NET LOSS - (135,413) (135,413)
-------------- ---------------- ----------------
BALANCE, June 30, 1999 546,500 (516,136) 30,364
CAPITAL CONTRIBUTIONS: (Unaudited)
Cash contributions 50,000 - 50,000
NET LOSS (Unaudited) - (23,653) (23,653)
-------------- ---------------- ----------------
BALANCE, September 30, 1999 (Unaudited) $ 596,500 $ (539,789) $ 56,711
============== =============== ================
</TABLE>
See independent accountant's report.
See accompanying notes.
A-5
<PAGE>
<TABLE>
<CAPTION>
BRIEF REPORTER, LLC
STATEMENTS OF CASH FLOWS
For the three months ended
September 30, For the year
------------------------------------ ended
1999 1998 June 30, 1999
(Unaudited) (Unaudited) (Audited)
---------------- ---------------- -------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (23,653) $ (50,036) $ (135,413)
---------------- ---------------- -------------------
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation 1,070 1,070 4,279
Contributed services - 28,500 47,500
Changes in operating assets:
Accounts receivable, trade (3,935) (35) (2,618)
Other assets (800) - 200
Accounts payable (2,225) 1,140 502
Unearned income 2,500 - -
---------------- ---------------- -------------------
Total adjustments (3,390) 30,675 49,863
---------------- ---------------- -------------------
Net cash used by operating activities (27,043) (19,361) (85,550)
---------------- ---------------- -------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Capital contributions 50,000 - 50,000
---------------- ---------------- -------------------
Net cash provided by financing activities 50,000 - 50,000
---------------- ---------------- -------------------
NET INCREASE (DECREASE) IN CASH 22,957 (19,361) (35,550)
CASH AND CASH EQUIVALENTS AT
THE BEGINNING OF THE PERIOD 17,979 53,529 53,529
---------------- ---------------- -------------------
CASH AND CASH EQUIVALENTS AT
THE END OF THE PERIOD $ 40,936 $ 34,168 $ 17,979
================ ================ ===================
</TABLE>
See independent accountant's report.
See accompanying notes.
A-6
<PAGE>
BRIEF REPORTER, LLC
NOTES TO FINANCIAL STATEMENTS
NOTE A BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Brief Reporter, LLC (the "Company") was organized as a
Virginia limited liability company with a duration of 30 years
under the name of Brief Bank LLC on September 12, 1996 for the
purpose of developing and marketing through an Internet portal
an on-line database of legal material. This material consists
of appellate briefs prepared by attorneys for important cases
in all federal and state jurisdictions. As a limited liability
company, the Company's ownership is evidenced by membership
interests as described in its Operating Agreement, as revised
from time to time. In September 1997, the Company's name was
changed to Brief Reporter, LLC.
OPERATIONS - As shown in the accompanying financial
statements, the Company has net losses of $23,653, $50,036 and
$135,413 for the three months ended September 30, 1999 and
1998, and for the year ended June 30, 1999, respectively. In
the absence of mitigating factors, the above-described results
of operations would create uncertainties regarding the
Company's ability to continue as a going concern. During
December 1999, Internet Law Library, Inc., a company operating
in the same industry, acquired the Company. See Note E for
further discussion.
ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could
differ from those estimates and the results could have a
material impact on the operations of the Company.
FINANCIAL INSTRUMENTS - The carrying values of the Company's
financial instruments, which include cash and cash
equivalents, accounts receivable and accrued charges
approximate their respective fair values.
CONCENTRATIONS OF CREDIT RISK - Financial instruments, which
potentially subject the Company to concentrations of credit
risk, consist principally of trade receivables and cash
equivalents. The Company places its cash with high credit
quality financial institutions. No collateral or other
security is required to support accounts receivable.
Substantially all of the Company's accounts receivables were
deemed fully collectible at September 30 and June 30, 1999;
therefore, no allowance for doubtful accounts has been
recorded. Approximately 42% and 79% of accounts receivable
were from a single customer at September 30, 1999 and June 30,
1999 respectively. Approximately 45% and 29% of total revenues
were derived from one customer for the three months ended
September 30, 1999, and for the year ended June 30, 1999,
respectively.
