SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM 10-QSB
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1997 or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________________ to ________________________
Commission file number 0-26548
Legal Research Center, Inc.
(Exact Name of Registrant as Specified in its Charter)
Minnesota 41-1680384
(State Or Other Jurisdiction (IRS Employer Identification No.)
Of Incorporation)
700 Midland Square Building, 331 Second Avenue So., Minneapolis, MN 55401
(Address Of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: 612/332-4950
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes__X__ No_____
(APPLICABLE ONLY TO CORPORATE ISSUERS)
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date.
3,297,633 shares of Common Stock as of May 2, 1997
<PAGE>
LEGAL RESEARCH CENTER, INC.
INDEX
PART I. FINANCIAL INFORMATION Page
----
Item 1. Financial Statements:
Consolidated Balance Sheets
March 31, 1997 and December 31, 1996 ........................ 2
Consolidated Statements of Operations
Three Months Ended March 31, 1997 and 1996 ................... 4
Consolidated Statements of Stockholders' Equity ................. 5
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1997 and 1996 ................... 6
Notes to Consolidated Financial Statements ...................... 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations .................................... 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K ................................. 12
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LEGAL RESEARCH CENTER, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(unaudited)
March 31, December 31,
ASSETS 1997 1996
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 568,133 $ 955,600
Accounts receivable:
Trade 946,523 713,965
Unbilled services 93,352 505,419
Related party 179,184 174,066
Less, allowance for doubtful accounts (120,000) (120,000)
--------------------------------
Net accounts receivable 1,099,059 1,273,450
Other 97,347 39,044
--------------------------------
Total current assets 1,764,539 2,268,094
--------------------------------
Other Assets
Intangible assets, net of accumulated amortization of
$212,460 and $152,789, respectively 767,794 827,465
Capitalized development costs, net of accumulated
amortization of $10,354 and $5,916, respectively 145,923 101,061
Investment in American Research Corporation 41,764 41,764
--------------------------------
955,481 970,290
--------------------------------
Furniture and equipment, at cost 362,469 367,381
Less, accumulated depreciation 154,174 129,886
--------------------------------
208,295 237,495
--------------------------------
$ 2,928,315 $ 3,475,879
================================
</TABLE>
See Notes to Consolidated Financial Statements (unaudited)
2
<PAGE>
LEGAL RESEARCH CENTER, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
March 31, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1996
- --------------------------------------------------------------------------------
Current Liabilities
Accounts payable $ 44,562 $ 182,032
Non compete agreement 16,508 16,508
Client advances 64,078 35,957
Accrued expenses:
Compensation 137,519 108,438
Other 121,019 137,291
-----------------------------
Total current liabilities 383,686 480,226
-----------------------------
Non compete agreement 43,334 47,461
-----------------------------
Common stock subject to repurchase obligation 105,000 105,000
-----------------------------
Stockholders' Equity
Common stock, $0.01 par value; authorized
20,000,000 shares; issued 3,297,633 32,976 32,976
Additional paid in capital 6,765,307 6,765,307
Accumulated deficit (2,435,738) (1,988,841)
Notes receivable from officers and directors (1,966,250) (1,966,250)
-----------------------------
2,396,295 2,843,192
-----------------------------
$ 2,928,315 $ 3,475,879
=============================
See Notes to Consolidated Financial Statements (unaudited)
3
<PAGE>
LEGAL RESEARCH CENTER, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three Months
Ended March 31,
----------------------------
1997 1996
- --------------------------------------------------------------------------------
Revenues $ 550,755 $ 441,782
Direct operating costs:
Compensation and benefits 275,479 171,834
Other 96,016 44,291
---------------------------
Total direct operating costs 371,495 216,125
---------------------------
Gross profit 179,260 225,657
---------------------------
