As filed with the Securities and Exchange Commission on December 22, 2000
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------
CAREERENGINE NETWORK, INC.
(Name of small Business Issuer in its charter)
Delaware 7361 13-2689850
(State or Other Jurisdiction (Primary Standard (I.R.S. Employer
of Incorporation or Industrial Classification Identification No.)
Organization) Code Number)
-------------------
2 World Trade Center
Suite 2112
New York, New York 10048
(212) 775-0400
(Address and telephone number of Principal Executive Offices)
-------------------
GEORGE W. BENOIT
Chief Executive Officer
CareerEngine Network, Inc.
2 World Trade Center
Suite 2112
New York, New York 10048
(212) 775-0400
(212) 775-0901 (Facsimile)
(Name, Address and Telephone Number of Agent For Service)
-------------------
Copies to:
Paul McCurdy, Esq.
Barry B. Feiner, Esq. Kelley Drye & Warren LLP
170 Falcon Court Two Stamford Plaza
Manhassett New York 11030 281 Tresser Boulevard
(516) 484-6890 Stamford, Connecticut 06901
(516) 484-6867(Facsimile) (203) 324-1400
(203) 327-2669 (Facsimile)
-------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective. [X]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
======================================================================================================================
Proposed
Maximum
Proposed Maximum Aggregate
Title of Each Class of Amount To Be Offering Price Per Offering Amount of
Securities to be Registered Registered Security(1) Price(1) Registration Fee
----------------------------------------------- --------------- ------------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Units, consisting of one 12% subordinated 2,875 $ 1,000.00 $2,875,000 $ 718.75
convertible debenture, redeemable class A
warrants to purchase 250 shares of common
stock and redeemable class B warrants to
purchase 250 shares of common stock (2)
----------------------------------------------- --------------- ------------------- ---------------- -----------------
12% subordinated convertible debentures
included in the units 2,875 $ (3) $ (3) $ (3)
----------------------------------------------- --------------- ------------------- ---------------- -----------------
Shares of Common Stock issuable upon
conversion of 12% subordinated convertible
debentures (4) 1,437,500 $ (3) $ (3) $ (3)
----------------------------------------------- --------------- ------------------- ---------------- -----------------
Class A Warrants included in the units 718,750 $ (3) $ (3) $ (3)
----------------------------------------------- --------------- ------------------- ---------------- -----------------
Shares of common stock issuable upon exercise
of the Class A Warrants included in the
units(4) 718,750 $ 4.00 $2,875,000 $ 718.75
----------------------------------------------- --------------- ------------------- ---------------- -----------------
Class B Warrants included in the units 718,750 $ (3) $ (3) $ (3)
----------------------------------------------- --------------- ------------------- ---------------- -----------------
Shares of common stock issuable upon exercise
of the Class B Warrants included in the
units(4) 718,750 $ 6.00 $4,312,500 $ 1,078.13
----------------------------------------------- --------------- ------------------- ---------------- -----------------
Managing underwriter's warrants to purchase
units 250 $ -0- $ -0- $ -0-
----------------------------------------------- --------------- ------------------- ---------------- -----------------
Units issuable upon exercise of the managing
underwriter's warrants 250 $ 1,200 $ 300,000 $ 75.00
----------------------------------------------- --------------- ------------------- ---------------- -----------------
12% Subordinated convertible debentures
included in managing underwriter's
warrants units 250 $ (3) $ (3) $ (3)
----------------------------------------------- --------------- ------------------- ---------------- -----------------
Shares of Common Stock issuable upon
conversion of 12% Subordinated convertible
debentures included in managing underwriter's
warrants units (4) 125,000 $ (3) $ (3) $ (3)
----------------------------------------------- --------------- ------------------- ---------------- -----------------
Class A Warrants included in managing
underwriter's warrants 62,500 $ (3) $ (3) $ (3)
----------------------------------------------- --------------- ------------------- ---------------- -----------------
Shares of common stock issuable upon exercise
of the Class A Warrants included in
managing underwriter's warrants(4) 62,500 $ 4.00 $ 62,500 $ 15.63
----------------------------------------------- --------------- ------------------- ---------------- -----------------
Class B Warrants included in managing
underwriter's warrants 62,500 $ (3) $ (3) $ (3)
----------------------------------------------- --------------- ------------------- ---------------- -----------------
Shares of common stock issuable upon exercise
of the Class B Warrants included in
managing underwriter's warrants(4) 62,500 $ 6.00 $ 375,000 $ 93.75
----------------------------------------------- --------------- ------------------- ---------------- -----------------
Placement agent's warrants to purchase
units(5) 240 $ -0- $ -0- $ -0-
----------------------------------------------- --------------- ------------------- ---------------- -----------------
Units issuable upon exercise of the Placement
agent's warrants 240 $ 1,200 $ 288,000 $ 72.00
----------------------------------------------- --------------- ------------------- ---------------- -----------------
12% Subordinated convertible debentures
included in Placement agent's warrants
units 240 $ (3) $ (3) $ (3)
----------------------------------------------- --------------- ------------------- ---------------- -----------------
Shares of Common Stock issuable upon
conversion of 12% Subordinated convertible
debentures included in Placement agent's
warrants units (4) 120,000 $ (3) $ (3) $ (3)
----------------------------------------------- --------------- ------------------- ---------------- -----------------
Class A Warrants included in Placement
agent's warrants 60,000 $ (3) $ (3) $ (3)
----------------------------------------------- --------------- ------------------- ---------------- -----------------
Shares of common stock issuable upon exercise
of the Class A Warrants included in
Placement agent's warrants(4) 60,000 $ 4.00 $ 240,000 $ 60.00
----------------------------------------------- --------------- ------------------- ---------------- -----------------
Class B Warrants included in Placement
agent's warrants 60,000 $ (3) $ (3) $ (3)
----------------------------------------------- --------------- ------------------- ---------------- -----------------
Shares of common stock Issuable upon exercise
of the Class B Warrants included in
Placement agent's warrants (4) 60,000 $ 6.00 $ 360,000 $ 90.00
----------------------------------------------- --------------- ------------------- ---------------- -----------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
======================================================================================================================
Proposed
Maximum
Proposed Maximum Aggregate
Title of Each Class of Amount To Be Offering Price Per Offering Amount of
Securities to be Registered Registered Security(1) Price(1) Registration Fee
----------------------------------------------- --------------- ------------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Selling Securityholders' Units(5) 2,400 $ 1,000.00 $2,400,000 $ 600.00
----------------------------------------------- --------------- ------------------- ---------------- -----------------
12% subordinated convertible debentures
included in the Selling Securityholders'
units 2,400 $ (3) $ (3) $ (3)
----------------------------------------------- --------------- ------------------- ---------------- -----------------
Shares of Common Stock issuable upon
conversion of the Selling Securityholders'
12% subordinated convertible debentures (4) 1,200,000 $ (3) $ (3) $ (3)
----------------------------------------------- --------------- ------------------- ---------------- -----------------
Class A Warrants included in the Selling
Securityholders' units 600,000 $ (3) $ (3) $ (3)
----------------------------------------------- --------------- ------------------- ---------------- -----------------
Shares of common stock issuable upon exercise
of the Class A Warrants included in the
Selling Securityholders' units(4) 600,000 $ 4.00 $2,400,000 $ 600.00
----------------------------------------------- --------------- ------------------- ---------------- -----------------
Class B Warrants included in the Selling
Securityholders' units 600,00 $ (3) $ (3) $ (3)
----------------------------------------------- --------------- ------------------- ---------------- -----------------
Shares of common stock issuable upon exercise
of the Class B Warrants included in the
Selling Securityholders' units(4) 600,000 $ 6.00 $3,600,000 $ 900.00
----------------------------------------------- --------------- ------------------- ---------------- -----------------
Total Registration Fee $ 5,022.01
----------------------------------------------- --------------- ------------------- ---------------- -----------------
======================================================================================================================
</TABLE>
(1) Estimated solely for purposes of determining the registration fee
pursuant to Rule 457 under the Securities Act.
(2) Includes 375 Units issuable upon exercise of underwriters'
over-allotment option.
(3) No registration fee required pursuant to Rule 457(i) under the
Securities Act.
(4) Pursuant to Rule 416 under the Securities Act, there are also being
registered hereby such additional indeterminate number of shares as may
become issuable pursuant to the antidilution provisions of the warrants
and the debentures.
(5) The private placement units as issued consisted of a $50,000 principal
amount debenture and Class A warrants to purchase 12,500 shares of
common stock and Class B warrants to purchase 12,500 shares of common
stock. As such, one private placement unit equals 50 public units. For
the purposes of this registration statement and the calculation of
fees, references to private placement units have been adjusted by a
factor of 50 to make them equal to the public units.
-----------------------
EXPLANATORY NOTE
This registration statement contains two prospectuses: one relating to this
offering of 2,500 units of CareerEngine Network, Inc., plus 375 units to cover
over-allotments, if any, and one relating to the offering of 2,460 units by some
of the securitiyholders of CareerEngine Network, Inc. Following the prospectus
are certain substitute pages of the selling securityholder prospectus, including
alternate front outside and back outside cover pages, an alternate "The
Offering" section of the "Summary" and sections titled "Private Financing" and
"Selling Securityholders and Plan of Distribution." Each of the alternate pages
for the selling securityholder prospectus is labeled "Alternate Page for Selling
Securityholder Prospectus." All other sections of the prospectus, other than
"Use of Proceeds," "Dilution," and "Underwriting" are to be used for the selling
securityholder prospectus.
-----------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
1
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THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR ANY APPLICABLE STATE SECURITIES COMMISSION
BECOMES EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND
IT IS NOT AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE
IS NOT PERMITTED.
--------------------------------------------------------------------------------
<PAGE>
Subject to Completion Dated __________, 2001
[LOGO] Career Engine
Network, Inc.
2,500 Units
each Unit consisting of
o $1,000 principal amount of 12% convertible debentures due on March 31,
2010,
o Class A warrants to purchase 250 shares of common stock and
o Class B warrants to purchase 250 shares of common stock
------------
You may trade the debentures and warrants separately starting six months
from the effective date of this offering unless we agree with the underwriter
that trading may begin sooner. Prior to that date, the debentures and warrants
will trade only as a unit.
Our common stock is traded on the American Stock Exchange under the symbol
"CNE." On December 20, 2000 the last reported sale price of our common stock was
$1.3125 per share.
For a description of the terms of the debentures and the warrants see
"Prospectus Summary - The Offering on page 1.
Our debentures and our class A and Class B warrants are not currently being
traded on any market. We have applied to list our units, debentures and warrants
on the American Stock Exchange under the symbols "CNEU," "CNED," "CNE_" and
"CNE_," respectively.
Selling securityholders are also offering up to 2,640 units through an
alternate prospectus that is dated ____________, 2001.
Investing in the units involves risks. Consider carefully the risk factors
beginning on page 7 of this prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
------------
Per Unit Total
----------------- ----------------
Public offering price.................... $1,000 $2,500,000
Underwriting discounts and commissions... $ 100 $ 250,000
Proceeds before expenses................. $ 900 $2,250,000
We expect total cash expenses in connection with the offering to be
approximately $ 250,000, which will include a nonaccountable expense allowance
of 3% of the gross proceeds of this offering that will be paid to Murphy &
Durieu, the managing underwriter of this offering. We have granted to the
underwriters a 45-day option to purchase up to 375 additional units to cover
over-allotments. We will also grant to the managing underwriter a five-year
warrant to purchase up to four additional units.
Murphy & Durieu expects to deliver the units on or about _________, 2001 if
payment for the units is received by Murphy & Durieu.
-------------
Murphy & Durieu
The date of this Prospectus is ______, 2001
<PAGE>
INSIDE FRONT COVER
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. All statements
regarding
o future events,
o our financial performance and operating results,
o our business strategy and
o 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, including the risks described in
the "Risk Factors" section and elsewhere in this prospectus. These factors may
cause our actual results to differ materially from any forward-looking
statements.
<PAGE>
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PROSPECTUS SUMMARY
This summary highlights selected information contained elsewhere in this
prospectus. This summary may not contain all of the information that you should
consider before buying securities in this offering. We urge you to read the
entire prospectus carefully, including the information set forth under "Risk
Factors," before making an investment decision.
Overview
Through our wholly-owned subsidiary, CareerEngine, Inc., we provide
web-based and related software services for employers, job seekers, professional
recruiters and service providers in the rapidly growing online recruitment
business. Using our proprietary software we offer customers the option of both
o utilizing our network of vertical, occupation specific career portal
sites to post job offerings and review posted candidate resumes and
o subscribing to our Application Services Provider or ASP services where
we construct, maintain and host recruitment and career center sites
for the exclusive use of our customers in meeting their human resource
requirements or as an additional revenue stream.
Our Network Division operates 25 portal career sites organized by
o specific job function,
o profession,
o designation,
o work location and
o diversity.
These sites enable employers and recruiters to post job offerings for specific
target areas in one or more of our career specific sites. Prospective employees
can search for jobs, confidentially post their resumes, receive personalized
advice from our online career counselors and avail themselves of a host of other
services.
Our Solutions Division develops and maintains career sites for companies
and recruiters. We customize these sites to reflect the particular look and feel
of our customers' websites utilizing our software which we make available on an
ASP basis. We believe that offering a prospective client the opportunity to
participate in our network of career sites and having us build a career center
for the client's own website, gives us a flexibility which we believe is not
enjoyed by any of our competitors. We believe that by offering multiple
solutions to online recruiting needs, we have established our own unique niche
in the online recruiting market.
Our CareerEngine Network Division
Most online job sites lack specialized capabilities. Their postings are
broad based, covering all types of jobs in many industries. As a result, job
seekers must often search through exhaustive lists of unsuitable opportunities.
The CareerEngine Network is different. Our category specific approach enables
job seekers to focus on those opportunities which are suitable for their skills.
Recruiters and employers can quickly find and attract qualified candidates with
specialized skills and expertise. We believe we offer one of the largest network
of independent career sites through which a recruiter can conveniently and cost
effectively focus on highly trained qualified candidates suited for specific job
openings. The vertical orientation of our job sites - which encompass fields
ranging from accounting to sales and IT - makes it easier for job seekers and
potential employers to locate and evaluate one another.
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<PAGE>
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The number of aggregate postings on our network has fluctuated since we
began building our network in March 1999. As of December 12, 2000, the
approximate number of job postings on our network sites was 51,200. While many
of these postings are placed by corporations and recruiters, we derive a
significant number of postings through our network of over 40 distribution
partners. These partners include major online and offline recruitment
advertising firms and major recruitment and placement agencies that seek a
variety of websites, both category specific and broad based, to post their
clients' job openings. Some of our distribution partners include
o TMP Worldwide,
o CareerBuilder, Inc.,
o Bernard Hodes,
o Vault.Com,
o Shaker Advertising and
o Recruit USA.
We believe that these distribution arrangements are particularly valuable
because we have no sales expense associated with the postings of our
distribution partners. There are more than 5,000 salespersons and/or account
executives engaged by our distribution partners involved in soliciting job
postings. Our distribution partners pay us our standard posting fee less a
commission for postings they originate and list on the CareerEngine network.
Among the services provided employers and recruiters on our network is the
opportunity to access our confidential resume database containing resumes placed
on our category specific websites by job seekers. These resumes are furnished to
them with built-in safeguards to protect the privacy concerns of applicants.
Recently, we have entered into a number of co-branding arrangements where
we either develop or upgrade a career site for a co-branding partner that is a
leader in its particular field, such as
o CFO.com, the online division of CFO Magazine,
o Crain's NY.com, the online version of the financial news journal, and
o Engineering.com, a site serving the engineering community,
o JoC.com, the online version of The Journal of Commerce, an Economist
Group publication.
These sites participate as members of our CareerEngine Network together with our
own vertical career sites and we share the revenues generated. Another partner
is SmartMoney.com, a popular website offering personal financial news, tools and
investment advice. Users of this site will now have access to a career center
created by us offering confidential resume hosting, job postings and career
specific news.
Revenue from the CareerEngine Network Division is derived from
a. job posting fees,
b. joint venture transactions with major content providers;
c. corporate advertisement placements and
d. sponsorships.
Our CareerEngine Solutions Division
Online career centers are becoming increasingly utilized by publishers,
corporations and other organizations. Web publishers can utilize career centers
to create additional revenue streams and retain visitors. Corporations can use a
career center to make their online recruitment efforts more productive. Early in
2000, we formed our CareerEngine Solutions Division to offer the experience,
staff and know-how to build, host and maintain on an ASP basis career centers
for on and offline organizations more
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<PAGE>
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effectively, quicker and at considerably less cost than would be the case if the
organizations built and maintained their own websites. These career centers will
provide the opportunity to attract and recruit the best candidates by providing
them with the ability to quickly assess the company's visions and competitive
advantages.
We develop customized career content for our client's site, and recommend
"plug-ins" that incorporate the latest technology - such as job search agents
and confidential resume hosting. If the site we construct becomes an important
revenue producer for the company, it has the option of joining the CareerEngine
Network and share in the benefit of having over 5,000 sales representatives
selling and marketing job postings for the site. We also provide programs to
help the company effectively sell advertising inventory, facilitate site updates
and provide customer service.
Revenues generated by this division include a portion of initial cash set up
fees and monthly subscription-type revenue streams based upon contractual terms.
In the nine months since we started this division, we have signed up seven
clients and generated division revenues of $205,000.
The Market Opportunity For Online Recruitment
According to industry sources, business in the U.S. spent in excess of $13
billion in 1997 to hire new employees by advertising job openings in newspapers
and by utilizing headhunters. With the acceptance of the Internet as an
attractive medium for online recruiting, an increasing share of recruiting
efforts will be conducted online. According to Forrester Research, Inc. the size
of the online recruiting market will increase from $105 million in 1998 to $1.7
billion in 2003. We believe that the complementary recruitment services offered
by our two divisions places us in a strong position to take advantage of these
favorable market prospects.
Recent Initiatives
During the last six months we have announced the following initiatives:
o Offered a wireless job search service, which alerts job seekers via
wireless technology about job opportunities that match their
specifications. The Wireless Job Search Agent alerts candidates to the
most current job listings through their cellular phones. The service
speeds the career search process, enabling users to leverage the
instant notification of wireless technology.
o Created a career search section for CFO.com, the online division of
CFO Magazine
o Created a career search section for SmartMoney.com, the online
division of SmartMoney Magazine.
o Created a career search section for JoC.com, the online version of The
Journal of Commerce, an Economist Group publication.
o Enhanced our Job Search Agent to include an 'Auto-Apply'
functionality. Auto-Apply allows a registered user to have their
resume automatically submitted as new job postings become active on
our sites.
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<PAGE>
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The Offering
Securities Offered
2,500 units:
Each unit consists of
o a $1,000 principal amount of $12% convertible debentures due on March
31, 2010,
o Class A warrants to purchase 250 shares of common stock and
o Class B warrants to purchase 250 shares of common stock
The debenture and the warrants will trade only as a unit for six months
following this offering, unless we agree with the underwriter that separate
trading may begin sooner. Thereafter, each of the securities will trade
separately. For more information, see "Description of Securities."
The Debentures:
Principal Amount of Debenture .. $1,000.
Annual Interest Rate ........... 12% interest.
Payment of Interest ............ Quarterly in cash on January 1, April 1,
July 1 and October 1 of each year,
commencing July 1, 2001.
Maturity ....................... March 31, 2010.
Conversion by Holder ........... A Holder may convert all or a portion of
the principal amount of his debenture
outstanding at the time such conversion
is effected into our common stock at any
time before the close of business on the
earlier of March 31, 2010 or the date
that principal and interest under the
debenture has been paid in full. If we
call the debenture for redemption, a
Holder may convert his debenture at any
time before the close of business on the
redemption date. The initial conversion
price is $2.00 per share, subject to
adjustment in certain events. On
conversion, no payment or adjustment for
accrued and unpaid interest will be
made. All such interest will be
forfeited.
Redemption ..................... by Holder Up to $50,000 total value of
the debentures of any holder upon notice
of the holder's death and redemption
election by his or her estate. This
right of redemption may only be
exercised by the estate of the original
holder. It does not pass to any
transferee.
Redemption by Us ............... We can redeem all or part of the
debentures at 100% of their principal
amount, plus accrued interest to the
redemption date if the closing price of
our common stock equals or exceeds 2.154
times the then conversion price for a
period of 20
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<PAGE>
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consecutive trading days ending three
trading days prior to the notice of
redemption.
Ranking ........................ The debentures are second in right of
repayment to all of our senior debt.
Senior debt is any indebtedness payable
to banks or other traditional long-term
institutional lenders such as insurance
companies and pension funds, unless in
the instrument creating or evidencing
such indebtedness, it is provided that
such indebtedness is not senior in right
of payment to the debentures. If we were
to become insolvent, such senior debt
would have a priority of right to
repayment in connection with our
liquidation.
Transferability ................ There are no transfer restrictions on
the debentures. However, the right to
redemption upon death of the initial
holder will terminate on transfer.
Please refer to "Description of Securities - The Debentures and the
Indenture."
Class A Warrants:
The Class A warrants are exercisable at a price of $4.00 per share until
they expire on March 31, 2003, subject to adjustment in certain events. We
may redeem the A Warrants on not less than 30 days notice at a redemption
price of $0.001 per Warrant, provided that the reported closing price of
our common stock equals or exceeds 150% of the then exercise price of the
warrant for a period of 20 consecutive trading days ending three trading
days prior to the notice of redemption. Please refer to "Description of
Securities - Class A Warrants."
Class B Warrants:
The Class B warrants are exercisable at a price of $6.00 per share until
they expire on March 31, 2005, subject to adjustment in certain events. We
may redeem the B Warrants on not less than 30 days notice at a redemption
price of $0.001 per Warrant, provided that the reported closing price of
our common stock equals or exceeds 150% of the then exercise price of the
warrant for a period of 20 consecutive trading days ending three trading
days prior to the notice of redemption. Please refer to "Description of
Securities - Class B Warrants."
Risk Factors:
An investment in the units involves a high degree of risk. You should not
consider this offer if you cannot afford to lose your entire investment.
Please refer to "Risk Factors" for factors you should consider.
Use of Proceeds:
The net proceeds from the offering, estimated to be approximately
$ 2,000,000, will be used primarily for sales and marketing, continued
development and enhancement of the operations of the two divisions of our
wholly-owned subsidiary, CareerEngine, Inc. , and for working capital. For
more information regarding how we will use the proceeds, please refer to
"Use of Proceeds."
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<PAGE>
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Summary Financial Data
Set forth below are selected financial data for each of the periods
indicated. The selected financial data for the years ended December 31, 1999 and
1998 as well as the nine-month periods ended September 30, 1999 and 2000 and the
selected balance sheet data as of December 31, 1999 and September 30, 2000 have
been derived from the audited and unaudited financial statements included
elsewhere in this prospectus. Results for the nine month period ended September
30, 2000 are not necessarily indicative of the results for the full fiscal year.
These unaudited financial statements reflect all adjustments (consisting of
normal recurring accruals) and disclosures which, in the opinion of our
management, are necessary for a fair statement of results for the periods
presented . All of the information set forth below should be read in conjunction
with our consolidated financial statements, including the notes thereto, "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the other financial information included in this
prospectus.
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
December 31, September 30,
-------------------------------- ------------------------------
1999 1998 2000 1999
-------------- -------------- -------------- --------------
(Unaudited) (Unaudited)
Continuing Operations:
<S> <C> <C> <C> <C>
Revenues $ 1,471,421 $ 1,944,408 $ 2,296,448 $ 1,877,428
Expenses 4,424,308 2,267,067 5,789,443 2,228,529
-------------- -------------- -------------- --------------
Loss from continuing operations
before income taxes (2,952,887) (322,659) (3,492,995) (351,101)
Income tax provision 10,098 (108,477) 15,340 12,163
-------------- --------------- -------------- --------------
Loss from continuing operations (2,962,985) (214,182) (3,508,335) (363,264)
Loss from discontinued operations (1,089,409) (410,227) (730,318) (1,226,550)
--------------- --------------- --------------- ---------------
Net Loss $ (4,052,394) $ (624,409) $ (4,238,653) $ (1,589,814)
=============== =============== =============== ===============
Per common share - basic and diluted
Loss from continuing operations $ (.55) $ (.03) $ (.65) $ (.06)
Loss from discontinued operations (.20) (.08) (.13) (.23)
--------------- --------------- --------------- ---------------
Net loss $ (.75) $ (.11) $ (.78) $ (.29)
=============== =============== =============== ===============
Weighted average number of common
shares outstanding - basic and
diluted 5,435,673 5,489,376 5,440,090 5,435,964
=============== =============== =============== ===============
</TABLE>
<PAGE>
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<TABLE>
<CAPTION>
September30, December 31,
2000 1999
------------- -------------
(Unaudited)
Total assets
<S> <C> <C>
Total liabilities exclusive of liabilities relating to discontinued operations $ 5,604,841 $ 7,060,445
Excess of liabilities over assets of discontinued operations $ 3,396,733 $ 1,891,201
Total stockholders' equity $ 3,361,269 $ 3,215,344
$ (1,153,161) $ 1,953,900
</TABLE>
------------------------
Our principal executive office is located at Two World Trade Center, Suite
2112, New York, New York 10048. Our telephone number is (212) 775-0400 and our
Web site addresses are www.CareerEngine.com and www.CareerEngine.net.
Information contained on our websites is not a part of this prospectus.
Unless otherwise indicated, all information in this prospectus assumes that
the underwriters will not exercise their over-allotment option.
--------------------------------------------------------------------------------
<PAGE>
RISK FACTORS
This offering involves a high degree of risk. Each prospective investor
should carefully consider the risks described below and other information in
this prospectus before making an investment decision.