A-7
<PAGE>
BRIEF REPORTER, LLC
NOTES TO FINANCIAL STATEMENTS
NOTE A BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
CASH AND CASH EQUIVALENTS - The Company considers all highly
liquid investments with maturities of three months or less
when purchased to be cash equivalents.
COMPUTERS AND OFFICE EQUIPMENT - Computers and office
equipment are stated at cost and depreciation is provided for
using the straight-line method over estimated useful lives of
five and seven years, respectively. Expenditures for
additions, major renewals, and betterments are capitalized and
expenditures for maintenance and repairs are charged to
earnings as incurred.
When properties are retired or otherwise disposed of, the cost
thereof and the applicable accumulated depreciation is removed
from the respective accounts and the resulting gain or loss is
reflected in earnings.
REVENUE RECOGNITION - The Company recognizes revenue from
on-line products when they are sold.
INCOME TAXES - The Company is a limited liability company
treated as a partnership for income tax reporting purposes
and, as such, is not subject to federal income tax.
Accordingly, no provision for federal income taxes is provided
in the financial statements. The income tax liability of the
individual members is not accrued on the books of the Company.
All income and expense items are apportioned and shared by the
members based on their respective capital accounts.
NOTE B LEASE COMMITMENTS
Lease commitments do not extend beyond one year. Total rent
expense for the three months ended September 30, 1999 and
1998, and for the year ended June 30, 1999, amounted to
$1,450, $2,175 and $8,700, respectively.
NOTE C MEMBERS' INTERESTS
Members of the Company are not personally liable for any debt
obligation or other liability of the Company. Members have the
right to elect a manager to handle the daily business of the
Company, have the right to ratify major business decisions and
are entitled to a proportionate share of profits, losses and
distributions of Company assets.
A-8
<PAGE>
BRIEF REPORTER, LLC
NOTES TO FINANCIAL STATEMENTS
NOTE C MEMBERS' INTERESTS (CONTINUED)
In March 1999, the members granted a 2.2% financial interest
to an individual based on years of service to the Company.
This financial interest entitles the holder to a proportionate
share of profits, losses and distributions of Company assets
and provides for the same limited liability accorded the
members. The holder of the financial interest also has the
same rights as other members under the sales contract signed
on December 8, 1999 (See Note E below). The holder of a
financial interest is not allowed to participate in the
management or control of the Company, as do members. At
September 30, 1999 and June 30, 1999, the holder of the
financial interest had a small interest in the retained
deficit of the Company. The holder received stock valued at
$20,000 pursuant to the sales contract described in Note E.
NOTE D NONCASH FINANCING ACTIVITIES
Two members of the Company each contributed management and
production services in exchange for their respective member
interests. For the period from inception of the Company in
September 1996 to June 30, 1999, the Company recorded total
compensation expense of $256,500 for the contributed
management and production services of these two members.
Contributed services valued at $28,500 and $47,500 were
contributed for the three months ended September 30, 1998 and
the year ended June 30, 1999 respectively. The value of these
services was based on actual amounts paid for comparable
services.
NOTE E SUBSEQUENT EVENTS
On December 8, 1999, the Company's members signed a contract
to exchange all of their interests and the 2.2% financial
interest in the Company for 483,325 shares of the common stock
of Internet Law Library, Inc. ("Internet Law") valued at $1
million dollars. The contract provides that for any public
offering of Internet Law's stock prior to July 1, 2000, the
Company's members are granted the right of registration for up
to 25% of their holdings at the time of registration (unless
the registration is deemed by the underwriters to be
detrimental to the public offering). If the members are not
granted the right of registration for any public offering
occurring prior to July 1, 2000, then Internet Law will
purchase $125,000 worth of the members' holdings based on the
average of the daily closing price of Internet Law's stock
during the first five trading days preceding July 1, 2000.
The contract provides for an employment agreement between the
President of the Company and Internet Law, and a three-year
agreement was executed by the parties effective December 1,
1999.