Other operating costs:
Sales and marketing 298,223 203,191
General and administrative 337,706 250,063
---------------------------
Total other operating costs 635,929 453,254
---------------------------
Operating loss (456,669) (227,597)
Interest income 10,029 49,829
Interest expense (257) --
Losses related to unconsolidated investments -- (51,500)
---------------------------
Net loss $ (446,897) $ (229,268)
===========================
Net loss per share $ (0.20) $ (0.11)
===========================
Weighted average common shares outstanding 2,257,633 2,135,833
See Notes to Consolidated Financial Statements (unaudited)
4
<PAGE>
LEGAL RESEARCH CENTER, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Additional
------------------------- Paid-in Accumulated Notes
Shares Amount Capital Deficit Receivable Total
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 2,135,833 $ 21,358 $ 4,551,634 $ (332,288) $ -- $ 4,240,704
Issuance of stock to purchase
The Law Office, Inc. 121,800 1,218 242,382 -- -- 243,600
Issuance of stock options to
purchase The Law Office, Inc. -- -- 15,441 -- -- 15,441
Issuance of shares subject to a
stock subscription agreement 1,040,000 10,400 1,955,850 -- (1,966,250) --
Net loss -- -- -- (1,656,553) -- (1,656,553)
-----------------------------------------------------------------------------------
Balance, December 31, 1996 3,297,633 32,976 6,765,307 (1,988,841) (1,966,250) 2,843,192
Net loss -- -- -- (446,897) -- (446,897)
-----------------------------------------------------------------------------------
Balance, March 31, 1997 3,297,633 $ 32,976 $ 6,765,307 $(2,435,738) $(1,966,250) $ 2,396,295
===================================================================================
</TABLE>
See Notes to Consolidated Financial Statements (unaudited)
5
<PAGE>
LEGAL RESEARCH CENTER, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(unaudited)
Three Months Ended
March 31,
---------------------------------
1997 1996
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows From Operating Activities
Net loss $ (446,897) $ (229,268)
Adjustments to reconcile net loss to net cash used operating in activities:
Depreciation 26,325 12,415
Amortization of intangible assets and capitalized development costs 64,109 --
Loss on retirement of furniture and equipment 1,606 --
Provision for uncollectible accounts receivable -- 4,400
Equity in losses of unconsolidated investments -- 51,500
Changes in assets and liabilities:
Trade accounts receivable and unbilled services 179,509 (100,375)
Related party accounts and other current assets (63,420) (2,306)
Accounts payable (137,470) (35,137)
Client advances 28,121 (16,091)
Accrued expenses 12,809 10,942
-------------------------------
Net cash used in operating activities (335,308) (303,920)
-------------------------------
Cash Flows From Investing Activities
Sale (purchases) of furniture and equipment, net 1,268 (40,299)
Advances to unconsolidated subsidiaries -- (230,414)
Capitalized development costs (49,300) (8,400)
-------------------------------
Net cash used in investing activities (48,032) (279,113)
-------------------------------
Cash Flows From Financing Activities
Cash payments on non compete agreements (4,127) --
-------------------------------
Net cash used in financing activities (4,127) --
-------------------------------
Decrease in cash and cash equivalents (387,467) (583,033)
Cash and cash equivalents
Beginning 955,600 3,510,752
-------------------------------
Ending $ 568,133 $ 2,927,719
===============================
</TABLE>
See Notes to Consolidated Financial Statements (unaudited)
6
<PAGE>
LEGAL RESEARCH CENTER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997
(unaudited)
Basis Of Presentation: The interim financial statements are unaudited, but in
the opinion of management reflect all adjustments necessary for a fair
presentation of results of such periods. All such adjustments are of a normal
recurring nature. The results of operations for any interim period are not
necessarily indicative of results for a full fiscal year. These financial
statements should be read in conjunction with the audited financial statements
and notes thereto, for the year ended December 31, 1996.
Principles Of Consolidation: The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiary, The Law Office, Inc.
(TLO) and its eighty-five percent owned subsidiary, The CyberLaw Office, Inc.
(CLO). All significant intercompany accounts and transactions have been
eliminated.