We have a limited operating history in the online employment recruitment
business and we may not be successful.
We did not commence operations as an online employment recruiting service
until March 1999 when we began building our network career sites. It was not
until the end of the first quarter of 2000 that we started offering our ASP
services through our newly formed CareerEngine Solutions Division. As a result,
we have a limited operating history upon which you can base an evaluation of our
current business and prospects. During the past five years, we concentrated in
providing merchant and investment banking services, primarily related to real
estate projects, and financial consulting services. In August 2000, we
discontinued these business segments to concentrate on our efforts on our online
recruiting business.
Our business model for offering multiple solutions to online recruiting
needs has only been in place since the beginning of 2000. Accordingly, its
effectiveness has not been adequately tested. Accordingly, we cannot guarantee
that we will be able to generate the profits necessary to sustain our business
expectations. You must consider the risks, expenses and problems frequently
encountered by an early stage business in a rapidly evolving market, which makes
our ability to implement successfully our business plan uncertain. Some of the
risks that we may face include our ability to:
o attract and maintain additional job listings on our existing vertical
career sites and target new career destination sites;
o induce suitable companies and firms pre-eminent in their respective
fields to enter into co-branding agreements with us;
o develop and expand our client base for ASP services to the point where
our Career Solutions Division becomes self sufficient;
o maintain current and develop new distribution relationships with
highly trafficked on and offline sites;
o respond effectively to competitive pressures; and
o attract, retain and motivate qualified personnel.
Furthermore, we do not know
o if we will have the experience and talent to overcome technical
difficulties that may arise from time to time that could delay or
prevent the successful design, development, testing, introduction or
marketing of solutions, or
o that any new solutions or enhancements to existing solutions will
adequately meet the requirements of our current and prospective
customers and achieve any degree of significant market acceptance.
<PAGE>
If, for technological or any other reasons,
o we are unable to develop and introduce new solutions or enhancements
to existing solutions in a timely manner or in response to changing
market conditions or customer requirements, or
o if our solutions or enhancements contain errors or do not achieve a
significant degree of market acceptance,
our financial position, results of operations and cash flows could be materially
and adversely affected.
Our untested pricing models may not generate expected revenue.
Because we have limited experience in pricing our online recruitment
servicing we cannot accurately forecast the magnitude, timing or profitability
of future revenues. We have priced our service so that we receive
o a fixed schedule of fees for job listings on each site in our network;
o fees based on various pricing models for resume matching through
resume subscription by employers and recruiting firms;
o fees in accordance with three pricing plans for providing ASP service
based on the type and sophistication of the services offered;
o no up front fees but complete sharing of all revenues for co-branding
arrangements; and
o reduced job posting fees from distribution partners to allow for
negotiated commissions.
Until we gain more experience in pricing our services we cannot be sure
that with respect to some or all of our services we have established a pricing
policy that is both competitive with what others are charging and at the same
time sufficient to assure us a fair return. We would expect to fine tune our
pricing policies as we gain more experience in our revenue models. In any event
we have no assurance that our pricing models, even if modified to meet changing
conditions or evaluations, will be sufficient to sustain operations and to
enable us to continue in business.
Another significant pricing risk is in the selection of co-branding
partners. These arrangements are entered into with the understanding that our
co-branding partners have followings sufficient to produce a strong revenue
stream which they will share with us. Since the cost of all the set up, hosting
and maintenance charges are borne solely by us, if we guess wrong in the
selection of our co-branding partners we may sustain large and continuing losses
in meeting our obligations under these arrangements without any offsetting
return which may in turn threaten our continued viability.
We have a history of losses and we expect continued losses.
For the year ended December 31, 1999, we generated revenues from continuing
operations of $1,471,000, of which $31,000 related to our online recruiting
operations, and sustained losses from continuing operations of approximately
$2,963,000. For the first nine months of 2000, we generated revenues from
continuing operations of $2,296,000, of which $930,000 related to our online
recruiting operations, and sustained losses from continuing operations of
approximately $3,508,000. These losses
<PAGE>
were directly attributable to our online recruiting activities. We expect these
operating losses to continue for the next six to nine months because of our need
to incur additional costs and expenses related to:
o increased marketing and advertising to strengthen brand awareness
and to develop and expand our ASP offerings;
o rapid expansion of our sales and other personnel;
o continued development of our career websites;
o development of strategic relationships with industry-focused
Internet sites; and
o upfront charges to be incurred in developing co-branded websites
in connection with our aggressive promotions of this type of
business relationship.
Our ability to become profitable depends on our ability to generate and maintain
greater revenues which depends in turn on:
o our ability to convince employers and recruiters to utilize our
websites for their online recruiting needs;
o the continued growth and acceptance of the Internet as a
recruiting tool;
o the number of job seekers who visit our websites;
o the number of job opportunities posted on our websites;
o attracting a sufficient number of additional ASP customers to
establish our Solutions Division as a self sufficient entity.
If we do achieve profitability, we cannot be certain that we will be able
to sustain or increase profitability on a quarterly or annual basis in the
future. Our inability to achieve or maintain profitability or positive cash flow
could result in disappointing financial results, impede implementation of our
growth strategy or cause the market price of our securities decrease. We may not
be able to achieve profitability.
We will require substantial additional funding in order to finance the
development of our business. Our inability to obtain such financing or
significantly increase revenues most likely will have an adverse effect on our
business.
Our success will depend on inducing greater usage by employers and
recruiters by our network services and on securing more widespread acceptance of
our CareerEngine Solutions ASP services. This means having an adequate
advertising and marketing budget and adequate funds to continue to promote our
services. We expect that the net proceeds from this offering together with our
existing resources will be sufficient to meet our cash needs for at least 12
months. However, if the actual costs of adding to and enlarging our customer
base are higher than projected or our contemplated future revenues fall below
our current expectations, we may need additional financing before the expiration
of 12 months.
Through September 30, 2000, we have been operating at a negative cash flow
rate of approximately $500,000 per month. We expect the negative cash flow of
approximately $500,000 to continue through December 31, 2000. We have initiated
a cost reduction strategy and expect to be
<PAGE>
operating at a negative cash flow rate of approximately $300,000 per month,
commencing January 2001.
We estimate that we must generate an aggregate of at least approximately
$450,000 per month in gross revenues before our cash flow will be adequate to
cover our operating expenses and capital expenditures.
We have sustained our operations primarily from our own corporate resources and
proceeds from the private financing of units. We estimate that we will need, at
least, an additional $6 million, including the funds to be obtained from this
offering, over the next 18 months in order to complete development of the
additional active web sites. We anticipate, but cannot assure, that this
financing will come from the exercise of the warrants. We cannot assure that the
price of our common stock will ever attain sufficient levels to induce the
exercise of the warrants. In the event that the warrants are not exercised
within the time period needed to finance our development of the additional
active web sites, we will be forced to seek alternate sources of financing, most
likely from one or more additional public or private equity or debt offerings.
We currently have no commitments for any of such additional fundings. We may not
be able to raise needed cash on terms acceptable to us or at all. Financings may
be on terms that are dilutive or potentially dilutive to our stockholders. If
sources of financing are required, but are insufficient or unavailable, we will
be required to modify our growth and operating plans to the extent of available
funding, which would have an adverse effect on the successful implementation of
our planned business development.
Our earnings may fluctuate seasonally, which may affect our financial results.
As a result of our limited operating history in the online recruitment
business, we do not know if the online recruitment market is subject to seasonal
fluctuations. We believe that revenue from print media, recruiting search firms
and other traditional recruiting services are generally lower in the months of
August, November and December because of reduced recruiting and job search
activity during vacation periods and holiday seasons. As the online recruitment
market develops, we may find that similar seasonal and cyclical patterns
characterize online recruiting or we may discover other seasonal patterns. If
seasonal fluctuations develop in the online recruitment market, our business,
results of operations and financial condition could be materially and adversely
affected.
Our business could be adversely affected by a downturn in the economy.
Online recruitment is a new industry and we do not know how sensitive our
industry is to general economic conditions. Demand for online recruitment
offerings may be significantly and adversely affected by the level of economic
activity and employment in the United States. High economic growth has given
rise to rapid employee turnover. A slowdown in the economy could arrest this
movement and cause employers to reduce or postpone their recruiting efforts
generally, and their online recruiting efforts in particular. Therefore, if a
significant economic downturn or recession occurs in the United States, our
projections and prospects could be materially and adversely affected.
One of our strategies is to establish awareness of our career sites through the
establishment of partnerships with established branded partners, and if these
partners fail to maintain these brands, we may not be able to sustain or
increase the number of employers, recruiters and job seekers using our websites.
We believe that establishing and maintaining our "co-branded" career
websites is an important aspect of our business. These brand names are critical
in our efforts to establish, maintain and increase
<PAGE>
the number of employers, recruiters and job seekers who use our websites. We
believe that the importance of brand recognition will increase due to the
continued growth in the number of competitors entering the online recruiting
market. Our ability to promote and position our sites depends largely on the
success of our partners continuing marketing efforts and our ability to
effectively satisfy the needs of employers, recruiters and job seekers. To
promote our brand names, we intend to substantially increase our visibility by
attending trade shows and placing a few select targeted print ads and online
sponsorships without increasing our marketing budget. A portion of the net
proceeds from this offering will be used for this purpose. If we fail to
successfully promote and maintain our brand names, or if we incur excessive
expenses attempting to promote and maintain them, we may be unable to implement
our business plan and our financial results may suffer. See "Use of Proceeds."
We have significant competition from a variety of sources.
The market for online recruitment solutions is intensely competitive and
highly fragmented. Our Network Division competes directly with a number of
companies such as CareerBuilder, Inc. which maintains career specific job sites.
Our Solutions Division faces competition with a growing number of firms offering
ASP services for career and job searchers such as BrassRing, WebHire Inc. and
iSearch to name just a few. In addition, we compete with large companies that
offer a single database "job board" solution, such as Monster.com and
Headhunter.net. We also compete with large Internet information hubs, or
portals, such as Excite.com. We may experience competition from potential
customers to the extent that they develop their own online recruitment offerings
internally. In addition, we compete with traditional recruiting services, such
as newspapers and employee recruiting agencies, for a share of employers' total
recruiting budgets. We expect to face additional competition as other
established and emerging companies, including print media companies and employee
recruiting agencies with established brands, enter the online recruitment
market. We may also face competition from organizations that choose to develop
online recruitment offerings internally. It is also possible that, as the online
recruitment market develops and new products and services are introduced, we may
face competition from the members of the network of our distribution partners.
Many of our current and potential competitors have longer operating
histories, significantly greater financial, technical, marketing and other
resources, greater brand recognition and a larger installed customer base than
we do. In addition, current and potential competitors may make strategic
acquisitions or establish cooperative relationships to expand their offerings
and to offer more comprehensive solutions.
We believe that there will be rapid business consolidation in the online
recruitment industry. Accordingly, new competitors may emerge and rapidly
acquire significant market share. In addition, new technologies will likely
increase the competitive pressures that we face. The development of competing
technologies by market participants or the emergence of new industry standards
may adversely affect our competitive position.
As a result of these and other factors, if we are not able to compete
effectively with current or future competitors, we will not succeed in our
business plan.
If we lose the services of our executive officers, or if we cannot recruit and
retain additional skilled personnel, our business may suffer.
We depend on the continued services and performance of George W. Benoit,
Chairman and Thomas J. Ferrara, President and Chief Executive Officer for our
future success. We do not have an employment agreement with Messrs. Benoit or
Ferrara. If any one or more of Messrs. Benoit or Ferrara become unable or
unwilling to continue in their present positions, our business and financial
conditions
<PAGE>
could be damaged. We are not the beneficiaries of any key person life insurance
covering them or any other executive.
We depend upon the ability to attract, hire, train and retain highly
skilled technical, sales and marketing, and support personnel, particularly with
expertise in Internet solutions and online recruiting. Competition for qualified
personnel throughout our industry is intense. If we fail to attract, hire or
retain such personnel, our business, results of operations and financial
condition could be materially and adversely affected. We may experience
difficulty providing the proper level of service to our customers or incur
increased costs due to rising salary and benefit levels. If we are unsuccessful
in attracting and training new employees, or retaining and motivating our
current and future employees, our business could suffer significantly.
We do not have long-term agreements with employers and recruiters, which may
cause our revenue to fluctuate.
We derive a substantial portion of our revenues from employers and
recruiters who will pay to post job opportunities on our website. Generally,
these employers and recruiters will post their job opportunities on a monthly
basis. They will have no obligation to purchase any upgrades or other service
offerings, or to post any job opportunities for more than a month at a time. As
a result, an employer or recruiter that generates substantial revenue for us in
one month may not do so in a later month. It is, therefore, essential that we
continually maintain existing accounts and establish and develop new accounts
with employers and recruiters. If we fail to attract and maintain a sufficient
level of job postings, our business, results of operations and financial
condition could be materially and adversely affected.
In addition, our agreements with ASP clients, distribution partners and
co-branding partners have durations of between one and three years.
Consequently, our survival depends in part on our ability to either renew these
agreements when they expire or replace them with arrangements with new clients.
We may be unable to effectively manage rapid growth that we may experience,
which could place a continuous strain on our resources.
We plan to rapidly expand operations in both our divisions which expansion
we believe will be required to for us to attain a positive cash flow and
profitability. Our rapid growth, if it occurs, will impose significant demands
on our management, financial, technical and other resources. To manage our
future growth, we must adapt to changing business conditions and improve
existing systems or implement new systems for our financial and management
controls, reporting systems and procedures. Furthermore, in order to achieve
rapid growth, we may acquire technologies or products or enter into strategic
alliances. For us to succeed, we must make our existing technology, business and
systems work effectively with those of any strategic partners without undue
expense, management distraction or other disruptions to our business. If we fail
to manage any of the above growth challenges successfully, our business, results
of operations and financial condition could be materially and adversely
affected.
We depend on third parties to facilitate access to our websites, and face risks
of capacity constraints, which could increase our expenses or reduce our
revenues unexpectedly.
We depend on Globix, Inc. and other Internet service providers and website
operators, which may experience Internet connectivity outages. Such outages may
cause users to experience difficulties in accessing our own websites and for
those constructed and hosted by us for others. Any system failures at these
third parties may cause an interruption in service or a decrease in
responsiveness of these websites and may impair users' perceptions of them. Any
failure to handle current or increased volumes of traffic
<PAGE>
on these websites may impede our ability and those for whom we construct, host
and maintain sites to sustain or increase the number of employers, recruiters
and job seekers who use these websites.
We anticipate that we will derive a substantial portion of our revenues
from employers and recruiters that pay to post and upgrade their job
opportunities. The amounts they are willing to pay to post and upgrade their job
opportunities will depend to a significant degree on the number of job seekers
who will visit our websites. We will depend on the performance, reliability and
availability of our websites and those of our distribution partners to attract
and retain these job seekers. Capacity constraints could prevent them from
accessing our websites for extended periods of time and decrease our traffic.
Decreased traffic could result in fewer employers and recruiters posting job
opportunities on our websites or buying fewer upgrades and other enhanced
services. This would result in decreased revenues. In addition, if the number of
employers, recruiters and job seekers on our websites increases substantially,
we may experience capacity constraints and need to expand or upgrade our
technology at a time when we do not have adequate funds to do so, or when that
technology is not readily available.
We rely on technology that is owned by third parties.
We license certain technology that is incorporated into our services and
related products from third parties. Examples include licenses relating to
Server software from Microsoft SQL Server Enterprise, Microsoft Windows NT
Server Enterprise, and Verity Information Server. These licenses are perpetual.
In light of the rapidly evolving nature of Internet technology, we may
increasingly need to rely on technology from other vendors. Technology from
others may not continue to be available to us on commercially reasonable terms,
if at all. The loss or inability to access such technology could result in
delays in our development and introduction of new services and related products
or enhancements until equivalent or replacement technology could be accessed or
developed internally. If we experience such delays, our ability to keep abreast
of technological changes and developments could be severely arrested.
We do not own any patents and may not be able to protect our proprietary rights.
Our success and ability to compete depend to a significant degree on our
internally developed proprietary technology and on our brand, marks and domain
names. We have not applied for nor do we have patent protection for our
technology. We have applied for federal trademark registration for our
CareerEngine name though it has not yet been granted. Aside from our name we
rely intellectual property laws, and on confidentiality and non-disclosure
agreements with our employees and third parties, to establish and protect our
proprietary rights. We cannot assure you that the steps we have taken to protect
our proprietary rights will be adequate or that we will be able to defend our
marks. If we are unable to secure or protect our marks and systems, we could
suffer a loss of good will standing in the industry and ultimately in revenues.
Third parties may claim that our business activities infringe upon their
proprietary rights. From time to time in the ordinary course of business we may
be subject to claims of infringement of third parties' trademarks and other
intellectual property rights. Such claims could subject us to significant
liability and result in invalidation of our proprietary rights. These claims
could also be time-consuming and expensive to defend, even if we ultimately are
not found liable. In addition, these claims could divert our management's time
and attention.
Our business may suffer if users confuse similar domain names with those of our
category specific career websites.
There are a number of companies in the online recruiting market with
corporate and domain names similar to ours. We cannot assure you that potential
users of our websites will not confuse our
<PAGE>
name and the domain names of our category specific career websites with similar
names used by others. If any confusion occurs, we may lose business to
competitors, or some of our users may have negative experiences with these other
companies or websites that they mistakenly associate with us.
Our business is dependent on the development and maintenance of the Internet
infrastructure.
Our success will depend, in large part, upon the development and
maintenance of the Internet infrastructure as a reliable network backbone with
the necessary speed, data capacity and security, and timely development of
enabling products, such as high speed modems, for providing reliable Internet
access and services. We cannot assure you that the Internet infrastructure will
continue to effectively support the demands placed on it as the Internet
continues to experience increased numbers of users, greater frequency of use or
increased bandwidth requirements of users. Even if the necessary infrastructure
or technologies are developed, we may have to expend considerable resources to
adapt our offerings accordingly. Furthermore, in the past, the Internet has
experienced a variety of outages and other delays. Any future outages or delays
could affect the Internet sites on which our customers' job advertisements are
posted and the willingness of employers and job seekers to use our online
recruitment offerings. If any of these events occur, our business, results of
operations and financial condition could be materially and adversely affected.
Our business depends on the acceptance of the Internet as a recruiting medium
and an accepted means for doing business.
Our future is highly dependent upon a significant increase in the use of
the Internet as a recruiting medium. The online recruitment market is new and
rapidly evolving, and we cannot yet gauge its effectiveness as compared to
traditional recruiting methods. As a result, demand and market acceptance of
online recruitment offerings are uncertain. Many of our current and potential
employer customers have little or no experience using the Internet for
recruiting purposes and have allocated only a limited portion of their
recruiting budgets to online recruiting. The adoption of online recruiting,
particularly by those entities that have historically relied upon traditional
methods of recruiting, requires the acceptance of a new way of conducting
business, exchanging information and advertising for jobs. Such customers may
find online recruiting to be less effective for meeting their hiring needs
relative to traditional methods of recruiting employees. We cannot assure you
that the online recruitment market will continue to emerge or become
sustainable.
Our success also depends on the continued development of the Internet as an
accepted means for doing business; upon continued improvement in the
reliability, speed, security and ease of use of the Internet; and increased
access to the Internet, through personal computers or otherwise.
If the online recruitment market fails to develop or develops more slowly
than we expect or the Internet does not become an accepted means for doing
business, our business, results of operations and financial condition would be
materially and adversely affected.
We may be adversely affected by government regulations and legal uncertainties
associated with the Internet.
Laws and regulations directly applicable to Internet communications,
commerce and advertising are becoming more prevalent, but the legislative and
regulatory treatment of the Internet remains largely unsettled. The U.S.
Congress has adopted Internet laws regarding copyrights, taxation and the
protection of children. In addition, a number of other legislative and
regulatory proposals under consideration by federal, state, local and foreign
governments could lead to additional laws and regulations affecting the right to
collect and use personally identifiable information, online content, user
privacy, taxation, access
<PAGE>
charges and liability for third-party activities, among other things. For
example, the growth and development of the market for Internet commerce may
prompt calls for more stringent consumer protection laws, in the United States,
that may impose additional burdens on companies conducting business over the
Internet.
Although our transmissions originate from New York, the governments of
other states might attempt to regulate our transmissions or levy sales or other
taxes relating to our activities. Courts may seek to apply existing laws not
explicitly relating to the Internet in ways that could impact the Internet, and
it may take years to determine whether and how laws such as those governing
intellectual property, privacy, libel and taxation will affect the Internet and
the online recruitment industry.
Existing or future laws or regulations affecting the Internet could lessen
the growth in use of the Internet generally and decrease the acceptance of the
Internet as a communications, commercial and advertising medium, and could
reduce the demand for our services or increase our cost of doing business. Any
of these events could cause our business, financial condition and results of
operations to be materially and adversely affected.
Because our business involves the transmission of information, we may incur
liability for information retrieved from or transmitted over the internet.
We may be sued for defamation, obscenity, negligence, copyright or
trademark infringement or other legal claims relating to information that is
posted or made available on our websites. Other claims may be brought based on
the nature, publication or distribution of our content or based on errors or
false or misleading information provided on our websites. These types of claims
have been brought, sometimes successfully, against online services in the past.
We could also be sued for the content that is accessible from our websites
through links to other Internet sites. Although we have commercial liability
insurance with $1 million coverage with a $1 million umbrella, awards may exceed
these amounts. We do not have errors and omission liability insurance. We also
offer email services, which may subject us to potential risks, such as
liabilities or claims resulting from unsolicited email or spamming, lost or
misdirected messages, security breaches, illegal or fraudulent use of email, or
interruptions or delays in email service. Our insurance does not specifically
provide for coverage of these types of claims and therefore may not adequately
protect us against these types of claims. In addition, we could incur
significant costs in investigating and defending these claims, even if we
ultimately are not found liable. If any of these events occur, our business,
results of operations and financial condition could be materially and adversely
affected.
Concerns regarding security of transactions and transmitting confidential
information over the Internet may negatively impact our electronic commerce
business.
We believe that concern regarding the security of confidential information
transmitted over the Internet, such as resumes submitted in confidence and
credit card numbers, prevents many potential users of our services from engaging
in online transactions. If we do not add sufficient security features to our
websites, our services may not gain market acceptance or there may be additional
legal exposure to us. We have included basic security features in some of our
products to protect the privacy and integrity of customer data, such as password
requirements to access some data.
Despite the measures we have taken, our infrastructure is potentially
vulnerable to physical or electronic break-ins or similar problems. If a person
circumvents our security measures, he or she could misappropriate proprietary
information or cause interruptions in our operations. Security breaches that
result in access to confidential information could damage our reputation and
expose us to a risk of loss or liability. We may be required to make significant
investments and efforts to protect against or remedy
<PAGE>
security breaches. Additionally, as electronic commerce becomes more prevalent,
our customers will become more concerned about security. If we do not adequately
address these concerns we may incur liability and we may not be able to sustain
or increase the number of employers, recruiters and job seekers using our
services.
Our early stage Internet operations are vulnerable to interruptions and
breakdowns in service.
As an early stage Internet business we are particularly vulnerable to
breakdowns and interruptions in our service which could disrupt our ability to
provide continued and sustained support to advertisers and publishers. Computer
viruses, for example, may result in interruptions, which may cause us to incur
additional operating expenses to correct problems we may experience. In
addition, the inadvertent transmission of computer viruses could expose us to a
material risk of loss or litigation and possible liability. Moreover, if a
computer virus affecting our system is publicly disclosed, our reputation could
be materially damaged and our visitor traffic may decrease. If because of
interruptions our customers and prospective customers lose faith in our ability
to serve their needs, they may choose more traditional means for posting their
ads.
Our operations and services are vulnerable to natural disasters.
Our operations and services depend on the extent to which our computer
equipment and the telecommunications infrastructure of our third-party network
providers is protected against damage from fire, power loss, telecommunications
failures, and similar events. Despite precautions taken by us and our
third-party network providers, over which we have no control, a natural disaster
or other unanticipated problems at our network hub, or a third-party network
provider point of presence could cause interruptions in the services that we
provide. If disruptions occur, we may have no means of replacing these network
elements on a timely basis or at all. We do not currently maintain back-up
Internet services or facilities or other back-up computing and
telecommunications facilities. Extensive or multiple interruptions in providing
users with Internet access are a reason for user decisions to stop using access
services. Accordingly, any disruption of our services due to system failure
could have an adverse effect on our business, results of operations and
financial condition.
Our management has broad discretion over use of proceeds from this offering and
may fail to use them effectively to increase our business.
If all of the Units offered hereby are sold, the net proceeds of this
offering are estimated to be approximately $2,000,000, assuming that no warrants
are exercised. We will retain broad discretion regarding the allocation of these
funds. We intend to use a majority of the net proceeds for increased sales,
advertising and marketing expenses and the development of our websites. You will
not have the opportunity to evaluate the economic, financial or other
information on which we base our decisions on how to use the proceeds. We may
use the net proceeds ineffectively or for purposes with which you disagree. Our
failure to apply the proceeds effectively could impede our ability to expand our
business.
The market price of our debentures and warrants may be volatile.
The market price of our debentures and warrants which will be closely tied
to the market price of our common stock may fluctuate significantly in response
to the following factors, some of which are beyond our control:
o variations in quarterly operating results;
o changes in financial estimates by securities analysts;
<PAGE>
o our announcements of significant contracts, milestones, acquisitions;
o strategic relationships or capital commitments;
o additions or departures of key personnel;
o sales of common stock or termination of stock transfer restrictions;
and
o fluctuations in stock market price and volume, which are particularly
common among securities of Internet companies.
