U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[ X ] Quarterly report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 2000
-------------
Transition report under Section 13 or 15(d) of the Exchange Act of 1934
For the transition period from __________ to __________
Commission file number 1-9224
CAREERENGINE NETWORK, INC.
--------------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
DELAWARE 13-2689850
-------------------------------- ------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2 World Trade Center, Suite 2112, New York, N.Y. 10048
------------------------------------------------------
(Address of Principal Executive Offices)
212-775-0400
------------
(Issuer's Telephone Number, Including Area Code)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [ X ] No [ ]
The number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
Class Outstanding at July 31, 2000
----- ----------------------------
Common stock - par value $.10 5,442,073 shares
<PAGE>
PART I
FINANCIAL INFORMATION
Item l. Financial Statements.
The following consolidated financial statements of
CareerEngine Network, Inc. and subsidiaries (collectively
referred to as the "Company," unless the context requires
otherwise) are prepared in accordance with the rules and
regulations of the Securities and Exchange Commission for Form
10-QSB and reflect all adjustments (consisting of normal
recurring accruals) and disclosures which, in the opinion of
management, are necessary for a fair statement of results for
the interim periods presented. It is suggested that these
financial statements are read in conjunction with the
financial statements and notes thereto included in the
Company's Form 10-KSB for the year ended December 31, 1999,
which was filed with the Securities and Exchange Commission.
The results of operations for the three and six months ended
June 30, 2000 are not necessarily indicative of the results to
be expected for the entire fiscal year.
1
<PAGE>
<TABLE>
<CAPTION>
CareerEngine Network, Inc. and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
June 30, December 31,
2000 1999
------------ ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 2,115,855 $ 1,006,276
Marketable securities 2,453,610 4,888,610
Real estate leased, net 69,630,734 70,336,022
Fixed assets, net 621,054 600,541
Deferred financing costs, net 2,201,914 1,707,279
Deferred rental income 1,653,080 577,485
Other assets 584,837 565,018
------------ ------------
$ 79,261,084 $ 79,681,231
============ ============
LIABILITIES
Bonds payable $ 72,750,000 $ 72,750,000
Debentures payable 1,331,028
Accrued interest 890,558 836,130
Accrued expenses and other liabilities 1,249,429 1,891,201
------------ ------------
Total liabilities 76,221,015 75,477,331
------------ ------------
Due to preferred member 2,250,000 2,250,000
------------ ------------
Commitments
STOCKHOLDERS' EQUITY
Common stock - authorized 10,000,000 shares,
par value $.10; issued 6,749,600 shares 674,960 674,960
Paid-in surplus 16,098,009 14,984,510
Deficit (12,950,021) (10,657,861)
------------ ------------
3,822,948 5,001,609
Less treasury stock, at cost -
1,312,327 shares in 2000 and 1,313,927 in 1999 (3,032,879) (3,047,709)
790,069 1,953,900
------------ ------------
$ 79,261,084 $ 79,681,231
============ ============
</TABLE>
2
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<TABLE>
<CAPTION>
CareerEngine Network, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------- ----------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
Revenues
<S> <C> <C> <C> <C>
E-recruiting related services $ 335,948 $ 514,558
Rental income from real estate leased 2,233,467 $ 457,835 4,491,096 $ 1,051,672
Consulting fees 3,000 183,924 14,600 292,014
Income on securities transactions, net 21,332 890,015 696,137 1,081,856
Interest income 22,511 97,713 64,863 206,345
----------- ----------- ----------- -----------
2,616,258 1,629,487 5,781,254 2,631,887
----------- ----------- ----------- -----------
Expenses
Compensation and related costs 935,472 670,613 1,698,714 1,120,246
Real estate leased expenses, net 2,061,465 773,106 4,070,092 1,705,419
Advertising 416,063 45,258 1,026,854 75,158
General and administrative 522,731 339,219 1,014,859 565,058
Interest on beneficial conversion feature
of debentures payable 246,875 246,875
----------- ----------- ----------- -----------
4,182,606 1,828,196 8,057,394 3,465,881
----------- ----------- ----------- -----------
Loss before income taxes (1,566,348) (198,709) (2,276,140) (833,994)
Income tax provision 680 16,020 13,522
----------- ----------- ----------- -----------
Net loss $(1,566,348) $ (199,389) $(2,292,160) $ (847,516)
=========== =========== =========== ===========
Net loss per common share - basic and diluted $ (.29) $ (.04) $ (.42) $ (.16)
=========== =========== =========== ===========
Weighted average number of common shares
outstanding - basic and diluted 5,440,000 5,436,000 5,438,000 5,436,000
=========== =========== =========== ===========