A-9
<PAGE>
BRIEF REPORTER, LLC
NOTES TO FINANCIAL STATEMENTS
NOTE E SUBSEQUENT EVENTS (CONTINUED)
The contract also gives the President the right of first
refusal on any offers to sell a controlling interest in the
Company within three years from the date of the contract.
The unaudited pro forma combined balance sheets of the Company
and Internet Law at September 30, 1999 and the unaudited pro
forma combined results of operations of the Company and
Internet Law for the three months ended September 30, 1999 and
for the year ended June 30, 1999, and for the period from
Internet Law's inception on November 30, 1998 to June 30, 1999
(assuming the Company had been acquired on July 1, 1998),
respectively, are shown below:
<TABLE>
<CAPTION>
Internet Law Pro Forma
Library, Inc. Brief Reporter, Pro Forma Combined
(As reported) LLC (Unaudited) Adjustments (Unaudited)
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<S> <C> <C> <C> <C>
BALANCE SHEETS AT SEPTEMBER 30, 1999
Current assets $1,092,402 $ 48,591 $ - $1,140,993
Intellectual property and
equipment, net 3,712,884 10,620 3,723,504
Goodwill, net - Note 1 - - 900,193 900,193
---------- ----------- ---------- ----------
Total assets $4,805,286 $ 59,211 $ 900,193 $5,764,690
========== =========== ========== ==========
Current liabilities $1,653,940 $ 2,500 $ - $1,656,440
Stockholders/members' equity 3,151,346 56,711 900,193 4,108,250
---------- ----------- ---------- ----------
Total liabilities and
stockholders/members' equity $4,805,286 $ 59,211 $ 900,193 $5,764,690
========== =========== ========== ==========
</TABLE>
A-10
<PAGE>
<TABLE>
BRIEF REPORTER, LLC
NOTES TO FINANCIAL STATEMENTS
NOTE E SUBSEQUENT EVENTS (CONTINUED)
Internet Law
Library, Pro Forma
Inc. (As Brief Reporter, Pro Forma Combined
reported) LLC (Unaudited) Adjustments (Unaudited)
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS FOR THE THREE MONTHS
ENDED SEPTEMBER 30, 1999
Revenues $ 91,151 $ 11,243 $ - $ 102,394
----------- ---------- ---------- -----------
Net loss - NOTE 2 $ (532,039) $ (23,653) $ (37,003) $ (592,695)
=========== ========== ========== ===========
Basic and diluted loss
Per share $ (0.03) $ (0.03)
=========== ===========
Weighted average shares:
Basic 16,535,920 483,325 17,019,245
=========== ========== ===========
Diluted 17,095,779 483,325 17,579,104
=========== ========== ===========
STATEMENTS OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1999
Revenues $ 53,520 $ 28,862 $ - $ 82,382
----------- ---------- ---------- -----------
Net loss - NOTE 3 $ (612,214) $ (135,413) $ (148,010) $ (895,637)
=========== ========== ========== ===========
Basic and diluted loss
Per share $ (0.06) $ (0.08)
=========== ===========
Weighted average shares:
Basic 10,763,581 483,325 11,246,906
=========== ========== ===========
Diluted 11,551,081 483,325 12,034,406
=========== ========== ===========
</TABLE>
NOTE 1 To record goodwill based on the purchase of the Company's
net assets (valued at $39,794) by Internet Law Library, Inc.
for common stock (valued at $1,000,000). Goodwill is
amortized over 20 years, resulting in unamortized goodwill of
$900,193 as of September 30, 1999.
NOTE 2 To record amortization expense of $12,003 and $25,000
additional salary expense under the employment agreement with
the President of Brief Reporter.
NOTE 3 To record amortization expense of $48,010 and $100,000
additional salary expense under the employment agreement with
the President of Brief Reporter.
A-11
<PAGE>
In management's opinion, the unaudited pro forma combined
balance sheets and statements of operations may not be
indicative of the actual financial position or results of
operations that would have occurred had the acquisition been
completed at July 1, 1998.
A-12