In the past, following periods of volatility in the market price of a
company's securities, securities class action litigation often has been
instituted against that company. Such litigation is expensive and diverts
management's attention and resources. Any one of the factors noted herein could
have an adverse affect on the value of the debentures and warrants.
Anti take over provisions of the Delaware Corporation Law.
The Delaware Corporation Law contains provisions which may enable our
management to retain control and resist a takeover of our company. Accordingly,
these provisions could discourage or make more difficult a merger or other type
of corporate reorganization even if they could be favorable to the interests of
our stockholders.
Our officers and directors exercise significant control over our affairs, which
could result in their taking actions of which other stockholders do not approve.
Our executive officers and directors and entities affiliated with them
currently control approximately 45.0% of our outstanding common stock. After
this offering they will control approximately 36.0% of our outstanding capital
stock, assuming that the over-allotment option is exercised and that all of the
debentures are converted into shares of our common stock. These stockholders, if
they act together, may be able to exercise substantial influence over all
matters requiring approval by our stockholders, including the election of
directors and approval of significant corporate transactions. This concentration
of ownership may also have the effect of delaying or preventing a change in
control of our company and might affect the market price of our common stock.
Lack of dividends.
We have not previously paid any cash dividends on our common stock and
currently intend to retain all future earnings, if any, to finance the
development and expansion of our business. We do not anticipate paying cash
dividends on our common stock in the foreseeable future.
There is no prior public trading market for our Units, Debentures or Warrants.
If sustained public trading markets in these securities do not develop, your
ability to sell the securities at acceptable prices may be adversely affected.
In addition, due to the limited number of debentures, it is possible than a
sustained trading market for the debentures will not develop.
Prior to this offering, there was no public trading market for our units,
debentures or warrants and there can be no assurance that a public trading
market for these securities will be developed or maintained in the future.
Although we anticipate that these securities will be approved for listing on the
American Stock Exchange, the development of a public market depends upon the
presence in the marketplace of a sufficient number of willing buyers and sellers
at any given time, over which we have no control. There can be no assurances
that
o you will be able to liquidate your investment without considerable
delay, if at all,
o quotations will be available on the American Stock Exchanges as
contemplated, or
o if a market develops, that such market will continue.
The trading volume for these securities may have a significant impact on their
respective market prices.
In addition, since only a limited number of debentures and a limited
principal amount of debentures will be issued, there is a good change that a
sustained market for the debentures will not develop. In such an event, you may
not be able to sell your debentures and you may be required to hold on to them
until maturity.
See "Description Of Securities."
Risk of ownership of the debentures.
The debentures are our general unsecured obligations and are subordinate to
all of our "Senior Indebtedness" except indebtedness which by its term is
subordinate or equal in right of payment to the debentures. Our ability to make
payments of interest on the debentures and to repay the principal thereof at
maturity may be affected by the success of our operations and the amount of our
other indebtedness. We are permitted to incur additional indebtedness in the
future without limitation or restriction by reason of the debentures. This
additional indebtedness, subject to limited exceptions, could be superior to or
equal in right of payment with the indebtedness of the debentures. The
debentures will not be personally guaranteed or rated by any agency, and there
will be no sinking fund with respect thereto. Accordingly, an investment in the
debentures is speculative, involves a high degree of risk, and should be
purchased only by persons who can afford an entire loss of their investment.
Default on Senior Indebtedness.
If we default on any Senior Indebtedness, such Senior Indebtedness must be
discharged in full before any payments can be made for principal, interest, or
otherwise on account of the debentures. Senior Indebtedness includes any bank or
similar debt we may incur in the future.
Default on debentures.
Default on any Senior Indebtedness does not itself constitute a default under
the debentures or the indenture. A default with respect to the debentures occurs
only upon the failure to timely make a payment required with respect to the
debentures or the occurrence of other specific events enumerated as defaults in
the debentures. Inasmuch as payments under the debentures are due only
quarterly, we could experience financial difficulties months before a payment
due date on the debentures, and the debenture holders would be unable to declare
a default with respect to the debentures until the next payment due date passed
without payment being made under the debentures. In any event, should a default
occur under the terms of the debentures, unless the holders of more than 50% of
the principal amount of the debentures elect to declare a default, no individual
debenture holder will have the right to pursue his or her remedies thereunder.
<PAGE>
Possible loss of interest on conversion.
If a debenture is surrendered for conversion , the holder of such debenture
will not receive the accrued but unpaid interest on the debenture.
Possible taxable dividend.
If we were to make a distribution of property to our stockholders which
would be taxable to the stockholders as a dividend for federal income tax
purposes and the conversion price of the debentures were to be decreased
pursuant to the anti-dilution provisions of the debentures, such decrease could
be deemed for federal income tax purposes to be payment of a taxable dividend to
debenture holders. An example of such a distribution would be a distribution of
our evidences of indebtedness or assets, but generally not stock dividends on
common stock or rights to holders of common stock to subscribe for common stock
Arbitrary determination of conversion and exercise prices.
We have arbitrarily determined the conversion price of the debentures and
the exercise prices of the warrants in consultation with the underwriter. These
prices bear no relationship to our assets, earnings or lack thereof, book value
or other such criteria of value.
Possible dilution from future sales of common stock.
Our Board of Directors has the authority to issue up to 20,000,000 shares
of common stock and to issue options and warrants to purchase shares of our
common stock without stockholder approval. Future issuance of our additional
shares of common stock could be at values substantially below the price at which
you convert your debenture and, therefore, could represent further substantial
dilution to investors in this offering. In addition, our Board could issue large
blocks of our common stock to fend off unwanted tender offers or hostile
takeovers without further stockholder approval.
The underwriter's unit warrants may restrict our ability to raise additional
capital.
When we complete the offering we will sell to the underwriter and/or its
designees, for nominal consideration, warrants to purchase up to four units. For
the life of the underwriter's warrants, the holders will have, at a nominal
cost, the opportunity to profit from a rise in the market price of our common
stock with a resulting dilution in the interest of our existing security
holders. As long as the underwriter's warrants remain unexercised, our ability
to obtain additional financing may be limited. The underwriter may exercise its
warrants at a time when we would, in all likelihood, be able to obtain any
needed capital by a new offering of securities on terms more favorable than
those provided for by the warrants.
You cannot sell the shares underlying the warrants if we do not have an
effective registration statement.
<PAGE>
You cannot exercise the warrants and sell the underlying shares unless we
keep a prospectus effective and the shares underlying the warrants are qualified
or exempt in the states in which exercising warrant holders reside. We have
registered these shares and have qualified them in the states where we plan to
sell the units unless the state does not require qualification. We have also
filed an undertaking with the Securities and Exchange Commission to maintain a
current prospectus relating to these shares until the expiration of the
warrants. However, we cannot assure that we will be able to satisfy this
undertaking. The warrants may be deprived of any value if we fail to do so. The
common stock and warrants are detachable and separately transferable six months
after the effective date of this offering unless we agree with the underwriter
that trading may begin sooner. Purchasers may buy warrants in the aftermarket or
may move to jurisdictions in which the shares underlying the warrants are not so
registered or qualified during the period that the warrants are exercisable. In
that event, we would be unable to issue shares to those persons desiring to
exercise their warrants, and warrant holders would have no choice but to offer
to sell the warrants in a jurisdiction where a sale is permitted or allow them
to expire unexercised.
You could lose your right to exercise your warrants if we exercise our right to
redeem the warrants.
Under some circumstances, we may redeem all of the warrants at nominal
cost. If you are a warrant holder and we call for redemption, to the extent we
redeem your warrants, you will lose your right to purchase shares pursuant to
your warrants. Furthermore, the threat of redemption could force you to:
o exercise your warrants at a time when it may be disadvantageous for
you to do so;
o sell your warrants at the then current market price when you might
otherwise wish to hold them; or
o accept the redemption price which will be substantially less than the
market value of your warrants at the time of redemption.
See "Description of Securities -- Warrants" for the conditions under which we
may redeem the warrants. We will not call the warrants for redemption if a
current prospectus is not available for the exercise of the warrants.
<PAGE>
PRICE RANGE OF COMMON STOCK
Our common stock trades on the American Stock Exchange and Pacific Stock
Exchange under the symbol "CNE."
Fiscal Years (Quarterly) Common Stock
--------------------------------------------------------------------------------
1998 High Sales Price Low Sales Price
---- ---------------- ---------------
1st Quarter $ 1.00 $ 0.75
2nd Quarter 0.9375 0.6875
3rd Quarter 0.875 0.625
4th Quarter 1.25 0.75
1999
----
1st Quarter 2.625 1.00
2nd Quarter 9.50 2.1875
3rd Quarter 5.00 2.50
4th Quarter 6.00 3.50
2000
----
1st Quarter 5.00 2.75
2nd Quarter 3.0625 1.75
3rd Quarter 2.1875 1.1875
For a recent closing sale price of our common stock, please see the cover
page of this prospectus.
As of December 14, 2000 we had 235 holders of record of our common stock
which includes brokerage firms and/or clearing houses holding our shares for
their clientele. Although each of these brokerage houses and/or clearing houses
hold the shares for a number of their clients, each such firm is considered as
only one holder.
<PAGE>
USE OF PROCEEDS
The net proceeds to us from the sale of units being offered by this
prospectus are estimated to be $ 2,000,000 after deducting the underwriting
discounts and estimated offering expenses. The following table sets forth the
principal categories of expense for which the offering proceeds are to be used,
based on our current budget.
Approximate Percentage
Allocation of Net Proceeds Approximate Dollar Amount of Net Proceeds
-------------------------- ------------------------- ----------------------
Sales and marketing(1) $ 500,000 25.0%
Product development and
enhancement of the services
offered(2) $ 500,000 25.0
Information technology $ 300,000 15.0
General corporate purposes
including working capital(3) $ 700,000 35.0
---------- -------
Total $2,000,000 100.0%
========== =======
---------------
1. Sales and marketing includes hiring additional sales personnel,
electronic, print media and direct mail advertising as well as marketing efforts
directed at advertisers, employers and recruiters, and prospective strategic
partners.
2. Product development and enhancement includes developing ancillary
products, expanding site capability, creating more services for users, and
making sites more attractive.
3. The remaining net proceeds will be used for general corporate purposes,
including working capital and capital expenditures. The amounts we actually
expend for general corporate purposes may vary significantly and will depend on
a number of factors, including the amount of our future revenues and the other
factors described under "Risk Factors."
We expect that our actual allocation of proceeds will vary, possibly
substantially, from our current budget as a result of unforeseen developments.
Possible material events that could cause a change in the allocation of proceeds
include: increased marketing expenses; increased information technology costs
and longer product development times. Our management will retain broad
discretion in the allocation of the net proceeds of this offering. A portion of
the net proceeds may also be used for strategic partnerships or to acquire or
invest in complementary businesses, technologies or product lines. We have no
current agreements or commitments and we are not currently engaged in any
negotiations with respect to any acquisitions.
We believe that the net proceeds from the sale of the units and cash
generated by our operations will suffice to satisfy our contemplated cash
requirements through December 31, 2001. Most likely, we
<PAGE>
will seek additional funding at some point in 2001. In the event that we do
require additional financing, we cannot assure that this financing will be
available to us on acceptable terms, if at all. In this regard, see the risk
factor "We will require substantial additional funding in order to finance the
development of our business. Our inability to obtain such financing or
significantly increase revenues most likely will have an adverse effect on our
business."
We plan to invest the proceeds that we do not immediately use principally
in United States government securities, short-term certificates of deposit,
money market funds or other short-term interest bearing investments.
Dividend Policy
We intend to retain future earnings, if any, to finance the expansion of
our business and do not expect to pay any cash dividends in the foreseeable
future.
Private Financing
In June and August 2000, we completed the sale of 48 debenture and warrant
units at a price of $50,000 per unit in a private financing transaction. Each
private financing unit consisted of securities substantially similar to the
units offered in this prospectus, except that each private financing unit was
equal to 50 of the units offered pursuant to this prospectus. We granted the
holders of these private financing units the right to register their units for
public sale. To this end, on the date of this prospectus, we will issue units to
the holders of the private units identical to the units offered in this
prospectus in exchange for their private financing units at a rate of 50 public
units for each private financing unit. These units have been registered for
public sale and are being sold by selling securityholders pursuant to another
prospectus. Except as set forth in this paragraph, all references in this
prospectus to numbers of private financing units assumes retroactive exchange of
public units for private units. For example, 50 private financing units would
represent only one actual private financing unit sold in the private financing.
Dirks & Company, Inc. acted as the placement agent. We paid Dirks a fee of
$240,000, which was equal to 10% of the aggregate purchase price of the units
sold, and a non accountable expense allowance of $72,000, which was equal to 3 %
of the aggregate purchase price of the units sold. We also granted Dirks, for
nominal consideration, a warrant, exercisable over a five year period which
commenced on the closing date of the private financing, to purchase units at a
price of $1,200 per unit, which equaled 10% of the number of units sold in the
private financing. The units underlying the securities acquired by Dirks as
placement agent have been registered for public sale are are included in this
prospectus.
Barry W. Blank purchased 300,000 units in the private financing. Mr. Blank
was employed by Dirks as a registered representative at the time of the private
financing and he participated in the sale of the private financing units.
Currently he is employed by the underwriter and will participate in the sale of
the units in this offering. Dirks has granted Barry Blank the right to 70% of
the units underlying the placement agent warrant.
<PAGE>
Capitalization
The following table sets forth our capitalization as of September 30, 2000.
o on an actual basis;
o on an as adjusted basis to give effect to:
o the sale of the 2,875 units offered by us in this prospectus assuming
a public offering price of $1,000.00 per unit and the exercise of the
Underwriter's over-allotment option; and
o payment of the underwriting discounts and estimated offering expenses
that we will pay.
<TABLE>
<CAPTION>
Actual As Adjusted
---------------- ----------------
<S> <C> <C>
Debentures payable, net of unamortized discount of $643,972
and $1,403,272 $ 1,756,028 $ 3,871,728
---------------- ----------------
Excess of liabilities over assets of discontinued operations 3,361,269 3,361,269
---------------- ----------------
Stockholders' equity:
Common stock - authorized 20,000,000 shares,
par value $.10; issued 6,749,600 shares $ 674,960 $ 674,960
Preferred stock - authorized 1,000,000 shares,
par value $.10; none issued
Paid-in surplus 16,096,808 16,856,108
Deficit (14,896,533) (14,896,533)
---------------- ----------------
1,875,235 2,634,535
Less treasury stock, at cost -
1,305,594 shares in 2000 and 1,313,927 in 1999 (3,028,396) (3,028,396)
---------------- ----------------
Total stockholders' equity (1,153,161) (393,861)
----------------- -----------------
Total capitalization $ 3,964,136 $ 6,839,136
================ ================
</TABLE>
<PAGE>
Management Discussion And Analysis Of Financial
Condition And Results Of Operations
In this section, we explain our financial condition and results of
operations. As you read this section, you may find it helpful to refer to our
Financial Statements at the end of this prospectus and the information contained
in the section entitled "Summary Financial Data." This discussion contains
forward-looking statements that involve risk and uncertainties. Our actual
results may differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including those set forth under "Risk
Factors" and elsewhere in this prospectus.
Overview
In August 2000, we discontinued our merchant banking operations, which
consisted of our real estate project with Carmike Cinemas, Inc., and our
financial consulting operations. Accordingly, our remaining operations are
solely from our e-recruiting segment. Our financial resources and our
management's efforts are now focused entirely on this segment.
E-recruiting activities are derived from the operations of the two
divisions of our wholly-owned subsidiary, CareerEngine, Inc. These divisions,
CareerEngine Network and CareerEngine Solutions, provide on- and off-line
companies with a dynamic solution to on-line recruiting challenges.
Results of Operations
In this section, we discuss our earnings for the periods indicated and the
factors affecting them that resulted in changes from one period to the other.
Nine Months Ended September 30, 2000
Compared with Nine Months Ended September 30, 1999
Revenues
Total revenues increased to $2,296,448 for the nine months ended September
30, 2000 from $1,877,428 for the nine months ended September 30, 1999, due
primarily to increases in E-recruiting service revenues and income on cash
management activities.
E-recruiting related services increased to $929,718 for the nine months
ended September 30, 2000 from $16,031 for the nine months ended September 30,
1999, as our E-recruiting subsidiary, CareerEngine, Inc., commenced operations
in the quarter ended September 30, 1999.
Income on securities transactions, net decreased to $1,266,294 for the nine
months ended September 30, 2000 from $1,332,960 for the nine months ended
September 30, 1999. We believe that the principal reason for this decrease was
the results of our cash management and investing activities. These activities
include transactions involving futures, puts, calls, equities, municipal
securities and other securities.
Interest income decreased to $98,412 for the nine months ended September
30, 2000 from $300,187 for the nine months ended September 30, 1999, due to the
reduced amount of funds available for investment.
<PAGE>
Other income for the nine months ended September 30, 1999 relates primarily
to our collection of a reserved receivable relating to the sale of a former
subsidiary.
Expenses
Total expenses increased to $5,789,443 for the nine months ended September
30, 2000 from $2,228,529 for the nine months ended September 30, 1999,
principally due to the increased compensation and selling costs associated with
our e-recruiting operations.
Compensation and related costs increased to $2,482,190 for the nine months
ended September 30, 2000 from $1,007,069 for the nine months ended September 30,
1999. The increase is due principally to the additional employees hired by
Career Engine, Inc. in connection with our internet-based E-recruiting
activities. We anticipate that compensation costs will increase moderately in
the last three months of 2000.
Advertising expense increased to $1,357,774 for the nine months ended
September 30, 2000 from $412,695 for the nine months ended September 30, 1999.
This significant increase was due to CareerEngine, Inc.'s commencement of a
comprehensive communications program in 1999.
General and administrative expenses increased to $1,702,604 for the nine
months ended September 30, 2000 from $808,765 for the nine months ended
September 30, 1999, due primarily to the increased operations of CareerEngine,
Inc.
The $246,875 non-recurring interest expense for the nine months ended
September 30, 2000 represents the charge required to recognize the beneficial
conversion feature related to the issuance of debentures payable and the related
warrants in June 2000.
Operating Loss
On a pre-tax basis, we had a loss of $3,492,995 for the nine months ended
September 30, 2000 from continuing operations, compared with a loss of $351,021
from continuing operations due to the expenses associated with CareerEngine,
Inc. In the nine months ended September 30, 2000, we had a tax expense of
$15,340 compared to a tax expense of $12,123 for the nine months ended
September, 30 2000. For Federal income tax purposes, as of December 31, 1999, we
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.
Our net loss for the nine months ended September 30, 2000 from continuing
operations was $3,508,335 compared with a net loss of $363,264 from continuing
operations for the nine months ended September 30, 1999. For the nine months
ended September 30, 2000, loss per share from continuing operations (basic and
diluted) is $.65 per share. For the nine months ended September 30, 1999, net
loss per share from continuing operations (basic and diluted) was $.06 per
share.
Our net loss for the nine months ended September 30, 2000 from discontinued
operations was $730,318 compared with a net loss of $1,226,550 from discontinued
operations for the nine months ended September 30, 2000. For the nine months
ended September 30, 2000 loss per share from discontinued operations (basic and
diluted) is $.13 per share. For the nine months ended September 30, 1999, net
loss per share from discontinued operations (basic and diluted) was $.23 per
share.
Our net loss for the nine months ended September 30, 2000 was $4,238,653,
compared with a net loss of $1,589,814 for the nine months ended September 30,
1999. For the nine months ended September
<PAGE>
30, 2000, loss per share (basic and diluted) is $.78 per share. For the nine
months ended September 30, 1999, net loss per share from (basic and diluted) was
$.29 per share.
Year Ended December 31, 1999
Compared to Year Ended December 31, 1998
Revenues
Total revenues increased to $1,471,421 in 1999 from $1,944,408 for 1998.
E-recruiting related services increased to $30,980 in 1999 from nil in 1998
as the operations of our subsidiary, CareerEngine, Inc., commenced.
Income on securities transactions, net decreased to $836,549 for 1999 from
$1,526,873 for 1998. This revenue category includes the net profit from our cash
management and our investing in futures, puts, calls, municipals and other
securities.
Interest income decreased to $374,522 in 1999 from $417,535 in 1998 due to
the reduced amount of funds available for investment.
Other income increased to $229,370 for 1999 from $22,101 in 1998 due to our
collection of a reserved receivable relating to the sale of a former subsidiary.
Expenses
Total expenses increased to $4,424,308 for 1999 from $2,267,067 in 1998.
Compensation and related costs increased to $1,725,074 for 1999 from
$1,223,597 for 1998. The increase is due principally to the additional employees
hired by CareerEngine, Inc. in connection with its internet-based job search
services venture.
Advertising expense increased to $1,235,778 for 1999 from $77,515 for 1998
as CareerEngine, Inc. commenced its comprehensive communications program in
1999.
General and administrative expenses increased to $1,336,215 for 1999 from
$567,378 for 1998 due primarily to the increased operations of CareerEngine,
Inc.
Interest expense decreased to $127,241 for 1999 from $398,577 for 1998
primarily because we computed interest due on our outstanding tax assessment
based on one year in 1999 and several years in 1998.
Operating Loss
On a pre-tax basis, we had a loss of $2,952,887 for the year ended December
31, 1999 from continuing operations compared with a loss of $322,659 from
continuing operations due to the expenses associated with CareerEngine, Inc. For
Federal income tax purposes, as of December 31, 1999, we 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.
Our net loss for the year ended December 31, 1999 from continuing
operations was $2,962,985 compared with a net loss of $214,182 from continuing
operations for the year ended December 31, 1998.
<PAGE>
For the year ended December 31, 1999, loss per share from continuing operations,
basic and diluted, is $.55 per share. For the year ended December 31, 1998, net
loss per share from continuing operations, basic and diluted, was $.03 per
share.
Our net loss for the year ended December 31, 1999 from discontinued
operations was $1,089,409 compared with a net loss of $410,227 from discontinued
operations for the year ended December 31, 1998. For the year ended December 31,
1999, loss per share from discontinued operations, basic and diluted, is $.20
per share. For the year ended December 31, 1998, net loss per share from
discontinued operations, basic and diluted, was $.08 per share.
Our net loss for the year ended December 31, 1999 was $4,052,394, compared
with a net loss of $624,409 for the year ended December 31, 1998. For the year
ended December 31, 1999, loss per share, basic and diluted, is $.75 per share.
For the year ended December 31, 1998, net loss per share, basic and diluted, was
$.11 per share.
Liquidity and Capital Resources
We are currently operating at a negative cash flow rate of approximately
$500,000 per month. We expect the negative cash flow of approximately $500,000
to continue through December 31, 2000. We have initiated a cost reduction
strategy and expect to be operating at a negative cash flow rate of
approximately $300,000 per month, commencing January 2001.
We estimate that we must generate an aggregate of at least approximately
$450,000 per month in gross revenues before our cash flow will be adequate to
cover our operating expenses and capital expenditures.
If sources of financing are required, but are insufficient or unavailable,
we will be required to modify our growth and operating plans to the extent of
available funding, which would have an adverse effect on the successful
implementation of our planned business development.
The transaction relating to our six movie theaters and Carmike Cinema,
Inc., a discontinued operation, is and always has been cash flow neutral (rent
is equal to interest expense, principal amortization and other related expenses
that are our responsibility). Carmike's filing of a petition under Chapter 11 of
the United States Bankruptcy Code has not changed this financial relationship as
our exposure related to this real estate project is and always has been limited
solely to our interest in the theaters.
We do not have any material commitments for capital expenditures as of
September 30, 2000.
Recently Issued Accounting Pronouncements
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 ("SAB 101") "Revenue Recognition in Financial
Statements" which contain the Securities and Exchange Commission Staff's views
in applying generally accepted accounting principles to selected revenue
recognition issues. The implementation of SAB 101 has no effect on our financial
statements.
<PAGE>
Business
We provide a range of online career services and solutions to employers,
recruiters and job seekers through our wholly-owned subsidiary, CareerEngine,
Inc. We operate our network of occupation specific career portal sites on which
employers and recruiters may post job offerings and utilize our other
recruitment services. In addition, we offer Application Services Provider or ASP
services to those customers who seek to have us construct, maintain and host
career centers on their own websites.
The Market Opportunity
Recruiting Market
Based on data from Interbiznet.com's 1999 Electronic Recruiting Index, we
estimate that the U.S. spent in excess of $13 billion in 1997 to hire new
employees by advertising job openings in newspapers and by utilizing
headhunters. We believe there are several factors causing an increase in
spending on recruiting efforts:
Increased Labor Shortage. The demographic trends such as the aging of the
Baby Boomers and decreasing birth rates, together with the continued growth in
the U.S. economy, are combining to cause a tight labor market. According to a
1998 recruiting survey prepared by Interbiznet.com, over 60% of the recruiters
surveyed experienced labor shortages. As a result, the recruiting process now
focuses less on selecting qualified employees from a ready pool of candidates
and more on managing a scarce resource.
Increased Employee Turnover. Employees currently change jobs more often
then they have in the past and even satisfied employees are increasingly
investigating job opportunities. According to the U.S. Bureau of Labor
Statistics, the average person entering the workforce today will work for
between eight and ten different employers. In the 80's executives may have
changed employers once or twice per career. Now the average employee stays at
one company for about 4 years, down from the 10 years averaged during the 60's.
This makes it more difficult for employers to retain qualified, experienced
individuals and increases the number of hires that must occur each year in order
to maintain or grow an employer's workforce.
Increased Urgency To Reduce Time To Hire. Forrester Research, Inc.
estimates that unemployment among "knowledgeable workers" is less than 1%
relative to overall unemployment of 4.0%. Because of the shortage in highly
skilled job seekers, qualified candidates must be hired quickly or they may be
lost to competitors.