</TABLE>
3
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<TABLE>
<CAPTION>
CareerEngine Network, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended
June 30,
------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Cash flows from operating activities
Net loss $ (2,292,160) $ (847,516)
Adjustments to reconcile net loss to net cash (used in)
provided by operating activities:
Depreciation and amortization 903,338 102,515
Interest on beneficial conversion feature of debentures payable 246,875
Sale of marketable securities, net 2,435,000 924,265
Issuance of treasury stock for services 15,200
Changes in:
Deferred financing costs, net (326,803)
Deferred rental income (1,075,595)
Other assets (19,819) (424,284)
Accrued expenses, other liabilities and accrued interest (587,345) 3,965,838
------------ ------------
Net cash (used in) provided by operating activities (701,309) 3,720,808
------------ ------------
Cash flows from investing activities
Sale of investment securities, net 22,277,225
Construction of improvements (25,949,810)
Purchase of furniture and equipment (164,112) (151,741)
Increase in due to preferred member 750,000
------------ ------------
Net cash used in investing activities (164,112) (3,074,326)
------------ ------------
Cash flows from financing activities
Purchase of treasury stock (23,180)
Proceeds from issuance of debentures 1,331,028
Additional paid in capital from sale of debentures 643,972
------------ ------------
Net cash provided by (used in) financing activities 1,975,000 (23,180)
------------ ------------
Increase (decrease) in cash and cash equivalents 1,109,579 623,302
Cash and cash equivalents at beginning of period 1,006,276 1,040,955
------------ ------------
Cash and cash equivalents at end of period $ 2,115,855 $ 1,664,257
============ ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Supplemental disclosures of Cash Flow Information
Cash paid during the period for:
Interest (net of amounts capitalized) $ 3,255,916 $ 2,486,827
Income taxes $ 16,020 $ 7,375
Issuance of warrants in connection with debentures payable $ 222,282
</TABLE>
4
<PAGE>
Careerengine Network, Inc. and Subsidiaries
Notes To Condensed Consolidated Financial Statements
(Unaudited)
1. Significant Accounting Policies
-------------------------------
The accounting policies followed by the Company are set forth in the
notes to the Company's financial statements included in its Form
10-KSB, for the year ended December 3l, 1999, which was filed with the
Securities and Exchange Commission.
Certain amounts have been reclassified in the financial statements for
the three and six month periods ended June 30, 1999 to conform to the
presentation of the three and six month periods ended June 30, 2000.
2. Income (Loss) Per Share
-----------------------
Basic income (loss) per share is based on the weighted average number
of common shares outstanding. Employee stock options did not have an
effect on the computation of diluted earnings per share since they were
anti-dilutive.
3. Debentures Payable
------------------
On June 28, 2000, the Company privately placed 39.50 units of its
securities. Each unit consisted of a $50,000 subordinated convertible
debenture, 12,500 Class A Common Stock Warrants and 12,500 Class B
Common Stock Warrants. Each $50,000 debenture is convertible into
25,000 shares of common stock. The Class A and B Warrants are
exercisable at $4 and $6, respectively. The debentures bear interest at
12%, payable quarterly, commencing October 1, 2000 and mature March 31,
2010. The Class A and B Warrants are exercisable at any time until
March 31, 2003 and March 31, 2005, respectively. On August 7, 2000, the
Company privately placed an additional 8.50 units under the same terms
and conditions as set forth above.
The Company incurred a non-recurring non-cash interest charge of
$246,875 due to the beneficial conversion feature of the debentures. In
addition, the Company valued the warrants, which were treated as debt
discount utilizing the Black-Scholes Pricing Model, at $643,972 which
will be amortized over the life of the debentures.
5
<PAGE>
4. Real Estate Leased and Bonds Payable
------------------------------------
In 1997, the Company entered into a triple net, credit type lease, as
amended (the "Lease"), with Carmike Cinemas, Inc., pursuant to which
the Company leased six parcels of land and the improvements thereon
(the "Property") to Carmike. Concurrently, the Company issued
$72,750,000 principal amount of its adjustable rate tender securities
due November 1, 2015 (the "Bonds"). The Bonds are secured by
irrevocable letters of credit issued by a group of banks. In connection
therewith the Company entered into a Reimbursement Agreement with
Wachovia Bank, N.A., as agent for the banks, under which the Company is
obligated to remit all rent received under the lease to Wachovia to
reimburse the banks for the Bond payments made by draws on their
letters of credit.