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 amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Net Loss Per Common Share: Net loss per common share is computed on the basis of
the weighted average number of common shares outstanding during the respective
periods.
Income Taxes: The income tax benefit computed at the statutory rate for the
three month period ended March 31, 1997 is approximately $152,000 which is
offset by a valuation allowance of the same amount. Deferred taxes are provided
on a liability method whereby deferred tax assets are recognized for deductible
temporary differences and operating loss or tax credit carryforwards, and
deferred tax liabilities are recognized for taxable temporary differences.
Temporary differences are the differences between the amounts of assets and
liabilities recorded for income tax and financial reporting purposes. Deferred
tax assets are reduced by a valuation allowance when management determines that
it is more likely than not that some portion or all of the deferred tax assets
will not be realized. Deferred tax assets and liabilities are adjusted for the
effects of changes in tax laws and rates on the date of enactment.
Major Customers: Three customers accounted for 20.6%, 12.3% and 0% respectively,
of the Company's total revenues for the quarter ended March 31, 1997. These same
customers accounted for 24.7%, 0% and 13.4%, respectively, of the Company's
total revenues for the same period in 1996.
Acquisition of The Law Office, Inc.: In May 1995 the Company acquired 25% of the
stock of TLO. The investment in TLO was accounted for under the equity method of
accounting through May 1996.
In May 1996, the Company acquired all of the remaining outstanding shares of TLO
for $97,961 in cash including acquisition costs, issuance of 121,800 shares of
the Company and options to buy 54,500 shares of the Company at $3.50 per share.
The purchase of TLO was accounted for as a purchase and the purchase price was
allocated to the assets acquired and liabilities assumed based on fair values.
The excess of the purchase price above the fair value of the assets has been
assigned to intangible assets which are being amortized over periods ranging
from 18 to 60 months.
7
<PAGE>
The CyberLaw Office, Inc.: CLO was incorporated in Minnesota in October 1995,
and is a majority owned subsidiary of the Company. CLO was originally created by
the Company to expand its on-line activities similar to TLO, into the
international market place. In July 1996, the Company sold a 15% interest to a
director of the Company as an inducement to become the new Chief Executive
Officer of CLO, as part of the employment agreement, for a nominal sum. CLO has
insignificant assets and reported no results from operations in the three months
ended March 31, 1997 and 1996, respectively. In August 1996, the Company
consolidated management of all Internet related activities under the Chief
Executive Officer of CLO. TLO has a negative book value and requires substantial
additional investment to achieve its potential. CLO continues to seek additional
investment from outside investors in 1997. The Company intends to consolidate
ownership of TLO under CLO when additional financing is complete.
Common Stock Subject To Repurchase Obligation: In September 1996, the Company
issued 40,000 shares of common stock on behalf of TLO to settle a $140,000 note
payable. The note was issued to a former shareholder of TLO as a prerequisite to
the acquisition of TLO by the Company. In October 1996, 10,000 of such shares
were repurchased by the Company from the shareholder at $3.50 a share. Under the
terms of the agreement by which the shares were issued, the shareholder could
require the Company to repurchase 10,000 shares at $3.50 a share upon written
notice to the Company, on or before December 31, 1997. In addition, the
shareholder can require the Company to repurchase a portion or all of the
remaining shares at $3.50 a share if TLO obtains debt or equity financing in
excess of $500,000.
Notes Receivable From Officers And Directors: On September 3, 1996 the Company
sold an aggregate of 1,040,000 shares of its common stock to three of its
officers and/or directors, at the closing price for the Company's common stock
on September 4, 1996, or $1.89 per share. The purchases were made through seven
year non-recourse notes, with the shares pledged as collateral. The notes bear a
fixed interest rate of 8.5% and cannot be prepaid anytime before September 2,
2003. The shares are restricted and cannot be sold or otherwise transferred
without repaying the notes. It is Company policy not to record interest income
on the notes until cash is received on September 2, 2003.