Online Recruiting Market
With the acceptance of the Internet as an attractive medium for online
recruiting, an increasing share of recruiting efforts is being conducted online.
International Data Corporation estimates that the total number of individual
Internet users worldwide will grow from approximately 69 million in 1997 to 320
million in 2002. As Internet usage becomes more widespread, companies from a
broad range of industries are expected to conduct an increasing percentage of
their recruiting over the Internet. Of the 6 million businesses in the U.S.,
Forrester estimates that only 15,000 businesses currently recruit online, but
this figure is estimated to increase to 124,000 by 2003. Forrester forecasts
that by 2003, most large
<PAGE>
companies, 60% of medium-sized companies and 20% of small companies will use the
Internet for recruiting purposes. We believe that online recruiting has the
following advantages over the more traditional means of recruiting and job
searching:
o it is interactive, allowing immediate links to additional information;
o it provides information about local and geographically dispersed job
seekers and job opportunities;
o it allows employers, recruiters and job seekers to conduct more
focused searches;
o it allows employers, recruiters and job seekers to research and gather
information anonymously;
o it is more cost-effective;
o it is accessible at any time by employers, recruiters and job seekers;
and
o it reduces the time to conduct and close a successful job search.
Our Entry into the Online Recruiting Market
The online recruitment business looked to us as a particularly attractive
market opportunity and in 1998 we repositioned ourselves to enter this market.
We did this in the first instance by developing a network of category specific
career oriented websites which enabled employers to post job offerings addressed
to candidates in specific career or destination areas and qualified individuals
in these categories to post resumes for potential employers to review. Later we
followed up the establishment of our network of career sites with the formation
of our CareerEngine Solutions Division which was created to construct, maintain
and host career service sites on an ASP basis to corporations and others seeking
to add career centers to their websites.
Our CareerEngine Network Division
The principal players in the online recruiting business are those that
provide aggregate job postings on online job boards. Many of these sites, while
widely known and with large followings, are broadly based. By covering all types
of jobs in many industries, every employer and applicant who accesses these
sites must search through broad menus of options. This approach diminishes the
usefulness of these sites by requiring users to undertake inefficient and more
lengthy search processes. Additionally, these sites typically do not allow job
seekers to restrict access to their resumes. This feature is vital in a tight
labor market as most job seekers are employed and, do not want their current
employer to know of their search for another job.
When we entered this market in early 1999 we sought to overcome the
problems inherent in broad-based job posting sites by concentrating on creating
a network of "vertical" websites that were skill- or diversity-based. Our
business model is still relatively new within this highly fragmented recruiting
industry. Today, after establishing 25 sites with specialized features that
allow people with similar skills and career goals to learn about developments in
their field and gain access to resources and training, we have become one of the
leading proponent of this type of approach to online recruiting. The specific
career websites currently in our network are:
<PAGE>
--------------------------------------- -----------------------------------
ITClassifieds.com SalesClassifieds.com
--------------------------------------- -----------------------------------
FinancialPositions.com CollegeGradClassifieds.com
--------------------------------------- -----------------------------------
RetailClassifieds.com MgmtClassifieds.com
--------------------------------------- -----------------------------------
LawListings.com AdminClassifieds.com
--------------------------------------- -----------------------------------
EducationClassifieds.com AccountingClassifieds.com
--------------------------------------- -----------------------------------
MarketingClassifieds.com GovernmentClassifieds.com
--------------------------------------- -----------------------------------
MBAClassifieds.com ExecuClassifieds.com
--------------------------------------- -----------------------------------
ArchitectClassifieds.com Advertising-PR.com
--------------------------------------- -----------------------------------
EngineeringClassifieds.com ClassifiedsforWomen.com
--------------------------------------- -----------------------------------
TBWCareers.com 1NOLCareers.com
--------------------------------------- -----------------------------------
MedCareers.com
--------------------------------------- -----------------------------------
---------------------------------------------------------------------------
SmartMoney.CareerEngine.com
---------------------------------------------------------------------------
CFOPositions.com
---------------------------------------------------------------------------
CrainsNYCareers.com
---------------------------------------------------------------------------
JOCCareers.com
---------------------------------------------------------------------------
Contrasted to other online recruiting sites, CareerEngine's vertical sites
allow employers to search targeted resume databases easily and to focus
recruiting efforts on select communities of potential employees in specific
fields. Similarly, potential employees are able to focus their searches on
precise vocations. For both employer and candidate, vertical sites make it
easier to locate, compare, evaluate, and consummate engagements, one with the
other. Our online recruiting sites have the benefit of being confidential,
vocation-specific, and free to job seekers.
A job posting by an employer consists of a full-page template in which the
employer presents, in detail
o its corporate profile,
o the job type being offered,
o job skills required,
o employment location,
o contract length (if applicable) and
o salary range.
Each job posting includes an e-mail link directly to the employer's
preferred e-mail address, as well as a fax number through which it will receive
all resumes for that posting. Employers are encouraged to select as many of our
career websites as applicable for the given position to help them target the
right candidates and to increase the likelihood that job seekers will find more
jobs that match their skills. Job postings remain active for a maximum of 60
days or until the position is filled.
Personalized professional consultants are available to job seekers through
"career advisors" who are skilled in areas including resume development, salary
negotiations and market trends. Job seekers can, among other services available
to them, post their resumes, log employment criteria into a CareerEngine search
engine site and automatically receive e-mail notification when a job matching
those criteria is listed. Notices can be sent to the job seeker's wireless phone
or pager. Our resume connections service gives companies the opportunity to mine
our confidential resume base containing resumes of candidates who trust us to
keep their credentials secure and are reluctant to post their resumes elsewhere.
Recruiters and companies are now able to enter criteria for the candidates they
seek and automatically receive e-mail alerts when a job seeker meeting those
criteria posts a resume. They, too, can be sent a wireless notification.
<PAGE>
Our sites automate much of the recruiting process while providing more
information and real-time interaction between job seekers and employers than do
most other e-recruiting sites. Because it is easy to use and far less costly
than traditional recruiting methods, we expect our CareerEngine network to draw
increasing numbers of users.
Of the 25 sites offered by us, our most highly developed sites are
SalesClassifieds.com, ITClassifieds.com, CFOpositions,
AccountingClassifieds.com, and FinancialPostions.com.. We have focused our
initial efforts on these sites, and are expanding our platform to ensure its
attractiveness to firms seeking specific audiences in these categories. We are
actively seeking partners for the following other sites: AdminClassifieds.com,
Advertising-PR.com, ArchitectClassifieds.com, ClassifiedsforWomen.com,
CollegeGradClassifieds.com, EducationClassifieds.com, LawListings.com,
MarketingClassifieds.com, MBAClassifieds.com, and MgmtClassifieds.com. We expect
to use a portion of the moneys raised in this offering to further enhance these
sites and to actively seek appropriate partners for the underutilized other
sites in our network. In addition, we expect to further expand our network to
cover additional sites that address new job functions, industry, and geographic
areas. With the continuing expansion of employer and employee traffic to our
site, CareerEngine anticipates becoming one of the Internet's most robust
players in online recruiting.
Our Distribution Partners
As of December 12, 2000 the number of aggregate postings on our network
sites were 51,200. While many of these postings are placed by corporations and
recruiters, a significant number of these postings are placed through more than
40 of our distribution partners consisting of major online and offline
recruitment advertising firms and major recruitment and placement agencies that
aggregate and republish job listings either on- or offline. In contracting with
us they seek to expand the reach of their clients' listings by posting them on
one or more of our career specific sites. These listings are obtained by us
without any associated sales expense, since their postings were secured solely
by the more than 6,000 sales persons engaged and paid for by our distribution
partners responsible for the initial listings. We have formed distribution
alliances with RecruitUSA Inc., a leading online career-search network; and over
30 of the nation's leading recruitment advertising firms. Other distribution
partners include online recruiters CareerBuilders, Inc. and Vault.Com and
offline recruiters Shaker Advertising, TMP Worldwide and Bernard Hodes.
Our Co-Branding Partners
Central to our plan for growing the business and increasing our resume
database is the forming of co-branded alliances with other career-based and
special interest destination sites of companies that are leaders in their
respective fields. We have entered into co-branding agreements with CrainsNY,
the Journal of Commerce, an EconomistPublication, a website serving the
engineering professional community and with SmartMoney.com, a popular website
offering personal financial news, tools and investment advice. We bear all the
up front costs in building or modifying these sites to reflect the look and feel
of our co-branding partners and when the sites are operational we share in all
revenues generated by the sites.
We also entered into a partnership with Vulcan Ventures' click2learn,
creating a co-branded distance learning portal. Through this portal, we generate
revenue by offering companies and individual professionals training materials
including books, videos, online and certification courses.
Revenues
Our revenues from our network career sites are derived from the
following sources:
<PAGE>
Job Posting Fees. These are fees for position ads on one or more of our
vertical career sites. We offer our posting clients the opportunity to post on
our websites in single units, in units of 10, 25 and 100 and for unlimited
amounts for annual and semi-annual periods. We charge the same fees for posting
by our distribution partners before deducting a negotiated commission due them.
Co-branding Fees. We share in all revenues generated by our co-branded
websites.
Fees From Advertisements On Our Websites. Additional revenues are generated
by banner and button advertising by our recruiting clients on our websites.
Corporate Sponsorships and Market Reports. We expect to be able to derive a
separate revenue stream for including names and URL's of companies in recruiting
directories and from underwriting articles featuring our clients and from
providing market research and reporting services.
Our CareerEngine Solutions Division
Building on the experience, technology and know how gleaned from the
successful implementation of our network career sites, in March 2000 we began
offering corporations and others the opportunity to have us construct, maintain
and host on an ASP basis career centers on their websites. With this service, we
can enhance the content of an online site by adding a career center that will
provide relevant career information to visitors and additional revenue to the
owners of the website. For offline companies looking to boost their employment
recruitment effort we can construct a career site that instantly introduces
online job seekers to these offline firms. In both cases we provide a turnkey
solution to their career site needs which we are able to do more effectively,
quickly and at considerably less cost then would be the case if they built and
maintained their own online career centers.
We also have consultants on staff that work with ASP clients in planning
and developing their career sites and in optimizing their use. They will
recommend the most appropriate of our models to meet their needs and suitable
"plug-ins" that incorporate the latest technology - such as job search agents
and confidential resume hosting. In addition to building, hosting and
maintaining career sites, we also offer training programs to assist our clients
to more effectively sell advertising inventory, facilitate site updates and
provide superior customer service.
We offer our services in the Basic, Mid Level and Enterprise models, which
vary in price and scope based on the clients' needs and desired level of
sophistication. The costs for such services consist of an initial set up fee
varying in amount from $2,500 to $50,000 and monthly maintenance charges varying
from $1,000 to $6,000 respectively.
Basic service includes the following features among others:
o proprietary search technology that helps job seekers better match
their qualifications to career opportunities with keyword-specific
searches;
o resume posting and searching services;
o daily backups of both job postings and resume data;
o tell-a-friend referral service to increase site traffic;
<PAGE>
o performance tracing service that provides site activity reports and
statistics;
o world-class traffic management capabilities that ensure adequate site
bandwidth;
o periodic software upgrades to provide access to emerging job search
technologies; and
o features that keep the site secure and visitors' data confidential.
The more advanced Enterprise Services will include the additional features:
o additional enhancements that give the website a more customized look
and feel and enhanced functionality;
o sophisticated technology for more extensive search functions;
o search agent capabilities that notify visitors and clients when a job
or person meeting a prescribed criteria is found;
o site searches powered by high-speed Verity(TM)search technology;
o customized reports; and
o ongoing seminars and training to help you maximize the value of your
site.
We also offer all ASP clients if their career sites have a sufficiently
large following, the option of joining our CareerEngine Network and benefit from
the sales and revenue of our distribution partners.
In addition to the regular features, each of our model plans offer the
following optional plug-ins for additional charges:
o Site Advisor section;
o Job Search Agent;
o Message Board;
o Universal registration for site and Career section;
o Resume faxing service;
o Personalization;
o Content package featuring news and feature articles;
o Credit Card processing for advertising sales;
o Reporting for advertisers;
o Resume Search Agent for recruiters;
<PAGE>
o One click posting of jobs to multiple sites; and
o Featured Employer advertising programs.
Our Competition
The market for online recruiting services is relatively new, intensely
competitive and rapidly evolving. There are minimal barriers to entry, and
current and new competitors can launch new websites and add content at
relatively low costs within relatively short time periods. We expect competition
to persist and intensify and the number of competitors to increase significantly
in the future. We compete against large online recruiting services that operate
"generalist sites" that offer single database job boards, such as Monster.com,
HotJobs.com, CareerBuilder.com, HeadHunter.net, as well as corporate Internet
sites, and not-for-profit websites operated by individuals, educational
institutions and governmental agencies. We also compete against some companies
including CareerBuilder that offers one or more specific career sites oriented
toward the community served by one or more of our vertical career sites and with
an increasing number of companies offering ASP services that construct, host and
maintain career centers for individual corporations, professional associations
and other organizations. In addition to this online competition, we compete
against a variety of companies that provide similar content through one or more
media, such as classified advertising, radio and television. Many of our current
and potential competitors, including those mentioned above, have significantly
greater financial, technical and marketing resources, longer operating
histories, better name recognition and more experience than we do. Many of our
competitors also have established relationships with employers, recruiters and
other job posters.
Intellectual Property
Our success and ability to compete depends significantly on our internally
developed proprietary technology and on our brand names and marks. We rely upon
trademark and other intellectual property laws, and on confidentiality and
non-disclosure agreements with our employees and third parties to establish and
protect our proprietary rights. We have applied for a federal registered
trademark for "CareerEngine." We cannot assure you that our trademark
applications will be approved or granted or, if granted, that will not be
successfully challenged by others or invalidated through administrative process
or litigation. If our registration of CareerEngine is not approved or granted
due to the prior issuance of trademarks to third parties or for other reasons,
there can be no assurance that we will be able to enter into arrangements on
commercially reasonable terms to allow us to continue to use that trademark. We
do not have and have not sought any patent protection on our proprietary
technology.
We cannot assure you that our confidentiality and non-disclosure agreements
will provide adequate protection for our proprietary rights if there is any
unauthorized use or disclosure of our proprietary information or if our
employees, consultants, advisors or other fail to maintain the confidentiality
of our proprietary information. We also cannot assure you that our proprietary
information will not otherwise become known, or be independently developed, by
competitors. See "Risk Factors - We may not be able to protect and enforce our
intellectual property rights, which could result in the loss of our rights, loss
of business or increased costs."
Employees
As of December14, 2000, we had 46 full-time employees, including sixteen in
the sales, the marketing and the business development divisions, six in the
administration and the operations divisions, and seventeen in the information
technology division. We are not subject to any collective bargaining agreements
and we believe that our relations with our employees are good.
<PAGE>
Facilities
We currently lease approximately 7,000 square feet of office space at 2
World Trade Center, Suite 2112, New York, New York for our executive offices.
The lease on this space is due to expire on February 28, 2006. The minimal
annual base rents payable for the period of March 1, 2000 through February 28,
2006 are as follows:
For Years Annual Rent Per Year
------------------------------------- ------------------------------------------
2000 through 2004 $139,100
2005 and 2006 $162,200
Our Discontinued Operations
During the past five years, we concentrated in providing merchant and
investment banking services, primarily related to real estate projects, and
financial consulting services. In August 2000, we discontinued these business
segments to concentrate on our efforts on our online recruiting business. Please
see Note 4 to our unaudited financial statements for the nine month period ended
September 30, 2000 for information related to our discontinued operations.
Legal Proceedings
In November 2000 one of our subsidiaries was served with a summons and
complaint in connection with an action commenced in October 2000, by the Housing
Authority of the County of Riverside, California against multiple defendants.
This action was filed in the Superior Court of California County of Riverside
and is currently pending.
The plaintiffs issued certain bonds, the interest on which was to be
treated as tax-exempt. The Internal Revenue Service later determined that the
interest on these bonds was not tax-exempt. The plaintiffs alleged in connection
with the issuance and underwriting of the bonds, various defendants negligently
and fraudulently misrepresented to plaintiffs that the interest on the bonds
would be tax-exempt. Plaintiffs are seeking damages as a result of such
misrepresentation in the amount of $1,100,000, which damages plaintiffs have
requested be trebled as permitted by statute. Plaintiffs are also seeking
punitive damages in an unspecified amount. Our subsidiary plans to vigorously
defend against the action.
Management
Executive Officers and Directors
Directors serve for a term of three years or until their successors are
elected and qualified.
Our executive officers and directors and their respective ages are as
follows:
<PAGE>
<TABLE>
<CAPTION>
Directors
---------------------------
Name Age Position Since Term Expires
<S> <C> <C> <C> <C>
George W. Benoit (1)(2)(4) 64 Chairman of the Board 1971 2001
Anthony S. Conigliaro 50 Vice President and Chief Financial N/A
Officer, Treasurer and Secretary
Thomas J. Ferrara 30 Director, President, and Chief 2000 2001
Executive Officer, CareerEngine,
Inc.
Sarah Choi 29 Chief Operating Officer, N/A
CareerEngine, Inc.
John S. Diefendorf 30 Chief Information Officer, N/A
CareerEngine, Inc.
Kevin J. Benoit (1)(2)()(5) 38 Director 1999 2003
Charles W. Currie 2)(3)(4)(5)(6) 58 Director 1986 2003
Joseph G. Anastasi (3)(5)(6) 64 Director 1986 2002
David W. Dube (3)(4)(5)(6) 45 Director 1996 2001
James J. Murtha (3)(5)(6) 52 Director 1986 2002
Edward H. Martino 51 Director 2000 2001
</TABLE>
----------------------
(1) George W. Benoit is the father of Kevin J. Benoit.
(2) Serves on the Executive Committee (described below).
(3) Serves on the Audit Committee (described below).
(4) Serves on the Compensation Committee (described below).
(5) Serves on the Nominating Committee (described below).
(6) Serves on the Incentive Compensation Committee (described below).
GEORGE W. BENOIT, has been the President, Chief Executive Officer and a
director of CareerEngine Network, Inc. since 1971. In addition, Mr. Benoit has
been Chairman of the Board since 1972.
ANTHONY S. CONIGLIARO, has been the Vice President and Chief Financial
Officer of CareerEngine Network, Inc. since March 1999. From 1996 to 1999, Mr.
Conigliaro, was Executive Vice President and Chief Financial/Operating Officer
of InterJet Online Services, Inc., New York, a company that developed an
aviation "portal" website. He was also Vice President and Chief Operating
Officer of Realty and Equipment Corporation, New York, a private investment firm
with a large commercial real estate portfolio. Mr. Conigliaro, a certified
public accountant, began his career with Coopers & Lybrand, New York.
THOMAS J. FERRARA, has been employed by our subsidiary, CareerEngine, Inc.
since June 1998. He has been a Director of CareerEngine Network, Inc. since
October 2000. Mr. Ferrara is a founder of our online recruiting business. He is
the President and Chief Executive Officer of our subsidiary, CareerEngine, Inc.
As the President and Chief Executive Officer, he is responsible for business
development, strategic partnerships and the overall growth of the subsidiary.
Prior to joining CareerEngine, Mr. Ferrara served as Executive Vice President at
Remote Lojix, New York, an information technology company.
<PAGE>
SARAH CHOI, joined us in October 2000 after serving as co-founder and
Senior Vice President of Operations at Remote Lojix, a national information
technology company. Ms. Choi brings to CareerEngine her experience in
establishing corporate infrastructure, project management and acquisitions. She
is responsible for overall operations of the organization which includes Project
Management and Administration.
JOHN S. DIEFENDORF, joined our subsidiary, CareerEngine, Inc., in June 2000
after serving as Director of Information Technology at John Hancock Financial
Services in Boston. He brings to CareerEngine extensive senior-level technology
experience in software development, training and management for Fortune 100
firms. He has previously worked at Microsoft Corporation in New York. He also
has served as Director of Engineering at Systron Consulting Group, Inc, in New
York where he supervised technology development for leading corporations
including Merrill Lynch, Citibank, Chase Manhattan Bank and KPMG.
KEVIN J. BENOIT, has been a director of CareerEngine Network, Inc. since
August 1999. Mr. Benoit is the sole principal of Stratford Capital Management,
Inc., an investment management firm, and an employee of CareerEngine. Mr. Benoit
is a registered C.T.A. and C.P.O. and specializes in arbitrage and hedging
strategies. His business experience includes employment with Prudential
Securities, Inc. (1987- 1995) as Vice President of Arbitrage and Hedging in
their Municipal bond Department, and Bear Stearns, Inc. (1984-1987) where he
served in a similar capacity. Mr. Benoit's father is George Benoit our President
and CEO.
CHARLES W. CURRIE, has been a director of CareerEngine Network, Inc. since
1986. Mr. Currie has been a partner with Asset Management Services LLC, a
company that provides marketing services to investment managers, since August
1996. From June 1993 to July 1996, he was a Senior Vice President with Pryor,
McClendon, Counts & Co., Inc., investment bankers.
JOSEPH G. ANASTASI, has been a director of CareerEngine Network, Inc. since
September 1986. Since 1960, Mr. Anastasi has been owner and president of
Montgomery Realty Company, Inc., a firm specializing in commercial sales,
development consulting and property management. He was president of The Anastasi
Stephens Group, Inc. which was engaged in real estate development and was the
general partner of Muirkirk Manor Associates Limited Partnership. Muirkirk Manor
filed bankruptcy in December 1994 and it was discharged in December 1995. The
Anastasi Stephens Group, Inc. has been inactive since that time.
DAVID W. DUBE, has been a director of CareerEngine Network, Inc. since June
1996. Mr. Dube is a private investor with active interests in various real
estate, financial services and giftware companies. He was Senior Vice President
and Chief Financial Officer of FAB Capital Corp., a merchant banking and
securities investment firm, and served in various other capacities through
October 1999. From 1996 to 1997, Mr. Dube was President and Chief Executive
Officer of Optimax Industries, Inc., a publicly-traded company with operating
interests in the horticultural, decorative giftware and truck parts accessories
industries. From February 1991 to June 1996, he was the principal of Dube &
Company, a financial consulting firm. Mr. Dube serves on the Boards of Directors
of publicly-traded Kings Road Entertainment, Inc., New World Wine
Communications, Ltd., and SafeScience, Inc. and several privately-held
enterprises.
JAMES J. MURTHA, has been a director of CareerEngine Network, Inc. since
December 1986. Since June 1997, Mr. Murtha has been self-employed as a real
estate investor. From August 1994 to June 1997, Mr. Murtha held the position of
President of Kenwood Capital, L.P., a limited partnership, that specializes in
real estate investments.
<PAGE>
EDWARD H. MARTINO has been a Director of CareerEngine Network, Inc. since
October 2000. During his seventeen years at IBM, Mr. Martino has held a variety
of management positions in sales, marketing and human resources. He is an active
New York area software industry leader. Working with the private sector and
government, he has led initiatives such as development of the first high tech
building in New York City serving new media companies. Mr. Martino serves on
several boards including the New York software industry association, where he is
the vice chairman, the emerging industry alliance, where he is one of six
statewide industry directors, and the Bronx Museum of the Arts, where he is
treasurer and vice chairman.
Each non-employee director receives an annual fee of $12,000 plus expenses
incurred for attending meetings of the Board, Annual Stockholders Meetings and
for each meeting of a committee of the Board not held in conjunction with a
Board meeting.
Our Board of Directors have established the following committees:
o an Executive Committee;
o an Audit Committee;
o a Compensation Committee;
o a Nominating Committee; and
o an Incentive Compensation Committee.
The Executive Committee exercises the powers of the Board during the
intervals between meetings of the Board. The Audit Committee discusses audit and
financial reporting matters with both management and our independent public
accountants to determine the adequacy of internal controls and other financial
reporting matters. The Compensation Committee reviews and recommends to the
Board the compensation and benefits of all the officers and employees of
CareerEngine. The Nominating Committee nominates candidates for election to the
Board. The Incentive Compensation Committee reviews and recommends to the Board
the incentive compensation of all the officers and employees of CareerEngine and
administers the issuance of stock options to officers, employees, directors and
consultants.
Executive Compensation.
The following table sets forth all compensation awarded to, earned by or
paid to, our Chief Executive Officer and our other two most highly compensated
executive officers whose annual compensation exceeded $100,000 in 1999 for all
services rendered in all capacities to us during 1999, 1998 and 1997.
<PAGE>
Summary Compensation Table
Long Term
Annual Compensation Compensation
--------------------- All Other
Name and Salary Bonus Compensation(1)
Principal Position Year ($) ($) ($)
------------------ ---- -------- -------- ---------------
George W. Benoit 1999 $201,571 $36,067
President, Chief 1998 201,414 50,000 36,344
Executive Officer and 1997 201,830 200,000 36,576
Chairman
Kevin J. Benoit 1999 143,750 145,000
Director and Vice
President of Randolph,
Hudson & Co., Inc., a
wholly-owned subsidiary
of CareerEngine
Thomas J. Ferrara 1999 132,259 50,000
Director, President and 1998 62,307
Chief Executive Officer
of CareerEngine, Inc., a
wholly-owned subsidiary
of CareerEngine
-----------------
(1) Represents CareerEngine's share of insurance premium on Split Dollar Life
Insurance Agreement.
<PAGE>
Stock Options
The following tables show information with respect to incentive and
non-qualified stock options granted in 1999 to the executives and the aggregate
value at December 1, 2000 of those options. The per share exercise price of all
options is equal to the fair market value of a share of common stock on the date
of grant. No options granted to any named executives have been exercised.