On August 8, 2000, Carmike filed a petition under Chapter 11 of the
United States Bankruptcy Code. As a result of that filing and Carmike's
subsequent failure to pay rent under the Lease, the Company failed to
make certain payments to Wachovia under the Reimbursement Agreement.
Wachovia has declared a default under the Reimbursement Agreement, and
has accelerated all amounts due by the Company thereunder. In addition,
Wachovia has directed the Trustee under the Indenture governing the
issuance of the Bonds, to accelerate the payment of all principal and
interest with respect to the Bonds. Such amounts will be paid entirely
through draws on the letters of credit and will not be paid with funds
of the Company.
The Company's obligations under the Reimbursement Agreement and the
Bonds are and always have been fully non-recourse, and the Company's
exposure is and always has been limited solely to the Company's
interest in the Property. The Company cannot determine, at this time,
the prospective effect of the proceeding initiated by Carmike.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Certain statements in the "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and
elsewhere in this Form 10-QSB constitute "forward-looking
statements" within the meaning of the Reform Act. See Part II,
Other Information - Item 5.
A. Three Months Ended June 30, 2000 Compared
-----------------------------------------
with Three Months Ended June 30, 1999
-------------------------------------
Total revenues increased to $2,616,258 for the three
months ended June 30, 2000 from $1,629,487 for the
three months ended June 30, 1999.
E-recruiting related services increased to $335,948
for the three months ended June 30, 2000 from nil for
the three months ended June 30, 1999 as the
E-recruiting operations of the Company's subsidiary,
CareerEngine, Inc., commenced in the quarter ended
December 31, 1999.
Rental income from real estate leased increased to
$2,233,467 for the three months ended June 30, 2000
from $457,835 in the three months ended June 30,
1999. Rental income for the three months ended June
30, 1999 represents interest income earned on
unexpended construction proceeds, as the construction
of the Company's movie theaters was completed on
November 20, 1999 and rent thereon commenced.
Financial consulting fees were $3,000 for the three
months ended June 30, 2000 compared to $183,924 for
the three months ended June 30, 1999. Significant
variations in this category of revenue are likely to
occur due to the transactional nature of the
Company's financial consulting business.
Income on securities transactions, net decreased to
$21,332 for the three months ended June 30, 2000
compared to $890,015 for the three months ended June
30, 1999 principally from the results of the
Company's cash management and investing activities.
These activities include transactions involving
futures, puts, calls, equities, municipal securities,
and other securities.
Interest income decreased to $22,511 for the three
months ended June 30, 2000 from $97,713 for the three
months ended June 30, 1999 due to the reduced amount
of funds available for investment.
7
<PAGE>
Total expenses increased to $4,182,606 for the three
months ended June 30, 2000 from $1,828,196 for the
three months ended June 30, 1999.
Compensation and related costs increased to $935,472
for the three months ended June 30, 2000 from
$670,613 for the three months ended June 30, 1999.
The increase is due principally to the additional
employees hired by CareerEngine, Inc. in connection
with its internet-based job search services venture.
The Company anticipates that compensation costs will
increase moderately in the last six months of 2000.
Real estate leased expenses, net increased to
$2,061,465 for the three months ended June 30, 2000
from $773,106 for the three months ended June 30,
1999 due primarily to the completion of the
construction of the movie theaters and the
commencement of rent in late 1999.
Advertising expense increased to $416,063 for the
three months ended June 30, 2000 from $45,258 for the
three months ended June 30, 1999 as CareerEngine,
Inc. commenced its comprehensive communications
program in 1999.
General and administrative expenses increased to
$522,731 for the three months ended June 30, 2000
from $339,219 for the three months ended June 30,
1999 due primarily to the increased operations of
CareerEngine, Inc.
The $246,875 non-recurring interest expense for the
three months ended June 30, 2000 represents the
charge required in connection with the beneficial
conversion feature related to debentures payable and
the related warrants.
On a pre-tax basis, the Company had a loss of
$1,566,348 for the three months ended June 30, 2000
compared with a loss of $198,709 for the three months
ended June 30, 1999 primarily due to the start-up
expenses associated with CareerEngine, Inc. and a
significant decrease in income from securities
transactions. In the three months ended June 30,
2000, the Company had a tax expense of nil compared
to a tax expense of $680 for the three months ended
June 30, 1999. For Federal income tax purposes, as of
December 31, 1999, the Company had net operating loss
carryforwards of approximately $17,311,000 available
to reduce future taxable income. These carryforwards
expire in the years 2005 through 2019.
8
<PAGE>
The Company's net loss for the three months ended
June 30, 2000 was $1,566,348 compared with a net loss
of $199,389 for the three months ended June 30, 1999.