Common stock issued to officers or directors in exchange for notes receivable
structured as described above, are not deemed to be shares outstanding under
generally accepted accounting principles. Rather, such shares are treated as
stock options and therefore common stock equivalents for purposes of calculating
weighted common average shares outstanding and earnings per share.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis provides information that the Company's
management believes is relevant to an assessment and understanding of the
Company's results of operations and financial condition. This discussion should
be read in conjunction with the financial statements and footnotes which appear
elsewhere in this Report and the Company's annual report for 1996 on Form
10-KSB.
In connection with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, the Company cautions readers that statements
contained herein, other than historical data, may be forward-looking and subject
to risk and uncertainties including, but not limited to the continuation of
revenues through the Company's strategic alliances and the successful
development of other new business. The following important factors could cause
the Company's actual results to differ materially from those projected in
forward-looking statements made by or on behalf of , the Company:
o Failure of the Company or its partners to successfully expand its
market share and sell products and services.
o Company's inability to produce and deliver its products and services
at margins sufficient to cover operating costs.
o Risks related to obtaining permanent financing for CLO and TLO.
o Effectiveness of cost cutting measures implemented by the Company to
moderate the growth in sales and marketing and general and
administrative expenses.
The Company's revenues have historically been derived from conducting analytical
research and writing on a non-recurring basis for its customers. Historically,
the Company has experienced a seasonal fluctuation in revenues with second and
third quarters being the slowest quarters of the year and the last quarter being
the strongest. The Company has developed and implemented programs designed to
attract customers to enter into long term relationships to provide greater
consistency in quarterly revenues.
In May 1996, the Company purchased all of the remaining outstanding shares of
TLO. The Company has been funding development and operations of TLO since May
1995. 1997 results from operations for TLO are fully consolidated with the
Company's results. TLO is in the early stage of commercial operation. For the
three months ended March 31, 1997, TLO has generated $18,200 in revenues.
Revenues are currently generated from the leasing of space on TLO's web-site and
from the sale of ancillary services. First quarter expenditures have been on
activities necessary to support and enhance its web-site, to advertise and
market its services and solicit content providers for TLO. The Company
recognized approximately $240,000 of net losses of TLO for the three months
ended March 31, 1997. The Company recorded $51,500 of net losses of TLO under
the equity method of accounting, representing 25% of TLO financial results for
the three months ended March 31, 1996.
The Company created CLO to expand its on-line activities into the international
market place. In July 1996, the Company sold a 15% interest to a director of the
Company as an inducement to become the new Chief Executive Officer of CLO. In
August 1996, the Company consolidated management of all Internet related
activities under the Chief Executive Officer of CLO. The Company intends to
consolidate ownership of TLO under CLO when additional financing is complete.
CLO plans to be a full-service, on-line commercial center offering a variety of
goods and services to legal professionals and a variety of legal related goods
and services to the general public. Through a comprehensive and aggressive
sales, promotional, advertising and networking effort that leverages on the
marketing success of Microsoft Corporation's Windows 95 and Office 97, CLO and
TLO expect to attract entrepreneurial national and regional practice attorneys
and vendors to offer their services and products through CLO's and TLO' s
web-site.
9
<PAGE>
On a consolidated basis CLO and TLO have a negative book value and require
substantial additional investment to achieve their potential. CLO plans to seek
additional investment from potential outside investors in the future.
The Company continues to develop its Corporate Alternative Dispute Resolution
Enterprises, (CADRE) program. An alternative dispute resolution (ADR) system is
a means to reduce the amount of courtroom litigation and includes private
arbitration and mediation. The Company intends to develop CADRE initially as a
several day corporate training course in the concepts and skills necessary to
implement and utilize an ADR system on a corporate-wide basis. The Company has
substantially completed the curriculum and market development and expects that
the product will be launched in the second quarter of 1997.