Option Grants in 1999
Individual Grants(1)
Name and Number of Percent of Total Exercise
Principal Position Shares of Options Granted to Price Expiration Date
(1) Common Stock Employees in 1999 ($/Sh)
Underlying
Option #
George W. Benoit 150,000 33% 2.50 April 7, 2004
Kevin J. Benoit 100,000 22% 2.25 April 7, 2009
Thomas J. Ferrara 100,000 22% 2.25 April 7, 2009
Aggregated 1999 Year End Options Values
Number of Shares of Value of Unexercised Exercisable/
Common Stock In-The-Money Options Unexercisable
Underlying at December 1, 2000
Unexercised Options
at 12/1/2000
George W. Benoit 150,000 -0- 37,500/112,500
Kevin J. Benoit 100,000 -0- 20,000/80,000
Thomas J. Ferrara 100,000 -0- 20,000/80,000
--------------------------------------------------------------------------------
(1) Granted under the 1990 Incentive Stock Option Plan.
<PAGE>
Stock Option Plans
1990 Incentive Compensation Plan.
The 1990 Incentive Compensation Plan, as amended, was adopted by our board
and stockholders on June 7, 1990. We reserved 750,000 shares of our common stock
for issuance upon exercise of stock options, stock appreciation rights, or
restricted stock awards granted under the incentive compensation plan. The
incentive compensation plan is intended to assist us in securing the long-term
success and growth of CareerEngine by allowing our officers and other key
employees to share in the ownership and growth of Career Engine in return for
their continued loyalty and service.
Our Incentive Compensation Committee administers the incentive compensation
plan in accordance to its provisions. The Committee determines 1) who receives
options, appreciation rights or restricted stock, 2) the number of shares of
common stock that may be purchased under the options, the time, manner of
exercise and exercise price of options, and 3) the number of shares of
restricted stock. Under the incentive compensation plan, we may grant incentive
and non-qualified stock options, stock appreciation rights, or restricted stock
awards to our officers and employees.
The term of options and stock appreciation rights granted under the
incentive compensation plan may not exceed ten years or five years for an
incentive stock option granted to an optionee owning more than 10% of our voting
stock. The exercise price for incentive stock options shall be equal to or
greater than 100% of the fair market value of the shares of our common stock on
the date of grant; provided that incentive stock options granted to a 10% holder
of our voting stock shall be exercisable at a price equal to or greater than
110% of the fair market value of our common stock on the date of the grant. The
exercise price for non-qualified options will be set by the Committee, in its
discretion, but in no event shall the exercise price be less than the fair
market value of shares of our common stock on the date of grant. The stock
appreciation rights may only be granted in conjunction with the Non-Qualified
Stock Options. The exercise of the stock appreciation rights will
proportionately reduce the number of shares of common stock issuable upon
exercise of the Non-Qualified Stock Options. Shares of our common stock received
upon exercise of options granted, or grants of restricted stock under the
incentive compensation plan will be subject to restrictions on sale or transfer.
The incentive compensation plan was terminated on June 3, 1999.
As of the date of this prospectus, we have granted incentive stock options
to purchase 610,000 shares of our common stock under the incentive compensation
plan. Of these options 1. 50,000 have expired, and 2. options to purchase
350,000 shares have been granted to our officers and directors.
The 1999 Stock Option Plan.
In April 1999, the board of directors and stockholders adopted our 1999
Stock Option Plan. We have reserved 350,000 shares of common stock for issuance
upon exercise of options granted from time to time under the option plan. The
stock option plan is intended to assist us in attracting, securing and retaining
key employees, directors and consultants by allowing them to participate in our
ownership and growth through the grant of incentive and non-qualified options.
Our Incentive Compensation Committee administers the stock option plan in
accordance with its provisions. The Committee will determine who shall receive
options, the number of shares of our common stock that may be purchased under
the options, the time, manner of exercise and exercise price of options.
<PAGE>
Under the stock option plan, we may grant incentive stock options only to
our officers and employees, and non-qualified options to our officers,
employees, directors, consultants, agents and independent contractors. The term
of options granted under the stock option plan may not exceed ten years or five
years for an incentive stock option granted to an optionee owning more than 10%
of our voting stock. The exercise price for incentive stock options shall be
equal to or greater than 100% of the fair market value of the shares of our
common stock on the date of grant; provided that incentive stock options granted
to a 10% holder of our voting stock shall be exercisable at a price equal to or
greater than 110% of the fair market value of our common stock on the date of
the grant. The exercise price for non-qualified options will be set by the
committee, in its discretion, but in no event shall the exercise price be less
than the fair market value of shares of common stock on the date of grant.
Shares of common stock received upon exercise of options granted under the plan
will be subject to restrictions on sale or transfer.
As of the date of this prospectus, we have granted stock options to
purchase 40,000 shares of our common stock under this option plan, of which all
have been granted to directors of our Company.
401(k) Cash or Deferred Compensation Plan.
We have established a tax-qualified 401(k) cash or deferred compensation
plan that covers all of our employees who have completed one year of service and
attained age 21. The 401(k) plan is intended to qualify under Section 401 of the
Internal Revenue Code so that contributions by qualified participants and by us,
and the income earned on such contributions, are not taxable until withdrawn.
Our contributions to the 401(k) plan are tax deductible.
The 401(k) plan permits our participating employees to contribute up to 15%
of his or her pre-tax gross salary, within the limitations imposed by the
Internal Revenue Code, to the plan. We may, in our discretion on an annual
basis, make contributions, under the 401(k) plan. The employees are fully vested
immediately in the contributions we make.
Split Dollar Life Insurance Agreement
Our Chairman, George W. Benoit, is presently the beneficial owner and
holder of 1,801,620 shares of our common stock. He has advised us that, on his
death, his estate may be required to publicly sell all or substantially all of
such shares to satisfy estate tax obligations. The public sale of all such
shares might destabilize the market for our publicly traded stock. Accordingly,
potentially avoid the necessity of his estate selling his shares, as of January
20, 1995, we entered into an agreement, commonly known as a split dollar life
insurance agreement, with a trust created by Mr. Benoit. Under the terms of the
agreement, we will pay the premiums for a $1,000,000 life insurance policy on
the life of Mr. Benoit. The Trust has granted an interest in the policy to us to
the extent of the sum of all premium payments made by us. These arrangements are
designed so that if the assumptions made as to mortality experience, policy
dividends and other factors are realized upon Mr. Benoit's death or the
surrender of the policy, we will recover all of our insurance premium payments.
The portion of the premium paid by us in 1999 pursuant to this arrangement was
$36,067.
Limitation on Liability and Indemnification Matters
As authorized by the Delaware General Corporation Law, our certificate of
incorporation provides that none of our directors shall be personally liable to
us or our stockholders for monetary damages for breach of fiduciary duty as a
director, except for:
<PAGE>
o Any breach of the director's duty of loyalty to us or our
stockholders;
o Acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
o Unlawful payments of dividends or unlawful stock redemptions or
repurchases; or
o Any transaction from which the director derived an improper personal
benefit.
This provision limits our rights and the rights of our stockholders to
recover monetary damages against a director for breach of the fiduciary duty of
care except in the situations described above. This provision does not limit our
rights or the rights of any stockholder to seek injunctive relief or rescission
if a director breaches his duty of care.
Our certificate of incorporation further provides for the indemnification
of any and all persons who serve as our director, officer, employee or agent, to
the fullest extent permitted under the Delaware General Corporation Law.
Under our bylaws, we must indemnify any director or officer who was, is or
is threatened to be made, a party to any legal proceeding, whether civil,
criminal, administrative or investigative (including any action or suit by or in
our right) because such person is or was a director or officer, against
liability incurred in such proceeding. Unless a court orders that we indemnify
the director or officer, we do not indemnify them for any liability incurred in
a proceeding in which the director or officer is adjudged to be liable to us for
negligence or misconduct in the performance of his duty to us.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to our directors, officers and controlling persons pursuant to
the foregoing provisions, or otherwise, we have been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act, and is, therefore, unenforceable.
<PAGE>
Principal Stockholders
The following table sets forth, as of December 14, 2000, the shares of our
common stock owned beneficially
o by our present directors and executive officers individually,
o by all of our present directors and executive officers as a group and
o by persons known to us to own more than five (5%) percent of the
outstanding shares of Common Stock:
<TABLE>
<CAPTION>
CURRENT
----------------------------------------------------------
% of Aggregate voting
Power and Outstanding
Name of Beneficial Owner(1) Position Beneficially Owned(2) Equity Owned(3)
------------------------------------ ----------------------------- ------------------------------ ---------------------------
<S> <C> <C> <C>
George W. Benoit President
Chairman and Chief
Executive Officer 1,801,620 (4)(8) 32.28
Kevin J. Benoit Director 438,000 (5)(6)(8) 7.87
Charles W. Currie Director 276,780 (7)(11) 4.99
Joseph G. Anastasi Director 7,200 (11) *
David W. Dube Director 9,000 (11) *
James J. Murtha Director 5,000 (11) *
Edward H. Martino Director 300 *
Anthony S. Conigliaro Vice President and
Chief Financial Officer -0- 0
Thomas J. Ferrara Director, President and
Chief Executive Officer
of CareerEngine, Inc. 46,500 (5)(9) *
Sarah Choi Chief Operating Officer
of CareerEngine, Inc. -0- 0
John F. Diefendorf Chief Information Officer
of CareerEngine, Inc. -0- 0
Barry W. Blank Principal Stockholder 878,100 (10) 14.85
All Directors and Executive
Officers as a group (11 persons) 2,584,400 44.97
-------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
* Owns less than one (1%) percent.
(1) The address of all the beneficial owners is: CareerEngine Network Inc., 2
World Trade Center, New York, New York 10048; except that the address for
Barry W. Blank is P.O. Box 32056, Phoenix, Arizona 85064.
(2) A person is deemed to be a beneficial owner of securities that can be
acquired by such person within 60 days from the filing of this Registration
Statement upon the exercise of options and warrants or conversion of
convertible securities. Each beneficial owner's percentage ownership is
determined by assuming that options, warrants and convertible securities
that are held by such person (but not held by any other person) and that
are exercisable or convertible within 60 days from the filing of this
Registration Statement have been exercise or converted. Except as otherwise
indicated, and subject to applicable community property and similar laws,
each of the persons named has sole voting and investment power with respect
to the shares shown as beneficially owned.
(3) All percentages of beneficial ownership are calculated based the number of
shares outstanding as of December 14, 2000. On such date we had 5,444,006
shares of common stock issued and outstanding.
(4) Includes the following: (1) options to purchase 37,500 shares of common
stock; and (2) 90,700 shares of common stock held in George W. Benoit's
401K Plan.
(5) Includes options to purchase 20,000 shares of common stock.
(6) Includes the following: (1) 21,000 shares of common stock held in the Kevin
J. Benoit 1998 Family Trust, of which Kevin J. Benoit is the Trustee; and
(2) 35,300 shares of common stock held in Kevin J. Benoit's Individual
Retirement Account.
(7) Includes the following: (1) 200 shares of common stock owned by Mr.
Currie's wife; and (2) 9,900 shares of common stock held in Charles W.
Currie's Individual Retirement Account.
(8) Includes 100,000 shares of common stock that can be acquired on the
conversion of certain debentures and related warrants.
(9) Includes 25,000 shares of common stock that can be acquired on the
conversion of certain debentures and related warrants
(10) Includes 300,000 shares of common stock that can be acquired on the
conversion of debentures and related warrants purchased in the private
financing. Also, includes 168,000 shares that can be acquired on the
conversion of debentures and related warrants issuable upon exercise of
placement agent warrants issued to the placement agent in the private
financing and promised to Mr. Blank. See "Private Financing."
(11) Includes options to purchase 5,000 shares of common stock.
<PAGE>
Certain Transactions
There have been no material transactions during the past two fiscal years
or from the end of the last fiscal year to the date of this prospectus to which
we were a party, in which any of our executive officers, directors or principal
securityholders has a direct or indirect interest.
Description of Securities
UNITS
We are offering 2,500 units. Each unit consists of one debenture, 250 class
A warrants and 250 class B warrants. These securities are described below.
Another 52.8 units have been registered for public sale and are being sold
by selling securityholders pursuant to another prospectus. See "Private
Financing."
Unitholders may trade the debentures and warrants separately starting six
months from the effective date of this offering unless we agree with the
underwriter that trading may begin sooner. Prior to that date, the debentures
and warrants will trade only as a unit.
THE DEBENTURES AND THE INDENTURE
General
The debentures will be issued under an indenture to be dated as of ________
__, 2001, between CareerEngine Network, Inc. and ____ as trustee. The terms of
the debentures include those stated in the indenture. The following summary of
material provisions of the indenture and the debentures does not restate those
documents in their entirety. A copy of the indenture, which includes the
debenture, is filed as an exhibit to the registration statement of which this
prospectus is a part. To obtain a copy of the indenture see "Available
Information."
Principal Amount of Debenture
The principal amount of each debenture will equal $1,000.
Quarterly Payment of Interest and Payment of Principal at Maturity
We will pay interest on the debentures from the date of their delivery at
the rate of 12% per annum. We will make interest payments quarterly on January
1, April 1, July 1 and October 1 of each year, commencing July 1, 2001.
We will repay the principal amount of the debentures on March 31, 2010,
unless the debentures are redeemed prior to their maturity.
We will make all payments of principal and interest on the debentures at
the offices of the trustee in ________ located at _____ . However, we may pay
interest by check mailed to the holder at the holder's address listed with the
trustee in the debenture register.
<PAGE>
Repayment of Debentures Before Maturity
Redemption by Holder's Estate. Upon the death of a debenture holder, the
holder's estate may require us to repay a maximum of $50,000 in principal amount
of and accrued interest on the debentures owned by the deceased holder. This
right to require repayment is known as a right of redemption. This right of
redemption is limited to the estate of the initial holder. If a holder transfers
the debentures, the subsequent holder of the debentures is not entitled to this
right of redemption. If spouses are joint record owners of debentures, the
election to redeem will apply when either record owner dies. In other cases of
debentures jointly held, the election will not apply.
Redemption by Us. We can redeem all or part of the debentures at 100% of their
principal amount, plus accrued interest to the redemption date if the closing
price of our common stock equals or exceeds 2.154 times the then conversion
price for a period of 20 consecutive trading days ending three trading days
prior to the notice of redemption.
If we decide to redeem the debentures, we are required to provide the
holder with written notice of such intention at least 30 days before we redeem
the debentures.
If we redeem less than all of the outstanding debentures, the trustee will
determine which debentures will be redeemed either by pro rating or choosing by
lot.
Ranking of Debentures
The debentures will rank below our senior debt, which we may incur in the
future. This means that we will be required to make payments of principal,
premiums, if any, and interest on our senior debt before we make such payments
on the debentures. Senior debt includes indebtedness for money that we borrowed
that is outstanding on the day that we execute the indenture and money that we
borrow after we execute the indenture, where we borrow the funds from banks or
other traditional long-term institutional lenders such as insurance companies
and pension funds. Such debts will rank below the debentures only if the note or
other document that creates the debt provides that such debt is not senior in
right of payment to the debentures. At December 15, 2000, we had no senior debt.
We expect that from time to time we will borrow additional funds that rank
senior to the debentures. We are not limited in the amount of additional
indebtedness that we can borrow. The more that we borrow, the greater our debt
service. If we are unable to meet our debt service and we are required to pay or
distribute our assets to creditors due to our dissolution, winding up of
affairs, liquidation, bankruptcy or other similar event, we will be required to
make all payments due upon all senior debt before we can make payments to the
debenture holders or the trustee.
Modification of the Indenture
With the consent of the holders of not less than a two-thirds in principal
amount of outstanding debentures, CareerEngine Network and the trustee may
modify the indenture by :
o adding, changing or eliminating any provisions of the indenture; or
o modifying the rights of the debenture holders under the indenture.
However, no modification may be made without the consent of the debenture
holders affected to:
(a) reduce the amount of debentures whose holders must consent to an
amendment;
<PAGE>
(b) reduce the rate of or change the time for payment of interest on any
debenture;
(c) reduce the principal of or change the fixed maturity of any debenture;
(d) make any debenture payable in money other than that stated in the
debenture;
(e) make any change in the provisions related to waiving past defaults,
receiving payments under the debentures or bringing suit to enforce such
payments;
(f) alter the manner in which the indenture may be amended in such a way
that it adversely affects the rights of holders; or
(g) alter the provisions of the indenture so as to adversely affect the
junior ranking of the debentures to senior debt.
CareerEngine Network and the trustee do not require the consent of any
holders to amend the indenture to:
o fix any ambiguity, omission, defect or inconsistency;
o provide for the assumption by a successor corporation of our
obligations under the indenture;
o make any other change that does not adversely affect the rights of any
holder of the debentures; or
We are required to mail to all holders a notice briefly describing any
amendment to the indenture promptly after the amendment is effected. However,
our failure to give such notice to all holders or any defect in such notice will
not impair the validity of the amendment.
Events of Default, Notice and Waiver
Each of the following constitutes an event of default under the indenture:
o If we fail to pay principal or interest when due and we do not cure
such failure for a period of 15 days after holders have given us
notice of such failure;
o If we fail to comply with any other material obligation in the
indenture and such failure continues for at least 30 days after we
have received written notice of such failure from the trustee or the
holders of at least a majority in principal amount of the outstanding
debentures;
o If we become subject to certain events of bankruptcy, insolvency or
reorganization.
If the trustee knows that an event of default has occurred and has not been
rectified, it is required to mail to each debenture holder a notice of the event
of default within 90 days after it occurs. However, except for an event of
default in the payment of principal or accrued interest on any debenture, the
trustee need not send such notice if and for as long as a committee of its trust
officers determines that withholding notice is not against the interest of the
debenture holders.
<PAGE>
We are required to deliver to the trustee, within 120 days after the end of
each fiscal year, a certificate indicating whether we know of any event of
default that has occurred during the previous year.
If an event of default occurs and has not been rectified, either the
trustee or the holders of a majority of the principal amount of the outstanding
debentures, by giving us notice, may declare the principal and any accrued
interest on the principal of all of the debentures to be due and payable.
Holders of at least a majority of the principal amount of all outstanding
debentures may:
o waive any default other than a default in payment of principal or
interest or a default under the conversion provisions; and
o direct the time, method and place of conducting any proceeding for any
remedy available to the trustee, or exercising any power of trust
conferred on the trustee.
A holder may bring an action to collect any interest or principal under the
debenture that has come due but not been paid. A holder's right to institute a
proceeding with respect to any other matter under the indenture is limited. A
debenture holder may institute such a proceeding only if:
o he notifies the trustee in writing of a continuing event of default;
o holders of at least a majority in principal amount of the outstanding
debentures deliver a written request to the trustee to pursue a
remedy;
o holders provide the trustee with indemnification that the trustee
deems satisfactory against any loss, liability or expense;
o the trustee fails to comply with the request to institute proceedings
within 60 days of receiving the request; and
o the trustee does not receive written instructions that are
inconsistent with the request from the holders of at least a majority
in principal amount of the outstanding debentures during the 60 day
period.
Covenants of CareerEngine Network
In the indenture, we agree to abide by certain covenants while the
debentures are outstanding. These covenants include our obligation to:
o pay all interest and principal when due;
o deliver to the trustee copies of all of our filings with the
Securities and Exchange Commission;
o certify in writing to the trustee within 120 days after the end of
each fiscal year whether we were in default under the indenture and,
if so, the status of such default and our efforts to correct it;
o not declare or pay any cash dividend on outstanding stock or purchase
or otherwise acquire any of our stock during any period in which an
event of default exists;
<PAGE>
o refrain from entering into certain transactions with our affiliates,
unless our board of directors determines in good faith that the terms
of such transactions are at least as good as we could have obtained
had we entered into such transactions with non-affiliated persons; and
o comply with certain general covenants concerning the operation of our
business.
The Trustee
__________ will be the trustee under the indenture. The trustee is not the
transfer agent and registrar for our common stock. The trustee will be permitted
to engage in other transactions; provided, however, if it acquires any
conflicting interest it must either eliminate such conflict within 90 days,
apply to the Securities and Exchange Commission for permission to continue as
trustee or resign.
No Personal Liability Of Directors, Officers, Employees And Shareholders
None of our directors, officers, employees or shareholders, acting in such
capacities, shall have any liability for any of our obligations under the
indenture or the debenture. Each debenture holder waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the debentures. Such waiver might not be effective to waive liabilities under
the Federal securities laws because it is the view of the Securities and
Exchange Commission that such a waiver is against public policy.
Governing Law
The indenture provides that it and the debentures will be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to applicable principles of conflicts of law to the extent that the
application of the law of another jurisdiction would be required thereby.
CAPITAL STOCK
Our authorized capital stock consists of 20,000,000 shares of common stock,
$.10 par value per share, and 1,000,000 shares of preferred stock.
Common Stock
Under our certificate of incorporation, our Board is authorized, subject to
limitations prescribed by law, without further stockholder approval, from time
to time to issue up to an aggregate of 20,000,000 shares of common stock.
Holders of our common stock are entitled to
o one vote per share,
o share in all dividends that our Board, in its discretion, declares
from legally available funds, and
o participate pro rata in all assets that remain after payment of
liabilities, in the event of our liquidation, dissolution or winding
up.
Holders of our common stock have no conversion, preemptive or other
subscription rights, and there are no redemption provisions applicable to common
stock.
<PAGE>
Preferred Stock
Our Board has the authority, without further shareholder approval, to issue
up to 1,000,000 shares of preferred stock in one or more series. Each series may
have different rights, preferences and designations and qualifications,
limitations and restrictions.
No preferred stock has been issued as of the date of this prospectus.
Warrants
General.
We will issue 500,000 redeemable class A warrants and 500,000 redeemable
class B warrants as part of the Units sold in this offering.
Exercise Period and Initial Exercise Price
The class A warrants are exercisable from their date of issue through March
31, 2003 at an exercise price of $4.00 per share.
The class B warrants are exercisable from their date of issue through March
31, 2005 at an exercise price of $6.00 per share.
A warrant holder will not be deemed to be a holder of the underlying common
stock for any purpose until the Warrant has been exercised.
The following provisions are applicable to both the class A and class B
warrants:
Redemption. We have the right to redeem the warrants at a redemption price
of $.001 per warrant after providing 30 days' prior written notice to the
warrant holders, if the closing price of the common stock equals or exceeds 150%
of the then exercise price of the warrants for 20 consecutive trading days
ending three days before the notice of redemption. We will send the written
notice of redemption by first class mail to warrant holders at their last known
addresses appearing on the registration records maintained by the transfer agent
for our warrants. No other form of notice or publication or otherwise will be
required. If we call the warrants for redemption, they will be exercisable until
the close of business on the business day next preceding the specified
redemption date or the right to exercise will lapse.
Exercise. A warrant holder may exercise the warrants only if an appropriate
registration statement is then in effect with the Securities and Exchange
Commission and if the shares of common stock underlying the warrants are
qualified for sale under the securities laws of the state in which the holder
resides.
Our Warrants may be exercised by delivering to our transfer agent the
applicable warrant certificate on or prior to the expiration date or the
redemption date, as applicable, with the form on the reverse side of the
certificate executed as indicated, accompanied by payment of the full exercise
price for the number of warrants being exercised. Fractional shares of common
stock will not be issued upon exercise of the warrants.
<PAGE>
Anti-dilution Adjustments. The warrants contain provisions that protect
against dilution by adjustment of the exercise price and the number of shares
issuable upon exercise in some events. These events include, but are not limited
to:
o stock dividends payable in stock;
o stock splits;
o certain below market issuances of stock;
o reclassifications;
o mergers; or
o a sale of substantially all of our assets.
Anti-Takeover Effects of Delaware Law and Our Certificate of Incorporation and
By-Laws
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law. That section provides, with exceptions, that a Delaware
corporation may not engage in any of a broad range of business combinations with
a person or his affiliate or associate who is an owner of 15% or more of the
outstanding voting stock of the corporation for a period of three years from the
date that this person became an interested stockholder.
Transfer Agent and Warrant Agent
The transfer agent for our common stock and warrants is Registrar and
Transfer Company, 10 Commerce Drive, Cranford, New Jersey 07016.
<PAGE>
Underwriting
The underwriters named below have severally agreed, subject to the terms
and conditions contained in an underwriting agreement with us, to purchase 2,500
units from us at the price set forth on the cover page of this prospectus, in
accordance with the following table:
Underwriter Number of Units
----------- ---------------
Murphy & Durieu ................................
Total ...................................... 2,500
Nature of Underwriting Commitment. The underwriting agreement provides that
the underwriters are committed to purchase all the Units offered by this
prospectus if any units are purchased. This commitment does not apply to 375
Units subject to the over-allotment option granted by us to the underwriters to
purchase additional Units in this offering.
Conduct of the Offering. We have been advised by Murphy & Durieu, that the
underwriters propose to offer the Units to be sold in this offering directly to
the public at the public offering price set forth on the cover page of this
prospectus, and to certain securities dealers at that price less a concession of
not more than $100.00 per Unit. The underwriters may allow, and those dealers
may re-allow, a concession not in excess of $50.00 per Unit to certain other
dealers. After the Units are released for sale to the public, the offering price
and other selling terms may be changed from time to time by the underwriters. No
change in those terms will change the amount of proceeds to be received by us as
set forth on the cover page of this prospectus.
The underwriters have informed us that they do not expect to confirm sales
of shares offered by this prospectus on a discretionary basis.
Overallotment Option. We have granted the underwriters an option, expiring
45 days after the date of this prospectus, to purchase up to 375 additional
Units from us on the same terms as set forth in this prospectus with respect to
the 2,500 Units offered hereby. The underwriters may exercise this option, in
whole or in part, only to cover over-allotments, if any, in the sale of the
Units offered by this prospectus.