For the three months ended June 30, 2000, loss per
share (basic and diluted) is $.29 per share. For the
three months ended June 30, 1999, net loss per share
(basic and diluted) was $.04 per share.
Six Months Ended June 30, 2000 Compared
---------------------------------------
with Six Months Ended June 30, 1999
-----------------------------------
Total revenues increased to $5,781,254 for the six
months ended June 30, 2000 from $2,631,887 for the
six months ended June 30, 1999.
E-recruiting related services increased to $514,558
for the six months ended June 30, 2000 from nil for
the six months ended June 30, 1999 as the
E-recruiting operations of the Company's subsidiary,
CareerEngine, Inc., commenced in the quarter ended
December 31, 1999.
Rental income from real estate leased increased to
$4,491,096 for the six months ended June 30, 2000
from $1,051,672 in the six months ended June 30,
1999. Rental income for the six months ended June 30,
1999 represents interest income earned on unexpended
construction proceeds, as the construction of the
Company's movie theaters was completed on November
20, 1999 and rent thereon commenced.
Financial consulting fees were $14,600 for the six
months ended June 30, 2000 compared to $292,014 for
the six months ended June 30, 1999. Significant
variations in this category of revenue are likely to
occur due to the transactional nature of the
Company's financial consulting business.
Income on securities transactions, net decreased to
$696,137 for the six months ended June 30, 2000
compared to $1,081,856 for the six months ended June
30, 1999 principally from the results of the
Company's cash management and investing activities.
These activities include transactions involving
futures, puts, calls, equities, municipal securities,
and other securities.
Interest income decreased to $64,863 for the six
months ended June 30, 2000 from $206,345 for the six
months ended June 30, 1999 due to the reduced amount
of funds available for investment.
9
<PAGE>
Total expenses increased to $8,057,394 for the six
months ended June 30, 2000 from $3,465,881 for the
six months ended June 30, 1999.
Compensation and related costs increased to
$1,698,714 for the six months ended June 30, 2000
from $1,120,246 for the six months ended June 30,
1999. The increase is due principally to the
additional employees hired by CareerEngine, Inc. in
connection with its internet-based job search
services venture. The Company anticipates that
compensation costs will increase moderately in the
last six months of 2000.
Real estate leased expenses, net increased to
$4,070,092 for the six months ended June 30, 2000
from $1,705,419 for the six months ended June 30,
1999 due primarily to the completion of the
construction of the movie theaters and the
commencement of rent in late 1999.
Advertising expense increased to $1,026,854 for the
six months ended June 30, 2000 from $75,158 for the
six months ended June 30, 1999 as CareerEngine, Inc.
commenced its comprehensive communications program in
1999.
General and administrative expenses increased to
$1,014,859 for the six months ended June 30, 2000
from $565,058 for the six months ended June 30, 1999
due primarily to the increased operations of
CareerEngine, Inc.
The $246,875 non-recurring interest expense for the
six months ended June 30, 2000 represents the charge
required in connection with the beneficial conversion
feature related to debentures payable and the related
warrants.
On a pre-tax basis, the Company had a loss of
$2,276,140 for the six months ended June 30, 2000
compared with a loss of $833,994 for the six months
ended June 30, 1999 primarily due to the start-up
expenses associated with CareerEngine, Inc. and a
significant decrease in income from securities
transactions. In the six months ended June 30, 2000,
the Company had a tax expense of $16,020 compared to
a tax expense of $13,522 for the six months ended
June 30, 1999. For Federal income tax purposes, as of
December 31, 1999, the Company had net operating loss
carryforwards of approximately $17,311,000 available
to reduce future taxable income. These carryforwards
expire in the years 2005 through 2019.
10
<PAGE>
The Company's net loss for the six months ended June
30, 2000 was $2,292,160 compared with a net loss of
$847,516 for the six months ended June 30, 1999. For
the six months ended June 30, 2000, loss per share
(basic and diluted) is $.42 per share. For the six
months ended June 30, 1999, net loss per share (basic
and diluted) was $.16 per share.
B. Liquidity and Capital Resources
-------------------------------
Management of the Company believes that funds
generated from operations, supplemented by its
available assets, will provide it with sufficient
resources to meet present and reasonably foreseeable
future capital needs. These available assets consist
primarily of cash, and investments which are readily
convertible into cash.
The Company invests excess funds in liquid,
short-term financial instruments in order to maximize
its current cash return with minimum interest rate
risk, while preserving the ability to move quickly in
funding attractive merchant banking ventures. Such
investments include U.S. Government and municipal
obligations, futures contracts and money market
funds.