RESULTS OF OPERATIONS
Revenues: Revenues increased by $108,973 or 24.7%, to $550,755 for the three
month period ended March 31, 1997 over the same period of 1996. The increase in
revenues is primarily attributable to an increase in traditional research,
writing and document retrieval projects that the Company has been able to secure
through sales and marketing activities.
First quarter 1997 multi-jurisdictional survey (MJS) revenues declined due to
the completion of a major project in the fourth quarter of 1996 and that project
size in terms of first quarter 1997 revenue, have declined. MJS are typically
non-recurring fixed price projects. In some instances on-going revenue will be
derived from updating completed projects quarterly or annually. Historically,
gross margins on MJS have been lower than traditional research and writing
projects, as such projects are typically fixed price in nature. The Company
expects to improve gross margins on such projects during the remainder of 1997
by improving the efficiency of its production process and reducing or
eliminating costs. The Company expects to continue its sales and marketing
efforts to seek and expand upon multi-jurisdictional projects in the future.
Direct Operating Costs: Direct operating costs for compensation and other
benefits include hourly contract fees for independent research attorneys and
hourly compensation of staff research attorneys, document production and support
personnel, and compensation and other benefits for TLO web-site support and
development staff. Other direct operating costs include outside research fees
and services, royalty fees for association referrals, computer database charges,
project data conversion fees and document retrieval expenses.
Total direct operating costs increased $155,370, or 71.9%, for the three months
ended March 31, 1997 from the same period in 1996. The increase in direct
operating costs is primarily due to higher personnel costs, computer database
charges and electronic book conversion fees. Personnel costs increased due to
wage and salary increases and the hiring of additional staff attorneys for
research and writing to handle increasing volume and the hiring of web-site
development and support personnel for TLO. Computer database charges increased
due to increased usage of database services to complete research projects.
Project data conversion fees increased as more customers require that work
product be delivered in an electronic format to facilitate subsequent sale or
use.
Direct operating costs, expressed as a percentage of revenue, increased from
48.9% to 67.5% for the three months ended March 31, 1997 from the same period in
1996, for the reasons discussed above.
Gross Profit: Gross profit decreased by $46,397, or 20.6%, to $179,260 over
March 31, 1996 gross profit of $225,657. As a percentage of revenue, gross
profit declined from 51.1% to 32.5%, primarily as a result of the increase in
direct operating costs discussed above.
Other Operating Costs: Other operating costs include compensation of officers
and corporate staff, advertising and direct marketing expenditures and general
corporate overhead, including depreciation and amortization. Other operating
costs increased by $182,675, or 40.3%, for the three months ended March 31, 1997
from the same period in 1996. The increase in other operating costs by category
was $95,032, or 46.8%, in sales and
10
<PAGE>
marketing and $87,643, or 35.0%, in general and administrative. The increase in
sales and marketing costs was primarily due to increased staffing and marketing
and advertising expenditures for TLO. General and administrative expenditures
increased due to expenditures by TLO to hire management and support staff, lease
office space, purchase equipment and supplies and recognize amortization expense
on intangible assets. The increase in general and administrative expenditures by
TLO was offset by a decline in general and administrative expenses incurred in
the research and writing business.
Other Income and Expense: Interest income decreased $39,800 for the three months
ended March 31, 1997 from the comparable period in 1996. The decrease was a
result of less cash invested in interest bearing accounts.
From January 1, 1996 through the date of acquisition on May 13, 1996, the
Company recorded 25% of TLO's losses under the equity method of accounting.
Subsequent to the acquisition, TLO's results of operations have been fully
consolidated into the Company's financial statements.
LIQUIDITY AND CAPITAL RESOURCES
The Company continued to use the proceeds from its initial public offering in
August 1995 to fund first quarter 1997 operating costs, to fund the development
of CADRE, and to provide working capital to CLO and TLO. In addition, the
Company continues to look for other marketing and development opportunities and
alliances to increase revenues and cash flow. At March 31, 1997 the Company had
cash and cash equivalents of $568,133 and working capital of $1,380,853.