Offering Discounts and Expenses. The following table shows the per unit and
total underwriting discounts to be paid by us to the underwriters. These amounts
are shown assuming no exercise and full exercise, respectively, of the
underwriters' over-allotment option described above:
<PAGE>
<TABLE>
<CAPTION>
Total without Total with
Over-Allotment Over-Allotment
Per Unit Option Option
------------------- --------------------- ---------------------
<S> <C> <C> <C>
Total underwriting discount to be paid by us....... $100 $250,000 $287,500
</TABLE>
The expenses of this offering, not including the underwriting discounts,
are estimated to be approximately $250,000 and will be paid by us. Expenses of
this offering, exclusive of the underwriting discounts, include the 3%
nonaccountable expense allowance payable to Murphy & Durieu, the Securities and
Exchange Commission filing fee, the NASD filing fee, AMEX listing fees, printing
expenses, legal and accounting fees, transfer agent and registrar fees and other
miscellaneous fees and expenses.
We have agreed that if this offering is successfully completed we will pay
to Murphy & Durieu, a non-accountable expense allowance equal to three percent
of the initial public offering price of the sale of the Units in this offering
(including sales on exercise of the underwriters' over-allotment option). The
underwriters have no right to designate or nominate a member of the board of
directors of CareerEngine.
Underwriter's Warrant. On completion of this offering, we will issue the
Underwriter's Warrant to Murphy & Durieu, entitling it to purchase from us up to
ten percent of the number of Units sold in this offering, exclusive of the Units
available pursuant to the over-allotment option, for $1,200 per Unit. The
warrant is exercisable during the four-year period beginning one year from the
date of issuance. The warrant, and the securities underlying the warrant, are
not transferable for one year following the effective date of the registration,
except to an individual who is an officer or partner of an underwriter, by will
or by the laws of descent and distribution, and are not redeemable.
The holder of the Underwriter's Warrant will have, in that capacity, no
voting, dividend or other shareholder rights. Any profit realized by the
underwriters on the sale of the Units issuable upon exercise of the
Underwriter's Warrant may be deemed to be additional underwriting compensation.
The securities underlying the Underwriter's Warrant are being registered
pursuant to the registration statement of which this prospectus is apart. During
the term of the Underwriter's Warrant, the holder thereof is given the
opportunity to profit from a rise in the market price of our securities. We may
find it more difficult to raise additional equity capital while the
Underwriter's Warrant is outstanding. At any time at which the Underwriter's
Warrant is likely to be exercise, we may be able to obtain additional equity
capital on more favorable terms.
Indemnification. We have agreed to indemnify the underwriters against
certain liabilities, including liabilities under the Securities act, or to
contribute to payments that the underwriters may be required to make in respect
thereof.
Stabilization and Other Transactions. The rules of the Securities and
Exchange Commission generally prohibit the underwriters from trading in our
Units on the open market during this offering. However, the underwriters are
allowed to engage in some open market transactions and other activities during
this offering that may cause the market price of our common stock to be above or
below that which would otherwise prevail in the open market. These activities
may include stabilization, short sales and over-allotments, syndicate covering
transactions and penalty bids.
o Stabilizing transactions consist of bids or purchases made by the lead
representative for the purpose of preventing or slowing a decline in
the market price of our Units while this offering is in progress.
<PAGE>
o Short sales and over-allotments occur when the representatives, on
behalf of the underwriting syndicate, sell more of our Units than they
purchase from us in this offering. In order to cover the resulting
short position, the representative may exercise the over-allotment
option described above and/or they may engage in syndicate covering
transactions. There is no contractual limit on the size of the
syndicate covering transaction. The underwriters will deliver a
prospectus in connection with these short sales. Purchasers of Units
sold short by the underwriters are entitled to the same remedies under
the federal securities laws as any other purchaser of Units covered by
the registration statement.
o Syndicate covering transactions are bids for or purchases of our Units
on the open market by the representatives on behalf of the underwriters
in order to reduce a short position incurred by the representatives on
behalf of the underwriters.
o A penalty bid is an arrangement permitting the representatives to
reclaim the selling concession that would otherwise accrue to an
underwriter if the Unit originally sold by that underwriter was later
repurchased by the representatives and therefore was not effectively
sold to the public by such underwriter.
If the underwriters commence these activities, they may discontinue them at any
time without notice. The underwriters may carry out these transactions on the
AMEX, in the over-the-counter market or otherwise.
Passive Market Making. Prior to the pricing of this offering, and until the
commencement of any stabilizing bid, underwriters and dealers who are qualified
market makers on the AMEX may engage in passive market making transactions.
Passive market making is allowed during the period when the Securities and
Exchange Commission's rules would otherwise prohibit market activity by the
underwriters and dealers who are participating in this offering. Passive market
makers must comply with applicable volume and price limitations and must be
identified as such. In general, a passive market maker must display its bid at a
price not in excess of the highest independent bid for our common stock; but if
all independent bids are lowered below the passive market maker's bid, the
passive market maker must also lower its bid once it exceeds specified purchase
limits. Net purchases by a passive market maker on each day are limited to a
specified percentage of the passive market maker's average daily trading volume
in our common stock during a specified period and must be discontinued when such
limit is reached. Underwriters and dealers are not required to engage in passive
market making and may end passive market making activities at any time.
<PAGE>
Legal Matters
The validity of the securities being offered hereby will be passed upon on
our behalf by Barry B. Feiner, Esq., 170 Falcon Court, Manhassett, New York
11030. Legal matters relating to this offering will be passed upon for the
underwriters by Kelley Drye & Warren LLP, 101 Park Avenue, New York, New York
10178. Mr. Feiner's wife owns an aggregate of 35,000 shares of our common stock.
Experts
The financial statements as of December 31, 1999 and for each of the years
in the two-year period then ended , included in this prospectus have been
included in reliance on the report of Richard A. Eisner & Company LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
Available Information
We have filed a registration statement on Form SB-2 under the Securities
Act with the Securities and Exchange Commission with respect to the units
offered hereby. This prospectus filed as a part of the registration statement
does not contain all of the information contained in the registration statements
and exhibits and reference is hereby made to such omitted information.
Statements made in this registration statement are summaries of the terms of
these referenced contracts, agreements or documents and are not necessarily
complete. Reference is made to each exhibit for a more complete description of
the matters involved and these statements shall be deemed qualified in their
entirety by the reference.
In addition, we file annual, quarterly, and special reports, proxy
statements, and other information with the Securities and Exchange Commission.
You may read and copy our registration statement on Form SB-2, the exhibits
thereto, any reports, statements and other information we file at the Securities
and Exchange Commission's public reference room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Please call the Securities and Exchange Commission at
1-800-SEC-0330 for further information on the operations of the Public Reference
Room. Our Securities and Exchange Commission filings are also available on the
Securities and Exchange Commission's Internet site which is http://www.sec.gov
We intend to furnish our stockholders with annual reports containing
financial statements audited by our independent accountants.
<PAGE>
Index To Financial Statements
(Information with respect to the nine-months ended
September 30, 1999 and 2000 is unaudited)
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants F-2
Financial Statements:
Financial Statements as of December 31, 1999
and for each of the years in the two-year period then ended:
Balance Sheet as of December 31, 1999 F-3
Statements of Operations for the years ended
December 31, 1999 and December 31, 1998 F-4
Statements of Stockholders' Equity (Deficit) for the years ended
December 31, 1999 and December 31, 1998, F-5
Statements of Cash Flows for the years ended
December 31, 1999and December 31, 1998, F-6
Notes to Financial Statements F-7
Unaudited Financial Statements as of September 30,2000 and for each of the
nine-month periods ended September 30, 2000 and 1999:
Balance Sheet as of September 30, 2000 F-18
Statements of Operations for the nine-months
ended September 30, 2000 and 1999 F-19
Statements of Cash Flows for the nine months
ended September 30, 2000 and 1999 F-20
Notes to Financial Statements F-21
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
CareerEngine Network, Inc.
New York, New York
We have audited the consolidated balance sheet of CareerEngine Network, Inc. and
subsidiaries (formerly Helmstar Group, Inc. and subsidiaries) as of December 31,
1999, and the related consolidated statements of operations, changes in
stockholders' equity and cash flows for each of the years in the two-year period
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 audits.
We conducted our audits 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of CareerEngine
Network, Inc. and subsidiaries as of December 31, 1999, and the consolidated
results of their operations and their consolidated cash flows for each of the
years in the two-year period then ended in conformity with generally accepted
accounting principles.
Richard A. Eisner & Company, LLP
New York, New York
March 10, 2000
With respect to Note A
March 28, 2000
With respect to Note G
August 16, 2000
With respect to Note H
August 30, 2000
With respect to Note F[3]
November 22, 2000
<PAGE>
CAREERENGINE NETWORK, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
December 31, 1999
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Cash and cash equivalents $ 1,006,276
Marketable securities 4,888,610
Fixed assets, net 600,541
Other assets 565,018
-----------------
$ 7,060,445
LIABILITIES
Accrued expenses and other liabilities $ 1,891,201
Excess of liabilities over assets of discontinued operations 3,215,344
-----------------
5,106,545
Commitments and contingencies
STOCKHOLDERS' EQUITY
Common stock - authorized 10,000,000 shares, par value $.10;
issued 6,749,600 shares 674,960
Paid-in surplus 14,984,510
Deficit (10,657,861)
-----------------
5,001,609
Less treasury stock, at cost - 1,313,927 shares (3,047,709)
-----------------
1,953,900
-----------------
$ 7,060,445
=================
</TABLE>
See notes to financial statements
<PAGE>
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------
1999 1998
-------------- --------------
Revenues:
<S> <C> <C>
E-recruiting related services $ 30,980
Income on securities transactions, net 836,549 $ 1,526,873
Interest income 374,522 417,535
Other income 229,370
-------------- --------------
1,471,421 1,944,408
-------------- --------------
Expenses:
Compensation and related costs 1,725,074 1,223,597
Advertising 1,235,778 77,515
General and administrative 1,336,215 567,378
Interest 127,241 398,577
-------------- --------------
4,424,308 2,267,067
-------------- --------------
Loss from continuing operations before income taxes (2,952,887) (322,659)
Income tax provision (benefit) 10,098 (108,477)
-------------- --------------
Loss from continuing operations (2,962,985) (214,182)
Discontinued operations:
Loss from operations of discontinued real estate and consulting activities (1,089,409) (410,227)
-------------- --------------
Net loss $ (4,052,394) $ (624,409)
============== ==============
Per common share - basic and diluted:
Loss from continuing operations $ (.55) $ (.03)
Loss from discontinued operations (.20) (.08)
-------------- --------------
Net loss per common share $ (.75) $ (.11)
============== ==============
Weighted average number of common shares outstanding - basic and diluted 5,435,673 5,489,376
============== ==============
</TABLE>
See notes to financial statements
<PAGE>
Consolidated Statements of Changes in Stockholders' Equity
<TABLE>
<CAPTION>
Common Stock Paid-in
Shares Amount Surplus Deficit
------------- ------------ ---------------- ----------------
<S> <C> <C> <C> <C>
Balance - January 1, 1998 6,749,600 $ 674,960 $ 14,984,510 $ (5,981,058)
Treasury stock acquired at cost
Net loss (624,409)
------------- ------------ ---------------- ----------------
Balance - December 31, 1998 6,749,600 674,960 14,984,510 (6,605,467)
Treasury stock acquired at cost
Net loss (4,052,394)
------------- ------------ ---------------- ----------------
Balance - December 31, 1999 6,749,600 $ 674,960 $ 14,984,510 $ (10,657,861)
============= ============ ================ ================
Treasury Stock
Shares Amount Total
------------- --------------- ---------------
<S> <C> <C> <C>
Balance - January 1, 1998 1,233,227 $ (2,928,598) $ 6,749,814
Treasury stock acquired at cost 63,000 (95,931) (95,931)
Net loss (624,409)
------------- --------------- ---------------
Balance - December 31, 1998 1,296,227 (3,024,529) 6,029,474
Treasury stock acquired at cost 17,700 (23,180) (23,180)
Net loss (4,052,394)
------------- --------------- ---------------
Balance - December 31, 1999 1,313,927 $ (3,047,709) $ 1,953,900
============= =============== ===============
</TABLE>
See notes to financial statements
<PAGE>
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------
1999 1998
------------------ ------------------
Cash flows from operating activities:
<S> <C> <C>
Loss from continuing operations $ (2,962,985) $ (214,182)
Adjustments to reconcile loss from continuing operations to net cash
(used in) provided by operating activities:
Depreciation and amortization 168,211 42,630
Gain on sale of furniture and equipment (166)
Purchase of marketable securities (14,772,852) (26,361,024)
Sale of marketable securities 17,740,652 25,739,476
Changes in:
Other assets (99,132) 52,196
Accrued expenses and other liabilities 566,340 457,429
------------------ -----------------
Cash provided by (used in) continuing operations 640,234 (283,641)
Cash (used in) provided by discontinued operations (2,308,205) 825,316
------------------ -----------------
Net cash (used in) provided by operating activities (1,667,971) 541,675
------------------ -----------------
Cash flows from investing activities:
Purchase of furniture and equipment (544,182) (94,074)
Other 17,493
------------------- -----------------
Cash used in continuing operations (544,182) (76,581)
Cash provided by (used in) discontinued operations 1,450,654 (727,592)
------------------- -----------------
Net cash provided by (used in) investing activities 906,472 (804,173)
------------------ -----------------
Cash flows from financing activities:
Purchase of treasury stock (23,180) (95,931)
Cash provided by discontinued operations 750,000 597,032
------------------ -----------------
Net cash provided by financing activities 726,820 501,101
------------------ -----------------
(Decrease) increase in cash and cash equivalents (34,679) 238,603
Cash and cash equivalents at beginning of year 1,040,955 802,352
------------------ -----------------
Cash and cash equivalents at end of year $ 1,006,276 $ 1,040,955
================== =================
Supplemental disclosures of cash flow information related to
continuing operations:
Cash paid during the year for:
Interest $ 241 $ 6,815
Income taxes $ 31,175 $ 71,763
</TABLE>
See notes to financial statements
<PAGE>
CAREERENGINE NETWORK, INC. AND SUBSIDIARIES
Notes to Financial Statements
December 31, 1999
NOTE A - THE COMPANY
Effective March 28, 2000, Helmstar Group, Inc. changed its name to CareerEngine
Network, Inc. CareerEngine Network, Inc. is engaged in the e-recruiting business
through its subsidiary CareerEngine, Inc. which was formed in 1998. CareerEngine
Network, Inc. through other subsidiaries was also engaged in merchant banking
activities concentrating on real estate projects and also provided financial
consulting services. On August 16, 2000, the Board of Directors of CareerEngine
Network, Inc. decided to discontinue such operations and accordingly, the
accompanying consolidated financial statements have been restated to reflect
merchant banking activities and financial consulting services as discontinued
operations. The Company's only remaining operating segment after giving effect
to discontinued operations is the e-recruiting business.
NOTE B - SIGNIFICANT ACCOUNTING POLICIES APPLICABLE TO CONTINUING OPERATIONS
[1] Principles of consolidation:
The accompanying consolidated financial statements include the accounts of
CareerEngine Network, Inc. and its subsidiaries (the "Company"). All
significant intercompany balances and transactions have been eliminated.
[2] Revenue recognition:
E-recruiting related services are earned on the placement of banner and job
placement advertisements on the Company's web site. Such fees are
recognized over the period during which the advertisements are exhibited.
[3] Depreciation and amortization:
Furniture, fixtures and equipment are being depreciated using both
straight-line and accelerated methods over estimated lives of five to seven
years. Leasehold improvements are amortized on a straight-line basis over
the shorter of the term of the lease or their estimated useful lives.
[4] Cash and cash equivalents:
The Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents. As of
December 31, 1999, cash equivalents consist principally of an investment of
approximately $853,000 in a money market account.
[5] Net loss per share:
Basic and diluted net loss per share is computed based upon the weighted
average number of common shares outstanding during each year. Outstanding
employee stock options did not have an effect on the computation as they
were anti-dilutive.
[6] Income taxes:
Deferred income taxes are measured by applying enacted statutory rates in
effect at the balance sheet date to net operating loss carryforwards and to
the differences between the tax bases of assets and liabilities and their
reported amounts in the financial statements. The resulting deferred tax
asset as of December 31, 1999 was fully reserved since the likelihood of
realization of future tax benefits cannot be established.
<PAGE>
NOTE B - SIGNIFICANT ACCOUNTING POLICIES APPLICABLE TO CONTINUING OPERATIONS
(CONTINUED)
[7] Marketable securities:
The Company's marketable securities, which have a cost of $4,848,780,
consist of United States Treasury Bills and Municipal Bonds which are
classified as trading securities and are recorded at market value. Gains
and losses on the trading securities are included in operations.
[8] Derivative financial instruments:
As part of its investment strategies to profit from anticipated market
movements, the Company maintains trading positions in a variety of
derivative financial instruments consisting principally of futures
contracts in treasuries, stocks and municipal securities. All positions are
reported at fair value, and changes in fair value are reflected in
operations as they occur. The Company realized net gains from derivatives
sold in 1999 and 1998 of approximately $837,000 and $1,527,000,
respectively. Such amounts are included in income on securities
transactions in the accompanying statements of operations. At December 31,
1999, no derivative financial instruments were held by the Company and the
average fair value of such instruments held during the years was not
material.
[9] Stock-based compensation:
The Company has elected to continue to account for its stock-based
compensation plans using the intrinsic value method prescribed by
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB25"). Under APB25, compensation cost for stock options is
measured as the excess, if any, of the quoted market price of the Company's
common stock at the date of the grant or other measurement date over the
amount an employee must pay to acquire the stock.
[10] Use of 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.
[11] Advertising costs:
Advertising costs, which relate primarily to the e-recruiting business, are
expensed as incurred.
[12] Software development costs:
External direct costs of materials and services incurred to develop the
Company's website during the application development stage were
capitalized. Such costs which amounted to approximately $38,000 in the year
ended December 31, 1999, are being amortized using the straight-line method
over an estimated useful life of three years.
<PAGE>
NOTE C - INCOME TAXES
The income tax provision (benefit) applicable to continuing operations, all of
which is current, consists of the following:
Year Ended
December 31,
-----------------------------
1999 1998
------------ --------------
Federal $ 0 $ (22,143)
State and local 10,098 (86,334)
------------ -------------
$ 10,098 $ (108,477)
============ =============
At December 31, 1999, the Company has a net operating loss carryforward for
federal income tax purposes of approximately $17,311,000, which expires in the
years 2005 through 2019.
The Company's deferred tax asset consists of the following as of December 31,
1999:
Deferred tax assets:
Net operating loss carryforward $ 7,963,000
Liability for interest and state taxes related to federal
tax settlement 266,000
Other 39,000
-------------
Total deferred tax assets, before valuation allowance 8,268,000
Less:
Valuation allowance (8,002,000)
-------------
Total deferred tax assets 266,000
Deferred tax liability:
Deferred rental income (266,000)
-------------
Net deferred tax assets $ 0
=============
The valuation allowance increased by approximately $2,027,000 during 1999 and
$650,000 during 1998.
The effective tax rate applicable to continuing operations varied from the
statutory federal income tax rate as follows:
Year Ended
December 31,
--------------------
1999 1998
--------- --------
Statutory rate (34.0)% (34.0)%
State and local taxes, net of federal income tax effect (12.0) 4.3
Nondeductible expenses 1.8 3.9
Tax exempt interest (5.5)
Reversal of prior year tax overaccrual (7.2)
Valuation allowance 50.0 18.2
--------- --------
Effective rate .3% (14.8)%
========= ========
<PAGE>
NOTE C - INCOME TAXES (CONTINUED)
The Internal Revenue Service has examined the Company's federal income tax
returns for the years 1985 through 1989 and in December 1999 assessed a tax
deficiency of $348,000 together with accrued interest of $576,000. As of
December 31, 1997, the Company had recorded a liability for income tax and
interest related to the years under examination and during 1998 and 1999, the
Company accrued additional interest expense of $312,000 and $125,000,
respectively, related to the tax deficiency, thereby increasing the liability to
$984,000 at December 31, 1999, including related additional state and local tax
deficiencies.
NOTE D - FIXED ASSETS
Fixed assets consist of the following:
Furniture and fixtures $ 163,701
Computer and equipment 855,795
Leasehold improvements 86,807
-------------
1,106,303
Less accumulated depreciation 505,762
-------------
$ 600,541
=============
NOTE E - STOCK OPTION PLANS
In 1990, the Company adopted a stock option plan (the "1990 Plan") for granting
of options to purchase up to 750,000 shares of its common stock, pursuant to
which officers and other key employees are eligible to receive incentive and/or
nonqualified stock options, stock appreciation rights, and restricted stock
awards. Incentive stock options granted under the 1990 Plan are exerciseable for
a period of up to 10 years (five years in the case of a 10% stockholder) from
date of grant at an exercise price which is not less than the fair value on date
of grant, except that the exercise price of options granted to a stockholder
owning more than 10% of the outstanding capital stock may not be less than 110%
of the fair value of the common stock at date of grant.
On April 23, 1999, the Company adopted a stock option plan (the "1999 Plan") for
granting options to purchase up to 350,000 shares of common stock, pursuant to
which officers and other key employees are eligible to receive incentive and/or
nonqualified stock options. Options granted under the 1999 Plan are exercisable
for a period of up to 5 years from date of grant at an exercise price which is
not less than the fair value on date of grant, except that the exercise price of
options granted to a stockholder owing more than 10% of the outstanding capital
stock may not be less than 110% of the fair value of the common stock at date of
grant.
Stock option activity under the 1990 Plan and 1999 Plan is summarized as
follows:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------
1999 1998
------------------------- -----------------------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
----------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Options outstanding at beginning of year 100,000 $ .56 100,000 $.56
Granted 460,000 2.33
----------- -----------
Options outstanding at end of year 560,000 2.02 100,000 .56
=========== ===========
Options exercisable at end of year 100,000 .56 100,000 .56
=========== ===========
</TABLE>
<PAGE>
NOTE E - STOCK OPTION PLANS (CONTINUED)
The following table presents information relating to stock options outstanding
at December 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
----------------------------------------- -------------------------
Weighted
Weighted Average Weighted
Average Remaining Average
Exercise Life in Exercise
Range of Exercise Price Shares Price Years Shares Price
----------------------- ----------- ---------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
$.56 100,000 $ .56 2.92 100,000 $ .56
$2.25 - $2.50 460,000 2.33 9.27
----------- -----------
560,000 2.02 8.14 100,000 .56
=========== ==== ===========
</TABLE>
On May 1, 1999, CareerEngine, Inc., a subsidiary of the Company, adopted a stock
option plan (the "1999 Plan") for granting options to purchase up to 2,000,000
shares of common stock, pursuant to which officers and other key employees are
eligible to receive incentive and/or nonqualified stock options. Options granted
under the 1999 Plan are exercisable for a period of up to 10 years from date of
grant at an exercise price which is not less than the fair value on date of
grant, except that the exercise price of options granted to a stockholder owing
more than 10% of the outstanding capital stock may not be less than 110% of the
fair value of the common stock at date of grant. During 1999, CareerEngine, Inc.
granted 1,580,000 options of which 15,000 options are exercisable at December
31, 1999 at $2.50.
The following table presents information relating to stock options outstanding
at December 31, 1999:
Options Outstanding Options Exercisable
------------------------------------------- -------------------------
Weighted
Weighted Average Weighted
Average Remaining Average
Exercise Life in Exercise
Shares Price Years Shares Price
------------ -------- ---------- --------- ----------
1,075,000 $.01 9.34
505,000 2.50 9.87 15,000 $2.50
------------ ---------
1,580,000 $.55 9.51 15,000
============ ==== ==== =========
The fair value of options at date of grant was estimated using the Black-Scholes
option pricing model utilizing the following assumptions:
CareerEngine CareerEngine,
Network, Inc. Inc.
1999 1999
-------------- --------------
Risk-free interest rates 5.12% to 6.59% 5.15% to 6.30%
Expected option life in years 5 to 7 5
Expected stock price volatility 134% 46%
Expected dividend yield 0% 0%
<PAGE>
NOTE E - STOCK OPTION PLANS (CONTINUED)
Had the Company elected to recognize compensation cost based on the fair value
of the options at the date of grant as prescribed by Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation", net
loss in 1999 would have been approximately $(4,274,049) or $(.79), per basic and
diluted loss per share.
NOTE F - COMMITMENTS AND LITIGATION
[1] The Company occupies office space under a lease expiring on February 28,
2006. Rental expense relating to the lease amounted to $167,966 and
$164,819 for the years ended December 31, 1999 and 1998, respectively.
Minimum future annual rental payments at December 31, 1999 are as follows:
2000 $ 139,100
2001 139,100
2002 139,100
2003 139,100
2004 139,100
Thereafter 162,200
-----------
$ 857,700
===========
[2] The Company has a Retirement Savings Plan for its employees, pursuant to
Section 401(k) of the Internal Revenue Code. Employee contributions to the
plan and the Company's matching contributions vest immediately. The
Company's contribution to the plan, in accordance with the plan's top
heavy provisions, amounted to approximately $10,100 and $9,800, in the
years ended December 31, 1999 and 1998, respectively.
[3] In February 2000, the Company, in exchange for a nominal amount obtained a
release from claims arising from a 1996 litigation.