In 1997, the Company issued $72,750,000 of adjustable
rate tender securities due November 1, 2015 (the
"Bonds"). The Bonds were issued to finance 97% of the
cost of the Company's real estate program. The 3%
balance, $2,272,500, was provided as a capital
contribution by the Preferred Member ($2,250,000) and
the Common Members ($22,500) of the Company's lessor
subsidiary, Movieplex Realty Leasing, L.L.C. A third
party owns 100% of the Preferred Membership and two
subsidiaries of the Company own 100% of the Common
Membership of the Lessor.
The monthly rent received by the Company, which
commenced November 20, 1999, is always sufficient to
pay the interest and amortization related to the
Bonds, as well as the preferred return on the capital
contributed by the Preferred Member and Common
Members throughout the term of the related 16-year
lease. In addition, rent will cover all other costs
of owning and operating the real estate other than
Federal, state or local income taxes due on a net
income basis.
On August 8, 2000, the Lessee under the Lease with
the Company pertaining to all six parcels of land and
the theaters thereon included in Real Estate Leased,
filed a petition under Chapter 11 of the United
States Bankruptcy Code. As a result of that filing
and the Lessee's subsequent failure to pay rent under
the Lease, the Company failed to make certain
11
<PAGE>
payments to Wachovia Bank, N.A., as Agent, under the
Company's Reimbursement Agreement with Wachovia.
Wachovia has declared a default under the
Reimbursement Agreement, and has accelerated all
amounts due by the Company thereunder. In addition,
Wachovia has directed the Trustee to accelerate the
payment of all principal and interest of the Bonds
Payable issued by the Company in connection with the
Lease. The Company cannot determine, at this time,
the prospective effect of the proceeding initiated by
the Lessee. However, the Company's obligations under
the Reimbursement Agreement and Bonds Payable are and
always have been fully non-recourse, and the
Company's exposure is and always has been limited
solely to the Company's interest in the
aforementioned six real properties.
While the Company believes that currently available
funds will provide it with sufficient resources to
meet all present and reasonably foreseeable future
operational and capital needs, the Company continues
to seek external financing in order to fund the
projected expanded operations of its e-recruiting
Internet focused venture. The Company does not have
any material commitments for capital expenditures as
of June 30, 2000.
12
<PAGE>
PART II
OTHER INFORMATION
Item 5. Other Information.
Certain statements under the caption "Management's Discussion
and Analysis of Financial Condition and Results of Operations"
and elsewhere in this Form 10-QSB constitute "forward-looking
statements" relating to CareerEngine Network, Inc. and its
subsidiaries (the "Company") within the meaning of the Private
Securities Litigation Reform Act of 1995. All statements
regarding future events, our financial performance and
operating results, our business strategy and our financing
plans are forward-looking statements. In some cases you can
identify forward-looking statements by terminology, such as
"may," "will," "would," "should," "could," "expect," "intend,"
"plan," "anticipate," "believe," "estimate," "predict,"
"potential" or "continue," the negative of such terms or other
comparable terminology. These statements are only predictions.
Known and unknown risks, uncertainties and other factors could
cause actual results to differ materially from those
contemplated by the statements. In evaluating these
statements, you should specifically consider various factors
that may cause our actual results to differ materially from
any forward-looking statements. Factors which could cause
actual results to differ from the forward looking statements
include, among others, the following: general economic and
business conditions; competition; the success of operating
initiatives relating to the Company's technology related
subsidiary and the Company's financial consulting services;
development and operating costs; fluctuations in interest
rates; the existence or absence of adverse publicity; changes
in business strategy or development plans; quality of
management; availability, terms and deployment of capital;
business abilities and judgment of personnel; availability of
qualified personnel; labor and employee benefit costs; and
changes in or the failure to comply with government
regulations.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits-- A statement regarding the computation of
per share earnings is omitted because the computation
is described in Note 2 of the Notes to Consolidated
Financial Statements (Unaudited) in this Form 10-QSB.
Exhibit 27 -- Financial Data Schedule - see below
(b) Reports on Form 8-K:
The Company did not file any reports on Form 8-K
during the three months ended June 30, 2000.
13
<PAGE>
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.
CAREERENGINE NETWORK, INC.
/s/ George W. Benoit
--------------------
Date: August 14, 2000 George W. Benoit, Chairman of the Board
of Directors, President, and Chief Executive
Officer
/s/ Anthony S. Conigliaro
-------------------------
Date: August 14, 2000 Anthony S. Conigliaro, Vice President and
Chief Financial Officer