Cash used in operating activities was $335,308 in the first three months of
1997. This use of cash is primarily the result of a $354,857 net loss before
depreciation and amortization and other non-cash charges, a $137,470 decrease in
accounts payable, offset by a $179,509 decrease in accounts receivable and
unbilled services. The increase in accounts receivable offset by the reduction
in unbilled services from December 31, 1996 is primarily attributable to one
large, multi-jurisdictional project for which billing cycle spans over a 3 to 6
month time frame. The Company collected over $450,000 on this project in April
1997. The Company expects cashflow from operations to be negative for the next
two quarters.
Investing activity for the first three months of 1997 was $48,032 principally as
a result of investments in CADRE. Cash used in financing activities consisted of
$4,127 of payments made to former shareholders in connection with the
acquisition of TLO. The Company expects the level of cash used in investing
activities to continue at the same level for the next quarter until CADRE begins
to generate cash flow.
Cash used in operating activities was $303,920 in the first quarter of 1996. The
usage was primarily due to a net loss of $229,268 plus non cash charges of
$68,315 offset by an increase in accounts receivable and unbilled services of
$100,375 and a decrease in accounts payable and accrued expenses of $40,286.
Cash used in investing activities was $279,113, primarily due to advances to TLO
and purchases of furniture and equipment. There were no cash flows associated
with financing activities during the first quarter of 1996.
Management believes that during 1996, it completed the development and
implementation of the necessary infrastructure to support larger revenues in the
core business in 1997 and beyond. In addition, the Company has instituted
specific cost control measures such as hiring and wage freezes, to reduce
expenditures in all areas of its operation. The Company expects that by the end
of 1997, expenditures in the core research business will be funded almost
exclusively by funds generated from operations. The Company believes that the
cash requirements of CLO, TLO, CADRE and other marketing and development
activities will be significant in the first half of 1997. Initially, the Company
intends to fund such investments and development activities and if possible,
raise additional funding in 1997, although there is no assurance that such
financing will be available on terms acceptable to the Company or at all. If the
Company does not raise such funds, cash advances to CLO and TLO will be reduced
or eliminated in order to conserve cash.
11
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
i. News release dated May 8, 1997 regarding the financial results
for the three months ending March 31, 1997
(b) Reports on Form 8-K
i. none
12
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
LEGAL RESEARCH CENTER, INC.
Dated: May 9, 1997 By: /s/ Frank G. Hallowell
-----------------------
Frank G. Hallowell
Vice President and Chief Financial Officer
13
<PAGE>
EXHIBIT
News release dated May 8, 1997 regarding financial results
for the quarter ended March 31, 1997
14
<PAGE>
May 8, 1997
Legal Research Center, Inc. Contacts: Christopher Ljungkull, CEO
700 Midland Square Building Frank Hallowell, CFO
331 Second Avenue South Legal Research Center, Inc.
Minneapolis, MN 55401 612/332-4950, 800/776-9377
Joseph Jennings
The Sage Group
612/321-9897
LEGAL RESEARCH CENTER REPORTS
24% GROWTH IN REVENUE FOR FIRST QUARTER
Minneapolis, MN - Legal Research Center, Inc. (NASDAQ:LRCI) today announced
revenues of $550,755 for its first quarter year ended March 31, 1997, an
increase of 24 percent over $441,782 in 1996. The company posted a net loss of
$446,897, or 20 cents a share, compared to a net loss of $229,268, or 11 cents a
share, over the same period in 1996. The portion of net loss attributable to the
company's investment and on-going development in The CyberLaw Office, Inc. and
The Law Office, Inc. (collectively referred to as "CLO") amounted to $239,918,
or 11 cents a share, versus $51,500, or 2 cents a share, in fiscal 1996.