In connection with the above litigation, on November 22, 2000 the Company
was served with a Summons and Complaint in connection with an action
commenced in October 2000, by the Housing Authority of the County of
Riverside, California against multiple defendants. The Plaintiffs alleged
in connection with the issuance and underwriting of certain bonds that
various defendants negligently and fraudulently misrepresented to the
Plaintiffs that the interest on the bonds would be tax exempt. The
Plaintiffs are seeking damages as a result of such misrepresentation in the
amount of $1,100,000. The Plaintiffs are also seeking punitive damages in
an unspecified amount. Management is vigorously opposing those claims,
however, the outcome of the litigation is not presently determinable.
<PAGE>
NOTE G - DISCONTINUED OPERATIONS
On August 16, 2000, the Board of Directors of the Company decided to discontinue
its merchant banking operations, which consisted of its real estate project with
Carmike Cinemas, Inc., and its financial consulting operations. The financial
statements have been restated to reflect the discontinued operations of the
periods presented and to reclassify the assets and liabilities related thereto.
Results of discontinued operations are summarized as follows:
Year Ended December 31,
----------------------------------
1999 1998
--------------- ---------------
Rental income from real estate leased $ 996,405 $
Consulting fees 615,314 1,040,000
Interest income 3,212
Other income 22,101
--------------- ---------------
Total revenues 1,614,931 1,062,101
--------------- ---------------
Real estate leased expenses, net 1,568,029 1,093,435
Compensation and other costs 917,532 377,566
General and administrative expense 218,779 1,327
--------------- ---------------
Total expenses 2,704,340 1,472,328
--------------- ---------------
Loss from discontinued operations $ (1,089,409) $ (410,227)
=============== ===============
Assets and liabilities of the discontinued operations at December 31, 1999 are
as follows:
Real estate leased, net $ 70,336,022
Deferred financing and leasing costs, net 1,707,279
Deferred rental income 577,485
---------------
Total assets 72,620,786
---------------
Bonds payable 72,750,000
Accrued interest 836,130
Due to preferred member 2,250,000
---------------
Total liabilities 75,836,130
---------------
Excess of liabilities over assets of
discontinued operations $ (3,215,344)
===============
[1] Description of real estate operations:
In 1997, Movieplex Realty Leasing, L.L.C. ("Movieplex"), a subsidiary of
the Company, entered into an agreement with a major film exhibitor, Carmike
Cinemas, Inc. ("Carmike"), to develop and lease an unspecified number of
state of the art multiplex movie theaters at a cost not to exceed
approximately $75,000,000, plus an amount equal to any proceeds received by
Movieplex from the investment of related funding prior to the expending of
development costs (the "Project Funding"). Under the terms of the
agreement, Carmike was responsible for construction costs in excess of the
Project Funding. The primary components of the Project Funding were (i)
$72,750,000 from Movieplex's issuance of bonds and (ii) $2,272,500 from an
equity investment by Movieplex.
<PAGE>
NOTE G - DISCONTINUED OPERATIONS (CONTINUED)
[1] Description of real estate operations: (continued)
Pursuant to one of the related agreements, Carmike acted as the development
agent for Movieplex over the period November 20, 1997 through November 19,
1999 (the "Development Period"). During the Development Period, eight
theaters (each theater consisting of an acquired parcel of land and the
improvements constructed thereon) were developed at a cost substantially in
excess of the Project Funding. These excess costs were funded by Carmike.
In order to restore the original intent of developing multiple theaters at
an amount not to exceed the Project Funding, on April 11, 2000, Movieplex
transferred title to two theaters to Carmike. The costs relating to the
remaining six properties, after reallocating those costs incurred by
Movieplex pertaining to the two transferred theaters, does not exceed the
cost incurred to develop such remaining theaters. The allocated costs for
each of the six theaters does not exceed their value as determined by an
outside appraiser. In connection with the transfer of the two theaters, the
related lease was amended to (i) increase the purchase option price to
Carmike at the expiration of the initial lease term from 100% to 110% of a
pre-determined future value, (ii) effectively increase the rent payable
during the initial renewal option term of the lease by 10%, and (iii)
increase the current return on Movieplex's common members' equity
investment. These amendments, in the aggregate, increased the Company's
anticipated financial return on this transaction. The Company was also
compensated ($188,000) for its consulting services provided with regard to
this matter.
Commencing November 20, 1999, Carmike leased each of the six theaters under
the terms of a triple net, credit type lease with Movieplex, as lessor.
Monthly rental payments received by the lessor primarily fluctuate with the
debt service payments on the related bonds and the cash return due to the
Common and Preferred Members of Movieplex. The lease requires that Carmike,
in addition to paying a stipulated monthly rental to the lessor (i) pay all
utilities, insurance, and local real estate, corporate and franchise taxes;
(ii) reimburse the lessor for substantially all of its necessary and
reasonable expenses incurred in fulfilling its role as lessor; and (iii)
assume full operating, maintenance and environmental responsibilities for
the preservation and, if necessary, restoration of the land and related
improvements thereon. At the end of the initial lease term in 2015, Carmike
has the option to extend the lease, relating to not less than all the
theaters, for an additional term of ten years and, thereafter, for an
additional term of five years at rental rates provided in the lease.
Alternatively, at the end of the initial lease term, Carmike has the option
to purchase, not less than all the theaters, at an amount based on a
predetermined future value.
Bonds payable were secured by irrevocable letters of credit issued by a
group of banks which, in turn, were collateralized solely by the related
land and theaters thereon. In connection therewith the Company entered into
a Reimbursement Agreement with Wachovia, N.A. as agent for the banks, under
which the Company was 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. The bonds bear interest, payable monthly, at a
variable base rate (6.46% at December 31, 1999) indexed to the 30-day,
high-grade commercial paper rate which is reset weekly. Principal on the
bonds was payable in annual installments, commencing December 1, 2000, in
amounts ranging from $970,000 to $7,775,000 with a final payment due at
maturity, November 1, 2015, of $12,975,000.
The 3% equity investment by the lessor amounted to $2,272,500 of which
$2,250,000 and $22,500 was contributed by the lessor's Preferred and Common
Memberships (or shareholdings), respectively. 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 Common and Preferred Membership
interests are entitled to a cash return based on a formula specified within
the lease.
<PAGE>
NOTE G - DISCONTINUED OPERATIONS (CONTINUED)
[1] Description of real estate operations: (continued)
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 to date under the lease, the Company failed to make
required payments to Wachovia under the Reimbursement Agreement.
Accordingly, on August 15, 2000, Wachovia declared a default under the
Reimbursement Agreement and accelerated all amounts due by the Company
thereunder. Wachovia also directed the Trustee under the related indenture
to redeem the bonds. On August 15, 2000 the bonds were paid entirely
through draws on the related letters of credit. Accordingly, amounts
previously payable on the bonds became payable to the banks immediately
under the Reimbursement Agreement. The Company anticipates that title to
the six theaters will be transferred to the banks in payment of the
non-recourse debt under the Reimbursement Agreement. At such time, the
Company will recognize a gain to the extent of the excess of the
liabilities over the carrying value of the assets related to the real
estate leased to Carmike.
[2] Other information with respect to real estate operations:
As of December 31, 1999 real estate leased consists of the following:
Land $ 14,637,500
Improvements 55,857,449
---------------
70,494,949
Less accumulated depreciation 158,927
---------------
$ 70,336,022
Expenses related to real estate leased, net consist of the following:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------
1999 1998
--------------- ---------------
<S> <C> <C>
Interest expense on bonds $ 2,799,381 $ 4,595,202
Interest income on restricted investments (1) (1,393,946) (3,502,350)
--------------- ---------------
Interest expense, net 1,405,435 1,092,852
Depreciation expense 158,927
Other 3,667 583
--------------- ---------------
$ 1,568,029 $ 1,093,435
=============== ===============
</TABLE>
(1) The Trust Indenture pursuant to which the bonds were issued, restricted the
term and the investment instruments in which the bond proceeds would be
invested until spent for the purposes defined in the indenture. Interest
income earned on the investments is being shown as an offset to the
interest expense on the bonds.
During the Development Period, interest, related fees and amortization of
deferred financing costs related to the bonds were capitalized, except
those amounts attributable to funds not yet expended to either purchase
land or construct the improvements thereon. During the years ended December
31, 1999 and 1998, respectively, approximately $3,051,629 and $516,000 of
interest, letter of credit fees and amortization of deferred financing
costs, were capitalized and included in real estate leased-improvements.
<PAGE>
NOTE H - INCREASE IN AUTHORIZED STOCK
On August 30, 2000, the Board of Directors increased the number of authorized
shares of common stock from 10,000,000 to 20,000,000 shares and authorized
1,000,000 shares of preferred stock with a par value of $0.10 per share.
Preferred stock may be issued in one or more series in the discretion of the
Board of Directors.
<PAGE>
CareerEngine Network, Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30,
2000
(Unaudited)
-----------------
ASSETS
<S> <C>
Cash and cash equivalents $ 953,714
Marketable securities 2,533,153
Fixed assets, net 657,906
Other assets 1,460,068
-----------------
$ 5,604,841
=================
LIABILITIES
Debentures payable $ 1,756,028
Accrued expenses and other liabilities 1,640,705
-----------------
Total liabilities 3,396,733
Excess of liabilities over assets of discontinued
operations 3,361,269
-----------------
Commitments
STOCKHOLDERS' EQUITY
Common stock - authorized 20,000,000 shares,
par value $.10; issued 6,749,600 shares 674,960
Preferred stock - authorized 1,000,000 shares,
par value $.10; none issued
Paid-in surplus 16,096,808
Deficit (14,896,533)
-----------------
1,875,235
Less treasury stock, at cost -
1,305,594 shares (3,028,396)
-----------------
(1,153,161)
-----------------
$ 5,604,841
==================
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
CareerEngine Network, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
2000 1999
--------------- ----------------
Revenues
<S> <C> <C>
E-recruiting related services $ 929,718 $ 16,091
Income on securities transactions, net 1,266,294 1,332,960
Interest income 98,412 300,187
Other income 2,024 228,190
--------------- ----------------
2,296,448 1,877,428
--------------- ----------------
Expenses
Compensation and related costs 2,482,190 1,007,069
Advertising 1,357,774 412,695
General and administrative 1,702,604 808,765
Beneficial conversion feature
of debentures payable 246,875
--------------- ----------------
5,789,443 2,228,529
--------------- ----------------
Loss from continuing operations
before income taxes (3,492,995) (351,101)
Income tax provision 15,340 12,163
--------------- ----------------
Loss from continuing operations (3,508,335) (363,264)
--------------- ----------------
Discontinued operations:
Income (loss) from operations of discontinued
real estate and consulting activities 74,349 (1,226,550)
Write-off of unamortized financing costs (804,667)
--------------- ----------------
Loss from discontinued operations (730,318) (1,226,550)
--------------- ----------------
Net Loss $ (4,238,653) $ (1,589,814)
=============== ================
Per common share - basic and diluted
Loss from continuing operations $ (.65) $ (.06)
Loss from discontinued operations (.13) (.23)
--------------- ----------------
Net loss $ (.78) $ (.29)
=============== ================
Weighted average number of common shares
outstanding - basic and diluted 5,440,090 5,435,964
=============== ===============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
CareerEngine Network, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
2000 1999
------------ ------------
Cash flows from operating activities
<S> <C> <C>
Loss from continuing operations $(3,508,335) $ (363,264)
Adjustments to reconcile loss from continuing operations to
net cash provided by (used in) operating activities:
Depreciation and amortization 232,144 191,651
Beneficial conversion feature of debentures payable 246,875
Sale of marketable securities, net 2,355,457 1,528,540
Issuance of treasury stock for services 18,483
Changes in:
Other assets (688,397) 7,743
Accrued expenses and other liabilities (250,496) 939,478
------------ ------------
Cash provided by (used in) continuing operations (1,594,269) 2,304,148
Cash provided by (used in) discontinued operations (584,393) 8,462,072
------------ ------------
Net cash (used in) provided by operating activities (2,178,662) 10,766,220
------------ ------------
Cash flows from investing activities
Purchase of furniture and equipment (273,900) (557,471)
------------ ------------
Cash provided by (used in) continuing operations (273,900) (557,471)
Cash provided by (used in) discontinued operations (10,879,253)
------------ ------------
Net cash provided by (used in) investing activities (273,900) (11,436,724)
------------ ------------
Cash flows from financing activities
Purchase of treasury stock (23,180)
Proceeds from issuance of debentures 1,756,028
Additional paid in capital from sale of debentures 643,972
------------ ------------
Cash provided by (used in) continuing operations 2,400,000 (23,180)
Cash provided by (used in) discontinued operations 750,000
------------ ------------
Net cash provided by (used in) financing activities 2,400,000 726,820
------------ ------------
Increase (decrease) in cash and cash equivalents 52,562 56,316
Cash and cash equivalents at beginning of period 1,006,276 1,040,955
------------ ------------
Cash and cash equivalents at end of period $953,714 $1,097,271
============ ============
Supplemental disclosures of Cash Flow Information from
continuing operations
Cash paid during the period for:
Interest $45,336 --
Income taxes $30,684 $7,375
Issuance of warrants in connection with debentures payable $222,282 --
</TABLE>
The accompanying notes are an integral part of the financial statements.
<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
nine month period ended September 30, 1999 to conform to the presentation
of the nine month period ended September 30, 2000. In addition, the
financial statements have been restated to reflect the discontinued
operations of the periods presented and to reclassify the assets and
liabilities related thereto (see Note 4).
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. Excess of Liabilities over Assets of Discontinued Operations
In August 2000, the Company discontinued its merchant banking operations,
which consisted of its real estate project with Carmike Cinemas, Inc., and
its financial consulting operations. Accordingly, the Company's remaining
operations are solely from its e-recruiting segment.
The Company will recognize a gain in an amount approximately equal to
Excess of Liabilities over Assets of Discontinued Operations ($3,361,269 at
September 30, 2000) when title relating to six properties leased to Carmike
is transferred pursuant to the direction of Wachovia, N. A., as agent to
the holders of the non-recourse debt under the Reimbursement Agreement
referred to below. However, due to various proceedings relating to
Carmike's petition under Chapter 11 of the United States Bankruptcy Code,
no such transfer, as yet, has been made. The Company's exposure related to
this real estate project is and always has been limited solely to the
Company's interest in the six properties.
<PAGE>
Discontinued Operations
In 1997, the Company entered into a triple net, credit type lease with
Carmike, pursuant to which the Company leased to Carmike six parcels of
land and the improvements thereon. Concurrently, the Company issued
$72,750,000 principal amount of its adjustable rate tender securities due
November 1, 2015 (the "Bonds"). The Bonds were secured by irrevocable
letters of credit issued by a group of banks. In connection therewith the
Company entered into a Reimbursement Agreement with Wachovia, as agent for
the banks, under which the Company was 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 to date under the lease, the Company failed to make
required payments to Wachovia under the Reimbursement Agreement.
Accordingly, Wachovia declared a default under the Reimbursement Agreement
and accelerated all amounts due by the Company thereunder. Wachovia also
directed the Trustee under the related Indenture to redeem the Bonds. Such
amounts were paid entirely through draws on the related letters of credit
and were not paid with funds of the Company. However, as the Bonds are no
longer outstanding, all unamortized financing costs (amounting to $804,667)
relating thereto were expensed. In addition, Carmike has not disaffirmed
the lease and continues to occupy the six theaters.
The financial statements have been restated to reflect the discontinued
operations of the periods presented and to reclassify the assets and
liabilities related thereto.
Excess of Liabilities over Assets of Discontinued Operations at September
30, 2000 consists of the following:
September 30, 2000
------------------
Real estate leased, net $ 69,510,631
Other assets 2,643,780
Reimbursement obligations (72,750,000)
Other liabilities (515,680)
Due to preferred member (2,250,000)
------------------
$ (3,361,269)
==================
Loss from discontinued operations for the nine month period ended September 30,
2000 and 1999 are as follows:
Nine Months Ended
September 30,
-------------------------------------
2000 1999
------------------ -----------------
Revenues $ 5,804,374 $ 1,768,759
Expenses (5,730,025) (2,995,309)
Write-off of unamortized
financing costs (804,667)
------------------ -----------------
$ (730,318) $ (1,226,550)
================== =================
<PAGE>
================================================================================
You may rely only on the information contained in this prospectus. We have not
authorized anyone to provide information different from that contained in this
prospectus. Neither the delivery of this prospectus nor the sale of the units
means that the information contained in this prospectus is correct after the
date of this prospectus. This prospectus is not an offer to sell or solicitation
of an offer to buy the units in any circumstances under which the offer or
solicitation is unlawful.
TABLE OF CONTENTS
Page
Prospectus Summary.................................
Risk Factors.......................................
Price Range of Common Stock........................
Use of Proceeds....................................
Dividend Policy....................................
Private Financing..................................
Capitalization.....................................
Selected Financial Data............................
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Business.
Management.........................................
Principal Stockholders.............................
Certain Transactions...............................
Description of Securities..........................
Underwriting.......................................
Legal Matters......................................
Experts............................................
Available Information..............................
Index to Financial Statements...................F-1
================================================================================
================================================================================
2,500 Units
CareerEngine Network, Inc.
--------------
PROSPECTUS
--------------
MURPHY & DURIEU
_______, 2001
================================================================================
<PAGE>
ALTERNATE PAGE OF SELLING SECURITYHOLDER PROSPECTUS
Subject to Completion Dated __________, 2001
[LOGO] Career Engine
Network, Inc.
2,640 Units
each Unit consisting of
o $1,000 principal amount of $12% convertible debentures due on March 31,
2010,
o class A warrants to purchase 250 shares of common stock and
o class B warrants to purchase 250 shares of common stock
------------
$2,640,000 aggregate principal amount of $12% convertible
debentures due on March 31, 2010
------------
Class A warrants to purchase an aggregate of 660,000 shares of common stock
------------
Class B warrants to purchase an aggregate of 660,000 shares of common stock
------------
An aggregate of 1,320,000 shares of common
stock issuable upon the exercise of the Class
A and Class B warrants
------------
The debentures and warrants will trade separately starting six months from
the effective date of this offering unless we agree with the underwriter that
trading may begin sooner. Prior to that date, the debentures and warrants will
trade only as a unit.
Selling securityholders may sell the Units and the component parts of the
units using this prospectus.
Using an alternate prospectus, we are offering 2,500 units plus up to an
additional 375 units to cover over-allotments, if any, in an underwritten public
offering.
Our common stock is traded on the American Stock Exchange under the symbol
"CNE." On December 20, 2000 the last reported sale price of our common stock was
$1.3125 per share.
For a description of the terms of the debentures and the warrants see
"Prospectus Summary - The Offering on page 1.
Our units, debentures and class A and Class B warrants currently are not
being traded on any market. We have applied to list our units, debentures and
warrants on the American Stock Exchange under the symbols "CNEU," "CNED," "CNE_"
and "CNE_," respectively.
Investing in our securities involves risks. Consider carefully the risk
factors beginning on page 7 of this prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this Prospectus is ______ , 2001
<PAGE>
ALTERNATE PAGE OF SELLING SECURITYHOLDER PROSPECTUS -- (CONTINUED)
The Offering
Securities Offered
This prospectus relates to the offering of 2,640 units by Selling
securityholders. It also relates to up to 1,320,000 shares of our common
stock that we may issue to them upon the exercise of the warrants. See
"Description of Securities" and "Selling Securityholders and Plan of
Distribution."
Each unit consists of
o a $1,000 principal amount of $12% convertible debentures due on March
31, 2010,
o class A warrants to purchase 250 shares of common stock and
o class B warrants to purchase 250 shares of common stock
The debenture and the warrants will trade only as a unit for six months
following this offering, unless we agree with the underwriter that
separate trading may begin sooner. Thereafter, each of the securities will
trade separately. For more information, see "Description of Securities."
The Debentures:
Principal Amount of Debenture .. $1,000.
Annual Interest Rate ........... 12% interest.
Payment of Interest ............ Quarterly in cash on January 1, April 1,
July 1 and October 1 of each year,
commencing July 1, 2001.
Maturity ....................... March 31, 2010.
Conversion by Holder ........... A Holder may convert all or a portion of
the principal amount of his debenture
outstanding at the time such conversion
is effected into our common stock at any
time before the close of business on the
earlier of March 31, 2010 or the date
that principal and interest under the
debenture has been paid in full. If we
call the debenture for redemption, a
Holder may convert his debenture at any
time before the close of business on the
redemption date. The initial conversion
price is $2.00 per share, subject to
adjustment in certain events. On
conversion, no payment or adjustment for
accrued and unpaid interest will be
made. All such interest will be
forfeited.
Redemption by Holder ............ Up to $50,000 total value of the
debentures of any holder upon notice of
the holder's death and redemption
election by
<PAGE>
his or her estate. This right of
redemption may only be exercised by the
estate of the original holder. It does
not pass to any transferee.
Redemption by Us ................ We can redeem all or part of the
debentures at 100% of their principal
amount, plus accrued interest to the
redemption date if the closing price of
our common stock equals or exceeds 2.154
times the then conversion price for a
period of 20 consecutive trading days
ending three trading days prior to the
notice of redemption.
Ranking ......................... The debentures are second in right of
repayment to all of our senior debt.
Senior debt is any indebtedness payable
to banks or other traditional long-term
institutional lenders such as insurance
companies and pension funds, unless in
the instrument creating or evidencing
such indebtedness, it is provided that
such indebtedness is not senior in right
of payment to the debentures. If we were
to become insolvent, such senior debt
would have a priority of right to
repayment in connection with our
liquidation.
Transferability ................. There are no transfer restrictions on
the debentures. However, the right to
redemption upon death of the initial
holder will terminate on transfer.
Please refer to "Description of Securities - The Debentures and the
Indenture."
Class A Warrants:
The Class A warrants are exercisable at a price of $4.00 per share until
they expire on March 31, 2003, subject to adjustment in certain events. We
may redeem the A Warrants on not less than 30 days notice at a redemption
price of $0.001 per Warrant, provided that the reported closing price of
our common stock equals or exceeds 150% of the then exercise price of the
warrant for a period of 20 consecutive trading days ending three trading
days prior to the notice of redemption. Please refer to "Description of
Securities - Class A Warrants."
Class B Warrants:
The Class B warrants are exercisable at a price of $6.00 per share until
they expire on March 31, 2005, subject to adjustment in certain events. We
may redeem the A Warrants on not less than 30 days notice at a redemption
price of $0.001 per Warrant, provided that the reported closing price of
our common stock equals or exceeds 150% of the then exercise price of the
warrant for a period of 20 consecutive trading days ending three trading
days prior to the notice of redemption. Please refer to "Description of
Securities - Class B Warrants."
Risk Factors:
<PAGE>
An investment in the preferred stock involves a high degree of risk. You
should not consider this offer if you cannot afford to lose your entire
investment. Please refer to "Risk Factors" for factors you should
consider.
Use of Proceeds:
We will not receive any of the proceeds from the sale of securities by the
selling securityholders. We will receive proceeds from the exercise of any
of the warrants. We will use the net proceeds from warrant exercises for
working capital and general corporate purposes.
<PAGE>
ALTERNATE PAGE OF SELLING SECURITYHOLDER PROSPECTUS -- (CONTINUED)
Private Financing
In June and August 2000, we completed the sale of 48 debenture and
warrant units at a price of $50,000 per unit in a private financing transaction.
Each private financing unit consisted of securities substantially similar to the
units offered in this prospectus, except that each private financing unit was
equal to 50 of the units offered pursuant to this prospectus. We granted the
holders of these private financing units the right to register their units for
public sale. To this end, on the date of this prospectus, we will issue units to
the holders of the private units identical to the units offered in this
prospectus in exchange for their private financing units at a rate of 50 public
units for each private financing unit. These units have been registered for
public sale and are being sold by selling securityholders pursuant to this
prospectus. Except as set forth in this paragraph, all references in this
prospectus to numbers of private financing units assumes retroactive exchange of
public units for private units. For example, 50 private financing units would
represent only one actual private financing unit sold in the private financing.
See "Selling Securityholders and Plan of Distribution" for information relating
to the Securityholders who are offering these securities for sale.
Dirks & Company, Inc. acted as the placement agent. We paid Dirks a fee
of $240,000, which was equal to 10% of the aggregate purchase price of the units
sold, and a non accountable expense allowance of $72,000, which was equal to
three percent of the aggregate purchase price of the units sold. We also granted
Dirks, for nominal consideration, a warrant, exercisable over a five year period
which commenced on the closing date of the private financing, to purchase units,
which equaled 10% of the number of units sold in the private financing, at a
price of $1,200 per unit. The units underlying the securities acquired by Dirks
as placement agent have been registered for public sale and are included in this
prospectus. Dirks has granted Barry Blank the right to 70% of the units
underlying the placement agent warrant.
Barry W. Blank purchased 300,000 units in the private financing. Mr.
Blank was employed by Dirks as a registered representative at the time of the
private financing and he participated in the sale of the private financing
units. Currently he is employed by Murphy & Durieu, the underwriter of our
concurrent underwritten unit offering. He will participate in the sale of the
units in the underwritten offering.
<PAGE>
ALTERNATE PAGE OF SELLING SECURITYHOLDER PROSPECTUS -- (CONTINUED)
Selling Securityholders And Plan Of Distribution
The registration statement, of which this prospectus forms a part,
relates to the registration by us for the account of selling securityholders, of
an aggregate of:
o 2,640 units;
o 2,640 debentures;
o 660,000 class A warrants;
o 660,000 class B warrants:
o 1,320,000 shares of our common stock that we may issue upon exercise
of the warrants.
The tables below sets forth information with respect to the selling
securityholders as of December 15, 2000. We will not receive any of the proceeds
from the sale of these securities. We will receive proceeds only for shares sold
by us pursuant to warrants exercised. There are no material relationships
between us or our affiliates and any of the selling securityholders except as
disclosed below. Based on information provided to us by the selling
securityholders, all securities are beneficially owned.