Christopher Ljungkull, chief executive officer of Legal Research Center,
commented: "While we are pleased with the Company's first quarter revenue
performance, we expect a significantly higher revenue growth rate through the
rest of the year. Not yet reflected in revenues, but expected, are research
projects generated by the development of a work product database for Risk
Enterprise Management Limited, additional multi-jurisdictional surveys under our
contract with Bankers Systems, Inc., CADRE revenue and CLO revenues from new
agreements generating on-line transactions. Additionally, we are beginning to
see revenue from annual research contracts which are now replacing business
previously sold on a project-by-project basis."
"With the implementation of new cost control measures and improved project
management procedures in the first quarter of 1997, gross margins have been
improving dramatically," Ljungkull noted. "Excluding the costs of CLO, operating
expenses declined slightly compared to the first quarter of 1996. We will
continue efforts to reduce or eliminate expenses in all areas of the business."
"CLO's first quarter revenue performance was slightly below expectation."
Ljungkull continued, "While development and operating costs of CLO are
significantly higher than a year ago, they declined in the first quarter
following strict cost control measures implemented in the fourth quarter of
1996. We remain very much committed to this exciting and potentially rewarding
investment and are actively seeking financing to continue its profitable
development and expansion."
Legal Research Center, headquartered in Minneapolis, offers cost-effective
legal research and writing services to attorneys in corporate and private
practice throughout the world. Legal Research Center also provides law-related
products and services to lawyers and the general public through The CyberLaw
Office and The Law Office, which operates a web site on The Microsoft Network
and the
15
<PAGE>
Internet. Additionally, the company is developing a proprietary alternative
dispute resolution training program for corporate and legal use under the trade
name CADRE (Center for Alternative Dispute Resolution Enterprise).
Statements contained here, other than historical data, may be forward-looking
and subject to risks and uncertainties including, but not limited to the
continuation of revenues through the company's strategic alliances and the
successful development of other new business, as well as those set forth in the
company's 10-KSB, 10-QSB and other SEC filings.
LEGAL RESEARCH CENTER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months
Ended March 31,
----------------------------
1997 1996
------------- ------------
Revenues $ 550,755 $ 441,782
Operating loss $ (456,669) $ (227,597)
Net loss $ (446,897) $ (229,268)
Net loss per share $ (0.20) $ (0.11)
Weighted average common shares outstanding 2,257,633 2,135,833
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, December 31,
1997 1996
----------- -----------
Current assets $ 1,764,539 $ 2,268,094
Furniture and equipment, net 208,295 237,495
Other assets 955,481 970,290
----------- -----------
Total assets $ 2,928,315 $ 3,475,879
=========== ===========
Current liabilities $ 383,686 $ 480,226
Long-term and other liabilities 148,334 152,461
Stockholders' equity 2,396,295 2,843,192
----------- -----------
Total liabilities and stockholders' equity $ 2,928,315 $ 3,475,879
=========== ===========
16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM QUARTER
ENDED AND THREE MONTHS ENDED MARCH 31, 1997 FINANCIAL STATEMENTS AND IS
QUALIFIED IN ITS ENTIRETY TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 568,133
<SECURITIES> 0
<RECEIVABLES> 946,523
<ALLOWANCES> 120,000
<INVENTORY> 0
<CURRENT-ASSETS> 1,764,539
<PP&E> 362,469
<DEPRECIATION> 154,174
<TOTAL-ASSETS> 2,928,315
<CURRENT-LIABILITIES> 383,686
<BONDS> 0
0
0
<COMMON> 32,976
<OTHER-SE> 2,363,319
<TOTAL-LIABILITY-AND-EQUITY> 2,928,315
<SALES> 0
<TOTAL-REVENUES> 550,755
<CGS> 0
<TOTAL-COSTS> 371,495
<OTHER-EXPENSES> 635,929
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 257
<INCOME-PRETAX> (446,897)
<INCOME-TAX> 0
<INCOME-CONTINUING> (446,897)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (446,897)
<EPS-PRIMARY> (0.20)
<EPS-DILUTED> (0.20)
</TABLE>