We assume that the selling securityholders will sell all of their
securities. However, beneficial ownership after the offering will depend upon
the actual number of securities sold by each selling Securityholder.
Taking into account the shares of our common stock issuable upon conversion
of debentures and the exercise of warrants owned by Mr. Blank, Mr. Blank is the
beneficial owner of more than 10% of our common stock. All CareerEngine Network
securities owned by Mr. Blank will not be sold except in compliance with the
provisions of Section 16(b) of the Securities Exchange Act of 1934. The share
table includes the shares issuable on the conversion of debentures and on the
exercise warrants owned by each selling Securityholder.
Mr. Blank was employed by Dirks, the placement agent for our private
financing, as a registered representative. He participated in the sale of the
private financing. Currently, he is employed by Murphy & Durieu, the underwriter
of our concurrent public unit offering. He will participate in the sale of the
units in that offering.
<PAGE>
Debentures
<TABLE>
<CAPTION>
------------------------------------------ --------------- -------------- -------------- ------------------------------
Percentage Owned
------------------------------------------ --------------- -------------- -------------- --------------- --------------
Debentures Debentures
Beneficially Beneficially
Owned Before Number of Owned Before After
Offering Debentures After Offering Offering
Name Offered Offering
------------------------------------------ --------------- -------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Barry W. Blank TTEE for Barry W. Blank 300(1) 300 0 11.36 0
Trust Dated 11-13-96 as amended 12-23-96
------------------------------------------ --------------- -------------- -------------- --------------- --------------
Bernard R. Bober 50 50 0 1.89 0
------------------------------------------ --------------- -------------- -------------- --------------- --------------
Richard A. Michaelson 50 50 0 1.89 0
------------------------------------------ --------------- -------------- -------------- --------------- --------------
Compass Bank CSDN FBO Renaissance US 250 250 0 9.47 0
Growth and Income Trust PLC
------------------------------------------ --------------- -------------- -------------- --------------- --------------
Compass Bank CSDN FBO Renaissance 250 250 0 9.47 0
Capital Growth and Income Fund III, Inc.
------------------------------------------ --------------- -------------- -------------- --------------- --------------
George W. Benoit 100 100 0 3.79 0
------------------------------------------ --------------- -------------- -------------- --------------- --------------
Alec G. Land 25 25 0 0.95 0
------------------------------------------ --------------- -------------- -------------- --------------- --------------
Tenaire Inc. Profit Sharing Trust U/A/D 50 50 0 1.89 0
1-30-69 86-6042651
------------------------------------------ --------------- -------------- -------------- --------------- --------------
Dr. Robert Brod, Profit Sharing Plan 50 50 0 1.89 0
------------------------------------------ --------------- -------------- -------------- --------------- --------------
Kevin and Nadine Benoit 100 100 0 3.79 0
------------------------------------------ --------------- -------------- -------------- --------------- --------------
Barry A. Friedman 50 50 0 1.89 0
------------------------------------------ --------------- -------------- -------------- --------------- --------------
Daniel Charlton Williams 50 50 0 1.89 0
------------------------------------------ --------------- -------------- -------------- --------------- --------------
Robert W. Wahl 100 100 0 3.79 0
------------------------------------------ --------------- -------------- -------------- --------------- --------------
Everett A. Sheslow 50 50 0 1.89 0
------------------------------------------ --------------- -------------- -------------- --------------- --------------
Peter R. Harvey 200 200 0 7.58 0
------------------------------------------ --------------- -------------- -------------- --------------- --------------
Kaufman II Limited Family Partnership 25 25 0 0.95 0
------------------------------------------ --------------- -------------- -------------- --------------- --------------
Ben Shirley Branch 50 50 0 1.89 0
------------------------------------------ --------------- -------------- -------------- --------------- --------------
John S. Price Trustee Wilson Price 100 100 0 3.79 0
Barranco Billingsley Keough Plan FBO
Bill Barranco
------------------------------------------ --------------- -------------- -------------- --------------- --------------
Delaware Charter Guarantee & Trust Co. 50 50 0 1.89 0
TTEE FBO Connie S. Shaw IRA
321-30194-11, Tax ID No. 51-0099493
------------------------------------------ --------------- -------------- -------------- --------------- --------------
Dan N. Williams 50 50 0 1.89 0
------------------------------------------ --------------- -------------- -------------- --------------- --------------
Gilbert Sandler 25 25 0 0.95 0
------------------------------------------ --------------- -------------- -------------- --------------- --------------
Thomas J. Ferrara 25 25 0 0.95 0
------------------------------------------ --------------- -------------- -------------- --------------- --------------
Kathleen J. Blank 50 50 0 1.89 0
------------------------------------------ --------------- -------------- -------------- --------------- --------------
The Violet M. Blank Living Trust 25 25 0 0.95 0
------------------------------------------ --------------- -------------- -------------- --------------- --------------
John L. Mozley Trust, John L. Mozley, 100 100 0 3.79 0
Trustee U/A/D 1/18/83
------------------------------------------ --------------- -------------- -------------- --------------- --------------
Brod Living Trust, Albert T. Brod & Lois 25 25 0 0.95 0
Anne Brod, Trustees
------------------------------------------ --------------- -------------- -------------- --------------- --------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------ --------------- -------------- -------------- ------------------------------
Percentage Owned
------------------------------------------ --------------- -------------- -------------- --------------- --------------
Debentures Debentures
Beneficially Beneficially
Owned Before Number of Owned Before After
Offering Debentures After Offering Offering
Name Offered Offering
------------------------------------------ --------------- -------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Ben Shirley Branch 50 50 0 1.89 0
------------------------------------------ --------------- -------------- -------------- --------------- --------------
R. George Cranmer 10 10 0 0.38 0
------------------------------------------ --------------- -------------- -------------- --------------- --------------
Delaware Charter Guarantee & Trust Co. 40 40 0 1.52 0
TTEE FBO R. George Cranmer IRA Tax ID
No. 51-0099493, Account No. 321-30125-15
------------------------------------------ --------------- -------------- -------------- --------------- --------------
Robert & Josephine Tomasulo JTROS 25 25 0 0.95 0
------------------------------------------ --------------- -------------- -------------- --------------- --------------
Robert Cohen 50 50 0 1.89 0
------------------------------------------ --------------- -------------- -------------- --------------- --------------
Charles R. Hoover & Shirley A. Hoover, 25 25 0 0.95 0
Common Property with Right of
Survivorship
------------------------------------------ --------------- -------------- -------------- --------------- --------------
Dirks & Company, Inc. 240 240 0 9.09 0
------------------------------------------ --------------- -------------- -------------- --------------- --------------
</TABLE>
(1) Kathleen Blank is the daughter of Barry Blank and Violet Blank is the
mother of Barry Blank
(2) Does not include debentures issuable upon the exercise of 70% of the
Placement Agent Warrants. Mr. Blank has the right to 70% of the Placement
Agent Warrants. See "Private Financing".
(3) Assumes exercise of Placement Agent Warrants. See "Private Financing."
Common Stock
<TABLE>
<CAPTION>
------------------------------------------ --------------- -------------- -------------- ------------------------------
Percentage Owned
------------------------------------------ --------------- -------------- -------------- --------------- --------------
Shares Shares
Beneficially Beneficially
Owned Before Number of Owned Before After
Offering Shares After Offering Offering
Name Offered Offering
------------------------------------------ --------------- -------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Barry W. Blank TTEE for Barry W. Blank
Trust Dated 11-13-96 as amended 12-23-96 410,100 0 410,100 7.53 7.53
------------------------------------------ --------------- -------------- -------------- --------------- --------------
Bernard R. Bober 0 0 0 0 0
------------------------------------------ --------------- -------------- -------------- --------------- --------------
Richard A. Michaelson 0 0 0 0 0
------------------------------------------ --------------- -------------- -------------- --------------- --------------
Compass Bank CSDN FBO Renaissance US
Growth and Income Trust PLC 0 0 0 0 0
------------------------------------------ --------------- -------------- -------------- --------------- --------------
Compass Bank CSDN FBO Renaissance Capital
Growth and Income Fund III, Inc. 0 0 0 0 0
------------------------------------------ --------------- -------------- -------------- --------------- --------------
George W. Benoit 1,701,620 0 1,701,620 31.04 31.04
------------------------------------------ --------------- -------------- -------------- --------------- --------------
Alec G. Land 0 0 0 0 0
------------------------------------------ --------------- -------------- -------------- --------------- --------------
Tenaire Inc. Profit Sharing Trust U/A/D
1-30-69 86-6042651 1,400 0 1,400 .03 .03
------------------------------------------ --------------- -------------- -------------- --------------- --------------
Dr. Robert Brod, Profit Sharing Plan 500 0 500 .01 .01
------------------------------------------ --------------- -------------- -------------- --------------- --------------
Kevin and Nadine Benoit 338,000 0 338,000 6.19 6.19
------------------------------------------ --------------- -------------- -------------- --------------- --------------
Barry A. Friedman 2,000 0 2,000 .04 .04
------------------------------------------ --------------- -------------- -------------- --------------- --------------
Daniel Charlton Williams 0 0 0 0 0
------------------------------------------ --------------- -------------- -------------- --------------- --------------
Robert W. Wahl 42,400 0 42,400 7.79 7.79
------------------------------------------ --------------- -------------- -------------- --------------- --------------
Everett A. Sheslow 2,000 0 2,000 .04 .04
------------------------------------------ --------------- -------------- -------------- --------------- --------------
Peter R. Harvey 0 0 0 0 0
------------------------------------------ --------------- -------------- -------------- --------------- --------------
Kaufman II Limited Family Partnership 0 0 0 0 0
------------------------------------------ --------------- -------------- -------------- --------------- --------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------ --------------- -------------- -------------- ------------------------------
Percentage Owned
------------------------------------------ --------------- -------------- -------------- --------------- --------------
Shares Shares
Beneficially Beneficially
Owned Before Number of Owned Before After
Offering Shares After Offering Offering
Name Offered Offering
------------------------------------------ --------------- -------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Ben Shirley Branch 0 0 0 0 0
------------------------------------------ --------------- -------------- -------------- --------------- --------------
John S. Price Trustee Wilson Price
Barranco Billingsley Keough Plan FBO
Bill Barranco 0 0 0 0 0
------------------------------------------ --------------- -------------- -------------- --------------- --------------
Delaware Charter Guarantee & Trust Co.
TTEE FBO Connie S. Shaw IRA
321-30194-11, Tax ID No. 51-0099493 0 0 0 0 0
------------------------------------------ --------------- -------------- -------------- --------------- --------------
Dan N. Williams 0 0 0 0 0
------------------------------------------ --------------- -------------- -------------- --------------- --------------
Gilbert Sandler 100,000 0 100,000 1.80 1.80
------------------------------------------ --------------- -------------- -------------- --------------- --------------
Thomas J. Ferrara 21,500 0 21,500 .39 .39
------------------------------------------ --------------- -------------- -------------- --------------- --------------
Kathleen J. Blank 0 0 0 0 0
------------------------------------------ --------------- -------------- -------------- --------------- --------------
The Violet M. Blank Living Trust 0 0 0 0 0
------------------------------------------ --------------- -------------- -------------- --------------- --------------
John L. Mozley Trust, John L. Mozley,
Trustee U/A/D 1/18/83 0 0 0 0 0
------------------------------------------ --------------- -------------- -------------- --------------- --------------
Brod Living Trust, Albert T. Brod & Lois
Anne Brod, Trustees 0 0 0 0 0
------------------------------------------ --------------- -------------- -------------- --------------- --------------
Ben Shirley Branch 0 0 0 0 0
------------------------------------------ --------------- -------------- -------------- --------------- --------------
R. George Cranmer 0 0 0 0 0
------------------------------------------ --------------- -------------- -------------- --------------- --------------
Delaware Charter Guarantee & Trust Co.
TTEE FBO R. George Cranmer IRA Tax ID
No. 51-0099493, Account No. 321-30125-15 0 0 0 0 0
------------------------------------------ --------------- -------------- -------------- --------------- --------------
Robert & Josephine Tomasulo JTROS 0 0 0 0 0
------------------------------------------ --------------- -------------- -------------- --------------- --------------
Robert Cohen 0 0 0 0 0
------------------------------------------ --------------- -------------- -------------- --------------- --------------
Charles R. Hoover & Shirley A. Hoover,
Common Property with Right of
Survivorship 0 0 0 0 0
------------------------------------------ --------------- -------------- -------------- --------------- --------------
Dirks & Company, Inc. 0 0 0 0 0
------------------------------------------ --------------- -------------- -------------- --------------- --------------
</TABLE>
(1) Kathleen Blank is the daughter of Barry Blank and Violet Blank is the
mother of Barry Blank
Shares beneficially owned in the above table does not include shares
issuable upon conversion of the debentures or exercise of the warrants owned by
each of the selling securityholders. At present, for each debenture owned by a
selling securityholder, that holder owns 250 class A warrants and 250 class B
warrants. In addition, each debenture currently is convertible into500 shares of
our common stock.
The sale of the securities by the selling securityholders may be effected
from time to time in transactions, which may include block transactions by or
for the account of the selling securityholder,
o on the American Stock Exchange,
o in the over-the-counter market,
o in negotiated transactions,
o through the writing of options on these shares, or
o a combination of these methods of sale, or otherwise.
Sales may be made at fixed prices which may be changed, at market prices
prevailing at the time of sale, or at negotiated prices.
<PAGE>
Selling securityholders may effect these transactions by selling their
shares directly to purchasers, through broker-dealers acting as agents for the
selling securityholders, or to broker-dealers who may purchase shares as
principals and thereafter sell the shares from time to time on the American
Stock Exchange, in the over-the-counter market, in negotiated transactions, or
otherwise. Broker-dealers, if any, may receive compensation in the form of
discounts, concessions, or commissions from the selling securityholders and/or
the purchasers for whom these broker-dealers may act as agents or to whom they
may sell as principals or both, which compensation as to a particular
broker-dealer may be in excess of customary commissions.
The selling securityholders and broker-dealers, if any, acting in
connection with these sales might be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act and any commission received by
them and any profit on the resale of these securities might be deemed to be
underwriting discounts and commissions, under the Securities Act.
At the time a particular offer of the securities is made by or on behalf of
a selling securityholder, to the extent required, a prospectus supplement will
be distributed which will set forth the number of securities being offered and
the terms of the offering, including the name or names of any underwriters,
dealers, or agents, the purchase price paid by any underwriter for securities
purchased from the selling securityholder and any discounts, commissions, or
concessions allowed or reallowed or paid to dealers, and the proposed selling
price to the public.
Under the Exchange Act and its regulations, any person engaged in the
distribution of securities, offered by this prospectus may not simultaneously
engage in market-making activities with respect to the securities or our common
stock during the applicable "cooling off" period prior to the commencement of
this distribution. In addition, and without limiting the foregoing, the selling
securityholders will be subject to applicable provisions of the Exchange Act and
its rules and regulations, including without limitation Regulation M promulgated
under the Exchange Act, in connection with transactions in the securities, which
provisions may limit the timing of purchases and sales of shares of common stock
by the selling securityholders.
Sales of any of our securities by the selling securityholders may depress the
price of such securities in any market that may develop for these securities.
<PAGE>
ALTERNATE PAGE OF SELLING SECURITYHOLDER PROSPECTUS -- (CONTINUED)
================================================================================
You may rely only on the information contained in this prospectus. We have not
authorized anyone to provide information different from that contained in this
prospectus. Neither the delivery of this prospectus nor the sale of the units
means that the information contained in this prospectus is correct after the
date of this prospectus. This prospectus is not an offer to sell or solicitation
of an offer to buy the units in any circumstances under which the offer or
solicitation is unlawful.
TABLE OF CONTENTS
Page
Prospectus Summary.................................
Risk Factors.......................................
Price Range of Common Stock........................
Use of Proceeds....................................
Dividend Policy....................................
Private Financing..................................
Capitalization.....................................
Selected Financial Data............................
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Business.
Management.........................................
Principal Stockholders.............................
Selling Securityholders and Plan of
Distribution..................................
Certain Transactions...............................
Description of Securities..........................
Legal Matters......................................
Experts............................................
Available Information..............................
Index to Financial Statements...................F-1
================================================================================
2,640 Units
and
1,320,000 Shares
CareerEngine Network, Inc.
--------------
PROSPECTUS
--------------
_______, 2001
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
Section 145 of the General Corporation Law of the State of Delaware
provides for the indemnification of officers and directors under certain
circumstances against expenses incurred in successfully defending against a
claim and authorizes a Delaware corporation to indemnify its officers and
directors under certain circumstances against expenses and liabilities incurred
in legal proceedings involving such persons because of their being or having
been an officer or director.
Section 102(b) of the Delaware General Corporation Law permits a
corporation, by so providing in its certificate of incorporation, to eliminate
or limit a director's liability to the corporation and its stockholders for
monetary damages arising out of certain alleged breaches of their fiduciary
duty. Section 102(b)(7) provides that no such limitation of liability may affect
a director's liability with respect to any of the following: (i) breaches of the
director's duty of loyalty to the corporation or its stockholders; (ii) acts or
omissions not made in good faith or which involve intentional misconduct of
knowing violations of law; (iii) liability for dividends paid or stock
repurchased or redeemed in violation of the Delaware General Corporation law; or
(iv) any transaction from which the director derived an improper personal
benefit. Section 102(b)(7) does not authorize any limitation on the ability of
the company or its stockholders to obtain injunctive relief, specific
performance or other equitable relief against directors.
Article Tenth of the Registrant's Certificate of Incorporation provides
that the personal liability of the directors of the Registrant be eliminated to
the fullest extent permitted under Section 102(b) of the Delaware General
Corporation law.
Article V of the Registrant's By-laws provides that all persons whom the
Registrant is empowered to indemnify pursuant to the provisions of Section 145
of the Delaware General Corporation law (or any similar provision or provisions
of applicable law at the time in effect), shall be indemnified by the Registrant
to the full extent permitted thereby. The foregoing right of indemnification
shall not be deemed to be exclusive of any other rights to which those seeking
indemnification may be entitled under any by-law, agreement, vote of
stockholders or disinterested directors, or otherwise.
Insofar as indemnification for liabilities under the Securities Act of
1933, as amended (the "Securities Act") may be permitted to directors, officers
or persons controlling the Registrant pursuant to the foregoing provisions, the
Registrant has been informed that in the opinion of the Commission, such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
Reference is made to the Underwriting Agreement, the proposed form of which
is filed as Exhibit 1.1, pursuant to which the underwriter agrees to indemnify
the directors and certain officers of the Registrant and certain other persons
against certain civil liabilities.
Item 25. Other Expenses of Issuance and Distribution
The following table sets forth the expenses (other than the underwriting
discounts and commissions and the representative's non-accountable expense
allowance) expected to be incurred in connection with the issuance and
distribution of the securities being registered. All of such expenses are
<PAGE>
estimates, other than the filing fees payable to the Securities and Exchange
Commission and the National Association of Securities Dealers, Inc.
Securities and Exchange Commission Filing Fee..................... $ 5,022
National Association of Securities Dealers, Inc. Filing Fee....... $ 2,509
AMEX Listing Fee.................................................. $32,000
Accounting Fees................................................... $20,000
Legal Fees........................................................ $50,000
Printing and Engraving Expenses................................... $50,000
Trustee Fees ................................................ .... $ 3,500
Transfer and Warrant Agent fees................................... $ 2,000
Miscellaneous Expenses............................................ $ 9,969
Total...................................................$175,000
Item 26. Recent Sales of Unregistered Securities
Since November 1997 the Registrant has issued securities without
registration under the Securities Act in the following transactions:
1. On June 28, 2000, the Registrant issued 39.50 private financing units of
its securities (each unit equal to 50 times the amount of a public unit offered
herein). Each private financing 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.
2. On August 7, 2000, the Company issued an additional 8.50 units under the
same terms and conditions as set forth in paragraph 1, above.
3. In March, April, May, June, July and October 2000, the Company partially
compensated a vendor with 8,333 unregistered shares, in the aggregate, of Common
Stock in lieu of cash.
The sales and issuances of securities noted above were deemed to be exempt
from registration under the Securities Act in reliance upon Section 4(2) as
transactions not involving a public offering. Dirks & Company, Inc. acted as
placement agent in the Registrant's sale of units described in 1 and 2 above.
For its services, Dirks received a 10% placement agent's fee; a 3%
non-accountable expense allowance and 4.8 placement agent units. The securities
described in 3 above were not sold through an underwriter and, accordingly,
there were no underwriting discounts or commissions involved.
<PAGE>
Item 27. Exhibits
Exhibit
No. Description
------- -----------------
1.1 Form of Underwriting Agreement *
3.1 Restated Certificate of Incorporation of the Company (2)
3.1a Amendment to Certificate of Incorporation (2)
3.2 Amended and Restated By-Laws of the Company (4)
4.2 Indenture with _______________ concerning the 12% Convertible
Debentures Due March 31, 2010
4.3 12% Debenture Due March 31, 2010 (contained in Exhibit 4.2)
4.4 Form of Class A Warrant
4.5 Form of Class B Warrant
4.6 Form of Underwriter's Unit Warrant *
5.1 Opinion of Barry B. Feiner, Esq. *
10.1 Lease of the Company's executive offices, dated February 29, 1996 (3)
10.2 1999 Stock Option Plan (1)
10.3 Indenture of Trust between Movieplex Realty Leasing, L.L.C. and First
Union National Bank, as Trustee, dated November 1, 1997 (2)
10.4 Form of Bond (2)
10.5 Master Lease Agreement by and between Movieplex Realty Leasing, LLC,
as Landlord, and Carmike Cinemas, Inc., as Tenant, dated November 20,
1997 (2)
10.6 Reimbursement Agreement by and among Movieplex Realty Leasing, LLC,
the Lenders, and Wachovia Bank, N.A, dated November 20, 1997 (2)
10.7 Form of Letter of Credit (2)
10.8 Form of Bond Purchase Agreement between Movieplex Realty Leasing, LLC.
and Purchasers, dated November 20, 1997 (2)
10.9 Agency and Development Agreement between Movieplex Realty Leasing,
LLC., and Carmike Cinemas, Inc., dated November 20, 1997 (2)
10.10 Master form of ASP Agreement between the Company and Customers
10.11 Master form of Co-Branding Agreement between the Company and
Customers
21 A List of the subsidiaries of the Company
23.1 Consent of Richard A. Eisner & Company, LLP
23.2 Consent of Barry B. Feiner, Esq. (included in Exhibit 5.1).
24. Power of Attorney (included in signature page).
----------
* To be filed by amendment.
(1) Filed as an exhibit with the same number to Annual Report on Form 10-KSB
for the period ended December 31, 1999.
(2) Filed as an exhibit with the same number to Annual Report on Form 10-KSB
for the period ended December 31, 1997.
<PAGE>
(3) Filed as an exhibit with the same number to Annual Report on Form 10-KSB
for the period ended December 31, 1996.
(4) Filed as an exhibit with the same number to Annual Report on Form 10-KSB
for the period ended December 31, 1995.
<PAGE>
Item 28. Undertakings
The undersigned Registrant hereby undertakes to:
(1) file, during any period in which it offers or sells securities, a
post effective amendment to this Registration Statement to:
(i) include any prospectus required by Section 10(a) (3) of the
Securities Act;
(ii) reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the Registration Statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20
percent change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective Registration
Statement; and
(iii) include any additional or changed material information on
the plan of distribution;
(2) for determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement relating to the
securities then being offered, and the offering of Such securities at that
time shall be deemed to be the initial bonafide offering of such
securities.
(3) file a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of their counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
The undersigned Registrant hereby undertakes (1) to provide to the
underwriters at the closing specified in the underwriting agreement certificates
in such denominations and registered in such names as required by the
underwriters to permit prompt delivery to each purchaser; (2) that for the
purpose of determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b) (1) or (4) or 497(h)
under the Securities Act as part of this Registration Statement as of the time
the Securities and Exchange Commission declares it effective; and (3) that for
the purpose of determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration statement
herein, and treat the offering of the securities at that time as the initial
bona fide offering of those securities.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form SB-2 and authorized this
Registration Statement to be signed on its behalf by the undersigned, in the
City of New York, State of New York on December 21, 2000.
CareerEngine Network, Inc.
By: /s/ George W. Benoit
--------------------------------------------
George W. Benoit,
President, Chief Executive
Officer and Chairman of the Board
ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints George W. Benoit, his true and lawful attorney-in-fact
and agent, with full power of substitution and resubstitution, for him and in
his name, place and stead, in any and all capacities, to sign any and all pre-
or post-effective amendments to this Registration Statement, and to file the
same with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any one of them, or their or his substitutes,
may lawfully do or cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed below by the following
persons in the capacities indicated on December___, 2000.
Signature Title
/s/ George W. Benoit President, Chairman
-------------------------------------------- and Chief Executive Officer
George W. Benoit
/s/ Anthony S. Conigliaro Vice President and
-------------------------------------------- Chief Financial Officer
Anthony S. Conigliaro
/s/ Kevin J. Benoit
-------------------------------------------- Director
Kevin J. Benoit
-------------------------------------------- Director
Charles W. Currie
/s/ David W. Dube
-------------------------------------------- Director
David W. Dube
-------------------------------------------- Director
James J. Murtha
/s/ Joseph G. Anastasi
-------------------------------------------- Director
Joseph G. Anastasi
<PAGE>
Signature Title
/s/ Thomas J. Ferrara
-------------------------------------------- Director
Thomas J. Ferrara
/s/ Edward H. Martino
-------------------------------------------- Director
Edward H. Martino
